Analysis on Burberry’s Competitive Position, Resources and Competences free essay sample

In the luxury fashion industry, Burberry has been developing when since it is created in 1856 in Britain. Main business that Burberry has is luxury goods manufacture, retailing and wholesales. So far the retailing stores that Burberry established in the world are more than 500 (Bruce Kratz, 2007). The products of Burberry are welcomed for its high quality, excellent design and good service. The development of Burberry has been going international as international markets are profitable. In recent year, in the luxury industry, competition is becoming fiercer and this is another reason why Burberry has to compete with other competitors in the international market. It is a good example for the discussion of competitive position, resources and competences. This paper will firstly analyze the competitive position and the business environment in the market. Following the discussion on the competitive position that Burberry has, this paper will evaluate the resource and competence that Burberry has. We will write a custom essay sample on Analysis on Burberry’s Competitive Position, Resources and Competences or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page As at the current stage, Burberry has been making efforts on expanding the business internationally with the focus on the Asia Pacific market as it is growing in the recent years. This paper will also assess issues and difficulties faced by international companies in implementing and evaluating the strategies as it is very important for Burberry to know what are the potential issues that they will have. Analysis on Burberry The fashion industry is now in competitive market as there are a lot of competitors are seeking for sharing profits in the international market. The competitive position analysis is very useful for Burberry as it helps understand the current market situation and contribute to the potential improvement on the business strategies. Burberry has position the products as ‘democratic luxury’ which indicates that Burberry does not strive to compete with the top luxury brands such as Louis Vuitton, Hermes and Gucci. The competitors that Burberry considers are brands like Emporio Armani, MiuMiu, Just Cavalli or DG. The positioning has determined the customer segment, pricing, marketing strategy and products. By identifying the positioning, Burberry is able to find the correct competitive strategy in order to compete in the difficult international market. From the statistics provided by the Annual Report of Burberry, it can be seen that revenue that Burberry has got in the previous two years of 2011 and 2012 have been growing despite the fact that the global economic crisis has been having great impacts on the consumption industry (Burberry Annual Report 2012, 2012). Regarding resource and competence that Burberry owns, it is very useful for understanding how Burberry is so successful in the competitive market. For luxury brand like Burberry, the competence that it has is on the products. The products that Burberry produces are of great design and quality which is important for this brand to attract customers and become sustainable in this market. Outwear for Burberry is the most important products as it is focusing on the apparel business. The Menswear is also occupying a great part of the wholesale revenue (Fill, 2009). The marketing strategy is usually based on marketing objectives. Marketing objectives determine strategies that will be designed and implemented in the business. For the success that Burberry has achieved, the effective objectives are very important. According to the Annual Report of Burberry 2012, it shows that revenue increase in Europe, American is not as high as in Asia Pacific, when it is compared to the year of 2011. But when considering that the global economic crisis is having great impacts on the consumption, especially in Europe and America, it can be concluded that the market in these two regions are growing well. Therefore the strategy that Burberry has for maintaining the business in European market and American market is effective. The Asia Pacific marketing is growing fast and therefore it is considered to be the focus in the next few years in terms of promotion and marketing. According to figures discovered from the Annual Report 2012 of Burberry, the revenue that Asia Pacific market got had increased 43% when comparing the revenue of 2011 to 2012. It seems that Asia Pacific market is having great potentials. So Burberry has set the objective in this market to increase the marketing efforts in order to get the best improvement out of the market. As under the economic environment, the Asia Pacific market has become very important as it is the business driving force for the profitability and opportunities in business. Low labour costs and manufacturing costs are also considered to be important. Burberry has developed its promotional strategy by combining traditional way of promotion and the digital promotion together. Traditionally, Burberry is using outdoor advertising, commercials on TV, newspaper and magazines to promote the products as for luxury industry usually invest a lot on advertising. The traditional advertising that Burberry has been doing is very visual and it is very effective. In addition, Burberry has adopted the new digital way on promotion. Online advertising and social media advertising has been considered to be effective in the advertising industry and therefore Burberry has included it in the promotion plan and marketing plan (Wemby, 2010). Burberry has firstly developed its own website in order to use it as a base to send out information to viewers and customers to the brand. In the recent years, Burberry also adopts the e-commerce into the website so customers and order the products through the websites and online payment is also made available for customers to pay for the purchase. Direct marketing method is also considered very important and Burberry has been using it for some time. Direct marketing methods include text message, newsletter and emails (Lannon, 1996). The advantage that direct marketing has is that it increases the density of interaction between Burberry and customers. The information sent to customers is effective and direct. In addition, Burberry is also using the direct emailing system to do research and survey in order to understand the needs of customers and therefore develop better marketing strategy or products strategy for them. Social media promotion has been considered useful in the marketing methods. Burberry has created its Facebook and Twitter pages in order to attract attention of followers and promote its concepts and products to wilder viewers (Shee Abratt, 1989). In addition, YouTube is also used to spread the information of new collection. When people like the information that Burberry shares, they are able to forward it to their friends and by this way, these videos are playing important role of spreading information. In addition, as smart phones have got popular in the recent years, Burberry has found it necessary to use this platform to connect with the customers therefore it