Bargainingpower of suppliersMost of Burberry’s supplier are located inEurope and their end products are produced in the UK and also elsewhere byoutside suppliers.
There is a small risk of forward integration because there big entry barriers to enter luxury business. Whatstrengthens suppliers’ power is that some of the products are distinct and haveno real substitutes. And what weakens suppliers’ strength is that Burberry isknowledgeable about products they buy from suppliers.For Burberry it’s easier to switch suppliers materialssuch as leather, cashmere or cotton. There is a large number of them so it’snot difficult for Burberry to change from one supplier to another. However itis different when it comes to more advanced items.
Craftsmen posses certainskills which take a long time to master plus there is also a decreasing numberof them and they can charge more. Consequently it’s getting more difficult for Burberry to change them andplacing more power in to the hands of craftsmen. Burberry risk of getting lowerquality items by changing any supplier.
Bargaining power of suppliers ismoderate.Threat ofsubstitute productsThere is a growingnumber of low-middle price labels such as Asos, Bohoo and Missguided. There arecustomers who are sensible to economic cycle and buy from those brands. Theirexpertise is being really good at imitating higher priced luxury items in brieftime period. It takes them one to four weeks to copy luxury products.Counterfeititems from China which look alike genuine products and it’s challenging to distinguishthem from authentic products are also a danger to Burberry’s products.
Whatmakes pricey products differ the most from mimicked products is the way upscalebrands are perceived. Consumers do not buy upscale items purely for their usefulness,because cheaper fake products offer comparable use, but because luxury brandsare a synonym of wealth and social status. (NUS Investment Society, Consumer Industryreport on U.S. luxury goods) The greatest threat of substitutes is from rivals whichoffer prodcuts of equal or even better quality and customers have minor costsswitching them.
Burberry is planning to remove their items from certain shops thatare not luxury and renovate their own shops. Companies like Louis Vuitton hascreated their label and distinction on expensive leather handbags andBurberry’s aim is to compete with brands like that. Burberry thinks that byselling high-priced handbag they will be able to boost their margins.
Forcomparable products Louis Vuitton charges higher prices. The company alsomaking alterations in crucial employees. Their designer Christopher Bailey whohas been with the company for 17 years will be replaced and they are lookingfor somoneone with extensive expertise in designing handbags. (CNN)Their aim is to turn the brand into a luxury brand. They willexpand their handbag offering because handbags create larger margins thantrench coats, which is Buberry’s signature item. Louis Vuitton has bigger arrayof leather goods. They will reduce the number of the outlet stores. By trainingin-store employees on leather goods and styling they want to improve buyer’sexperience and boost their efficieny.
Making the most out of digital mediaremains one of the goals. The british designer was one of the first who entereda »see now, buy now« model which allowes custmoers to purchase immediatelyafter a fashion shows. That was a bold move and a very different way ofshopping and fewer chances for forgery. All this will result in profitability.They expect revenue and operating margins will be stable over the next twoyears and in 2021 they predict growth.
(businessoffashion).Louis Vuitton knows how to differentiate itself. Louis Vuittonhandbags are compared to Burberry’s higher in price. Another thing that differsBurberry from Louis Vuitton is that Louis Vuitton never has a sale, they nevermark down prices because they believe all customers should pay the same pricefor products.