Business Strategy Report: Burberry's Strategic Analysis

This report provides a comprehensive analysis of Burberry's business strategy. It begins with an introduction to business strategy and the Burberry brand, followed by an analysis of the macro environment using the PESTLE framework, considering political, economic, social, technological, environmental, and legal factors. The report then delves into Burberry's internal environment, employing SWOT analysis to assess its strengths, weaknesses, opportunities, and threats. The report also applies Porter's five forces model to evaluate the competitive forces within the industry. Furthermore, the report applies various theories and concepts such as Porter's generic and Bowman's strategy clock to formulate strategic planning. The report concludes with a summary of the findings and references.

BUSINESS STRATEGY

TABLE OF CONTENTS
INTRODUCTION..............................................................................................................1
LO 1................................................................................................................................. 1
P1. Analyzing the impact and influence of macro environment in Burberry.............1
LO 2................................................................................................................................. 4
P2. Analyzing internal environment and capabilities of Burberry.............................4
LO 3................................................................................................................................. 6
P3. Applying porter's five forces model and evaluating competitive forces in Burberry
................................................................................................................................. 6
LO 4................................................................................................................................. 9
P4. Applying various theories, concepts and models in Burberry with devising
strategic planning.....................................................................................................9
CONCLUSION............................................................................................................... 12
REFERENCES...............................................................................................................13

INTRODUCTION
Business strategy is a long term planning or course of action which is developed
to achieve specific and measurable objectives of organisation. Top management
formulates these strategies which are implemented by middle level managers under the
guidance of top level authorities. Burberry, the selected organisation in present report, is
a luxury fashion company which was found by Thomas Burberry in the year 1856. The
head-quarter of company is in London, UK. The firm mainly deals in clothing, fashion
accessories, perfumes, sunglasses and cosmetics. The study will analyse business
strategy used by Burberry in their organisation. Report will first analyse macro as well
as internal environment which influences organisation by applying an appropriate
framework like PESTLE and SWOT analysis. Report will apply Porter's five forces
model as well as various theories and concepts such as Porter's generic and Bowman's
strategy clock on selected company.
LO 1
P1. Analysing the impact and influence of macro environment in Burberry
Brief profile of Burberry
Company Background
Burberry is a luxury fashion brand which was found by Thomas Burberry in 1856
when he was 21 years old. The first shop was opened on sportswear in Basingstoke,
London in 1891. Burberry has its own stores and global franchisees. Also, company
sells its products through concessions in third party stores. It has now become one of a
leading luxury brands with large business world-wide (Bull and et.al., 2016). Products
served by company are women wear, kids wear, menswear, cosmetics, fashion
accessories, fragrances, handbags and sunglasses. It is famous and known for Trench
Coats.
Mission
The mission of organisation is to keep up its vitality and integrity of its brand.
Vision
To be the first organisation that is fully digital end to end and to build social enterprise
Objectives
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Major and basic objectives of the organisation are:
 To maintain the standard and quality of products and services
 To meet the needs and satisfaction level of consumers as well as staff and
employees
Appropriate framework to analyse macro environment
Business environment is complex and dynamic in nature as well as it has long
term impact on the growth of organisation. So, it is important to understand social, legal,
political, environmental, economic and technological factors which affect macro
environment of Burberry (Dobbs, 2014). The purpose of analysing these factors is to
identify threats and possible opportunities that will impact on organisation as a whole.
The factors can be assessed by PESTLE analysis:
PESTLE Analysis
Political
Political factors include government stability, foreign trade regulations, tax
policies and social welfare policies. Burberry expands its business in every possible
global sector and operates in many countries. Political regulations and changes in laws
in various countries can affect the performance of organisation. Laws and regulations
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Illustration 1: PESTLE ANALYSIS
(Source: Pestle analysis, 2016)

include taxation, accounting standards and domestic or foreign environmental laws.
Burberry operates in EMEIA that is Europe, Middle East, India and Africa and in
America, Asia Pacific.
