Burberry Julie Mitchell Hillary Murray Sarah Kozsan Tim Barba Matt Murmello
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Executive CompanySummary Profile • Organizational Structure • International Management – Strategy – Culture – Policy and Procedure • Metrics
Organizational Outline Source: Burberry. “Board & Board Committees.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013.
International Management Strategy • Diversification of Stores • Product Line • Social Media • Customer Service
Job Responsibilities and Compensation Job Title Responsibilities Number Yearly of Salary Managers Design Managers Oversee fashion research and 3 $110,000 design team activities Marketing Managers Oversee marketing 3 $110,000 techniques specific to that region Operations and Supply Chain Oversee operations and 1 $ 90,000 Manager production schedules, etc. Customer Resource Manager Develop firm’s relationship 1 $ 90,000 with new customers and foster established relationships Human Resource Manager Set policies for the region, 1 $ 95,000 oversee hiring and training new employees Information Technology Managers Oversee routine maintenance 2 $100,000 of electronic systems Corporate Affairs Manager Bridge the gap between 1 $100,000 Burberry corporate managers and regional managers Strategy and Finance Managers Provide financial advice, 2 $115,000 handle financial reports and portfolios Store Architecture Manager Oversee store front design, 1 $85,000 tailored to each region Regional Research Manager Perform necessary research 1 $85,000 to learn about important laws in specific region of business
Cultural Differences, Britain and France Cultural Factor Britain France Main Religion Christianity Roman Catholic (83%–88%) Education Literacy Rate: 99% Literacy Rate: 99% Five stages of education: early Five stages of education: years, primary, secondary, kindergarten, primary school, Further Education, and Higher middle school, high school, Education vocational high school Economic GDP (2012) per capita: GDP (2011) per capita: $35,000. $38,514.46 (currency: euro) (currency: pound sterling) Politics 3 parties: conservative, labor, 2 opposing parties: left-wing liberal democrats and right-wing Family A rise in the number of single- Family is the backbone of person households. French identity and community People are generally getting life. married later and many women Couples marry later and wait do not want to have children longer to have children right away. Concentrate on their jobs and put off having a baby until late thirties Class Structure Underclass, working, middle, Highest, middle, lower upper Official Languages English French Natural Resources/ coal, petroleum, natural gas, coal, iron ore, bauxite, zinc, Geography tin, limestone, iron ore, salt, uranium, antimony, arsenic, clay, chalk, gypsum, lead, silica, potash, feldspar, fluorospar, arable land gypsum, timber, fish
Challenges to doing Business in France 1. Starting a business 6. Paying Taxes 2. Construction 7. Trading Across Borders Permits/Electricity 8. Enforcing Contracts 3. Registering Property 9. Resolving Insolvency 4. Getting Credit 10. Culture * 5. Protecting Investors
Culture and Competition Culture Competition – Take great pride in their nation Paris is home to many high-end and government fashion houses. – Offended by any negative • Chanel comments about their country • Christian Dior – Embody romance and passion • Louis Vuitton – Embrace style and sophistication • Hermes – Understated elegance in clothing – Sophisticated, professional, fashionable – Not overly fussy or complicated – Nice dresses, suits, long coats, scarves, berets
Employee Rights • Workers posted to work in France from other countries are covered by French employment legislation - Important for Burberry to recognize (especially with managers) • Laws regarding: employees' hours of work, including overtime, and particular restrictions for night workers and young workers • Employees are entitled to: – Minimum rest breaks (hours of rest between ending and starting work) – Weekly rest periods (subject to certain exemptions, Sunday is a non-working day and forms part of the statutory weekly rest period) – Maternity leave – Paternity leave
International Management Policies • Consistency • Working conditions • Focus on growth
Product and Organization Structure
Burberry Beyond • 3 pillar program identifying values worth more than money 1. Burberry Impact 2. Burberry Engage 3. Burberry Invest
Burberry Impact “leveraging our creative thinking culture to inspire sustainable action” • People – Total compliance • Product – Reductions at the regional level • Process – Reduce energy consumption • Property – Improved construction practices
Burberry Engage “Harnessing the passions and talents of Burberry associates” Time volunteered by Burberry Associates
Burberry Invest “Supporting and inspiring the next generation of creative thinkers” • Donations – The Burberry Foundation which is partnered with 32 other charities affecting 75,000 kids • Coat drive • Burberry Create – training meant to develop young kid’s minds
Works Cited • Ahrendts, Angela. “Burberry’s CEO on Turning an Aging British Icon into a Global Luxury Brand.” Harvard Business Review. Jan. – Feb. 2013. Web. 10 Nov. 2013. • Burberry. “Annual Review 2012/13.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. • Burberry. “Board & Board Committees.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. • Burberry. “Company History.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. • “Burberry goes digital: A British fashion giant is banking on technology to lure back customers.” The Economist. 22 Sept. 2012. Web. 10 Nov. 2013. • Conti, Samantha. “Christopher Bailey Begins to Build His Burberry.” WWD.com. 14 Nov. 2013. Web. 10 Nov. 2013. • Gordon, Kathy, Ian Sherr, and Joann S. Lublin. “Apple Taps Fashion CEO as Retail Magic Fades: Burberry’s Angela Ahrendts Brings Flair for Minimalist Style, Love of Tech.” Wall Street Journal. 15 Oct. 2013. Web. 10 Nov. 2013. • Luthans, Fred, and Jonathan P. Doh. International Management: Culture, Strategy, and Behavior. New York: McGraw-Hill Irvin, 2012. Print. • Vogue. “Burberry.” Vogue.com. Vogue, n.d. Web. 10 Nov. 2013.
