RBP020L056A - Burberry's Strategic Analysis: Strategy in Practice

This report provides a comprehensive strategic analysis of Burberry, a luxury British fashion brand. It assesses the external environment using PESTEL analysis, identifying political, economic, social, technological, environmental, and legal factors impacting the company. The report also evaluates industry attractiveness through competitive forces analysis, examining the threats of new entrants, bargaining power of suppliers and buyers, the threat of substitutes, and competitive rivalry. An internal analysis is conducted using resource analysis and value chain analysis to understand Burberry's resources, competencies, and key activities. Furthermore, VRIO analysis is employed to assess the competitive implications of Burberry's resources. The TOWS analysis suggests strategies for growth in the international market, and the SAF (Suitability, Acceptability, Feasibility) framework evaluates strategic options. The report concludes with insights into Burberry's strategic position and recommendations for future growth.

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Name:
Student Id:
Module Name: STRATEGY IN PRACTICE
Module Code:

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Table of Contents
Introduction......................................................................................................................................3
PESTEL Analysis............................................................................................................................3
Competitive Analysis.......................................................................................................................5
Resource Analysis...........................................................................................................................6
Value Chain Analysis......................................................................................................................7
Primary activities.........................................................................................................................7
Secondary Activities....................................................................................................................7
VRIO Analysis.................................................................................................................................8
Tows Analysis.................................................................................................................................9
SAF Strategy..................................................................................................................................11
Conclusion.....................................................................................................................................14
References......................................................................................................................................15

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Introduction
Burberry is a luxurious British fashion brand operating from its headquarters in London,
the U.K. it designs all kinds of clothing and accessories and specializes in outdoor fashion
clothing. The company is a well-known luxury fashion brand across the globe. This report will
identify the potential threats and growth opportunities for the company by analyzing its external
business environment. It will also acknowledge the industrial attractiveness through the
competitive forces analysis of the company. The internal environment will also be analyzed to
bring out key insights into the company’s resources and competencies. The TWOS analysis will
suggest new strategies for the company’s overall growth in its international industrial market.
PESTEL Analysis
Political Factors
In Fashion industry political factors put a profound impact. Due to the strict political
regulations, the fashion industry will have to face unavailability if necessary resources that will
enhance the overall cost of manufacturing products such as cotton and more. In addition to this,
international regularities are taking part in formulation of strict rules that will affect the future
performance of fashion industry profoundly (5 threats for fashion industry in future, 2022). This
brings a threat to the company’s brand image as a responsible business.
Economic Factors
Brexit has been enhanced the fluctuation in the currency which caused sudden increment
in VAT, duty cost and other such expenses. Reason being, the fashion industry has been faced
numerous cancellations of the orders (Grose, 2021). The demand for the company’s products in
China has decreased due to the Covid-19 restrictions. Covid-19 also decreased the demand for
many luxury brands including Burberry due to the global economic stability as an impact of the
pandemic. The declining demands may bring a threat to the company of low sales and hence
affect its financial balance.
Social Factors

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The fashion industry is changing over time due to the frequently changing fashion trends
and the influence of social media on the global population. The changing demands of customers
due to the contrasting personalities, choices, ethnicity, and nationality make it difficult to offer a
similar range of products to different individuals (Wajidand Zafar, 2021). This brings an
opportunity for customized outfits to be offered to the customers following the latest fashion
trends in their outfits.
Technological Factors
Fashion industry is likely to use advance and updated technologies including effective
tools so that they can offer better and quality products to the end customers. Nowadays, robots,
artificial intelligence, virtual techniques are being used to offer the best quality products to the
buyers. In addition, the number of digital buyers is also increasing. It will create opportunity for
the companies working in the respective industry as they can easily offer creative, designer
clothes and fashion accessories to the final buyers.
Environmental Factors
The climatic conditions of every region are different, and it is not easy to predict the
weather conditions effectively. The unwanted change in weather can affect the supply chain of
the company due to delays in the delivery of its products or raw material from its suppliers. This
brings a threat to the supply chain efficiency in the industry. Fashion industry caused major
green house gas emission at global level. Additionally, huge amount of wastage is also generated
by the industry. Therefore, the government put strict rules & regulations on fashion industry in
order to complete the daily operations in sustainable manner. This will allow help in controlling
over environmental pollution and also contribute in future sustainability. Hence, climate
conditions and increasing environmental pollution have become a major threat for the industry.
Legal Factors
The laws and regulations of different countries are different according to the situations
and the company must abide those regulations to run its business in all those countries. To work
successfully in the fashion industry, there is requirement to obey the necessary laws. Here,
numerous regulations need to follow in fashion industry such as Copyright Act, Designs Act,
The trademark Act and more. In addition to this, government authorities also make necessary