has created an application for smart phones. The smart phone application – Art of Trench is used by Burberry in order for giving more information to customers. In the same time, it is a very useful direct marketing tool. This smart phone application is updating customers about the new collection or promotion for the products, and therefore it is very popular among its customers. So far, the global economic crisis is having great influences on the pricing of consuming goods. For Burberry, it has noticed that pricing is important as the market is still very competitive. Competitive pricing strategy has been adopted in order to compete with other competitors in the international market. But when comparing the pricing of Burberry with other brands, it can be seen that the pricing is among the high range. Though Burberry will lower the pricing in order to be competitive in the market, however it will not give up pursuing higher profits as the market for Burberry is growing and the target customers are whose who pay more attention on fashion and high quality (Chaffey Smith, 2013). From the analysis above, it shows that Asia Pacific market is having great potential for development from the statistics presented. Moreover, under the global economic crisis, exploring the potential customers and market. Though it seems that Burberry is confident about its strategy and future, it should neglect some difficulties that it is facing when expanding the business to other countries (Whatley, 2012). Social cultural factor is one of the most important external environmental factors that companies should consider when expanding the business internationally. At the current stage, Burberry has identified the Asia Pacific market as its most important market for the near future; therefore the expansion will be concentrated on the Asia Pacific market. As a brand originated from Britain, the corporate culture is in western style. The corporate culture is having great influence in every aspect of the business including the products and management. When expanding to Asia Pacific market, Burberry has to take the differences that Asia Pacific region has with the European and American market that Burberry has been familiar with (Smith Taylor, 2004). The most important difference that Burberry has to consider is the social and cultural differences. First of all, the management style and the management methods should be modified in order to fit the environment as for manufacturing and retailing industry, a lot of employees are involved. A certain degree of localization is needed in order to reduce conflicts between management level and employees. Human resource has been considered very important especially for Burberry that is in creativity field, the talents that need to be retained in order for the products and designs to be remained consistent. Western customers and Asian customers are having different sizes and needs for products. Burberry needs to modify the products in order to fit the needs of the Asian customers. In addition, cultural difference also has influence on the communication and promotion strategy; therefore local talents should be employed in order to avoid misunderstanding in the promotion campaign. Competition will remain high in the Asia Pacific market. When one market gets profitable, new entrants will enter this market in order to share profits. The current situation shows that the economy is going down and for enterprises’ survival they need to expand the market and the customers. A lot of companies in the same industry will enter the same market in order to gain profits. Competition strategy should be developed if Burberry wants to be successful in the Asia Pacific market. With the global economic crisis, competitors of Burberry will lower their pricing in order to attract more products and to compete with their competitors. As customers are usually very sensitive to pricing, so lowering pricing is the most effective method to adopt. However, lowering pricing indicates that the profitability is lowered compared to before. In addition, as the costs of manufacture are increased, it is going to be difficult for Burberry to maintain the same level of profitability even in the best performed markets. The global economci crisis brings a lot of financial issues to the global market. Because of inflation, the price of raw materials and the salaries for the workforce are both increasing. This is the reason why the costs of the manufature are increased (Moore Birtwistle, 2004). Moreover, when Euroepan and American companeis move greatly their business to Asia Pacific market, they have to take the changing foreign currency rate into account. For exmaple, the appreciation of Chinese RMB has compressed the profitability. In combination with the competitive pricing strategy, it is contributing difficulties for Burberry to survive in the Asia Pacific market. Political factor is also important for Burberry to consider when expanding the business to other countries. Political factor is usually referred to the way that government intervenes in the economy. Political factors included areas legal and taxation. For Burberry, the political factor that it has to consider is the VAT rates that different countries set when accepting the import. It is important to review the VAT rates because Asia Pacific has become the most important market for Burberry to explore in the future. At the moment, the VAT rates in the Asia Pacific countries are still favourable for Burberry’s business. However, with the global economic crisis, countries in Asia Pacific region might consider to increase the VAT rate in order to protect the domestic market as the importation will damage the domestic companies who are operating in the same industry (Okazaki Rivas, 2002). In conclusion, the difficulties that Burberry faces are the increasing competition in the market, the increasing costs and compressed profitability. Conclusion This paper takes Burberry as a case to study the international competitive position and the business environment as it has been expanding its business internationally especially to the Asia Pacific Region as it is defined as the region where most business potentials are found. This paper also evaluates the current strategy of Burberry. The current international business strategy is good as it correctly identified the target market and strategy. However even though the market is well identified and the strategy is well developed in order fit the demands of the market, there are still difficulties that Burberry will face when the focus of the business is shifted to Asia Pacific market. Cultural and social differences are important so Burberry has to take them into account when developing the products and the marketing strategies. With Global economic crisis and influence of inflation and exchange rate, the costs of manufacture will grow and the profits will be reduced. Moreover, with the political factor that government is playing the intervention role in the international business, the VAT rate might be raised in order for the Asia Pacific Region to defend the domestic market and business as too much importing is causing issues for the domestic market.