Strategic analysis of Abercrombie Fitch will provide an indication about vision and mission of the company. In addition, it will also reveal SWOT analysis of the company.

1. Welcome to
Presentation:
Strategic Analysis of
Abercrombie & Fitch
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2. Contents:
Introduction to Abercrombie & Fitch
Question # 1: Internal Analysis
Question # 2: External Analysis
Question # 3: Industry Analysis
Question # 4: Strategy Formulation
Strategic options to Abercrombie & Fitch
Strategic statement to Abercrombie & Fitch
Recommendations
List of references

3. Abercrombie & Fitch Co (A&F) began as a Manhattan-based
retailer of exotic sporting goods in 1892 (Thrasher, 2013).
It mainly focuses on casual wear for young consumers
(PricewaterhouseCoopers, 2013).
A&F has more than 1000 retail stores across United States,
Europe, and Asia pacific region (Ghigliotty, 2013).
They are known for teenage retail brand in US market
(Thrasher, 2013).
A&F listed on New York Stock Exchange and a member of its
prestigious constituent of S&P 500 (Abercrombie and Fitch,
2014).
A&F reported $1.03 billion sales in 2013 (Huffington Post, 2013)
Introduction to Abercrombie &
Fitch

4. What is Internal analysis: This involves identifying the
business' strengths and weaknesses, by analyzing its
competencies. It also involves managers highlighting the
business' competitive advantage (Henry, 2008).
Tools for internal analysis: Following tools are useful for
internal analysis. They are:-
SWOT analysis
Value chain analysis
Question # 1: Internal Analysis

5. SWOT Analysis: It examines internal factors of a firm that influence
business and profitability as well (Henry, 2008). The SWOT analysis of A&F
is as follows:-
Strengths
Strong brand image among teenage customers.
Unique shopping experience for customers (Ghigliotty, 2013).
Has continuously made profit in business (Thrasher, 2013).
Differentiation in retail services that attracts large pool of customers.
Weaknesses
Limited presence in global markets as compared to major rivals.
Controversial marketing strategy pictures are too provocative (Forbes, 2013).
Limited number of customer segment.
High price for a low perceived fashion items.
Question # 1: Internal Analysis(Cont.)

6. Opportunities
Growing demand for fashion retail items all over the world.
Expansion of retail stores in new geographical representation.
Increasing online sales (Huffington Post, 2013).
Launching new stales as per recent trend.
Threats
Severe competition from major rivals such as GAP, American Eagle, J. CREW
Different kinds of macro environmental pressures.
Impacts of global recession (Ghigliotty, 2013).
Future economic slowdown in global economy.
SWOT Analysis(Cont.)

7. Value chain analysis: Value chain model is a significant internal
analytical model that helps analyzing internal and core competencies of an
organization (Shili, 2008). It has two elements such as primary and support
activities. The analysis is as follows:-
Primary activities:
Inbound logistics: A&F has develop an integrated supply chain that
streamlines its operational activity that enhance cost efficiency in
business and provides a competitive edge in business (Inbound logistics,
2011).
Operations: A&F offer best quality fashion retail items to its customers
that helps attract more customers.
Outbound logistics: Abercrombie & Fitch has well established
outbound logistics that supports its distribution facility in business
which streamlines overall efficiency in business (Abercrombie and Fitch,
2014).
Value Chain Analysis

8. Support activities:
Technology development: Abercrombie and Fitch has efficient
technology to operate its central warehouse and distribution among
retail stores as and when necessary (Ghigliotty, 2013).
Human resources development: A&F regularly exercises employee
training and development program through its own academy that trains
potential employees and staffs for future managerial position (Thrasher,
2013).
Firm infrastructure: Abercrombie and Fitch gives more priority its
stakeholders and they are more concerned about its corporate social
responsibility.
Value Chain Analysis (Cont.)

