Questions and Answers on Burberry Company
1. How is Burberry perceived in the marketplace? How does the present image compare to the past and the factors which made the brand successful?
Thomas Burberry, the founder of the company, when opening his small outfitter’s shop might not imagine that, with time, it would grow into a large-scale producer of luxury goods. After the company’s entry into the market in 1856, a few years later, it managed to create its reputation as a luxury goods provider. The invention of gabardine greatly contributed to the promotion of the company. Although the material was accessible to other producers, only Burberry managed to produce gabardine goods of the highest quality. The exclusive level of the company’s work was recognized by the British government, and it assigned Burberry to design a new uniform for the British officers. Moreover, consequently, advertising techniques applied by the company also influenced the consumers’ opinion about Burberry’s products: “Burberry developed a reputation for quality through the involvement and use of Burberry products in various expeditions, sporting events, and excursions.” (Jarosinski, 2014, p. 1) Moreover, the company’s trench coat design gained wide recognition among celebrities. The brand was not only perceived as a symbol of quality and luxury but also “developed the Burberry logo and, with it, the Burberry dream” (Jarosinski, 2014, p. 2). Thus, it is possible to state that Burberry’s quality was perceived as something unconditional, and the company’s products became the most desirable clothing items of fashion lovers not only in Britain but also in the entire world.
The main causes of Burberry’s success at the beginning of its history have been mentioned above. However, the industrial revolution (the invention of new materials and equipment), as well as the orientation of Burberry on product quality, made a significant contribution to its success and development. Being a preferred brand among the celebrities made the company the icon of style and luxury for the British citizens, as well as many people around the world. However, the factor of reasonable management should be also noted in this regard. It should be noted that it was rather difficult to administer a flourishing company and, at the same time, control how all the managers observe the main rule of the highest quality of goods. A lot of time has passed since these factors started to work for Burberry. One of the first important warnings that became dangerous for Burberry’s image was the Chavs. Though Burberry was on the rise financially, it gradually started gaining popularity among the working class of Great Britain, who, as a rule, had only high-school education: “Burberry’s distinctive beige check, once associated with A-listers, [became] a uniform of a rather different social group” (Jarosinski, 2014, p. 6). Thus, the pricing policies applied by the company made the goods affordable for the Chavs. The elite classes did not want to look equal to the working people, and this issue spoiled the reputation of Burberry. Nowadays, the company has numerous competitors and is in a constant fight with the Chinese fakes. “Over the years, Burberry’s public image began to change as the luxury status of the Burberry brand began to diminish.” (Jarosinski, 2014, p. 2)
However, the fact of losing its luxury status does not mean that Burberry does not produce quality goods. The past image of the company was associated with uniqueness, quality, and luxury. However, an economic crisis and the emergence of numerous competitors made Burberry’s CEOs think about how to give their usual customers a chance to buy their goods without sacrificing the quality. The company also sought ways of being incorporated into the flourishing online shopping system. At the same time, Burberry had to remain focused on the fact that “in luxury sectors, mystery, aura, rarity, elegance, craftsmanship, mystique and exclusivity were key success factors” (Jarosinski, 2014, p. 3). Thus, finding a balance of all these factors was a more complicated task for Burberry’s managers than just implementing technological innovations with the purpose of gaining more profit.
2. As the new CEO, what would be your biggest challenges and what would you focus on?
Being Burberry’s CEO means being able to focus on the work in various directions. Producing more goods and opening a higher number of licensed shops are too simple strategic lines for such a big company. Besides these tasks, the CEO’s main challenges include preserving the positive image of the brand in the market, proving to the customers that the highest quality of the goods does not change with years, developing new fashion lines, and licensing more shops all over the world that need to be strictly controlled. Each of these challenges can be attributed to particular activities. First of all, it should be noted that working in the luxury niche means being capable of deciding which segments of the market the company’s products can fit. There exist three such segments: absolute, aspirational, and accessible. The first group is interested in the uniqueness of the product; the second values quality the most; and the representatives of the last group of customers is dependent on the price of the product. It is complicated to satisfy all the groups, so the CEO will have to decide, which type of products Burberry will produce. Thus, a particular strategy for the brand’s image control should be developed. It should be considered that “A customer’s experience in a Burberry store in Tokyo might be very different from that in a store of Chicago.” (Jarosinski, 2014, p. 7)
Moreover, the number of Burberry’s licensed shops grows. At the beginning of the Chinese market development, the Chinese started spoiling the image of the company by trying some things on in the Chinese shops and then buying them in the USA and Europe. This fact negatively influences the image of the mystery and uniqueness of a luxury brand. Therefore, the bigger the company is – the more challenges for the CEOs it offers. As Burberry’s CEO, I would focus on supporting the image of the company in the world market, controlling that all the licensed shops use the same strategy to influence the customers to make a purchase, and fighting against fakes and damping.
3. As the world globalizes and the quality of production in outsourced factories improves, does outsourcing production still have a serious negative impact? Is the “made in Britain” label critical to keep the luxury status?
