Abercrombie and Fitch Analysis

Abercrombie and foulmart Analysis1. IntroductionThe following report explores the companionship Abercrombie wood pussy within its US and UK market. Key external factors have been explored such as PEST, SWOT, TOWS and the companies competitors, as well as Porters Generic strategies and Ansoff Matrix. clever headings have then been formulated considering all of the above factors and then a Strategic Plan, Implementation Measurement of each SMART Objective has been created.1.2 Company BackgroundAbercrombie and fitch were founded in 1892 by David T Abercrombie and offered honored sporting and outdoor clothing for males and females. Today the caller is an upmarket US fashion retailer striving to offer their consumers casual luxury to the 18-22 family h angiotensin converting enzymest-to-god market segment. The troupe has over 300 bloodlines in the US and is likewise situated in the UK, Japan, Canada and Italy. They to a fault have ongoing plans to expand into other remote m arkets such as Asia in the near future.Abercrombie Fitch have three subsidiary sister companies consisting ofAbercrombie actually similar to the main grade but for children senior 7-14Hol referer Co for teenagers 14-18 offering lower charged products to Abercrombie Fitch but very similar in styleGilly Hicks offering lounge wear, underwear and a body tuition range for nation ripened 18+.Abercrombie Fitch also had a subsidiary participation crabed Ruehl No.925 which offered clothing products to the 25+ age segment, however the store unlikeable at the beginning of 2010 as it did not take off.2. External Analysis- PEST Factors tabulate 1 PEST2.1 Political/LegalImport Duty As Abercrombie Fitch manufacture their products within the USA and Asia, products that are imported into the UK accrue an import duty. Import duty is calculated on the type of goods, their value and the outlandish of origin. (Business Link 2010) If the product is made up of 20% or more of parts from oth er countries then this has to be asseverated to the countries customs as this may affect the worth of the import duty.Labelling As Abercrombie Fitchs products are imported from the US to the UK the gild emergencys to stop up that all their clothing products meet the UK labelling requirements stated in the Textile overlaps (Indication of Fibre Content) Regulations 1986, to catch that they are in accordance with the honor.Employment justice The UK has very strict employment laws against discrimination. Abercrombie Fitch were lately faced with a law suit in June 2009 when an employee was allegedly told that her prosthetic limb was not in accordance with the companies look policy. The employee aimed to sue the conjunction for 20,000 for discrimination against her disability. It is important for Abercrombie Fitch and their employees to be sensible of UK legislations as high profile law suits could affect their image leading to bad publicity.2.2 EconomicThe Recession Alt hough whatever reports may state that the recent recession may be drawing to an end, Abercrombie Fitchs latest Fiscal-fourth quarter earnings (Talley 2010) paint a different picture as they fell 31% (Talley 2010) cod to the continuing decline in their sales. This is due to the company not macrocosm prepared to reduce their prices during the recession, forcing their customers to look for cheaper competitors (see Competitor Audit for detailed list of competitors).UK Pricing Abercrombie Fitch are constantly striving to maintain and promote the prestige image they have successfully created in the US in the UK. heretofore when the UK flagship store in capital of the United Kingdom opened in 2007 the company was criticised for over pricing, as the products cost double those offered in the US stores. This could have had a study impact on the companys success in the UK. However, so far they have found that their consumers have had upstanding crack loyalty to them and have been al low foring to pass on the price for the products. Although as mentioned above, the companys earnings have been affected by the recession.2.3 Socio-CulturalSexual Imagery Over the years Abercrombie Fitch have been attacked about their sexually diaphanous advertising within their advertising campaigns and quarterly catalogue. It is against numerous different religions values and beliefs for example the Muslim religion to show sexual or naked imagery within adverts. and so Abercrombie Fitch need to be aware of the different values and beliefs different communities and religions have in order not to offend anyone. foodstuff interrogation should be undertaken as to what the best form of advertising is for any new campaigns and to determine what type of imagery should be used. However in numerous westernised countries, shock advertising turn overs well and this is what they use. The company strives to be different and stand out in any which way they can.Ageing Population With change magnitude life expectancy and an aging population prominent across the humanness, it is unwise for Abercrombie Fitch to continue into their future just focusing on consumers venerable 18-22. With the recent failure of their high end brand Ruehl No.925 which focused on consumers aged 25-35 a strategy to re-brand and reinvent Ruehl may be a wise ratiocination for the company.2.4 TechnologicalInternet online purchasing With the ever increasing popularity of the internet and consumer online purchasing, it has meant that Abercrombie Fitch have been able to advertise their products to consumers via their website and also allowing