Abercrombie and Fitch

Abercrombie and Fitch (ANF) is a retail store for clothes, it is an American based company, but the clothes are marketed as lifestyle brands. These retail outlets operate in Unites states, Canada and the United Kingdom. This company has somewhere around five brands, they are as follows:

1. Abercrombie and Fitch (namesake brand of the company),

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2. Abercrombie kids,
3. Hollister Co.,
4. RUEHL No. 925
5. Gilly Hicks.

The company has somewhere around 100 retail outlets and it plans to open another 110 more outlets.

Abercrombie and Fitch (ANF) have their own e-commerce website, and this site attracts somewhere around 1 million customers in a month. The company was founded by David Abercrombie in 1892 and in 1900 Ezra Fitch joined the company and the company officially became Abercrombie and Fitch. The Limited bought the Abercrombie and Fitch in the late 20th Century after the financial troubles of 1960 and 1970. But in today’s time the company has gained the financial success it needed and due to this financial success Abercrombie and Fitch has launched four other brands and the company has been expanding internationally as well.

And even today the company is considered to be specialty retailer for clothes. The company targets men, women and children from ages 7 years to 50 years. One of the ways the company retains its customers is through keeping enough qualities of clothes (of all sizes and colors) in all of their retail outlets. And this provides a surety for the customer that the company will always provide the most recent products to them. The continually success of the company is based on:

1. continuous improvement of the products in terms with quality and innovation
2. expansion.

Mission Statement

The mission statement of Abercrombie and Fitch (ANF) is to attract the best of the best executives and management associates for itself and its subsidiaries. The company wants to encourage its employees so that they provide the highest level of performance, which will serve best to the interests of the shareholders and the company as well. Abercrombie and Fitch consider its brand to be more authentic and relevant. The brand for the company is their focus, their lifestyle because it provides the company with the surety of growth and stability.

The brand gives the company a great deal of opportunity like the ability to evolve, to innovate. It also provides them with long – term profitability along with that it also produces an emotional response from their customers and clients alike.

Environmental Analysis

Environment can be defined as a surrounding in which one organization operates. Environmental analysis is based on two things that is:

1. external environment, which is based on organizational, general and task environment
2. internal environment, which is based on the organizational culture.

An organization’s environment is mostly composed of those institutions or forces that are outside the company and potentially affect the organization’s performance. These typically include suppliers, customers, competitors and government and public pressure groups etc. The environment that surrounds Abercrombie and Fitch (ANF) includes opportunities and threats and it depends on the company’s strategy as well. It shows that how Abercrombie and Fitch takes advantage of opportunities and finds solutions for its problems.

The management of the company should keep in mind the tastes and the preferences of the customers are always changing. The changing environment of the company can be considered as an advantage and it is important that the executives Abercrombie and Fitch should pay more attention to the changing nature of the environment and attitudes and behaviors of their customers. The environmental analysis of Abercrombie and Fitch is based on social responsibility, environment.

These two forces have identified their relevance with the company and it also shows how the company adapts itself to these two forces operating in the environment. (Daft, 1997) Abercrombie and Fitch has to make sure that they are practicing in an ethically and a social environment or not. Social responsibility means that the company whether it is public or private has responsibility to society and it the company who has to keep their actions and practices in the best interests of the people.

The social responsibility of the company is based on four kinds of responsibilities and they are as follows:

1. Economic responsibility: an organization is the basic economic unity of a society. The responsibility of the company is to produce the products that the society wants and to maximize the profits for the company’s shareholders and owners. When economic responsibility is carried out to the extreme is called profit maximizing view. This view basically shows that the corporation should be operated on a profit oriented basis. And its mission is to increase the profits so long that the company within the rules and boundaries of the game.
2. Legal responsibility: defines what the society thinks is important with the respect appropriate behavior. The companies are expected to fulfill their economic goals within the legal framework. Legal requirements can be imposed by the local, national and international regulatory services.
3. Ethical responsibility: basically includes behaviors that are not necessarily codified into law and may not serve as the company’s direct economic interests. If the company wants to be ethical, the organization’s decision makers should act with fairness, equity, respect the rights of the individuals and the employees of the company and provide different treatment of individuals, only when it is considered relevant to the company’s goals and tasks.
4. Discretional responsibility: it can be defined as the organizational responsibility that is voluntary and guided by the organizations desire to make social contributions and which is not mandated by the economic, law or ethical responsibilities of the company. Discretionary activities include generous philanthropic contributions that offer no payback to the company and are also not expected back. The discretionary responsibility is the highest criteria in the social responsibility of the company because it goes further than the social expectations that contribute to the community’s welfare.

