Burberry Case Study Analysis

Introduction:

Burberry is now one of the most successful fashion brands in the world. A British luxury fashion giant established in 1856, Burberry successfully transformed itself from a simple store in Basingstoke, Hampshire in England to one of the most unbeatable trendsetters in the world of fashion. With the right management technique and well-thought-out marketing strategy that led to its expansion and growth, Burberry has not only become a respected leader in the realm of fashion and design but also unbeatable in terms of business strategy, marketing plan, and promotional techniques.

Burberry’s takeoff in 1997

Prior to the arrival of Burberry’s former chief executive Rose Marie Bravo, Burberry was a company deeply dependent on distribution and licensing agreements with a number of licensees and distributors. Apart from this, the company had only offered a limited set of products (Moon 1). The business strategy of the fashion company in ‘90s was not consistent with its quality intention, as then Burberry was heavily reliant upon retailing.

During those years, Burberry just concentrated itself on a constricted base of product line, selling umbrellas and outerwear to distributors and licensees. This strategy failed to attract a strong costumer base of upper-class and affluent people. As a result, the company had greatly lost its individuality and distinctiveness that made it one of the oldest fashion brands.

In the words of Bravo, Burberry was confronting several structural and strategic concerns which must be addressed properly. Bravo was not satisfied with the profits earned by the company, as she believed that its earnings quality was not that satisfactory. According to her, Burberry did not just lack the needed consistent vision; it missed the proper discipline essential to succeed in the competitive fashion industry Moon 1).

The first problem is concerned with structural issues. This refers to the overall management structure of the fashion company which must be addressed in order to meet the changes to be introduced to the company. There was a sheer inconsistency between Burberry’s management structure and its quality proposition.

Another problem is related to strategic issues. To be a respectable luxury products retailer, the company needed to focus on its brand and image. Its old retailing strategy did not help it attract a strong affluent costumer base which is needed to promote the company’s brand and image. Thus, the goal of Bravo was to introduce the “discipline” needed to succeed in the fashion line industry.

Bravo’s strategic goals

The primary goal of Bravo was to convert the fashion company from a manufacturer of limited set of products into a reputable lifestyle brand that was concerned with style, design and innovation (Moon 2). Bravo’s vision spurred great changes in the company as she had to introduce a new company structure and strategic goals. To meet her goal, the first thing she did was recruit a talented people who would infuse new and innovative ideas to the company.

Bravo believed she needed the right people to work on the proposed changes for the company. These people had wide experiences and background in retailing, design, and store management. Among Bravo’s recruits was Stan Tucker who headed the company’s menswear. The former chief executive also made changes in cosmetic line, as well as logo, designs, and packaging.

All the changes Bravo introduced to the company aimed at establishing the following strategic goals (Moon 3-5):

• Reposition the brand: This goal targeted younger consumer base. In achieving this goal, the company concentrated on particular price bracket and price point. The sub-purpose of this goal was to be Burberry accessible to its target market without compromising its product quality and brand image.
• Update product line: This resulted in cutting most of its stock-keeping units to almost 25 percent. The purpose of this action was to remove obsolete designs and introduce new product line. Bravo then had to recruit a new design team to spruce up the company’s customary products. As a result, major redesigns were made to Burberry’s three primary collections: menswear, womenswear, and accessories.
• Expand the brand collection: This pave the way for the creation of a new label called Burberry Prorsum. The purpose of this new portfolio was to strengthen the company’s entry in the luxury market. This triggered Burberry to focus on the right promotional strategies like staging its very first fashion show during the London Fashion Week in 1998.
• Advertising: The goal is to endorse company’s new image as a luxury brand. The company then hired famous photographers like Mario Testino who worked with fashion magazines, such as The Face, Vogue, and Vanity Fair. Also, Burberry tapped Stella Tenant and Kate Moss to promote the brand.

Buberry’s change from 2003-2008

The company successfully diversified its products line by adding new luxury portfolios like Prorsum. In 2003, the company succeeded in attracting younger demographic. It also enticed A-list celebrities like Madonna. The British Fashion Council also gave the company the prestigious Contemporary Design Collection of the Year Award. Apart from diversification, Burberry also engaged in product expansion, which resulted in the launching of its new perfume Burberry Brit.

Last year, Interbrand included Burberry in the list of 100 most valuable global brands. Through its strategy dubbed as Project Atlas, the company continues to sustain superiority within the following goals:

• Design. To enhance sourcing effectivit and retail output;
• Merchandising. To forge a more energetic and wide-ranging marketing program.
• Sourcing. To implement an integrated global-scale sourcing stratagem.
• Logistic and Distribution.

The current Burberry’s CEO is Angela Ahrendts who was recruited in July 2006. Under her management, Ahrendts added new product line such as sunglasses, shoes, reading glasses, accessories, among others (Lewis). One of her main goals is to focus on establishing loyal following in the United States.

The direction Angela Ahrendts wanted to take is to position Burberry as a formidable global brand (Hawkes). Today, Burberry is now selling handbags worth £1,500 (Davey). The new CEO also extended Burberry’s products into leather goods and luxury handbags.

For over the past five years, Burberry hit a steady increase in profits. By end 2004, the company had total revenue of £675.8 million. The succeeding years also gave the company some reason to celebrate as it marked increase in revenue: £715.5 million (2005); £742.9 million (2006); and £850.3 million (2007). This year, Burberry raked in £995.4 million despite the recent financial crisis.