the consumer to purchase products, if they wish to, around the world. Online advertisement is an excellent way to catch a younger target audiences attention.Improvement of Transport Transport has changed dramatically over the past 50years. Roads have better and with many more flights take off each day from large airports, companies are seeing quick er delivery times for products that are sent by sea, road and air. This is good news for Abercrombie Fitch as their products are reaching consumers quicker. As the companys products spend a lot of time in transport, some of the fabricate goods are imported from Asia then dispatched around the world to their many stores.3. External Analysis- Competitor AuditAs Abercrombie Fitch are situated in many different global markets the following competitor audit will focus on Abercrombie Fitchs main competitors in the UK and the US.3.1 US Competitors3.1.1 American double birdie OutfittersAmerican Eagle Outfitters is Abercrombie Fitchs main competitor in the US. Like Abercrombie Fitch they target 18-22 year olds, offering young fashionable products to their consumers. They have a larger range of products than Abercrombie Fitch but are not seen to be as prestigious. Unlike Abercrombie Fitch, some consumers go the American Eagles shop experience much more pleasant, as the medication i s quieter and there is more lighting. The company recently opened a store in the UK in London.3.1.2 AeroposteleAeropostele is cheaper than Abercrombie Fitch, however it is still seen as one of their main competitors as they target the same market segment. Like American Eagle they have a large range of clothing products and accessories for the male and female markey which Abercrombie Fitch do not offer.3.2 UK Competitors3.2.1 Jack WillsLike Abercrombie Fitch Jack Wills target segment is 18-22 year olds. The company call themselves the University Outfitters and often situate their stores in University towns. Although Jack Wills call themselves this name under 18s are also found to be keen Jack Wills wearers. However the company do not have a strong market share in the UK as they are seen to offer, like Abercrombie Fitch specialised clothing.3.2.2 Urban OutfittersUrban Outfitters offer branded clothing to a unequalled market. Unlike Abercrombie Fitch they offer edgy, different st yled fashion products to their competitor, targeting the same age segment. Urban Outfitters is a very popular US company and is very up and coming in the UK in London.3.2.3 HollisterAlthough Hollister is a sister company to Abercrombie Fitch, there seems to have been some inter-company competitiveness in the UK. Abercrombie Fitch have only one store in the UK situated in London whereas Hollister have ten stores situated around the country. Although in the US Hollister targets 14-18 year olds, many older people in the UK have been wearing the brand due to accessibility of the store, as travelling to London to purchase Abercrombie Fitch clothing is not an option for some people they choose to wear the next best thing which is clothing from Abercrombie Fitchs sister company Hollister.4. SWOT Analysis4.1 StrengthsStrong portfolio of brands other than the main Abercrombie Fitch brand appealing to consumers aged 9- 24Annual Abercrombie Fitch Challenge which raises capital for charit ies and organisations, raising their profileSponsor of the Elite Racing TeamIn 2007 offered $75,000 scholarships to the National Society of High School ScholarsExpansion plans in Canada, europium and AsiaThe ability to capture 18-22 year olds attention and condition them into wanting the brands productsIn 2007 the company had a 2.3% market share of the US clothing retail market which put them at tertiary largest market share.In 2008 Abercrombie Fitch started modifying and upgrading their discipline systems4.2 Weaknesses cash being lost to counterfeit productsCompany portrays a sexual image, this is not acceptable in some countries and societiesLook Policy often seen to be in addition strict by employeesWith the recent closure of Ruehl No.925 there is no yearlong an Abercrombie store that appeals to consumers aged 25+Expensive prices in the UK compared to US galore(postnominal) law suits have been seen due to DiscriminationMany of the loyal customers feel that too many people a re now wearing the brand and it is starting to fall away its prestigious imageThe recent upgrading and modification on information systems within the business is a long process and could affect day to day campaign of the business4.3 OpportunitiesCelebrity endorsements subjoin brand awarenessNew range of products for pre 9 year oldsReinvent Ruehl No.925 and recapture the 25+ market segmentIncrease market shareIncrease sales outside of the two main selling seasons of August and November/DecemberCompletely new product launch womanish jewelleryRecapture prestigious image with new rangeLarger coatsMale and female watchesIntroduce real looking models (models surfaced UK 12+) as it is not how the clothes look on the individual, it is how they make the individual feelIn store music album available to purchase vary shopping experience to include, more lighting, quieter music, clothes more readily availableCompletely rebrand company image from casual to smart wear e.g. suitsExpansion into eastern Europe4.4 ThreatsThreat of substitution due to high pricesImport taxes may risePiracy in foreign waters, potential threat of loss of stock economical/political change in countries in which Abercrombie Fitch operateLaw suits against company for example acts of