The Story of Abercrombie & Fitch - Case Study Example

ABERCROMBIE AND FITCH EXPANSION INTO EUROPEAN MARKET Introduction The story of Abercrombie & Fitch group features the objectives of the European market expansion and the far it has been able to go in the development. Abercrombie & Fitch group focuses on stabling more stores in Europe as part of its international strategy. Headquartered in Ohio, Abercrombie & Fitch deals with clothes and the accessories with four different brands in United States. These are, Abercrombie & Fitch (A&F), Abercrombie kids, Hollister co. and Gilly Hicks. Abercrombie & Fitch started its internationalization process in 2006 with an objective of opening flagship stores in the major cities (Roederer, 2013). The best A&F brand marketing strategy for Europe A marketing strategy in any business is a tool to a competitive advantage. It refers to setting the marketing plans, objectives and working towards market share. Marketing strategies are dynamic due to the different circumstances or environments companies do business. It is then necessary for a marketing manager to scan the environment before laying the most appropriate marketing strategy. The scan is conducted for both internal and external environments. In the internal environment, a marketing manager will have to consider the marketing mix, performance and any possible constraints that affect its implementation (Roederer, 2013). The most effective marketing strategy features market segmentation, targeting and then product differentiation or positioning. The first step is dividing the market into subsets of consumers with common needs. Consumer grouping is possible through the following segmenting the market. First, market can be segmented geographically, which gives precise features and common characteristics determining the needs of consumers in that particular region. Rainy regions will have high demand for raincoats and gumboots while hot regions will be in great need of summer clothing. Second, segment using variables like age, education and gender that is referred to demographic segmentation (Roederer, 2013). Third, there is behavioral segmentation whereby customers are grouped according to their usage rates and attitudes. The subset then gives the demand level. Fourth, cultural segmentation will consider putting together customer with same belief and moral values. The marketing manager will also be able to understand different culture preferences to provide only what is acceptable in a particular culture. Market segmentation gives some information about the potential customers. The data is useful in defining the target market. Using such data, the marketing manager can know what is needed where and by whom, how much is required, the time it is needed and at what price it can be bought. It is then easier to plan for important activities like product designing, branding and product channeling. With identified target market, the marketing manager goes on with positioning or product differentiation. Product differentiation is distinguishing aspects from the competitors and it is crucial because of the different target markets. The ability to meet the various customers needs across the European market, it calls for product tailoring. It involves adding or removing some product features. Standardization versus Adaptation of the product policy In international business, there are four main product options to adopt. First, an organization can choose to sell the product as it is without changing or altering anything. Second, the organization can make some modifications to the product to meet the different regions and countries. Third, an organization can choose to design particular new product for the global markets. That is new product development. Finally, an organization can choose to incorporate all market differences into one global brand. The global brand will then be able to sell in different markets without any problems (Roederer, 2013). Standardization product policy means maintaining the same brand and product features for the foreign markets while adaptation involves tailoring the brand. Tailoring may involve removing or adding new features to a brand. Adaptation of product policy is aimed at giving different product features, different product performance, product exceptional services and more product information or less information. Below are reasons for adaptation product policy. First, there are different customers’ preferences. Market segmentation results to different subsets with different preferences and to be able to meet those preferences, products should be tailored as per the specific preferences. Second, foreign markets come with different environments. Considering the legal environment for example, some products will not be required in some markets the way they are. To meet the legal requirements in those different markets, there is a need for adaptation product policy, which sees that the product has only what the requirements require of it. Third, market segments provide broad customer coverage hence broad requirements. To tailor the brand as per specific market segment, adaptation product policy is necessary (Roederer, 2013). It is preferable to have an adaptation product policy for Abercrombie and Fitch because of some benefits. With adaptation product policy, the products sold are able to fit the local culture well compared to the standardized ones. Sales increase once the product is culturally accepted in the market. Abercrombie and Fitch will also be able to meet the different regulatory requirements in the foreign market. Packaging and logos, for example, will be made as per the regulations hence avoiding litigations. Adaptation product policy gives the organization some strength to withstand competition threats. With fierce competition or change in technology in a specific region, adjustments can be made to gain a competitive advantage. Risks associated with differentiated pricing policy Differentiated pricing policy is adjusting prices for different markets. Products in some markets are bought at a cheaper price than in other markets due to some circumstance. Sometimes charging the same price in all markets seems unfair since there are some factors, which need to be considered. These factors may include; cost of production, which is highly determined, by the cost of acquiring raw materials and human resource. Different prices can also be charged in offering discounts. When entering new markets, for example, the marketing manager has to sell at cheaper prices for customer attraction. It is a real project when entering the market because one has the privilege of creating customer base within a short period. In pursuance of cost leadership, the marketing manager can also settle on this policy. However, it is only effective if one can control the cost of production or able to obtain resources at a cheaper price compared to competitors (Roederer, 2013). Differentiated pricing policy has some risks to the organizations like; there are high chances of consumer switching to markets offering the products at a cheaper price. Most of the outlets or stores are not far from each other and one can easily visit the stores. Charging different prices in stores close to each other is a challenge to the store offering the clothes at a higher price. The store with high prices will