Strategic Analysis Report: American Eagle Outfitters Overview

This report offers a detailed strategic analysis of American Eagle Outfitters, examining its vision, mission, goals, and objectives. It utilizes tools like PESTEL analysis to assess the macro-environment and Porter's five forces to evaluate the competitive landscape. The report also includes a capability analysis using the value chain framework. Based on these analyses, a proposed strategy is developed and evaluated for suitability, acceptability, and feasibility. The report concludes with an overview of the company's strategic position within the retail industry. The report provides a comprehensive overview of the company, its current position and suggests a path forward.

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Strategic analysis of American Eagle Outfitters

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Contents
Introduction......................................................................................................................................2
Vision, Mission, goals, and objectives............................................................................................2
Macro-environment.........................................................................................................................3
Porter’s five forces...........................................................................................................................5
Capability analysis...........................................................................................................................7
Proposed strategy...........................................................................................................................10
Strategy evaluation........................................................................................................................12
Conclusion.....................................................................................................................................12
Reference.......................................................................................................................................13

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Introduction
Strategic management and analysis in an organization are essential for formulating,
implementing and evaluating the strategic decisions for achieving the goals and objectives. This
report includes the strategic analysis of the chosen company American Eagle outfitters with the
help of various tools. The internal and external business environment of the organization is
analyzed for identifies the issues and problems which are faced for strategic management. This
report includes the strategic analysis which is done with the help of evaluating the vision,
mission, goals, and objectives. The analysis of macro-environmental includes the PESTEL for
analyzing the business environment. The analysis of the industry is conducted with the help of
Porter’s five forces and value chain analysis is done for the analysis of capability. In order to
evaluate the strategic options, the generic strategies are adopted and the proposed strategy is
evaluated by using the suitability, acceptability, and feasibility.
American Eagle Outfitters profile
American eagle outfitters, inc is a retailer of American lifestyle clothing and accessories. It is a
public company and its headquarter is in Pittsburgh, Pennsylvania which is founded in 1977 by
Jerry and Mark Silverman. The number of locations that are served by American Eagle Outfitters
is 934 across the world and the number of employees is more than 45,000 (American Eagle
Outfitters, 2018). It operates in the clothing, designing, marketing and selling the own-brand
accessories and clothing. The line of products is not limited but includes denim wear, sweaters,
knits, personal care, and accessories. These are sold under the name of AEO and aerie brand
names which include the retail stores of AEO brand, aerie retail stores and AEO direct.
Vision, Mission, goals, and objectives
The vision statement includes the statement for the desired future which the company wants to
be in the future. It plays a crucial role in aspirations and motivating and stretches the
performances. The vision statement is to build trust, honesty, and integrity. We strive: to
determine, create and work hard. They ensure that everyone should be the best version of
themselves. The value of the organization includes people, innovation, passion, integrity, and
teamwork. The mission statement of the organization is to invest in and give back to the
communities which contribute to their success (American Eagle Outfitters, 2018).

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Macro-environment
The macro-environment includes the framework of analyzing the broad environmental factors
which impact on the survival. It is considered as a strategic tool for analyzing the macro
environment. It includes the political, economic, social, technological, environmental and legal.
These factors directly impact on the macro environment of the American eagle outfitters. Any
change in the factors impact on the business in the market. It impacts on the competitive
advantages and on the profits level of the retailing sector (Bettis, et al., 2014).
Political factors
Political factors impacts on the profitability and survival chances. As American Eagle outfitters
required to consider the long term profitability because it operates apparel stores which require to
diversify the systematic risks. In the market, it is necessary for the organization to consider
political stability as it is important in the clothing sector for the economy of the country. The
level of corruption is required to consider in the market for following the regulations in the sector
of services. The legal framework is required to be considered for the enforcement of the contract.
In the service sector, tariffs and trade regulations are required to be considered. Pricing
regulations are included in the political factor and providing the industrial safety regulations for
the employees. In apparel stores, it is necessary to consider the product labeling and taxation of
the country (Boehghe and Cruz, 2010).
Economic factors
The economic factors include the interest rates, savings and inflation, foreign exchange and cycle
of the economy which are required to be considered for the demand and investment. These
factors are required to be considered for competitive advantages. American eagle outfitters
consider the economic system for operations of the business. The efficiency of the market is
required to be considered and the quality of infrastructure. In apparel stores, the skill level of the
workforce is required to be considered. In the economy, it is necessary for the organization to
consider the productivity level (Dobbs, 2014).
Social factor

