Business Environment Analysis of Burberry PLC (2023)

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Business Environment

Table of Contents
Introduction....................................................................................................................................................3
1. Examine the management structure and, the governance of your chosen company.................................4
Management of Burberry PLC...................................................................................................................4
Organisational Structure of Burberry PLC...............................................................................................6
2. Assess and evaluate the effects of external environmental influences on your chosen organisation........7
Importance of PESTEL analysis for Burberry PLC..................................................................................7
PESTEL analysis for Burberry PLC..........................................................................................................7
Conclusion...................................................................................................................................................12
References....................................................................................................................................................13
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Introduction
Business environment surrounding and organisation consists of external environment and
internal environment. For an organisation to success, it is essential that all the business
associated environmental variables are analysed properly and managed so that the organisation is
able to achieve its mission and vision. There are macro environment variables such as Political,
Economic, Social and Technological variables that are concerned with the benefits, costs and
risks to an organisation. Similarly, there is internal environment in the organisation that affects
the functioning of the organisation. The organisational structure of an organisation should be
matched with its culture so that the company could develop a harmony in its functioning.
Organisational resources need to be aligned with these environmental variables for the success of
an organisation. The current report would analyse the business environment associated with an
organisation using the example of Burberry PLC which is a luxury fashion company in United
Kingdom. The organisational structure of the Burberry PLC would be described in the report
including its Board of Directors, Chairman and Executive Directors. The environmental analysis
of Burberry PLC would also be conducted using PESTLE analysis and SWOT analysis.
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1. Examine the management structure and, the governance of your chosen
company.
Burberry PLC was established in 1856 by Thomas Burberry in London, United Kingdom. Since
its establishment in 1856, the company has seen 163 years of hard work by its founder and later
generation to make the company as one of the largest brands in the Fashion Industry. Burberry
PLC started with one store in London but now the company has its stores in 51 countries that tell
the story behind the success of the company (Andersson, Forsgren and Holm, 2016). Until 1995,
Burberry was a family controlled business but after the demerger from GUC PLC, the company
became Burberry PLC. Burberry PLC is listed in the London Stock Exchange and company has
been doing really well in the exchange as its share price has been increasing with a steady price
in the last decade.
Burberry PLC is known for the invention of Gabardine, a world famous fabric which is
completely breathable, weather-proof and hardwearing fabric. Gabardine was invented by
Thomas Burberry in 1879 and he patented the fabric in 1888. Since then, Gabardine is
exclusively developed for the Burberry PLC that has become the prime brand fabric for the
company. Burberry PLC is a premium brand when it comes to Trench Coats which are
considered as one of the best products by the company in its category. Burberry PLC fashion
house mainly focuses on readymade clothing fashion wear, accessories, Sunglasses, premium
range fragrances and personal care cosmetic products.
Management of Burberry PLC
Dr Gerry Murphy is the Chairman of Burberry PLC who was appointed the Chairman of Board
on 12 July 2018. Gerry Murphy has approximately 35 years of experience in the corporate world
and has worked as executive and CEO in many big organisations such as Blackstone, Kingfisher
PLC, Exel PLC and Greencore Group PLC before joining Burberry PLC.
Marco Gobbetti is the Chief Executive Officer of Burberry PLC who was appointed the CEO of
the company on July 5th 2017.
The Chief Operating and Financial Officer of Burberry PLC is Julie Brown who was appointed
the COO and CFO of the company on January 18th 2017
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Rest of the Management of Burberry PLC is described below:
Fabiola Arredondo – Non-Executive Director
Ian Carter – Non-Executive Director
Jeremy Darroch – Senior Independent Director
Ron Frasch – Non-Executive Director
Stephanie George – Non-Executive Director
Matthew Key – Non-Executive Director
Dame Carolyn McCall – Non-Executive Director
Orna NiChionna – Non-Executive Director
The Corporate Governance at Burberry PLC is managed by the Board of the Company which is
supported by many other committees. The Board of the Burberry PLC is responsible for the
strategic direction of the company and creates a business plan for the company so the company is
able to achieve its objectives. The committees that support the Board of Burberry PLC are shown
in the below figure:
Figure 1: Committees and Board of Burberry PLC (Auster and Choo, 2018)
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The Board of the company makes sure that the business strategy of the company is able to
provide long term results and growth and maintain the competitive advantage in the market. The
Board of the company also decides the new markets to which company should try to enter to
increase its global presence. Similarly, the new mergers and acquisition decisions are also taken
by the Board of the company.