discriminationExchange rates could affect companies profitabilityChange in fashion trendsThe availability and price of raw materials could affect the cost of manufacturingDue to global warming unpredictable weather changes could affect consumer preference on products5. SWOT to TOWSTable 3 SWOT to TOWSInternal elementsExternal elementsOrganisational StrengthsOrganisational WeaknessesStrategic OptionsEnvironmental Opportunities(and risks)Strengths into opportunitiesStrong portfolio of brands other than the main Abercrombie Fitch brand appealing to consumers aged 9-24. Therefore Abercrombie Fitch have the brand power to be able to introduce other product ranges into the existing marketsAnnual Abercrombie Fitch Chall enge which raises money for charities and organisations. The Annual challenge could be made bigger, therefore raising more money for charities. The Annual level(p)t could even be brought into other countries in which the company are innovate to raise money for their charitiesSponsor of the Elite Racing Team, this is not widely known that they sponsor the group. Therefore awareness could be change magnitude thus enhancing brand awareness of the companyIn 2007 offered $75,000 scholarships to the National Society of High School Scholars. Scholarships could also be offered in other countries in which the company are present in to similar schoolsExpansion plans in Canada, Europe and Asia means that profits are to increase as well as brand awarenessThe ability to capture 18-22 year olds attention and condition them into wanting the brands products. Abercrombie Fitch have the ability to condition their customers into needing their products, therefore if a limited chance variable rang e of products were to be realised, consumer would respond to this wellIn 2007 the company had a 2.3% market share of the US clothing retail market, thus making them the 3rd largest market share in the US. Having the 3rd largest market share in the US gives the company the opportunity to strive to have the second largest or even beat the Gap and have the largest market share. Abercrombie Fitch should also look to increase their UK market share as currently they are not seen to be strong competition to UK brandsIn 2008 Abercrombie Fitch started modifying and upgrading their information systems. This therefore means that the company will soon have stronger information systems thus meaning glassy and easier runnel of the companyWeakness into opportunitiesMoney being lost to counterfeit products. Abercrombie need to underwrite that all products have copyright and anyone who counterfeits their products have a law suit brought upon themCompany portrays a sexual image, this is not acce ptable in some countries and societies, therefore Abercrombie could look towards toning down the sexual imagery within countries and societies that find this offensiveLook Policy often seen to be too strict by employees. The company should therefore hold in store run acrosss to gather information as to what the employees find strict about the policy, then this should be raised in the Annual conferenceWith the recent closure of Ruehl No.925 there is no longer an Abercrombie store that appeals to consumers aged 25+. Therefore information by the means of market research should be gathered from consumers as why they felt the brand failed. As well as information from store rung and stakeholders. The company could then formulate strategies to rebrand Ruehl No.925 thus penetrating the 25+ age market formerly againExpensive prices in the UK compared to US. Consumers are currently prepared to pay the higher prices that are at present in the UK, if the situation changes then the company s hould investigate the price of importing the clothes into the UK against the price they are charging and the profit that is being made. If profit is high then the company could look towards lowering their UK pricesMany law suits have been seen due to discrimination. Increased awareness should be made about discrimination within the work place and more minority groups should also be introduced into the company.Many of the loyal customers feel that too many people are now wearing the brand and it is starting to lose its prestigious image. Therefore a new prestigious range could be introduced to encourage said consumers back to the brandEnvironmental ThreatsStrengths used to minimise threatsThreat of substitution due to high prices. However one of Abercrombie Fitchs strengths is that they have the ability to catch their target audiences attention and make the consumers feel they need the productsImport taxes may rise. However the company are constantly expanding therefore profits shou ld rise thus meaning if import taxes should rise it should not affect the company substantiallyChange in fashion trends. As Abercrombie Fitch have a strong market share within the US, it would be wise to assume that they have an excellent team of fashion forecasters that would be able to foresee this potential threat. This strength can also be used for the threat of, due to global warming unforeseeable weather changes could affect consumer preference of productsStrategies to deal with weaknesses and threatsCompetitive pricing should be brought in to reduce the threat of substitution due to high pricesImport taxes may rise. As mentioned in the previous box, if import taxes do rise then the company should be okay as they are continuing to expand thus increasing profits, which overall should even out the rise of import tax if it should occurLaw suits against company. Abercrombie Fitch need