Social responsibility has Abercrombie and Fitch to grow and develop. Abercrombie and Fitch have a respectable position due its charitable work and community involvement programs. The company and their employees play a major role towards in community service as well.

Environment responsibility means that the company maintains a clean and safe environment for its customers to benefit both the company and the people living around where the company operates. The trends in the environment have a huge impact on the organization. The environment can provide major opportunities as well as threats for the company. Abercrombie and Fitch are known as the no. 1 retailer today in clothes. This basically shows Abercrombie and Fitch have the strategic ability to adapt to the changing forces resulting in the environment. (Fullmer, 1983)

Economic Analysis

It is sometimes believed that economic environment is of concern only to business whose socially approved mission is the production and distribution of goods and services that people want to pay for. But it is also of the utmost importance to other types of organized enterprises as well. For example, a government agency takes resources, usually from taxpayers and provides services that are mostly desired by the public. The economic analysis is based on capital, labor, price levels, customers and government fiscal and tax policies. (Pearce & Robinson, 2004)

Capital

Almost every kind of organization needs capital that is machinery, buildings, inventories of goods, office equipment, tools of all kinds and most importantly cash. The cash resources of Abercrombie and Fitch can be generated within the company to buy capital items outside. For example, business profits of the company are used to open more retail outlets etc. but mostly companies like Abercrombie and Fitch are dependent on capital requirements from various suppliers, whose job is to produce many materials like cloth, threads etc and other items of capital, Abercrombie and Fitch needs for its operations.

Labor

Another important input from the economic point of view would be the availability, quality and price of labor. The price of labor is a very important factor for an enterprise since all of the company’s products are made in the South East countries like Pakistan, India and China, where labor process play an important role in the making of the products. (Drucker, 2007) Price Levels The input side of Abercrombie and Fitch is very mush affected by price-level changes.

If process go up very quickly like it did in the 1960’s and 70’s (the company at that time faced financial problems) it creates a turbulence, which affects the company severely. Inflation not only upsets businesses but it also influences factor of the company. (Drucker, 2007) Government Fiscal & Tax Policies Government control of the availability of credit through fiscal policy has considerable impact not only on the availability of credit through fiscal policy has considerable impact not only on business but also on most non – business operation of Abercrombie and Fitch like their social programs for their employees.

For example, if the taxes on business profits of Abercrombie and Fitch are high, the incentive to go into business or stay in it tends to decrease and the investors look elsewhere to invest their capital. And for example, if the taxes are levied on sales, which they are, prices of the clothes will rise and people will tend to buy less and this will decrease the profit of the company considerably.

Customers

Customers are one of the most important factors of the economic analysis and for the success of the company. Without them a business cannot exist.

But to capture customers Abercrombie and Fitch have to learn that what their customer’s likes and dislikes and are they willing to spend their money on their products or not. In the long run Abercrombie and Fitch has to serve the different and changing needs and preferences of customers, and if they do not do so then the company is surely to fail.

Non – Economic Factors

Technological Factors One of the most pervasive factors in the environment is technology. Technology is referred as the combination of knowledge that we have of things, it includes innovation, techniques and inventions.

But the main influence of technology on Abercrombie and Fitch would be that how it helps the company to design, produce, sell and distribute their outfits and clothes. Some of the benefits of technology would be increase in the productivity of employees, a high standard of living, and more leisure time for the employees and a great variety of products. (Daft, 1997)

Social & Cultural Factors

The social environment of the company is a combination of attitudes, desires, expectations, beliefs and customs of employees in Abercrombie and Fitch.

