Write a marketing research paper refering to Burberry brand company in kenya……….
Burberry is a British luxury brand with branches globally. The company is distinct in its Britishness, genuine outwear legacy and extravagance positioning. The business is motivated by its unique design, promotion and retailed strategies, digital focus and incorporation, diversity in channeling, manifold category proficiency and worldwide reach and balance in emerging markets. The group is involved in crafting, marketing and sourcing of men’s wear, women’s wear, non-attire wear, outwear and children’s wear. It conducts its distribution via an expanded retail network, wholesale and worldwide licensing routes.
The group conducts its business in three methods; by location, merchandise and channel. Its products are distributed to Spain, Europe, Americas and Asian Pacific using the retail and wholesale methods with discriminatory license agreements. By use of trademarks Burberry also distributes its products using third party licenses. The company has a large capital base to finance its divertive operations as it makes an effort to beat the main competitors in the industry.
History of the group
The company can be traced back in 1856 when a 21-year-old draper’s apprentice, Thomas Burberry, opened a small outfitter’s unit in Basingstoke, Hampshire in England. In 1870, the store had developed to an emporium, through its dedication to superiority and originality in fabric and outwears design. Burberry brought into market Gabardine a breathable, long-lasting and tear proof textile. The business later opened under a new trading name, Thomas Burberry & sons which introduced a store in the West end of London at 30 Haymarket. By 1914, the business introduced rings and trench coat and in 2002 saw the business launch trench coat service. Presently, the business is worldwide identified extravagance brand having a global network of distribution.
The company has continued to record increasing revenues for the last five years since 2007 (see appendix 1). The company’s attributable profit has been irregular as it varies from time to time. For instance, in 2007 it recorded a net profit of £ 110.2 million which went up to £135.2 million in 2008 and recorded a loss of £ 6.0 million. The company made a profit of £81.4 million in 2009 and 2010 but recorded a high of £ 208.4 million in 2011. The company recorded the highest net increase in cash and cash equivalents of £210.5 million in 2009 and 2010 and the lowest decrease of £19.4 million in 2008. The company has a net assets of £733.7 million presently which is the highest ever recorded. It s net cash stands at £297.9 million as at 2011 (Burberry PLC Annual Report, 2011).
Burberry is headed by Angela Ahrendts as the C.E.O and Stacey Cartwright as the vice president and chief financial officer. The chairman of board of directors is Sir John Peace. There are other 5 other non-executive directors in the company. Burberry attracts skilled employees from different countries and diverse locale settings. The human resource is dedicated to making a everlasting fashion and giving a personalized lucrative service. The team has a vast experience in the various fields of fashion design, innovative endowments and work towards the core strategies of the firm. Employees are given exemplas packages like healthcare, pension and discounts to products bought within the firm. Burberry is a world wide employer, with a London based headquarters and opportunities all over Europe, Asia and America. The available chances include wholesale and retail sales vacancies, operations like information technology and finance.
The company offers a range of products in fashion design which include: women’s wear, Men’s wear, men’s accessories, children wear, beauty, perfumes, home and gifts. Besides, the company has exclusive art of the trench and acoustics which differentiate it with the other firms in the same industry. Moreover the firm has set up various foundations to assist youth realize their goals in life through the power of innovation and creativity. The Burberry foundation identifies innovative programs to develop a strong link with altruistic organizations in helping youth to foster their connection with families, friends and society and build on opportunities in learning, life and career. As a result, the firm has influenced over 44 000 youth around the world, through its charitable contributions.
Market and risks
Burberry markets its merchandises to final customers through retail and whole feeds. For the year 2010/2011, the company recorded retail revenue of 64% and 29% from the wholesale. The group targets high income earners who can afford to pay for their inventions more comfortably. These potential customers include; top models, international celebrities like Lara Milanovic, high profile women and men among other wealthy clients in the world. The targets markets for the firm are being established in Japan through licensing contracts.
