Harvard Case - Burberry
"Burberry" Harvard business case study is written by June Cotte, Marta Jarosinski. It deals with the challenges in the field of International Business. The case study is 16 page(s) long and it was first published on : Apr 28, 2014
At Fern Fort University, we recommend that Burberry pursue a multifaceted strategy to revitalize its brand and achieve sustainable growth. This strategy will focus on: 1) Reinforcing the brand's heritage and luxury positioning, 2) Expanding into new markets through targeted global market entry strategies, 3) Embracing digital transformation to enhance customer experience and drive sales, and 4) Strengthening its commitment to environmental sustainability and corporate social responsibility.
2. Background
The case study focuses on Burberry, a luxury British fashion house facing challenges in maintaining its brand image and achieving consistent growth. The company has experienced declining sales and profitability in recent years, partly due to a shift in consumer preferences towards more contemporary and accessible luxury brands. The case highlights the company's efforts to reposition itself under the leadership of CEO Marco Gobbetti, who aims to re-establish Burberry's luxury positioning and drive growth through a combination of product innovation, digital marketing, and international expansion.
The main protagonists in the case are:
- Marco Gobbetti: The CEO of Burberry, tasked with revitalizing the brand and driving growth.
- Christopher Bailey: The former Chief Creative Officer, who played a key role in shaping Burberry's brand identity and product strategy.
- The Burberry Board of Directors: Responsible for overseeing the company's strategic direction and performance.
3. Analysis of the Case Study
The analysis of Burberry's situation can be framed using the Porter's Five Forces framework to understand the competitive landscape and the SWOT analysis to assess the company's internal strengths and weaknesses:
Porter's Five Forces:
- Threat of new entrants: The luxury fashion market is characterized by high barriers to entry due to brand recognition, distribution networks, and high capital requirements. However, the emergence of new direct-to-consumer brands and the growing influence of e-commerce platforms could pose a threat.
- Bargaining power of buyers: Luxury consumers are price-sensitive but also value exclusivity and brand prestige. Burberry needs to balance its pricing strategy to maintain its premium image while remaining competitive.
- Bargaining power of suppliers: The luxury fashion industry relies on specialized suppliers for high-quality materials and craftsmanship. Burberry needs to manage its relationships with suppliers to ensure consistent quality and competitive pricing.
- Threat of substitute products: Luxury consumers have a wide range of alternative products and experiences to choose from, including other luxury brands, designer labels, and high-end streetwear. Burberry needs to differentiate itself through product innovation, brand storytelling, and customer engagement.
- Competitive rivalry: The luxury fashion market is highly competitive, with established players like LVMH, Kering, and Richemont vying for market share. Burberry needs to differentiate itself through its brand identity, product offerings, and customer experience.
SWOT Analysis:
Strengths:
- Strong brand heritage and recognition: Burberry enjoys a long history and global recognition as a luxury brand.
- Established distribution network: The company has a well-established retail presence in key markets worldwide.
- Strong product development capabilities: Burberry has a team of talented designers and product developers who can create innovative and desirable products.
- Commitment to digital transformation: The company has invested heavily in digital marketing and e-commerce platforms.
Weaknesses:
- Declining sales and profitability: Burberry has faced challenges in maintaining its market share and profitability in recent years.
- Brand image dilution: The company's efforts to appeal to a broader audience have led to some brand image dilution.
- High dependence on wholesale channels: Burberry's reliance on wholesale partners can limit its control over pricing and distribution.
- Limited focus on sustainability: The company has been criticized for its environmental impact and lack of transparency in its supply chain.
Opportunities:
- Growing demand for luxury goods in emerging markets: The luxury market is expanding rapidly in Asia, particularly in China and India.
- Increased adoption of e-commerce: The rise of online shopping presents opportunities for Burberry to reach new customers and expand its global reach.
- Focus on personalized customer experiences: Luxury consumers are increasingly demanding personalized experiences, which Burberry can leverage through data analytics and digital marketing.
- Sustainability as a competitive advantage: Consumers are increasingly prioritizing brands that are environmentally and socially responsible.
Threats:
- Economic uncertainty: Global economic downturns can impact consumer spending on luxury goods.
- Competition from emerging brands: New brands are challenging established players in the luxury market.
- Fluctuating exchange rates: Currency fluctuations can impact Burberry's pricing and profitability.
- Geopolitical risks: Political instability and trade tensions can disrupt global supply chains and impact consumer confidence.
4. Recommendations
To address the challenges and capitalize on the opportunities identified, Burberry should implement the following recommendations:
1. Redefine and Reinforce the Brand's Luxury Positioning:
- Refocus on Heritage and Craftsmanship: Emphasize Burberry's rich history, iconic designs, and commitment to quality craftsmanship.
- Elevate Product Quality and Exclusivity: Invest in premium materials, intricate designs, and limited-edition collections to reinforce the brand's luxury positioning.
- Refine the Brand's Visual Identity: Develop a more cohesive and consistent brand identity across all touchpoints, including packaging, store design, and digital marketing.
- Engage Influencers and Celebrities: Partner with influential figures who embody the brand's values and appeal to its target audience.
2. Targeted Global Market Entry Strategies:
- Focus on High-Growth Emerging Markets: Prioritize expansion into markets with strong economic growth and a growing demand for luxury goods, such as China, India, and Southeast Asia.
- Tailor Products and Marketing to Local Preferences: Adapt product offerings and marketing campaigns to cater to the specific cultural and consumer preferences of each market.
- Develop Strong Local Partnerships: Collaborate with local retailers, distributors, and influencers to build brand awareness and establish a strong presence in new markets.
- Invest in Local Manufacturing and Sourcing: Consider establishing manufacturing facilities or sourcing materials locally to reduce costs and enhance local engagement.
3. Embrace Digital Transformation for Enhanced Customer Experience:
- Develop a Seamless Omnichannel Experience: Integrate online and offline channels to provide a consistent and personalized customer experience.
- Leverage Data Analytics to Personalize Marketing: Use customer data to personalize product recommendations, promotions, and communications.
- Invest in Interactive Digital Content: Create engaging digital experiences through virtual reality, augmented reality, and interactive storytelling.
- Strengthen Customer Service and Support: Provide responsive and personalized customer service through multiple channels, including social media and live chat.
4. Strengthen Commitment to Environmental Sustainability and Corporate Social Responsibility:
- Implement Sustainable Sourcing Practices: Partner with suppliers who adhere to ethical and environmental standards.
- Reduce Environmental Footprint: Minimize waste, reduce energy consumption, and implement sustainable packaging solutions.
- Promote Transparency and Accountability: Publish reports on the company's environmental and social performance.
- Support Community Initiatives: Invest in local communities and social causes aligned with the brand's values.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations focus on leveraging Burberry's core competencies in brand building, product development, and global reach while aligning with its mission to create desirable and innovative luxury products.
- External customers and internal clients: The recommendations prioritize customer experience, brand engagement, and employee satisfaction.
- Competitors: The recommendations address the competitive landscape by emphasizing product differentiation, market expansion, and digital innovation.
- Attractiveness ' quantitative measures if applicable (e.g., NPV, ROI, break-even, payback): The recommendations are expected to drive revenue growth, enhance brand value, and improve profitability. However, specific financial projections would require further analysis and data.
- Assumptions: The recommendations assume that Burberry can effectively implement its strategic initiatives, that the global luxury market will continue to grow, and that consumer preferences for luxury goods will remain strong.
6. Conclusion
By implementing these recommendations, Burberry can revitalize its brand, achieve sustainable growth, and solidify its position as a leading luxury fashion house. The company's focus on heritage, innovation, digital transformation, and sustainability will resonate with discerning consumers and drive long-term success.
7. Discussion
Other alternatives not selected include:
- Merging with another luxury brand: While a merger could provide access to new markets and resources, it could also lead to brand dilution and cultural clashes.
- Focusing solely on digital channels: While digital channels offer significant opportunities, a purely online strategy could limit brand engagement and customer experience.
- Cutting costs and downsizing operations: Cost-cutting measures could negatively impact product quality, brand image, and employee morale.
Risks and Key Assumptions:
- Execution risk: The success of the recommendations depends on Burberry's ability to effectively implement its strategic initiatives.
- Market volatility: Economic downturns or shifts in consumer preferences could impact demand for luxury goods.
- Competition: Burberry faces intense competition from established and emerging luxury brands.
- Digital disruption: The rapid evolution of digital technology could require constant adaptation and investment.
8. Next Steps
To implement these recommendations, Burberry should take the following steps:
- Develop a detailed strategic plan: Outline specific actions, timelines, and resource allocation for each recommendation.
- Establish a dedicated team: Assemble a cross-functional team to oversee the implementation of the strategic plan.
- Communicate the strategy to stakeholders: Inform employees, investors, and partners about the company's vision and strategic direction.
- Monitor progress and make adjustments: Regularly track key performance indicators and make adjustments as needed to ensure the strategy remains on track.
By taking these steps, Burberry can position itself for long-term success in the dynamic and competitive luxury fashion market.
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Case Description
In 2006, Burberry appointed a new chief executive officer (CEO) with many years of experience in senior positions in the fashion and luxury industries. Though Burberry had enjoyed continued year over year growth, the sales growth was not on par with the growth seen within the personal luxury industry. Big changes within Burberry were expected to come as the new CEO took the reins in July 2006. What were the transformations and changes that Burberry would need to make in order to successfully adapt to the dynamic and innovative global business environment of the luxury industry?
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