Bargaining to four weeks to copy luxury productsCounterfeit

power of suppliersMost of Burberry’s supplier are located in
Europe and their end products are produced in the UK and also elsewhere by
outside suppliers. There is a small risk of forward integration because  there big  entry barriers to enter luxury business. What
strengthens suppliers’ power is that some of the products are distinct and have
nonexistent substitutes. And what weakens suppliers’ strength is that Burberry
is knowledgeable about products they get from suppliers.

For Burberry it’s easier to switch suppliers who
supply them with commodities such as leather, cashmere or cotton. There is a
large number of them so it’s not difficult for Burberry to change from one
supplier to another. However it is different when it comes to more advanced
items. Craftsmen posses certain skills which take a long time to master plus
there is also a decreasing number of them and they can charge more.  Consequently it’s getting more difficult for
Burberry to change them and placing more power in to the hands of craftsmen. Burberry
risk of getting lower quality items by changing any supplier. Bargaining power
of suppliers is moderate.

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Threat of
substitute products

There is a growing number of low-middle price labels
such as Asos, Bohoo and Missguided. There are customers who are sensible to
economic cycle and buy from those brands. Their expertise is being really good
at imitating higher priced luxury items in brief time period. It takes them one
to four weeks to copy luxury productsCounterfeit
items from China which look alike genuine products and it’s challenging to distinguish
them from authentic products are also a danger to Burberry’s products. What
makes pricey products differ the most from mimicked products is the way upscale
brands are perceived. Consumers do not buy upscale items purely for their usefulness,
because cheaper fake products offer comparable use, but because luxury brands
are a synonym of wealth and social status. (NUS
Investment Society, Consumer Industry report on U.S. luxury goods) The
greatest threat of substitutes is from rivals which offer prodcuts of equal or
even better quality and customers have minor costs switching them.

Burberry is planning to remove their items from certain shops that
are not luxury and renovate their own shops. Companies like Louis Vuitton has
created their label and distinction on expensive leather handbags and
Burberry’s aim is to compete with brands like that. Burberry thinks that by
selling high-priced handbag they will be able to boost their margins. For
comparable products Louis Vuitton charges higher prices. The company also
making alterations in crucial employees. Their designer Christopher Bailey who
has been with the company for 17 years will be replaced and they are looking
for somoneone with extensive expertise in designing handbags. (CNN)

Their aim is to turn the brand into a luxury brand. They will
expand their handbag offering because handbags create larger margins than
trench coats, which is Buberry’s signature item. Louis Vuitton has bigger array
of leather goods. They will reduce the number of the outlet stores. By training
in-store employees on leather goods and styling they want to improve buyer’s
experience and boost their efficieny. Making the most out of digital media
remains one of the goals. The british designer was one of the first who entered
a »see now, buy now« model which allowes custmoers to purchase immediately
after a fashion shows. That was a bold move and a very different way of
shopping and fewer chances for forgery. All this will result in profitability.
They expect revenue and operating margins will be stable over the next two
years and in 2021 they predict growth. (businessoffashion).

Vuitton knows how to differentiate itself. Louis Vuitton handbags are compared
to Burberry’s higher in price. Another thing that differs Burberry from Louis
Vuitton is that Louis Vuitton never has a sale, they never mark down prices
because they believe all customers should pay the same price for products


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