Management is the process of being in control or taking charge of people or other things, within an organization or in any given environment. Strategic management, therefore, is identifying particular goals and objectives, analyzing the competitive environment, internal organization and evaluating the measures required to put the company on par with the competitors. Companies need management to take care of its staff and put in strategies, and implement them. Managers have a responsibility of upgrading the organization to be at the top notch and best among its competitors. The companies depend on the management if there is poor management it is definite that the company is likely to go down. Good management keeps the company at the top. For consumers to buy anything from a company they look at the reputation, quality, and value for their money. Abercrombie & Fitch is a company that was known for retailing teen casual clothing. The company had a good management right from the start, but in the course of the years, the company started showing too much nude in their advertisements and in due time this changed the consumer's perception about the company. Consumer thought that the company was too sexual in their advertisement and they did not feel comfortable purchasing products from the company.
Management shapes the face of an organization and poor management can really cause the company its image (Alvintzi, & Eder, 2010). When Abercrombie & Fitch company noticed that the sale was extremely low and the company’s image was at stake they had to change management and the new management has tried to repaint the company’s image, by doing the advertisement with very little nude involved, and the company also changed the customer focus from teens to adults.
Strategic management helps the company to understand its current situation, identify goals and objectives that can push the company back to the level of its competitors, this management involves all staff in the organization (Jones, 2016). An organization needs everyone to work together in order to achieve a particular goal or objective (Clough, Sears, Sears, Segner, & Rounds, 2015). Most companies or organizations that prosper are holistic, the company takes good care of its staff and in return, the stuff works together for a better outcome of the organization.
Internal Analysis (Strategic capability model)
According to Laljani (2009) every organization has its own way of implementing its strategies, some of the biggest challenges organizations often face in building their capabilities is making the organization's staff move from functional thinking to capability thinking. In functional thinking is it’s all about the things the organization do but in capability thinking it’s about the ability the organization has to enable them to do the work. For an organization to develop its capability model tool is to underline the organization's function and discover the capabilities that lie beneath the functions (Bassi, 2011).
McKinsey 7s Model
Abercrombie & Fitch Company has strategically used McKinsey 7s model to analyze its internal design through strategy, structure, systems, shared values, style, staff and skills for the purpose of identifying if the company is achieving its goals and objectives. The 7s have been strategically used to create an impact in the company hence maintaining its top position.
Structure- the organization is organized in such a way that the there is a top management and the other staffs. The organization operates in a chain of hierarchy, it uses both top-bottom approach and bottom-top approach hence making everyone feel appreciated and take responsibility of their assigned duties (Wales, Gorman, & Hope, 2010).
Strategy- the firm has put in plans that have enabled the company to stay at the top despite the stiff competition and rivalry from other companies. The company has long term goals that have paved the way for great achievement. The company’s vision has kept it on the move and at par of other competitors.
Structure- the company’s operation is organized in a way that each department has its head; the company has production section, marketing and advertisement, and retail section. Each head has a representative who is in charge and reports to the top management in case of any communication.
System- the industry uses systematic approach in solving various issues that may arise within the firm, this starts at the top management and incase of any changes all the members are involved in the decision making process.
Skills- the firm has employed skilled individuals, right from the top management to, production, sales team, marketing and advertisement. Each staff is competent at their areas of expertise and very dedicated to meeting their goals and objectives and this is why the company is at the top.
Staff- the company is big and has over 50 employees, each employee is an expert at their job. The company’s criteria for hiring new staff is very strict, they only choose specific type of new staff that they feel are fit and have what it takes that the company wants and this starts right from the physical appearance. Thus the company is very selective when it comes to recruiting new staff.
Style- the company has a chain of command; the top management is responsible for making all decisions within the company. All kinds of consultations and decision making are done at the top. The other staffs take instructions from the top management and their contribution is required only when necessary.
