Abercrombie & Fitch: Strategic Management and Analysis Report

This report provides a comprehensive strategic analysis of Abercrombie & Fitch (A&F), examining its business environment, competitive landscape, and internal capabilities. The analysis begins with an executive summary and introduction, followed by an external analysis using Porter's Five Forces model and competitor analysis. The internal analysis delves into A&F's resources, capabilities, core competencies, and a SWOT analysis. The report also evaluates A&F's current strategies, target market, and management techniques to formulate a focus differentiation strategy. The study explores the apparel industry's characteristics, A&F's competitors (Forever 21, GAP, Zara, etc.), and the impact of industry rivalry, new entrants, substitutes, and customer/supplier bargaining power. Internal analysis highlights A&F's strengths (brand image, financial base, management) and weaknesses (cultural diversity, high costs). Opportunities include expanding product lines and online presence. The report concludes with a strategic model and implementation suggestions, advocating for a focus differentiation strategy targeting younger age groups and a broader customer base.

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Executive Summary
Performing better than the competitors is one of the goals to sustain in the market or
in business. This is true or followed by all companies including Abercrombie & Fitch,
which has been in existence since 1892. This study helps in knowing the
Abercrombie & Fitch business environment which consists of external analysis of the
company using Porter’s five forces model and a strategic analysis to evaluate the
current strategic groups that exist in the industry. The study also focuses on internal
analysis of the A&F, that include resources, capabilities, core competencies of the
company. The SWOT analysis is also provided to gain insight into the internal
aspects of the company. Furthermore, Abercrombie & Fitch internal components are
analyzed to get information about the current strategy employed by the company,
their target market and their management techniques and with the help of this
information a strategy is created to help the company determine their target market,
the competitive position and tools needed to broaden their business framework.

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Table of Contents
Executive Summary...............................................................................................................................1
Introduction...........................................................................................................................................3
External Analysis....................................................................................................................................3
Competitor Analysis...........................................................................................................................3
Industry analysis................................................................................................................................4
Internal Analysis....................................................................................................................................5
Strategic Model.....................................................................................................................................6
Strategy Implementation.......................................................................................................................7
Conclusion.............................................................................................................................................8
References.............................................................................................................................................9
Appendix.............................................................................................................................................10

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Introduction
Abercrombie & Fitch is the most well- known men and women retail clothing brand
and was founded in 1892 in New York by David T. Abercrombie and Ezra H. Fitch.
The company earlier was a supplier of sporting, camping equipment and fishing
rods. In 1928, partners sold A&F Company to James S. Cobb and Otis L. Guernsey,
after that they explored their operations by including all sporting clothes like golf,
tennis and skate clothing. The company became the greatest sporting goods store in
the world in few years and also held the most precious collection of firearms. Growth
of A&F was tremendous as company spotted a net profit of US$682,894 that was a
record breaking income (Fitch, 2019). A&F Company expanded from small sporting
store to 1,000 plus stores and three different brands that are Abercrombie kids,
Hollister California and Gilly Hicks in the world because of its strategic decisions.
Abercrombie & Fitch showed an impressive performance in the FY 2018, as
compare to its result in FY 2016 (Figure1). The company’s reduced its number of
outlet and focused on larger stores and are integrated with technology. Abercrombie
also made efforts in engaging its customers by expanding its presence in Social
media platforms and also invested in developing its direct consumer channels and
capabilities. All these leads to growth and progress of the company and contributed
towards improving top and bottom line approaches while continuing its strategic
investment in marketing, direct to consumer and Omni-channel capabilities (Forbes,
2018).
External Analysis
Analyzing Abercrombie & Fitch Company and its competitive environment begins
with knowing the apparel industry dominant characteristics that can affect the whole
organization. The rate of growth and market share of apparel industry is relatively
higher than other industries and attracting new entrants. The apparel industry is
characterized by fast product innovation which requires marketers, retailers,
designers to know better about the needs of consumer and what they want and
continuous innovation in their product is mainly a survival strategy in this industry
(Weber, 2009).
Competitor Analysis
The clothing retail market is very competitive in order to survive in this market
companies have to follow different strategies keeping in mind trends and needs of
customer in market. A&F faces tough competition from brands like Forever 21, GAP,
Zara, TOPSHOP, H&M and Urban Outfitters. All these competitors have strong
brand name in term of price, quality and design (Fitch, 2019).
Abercrombie is struggling in relation to promotional activities run by competitor this
lead to increase their investment in promotional engagement with targeted segment