Organisational Structure of Burberry PLC
Burberry PLC has adopted the Functional Organisational Structure in which the operations of the
company are divided into different departments where each department is headed by a director.
Every department has a specific function such as the Marketing Department at Burberry PLC is
responsible for the promotion of the products of the company and brand management (Hult,
Hurley and Knight, 2017). The marketing department is responsible for developing the global
marketing strategy of the company and conducts researches in the market to collect the data and
then process the data to prepare a marketing strategy that could help the company in achieving
the competitive advantage in the Fashion Industry. The functional organisational structure is
shown in the below figure:
Figure 2: Functional Organisational Structure (Hult, Hurley and Knight, 2017)
The Executive and Non-Executive Directors of the company are given the responsibilities to run
different departments as per the objectives assigned to these departments. There are senior
managers who report to the directors and similarly managers who report to the senior managers.
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However, this structure is very useful in an organisation lie Burberry PLC where every
department has a specific role, it might create some trouble for the company if there is
miscommunication among the departments.
2. Assess and evaluate the effects of external environmental influences on your
chosen organisation.
The external environment has a direct impact on the performance of an organisation. External
environment could result in significance losses for an organisation if the organisational strategy
is not equipped to handle adverse market conditions. A comprehensive analysis of the external
environment is essential for an organisation to make sure that there are no risks to the company if
an unexpected turn happens in the market.
Importance of PESTEL analysis for Burberry PLC
Burberry PLC is an organisation that is listed in London Stock Exchange and also features in
FTSE 100 index. Along with this Burberry PLC operates in 51 countries. Since Burberry PLC
has such large region to cover and has a significant share in UK Fashion industry, any changes in
the environmental variables would affect the company to a huge extent. Similarly, if Burberry
PLC is unable to assess the economic conditions on global scale, its business strategy could
backfire and cause huge losses for the company (Gupta, 2015). The PESTEL analysis allows
Burberry PLC to assess the Political, Economic, Social, Technological, Environmental and Legal
conditions in the market that could affect the operations of the company. It would help the
company in assessing the future costs of operations and profit margin ration along with
minimising the risks to the organisation. PESTEL analysis also provides a platform for the
SWOT analysis that allows Burberry PLC to assess its strengths and weaknesses. By properly
analysis the external environment using PESTEL analysis, Burberry PLC would be able to
handle the future threats and efficiently take the benefits of the opportunities.
PESTEL analysis for Burberry PLC
The PESTEL analysis for Burberry PLC is provided in the below section with explaining the
impact of every external environment variable on the organisation.
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Political Factors
Every government has certain policies that affect the businesses operating in the country. Since
Burberry PLC has expanded into 51 countries with every government having different policies, it
is essential for Burberry PLC to develop country specific business strategy that would help the
company in making strong regional impact and compete with the local organisations.
Political stability is one of the biggest concerns for the Big Fashion Houses. If there is no
political stability in a region, it would become difficult for Burberry PLC to operate properly in
the country (Hilton and Platt, 2016). An example of this could be the Middle East countries
where Burberry PLC is not able to make an impact because of the inconsistency of the
government policies.
BREXIT is another example of political impacts on an organisation. If BREXIT is implemented,
it would become difficult for Burberry PLC to operate in European Union countries. France has
already declared that it would impose additional 45% duty on UK organisation.
Economic Factors
Assessing the economic conditions is crucial for Burberry PLC so that the company could
develop its investment plans accordingly. If Burberry PLC goes for expansion and invests huge
amount in entering a new market and that market crashes, it would be a huge setback for the
company. Another important economic factor that affects Burberry PLC is the type of economic
system implemented in a country (Kefalas, 2017). United Kingdom is a Free Market Economy
where there is no monopoly of a single organisation in the Fashion Industry. This has allowed
Burberry PLC to compete even with the bigger organisations in the initial days and grow in a
fairly competitive market.
Every economy goes through different business cycles such as Prosperity, Recession and
Recovery. It is crucial for Burberry PLC to identify these stages and prepare its strategy
accordingly. Last recession had a huge impact on the revenue and net profit of the company. But
the continued trust of the investors in the company management allowed it to pass through that
stage.
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The fiscal and monetary policies of the government also affect the economic operations of
Burberry PLC. If there is an interest hike by the Bank of England, then it would become difficult
for the company to borrow loans from the banks that would hamper its expansion plans.
