Assignment Sample on Strategic Report
1. Introduction to the organisation and current challenges
1.1. Introduction of the organisation
Burberry is a British luxury fashion and retailer brand which deals with fashion and apparel products of high quality. The organisation has its headquarter in London, England and it currently designs and sells ready-to-wear clothing and footwear. The company is majorly famous for its trench coats and leather goods along with fashion accessories and cosmetics. It has been established and named after Thomas Burberry in 1856 with an initial focus on the development of outdoor clothing. The company is immensely famous in the fashion market of London, UK, and is an integral part of the fashion and retailing industry of the country.
1.2. Summary of the organisation along with its current challenges
Burberry was an independent and family-controlled company till 1955 ever since it has been established; however, as it expanded its business, the organisation took the shape of a multinational company. The brand has become one of the most valuable luxury brands all around the world which offers luxury clothing and other products to its potential customers. Burberry has been listed in the London Stock Exchange and is one of the constituents of the FTSE 100 index (Burberry.com, 2021). The company currently offers its products in almost 59 countries around the world which makes it one of the largest luxury brand sellers across the globe. In the financial year of 2005, the company had completed its demerger with GUS plc which was one of the major shareholders of the organisation. The brand has secured 73rd position in Interbrand’s Best Global Brand around the world alongside competitors such as Prada and Louis Vuitton (Burberry.com, 2021).
The worldwide revenue of the company has been accounted to be around 2.63 billion pounds sterling as of the fiscal year of 2020. However, the company has witnessed certain issues in the past few years which have affected its business dramatically. The company has announced restructuring its operations and business functions as it has been experiencing a significant loss in its profit margin for past few years. According to statements provided by the CEO of Burberry, the company has been facing loss due to the impact of the external environment on the business of the organisation. According to the view of Wang and John, (2019), challenges of the external market, rapid and broad change in customer behaviour, and transition period of the brand are collective reasons for a downturn of the company. A significant downfall in the profitability of the company was seen in the fiscal year of 2015-2016 when the company reported poor earnings. The company has seen success under the leadership of CEO Christopher Bailey, a famous fashion designer, who has made the company a digital champion. However, the company has seen significant changes as its leadership changed in 2014 and due to the change of leadership, it faced several issues which makes it difficult for the company to make a profit and run its business smoothly. In the financial year of 2020, the company has announced an increase in its sale in China during the first quarter of the year. However, its sales in Europe, Middle East, and Africa (EMEIA) have dropped significantly to a whopping 75% which is considered a major downfall for the company. As suggested by HU, and XIANG, (2019), to make the situation even worse for the organisation, the pandemic situation caused due to COVID-19 has resulted in the future downfall of the organisation and it has reduced its workforce and has cut almost 500 jobs in order to run its business.
1.3. Purpose statement of the organisation
The purpose statements of the company state that it strives to be creativity-driven, open and caring, forward-thinking, and proud of its heritage are its hallmarks. This sheds light on the aims of the company as it works hard to achieve creativity and a caring working environment (Phan, 2021). The organisation strives to make quality products which can live up to the expectations of its potential customers and can maintain the standards of the company.
2. Environmental analysis
2.1. Macro trend analysis focusing three key drivers of changes based on PESTLE analysis
PESTLE analysis of Burberry is essential to analyze business tactics of the company which has a significant impact on the business of the organisation. It examines the external environment of the organisation such as factors like political, economic, social, technological, legal, and ecological. A PESTLE analysis focuses on different external factors which impact the business of Burberry. As narrated by Techo (2018), the framework of PESTLE is imperative for companies like Burberry as it assists to understand the dynamics of the market which can help the company to improve its business.
Social factors: Burberry is a premium and luxury brand that is mostly preferred by people belonging to higher living standards. As the brand has realized the significant potential in its middle-class customers, it has launched some mid-range products in order to cater to middle-class customers which help the company to make significant profits (Beser Ramada, 2021). The company aims to expand its business further by satisfying the needs of its middle-class customers. Therefore, it can be stated that social factors are one of the key factors which determine a change within the company.
Technological Factors: Advancement of technology has been a key driver of change within any industry and in order to keep up with the latest trends, organisations need to keep their functions updated. In order to match up with the changing trends, Burberry strives to keep itself updated from technological perspectives. As argued by Oraman et al. (2018), it uses various social media platforms in order to enhance its image and also to increase its sales. The leaders of Burberry believe that with the revolution of the internet and other technologies, the implementation of social media platforms to promote their products is necessary. Keeping the organisation updated with advanced technologies can help the company to win a competitive advantage in highly competitive retail industry (Matovic, 2020).
Legal factors: Legal factor is one of the most vital external factors which determines growth and development of an organisation. Burberry operates its functions across a large number of countries around the world and so it needs to abide by the regulations of different countries. Taxation imposed by different countries can have a significant impact on the business of Burberry (Ekaterina, 2021).
Based on the above analysis it can be concluded that social and technological factors of the external environment can be beneficial for the organisation and so it can be an opportunity for Burberry. However, the legal factors of external environment analysis can be a potential threat for the business of Burberry.
2.2. Explanation of two highly uncertain key drivers of change
Two of the highly uncertain key drivers of change for the business of Burberry are Political factors and economical factors.
Political factors: Burberry operates its functions all around the world and so it has to abide by different rules and regulations. Stable political conditions can help an organisation to work smoothly; however, due to the impact of Brexit, the company has experienced significant issues in its operations. According to the view of Nguyen and Le, (2020), the investors have reduced their investments in the company due to uncertainties caused by Brexit.
Economical factors: Economical factors of the company such as its stock exchange and revenue are subject to rapid change and so it has a significant impact on the business of Burberry (Islam, 2017). The elite range of products does not get much affected by its economical factors since it has a high price; however, its mid-range products get affected by a change in pricing. [Referred to Appendix1]
2.3. Porter’s five forces analysis
Competitive rivalry: Competitive rivalry is one of the most significant factors which determine the development or downfall of an organisation. If the rivalry among the competitors is intense it can affect the profitability of the organisation. Burberry operates in highly competitive household goods and personal products and so its competitors do not have long-term impacts on its profitability. As narrated by Pu et al. (2021), the analysis of this force reveals that competitive rivalry in terms of Burberry is a weak force and so it can be an opportunity for the business of the company.
Bargaining power of suppliers: The suppliers of Burberry are in a dominant position which can decrease the profit margins made by the company. Therefore, it can be said that the bargaining power of suppliers has a strong force which can be a threat for Burberry.
Bargaining powers of buyers: Buyers demand high-quality products at lower prices which puts significant pressure on Burberry. This reveals that the bargaining power of buyers can be a potential threat for the organisation (Onyusheva and Seenalasataporn, 2018).
Threats of substitutes: The products offered by Burberry are often similar to products offered by many other companies which increase the threat of substitutes in case of Burberry. Therefore, it can be stated that threats of substitutes can be a major threat for the business of Burberry.
Threats of new entrants: New entrants in the fashion and retail industry can bring innovations that can put significant pressure on Burberry. Burberry needs to come up with new strategies and planning in order to deal with this factor of five forces. Threats of new entrants can be another potential threat for the organisation which can affect its competitive advantage (Anastasiu et al. 2020).
3. Capability analysis
3.1. Value chain analysis
Analysis of value chain is a business term that is used to determine the entire range of iterative processes implemented by Burberry around various parts of the world in order to develop its products. It is considered to be the strategic analysis of its components that determines its business activities. In this part of the study value chain analysis of Burberry has been performed in order to determine its valued processes (Zhang, 2017). The value chain activities of Burberry can be divided into two parts such as primary activities and secondary activities.
Primary activities
The primary activities of the value chain analysis of Burberry involve the processes of producing and selling the products to its customers.
- Operations: The process of operations in Burberry starts when the raw materials arrive at the factories of Burberry and is ready to process the raw materials to launch finished products in the market. Some of the operation processes involved in Burberry is machining, packing, assembling, and testing (Haleem and Jehangir, 2017).
- Inbound logistics: Inbound logistics is an important part of the product development phase and to maintain this process building strong relationships with suppliers is essential. Analysis of inbound logistics is significant in order to focus on all the aspects of transformation from raw materials to finished products.
- Outbound logistics: The outbound logistics of Burberry involves various processes of delivering the finished products to customers by passing through various stages. Some of the processes involved in outbound logistics are handling material, warehousing, order processing, delivering the products (Chesula and Kiriinya, 2018). The organisation can optimize its outbound logistics in order to explore its sources of competitive advantages.
- Services of Burberry: The pre-sale and post-sale services offered by Burberry can be significant in determining and developing customer loyalty. Modern customers who are proactive on social media consider post-sale services as important as marketing and promotion.
Secondary activities
- Technology development: Implementation of advanced technologies such as automated machines and robots at warehouses.
- Human Resource Management: Hiring skilled employees and proper management of cash flow (Wu, 2020).
- Procurement: A large number of suppliers are vertically integrated.
3.2. VRIO analysis
| Resources for organisational competencies in Burberry | V | R | I | O | Competitive advantage |
| Vision of leadership for set of challenges | Yes | No | No | No | Strong competitive advantage |
| Synergy and portfolio of products among various lines of products | Yes | Yes | Yes | No | Short term competitive advantage |
| Trademarks, copyrights, and intellectual property right | Yes | Yes | No | No | Strong competitive advantages |
| Position among wholesalers and retailers | Yes | Yes | No | Yes | Sustainable competitive advantage |
| Opportunities in e-commerce space implementing current IT capabilities | Yes | No | No | No | Sustainable competitive advantage |
| Access of capital | Yes | No | Yes | No | Low competitive advantage |
| Management of channel and sale force | Yes | No | Yes | No | Sustainable competitive advantage |
| Pricing strategies | Yes | No | Yes | Yes | Temporary competitive advantage |
| Record of project execution | Yes | Yes | No | Yes | Strong competitive advantage |
| Cost competitiveness and distribution of logistics | Yes | No | Yes | Yes | Medium competitive advantage |
Table 1: VRIO analysis of Burberry
(Source: Created by learner)
Core competencies of Burberry
As per the VRIO analysis performed above, it can be stated that the vision of leadership for sets of future challenges of Burberry is one of its core competencies which provides a strong competitive advantage to the organisation. The organisation has a strong trademark and copyright along with core competencies which provides a significant competitive advantage to the company (Kulesová, 2017).
Non-core competencies of Burberry
The non-core competencies of Burberry are its synergy and product portfolio which provides low competitive advantages to the company. Besides that, access to cheap capital and pricing strategy of the company are other non-core competencies of the company which provides low to temporary competitive advantages to the organisation (Daradkeh et al. 2018). In addition, cost of competitiveness and distribution of logistics are also non-core competencies of the company which provides medium competitive advantages to the business organisation.
3.3. Competitive implication
Based on the above analysis, it can be stated that the company needs a strong business portfolio and synergy in order to win competitive advantages in the market. In order to build a strong company portfolio, the company needs to understand its funding clearly and design a strong portfolio and monitor it regularly. This can help the company to win competitive advantages in the market fashion and retail industry (Percoco, 2017). Another field which needs to be improved in order to win a competitive advantage is its access to cheap capital. According to leading business journals, Burberry does not have access to cheap capital in comparison to its rival companies which affects the business profitability of the company.
4. Proposed strategy
Based on the SWOT analysis of Burberry it can be noted that the company has been dealing with certain problems due to which it has failed to make its desired profitability in business. Issues such as limited product lines, high cost of products, and limited market in Asian markets have imposed significant pressure on the business of Burberry. Therefore, the company needs to propose proper strategies in order to mitigate the risk of these issues and make a profit in its business. [Referred to Appendix2]
Cost Leadership strategy
Cost leadership is effective for any organisation that desires to win a competitive advantage over its competitors in the market. As the products offered by Burberry are mostly of premium line, it can fit the pockets of a fixed range of people, and youngsters who mostly buy products from their pocket money cannot buy its products. This makes the company restricted to a small number of customers which has been directly affecting its profitability. Cost leadership can help the company to cut the price of its product by reducing overall production costs (Daradkeh et al. 2018). This can make its products affordable for a vast range of customers which can increase its sales and overall profitability. Charging lower costs can increase the number of sales of its goods which eventually can increase the total revenue of the company. Management team of Burberry can implement its technologies to conduct research and development which can help them to understand and implement an effective cost leadership strategy
Product differentiation strategy
The product line of Burberry consists of apparel, beauty products, and footwear which has been limited to the luxury and fashion industry. Moreover, its products are highly imitable and many companies of a similar range offer similar products which affects the business of Burberry. In order to deal with this issue, the company needs to adopt a product differentiation strategy. Product differentiation strategy involves a process that can distinguish the products of Burberry from products offered by other brands (Kulesová, 2017). The main objective of this strategy is to establish a competitive advantage for an organisation and define compelling USPs (Unique Selling Propositions) which distinguish its products from its competitors.
Market expansion strategy
It has been evaluated from the study that the market of Burberry has been restricted to certain countries and it has not yet expanded its business in Asian countries. Many Asian countries have emerging markets that can provide development opportunities to the organisation and so the management team of Burberry can be advised to implement a market expansion strategy to expand its business in Asian markets (Percoco, 2017). The company can use direct exporting of its products to their desired Asian markets which can help to increase profitability and number of sales for the company.
5. Conclusion
The conclusion statement of the study states that Burberry is a multinational luxury fashion and retailing company which has been facing a significant loss in its business for the past few years. The study summarizes a brief overview of the organisation which reveals that the company has been struggling in making profits in its business. It can be concluded from the purpose statement of the organisation that the leaders of the company hailed towards creativity and forwards thinking ideas within the organisation. In order to analyze the strategic position of the company, its external environment has been evaluated with the help of PESTLE analysis. PESTLE analysis of the company has revealed that due to the impact of Brexit, the profitability of Burberry has been affected. Besides that, the SWOT analysis of the company reveals that it has been dealing with certain issues such as limited product lines and high cost of products. It has been suggested in the study that cost leadership strategy along with product differentiation and market expansion strategy can help the company to expand and develop its business.
References
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Appendices:
Appendix 1: PESTLE Analysis
| Political factors
· Stability of government · Impact of Brexit · Corruption |
Economical factors
· Rate of interest · Exchange rates · Economic growth |
| Social factors
· Living standards of customers · Health consciousness · Cultural taboos |
Technological factors
· Advanced technologies · Automation degree |
| Legal factors
· Employment law · Consumer law |
Environmental factors
· Geography · Infrastructure |
(Source: Created by learner)
Appendix 2: SWOT Analysis
| Strengths
· Focused branding · Global presence · Community engagement |
Weaknesses
· Premium product range · Limited product line · Asian markets |
| Opportunities
· Developing markets · Changing lifestyle · Product line expansion |
Threats
· Fake products · Competitors |
(Source: Created by learner)
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