Burberry’s Resources and Capabilities Essay Sample

Burberry is a British luxury brand founded by Thomas Burberry in 1856, which design, sources
manufactures and distributes high quality apparel and accessories for men, women and children.
Burberry “has been defined by an overt Brutishness, a trio of instantly recognizable icons (the
trench coat, the trademark check, and the ‘prorsum’ knight logo), and a deft creativity that ensure
its designs are timeless.” (Vollmer and Premo, 2012) In 1998, Burberry has been described as
“an outdated business with a fashion cachet of almost zero.” (Strategic Direction, 2005, P22) the
product of trench coat of Burberry is a fashion classic, almost every designer tried to imitated,
but still remind people about Burberry.

Furthermore, the check pattern has become Burberry’s own signature, it use as the lining for the
trench coats and scarf’s pattern for men and women. (Sanghvi, 2011) In 1891, Burberry opened
the first store in London and international store was opened in Paris by 1910. In 1920 Burberry
entered Japan market and cooperated with local retailers. In the past years, Burberry was quite
successful, various resources and capabilities having been invested and improved, also different
kinds of strategy were applied for its business. In this essay, three main points will be discussed
as follows: * Identifying Burberry’s resources and value

* Appraising Burberry’s resources and capabilities to analyse organisational competence *

Finally, developing Burberry’s strategies.

Identifying resources
“Resources are the productive assets owned by the firm.” (Grant, 2005) There are three types of
resource: Tangible, Intangible and Human resource. Tangible resource is quite easy to identify,
which includes financial resources and physical asserts. It can be seen from Burberry’s Balance
sheet, from 2008 to 2012, the net asset of Burberry increased each year and Total Equity
achieved ￡ 891.40 million in 2012 March. (London Stock Exchange, 2012) According to
Thomson (2012), Burberry has 443 stores including 56 franchises in 80 countries and Europe is
its biggest market with 34% of sales, and Asia follows with 33% of sales. Furthermore, Burberry
got two London lines, which support Span and Japan market. Intangible resource is difficult to
indentify, which more valuable than tangible resource and including technology, reputation and
culture. In Burberry stores, every salesman has an ipad orders and checks product online for
customer and “Burberry’s use of digital technology is trailblazing.” (Thomas, 2012)

Moreover, Burberry got good reputation and brand image, since it was established, which
provided high quality products and got own unique style that be easily identified. Human
resources “comprise the expertise and effort offered by employees.” (Grant, 2005) Burberry has
a design term and provides their design for the Burberry London line and control the design
direction of other lines. Christopher Bailey, as a design director takes the responsibility for the
design of the Burberry prorsum collection. (Moore and Birtwistle, 2004) Burberry also focuses
on employing and tries to find the very best people work for them. Burberry has a long history,
and its process of establishing luxury brand image is a long term task, which are Burberry’s
significant value and its value base on the resources and Capabilities. Grant said (2005),
“individual resource do not confer competitive advantage alone, they must work together to
create organisational capability, and which is what the firm can do.” (p114)
.

Product:
The standard of Burberry is high quality, unique style and fashion. Burberry has a very clear and
unique positioning as the authentic British luxury brand, which is one of the key success factors
of Burberry. A unique position is very important for a firm, because other competitors cannot
easily copy it and different new products were launched at different time by Burberry, which can
always keep its brand unique and competitive advantage. Burberry launched 6 new brand levels
—Burberry prorsum, Thomas Burberry, Burberry accessorise, Burberry London, Burberry Blue
and Black. Different brand levels focus on different target customers, which can increase the
sales. Burberry owned a London line, which is the most core ready-to-wear range of Burberry,
and more than 450 lines provide womenswear each season, also more than 330 lines offered
menswear. Both womenswear and menswear gained a huge of turnover. The Burberry London
line also supported Spanish and Japanese market, in 2002, 40% of Burberry’s wholesale
customers were from Spain or Portugal. (Birtwistle, 2004) Apart from apparel, other products
also contributed to Burberry’s turnover, such as, accessories and childrenswear. (Moore and
Bietwitle, 2004)

(Grant, 2005) In a fashion brand firm, design term is an important human resource; The fabric of
Burberry differs from other brand, which was weatherproof but breathable as well. (Burberry,
2002) Because of the change of fabric, Burberry’s reputation has been enhanced. Using this kind
of fabric is one of benefit, but also is a weakness.