2013 Matthew Murmello, Sarah Kozsan, Julie Mitchell, Hillary Murray, and Timothy Barba Stonehill College 12/5/2013
Name: Burberry Location: London, United Kingdom Company Annual Revenue: €1,999 Million (“Year to 31 March”) (Burberry Annual Review 5) Number of Employees: 10,000 (Ahrendts) Type of Business: Clothing Industry and Retail Executive Summary: Burberry is a British luxury fashion house that distributes clothing and fashion accessories and licenses fragrances. Founder Thomas Burberry was a famous clothing designer and created the company in 1856. Burberry today is a very successful multinational corporation that has stores all over the United Kingdom, Europe, North America, and parts of Asia. Burberry is great at diversifying their stores, having multiple product lines, and great customer service. This allows the company to continue to expand internationally. In this case France is an optimal location for Burberry to grow in. The cultures of the two countries are very similar, and France is a hot spot for high end fashion. However, there are some challenges that Burberry could face while expanding. Firstly, there are certain permits that would be required. There are also different tax laws in France than Great Britain. It is difficult to receive credit in France as well. France already has a number of high end fashion stores such as Chanel and Louis Vuitton. These factors all contribute to increased costs and are barriers to entry for Burberry. To combat the challenges that lay in front of Burberry, the company has created different international policies and procedures to help achieve success abroad. Since labor laws are different in France, Burberry has created a policy that protects foreign workers who are vulnerable to exploitation. They do this by regularly checking up on factories and stores to make sure everything is in order.
This has led Burberry to great financial success. To measure success in other terms, Burberry has created a three pillar system designed to identify values worth more than money. Burberry Impact, the first pillar, covers four key areas which are people, product, process, and property. To help these key areas Burberry regularly checks in on factories and stores to keep workers, environments, and processes safe. Burberry Engage is the second pillar. This pillar enables and encourages employees to use their other talents to help better the company. Lastly, Burberry Invests, is the last pillar. This pillar has Burberry donate to different charities or invest in various programs around the world to better young kids or other various aid organizations. All of these things help Burberry be a strong presence in the high end fashion market. Company Description: Burberry was established in 1856, by an esteemed clothing designer by the name of Thomas Burberry (Burberry, “Company History”). The company’s iconic emblem represents Thomas Burberry’s perseverance and image to establish a luxurious clothing line that has bourgeoned within the past few centuries (Voguepedia, “Burberry”). Burberry’s iconic emblem represents a knight in shining armor on a horse, while holding a pendent bearing the word “Prorsum”, when translated from Latin means “forward” (Voguepedia, “Burberry”). Thomas Burberry produced his legendary clothing line by first manufacturing a trench coat that was influenced by a type of linen vestment that was mainly sported by farmers and herdsman within Great Britain (Voguepedia, “Burberry”). The features of this trench coat were later patented by Thomas Burberry in 1888 under the name of gabardine (Voguepedia, “Burberry”). Gabardine is a water-resistant and durable cotton trench coat (Voguepedia, “Burberry”). Since the company’s inception it has expanded its product line from their high quality trench coats to other luxury goods (Burberry Annual Review 29).
In recent news, Burberry’s Chief Executive Officer, Angela Ahrendts was recently hired to become Apple Inc.’s “senior vice president of retail and online stores” (Gordon, Sherr, and Lublin). During her seven year term as CEO of Burberry Group, Angela Ahrendts revitalized the company’s “image with more-subtle designs and understated offerings, after the brand's famous beige, black and red plaid had become a bit frayed due to overexposure” (Gordon, Sherr, and Lublin). Angela Ahrendts will withhold her position as CEO through the middle of 2014, but will then be replaced by the company’s Chief Creative Officer, Christopher Bailey (Conti). Bailey will take on both his current position and CEO of Burberry next year (Conti). Christopher Bailey has already outlined future plans for Burberry once he takes the position as the company’s new Chief Executive Officer. Christopher Bailey had promoted Luc Goidadin “to the new position of chief design officer” (Conti). Christopher Bailey described Luc Goidadin’s duty as “chief design officer”, to not only supervise Burberry’s design department, but is also required to present Bailey with progress reports, enabling him to still be connected with the innovation of new designs (Conti). Also, Bailey has already established “a new company-wide organizational structure” (Conti). According to Samantha Conti in her article, “Christopher Bailey Begins to Build His Burberry”, she stated that the company “will be streamlined into three distinct pillars: design, product and communication; regions, and operations and finance, with existing senior executives taking on additional responsibilities” (Conti). Since Christopher Bailey has been a designer for Burberry for a few years now, it is understandable that he wants to focus on those three pillars to facilitate in building up this iconic brand (Conti). For Bailey to perfect these three pillars he needs to know that he will have the support and overwhelming assistance from the company’s senior managers (Conti).
