Burberry Case Study Notes & SWOT PDF

Preview

Summary

handout...

Description

Burberry Case Study Notes Pages 412-413 notes ❏ The viability of a fashion brand is dependent on the efficacy and appropriateness of the decisions from those who are responsible for management. Gucci is an example of a brand that whose business model that management deployed in order to achieve strategic/and or not strategic objectives. The brand was originally very popular and then a generation later suffered loss of cachet and had significant losses. ❏ This new adoption sacrificed management control over product development and distribution in favour of indiscriminate licensing agreements. This undermined Gucci credibility, Tom Ford’s arrest of Gucci decline in 1990’s attributed to a business model that maximised internal controls, product sourcing, brand communication, and distribution. ❏ The front-end of the Gucci model is concerned with management of risk through the provision of a portfolio of distinctly positioned fashion brands and maximisation of internal control through abandoning licensing agreements in favor of company-owned or company-controlled manufacturing and distribution. For Burberry business models are detrimental to the company’s performance. Burberry saw profits drop in 1998 with a fashion cachet of almost zero. Rose Marie Bravo, new chief executive realigned the business model from then and improved the business performance. ❏ The partial public share offering and preference of internal control over manufacturing and distribution, expansion of product portfolio to include a wider customer base and the use of multi-brand positioning, reflect the developments that occurred within other premium international fashion retail companies. Thomas Burberry founded burberry in 1856 in england selling men's outerwear. Company enhanced there a fabric resistant to tearing, waterproof, and breathable; this became a standard service uniform maker for british officers and the trench coat was created the first world war. The coat was adopted by leading explorers and the first london store opened in 1891 and the first international store opened in paris 1910. In 1920 entered wholesale agreements with japanese retailers and developed further with mitsui appointed distributor to their outerwear products in japan 1964. ❏ Licenses were giving to third parties in Europe, Asia to facilitate the expansion of the burberry product range and increase foreign market distribution with an ever increasing reliance upon Asia sales. ❏ Key strategic challenges that the business faced in 1997 is a heavy reliance upon a small base of core products, company owned retail network based in non-strategic locations, inconsistent wholesale distribution strategy, trading of burberry products to other non approved distributors and stockists, poorly controlled licensing strategy, and under investment in corporate infrastructures.

Page 14 Issues: - Old target market was narrow customer base of middle-aged, fashion conservative men. - Lack of control of distribution and product design due to poor licensing and distribution agreements New Strategy: - Become a distinctive luxury band with clear positioning - Focus in on design, merchandising, marketing and distribution strategy - Modify customer base: younger, new, fashion-forward but still stick to traditional customer base 3 Parts to New Initiatives: 1. ● ● ● ●

Brand Management: Burberry’s -> Burberry New brand logo Contemporary packaging New Ad Campaigns with theme of high fashion but still British + Celebrity Spokesmodel -> Kate Moss ● Built up credibility by opening Flagship store on New Bond Street in London next to YSL, Chanel, Gucci, Versace 2. ● ● ● ● ●

Product Design & Sourcing New Design Team -> Christopher Bailey as Design Director New collection: Burberry Porsum, a high fashion collection Burberry London Brand, upgrade range to reflect new lifestyle image Eliminated unnecessary product variation Secured more control on Licensing for product design and manufacturing

Page 15 3. ● ● ● ●

Brand Distribution All non-profitable and “non-core” retail stores in Europe were closed Wholesale accounts with non-appropriate stockists were discontinued Bought back its distribution rights from Hong Kong, Singapore and Australia Repositioned as a prestige and exclusive brand

Burberry Business Model ● Turnover increased from 2000 to 2003 by 263% ● Products: Offer both regular and seasonal products, multi brand strategy: Prorsum, The Burberry London Page 416 Burberry’s international lines Burberry London ● Designed for Spanish and Japanese markets ● Spanish market described as “more diverse with a strong classic element.” 2002-03, 40% of Burberry’s wholesale customers were from Spain or Portugal Spanish department store chain, El Cortes Ingles, was Burberry’s largest wholesale customer Thomas Burberry ● Target: 15-25 year old ● Initially sold to just Spain and Portugal but has been extended to UK & Europe ● Emphasis on casual fashion ● Modernized brand logo Burberry Blue & Black ● Sold exclusively in Japan ● 1996 casual collection for younger women ● Now targeted at younger professional male and is comprised of tailored clothing and sportswear Burberry ● Handbags largest accesories product ● Other accessories: Scarves, shoes, and leather goods ● Categories: Fragrance, eyewear, timepieces, and childrenswear Business model ● Multi-brand approach - maximum market coverage/broad customer appeal ● Flexibility and market responsiveness ● Broad coverage of product categories and differential price positionally among brands proves a comprehensive lifestyle offer that also enables customers to access, as well as trade-up(and down) between various brand levels Page 417

