Anton Emmanuel's Blog

As the semester progresses and we delve further into the facets of business, I find myself reading business articles through an entirely different lens. And although no business problem can be entirely force fit into a framework, it is interesting to see Michael Porter’s assertions applying in the business world.

Burberry—a luxury British fashion house—is an ideal example. In 2006, as global luxury markets boomed, Burberry struggled with stale brand perception, and paltry growth. Licensing agreements with manufacturers were diluting the company’s luxury appeal, and a decentralized design process was further compounding the problem.

In enters, Angela Ahrendts. As newly minted CEO, she was tasked with returning the brand to its former heights. And surely enough, has won praise for executing a sharp turn-around. Burberry’s top-line doubled over the next five years.

Ahrendts’ strategy reduces into a few, very simple, components. First, she identified that the company’s struggles were largely related to unilateral design teams not effectively working in unison. This resulted in inconsistent and—at times—unappealing products. Second, she noted that the company’s theme had shifted. The well-cut trench coats that were synonymous with Burberry’s iconic image had been relegated behind scores of other products.

So what’s the solution? Simple. Ahrendts understood that she needed to identify a focus, and organize the company’s activities accordingly. She shut down many design functions, and consolidated the remaining into one unit. According to Ahrendts, Burberry had strayed from its roots; and therefore, her team bought back 23 licenses, and centralized Burberry’s entire brand image around its classic trench coat. Interestingly, many of Ahrendts’ decisions mirror Porter’s sentiment on strategy. Porter contends that businesses must make tradeoffs in deciding what their offering will be. Doing too much can adversely impact the delivery of value to the consumer. Instead, a company’s activities must be organized around a chosen focus. Indeed, this very rationale proved effective in levelling Burberry’s downward trajectory.

** Came across this article on Burberry’s turnaround, and was compelled to do a little more research.  Take a look at this insightful  interview Angela Ahrendts did with the Harvard Business Review. Information was also sourced from these articles.