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Contents:Introduction to Abercrombie & FitchQuestion # 1: Internal AnalysisQuestion # 2: External AnalysisQuestion # 3: Industry AnalysisQuestion # 4: Strategy Formulation

Strategic options to Abercrombie & Fitch Strategic statement to Abercrombie & Fitch

RecommendationsList of references

Abercrombie & Fitch Co (A&F) began as a Manhattan-based retailer of exotic sporting goods in 1892 (Thrasher, 2013).It mainly focuses on casual wear for young consumers (PricewaterhouseCoopers, 2013). A&F has more than 1000 retail stores across United States, Europe, and Asia pacific region (Ghigliotty, 2013).They are known for teenage retail brand in US market (Thrasher, 2013).A&F listed on New York Stock Exchange and a member of its prestigious constituent of S&P 500 (Abercrombie and Fitch, 2014). A&F reported $1.03 billion sales in 2013 (Huffington Post, 2013)

Introduction to Abercrombie & Fitch

What is Internal analysis: This involves identifying the business' strengths and weaknesses, by analyzing its competencies. It also involves managers highlighting the business' competitive advantage (Henry, 2008).Tools for internal analysis: Following tools are useful for internal analysis. They are:-

SWOT analysisValue chain analysis

Question # 1: Internal Analysis

SWOT Analysis: It examines internal factors of a firm that influence business and profitability as well (Henry, 2008). The SWOT analysis of A&F is as follows:-Strengths

Strong brand image among teenage customers. Unique shopping experience for customers (Ghigliotty, 2013).Has continuously made profit in business (Thrasher, 2013).Differentiation in retail services that attracts large pool of customers.

WeaknessesLimited presence in global markets as compared to major rivals. Controversial marketing strategy pictures are too provocative (Forbes, 2013).Limited number of customer segment. High price for a low perceived fashion items.

Question # 1: Internal Analysis(Cont.)

OpportunitiesGrowing demand for fashion retail items all over the world. Expansion of retail stores in new geographical representation. Increasing online sales (Huffington Post, 2013). Launching new stales as per recent trend.

Threats Severe competition from major rivals such as GAP, American Eagle, J. CREWDifferent kinds of macro environmental pressures. Impacts of global recession (Ghigliotty, 2013).Future economic slowdown in global economy.

SWOT Analysis(Cont.)

Value chain analysis: Value chain model is a significant internal analytical model that helps analyzing internal and core competencies of an organization (Shili, 2008). It has two elements such as primary and support activities. The analysis is as follows:-

Primary activities: Inbound logistics: A&F has develop an integrated supply chain that streamlines its operational activity that enhance cost efficiency in business and provides a competitive edge in business (Inbound logistics, 2011). Operations: A&F offer best quality fashion retail items to its customers that helps attract more customers. Outbound logistics: Abercrombie & Fitch has well established outbound logistics that supports its distribution facility in business which streamlines overall efficiency in business (Abercrombie and Fitch, 2014).

Value Chain Analysis

Support activities: Technology development: Abercrombie and Fitch has efficient technology to operate its central warehouse and distribution among retail stores as and when necessary (Ghigliotty, 2013). Human resources development: A&F regularly exercises employee training and development program through its own academy that trains potential employees and staffs for future managerial position (Thrasher, 2013). Firm infrastructure: Abercrombie and Fitch gives more priority its stakeholders and they are more concerned about its corporate social responsibility.

Value Chain Analysis (Cont.)

Strategic Capabilities Analysis of A&FResources Competences

Threshold Capabilities

Threshold Resources

Tangible Supply chain network Differentiation in business Intangible Brand image Customer perception

Threshold Competences Differentiation in retail services that attracts large pool of customers.

Capabilities for competitive advantage

Unique Resources Tangible Supply chain network Offer recent trends and styles Intangible Brand identity and brand awareness among teenage customers.

Core Competences Differentiation in fashion clothing retail business

Strategic Capability model adapted from Johnson et al (2011)

PESTLE Analysis: It examines external environmental factors of a firm that influence on A&F’s business and strategic decision made by the Company. The analysis is as follows:-Political forces

Stability of the US government helps to do business without any political turmoil. Any changes in corporate taxation policy could severely affects A&F profitability.

Economic forcesFinancial crisis may significantly affects A&F sales as all products are premium priced (Thrasher, 2013). Any negative changes in financial environment affects A&F business.Economic growth is concerned for retail business in US.

Question # 2 External Analysis

Social forcesChanges in consumption of pattern of consumers is a major concerned issue for Abercrombie & Fitch. Impact of spending habits of consumers is also influential factor for A&F.Growing young aged consumers in developed countries.

Technology forces Frequent changes in technology requires huge investment to get updated and efficient technology. Development of online grocery shops needs efficient technology and communication systems to reach more customers. Future economic slowdown in global economy may have a significant impact on business (PricewaterhouseCoopers, 2013).

PESTLE analysis (Cont.)

Legal forcesLabor and employment laws have huge impact on operations of A&F.Corporate tax laws, commercial laws and antitrust laws changes frequently.Corporate social responsibility and green business practice is a new dimension to US retail business to make corporations socially responsible and it increases costs of doing business for A&F (Smith, 2011).

Environment forces Impacts of climate changes on A&F supply chain.High cost for sourcing raw food items due to adverse weather. Future a major threat for business of A&F to keep maintaining a stable growth of business in future due to global warming caused by environmental impacts.

PESTLE analysis (Cont.)

