Burberry Group Inc

Burberry Group Inc

Introduction

The global luxury lifestyle industry started a new era of slow but steady growth in the market which included leather accessories, hard luxury, fashion, cosmetics and fragrance. In the last one year the market reached 253 billion Euros in terms of revenue. This was almost up to 13 percent from the current market exchange rate which was just 1 percent on real growth terms cause by global challenged which hanged on the luxury industry (Vittayakorn et al 2015).  Currently, the global luxury lifestyle market is expected to experience continued increased slow growth. There are expected slowdowns in key emerging markets which would bear risks. In addition, luxury brands and retailers are expected to seek better ways of expanding the portfolios which will foster investment in “luxury investments” and “lifestyle branding” and harness social media and tap the psyche within the new digital consumers. This paper will take focus of three global major Luxury Lifestyle brands (Brown and Rice 2013).

Burberry Group Inc is a British luxury lifestyle company that has headquarters in London, England. The company core fashion production focuses on production and distribution of fashion accessories, sunglasses, cosmetics, ready-to-wear outwear and fragrances. The company was established in the year 1856 which had an original focus on outdoor attires (Vittayakorn et al 2015). However, the firm moved further to the high end fashion markets where it evolved to pattern based scarves, trench coats and other crucial fashion accessories. In 1891, the first shop was open in the Haymarket. The firm was reincorporated in 1955. Burberry has been famous for its offer of trench coat (Vittayakorn et al 2015). Burberry has its branded stores as well as franchises all over the world and makes sales via concessions to other third party stores. Christopher Bailer is the Chief Executive Officer. Burberry is listed on the London Stock Exchange. Currently, Burberry has operation in more than 50 countries with more than 500 stores (Vittayakorn et al 2015).

On the other hand, Pittards Inc is a leather mill and tannery firm that produces high quality leather. It is world leading brand on luxury leather goods and fashion accessories such as high quality bags. Footwear, gloves and sport equipments such as football boots. The firm history may be traced back in 1826 while it was operating at Yeovil, Somerset (Vittayakorn et al 2015). By the year 2006, Pittards Inc had operation in two core UK sites: Yeovil that was hosting firm gloves leather department and Leeds. More than 80 percent of all raw materials that were used in production were sourced in the United Kingdom and eighty percent of the outputs were exported to more than 30 nations worldwide. This resulted to success of the company via business objective achievements and other export awards. West Yorkshire deals with Leeds and Bradford has been well known in the textile world industries (Vittayakorn et al 2015).

Finally, Ted Baker London is a worldwide lifestyle brand name with more than 350 locations in five continents. Ted Baker is marked as “no ordinary designer label” that provide menswear, womenswear, and accessories. The firm has been well known for its different use of pattern and color and prototypical British susceptibility, the firm avant-garde approach toward fashion, extraneous intelligence of absurdity and the unwavering attention to details, plea to style cognizant men and women who have great trust to the firm to offer something that is far from ordinary (Vittayakorn et al 2015).

Research Question

Do Factors That Affect Movement Of Luxury Product Impact The Firm Performance? 

Basically, the perception of luxury lifestyle product has not been a new and its root backs great civilization from ancient world. Luxury lifestyle is associated with uniqueness, wealth, authority and individuality. Luxury products are known for their high aspect of superiority, uniqueness, quality, high prices and craftsmanship (Vittayakorn et al 2015). The products target group is elitist society that source value from aspect of individuality, premium pricing, service and brand heritage. Luxury commodities are marked by capacity to meet emotional and psychological needs in relation to social, prestige and esteem status. That target customer group tends to be price insensitive and remain loyal to the brands. Excellence, desirability and brand aura are the core features for a successful luxury brand (Molloy and Larner 2010).

According to economics, for the case of luxury products, when the price of the product increases, the demand as well increases. The assumption is that they must have high income elasticity of demand meaning that individual’s income increases results to increased demand for the luxury products. The current business model within luxury lifestyle products is that it incorporates offer of supreme quality, high price and exclusive products to the clients who are part of high top wealth band (Vittayakorn et al 2015).

