6EC513 | Global Business Strategy & Analysis | Burberry Case Study

 

Background of the case study of the company

Burberry is a British luxury company which offers various products such as ready to wear fashion clothes, fashion accessories, fragrance, sunglasses etc.  They are famous for their trench coats which are offered by them. Initially the company was established with outdoor attires and later on they moved to the high fashion market. They have been operating through their stores in almost 50 countries and now they want to expand their business by taking sustainable competitive advantage. This can be by way of analysing the market efficiently which is done in the report. 

Internal and External Analysis of the company

It is important for the companies to understand the business environment so that they can analyse the opportunities and threats which are available in the market. For this various external and internal factors need to be analysed which has influence on the businesses (Glowik, 2017). This can be done by way of PESTLE and SWOT analysis for Burberry.

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PESTLE Analysis

Burberry pestle analysis which help them to analyse the external factors is given below - 

• Political Factors: The political factors are those factors which affects the company by  the actions and policies of the government. The political stability of the UK has positive impact on the organisation as in near future their will not be any change in the policies so the existing strategies can be used by them. Along with this the decrease in the import duty will reduce the cost of the company of procuring the materials. But the level of taxes which are imposed by the government affects the operation as this reduces their profitability as they have to pay more of the taxes.

• Economic Factors: Economic factors includes various factors such as employment rate, inflation rate etc. which affect the operations directly. The cost of the labour has crucial impact on the organisation as they have to bear such cost. The wage rate in UK has been increased due to which the cost of operation of the company will increase and thus it will affect the profitability of Burberry. In addition to this the cost of borrowing need to be considered as this also adds to the total cost of the company. But the better relations with other countries will help them to expand their business by way of diversification. This has positive impact on the company as they can enhance their market share which will increase their profitability.  

• Social Factors: The social factors are associated with the demographic factors which includes the age, gender of the consumers, also it includes the taste and preferences, their  perception and attitude which has impact on the demand of the products and services so offered by the company. The designs of the fashion clothes which are provided by the Burberry are unique which can easily attract the customers so this has positive impact on the company. But the changes in the perception can adversely affect the demand which can be because of the promotional activities of the competitors and even the brand loyalty of the customers can affect the decision making. This has negative impact on the company (DaSilva and Trkman, 2014).    

• Technological Factors: The technological factors includes the advancement of the technology of the processes which are used by the companies. These technological updates helps the companies to take the competitive advantage. To meet up with the changes in the technological environment, RFID technology is being used by the  Burberry which helps them to manage their inventory and it will improve their in-store experience. Also they uses complete display which helps the customers to reduce the time to be spend in the stores. But the advancement in the technology leads to increase in the demand of the funds which is to be used by them in updating the technology. 

• Legal Factors: Such factors are related with the regulations which are imposed by the legal system of the country. Various labour laws and employment laws affect the company as they have to meet up with such laws and regulations. This increase the responsibilities of the Burberry as they have to comply with all such regulations. To maintain the position and the goodwill they have taken some patents and copyright which protect their operations and processes from being copied. This facilitates them to effectively cope up with the competition.

•  Ecological Factors: The ecological factors imposed various laws on the company which is why they have to make changes in their processes. To reduce the impact of such factors Burberry have been using various waste management techniques. Further their effective relations with the suppliers helps them to procure funds from them in bulk so that they do not have to place order again and again. This helps them to reduces the pollution by minimising the carbon footprints (Choi, 2015). 

SWOT Analysis

Burberry SWOT Analysis that will help them to analyse the internal factors:

Strengths	Weaknesses
The  Burberry has a strong market image and brand loyalty of the customers for the quality of their products. The company has a global presence due to which they can easily cater the customers and helps them in enhancing their profitability (Köseoglu and Lester, 2013). The prices of the product are high due to which they cannot be afforded by all the people. The product line of the company is limited to specific product that is they only offers luxury and fashion garments and accessories.	High attrition rate in work force – compare to other organizations in the industry Burberry has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees. Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present. There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market. The profitability ratio and Net Contribution % of Burberry are below the industry average.
Opportunities	Threats
The change in the taste and preference of the people will help them to increase the demand of their products with the help of various innovation in them. The Asian market are developing which is why they can easily expand their market share by way of aggressive advertising and by opening various stores. The level of competition has significant impact on the company as they have to make changes in their strategies as per the competitors move. Changes in the customers taste and preference may affect the demand of the products of the company as they may switch to other brand.	The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term. Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales. The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets. Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

 

Identification of the sustainable competitive advantage for the company

Porter's generic model is very helpful in development of competitive advantage for organisation so that they can sustain their business for a longer period of time. This model is very helpful for Burberry so that they ear able to form effective strategies which can lead to development of  competitive advantage in the organisation. Generic strategy is facilitation in improvement of performance in the industry with help of four strategies (Rachapila and Jansirisak, 2013). Four strategies of this model is discussed below:

• Cost Leadership: According to this strategy company have aim that they wants to increase their customer base by adopting a low cost strategy. This can be used by Burberry by utilisation of their capacity with differentiation in the overall category of products being offered by this brand. This is also leading to increasing of profit margins and a competitive  advantage.

•  Differentiation: This is the strategy which has a major focus on providing products with differentiation so that company can develop customer loyalty for their products. There are some advantages which are related with strong recognition from customers, better product quality, improvement of distribution channels. This strategy will facilitate Burberry in increasing brand loyalty in concern with products and services  offered by them (Bos, Pendleton and Toms, 2013).