9. Strategic Capabilities Analysis of A&F
Resources Competences
Threshold
Capabilities
Threshold Resources
 Tangible
 Supply chain network
 Differentiation in business
 Intangible
 Brand image
 Customer perception
Threshold
Competences
 Differentiation in retail
services that attracts large
pool of customers.
Capabilities for
competitive advantage
Unique Resources
 Tangible
 Supply chain network
 Offer recent trends and styles
 Intangible
 Brand identity and brand
awareness among teenage
customers.
Core Competences
 Differentiation in
fashion clothing retail
business
Strategic Capability model adapted from Johnson et al (2011)

10. PESTLE Analysis: It examines external environmental factors of a firm
that influence on A&F’s business and strategic decision made by the
Company. The analysis is as follows:-
Political forces
Stability of the US government helps to do business without any political
turmoil.
Any changes in corporate taxation policy could severely affects A&F
profitability.
Economic forces
Financial crisis may significantly affects A&F sales as all products are
premium priced (Thrasher, 2013).
Any negative changes in financial environment affects A&F business.
Economic growth is concerned for retail business in US.
Question # 2 External Analysis

11. Social forces
Changes in consumption of pattern of consumers is a major concerned issue
for Abercrombie & Fitch.
Impact of spending habits of consumers is also influential factor for A&F.
Growing young aged consumers in developed countries.
Technology forces
Frequent changes in technology requires huge investment to get updated
and efficient technology.
Development of online grocery shops needs efficient technology and
communication systems to reach more customers.
Future economic slowdown in global economy may have a significant impact
on business (PricewaterhouseCoopers, 2013).
PESTLE analysis (Cont.)

12. Legal forces
Labor and employment laws have huge impact on operations of A&F.
Corporate tax laws, commercial laws and antitrust laws changes frequently.
Corporate social responsibility and green business practice is a new
dimension to US retail business to make corporations socially responsible
and it increases costs of doing business for A&F (Smith, 2011).
Environment forces
Impacts of climate changes on A&F supply chain.
High cost for sourcing raw food items due to adverse weather.
Future a major threat for business of A&F to keep maintaining a stable
growth of business in future due to global warming caused by environmental
impacts.
PESTLE analysis (Cont.)

13. What is industry analysis: The industry analysis evaluates entire
industry and competitiveness of an organization within the industry
(Henry, 2008).
Tools to industry analysis: There are several strategic tools
available for analyzing the specific industry and its competitiveness in
relation to a single business firm. Porter’s five forces model is a ideal
model for analyzing the industry and its competitiveness.
Porter’s five forces model: Developed by Harvard University professor
Michael Porter and it has five components:-
I. Rivalry among existing firms
II. Bargaining power of customers
III. Bargaining power of suppliers
IV. Threats of new entrants
V. Threats of substitute products
Question # 3: Industry Analysis

14. Rivalry among existing firms [HIGH]
There are several number of fashion based retail brands available in the US
retail industry (Forbes, 2013).
Each retail brands offers very competitive price to attract more customers.
Each brand tries to make differentiation of their business through innovative
offers.
Threats of new entrants [LOW]
New brand requires huge investment to build necessary
infrastructure for doing fashion clothing business in USA (Smith, 2011).
There are many established fashion brands and people are very much
loyal to these clothing brands.
Threats of substitute products [HIGH]
Consumers are able to go different shops rather than just A&F retail store as
there is many alternative option available across USA and other countries.
Porter’s five forces analysis

15. Bargaining power of consumers[HIGH]
Customers have many alternative choice available across USA (Smith, 2011).
Each fashion clothing brand offers very competitive price.
There are many discount retail shops available that offer very low price and
consumers find very convenient to shop these retail shops.
Sensitivity to promotional offer and pricing of products.
Bargaining power of suppliers [LOW]
Abercrombie & Fitch has excellent supply chain network for sourcing
raw food and best quality retail items for its customers (Inbound
logistics, 2011).
There are several thousands of suppliers available and therefore A&F
can source fresh and best quality foods at a competitive price
(PricewaterhouseCoopers, 2013).
Porter’s five forces analysis (Cont.)

16. Why strategy option is crucial: Strategic options are creative
alternative action-oriented responses to the external situation that an
organisation faces. Strategic options take advantage of facts and actors,
trends, opportunities and threat of the outside world. (Henry, 2008).
possible strategic options available to A&F: There are several
strategies can be adopted to overcome external and internal forces to
A&F business:-
Enhance brand awareness and brand equity of Abercrombie & Fitch
Expand target markets such as to target adults customer group
Better advertising and promotion.
New product development and market penetration in Europe.
More focus on competitive advantage.
Question # 4: Strategy Formulation
A: Strategic Options to A&F

17. Strategy statement: A strategy statement communicates a firm’s strategy to
everyone within company. The statement consists of three components:
objective, scope and competitive advantage. All three components must be
expressed as clearly as possible (Henry, 2008).
Potential strategy statement to A&F: Following strategy statement could
be useful to the Board of Abercrombie Fitch :-
Mission of A&F: To deliver fashion clothing at competitive price.
Vision of A&F: To become one of the leading teenage fashion clothing
brands in the world.
Values of A&F: We believe in our business model and satisfy our
customers.
Competitive advantage: We have built integrated supply chain
systems for our business that helps to grow business.
Question # 4: Strategy Formulation
B: Strategy Statement to A&F

18. Recommendations
 Bringing diversification in fashion clothing business.
 Focusing on current competitive advantage.
 Enhance target market segments.
 Increase global presence in new geographical
destinations.
 Paying close attention on macro environmental forces.
 New product development that adds new customer
segments.
 Better advertising and promotion.
 Concentrate on market research to find out recent
trend and demands of consumers.
 Aware of price wars in fashion clothing retail industry.

19. References
 Abercrombie and Fitch, 2013. Abercrombie & Fitch Analyst Day Presentation.
[Online]. Available at:
http://www.abercrombie.ca/anf/investors/investorrelations.html[Accessed 18
November 2014].
 Forbes, 2013. Abercrombie dressed to disappoint. [Online]. Available at:
http://www.forbes.com/sites/zacks/2013/08/27/abercrombie-dressed-to-
disappoint/ [Accessed 18 November 2014].
 Ghigliotty, D., 2013. Abercrombie & Fitch to close up to 50 stores in the U.S.
following weak sales during the holiday season. . [Online]. Available at:
http://www.dailymail.co.uk/news/article-2283222/Abercrombie--Fitch-close-50-
stores-U-S-following-weak-sales-holiday-season.html [Accessed 18 November
2014].
 Henry, A., 2008. Understanding strategic management. Oxford: Oxford
University Press.
 Huffington Post, 2013. Abercrombie & Fitch Sales Decline for Seventh Straight
Quarter. [Online]. Available at:
http://www.huffingtonpost.com/2013/11/21/abercrombie-sales-
decline_n_4315737.html [Accessed 18 November 2014].

20. References (Cont.)
 Inbound logistics, 2011. Supply Chain Gain: Global Growth. [Online].
Available at: http://www.inboundlogistics.com/cms/article/supply-chain-
gain-global-growth/ [Accessed 18 November 2014].
 PricewaterhouseCoopers, 2013. Retail and consumer worlds express: The
great leap online. [Online]. Available at:
http://www.pwc.com/en_GX/gx/retail-consumer/pdf/pwc-randc-worlds-
express-the-great-leap-online.pdf [Accessed 18 November 2014].
 Shili, S., 2008. Management: Perspective and practice. International
Journal of Business and Management, 3 (12), 137-141.
 Smith, J., 2011. Abercrombie & Fitch: To price promote or not to price
promote. [Online]. Available at:
http://www.wiglafjournal.com/pricing/2011/07/abercrombie-fitch-to-price-
promote-or-not-to-price-promote/ [Accessed 18 November 2014].
 Thrasher, M., 2013. How Consumers Fell In And Out Of Love With
Abercrombie & Fitch. [Online]. Available at:
http://www.businessinsider.com/the-rise-and-fall-of-abercrombie-and-
fitch-2013-7?op=1 [Accessed 18 November 2014].

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