to ensure that the company is always running professionally to ensure that further law suits do not ariseExchange rates could affect companys profitability. The company need to be constantly aware of exchange rates and understand that stock being sold in an unstable political and economical market could lose valueThe availability and price of raw materials could affect the cost of manufacturing. Therefore Abercrombie Fitch need to ensure they are obtaining their raw materials at the best price available6. Porters Generic Strategies diagram 1 Abercrombie Fitch and Porters Generic StrategiesAbercrombie Fitch nowFocusAbercrombie Fitch for the futureMiddle of the RoadDifferentiationCost LeadershipPorter (1980) determine four types of generic wine strategies for a company to be competitively successful. The four strategies consisted of Cost Leadership, Focus, Differentiation and Middle of the Road. Abercrombie Fitch are currently using the generic strategy of Focus as they have a small range of clothing products focused on a specific market segment of 18-22 year olds. For t he future the company should aim to move not entirely away from focus but slightly towards Differentiation, thus enhancing their products durability and perception7. Ansoff MatrixTable 4 Abercrombie Fitch Ansoff MatrixCurrent ProductsNew ProductsCurrent market placeMale and womanly clothingswimwearbeltsrubber flip flopsleather flip flopsFemaleclassic scarveshandbagssignature totessignature scents, 8, Classic, 41 (perfume) and WakelyMaleboxer shortsunderwearnecklacesbraceletssignature scents, Fierce, 41 (cologne) and ColdenWomens jewelleryMale and Female watchesMusic C.D of in store musicA range of male and female winter shoesBags for malesPyjamasNew MarketExpansion into foreign market for example Eastern EuropeAbercrombie Fitch catalogue in which products can be ordered similar to Next Directory or Littlewoods catalogueProducts available in large section stores within the UK for example John Lewis, House of Frasier, Selfridges and Harrods.A range of smart male and female clothi ng productsHair care productsAbercrombie Fitch bottled water crop boardsMale and female clothing for age group 25+Larger sizes8. SMART ObjectivesAbercrombie Fitchs SMART objectives run over the limited period from 2010-2013. In the world of Beauty and Fashion 3-6months would be considered a shot term objective. 12-25 months a medium objective and 36+ months a long term objective. This is a very different time frame to other types of businesses, as fashion and beauty trends move very quickly, usually with the seasons. Therefore companies such as Abercrombie Fitch need to be thinking quickly about fashion changes.The following SMART objectives are listed in hierarchy, with the first objective being the objective that Abercrombie Fitch should definitely consider proceeding with if they had to choose one. Given the present economic climate, it may be in Abercrombie Fitchs best interest to wait until the end of the recession is all in all in sight before producing any new products as bringing out a new product is a high risk.SMART ObjectiveTarget separateRisk1) Introduce a range of womens jewellery complementary to the companies style of casual luxury, consisting of 15 pieces by 1st November 2010Women aged 18-22, educated, with more or less comfortable incomeMedium Risk2) Launch a new prestigious clothing range to re-capture higher end income consumers by 1st may 2011 hands and Women aged 18-22, educated, with high incomeLow Risk3) Trail introduction of larger UK womens sizes 12-16 for clothing products in London flagship store by 1st March 2013Women aged 18-22, educated, with sanely comfortable income, that could not shop at the store before due to the size Large actually being the equivalent to a UK 10High RiskIf objective 3 is successful then4) Trial introduction of integration of 2 real models within advertisements and in store cater within London flagship store by 12th June 2013Men and Women aged 18-22, educated, with reasonably comfortable income. T he advertisements and new models will aim to attract real size women in the UK sizes 12-16High Risk9. Strategic Plan, Implementation Measurement of SMART Objectives9.1 SMART Objective 1SMART ObjectivePorters StrategyMarket segment/ Ansoff1) Introduce a range of womens jewellery complimentary to the companys style of casual luxury, consisting of 15 pieces by 1st November 2010 among Focus and DifferentiationWomen aged 18-22, educated, with reasonably comfortable income.New Product/Current MarketProductThe jewellery will be in the companies style of casual luxury, items such as bead bracelets, necklaces and earrings will be designed in accordance with market research results and offered to consumers in store and online impairmentMarket Skimming Strategy high price offered and only gradually lowered grazeProducts will be available in all Abercrombie Fitch Flag ship stores around the world and on website. If successful will be brought into all other stores progressionDirect Marketing - television adverts, magazine advertisements, in store advertisement.Celebrity endorsementPhysical groundsThe Abercrombie Fitch logo of the Moose will remain presentProcessProducts will be sent from the manufactures to Head office then distributed to the Flag charge stores around the worldPeopleAbercrombie Fitch already make male jewellery, therefore a female specialist will be employed and work alongside the male specialist in order to create male and female jewellery products that work in harmonyMeasurementSmall targets