Social desires, expectations and pressures usually give a rise to laws and standards of ethics. As we known fact that attitudes and values differ among workers and employers, it becomes difficult for managers to design an environment conducive to performance and satisfaction. It is even more difficult for the managers of Abercrombie and Fitch to respond to these forces when they are outside the company; the managers have no choice to take them into consideration when they are making their decision.

Political Factors

The political factors are usually made up of laws, regulations and government agencies and their actions which affect all kinds of organizations, usually varying to different degrees. Laws are usually passed as the result of social pressures and problems that are faced by companies like Abercrombie and Fitch. Government virtually affects every company and every aspect of life. But with respect to business, it acts for 2 reasons

1. promotes the business
2. it constraints the business

For example, it promotes the Abercrombie and Fitch business by stimulating economic expansion and development.

Demographic Factors

Demographic factors are based on the characteristics of society and in this case it would include the income of the people, gender, their ages, work background and education of th customers. It would also include their like and dislikes in clothes, whether they like to wear jeans or pants or shorts, what colors they like, the cuts they prefer. (Weihrich & Koontz, 1993) Competitor Analysis In the competitor analysis the company first has to know who its competition is and identifying the competitor is considered to be a simple task.

The competitor of Abercrombie and Fitch would be American Eagle Outfitters (AEO), Gap (GPS), Aeropostale (ARO) and Urban Outfitters (URBN). A company can distinguish between 4 levels of completion, which is based upon the degree of the product’s substitutability.

They are as follows

1. Brand competition,
2. Industry competition,
3. Form Competition and
4. Generic competition.

More specifically a company would be able to identify its competitors from such an industrial point of view and a market point of view as well. As we know that the company’s closest competitors are those which are pursuing the same target markets with the same strategy.

A group of companies that follow the same target markets are known as a strategic group. Abercrombie and Fitch would need to indentify the strategic group in which it competes. Once Abercrombie and Fitch have identified for example, American Eagle Outfitters’ strategies it must then ask itself that what the competitor is from the marketplace. Or what drives the competitor’s behavior? (Pearce & Robinson, 2004) American Eagle Outfitter (AEO) is the company which also targets the same customers ranging from 15 years to 25 years. AEO is a small company compared to ANF in terms of sales and profit.

But recently the company is growing strongly and steadily than Abercrombie and Fitch. The company generated revenue of $3. 7 billion in 2007. If we compare the price of male jeans between ANF and AEO, it would be ANF jeans cost $80 a pair whereas AEO jeans cost $45 a pair. Areopostale (ARO) is also a smaller company compared to ANF. But this company also targets the same segments of the market that is customers ranging from 14 years to 24 years. The company’s business mostly relies on sales and promotion of their products. The company generated revenue of $1.

59 billion in 2007. If we compare the price of male jeans between ANF and ARO, it would be ANF jeans cost $80 a pair whereas ARO jeans cost $25 a pair. Urban Outfitters (URBN) is indirectly a competitor of ANF, due to its differentiation in target market segmentation. But the company also target customers ranging from the ages of 18 years to 50 years. The company generated revenue of $1. 50 billion in 2007 Gap (GPS) is a much larger company than ANF, in terms of its sales, stores and even its target market. The company generated revenue of $15. 8 billion in 2007.

If we compare the price of male jeans between ANF and GPS, it would be ANF jeans cost $80 a pair whereas GPS jeans cost $50 a pair.

Company Data  - Sales Revenue - Net Income Sales per Store - Comparable Sales Growth

Abercrombie & Fitch Company 2007 $298M - $3. 75B - $476M - $3. 47M  - (1%)

Aeropostale 2007  $1. 59B - $129M - $1. 93M -  3. 3%

American Eagle Outfitters 2007 ? - $3. 06B - $400M - $3. 1M - 1%

Gaps 2007 $903M - $15. 8B - $833M  - $4. 99M  - (4%)

Urban Outfitters 2007 $21. 8M - $1. 22B - $116M - $5. 81M  - (6. 2%)

SWOT Analysis

SWOT analysis is the evaluation of the of a company’s strengths, weaknesses, opportunities and threats.