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In the social factor, the business is required to consider the culture and structure and way of the
business environment is required to consider. Social factors require to consider the beliefs and
attitudes of the marketers for understanding the customer's requirements. The customization is
required in the clothing sector. Social factors include the demographics and population skill
level. In society, it is necessary to consider the structure, power, and hierarchy. The culture
includes the gender, roles that are required to be considered for encouraging the business
(Boehghe and Cruz, 2010).
Technological factors
Technology is required to consider the price structures and competitive landscapes. It is
necessary for the organization to continuously bring the innovation for maximizing the profits
and becoming the leader in the market as the clothing sector includes the competitive
advantages. The recent technological development helps in gaining the market. It is necessary to
monitor the popularity level. Innovation in the clothing sector helps in gaining more customers
which increases the potential (Dobbs, 2012).
Environmental factor
In a different market, the norms and standards are different. Environmental and liability laws are
different in the region. The environmental factors which majorly impacts the American eagle
outfitters include the consideration of weather conditions which helps in managing the resources
and products which are given to customers. Change in climate requires to be considered for
providing the right clothes in the market (Boehghe and Cruz, 2010). American eagle outfitters
require to contribute to the retaliation.
Legal factors
In business, the legal framework is essential to be considered for protecting intellectual property
rights. It is necessary to consider entering into the market for a competitive edge. The laws which
are considered by the organization include the intellectual property laws for protecting the data.
In a different market, the government has placed the discrimination laws for protecting the
employees and ensure to treat the employees effectively and provide the opportunity (Pinto,

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2013). Laws are created for keeping the quality level and various products for keeping and
preventing the customers by providing safe products.
Porter’s five forces
Porter’s five forces is a strategic tool for analyzing the competitive positions and it helps in
evaluating the competitive strength and position which helps in determining the competitive
intensity and helps in attracting the market. It is considered as a strategic management tool for
determining the competitive landscape. The five forces are:
 The threat of New Entrants
 Bargaining Power of Suppliers
 The Threat of Substitute Products or Services
 Rivalry Among Existing Firms
 Bargaining Power of Buyers
The model of porter’s five forces is used for analyzing the industry in order to attract the inherent
potential for profits. This helps the management in making strategic decisions.
The threat of new entrants
In the industry, it is difficult to achieve the economies of scale in the American eagle outfitters.
A new entrant’s threat is considered a weaker force. In the industry, product differentiation is
strong in the market. Differentiated products are sold by the industry as the customers prefer
differentiated products. New entrants require huge investment and the research and development
costs are high and these factors make the new entrants threat as a weaker force. The strict
licensing and requirements of legal are required to be fulfilled for beginning the business
(Borden, 2010).
Bargaining power of suppliers
AEO operates in the industry in which it is more as compared to buyers. The control over the
prices by suppliers is less and it makes the bargaining power of suppliers as weak. It is easy for
buyers to switch suppliers because of the less differentiated and low cost of switching. In the