Burberry’s Organizational Structure: Source: Burberry. “Board & Board Committees.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. International Management Strategy: For many multinational corporations (MNCs), developing an international management strategy allows them “to keep track of their increasingly diversified operations in a continuously
changing international environment” (Luthans and Doh 272). Burberry is one multinational corporation that continues to expand their products not only domestically, within the United Kingdom, but in parts of North America, Asia Pacific, the Middle East, etc. (Burberry Annual Review 22). Since Burberry is a highly accomplished company within the retail industry it is idealistic that it would like to introduce its luxuries and brand into a new market when the opportunity arises. In order for Burberry to jump at the opportunity to open its doors in another European country, the company would need to develop and implement a solid international management strategy (Luthans and Doh 268). When constructing an international management strategy for Burberry, we need to consider numerous approaches and principles that will allow for the business to flourish within their target market (Luthans and Doh 272). According to Fred Luthans and Jonathan P. Doh, in International Management: Culture, Strategy, and Behavior, they stated that “strategic management is the process of determining an organization’s basic mission and long-term objectives and then implementing a plan of action for pursuing this mission and attaining these objectives” (271). Since the international management strategy is critical, it is imperative to determine which levels of management are going to construct this long-term plan of action (Luthans and Doh 271). Two levels of management are capable in acquiring this project, being senior (CEO, COO, etc.) and/or lower levels of management (Luthans and Doh 271). Logically, members of senior management within a multinational corporation have the upper hand when creating the international management strategy, but there have been cases in which all levels of management are equally involved in the decision making process (Luthans and Doh 271). After reviewing Burberry’s Annual Review from 2012 to this current year, it is evident that the company’s senior management crew has the final say in how they forecast business success. As members of senior management are brewing
new strategies, they need to keep in mind Burberry’s brand image, merchandise, marketing, real- estate, as well as technological improvements (Burberry Annual Review 29-30). According to Fred Luthans and Jonathan P. Doh in International Management: Culture, Strategy, and Behavior, they stated that “MNCs often invest in advanced industrialized countries because they offer the largest markets for goods and services” (285). Burberry continues to open new store locations throughout Europe, probably in response to recognizing new fashionable trends and high tourist attractions. The company has seen a “13% increase in average space growth”, because Burberry is purchasing and investing real-estate within London, countries within the Eurozone, Milan, etc. (Burberry Annual Review 36). Numerous branches withhold Burberry’s international management strategy tree, but one reason for why Burberry is diversifying their retail market is from the unique lines of clothing and accessary products they offer their customers. Fortunately, it is not highly uncommon for an extravagant clothing company with a stature similar to Burberry to accumulate a large percentage of their revenue from one article of merchandise (Ahrendts). Unfortunately, the company in recent years has partially deviated from marketing their most famous line of clothing since its inception; the trench coat (Ahrendts). According to Burberry’s Chief Executive Officer, Angela Ahrendts in the article “Burberry's CEO on Turning an Aging British Icon into a Global Luxury Brand”, she stressed that “outerwear represented only about 20% of our global brand business” (Ahrendts). Burberry’s trench coat is an extremely liquid asset that is steeped with history (Ahrendts). As previously mentioned the trench coat was designed by Thomas Burberry and manufactured at a facility in Castleford (Ahrendts). Instead of outsourcing the labor and raw materials needed to assemble these trench coats overseas, Burberry should keep up with tradition by producing the trench coats in Great Britain (Ahrendts). According to Burberry’s Chief Executive Officer,
Angela Ahrendts in the article “Burberry's CEO on Turning an Aging British Icon into a Global Luxury Brand”, she stated that “we would reinforce our heritage, our Britishness, by emphasizing and growing our core luxury products, innovating them and keeping them at the heart of everything we did” (Ahrendts). Recently, Burberry shut down factories in New Jersey and Wales, in order to predominately focus on manufacturing these trench coats in Castleford (Ahrendts). As a result of this transformation, Burberry was capable of tripling their “global workforce to nearly 10,000, adding more than 1,000 jobs in the UK over the past two years alone” (Ahrendts). Burberry should keep their identity polished within the clothing industry, as a company that continues to develop quality made trench coats in Great Britain, allowing them to reinforce their company’s cultural norms, as well as sharing the story with customers from producing a luxurious product (Ahrendts). Manufacturing trench coats in house will hopefully result in an upward trajectory of new jobs within the United Kingdom, amongst “end-to-end product development and production” (Burberry Annual Review 42). Burberry’s “product excellence” is greatly influenced by the company’s “intensive focus on design innovation, quality and core heritage icons” (Burberry Annual Review 30). The company’s collection of outerwear, mainly being the trench coat, is credited towards approximately “50% of mainline apparel sales” (Burberry Annual Review 30). The success of trench coat sales is predominately due to monthly fashion displays, as well as, notoriety during the 2012 Summer Olympics in London (Burberry Annual Review 29 - 30). Throughout the Olympics, the company wanted to partner the durability of their trench coat to meteorological conditions, by streaming “live images of London scenes simultaneously throughout the Olympic period to prominent outdoor sites in London, Paris, Hong Kong, Los Angeles and New York” (Burberry Annual Review 29). If Burberry wanted to open a shop in France, one way for them
