In February 2014, Burberry's chief executive officer Angela Ahrendts is preparing to hand the reins of the English luxury fashion company to chief creative officer Christopher Bailey. Under Ahrendts and Bailey's partnership, in place since 2006, Burberry's revenues have tripled to more than two billion English pounds, and operating profits have more than doubled. Ahrendts has led Burberry to become a brand that once again stands for luxury and that has a strong global and digital footprint. Yet the leadership change is met with skepticism. Is Burberry's current strategy also the right one for the future, and can Bailey continue Burberry's transformation?
Swot Analysis of "Burberry in 2014" written by Anita Elberse includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Burberry's Ahrendts facing as an external strategic factors. Some of the topics covered in Burberry in 2014 case study are - Strategic Management Strategies, Manufacturing and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Burberry in 2014 casestudy better are - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, increasing transportation and logistics costs,
challanges to central banks by blockchain based private currencies, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Burberry in 2014 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Burberry's Ahrendts, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Burberry's Ahrendts operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Burberry in 2014 can be done for the following purposes –
1. Strategic planning using facts provided in Burberry in 2014 case study
2. Improving business portfolio management of Burberry's Ahrendts
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Burberry's Ahrendts
Strengths Burberry in 2014 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Burberry's Ahrendts in Burberry in 2014 Harvard Business Review case study are -
Organizational Resilience of Burberry's Ahrendts
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Burberry's Ahrendts does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Burberry's Ahrendts has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Burberry in 2014 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Burberry's Ahrendts in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Burberry's Ahrendts has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Burberry's Ahrendts has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Cross disciplinary teams
– Horizontal connected teams at the Burberry's Ahrendts are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High switching costs
– The high switching costs that Burberry's Ahrendts has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Diverse revenue streams
– Burberry's Ahrendts is present in almost all the verticals within the industry. This has provided firm in Burberry in 2014 case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Burberry's Ahrendts is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Burberry's Ahrendts is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Burberry in 2014 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy in the Burberry in 2014 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Strong track record of project management
– Burberry's Ahrendts is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Burberry's Ahrendts is one of the most innovative firm in sector. Manager in Burberry in 2014 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Training and development
– Burberry's Ahrendts has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Burberry in 2014 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Burberry in 2014 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Burberry in 2014 are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Burberry in 2014 HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Burberry's Ahrendts has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Burberry in 2014 has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Burberry's Ahrendts 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Burberry's Ahrendts has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Burberry's Ahrendts even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Products dominated business model
– Even though Burberry's Ahrendts has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Burberry in 2014 should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Burberry in 2014, is just above the industry average. Burberry's Ahrendts needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Aligning sales with marketing
– It come across in the case study Burberry in 2014 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Burberry in 2014 can leverage the sales team experience to cultivate customer relationships as Burberry's Ahrendts is planning to shift buying processes online.
High cash cycle compare to competitors
Burberry's Ahrendts has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Capital Spending Reduction
– Even during the low interest decade, Burberry's Ahrendts has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Burberry's Ahrendts is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Burberry's Ahrendts needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Burberry's Ahrendts to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Burberry's Ahrendts has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Burberry's Ahrendts has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Burberry in 2014 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Burberry in 2014 are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Burberry's Ahrendts can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Burberry's Ahrendts has opened avenues for new revenue streams for the organization in the industry. This can help Burberry's Ahrendts to build a more holistic ecosystem as suggested in the Burberry in 2014 case study. Burberry's Ahrendts can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Burberry's Ahrendts can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Learning at scale
– Online learning technologies has now opened space for Burberry's Ahrendts to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Developing new processes and practices
– Burberry's Ahrendts can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Burberry's Ahrendts has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Burberry in 2014 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Burberry's Ahrendts to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Burberry's Ahrendts in the consumer business. Now Burberry's Ahrendts can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Burberry's Ahrendts to increase its market reach. Burberry's Ahrendts will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Burberry's Ahrendts can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Burberry in 2014 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Burberry's Ahrendts to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Burberry's Ahrendts to hire the very best people irrespective of their geographical location.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Burberry's Ahrendts to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Burberry's Ahrendts can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Burberry's Ahrendts can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Threats Burberry in 2014 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Burberry in 2014 are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Burberry's Ahrendts business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Burberry's Ahrendts in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Burberry's Ahrendts has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Burberry's Ahrendts needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Burberry's Ahrendts with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Burberry's Ahrendts in the Sales & Marketing sector and impact the bottomline of the organization.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Burberry's Ahrendts will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Burberry's Ahrendts.
Shortening product life cycle
– it is one of the major threat that Burberry's Ahrendts is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Burberry's Ahrendts high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Burberry's Ahrendts needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Burberry's Ahrendts can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Increasing wage structure of Burberry's Ahrendts
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Burberry's Ahrendts.
Stagnating economy with rate increase
– Burberry's Ahrendts can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Burberry in 2014 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Burberry in 2014 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Burberry in 2014 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Burberry in 2014 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Burberry in 2014 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Burberry's Ahrendts needs to make to build a sustainable competitive advantage.