Burberry Analysis of the Competitive Environment

Deluxe: How luxury lost its luster, by Dana Thomas, brings a hard hitting, raw look at the world of luxury and the mass demand of luxury that has occurred. The book was published by the Penguin Group in 2007. Luxury is defined by Thomas as truly special, and was only available to the aristocratic world of wealth and old money in western culture. Luxury signified an experience and lifestyle that denotes royalty, fame, and fortune. However, with large companies owning the former family-owned luxury producing businesses, profits are the main goal not the production of luxury. Thomas reveals the unfortunate demise and rise of

Gucci is one of the most powerful leaders in luxury fashion market. Gucci is founded by Guccio Gucci in 1921 in Florence, Italy. Now, Gucci is the part of Gucci Group and Pinault Printemps Recloute (PPR). The globalization of the fashion environment and boost in the western economies transform Gucci from a small Italian company in to large luxury fashion brand in global level.

The consumption of luxury goods in China is mounting sharply. Not only those born to elite families, but also many common people are greedy for luxury brands (China, a Booming

Price is an important factor in Burberry as price affects the value that costumers perceive they get from buying a product (Jobber & Ellis-Chadwick, 2012). Burberry uses competitive pricing similar to its competitors which produces a psychological effect on Burberry customers (Jacobson, n.d). If Burberry for example lowered its price dramatically then customers may believe the quality has decreased and may presume it’s not worthy to be named a luxury brand. However by being expensive it suggest better quality and desire to sustain its customers as well as making there products seem exclusive.

Sociocultural: In the recent years, the desire to appear wealthy has attributed to the increased popularity in luxury products. Also, the desire for luxury goods was promoted by effective advertising and TV programming that promoted conspicuous consumption to middle-income consumers. Middle-income consumers also tend to “reward” themselves with luxury items.

success factors. However, the company has a few weaknesses and threats they need to address in

Andy Warhol, a pioneer in the visual art movement once said: “Whenever people and civilizations get degenerate and materialistic, they always point at the outward beauty and riches and say that if what they were doing was bad, they wouldn’t being doing so well, being so rich and beautiful” (Warhol, 1975). Throughout history, luxury emerged as early as civilization did. For old Romans, the concept of luxury was a “disruptive power of desire”. They set up the first laws about luxury: “how much could be spent on banquets and adornment” (Ward, 2011). Since the rise of Christianity, luxury stared to changed its meaning to be related to lust and sexuality. Until 17th century, perspectives of

Moreover for the profit for the year, Burberry had a drop of 8.55% to 287.7m from 314.6m. The trend of the firm is decreasing in related to the three financial years. The reason of the decline can be due to the increase of the geopolitical concern in the Middle East and Russia and Uncertainty in Eurozone. These factors have any huge negative impact on the performance of the luxury sector.

This behavior brings competitive advantages to the European luxury brands. Moreover, customers in different countries have different purchase behaviors. For instance, some countries’ customers are willing to move away from common recognized brand, because they want to purchase more exclusive products. Furthermore, because of the increasing speed of globalization, people are more likely willing to travel between different countries. These travelers will buy luxury good during their trips. In fact, Chinese tourists contributed over one third of sales in Europe. The luxury goods industry should notice to adjust the actual demand between local people and tourists in Europe

Burberry, founded in 1856, is a leading international luxury brand. Burberry designs, manufactures and licenses apparel and accessories for distribution through its own stores and network of prestige retailers worldwide. In early 1998, the new management team at Burberry set out its strategy to reposition and revitalise the brand, which resulted in significantly improved results and strengthened the base to build the business. With continuous growth since last five years, Burberry has faced new challenges of brand sustainability and positioning in a volatile industry (fashion) where customer behaviour is unpredictable. Thus, it requires a strategy that lays foundations for long-term growth and addresses the issues

The overall sales of luxury goods in the year 2009 is expected to be more than US$150 billion and Asia contributes 10% to it. The concept of luxury is now not confined to only to Europe and US, the Asian subcontinent contributes majorly to it, with India and China as the newly emerging markets. Professor James Twitchell (2002) comments on the democratization of luxury and the changing consumer psychology These new customers for luxury are younger than clients of the old luxe used to be, they are far more numerous, they make their money far sooner, and they are far more flexible in financing and fickle in choice. They do not

Burberry Group plc (Burberry) is into the global luxury sector. It works in the designing, marketing and sourcing of outerwear, women’s wear, men’s wear, non-apparel and children’s wear categories. It distributes through a diversified network of retail, wholesale and licensing channels worldwide. The company operates its business in three ways by region, by product and by channel. Burberry distributes its products in Europe, Spain, Americas and Asia Pacific through retail and wholesale channels and with selective license arrangements. In addition, it licenses third parties to manufacture and distribute products using the Burberry trademarks. It categorizes

Porter’s five model is defined as the framework that evaluate the position of a company in the external environment with focus drawn on the level of competitiveness (Roy 2011). The framework considers factors such as rivalry, substitute goods, the power of suppliers and buyers as well as new entrants. Four forces can influence the success of Michael Kors. The first one is competitive rivalry. Here, the struggle is about maintaining performance despite different tactics used by different companies to increase sales. For instance, Ralph Lauren uses premium prices for quality products to differentiate itself, while Coach uses product variety within the line of handbags to remain competitive (Stewart 2016). Also, when the industry is flooded with similar companies producing similar merchandise, the probability of a company stagnating is high because consumers have a variety to pick from. Hence, the need to establish loyal customers.

Her transformation of Burberry had become a text book example of how to transform a business that other luxury brands are sometimes said to be “doing a Burberry” (Financial Times 2004). In 2005 Angela Ahrendts, replaced Bravo as Chief Executive who made changes to Burberry product line by making checks more stable and by focusing more on higher-margin products like handbags and perfumes (Friedman 2011).

Due to the indiscreet licensing, the market is flooded with dowdy Burberrys covered with check. Also the credibility of Burberry were damaged by ‘Chav’ generation symbolizing themselves with Burberry check. When Rose Marie Bravo joined Burberry as a CEO in 1997, major department stores Harvey Nichols and Selfridges did not even stock Burberry ranges, and Harrods