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amendments in the acts over the period of time. In this regard, modifications in the existing laws
and regulations will create threat for the fashion industry that will affect the future progress in
significant manner.
Competitive Analysis
Threats of New Entries
The new entries bring innovation to the industry with their pricing strategy or product
specializations. The low pricing strategies of emerging fashion brands affect the leading brands
like Burberry PLC’s business, being at a high risk of being a luxurious brand. The companies
also manage to maintain the economic scale by lowering their fixed costs according to different
regions (Pádraig, 2017). This allows the industry to maintain a moderate threat of new entries
into the fashion retail market. The moderate threat of new entry maintains a does not bring
significant contribution to increase the industry effectiveness.
Bargaining Power of Suppliers
The high dependability of the fashion brands on the suppliers signifies the high
bargaining power of the suppliers in the industry. Almost every company depends on several
suppliers for their raw materials and these suppliers can prove to dominate the big companies
like Burberry to receive higher prices for their service decreasing the company’s profit margin
(Lordet al.2021). The major reason of higher bargaining power of suppliers is the limited
availability of the raw material to produce the quality fashion products.
Bargaining Power of Buyers
It became easy for the customers to exploit the price while buying clothing and related
products making their bargaining power high enough in the global market. The buying behavior
of the customer shows that they want the best product in the minimum price possible (Yadav,
Gupta and Singh, 2018). This makes it difficult for fashion brands to maintain their long-term
profitability through their products and services. The companies reduce the customer bargaining
power by building a large customer base which also streamlines their production and sales. The
discount and customer loyalty schemes also bring customers towards the brand. This maintains
the moderate bargaining power of the customers.

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Threat of substitutes
In context of the fashion industry, they offer clothes, accessories and other such
necessary products to the buyers. It is quite complex to get the substitute of such products as
these products are fall under the category of essential commodities. Therefore threat of substitute
is lower for the respective industry due to limited availability of close substitutes.
Competitive Rivalry
The intense competition in the industry leads the organization to reduce the prices and
hence the profitability suffers. The competition directly affects the long-term profitability goals
of the organization. In context of fashion industry, there are several well-known players are
already present such as Zara, H&M, and more. In this context, Zara has market share of nearly
11% in the global apparel industry with annual revenue of 11.94 billion in the first quarter of
2021. On other side, H& M is also one of the leading fashion retailer having net income of 2.5
bullion $ in 2021 (Finbox. Com, 2022). These all brand are renowned with remarkable market
share. Here, high number of rival firms makes the competition intense for. Therefore,
competitive rivalry is high in fashion industry. It is important for the companies to maintain
unique and creative features in their product to gain competitive advantage.
Resource Analysis
Tangible resources
The tangible resources include all the physical resources available to any business organization.
These resources can easily be acknowledged by both organization and its competitors.
 Land: Burberry’s land resources are one of the most essential resources as they as they
provide company space to undergo all its manufacturing as well as other operations
(Keßleret al.2021). Here, land is the major strength of the company that will contribute
in future success as well.
 The raw materials: Used for production and packaging of the Burberry products are
tangible as they are easily accessible to its competitors as well. Timely availability of raw
material is also a great strength of the respective company.

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 The equipment: Used in all the business operations of the company also falls in this
category including all the technological and digital tools used. The entity has availiabliy
of necessary equipments for the production that is considered as a strength for improving
future performance.
The financial resources including the Equity based capital and the debt base capital are also
the major tangible resources of the company. In 2021, the company earned total revenue of
nearly 2344 million Euros with the operating profit of 521 million Euros. Additionally, 1216
million cash receivable has been received by the company so far. The cash flow of Burberry
increased from 625 million to 677 million from 2020 to 2021 (Burberry, 2021). In 2021, the
current ratio of the entity was 2.82% that shows that they have sufficient current assets to pay the
current liabilities. Also, they have current ratio of nearly 1.95% in 2020. Further, the interest
coverage ration of the entity has been identified as 13.8 times in 2021 which was 17.2 times in
2020.It can be said that COVID-19 has been created a threat for the financial position of the
entity that will also affect their future profit as well.
Intangible Resources
The resources that lack physical value are said to be intangible for the business and are
used only as per the requirement. The intangible resources are not easy to be identified by the
competitors. The brand reputation of Burberry is built on its unique attributes for a long time
since the company existed in the market (Rismayaniet al.2021). Hence, the brand reputation is a
major strengthe of the entity that will also contribute in increment of future profit as well. This
reputation is built on the strong relationships and organizational structure of the company and
cannot be affected by its competitors. The long-built goodwill of Burberry in the international
market is all because of its customer experience and unique attributes. It enhances the value of
the company’s equity in the market. The customer experience is one of the essential intangible
resources for the company. Burberry provides an amazing shopping and customer experience to
those who visit them. The company may copy the marketing strategies from its competitors, but
the direction and planning are made in an imitable manner to provide effective customer
experience.

