Burberry Analysis

1 January 2017

The fashion world is well known for the exclusivity, luxury and high prices. A high fashion brand, represents style and important to the few that can effort to wear it. But the market for fashion is bigger than only the super rich. A global fashion brand must reach out to as many customers as possible, whit out loosing the value and exclusivity it possesses. This demands a very clear and well coordinated business plan, together whit some talented designers. But a well selling luxus brand just doesn’t happen overnight. It takes years and decades to build up the reputation and image that a fashion brand represents. A brand that has the history, exclusiveness and reputation of a real global fashion brand is Burberry.

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Burberry was founded in 1856 by Thomas Burberry, when he opened a store selling men’s outerwear. He develops a fabric called Gabardine, which was weatherproof, breathable and resistant to tearing. This was the start to Burberry success. The fabric was perfect for the British Army and Burberry designed the famous Trench coat. Soon after the know world famous Burberry check was developed, for use as a easily recognizable pattern in the lining. Because of the quality fabric gabardine, Burberry got known as the explorer’s best friend and is still today a brand that symbolizes quality for the world traveler.

But it has not been whit out troubles along the way. Fast growing and poor management of values and quality made Burberry lose some of the exclusivity and image they once possessed. But they regained control and turned the company around, making it one of today most sold high fashion brand. This is exciting in its simplicity, but the real excitement lies in how they did it. This is what I will analyze and describe in the following project. The Old structure 3. 1 To understand the company’s success today, we have to know the past and where it went wrong.

Therefore we have to find the key problems and analyze the company. Then we can see where the company started to lose control and later compare it to the Burberry today. I will base the analyses on different business strategies such as the marketing mix – the 4 P? s (product, price, promotional and placement), Supplier relation management, together whit Ansoff? s generic strategies for growth and Porters Three generic strategies. Burberry is a luxury goods manufacturer, wholesaler and retailer that operates in Europe, the Middle East, America and Asia Pacific.

Burberry designs, sources, manufactures and distributes luxury men’s, women’s and children’s clothing and non-apparel accessories globally through its own retail stores, concessions, online and to wholesale customers and franchisees. Burberry also licenses third parties to manufacture and distribute products using the ‘Burberry’ trademarks. External environment 3. 2 In 1964 Burberry made licensing and wholesales agreements whit the Japanese retailers Mitsui (licensing) and Sanyo (wholesale). Mitsui is today Japans largest general trading company, whit expertise in textiles.

Burberry and Mitsui have just made a 20 year long licensing agreement. This solidifies the key relationship between Burberry and Mitsui in one of the most important geographical markets today. But in the past the licensees agreements between Burberry and Mitsui and Sanyo was very vain and Burberry had only limited control. Mitsui and Sanyo had a lot of subcontractors and were distributing the Burberry brand to many under quality manufactures in Asia and Japan. The demand for the high fashion brand Burberry was large and the manufactures flooded the market, whit garments and accessories of poor quality.

Also because the wholesalers sold to unauthorized distributors, thru parallel trading, the garments were distributed whit out any respect for the brand. This put Burberry in a bad spot light, because as a brand, they represented the values of quality and stylish goods, for the world traveler. As a customer of Burberry, you want to be able to go in to any Burberry store in the world and find the goods of a consistent and high quality. The relationship management between Burberry and their supplier was almost not existing, and no common goal ore value was agreed.

This ends out in an erosion of the brand? s image. Whit’s means that the brand? image is being undermined, by the sales made through wholesale members to unauthorized distributors Also called parallel trading. As the brand looses value ore image, the customer does not want to pay the high price the product. One of the 4 P? s (price), in the marketing mix. Still the market in Asia was one of the markets that Burberry had its main profit on, (75% of all sales) special in smaller goods and accessories. Therefore there was no change in the management of the Asian market strategy. But when the Japanese economy made a turndown in 1990, Burberry lost a lot of profit on the Asian market. Products and placement 3. 3

Another mistake Burberry made was the placement of their product. In 1997 the brand was available in 60 different stores in central London. But the brand was not represented in any of the most prestigious stores, such as Harvey Nichols, Harrods and Selfridges. When a brand is not available in stores whit the image of luxury, it loses the customers segment that are representing precise the values, that Burberry would like to present true their products.

