Strategic Management Analysis: Abercrombie & Fitch Company Report

This report provides a comprehensive strategic management analysis of Abercrombie & Fitch, exploring the company's journey from its initial success to its challenges and subsequent adaptation. It delves into the application of strategic management principles, including internal analysis using the strategic capability model and McKinsey 7s model, and external analysis employing PESTEL framework to identify macro-environmental factors. The report further examines the industry structure, highlighting Abercrombie & Fitch's position as a monopolist and uses Porter's Five Forces to assess the company's competitive landscape and industry attractiveness. The analysis covers how the company's management strategies, including changes in advertising and target audience, have impacted its performance and market position. The report emphasizes the importance of strategic management in shaping a company's image, adapting to market changes, and achieving its goals and objectives.

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STRATEGIC MANAGEMENT: SRATEGIC MANAGEMENT IN COMPANIES
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Strategic Management in Companies
Introduction
Management is the process of being in control or taking charge of people or other things, within
an organization or in any given environment. Strategic management, therefore, is identifying
particular goals and objectives, analyzing the competitive environment, internal organization and
evaluating the measures required to put the company on par with the competitors. Companies
need management to take care of its staff and put in strategies, and implement them. Managers
have a responsibility of upgrading the organization to be at the top notch and best among its
competitors. The companies depend on the management if there is poor management it is
definite that the company is likely to go down. Good management keeps the company at the top.
For consumers to buy anything from a company they look at the reputation, quality, and value
for their money. Abercrombie & Fitch is a company that was known for retailing teen casual
clothing. The company had a good management right from the start, but in the course of the
years, the company started showing too much nude in their advertisements and in due time this
changed the consumer's perception about the company. Consumer thought that the company was
too sexual in their advertisement and they did not feel comfortable purchasing products from the
company.
Management shapes the face of an organization and poor management can really cause the
company its image (Alvintzi, & Eder, 2010). When Abercrombie & Fitch company noticed that
the sale was extremely low and the company’s image was at stake they had to change
management and the new management has tried to repaint the company’s image, by doing the
advertisement with very little nude involved, and the company also changed the customer focus
from teens to adults.

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Strategic management helps the company to understand its current situation, identify goals and
objectives that can push the company back to the level of its competitors, this management
involves all staff in the organization (Jones, 2016). An organization needs everyone to work
together in order to achieve a particular goal or objective (Clough, Sears, Sears, Segner, &
Rounds, 2015). Most companies or organizations that prosper are holistic, the company takes
good care of its staff and in return, the stuff works together for a better outcome of the
organization.
Internal Analysis (Strategic capability model)
According to Laljani (2009) every organization has its own way of implementing its strategies,
some of the biggest challenges organizations often face in building their capabilities is making
the organization's staff move from functional thinking to capability thinking. In functional
thinking is it’s all about the things the organization do but in capability thinking it’s about the
ability the organization has to enable them to do the work. For an organization to develop its
capability model tool is to underline the organization's function and discover the capabilities that
lie beneath the functions (Bassi, 2011).
McKinsey 7s Model
Abercrombie & Fitch Company has strategically used McKinsey 7s model to analyze its internal
design through strategy, structure, systems, shared values, style, staff and skills for the purpose
of identifying if the company is achieving its goals and objectives. The 7s have been
strategically used to create an impact in the company hence maintaining its top position.
Structure- the organization is organized in such a way that the there is a top management and the
other staffs. The organization operates in a chain of hierarchy, it uses both top-bottom approach
and bottom-top approach hence making everyone feel appreciated and take responsibility of their
assigned duties (Wales, Gorman, & Hope, 2010).

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Strategy- the firm has put in plans that have enabled the company to stay at the top despite the
stiff competition and rivalry from other companies. The company has long term goals that have
paved the way for great achievement. The company’s vision has kept it on the move and at par of
other competitors.
Structure- the company’s operation is organized in a way that each department has its head; the
company has production section, marketing and advertisement, and retail section. Each head has
a representative who is in charge and reports to the top management in case of any
communication.
System- the industry uses systematic approach in solving various issues that may arise within the
firm, this starts at the top management and incase of any changes all the members are involved in
the decision making process.

