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Marketing Strategy for ABERCROMBIE AND FITCH
Posted by Addison on Mar-29-2023
Introduction
The report primarily focuses on the marketing strategy of ABERCROMBIE AND FITCH to give a reader an overview of the growth dynamics of the company. Recently, several strategic issues and managerial problems have been identified in marketing strategy of ABERCROMBIE AND FITCH that have drawn the attention of the entire management to devise new marketing strategies that can help the company to resolve the problems to continue its expansion and future growth to achieve a competitive edge in the marketplace. This report is written to provide ABERCROMBIE AND FITCH marketing strategy with the required strategic solutions using multiple frameworks and tools.
External Environmental Analysis
PESTLE Analysis is the most popular strategic tool that is used by many organizations when conducting an external environmental analysis. This framework typically focuses on political, economic, social, technological, legal, and environmental factors that can impact the macro environment of the business (Zalengera, E.Blanchard, & C.Eames, 2014).
Political factors
Political Stability
ABERCROMBIE AND FITCH operates in a politically stable environment, which means that it provides the company with more friendly and stable business growth opportunities (Christodoulou & Cullinane, 2019). However, since ABERCROMBIE AND FITCH operates in multiple countries, there are high chances of various political tensions that can cause instability in market growth trends for ABERCROMBIE AND FITCH. This can limit the company's growth opportunities.
Pressure Groups
Moreover, it is important for ABERCROMBIE AND FITCH to analyze and monitor the activities of pressure groups. ABERCROMBIE AND FITCH can create a close collaboration with these groups to achieve long-term goals.
Corruption and Changing Policies
ABERCROMBIE AND FITCH must keep a close check on the changes in any government policies because they can directly impact the performance of the business. The operations of ABERCROMBIE AND FITCH are its different countries can become unpredictable if there is a high level of corruption and weak enforcement of the law (Achinas, Horjus, & Achinas, 2019).
Trade and Taxes
The profitability of a company is directly influenced if there are high taxes in a country. ABERCROMBIE AND FITCH should look into the taxation policies in each country before further expanding its operations (Eierle, Hartlieb, & C. Hay, 2022). Similarly, if there are high trade restrictions, it can get difficult for ABERCROMBIE AND FITCH to import and export its products, impacting the relationships with trade partners.
Economic factors
GDP, Employment, and Exchange Rates
The long-term growth strategies of ABERCROMBIE AND FITCH are majorly determined by the GDP growth of the economy. The purchasing power of consumers significantly increases with a high GDP. High unemployment in an economy shows that ABERCROMBIE AND FITCH can benefit from surplus labor with low-cost wages. Furthermore, ABERCROMBIE AND FITCH should monitor interest rates as it can affect the borrowing ability. With that being said, if there is a high fluctuation in currency, the profitability of ABERCROMBIE AND FITCH can also be influenced (Sadeghi, 2020).
Labor Market
It is important for ABERCROMBIE AND FITCH to make appropriate predictions regarding the labor market conditions in a specific economy (Sadeghi, 2020). This can help the company to hire a more talented workforce that can improve the performance of the company.
Industry lifecycle stage
ABERCROMBIE AND FITCH should consider expanding its operations in growing economies to benefit from growth opportunities. It can be challenging for ABERCROMBIE AND FITCH to enter a mature industry at a growing stage (Villamarín & Pinzon, 2017).
Social factors
Demographics
ABERCROMBIE AND FITCH should study the changing patterns of demographics, such as socio-economic variables, the aging population, and trends in migration (Barbara & Cortis, 2017). This can help the company to identify the right segment to target with a high potential for growth opportunities.
Cultural norms
Every country and society has a distinctive culture with different norms and values. It is important for ABERCROMBIE AND FITCH to study and identify social class stratification.
E-commerce
There has been a significant shift in online shopping. ABERCROMBIE AND FITCH needs to adopt necessary changes considering the growing use of social media networking sites and mobile phones to increase its revenue and overall profitability (Villamarín & Pinzon, 2017).
