Company Analysis Report Burberry & Mulberry

Company Analysis Report Burberry & Mulberry M2Di Angela Anthony - [email protected] Emi Kenny-Troughton - [email protected] Evita Lie - [email protected] Alda Júlía Magnúsdóttir - [email protected] Susanne Maier - [email protected] Greta Schliek - [email protected] Contents 1 - Introduction 2 - Industry Analysis: Porter´s 5 Forces 4 - Brand History 5 - Business Model Canvas 6 - Glocalisation 6 - Mintzberg’s 5P’s 8 - 7P’s Marketing Mix 10 - Positioning Matrix 11 - Brand Equity 12- Balanced Score Card 15 - Benchmarking 16 - Conclusion 17 - Appendix 36 - Source List Introduction It was the year 1856 when dressmaker Thomas Burberry opened his first store in Basing- stoke Hampshire, England. Little did he know that just over 100 years later a man called Rog- er Saul would opened a competitor store, Mulberry, only a 90 miles away in Somerset. In response to the technological revolution and mass production trend still occurring today many fashion consumers are revisiting their roots and opting for heritage brands such as Burberry and Mulberry, who offer a more comforting and wholesome set of values as well as a fashion forward aesthetic. Over the past decade both brands have lost popularity due to various factors and both have consequently attempted to rejuvenate their image. However Mulberry is still strug- gling while Burberry has successfully reclaimed its place in the luxury goods market, leading to our research question; “Why has Mulberry’s relaunch been less successful than Burberry’s?”. We started out by using models such as Porter’s 5 Forces to understand the macro situation of both brands and then progressed to the Business Model Canvas, Mintzberg’s 5Ps and Glocalisation to better understand the inner workings of both companies. Once we realised a key issue was Mulber- ry’s marketing, we applied the 7Ps, positioning matrixes, Kotler’s brand equity model and Kaplan and Norton’s balanced scorecard to further understand the extent to which this was affecting the companies. We also incorporated our own research, (an online survey of nearly 100 people and interviews with shop assistants and customers of each brand), to get a more well rounded grasp of the perception of the brands and their impact on the consumer. By using such a wide variety of models we aimed to isolate the main factors that could explain Burberrys success relative to Mul- berry. 1 Porters 5 Forces Threats of Substitute Products Luxury products are mainly purchased by the upper-middle to high-income level consumers. Pa- trons at these income levels purchase and wear premium products to show their affluence. There- fore the demand for these luxury goods is continuous. The consumers don’t have a direct substitute, as they possess individuality; however the market is penetrated with counterfeit products being shipped worldwide from Asia. As the quality of the counterfeit products has been improving over the past years, the brand value of premium brands is affected, which in-turn can cut down the brands revenue/profit margin. Also the rising popularity of middle price and fast fashion brands such as Zara and H&M can pose a threat to the luxury brands as they are more accessible to consumers in price and availability. The quality offered by luxury brands is the best available and designs are unique, but the increased internet accessibility of top luxury brands allows fast fashion brands to copy and respond to new trends within weeks after fashion shows. Luxury brands have moderate switching costs because of their individuality and position as a status symbol. During the time of recession consumers tend to trade down to middle price brands resulting in the loss of prestige of luxury brands. Bargaining Power of the Buyers All customers of the brands are individual consumers, which weakens buyer power. Luxury retailers can differentiate themselves through the styles and varying designs of product offerings. Although there are other possible sources of apparel, the psychological significance of retail garments is highly important to consumers, further weakening buyer power. Higher prices also have an effect on perception and desirability of brands, as higher prices mean more exclusivity. Pricing strategy for both brands in the past few years has been to increase the prices significantly. However, the consumers have low switching costs. Where brand loyalty exists, it is more likely to be to the de- signer than the retailer. The position of retailers is at the end of the value chain, means that they cannot integrate forwards and are obliged to offer customers what they want. This strengthens customer power. Burberry’s recent brand overhaul fortified the brand identity and image in the eyes of the consumer, so consumers may have a stronger incentive to purchase their wares. As the brands are both luxury brands, price elasticity is relatively inelastic, with price of their wares having increased significantly in the last few years, but profits and demand, especially for Burberry, are consistent or