Economic Analysis of Burberry

Topics: Burberry, Luxury good, Variable cost Pages: 13 (4001 words) Published: July 25, 2011
1.0 Introduction
There are tools and techniques that can help owners and managers make decisions. However these decisions are based on purely estimations where the costs and profits will come to a breakeven point. The common breakeven analysis is Cost-Volume-Profit Analysis. This analysis shows that how the cost and profit changes when the volume change. It analyses the effects on profits of changes in variable costs, fixed costs, selling prices, volume, and the products sold. However, there was a downside for this analysis which it only focuses on the breakeven point. In this paper, I mainly analyses Burberry’s performance and describing some of the companies’ background. Besides that, I also did some research on the structure and the competitiveness of the luxury fashion industry. Burberry had built their position in the market since 1856. Burberry Group is a British luxury fashion house, manufacturing clothing and fashion accessories. Its distinctive tartan pattern has become one of its most widely copied trademarks. The company has branded stores and franchises around the world, and also sells through concessions in third-party stores. It runs a catalogue business and has a fragrance line.

2.0 Burberry Background
The Burberry brand was well-known for the authentic British heritage, unique democratic positioning within the luxury arena. They are the largest retailer in United Kingdom. Their founding principles are quality, function and modern classic style. The trench coat, trademark check and Prosum horse logo are their globally recognized icon portfolio. By year 2000, Burberry operated 58 company-owned stores. 2.1 History

154 years ago, a 21 years old draper’s apprentice, Thomas Burberry, opened a small outfitter’s shop in Basingstoke Hampshire, England. By year 1870, Burberry focused on the quality and innovation in fabric and outwear design which expanded the shop into an ‘emporium’. Ten years after that, they invented Gabardine. Gabardine is a breathable, weatherproof and ‘tearproof’ fabric. In 1891, Thomas Burberry & Sons expanded their emporium in the West End of London at 30 Haymarket. They developed a predecessor of the trench coat, Tielocken, which was adopted by British officers during the Boer War in 1895. In 1904, the Burberry Equestrian Knight Logo was developed containing the Latin word “Prosum” meaning forwards and registered as a trademark. Burberry was then commissioned by the War Office to adapt its officer’s coat, to suit the conditions of British contemporary warfare, resulting in the modern day “trench coat”. In the 1920s, they added a lining to the trench coat, The Burberry Check, which was registered as a trademark of Burberry. In 1955, Burberry was awarded a Royal Warrant by Her majesty Queen Elizabeth II and the second Royal Warrant in 1989. With these reputation built, they became an international well-known luxury brand.

2.2 Products
Burberry has various kinds of products. All products are to do with fashion. The products they provide can be seen at the pyramid shown below.

Burberry brand uniqueness is the patented Burberry Check. It is a combined red, black and white check pattern. It was created in 1924 and was used as lining for the trench coats. It was then used for other merchandise including handbags, umbrellas, and scarves. Other than the Burberry trademark check, their signature icons also includes trench coat inspired D-rings, quilting and the Prosum equestrian knight logo. The Ansoff Matrix

Market Penetration
Classic Garments for existing target market (Trench coats, outwear, etc.)Product Development Burberry Accessories
i.e. stadium hats, handbags, toys, fragrances, etc.

Market Development
Diffusion ranges in mid 1990s for wider audience (Younger Consumers)

3.0 Industry
3.1 Luxury Industry Background
Fashion is normally built up from the creativity aspects of people’s personality. This is an industry where people can express...
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