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Value Chain Analysis
It is an important tool to analyze the internal position of the entity. In this, every activity
is evaluated in order to understand the opportunities of improvements. This analysis includes
assessment of ample of activities so that a firm can easily improve its future practices. The main
aim of value chain analysis is to provide the end products to the customers within minimum
period of time. In this, business owners are likely to break down each process of their business so
that appropriate results can be gathered in future period of time. In this regard, value chain
analysis is an important tool that is used by the majorities of the organization regardless their
size, scope, investment and more (Alieinykov and et. al., 2019). In context of Burberry, value
chain of the company is given below:
Support
Activities
Infrastructure Finance, Planning, Investors relations
HRM Recruitment, training & compensation system
Technology
Development
Social media, Use of digital application & tools
Procurement Service, Machinery & Advertising data
Primary
activities ->
Inbound logistics
Customer Access,
Data collection,
Incoming
material, storage
services
Operations
Branch
Operations
Assembly
Outbound
logistics
Order processing
Warehousing
report preparation
Marketing
and sales
Sales force
Promotion
Advertising
Websites
Services
Customer
Support
Complaint
resolution

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After analyzing the value chain, it is found that Burberry maintains proper and
appropriate infrastructure. Also, the staff members Burberry are competent enough to perform
their assigned duties. Here, HRM team of the respective company is made with designers,
managers, employees and more. To improve production efficiency, they also use latest and
updated technologies. It is analyzed that they procure services, machinery and relevant data set to
make improvements in their products effectively.
In terms of primary activities, they maintain appropriate logistic services so that the
customers can access their products in timely manner. Additionally, operations management of
the company is efficient to perform daily business activities in profound manner. Effective
marketing and sales strategies are followed by Burberry so that they can easily get the attention
of buyers to earn significant amount of profit. They offer services such as customer support,
complaint resolution and more to get better outcomes in the future period of time.
VRIO Analysis
Activities Valuable Rare Inimitable Organization Competitive
performance
Quality
YES YES YES YES Above
Normal
Product
differentiation
YES YES YES YES Above
Normal
Integrated
technologies
YES NO NO YES Sustained
Supply Chain YES NO NO YES Sustained

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Efficiency
There is significant core competence which is quality of the products of the respective
company due to the use organic and 100% certifies material to produce necessary fashion
products. In this regard, the business managers of the entity ensure to procure all the necessary
raw material for verified sources. Therefore, the competitors found it difficult to imitate the
quality of products that is being offered by the respective organization (Burberry, 2021).
Another core competence has been identified as product differentiation is the major
core competence. Under this, the entity is able to differentiate its products from the competitors.
They have team of well-qualified, efficient and potential designers who are able to produce
fashionable clothes with an aim to meeting with the demand of buyers significantly. Here,
product differentiation is helpful in terms of differentiating the product of the company from
other providers with an aim to get better results in future period of time.
Tows Analysis
TOWS MATRIX
INTERNAL FACTORS
Strengths (S)
S1: Effective quality standards
being used by the company.
S2 Qualified and potential
workforce.
S3 Providing better and
positive experience to the
buyers,
S4 Advance and updated
technical resources
S5 Sufficient tangible
resources
Weaknesses (W)
W1, Presence of intense level of
competition directly affects the
growth potential and success of the
respective business entity.

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EXTERNAL FACTORS
Opportunities (O)
O1: Increasing
sales and profit
margin by offering
customized
products to the
buyers.
O2, Technical
innovations
SO
Strategic options
S1+O1, Maintaining better
quality of products, they can
easily offer customized
products to the buyers
efficiently.
S2+O2, With the help and
efforts of competent
workforce, it is possible to
facilitate technical innovation
and creativity so that business
entity can easily earn
substantial amount of profit
margin.
WO, Here, expansion will help the
entity to maintain strong competitive
position in the market.
Threats (T)
T1, Uncertain
events such as
Breix and COVID-
19
T2, Modification
in the existing
laws and practices
ST, Strategic options WT, Strategic options
SAF Strategy
Recommendations:
The procedure of strategy formulation is efficiently examined concerning which we can provide
and evaluate a particular business plan for the company. It is identified that Burberry has not
initiated a price-based strategy and the main reason behind this was reduction in margins and
proper investment is not done.