SWOT Analysis for Abercrombie and Fitch Company
Abercrombie and Fitch Company will use the SWOT analysis as a management and planning tool to identify the organization’s internal strengths and weaknesses and the opportunities and threats. The analysis will assist the organization in identifying the areas of strength to capitalize on and the opportunities that can be exploited to improve its performance. In addition, the management will understand its weakness and threats that may obstruct the realization of its objectives, thus developing strategies to reduce those implications.
Strengths are the capacity of the organization to enhance its performance in order to achieve its intended objectives. Abercrombie and Fitch Company have developed a strong brand in the worldwide market. A strong brand name assists an organization in marketing its products in the market easily. Existing and potential customers are always attracted to the organization and its products, making penetrating new markets easy. The other strength is that it has been able to develop a strong distribution and supply net for its products. The company has over 300 locations in the United States and over 1100 stores worldwide. Such a network implies that the company reaches out to a wide market, and its customers can conveniently access its products.
The management has also made the company strong by establishing various subsidiaries that operate on their own. In this case, the company owns subsidiaries such as Hollister and Gilly Hicks which have also emerged as strong brands in market shares. Customers who may have issues with Abercrombie and Fitch may purchase products from its subsidiaries, thus contributing to the company’s revenue and profits. Lastly, Abercrombie and Fitch are one of the few companies that do not concentrate on advertising commercials unless in isolated cases. Print media advertisements dominate the company’s promotional mix, presenting in-store photographs for the customers. The method is cheap to run and attracts many customers who admire the photos of the products presented.
Abercrombie and Fitch are considered to have a weak and discriminatory marketing approach. The company’s leadership has been quoted saying that only cool individuals can shop in their outlets. Discriminatory puts off customers who may not perceive themselves as being cool. In addition, the company limits the customers served through size limitation; women’s clothes go up to size 10 while men’s are up to size 34. The approach was highly effective in the 1990s because the teens and the youth who were the target market appreciated and enjoyed the strategy. However, that generation has moved to another stage in life; therefore, the current young generation requires a different approach from what was there initially. The company continues to use the same strategy. Thus, it limits its market share. The other weakness of this company is the negative publicity of the discrimination of the employees. Customers are more sensitive to such accessions, and hence it loses a lot of clientele.
The most important opportunity that Abercrombie and Fitch should embrace is related to developing a new strategy that appeals to the current and coming generation of young people. The strategic change will enable the company to reach out to the target customers and build a strong appeal to the younger customers. The other important opportunity that Abercrombie and Fitch should exploit is the application of modern technology. The world has changed in terms of technological application, and so should business organizations. The company’s leadership should embark on the application of technology, such as e-business and online marketing. For example, the company should develop a marketing website with functional features through which customers can view the products offered, their descriptions, and price tags. In addition, social media can be used to enhance interaction with customers. Customers can ask questions and give their ideas and opinion through social media. In this case, the company will be in a position to understand its customers better and consequently meet their needs. Lastly, the company can continue expanding the market served by exploiting new markets through mergers and acquisitions.
Threats are the elements that are likely to hinder an organization from achieving its intended goals and benefiting from the opportunities within the market. There are two threats that Abercrombie and Fitch face today. The company is losing its market share because the current generation is not interested in the ‘cool–kind’ approach applied by the organization. The new generation is moving to outlets that have a modern and digital generation outlook. Abercrombie and Fitch is faced with the threat of losing customers and declining revenue and profits. A court battle is another threat Abercrombie and Fitch might experience because of its employee discrimination. Potential, existing, and former employees can gather evidence and prove in a court of law that they have been illegally discriminated against. The outcome of such cases might force the company to pay huge fines, thus affecting its reputation and reducing its opportunity to succeed in the future.
The segmentation analysis assists in the identification of how an organization has subdivided its market and business operations. Abercrombie and Fitch serves its market in three key segments: U.S. stores, international stores, and direct-to-consumer. The U.S. stores segment constitutes in-store operations in the USA and Puerto Rico. The segment, in this case, is the most prominent and contributes more than 50 % of the company’s total sales. For example, in 2012, the segment contributed to 58% of the total sales. The performance was a drop from 73% reported in the previous year. The U.S. stores segment comprises more than 900 stores making it an important market for the company. The market is, however saturated, and the company has little opportunity to expand and increase its market share.
The international store’s segment involves operations in other markets apart from the United States. The operations, in this case, include Canada, Asia, and Europe. In this market segment, the company owns more than 139 outlets, whose share of the company’s total sales jumped from 15% to 26% from 2011 to 2012. In 2012, the international store’s segment contributed to 33.3 % of the total sales. The company started its international business operations in Canada in 2006 and expanded to other markets in the United Kingdom, Italy, and Japan. The performance of premium products by the company declined significantly in European outlets during the late 2000s, but the performance in the Asian market has increased over the years.
The last market segment is the direct-to-consumer segment that utilizes online market operations in its operations. In this case, the customers served are from domestic and international markets. The share of total shares of the segment increased from 12% to 16% between 2010 and 2012. In 2012, the direct-to-consumer segment contributed to 25.6% of the total market. The aim of this market segment is to reach out to customers who cannot conveniently access outlets and that their regions cannot support the establishment and running of outlets. Customers served, in this case, have their products shipped to their most appropriate point at the company’s expense.
The market segmentation applied by the company is important and strategic in nature. The segments assist in serving the customers effectively and add to the diversification of the risks associated with serving a single market. However, there are two recommendations that can assist the company to exploit the market segment better. Primarily, the company should expand its operations in the international market by exploiting upcoming markets such as Brazil, India, and China, as well as various economies in Africa. The expansion will increase the revenue and profits of the company. In addition, the company should embark on an online market structure, which is cheap to run and convenient to the customers. Abercrombie and Fitch Company is better positioned to exploit the new market because of its strong brand name and the experience acquired over the years.