Burberry's Strategic Analysis: Issues, Resources, and Strategies

This report provides a comprehensive strategic analysis of Burberry, a luxury fashion brand. It begins with an introduction to strategic analysis and its importance, followed by an overview of Burberry's operations and market position. The report identifies and examines key strategic issues faced by Burberry, including the influence of economic factors, the threat of new entrants in the fashion industry, and the limitations of its product line. It further explores the role of the company's resources and capabilities in gaining competency and competitive advantage, analyzing both tangible and intangible resources. The analysis includes Burberry's international expansion strategies and their impact on the company's revenue and stability. The report concludes with an assessment of the company's competitive strategies in addressing the identified strategic issues, providing insights into Burberry's challenges and opportunities within the fashion industry. The report highlights the importance of adapting to economic fluctuations and the competitive landscape to maintain market share and achieve sustainable growth.

STRATEGIC ANALYSIS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1) Key strategic issues faced by firm and reason why they are considered strategic issue....4
2) Role of resources and key capability of the organisation in gaining competency and
competitive advantage............................................................................................................7
3) Assessment of competitive strategy in addressing strategic issue..................................11
CONCLUSION..............................................................................................................................13
REFERENCES..............................................................................................................................15
Appendix........................................................................................................................................18

INTRODUCTION
Strategic analysis or management helps firm to come up with different strategies that are
implemented by company in order to achieve its major goal and objectives. The planning and
application of strategies are initiated by higher authority of management on the behalf of owner
(Armstrong and et. al., 2015).
Definition: The scheme are made by proper analysis of internal and external environment in
which organisation work and compete. It has become one of the crucial part of organisation as it
helps them in sustaining in the market for very long time. Strategic analysis is done so that
company can have proper management of its resources and have maximum utilization. This
would help them to achieve goals and objectives of firm. In current study, we have taken
Burberry into account which a public firm is well known for its luxury fashion products (Baaij,
2016)
Company has achieved success in fashion world because of their unique idea and creativity; their
unique invention of clothes what makes them different from other luxury brand.
Size of firm: Owing its existence in more than 60 countries and having presence with 461 DOS
and 48 franchise stores across the globe. It gains major revenue from Asia Pacific region i.e.
39% of total revenue. However, company has witnessed a drop in sale in American region.
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The worldwide annual revenue of firm was amounted to 2.77 billion GBP in year 2017, while the
market capitalisation of the cited firm was recorded £8,112.30 million, in year 2016. Among this,
77% of revenue is drive from retail business and remaining from wholesale segment.
Presently it employs 9828 manpower at different location across the globe.
Objective: The main aim of firm is to offer quality products to the customer by assessing their
requirement. Further, it aims to be e-commerce leadership with excellence in operation.
Market growth: The Company has come long way in year that global revenue of firm was 716
million which in current time has turned into 2766 million GBP. Adjusted profit before tax in
year 2013 it was recorded £428 million which has reached £462 by year 2017. (Burberry in
luxury fashion industry 2016). The company has witnessed a growth of mere 2% in 2017 which
signifies that appropriate strategy and tactics must be considered by Burberry in order to boost its
growth rate.
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Company operation: The firm operate as one of the leading luxury fashion store, Its product like
trench coat are famous all over the world other than this it also produces ready to wear outwear
along with fashion accessories such as sunglasses, perfumes, cosmetics etc. Company main
operation include personal accessories and women's wear, other than this firm also operate in the
market of men's wear, children wear and beauty care. Personal accessories contribute 36% total
market share of firm while women wear is just behind with 29%.
In concern to the above, it can be concluded that the firm has pulled up the entire
customer spectrum and has a heavy reach on them. With proper change in their strategies
company have great chance of success. The report will focus on the strategic analysis used by
cited firm. It will also analyse the different strategic issues that company is facing in present
scenario, and how it’s affecting its performance in market (Baker, 2014).
1) Key strategic issues faced by firm and reason why they are considered strategic issue.
Strategic management plays a crucial role in organisation. Strategies made by firm not
only affects its operation but also have major impact on the culture and environment of firm.
