AGENDA

1.Company Overview 2.History 3.Swot analysis 4.Growth of E-Commerce in China 5.Pestel 5.Conclusion 6.Bibliography

Company Overview

As a clothing company, Abercrombie & Fitch emphasizes a hip, fun feeling and a healthy, outdoor lifestyle.

Abercrombie & Fitch is a retailer of casual clothing and accessories including cologne and perfume for men and women targeting the collegiate demographic (18-24). The company operates over 300 stores including "abercrombie" stores for children and teenagers; and also publishes a quarterly combination magazine/catalog. Abercrombie & Fitch is a hip and trendy casual style clothing brand that does not hide the fact it is aimed at the young and beautiful. Most appealing to students able to live full time in jeans and trendy accessories, Abercrombie & Fitch became best known for what the models werent wearing in its A&F Quarterly catalogue. A lot of people don't belong [in our clothes], and they can't belong. Are we exclusionary? Absolutely. Those companies that are in trouble are trying to target everybody: young, old, fat, skinny. But then you become totally vanilla. You don't alienate anybody, but you don't excite anybody, either." - CEO Mike Jeffries

SWOT ANALYSIS

 STRENGHTS

Solid financial position

Loyal customer base Strong brand image solid financial position Strong market position Effective marketing strategy Stores are trendy Website

WEAKNESSES

Expensive young target market provocative marketing

 OPPORTUNITIES

E-Commerce in China (emerging market) Chinese like Western look Economies of scale Growing middle class Expand products

THREATS

Cost of raw materials may rise Local competition Lompetition from similar companies Counterfeit products May not catch on

Growth of E-Commerce in China

In the second quarter of 2011, Chinas luxury brand e-commerce market had a value of $541 million dollars. This is expected to grow annually by 20% reaching $3.1 billion annually within 2 years

 In 2010, Chinas online shopping

industry had a turnover of $80 billion and grew 87% year on year.

China has 420 million internet users

with 185 million of these making at least one online purchase during 2010. (BBC)

Turnover from online shopping reached

$75 billion in 2010, up 75.3% from 2009 (iResearch)

According to the Boston consulting group there is a 99% internet penetration among our target audience of young middle class professionals and university students. Spending on average 3.6 hours online a day.(BCG)

Reasons for choosing China

For years China has been supplying products to western markets so it has the necessary experience and education in delivering products that adhere to the rigorous standards that are required by Western Legislation and consumers 64% average annual growth in Business to consumer e-commerce sales in China from 2006-2010, vs. 17% growth in Japan. $18 Billion Business to consumers e-commerce sales in China in 2010 which is a huge increase from $2.5 Billion in 2006.

Japan and South Korea are also viable options for establishing a subsidiary. Luxury products are in demand in both of these countries. However China is a huge marketplace with over 485 million internet users who spend a billion hours each day online. In 2010, 185 million of those made at least 1 online purchase.

E-Commerce Markets

Online shopping accounts for more than 5% of Chinas retail sales.

Buying online is now being viewed as more reliable and trustworthy than buying in the street markets. (Increased social interaction with chat rooms available online to talk with supplier)

It is argued that companies need to maintain Ex-Pats as 5-10% of their workforce because global experience is important (Jan Selmer 2004)

CHINA

China is the worlds leading cotton supplier. Therefore resources can be sourced locally thus reducing importing costs. Chinas rapidly growing middle class is a great attraction for Abercrombie.

With only 36% of the population using the internet there is scope for expansion and growth by establishing an Abercrombie store in China.

PEST ANALYSIS

Political Factors
China is moving towards a market
economy

Rules regulations and laws Relatively high political stability

Economical factors
Economic boom in china Growth in GDP Growing middle class Low employment rate High FDI Abercrombie sales increase

Social Factors
Attraction to Western style Large target market under 25 Social status

Technological Factors
Online shopping is 5% of Chinas retail E-Commerce growing at a maximum
rate

Abercrombie has E-commerce sales of

almost $1 billion

Conclusion

This is a very solid business decision for Abercrombie & Fitch because of the potential for economies of scope and the expanding market in a developing country with a huge potential client base. The role of the Ex-Pat manager is crucial in this case as Abercrombie & Fitchs ethos and style are significantly different from normal Chinese fashion retail stores. In your face marketing campaigns must be handled by Ex-Pat manager who has experience of working in store as it is potentially a difficult experience to transfer to the chinese public as well as replicating the stores lifestyle and atmosphere on the web. The Ex-Pat manager will be crucial for the successful transfer of HRM policies and we do not feel that a local Chinese manager would be able to communicate and integrate the unique Abercrombie business plan.

Bibliography