Leaders need to identify organizational needs, which can be opportunities to seize or threats to mitigate when making plans. Alignment between the operational processes and the strategy helps the company to achieve its vision and goals. Notably, any existing gap between the firm’s strategy and business process management should be bridged to enhance the efficiency and effectiveness of the enterprise process. The objective of this paper is to discuss how Abercrombie & Fitch can align its operational needs with business strategies. Particularly, the report will analyze the company’s industrial position using Porter’s Five Forces and its current leadership before offering recommendations for improvement.
Porter’s Five Forces Analysis of Abercrombie & Fitch
Porter’s Five Force Model is essential in understanding the distribution of power within an industry. The strengths and weaknesses of other competitors can thus be identified, and barriers created to minimize new entrants. Moreover, the framework helps to understand the extent of the bargaining power of customers and suppliers. The primary rivals of Abercrombie & Fitch are American Eagle, Gap, and Aeropostale which specialize in selling clothes and apparel. The following is Porter’s Five Force analysis of the company.
Rivalry Amongst Existing Firms
Competition among companies can be measured based on the growth rate of the company, the concentration of the rivaling firms, exit barriers, and cost switches. The level of competition in the apparel business is high since there are many existing enterprises. In the United States, the apparel market has almost reached its saturation. The only strategy that Abercrombie & Fitch can utilize is establishing a competitive edge so as to maximize its profits.
Power of Suppliers
Suppliers often gain more power when the raw material is rare; there are legal restrictions to making a delivery or the number of people willing to make the distribution is low. In the apparel industry, there are many willing suppliers, which lowers their bargaining power. Abercrombie & Fitch should search for suppliers that have a good reputation for offering high-quality fabrics and establish a long-term partnership. This will stabilize the supplier chain and place the company in a higher competitive niche.
Power of Buyers
Buyers have more power if they have an in-depth understanding of the product, and there are many options to buy from. In the case of clothes, customers have an almost exclusive say on what they think is more fashionable. Moreover, there are many shops where they can do their shopping if not satisfied with what Abercrombie & Fitch is offering. The buyer power is high, and the best strategy for the company is to understand consumer behavior and satisfy their needs.
Threat of Substitution
Substitutes are other goods that can serve the same purpose as those being offered by the company. In this case, although there are no alternatives for humans to wear aside from clothes, there are many brands. For instance, according to Wu (2019), Abercrombie & Fitch branded itself by designing revealing clothes and advertising with half-naked models leading to reduced popularity. People opted for more decent brands until the company changed its strategy. The implication is that the threat of substitutes is minimum since there are customers who are loyal to A&F.
The threat of New Entrants
The new entrants always increase competition when they join the market with similar products. When the capital needed to start the business is low, and the profit is attractive, more entrepreneurs will venture into the industry. In this case, many people are opening small companies to sell apparel. The main advantage that Abercrombie & Fitch has is its firm brand name and economies of scale, which it can use to upset the medium to high.
Effectiveness of Current Leadership Model
The organizational leaders bear the vision and stir people toward working together to achieve a common goal. Abercrombie & Fitch’s corporate governance is comprised of four executive leaders and 13 boards of directors. The executive team members include Fran Horowitz, the chief executive officer (CEO), Kristin Scott, Greg Henchel, and Scott Lipsky (Abercrombie & Fitch, 2021). Noteworthy, the CEO is a woman who leads through collaborating with her colleagues and other employees.
The leadership style of Horowitz is democratic in that she involves other people in the decision-making process. In an interview, the CEO stated that she always “strive to foster an environment where everyone feels safe and empowered to share ideas and feedback directly with me, whatever their role” (Ghose, 2019, para.1). This leadership model is effective as it makes workers feel an essential part of the company. The other advantage of this leadership style is that it encourages innovativeness, much needed in the apparel industry. The only downside is that when urgency is required, consulting with other people can be time-consuming.
Features of Effective Leadership
The effectiveness of a leader is portrayed in their ability to influence the subjects to achieve the company’s vision. The head of any firm must be knowledgeable and have the capacity to guide others even in a crisis. For instance, Abercrombie & Fitch suffered from reputation damage that made the company bankrupt (Wilson, 2020). However, the CEO was able to develop strategies that enabled the company to start making profits. For instance, Koehler (2017) provides excerpts of the CEO’s apologies to the public. Her humility made the clients regain the trust in the firm’s brand. With such effective leadership, managerial influence comes from, aside from legitimacy, other sources of administrative power including rewards by the executive and consultation as an expert.
Abercrombie & Fitch has an effective leadership model that is well suited for the industry. The participatory style coupled with the humility of servant leaders has helped the company to have a good brand. Therefore, the company can continue applying the same model in the day-to-day running of the business. The only proposal is for the CEO to understand who to consult on certain decisions since working with all employees can be time-consuming. One way of aligning operational needs with the business strategy is through adopting information technology to have a shared database that can be statistically analyzed to see where the project intersects. The other action that is needed is to use balanced scorecards to measure performance across the value chain.
Abercrombie & Fitch. (2021). Leadership. Web.
Ghose, C. (2019). Alone at the top: Abercrombie & Fitch CEO Fran Horowitz on shifting tides in female leadership. Web.
Koehler, I. (2017). Reputation management: A case study of Abercrombie & Fitch. Journal of Undergraduate Research in Communications, 8(1), 66-74. Web.
Wilson, M. (2020). The rise and fall — and rise again — of Abercrombie & Fitch. Business Insider Africa. Web.
Wu, J. (2019). Here’s how Abercrombie & Fitch ditched its past to try to bring back customers. CNBC. Web.