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Case Analysis Strategic Management

Magister Manajemen Universitas Indonesia


An Upscale Sporting Goods Retailer Becomes
A Leader in Trendy Apparel

Alexandra Ryan Ahmad Dina - 0906585641
Andre Samuel Saut Bakara - 0906585673
Deni Rahmatsyah - 0906585793
Didit Raditya - 0906585811
Emalia - 0906499165
Abercrombie & Fitch: An Upscale Sporting Goods Retailer Becomes a Leader in Trendy Apparel | 2

Abercrombie & Fitch

Competitive Strategy and Advantage in the Marketplace


Abercrombie & Fitch (A&F) is headquartered in New Albany, OH. The name Abercrombie and
Fitch originated in 1892, with a slogan “The Finest Sporting Goods Store in the World” was
producing luxurious sporting goods and rugged apparel for affluent customer. All the way through
history, A&F did a good job with keeping up customer relationship and changing fashion. Just like
during the World War II, the innovation was just adjusted with the war condition and consumed
properly in the market. Due to some internal and external problems, the company went for
bankruptcy in the year of 1977 and a year later Oshman’s sporting goods bought Abercrombie for
$1.5 million. This acquisition gave its first touch by changing the slogan into “The Adventure Goes
On”. Study for the old company was conducted, the positive ones to be retained and gave a hit in
expanded the variety.

In 1988 Limited acquired the company for $45 million and completely turned around and changed
everything, eliminating sporting goods and started introducing casual, classic American men and
women’s apparel. It was about repositioned the company as a provider of youth apparel with
specializing in the provision of outdoor clothing. In 1988, the company decided to change its
image to that of a Luxury lifestyle brand and expanding their retail store thought large market.

The acknowledgeable CEO of A&F, Michael Jeffries, able to make the store concept and strategy
as the place that match with the fickle youthful needs and wants, A&F was ranked as the 4th
profitable (net income as percentage of sales) company in apparel retailers in 2006.

A&F survived by catering to local tastes and preferences. However, the trends eventually go
beyond age, therefore A&F expanded the products to meet needs and wants different life stage. The
company hires the best looking employees to represent their store as brand representatives and
dressing employees in their latest fashion and styles. Currently, the brand name has expanded since
its success, and has gone global. The group markets under different stores: 356 Abercrombie &
Fitch stores, 212 Abercrombie, 515 Hollister co, 28 RUEHL and The newest brand 14 Gilly Hicks
(Winthrop Corporation). Under Jeffries leadership, A&F gain an astonishing performance. The net
profit is just keep going up and the company development retailers become emergent. It recognized
to become the largest retailer apparel in the world. But a question was raised, whether with the
current and future condition, will the business keep sustain?
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Problem Identification

The challenges that would be faced by A&F in the future were to maintain its competitive
advantage in which new entrant from US and abroad intent to imitate A&F strategies.

As our group has concluded that the main competitive strength of A&F are their ability in
extracting the values which their consumer can relate to, and reflecting this value through their
product and marketing communication. Therefore, in answering this challenge A&F has to ensure
that they are able to:

1. Maintain their connectivity with their very dynamic target market.

2. Anticipate the move of their rivals.

Case Analysis

Transforming A&F’s Image

The Abercrombie & Fitch (A&F) brand was established in 1892 and considered as luxury sporting
goods retailer with conservative tastes that became well known as rugged and high-quality outdoor
gear for affluent clients, including adventures, hunters, president and heads of royal family.
Famous for outfitting the safaris of Teddy Roosevelt and Ernest Hemingway and the expeditions of
Admiral Byrd to the North and South Poles, A&F goods were prominent for their durability and
dependability. This image was positioned A&F as expensive and exotic goods. A&F was not just a
place to purchase goods and apparel. It was also a place where individual in the community.
Through its history, A&F did a great job keeping up with customers and changing fashions.

