Global Business Strategy: Burberry's Australian Market Expansion Plan

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BUSINESS ORGANISATIONS AND ENVIRONMENTS IN A GLOBAL CONTEXT
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Table of Contents
Introduction......................................................................................................................................3
Background Information of Burberry Group PLC..........................................................................4
Discussion of the business environment in Australia......................................................................6
Analysis of Business Scenario.......................................................................................................11
Conclusion.....................................................................................................................................13
References......................................................................................................................................14
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Introduction
This report provides the expansion plan of the business of Burberry Group PLC within the
country Australia. The company is looking forward to expanding their business internationally
and looking further to establish the company within the markets of Australia. It wasn’t to ensure
its physical presence in Australia after making all the relevant research and analysis of the
country and its environment. There will be made a deep analysis into the market and business
sector of Australia in order to understand their culture and way of operating the business
successfully. There will be provided the background information of the company in this report
and a PESTLE analysis, as well as Porter’s Five Forces analysis, will also be made. The report
will include the approaches to business scenario analysis and a set of recommendations will also
be provided.
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Background Information of Burberry Group PLC
Burberry Group PLC is a public limited organization operating in the fashion industry. It is a
British luxury fashion house. Its headquarters is in London, England. The company Burberry
Group PLC was established in the year 1856 which was originally concentrated on the
development of the outdoor attire. This fashion house has also moved to the high fashion market
through developing its fabric named as Gabardine. This fabric is a great fabric as it is waterproof
as well as breathable. This company is also serving in several numbers of locations which are
approximately 498. This is a multinational organization and is also looking forward to
developing its business in more countries.
There is a wide range of products offered by this Burberry Group PLC. The fashion house is
focused on distributing the ready- to- wear outwear, trench coats, fragrances, cosmetics,
sunglasses as well as the other fashion accessories (Pulignano, et. al., 2015). The company has a
huge international market share. It is working within the Asia Pacific, Europe, Middle East, and
Africa as well as in Africa. It is working through the retail, wholesale as well as the licensing
channels. The company is providing all kind of fashion accessories for children, men as well as
women. The company Burberry has several numbers of stores in approximately 51 countries.
The departments involved in such company are operations, human resources department,
information technology, corporate affairs as well as the finance department.
There are several numbers of competitors in the market for Burberry such a Gucci, Prada, Louis
Vuitton as well as Christian Dior.
The company is also focused on donating approximately 1% of the adjusted profits before tax of
the business for the charitable causes. A large portion of these profits is dedicated to supporting
the Foundation of Burberry as well as its partners in addressing the requirements of the key
community within the luxury industry's footprint.
Legal Structure of the company
Burberry used to be an independent business owned and controlled by the family years until the
year 955. After it, this was reincorporated. Its demerger was completed in the year 2005 from
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GUS PLC which was the majority shareholder of this company. Now this company is listed on
the London Stock Exchange and it has also been ranked as 73rd in the Interbrand’s Best Global
Brands Report (Aslani, et. al., 2017).
Financial Performance of the company
In the year 2018, it was reported that in the last few years, the organization had destroyed the
clothes which were unsold along with the perfumes and accessories worth over £90 million. The
company has a revenue of £2732.8 million approximately and has an operating income of £410.3
million. The net income of the company in the year 2018 was £293.6 million.
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Discussion of the business environment in Australia
Following is conducted the PESTLE analysis for the business environment within Australia
considering all the political, economic, legal, social, technological as well as the environmental
factors:
Political Factors
Australia is considered a constitutional monarchy as the head of the state. The prime minister in
Australia is considered as the head of government of Australia and the queen is represented by
the Governor- General at the federal level. Australia is the member of the OECD, World Trade
Organization as well as Commonwealth of Nations. The businesses in Australia have a high
degree of the certainty of success. Australia is considered as one of the safe destinations for
investment. The political system of Australia is highly effective in responding to the economic
challenges as well as the policy direction. The adaptability of the Australian policy and the
relevant changes within the economy has been ranked as the top company of the region. The
companies can be benefitted through a stable political environment within the country of
Australia. Australia is considered as one of the most relevant markets for the MNCs within the
Asia- Pacific region (Chan, et. al., 2017).
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Figure: Policies- sustainable Australia
Source: Sustainable Australia
Economic Factors
There are generally the property prices high as per the income levels of the people within
Australia. There is a great demand for rental properties. The rental prices of some city’s
properties are also firmly set to be increased. While the population grows, the income rise, as
well as demand for the housing, also increases which cause to the increment in the prices. There
are certain areas in Australia which are offering great investment opportunities. The cost
competitiveness within Australia has caused to the growing numbers of foreign companies.
Australia is consistently emerging as the low-cost base among all other developed nations. The
strong economic growth rates are higher in Australia as compared to the other countries of
OCED including the UK as well as US (E. Dobbs, 2014). There is a low degree of the risk for
the businesses in the economy and there are stable interest rates as well as rising exchange rates
in Australia. It is good for new companies trying to expand their business in the market of
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Australia. The foreign direct investment of Australia has been increased by 24.6 USD billion in
the year 2018 which is compared with an increment of 11.7 USD billion in the previous quarter.