What is industry analysis: The industry analysis evaluates entire industry and competitiveness of an organization within the industry (Henry, 2008). Tools to industry analysis: There are several strategic tools available for analyzing the specific industry and its competitiveness in relation to a single business firm. Porter’s five forces model is a ideal model for analyzing the industry and its competitiveness.

Porter’s five forces model: Developed by Harvard University professor Michael Porter and it has five components:-

I. Rivalry among existing firmsII. Bargaining power of customersIII. Bargaining power of suppliersIV. Threats of new entrantsV. Threats of substitute products

Question # 3: Industry Analysis

Rivalry among existing firms [HIGH]There are several number of fashion based retail brands available in the US retail industry (Forbes, 2013). Each retail brands offers very competitive price to attract more customers. Each brand tries to make differentiation of their business through innovative offers.

Threats of new entrants [LOW]New brand requires huge investment to build necessary infrastructure for doing fashion clothing business in USA (Smith, 2011).There are many established fashion brands and people are very much loyal to these clothing brands.

Threats of substitute products [HIGH] Consumers are able to go different shops rather than just A&F retail store as there is many alternative option available across USA and other countries.

Porter’s five forces analysis

Bargaining power of consumers[HIGH]Customers have many alternative choice available across USA (Smith, 2011). Each fashion clothing brand offers very competitive price. There are many discount retail shops available that offer very low price and consumers find very convenient to shop these retail shops. Sensitivity to promotional offer and pricing of products.

Bargaining power of suppliers [LOW]Abercrombie & Fitch has excellent supply chain network for sourcing raw food and best quality retail items for its customers (Inbound logistics, 2011). There are several thousands of suppliers available and therefore A&F can source fresh and best quality foods at a competitive price (PricewaterhouseCoopers, 2013).

Porter’s five forces analysis (Cont.)

Why strategy option is crucial: Strategic options are creative alternative action-oriented responses to the external situation that an organisation faces. Strategic options take advantage of facts and actors, trends, opportunities and threat of the outside world. (Henry, 2008). possible strategic options available to A&F: There are several strategies can be adopted to overcome external and internal forces to A&F business:-

Enhance brand awareness and brand equity of Abercrombie & Fitch Expand target markets such as to target adults customer groupBetter advertising and promotion. New product development and market penetration in Europe. More focus on competitive advantage.

Question # 4: Strategy Formulation

A: Strategic Options to A&F

Strategy statement: A strategy statement communicates a firm’s strategy to everyone within company. The statement consists of three components: objective, scope and competitive advantage. All three components must be expressed as clearly as possible (Henry, 2008). Potential strategy statement to A&F: Following strategy statement could be useful to the Board of Abercrombie Fitch :-

Mission of A&F: To deliver fashion clothing at competitive price. Vision of A&F: To become one of the leading teenage fashion clothing brands in the world. Values of A&F: We believe in our business model and satisfy our customers. Competitive advantage: We have built integrated supply chain systems for our business that helps to grow business.

Question # 4: Strategy Formulation

B: Strategy Statement to A&F

Recommendations Bringing diversification in fashion clothing

business. Focusing on current competitive advantage. Enhance target market segments. Increase global presence in new geographical

destinations. Paying close attention on macro

environmental forces. New product development that adds new

customer segments. Better advertising and promotion. Concentrate on market research to find out

recent trend and demands of consumers. Aware of price wars in fashion clothing retail

industry.

References Abercrombie and Fitch, 2013. Abercrombie & Fitch Analyst Day

Presentation. [Online]. Available at: http://www.abercrombie.ca/anf/investors/investorrelations.html[Accessed 18 November 2014].

Forbes, 2013. Abercrombie dressed to disappoint. [Online]. Available at: http://www.forbes.com/sites/zacks/2013/08/27/abercrombie-dressed-to-disappoint/ [Accessed 18 November 2014].

Ghigliotty, D., 2013. Abercrombie & Fitch to close up to 50 stores in the U.S. following weak sales during the holiday season. . [Online]. Available at: http://www.dailymail.co.uk/news/article-2283222/Abercrombie--Fitch-close-50-stores-U-S-following-weak-sales-holiday-season.html [Accessed 18 November 2014].

Henry, A., 2008. Understanding strategic management. Oxford: Oxford University Press.

Huffington Post, 2013. Abercrombie & Fitch Sales Decline for Seventh Straight Quarter. [Online]. Available at: http://www.huffingtonpost.com/2013/11/21/abercrombie-sales-decline_n_4315737.html [Accessed 18 November 2014].

References (Cont.) Inbound logistics, 2011. Supply Chain Gain: Global Growth.

[Online]. Available at: http://www.inboundlogistics.com/cms/article/supply-chain-gain-global-growth/ [Accessed 18 November 2014].

PricewaterhouseCoopers, 2013. Retail and consumer worlds express: The great leap online. [Online]. Available at: http://www.pwc.com/en_GX/gx/retail-consumer/pdf/pwc-randc-worlds- express-the-great-leap-online.pdf [Accessed 18 November 2014].

Shili, S., 2008. Management: Perspective and practice. International Journal of Business and Management, 3 (12), 137-141.

Smith, J., 2011. Abercrombie & Fitch: To price promote or not to price promote. [Online]. Available at: http://www.wiglafjournal.com/pricing/2011/07/abercrombie-fitch-to-price-promote-or-not-to-price-promote/ [Accessed 18 November 2014].

Thrasher, M., 2013. How Consumers Fell In And Out Of Love With Abercrombie & Fitch. [Online]. Available at: http://www.businessinsider.com/the-rise-and-fall-of-abercrombie-and-fitch-2013-7?op=1 [Accessed 18 November 2014].

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