Burberry Portfolio

Burberry Prorsum consists of the luxury collections of Burberry. The collection is known for dexterous cuts and stylish design. The price for womenswear ranges from £600 to £2000 in all collections.

Burberry London is the lifestyle company’s nucleus label. The target market of this low-priced label target younger and more fashion-alert consumers. This collection offers reasonable prices that range from £50 to £500. The Burberry Blue and Black labels which are offered for young men and women were sold only in Japan, while the Thomas Burberry label was only sold in Portugal and Spain (Moon 5). The sport line of the company is the Burberry Golf collections offering golf clothing, bags, caps, and apparels. The price for this line ranges from over £50 (usually for the caps) to over £1000. The company also has childrenswear and accessories for boys and girls whose price ranges from £25 to more than £1000.

The Future: What should Burberry do next?

To sustain its unprecedented growth both in terms of financial standing and strategic performance, Burberry has to focus on the following concerns: a) balanced global expansion; b) distinct and proper position in the luxury market; c) improve expertise in licensing, wholesale, and retail; and d) better management team. These are needed to counter the market risks and threats inherent in the luxury market.

The company has also identified potential risks and threats to the company. These are the following:

• Increasing competition with key luxury brands. There is now increasing competition with other luxury brands like Lacoste, Calvin Klein, Polo Sport, among others.
• The incapacity to foresee and react to changes in costumer demands and product trends. It is now difficult to make an accurate forecast of the consumer demands because of the volatility of the global market environment. This is the reason why Burberry in investing much in research and studies to know the market demands and to make a proper response to it.
• The ongoing economic crisis that could affect the purchasing power of consumers. The most recent financial crisis does not just affect businesses and banking institutions, it also affects the purchasing capacity of consumer. Rather than buy luxury lifestyle products, consumers are forced to keep or invest their money in times of financial meltdown.
• Exposure to fluctuations of foreign currency. Due to the ongoing financial crisis, there is unstable fluctuation of foreign currency, particularly the US dollar. This affects Burberry’s export and import activities, as well as its operations in other countries.
• Dependency on its property rights and trademarks. Burberry is heavily dependent on intellectual property rights and trademark. China’s cheap products and imitations are costing Burberry and other lifestyle companies huge losses.
• Unstable supply chain. Instability in the movement of supply chain also poses threats and risks to the operation of Burberry. This is caused in part by unstable global economy and the fluctuation of foreign currency.
• Emerging new markets posed by China. The rising competition posed by China is also giving Burberry and other luxury lifestyle companies a run for their money. Apart from exporting cheap clothing, perfume, shoes, and other items, China is also known as the producer of imitation or fake products.

On the aspect of potential growth, Burberry is aggressively looking to sustain its global exposure and operations through effective marketing and management. Ahrendts stated that the Burberry management is looking forward to seeing more diversity in the product label. To sustain this growth, Burberry has to maintain its prestige and strong consumer base. Also, it has to introduce new products and reaffirm or modify the significant role of the check.

Where does Burberry sit in consumers mind?

To sustain its strong market base, Burberry has to continue to endorse its brand and sustain the costumers’ awareness of its products. The brand’s undeniable popularity will help the company improve in North American and Asian countries. To achieve this goal, the company has to position the brand globally while thinking of product extensions.

Which line should they go in for?

As for any particular line, the focus of Burberry now is to engage in product extension while bearing in mind its costumer base and brand image and name. The company now looks at better and more effective promotional campaign in Europe, as well as in the Asian market where there was a slow growth. It also has to sustain its focus on North American countries which suffered steep decline for the past three years.

How does the company deal with the idea of “Classic”?

What the company is after now is to sustain its “classic” core market base by means of putting more innovation so to kindle better sales output. In keeping with the idea of classic, Burberry is retaining its culture and classic collections like Burberry London and the check logo as its way of protecting its consumer base.

Burberry’s competitors

The main competitors of Burberry are House of Fraser, Aquascutum, Polo Ralph Lauren Corporatio, as well as Gucci, Louis Vuitton and Prada. The company believed that competition is luxury products increased in the past years. It foresees an increasing competition with both its direct competitors and indirect competitors across the globe.

The role of the check

The “check:” has become the popular distinction of Burberry with other luxury product lines. However, the new CEO of Burberry stated that she wanted less check for the company’s products to pave the way for more diversity (Weston). The decision was due to the check’s over-exposure in the international market that has been the motivation of most fake and counterfeit Burberry products usually produced in China. However, the company is not removing the check from its future products; it is simply reducing its visibility. The plan is to maintain the check, but the company decided to introduce diversity in terms of design in most of its upcoming products.

References:

Davery, Jenny. “Angela checks Burberry in as a global brand.” The Times Online 23 March

2008. October 27, 2008 http://business.timesonline.co.uk/tol/business/industry_sectors/consumer_goods/article3601658.ece

Hawkes, Steve. “Burberry takes hit as luxury market wavers.” The Times Online 16 January

2008. October 27, 2008 http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article3193198.ece

Lewis, Jane. Profile of Angela Ahrendts: “The ‘queen chav couture.’” Money Week 25 July

2006. October 27, 2008, http://www.moneyweek.com/news-and-charts/profile-of-angela-ahrendts-the-queen-of-chav-couture.aspx

Moon, Youngme. “Buberry.” Harvard Business School (2004): 1-15

Weston, Nicole. “:New Burberry CEO wants less check.” Luxist 08 July 2008. October 28, 2008 http://www.luxist.com/2006/07/08/new-burberry-ceo-wants-less-check/