• Cost focus: This is the strategy which is focussing on small segments of market which  has a advantage of taking benefits of lower cost. Burberry can offer their products by increasing their focus on small segment of markets. This will lead to enhancement of  internal efficiency of a company so that they can deal with the external competition  prevailing in the market. 

•  Differentiation focus: This strategy has a aim to create differentiation in one segment of target market. This is very helpful in serving specific customers and satisfying their specific requirements. This leads to charging of a premium price from their customers.

The strategy which is being adopted by Burberry is the cost leadership strategy which is helping to achieve high profit share in market to which they are dealing. This is also helpful in optimum utilisation of efficiencies and capabilities in large extent.

Hybrid strategy can also adopted by Burberry in which they can offer their products and services at lower prices. This will facilitate in creation of a differentiation so that prices can be reduced in comparison with their competitors. This is a hybrid strategy which is being adopted by Burberry as a global strategy which can help in targetting towards increase in their market share and also establishment of customer loyalty. This will help in expansion of this brand to various locations in which they are not having presence (Aras and Crowther, 2012).

This hybrid strategy is very helpful for Burberry in dealing with competition which they  are facing from various competitors such as H&M etc. This is also very helpful for this brand in making required changes in their process and providing products with the help of online mode. Burberry is also having their operations on some online platforms but they are willing to expand in other online sites also. This is a strategy which will help Burberry in surviving for long term in the market.

Strategic Recommendations to the company and various implementation issues

As per the analysis of various internal and external factors the recommendations are made to the Burberry which will help them to formulate and implement various strategies. Along with this it will help the Burberry to meet up with the changes which are required in the company. The recommendations which are made to them will further help them to take the advantages with which they can increase their market share, image of the brand etc. The recommendations which are made to company includes:

• The online services of the Burberry need to improved as the people nowadays prefers to use online medium for shopping. Such improvement need to be in context of the timing of the delivery, appropriate information on the website should be provided etc.

• By procuring the material in bulk can reduce the cost of the company which will help them to meet up with the requirement of the customers. Also the reduction in the import duty will help them to reduce the cost with which they can enhance their promotional activities.

• To improve the customers awareness about the products and services so offered by them. They need to focus upon various promotional campaign with which they can make the customers aware about their values and benefits. Such promotion activities must be so efficient that they can reflect the differentiation among their products and the product of the customers.

• The company has been using differentiation strategy, with the help of which they can easily take the competitive by making their customer brand loyal. Also they can form alliances with various local partners which can help them to operate efficiently (Anwar, 2019).

Burberry has a clear aim to achieve long term sustainability in competitive market due to which the management put maximum efforts in framing an effective strategy to cope up with issues that can bring them backward from their rivals engaged in similar sector. These issues are related with following aspects:

• Lack of resources: The strategic implementation rises demand of resources which are available with an organisation (Scott and Davis, 2015). It increments the cost utilised in adoption of advanced technologies, updating process, charging fees of hired consultants, training cost etc. It affects the decisions of management of Burberry regarding implementation of strategies at workplace. It restricts company to update their strategies according to the situations that arises due to contingent environment.

• Ineffective Training of the employees: Due to this the implementation of the strategies delays.  The management of Burberry formulate strategies according to their pre-determined goals and objectives which demands support from effective and skilled employees. Thus, the management need to identify training programs which can save time and cost as well as increasing skills of existing employees that can increase their contribution towards organisational goals and objectives.

• Lack of communication: Communication is an essential aspect which increases the effectiveness of formulated strategies. But it can be possible only if the management of Burberry provides suitable communication platform where the managers and employees can easily communicate and share information with each other that can be profitable for an organisation in near future. Lack of communication brings difficulties for employees in understanding the effectiveness of framed strategies which brings demotivation among them to contribute their maximum efforts in implementation (Spender,  2014).

• Lack of follow through: It is another issue that can restrict management of Burberry to implement strategies in desired way. Sometimes, the management failed to get reviews and suggestions from their employees due to lack of time. Due to this, it badly impacts the performance level of employees due to low motivation and willingness.

CONCLUSION

It is concluded from the above report that the organisations need to update their strategies with the help of which they can take the competitive advantage. For formulation the strategies the market need to be analysed by them with the help of SWOT and PESTLE analysis, so that they can identify the challenges which can be faced by them in future. Also the companies need to determine the the sustainability through various strategies which can be effectively evaluated with the help of Porters Generic Model. With the help of such identification and implementation the companies can efficiently achieve their goals.

REFERENCES

Books and Journals

• Anwar, J., 2019. Business strategy and organizational performance: measures and relationships (Doctoral dissertation, COMSATS Institute of Information Technology, Islamabad).
• Bos, S., Pendleton, A. and Toms, S., 2013. Governance thresholds, managerial ownership and corporate performance: Evidence from the UK. Managerial Ownership and Corporate Performance: Evidence from the UK (January 15, 2013).
• Choi, P., 2015. Immigration as Business Strategy: Simplifying American Immigration Law in a Global Economy. U. Mass. L. Rev., 10, p.164.
• DaSilva, C.M. and Trkman, P., 2014. Business model: What it is and what it is not. Long range planning, 47(6), pp.379-389.
• Glowik, M., 2017. Global strategy in the service industries: dynamics, analysis, growth. Taylor & Francis.
• Rachapila, T. and Jansirisak, S., 2013. Using Porter’s Five Forces Model for analysing the competitive environment of Thailand’s sweet corn industry. International Journal of Business and Social Research, 3(3), pp.174-184..
• Spender, J.C., 2014. Business strategy: Managing uncertainty, opportunity, and enterprise. Oxford University Press.

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