The firm business model targets ways to meet the client expectations as well as making selective distribution. The business model expressed in luxury industry are designing, production and marketing of the excellent product with use of service from fashionable designers, innovation, creativity and technologies with aims of producing tremendous high superiority meeting clients demands and expectations (Lewis, Larner and Heron 2008). Aspect of selective distribution makes sure that experience, quality services, protection, trust and choice which is repaid by consumers with aspect of loyalty (Vittayakorn et al 2015).

The fact is that, the global luxury lifestyle industry has been experiencing slump since the last global financial crisis period. During the recession period, the industry incidence negative development with a decline of 8 percent. The decline in the revenue was caused by tightened budget as well as decline in the level of spending. During the global recession period, almost 1125 billionaires in the world lost almost fifty percent of their wealth. As well, the richest people lost almost $ 10 billion worldwide (Lewis, Larner and Heron 2008). This remains the target group for the luxury lifestyle industry. Despite the slow down, there are expectation that the global economy will grow by 4.2 percent mainly due to high growth in India and China, hence the luxury good industry has been recovering slowly. According to reports, the global luxury lifestyle industry revenue increased from 153 million Euros in year 2009 to almost 163 million Euros in 2010.the growth was driven by various emerging markets from growing economies and rise in income for the developed markets (Achabou and Dekhili 2013).

In general, luxury lifestyle industry have target of countries that have high GDP growth, lower barriers of entry to the market, higher Foreign Direct Investments, sturdy IPR protection laws and agreeing to retail infrastructure. High Gross Domestic Product growth tends to be experienced within emerging markets such as BRIC nations. Such markets tend to be indicative on the growth of young consumer class with increasing disposable incomes ready to try the brands (Vittayakorn et al 2015). In fact, there are strong charisma of luxury brands in nations that have high GDP growth such as South Korea and Hongkong; but the focus has been mainly on countries such as China and India. Global luxury lifestyle; products have been spread all over depending on wealth concentration of the world. In fact, Europe is accounted for almost 40 percent of the sales, United States has 28 percent sales, Asia has 24 percent sales and the 8 percent goes to the rest part of part of the world. Cultural adaptation is a factor that impact luxury lifestyle products movements. For example, in country such as India, there are high sales of western styled brand apparel for women (Brannon and Divita 2015).

Critical Environment Analysis

PESTLE Analysis

Political trends: the luxury lifestyle industry has been experiencing political and electoral transition and issues. There exist four political issues that originated from political issues. They are such as, demand for democracy, increased local popularity, great public accountability and redefining the concept of politics and power. The political economies have as well changed from bipolar to tri-polar structure (Vittayakorn et al 2015).

Economic Trends: economic trends have been adverse in the last quarter of the year, the luxury lifestyle industry in general has experienced relative robust on economic growth. Asian countries have experienced better GDP growth of at least 4.5 percent. Various nations have experienced the risk weighted capital adequacy ratios for the banking system change which is caused by government sponsored bank recapitalization initiative, progress in financial structuring and changes in financial risks management. In general, capital adequacy ratio of central bank in the nations is higher that the Basle norm of 8 percent (Phau and Siew Leng 2008).

Social/ cultural trends: in addition, there are social and cultural issues that have been experienced in the last one year in luxury global lifestyle industry. Such trends incorporate irreversible rise of civil society mainly in Asian nations, rise of cavity societies within tri-polar structure of political economy, increased roles of intellectuals and introspection periods (Vittayakorn et al 2015).

Technology issues: it is a well known fact that luxury lifestyle industry is still an emerging industry and it is still experiencing more developments. Despite this, there are indication that the industry will grow with estimation of mobile apps and devices coming up (Achabou and Dekhili 2013). Further expectations are that there will be significant growth and technology advancement experienced in the mobile world. Mobile and multimedia commerce are part of technology advancements that are already in place. Hence, with the continued technology investment, growth and development has been imperative to achieve localization within the luxury lifestyle industry (Armstrong et al 2015).

