Case Study
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Word counts : 2637
Meng-Hsi Chin International Fashion Business N0595266
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Table of content Executive Summary 6 Methodology 7 Introduction 8 The Market 10
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Licensing 12
Branding 16 Sustain In Slow Economy 20 Recommendation 22 Bibliography 26 Appendix 30
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Executive summary The main aim to write this case study is to critical analyse Burberry’s turnaround strategy under Bravo and Ahrendts’ lead. The case study includes evaluation of Burberry’s licensing operations and branding strategy. The major finding shows that Burberry had poor operation in licensing; however Bravo and Ahrendt have made improvements on buying back and renovating licensing. Other finding indicates that Burberry has had re-build brand’s image due to the poor licensing operation had diluted the image of 158 years old brand. Also, further discussion about Burberry sustains in slow economy environment through targeting on traveling luxury consumer. Recommendation focuses on m-commerce market.
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Methodology This case study is base on the framework of Burberry’s Revival can it sustain article written by Doris Rajakumari John. This case study mainly carries out through researching related articles, news about Burberry’s strategy to critical evaluate discussion. Further research is focus on business journal articles, theory of branding and licensing. The case study has employed licensing theory to examine Burberry’s expansion strategy, positioning theory and identity theory to demonstrate Bravo and Ahrendts’ branding revamping strategy. Also analyzing macro and micro environments which in terms of PESTEL and SWOT analysis.
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Introduction In 1997 Rose Marie Bravo took over Burberry’s
In 2006, Angela Ahrendts took the place of Bravo
CEO occupation. By the time, Burber r y was
as CEO while the luxury fashion business was
surrendered by many problems. The image of
growing rapidly in the world, but Burberry wasn’t.
the brand was clichéd with its men’s raincoat
Burberry was struggling on its identity. Ahrendts
and tartan lining. Burberry had become an out
recognized Burberry’s problems that lacked focus
of fashion and boring brand. Bravo successfully
and uniformity of its product offerings. Therefore,
renovated Burberry’s position by her strategies.
Ahrendts decided to turnaround the brand together
For instance, launched new advertising campaign
with Christopher Bailey. The turnaround strategies
- featuring model Stella Tennant and Kate Moss,
mainly focus on the digital path to engage with
pruned the distribution, cut down the licensees
younger consumers on social media, own website
and streamlined the license operations. However,
and innovative online campaign such as 3D catwalk
Burberry was facing some new problems, its iconic
shows and Burberry Acoustic, also emphasizing
trademark plaid pattern was overexposed on
the historical core products in place that was the
Burberry’s offerings. Moreover, the British soap
central value of the brand. Other strategies such as
star Danniella Westbrook and her baby clad in
launched beauty products, buying back licensing
Burberry’s trademark check, which became a big
(John, 2014). Now Burberry is the leading digital
joke spotted by press. Also imitated goods were all
luxury brand symbolic of British, innovation and
over the Britain. Continually, Burberry clothing
elegance with its strong financial performance
with traditional check and caps worn by football
in 2014. The total revenue has increased 17% to
hoodlums, soon Burberry check became a mocking
£2,330 million in 2014 more than £1998 million
subject called Chav check.
in 2013 and its stock value is around 1,650 GBp (Burberry, 2014). Christopher Bailey was appointed CEO in October 2013. After Ahrendts left the Burberry, Bailey will continue to lead Burberry.
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The market
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The Internet is significant to luxury sales in recent year. A financial
Burberry is good at e-commerce strategy with product categories all
services firm Exane BNP Paribas has released a report and digital
available online in multiple languages and several countries across its
competitor map (Figure1) to state that Digital strategy is expected to
online sales. Louis Vuitton, Gucci and Tiffany all excel in digital path.
grow 40% of projected sales from 2013 to 2020. As consumers are more
In particularly, Louis Vuitton has made a large step in 2014, renovating
toward to convenience of shopping online, physical stores are diminished.
its website in July and has been transformed as a digital player with
The British brand Burberry remains the leader in digital luxury brand
ambitions. As the result those luxury brands that have not followed the
globally while its peers lag to follow the trends. In recent year, many
trail has been left behind in the grades such as CĂŠline, Fendi, Givenchy
luxury brands have developed their online presence. As rewards, those
and Prada (BOF, 2014).
who have invested in digital has high ranking in their sales.