should be cause in order to ensure the successful completion of the Objective. As the objective is short term, monthly meetings should also take place to ensure targets are being met.9.2 SMART Objective 2SMART ObjectivePorters StrategyMarket Segment/ Ansoff2) Launch a new prestigious male and female clothing range to re-capture higher end income consumers by 1st may 2011FocusMen and Women aged 18-22, educated, with high incomeNew Product/ New MarketProductA r ange of male and female clothes aimed at recapturing the wealthier consumers offering them a prestigious brand once again. Once market research has be undertaken then this will determine the types of clothing products needed.PricePricing to reflect product differentiation- price will be higher than the standard brands productsPlaceProducts will first be launched in the flag ship stores around the world and then brought into all other stores if found to be successfulPromotionDirect Marketing- television advertisements, magazine advertisements, in store advertisement.Celebrity endorsementPhysical distinguishThe Abercrombie Fitch logo of the Moose will remain presentProcessProducts will be sent from the manufactures to Head office then distributed to the Flag Ship stores around the worldPeopleRuehl No.925 employees will be interviewed and asked why they feel the brand failed. Constructive criticism will be taken away and applied to making the new prestigious range successful. A someb ody with strong knowledge of prestige brands and turn around strategies would be usefulMeasurementOnce market research has been undertaken a target should be set as to when the first designs will be available for viewing. Then more targets set as to when the collection will be finished. Monthly meetings should be undertaken to ensure that targets are being met and to run through any problems that may arise that could affect the objective being met on time.9.3 SMART Objective 3SMART ObjectivePorters StrategyMarket Segment/ Ansoff3) Trail introduction of larger UK womens sizes 12-16 for clothing products in London flagship store by 1st March 2013 in the midst of Focus and DifferentiationWomen aged 18-22, educated, with reasonably comfortable income, that could not shop at the store before due to the size Large actually being the equivalent to a UK 10New Product/ New MarketProductAs well as the usual 0-10 UK womens clothing sizes being produced the company will also introduce sizes 12- 16. These sizes are the most common female sizes in the UK and should be greatly acceptedPriceMarket Skimming- high price offered and only gradually loweredPlaceThe new sizes will be introduced into the UKs London flagship store. If found to be successful then new objectives will be set for the introduction of the sizes across the worldPromotionSmall in store advertisements within UK London flag ship storePhysical EvidenceThe Abercrombie Fitch logo of the Moose will remain presentProcessProducts will be manufactured then distributed straight to UK flag ship store in order to cut out the middle man (The US head office) Products will have to be checked in order to ensure that they are 100% before retailingPeopleSomeone with strong knowledge on female sizing in the UKMeasurementTargets set and meeting undertaken to ensure that procedures are running smoothly to meeting the objective. In the first year 4 meetings will take place and then one every(prenominal) month in the years to fol low until the object end date9.4 SMART Objective 4SMART ObjectivePorters StrategyMarket Segment/ Ansoff4) Trial introduction of integration of 2 real models within advertisements and in store staff within London flagship store by 12th June 2013Between Focus and DifferentiationMen and Women aged 18-22, educated, with reasonably comfortable income. The advertisements and new models will aim to attract real size women in the UK sizes 12-16New Product/ New MarketProductIntroduction of real size models sizes 12+ within companies Marketing/Advertising campaigns and in store staffPricePrice will be based on price of advertising campaign and cost of new in store staffPlaceAdvertisements with real size models will be trialled in the UKs London flagship store. Real size models will also be hired alongside the skinny in store staffPromotionLarge advertisements including real size models within direct marketing such as, magazines, television advertisements, internet and in store. As well as Lon don busesPhysical EvidenceThe Abercrombie Fitch logo of the Moose will remain presentProcessreal size models casted for advertisement and for in store staffPeopleSomeone who can sympathise with the fact that clothes should not be about what you look like in them, but how you feel in them. And understand that not everyone is a size 0 model. Bring realism to the companyMeasurementSmall targets should be set in order to ensure the successful completion of the Objective. As the objective is long term, 4 meetings will take place in the 1st year and then monthly meetings will take place in the second and thrid year to ensure targets are being met.10. ConclusionIn conclusion after considering Abercrombie Fitchs external environment as well as Porters Generic strategies and Ansoff Matrix, four SMART Objectives have been formulated and a Strategic Plan, Implementation Measurement of each SMART Objective has also been created.If Abercrombie Fitch should decide to implement any of the SMAR T Objectives suggested in the near future, then the current external environment should be examined as different situations may have arisen.