Burberry operates in countries such as India, Russia, Easter Europe and the middle East. These countries have a variety of legal and regulatory systems. Burberry uses the services of professional consultants to advise on legal and regulatory issues and to monitor ongoing developments. (Burberry annual report 2009/2010)
Burberry is attempting to move into Chinese market. However the security of contracts in China remains problematic. Foreign investors often complain of regulatory difficulties they encounter in enforcing local partners to adhere to previously agreed terms.Timothy (2008). Chinese law allows foreign companies to file legal suits in local court but many prefer arbitration because of concerns about the speed and impartiality of the courts. The spread of corruption in post-reform China has also affected the courts. Judicial staff in the largest cities (such as Bejing and Shanghai) has improved considerably during the reform years, but graft remains a serious problem in many provinces Timothy (2008).
Another political factor that influence negatively to the Group is the difficulty to get the visas for Chinese. Chinese tourist spend last year 350 dollar in UK .Barrett (2006)
1.2 Economic Factors
In 2009 due to a profound economic recession the global luxury market declined by around 9% and consumer confidence fell. (Burberry Market and Risk, 2011).
One of the causes is that a significant proportion of the Burberry sales are generated by customers who purchase products while travelling either overseas or domestically. therefore, shifts in travel patterns or a decline in travel volumes have affected trading results. (Burberry Market and Risk, 2011)
During the recession, Burberry shifted the product mix offered in the market by pushing the relatively inexpensive elements of the range whilst de-emphasising the more expensive elements.( The Economic Time 2011)
Burberry replaced its expensive jackets with its range of T- shirts in the windows of its Asian outlets during the region’s currency crisis. (Burca et al. 2004).
Burberry has had to restructure the Group’s operation in Spain because of the gradual decline in sales over the last two years with the loss of 300 workers. (Lopez, 2010)
In 2009 Burberry increased by 21% in Hong Kong sales due to the strong value of the dollar and the Euro versus the pound sterling.(Ruiz, 2009)
1.3Socio-cultural factors
Environmental factors effect Burberry as their customer pay a lot they expect fair trade items and items that are respectful to the environment. Burberry has kept a large proportion of production in the UK , which is in keeping with its roots and will hopefully keep the loyal customers satisfied. Jackson(2010)
The earthquake, and the nuclear power in Japan has impacted on Burberry who top the list of fallers, (5.4 per cent) as investors worried about the demand of high- end products.
(Young, 2008)Burberry operates 97 stores globally, with 231 concessions and 40 outlets. In 2010 the Group agreed to buy the 50 stores in China operated by its Hong kong-based franchise partner Kwok Hang. Jackson(2010) Burberry is to step up investment in new luxury market, such as Latin America as it seeks to build on the strength. As female shoppers are becoming increasingly fashion-conscious , fashion in India has become a vehicle for social identification (Atwal and Khan 2009)
1.4 Technological Factors.
Consumer now buy items globally via the internet changing the way products are promoted Burberry was one of the first brands to stream their catwalk show live and allow customers to order products they have seen on the catwalk. Jackson(2010)
Digital commerce- a newly-formed team, driving digital commerce globally to accelerate the brand’s digital leadership position in the luxury sector and help unlock the opportunities in this high-growth channel(Burberry annual report 2009/2010)
Burberry is committed to creating a seamless link between the physical and digital presence of the brand and increasing the multi channel proposition. (Burberry annual report 2009/2010)
In e-commerce, Burberry achieved 60% growth in the year bringing this commitment to digital technology in-store .(Burberry annual report 2009/2010)
INDUSTRY ANALYSIS
3.2.1 Entry Barrier.
Brand name can be important entry barriers as they create greater customer loyalty, which provides security of demand for the company. Kolter et al.2009. Burberry try to focus its brand on a specific type of customer. However in mid-2000s, the company’s products become to be more popular among a less desirable clientele or the wrong type of celebrity. Rigby( 2011)
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During that period the signature Burberry check print went from being a sign of discreet wealth to one of vulgar ostentation Rigby(2011). The company has managed to turn it’s imagine round since them by introducing a distinctive luxury brand with a clear design, merchandising, marketing and distribution strategy, appealing to new, younger, fashion- forward customers and retaining the traditional customer base( Burberry IPO Prospectus,2002)
We believe that with the new brand strategy the company is creating a strong brand value by diversifying their product with unique branding and a distinctive identity. ( www.burberry.com) This give the company large amount of publicity and credibility among customers that is not easy to match.