The firm also intends to get other license contracts through license partners globally, by leveraging their local and technical skills. The firm also uses franchisees to operate Burberry stores majorly in upcoming markets such as Armenia, Egypt, Israel and Mongolia. Burberry has great pride in its greater integration between strategy, product development and digital marketing. Some of their products are marketed using digital commerce to reach to customers who are not accessed to their branches but have a preference for their products. The group does apply price discrimination depending on the type of market or location or retail outlet used. The products are also priced depending on the technique or quality involved in making the design. The group’s price also considers their competitors’ pricing to avoid undercharging or overcharging the clients. The wider variety of products to choose from also defines the pricing strategy to use. Some of the raw materials like skins and leather are outsourced while others are in sourced hence applied in determining the pricing model.
Most important risks
The group values effectual administration and control of risks, to enhance delivery of their goals and objectives in achieving a remarkable shareholder wealth, and to safeguard its status and fulfilling the corporate governance principles. The risks may be internal to their control or external which is beyond their control. Some of the risks which the group does manage include; loss of key management or employees which would lower the group’s capacity to bring aboard its main strategies. In managing these risks the company offers competitive arrangements with particular structures designed to maintain key personnel. Through the management, the group conducts recruitment to identify talent and successively plan programmes for effective administration. Moreover, the group over depends on excessive information technology and operational framework of which its failure can lead to denial of service that could have a substantial impact on the group’s operation. This in turn can result into low reputation for the company due to negative social campaigns. In mitigating this, the group has put in place various controls to sustain the reliability and competence of the Group’s information technology. There are recovery plans and system security which are executed incase the IT system fails (Hollensen 2003).
What’s more, there are possible natural catastrophes like earthquakes and global epidemics like terrorist attacks. If the risk takes place in proximity to the locations of business it can really scare a way the customers. Therefore the group has in place continuity plans for the business to alleviate operational risks (Burberry PLC Annual Report, 2011).
The group also introduces their business in more volatile markets that are prone to varying economic, legal, social and political developments that may be above the control of the group. These risks may result into property seizure and high costs of operation given the regulatory environment. To curb this risk, the group employs the services of professional consultants to give directions on legal issues and the regulatory environment as to take due precautions before venturing.
Another risk is related to violations of ethical standards by the group’s staff and third parties. Hence this may lead to penalties, negative publicity and decline in sales and profits. In mitigating is risk, there is a corporate responsibility committee with the mandates to report any ethical violations and report on risks within the group.
Furthermore, the risk of overreliance on one chief supplier of which delay or disappointment in delivering any of these critical goods may affect on the operations. The group persists to reinforce its supply chain executive team to assist in reducing dependency on chief suppliers. The group also conducts yearly financial check ups to ascertain the capacity to deliver by their key suppliers.
The group distributes its products to 46 nations as at present but hopes to add more new targets on customary basis. The main distribution channel is via shipping where all the import duties and taxes are met by Burberry unless otherwise. The order for customers is tracked via the tracking number through the internet in all destinations in the 46 countries. There are free returns available globally for any unused product except for perfumes 30 days within the shipping durations; this is to promote customer loyalty.
The group markets it products through world trade fairs and exhibitions where different models display some of the latest designs from the company. This involves their partnerships with other beauty companies in organizing or sponsoring these worldwide events where potential customers from all walks of life view their fashion designs on displays. Similarly, the group has a well structured website which is updated with the latest designs and fashions around the world. Through the website, the group conducts e-marketing to reach to potential customers in countries without subsidiaries. Attractive display and promotion enhances the customer’s preference for the products. Moreover, the group publishes various magazines which are then distributed to various destinations in different languages to reach to reliable customers. The magazines have colored attractive designs of their products to influence the client’s decisions (Colin, 2004).
Burberry group applies a mixed model of operation where it distributes its products globally to 46 countries in Europe, America and Asia using various channels such as shipping and e-marketing. The group has subsidiaries in the 46 nations with it’s headquarter in London. The subsidiaries are headed and managed by managing directors who are appointed by the board of directors in the mother country. The online marketing has got online payment systems to enhance service delivery and customer satisfaction.