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(Frederick, 2014). In the year 2017, company has seen major decline in its revenue and also has
suffered from some internal problems which has affected its position in global market. Many
critics said that the strategic management of firm is responsible for such big changes and the
crisis which company is facing. There has been major drop in the sales of company. Some critic
even said that firm need to work on their brand desirability along with this, the entity itself has
accepted that they were unable to gain the loyalty of their customer. The key strategic issue
which company is facing are mentioned below:
 Influence of Economic Factor High threat with the entry of new players in the fashion industry Limited Product Line
Influence of Economic factors: Economy of country also plays important role in success of firm
and can also cause hindrance in the growth of same. In economic factors things like recession,
inflation, unemployment etc. are taken into consideration. If the economic growth of country is
good then it will have direct impact on the purchasing power of people influencing buyer's
decision making. But if growth is adverse, then it escalates in the profitability of firm. For
instance, in year 2008 country suffered from economic crisis when the total GDP of firm was
shrunk to 0.1% while the whole economy of country reduced to mere percentage of 4.9; this was
all result of the slowdown of global economy. Many people lost their job which majorly
impacted on their purchasing power, but now things are settling up and recession is being
overcome. Still, affect of that impact can be noticed on the way people shop. Its necessary for
Burberry to understand that the inflation has to be monitored and kept in consideration. But
various other economic factors will also come up and has to strategically controlled. In
contradictory to this (Grinblatt, and Titman, (2016) said that economic condition is not as much
as of big problem for firm as compare to the emergence of new company that is providing good
clothes at much lower price.
The threat of new entry: With new tends, there are many firms that have entered the business of
luxury brand. With too many options, it has become difficult for the firm to retain the loyalty of
their customers. With the growth trend in this industry, various new entrants have come up as
rivals, creating major impact on the stability of the firm. The innovative products and
promotional strategies have created and affected Burberry in huge terms. It has also affected the
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cost of firm as the new entrants are producing the product at much lower cost. It is evident that
budget fashion products of new entrant is limiting the sale of giant companies like Burberry.
Customers are now shifting towards them which in turn results into poor performance of giant.
Therefore, it is highly required that brand like Burberry must initiate more of sale promotion
scheme and offers in order to cater the attention of customers towards them.
Limited Product line: The product plays an important part in attracting customer toward the
firm. According to Baaij, (2016). The variation in product line aids customer with options and
also help them in retaining their loyalty. Burberry believes each product from fabric purchasing
to designing, manufacturing etc. has to be done and is uniquely doing it which has helped him in
gaining the position of one of the leading brand in firm. In the argument of above statement.
Dressler (2012.) said that the uniqueness in each product which Burberry is creating has less of
innovations. For instance, it created a water-resistant cloth which was flexible and had better
reach as in compared to the rivals. The loophole was that it had not done innovation in that and
kept manufacturing the same. This was creating the issue for firm. The cited firm has very
limited and unique product to offer their customer which is not enough to hold their interest
furthermore, the rival companies has already indulged in other business.
International Expansion
Burberry has adopted international expansion as one of their major strategic plan. This
has open many gates of opportunity and aid firm in becoming a brand name at global level. The
international branches contribute a large amount of sum in the annual revenue of firm. The
corporate has more than 300 stores all over the world through which they reach their customer
and provide them with their services and products (Ammenwerth and Winter, 2014). It has
number of stores in USA, China, Japan, Spain, middle east etc. This expansion was quite helpful
in the growth and development of firm.
In current times Burberry has earned its highest revenue from developing countries of
Asia pacific. Countries like China, India etc., has played major role in bringing up the sale of
firm. Seeing the great success the stores have achieved the entity had decided to open more
stores in the China leading the total count of store to 50 (Antony and Labib, 2008). The
instability in politics of nation along with major social change has an adverse effect on the sales
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of firm (Burberry share price 2017) (Reference to appendix illustration 2). This high dependency
on China has cost Burberry its position in market.
The high dependency on single country for it success has shaken the stability of entity in
market. Even though company has no hold over the economic and political changes of a nation.
But their strategy of investing on single nation had cost them a lot. Burberry instead of focusing
on one nation could have paid attention on keeping balance. They could also invest in other
developing nation who have great potential so that change in one nation doesn't affect the
business operation and profitability of whole firm.
Illustration 1: Burberry revenue by region
(Source: Burberry strategies for change.2016)
2) Role of resources and key capability of the organisation in gaining competency and
competitive advantage.
Resources and capabilities of firm play major role in the strategic development of firm. It
is this two that provide firm with a competitive advantage and stability in diverse market.