In 1978 Oshman’s Sporting Goods bought A&F which at that time was struggling to develop a
strong identity & experienced with recessions, war-time troubles, inventory shrinkage, bankruptcy,
changing ownership & legal battles. After evaluated the business model, A&F’s slogan was
changed from “the finest sporting goods store in the world” to “the adventure goes on”. This
acquisition became a turning point for A&F to build the new character of the brand. Some of values
such as good qualities and legendary old product were retained. The new management believed that
A&F can change their initially image to adapt and keep up-to-date with styles for the 1980s.

After a few owners, A&F was bought by Limited Inc. in 1988. In 1992, Michael Jeffries was
appointed as new CEO and began repositioning Abercrombie & Fitch as a more fashion-oriented
casual apparel and classic American clothes business directed at 18 to 22 year-old male and female
college students with a product assortment reflecting a youthful lifestyle based upon an East Coast
heritage and Ivy League traditions by introducing new format.
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Before defining the A&F’s new format and competitive advantage that brought them became a
leader in trendy apparel industry, the analysis starts by evaluating the external and internal
environment factors which potentially affect A&F’s business situation and management’s decisions
regarding to its long-term direction, objective, strategy, and business model.

A&F’s Industry and Competitive Environment Analysis

 Analyzing A&F’s industry and competitive environment begins with identifying the
industry’s dominant economic characteristics. The market size and growth rate of apparel
industry is slightly big and growing quite fast as changes of lifestyles. A&F had three main
competitors, American Eagle Outfitters Inc. (AEOS), Gap Inc. (GAP) and J. Crew Group,
Inc. From these three competitors, GAP was the largest, with 3,000 stores worldwide and
generated $16 billion revenue in 2005. The industries characterized by rapid product
innovation which required designer, merchandisers and marketer to know better what
consumer want and also strong product innovation capabilities such as continuous product
innovation is primarily a survival strategy in this industry.
 After gaining an understanding of the industry’s general economic characteristics, further
analysis should focus on the competitive dynamics of the industry. The most powerful and
widely used tool for assessing the strength of the industry’s competitive forces is the five-
forces model of competition1.
• The barriers to entry are relatively low as the cost to purchase and produce apparel
is minimal. In the specialty retail industry, economies of scale provide a significant
advantage over the local stores. The low growth in this industry also “makes it less
attractive to new entrants”.
• In the apparel industry, rivalry is moderate to high. The rivalry between
competitors is intense and forces each company to reinvention itself to maintain
efficiencies and inventory control. The apparel industry is mainly comprised of
several main rivals of equal size. As a result of a mature apparel industry, there is a
lack of drastically new innovative products that creates rivalry when firms are
unable to differentiate their products in the industry.
• Though some goods may not be considered direct substitutes due to brand
identification, once the name brand has been removed, one article of clothing
becomes difficult to tell apart from a similarly looking article of clothing.

The five-forces model of competition is the creation of Professor Michael Porter of the Harvard Business
School. For his original presentation of the model, see Michael E. Porter, “How Competitive Forces Shape
Strategy,” Harvard Business Review 57, no. 2.
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• The suppliers also hold little power due to the company buys merchandise from
numerous factories and suppliers around the globe, primarily located in South East
Asia and South America, thereby allowing retailers leverage in negotiating prices.
• Consumers as buyers are willing to pay a premium price for perceived quality and
“fashion recognition”, but the pricing points tend to be very elastic. One would
expect buyers to hold minimal power over their suppliers because of the
fragmentation of the retail industry.
Due to analysis above, most of the collective impact of the five competitive forces is
moderate to week, it meant that the apparel industry is still competitively attractive in the
sense that A&F can reasonably expect to earn good profits.
 Once these competitive forces defined, the next step is to determine the driving forces2 that
might influenced in reshaping the industry landscape and altering competitive condition.
The potential driving forces for A&F in the apparel industry are as follows:
• Increasing globalization – competition in apparel industry begins to shift from a
regional focus to international. Sometimes globalization becomes a strong driver to
broaden its current market share. As known that A&F planned to open its first
European store in London in 2007.
• Emerging new Internet capabilities and applications – the ability to reach
consumers via the internet gives buyers extraordinary ability to explore the product
offerings from any brands and shop the market for the best value. A&F enhanced
their capabilities to sell the product through Web sites equipped with shopping-cart
• Product innovation – creating wider product differentiation to attract more first-
time buyers has been a key driving force in apparel industry. To do so, A&F tried
to introduce two or three new items in its stores every week. Moreover A&F also
launched new men’s line, Ezra Fitch, featured with high-quality apparel made
from cashmere, velvet and leather for upscale segment and Gilly Hicks is a lifestyle
brand specializing in women's “knickers from casual to sexy, relaxed PJ's and
beauty things.”3
• Marketing innovation – using controversy as a free advertising such as publishing
a provocative catalog photograph, revealing clothes and racy slogans can alter the