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Skills- the firm has employed skilled individuals, right from the top management to, production,
sales team, marketing and advertisement. Each staff is competent at their areas of expertise and
very dedicated to meeting their goals and objectives and this is why the company is at the top.
Staff- the company is big and has over 50 employees, each employee is an expert at their job.
The company’s criteria for hiring new staff is very strict, they only choose specific type of new
staff that they feel are fit and have what it takes that the company wants and this starts right from
the physical appearance. Thus the company is very selective when it comes to recruiting new
staff.
Style- the company has a chain of command; the top management is responsible for making all
decisions within the company. All kinds of consultations and decision making are done at the
top. The other staffs take instructions from the top management and their contribution is required
only when necessary.
Shared values- the company has their goals and objectives, they have their code of conduct and
principles that have placed them at the top position. The organization is dependent on its set rules
for all the operations that are carried out within the organization (Cornelissen, 2011). These
principles are a guideline for everyone in the company to follow for the purpose of achieving the
best outcome.
External Analysis
PESTEL ANALYSYS
For a company to achieve its desired goals and objectives, it must have implemented good
strategies that the organization requires to accomplish a mission (Hatch, & Schultz, 2008). The
PESTEL framework is a marketing tool that helps the organization to identify its potential for the
purpose of being competitive.

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This framework helps in identifying various macro-environmental factors that directly affect the
organization's performance. Political factors should be considered for any business development
because it can act as a threat for the company (Mascarenhas, 2011). Companies need to look at
the political environment where they can, for example, have their headquarters because it can
either positively or negatively affect the company’s image (Hubbard, Al, & Galvin, 2014).
Companies look at things like social policies, trade regulations, tax issues, and governments’
stability before starting a business. For example, a company will base its offices or outlets in
environments that they feel is safe and war-free zone. The second factor is the economic,
economic factors such as inflation, unemployment, interest rates, credit accessibility among
others are the influencers of economic factors that can affect a company. These factors must be
considered because there are many things that change during the company’s lifetime.
Political Factors
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The third external factor is a social factor; social indicators include exchange rates, GDP, and
inflation. These indicators drive the social factor, like distribution of wealth, education levels,
and changes in trend and lifestyle and population demographics. If a company, for example,
retails teen clothes in an environment where the aging population is higher than the young
population, then the possibility of a company making a sale is very minimal. The fourth factor is
technological factors. The rate of the advancement in technology has led to an increase in
discoveries and new innovation (Kaplan, 2012). For a company to stay at the top of its game, it
means that they have to go with the new technology and adjust to it (Thommen, & Grösser,
2014). This at some point has helped the company do better marketing, for example, the
technology today enables a consumer to buy a particular product of their choice online and
delivered to their comfort zone without having to go miles away to get the product.
Advertisement and marketing take different direction all the time because of technology, if the
company uses the right technology and innovations they get an upper hand in catching up with
the new trend. Environmental factors are also external factors that ought to be considered
because different governments react differently in dealing with companies and pollution (Teece,
2009).
The company, therefore, must be able to ensure that the energy consumption, waste disposal, and
environmental pollution is well managed to avoid penalties by the government. Some of these
environmental factors make it hard for companies to start their own firms and are forced to sublet
to the already existing firms. Lastly is the legal factor. Every government has its own laws and
regulations. Before a company decides to open up its warehouse and offices, it is important they
know what is expected of them in order to start a business. Some of the legal factors that affect
the company include employment regulations, health and safety regulations, product regulations,
patent infringement among others (Wagener, 2008). Employment regulations sometimes highly

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affect the company because, for example, the law requires the company to pay its staff a certain
amount of income and the company may not be able to pay the required wages to its employees
because the business probably is not stable. Such kind of legal factor often affects the company’s
performance. All these factors are related in one way or another and they are the major factors
that affect the business strategies.
Industry Analysis
Monopoly
Abercrombie & Fitch are one of the best American retailers; the retail industry consists of
thousands of brands. Abercrombie & Fitch mainly retailed teens outfit with a variety of different
brands. The company is known to monopolize the market because of its unique high sense of
fashion. A monopoly industrial structure is a market whereby a single firm controls the entire
market, monopoly company structure can monopolize the market by raising prices because they
have many buyers who purchase their products (Karmann, 2012). This industrial structure is
known to set the prices, maximize prices, have high barriers to entry and exit and there is only
one firm that dominates the market (Friedli, Mundt, & Thomas n.d.). Abercrombie & Fitch
company besides having a bad image, it was one of the best sellers and they were identified by
great and unique quality designs, they had many outlets spread all over and they as well had
many buyers, who don't know Abercrombie & Fitch? The models they used were of a high
standard and their products were tailor-made for high-end consumers. All of its products had
higher prices at close to luxury levels and their stores situated mostly in their consumer's
location.