Strategic management play crucial role in organisation. Making good strategy for the benefits of
firm is quite difficult as these strategies are made on the uncertain situation and have major
impact on the operation of firm (Dressler, 2012)
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The strategic plan of firm can only be made by analysing the impact of external environment.
This external environment include the resources, capabilities and competency and its impact on
the strategy of an organisation. Strategy analysis can be described as the relationship of firm and
the environment it works in. The business strategy are made so that proper balance between the
relationship of this two can be maintained.
Here the appreciation of Burberry resources and capabilities are made in order to analyse
the competency of firm in developing strategies.
Resources can be defined as productive asset that help firm in their development. There
are three type of resources that is tangible, intangible and human resource. The tangible resource
of firm can easily be identifies by raking the current balance sheet of firm. It mostly includes
physical assets and financial resources that are owned by entity such as plants, finance lands etc.
On the basis of above statement the balance sheet of firm from year 2008 to 2012 has been
analysed. By this analysis it has come forward that the net asset of firm has been increasing each
year; by year 2012 the total equity of firm has reached 891.40 million. Moreover, the firm has
more than 400 stores with 48 franchise in more than 80 countries (Gomez-Mejia, Balkin and
Cardy, 2014) . Sales of firm are also consider as one of the important resource. Burberry has its
biggest sale in Europe, with China just after it with 33% of total sale of firm. Intangible
resources are difficult to find or identify but they are considered more valuable than any other
tangible sources. These intangible resources include brand name, reputation, culture, technology
etc. Company has been recognised as a top brand with good reputation that provide quality
product and has innovative style that make it different from other. Human resource are also
considered important part they aid firm by providing their expertise and effort through which
firm can achieve its goals and objectives. The firm pays special attention to the employees and
make sure that only best and highly competent people get hired in the firm. Individual resources
no matter what are not enough to produce great result they are required to work together in order
to enhance the capability of organisation and assist them in gaining competitive advantages.
Organisational capabilities provide firm a chance to reign high in the industry and
economic in which they operate. It gives firm a dynamic edge that helps firm in putting strong
competition in changing market. Burberry internal organisational capability of modularity and
cooperative strategy has helped firm in gaining an edge over their rivals from very ealy stage of
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time. (Hagel and Brown, 2015). The capabilities of firm can be identified on the basis of four
business models
 Product
 manufacturing
 distribution marketing
Products
Products are important part of any firm. The competency of firm can be determined by
the quality of product it provides top their customers. It essential of a business to see that the
quality of their product is best as whole resources and capability of firm are used in order to
produce the products. Burberry is known for its unique design, creative ideas and its high style
fashion. Its unique position as one of the leading authentic brand had assisted firm in having
strong hold of luxury market. Uniqueness is what make firm different from other. This factor
make it difficult for rival brand to copy the product of firm. Other than firm also ensure that they
launch different product at different time so that they can attract the attention of customer.
Burberry has launched different brand level so that they can target particular customer
and make sure that their needs are fulfilled. This level includes Burberry prorsum, Thomas
Burberry, Burberry accessories Burberry London and many more (Hedman, and Kalling, 2013)
Targeting customer by dividing them in a group, work in the benefit of firm and also increase
their sales. Apart from apparel there are many other products which contribute in annual turnover
of firm. This targeting method help firm in understanding the need of customer and produces a
quality product that can satisfy the demand of customer.
Manufacturing:
Capability of firm can be determined by the skills of its labour. In the fashion industry its
design that what make firm different from other, designer are considered as one of the crucial
resource of firm. It's the capability of designer and its unique idea that shape the competency of
firm. The knowledge of designer is the key that is required for the success of firm. The first stage
of manufacturing include implementation by design team. The design team is also responsible to
look after the various level of firm. For e.g. The designer of Burberry has innovated a unique
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clothes which is not only waterproof but also comfortable and breathable. This innovation and
creativity was what brought cited firm at such a height (Murthy, 2012) Fabric in clothes industry
play important role. The major suppliers of firm are European countries it has both positive and
negative impact. Positive impact is that the firm production does not get affected by crisis in
Asia pacific countries. Negative effect is that the material that firm acquire are quite expensive
which increase the risk over the firm. To overcome this the firm has approach Japanese specialist
and expertise and has sign licence agreement. The firm is moving with trend and is adapting
necessary changes which can help them in enhancing their capabilities and their competency to
produce a quality product.