Burberry purchased the fabric from a limited number of European suppliers, which means the
cost of fabric is quite high and difficult to purchase. In addition, before buying initial fabric,
sales forecasts have to ensure product availability and further purchase are based on the
extrapolation of early orders received. (Burberry IPO prospectus, 2002) Hence, Burberry has to
undertake some risk while they purchase materials. In order to expand Burberry’s market and
allocate the risk and pressures of manufacturing, Burberry granted few of licences to Japanese
companies that must know specialist expertise. The way of interface between Burberry and
Japanese companies is signing licences agreements, which can be used to control the firms and
interact with each other. (Moore and Bietwitle, 2004)

Distribution:
Burberry sells its product in company-owned stores, also co-operates with third-party stockists
and Japanese firms, which managed by licence agreements. Burberry has three distribution
channels; the first one is retail distribution, and it included four formats. Since Burberry has been
established, different flagship stores were opened in London, New York city, Barcelona and
Tokyo. Burberry owned a flagship store in New Bond street, London, where has a few of luxury
brand stores, such as, Gucci, Prada and Dior, which means Burberry under high stress from
competitors and has to invest more resources and capabilities to keep its competitive advantage.
In September, 2012, Burberry opened the biggest store in Regent Street. Burberry CEO Angela
said that: “Burberry Regent Street bring our digital world to life in a physical space for the first
time, where customers can experience every facet of the brand through immersive multimedia
content exactly as they do online.” (Retail design blog, 2012)
Using flagship store as a kind of advertising seems become an important strategy of luxury
brands. Other retail distribution are regular price retail store, department store and designer outlet
stores over the world and made a huge of profit every year. Another channel is wholesale
distribution, which includes prestigious department stores, speciality fashion retailers and duty-
free retailers, “17% were in the USA, 40% were in Spain and Portugal, 37% in the rest of
Europe,” and others in Asia. (Moore and Birtwistle, 2004) The third channel is licensee
distribution in Japan market, they provide product to department stores and speciality stores.
Burberry’s distribution network is very wide, it covered a large number of country and online
order also be provided around the world. According to Moore (2004), Burberry got lots of
benefits from the model of distribution, such as, turnover and reputation. (Moore and Bietwitle,
2004)

Merchandising & Marketing:

As Burberry IPO prospectus (2002) said, Burberry thinks marketing communication is
significant. All marketing activities are managed by London market term; this term also
determines the development direction for Burberry term in the world. The marketing
communication includes three main models: Advertising, Fashion Shows and Editorial
placement. Advertising:

Burberry usually launches twice advertising each year, which focus on leading fashion and
lifestyle publications. Advertising plays an important role in marketing strategy, which can
inform customers Burberry’s products and philosophy of the company, in addition, it can
improve firm’s image and reputation, and lifestyle association. Fashion Shows:

Fashion show is a distinct element between luxury brand and lower brand, which usually hold by
luxury brand to display its new products. Fashion show can gather lots of well-know designer,
celebrities and retailers from the world. Burberry’s fashion shows for womenswear and
menswear hold twice in Milan every year. Moreover, Burberry London line hold shows at
London Fashion Week every season. Fashion show also is a type of luxury advertising, and may
be able to increase the number of order from retailers. Editorial placement:

Burberry offers brochures about its new product for VIP customer and operators every new
season. It can help Burberry create brand awareness and built it luxury positioning, which aim to
maximise world-wide editorial coverage. (Moore and Bietwitle, 2004) The four models seem
like focus on different tasks, actually worked together and supported each other. Every signal
competence is indispensable in Burberry. The Architecture of Burberry not only based on
investment of resources and capabilities to make profit, but also required to achieve sustainable
competitive advantage. Hence, dynamic capability is very important.

Dynamic capability is “the firm’s ability to integrate, build, and reconfigure internal and external
competences to address rapidly changing environment.” (Teece, Pisano and Shuen, 1997, P516)
In fashion market, the trend of fashion changed very fast, such as, style, colour and fabric.

. (Moore and Bietwitle, 2004)

Developing strategy implications:
After identifying and analysing the resources and capabilities of Burberry, it is important that to
know what its strengths are affecting the company became stronger than other brands. Firstly, it
can be seen from the balance sheet, Burberry has adequate financial resource to support its
development and investment. The quality of product is quite, which is Burberry’s strategic
capability. Furthermore, Burberry has a clear positioning, which is a strategy to guide its
business activity and avoid other competitor to copy. In addition, the distributions network is
quite wide, and the product can be distributed over the world. What is more, as a luxury brand,
Burberry gain good company image and reputation, this strength can attract more customers. On
the other hand, Burberry should identify its weaknesses as well, and think about how Burberry
can upgrade existing resources and capabilities to deal with its weaknesses and problems to
improve its firm performance. The weaknesses of Burberry can be identified into three aspects:
high costs and limited target customers.

As before mentioned in manufacturing process, Burberry is buying the fabric from a limited
number of suppliers from Europe, the suppliers do not need to reduce the price of fabric to attract
buyer, what worse is they might increase the price, because demand more than supply, as
consequence, the cost of material is quite high. Moreover, establishing a luxury brand, a huge of
investment is usually required, such as, advertising, Fashion show and other marketing
communication activities. Another weakness is Burberry do not have as much customer as other
lower brand. The price of Burberry’s products are quite high, which means not every customer
can accept the price, but price is a main point affect buyer behaviour, so Burberry focus it target
customer on the people who got higher income.