3.2.2 Substitutes.
Burberry covers almost everything in the fashion apparel industry: women wear menswear, soft accessories, shoes, cosmetics and youth- trendy.(Burnerry annual Report 2009/2010) However substitute products that can replace Burberry products pose an obvious threat to the group and other competitors in the industry. Burberry substitutes can be found in the Spanish company “Zara” which offer similar product at lower prices and good quality. (www.zara.es).
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3.2.3 Supplies.
Burberry strives to achieve the highest quality standards in all components and stages of its supply chain process. The Group has been working to address issues deeper in the supply chain including raw material and subcontractor level of the supply chain (Burberry annual report 2009/2010)
Burberry believes that its products should only be made in factories that comply with local labour and environmental laws. Burberry suppliers are governed by its Ethical Trading Policy that sets clear expectations regarding issues. This policy is based upon internationally accepted codes, International Labour Organisation. (www.burberry.com)
The majority of Burberry’s products are manufactured in Europe through third-party suppliers. All new Burberry suppliers, regardless of location, must be approved by the Corporate Responsibility team prior to production taking place.(www.burberry.com)
3.2.4 Buyers
Burberry has different lines and sub-brand each one for a type of buyer. Burberry London is a modernised offering for the classic clients. Burberry Prorsum is very fashionable and modern, Tomas Burberry is aimed at teenagers. As Burberry is a luxury brand their customers buy products and expect quality and exclusivity.(Burberry annual report 2009/2010)
3.2.5 Competitors
Polo Ralph Lauren is a major competitor for Burberry which operates also in the luxury goods market (Alvarez, 2011). The group began with flamboyant ties has extended the brand to everything from luggage and polo shirts to women’s handbags and perfume. The Financial Times (2010).Polo Ralph Lauren offers not only similar products to Burberry but also they have similar presented styles of campaigns.
Its competitor, Ralph Lauren also uses e-commerce to sell more products and get more consumers. Ralph Lauren attempts to compete with Burberry in product quality and in having the same product segmentation The Financial Times (2010)
INTERNAL ANALYSIS
3.3.1 IT integration and communication technologies
Through the integrated effort of its Marketing Creative Media and IT teams, Burberry has built sector leading expertise in the digital media arena (www.burberry.com).Burberry created a webcast that allowed consumers to purchase runway items for expedited delivery (www.burberry.com). The firm is using e- commerce technologies which mediated exchanges between parties as well as the electronically based intra or intergenerational activities that facilitate such exchanges (Gay et al. 2007). The Group has established social media platform, creating new communities of interest. In fact Burberry has implemented a global communication infrastructure with over one million fans on Facebook (www.burberry.com).By using SAP software the company’s entire business data is integrated in a single system, and immediately available to all of the other department of the company for further processing and evaluation Schich.and Schmieden (2001 ) The system was deployed in the USA operations in April 2009 in most of Asia in May 2010, Nowadays approximately 90% of Burberry’s stores are converted (www.burberry.com). I believe that Burberry will strive to gain technological superiority in the industry; as the company introduced the brand in the technological business.
3.3.2 Human Resources
The Burberry Human Resources team focus on recruiting, retaining and develop world class employees around the world.A commitment to diversity and respect for all is a key foundation underlying the Burberry culture and its success as a global luxury brand. Not only through its geographic footprint, but also through its workforce. In the global headquaters at Horseferry House, Burberry employs nationals of 39 different countries from the five continents (www.burberry.com).with equal oppertunities for men and women. Burberry won the Female FTSE 100 Award’ as well as the ‘FTSE Executive Women Award’ in 2010.(Burberry annual report 2009/2010) The Board health and safety audit process and programme that ensure Burberry healthy and safe environment for all employees and customers (www.burberry.com).
3.3.3 Production and Procedures
All new Burberry suppliers must be approved by the Corporate Responsibility team prior to production taking place. (Burberry annual report). In 2009, Burberry launched its Corporate Responsibility Handbook which was distributed to all suppliers, providing additional detail and guidance to assisting suppliers with integrating our policies into their management systems. Burberry adopted a participative and collaborative approach with the group supplies. Burberry is a founding member of the BSR Sustainable Luxury Working Group( Burberry annual report 2009/2010). Burberry was established to explore common approaches to collectively address material Corporate Responsibility issues specific to the luxury sector like the use of exotic skins.