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which make impact on their gross profit. The main problem in apparel industry is to
anticipate and respond speedily to the changing trend for competing in the market
but there are more brands on the high street like TOPSHOP which keep updating
with trends and styles and other alternatives for customer are H&M and Forever 21
in affordable prices all this lead to decreasing sales of A&F.
When analyzing the competition through looking at brand positioning in the apparel
market, Abercrombie faces competition in both segments the low medium fashion
and high price axis. As compare to A&F other brands are more successful in this
industry because they anticipate change and deliver varieties of styles to consumer.
Industry analysis
Porter five force analyses help to determine the attractiveness of industry and
competition from external source (Roy, 2009). The forces that need to be analyzed
for taking strategic decision of Abercrombie & Fitch are discussed below.
Industry Rivalry
A&F is facing a tough competition in this industry as there are more numbers of
sellers in the market such as H&M, TOPSHOP, GAP any many more. The level of
competition makes it difficult for companies to survive in the market in profitable
manner for long run. The main point of focus is that due to fierce competition growth
of the industry become low and those who have resources and ability to respond to
the changing needs of the customers are able to survive in this industry.
Threat of New Entrants
Entry and exit in this industry is quite easy and the threat of new entrants is always
presence in the market. A&F is also struggling to increase its market base; any new
entrants may resultant in slow growth of industry and affect the already existing
company’s profitability ratio.
Threat of Substitute
Substitute of each product is available in market nowadays; customers have wide
choices to make selection. The threat of substitute is quite high in this industry but
A&F can handle is by focusing on being a service and product oriented company by
understanding needs of customers and gaining competitive advantage.
Bargaining Power of Suppliers
In this industry, suppliers have much bargaining power because there are too many
options available for the company to switch over another supplier in the market.
Moreover, the suppliers are very much dependent on the apparel industry for their
working but powerful supplier can increase their prices which directly lower the
profitability of companies like Abercrombie & Fitch.

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Bargaining Power of Customers
Customers are king of the market and thy have power to choose amongst the best in
market. The consumer behavior in this industry is quite unpredictable as customers
are free to buy products of many available brands. This put pressure on A&F depend
on the customer base of the company, smaller base leads to higher bargaining
power of customers and higher their ability to demand discounts and offers.
According to above analysis it can be said that the impact of all these forces on an
average is moderate, this means that industry is competitively attractive which leads
to earn good profit for A&F.
Internal Analysis
Conducting an internal analysis is become important to know the organization
strengths and weaknesses which can be work upon and used to compete in the
market. The analysis provides necessary or useful information on competitive
strengths and advantages of the company which make it different from others and
can be the reason of its growth in the business. A&F is a brand which deliver
fashionable look in high prices targeting the college and high school segment.
Analysis of valuable resources and capabilities is important to focus on competitive
advantage on current market trends, for identifying these SWOT analysis is done.
Strengths
 A&F is maintaining its market share performance and has strong financial
base (Figure 2).
 Strong brand image of the company is a key strength and retaining the loyal
customers.
 An effective management team is a reason behind the success of
Abercrombie and its brands. There management focused on continually
producing the specialized product for a niche market which leads to great
market capitalization.
Weaknesses
 A&F is struggling because of their cultural diversity and have been in dilemma
for racial discrimination against minority class which affected their image in
public.
 They focus on perfecting their brand instead of improving their product.
 A&F overpriced apparel may bring challenges for the company in this
competitive market and their high cost structure impact on their profitability
ratio (Foubert & Gedenk, 2018).