Technological factors
Technological innovations
On-going technological innovations should be considered carefully by ABERCROMBIE AND FITCH so that it can stay ahead of the competitive market. ABERCROMBIE AND FITCH should continue working on introducing major technological transformations to achieve a competitive advantage (Rastogi & TRIVEDI, 2016).
Social Media Marketing
The collaboration with consumers has been growing rapidly because of the development of communication technologies (Rastogi & TRIVEDI, 2016). ABERCROMBIE AND FITCH can take it as a great opportunity where can use innovative strategies to expand its customer base.
Environmental factors
Waste Management
ABERCROMBIE AND FITCH should implement the latest technological tools to minimize environmental pollution. Waste management is now getting popular and has been considered a major business norm (Igliński, Iglińska, & Cichosz, 2016).
Climatic Conditions and Eco-friendly products
Climatic conditions can influence the efficiency of ABERCROMBIE AND FITCH. The cost of a company's operations can be increased if there are extreme weather conditions. Similarly, there has been an increasing demand for eco-friendly products. ABERCROMBIE AND FITCH should work towards adopting more sustainable business practices to gain customer trust (Barkauskas, Barkauskienė, & Jasinskas, 2015).
Legal factors
Employee protection laws
It is important for ABERCROMBIE AND FITCH to follow the health and safety laws for its employees that are issued by the authorities to ensure the safety of its labor.
Consumer laws
ABERCROMBIE AND FITCH should protect its customer data to ensure their security and privacy concerns. Moreover, it should set the right price with the right product quality (Igliński, Iglińska, & Cichosz, 2016).
Porter's Five Forces
ABERCROMBIE AND FITCH can use Porter's Five Forces to analyze the competitive landscape of the industry. The strategic planners of ABERCROMBIE AND FITCH can use this framework to make effective decisions.
Threat of New Entrants
ABERCROMBIE AND FITCH operates in an industry where it is difficult to achieve economies of scale, making it difficult for new entrants to enter the industry (Yunna & Yisheng, 2014). There is a strong product differentiation with high capital requirements. Moreover, it is difficult to establish a distribution network easily in this industry. Thus, ABERCROMBIE AND FITCH has a weak threat of new entrants.
Bargaining Power of Suppliers
There are more suppliers in the industry of ABERCROMBIE AND FITCH. This shows that there is less control over prices. Organizations like ABERCROMBIE AND FITCH can easily switch to other suppliers because of less differentiation in products. This makes the bargaining power of suppliers a weak force in ABERCROMBIE AND FITCH's industry (H. Th. Bruijl, 2018).
Bargaining Power of Buyers
The industry in which ABERCROMBIE AND FITCH operates has many suppliers as companies to buyers. This means that buyers have fewer options and do not have control over prices (H. Th. Bruijl, 2018). The high product differentiation shows that there are few alternative products for buyers, and there is a high switching cost. This makes the bargaining power of buyers a weak force in the industry.
Threat of Substitute Products and Services
ABERCROMBIE AND FITCH operates in an industry that offers very few substitutes to its customers. The substitutes that are available are expensive because of their high quality (Zhao, Zuo, & Wu, 2016). However, companies like ABERCROMBIE AND FITCH sell their products at a lower prices. This clearly shows that buyers may feel reluctant when switching to other substitutes.
Rivalry Among Existing Firms
ABERCROMBIE AND FITCH operates in a less competitive industry. The already established companies have a large market share, meaning that any move by the existing companies will be noticed. Moreover, ABERCROMBIE AND FITCH has to take several competitive actions to become a market leader, as the industry is likely to grow rapidly in the coming years (Aithal, 2020).
SWOT Analysis
ABERCROMBIE AND FITCH can make use of SWOT analysis to effectively analyze the company's internal strengths, weaknesses, external opportunities, and threats.
Strengths
Strong distribution network
ABERCROMBIE AND FITCH operates in various countries and has multiple outlets that help the company to deliver its products quickly to its customers. This shows that ABERCROMBIE AND FITCH has a strong distribution network (Benzaghta, Elwalda, & Mousa, 2021).