rising. Fashion, by its very nature, is also unpredictable. The products are determined by designers, sub-cultures and creative industries, and are subject to sharp and unpredictable changes, strengthening customer power. Therefore, bargaining power of customers is assessed overall as low to moderate. Bargaining Power of Suppliers Suppliers hold a moderate level of bargaining power in the luxury goods industry due to various factors, including the dwindling number of highly skilled craftsmen. As younger generations fail to show interest in developing skills that made some of the largest fashion houses great, numbers of workers skilled enough to create luxury and couture pieces are plummeting. In France especially there is a clear decline in couture level embroiderers, from around 10,000 in 1920 to 200 in the pres- ent day. Although this could be considered a disadvantage to the suppliers, it actually just makes the surviving artisans careers much more stable as there is less chance of them being substituted or replaced by other craftsmen. There is also a certain respect between the manufacturers and the luxury brands as a lot of the partnerships are based on past cooperation. This leads to a situation where switching costs are actually quite high, not necessarily in upfront payments, but in terms of relationships and the resulting quality of the products as trust is broken and new manufacturers often cannot guarantee the same level of quality due to, for example, lack of expertise. However the situation is not completely in the suppliers favour as companies often do not outsource all of their collection of goods, meaning that the company still has power over choosing which suppliers 2 they entrust with their products. The threat of forward integration is very unlikely due to the size of the wealth of the luxury companies compared to that of the manufacturers, and therefore suppliers must still be reliant on the companies coming to them with requests. The factors are relatively even and so the bargaining power of the suppliers remains at a moderate level, however as the number of skilled workers continues to decrease there is a chance of the level being raised higher to accom- modate the increased desirability of such workers. Competitive rivals within the Industry The luxury goods market has some intense competition with several established brands, which have won trust and loyalty from their customers. The brands have an equal standing in the market and entering, as a new competitor has proven difficult for new companies. This means that recog- nised brands, like Burberry and Mulberry, have little to no competition from new and young brands, as joining the market also necessitates a huge capital. As luxury goods require the highest quality in every aspect of production, newcomers must have a substantial capital to be able to compete on all levels. This drives the new brands further towards contemporary innovation. Mulberry started as a niche brand with handmade leather bags, branching into other sectors later, and is now appreciated for its high quality and rich heritage. Burberry has also set milestones in originality and design and the focus on innovation will always be high within these companies. The luxury brands are known for their impeccable traditional customer service inside the store and have moved over towards e-commerce. Burberry was one of the first brands to broadcast their runway shows online and Mulberry has a sizable online presence as well. The established luxury goods brands are highly dependent and appreciated for their rich heritage, something that is hard for new brands to achieve. They would have to create their own heritage or really focus on product differentiation. Therefore, there is a different market for these brands, called the ‘new luxury’ market: market for luxury goods brands that do not focus on heritage at all. These are brands such as Maison Martin Margiela. Threat of New Entrants The of entry of new competitors is high when profitability does not require economies of scale, initial capital investment is low, and accessing distribution channels is easy. Undifferentiated products, unknown brand names and low consumer switching costs also have a great influence for new entrants. Location, proprietary technology and materials, expected retaliation of existing firms, and governmental policy are no issues. In contrast, the threat of new entrants is low if profitability requires economies of scale, products are differentiated, brand names are well-known, initial capital investment and consumer switching costs are high. If accessing distribution channels is difficult; location, proprietary technologies, materials, government policy and expected retaliation of existing firms are issues. With the existence of barriers to entry - patent and rights - taken into consideration; adapting to the brands Burberry and Mulberry this means that the most attractive segment is one in which entry barriers are high and exit barriers are low.

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