Driving forces are the major underlying causes of change in industry and competitive conditions,
“Essentials of Strategic Management: The Quest for Competitive Advantage” Second Edition, p 58
Gilly Hicks, http://en.wikipedia.org/wiki/Gilly_Hicks
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competitive positions of rival firm and effectively attract attention of teenager and
young adult who often respond positively to this kind of marketing strategy.
• Changing social concerns, attitudes and lifestyles – rising social issues & changing
attitudes and lifestyles can be dominant to lead the industry change. Apparently
young people purchase the product not just for the functionality but because it
promotes a certain value that they can relate to. To address this, Michael Jeffries
made sure that A&F apparel reflected the lifestyles of college student by assigned
team of designers, merchandiser and marketers visited college campuses once a
month to talk to student and explore what they liked and how the spent their time.
 After determining its driving forces, A&F need to reveal the market positions of industry
competitor using strategic group mapping4. This tool is useful for comparing the market
positions of industry competitor. As shown in figure 1 below, A&F has better positioning
in term of fashion content and price compare to two main competitors.


 The next analysis is competitive intelligence which scanning the rivals’ strategies, action
and announcement, resource strengths and weaknesses and the thinking and leadership
styles of their executive is valuable for predicting the strategic moves competitors are
likely to make next. A&F need to anticipate that AEOS planned to launch two new store
concept in 2006, one is Martin+Osa, the clothing store selling denim and active sportswear
to men and women ages 24-40 and the other one is Aerie, an intimate apparel sub-brand
and stand-alone stores. Other competitor, J Crew, also planned to launch Madewell, a

A strategic group is a cluster of industry rivals that have similar competitive approaches and market
positions, “Essentials of Strategic Management: The Quest for Competitive Advantage” Second Edition, p 62
Source: Goldman Sachs
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lower price casual clothing store for women selling merchandise and preparing an initial
public offering of common stock of $355 million.
 Following that, A&F need to define the industry’s key success factors (KSFs)6 which
affect the ability to prosper in the marketplace. In the apparel industry, the KSFs are
appealing design and color combinations, low-cost manufacturing to achieve scale
economies, a strong network or store concept and advertisements that effectively
communicate value and the brand’s image.
 The final step in evaluating the industry and competitive environment is consolidating the
above analyses to determine if the apparel industry offers strong prospect for attractive
profits. Based on that, this apparel industry market is fundamentally attractive for A&F
since they had an evitable market. It catered to teenagers, whose population in US was
growing and somewhat considered to be recession-proof.

A&F’s Resources and Competitive Strength Analysis

A&F provide higher quality, higher priced items and focus mainly on clothing. Most consumers are
willing to pay extra for the Abercrombie name and style. A&F’s major competitive advantage is its
brand name. A&F is a major status symbol in many high schools and colleges in America because
of its higher price and fashionable look.