Figure 1, Digital competitor map. 11
Licensing
Licensing is a way to get entry into foreign market
Both Brave and Ahrendts had concerned about
with a restricted risk. International licensor firm/
licensing operations when they were CEO. In 1980s, the
brand permits licensee copyrights, trademark right
Chief Executive Officer Stanley Peacock proliferated
and patent right on product production. Licensee in
the company’s licenses worldwide. This move for the
return will manufacture the licensor’s products to
brand had the highly recognizable and sales effects in
sell in assigned country/region market and pay the
the mid-term, but had the deteriorated impacts in the
licensor fees. The potential benefits for licensor could
long term. Burberry went bad in 1990s due to licensing
access to related market fast, to publicity and loyalty
impact on Burberry’s trademark check what was no
from other countries in order to address licensor’s
longer warranty of quality and distinctive. More than
expansion strategy (Twarowska and kakol, 2013).
30 licensees had the right to put Burberry’s trademark
However, over-used the licensing strategy to sustain
check on their products in order to gain profits for
brand/firm’s reputation and expansion could generate
their companies from whisky in Korea to watches in
incompatible consequence. For example, Pierre Cardin
Switzerland (Tungate, 2005). For Bravo, her licensing
and Burberry had been increased rapidly licensing
strategies mainly focused on maintenance the quality
worldwide, but they had diluted their brand equity
and brand’s image by cutting the number of licensees
and lost control of product quality and image (Colucci
such as Spain to regain control on the brand, and re-
et al, 2008).
made agreement with licensees to force the licensees increased marketing spending such as Japan. As the result of granting licenses operations in oversea markets and extension for the brand, Burberr y generated sales of £230 million a year, and the value of Burberry was estimated of more than £1.6 billion a year in 2000 (The telegraphy, 2000).
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When Ahrendts took over the CEO in 2006, the fashion luxury industry was rising at 13%, but Burberry only rose 2% (John, 2014). Ahrendts recognized Burberry had identity issue. Burberry had licensed its name globally with 23 licenses, which were producing everything differently from men’s outerwear to dog cover-up and leashes. According to Ahrendts, “there is nothing wrong with each product, but together they added up to just a lot of stuff—something for everybody, but not much of it exclusive or compelling”. Furthermore, Ahrendts realised that Burberry had different value products in different region. For instance, one of the designing teams in the U.S manufactured raincoats that marked as “Made in U.S.A” with half the price point where in UK, also in Italy and Germany had licenses to create trench coats that were much cheaper than those in the U.S. Ahrendts concluded that great luxury global brands don’t design and produce all different kinds of product all around the world (Harvard Business review, 2013).
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Ahrendts’ solutions for Burberry’s identity issue was focus on core product line and buying back all 23 licenses that allowed other companies to use the Burberry trademark check in order to re-build the position of Burberry had then. Since then, the Burberry brand’s value has grown from £2 billion to £7 billion in 2013, and share prices have increased by 461% in the last five years (Management Today, 2013). Poor licensing operation could dilute brand’s image. Although licensing extension could bring short-term profit, it also could jeopardize brand’s image and unique position. On Burberry’s case, when luxury brand reaches out mass markets by licensing strategy, Burberry also lost its exclusivity. Both CEOs of Burberry were trying to regain the charm and exclusivity, and narrow down the gap between Britain and foreign markets. Keeping the brand’s image consistently is the critical component for building up long-term global luxury brands (Skorobogatykh et al, 2014).
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Branding
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Bravo and Ahrendts both recognized the fatal problem that
At advertising, Bravo used the celebrity endorsement on
Burberry had faced when they were CEO. Re-building the brand’s
advertising such as featuring model Stella Tennant and Kate Moss
image was Ahrendts and Bravo’s turnaround strategy. Al Ries and Jack Trout (1972) stated that brand’s positioning theory
to cut the average age of Burberry customers in order to appeal to younger female generation (John, 2014). The benefits of using celebrity endorsement are giving the brand a clear personality for
is not emphasis on product itself, it is about targeting the right
a minimum of effort and bring with them a rich imagination world
group and putting the image into customers’ desired mind. Hence,
where customer desired (Tungate, 2005). Celebrity endorsement
when applying the positioning strategy, the company should concentrate on the elements that surrounding on the product. For example, price, distribution and advertising strategies (see as Hampf and Lindberg-Repo, 2011). Bravo’s strategy can be
also can be demonstrated in S-O-R model. By featuring famous models or stars to stimulate the association between the target consumers and product (Gwinner and Eaton, 2013) in order to generate consumers’ aspired emotion to the final main purpose of responding on purchase (Tungate, 2005).
