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Case Study on Abercrombie and Fitch Company- Assignment

   

Added on  2019-11-29

8 Pages4056 Words771 Views
Question 1 (Internal Analysis)Drawing on strategic capabilities models, conduct an internal analysis on Abercrombie Fitch. Inyour view, are any of the core resources and core capabilities under threat? Justify your answer(400 words)Abercrombie and Fitch Company have roots back in 1892, when the founder members Davidand Ezra started the company in New York. The company began its journey as a supplier ofcamping equipment, guns, excursion goods and sports tools along with fishing rods. After a lotof changes in the products of the company, Abercrombie and Fitch Company finally gotestablished in the market as retail clothing brand. By 2012, Abercrombie and Fitch Companyhave grown as one of the most popular clothing brands. The philosophy of the company isfocused towards creating a unique brand experience for the customers (Kumar and Kim, 2014).Recently the company has introduced the concept of direct-to-consumer operations and lookingforward for expansion in international market. It is important to look at the internal capabilitiesand weakness of the company before making a strategy for expansion. Here is a SWOT analysisof Abercrombie and Fitch Company:Strengths:The strength of the company includes its vast experience in the domain of retail. Ithas a clear, segmented and established target market along with a stable base of loyal customers.The brand image of the company is well-known for providing unique store experience to thecustomer. The company has successfully maintained its position as a luxury brand in the marketand customers are willing to pay premium cost to buy products of Abercrombie and Fitch. Theexpansion plans of the company till date are proven successful especially the recent expansion inEngland as quite profitable. The company is running 84 international stores located in Spain,Germany, Belgium, China and Ireland since 2012.Weaknesses:The branding and positioning of the company are quite out-dated in the digitalretail market. Due to changes in the retail shopping, the company launched the store on an onlineplatform which has hampered its business in the retail store and the core strategy of the companyabout providing ‘shopping experience’ seems to be failed. The company has to shut down morethan 180 stores based in the US due to underperformance. The lawsuit against the Abercrombieand Fitch in 2003, regarding discrimination during the hiring process, has developed its badimage in the market (Koehler, 2017). The gross profit rate of Abercrombie and Fitch wasrecorded to be going down in 2011. As the company missed the projected estimates of WallStreet, the shares of Abercrombie and Fitch saw a major pricedecline.Opportunities:The Abercrombie and Fitch can boost its online presence and can save theexpenditure of maintaining huge numbers of retail outlets. The expansion of the company in thenarrow and segmented market is likely to improve the sales revenues. Abercrombie and Fitchcan utilize the opportunity of celebrity endorsement and other online marketing technique toestablish a strong brand image among online customers (McCormick and Livett, 2012). The

online presence of Abercrombie and Fitch improves its functioning in the international market.Although various online retail companies are trying to attract customers based on the discountstrategy, Abercrombie and Fitch have successfully maintained its image of the luxury brand inthe market.Threats:The closing of the retail outlets is a threat for the company as it is conflicting to itsmotto of providing ‘unique shopping experience’ to the customers. The competitors which areoperating online with seamless apps are a real threat for the company as it is quite new on theonline platform. The increasing options for online shopping for the customer may have anegative impact on the loyal customer base of the company.Question 2 (External Analysis)Using the PESTEL framework, critically discuss the impact of external forces on the company.(400 words)The external environment of the company has a significant impact on its profitability. In the caseof overseas expansion, it is important to consider the external factors such as political aspects,economic background of the country, technological changes, social aspects, legal formalities andenvironmental forces. Here is the PESTEL analysis which discusses the external forces whichare affecting the working of Abercrombie and Fitch Company.Political forces:The stable government of US supports the interrupted functioning of thecompany. The expansion of Abercrombie and Fitch Company in the countries like Spain,Germany, Belgium, China, and Ireland has considered the stable politicalsituationsin the hostcountries. The governments in these host countries are supporting the global business strategyand thus inviting the companies to do business on their land. While focusing the other Asiancountries Abercrombie and Fitch Company has to consider the politically stable countries likeIndia to ensure the secure business situation.Economic forces:The economic growth of developing countries has supported the expansionstrategy of Abercrombie and Fitch Company. The increase in spending capacity of the peopleliving in developing and Asian countries has now made the Abercrombie and Fitch Companyluxury products affordable for them. During the recession period Abercrombie and FitchCompany sustained the brand of luxury products and thus it has loyal customers who areinterested to spend more for a quality product. The changes in the economic environment,however, affect the sales figures of the company as not every customer is interested to buyluxury products during an economic slowdown. Thus, Abercrombie and Fitch Company will notbe able to attract new customers and it will difficult for the company to retain the existingcustomers during economic slowdown due to high product prices.Social forces:The advertisement and marketing of Abercrombie and Fitch Company are mainlyfocused on sexually explicit images. These advertisements can hurt the beliefs and religious

values of some Asian countries as naked and sexual picture of women is not preferred to bedisplayed on public platform (Rainer, 2016). For example- The countries with major Muslimpopulation often oppose the sexual content in the advertisement. If Abercrombie and FitchCompany continue to use the same advertisement strategy among all Asian countries then it cannegatively affect their brand image. Company has to be careful about their marketing campaignas the successful advertisement strategy in west might not work in the eastern countries(Gennaro, 2010). The demographic dimension is rapidly changing in the world; the future is ofyoung people. However, due to increasing life expectancy there are many countries which havemore aging population which can be Abercrombie and Fitch’s potential customers. While doinga rapid international expansion the Abercrombie and Fitch should consider the taste andpreferences of different customers belonging to different cultures and countries.Technological forces:The popularity of online shopping as made it mandatory for Abercrombieand Fitch to open an online store. The company has to improve their online advertisement toreach more customers and make them aware about their products (Tong, 2010). The companieswhich discount strategies are highly available on the online platform thus Abercrombie and Fitchhave to explore the online advertisement to grab the attention of online customers.Environment forces:The changes in the climate have an impact on the supply chainmanagement of the company. The weather changes also affect the buying behavior of thecustomers, for example, people are likely to buy clothes based on the seasonal changes. Theclimate of the host country affects the taste and preferences of the customers and further affectsthe demand and sale of the product as well.Legal forces:The import duty and employment law of the host country are the factors whichaffect the functioning of Abercrombie and Fitch in the international market. The strict law to stopdiscrimination majorly affected the hiring strategy of the company and Abercrombie and Fitchhas to face the law suit due to their ‘look policy’ for the employees (Marques, 2010).Question 3 (Industry Analysis)Critically evaluate the structure of the industry in which the company is operating. (400 words)The environment of the retail industry is competitive like never before. The multichannelretailers are dominating the retail sector and due to a wide spread of Internet and popularity ofonline shopping, the retail sector is totally transformed. In order to increase the profitability moreand more, retailers are moving online. However, the fashion industry, apparel stores or clothretailers find it difficult to provide in-store shopping experience to the consumer on an onlineplatform. Here is the detailed analysis of the cloth retail industry of which Abercrombie andFitch is a leading anchor based on Porter’s five forces model (Parnell, 2010).Rivalry among existing players:The competition among the existing players in retail clothingsector is quite high. The major competitors of Abercrombie and Fitch includes: American Eagle

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