ABERCROMBIE AND FITCH

MIDTERM REQUIREMENT FOR

STRATEGIC MARKETING MANAGEMENT

CHAPTER 1 – BACKGROUND OF THE COMPANY

A. Scope

Abercrombie & Fitch Co. is a specialty retailer who primarily sells its products

through store and direct-to-consumer operations, as well as through various wholesale,

franchise and licensing arrangements. The Company operates through two segments:

Abercrombie, which includes the Company's Abercrombie & Fitch and abercrombiekids

brands, and Hollister, which includes the Company's Hollister and Gilly Hicks brands. The

Company offers an array of apparel products, including knit tops, woven shirts, graphic t-

shirts, fleece, sweaters, jeans, woven pants, shorts, outerwear, dresses, intimates and

swimwear, and personal care products and accessories for men, women and kids under the

Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands.

The Company has operations in North America, Europe, Asia and the Middle East.

As of January 28, 2017, the Company operated 709 stores in the United States and 189 stores

outside of the United States. The Company operated 30 desktop and mobile Websites for its

brands globally and the Websites were available in 11 languages, accepted 29 currencies and

shipped to more than 120 countries. (https://www.reuters.com/finance/stocks/company-

profile/ANF)
B. Mission and Vision

Mission Statement

To create the best value for money for the teenagers all around the globe by providing

excellentquality products augmented with the best service, care and experience.

Vision Statement

To be the leading, global specialty retailer of apparel and accessories for Men, Women,

and Kids that offers products of enduring quality and exceptional comfort that allow consumers

around the world to express their own individuality and style.

CHAPTER 2 – INTERNAL ANALYSIS

A. Customer Profile

1. WHO is involved in buying and consuming?

The typical customer of the brand Abercrombie and Fitch is seen as a young,

athletic person who likes to dress stylishly and in the latest of fashions. The fashion needs

to fresh and light and not formal and bulky. The customer should love casual fashion for

which their tees and jeans are renowned. Similarly, when we come to A&F kids, the kids

clothing is generally purchased by parents – who should be well off and should be ready

to spend a little bit more to dress their kids in the latest in fashion.

2. WHAT are their choice criteria?

 Abercrombie has always been leading the denim and t-shirt market from front but

the brand wants to be present in all genres, hence they have launched a wide range

of products for everyone. Abercrombie and Fitch aims to leverage equal

dressing opportunity to every kid and every oldie on the street.Some of the impressive

products launched by Abercrombie and Fitch over the course of time are:

 Graphic Tees

 Chambary Shirts

 A&F Shorts

 Swimwear

 Denims

 Men’s Fragrance Fierce

 Abercrombie and Fitch Credit Card issued by World Financial Bank

Network

 Handbag collection by Ruehl

 Perfume 41

3. WHERE do they buy?

Abercrombie and Fitch’s market are those who are well off and should be ready to

spend a little bit more to dress in the latest fashion. Abercrombie and Fitch may sell their

products to high-end malls like Ayala Mall Greenbelt or SM Aura Premier. Due to the

growing number of e-commerce, having a website and partnering to different online

platforms like Zalora may may also be a great tool to sell their products.

4. HOW do they use the product?

 Abercrombie and Fitch is an American origins brand known for its young and

dashing image. It is used by wearing the brand and promoting it as well.

5. WHY do they buy/use the product?

Customers buy/use Abercrombie and Fitch because the brand has a strong retail

presence in the US as well as across the Globe. It is known for its youth targeted clothing,

design and quality of its clothing.

6. WHEN do they buy/use the product?

Customers would buy the brand Abercrombie and Fitch when they arewell off and

have enough money to spend a little bit more to dress in the latest fashion. Customers

would probably use it occasionally like birthdays, anniversaries, parties, etc. for it is said

expensive and not a typical garment.

B. 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:

I. Primary Activities

a. Inbound Logistics

A&F does not depend much on the external sources for production as most of

their products are made from their factories in United States. The main advantage of this

is even if any small companies tries to duplicate A&F products or try to manufacture

them at cheaper prices from countries like China or Bangladesh, the A&F customers will

know how genuine the products they are buying.(Strength)

b. Operations

When a company it operates such a way its operations are carried out worldwide

efficiently without any disruption in its sales or services. As A&F sales are spread out

over the world wide over internet it’s very necessary to carry out operations effectively.