Manufacturing and sourcing Burberry London ● Fabric procurement and pre-production - company uses own fabric weaving operation on supply linings and fabrics for ● Sourced from limited number of European suppliers ● Purchases directly or retains full-control over the purchase by third-party manufacturers ● Castleford(England, Treorchy(Wales) & New Jersey - internal manufacturing facilities ● Page 418 Three important observations: 1. Retention of internal weaving and manufacturing capability, the company has retained control over the creation of rainwear; their core product 2. Through the use of third-party manufacturers and licenses, external expertise is brought to the collections and with it an ability to be flexible and responsive to changing customer tastes and demands 3. Their exclusive use of license manufacturing in japan serves to integrate the local expertise, knowledge and commitment of established and reputable local organizations 4. Overall, their use of their near-to-market capability eliminates the problems associated with managing a global supply chain within a very significant profit-generating market Page 419: Distribution Channels Three main channels ● Retail ● Wholesale: company controlled ● Licence Retail distributions Four formats: 1. Their stores serves an important role in communicating the exclusive positioning of the Burberry brand 2. Merchandise is tailored to suit local climates and local variations 3. Department store concessions: offer edited version of Burberry London/Thomas Burberry ranges 4. Operates nine designer outlet stores: three factory stores in the UK, USA, and Spain.

a. They sell surplus stock at a discounted price from the retail store and the wholesale side of the business. b. These sell products usually have minor imperfections Wholesale distribution: ● Burberry claims to work with wholesale customers on an individual store basis in order to select appropriate products and volumes in order to maximise the sale of the products at full price ● Works with major stockist and store presentation visual merchandising and store presentation of the Burberry brand ● Company also engages in collaborative marketing activities with important clients ○ Stockist receive a benefit towards advertising Burberry brand Page 420: License distribution ● Both firms provide product, visual merchandising and sale staff to their department store customers. ● Advantages: ○ Provides maximum control over the presentation of the Burberry brand within significant and important markets: maximum return on investments ○ Efficiently and effectively maintains to exclusivity and integrity of the brand ○ Wholesale stockist worldwide provides for maximum market coverage at minimal cost and reduce risk ● Retail stores provide an impetus for media and consumer interest in the Burberry brand within the respective markets which precipitate wholesale sales, while the profits from wholesaling ensure the flagship stores are economically viable Marketing communication: ● Burberry clearly identify the importance of active marketing communications in the development of an image and lifestyle that is capable of “generating interest among retail customers, wholesale buyers and the media” ● Coherent brand identity, all burberry marketing: three core strands of Burberry communications: ○ Advertising: ■ Twice-yearly ■ Seasonal collections ■ British images these advertisements draw heavily from the firm’s heritage and history ■ Present a mix of products that present the overall brand image

■ Japanese: advertising campaigns directly using the images and campaigns generated by the london marketing team ○ Fashion shows: ■ Important elements in their marketing plan since these serve to underline the luxury status of the brand ■ Twice-yearly in Milan: men and women’s Burberry Prorsum ■ Maximise fashion media coverage internationally ■ Burberry london line shown at London Fashion week ○ Editorial placement ■ Adopted a proactive public relations strategy aimed at the fashion and trade press ■ Maximise world-wide editorial coverage and comment in support of the Burberry brand and to endure frequent product placement in the leading fashion, business, trade, and newspaper publications.

Page 421 ● Use a information-only website with images, company history and ad campaigns ● Core elements of marketing communications: Advertising t create luxury image and lifestyle distinction, Fashion Shows to receive international media and Editorial Placement via PR and product placement Conclusion: ● Clear positioning, brand values and lifestyle associations is important ● Distribution should maximize market coverage but be strategic ● Product extension leads to strong brand identity ● Media relations is important to create credibility as a luxury brand Additional Burberry Research Burberry Case Study: The Rebranding of Burberry In book Pg 102-105 The Rebranding Decision ● Main goal is to transform and reposition the brand from the old, unexciting brand to become into a luxury lifestyle that is stylish and innovative. (1997) ○ Hired new team of highly qualified managers experiences in interpreting and analyzing consumers markets trends ○ Changed the Burberry’s name to Burberry ■ Introduced a more modern look and packaging

