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Strategic Plan Burberry

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Introduction

2011 LONDON SCHOOL OF BUSINESS & FINANCE Strategic Development at Burberry Student Name: Madhumalesh Prakash Student ID: A4036664 Submission Date: 4th November, 2011 Intake: MBA Batch 8A Module Name: Strategic Planning Module Code: SP Assignment Title: Longitudinal Strategic Development Study Word Count: 4044 Table of Contents 1. Recent past to the present: 1.1. Introduction 1.2. Business 1.3. Leadership and culture at Burberry 1.4. Strategies deployed 2. The Strategic Position 2.1. Macro-Environment 2.2. Industry and market structure and competitive conditions 2.3. Strategic capability, Resources and Competences 2.3.1. Strategic capability 2.3.2. Resources 2.3.3. Competences 2.4. Financial situation of Burberry 3. Strategic choice 3.1. Business level strategic choice 3.2. Corporate level strategic choice 3.3. Direction and methods 3.4. Recommendations 4. Conclusion 5. Appendix 6. References Recent past to the present: Introduction Burberry, one of the famous designer brands in the world was started by a 21-year old draper?s apprentice, Thomas Burberry. This all started with a small outfitter?s shop in Basingstoke, Hampshire, England (The Telegraph 2011). Burberry gained popularity during the First World War when it won the contract to supply trench coats to the British army. Later on, Burberry was also worn by Humphrey Bogart in Casablanca, Audrey Hepburn in Breakfast at Tiffany?s and Peter Sellers in the Pink Panther. Burberry?s main mission was to sell Britishness to the world (Friedman 2011). Business Burberry markets its products to its end consumers through three channels: Retail, wholesale and licensing. Burberry sources and markets its apparel and accessories worldwide with major markets in Spain, America and Asia Specific which accounts to 90% its revenue and emerging markets like China, India, Russia, East Europe and the Middle East (Annual Review 2010). The first product developed in 1880, which was responsible for Burberry?s success was Gabardine Macs- A breathable and waterproof fabric used for making of trenchcoats. In 1985, Burberry develops ?Tielocken?, the predecessor of trench coat which was worn by army officials in Boer War. ...read more.

Middle

Burberry?s industry structure can be seen as entrepreneurial structure or functional structure. Entrepreneurial structure as the organisation is organised wholly around the chief executive, Ahrendts. Functional structure, like all the functions such as production, finance, marketing and HR is controlled by chief executive. And, Christopher Bailey as creative head responsible for the production. Advantages of these structures are: they are centralised, relatively less overheads and simple lines of control (Thompson 1997). As we saw before, Burberry sells its products to its end customers through retail, wholesale to different parts of the world. Let us see the revenue from different markets and different channels (Burberry.com): Americas: constitutes to 27% of the total revenue which includes business in US, Canada, Central and South America. Europe: this includes the operation in Europe excluding the Spanish operation and accounts for 34% of total revenue. Asia-Pacific: including operations in China and Japan this market is growing rapidly constituting for 33% of the revenue for Burberry. Rest of world: this includes operations in India and Middle East which constitutes for 6% for its total revenue. Retail: This channel accounted for 64% of its total revenue including 174 stores, 199 concessions with departmental stores and 44 outlets, as well as digital commerce across the world. Wholesale: 29% of revenue for Burberry comes from this channel. This includes sales to departmental stores and its franchises mainly in emerging markets. Licensing: Remaining 7 % of revenue comes from licensing, including royalty income received from licenses in Japan, its global licenses for fragrance, eyewear and timepieces, and a small European childrenswear license. Competitive conditions can be analysed by porter?s five forces framework which helps in identifying the sources of competition (Johnson et al 2006). The threat of substitutes There are lot of luxury brands which have established their names in the fashion industry. The threat of new entrants Fashion industry is ever growing and there may be threat of new and cheaper brands entering the market. ...read more.

Conclusion

Product development can be done by organic method or licensing for new accessories. In corporate level, as we saw before strategic choice is diversification. The two strategic directions: market development and diversification in Ansoff matrix comes under this level. The vertical integration can be done by acquisition of the textile industries supplying raw materials or by acquisition of rival companies like Gucci. The acquisition again should be done after analysing the criteria seen before. Methods of Joint venture/ Alliance can be used for horizontal integration by contractual relationship with high end sports car brand for the production of its merchandises. For example, Puma produces clothing and other merchandise like bags, wallets for Ferrari and Ducati. Conclusion Burberry, a must-have fashion brand in Britain started in 1856 produced coats for army officials. In just few years it lost its old cultural status and developed new cutting-edge trends to become a modern luxury brand. With a key strategy of brand extension and it?s very British image it soon became popular in US and Asian markets. As we saw in the report, the leadership skills of Bravo and Ahrendts played an important role in developing and execution of strategies for the development of its unique resources and core competences. Burberry?s adoption of related diversification had led to its success. It operates in only one value network of fashion which makes it to concentrate more on it and grow radically through franchises and licensing. The studies also shows the strategy should be adopted in proper times by a lot of analysis like PESTLE and the success criteria needs to be analysed before executing any strategy. It is also seen that strategies deployed by Burberry have resulted in good financial situation. In simple words, ?All is well in Burberry? because of its past and present strategies. Appendix Return on Equity(ROE) = (Net profit after tax/ Shareholder?s Equity)*100 ROE of Burberry: (212.5/733.3)*100 = 28.2% Current ratio = Current assets / Current liabilities Current ratio of Burberry: 870.1/534.3 = 1.63 Gross profit margin = Gross profit/ Sales revenue Gross profit margin of Burberry: 1009.7/1501. ...read more.

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