3.3.4 Distribution
In other to reflect the exclusively of the company brand, Burberry has changed their management distribution policies and withdrew stock from all European stores deemed unprofitable. Burberry has closed accounts in Asian countries in order to prevent firms selling Burberry goods not purchased by the company (Burberry individual report). Prices are kept consistent and Burberry stresses the need for visual merchandising within stores. By using the outlet and factory stores, Burberry is also able to sell products made from surplus fabrics and products with minor imperfections, therefore keeping wastage to a minimum whilst attracting consumers who may be priced out of purchasing regular stock (Daily Mail 2005).
3.3.5 Marketing and sales
The re-branding of the company began with a new brand logo and name change (from Burberry’s to Burberry) and sought to alter the current, moribund perception of the brand by employing a striking new advertising campaign, using popular fashion models and photographers.( (Daily Mail 2005) In addition, window and interior designs in stores are crucial factors in presenting a correct image. Burberry also increased its market presence by launching a seasonal brochure and web site, and focused on leading lifestyle and fashion publications for its twice yearly advertising campaigns, ensuring the advertising focus on brand image (Daily Mail 2005). Burberry marketing difficulty is to stay ahead of the competition creating innovative ideas through a open-plan office (Lauer 2009). Burberry plans to place greater focus on digital marketing .It intends to re launch the website this year. The Group also launched a consumer website, which aims to celebrate Burberry’s iconic trench coat Thomas (2009). Burberry has showrooms in London, New York, Milan, Barcelona, Düsseldorf and Hong Kong. Burberry uses different iconic actress or model to sustain its brand (Emma Watson, Kate Moss).
Recommendations:
Burberry strategy of production is based on quality. However they should look for scale economy in order to increase their profit in the future. Burberry should establish quality control strategies are introduced in their manufacturing companies worldwide, to ensure product quality that the customers expect. Burberry should also look into the possibility of using synthetic material instead of animal fur, to promote animal protection and gain the recognition for the public who are against to use animal fur. We also recommend Burberry to change their packaging according to their different market portfolio. It will help Burberry differentiation strategy.
FOUR P’s
In this part, the different marketing instruments used by Burberry will be compared with that used by their competitors. The most important marketing mix instruments are known as four P’s; product, price, place and promotion (Hoffmann, 2005). In Burberry we believe that product and place are the more relevant.
Product:
Burberry product strategy is based on elevating the brand span all consumers. In 2009 Burberry once again included on Interbrand’s list of the Top 100 Global Brands 2009.
In order to make the brand more accessible to the market, Burberry has decided to diversify their product market and portfolio. It strategy provide more flexibility and responsiveness.(Moore and Birtwistle).
In order to prove Burberry product quality the group has product guarantee. This provide Burberry with a competitive advantage because this increase consumer confidence .The role of the customer service for Burberry is very important they believe that such service can provide greater customer satisfaction and greater loyalty to the brand. They have customers support in their web side where the customers can keep in touch with the company at any time of the day and also a telephone number that is operative from 9 to 6 all working days.(www.burberry.com)
Burberry uses a range of colour for its product and the most famous are red, black and camel. The brand wants to reduce stocks in order to guarantee sales (Dubitsky et al 2011)
Place:
Burberry has decided move to new luxury markets such as China, Russia, India ,The Middle East, Brazil and Mexico where the luxury as a concept is defined within the scope of socio-psychology as a result of its connection to a culture, state of being and lifestyle, whether it is personal or collective. Burberry sees in such a countries the perfect link associated with their brand by a recognisable style, strong identity, high awareness and enhance emotional and symbolic association.( Okonkwo 2009)
Burberry place strategy is only focus on preserving the brand image for example in Barcelona it was situated in one of the most famous boulevard called Lima, with this strategy the group wanted to be better accessible than their competitors. Perez (2009)
Burberry uses locations strategic in Madrid as they are situated beside plush restaurant and another luxury brand shop with this strategy. Burberry attracts customer from other luxury brands and create a high recognition brand. (Rumeliotis 2011)
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www.zara.es
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