Branding in Europe
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Executive summary
Aalborg University 12.01.2012
This is a meta-theoretical project, which means that the emphasis is on methodology, philosophy of science and theories that apply to real business problems. Besides this, the researchers have studied an illustrative case of Abercrombie & Fitch, which is an
American luxury casual retailer company. The problem formulation of this project is:
‘ This project aims to explore , how retail companies’ branding strategies can evolve in the internationalization process, using an illustrative case of Abercrombie & Fitch.’
In this project, the researchers are objective, stay externally from the company and try to find the answers for the problem formulation stated above. The deductive approach and qualitative research are applied during the study.
The study shows that Abercrombie & Fitch follows the Uppsala model in the internationalization process from the first stage, where it stayed a long time, then skipped the second one to go to the third stage. The company has not gone into the fourth stage of the theory due to the fact that it is not a manufacturer. Abercrombie &
Fitch has built its brand as a young-adult luxury casual lifestyle with a special experience for the customers when visiting the stores. The unique feature of this company is the in-store atmosphere, provocative and rebellious advertisements by using semi-nude models. At the moment, this is the only company, which has success in tying clothes and nudity.
When internationalizing, Abercrombie & Fitch faces challenges with brand image and brand awareness, which it has to overcome to build up brand value in the new markets. The general campaign, product portfolio, style and the special experience in the stores is transferred from the US to the European market. There are differences concerning the number of flagship stores, the size of stores and price of products in
Europe compared to the US. Due to the fact that there are both similarities and differences in Abercrombie & Fitch’s different markets, they can affect the brand image and brand awareness of the company from the country of origin to the foreign markets. Abercrombie & Fitch uses its internationalization process to build up a more exclusive and premium brand in Europe with only a few, strategically located flagship stores, the pricing strategy and a very special in-store atmosphere. The Abercrombie
& Fitch brand evolved in a more exclusive direction when internationalizing to
Europe.
Group 11
Title page
Aalborg University 12.01.2012
Place:
Project:
Aalborg University
Semester project, 1 st
semester, Master in International Business
Group:
Economics
No. 11
Supervisor: Andreea Ioana Iacob
Submission: 12.01.2012
Pages: 72 (172.664/2400 = 71,94)
Adina-Florentina Bot
Sascha Gutmann
Phuong Ninh
Tatjana Zvereva
Sofie Lind Østergaard
Group 11
Table of Contents
Aalborg University 12.01.2012
History of Abercrombie & Fitch
................................................................................ 4
Abercrombie & Fitch’s marketing and advertising .............................................. 7
Definition and characteristics of a paradigm
.......................................................... 9
The Functionalism, Interpretivism, Structuralism and Interactionalism paradigms (FISI)
Burrell and Morgan Four Paradigm Model of Social Theory
Our paradigmatic considerations
............................................................................. 19
..................................................................................... 19
................................................................................. 23
Research criteria in this project
.......................................................................... 24
............................................................................................ 28
Definition of a brand, brand image and brand identity
................................ 32
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Differences between global, local and glocal marketing
............................. 35
.................................................................................... 36
..................................................................................... 38
Drivers of international branding strategy
....................................................... 38
....................................................................................... 40
The process of brand globalization
.................................................................... 40
Connection of internationalization and branding
............................................... 43
........................................................................................... 44
............................................................................................... 46
Internationalization of Abercrombie & Fitch
...................................................... 54
Drivers for international branding strategy
.......................................................... 57
............................................................................................ 58
Challenges for A&F’s brand internationalization .............................................. 59
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1.
Introduction
Aalborg University 12.01.2012
This chapter consists of an introduction to the topic of the project and the problem formulation. Research questions will also be presented and it will be argued how the questions will be answered. Likewise there will be a description of an illustrative case, Abercrombie & Fitch and the project will be based on this. Abercrombie &
Fitch will be introduced later in this chapter.
Through research one aims to discover, investigate and interpret facts, revisions of accepted theories or laws. Research is very important as it is designed to solve a particular existing problem and research also impacts the decision making (Bryman and Bell, 2003, p. 4). In order to solve the organisational problems, the researchers have to diagnose the situation by i.e. interviewing key players and revising available documents, articles or seeking guidance from learnt theories and paying great attention to the assumptions underlying these theories (Kuada, 2011, p. 6). This project will focus on the internationalization process and retail companies branding strategies. This topic is very interesting, because there are a lot of branding strategies and it is very important to choose the best strategy especially, when one wants to internationalize. “ Branding aims to establish a significant and differentiated presence in the market among their competitors and to attract and retain customers.