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Opportunities
 The perfect way in current scenario is to expand or add a line in its operation
for lesser price which helps A&F to target or attract new base of customer.
 For competing in this industry, expansion in current brands is always a best
option so A&F mainly deals in skirts, pants, shirts, perfumes and hats. They
can focus on producing a beach inspired footwear line which will attracts the
more customers.
 They already have presence globally but A&F can also expand by setting up
their subsidiaries in other countries.
 Take advantage of online platform by focusing on E-commerce sites.
Threats
 The main threat for A&F is their competitors in apparel industry at the low and
high end of axis.
 Rising cost of production, raw material and the high cost structure will be a
problematic situation for Abercrombie in near future.
 They were in controversies for racial profiling that limited their customer base
and kept them mainly focused on young white male and females with nice
personality not on all the customers.
The main competitive strength of the company is their position in the industry due to
their focus on target market and their ability to deliver the product as per need of
their customers. This is done strategically by making continuous efforts to connect
with their customer and get close to them as much as possible. The target market
and positioning of the company is also considered as their key strength to compete
in the market as they focused on niche market with age ranging from school to
college students ages 18-25.
Currently they positioned themselves as the brand with quality for college going
students and catering the needs of this niche market by offering product from their
brands and their current strategy is to target customers who have highest income
bracket and can afford the premium quality products. A&F strategy to promote is
related with the value of their target market that is sensuality, youthful lifestyle, a love
for outdoor and fun with friends. All these values of their target market are
communicated with their brand to promote its product (Vogel, 2017).
Strategic Model
Strategy Formulation is done by analyzing the external and internal environment of
the company and then keeping in mind the strengths and opportunities different

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alternatives are find out for success and growth of the organization and to compete
in this tough competition (Henry, 2008). As per the role of strategic consultant for
Abercrombie & Fitch all necessary things are evaluated and on basis of that some
strategies are formulated which leverage the core business.
A strategy which can be used by Abercrombie & Fitch to compete with all of the
competition in the apparel industry is a focus differentiation strategy. They can
differentiate their product from all other competitors by offering well designed apparel
to satisfying needs of niche market which is ages from 7-22 years of younger age
and should focus on improving the product line for the entire group of people rather
than just concentrating on thin nice personality white men and women. A&F can
target and position differentiation focus strategy to young and teenager buyers. This
model is suitable according to the current market situation because in apparel
industry trends changes quickly and only adapting this change help in to be a leader
in the market for that product focus differentiation model can be used.
There are some options that can be help in building or pulling core of the company.
A&F should also change their marketing strategy by replacing thin white men and
branding their brand without any racism by using different models irrespective of
their race and size (Monahaan, et al., 2017). By changing their positioning strategy
they can target more customers of diverse culture. The company can opt for
turnaround strategy by changing the concept of shirtless models and discontinuing
their wrong ads. Instead of all this marketing strategy they can opt for decent trendy
millennial outdoor images for appealing to the customers.
All these strategies can be implemented as from evaluating the company
environment it can be identified that there are lots of opportunities in this industry
which leads to growth of A&F, if company opted for changing its marketing strategy it
will bring more customer as through new campaign they can spread that they will be
open for all sizes and race without any discrimination this will also helpful in building
strong brand image in the apparel industry against all the competitors.
Strategy Implementation
Implementation is most important to change any process or practices. There are
many obstacles or barriers that impact the successful implementation of change
(Kotter, 2012). The most difficult situation to execute a strategy is to know when to
apply it on what timing and in which sequence. Another area that could be focused
or considered as the barrier in change is lack of resources, as to change marketing
strategy and to adapt focus product differentiation strategy both these need
investment and financial resources so for accomplishing any change resources is
considered as biggest barrier.
Resistance to change is the most common barrier during execution as employee
resist to alter their responsibilities or restructuring of department because of any