In the stores they have an effective hierarchy of employees who smoothly carry out the

operations. To deal with Internet sales, Using the Cisco integrated services router as its

platform, the company cost-effectively improved performance of existing applications

and created a platform for continued innovation.(Strength)

c. Outbound Logistics

Moving products from a manufacturer’s warehouse to a retailer’s distribution

center in a timely, efficient manner is tough when all the setup is located in United

States. A&F depends on the Shipper solution. This new system will track each product

from a manufacturer’s facility to the retailer’s center. This application is exception

driven, so that the retailer can be via email if there are shipment problems.(Strenght)

d. Marketing and Sales

 A&F conducts marketing strategy analysis of organizations to support sales

managers in formulating and implementing successful marketing strategies. Marketing

and sales of A&F is monitored by using market segmentation, this is done by dividing

the customer market into segments and identifying the potentially profit-making

areas.(Strength)

e. Service

Proper advertising campaign helps in making an impact on the customer and helps

the brand in getting connected with the customer. Services offered in store and online are

excellent in A&F which appear to provide a cutting edge from its competitors. Be it the

material, uniqueness of brand coupled with excellent services has helped A&F achieve a

unique status in retail market.(Strength)

II. Secondary Activities

a. Infrastructure

Infrastructure of any organization holds the financial and business units together.

A&F has a strong infrastructure built up which carries out various operations thus

providing enough backup for all its primary activities. The team partners with various

areas of business provide daily support to their domestic and international store

expansion and other strategies. (Strength)

 b. Human Resource Management

Human resource management team of A&F tries to maintain a smooth

functioning of the whole Business units. It involves in recruiting and selecting

employees who are committed to the work of giving best to the organization.(Strength)

c. Technology/Development

The IT department of A&F is dedicated in upholding technological standards,

processes and audit methodologies based on retail technology trends to support business

strategies. (Strength)

CHAPTER 3 – EXTERNAL ANALYSIS

A. Industry Analysis

Abercrombie and Fitch would generally be classified under the Filipino apparel

retail industry and may be further classified under the lifestyle wear category.

 Market Size and Industry growth

Table X.X: Philippine Apparel Retail Industry Value from 2013 to 2017
 Source: MarketLine - Industry Profile for Apparel Retail in the Philippines
February 2018 // Reference Code: 0115-2005

Table X: : Philippine Apparel Retail Industry Value forecast from 2017 to 2022

Source: MarketLine - Industry Profile for Apparel Retail in the Philippines February

2018 // Reference Code: 0115-2005

The rise of the Philippine Apparel Retail Industry continues for thesucceeding

years to follow and is forecasted to have a value of Php464,758.2M by 2022, an increase

of at least 61.1% since 2017. Thecompounded annual growth rate from year 2017-2022 is

predicted to be at around 10.1%.

 Intensity of Rivalry

Adidas (Streetwear)
 One of the top competitors in the Apparel Retail Industry, a deadly roster of

collaborative partners like Kanye West, Palace Skateboards and others. Adidas has built a

reputation over the years for its ability to be in tune with culture and the evolution of

trends a strategy built by design and one that will help carry them into the future,which

established a network of loyal customers.

Guess

The brand’s global growth has proven that this company offers sells fashionable

that creates new fashion trends in the market. They provide casual clothes that are made

for all people (irrespective of age, gender, ethnicity, disability and other defining traits) it

is genuinely reflected in other parts of Guess’ business, such as its selection of models,

global brand ambassadors and so forth.

American Eagle

A brand which shows consistent growth in e-commerce sales and ongoing

investment in technology and omni capabilities are delivering strong revenue

growth.American Eagle Outfitters (AEO), made one of the biggest comebacks in their

history, they miraculously bounced back, doubling their share price and increasing digital

growth two-fold.

There are still lot of brands in the apparel industry but it's already becoming

saturated because they offer the same products. There are a lot of brands who sell the

same type of products that's why competition is intense.