to convey the message as to why the French should buy their trench coat is by filming a video portraying a businessman walking out of Chanel after attending a sales conference. The video would depict the French businessman wearing a Burberry trench coat to keep him dry from a typical rainy day in France. This form of advertisement may lure the attention of other French businessmen and businesswomen to buy a Burberry trench coat. Social media persists to be a major factor in how Burberry markets the trench coat, as well as, various other products. Social media is extremely versatile and the ease of convenience welcomes many viewers to become part of the fashion experience. The company continues the “extension of its reach through marketing innovation, leveraging brand content to engage and connect global audiences” (Burberry Annual Review 29). Social media has greatly facilitated in how first time buyers, avid shoppers, and brand loyalty customers connect with Burberry outside its stores internationally. During this year, Burberry launched its S/S13 operation, introducing the company’s spring and summer line of clothing through captivating photos and models wearing trench coats to promote the celebration of seasons (Burberry Annual Review 29). Promotional awareness and advertisement for the S/S13 operation was dispersed throughout search engines such as YouTube, Facebook, Twitter, and Instagram (Burberry Annual Review 29). It is worth mentioning that “the women's-wear A/W13 show was streamed live on Twitter for the first time, allowing followers to embed the show stream in personal newsfeeds” (Burberry Annual Review 29). Burberry is currently the leading “luxury brand” follower on Facebook with about 15 million viewers, along with being “the leading luxury lifestyle brand on Instagram” (Burberry Annual Review 29). Also, Burberry released a short film to introduce this year’s new clothing line, which ranked in approximately 1.7 million spectators (Burberry Annual Review 29). Even though social media has facilitated in expanding
the promotion of the Burberry brand, the company needs to not only maintain their stance as the number one follower on Facebook and Instagram, but create luring ads and videos that will enhance their positioning power on Twitter and YouTube (Burberry Annual Review 29). Hypothetically speaking, if Burberry wanted to create a video targeting men and women between the ages of 25 to 35 years old with a working salary, they would want to utilize these four popular search engines, because this specific age group is familiar with how these types of social media work. As with any company, one of the most crucial aspects of an international management strategy is continuously providing quality service to customers in any which way possible. Providing quality service and selling luxurious products goes hand in hand. Burberry takes great pride in delivering superior service and getting to know their customers through a service center (Burberry Annual Review 36). The company built an addition on their “customer focus” part of the international management strategy by “the opening of a new service centre in Shanghai” (Burberry Annual Review 36). This particular service center is equipped to support “Burberry customers 24/7 by phone, email, live chat in 11 languages and via a dedicated customer service Twitter account” (Burberry Annual Review 36). Burberry feels that one way for a customer to fully immerse themselves in the buying power of this luxurious brand is with the ease in assistance of technology (Burberry Annual Report 42). Burberry has become an extremely technology savvy company within the last few years, in ways that “enable the rapid delivery of consolidated data such as product details, customer and transaction information to front-end applications, including the development of an iPad-enabled digital catalogue for showrooms” (Burberry Annual Review 42). This is just a taste of how the company incorporates technology into their rules of running a business, but a
perfect example of how a Burberry store incorporates technology into their daily routine is astonishing. In 2012, Burberry opened a brand new outlet on Regent Street in London (“Burberry goes digital”). When customers enter the store adjacent to the door stands a 22 foot tall monitor that displays an array of pictures of Burberry’s newest clothing line (“Burberry goes digital”). Also, apparels are usually fitted with a radio frequency identification (RFID) instrument, which enables the customer to “flash clothes in front of interactive screens to see how a handbag detail or raincoat lining is made” (“Burberry goes digital”). Overall, Burberry is focused on the “quality imperative” of the international management strategy, because they want to ensure that investing a certain percentage of money in technology, social media, real-estate, and more will inhibit the company to build their brand internationally (Luthans and Doh 275). Utilizing this valuable information will allow Burberry to further develop an international management plan that enables the company to successfully operate and diversify their operations in France. With this information Burberry can construct a pie chart depicting which areas of service the company should focus heavily on when implementing their plan of action. Since Burberry is in the clothing industry it is understandable that the company should focus greatly on functionalities, including the marketing, assembling, etc. (Burberry Annual Review 29 – 30). However, Burberry should also take into consideration diversifying their market and investment (Burberry Annual Review 36).