Figure: GDP growth rate in Australia
Source: Austrade
Social Factors
There are several numbers of social factors having a direct impact on the operations of any
business operating in any country. Changes in the trends of society, as well as culture, can have
an impact on the demand of the products as well as the services provided by any firm. Australia
is considered as the best country to live in the world in terms of education, health as well as the
quality of life. As compared to other major economies, there is a relatively small population in
Australia of approximately 22.9 million. Australia is considered as the most multicultural as well
as multiracial country of the word. It is good opportunities for the businesses of the retail fashion
industry as there are chances of increment in sales and good business options. There have also
been notices the issues of migration in Australia to a great extent. The Australians are generally
very hard working, lively as well as outward looking. The social factors are in favor of the
expansion of business in Australia (Pedersen, et. al., 2018).
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Technological Factors
The new technologies are helpful in creating new products as well as the processes. The
technologies are helpful in making the improvement in the quality cutting the costs as well as
leading towards the innovation. These developments in the technologies are very beneficial for
the consumers as well as the companies providing the goods as well as services. Australia is
considered one of the most advanced countries in the use of technologies. The country is well
known for the purpose of adopting new technologies at a faster rate than other countries in the
world. The technology purchases will be growing 4% to $65 billion in the year 2019. The local
companies are making the investment in the new technologies in order to meet the requirements
of the customers and be able to satisfy them. The tech consultancy services, computers, and
pieces of machinery, cloud computing, artificial intelligence as well as software are like to drive
the investments which may result in the innovation in the new designs. It will be beneficial for
any organization which is going to expand its business in Australia.
Environmental Factors
The environmental factors include climate change as well as several industries such as the
weather. The changes in temperature at any location can have a direct impact on the several other
industries such as tourism, fashion industry as well as insurance. There is being identified the
great environmental awareness in the companies to protect the environment of the country.
Australia is one of the beautiful countries of the world as there are stunning beaches, forests as
well as the mountains. The country is also known for the brilliant diversity of nature. Several
numbers of visitors continuously visit the company due to the good environment. It can be a
beneficial factor for the business operating in Australia as those visitors can be attracted to
purchase the products and services. The country of Australia is also facing several numbers of
environmental challenges. Australia is the driest continent on the earth and there is also faced a
challenge of the climate change by the people living and businesses operating there. There has
been conducted a recent Senate inquiry that the climate change is the current and existential
security risk to the country Australia. There is a lack of water identified which can be a
problematic environmental factor affecting the businesses. There can be some potential outcomes
of climate change such as infectious diseases as well as the regional conflicts over the food.
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Legal Factors
There are several legal factors that are required to be considered while operating businesses in
any country. There are several numbers of laws as well as legislation that are required to be
followed by the businesses in any country. The introduction of the anti-discriminatory practices,
the increment in the minimum wages as well as the requirements of the recycling within the
businesses are some of the examples of recent laws which can have the direct impact on the
business operations. Before establishing the business in Australia, it is necessary to identify all
the potential laws which can have a direct impact on the operations of its business. In order to
ensure the fair trading between both businesses as well as the customers, there are several fair
trading laws in Australia such as competition laws, privacy laws, contract laws, consumer laws
as well as The Fair Work Act 2009 in order to govern the employment within the country
Australia (Bokma, et. al., 2018).
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Analysis of Business Scenario
This section will include the analysis of the business opportunities for the company Burberry in
the country Australia. The company can be established in Australia after conducting the whole
research of the business operations as well as the country. There are several numbers of
analytical approaches which are used in order to make an analysis of the business scenario such
as SWOT analysis as well as Porter’s five forces analysis. Porter’s five forces analysis can be
used as one of the best analytical tools that can be used to analyze the business scenario of
Burberry Group PLC. Following is given the Porter’s Five Forces model for the fashion industry
in Australia:
Bargaining power of buyers
The fashion retail industry has a great market value of several hundred billions of dollars with
the average price of per product. This is one of the important forces in this model which
identified the bargaining power of the buyers. They have the ability to choose to push down the
prices of the products. They may switch the retailers as the industry is already competitive. In the
case of the fashion industry, it can be identified that buyer power is a relatively large force. It has
also been very easy for the customers to go online and have a survey of all the products available
online. It has increased the bargaining power of the customers. They also have the alternatives
available in order to shop hence the bargaining power of the customers is very high (Hagman, et.
al., 2017).
Bargaining power of supplier
In the fashion retail industry, supplier power is identified as small in Australia. Most of the
manufacturing companies generally outsource their products or the raw material from the
suppliers who just receive the fraction of the profits. The suppliers have very little control over
the fashion industry as they are dispensable can always be swapped out. There is a relatively low
bargaining power of the suppliers.
Competitive rivalry
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In Australia, there has been identified a great competition in the retail fashion industry. There are
already several numbers of key players in the market. There are also large retailers who are
selling very similar products to the customers hence the competitive rivalry in the fashion
industry in Australia is very high. Nowadays there is also identified the continuous innovation in
the industry hence it has become very necessary to adopt such changes and bring innovation
within the business so that the competitive edge can also be achieved. The fashion industry is
considered as very difficult one to get into and it has also become a race to the bottom
(Edgington, 2018).
The threat of new entrants
Australia is a very risk-free country for the purpose of operating businesses as well as making the
investments. The businesses can easily enter into the Australian market and operate their
business successfully. However, there is a very small force of the threat of new entrants in the
market. There are already several key players in the market and the new entries will not be
posing this much of threat for the business (Wolfram, et. al., 2016). There is also a need for huge
capital investment in order to establish the fashion house in Australia hence everyone is not able
to afford it.
Threat of substitution
There is very little to the substitutes of the clothes in the fashion retail industry. There is no such
problem of threat from the substitutes for the business of Burberry Group PLC in Australia. This
force is almost very small and all the substitutes in this industry can be considered as the
competition.
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