Cheap copies of Burberry's brand in developing countries is threat and intense
competition for company due to no copyright law existing in those nations. Business of
Burberry is also affected by other political conditions of relevant countries of the
organisation such as political instability and limitation or restriction to transfer capital
across borders and import legislation (Echchakoui, 2018). Approximately 60% of raw
material is imported from Europe which is beneficial for company to stand unaffected by
Chinese import impacts.
Economical
Economic factors are those that pertain to the economy of nation and include
inflation, money supply, unemployment, interest rates and current stage of economic
cycle. The major factor for Burberry is inflation rates which directly affect the buying
capacity of consumers. Luxury industry has seen slowdown since 2011 due to
economic weakness in Europe and it affected the level of spending power of consumers
in luxury items and find substitution with lower price. Also, there is increase in fuel
prices currently because of civil unrest may enhances the transportation cost and
affects margin of company. Rate of GDP in country may affect growth of company in the
near future. Exchange rates of country affect the profitability of Burberry (Moon, 2018).
Social
Social factors include culture, beliefs, values and attitudes hold by majority of
population as a community as well as population demographics and income distribution.
Society's culture and their way of doing things affect the culture of organisation. Culture
differences of consumers will create various trends and well-defined taste. The impact
of social factors are not just important for operational aspect but also on the marketing
aspect of Burberry. It is important to understand the customers well, their level of
education, lifestyle and segment of society. It will help company to design marketing
and product strategies effectively that would lead company to become a success.
Technological
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This includes factors such as speed of technological development and new
discoveries. Burberry is very ambitious about new development and researches in
technology as it was the first luxury brand to perform a fashion show live in 3D and give
opportunity to consumers to directly purchase from the catwalk. There are some more
technological usage in the organisation like introducing social website like
artofthetrench.com where consumers can order customized trench coat as they prefer.
Technological improvement allows company to function more effectively. Burberry also
become the first luxury brand who uses Snap-code in 2016, it enhanced shopping
experience, consumer can unlock information about products by just scan the code from
their phones (Olson and et.al., 2018). It impacts positively on the business environment
and increase its profitability.
Environmental
Different organisation hold various standards of environmental protection. Every
organisation should consider factors like energy consumption, environmental protection
laws and waste disposal. Environmental factors also include weather condition, change
in climate, etc. Burberry may affected by weather condition as it may significantly impact
the ability to manage the transportation of raw materials, resources and finished goods.
Burberry is conscious about environmental protection as its recycling partner has
converted waste of raw material and sample waste about 130 tonnes into car door
insulation (Parnell, 2016).
Legal
Organisation should consider legal laws like employment law, legal law and
product safety to protect and develop strategy. Burberry faced issues of various
unidentified brands who produce exact copy of the company and sell them in much
cheap prices, it actively breaks the terms of its trademark. Organisation spend 2 million
pound a year to fight these counterfeits. Legal factors include anti-trust laws,
discrimination laws, intellectual property laws and employment law as well as health and
safety law along with data protection.
M1
Strategic management decision is defined as the process of formulating,
implementing and evaluating of cross functional decisions that help the organisation to
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accomplish its objectives effectively (Porter and Heppelmann, 2014). Macro
environment help Burberry to develop strategic decision:
 To overcome political factor Burberry develop effective strategic decisions which
include- Maintaining their consistency of pricing in every country to avoid foreign
trade rates and other taxes. Company develop regulations and take help of legal
laws to fight against those brands who produce copies of Burberry's product.
 However, to overcome increasing fuel prices and transportation cost, company
develop their official website from which consumer can buy their products
directly.
 Burberry analyse its consumer taste and preference as well as current market
trend to provide exactly what client need and want. They develop effective
marketing strategy to influence the behaviour of consumers.
 It can be critically assessed that technological factor is strength of Burberry and
they improve and utilize it in every possible manner to attract their customers and
build brand image different from its competitors. However, in absence of
advanced techniques, firm may have to face high cost and reduced profits.
 Burberry implements some major things in their management decisions to
consider legal laws like employment law, legal law and product safety to protect.
LO 2
P2. Analysing internal environment and capabilities of Burberry
Internal environmental scanning help to determine internal factors of an
organisation to identify strengths, weaknesses to determine that the organisation is
enough capable to take advantage of available opportunities while avoiding threats.