”
(American Marketing Association Dictionary, 2011). Branding can help companies get their name well-known by being special and unique. There has already been conducted a lot of research in the area of branding, because it is not a new phenomenon. In 1988 Onkvisit and Shaw raised the question whether to brand or not to brand. They also put emphasis on that at that time mostly was large multinational companies that used branding (Onkvisit and Shaw, 1988, p. 22). Douglas et al. (2001, p. 1) also expressed the importance of branding: “ Brands play a critical role in establishing a firm's visibility and position in international markets. Building a coherent international brand architecture is a key component of the firm's overall international marketing strategy […].
”
Today it is a highly used term and there has been shown over the years a bigger interest in writing on the topic. Kotler et al.
(2009) have written widely about branding in their popular textbook, ‘Marketing
Management’. It is clearly an important issue for companies especially in the international markets.
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Even though there has been a lot of literature written about branding, there has been less research done in the area of retail branding. Ailawadi and Keller are some of the researchers that have been working in the area of retail branding. They have stated the growing focus on branding and the value it can add to retail companies. “ Given its highly competitive nature, branding can be especially important in the retailing industry to influence customer perceptions and drive store choice and loyalty.”
(Ailawadi and Keller, 2004, p. 331). This statement shows how big an impact branding can have on companies in the retail industry. Nowadays branding is seen as a competitive factor and asset of a company in its home country and when internationalizing. When a company wants to internationalize, there are a lot of elements to consider. One of them is its branding strategy – i.e. it can use the same branding in the foreign market as it does in the domestic market or maybe it cannot.
Big companies often see internationalization as the last step in an expansion process.
The globalization of markets has pushed the competition to be on a global scale and therefore the companies in general, but also the retail companies, need to take action and use the valuable assets in the company in order to be competitive. If a company has a strong brand, it can help the company to establish an identity in the market, but also in the customers’ mind (Douglas et al., 2001, p. 2).
This research is important due to the big emphasis on branding and internationalization today. It is also essential, because branding has such a big and central role in retail companies and its competitive level. Furthermore it is interesting to research the combination with branding and internationalization and connect them, because there are not many researches that have done this before. These are the reasons for wanting to connect the internationalization process with the branding strategies of retail companies and this has resulted in a problem formulation.
1.1.
Problem formulation
This project aims to explore , how retail companies’ branding strategies can evolve in the internationalization process, using an illustrative case of Abercrombie &
Fitch.
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The research questions for this project are the following:
1.
What is Abercrombie & Fitch internationalization process?
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This question will be answered with the help of an internationalization theory and data about the historical periods of the company. It can be seen as the basic of the analysis and will be used throughout the project.
2.
What is Abercrombie & Fitch’s branding strategy?
When answering this question, branding theories are the weighting part.
Branding theories and data regarding Abercrombie & Fitch will therefore help to answer this question.
3.
What kind of challenges does Abercrombie & Fitch face, when internationalising its brand to Europe?
This question will be answered in the analysis, and it will be based on the annual report from Abercrombie & Fitch and a mix of the branding theories and influencing factors.
4.
What are the similarities and differences in Abercrombie & Fitch’s branding in the USA compared to Europe?
This question has a connection to the previous questions and will therefore be answered in the same manner with branding theories and data concerning the case.
Research questions are very important as they will guide the research, decisions about what data to collect and how to analyse the data (Bryman and Bell, 2003, p. 37).
The research question will help the researcher guide through a coherent analysis. In general the answers of the research questions will be an analysis based on theories and available literature on the topic. This is to be aware of the different points of view expressed by others on the issue (Kuada, 2011, p. 21).
1.2.
Case study
Robert K. Yin defines the case study research method as an „ empirical inquiry that investigates a contemporary phenomenon within its real-life context; when the
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Group 11 Aalborg University 12.01.2012 boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used.
” (Yin, 1984, p. 23). In case studies, ‘why’ and
‘how’ questions are often asked. Case studies are distinguished between multiple or single cases. The single case study is used in this project, because only one company is being studied. A case study often entails a more detailed analysis about a single case (Bryman and Bell, 2011, p. 59).
The researchers use the case study to examine a contemporary real-life situation, which provides the basis for the application of ideas and extension of methods.