The product line had over the years narrowed down to a small line of the old core products (the trench coat, outerwear and winter collection) and a enormous line of product on 100. 00 units, that was whiteout any serious product line management. Therefore Burberry lost many of its customers. The basic segment of customers was mostly elder men and Asian tourists. (product and promotion) The combination of bad licensing management, the economic turndown in Japan and product placement, meant that Burberrys annual profit had gone from ? 62 million to ? 25 million in 1997. A decrease that cut not be ignored and therefore the current owner, Great Universal Stores (GUS), hired the president of Saks, Rose Marie Bravo as the new CEO.

Rose Marie Bravo had 25 years of experience from Saks Fifth Avenue and started to headhunt talent from the industry. “ I needed people who knew what it took to succeed in a retail environment, people who knew what customers wanted, what price points people wanted, where the gaps were. ” -Rose Marie Bravo In this short quote from Mrs. Bravo, She tells us the plan for Burberry. By identifying The gaps and analyzing the market, Burberry cut reposition themselves in one of those gaps, while keeping their brand image. She made the Burberry business model, which comprises four interrelated dimensions.

Manufacturing and sourcing. 3. Distribution channels. 4. Marketing communication. This is very similar to the 4 P? s we use for making a marketing strategy, also called the marketing mix. Products, price, placement and promotion. The 4 P? s a way to look at the customer’s needs and how the products can satisfy their needs. This gives your business an advantage, compared to the competitors. Furthermore it can make your products stand out, compared to similar products, and create loyalty to your brand. In a fast changing business as fashion and whit product that are so transient, it is important to create brand loyalty.

If your supply the customer whit well designed products of high quality and they find the service of the brand/ business satisfying, they will most likely buy more products from your brand. Loyal customer is also less price conscious and will see your product as an investment. I will base my analyses of the structural changes of Burberry, on Mrs. Bravos “Burberry business model” and the marketing mix. Marked and business scope. 4. 2 To find a position for your business and identifying a niche for your brand, we can use Porters three generic strategy.

Porters three generic strategy is a part of the portfolio matrix, used and associated whit the Boston Consulting Group (BCG). “The portfolio mix is used to establish the best mix of businesses in order to maximize the long- term earnings growth of the firm. ” In Porters model we focus on cost and differentiation. Product mix or the Product portfolio. The price on the product is in Burberrys is effected by multiple factors, called cost drivers. There is of course the price for making the products, and value added thru the value chain, but there is also the factor, of the value of the brand image.

The value of a brand is intangible and is develop out of the image, it represent true sale to customers. The image of the brand is impossible for competitors to copy and therefore, it also separates the brand from other brands in the same product and price class. Therefore we can take the brand and the price of the existing products and find new markets to explore and penetrate. We take Burberrys product line, the prices on these and compare them to exciting brands.

In comparison a male polo shirt from Burberry cost 70?. In accessories there was also a market for Burberry. The price for a leather handbag from Coach is 298? and from Gucci a similar product is 790?. The price for a leather handbag from Burberry is 495?. (Of course all prices can variant from the design and type of products. ) Know that we have established that there is a market segment, that Burberry can target their product on it is time to clarify the objects of the business. An object describes the aim for the business. Burberrys aim was to repossession themselves in the fashion world, by being different from the competitors.

Differentiation of Burberry, compared to other brands meant that Mrs. Bravo had to determinant the image and vision of Burberry. Together whit Pat Doherty, the senior vice president of marketing worldwide and Michele Smith, head of woman’s wear, they defined the image of Burberry. (Their vision). Burberry vision is to stands for accessible luxury good. With the promise of a functionality, classic, quality, chic and whit the touch of the heritage of the aristocratic England, designed in the products. The marked is there, but it is not enough to have a place to sell your products.