Financial position
ABERCROMBIE AND FITCH has established itself as a strong financial company over the past few years. It has generated enough profits that can be used to finance any future expenditure (Basset & Mohamed, 2018).
Automation
ABERCROMBIE AND FITCH has adopted the latest and innovative technology in its business operations, which has allowed the company to reduce its production costs (Benzaghta, Elwalda, & Mousa, 2021).
Social media presence
ABERCROMBIE AND FITCH has been successful in establishing itself as a strong brand on social media platforms that, includes Facebook, Twitter, and Instagram. This increases customer engagement (Basset & Mohamed, 2018).
Weaknesses
High rent costs
ABERCROMBIE AND FITCH has its manufacturing plants on rented properties. This increases the company's overall costs, and a significant portion of ABERCROMBIE AND FITCH's profits go into paying the rent (Comino & Ferretti, 2016).
Research and Development
ABERCROMBIE AND FITCH has not been able to conduct effective and in-depth market research regarding new markets and products (Comino & Ferretti, 2016). Customer trends are always evolving, and it is important for ABERCROMBIE AND FITCH to take immediate action in conducting its research.
Centralized Power
There has been a centralized decision-making process in ABERCROMBIE AND FITCH. This means that employees have to consult their managers before taking any decision themselves. This slow down the decision-making process. and employees feel demotivated. Thus, impacting the operations of ABERCROMBIE AND FITCH (Comino & Ferretti, 2016).
Opportunities
Presence of Internet
ABERCROMBIE AND FITCH has a great opportunity of expanding its business by using the internet. Since there has been a growing trend in online shopping ABERCROMBIE AND FITCH can boost its sales by expanding its online stores (Yan, Xia, & X.H.Bao, 2015). Additionally, social media platforms can be updated constantly to engage customers with all the new products introduced by ABERCROMBIE AND FITCH.
Technological Innovations
Technology is constantly evolving, and ABERCROMBIE AND FITCH can benefit from it by implementing the technology in its various departments. Manufacturing process can be completed automated, which can eventually help ABERCROMBIE AND FITCH to reduce its costs (Taghavifard, Mahdiraji, & Alibakhshi, 2018).
Globalization
The continuous increase in globalization has allowed ABERCROMBIE AND FITCH to expand its business operations across borders. It has the opportunity of entering new markets (Yan, Xia, & X.H.Bao, 2015).
Threats
New Entrants
Recently, many companies are entering the industry in which ABERCROMBIE AND FITCH operates. This means that there are chances of increased competition. This poses a threat to ABERCROMBIE AND FITCH as it has to put more effort into gaining market share (Taghavifard, Mahdiraji, & Alibakhshi, 2018).
Fluctuations in exchange rates
The exchange rates are highly subjected to fluctuations that negatively impact the sales of ABERCROMBIE AND FITCH. ABERCROMBIE AND FITCH needs to study the changing fluctuations to keep up with its profitability (Vlados & Chatzinikolaou, 2019).
Consumer trends
The consumer trends are constantly changing, that causes changes in their demands. This puts pressure on companies like ABERCROMBIE AND FITCH, who have to continuously meet their consumer demands. Moreover, there is a significant threat from substitute products because consumers tend to switch to these companies (Vlados & Chatzinikolaou, 2019).
Marketing Mix
Product
ABERCROMBIE AND FITCH operates in a wider range of products. Each of the products has its further product lines that are sold under the ABERCROMBIE AND FITCH. This means that customers can benefit from a large variety of products. ABERCROMBIE AND FITCH sells highly differentiated products with higher quality that, gives it a competitive edge (Khan, 2014).
Price
ABERCROMBIE AND FITCH follows a competitive pricing strategy. The company also takes into account all its costs before setting its prices (Londhe, 2014). Currently, ABERCROMBIE AND FITCH is using a product bundle pricing strategy where customers get bundled products at lower prices.
Place
ABERCROMBIE AND FITCH has adopted various distribution channels to reach its customers. The company sells its products through its website directly (Thabit & Raewf, 2018). Apart from this, it also distributes its products to wholesalers, who then further sell it to small retailers. ABERCROMBIE AND FITCH has its own retail stores where it sells its products directly to consumers.