Legal Issues: with the enhancement of intellectual property rules and rights, commercialization and protectionism have been crucial source of competitive advantages for the economies and core drivers of the competitive strategies (Vittayakorn et al 2015). In fact, nations have been aware of the need of long term policies commitment toward collective transformation in the industry to one that is based upon knowledge fostered by innovation and sustained learning. Countries have agreed to work closer with each other to ensure there is acceleration of intellectual property asset creation, protectionism and commercialism (Achabou and Dekhili 2013).

Industry Competition Review – Porter Five Force

Threat of new entrants: a new entrant to the industry is expected to deal with high cost related with entry. Major competitors within the industry are far from establishing sturdy distribution channels (Vittayakorn et al 2015). Such will hinder the plans of retaliating with technology development since failure to have distribution channeled, the products will be hard t be considered by the customers in the competitive markets. Companies have to worry on government regulation in some nations which are likely to weaken competitive advantages (Amatulli and Guido 2011).

Bargaining powers of the suppliers: in general, suppliers in the luxury lifestyle industry have low bargaining powers since the products are far from being well established in the market.

Bargaining powers of the Buyers: Large parts of the consumer in the industry are professionals who largely depend upon expensive products with expectation of seamless services. Bargaining powers of consumers in the industry is relatively high since there are few clients but large players within the industry (Armstrong et al 2015).

Threats of Substitutes: there exist little threats that would come up as a possible risk of substitute. The reason behind this fact is that product-for-product substitution does not take place mainly in the luxury commodity market. There are no commodities that have capacity of replacing the ingenuity held by luxury lifestyle products. In addition, million of users of luxury lifestyle products do find it quite unattractive to use any other commodity that purely luxury lifestyle products (Vittayakorn et al 2015).

Selection and Justification of Financial Reports

The luxury lifestyle industry has various financial ratios that aid the managers when it comes to operations and selling of luxury commodities. These financial ratios may be used by investors in determining long term security, overall profitability and short term efficiency of luxury Lifestyle Company. In addition, the ratio assists in analyzing how well the firms are selling the inventory, pricing of the commodities and operation of the business in general (Armstrong et al 2015).

Non Financial Ratio

The luxury commodity industry in the recent time has been bale to develop efficient and effective process that implement policies and task relevant for satisfaction of customers, organizations and management of the companies (Vittayakorn et al 2015). Within the companies, there exist reluctant focus on careful management of all crucial process that are involved in distribution and production of luxury services and products in the industry (Armstrong et al 2015).

However, for the small luxury companies, they do not rely upon capabilities of implementing operation management. Rather, the companies have engaged in various activities that are part of management schools and associated with operation management. Such activities that are undertaken are such as product development, manufacturing of products, production and distribution process (Craik 2009). Conversely, operation management do deal with operations that are within the industry and the organizations. Operation management in this case relates with activities such as control of inventories, management of purchases, evaluations and logistics. To achieve the best deal, all the three firms have invested in efficiency and effectiveness of process. Hence, operation management is a performance metric that incorporate analysis and management of firm internal processes (Armstrong et al 2015).

The firms are dedicated to quality for the time they have been operation which has achieved satisfaction of millions of their customers for the worldwide customers. The firms were founded and pursue best quality as well as craftsmanship in relation to luxury products designing and production (Vittayakorn et al 2015). The firm’s products that are patronized by customers are well manufactured using original and unparalleled materials. Durability and bright colors of the products are sourced by use of pure raw materials. Raw materials used in production of the commodities have capabilities of meeting high quality standards as well as specifications (Vittayakorn et al 2015).  In addition, the packagings of the materials are subjected to sturdy quality standards. The three firms have been able to maintain their reputation being world leading luxury lifestyle companies for quite long. They have capacity of facing challenges in various markets unswervingly. Such has been effective via effective promotion and positioning strategies that deliver profit growth as well as building firm foundation.

Bibliography:

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Amatulli, C. and Guido, G., 2011. Determinants of purchasing intention for fashion luxury goods in the Italian market: A laddering approach. Journal of Fashion Marketing and Management: an International Journal, 15(1), pp.123-136.

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Brown, P. and Rice, J., 2013. Ready-to-wear apparel analysis. Pearson Higher Ed.

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