International Managment Strategy 20% Functional 20% 60% Diversity Economic International Management Chart According to International Management: Culture, Strategy, and Behavior by Fred Luthans and Jonathan P. Doh, it is extremely important for multinational corporations to organize their operations effectively in order to compete in the international arena. “For all MNCs following this strategic route, a number of basic organization structures need to be considered” (Luthans and Doh 316). In many cases the design of the organization structure will be similar to the one used by the domestic parent company. “However, significant differences may arise depending on the nature and scope of the overseas businesses and the home office’s approach to controlling the foreign operation” (Luthans and Doh 316). The most important aspect of the organization is that it allows the subsidiary to “respond to specific concerns, such as production or technology or the need for specialized personnel” (Luthans and Doh 316). Finally, the overall goal of the organization of the subsidiary should be “to meet the needs of both the local markets and the home-office strategy of globalization” (Luthans and Doh 316). One way for a firm to first enter into international markets is through the creation of a subsidiary. “A subsidiary is a common organizational arrangement for handling finance-related businesses or other operations that require an on-site presence from the start” (Luthans and Doh
316). With manufacturing firms, it is common for them to export their locally produced goods or services, and because there is little to no competition “the firm can charge a premium price and handle sales through an export manager” (Luthans and Doh 317). If it is a narrow product line, the export manager “usually reports directly to the head of marketing, and international operations are coordinated by this department” (Luthans and Doh 317). “If the firm has a broad product line, and intends to export a number of different products into the international market, the export manager will head a separate department and often report directly to the president” (Luthans and Doh 317). By using the export approach, the firm can “reduce the risk and size of investment in establishing significant international operations while at the same time testing the size of international markets” (Luthans and Doh 317). The export strategy previously discussed works well only if the company has little competition and is “using international sales only to supplement domestic efforts” (Luthans and Doh 317). When the sales overseas begin to increase, there is pressure for the firm to setup on- site operations and there is also pressure to keep up with the increasing competition. “Establishing foreign manufacturing subsidiaries can help the MNC deal with both of these pressures” (Luthans and Doh 317). “Each foreign subsidiary is responsible for operations within its own geographic area, and the head of the subsidiary reports either to a senior executive who is coordinating international operations or directly to the home-office CEO” (Luthans and Doh 317). “If international operations continue to grow and require more control, subsidiaries commonly are grouped into an international division structure” (Luthans and Doh 317). This international division structure “handles all international operations out of a division that is created for this purpose” (Luthans and Doh 317). This is important and useful for an
international company because it makes the CEO less responsible for monitoring what is going on overseas. “Instead, the new head of the international division coordinates and monitors overseas activities and reports directly to the CEO on these matters” (Luthans and Doh 317). Burberry recognizes the importance of the international division structure. “The grouping of international activities under one senior executive ensures that the international focus receives top management’s attention” (Luthans and Doh 318). By structuring the unit this way, it also “allows the company to develop an overall, unified approach to international operations, as well as a cadre of internationally experienced managers” (Luthans and Doh 318). While this approach does have a few drawbacks, Burberry will put measures in place in order to ensure that this strategy succeeds for their company. For example, because this structure separates the domestic and international managers, there is the risk of having “two different amps with divergent objectives” (Luthans and Doh 318). Burberry plans to combat this by having a unified set of values that are important to both the home division and the new international divisions. It is important to Burberry that the domestic and international managers communicate effectively and work together to maintain the brand image that Burberry wants to portray. Burberry’s business is structured by channel, region and product division, and then is supported by the core corporate functions. The core corporate functions at Burberry are design, marketing, store architecture, supply chain, customer resources, information technology, human resources, corporate affairs, and strategy and finance. To account for and incorporate all of Burberry’s core corporate functions, the French division will be organized in the following way:
Compensation Job Title Responsibilities Number Yearly of Salary Managers Design Managers Oversee fashion research and 3 $110,000 design team activities Marketing Managers Oversee marketing techniques 3 $110,000 specific to that region Operations and Supply Chain Oversee operations and 1 $ 90,000 Manager production schedules, etc. Customer Resource Manager Develop firm’s relationship 1 $ 90,000 with new customers and foster established relationships Human Resource Manager Set policies for the region, 1 $ 95,000 oversee hiring and training new employees Information Technology Managers Oversee routine maintenance 2 $100,000 of electronic systems
Corporate Affairs Manager Bridge the gap between 1 $100,000 Burberry corporate managers and regional managers Strategy and Finance Managers Provide financial advice, 2 $115,000 handle financial reports and portfolios Store Architecture Manager Oversee store front design, 1 $85,000 tailored to each region Regional Research Manager Perform necessary research to 1 $85,000 learn about important laws in specific region of business Company International Management and Issues: It is important to look at how motivation and leadership must vary from culture to culture when working with a multinational corporation. If a company is going to open a new division in a region different from their home region, then they must first take into account the differences in that region’s culture compared to the home culture. The text defines motivation as “a psychological process through which unsatisfied wants or needs lead to drives that are aimed at goals or incentives” (Luthans and Doh 422). Motivation is closely related to the performance of your employees, and while the process can be the same from culture to culture, the goals and objectives may be different. Different things motivate different employees, and culture often has an impact on the motivation factors. For example, “while workers in some countries may be lured into attractive jobs provided by MNCs through relatively good salary compensation and the promise of upward mobility, many have become impatient from the lack of institutional follow- through in various dimensions” (Luthans and Doh 448). The most important thing for international managers to do is “to put together a motivational package that addresses the