Therefore, Abercrombie & Fitch will be introduced as an illustrative case study for this project. Abercrombie & Fitch has been chosen due to its different and sometimes provocative way of branding and advertising and is in the internationalization process therefore the research is up to day. The research will mostly focus on the challenges that a brand faces entering a new market, which in this case is Europe, compared to the home market, the US. The internationalization of Abercrombie & Fitch has come rather late regarding the history of the company. The researchers found the company fascinating because its branding and style in Europe are seen as special and unique.
1.2.1
History of Abercrombie & Fitch
Abercrombie & Fitch (A&F) is an American fashion retailer of luxury casual clothing and accessories for both men and women. The company has four different brands:
Abercrombie & Fitch, Hollister, Gilly Hicks and Abercrombie Kids. The
Abercrombie & Fitch brand is targeting the upper-middle class between 18 to 22 years (AF-1, 2011). The brand operates over 316 stores in USA and 10 international stores before November 2011 (AF-2, 2011) and the website ‘www.abercrombie.com’, where people can shop online.
The company was established in 1892 and became known as a supplier of camping, fishing and hunting gear. Abercrombie & Fitch began with a small waterfront shop and a factory in downtown Manhattan, New York City under the name David T.
Abercrombie Co. (AF-3, 2007), which was owned by David T. Abercrombie.
The lawyer Ezra Fitch was a loyal customer of Abercrombie Co. and in 1904 he brought a major share into the growing company, being officially named co-founder of David T. Abercrombie Co. Hence, the official name of the company became
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Abercrombie & Fitch Co. The founders had different views on the company’s growth for the future, as Fitch wanted to expand the company’s appeal to the general public, whilst Abercrombie wanted to continue selling gear only for professional outdoorsmen. This resulted in David T. Abercrombie selling his share of the company to Fitch in 1907.
Shortly after David T. Abercrombie resigned, Abercrombie & Fitch started a mailorder catalogue. The catalogue had 456 pages and it featured outdoor clothing, camping gear, articles and advice columns. The cost of the catalogue nearly bankrupted the company, but the subsequent flood of orders justified the expenses.
Three years later, A&F became the first company in New York to sell such clothing to both women and men. In 1917, the store moved into a twelve floor building at the corner of Madison Avenue & East 45th Street in New York. The store occupied all twelve floors and thus became “the largest and most impressive outdoor gear and sporting goods store in the world.” (AF-4, 2008).
Abercrombie & Fitch dressed a lot of great hunting and exploration expeditions, like
Charles Lindbergh’s flight across the Atlantic Ocean, Theodor Roosevelt’s trips to
Africa and Robert Peary’s expedition to the North Pole.
In 1928, Ezra Fitch retired from the company and sold his shares to his brother-inlaw, James S. Cobb. A&F expanded its business, acquiring a similar business from
New York and a Chicago branch, which became a subsidiary of A&F, but it remained under its own name. Therefore, the company widened its product portfolio with polo, golf and tennis equipment.
In the fall of 1958 it opened a store in San Francisco. Then, it continued to open stores in Florida and New Jersey.
Under the leadership of Hall Haskel, the company had lost $1 million. After a year it went bankrupted and in 1977 officially closed its doors. Then a sporting goods retailer, Oshman purchased the Abercrombie & Fitch name, trademark, and mailing list (Barnash, 1989). Soon after, in 1979, Oshman opened a store in Beverly Hills,
California under the A&F brand and tried to revive it by selling modern sportswear.
However, it didn’t succeed in increasing the sales.
In 1988 the company was acquired by The Limited Inc. It established its Headquarter in Columbus, Ohio and all the inventory was cleared out. Thus, in 1992 it was repositioned as a more fashion-oriented casual apparel business. Michael Jeffries was
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Group 11 Aalborg University 12.01.2012 named president of A&F and opened 17 stores in one year. He noticed that he had to be more focused on the teen retail market and he changed the clothes into a luxury casual style.
He adopted a new strategy to attract customers by infusing the store with music, entertainment and more popular looks and styles. Also, he has never decreased the prices, but instead, he raised the prices in order to preserve the brand and to strengthen profits.
In 1997, A&F launched Abercrombie for kids aged from 7 to 14 (AF-5, 2011), then in
2000 it introduced its third brand, Hollister Co., which targets teenagers and is a brand referring to a surfer lifestyle. In 2001, the company settled its Headquarter in New
Albany, Ohio and it has remained there until now (AF-5, 2011).