Distribution
Distribution channel play major role as this factor decide how and where people can get
the products of firm. It also helps firm in gaining visibility. Good distribution strategy helps in
making customer satisfied which shows the competency of firm in reaching their customers.
Burberry use three channels of distribution that is Retail, wholesale and franchiser. The firm sale
its product in few ways such as company owned stores, co-operate stores where they work with
third party and last Japanese firm which work on the licensed agreement form by firm. The firm
has opened flagship stores in high street of London and New York in these cities it found high
competition from brand like Gucci and Prada. Competing with such a known brand create
pressure on the firm and they are required to put more resource and capabilities to earn
competitive advantages over such a big name. Other than retail other than this company is also
working toward digital sector. In 2012 company has open its one of the biggest store in Regent
street whose focus lies on digital world. The firm was working on bringing their digital store in a
physical space. The special quality of it was that customers can experience great variety and
facet of firm like multimedia application. This shows how capable the firm is in reaching their
customer and providing them with best experience ever.
Burberry has used flagship stores as one of their major strategy so that their brand could
be promoted in the high street of London. Other than this their normal retail, departmental,
designer outlet stores etc. that are spread all over the world make huge profit and contributes in
the sales and growth of firm. Their wholesale channel is consisted of speciality fashion retailer,
prestigious department stores and duty free retailers. Among these stores 17% are located in
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USA, 40% in Spain and Portugal and remaining percent are distributed all over the Europe.
(Worldwide store of Burberry 2017). (Reference to appendix illustration 3) There licence
distribution in Japan market provide their product to departmental stores and specialist stores.
The distribution network of cited firm is quite wide and well distributed this help them in
covering large no. of countries. Many critics even have stated that distribution way of firm is
quite affective and help Burberry in achieving many benefits such as high turnover and good
brand image (Neumann and Finaly-Neumann, 2014).
Merchandising and Marketing
Burberry in its prospectus in 2002 said that marketing communication play significant
role in the firm. The marketing activity of firm is managed by the London team of marketing
who sees not only the market of nation but also of whole world. The marketing in fashion work
include three models that is Advertising, Fashion shows and editorial placement Advertisement: Every year Burberry organise two advertisement events. The focus of this
event lies on leading fashion of the current times and lifestyle publication. Marketing lead
a major role in the strategies made by firm. Marketing help in creating awareness about
the product of firm and also help in sending the message about philosophy and values of
firm on which it works. In addition to all this it also helps in making and enhancing the
brand image of firm. Fashion show: Fashion show is the one element what make luxury brand different from
lower brand. Fashion show are hold by luxury firm in order to introduce their new
product in market. This show help firm in gathering lot of valuable people such as
retailer, celebrities well known designer from all across the world. Burberry hold two
fashion show for both women and men every year in Milan. Burberry London line also
hold fashion shows at London fashion week which is one of the most known platform of
fashion (Gomez-Mejia, Balkin and Cardy, 2014) Fashion show are type of advertisement
or it can also be said its type of luxury advertisement. It helps firm a lot in gaining
competitive advantage.
Editorial placement: Burberry operates in every new season and to ensure the loyalty of its
customer it provides Boucher to its VIP customer. The aim of firm is to achieve worldwide
editorial coverage. The three model used by firm have different functions, roles and
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responsibility but this model work together and support each other so that objectives of firms can
be achieved. Every single factors mentioned above contribute to the competency of firm. Their
unique clothes, distribution channel and advertisement to reach people shows hoe competent the
firm is in satisfying their customer.
The aim of Burberry is not only the investment of resources and capability but it also
works to achieve competitive advantage so that dynamic capability can be achieved.
By analysing these resources and capabilities Burberry will become more aware of its
strength and weaknesses and can plan accordingly so that he can strengthen it strong point and
can eliminate its weaknesses. This will aid firm in finding stability and will also help in gaining
upper hand in the competitive market. The above mentioned all factors determine the
competency of firm. The company has strong financial background and resource which can help
entity in enhancing the quality of its product. This resource can also be used as corporate strategy
which can provide business with better opportunities and growth. It strong brand image also
provide firm with a leverage and help in competitive market. By identifying its weaknesses firm
can work on eliminating it so that better strategies can be made. This all will increase the
competency of firm and will provide it competitive advantage.
3) Assessment of competitive strategy in addressing strategic issue.