Promotion
ABERCROMBIE AND FITCH uses traditional and modern promotional techniques. TV ads are used to reach a larger audience. ABERCROMBIE AND FITCH also advertises on social media sites such as Facebook, Instagram, and Twitter. Events are sponsored by the company. Moreover, ABERCROMBIE AND FITCH participates in several exhibitions (Londhe, 2014).
VRIO Analysis
Valuable
ABERCROMBIE AND FITCH engages in corporate social responsibility activities. This has allowed the company to establish a strong brand image. Since, ABERCROMBIE AND FITCH has a well-established distribution network, the products are reached to consumers in a timely manner. ABERCROMBIE AND FITCH has been able to introduce innovation in its various departments, which has lowered its costs (Ariyani & Daryanto, 2018).
Rare
ABERCROMBIE AND FITCH operates in multiple countries. This means that its global presence is a rare factor. It works towards an organizational culture that encourages teamwork, and creativity among employees (Ariyani & Daryanto, 2018). ABERCROMBIE AND FITCH is also able to adapt to different societies, and cultures due to its exposure to various locations.
Inimitable
The products produced by ABERCROMBIE AND FITCH are of a high quality. Customers make repetitive purchases, and thus it is an inimitable source. (Miethlich & G. Oldenburg, 2019). ABERCROMBIE AND FITCH has a significant placement of its stores that gives an easy access to its customers. Additionally, the company has been using a competitive pricing strategy because it has been able to achieve economies of scale, thus lower production costs.
Organization
ABERCROMBIE AND FITCH, over the years, has successfully gained a financial strength. ABERCROMBIE AND FITCH can make use of these finances to invest in major acquisitions that give it more growth opportunities. The advancements in technology have allowed ABERCROMBIE AND FITCH to manage its operations more effectively. Distribution channels are another resource for ABERCROMBIE AND FITCH. The supply chain is very efficient, resulting in more revenue (Miethlich & G. Oldenburg, 2019).
Value Chain Analysis
Primary Activities
ABERCROMBIE AND FITCH is involved in primary activities such as the production of goods and then selling them to the target audience.
Inbound Logistics
ABERCROMBIE AND FITCH should ensure to have a strong relationship with its suppliers to avoid any inconvenience in receiving, storing, and distributing the product. This will help ABERCROMBIE AND FITCH to have a more effective transformation of a product (Ariwibowo & Saputro, 2021).
Operations
Operations involves manufacturing as well as services. ABERCROMBIE AND FITCH should conduct an in-depth analysis of its operational activities to remain ahead of its competitors (M.El-Sayed, W.Dickson, & O.El-Naggar, 2015). This will increase the productivity of the company, and more profits can be generated.
Outbound Logistics
It is important for ABERCROMBIE AND FITCH to analyze, and optimize its outbound logistics so that it is able to achieve the long-term corporate goals. Managing outbound activities properly reduces the chance of late deliveries (M.El-Sayed, W.Dickson, & O.El-Naggar, 2015).
Marketing and Sales
ABERCROMBIE AND FITCH should use various marketing and sales techniques to differentiate its products from its competitors. ABERCROMBIE AND FITCH can adopt marketing and sales activities such as promotional activities, advertising, and building strong relationships with suppliers and customers (Ariwibowo & Saputro, 2021).
Services
In terms of services, ABERCROMBIE AND FITCH must ensure that it provides its customers with the pre-sale and post-sale services (Jaligot, C.Wilson, & R.Cheeseman, 2016). The post-sale service typically falls into the promotional activities of a company. ABERCROMBIE AND FITCH can thus develop its customer loyalty.
Secondary Activities
Firm infrastructure
A strong infrastructure of a firm can enable ABERCROMBIE AND FITCH to optimize the entire value chain of the company. Moreover, by controlling the infrastructure activities, ABERCROMBIE AND FITCH can be in a better position to get a strong foothold in the competitive marketplace (Darmawan & Wiguna, 2014).