You also have to customer that will buy your products. To target your products to the right customers, we have to divide the market in to segments. In every segment there is a unique group of customers, based on characteristics such as age, gender, geography, need and income. In Burberrys case they wanted to appeal to new, young and fashion forwarded customers. Products 4. 3 The new talented task force had found the visions and business scoop for Burberry and that there was a marked for them to penetrate. They now needed to focus on whit’s products they wanted to promote the new Burberry brand.

One of the first changes the product base undertook, was to cut down the number of product from 100. 000 to 24. 000. Keeping only the products that would enhance Burberrys new vision to the customers. Mrs. Bravo also hired a new design team to redesign Burberry? s traditional products and to design a range of new products whit Burberrys new vision in mind. To help deciding about new products we can use the Product mix or the Product prortfolio. It helps us to manage existing products, the elimination of obsolete or nonprofit making ones, and the development and introduction of new products.

The product portfolio also helps us to make long term strategies and design product lines. Product lines are individual products items that are closely related to another product item. Such as a fashion collection. A collection or a product line motivates the customer, to buy more than one product. The collection is designed so the items can be put together; whit more items of the same collection and thereby makes a complete outfit. In Burberry? s case they stared to whit classify their product, as either continuity or seasonal. In some cases, a seasonal product can become continuity, if the demand extends beyond the season.

The product range extends from men’s, woman’s and children’s apparel and accessories. To analyze existing and new products we use a model called the product portfolio matrix. This categorizes the products into one of four different areas. The horizontal axis illustrates the Market share. Is shows if the product being sold, has a low or high market share compared to the competitors. On the vertical axis the market growth is illustrated and shows, if the numbers of potential customers in the market growing or not or the market attractiveness.

By nalyzing its current product portfolio, Burberry can decide which products in the portfolio they should investment more in, or if the product is nonprofit making and shout be eliminated. It also helps to develop growth strategies for new products. The four areas are as following. Stars are high growth products on the market or marked leaders. They have great potential in the future, if they are managed right. They are typical generating large amounts of cash and are represent the best profit opportunity available the company in the short term. Compared to the competitors, the star product are relatively strong.

Often they need heavy investment to sustain their growth in the form of capital expenditure and increased working capital. Eventually their growth will slow, and if they maintain their relative market share, they will become cash cows. Cash cows are slow growing products, with a relatively high market share. They are a stabile provider of cash and are mature, successful products, with relatively little need for reinvestment. They need to be managed to keep making profit, but will continue to generate a strong cash flows. The profit it generates can be used to finance the stars, helps to pay dividends, research and development and marketing.

The cash cow is in some way the foundation of the profit in a business. Question marks are products with low market share, but which operate in a high growing market. They have potential, but require further investment, in order to grow in market share. Because of the high growing market but low market share, the question marks sometimes require more cash than they are able to generate them self. If the question mark is not managed right, if plus their market share does not increase and the market growth slowdown, it will become a dog( see below).

If the question marks are managed right it can become a star and maybe later turn into a cash cow. But heavy investment has to be put in the question mark, to gain market share. The segment of the market, the question mark product is available in, is most likely dominated by a more powerful competitor. Management need to think hard about “question marks”. Which ones should they invest in and which ones should they eliminate. The term “dogs” refers to products, which have a relative low market share in an unattractive, low-growth market. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in.

If investment is put in to the dog, the amount of profit is most likely not worth the work and investment they have put in it. It is what we call a cash loser ore a cash trap. Often the company will phase the product out of production. When dealing whit the four types of products, there are normal four strategies for each type. The first is to build Shares. The company can decide to invest it attempt to increase market shares. For example trying to turn a question mark into a star. Number tow is to hold. Here the company invests, just enough to keep the product in its present position.