  Number of New Entrants

Assessment: Moderate

I. Low Barriers - you can enter the industry easily. There areminimal procedures to worry

about and manageable fixed cost.

II. High requirements for capital - It is costly to mass produce goodsand the rent in malls

are high.

III. Highly saturated market - brands in the apparel industry offeralmost the same

products so it will be a challenge to offer something new to the market.

B. PESTEL Analysis

POLITICAL

 Taxation Policies – “the reduction in income tax is rendered meaningless by the

tremendous increase in the taxes to be imposed on consumer goods, prime commodities,

medicines, electricity, and fuel” (Avecilla, V., 2018). An increase on income tax, will see

a decline in sales for Abercrombie as consumers will be more money conscious. (Threat)

 Change in Government –“The President of the Phillipines wants to change the

constitution, both to introduce federalism and to change the central government from a

purely presidential system to a presidential-parliamentary model” (economist.com).

Changesin law could affect how Abercrombie run the business in order to meet new law

standards, affecting the brand financially. (Threat)

ECONOMIC

 Recession, Disposable Income, Employment – ‘PH job market set for an upbeat 2017’

(rappler, 2017). The recent 1.8% increase in workers’ wages within the PH (rappler,

2017) and decrease in unemployment means consumers have more disposable income.

(Opportunity)

 State of Global Economy –“Despite the generally good economic performance, poverty

remains high and the pace of poverty reduction has been slow” (rappler.com). New

marketing strategies will be needed to increase sales if poor economic conditions returns.

Abercrombie target audience is 18-23 year olds. This is currently the age where their

consumers are in school or university. This will affect consumer behavior as no job

means no income, affecting sales. (Threat)

SOCIAL

 Lifestyle changes and Social Media – “Philippines is known to be the world leader in

social media usage” (Camus, M., 2018). The increasing popularity of social media allows

brands to reach and communicate directly with their consumers in a much more effective

way. (Opportunity)

 Consumer Attitudes and Opinions – “The number of consumers in the Philippines who

are willing to pay more for sustainable products and services continue to rise” (Nielsen,

2018). Its vital brands keep up to date with trends and understand exactly what their

consumers want. Currently Abercrombie are struggling with this as consumers feel the

brand is becoming dull and un cool. (Threat)

TECHNOLOGICAL
  New inventions – inventions such as iPhone and iPad have changed the way consumer

shop and receive company news.(businessinsider.com) Having a social meadia platform

or websites or even partnering with online platforms like Zalora may attract potential

customers to buy their product. (Opportunity)

 Online Shopping – the use of online shopping allows brands to access the worldwide

market without the cost of building stores. (Opportunity)

 Product Manufacturing – having the latest manufacturing technology allows brands to

stay innovative and surpass their competitors. (Opportunity)

ENVIRONMENTAL

 Ethical Manufacturing – “Filipinos are well-informed or specific about buying

products” (rappler.com).A lot of companies in this industry are taking the ethical issues

with seriousnessand have been carefully monitoring and responding to all concerns raised

by customers, who are taking a different direction by taking actions against firms that

violate ethical practices including holding protests and calling for boycotts for products

from such firms.(Threat)

 Pollution, Climate change, and Environmental Awareness -The most common

environmental concerns facing the clothing industry is on the dangerous impact on the

environment and world at large since fashion industry forms the second largest

environment polluter after oil industry. Clothing industry engages in large production

which leads to huge disposals and consequently amounting to high levels of waste which

increases the challenge of shortage of natural resources. (Threat)

LEGAL
 Legislation on products and packaging – as per Consumer Act of the Philippines R.A.

7394, “It is the policy of the State to protect the interest of the consumer, promote general

welfare and to establish standards of conduct for business and industry.” A change in

legislation could affect Abercrombie financially to meet new standards.(Threat)

 Employee Health and Safety Laws –“NutriAsia workers are on strike due to

contractualization and poor treatment of high management” (Rey, A, 2018). Abercrombie

need to make sure all equipment and working areas meet health and safety standards, not

only important for employee well-being but reputation of the company. (Threat)