There are various frameworks internal environment can be scanned of the organisation
such as: Resources/ capabilities Analysis, Value Chain Analysis, SWOT Analysis and
McKinsey 7s Frameworks, etc.
Capabilities refer to organisations ability to use its resources through company's
process and strategy to turn inputs into outputs. Internal environmental of Burberry is
asses by SWOT analysis to determine its capabilities:
SWOT Analysis
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SWOT analysis is an essential part of organisation which provides a view of
current situation of company and future opportunities.
Strengths
Burberry is an iconic fashion brand having 156 years of long history and
experience. It has 500 stores in 50 countries. It has always been known for providing
high quality and durable products to its end user (Shakhshir, 2014). To maintain its
luxurious status, company does not promote the brand and products through television
or any other platform of mass media. They advert on fashion websites including: Elle
and Vogue. The major focus of company is on digital world it becomes strength of the
organisation which makes the company to stands out from the crowd.
Weaknesses
The premium price of Burberry products is its strength as well as weakness as it
limits the organisation to a few customer segments and large percent of consumers are
excluded (Bowman, 2018). The products are also limited to clothing, fashion
accessories and beauty products. Burberry's weaknesses include high staff turnover,
weak cost structure as it faces lack of expertise in the field of supply chain management
and high staff turnover is lower the efficiency of the organisation and it increases cost.
The product segment in between women and men's apparel line is weak. Inventory
turnover is also low and it weakens the company.
Opportunities
Social beliefs and lifestyle are changing rapidly throughout the world, the taste,
preferences and wants of consumers have increased the demand of luxury goods and it
is an opportunity for Burberry to expand the market and increase its loyalty and sales.
As Burberry used technology effectively in advertising its products, it have opportunity to
more expand in digital media and being fully digitalized. Success in beauty range
highlights their capabilities to expand and effectively compete against competitors in
other sector as well. The Luxury sector such as experience and lifestyles offer
opportunity for Burberry to continue expansion in more untouched markets (Moon,
2018). More ideas and creativity such as 3D ramp walk give opportunity to host in more
shows in different cities. Burberry plans to collaborate with other brands it seems
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beneficial to the organisation to providing fashion products in affordable range to
Burberry lover consumer.
Threats
As Burberry have limited availability and high quality products they face threat
from other competitors. The consumer have higher bargaining power in fashion
industries and low switching cost it is a threat for the company that if consumers can
find higher price of Burberry and are able to adopt other brand as substitute. They also
face threat of imitation or fake products which can affect their brand loyalty and image
over a period. Other high class brand engage with their customers on social media, it
can affect the relation of Burberry with their customer as they are not socially active on
social media. Similar outlet is introduced by the brand which make consumer feel bored
with the brand. Company does not advertise its products on TV and on social media
due to its luxury image consumers and overall market thought that company is arrogant.
M2
SWOT is done for assessing internal capabilities structure and skill set of
Burberry. Organisation should improve brand equity and improve their presence
worldwide. This can act as strength of the firm. It can be said that not making use of
advancing technology can turn as a weakness for firm. However, to overcome
weaknesses of organisation, they should hire expertise in supply chain management
who maintain and minimize staff turnover and improve weak cost structure.
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LO 3
P3. Applying porter's five forces model and evaluating competitive forces in Burberry
Porter's five forces model was developed or introduced by Michael E Porter in
1979. It is an analytical tool that uses five forces of industry to determine the strength of
organisational competition and level of profitability (What is five forces analysis?, 2018).
Within the luxury market, there are various competitors of Burberry such as Chanel,
Gucci, etc. that are having same position, price and product range. This model helps
Burberry to understand five key competitive forces that are affecting company and to
determine organisational structure. The five forces are:
Figure 1: Porter's Five Forces Model
(Source: Porter's Five Forces, 2018)
Bargaining Power of Buyers
Buyers are dynamic as their preferences, demands and wants can change
frequently. Also, they want to purchase the best offerings available by paying low price
as possible. It can affect Burberry and put pressure on company's profitability in the long
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run. Higher bargaining power can increase consumer's ability to seek discounts and
offers if customer base is smaller and powerful, so it is important for the organisation to
develop and maintain efficient customer base. In case of Burberry, the bargaining power
of consumer is medium to high due to high customer loyalty and consistency of
demand.