Furthermore, A&F need to evaluate its internal situation, including its collection of competitively
valuable resources & capabilities to focus their competitive advantage on current market trends.
The company has figured out what works for them as an organization using SWOT analysis.


 A&F has continually made a successful profit over the years, even through in economic
recession (strong financial performance).
 Putting emphasis on a comfortable and positive work environment for their employees
illustrates that they know what it takes to be successful (such as taking away the usual way
of working; cubicles and strict eight hour days, and replacing them with open work areas
that promote team work).
 Leading by example is another strong characteristic. Michael 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. A&F provides healthy meals that help stimulate good ideas

Key success factors are the strategy elements, product attributes, competitive capabilities, or intangible
assets with the greatest impact on future success in the marketplace. “Essentials of Strategic Management:
The Quest for Competitive Advantage” Second Edition, p 67.
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 A&F knows that in order to be successful in selling a high priced product, the people who
represent Abercrombie must believe in the brand itself. They must eat, sleep, and breathe
 A strong management team is the number one reason that Abercrombie and its brands are
successful. Management is successful in continually creating a strong brand that will
continue keep them in the lead for a specialized product.


 A&F 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.
 Spend a lot of energy figuring out ways of perfecting their brand without racially excluding
customers and potential employees.
 Overpriced and high cost of structure.


 In light of the economy decreasing, people are not as willing to spend a large amount of
money on clothes. Now is the time for many to become conservative, save money and shop
for bargains. To maintain their customers and possibly gain more, A&F could take
advantage of the bargain hunter. A&F has made it clear that they chose not to lower prices
as it would cheapen the product. In order to appeal to the mass, they could keep their
current line, but add a line with a lesser price base. This will attract a broader base of
customers. More interest equates to more money.
 Expanding their current brands is always a way of staying competitive in today’s market.
Overall, A&F’s brands are mainly, skirts, pants, shorts, polo shirts, along with perfumes
and hats. Creating a beach inspired footwear line, may complete the look. It would be in
A&F’s interest to branch out from the norm. 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.
 A&F can take advantage in creating a theme which is happening on t-shirt, a bag to hand
out to customers with their purchase that they can use every time they make a purchase
(such as “Go Green”, “peace” theme).
 Expand internationally by export or subsidiary
 Online shopping or E-commerce business to expanding their service lines
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 Abercrombie & Fitch has been known for not being very diverse. By not being as diverse
as many other clothing companies, A&F could stand the chance of losing business.
 They were striving for a certain look and style. It was mainly consisted of young white
male and females with nice bodies, beautiful hair and shapes that fit their tiny clothes.
 Racial profiling, has also limited the type of clientele that frequents the stores, it limits the
potential income that the company could be earning.
 Abercrombie and Fitch have four brands such as Hollister, Ruehl, Abercrombie and Gilly
Hicks. A negative mark on one brand can possibly negatively affect all brands.
 Economic slowdown (cyclical economic changes)
 Rising cost of materials, commodity prices
 Competition from other apparel players at the low & high end of the spectrum (i.e., GAP,

STP (Segmentation, Targeting, Positioning) Analysis


Apparel is an already fragmented industry, the market is segmented demographically and psycho
graphically. The demographic segmentation of the industry includes segmentation by age, gender,
profession, education, income level, race, body profile. The Psychographic segmentation includes
segmentation by hobby, values, sports preference, sexual preference, etc.


A&F targets are described as cool, attractive, fashion-conscious consumers with age ranging from
elementary school to post-college, which are served by four of their brands:

 A&F (1992 - reflected youthful lifestyle of the East coast & Ivy League traditions):
College students
 Abercrombie (1998): Age 7-14 with fashions similar to A&F line
 Hollister Company (2000 - promoted the laid-back & California surf lifestyle): High school
students with lower priced casual apparel, personal care product and accessories
 Ruehl (2004 - inspired by lifestyle of New York City’s Greenwich Village): Post-college
consumer at age 22-35 with more upscale and expensive casual sportswear, trendy apparel
and leather goods.
 Gilly Hicks (2007 - inspired by the Australian theme of “Down Under”): A lifestyle brand
specializing in women's “knickers from casual to sexy, relaxed PJ's and beauty things” and
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offers underwear and loungewear for women 18 and up. Gilly Hicks is officially labeled as
“the Cheeky cousin of Abercrombie & Fitch”.


