July 25, 2010
Identify and describe the greatest environmental threats that have immediate implications for Abercrombie & Fitch.
Hitt, Ireland and Hoskisson define a threat as, “a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness.” (Hitt, Ireland and Hoskisson, page 37) Abercrombie & Fitch are in the retail industry, selling everything from clothing to jewelry to fragrances for men and women. Abercrombie & Fitch’s top competitors in this industry are American Eagle Outfitters, Gap, Inc., and J. Crew. While Abercrombie & Fitch has gone global with companies in other countries and now has online capabilities, these competing companies have also spread to some of these same countries and also has online capabilities. Abercrombie & Fitch and American Eagle Outfitters are running neck and neck in the areas of revenue and market capitalization. Another threat to Abercrombie & Fitch is that these companies, American Eagle Outfitters, Gap, Inc., and J. Crew all have higher price to earnings ratios. Abercrombie & Fitch also comes in second behind J. Crew in price to cash flow ratio and rates third behind J. Crew and American Eagle Outfitters in revenue. Outside of finances, another threat to Abercrombie & Fitch is their perceived lack of diversity as it relates to its consumers and its employees regarding who can wear their clothing and who can sale their clothing by catering towards a younger, predominantly college-aged group. This limitation on the type of people to wear and sale their clothing, also limits their earning potential. Also, because of the past decrease in the economy due to the housing market taking a dive and the unemployment rate rising every day, people are not as willing to spend a large amount of money on clothes. Now many people are becoming conservative, saving money and shopping for bargains. Abercrombie & Fitch refused to offer any discounts on its merchandise, which caused consumers to look elsewhere for less expensive clothing. Abercrombie & Fitch has quite a few external threats facing them while trying to be a leader in their industry. In addition to the external threats, Abercrombie & Fitch also has internal threats facing them, the biggest of these internal threats are lawsuits. Lawsuits have been placed against the company in the past years due to discriminatory employment practices. Abercrombie & Fitch was accused of giving desirable positions to white applicants, to the exclusion of minorities. Abercrombie & Fitch has a lot to deal with when it comes to environmental threats. There are several threats externally and internally they have to overcome in an effort to become a leader in the industry.
Identify and describe the greatest opportunities available in the marketplace for Abercrombie & Fitch to pursue.
Hitt, Ireland and Hoskisson define opportunity as, “a condition in the general that, if exploited, helps a company achieve strategic competitiveness.” (Hitt, Ireland and Hoskisson, page 37) Because of the issues with the economy, to maintain their customers and possibly gain more, A&F could take advantage of the bargain. Abercrombie & Fitch could take advantage of those looking to save money. Since Abercrombie & Fitch has made it clear that they chose not to lower prices as they believe it would cheapen the product, they could keep their current line, but add a line with a lower price, which will attract more customers. Abercrombie & Fitch could also expand on their current brands to stay competitive in today’s market. It would be in Abercrombie & Fitch’s interest to step away from the norm and expand on their client base by offering more variety. When a customer gets too comfortable with a certain name brand, it becomes easy for them to venture out and buy from someone else. Keeping it exciting, new and fun will ensure that...