The company’s SWOT Analysis
Burberry operates on the foundation values: to defend, discover and enthuse. These are based on independent and meritocratic philosophy, alliance and relatedness contributing to the society by linking it via the Burberry foundation. The group has a variety of strength and weaknesses as well as in their external environment, opportunities and threats is available. Its strength includes ability to design, market and retail their products based on the strong networks build by the group in 46 countries. The group has also in place a digital focus and integration to boost online marketing of its products. Moreover Burberry has a diverse channel which comprise of retail, e-commerce, wholesale and licensing to enhance the distribution of its brands of products. The company besides, boosts of its multiple category of competency in manufacture of women’s wear, men’s wear, children’s wear and non-attire which makes it to be among the leading fashion and design firm around the world. Last but not least, the group has a pride in a global reach and balance across the main regions and upcoming markets. This is attributed by the 46 nations of their market niches around the world.
The weakness of the group lays in its initiatives to diversify their operations in other parts of the world. This poses great risks such as changing environmental policies and regulatory policies. If the policies are changed all over suddenly, then the group is at danger of losing plenty of their investments which might jeopardize their growth and establishment.
There are a variety of opportunities available to the group in the industry which include; liberalization of market through integration of trade. By opening up markets and international relationship between Europe and other countries in the worldwide, the group stands a chance of investing in under-penetrated markets to increase their customer base. Through integrated markets, the group can leverage their franchise and intensify their non-attire market. Burberry has an opportunity to accelerate retail-led expansion to boost the rate of penetration in under-utilized market in pursuing operational superiority.
For every company there must be threats from the outside environment. These threats impede the growth of the firm or slow down its diversification operations. Burberry’s potential threats include; there is an increasing variation in the regulatory environment which the group is required to comply. The countries in which the group operates may vary in debt and taxation policies. If the company may fail to comply, it may be prone to legal challenge hence high cost of operation. Besides, there is increasing competition which continues to mount pressure on the resources. Some of the competitors include; LVMH and Versace who fall in the same line of industry and both have a strong marketing strategies and large distribution retail outlets. Inefficient management to deal with the pace of change can unfavorably affect the organization.
What’s more, economic downturn as a result of reduced customer wealth in relation to negative economic conditions may affect the demand of the products, interfering with the supply mechanism. It may also result into huge indebtedness which would otherwise lower the sales revenue and profit margins. Similarly, there are potential cases where some private business persons may use illegally the trademarks and other property rights, especially in countries where the firm does not have a subsidiary. These trademarks are primarily significant to the reputation of the group and its success and positioning. This could adversely damage the image and profits of Burberry.
Concurrently, the predicted profits due to acquisitions and joint operations may not be recognized. This may be as a result of failure to analyze the strategic alliances and joint operations which may produce unfavorable financial outcomes. In effect the return on investment may not be realized.
In rivalry with Burberry, there are other firms like Coach and Gucci. Back in 2002 London Stock Exchange when Burberry floated it s shares the firm used to enjoy extraordinary growth. The revenues had a growing rate of over40 % while the operating profits increasing by over 80 %. In the near future Burberry management is dedicated to fabricate upon the impetus so that greater shareholder value over a long term basis is achieved (Qi, 2011).