The third possibility is to harvest. Here the company reduces the amount of investment, in order to maximize the short term cash flows and profits from the product. This may have the effect of turning Stars into Cash Cows. Number four is to divest. The company decides to eliminate the product, by phasing it out or selling it. As a business you wood of course like, if all your products to be stars and cash cows. But in the fast changing world of fashion there is so many collection and products are presented, there will eventually be some of the product, which falls in the other categories.

Burberrys solution is to have a broad product range and to keep the classic styles in many of their designs. The product lines. 4. 4 Today Burberry continues to protect its classic core market, by adding innovation to the existing designs for the current customers, while still attracting new customers to the brand whit fashionable and functional products. Burberry categories all their products and brand icons through a strict product range hierarchy. The product range of Burberry is divided, in six key brand levels. Burberry Prorsum is the couture/ high fashion product line that focus on fashion shows.

The products are made in a limited quantity to secure the exclusivity of the line. The design of the Burberry Prorsum line is affecting the design of the other “lower” class lines, that are in the Burberry product lines. Therefore you will see that some of the patterns, silhouettes and prints are the same in the different lines. The Burberry London line is the companies Pret- a- porter or core ready- to- wear range. It is presented in tow collections for the spring/ summer and the autumn/ winter. In the past Burberry range was concentrated around outerwear, because of Burberrys heritage in ex. the Trench coat.

However in the attempt to penetrate new markets the new collections also include apparel for warmer climates. Both for woman and men the ranges now include swimwear, as well as complimentary accessories lines, such as shoes, bags, sportswear and sunglasses. Under the Burberry London line there is made two separate designed lines based on the segmentation of the markets in Spain and Japan. The design is fitted to satisfy the needs, in the markets the line is sold in. The two lines in Japan is called Burberry Blue line and Burberry Black Line. The lines are still classic, but are adapted to the fit requirements of Japanese consumers.

The accessory range is also incorporated in the Burberry brand and is one of the lines that are showing the largest growth, in profit by procent in reason years. The accessory line increased by 34,7% from 2002 to 2003 in comparison to the womanswear that increased wit 19,7% and menswear whit 8,9% in the same period. Thru the different lines and collection the Burberry brand have secured multiplied representation in different international markets and different segments of consumers. The lines make Burberry flexible and adaptable in a fast changing market.

The broad selection of product in different price classes, gives the customers the opportunity to trade up and “down” between the various brand levels. Manufacturing and sourcing. 4. 5 In order to reposition Burberry as a luxury fashion brand, the structure of the designing, manufacturing and sourcing, had to be redesigned. Today it is Christopher Bailey, that is responsible for designing the Burberry Prorsum collection. The London based design team is responsible, for the design of the Burberry London range and they also oversee the design of other Burberry brand lines and ranges.

They are for example in regular contact, whit the local design teams in Japan and Spain. This is to ensure that all variations of the Burberry brands are designed and presented in a consistent and coherent manner. The Burberry Prorsum collection is the design that all the other Burberry lines are looking at, for inspiration and direction. Burberry also worked hard to ensure the integrity of their brand, so it would remain the same globally, by reducing its use of outside licensees. It owns all of its retail stores (except those in Japan), thereby making it easy to control the quality of its products.

Product manufacturing is managed through a mix of external and internal suppliers. The manufacturing of Burberry garments and soft accessories, to the Burberry London collection, are done in the company’s own weaving fabrics. Raw materials for the Burberry Prorsum collection, are mainly from a limited numbers of European suppliers. Burberry also remains in full control over the purchasing of raw materials, by buying either directly or by third party manufactures, whist have been approved to bear the Burberry name or Burberry trademark.

In Japan exclusive manufactures are working close together whit Burberry to secure the high quality of the products. The two main licensing partners in Japan are Mitsui and Sanyo. Both licensees are exclusive responsible, for the design and manufacture of the Burberry London collection. As part of the deal between Burberry, Mitsui and Sanyo, they are both responsible for the management of 18 other firm in Japan. For monitoring the 18 sub licensees, they receive 20 procent of the royalties that Burberry receives from the sub licensees.