Bargaining Power of Suppliers
Suppliers are an essential part of organisation who are responsible for supplying
raw material in specific price based on products (Straker and Wrigley, 2016). The power
of supplier is medium due to huge amount of manufacturers across the world. Burberry
has long partnership with Peru who supplies cotton yarn to make trench coat. They
need several suppliers as in case if one supplier is unable to deliver raw materials, they
can contact another one. Burberry purchases raw material from the best suppliers as
they do not compromise with their quality.
Threat of Substitutes
When new products or services meet similar consumer needs in various ways, it
can affect profitability of industry. The threat of substitute is medium to high. Burberry
faces the threat of substitutes as other high street brands like Zara provides similar
products in less money and with increase in number in fake luxury, Burberry will get
affected. It is important for company to not only being product oriented but service
oriented as well (Moon, 2018). Also, it is essential to overcome threat of substitute to
understand the core needs of consumers. Burberry overcomes this factor as they
provide quality goods and thus, brand loyalty of customers is high.
Threat of New Entrants
As it is a luxurious brand, threat of new entrants is medium to low. But new
entrants in personal and household products develop innovation in their products, lower
their prices, offering new value proposition to consumers with reducing the cost. It is
important for Burberry to manage all these challenges and build barrier to control its
competition (Porter, 2018).
Burberry can handle the threat of new entrants by innovating new services and
products as it attracts new customers as well as give a reason to existing or old
purchaser to buy company’s goods and by investing money on R&D, they increase
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capacity of organisation to beat its competition. Structure of fashion industry is dynamic
which means that entry barriers are low and thus, Burberry should increase their
internal and external strength effectively to compete with the new entrants efficiently.
Rivalry among Existing Competitors
If rivalry among existing competitors is intense then it can drive the prices down
and decrease profitability of organisation. The competitive rivalry in Burberry is medium
to high. Main competitors of Burberry are Gucci and Chanel. As they are operating at an
international level, there are both; global and local competitors. Burberry can overcome
this factor by building sustainable differentiation and scale so that they can compete
effectively. Also, it is recommended to collaborate with competitors to enhance market
size rather than compete for small markets.
M3
By analysing all the five forces, Burberry can identify game changing trends and
swiftly respond to achieve the future opportunity. Burberry can implement appropriate
strategy to improve competition edge and improve market position based on the
outcomes. Strategies based on Porter's Five Forces model are:
 Burberry can implement strategy to tackle threat of new entrants by
differentiation strategy, bringing innovation in their products and services and
they can implement economies of scale to lower the fixed cost per unit. By
effective research and development they build barrier for new entrants as they
are not willing to enter in dynamic, established industry such as Burberry defining
the standard regularly (Suh, 2014).
 Strategy that can overcome bargaining power of supplier are: Burberry can build
efficient supply chain with multiple supplier that help the company to not
dependent on one supplier. Burberry can experiment with their products design
with the use of various raw materials so if price of one raw material is get higher
they can shift to another material.
 Company can build large customer base it will decrease bargaining power of
customer and it will give chance to contour its production and sales process to
the firm. Developing new products will also decrease switching of existing
customer to other brands from Burberry. They can use price based strategies to
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reduce the overall cost and provide products in less price to consumers to reduce
bargaining power of consumer.
 Threat of substitute can tackle by knowing exactly what consumer need and
demand rather than what customer is buying (Bull and et.al., 2016). By focused
differentiation strategy they seek to provide high quality product, customized
product as consumer prefer and demand. They can also make strategy to
increase the switching cost for buyers. Burberry should service oriented and
provide quality services with quality products to their buyers to maintain
consumers loyalty towards brand.
 Competitive rivalry can reduce by building sustainable differentiation. They can
also collaborate with their competitors to make their position in larger market size
not just competing for small market.
