Burberry Strategic Analysis

Topics: Strategic management, Luxury good, SWOT analysis Pages: 12 (3179 words) Published: April 4, 2011
Table of Contents
Executive Summary1
Strategic Review
A)Strategic analysis of Burberry
i. Environmental Analysis………………………………………………………………………………………1-3 ii. Resources and competence analysis………………………………………………………………….3-4 iii. Purpose/culture/stakeholder analysis4
B) Recommendation for future development
i. Three options suggested using TOWS Matrix5-6
ii. Chosen strategic option6
Appendices and Bibliography7-13

Executive Summary
This report is a strategic review of Burberry PLC and analyses the Environmental factors that surround the business. It looks into Resource, competence and culture analysis. Each section analyses Burberry and critiques the models. A SWOT analysis and TOWS matrix are then formed to outline three options of which one has been recommended.

Environmental analysis
With reference to Appendix 1
This PESTLE analysis was carried out for Burberry PLC as an aid to decision making. By looking at the external macro environment Burberry can plan for the future and analyse the risks that occur within that market. In the current countries and the emerging markets they operate, they must be wary of political stability as this could have an adverse impact on their operations or revenues. E.G a change of government in the UK has seen VAT due to increase to 20% in January 2011. Furthermore in emerging markets several countries have a variety of legal systems which can be changed retrospectively. This may not be enforced consistently especially in times when public debt is high and tax revenues are declining. Currently Burberry uses a risk assurance department to monitor markets and ongoing developments. If the option of expanding for future development is considered then this department would research whether it is feasible. Economic factors that should be considered when planning future development include interest rates, taxation changes and exchange rates. Prior to the economic downturn late 2008 the luxury goods market had grown 8% per annum. In 2009 it was estimated the market declined by 9% and is now worth €150 billion. [ (Markets and Risks, 2010) ] The economic downturn affected consumers’ purchases of luxury items which adversely affected Burberry’s sales in certain markets. For example a proportion of sales are generated by customers who travel overseas. This resulted in shifts in travel volumes which affected trading. In Spain Burberry restructured its operations due to the economic recession. If expansion is an option manufacturing in new countries in which there is inflation it can provoke higher wage demands from employees and thus raise costs. In fashion industry there is constant changes in consumer tastes and fashion. The inability to anticipate and respond to these changes can have an adverse impact on revenues. Burberry combated this by introducing ‘AprilShowers’ capsule range in order to ‘fulfil consumer demand and drive brand momentum’ [ (Markets and Risks, 2010) ] Burberry adapted to increasing use of technology through the use of online shopping and machinery to produce clothes more efficiently. As this is a fast changing market new technology has improved IT systems in order to create a more efficient supply chain. Environmental factors that need considering for future development is an increased carbon footprint as they are global, development in recycling and there has been a call for increase in organic cotton which increases costs. Finally Burberry has to be aware of different laws and regulations when entering different countries they wish to operate in. These include laws such as minimum wage, consumer laws, competition laws, employment laws and safety legislation. Using PESTLE analysis for the external macro environment can be effective in understanding the market and where Burberry position lies. However [ (McDonough, 2009) ] argued it needs to be updated regularly to be effective as the business environment is always changing. Porters 5 Forces...
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