have more idle stock for some time because customers have shifted. Such store will not be in a position to meet its costs as if logistics costs hence high chances of losses. In the store offering low prices, the demand can be stretched beyond its stock hence supply shortages (Roederer, 2013). There is also a risk of reselling. This is the creation of a longer distribution chain for the company. The long distribution chains come with extra costs because several entities are supposed to meet their costs. Such distributions costs are then carried forward to the customers who end up incurring more than the fixed price. With resellers in the market, the organization may not be able to meet the needs of their customers directly as it is supposed to be. Exclusive distribution policy or extension of Abercrombie and Fitch distribution channels Distribution channels determine how consumers get products in their hands. In determining the right distribution policy, one has to consider the following factors. First, the marketing manager has to consider the finance resource. Distribution channels have different activities and those activities need funding. One should go for a distribution policy that the organization is able to fund. The cost of the distribution policy should be low as possible to cut down the operational costs. Another factor to consider is logistics. Logistics should define how the products would reach the customers in the market. Transport means should be readily available for the transportation of the manufactured goods. In case the organization cannot provide the required transport means, it can rely on other agents for transportation (Roederer, 2013). An exclusive distribution policy is where the organization gives a distributor or retailer the exclusive rights to a product. In our case study, for example, a distributor or retailer is given exclusive rights to Abercrombie clothes and accessories. The organization should also consider the required after sales support. If exceptional after sales supports like training and repairs are necessary from the organization itself, the organization should adopt a direct distribution policy. Abercrombie and Fitch Company should stick to exclusive distribution policy whereby it involves another party in the distribution. The distributor or retailer given the exclusive rights can help the organization in the following ways; effective movement that helps the organization cut down unnecessary transport costs. Moving clothes direct to the customers in the whole Europe market can be so expensive. With the assistance of the distributor, clothes are then transferred to the customers efficiently without shortages of clothes. Distributors also help in bulk breaking that is important when dealing with local clients. Distributors or stores with the exclusive rights on clothes acquire clothes on bulk hence need for bulk breaking to fit customer requirements. Customers buy small units, which cannot be shipped alone, but there is consolidation before shipping and bulk breaking after shipping (Roederer, 2013). Stores and distributors can also do some consolidations. Consolidation is required when clothes are sent from different areas and for some reasons, they need to be identified or sold as a single unit. With the adaptation product policy, there is the need to tailor clothes and accessories as per needs of a specific market. Customization of the goods is then made possible by the presence of the distributors or retailers who understand customer and legal requirements better. They then save the head office the costs and resources that might have been required to study the local market requirements and training resources for the head office to tailor the clothes (Roederer, 2013). The stores or distributors also play a role in the promotion. The stores are designed in a manner that they advertise the main company. In the case study, we see how Abercrombie & Fitch does promotion by making entertainment in the shopping malls the main preference. With them, the organization does not have to invest so much in promotions in the local markets hence cutting down the advertisement costs. Elements for developing a communication policy designed for European market European market requires a good communication policy to be used to pass the necessary information to the customers. Passing information can be in the form of advertisements where the organizations get an opportunity of selling its products to the customers through giving out the information about existing clothes, information about new clothes and information on any changes made. The communication policy should have the following elements for its effectiveness; First, the marketing manager has to know the mission of the communication. That answers the question, why communicate. Communication can be made for various reasons as discussed above where one needs to give the customers knowledge about the products. Second, one has to consider money. Money happens to be a budget constraint in communication. The budget should be reasonable, not to spend so much to incur losses but to spend some finances and get back the best returns or sales out of the advertisement (Roederer, 2013). Third, one has to consider the message passed. Message is the creative ideas put together for the customers. The message should be sensitive enough not to influence different regions and cultures negatively. The one passing out the message should be in full knowledge of the language of the target market to prevent misunderstandings, which is so rampant in international markets. Fourth, one should include the media. Media refers to the method used in passing the information. The media can be Television, radio, email or social network. The media used should be effective enough in coverage as well as budget friendly. The message need to be tailored properly to fit the media been used hence delivery good response (Roederer, 2013). Lastly, there is measurement. A communication policy should provide a platform for gauging the response of the audience. Measurement can be done in two main ways, through sales and through research where data is collected to know the views of the audience. Conclusion Abercrombie & Fitch should consider market segmentation in the European market. Market segmentation gives the right data for the target market. With the target market, it is easier for positioning. Adaptation of the product policy is preferable to tailor the product to specific market segment. Differential pricing policy between USA and Europe is risky since it can result to reselling which increases the distribution chain making it more costly to both the provider and customer at a higher price. Exclusive distribution policy should be retained for its benefits gained up to this far. Such benefits include bulk breaking and product tailoring. After entering the European market, the communication policy should have elements of the mission, message, money, media and measurement. Mission shows the intention of communicating, message shows what is communicated, money show the budget, and media shows the communicating method while measurement is important for gauging the response of the audience. References Roederer, U. M. (2013). Abercrombie & Fitch: Experiential Marketing in International markets. Paris: Centrale de Cas et de. Read More