LO 4
P4. Applying various theories, concepts and models in Burberry with devising strategic
planning
Porter's Generic Strategies
This concept was introduced by Michael Porter in 1980. It describes how
organisation gain competitive advantage across target market. There are four generic
strategies in which company can choose one or two to gain competitive advantage
either through lower cost in compare to its competitors or by differentiating itself and
add specific feature to their products. Organisation who focus on producing
standardized products and sell products in low per unit cost to customer can have cost
leadership strategy in their organisation. This strategy can attract those consumers who
are price sensitive (Straker and Wrigley, 2016). As all the products of Burberry are
luxurious products and innovative designs, the pricing has to be premium so cost
leadership strategy does not apply in the organisation. The most suitable and applicable
strategy can be applied in Burberry are:
Differentiation strategy
Differentiation focus is the classic niche marketing strategy applicable in
Burberry. Differentiation means making your services or products different and more
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appealing to your customer base. They can be different in design, brand image,
customer service, feature, technology, product performance, etc. Burberry can
command a premium price for its products and services as they pursuing differentiation
strategy. It is appropriate where target segment of customer are not price sensitive.
Burberry develop products and services that offers unique attributes that are valued by
customers (Dobbs, 2014). Company faces some risk by using differentiation strategy
like, risk of attack by its competitors following focus strategies may achieve even greater
differentiation in their market segment, Imitation by competitors of products and
changes in consumer taste. To overcome this risk organisation need to have quick
product and service development process and continuous innovation help the company
to compete effectively with its competitors.
By using this strategy Burberry have the following internal strength:
 High skilled and creative product development. Organisation reputation and name for quality and innovation.
Focus strategy
Focus strategy concentrate on one segment of market. Purpose behind this
strategy is that the needs and wants of group can be better served by focusing on that
specific group. Burberry is of Niche market, the best suited and applied strategy is focus
strategy or focus differentiation strategy. It is a luxury fashion brand with premium prices
so group of consumer is specific and in limited territory. By using this strategy, company
attract one type of customer with differentiated products. It will may result in firm growth
in those particular niches.
Bowman's Strategic Clock
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Illustration 2: Bowman's Strategic Clock
(Source: Bowman's strategy clock, 2018)
Bowman's strategy clock is a diagrammatic representation which shows
relationship between price and consumer value. This model is used by the organisation
to analyse its competitive position in market as compared to its competitors (Uggla,
2015).
Application of Porter's Generic strategy is focus on major tree points that
company can use and provide its customer what they exactly want (Moon, 2018). In the
case of Burberry, company uses Differentiation strategy and focus strategy or
combination of both. And application of Bowman's strategic clock is broad study of
porter's three strategic position to eight. It explains the perceived and cost value
combination uses by various organisation, it also identifying the possibility of each
strategy success.
According to Bowman's strategy clock, the first step is analysing competition,
identifying, assessing and selecting key competitors (Suh, 2014). The second step is
developing competitive marketing strategy that effectively positions company against
competitors and makes it able to gain possible competitive advantages over others.
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Burberry had always been very particular and specific in choosing its strategy. It
generally decides the strategy on the basis of its product type. In the beginning
organisation adopted Differentiation focus strategy and it had been well positioned
during that time.
As a result of this strategy, brand become more known and recognisable in large
segments of customers. The current strategy that Burberry uses is Exclusive
Differentiation policy.
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CONCLUSION
The above study analysed macro environmental factors by using PESTLE
analysis and concluded that technological factor is strength of Burberry. Political and
economic factors have affected the business and legal factor helped organisation to
protect it from fraud brands who make copies of Burberry products. After this, internal
environment was analysed by SWOT analysis that gave a view of current situation of
Burberry and future opportunities to gain competitive advantage. By using Porter's five
forces model in organisation, it was analysed the current competition is medium, buyer
power is low, power of supplier is medium and threat of substitute is high. In Porter's
generic strategies, it was discussed that company uses differentiation and focus
strategy as organisation is of niche market and narrow segment. Porter's generic
strategy and Bowman's strategic clock both aimed to help Burberry to understand how
they can compete in marketplace effectually.
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