The use of the near- to- market supply chain management, makes the production very flexible, but it have also the advantage of eliminating the logistic problems, there can accrue whit a global supply chain. Most of Burberrys logistic activity is manage in- house whit warehouses in England, USA, Hong Kong and Barcelona. The latest improvement in the supply chain, is software improvements have been particularly targeted at the Spanish market. Distribution channels. 4. 6 The distribution of the various Burberry bands is managed through stores (retail), wholesalers and through license agreements. The retail is based on four types of stores.

The most important is the Burberry flagship stores, there is located in London, New York, Barcelona, Milan, Dusseldorf and Tokyo. The serve as showrooms, for potential wholesale stockiest and the fashion media. In the flagship store the wholesale customer, have access to all the various Burberry collections. The tree other types of stores are normal stores where the various Burberry brands are being sold to the primer customer base. This include some outlet stores where product whit minor imperfection are sold. The wholesale distribution is the channel that reaches out to most costumers.

The brand was represented in app. 100 stores in 2002 and includes prestigious department stores, specialist fashion retailers and duty free retailers. The licensee of Burberry is only taking place in Japan, in cooperation whit Sanyo and Mitsui. They are jointly responsible for the wholesale distribution of the Burberry brands across Japan. Sanyo owns and operates the Burberry flagship store in Tokyo that are presenting the entirer Burberry collection, including the Burberry Prorsum. This cooperation between Burberry and their licensees has the great advantage, that it minimizes the risk of operation abroad. Marketing communication.

In the relaunching of Burberry new image and lifestyle, there have to create interest among the customers. The new image was put together whit a team of talented photographers and skilled marketing manageress. The entire Burberry marketing management is controlled by the London marketing team. This is to generate and sustain a coherent brand identity on a global level. There are three core types of marketing in the Burberry model. Advertising, fashion shows and editorial placement. One popular theory for how to do successful advertising, is the AIDA model. It stands for Attention, Interest, Desire and Action.

Whit a strong focus on the companies heritage and history of the iconoclastic British image, Burberry launches a advertising champagne twice at year. It is based on the delivery of the seasonal collection to their retailers and stockiest. This creates the attention to the new collections and the Burberry image. Next step is to create interest towards the product mix. This is done in the fashion shows, which are presenting the new collection and draw international media coverage. Editorial placement is also are part of creating brand awareness and aims to maximize the worldwide editorial coverage.

By presenting the collections thru different types of media, Burberry will create much more inters to their customer base. At the relaunch of Burberry, some of the most popular supermodels was used. The models was chosen, all represented the values that Burberry now was representing. The use of models like Stella Tenant and Kate Moss was to create a desire for the customers. That they will feel the need to buy a product by Burberry, because they feel related to the image that Burberry are presenting. In the end, the combination of attention, interest and desire will make the customer hopefully takes action and buys the products.

This project was made to analyze and identify the dimensions of how a company like Burberry, was able to turn a sleeping business, into the success they are today. By defining the elements that was holding Burberry down, the new chief executive Rose Marie Bravo redesign and relaunced Burberry in the luxury fashion world. Using different business models as the 4 P? s, Porters generic strategy we found the market Burberry cut position themselves in and what costumers to target. The new blend of product and was found, by analyzing which products was representing the new image of Burberry.

By using the BCG model we cut analyze the different product and determent if the products wood need investment, are doing well on the market or if the product shot be taken out of production. The old distribution channels were out of control and a new strategy was laid. Coordination the distribution whit the retail, wholesale and licensing partners made Burberry able to supply a flexible and stable product range in the fashion world. The development that Burberry has made in Brand image, is based on defining new clear values and finding the visions of the company.

In the same time taking care of the old values that Burberry stands for. Thru clever marketing Burberry now is presented, as one of the most credible luxury fashion brand in the world. The final issue is now to sustain and develop a healthy business in the long term. The fast changing and very competitive world of fashion, is a ongoing challenge for Burberry. But whit careful planning and innovation, Burberry will remain its position, as one of the leading luxury fashion brand in the world.

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