Abercrombie & Fitch July 25, 2010 Identify and describe the greatest environmental threats that have immediate implications for Abercrombie & Fitch. Hitt, Ireland and Hoskisson define a threat as, “a condition in the general environment that may hinder a company’s efforts to achieve strategic competitiveness. ” (Hitt, Ireland and Hoskisson, page 37) Abercrombie & Fitch are in the retail industry, selling everything from clothing to jewelry to fragrances for men and women. Abercrombie & Fitch’s top competitors in this industry are American Eagle Outfitters, Gap, Inc. , and J. Crew.
While Abercrombie & Fitch has gone global with companies in other countries and now has online capabilities, these competing companies have also spread to some of these same countries and also has online capabilities. Abercrombie & Fitch and American Eagle Outfitters are running neck and neck in the areas of revenue and market capitalization. Another threat to Abercrombie & Fitch is that these companies, American Eagle Outfitters, Gap, Inc. , and J. Crew all have higher price to earnings ratios. Abercrombie & Fitch also comes in second behind J. Crew in price to cash flow ratio and rates third behind J.
Crew and American Eagle Outfitters in revenue. Outside of finances, another threat to Abercrombie & Fitch is their perceived lack of diversity as it relates to its consumers and its employees regarding who can wear their clothing and who can sale their clothing by catering towards a younger, predominantly college-aged group. This limitation on the type of people to wear and sale their clothing, also limits their earning potential. Also, because of the past decrease in the economy due to the housing market taking a dive and the unemployment rate rising every day, people are not as willing to spend a large amount of money on clothes.
Now many people are becoming conservative, saving money and shopping for bargains. Abercrombie & Fitch refused to offer any discounts on its merchandise, which caused consumers to look elsewhere for less expensive clothing. Abercrombie & Fitch has quite a few external threats facing them while trying to be a leader in their industry. In addition to the external threats, Abercrombie & Fitch also has internal threats facing them, the biggest of these internal threats are lawsuits. Lawsuits have been placed against the company in the past years due to discriminatory employment practices.
Abercrombie & Fitch was accused of giving desirable positions to white applicants, to the exclusion of minorities. Abercrombie & Fitch has a lot to deal with when it comes to environmental threats. There are several threats externally and internally they have to overcome in an effort to become a leader in the industry. Identify and describe the greatest opportunities available in the marketplace for Abercrombie & Fitch to pursue. Hitt, Ireland and Hoskisson define opportunity as, “a condition in the general that, if exploited, helps a company achieve strategic competitiveness. (Hitt, Ireland and Hoskisson, page 37) Because of the issues with the economy, to maintain their customers and possibly gain more, A&F could take advantage of the bargain. Abercrombie & Fitch could take advantage of those looking to save money. Since Abercrombie & Fitch has made it clear that they chose not to lower prices as they believe it would cheapen the product, they could keep their current line, but add a line with a lower price, which will attract more customers. Abercrombie & Fitch could also expand on their current brands to stay competitive in today’s market.
It would be in Abercrombie & Fitch’s interest to step away from the norm and expand on their client base by offering more variety. When a customer gets too comfortable with a certain name brand, it becomes easy for them to venture out and buy from someone else. Keeping it exciting, new and fun will ensure that the customer will always come back looking for more. All over the world companies have decided to join in with the popular concept of “Going Green”, Abercrombie & Fitch can take advantage of this by creating environmentally friendly items.
Appealing to those consumers are environmentally conscious. Abercrombie & Fitch has many opportunities to evolve with the times in an effort to become a leader in the industry. Identify and describe Abercrombie & Fitch’s greatest organizational strengths? A company’s strengths are the attributes of the company that are helpful to achieving its objectives. Abercrombie & Fitch made a successful profit over the years, even through hard economic times. A lot of their success is due to their extremely comfortable work environment.