Many consumers in Asia have a preference for European made goods though they are costly; they view them to be of better quality. Conversely, European Firms shift their production to Asia since it is less costly to produce in Asia (Lewicki et al., 2003). Therefore, consumers have more attention to the source of the products. Luxury product brands must however be cautious to conserve their icon. Most women have preference for luxury products especially those endowed with resources. The role of women is growing in consumption of luxury goods. For instance, Yuan in 2006 found out that 65 % of the female consumers use over 60 % of their monthly income to buy luxury products. The research also indicated that 45 % of total luxury product sales volumes were attributed to Chinese women. Their reason for purchasing the products is to acquire a status in the society for their success in finances at the same time to give themselves a reward (Radha & Husband, 2006)
The group has put in place a safe shopping guarantee for each transaction that the consumer makes. No personal information is shared with others concerning a customer in exception of customer’s permission. Burberry also covers liability of purchases that are channeled through its website in cases where unauthorized application of credit card impacted via no error. Moreover, the group does not distribute or ship any commodity ordered via the website directly to anyone known to be under 18 years (Francesca and Pamela, 2006). As a matter of fact, Burberry observes all social conditions and working conditions in obeying the ethical standards set out by the authorities. With increase in women empowerment there is a high tendency of women who are financially endowed to spent more money on luxury handbags, shoes, clothing and designer perfumes to elevate their status in the society. For instance, ladies who are celebrities, concentrate more on fashion than any other activity. As a result they create market for the produced goods.
The economic environment of operation for the industry is an international one. Hence it encompasses foreign exchange and therefore subjected to exchange risks. The main currencies in this industry are British pound, Euro, Japanese Yen and American Dollar. There has been fluctuation between the Euro and the American Dollar which might eventually affect the exchange rates hence impacting on the profit margin through the transfer risks.
Rapid economic growth and its prediction increase the market for the luxury products in the industry. This may be through increasing of consumer confidence and real income which calls for a close scrutiny of operational choices. This will generate a powerful competition which will promote the luxury market establishment (Yang & Lee, 2002)
Political and regulatory environment
Yuan, (2006) mentioned of a possibility of the government imposing control over significant sectors in China economy and new regulations for investment by foreigners. This will provide some aggressive investors opportunities but for the non-aggressive they do not stand a chance. There are tariff and excises policy which may affect the development of luxury products in the market. Some habitual consumers of luxury products may not give up on their consumption but the rate of usage will go down.
Moreover, tourism policy may encourage consumption of luxury goods. Countries like China are becoming richer and hence through government positive attitude for the foreign investors, the luxury products sales volume might be on the rise. Policies that fight counterfeits creates an avenue for the sale of luxury products as consumers will buy authentic products.
The role of women is growing in consumption of luxury goods. For instance Yuan in 2006 observed that 65 % of the lady consumers use over 60 % of their monthly income to buy luxury products. The research also indicated that 45 % of total luxury product sales volumes were attributed to Chinese women. Their reason for purchasing the products is to acquire a status in the society for their success in finances at the same time to give themselves a reward (Radha & Husband, 2006)
Economic development demands high technology application. For example with the introduction of Chinese markets, the effective operation of foreign companies is determined by the Chinese rate of e-commerce growth. The new luxury firms requires internet to widen their media coverage platform. Internet is a source of instant information search. In respect to China’s 21st Century Internet Development Statistics Report (2008) the total number of internet user in China clocked 2.1 billion individuals. That citizen between 18-25 years old accounted to 50 % of that figure. Through internet, luxury brands can be presented by application of audiovisual which will play a vital part in creating awareness for the end user. Besides, use of advanced technology on cards can inspire consumption of luxury goods due to increased credit card application.
SWOT Analysis table 1.
v Ability to design, marketing and retail their products
v Digital focus and integration to boost online marketing of its products.
v Diverse channel which comprise of retail, e-commerce, wholesale and licensing to enhance the distribution of its brands of products.
v Multiple category of competency in manufacture of women’s wear, men’s wear, children’s wear and non-attire.
v Pride in a global reach and balance across the main regions and upcoming markets
v Poor diversification strategies
v Liberalization of market through integration of trade.
v The group can leverage their franchise and intensify their non-attire market.
v Burberry has an opportunity to accelerate retail-led expansion to boost the rate of penetration in under-utilized market in pursuing operational superiority.
v There is an increasing variation in the regulatory environment which the group is required to comply
v There is increasing competition which continues to mount pressure on the resources
v Economic downturn
v The predicted profits due to acquisitions and joint operations may not be recognized.
v Illegal use of trademarks
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