A&F aim to achieve the position as the coolest brand, the brand with greatest quality, the
inspirational brand of college students. Furthermore, A&F catered the needs of very niche market.
The term used is for this type of retailer is a specialty retailer, which in this market they aim to
position themselves as a market leader.

Brand Positioning: Luxury vs. Near Luxury vs. Standard

Luxury apparel stores typically target customers in the highest income bracket who can afford to
pay the highest prices for premium-quality merchandise. Apparel retailers of “near luxury” or
“inspirational” brands target customers from the middle- and upper-middle class who desire to
wear the latest fashions, but can not afford to pay premium, luxury prices so they settle for these
“near luxury” apparel brands such as Abercrombie & Fitch and Polo Ralph Lauren. Finally,
standard-level apparel stores such as The Gap target middle- and lower-class customers with
average incomes who purchase lower-priced merchandise and look for clearance sales.

4P Analysis

The main competitive strength of the A&F in maintaining their position in the industry relied
heavily on their focus at the target market, and their ability in serving the needs of their consumer.
This is strategically done by continuously making effort to connect and get as close as possible to
the consumer. A&F promote the value they believe their target market can relate with, that is
sensuality, youthful lifestyle, a love for outdoor and fun with friends. Those values are
communicated through their brand concept of “Casual Luxury”, and the marketing strategies
(marketing mix).

Promotion & Communication

The communication of A&F to their customer is translated into 4 main messages namely;

1. The Abercrombie & Fitch person (through cutting or shape of clothes)

2. Uniqueness (through design & logos)
3. Luxury (through the store concept and advertising)
4. Exclusivity (through membership and promotional event)

The most important aspects of the Abercrombie & Fitch person are the target age, being young
adult. Models in the catalogs, magazines, website, and store posters appear to be in their early
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twenties. In addition, store employees and in-store brand representatives appear to be in their late
teens and early twenties. The firm believe “to win teens” loyalty, you have to speak their language”
This means consumers relate to models, so the models must be like the target audience.

The build of an Abercrombie & Fitch person is another predominant message communicated
through catalogs, consumers, employees, gift cards, in-store brand representatives, magazines,
mannequins, models, posters, shopping bags, the product, and the website. The Abercrombie &
Fitch person is not overweight; models used for advertising & promotional items were notably thin.

The Abercrombie & Fitch magazines and catalogs also communicated messages of luxury. The
magazines were printed on higher quality linen paper, which alluded to a higher class than other
retail magazines.

Consumers that identified with messages of the A&F image including the look, uniqueness, luxury,
eventually were persuaded to purchase the clothing, and become part of the elite club. This concept
of exclusivity is reinforced with club membership (Hollister’s Club Cali), and some of the brand
promotional event- such as when they issued after-hours parties invitation with the new bands to
the shoppers during thanksgiving.

In channeling their message across to the target market, A&F is known for their eagerness in being
involved on controversy. As the matter of fact, part of their competitive strategy is to stir up
controversy, go against convention, and appeal emotionally to its youthful customer.

While adults tend to react negatively to the company provocative move, teenagers and young adult
were thought to respond positively to the move. This is possibly as an act of rebellion against the
traditional values, or because they feel connected to the life-style images that is portrayed in A&F
ads. Some observers assume that A&F intentionally create controversy to draw attention in hope
that this will bring shoppers to the outlet, and sell more products.