Once the company has performed it SWOT analysis, it can then proceed to develop specific goals for planning period. The analysis is used by the company so that the management of the company can see the impact it has on each possible strategic opportunity. This analysis is used in the decision making process of the company when the company’s desired object or goal is targeted and defined by the management of the company. SWOT analysis is also used in pre-crisis planning of the company and preventive crisis management of the company as well.

With the help of information which is extracted from the analysis the company is able to match its sources, resources and capabilities with its work activities and the competitive environment. When this analysis is applied, it helps the company with quantitative and qualitative marker research, it also helps with experimental tests of the company’s product, it helps the management to see the environmental challenges and it gives it time so that the company can overcome the challenges and it also helps with observational techniques as well. (

Strengths

A company’s strengths are its core competencies and resources in which it is one of the market’s leaders. Abercrombie and Fitch’s strengths are

1. the company is extremely competitive,
2. Abercrombie and Fitch’s excellent brand awareness of their products i. e. recognition within the country,
3. and a high quality image of their clothes and
4. the products of the company are reliable and long lasting.

Weaknesses

Weaknesses of the company are considered those areas, when the business of the company is compared to others in their own industry or market segments.

Weaknesses of the company can also be defined as elements of the organization that considered very harmful in achieving the set target and objective.

Abercrombie and Fitch’s weaknesses are

1. the risky positioning of Abercrombie and Fitch due to Gap.
2. Abercrombie and Fitch is global but it only has a limited presence in few countries like Canada and United Kingdom only.

Opportunities

Opportunities are can be classified according to the company’s attractiveness and the success and profitability.

Abercrombie and Fitch’s opportunities are

1. the brand of Abercrombie and Fitch itself creates a great deal of opportunities for the company like more sales of the company’s products since people consider it as a fashion brand as well,
2. The large market for clothes industry and there is an increase in the purchasing of clothes all over the world and
3. And lastly there is a large variety of media which can help the company to promote their products. (Daft, 1997) Threats/Issues Threats can be described as the seriousness and profitability occurrence of the company.

To deal with threats the company needs to prepare plans that show the changes the company can make before or during the occurrence of the threat.

Abercrombie and Fitch’s threats are

1. global warming that is the environmental damage that is done to the society through air and water pollution, noises and change in the climate due to the pollution etc.
2. child labor and the low wages of the workers who work in the company’s factories,
3. The competitors (like Gap) have the budgets to do huge promotions and advertising programs worldwide.

Long Term Objectives

Long term goals objectives include strategic goals and plans that go as far as 5 years or may be more. Abercrombie and Fitch have certain long-term objectives for itself and the management of the company is working very hard to achieve those objectives and to make their company a strategically successful organization.

The objectives are as follows:

1. Provide top quality products and services to their customer that is Abercrombie and Fitch brands plans to do just that by giving its customers good quality of clothes and with new clothes designs and choices and at reasonable prices.
2. Aims to be a retail leader in the clothes industry i. e. the fashion retail industry, Abercrombie and Fitch (ANF) can do that it they keep on going on the pace as they are going now and if they remain focus on customer service.
3. To stay above the competition. As we know that the company’s closest competitors are those which are pursuing the same target markets with the same strategy, therefore Abercrombie and Fitch need to have a competitive edge over their competitors and it was made possible when the company decided to focus of female and children clothing as well and not just only male clothing.
4. Abercrombie and Fitch (ANF) strive to establish itself in every market niche that is Abercrombie and Fitch must focus on long-term market shares instead of short-term sales. The company’s strategy should be to set up in such a way that the outlets are at such places where there is a consistent market share is obvious and that the sales of Abercrombie and Fitch are constant. It is considered important to open up outlets of Abercrombie and Fitch in the area of competition and acquire a long-term but consistent market shares for the company.

References

1. Daft, R. L. (1997), Management. The Dryden Press Fullmer, R. M. (1983), the New Management. New York: Macmillan Publishing Company
2. Weihrich, H & Koontz, H (1993), Management: A Global Perspective.
3. McGraw-Hill Pearce, J & Robinson, R (2004), Strategic Management: Formulation Long Term Objectives and Grand Strategies. New York:
4. The McGraw-Hill Companies Drucker, P. F (2007), Management: Tasks, Responsibilities, Practices. Transaction Publishers

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