As it has been discussed before that company is facing major drop in the revenue because
of socio political issues that are occurring in china which is one of its highest revenue generator
country. The firm is facing some issue with the changing trend in the market of high fashion
which are required to be eliminated so that it can progress and develop properly. In current time
the firm is focusing on a strategy of wider distribution through which the customer base and
customer loyalty can be win. Other than this company is ready for some major revolution that
can work in the benefit of firm. Some strategy of firm is mentioned below
High growth Asia
The firm strategy of international expansion has been a great success and has come up
with many benefits. But their utter dependency on China for high revenue and its unstable
condition has lead the firm to some lose. Investing in developing country has been supported by
many critics but depending on only one country cannot bring profit all the time. To overcome the
loss the firm has suffered it has decided to retreat its agreement with Japanese firm. This
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Japanese firm were targeting average people by providing them with moderately priced Burberry
items (Alukal., 2007) Japan represent one of the largest market of luxury market but in current
time it only contributes 1% of Burberry revenue, seeing the expense was much more than the
profit generated by this, firm has decided to close this stores. The management has also accepted
cost cutting measures and announced that £5m has more been reduced from its many business
operation. The company is finally responding to the lack lustre performance in global market. It
working on sustainable growth in various market so that productivity and efficiency can be
brought in firm. The company has enjoyed the benefit of China when the economy growth was
10% but its sudden shift has also affected the firm. But in current market it's diversifying in other
markets to continue to develop in new market. By reducing the additional cost and focusing more
on sustain development the firm is trying to overcome different crisis its facing.
Social Media
The firm want to continue it traditional strategy of producing their core product whose
quality are unmatchable. One of the critic said that is Burberry want to continue its traditional
luxury method they will have to make some tough decision regarding the there business they
may have to shut their stores, shrinking their budget and also has to pull their product from many
of its places. To overcome this problem they have decided to use the platform of social media.
This will help firm in gaining more visibility and it will also be able to reach people at much
wider level. The firm has decided to adapt one of the leading technology and social
advancement. In 2016 the firm has launched 24 hour marketing campaigns where it has a
campaign shots by Testino was displayed on snap chat for 24 hours. It was viewed by 100
million snap chat user it was one of its kind and was not use before it was useful in gaining the
attention of many people which is not possible with any other technique. (Xue, Choi and Ma,
2016).The firm realised the growing use of technology and is accepting in its firm in order to
compensate for the area they lack. Social media has helped them reach the places that were
beyond their reach and attract audience at much wider level. It also helps firm in creating
awareness among the people regarding their product. The other such action taken by firm was
that they opened a store where customer can see the product of firm like in multimedia storage.
Burberry is becoming one of the major digital store company. It has accepted technology as a
part and is getting many benefits from it (Social network demographic 2015) (Reference to
appendix illustration 3)
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The company has tried to find various way through which the strategic problem can be
reduced. The dependency problem is handle by taking more appropriate action and adopting the
method of sustainable growth. Instead of depending on one country it working on creating
balance and focusing on its productivity and efficiency. Social media is helping them in reaching
people at much wider level and also help them in overcome the area where they lack.
Recommendation
Designer of firm is important human resource but that does not mean other workers does not
hold any value in firm. The firm can provide them with reward, recognition and promotion
which can be quite useful in motivating the employees. Beside this they can also include them in
decision making process which will increase their involvement in firm
Social media is great strategy to reach wider expansion and overcome different weaknesses. But
if firm can adopt the method of diversification it will lead to many opportunities and success.
Retracting step at right time has always come handy; the firm can invest in other country which
have strong economic condition, it can also open other stores in London and other countries to
gain more visibility.
CONCLUSION
From above report it can be concluded that strategies play important role in the success of
firm. Lack of knowledge of incompetent strategy may have adverse effect on the operation of
firm. The company is suffering from three strategic issue that is motivation, diversification and
international expansion. This issue are needed to be solved so that efficiency can be brought. To
overcome this issue social media and other ways are provided with some recommendation that
can help firm in its growth.
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Appendix
Illustration 2: Burberry share price in Asia pacific countries
(Source: Burberry share price. 2017)
Illustration 3: Burberry outlet store in world
(Source: Worldwide number of burberry stores. 2017)
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Illustration 4: Demographic of snap chat and other social media.
(Source: Social network demographic 2015)
17