Design of outlets is luxurious. The Company views the customer's in-store experience as the
primary vehicle for communicating the spirit of each of the brands. The company uses the visual
presentation of the merchandise, the in-store marketing, music, fragrances and the sales associates,
or brand representatives. This is an effort to reinforce the inspirational lifestyles represented by the
brands, the youthfulness and the sensuality which they endorse. Each outlet was designed in one of
several prototypes which are created at company HQ. CEO Jefferies himself examine the model
closely to make sure the right messages are communicated in all stores across the nation. Each
detailed is comprehensively checked during his regular store visit.
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A&F are usually able to sell the products at premium price without necessity for regular discounts.

Management feels discounts would cheapen A&F brand. However they categorize their price range
with respect to the product line and the market segment.


Products sold by Abercrombie & Fitch send messages of luxury. Abercrombie & Fitch clothing
always had something to identify the person as wearing its product, such as the signature stitch on
the back pocket to jeans, the words Abercrombie, Abercrombie & Fitch, or A&F, or their symbol
the moose. The usage of word logos like A&F tended to be on the more relaxed clothing such as t-
shirts, sweatpants, and sweatshirts; whereas the usage of the moose symbol was on the more
luxurious clothing such as button up shirts and cashmere sweaters.

Abercrombie & Fitch products are also shaped to continue the message of thinness as the build of
Abercrombie & Fitch person. A&F clothing is not made in large sizes; women’s sizes were XS to L
in shirts and 00 to 10 in pants and men’s clothing was sized S to XXL in shirts and 30x30 to 36x34
in pants. All messages communicated a build of thin and toned bodies. These in turn convince
consumers that wearing the product make a person more attractive.

As have been highlighted above, A&F has a tendency to create controversy. This is also done
through the product they launched. Some of the controversy they create includes; selling a T-Shirt
with racist remark on the shirt, launch thong underwear for girls ages 10 and up with sexual phrases
on the product, and selling a T-Shirt which promote underage drinking.

Competitive Strategy Analysis

We have analyzed Abercrombie and Fitch strategies and performances in order to evaluate their
sustainable competitive strategy7. With all of the competition in the apparel industry, Abercrombie
& Fitch strategy could be considered as a focus differentiation strategy, it differentiate itself from
all other competitors through offering carefully designed products and services to appeal to the
unique preference and needs of their narrow (niche) target market which is men and women of ages
ranging from 7 to 22. A&F occupy differentiation-based focus strategies targeted at young &
teenagers buyers. The market contain buyer that willing to pay a price premium for the very finest
items available.

A competitive strategy concern the specifics of management’s game plan for competing succescully and
securing a competitive advantage over rivals. “Essentials of Strategic Management: The Quest for
Competitive Advantage” Second Edition, p 97.
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Conclusion and Recommendation


Future direction, in the long term A&F should continuously look for more opportunities to invest in
overseas for expanding into the European and Asian markets. And for the short term, A&F could
emphasize on online shopping, sponsoring college events, re-evaluating the needs and preferences
of its target market, improve its customer service and review the choice of magazine were A&F
places ads.

With such a dynamic management team and the desire to the specialty apparel by storm, they can
figure out a way to remain exclusive without being insulting and hurtful. It is ok to make a brand in
a particular style and fashion that will fit a certain body type, but it should to still be available to
anyone. It shouldn’t be marketed to anyone who feels as though they can fit that mold. The brand
should not only have models of one race and color or associates of one race and color. Executives
must come together in become the leader in diversity without compromising their goals.
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1. “Essential of Strategic Management: The Quest for Competitive Advantage” Second

Edition, John E. Gamble and Arthur A. Thompson, Jr., McGraw-Hill International Edition
2. Case 11 “Abercrombie & Fitch: An Upscale Sporting Goods Retailer Become a Leader in
Trendy Apparel”, Janet L. Rovenpor, Manhattan College, Essential of Strategic
Management: The Quest for Competitive Advantage, McGraw-Hill International Edition
3. Online Sources: