Burberry, Research Paper Example

Many older luxury brands face a quandary in modern times. Although their brand is usually based on a long, storied history, the brand must be reconfigured to appeal to modern-day consumers. In many ways, Burberry is the archetype of this problem. Burberry was founded 155 years ago in London; the brand has developed a robust offering of clothing and accessories that promotes its premium image. However, as time wore on, and competition in the luxury goods space intensified, Burberry faced a number of difficult challenges.

One of the major challenges was slowing revenue growth. In 1996, even though other

companies in the luxury sector were registering robust growth, Burberry’s annual growth was still around 2%. This annual growth performance was stark contrast to other luxury firms: Louis Vuitton Moët Hennessy (LVMH) had almost 12 times—and Pinault-Printemps-Redoute (PPR) more than 16 times—Burberry’s revenue in the aggregate over the same time period (HBR, 2012).

This anemic growth was a function of numerous factors: First, although Burberry had a ubiquitous presence around the world, there was no unified brand concept or offerings at the various locations. The disorganization of the brand offerings and management thinking went all the way to the top; indeed, the inability to present a unified offering to customers was one the reasons behind the company’s lagging growth. Another main reason: the company lacked a firm direction. Although the company’s history served as a foundation to build the brand’s future on, there was a lack of deeper thinking at the top levels of how the brand should change for current consumers. The appointment of a new CEO was meant to help allay the confusion and lead the company towards a new and more profitable future.

One of Ahrendts’s first strategic decisions was to adopt social media to burnish the brand’s “old fashioned” image. Ahrendts’s posited that if Burberry adopted a more aggressive social media posture, the firm would attract a new and profitable demographic: the Facebook generation. Indeed, Burberry was one of the first luxury companies to establish a brand page on Facebook in 2009. Since that time, the firm has acquired nearly 14 million fans; on Twitter, the brand has 1.3 million fans. Ahrendts used social media to breathe new air into the stultified brand that had become more synonymous with the impenetrable fog of London than with the fashion shoots in New York and Asia.

In addition to the new social media strategy, the company also focused on how consumer data could drive more efficient and profitable sales. The company used Salesforce to bring its diverse array of sales associates and sales staff onto the same page worldwide. The company also worked with the SAP, the German software maker, to help inform sales associates of potential customers’ preferences in real time. That is, at the touch of a button sales associates could access a customer’s purchase history, as well as what items and styles the customers wanted. These changes helped to bring the sales team on the same page

Ahrendts also aimed to refresh the brand’s clothing offerings. Burberry’s traditional organizational structure mirrored that of a department store. That is, similar to a department store, Burberry’s had individuals in charge of clothing niches such as men’s and women’s clothing. While that led to an accretion of knowledge at the manager level, these individuals often times would make decisions based on the company’s overall business. This was particularly true for the company to build a unified brand profile of products.

Thus, Burberry created new positions with a more macro view of the business: Thus, they created a new position for chief designer, a head of corporate resources, a head of planning, a chief supply chain officer.

Finally, Burberry tried to promulgate a coherent strategy for its operations abroad. For this innovation, Burberry looked to understand where their competitors already had a footprint. They identified every market in the world where two or more of their competitors had stores and Burberry had no stores. As a result, Burberry made the decision to vastly expand its footprint in fast-growing emerging markets such as Russia, Brazil, and Asia; a total of 132 new stores have been opened across the world since 2006. At the same time, the story has also unified the product offerings at these stores. Finally, the brand picked its target demographic: the millenials. Although Burberry had just increased its presence on social media and other media, Ahrendts posited that no other luxury brand had targeted the demographic; thus, if Burberry could capture their attention early on, the move would pay dividends in the future. The company further consolidated its presence on websites to present a united front for future consumers.

Overall, Burberry’s CEO took a substantial risk in trying to innovate in a mature company. Indeed, not only did she completely revamp marketing channels of how the brand spoke to its customers, she also changed the strategic decision of the firm to target millienials. These innovations have paid dividends as the previously anemic growth rate of 2% has now increased to 8-9%. Burberry provides ample lessons for older, traditional brands that are looking to leverage innovation in order to increase growth and change their existing profiles with customers.