applied into the positioning theory. At distribution, Bravo pulled out from small wholesale retailers and pushed into big retailer, also closed unprofitable stores and opened new ones to ensure that customers bought products from Burberry directly. Furthermore, Burberry established tier levels of stores, ranging from flagship to
Figure 2. The S-O-R model
concessions in department stores, retail store and factory/outlet stores. The purpose of setting up tier levels stores were to make the
STIMULUS
ORGANISM
RESPOND
generate consumers’ aspired emotion
Purchase
brand to be affordable and accessible to all customers without losing its prestige (anonymous, 2005). Positioning as a luxury brand, limited distribution is required. In limited places could enhance the cachet of exclusive of the brand,
Featuring Celibrity to stimulate the association between the target consumers and product
otherwise brand would lose its allurement if customers can buy products in the mass channels (VanAuken, 2012). 17 17
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Ahrendts re-built the image of Burberry together with Chief
Personalisation plays a key role in Burberry’s digital strategies
creative officer Christopher Bailey through digital way to focus on
in communication and product. By launching Bespoke that allows
younger generation (John, 2014). Ahrendts’ turnaround strategy
customers create and develop their unique trench coat online and
can be explained by identity theory. De Chernatony (1999)
share on social media. More recently, Burberry has collaborated
has introduced a new branding concept - identity theory that
with Google to launch a bold and experimental campaign - Kisses,
conceptualise the brand’s vision and culture. These related to the
which allows users sending peorsonalised virtual kisses with
positioning, personalisation and relationship with consumers (see
Burberry lips colours through smartphone and laptop camera to
as Hampf and Lindberg-Repo, 2011).
anyone. Kisses also can be share on social media (Doran, 2014).
By conceptualising the vision of Burberry, Ahrerndts’ first move
All Burberry’s digital branding strategies refer to engagement.
was focus on consistency the product offering. The concern was
Thunderhead further states engagement principles on its report:
about those licenses that were diluting the image of brand. After
If engagement is to be built, experiences and interactions with
buying back all the licenses, Burberry established a new rule:
customers have to be personalised, and rooted from understanding
every single product and campaign have to go through the home
customers’ preference and behaviour (Thunderhead, 2014).
office before exposure in public. The second move was: integrate
Burberry recognised that the digital technology has the power
the online and physical worlds. For example, in Burberry’s flagship
of fostering an interactive and emotional engagement to target
store has embedded technology into products that allows customers
customers of the future. Ahrendts and Bailey have put engagement
activate interactive screens showing each product’s story. The goal
with customers at the core of Burberry digital branding strategy
was to make a new vision ”Walking through the doors is just like
and they have believed engagement could bring customers closer to
browsing our website” said by Ahrendts, to create unique shopping
the brand. And now, Burberry has its presence on social media sites
experience for customers.
such as Facebook and twitter (Barnwell, 2014).
On the other side, Burberry also provides live-streams runway
There is no doubt that Burberry has successfully transformed its
show online and allows customers order product they see on
image to be a leading luxury brand in digital channels. The brand
runway show before products were available in stores (Barnes,
has also boosted the brand value and achieved market dominance in
2014).
the face of recessionary economy with £ 2 billion revenue in 2012. Burberry’s seamless integration has made the brand exclusive among the peers (The guardian, 2014).
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Sustain in Slow Economy
While in the slowing economy, most of developed countries strove with fragile domestic economies as consumer coped with high employed rate and cool income growth. However, luxury sector has received benefits from traveling consumer trends. According to the shopping tourism company global blue, the tax-free shopping policy has grown 26% since 2009. The Chinese global traveling consumers were the highest with the average spending at 1,083 dollars per transaction in 2013 (Deloitte, 2014) due to reason that luxury goods are more expensive in China (Appendix 1). The luxury industry has begun to be impacted by the slow economy due to the Europe’s debt crisis and slow growth in emerging market such as China (Appendix 1). Burberry’s chief financial officer - Stacey Cartwright stated that, Burberry was up against comparison, but Burberry has giant number of brand forces such as innovation and truly British image among peers. Burberry has been organising its house in order, transforming license in Japan (Appendix 2) focusing on core product line. These have the impacts on sales, but also mean its margins have improved. Cartwright further said: Burberry focuses on remaining global flagship in key markets where luxury traveling consumers will visit and spend in order to sustain in the slowing economy (The independent, 2012).
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Recommendation 2222
M-commerce This is important that Burberry intensifies its presence on M-commerce market. Mobile commerce is rising significantly in recent year. Mobile transactions represent 42% annual growth in value and volume between 2011 and 2016 globally, and m-commerce market worth 617 billion dollar with 448 million users has been predicted by 2016. Mobile payments are forecasted to arrive at 1 trillion by 2017. The key drivers of m-commerce growth are: the adoption of smartmobile, tablet and mobile broadband subscription. Especially in emerging market, the growth of smartmobile and Internet is exponential and bring to market saturation. M-commerce accounts for 17.4 of total online sales now. Tablet plays a key role in m-commerce market due to the reason of more people use tablet devices to purchase from home (European Travel Commission, 2014). By using M-commerce strategy, whether developing Mobile site or Application, there are several benefits for marketing and selling on smartmobile include: reaching the largest audience worldwide, monitoring consumer instantly, providing “always on� services and advertising anytime, anywhere (Ni business info, 2014).
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Conclusion The success of Burberry in luxury fashion industry is mainly attributed to its strong branding strategy. By cutting license operations to have fully control on products, new channel developed and strong advertising whether physical or digital, it is no doubt that Burberry has successfully re-built Burberry’s image. Now Burberry remains a leader digital luxury brand. Burberry sustains in slow economy by targeting on traveling luxury consumer to open more flagships in target destination markets. Further recommendation suggests that Burberry should intensify its presence on M-commerce market due to the reason of smartmobile users are growing significantly.
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Appendix
PESTEL Political and legal
Economic
- UKTI (UK Trade & Investment) supports UK retail brands on providing
- Emerging markets has boosted their economies with more available
platforms for promotion in the major cities globally. UK luxury brands are
incomes. Thereby luxury market was considered to increase more than
an important asset. UK brands and their designer teams convey a weighty
8% and forecasted to achieve £9.1 billion by 2015. British luxury brands
PR influences on global stage, and these could enhance the British “soft”
are in high request within global luxury markets. British luxury brands
power (Gov.uk, 2014).
were expected that 72% of them would have an existence outside the Britain in 2012. Brands were looking to expand into East Asia and Africa
- According to Doris Rajakumari John’s case study, China is one of the
where the markets grow fast. British luxury brands have already made
major markets for Burberry. China and Hong Kong are contributed to
their existence in China with 37% and other 27% are planning entry to the
Burberry’s sales growth in 2013 (John, 2014). Thus Chinese government’s
market (Gov.uk, 2014).
regulations and policies affect Burberry for sure. The Chinese Government was announced the Anti-gifting policy in July 2012 followed by anti-
- According to The Economist, the world economy has slowed down its
corruption campaign. Anti-gifting policy aims to decrease corporate and
pace. The world economy rose 2.6% in the second quarter this year. It’s
government on luxury spending and prevent people show-off their wealth
slower than the three quarters last year. The calculation of world GDP
to against the balance of the country. Due to China is the communistic
shows that emerging markets have been saddening on economic growth.
country, to prevent wealthy people to provoke less fortunate population
Brazil has backed into recession and Russian has frustrated. In the
and aggravate the disparity between rich and poor (Fashionbi, 2013).
