Introduction
Albeit the strong competition from conventional retailers and supermarkets, Abercrombie & Fitch has maintained its niche in the retail sector by ensuring its created quality standards that are based on many responsible factors: preferences for clothes products. In addition, Abercrombie & Fitch has built its entire business on its quality standards that are noted to be distinctive in the industry, especially among cloth retailers. In 2008, Abercrombie & Fitch’s also experienced the dire conditions brought by the economic slump; some retails in the US were met with challenges, thus, locations and operations had to be closed. However, the company managed to have positive revenues in 2008.
The Company’s products & services are the selling of all types of clothing. The main products which are being sold by this company in the world market include men’s clothing, women’s wears and kids wear. Men’s wears include belts briefcases clothing cufflinks and tie clips shirt dresses, jewelry, shoes, swimming kit, underwears wallet sunglasses, a watch, and many others. Women’s clothes include belts, clothing, handbags, purses, accessories, jewelry shoes, underwear sunglasses, swimming kids, wallets, watches, and many others. The kid’s wears include toys, clothes, accessories, belts, shoes, swimwear, watches and many others. These products are designed to cover all market segments of almost all income levels and the form of packaging that the product enjoys gives the customer a motivation to come back to the company to buy the product. According to Armstrong and Kotler (2007) through the product mix of this company they are able to create attention of customers get new customers who patronize business to buy and consume the product. The product takes all the needs of the family from the age of one month to the age of 100 years. This is because of the product mix decision that they have employed. They have more than 1000 items in-store to sell to the customers and these products are in different lines.
PEST analysis
Political: According to Schaik (2002) anti-labor practices are treated as a counterproductive tool to the growth of nations. It tends to show massive political turbulence in the economy. Recently the company faced a legal tussle for discrimination because of failure to follow countries’ laws. According to Greenhouse (2004) in the year 2004, A& F had to pay the U.S $ 40 million for settlement of a legal suit. This was to be paid for compensation to workers, who were non-whites, and who had sued the company. The legal suit concerned a class action. It cited discrimination in the workplace with white workers getting the most prominent job positions while the other non-whites were put in the backroom.
According to the New York Times, the case of discrimination consisted of a series of lawsuits. These law suites revolved around sex and race discrimination. A& F agreed with the plaintiffs to alter the employment system which was white-dominated and add more Hispanics, blacks, and Asians to the marketing of its materials. A San Francisco federal judge approved the settlement of class-action on 16th November 2004. The agreement called for A and F to pay the U.S $ 40 million to a number of females and minority plaintiffs wrote Banay (2005).
Economic: How can an MNC like Abercrombie and Fitch Company create an impact on the overall economy? To answer this we must look into the overall economies of scale as well as the managerial experience of Abercrombie and Fitch Company which can affect the overall economy of a developing nation. This company was mainly created to protect small business owners from getting destroyed due to the open market competition. This helps the economy to grow. Also in this context outsourcing is a vital factor that helps the economy to flourish. The labor cost of Abercrombie and Fitch Company just comprises 15% of the total product cost while the other operating costs include ‘R&D’, ‘logistics’, ‘product designing’ are still present in the U.S. economy. An example may be related to the impact of Abercrombie and Fitch Company on the overall U.S. economy. This helped the economy of the state to grow in employment, income & output wrote Banay (2005).
Social: According to Claessens and Schmukler (2008) every MNC should have some ‘Corporate Social Responsibility & Abercrombie and Fitch Company is no exception. Along with this Abercrombie and Fitch Company does look into the other major areas too from which the overall society can be benefited. According to Schifmann and Kanuk (2000) and Ansoff, Declerk, and Hayes (1976) improving the working conditions in the contacted factories, minimizing the global environmental footprint & using their brand give access to the excluded youth in the field of sport.
Technological: According to Schaik (2002) technology has played a crucial role in the quality of shoes that Abercrombie and Fitch Company has produced. The company introduced the largest fundamental technological innovation. So much hype was created owing to the technology & the materials that were used to market and produce their products. The technology evolving had helped Abercrombie and Fitch Company to come out with a new free running shoe. The specialty of this shoe was it gave the feel of running barefooted. It gave the athletes the freedom through its natural range of motion, eliminating all the extra and unnecessary components wrote Greenhouse (2004).
SWOT analysis
Strengths: Abercrombie and Fitch Company do not have any factories. The biggest advantage with it is that it does not engage money in buildings. The company has a powerful research & development center. This plays a vital role as new and innovative products are developed by Abercrombie and Fitch Company. Also, a big asset for the organization is the distribution of high-quality goods at the lowest possible price. Abercrombie and Fitch Company has a global appeal.