Social Factors
Fashion industry is an industry which is hugely affected by the social conditions. The power
structure in the society is very important for Burberry PLC as it mainly caters to one segment of
the society – Women. Women are the prime customers of Burberry PLC and if company tries to
enter in a market where women do not have a respectable status and financial independence, the
company would not be able to sustain in that market (Kennerley and Neely, 2015). Markets like
United Kingdom, USA and Europe have been the main focus of Burberry PLC as there is gender
equality in these countries and women have the decision making authority when it comes to the
spending on fashion wear and accessories.
Another important social factor to be considered by Burberry PLC is the different fashion senses
in the different communities. For example, the Indian culture is very different from the western
culture and Burberry PLC could not sell its bestselling products in UK market to the customers
in India because of the cultural differences. Burberry PLC also has many cosmetic products
which are in high demand in United Kingdom and many other countries (Mason, 2016). But
social beliefs and government policies affect the cosmetic segment of the company in some
regions. For example, China has a policy that prohibits the use of animal testing and some of the
Burberry PLC cosmetic products that require mandatory animal testing are banned in China.
Similarly, some of the accessories from company are not being sold in some Asian countries
because of the social belief against the use of Leather in the products.
Technological Factors
Fashion Industry is a technology driven industry where creativity and innovation are very
important for an organisation. Burberry PLC is using latest technology in designing its products
so that it could have a competitive advantage in the market. The use of Hologram Technology
has allowed Burberry PLC to create unique accessories designs which have become the prime
products of the company.
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Burberry PLC is also using technology in automating its supply chain management. Starting with
placing the order for raw materials to the suppliers, manufacturing the products, distribution to
sales everything is automated at Burberry PLC which has proved to be an X factor in the success
of the company (Pfeffer, 2018).
Communication is another important aspect as Burberry PLC is now focusing on placing its
products in the communication channels using Social Media. Burberry PLC has been running
promotional campaigns on Social Networking Sites and creating a digital communication
platform for better promotion. Burberry PLC is using technology as an engagement tool with its
customers.
Environmental Factors
Awareness about the environment has increased a lot these days and it is becoming difficult for
organisations to justify their environment hostile actions to the general public. Burberry PLC is
an organisation that has always tried to keep the negative impact of its operations on the
environment to the minimum extent. Burberry PLC is focusing on the sustainable manufacturing
approach where company tries to keep a strict eye on the processes that could harm the
environment.
According to the data provided by Burberry PLC, the three main ingredients of its fashion
products are Cotton, Cashmere and Leather. These three materials are responsible for 30%
emission of the greenhouse gasses which is a point of concern for the company. To address these
concerns, Burberry PLC has launched Better Cotton Initiative known as BCI in which the
company is working with more than 10, 00,000 farmers who produce cotton. The company is
generating awareness in these farmers of reducing the use of pesticides and other harmful
chemicals in the production so that the negative impact on the environment could be reduced.
Similarly, Burberry PLC is certified by Leather Working Group (LWG), the Italian Istituto di
Certificazione della Qualità per l'Industria Conciaria (ICEC) and the International Organization
for Standardization (ISO) and ensures sustainable sourcing of leather (Polonsky, 2014).
Legal Factors
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When an organisation is as large as Burberry PLC, the company has to have a structured legal
department that could ensure the compliance to all the government legislations. Since Burberry
PLC has its presence in 51 countries and every country has a different legislation system,
Burberry PLC needs to make the required changes in its legal policies.
In UK, Burberry PLC has to follow legislations such as Employment Act, Equality Act,
Minimum Wages Act, Anti-Discrimination Act, Competition Policy etc. The Employment Act
ensures that Burberry PLC establishes an employment contract with its employees and mention
all the employment related terms and conditions in the contract. Burberry PLC also has to make
sure that there are no unfair dismissals in the company. Similarly, the Anti-discrimination Act
forces the company to make sure that there is no discrimination in the company on the basis of
religion, gender or any other factor (Wang and Ellinger, 2016).
Burberry PLC also follows the International Labour Organisation (ILO) code of conduct that has
given the guidelines on the labour management to the organisations. The ILO code of conduct
has mentioned the minimum wages for the labours and also the maximum number of working
hours for the labours. Continuous Audits by the regulatory authorities are also organised to find
any irregularities in the implementations of the legislations of the government.
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Conclusion
This report analysed the basic business operations of Burberry PLC and its management
structure. A brief detail about the company management is provided in the report along with the
analysis of the organisational structure of the company. The functional organisational structure
of the company suits its organisational culture. The importance of the PESTEL framework for
the Burberry PLC is also provided in the report. The external factors have great influence on the
business operations of the Burberry PLC which is explained in detail in the report. Burberry PLC
is an organisation that has been growing at a great pace and also contributing in the social and
environmental improvements which are part of the CSR program of the company.
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