After all, happy employees do make a better work environment which leads to more productivity which leads to more profit. Abercrombie & Fitch has created this environment by taking away the usual mundane way of working; such as cubicles and strict eight hour days, and replacing them with open work areas that promote team work. They also encourage their employees to work out, and have built a state of the art gym, and nature walks for them to participate on a daily basis. Another strength is leading by example. The CEO, Mr. Mike Jeffries, is not held up in a stuffy office where is he is inaccessible.
He, like his employees works in a communal area with his staff members. Abercrombie & Fitch also provides healthy meals that they believe help stimulate good ideas. Abercrombie & Fitch also has a strong management team and that is the number one reason they are so successful. Management is successful in continually creating a strong brand that will continue keep them in the lead for a specialized product. Management believes that in order to be successful in selling a high priced product, the people who represent Abercrombie & Fitch must believe in the brand wholeheartedly.
Abercrombie & Fitch takes pride in seeking out the right fit for their brands, whether it is in the store or in corporate. Identify and define the company’s greatest weaknesses. As stated earlier, a company’s strengths are the attributes of the company that are helpful to achieving its objectives, on the other hand, a company’s weaknesses are the attributes of the company that are harmful to achieving its objectives. As discussed in environmental threats, Abercrombie ; Fitch has not done well in creating a culturally diverse atmosphere internally or externally.
They have been accused of racial profiling and discriminating against minorities that desire to work in their stores. By desiring to remain exclusive, they have alienated particular groups that have expressed interest their brand. Mike Jeffries, CEO, has admitted that Abercrombie ; Fitch only goes after the popular and desirable teenagers and anyone else can find somewhere else to shop when he said, “Candidly, we go after the cool kids. We go after the attractive all-American kid with a great attitude and a lot of friends. 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. ” (Cowan, K. 2007) With this type of attitude, Abercrombie ; Fitch needs to overlook their smart, yet greedy CEO Mike Jeffries and instead of spending so much energy trying to exclude others and try to figure out ways of perfecting their brand without racially excluding potential customers and employees.
Describe how Abercrombie ; Fitch’s strengths can be used to deflect environmental threats to further the company’s success in the industry? Because Abercrombie ; Fitch has such an outstanding management team and the desire to be the leader in specialty apparel, they need to figure out a way to remain exclusive in a non-discriminatory manner. While it is their option to make a brand in a particular style and fashion that will fit a certain body type, they should also make it in a way that it is available to anyone.
The brand should not be marketed to a specific group and should have models of more than one race and color and associates of more than one race and color. The management should lead by example in this area also by coming together and demonstrating diversity without compromising their objectives. Describe how Abercrombie ; Fitch’s strengths can be used to take advantage of opportunities to further the company’s success in the industry. Abercrombie ; Fitch’s biggest strength is the strong management team.
The management team can take advantage of its opportunities by making the decision to offer discounts on their merchandise or offering a line at a lower price. Management should also encourage their designers to come up with a new style instead of different variations of the normal style. Finally, Abercrombie ; Fitch should take a more active role in “Going Green” by producing more environmentally-safe products. This would demonstrate their concern for the environment and also attract those consumers who are environmental safety conscious. References “ANF: ABERCROMBIE & FITCH CO Top Competitors. Business News, Stock Quotes, Investment Advice – DailyFinance. [email protected], n. d. Web. 20 July 2010. <http://www. dailyfinance. com/company/abercrombie-and-fitch-co/anf/nys/top-competitors>. Cowan, K. Abercrombie & Fitch—aka Cool Kids Only?. (May 2007). http://blogs. payscale. com/salary_report_kris_cowan/2007/05/abercrombie_fit. html Hitt, M, R. D. Ireland, and R. E. Hoskisson. “The External Environment: Opportunities, Threats, Industry Competition, and Competitor Analysis. ” Strategic Management: Competitiveness and Globalization, Concepts and Cases. Mason: Cengage Learning, 2009. 37.