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Porter’s Five Forces
This company is a monopoly and has used Porter’s 5 forces of analysis to identify its potential
and capability to be one of the most outstanding and well recognized company. According to
porters analysis Abercrombie & Fitch Company is identified as an attractive industry using the
five forces to identify its position. First threat of new entrants is low because of the standards
that the company has set, the quality of their product have also distant them from any new
entrant threat. The second one is the bargaining power of suppliers is low, this is because the
company and the firm is one and therefore does not allow any other firm to have any entry and
exist and all the profit is for the company itself. The third force is, bargaining power of the buyer
is weak, and the fact that the company is identified for its high end fashion and high quality
already identifies its consumer. Most customers are of a high caliber and the stores are located in
areas where the targeted consumers exist. These reasons do not give room for bargaining. The
fourth force is that the companies do not have any threats of substitute products because they are
the trend setters, and they are known for the best, therefore having a substitute threat is very
unlikely. Finally the intensity of the rivalry is very high this is because of the stiff competition

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that’s existing among them, the fact that the company is doing very well in terms of customer
satisfaction, quality supply and high profit margins is a very big threat to other companies hence
the rivalry.
Strategy formation
Differentiation strategy
Companies too have their ups and downs, many companies that are doing better in the market
were at one point having a tainted name, and it took them time to recover their names and brands
(Corsi, & Neau, 2015). Abercrombie & Fitch company is not an exception, the company had its
image tainted because of the over sexual advertisement for their products. This was a disaster for
the company which was doing very well with many buyers spread across different geographic
boundaries. The company is trying so hard to repaint back its name. Differentiation strategy is
one of the best strategies that can help a company regain its name, this strategy has been used by
various companies and they are back at the top (Kodama, 2011). The company is still known for
the quality products despite the nude advertisement that caused it its face. With differentiation
strategy the company can introduce promotions on different products offered to the consumers,
the company can also cut the cost of specific items to enable them to attract new consumers. At
this point, advertisements are not important because they only worsen the situation. The
company should use the differentiation strategy by creating an outstanding product to its loyal
consumers and have hampers for all consumers who buy products at their outlets.
Differentiation system involves bridging the trust gap, to win back the consumer's trust, gaining
back the consumer trust may be difficult at this point in time but the company should focus on all
the positive sides of the company (Sekhar, n.d). The company should use the many outlets in
promoting the company name, in some outlets depending on the region; the company can cut

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prices on the products to equally remain competitive in the market. The fact that the company
still has the best product in the market that is of high quality should help in driving the sales and
promotions to retain the consumer. The company can redeem itself by using its product as still
the best in terms of quality in the market, the company can use celebrity icons to help bring back
the image of the company (London,& C.A.C.I., Inc. 2008). Abercrombie & Fitch Company
having many outlets should be an advantage because they are able to reach their consumers in
different locations at the same time, therefore any kind of promotions or token given to
consumers who purchase at their store will keep them at the competitive market and over some
time they will be back to their position. I recommend this strategy because other strategies like
cost-leadership and focus strategies have limitations and sometimes may not really fir in the
competitive market. Other big names also at one point had a bad public reputation because one
thing or another did not go so well, but by using the differentiation strategy, they are back on
their feet again.
Strategy statement
A strategy statement lies fourth in the hierarchy of company statement; it communicates or
displays the company’s strategy to everyone within the organization. The three components of
the statement are objectives, scope, and competitive advantage.
Abercrombie Fitch Company
Our Mission
To be the best in terms of value and quality by ensuring satisfaction whilst inspiring high-end
lifestyle for the consumer.

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Our vision
It is our goal to be the leading retailers in the market. We will accomplish this by researching,
sourcing and giving our consumers the best product in the market at a reasonable cost for the
product value and to the ultimate satisfaction of the consumer.
Our strengths
 Highly trained group of employees’ right from the top management, each experienced in
their area of specialty.
 Already have an identity and known for quality high-end products.
Weaknesses
 Negativity image/ publicity to our consumer
 Products designed just for a certain group of people no inclusiveness
What to do
 First is to redeem the company’s image by doing all that it takes to win back our
consumer's trust as soon as possible
 To design a wide range of products that shows inclusivity in our range of products within
the next 6 months
 If the project is successful we will have to use a proactive approach and change our form
of advertising to suit that of the consumer demand.