specific needs of the employee or group in each region where an MNC serves” (Luthans and Doh 448). The new division of Burberry will be opened in France. Since Burberry is a British company originally, it is important to look at the cultural differences between the two regions in order to make sure the new division is successful:
Cultural Factor Britain France Main Religion Christianity Roman Catholic (83%–88%) Education Literacy Rate: 99% Literacy Rate: 99% Five stages of education: early Five stages of education: years, primary, secondary, kindergarten, primary school, Further Education, and Higher middle school, high school, Education vocational high school Economic GDP (2012) per capita: GDP (2011) per capita: $38,514.46 $35,000. (currency: pound sterling) (currency: euro) Politics 3 parties: conservative, labor, 2 opposing parties: left-wing liberal democrats and right-wing Family A rise in the number of single- Family is the backbone of person households. French identity and community life. People are generally getting married later and many women Couples marry later and wait do not want to have children longer to have children right away. Concentrate on their jobs and put off having a baby until late thirties Class Structure Underclass, working, middle, Highest, middle, lower upper Official Languages English French Natural Resources/ coal, petroleum, natural gas, coal, iron ore, bauxite, zinc, Geography tin, limestone, iron ore, salt, uranium, antimony, arsenic, clay, chalk, gypsum, lead, potash, feldspar, fluorospar, silica, arable land gypsum, timber, fish
There are many challenges to starting a business in France. According to an article published by the TMF Group, there are ten specific challenges that should be looked at before doing business in France: 1. Starting a business: “France ranks 27th in the world for starting a business, according to the World Bank and International Finance Corporation” 2. Dealing with construction permits and getting electricity: takes “an average of 184 days to obtain and requiring a number of procedures to be completed. Companies must obtain an urbanism certificate, a building permit and a compliance certificate, as well as getting the required approval for opening a site and connecting it to water and electricity works” 3. Registering property: “Owing to the historic nature of most French towns and vicinities, registering property can be a long-winded and complicated procedure” 4. Getting credit: difficult to achieve in France. “France is home to a robust and contemporary financial system, but ranks 53rd in the world for ease of getting credit, highlighting the importance of having local help” 5. Protecting investors: “Common law countries have the strongest protection when it comes to outside investors (both shareholders and creditors) whereas civil law countries have the weakest protection” 6. Paying taxes: “President Francois Hollande recently announced plans to cut capital gains tax to attract business investment to France and restore damaged relations that resulted from corporate tax hikes. Businesses are required to make seven tax payments per year and taxation can take a significant chunk of money from company earnings”
7. Trading across borders: “It takes 11 days to import and nine to export, requiring two documents which can take between three and five days to prepare” 8. Enforcing contracts: “France has a modern legal system which is well equipped to enforce contracts in good time. It takes an average of 390 days to enforce contracts, which is well below the OECD average of 510” 9. Resolving insolvency: “Resolving insolvency is a streamlined procedure in France, although the recovery rate is a little lower than the OECD norm” 10. Culture: “Adapting to French business culture is important when considering cross border moves. Formality is important and the French are extremely proud of their language. Their passion for good food and wine should be observed, and businesses which appreciate differences in etiquette, approach and style in business are most likely to succeed” Specifically for Burberry’s new division it is important to look at number 10, culture. As a British brand it is necessary for Burberry to understand that France has its own culture and own brands and designers that it is familiar with. Because of this, there is also going to be a lot of competition for Burberry. France has a very high-fashion culture in some areas, so Burberry will be competing with other high-end designers such as, Chanel, Louis Vuitton, and Hermes. Along with competition, France has many cultural values that are different from those of Britain. “The French take great pride in their nation and government and are typically offended by any negative comments about their country. Visitors, particulary Americans, often interpret their attitude toward foreigners as rude” (“French Culture”). While women are becoming more prominent in the family life and in business, France is still most a “male-dominated culture” (“French Culture”). The French “embody romance and passion,” and they also “embrace style
and sophistication” (“French Culture”). These are two things that can be used to Burberry’s advantage when designing and offering products in France. As for any company starting a division in a new country, it is necessary to also look at that country’s employee rights laws. One law that is important for Burberry (due to its international aspect) is that “workers posted to work in France from other countries are covered by French employment legislation” (Carley). There are also laws about stating rules about “employees' hours of work, including overtime, and particular restrictions for night workers and young workers” (Carley). Another law in France states that employees are entitled to “minimum rest breaks, hours of rest between ending and starting work, and weekly rest periods” (Carley). Burberry must also recognize that “subject to certain exemptions, Sunday is a non-working day and forms part of the statutory weekly rest period” (Carley). France supports not only maternity leave, but also paternity leave, which is something that not all countries are accustomed to implementing (Carley). These are just a few laws about employee rights that France has created and Burberry must be sure to follow all of them when creating this division there. International Management Policies When it comes to luxury brands, Burberry is a household and classic name, coming out of its historical roots in England, started as a company in 1856 (Burberry). “The very name Burberry may reek of tradition and those timeless standards of quality that the British do best, but the company has, since its founding, been a real force for innovation” (Burberry). However, despite the traditional nature of the products and how the style can easily translate to any country, Burberry was having some trouble expanding around the world. “With its rich history, centered on trench coats that were recognized around the world, the Burberry brand should have