Shared values- the company has their goals and objectives, they have their code of conduct and principles that have placed them at the top position. The organization is dependent on its set rules for all the operations that are carried out within the organization (Cornelissen, 2011). These principles are a guideline for everyone in the company to follow for the purpose of achieving the best outcome.
For a company to achieve its desired goals and objectives, it must have implemented good strategies that the organization requires to accomplish a mission (Hatch, & Schultz, 2008). The PESTEL framework is a marketing tool that helps the organization to identify its potential for the purpose of being competitive.
This framework helps in identifying various macro-environmental factors that directly affect the organization's performance. Political factors should be considered for any business development because it can act as a threat for the company (Mascarenhas, 2011). Companies need to look at the political environment where they can, for example, have their headquarters because it can either positively or negatively affect the company’s image (Hubbard, Al, & Galvin, 2014). Companies look at things like social policies, trade regulations, tax issues, and governments’ stability before starting a business. For example, a company will base its offices or outlets in environments that they feel is safe and war-free zone. The second factor is the economic, economic factors such as inflation, unemployment, interest rates, credit accessibility among others are the influencers of economic factors that can affect a company. These factors must be considered because there are many things that change during the company’s lifetime.
The third external factor is a social factor; social indicators include exchange rates, GDP, and inflation. These indicators drive the social factor, like distribution of wealth, education levels, and changes in trend and lifestyle and population demographics. If a company, for example, retails teen clothes in an environment where the aging population is higher than the young population, then the possibility of a company making a sale is very minimal. The fourth factor is technological factors. The rate of the advancement in technology has led to an increase in discoveries and new innovation (Kaplan, 2012). For a company to stay at the top of its game, it means that they have to go with the new technology and adjust to it (Thommen, & Gro?sser, 2014). This at some point has helped the company do better marketing, for example, the technology today enables a consumer to buy a particular product of their choice online and delivered to their comfort zone without having to go miles away to get the product. Advertisement and marketing take different direction all the time because of technology, if the company uses the right technology and innovations they get an upper hand in catching up with the new trend. Environmental factors are also external factors that ought to be considered because different governments react differently in dealing with companies and pollution (Teece, 2009).
The company, therefore, must be able to ensure that the energy consumption, waste disposal, and environmental pollution is well managed to avoid penalties by the government. Some of these environmental factors make it hard for companies to start their own firms and are forced to sublet to the already existing firms. Lastly is the legal factor. Every government has its own laws and regulations. Before a company decides to open up its warehouse and offices, it is important they know what is expected of them in order to start a business. Some of the legal factors that affect the company include employment regulations, health and safety regulations, product regulations, patent infringement among others (Wagener, 2008). Employment regulations sometimes highly affect the company because, for example, the law requires the company to pay its staff a certain amount of income and the company may not be able to pay the required wages to its employees because the business probably is not stable. Such kind of legal factor often affects the company’s performance. All these factors are related in one way or another and they are the major factors that affect the business strategies.
Industry Analysis: Monopoly
Abercrombie & Fitch are one of the best American retailers; the retail industry consists of thousands of brands. Abercrombie & Fitch mainly retailed teens outfit with a variety of different brands. The company is known to monopolize the market because of its unique high sense of fashion. A monopoly industrial structure is a market whereby a single firm controls the entire market, monopoly company structure can monopolize the market by raising prices because they have many buyers who purchase their products (Karmann, 2012). This industrial structure is known to set the prices, maximize prices, have high barriers to entry and exit and there is only one firm that dominates the market (Friedli, Mundt, & Thomas n.d.). Abercrombie & Fitch company besides having a bad image, it was one of the best sellers and they were identified by great and unique quality designs, they had many outlets spread all over and they as well had many buyers, who don't know Abercrombie & Fitch? The models they used were of a high standard and their products were tailor-made for high-end consumers. All of its products had higher prices at close to luxury levels and their stores situated mostly in their consumer's location.