Eurozone GDP grew only 0.7% in this year. In Japan a new sales tax has crushed consumption. As for China attributed to 45% of world growth (The
- Luxury products have high prices in China, mostly the key reason
Economist, 2014).
is taxes. The main three taxes are put through to luxury goods, which include import duties, VAT (Value-add tax) and the consumption tax. The import duties are from 10% to 25% in common luxury items, but the cosmetic products and alcohol are from 35% to 60%. The VAT normally is 17% and the consumption tax is up to 30% (Want China Times, 2012). 31
Social - Burberry’s current target markets are EMEIA, Pacific Asia and America (Burberry, 2014). According to Forbes, around a third companies and half organisations claim they have global strategies and different plans with the purpose of addressing the needs of regional and cultural differences (Forbes, 2014)
Technological
- The ethical fashion is growing significantly in recent years. The
- Internet and technologies have stimulated the changes of business
majority of fashion consumers are willing to go without self-interest
model. As the result, e-commerce has become an important stage for
to buy ethical-made products. Thereby, more and more firms and
business. More and more retailers and manufacturers have awareness
organizations are developing their ethical strategies to gain interests
the opportunities that provided by e-commerce. The advantages in online
from consumers. Ethical fashion has typical features such as green
retails allow customers shop anytime, anywhere and online retailers also
fashion and fair trade. The basis of ethical fashion production is by
have access to their consumers in order to monitor consumers’ shopping
providing fair working conditions and standards to workers, sourcing
behaviour (Nielsen, 2014).
the organic material for clothes to minimize the environmental
- The Internet offers platforms to create a straight way relationship between retailers and customers such as email, social media and websites. Unlike the physical stores, customers only engage with limited advertising such as in-store display and TV commercial. Internet allows retailers engage with customers 24/7 by providing product reviews and comments from others. However, customers use the Internet differently. To understand the main target customers is the key of being online engagement (Nielsen, 2014).
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Environmental
impacts and establishing a sustainable business model in the factories’ region (Joerjens, 2006).
SWOT Strength
Weakness
- Burberry is the iconic and well-known British luxury brand with its rich history and heritage products (Burberry, 2014). - Since 1850s the trench coat that designed by Thomas Burberry has remained the classic and timeless outwear over the fashion
- Burberry lacks of its presence in other regions. Burberry only operates in three regions. Pacific Asia represents 39% of total wholesales revenue, EMEIA 36% and America 25% (Burberry, 2014).
industry (BAZAAR, 2013). - Burberry is one of the most prosperous luxury brand that has
- Burberry’s highly recognizable plaid is Burberry’s advantage, also
digital channels as a remarkable way of engaging with consumers
its disadvantage. Since 90’s Burberry has faced the biggest challenge
and bringing a new experience for luxury consumers. For example,
with imitation problem from China (Branding Magazine, 2011).
live-streamed catwalk shows, online communities, campaigns on social media and online store. Burberry not only becomes visible on its surface, but also achieved the revenue £ 2 billion in 2012 (The Guardian, 2013). - Story-telling: Burberry puts meaningful stories into their products and this helps the brand building branding image (The Guardian, 2014). - Personalise: Burberry has launched “Bespoke” online which allows customers to personalise their trench coat and share on social media (The Guardian, 2014).
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Opportunity
Threat
- Japan is the world’s second biggest luxury products market.
- Burberry might lose its exclusive trademark. Burberry’s unique
Burberry has been targeting on Japan for five years. But now
plaid trademark, which uses red, black and tan design (known as
Burberry only has 4 shops and 10 concessions in Japan. Burberry’s
Haymarket check) is under the threat in China. Burberry’s copyright
Pacific Asia chief executive Pascal Perrier said: “our peers generate
lawsuit was revoked by China’s trademark office because local fashion
10% of their global revenue in Japan while we are scarcely playing
house Polo Santa Roberta also claimed that it had legal right to use
there” (The Guardian, 2014).
“Haymarket Check” for its bags and accessories. Polo Santa Roberta’s lawyers argued that Burberry had not used the check enough for over
- The Japan licenses will be expired on 20 June 2015, Burberry
three years in china, further argued that Burberry was taken over a
finally has control in Japan to build its fully operations and offer
part of Scottish culture by trademarking the tartan (The telegraphy,
global collection to the core luxury consumers. Burberry currently
2013).
has generated its revenue £25 million in Japan and it was only breakeven in 2014. For the transforming, Burberry has signed another 3-years license with Sanyo Shokai to continue using the Blue and Black labels in Japan due to Sanyo Shokai has the strong attraction to young consumers in Japan (Burberry, 2014).
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- Strong competitors such as Chanel, Gucci, Prada and Louis Vuitton.
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