had many advantages” (http://hbr.org/2013/01/burberrys-ceo-on-turning-an-aging-british-icon-into-a- global-luxury-brand/Ahrendts). However, instead the CEO at that time stated how the British managers for the company that flew into meetings from around the world, were not even wearing Burberry themselves. This left the company only growing at about 2% a year, back 7 years ago when Angela Ahrendts first took the position as Burberry’s new CEO. In starting the problems that Burberry faced, Ahrendts addressed where she believed the company was going wrong when she took the position as Burberry’s CEO. “The company had an excellent foundation, but it had lost its focus in the process of global expansion” (Ahrendts). One of the main points that she made and acknowledged that the company had was how it was not offering the same products everywhere in the world, and needed to get back to its staple products of Burberry trenches and clothes, and focus on offering the same thing everywhere. Instead of relying on the company’s staple products, it was instead offering kilts, dog accessories and she states that “There’s nothing wrong with any of those products individually, but together they add up to just a lot of stuff – something for everybody, but not much of it exclusive or compelling”(Ahrendts). When she came into her new role as CEO of Burberry, Angela Ahrendts decided that she needed to revamp the company and bring it back to the model that made it famous and popular in the first place, focusing importance on the traditional luxury, rather than lose its market share in the luxury world as a result of straying too much from its traditional image. While discussing previous global brands that she had worked for and admires she says, “From Apple to Starbucks, I love the consistency – knowing anywhere in the world you can depend on having the same experience in the store or being served a latte with the same taste and in the same cup. That’s great branding” (Ahrendts). When she took control of the company, she decided that this is
where her main focus would lie on making the company better – creating a consistent brand image for Burberry across the world. An important aspect of ensuring that all of the brand’s products are consistent on all levels Ahrendts’ job was also to ensure that management was the same on all levels around the world as well. In order to have a consistent brand, management of the company and each sector of the company around the world must be consistent as well. “Great global brands don’t have people all over the world designing and producing all kinds of stuff. It became quite clear that if Burberry was going to be a great, pure, global luxury brand, we had to have one global design director” (Ahrendts). In hiring Christopher Bailey, this designer, as the head designer for the entire worldwide brand, it centralized power and made Burberry more consistent across the world. This then gives the company back the consumer awareness and liking of the product, and gives Burberry more market share that it may have lost when the company was not as centralized. International Management Procedures As part of the Corporate Responsibility section of Burberry’s website, it lists the Code of Conduct and other rules, regulations, and procedures that must be followed by the country worldwide. Being that it is a global company, one of the most important parts of this lies in the company’s Ethical Trading Policy and its Foreign Contract Worker Policy. Companies that have global reach and businesses must make sure that they decide how they wish to operate when hiring employees in other companies – whether they will follow their home country’s rules and regulations or those of the country it is doing work in. For example, it is illegal in some
countries to utilize child labor, but in others it is legal, so that company must make decisions on differing laws such as this, as to how they will react and operate. Burberry states under its Foreign Contract Workers Policy that this policy is “specifically intended to protect workers who may be potentially vulnerable to the exploitation regrettably existent in certain flows of international contract labour” (“Ethical Trading Process”). The company has many other policies along the same line and goes on to state that it regularly audits and checks up on factories and international distribution centers to ensure that all operations are to the international standards that the company has set for itself and its management. Burberry is also a full member of the Ethical Trading Initiative and has its own Ethical Trading team. These teams train employees to make sure everyone is on the same page around the world and then updates senior managers on the company’s status. “The Ethical Trading team and the Ethical Trading Initiative (of which Burberry is a full member) have delivered training to many of Burberry’s sourcing and product development team leaders and teams on Ethical Trading awareness and purchasing practices” (“Ethical Trading Process”). When it comes to employees, Burberry places full attention on them and wishes to maintain their well-being in order to ensure better productiveness and brand quality. “Burberry recognizes that its people are its greatest asset and constantly strives to attract the best talent worldwide, to provide meaningful development opportunities at all levels and to reward and recognize high performance” (“Our People”). The company’s website goes on to explain the makeup of the company and the people who work there, being that there are around 10,000 associates from over 100 countries that work in the different continents. The global management team is 37% female as well and there is a focus on finding diversity in the workplace. “The Burberry Leadership Council supported the development of 75 high potential associates towards
becoming next-generation leaders through international networking opportunities, global strategy off-sites, mentoring from senior executives and leadership training workshops” (“Our People”). The previous statement shows how much the company cares about and values its employees, knowing that without them, the brand would not be as strong. Impact on International Management Activities and Practices The policies and practices that Burberry has in place for the international stage of the company are there to effectively ensure that the company is the same no matter what country one is in. Burberry consumers wish to be able to go into any store around the world and feel that it exudes the same feeling of luxury, no matter where they are. These practices and policies ensure that this happens. In making sure that management is the same or follows the same rules around the globe, this then ensures that the global products have the same feel to them as well. This unity among those who work for the brand then makes it feel like more of a luxury brand to consumers who then find more value in the products that Burberry has to offer. Other policies, activities, and procedures that the company has set in place make sure that people continue to find value in the brand going into the future. Despite how it is illegal in some places around the world, many consumers are turned off by the fact that companies utilize child labor or other things of the like when operating in different countries around the world. By stating that the company will not operate through such means, even where it is legal, Burberry retains the consumers that it more likely than not, would have lost, had consumers found out that the company operated in such a way.