As a result, Burberry should build relationships with customers and develop more loyalty
customer, which is important to increase an organisation’s sales. Burberry can establish a
database system for customer, and then send email or brochure to them every new season.
Burberry’s products can be easily indentified because of its style and check pattern. So there are
lots of fake products in the market, which is decreasing Burberry’s value, because some
customer will buy the fake product to replace the real product, the image of Burberry is also
reduced. In 2005, Burberry Cracked down on the fake goods, but it has had unexpected result.
(Programme, 2005) So, the capability of cracking down the fake product should be improved.

Conclusion:
In conclusion, Burberry is a successful luxury brand, its business based on two basic and
important resources, which are finance resource and human resource. In human resource,
designers play a key role. Furthermore, those two resources worked together created other
tangible and intangible resources, also capabilities were carrying out by them. All resources and
capabilities contributed to competitive advantage, but dynamic capability is the main element to
establish sustainable competitive advantage, so the knowledge and innovation of designer is very
important. Although the resources and capabilities gained a few of strengths, the weaknesses still
need to be improved; Burberry should deal with the problems of material shortage, limited
customers and improve the capability of cracking down fake products.

Reference:
 Moore, C and Birtwistle, G, (2004), “The Burberry business model: creating an international
luxury fashion brand”, International Journal of Retail & Distribution Management, Vol.32 Iss: 8
pp.412-422 Burberry IPO Prospectus (2002), “Burberry group global offer of share”, Burberry
IPO Prospectus, summer. Burberry (2002), Burberry PLC Annual Report and Accounts 2002-
2003, Burberry, London. Anon. (2005), “Bravo for Burberry: From bust to boom- creating a
luxury fashion brand”, Strategy Direction, Vol. 21 Iss: 1 pp. 22 Thomson, R. (2012). Burberry: A
great British success. Available: http://www.retail-week.com/burberry-a-great-british-
success/5034635.article. Last accessed 10th Dec 2012. Teece, D, Pisano, G and Shuen, A.
(1997).
Dynamic Capabilities and Strategic Management. Vol:18 Iss: 7, p516. Retail Design Blog.
(2012). Burberry flagship store, London. Available:
http://retaildesignblog.net/2012/09/17/burberry-flagship-store-london/. Last accessed 10th Dec
2012. Vollmer, C and Premo, K. (2012). From Campaigns to Capabilities: The Impact of Social
Media on Marketing and Beyond. Available: http://www.booz.com/media/uploads/BoozCo-
Campaigns-Capabilities-Social-Media-Marketing.pdf. Last accessed 10th Dec 2012. Sanghvi, V.
(2011). The Burberry Story of Luxury. Available:
http://www.hindustantimes.com/Entertainment/Fashion/The-Burberry-story-of-luxury/Article1-
759494.aspx. Last accessed 10th Dec 2012. Grant, R.M.. (2005) Analyzing Resources and
Capabilities. Contemporary Strategic Analysis. Vol: 5 Iss: 5, p114. Chandler, A. (1992)
Organizational Capabilities and the Economic History of the Industry Enterprise. Vol:6(3) p84.
London Stock Exchange. (2012)
http://www.londonstockexchange.com/exchange/prices/stocks/summary/fundamentals.html?
fourWayKey=GB0031743007GBGBXSET1 Accessed 11st Dec

https://image.slidesharecdn.com/strategiesatburberry-111106191840-phpapp02/95/strategies-at-
burberry-8-728.jpg?cb=1320607153

Sponsored Peter Sellers in Pink Panther series.

Produced a forerunner of their famous signature trench coat for British officers in the Boer War
and later.

Sponsored Hollywood film stars Humphrey Bogart and Ingrid Bergman in Casablanca.

Sponsored Audrey Hepburn in Breakfast at Tiffany’s.

Celebrity endorsement through British supermodels like Lily Donalson and Agyness Deyn to
sponsor their latest collections.

Kate Moss became the face of Burberry for sometime and in 2009 Burberry endorsed British
actress Emma Watson.
Social networking through Facebook and own social network named “Art of the Trench” which
presents pictures of its customers. (The Art of the Trench)

Show at the London Fasion Week in 2009. (The Beat)

Television commercials for different products.

Promotion of latest collection in 3 Dimensional graphics at Burberry’s website.

Develop interest and curiosity of customers through online Burberry games in which you can
customize the clothes and accessories of a dummy so that you can imagine your personal choice
on your own.

Billboards at selective places. (Exhibit 2)

Public relations using various newspapers and magazines.

Direct Marketing as their main focus is on selling directly through their stores.

Most of the marketing and promotional efforts of Burberry went for success but once they
caused a heavy problem for the brand management. Due to some wrong promotional stuff, the
brand was started to adopt by young working class that resulted in tarnishing the brand image as
it was going against the core values and target market of the brand. The check became the
symbols of undesirables and customers wearing this brand were banned in some cities by the pub
landlords. This problem put a big question mark on the future success of Burberry but Burberry’s
brand management responded well, regained its British luxury lifestyle and gained strong rise in
demand specially from Asian countries.