● Analyzed existing gaps in the luxury market where Burberry can step in ○ Between armani and ralph lauren, where they could be neither too classic nor too fashion forwards ○ Between Gucci and Coach accessories ● Goal of the brand is to become an accessible luxury brand that is aspirational but also functional. ● Some other measures they took to make this brand possible. ○ Cut down products from 100,000 to 24,000 ○ Consistent look across all products ○ Redesigned the brand, products range from: continuity or fashion-oriented ○ Took a firm holder on licensing agreements where they royalties ranged from 3-12 percent ○ Reevaluating distribution ○ Raising prices to reflect the new positioning proposal, increasing gross margin from 47 percent to 56 percent The Labels ● Christopher Bailey: “Our biggest design challenge is to create a consistent brand image. The lifestyle of someone who lives in the English countryside.. just as a lifestyle of a fashionista. So unless we have strong vision and speak with a consistent voice, we run the risk of losing our brand credibility.” ● Introduced a line: Prorsum ○ Emphasize new status as luxury brand ○ Hand tailored suits, innovative fabrics, high profile, haute couture Communications ● Budget a 14 million dollar campaign ● Replaced old models like Kate Moss with Emma Watson, to introduced and appeal to new and younger generation without losing their current customer base Success and Challenges ● Company has received rewards including one from the British fashion council ● Success from branding on the British Heritage ● Decided to change how their infamous design was handled, now it’s under control where it was used more subtly and less in obvious places Angela Ahrendts and Burberry ● Her vision directed the brand towards future growth ● First goal was to continue attracting new generation of customers and emphasize the modern look of the brand throughs series of initiative including a stronger presence online ○ To stay more relevant to younger generation to appeal to social media outlet

Future ● Challenges in maintaining the brand and defending its positioning and managing its own growth ● Introduced a new line for children and it was successful with high demands ○ A great way to stay new and relevant

SWOT

STRENGTHS: ● Because burberry is a brand that has been in business for about 156 years, it is clear that the company has to be doing something right to have stayed in business this long. Some of the strengths I was able to come across in research was that the brand is Iconic. The checker plaid fabric print signature makes them recognizable. They have global presence, in about 50 countries and licensing through Europe, Asia and etc. The ability to reinvent the brand to make it more desirable and still relevant in today's day and age. Connection with new social media platforms and expanding their target audience. ● Burberry has a huge network of retail, wholesale, and licensing channels globally like Japan and Spain ● Reinvented itself from a manufacturer to a lifestyle brand. ● Brand expansion: ○ Children's apparel ○ Took off so well that the brand had problems with fulfilling shipping demands ● High level of internal control ○ High control over licensing ○ Agile Supply Chain & Flexibility to trends = purchase right after runway and seasonal pieces ● Brand has a strong focus on Men’s and Women’s category ● Positions itself as “democratic luxury” through live streaming fashion shows and interaction with consumers on social media and custom options for trench coats -> The Art of The Trench Coat, over 17,000,000 likes on

WEAKNESSES: ● High pricing strategy makes the brand accessible to a very narrow group of millennials ● Significant portion of sales come from Asian countries. Higher risk because a large portion of their sales comes from the same region. (In 2016, China accounted for 40% of sales) ● Consolidation of 3 sub brands means a less diverse customer base ● Little interaction with customers on Facebook, recent twitter mix up when they confused Dev Patel for Riz Ahmed -> Followers slammed the brand ● Limited product line. ○ Has only a few product lines and not as diverse as other luxury brands. They don’t sell home decor or furniture ● In the past, their infamous check design was overused due to uncontrolled licensing. ○ Today, check design is more subtly placed this strategy main goal was to improve the brand can offer more than coats and check designs. Not as creative or innovative as other luxury brands.

● ●

●

●

● ●

●

Facebook and 16,000,000 followers E-commerce Customer Experience = Omni-channel (RFID, informational screens & Big Data Remains a popular brand among international tourists ○ CON: makes it sensitive to exchange rate and international travel fluctuations Strong Heritage and focus on British roots ○ The brand has been deemed Royal warrant twice, by the Queen and Prince Charles, meaning that the brand can legally state that they are suppliers of the Royal Family. This Historic accomplishment added great value and to their heritage. ○ One of the most valuable companies owing to its legacy. Innovation around a core product The brand was able to successfully repositioned itself by hiring a new CEO and creative director to be more innovative and more current but still be true to the brand’s identity. ○ 1997: CEO Marie Bravo ○ 2000: Creative Director Christopher Bailey ○ 2006: CEO Angela Ahrendts ○ 2014-Current: CEO Christopher Bailey Associations with international celebrities to reach out to more diverse customer

OPPORTUNITIES: Michelle Nguyen ● Limited edition celebrity line ● Explore sustainable and ethical options ● Adapt communications to cater to Chinese consumers ● Virtual Reality ● Increase digital content on blog ● Weakness of the pound means more international travelers this year ● Mobile App ● Consumer interaction

THREATS: ● Counterfeiting & parallel markets ● Competition from other global luxury brands such as Louis Vuitton, Gucci and Prada ● Webrooming and fast fashion ● After effects of Recession and decrease in GDP means slow sales in retail ● Threat of fluctuating exchange rates ●

Sources: https://www.ladissertation.com/Sciences-Economiques-et-Sociales/Sciences-%C3%89conomiqu es/Burberry-SWOT-80905.html http://nymag.com/thecut/2015/11/burberry-combining-three-brands.html

http://wwd.com/fashion-news/designer-luxury/bailey-boosts-burberry-creative-team-new-roles-k ey-appointments-10846796/

http://www.burberryplc.com/documents/ar-15-16/burberry_annual_report_2015-16.pdf...