Executive Summary: Abercrombie and Fitch
Industry: High-end casual luxury apparel
Industry Analysis- The Five Forces
• Threat of New Entrants include: established companies in related clothing markets could adjust merchandise to expand into A&F market. Level of difficulty to enter dependent on established infrastructure and brand recognition. Brand value and infrastructure are large barriers to entry for a new company. o Core group of loyal customers; however, as customers age, styles, tastes, and financial status change impacting loyalty. A&F markets to the 18-22 age group but they actually sell to the 20-30 age group. The Hollister brand actually captures the 18-22 age group. o Capital requirements comparatively low and include manufacture/storage of clothing and liquid assets for retail space and wages. o Products protected by license and trademark logo, yet counterfeit/illicit products available. Aggressive steps in place to prevent counterfeits. o Low challenge for entrants to acquire inputs; raw materials are traded commodities. Slightly more challenging to develop distribution centers. o Economies of scale will impact profits, but do not shape industry. • Competitive Rivalries include: American Eagle, GAP, Aeropostale, and J. Crew. Competitors use differentiation (not pricing) as strategy toward overlapping target customers. Competitors are larger (GAP) and Smaller (American Eagle, Aeropostale, J. Crew) than A&F. o Very low switching costs for customers.
o Exit costs for competitors are high; difficult to sell fixed assets. o Growth of industry varies with economy climate.
o Perceived product differentiation is high due to brand image. o Fixed costs vary given the business model of the firm. • Supplier Bargaining Power is low for commodities.
o Inputs include raw materials (cotton, dye, etc.), and employees, both of with are readily available...
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