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industry of American Eagle outfitters, it is necessary to consider the customers’ requirements.
The profits of the industry are closely tied to the suppliers. It is necessary to provide reasonable
prices to customers (Borden, 2010). The bargaining power of suppliers is considered as weaker
in the industry.
Bargaining power of buyers
In the industry, the bargaining power of buyers is considered a weaker force because of a number
of suppliers. It is analyzed that within the industry, product differentiation is high which includes
that the buyers do not find the alternative firms which produce the product. In the industry, the
buyer's income is low which makes the buyers purchase the products at low prices (Bardeal and
Antonio, 2012).
Threat of substitute product
AEO operates in the clothing and accessories industry and the substitute of the product are very
few in the market. It is analysed that the few substitutes are available on the low profit earnings.
The substitutes are available in the markets which are more expensive. The products of AEO are
available for customers at a lower prices than the other competitors and also adequate quality is
also given. Buyers are less likely for switching the substitute products (Gereffi and Fernandez-
Stark, 2011).
Competitive rivalry within the industry
In retaining sector, the number of competitors in the market are more in which the AEO operates.
It is necessary to adopt the unique strategy for attracting the customers. In order to exit the
market, the barrier is high because of the high investment which is required for operations. The
strategies which are adopted by the business are diverse in which the unique strategy are adopted
for competing with each other (Bardeal and Antonio, 2012). Rivalry among existing firms is
considered as strong force in the market. In the industry, the requirement of fixed cost is high
which makes the business to push for the full capacity.
It is analysed that the AEO has a good competitive advantage because of the adoption of the
technology which helps the business in increasing the production. It helps the organization to
increase profits and become competitive player.

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Capability analysis
Value chain analysis
Value chain analysis is a tool for analyzing the capability of AEO sources of competitive
advantages.
The activities in the primary value chain include producing the selling the products and services
to the potential customers. The primary value chain helps in improving the performance and it
includes the
Inbound logistics
It is considered crucial for developing a strong relationship with suppliers as in business the
support of suppliers is necessary for storing the distributing the products. It is necessary to
analyze the inbound logistics for focusing on every aspect of transforming the raw material into
the finished product. In AEO, it includes the activities of retrieving the raw material, inputs
storing and distributing the raw material to operations for commencing the production function
(Darmawan, et al., 2014). It is considered a strength for the business for creating value by
maintaining effective relations with the stakeholders.
Operations
In operations, the analysis of operational activities is important for getting the activities done.
When the raw material arrives, the process is required to begin for the production of the end
product and launching in the market. The activities in operations include machining, packing,

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assembling and testing. The maintenance and equipment repair is also included. The
manufacturing and service operations are included for analysis as it helps to improve the
productivity, efficiency is maximized and ensures competitive success (Best, et al., 2017).
American Eagle Outfitters can get various benefits with the increase in productivity as it helps in
achieving the economic growth and profitability increases and provides competitive advantages.
Outbound logistics
Outbound logistics includes the activities to deliver the products to the consumers which include
the different intermediaries. It contains the activities of material handling, warehouse, schedule,
transporting and delivering the products to the destination. Outbound logistics helps in analyzing
the competitive advantages and achieving the objectives for growth. Outbound logistics are
required to be managed timely with the optimal costs and requires to deliver the products on time
(David and David, 2019).
Marketing and sales
In this step, the American Eagle outfitters are required to bring the benefits and differentiated
products for persuading the customers that the products which are offered to them are better than
the competitors. The marketing and sales are considered as important for the business and AEO
activities include marketing and sales as advertising, pricing, sales forces, quoting and to build
effective relations with the members. It is analyzed that the marketing funnel approach is
effective for AEO for activities of sales and marketing (Johnson, et al., 2014). The adoption of
integrated marketing activity helps in developing a brand activity for competitive advantages.
Services
For developing the customer loyalty, it is necessary for AEO to offer pre-sale and post-sale
services. It is considered important for the marketing and promotional activity. It is used as a tool
for spreading the position words for attracting a large number of customers.
Secondary activities
In order to support the primary activities, the support activities play a vital role to coordinate and
facilitate (David and David, 2019). It includes:

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Firm Infrastructure
It includes the wide range of activities like management of quality, accounting, finance, strategic
management, and planning. In AEO, effective infrastructure management is necessary for
providing value. The control in infrastructure activities helps in strengthing the competitive
position in the market (Dhital, 2013).
Human resource management(HRM)
For evaluating the HRM, AEO can adopt various HR aspects like recruiting, selecting, training,
performance management, and other activities. In business, for reducing the competitive pressure
which is based on motivation, skills and commitment require the effective management of HR.
The objective of minimizing the cost of hiring and the cost of training can be achieved (Ansoff,
et al., 2018).
Technology development
The support of technology is essential in business which requires the integration of technology in
production, distributing, marketing and HR functions. The implementation of updated
technology helps in attracting and satisfying customers. It includes the research and development
department of the AEO for the development of technology.
Procurement
It includes the involvement of purchasing the inputs like machines, raw material, equipment and
items which are essential for finishing product manufacturing. In AEO, the consideration of
procurement activities is essential for the support of inbound, outbound and operational value
chain analysis (Issa, et al., 2010).

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Proposed strategy
TOWS matrix
American Eagle outfitters Strengths
1. Brand awareness
2. Finances
3. Strong dealer
communities
4. Strong distribution
network
Weaknesses
1. Narrow demographic
2. Market share is less
3. High employee
turnover rates
4.
Opportunities
1. Supply chain
relocation
2. Potential of
partnership or mergers
SO
Increased awareness of the
brand
Financial liquidities are used
for partnering and merging
with other businesses
WO
Expansion of demographics
by analyzing the supply chain
For expanding the business
and market share the merger
with other markets will be
beneficial (Wang, et al.,
2011).
Threats
1. Rising of business
costs
2. The fast expansion of
fashion
ST
Using brand awareness for
increasing sales and
expanding the economies of
scale.
In order to expand in the new
fashion, investment in
liquidity by adding quality
(Korableva and Kalimullina,
2016).
WT
Expanding product lines for
increasing the economies of
scale.
Gaining the market share for
completing the fashion lines
faster.

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Porter generic strategies
Porter's generic strategies are used for developing the strategies. The porter generic strategy is
used for developing the strategic choice of differentiation and focusing on costs. The current
generic strategy is a best-cost provider strategy (Wu, 2010).
Cost leadership
It is analyzed that AEO is a best-cost provider. They use the strategy for preserving the market
leadership position with the help of effective management of the value chain. In order to expand
the market share, AEO requires to target the middle class for making the largest proportion in the
market. AEO requires to focus on the affordability and easily accessibility for producing and
expanding across the world (Rothaermel, 2017).
Differentiation
It is considered as a secondary strategy for expanding the base of customers by providing unique
features products. The objective of AEO is using of strategy for differentiating for embedding
the innovation and addressing the consumer's requirement (ÖNEREN, et al., 2017).
Strategy evaluation

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Evaluation of suitability, acceptability, and Feasibility
In order to meet the challenges in the market, the organization is required to make the changes in
strategies. It includes the suitability, acceptability, and feasibility.
Suitability- The business requires to exploit the opportunity by hiring the skilled labor and
incurring the additional costs (Zulkarnain, et al., 2018).
Acceptability- The generic strategy helps in meeting the expectation of satisfying the needs and
wants of the customers. For increasing sales, the acceptability is required from customers.
Feasibility- In order to effectively implementing the generic strategy, AEO requires to open the
stores in the area where the demand for fashion is more.
Conclusion
In order to conclude the report, it is analyzed that the strategic management tools are required for
making the position in the market. American eagle outfitters require to adopt the strategic
approach for growth and increasing profitability. In the clothing sector, differentiation in
products is required for entering and sustainability in the market. For the sustainable business,
American eagle outfitters are required to remain focus on capitalizing innovation in order to
build the winning portfolio. The generic strategy is effective for AEO for increasing
productivity and achieving the objectives. With the latest technology and maintaining the quality,
it will help in increasing the revenue and profitability also it will ensure thriving viable and
moving forward in the highly competitive market. In the Future, American eagle outfitters can
adopt the strategy to retain the customers and expanding the business in the new market. In order
to enter the market, PESTEL analysis is essential for analyzing the situation. For the competitive
advantage, it will be beneficial to adopt the porter generic strategy.
Reference
American Eagle Outfitters Annual report, 2018. Available at
http://www.annualreports.com/Company/american-eagle-outfitters-inc

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