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Burberry Case Study

Satisfactory Essays

Burberry is famous for its luxury English-made trench coats , also sells products including T-shirts which are imported from other countries. Within the Ready-Made Garments (RMG) industry the T-shirt is classed as a standardised-clothing item, with a manufacturing process that can be broken down into six stages (Figure 1). For the high-value stages of the value chain (R&D, Design, Marketing and Services), Burberry’s product design and development are centred in London and its services are also provided in the UK . This is because Burberry must maintain its luxurious brand, and the higher value-added that flows from having headquarters and prime divisions in a developed country is crucial to this. Conversely, an ideal location for the low-value stages of the RMG chain (Purchasing, Production, Distribution) would be Bangladesh.

From a real options perspective, Burberry could either start a franchise in Bangladesh, outsource apparel manufacturing or establish its own manufacturing plant (Figure 2). Regarding the first option, given the rapid growth of the luxury market in emerging countries , Burberry could set up a branch in the country. However, this option should probably be deferred to a later date because the current GNI per capita in terms of Purchasing Power Parity is low in Bangladesh , and therefore, at present, the total addressable market for the finest clothing is still in developed countries . Consequently, the remaining options are to outsource production to local companies or to invest directly in its own factories. Outsourcing would be possible, but for Burberry, the design of the T-shirt is as vital as its quality. Owing to the shortage of skilled labour it is likely that the workforce will be unable to manage the required standards of quality control (for “Higher Education and Training”, Bangladesh is ranked 117 out of 137 countries ). For this reason, outsourcing would involve an unacceptable level of risk. Consequently, Burberry ought to set up its own manufacturing plant.

There are currently three types of manufacturing operation in Bangladesh, depending whether raw cotton is used, imported yarn, or a premade fabric. For the reasons given above, outsourcing would not be a reliable

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