Weakness: The earnings of the organization are heavily dependent on the share of the footwear market. The overall diversified range of sports products gets neglected because of the heavy dependence on the cloth market. According to Armstrong and Kotler (2007), the retail sector of the company is very price sensitive. Although Abercrombie and Fitch Company do have a retailer in Abercrombie and Fitch company town most of its earnings are obtained by selling to its retailers.
Opportunity: Product development offers Abercrombie and Fitch Company various opportunities. Developing products such as women’s, men’s and Kidswear, sports wear, sunglasses & jewelry can create value for the organization. These kinds of items always tend to associate high profits for the organization. Various developing nations are targeted by Abercrombie and Fitch Company. Since it carries a global appeal country with high disposable income of the mass should be targeted.
Threats: Abercrombie and Fitch’s company is exposed to international trade-offs. Since it buys and sells in terms of various currencies, so margins and costs do not remain stable over a long period of time. Day by day the competition is becoming extensive in segments of garments and other wears. Competitors are raising the value of their brands to take away Abercrombie and Fitch Company’s market share. Since the retail sector is becoming price competitive customers are getting a better deal for themselves. Consumer’s sensitivity towards price can be a threat to the organization wrote Bangs (2002).
Michel Porter’s five forces analysis may be presented as follows
The degree of Rivalry: in the cloth retail industry demand is led by the design and trends apart from comfort. In the United States competition is decided by marketing skills. The market has undergone cuts in prices. For instance, there has been a 3 percent fall in retail prices over the last 10 years. The competition Abercrombie and Fitch Company faces most is from companies like China, Japan, Britain, etc who can offer their products at a much lower price wrote Booms, and Bitner (1981).
The threat of entry: Abercrombie and Fitch Company’s continuous attempts towards innovation and method of testing the cloths before selling ensure its quality. Its company has carried out scientific processes to ensure proper incorporation of marketing using technology. The company has invested a lot in the cushion system of the footwear which increases the comfort level. Besides, its brand value and product differentiation also help in maintaining the barrier to entry of other companies. These protect the entry of other firms within Abercrombie and Fitch Company’s market share.
The threat of substitute: Abercrombie and Fitch Company have been able to survive the threat of substitutes owing to its ability to keep the supply cost low and because of its brand recognition. Otherwise, the sportswear industry is characterized by price cuts and customers pay higher prices only for a better quality which Abercrombie and Fitch Company has been able to maintain.
Buyer power: Being a large organization with a large customer base, Abercrombie and Fitch Company has been able to maintain its buying power. It has also acquired many companies and works with several partners all over the world. According to Booms, and Bitner (1981) diversification of products, maintenance of low cost and innovative designs also helps to maintain the customer base.
The supplier power: Owing to its reputation and well-established position in the regions it operates, Abercrombie and Fitch Company is capable of controlling its supplies through an increase in the number of suppliers and thus raising competition and reducing costs. It has a supplier diversity management system to report and track their aims and expenses related to supplier diversity argues Fahey and Narayman (1986).
Operations and Business Strategy
The operations and business strategy at Abercrombie and Fitch Company is basically founded on the company’s values. Abercrombie and Fitch Company’s expansion overseas would also become an important business growth factor, especially as the company also targeted the growing clothing and sportswear market segments argues DePamphilis (2009). Abercrombie and Fitch Company would eventually find its potential in markets in Canada and in the United Kingdom. The acquisition of other relevant businesses became a strategy for Abercrombie and Fitch Company. In the United States, the company continued its expansion through this means, in addition to ventures where Abercrombie and Fitch Company would also merge with other companies. In terms of the operational strategy of the company, despite its expansion, Abercrombie and Fitch Company maintained that its products are based on the local market
With Abercrombie and Fitch Company’s strategy to provide consumers with fashions options, it is evident that the company has established its own niche in the retail sector.
Springing from a simple vision, Abercrombie and Fitch Company would adopt effective business models that would further push its operations. At the same time, it has been important for the company to reflect its values across all aspects of the company. Any customer that walks into an Abercrombie and Fitch Company experiences a different setting for clothing shopping: with its line of initiatives adds Jobber and Fahy (2006).
As a retailer with a specific niche, Abercrombie and Fitch Company also have its specific successes and challenges. According to Keller (2002) basically, as the company needs to ensure the business viability of its mission, the company adopted a business model that will drive to its success. At the same time, the company maintains its commitments as a fashion clothing retailer, but its competitiveness does not end in this niche.
Hence, Abercrombie and Fitch Company have continued to define its advantage outside its products, and these can be seen in its customer service, effective queue management systems, and distinctive quality standards wrote Crane, Kerin, Hartley, and Rudelius (2008).
References
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