Porter’s Five Forces
This company is a monopoly and has used Porter’s 5 forces of analysis to identify its potential and capability to be one of the most outstanding and well recognized company. According to porters analysis Abercrombie & Fitch Company is identified as an attractive industry using the five forces to identify its position. First threat of new entrants is low because of the standards that the company has set, the quality of their product have also distant them from any new entrant threat. The second one is the bargaining power of suppliers is low, this is because the company and the firm is one and therefore does not allow any other firm to have any entry and exist and all the profit is for the company itself. The third force is, bargaining power of the buyer is weak, and the fact that the company is identified for its high end fashion and high quality already identifies its consumer. Most customers are of a high caliber and the stores are located in areas where the targeted consumers exist. These reasons do not give room for bargaining. The fourth force is that the companies do not have any threats of substitute products because they are the trend setters, and they are known for the best, therefore having a substitute threat is very unlikely. Finally the intensity of the rivalry is very high this is because of the stiff competition that’s existing among them, the fact that the company is doing very well in terms of customer satisfaction, quality supply and high profit margins is a very big threat to other companies hence the rivalry.
Strategy formation: Differentiation strategy
Companies too have their ups and downs, many companies that are doing better in the market were at one point having a tainted name, and it took them time to recover their names and brands (Corsi, & Neau, 2015). Abercrombie & Fitch company is not an exception, the company had its image tainted because of the over sexual advertisement for their products. This was a disaster for the company which was doing very well with many buyers spread across different geographic boundaries. The company is trying so hard to repaint back its name. Differentiation strategy is one of the best strategies that can help a company regain its name, this strategy has been used by various companies and they are back at the top (Kodama, 2011). The company is still known for the quality products despite the nude advertisement that caused it its face. With differentiation strategy the company can introduce promotions on different products offered to the consumers, the company can also cut the cost of specific items to enable them to attract new consumers. At this point, advertisements are not important because they only worsen the situation. The company should use the differentiation strategy by creating an outstanding product to its loyal consumers and have hampers for all consumers who buy products at their outlets.
Differentiation system involves bridging the trust gap, to win back the consumer's trust, gaining back the consumer trust may be difficult at this point in time but the company should focus on all the positive sides of the company (Sekhar, n.d). The company should use the many outlets in promoting the company name, in some outlets depending on the region; the company can cut prices on the products to equally remain competitive in the market. The fact that the company still has the best product in the market that is of high quality should help in driving the sales and promotions to retain the consumer. The company can redeem itself by using its product as still the best in terms of quality in the market, the company can use celebrity icons to help bring back the image of the company (London,& C.A.C.I., Inc. 2008). Abercrombie & Fitch Company having many outlets should be an advantage because they are able to reach their consumers in different locations at the same time, therefore any kind of promotions or token given to consumers who purchase at their store will keep them at the competitive market and over some time they will be back to their position. I recommend this strategy because other strategies like cost-leadership and focus strategies have limitations and sometimes may not really fir in the competitive market. Other big names also at one point had a bad public reputation because one thing or another did not go so well, but by using the differentiation strategy, they are back on their feet again.
A strategy statement lies fourth in the hierarchy of company statement; it communicates or displays the company’s strategy to everyone within the organization. The three components of the statement are objectives, scope, and competitive advantage.
Abercrombie Fitch Company
To be the best in terms of value and quality by ensuring satisfaction whilst inspiring high-end lifestyle for the consumer.
It is our goal to be the leading retailers in the market. We will accomplish this by researching, sourcing and giving our consumers the best product in the market at a reasonable cost for the product value and to the ultimate satisfaction of the consumer.
- Highly trained group of employees’ right from the top management, each experienced in their area of specialty.
- Already have an identity and known for quality high-end products.
- Negativity image/ publicity to our consumer
- Products designed just for a certain group of people no inclusiveness
What to do
- First is to redeem the company’s image by doing all that it takes to win back our consumer's trust as soon as possible
- To design a wide range of products that shows inclusivity in our range of products within the next 6 months
- If the project is successful we will have to use a proactive approach and change our form of advertising to suit that of the consumer demand.
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