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strategy execution. The resistance can lead to failure of the strategy as employees
do not give their efforts whole heartedly. Lack of team work also become barrier in
change, teamwork is essential for achieving the goal if teams are not effective then it
has proven to be the failure of greatest strategies (Reeves, 2015).To overcome all
these barriers certain approaches can be used that includes communicating the
need of change to department on time to make them aware about their changing
role. It brings effective teamwork with same overview by avoiding miscommunication
and involvement of the employees in strategic decision making can help in
understanding their point of view also this reduce the resistance from employees.
To minimize the impact of shortage of resources, organizations should prioritize their
resource allocation based on return on investment criteria. When a prioritization is
done it ensures that resources are distributed properly and help in overcome the
resources shortage. Planning of implementation and knowing the cause and effect of
each strategy give benefit to follow the goals and allows in aligning short term goals
and tactics with long term goals of the organization (Johansson & Svensson, 2017).
All these things is considered in improving the change plan and will be suitable or
prove to be beneficial in implementation as they help in smooth implementation and
execution of change with reducing the effect of obstacles in the end result . Strategy
can be implemented by using these approaches of reducing the barrier of change.
Conclusion
Abercrombie & Fitch is a well-established brand in apparel industry because of its
brand value and positioning in the niche market. A&F has potential and resources to
compete in the market with competitors strategies. Strategic decision making and
implementing them on time are activities that require many efforts and resources.
Whereas formulation of strategies requires proper analysis and for making strategies
for A&F external and internal analysis is done. It can be concluded that in apparel
industry there are many opportunities which lead to growth of A&F and accordingly
some strategies are planned keeping in mind the strengths and weaknesses of the
company. They need to focus on improving their product to sustain in the
competition for longer time. With the help of analysis of the company it is identified
that there are many opportunities in front of A&F that is to expand its operations in
countries where chances of growth is more with using its core competencies that are
brand value, positioning of product and niche market.
In order to maintain growth rate and excellence of the company, A&F requires some
new strategies or has to take some strategic decision to accelerate growth cycle of
the company. These strategies include different market strategy, using online
platform and implementing product differentiation strategy, To implement all these
changes A&F has to face many challenges or barrier including lack of resources,
resistance from employees and lack of team work but to overcome these barriers
certain approaches can be used that are communicating, involving employees in

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decision making and prioritizing the different options according to goal of the
company.
References
Fitch, A. &., 2019. About us: Abercrombie & Fitch. [Online]
Available at: orporate.abercrombie.com/our-company/about-us/company-history
Forbes, 2018. How has Abercrombie turned around its Business?. [Online]
Available at: https://www.forbes.com/sites/greatspeculations/2018/05/08/how-has-
abercrombie-turned-around-its-business/#18defa972282
Foubert, B. & Gedenk, K., 2018. Something Free or Something Off?. Journal of
retailing, 91(1).
Hammoudeh, R., 2015. Zara, from Spain to the big wide world. Company analysis,
markets and competition. Germany: GRIN Publishing.
Henry, A., 2008. Understanding Strategic Management. New York: Oxford University
Press.
Johansson, E. & Svensson, J., 2017. Implementing strategy? Don't forget the middle
managers: Strategy implementation from a middle management perspective.
Department of Business Administartion, Technology and Social Science, Volume 2,
pp. 114-126.
Kotter, J. P., 2012. Leading Change. US: Harvard Business Review Press.
Marketwatch, 2019. Market Watch. [Online]
Available at: https://www.marketwatch.com/investing/stock/anf/financials
Monahaan, L., Espinosa, J. A. & Ortinau, D. J., 2017. Hate Does Not Have to Hurt:
The Influence of Hate-Acknowledging Advertising on Positive Word of Mouth.
Development in Marketing Science, pp. 477-481.
Reeves, M., 2015. Your Strategy Needs a Strategy: How to Choose and Execute the
Right Approach. US: Harvard Business Review Press.
Roy, D., 2009. Strategic Foresight and Porter's Five Forces. Germany: GRIN
Publishing.
Vogel, A. T., 2017. Consumer evaluations of trend imitation: brand equity, consumer
attitudes and preference. Journal of Product and Brand Management, 26(5), pp. 516-
527.
Weber, P., 2009. Abercrombie & Fitch. Marketing Analysis: A macro-environmental
and competitive audit. Germany: GRIN Publishing.

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Appendix
Figure: 1 Share Value and Revenue of Abercrombie & Fitch
Source: (Marketwatch, 2019)

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Figure: 2 Net Sales of Abercrombie & Fitch Company worldwide
Source: (Marketwatch, 2019)