Flow Chart Chart 1. This is the organizational structure of how Burberry’s management is set up. Each person reports to that person who is above them on the chart. This then translates around the globe in each country’s operations. Chart 2. http://fashionandpower.blogspot.com/2010/03/burberry-brand.html This second chart shows the organizational structure of the brands that Burberry has to offer. At the top is its Couture line which does not have as wide of a reach as to who can buy
and access these products. The accessories that are at the bottom of the triangle are those that consumers have more access to buying. In fitting with this set up, management is set up the same way. There are many more people who work at the bottom levels of management that report directly to the Board and the CEO who are at the top. Each Burberry location and store has associates who speak to their managers, who speak to regional and district managers, and this just goes up the chain/the pyramid until it reaches the company’s board and/or the CEO. Metric Report & Success Measures While researching the Burberry Company, there have been several noticeable things that have stuck in accordance with the company’s metrics and success measures. Firstly one of the most important features to this company is the “Burberry Beyond” initiative which “encompasses all activities relating to Burberry’s commitment to driving positive social, cultural, and environmental impact globally.” (Burberry Beyond) This program consists of three pillars which are Impact, Engage, and Invest and all focus on employee well being in addition to the environment. Burberry Impact covers four key areas which are people, product, process, and property. As a company, Burberry takes their employees well being and rights very seriously and requires their suppliers to obey local labor laws in addition to Burberry’s own policies. Burberry takes to the next step and has increased training and supplier visits in 2013 to 839 which is up 11% from last year. In accordance of taking care of people, Burberry also emphasizes the importance of a healthy environment. With the help of a very detailed environmental analysis within the company, Burberry was able to discover some of the most harmful pollutants from
manufacturing were coming from their tanneries. In response, Burberry worked closely with the tanneries and focused on reducing the amount of pollutants they were giving off. This small example exemplifies the how much Burberry cares about both its company and environment and continues to show that affection with their process and property by utilizing the idea of sustainability for the future. It is not often you see a business so focused on anything else but money – however the issues previously mentioned prove that not all businesses just look at the bottom line for a measure of success. Burberry Engage is the second pillar which leverages “core business competencies and individual talents in the communities where associates live and work remains the key objective.” (Burberry Beyond) in other words, Burberry promotes their employees to use their other talents to help improve a community in whatever way they can. Sustainable communities across the globe are a key part of Burberry’s plan and they continue to make an impact each year they operate. Finally the third pillar is Burberry Invest which relates to the financial support Burberry provides in their communities worldwide. Actions include charitable donations, scholarship opportunities, coat drives, and various programs for young kids to try and spark an interest in design and creativity. Burberry is one of the most successful and most recognizable brands in the world and they continue to improve on the flaws they can control. Of course money is important as well but the focus when expanding the business to different parts of the world doesn’t lie so much with the monetary value as it does with these three pillars. In turn, if we establish these three pillars in any new venture or community the money will follow, it has proven time and time again and as long as Burberry decided to stay in business they will continue to make a lot of money and more importantly make an impact on human lives and the environment.
Works Cited Ahrendts, Angela. “Burberry’s CEO on Turning an Aging British Icon into a Global Luxury Brand.” Harvard Business Review. Jan. – Feb. 2013. Web. 10 Nov. 2013. Burberry. “Annual Review 2012/13.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. Burberry. “Board & Board Committees.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. Burberry. “Company History.” Burberry.com. Burberry, n.d. Web. 21 Nov. 2013. Burberry. "Corporate Responsibility." Burberry.com., n.d. Wed 21 Nov. 2013. “Burberry goes digital: A British fashion giant is banking on technology to lure back customers.” The Economist. 22 Sept. 2012. Web. 10 Nov. 2013. Burberry. "Ethical Trading Process." Burberry.com., n.d. Wed 21 Nov. 2013 Burberry. "Our People". Burberry.com., n.d. Wed 21 Nov. 2013 Carley, Mark. "France: Employee Rights." Xperthr.com. Reed Business Information, n.d. Web. . Conti, Samantha. “Christopher Bailey Begins to Build His Burberry.” WWD.com. 14 Nov. 2013. Web. 10Nov. 2013. "French Culture: Customs & Traditions." Livescience.com. Tech Media Network, n.d. Web. . Gordon, Kathy, Ian Sherr, and Joann S. Lublin. “Apple Taps Fashion CEO as Retail Magic Fades: Burberry’s Angela Ahrendts Brings Flair for Minimalist Style, Love of Tech.” Wall Street Journal. 15 Oct. 2013. Web. 10 Nov. 2013. Luthans, Fred, and Jonathan P. Doh. International Management: Culture, Strategy, and Behavior. New York: McGraw-Hill Irvin, 2012. "Top 10 Challenges of Doing Business in France." Tmf-group.com. N.p., n.d. Web. . Vogue. “Burberry.” Vogue.com. Vogue, n.d. Web. 10 Nov. 2013.
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