Human Resource Management
ABERCROMBIE AND FITCH should place its major focus on analyzing the different aspects of HR, such as recruitment, selection, training, and performance evaluation of employees (Darmawan & Wiguna, 2014). ABERCROMBIE AND FITCH can reduce its costs by identifying and analyzing the costs associated with hiring and training.
Procurement
Procurement is an important element in the ABERCROMBIE AND FITCH's value chain. It is important for the company to assess its overall procurement activities so that the inbound, outbound, and operational activities can be optimized (Kumar & P. V., 2016).
Ansoff's Matrix
ABERCROMBIE AND FITCH can implement Ansoff's Matrix to make decisions regarding its business growth. This framework includes four different strategic choices that can be selected by ABERCROMBIE AND FITCH.
Market Penetration
Production capacity
ABERCROMBIE AND FITCH can increase its overall production capacity. This will allow the company to reach more wider audience in an existing market. ABERCROMBIE AND FITCH can also benefit from the reduced costs by expanding its production capacity. Thus, ABERCROMBIE AND FITCH can attract more customers using competitive pricing (Madsen, 2017).
Marketing Investment
ABERCROMBIE AND FITCH can penetrate the market by investing more in marketing and sales activities. This will help the company to engage with its customer more effectively, leading to more potential customers (Dawes, 2020).
Distribution Channels
Innovative and unique distribution channels can be explored by ABERCROMBIE AND FITCH. This will enable the company to reach new segments and groups of customers (Dawes, 2020). In addition to this, ABERCROMBIE AND FITCH can penetrate the market by improving its supply chain, giving more accessibility to customers.
Joint Ventures/Acquisitions
ABERCROMBIE AND FITCH can enter into joint ventures or can take over other leading companies of the market. This will give ABERCROMBIE AND FITCH more market share.
Market Development
Research & Development
ABERCROMBIE AND FITCH should keep on investing in its R&D department, so it is able to identify the changing trends of the market. This will help ABERCROMBIE AND FITCH to target the right market at the right time (Mukangai & Murigi, 2021).
Expanding Regionally
ABERCROMBIE AND FITCH can enter in a new market by expanding its operations regionally. This includes considering different cities of the country. ABERCROMBIE AND FITCH must consider any cultural differences when entering a new market (Mukangai & Murigi, 2021).
New Segments
New segments of the current market can be explored (Mukangai & Murigi, 2021). ABERCROMBIE AND FITCH can add new features and product uses to its existing products that satisfies the needs of a different customer segment.
Product Development
Modifications
ABERCROMBIE AND FITCH can modify the existing product by improving its features to enhance the product offerings.
Launching additional products
ABERCROMBIE AND FITCH should invest in its R&D department so it can come up with new and innovative products that attracts and fulfill the needs of the target audience. This will boost the sales of ABERCROMBIE AND FITCH and will increase profitability (Khajezadeh, Niasar, & Asli, 2019).
Diversification
Vertical Integration
ABERCROMBIE AND FITCH can consider vertical integration. This will allow ABERCROMBIE AND FITCH to develop and launch new products that are similar to its existing product category (Khajezadeh, Niasar, & Asli, 2019).
Horizontal Integration
ABERCROMBIE AND FITCH can diversify its business operation using horizontal integration. This means that the new products and services of ABERCROMBIE AND FITCH will not be related to its current products (Dhir & Dhir, 2015).
A new business diversification
Entering into a completely new business can be considered by ABERCROMBIE AND FITCH. The organization can work towards starting a new business that can give a company more growth prospects in the future (Dhir & Dhir, 2015). ABERCROMBIE AND FITCH can conglomerate with the help of mergers and acquisitions.
Conclusion
To conclude, it could be said that ABERCROMBIE AND FITCH can resolve its current managerial and strategic problems by focusing on its existing products. The company can adopt more attractive marketing strategies that can help ABERCROMBIE AND FITCH to boost its revenue and profitability. It is recommended to focus on maintaining strong supplier relationships. Moreover, it is also advised to focus on more innovative products so ABERCROMBIE AND FITCH can remain competitive in the market.
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