Due to globalization and technical development, outsourcing does not have such a negative impact on the quality of goods, in case this quality properly controlled. Many world-famous brands, such as Adidas and Marc Jacobs are produced in Bangladesh and China, correspondingly. However, the public is aware of the high quality of these brands and remains loyal to their favorite companies. Nevertheless, although the quality might not suffer in the case of outsourcing, the luxury image does. Thus, it is important to consider the priorities set by the company– low production cost and good quality or luxury goods and excellent quality. As Giorgio Armani, one of the leading Burberry’s competitors once said, “[<…]> as long as quality was controlled, there was no reason why some of the Armani brands could not be produced in China; however, he made it clear that “Made in Italy” label is very important to the top line because it shows specialization” (Jarosinski, 2014, p. 10). Therefore, focusing on a particular customer niche is an extremely important aspect in terms of deciding to outsource the company’s production. In addition, quality control at the offshore factories should be ensured to protect the brand’s image. For example, basing a workshop in the territory of China and hiring Chinese employees to produce goods may significantly reduce the production cost for luxury companies, but all the production techniques should be approved and controlled, as well as regular quality checks observed.
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Burberry was initially created in Britain. Its label “Made in Britain” proved the high quality of goods and attracted the interest of the upper social classes. Nowadays, the majority of the products that are considered either luxury or non-luxury has the label “Made in China”.
It is understandable that all commercial companies are aimed at getting as many profits as possible by all existing means. Thus, basing the workshops in China seems to be profitable in terms of production costs. However, as to what concerns luxury brands, some world-famous fashion companies still do not consider having their workshops in China. For example, “Gucci praised itself on its “Made in Italy” label and that is production was linked to the Tuscan region” (Jarosinski, 2014, p. 9). It is important to consider the fact that the prices for luxury products are much higher than the cost of the usual goods. Thus, those companies, whose main customers are high-class representatives, should estimate the value of their goods produced not in China but France or Italy and prefer the quality of their goods and the reputation of the top-class companies.
Moreover, China greatly affects the reputation of many famous brands because of the fakes produced as well as the low quality of the majority of its ‘copies’. At the same time, Britain has always been associated with stability and deeply-rooted values and traditions. This perception can also be applied to the quality of manufactured goods. Thus, it is possible to deduce that the label “Made in Britain” remains very important for Burberry’s customers. It gives them a chance not only to purchase high-quality goods but to feel the elitism of their social position and the regular fulfillment of their Burberry dream caused by the planned releases of the new items.
4. What are the operational and marketing changes Burberry can make? What are the potential future impacts of the company’s actions on Burberry’s position in the market?
The case describes the rises and the falls that Burberry had during its existence. There is no doubt that having the same CEO during a long period is good for a big company as this person knows all the weaknesses and strengths of the business and finds the ways to effectively manage them. However, fashion and luxury spheres are extremely dynamic, and their customers are so demanding that these industries require constant changes and development. Thus, “In 2005, it was first announced that Rose Marie Bravo would be stepping down from her position as Burberry’s Chief Executive Officer (CEO), [<…]>. Big changes within Burberry were expected to come as Ahrendts took the reigns in July 2006.” (Jarosinski, 2014, p. 1). Therefore, the new leader of the company had to face all the named challenges and issues and solve them for the prosperity of the company.
If the previous Burberry’s CEO had to think which market segment the company had to choose and how to preserve its luxury image, the first dilemma faced by Burberry and managed by Ahrendts was the emergence of online shopping: “The online luxury goods market value increased dramatically from € 1.7 billion in 2005 to € 2.2. billion in 2006” (Jarosinski, 2014, p. 3). Therefore, a marketing change that Burberry can make to efficiently operate the growing online market is to control the number of items sold via the Internet and decide whether it is a worthy endeavor since online selling facilitates the production of fakes and the unlicensed usage of the brand name. The company can improve the quality image of Burberry by inspiring the customers to visit the shops personally. One more operational change that Burberry can make is reorganizing the managerial control of the production process as “the design team members are based all over the world” (Jarosinski, 2014, p. 7), and this fact together with the difficulties created by the licensed shops affects the image of Burberry as the producer of high-quality luxury goods. Having one single team of designers and locating them in the head office may be the right solution to avoid fakes. One more argument for making some marketing change is conditioned by the fact that “Burberry had its products split among four product lines: Prorsum, womenswear, menswear and accessories” (Jarosinski, 2014, p. 7). All world-famous brands like Gucci and Armani do the same and develop many fashion lines. Thus, to support its quality and image, it will be good for Burberry to give separate names to all its lines. It will help to revive the interest of the customers.
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Burberry has many competitors, for example, companies like Gucci and Armani, Louis Vuitton and Prado. The only possible way to stay in line with the world’s fashion leaders is to observe the quality of the products. If Burberry applies the enumerated actions to make some organizational and marketing changes, the company’s position in the market will be improved. The cost of the changes is not the point of discussion in this regard. Transferring the designers to the head offices, transforming the fashion lines into sub-brands and prohibiting online Burberry shopping implies some significant expenses. However, they will be compensated by the raised interest of the target customers to the company since it is of particular importance to the company’s success “that more people were familiar with the brand than people, who could afford it” (Jarosinski, 2014, p. 6). Therefore, the offered operational and marketing changes may greatly improve the image of Burberry both in the eyes of its loyal customers and those who dream of buying Burberry’s products.