In 2004 after the success with the Hollister brand, the company introduced its fourth brand, RUEHL No. 925, which focused on the 22-35 age group. However, this brand was not as successful as Hollister and it was closed in early 2010. A&F only sells its products via its own stores and official websites. Every brand has its own stores and website.
The brand A&F began its international expansion, opening stores in Canada. Until
2007, the company was exclusively operating in the US and Canada. In March 2007
A&F went to Europe, with the first flagship
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store in London, which became a worldwide flagship store and boosted brand awareness among customers. Soon after,
Abercrombie & Fitch launched its fifth concept, Gilly Hicks, which sells bras and underwear for teenage girls. It is the only brand of A&F with a non-American image
(AF-6, 2007).
Nowadays, A&F is a very well-known brand in the US and it is internationally expanding in Europe and Asia. During 2011 it has opened a flagship store in Paris and
Madrid, and recently, it has opened flagship stores in Dusseldorf, Brussels and
Singapore. Also, in fiscal year 2012 A&F will continue its openings in Amsterdam,
Munich, Hamburg and Hong Kong. Meanwhile, it will close some stores in US (AF-
5, 2011).
In conclusion, the company Abercrombie & Fitch operates four brands, Abercrombie kids (for 7-14 age group), Hollister (for 14-18 age group), A&F (targeting 18-22 age
1 „ The flagship stores are being positioned as the highest and best that the brand has to offer, and are being used as testing grounds for innovation and experimentation.” (World English Dictionary, 2011)
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Group 11 Aalborg University 12.01.2012 group) and Gilly Hicks (specialized in women underwear). In this project the focus is put on the Abercrombie & Fitch brand and not the company.
1.2.2
Abercrombie & Fitch’s marketing and advertising
Historically speaking, A&F revamped its brand in the early 1990’s from an outdoorsy one to an aspirational brand by attracting customers with photos of semi-nude young and attractive models or store employees and pricing its clothing at a visible higher price than other brands traditionally marketed towards teens. The employees that are visible for the customers have to look attractive and represent the lifestyle of the company. A&F, through a combination of pricing and pervasive advertising, built a group of customers aspiring to look and live the A&F lifestyle (AF-7, 2010).
The Abercrombie & Fitch brand is promoted as a near luxury lifestyle concept (AF-8,
2005). Thus, the A&F lifestyle is reflected through its luxurious and special store environment. The moose logo or the name of the brand, embellishing each piece of clothing, is the distinctive brand recognition. The Abercrombie & Fitch brand is only sold in its own stores and through its official website.
CEO Michael Jeffries says that shopping in an A&F store is an experience due to the fact that models welcome the customers from the entrance and the semidarkness from the stores creates a feeling of curiosity, while the music puts one in a mood of coolness, unconcern and fun. Even some of the clothing is given a ‘story’: "You buy into the emotional experience of a movie ," Jeffries explains, "And that's what we're creating. Here I am walking into a movie, and I say, 'What's going to be at the box office today?’” (Perman, 2000).
“Perhaps not surprisingly, much of A&F’s notoriety and popularity emerged from controversial slogans, ad campaigns and over-sexualized clothing. They have sparked controversy when they sold thong underwear for pre-teen girls with suggestive remarks on them like ‘Wink Wink’.”
(AF-7. 2010). Also, they used to hire white candidates for sales or model position. This led to a class-action lawsuit that was later settled out of court and resulted in a more diverse recruitment (AF-7, 2010).
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Abercrombie & Fitch could be considered one of the leading speciality retailers in the world. CEO Michael Jeffries said “ our three major international flagship stores in
London, Milan and Tokyo are now annualizing well above the $200 million we talked about a year ago.
” (AF-9, 2011). So, the flagship stores in London, Tokyo, Milan had a great success and the brand’s growth will be fuelled by internationalization in the near future.
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2.
Methodology
Aalborg University 12.01.2012
The methodology chapter will present the different paradigms and it shows the different views in social science. As researchers of this project, we will present our point of view about social science and our choice of paradigms. By this, the readers will have insight into how the project is conducted. After this the methodology approach will be described and reflected on, i.e. the data collection methods and the scientific literature that are used. The limitations for the project will also be presented in this chapter. Finally, the project structure will be explained and illustrated in a figure.
2.1.
Definition and characteristics of a paradigm
“Paradigm is a term that relates closely to the normal science.” (Kuhn, 1996, p. 10).
Normal science, according to Kuhn, is defined by activities but not rules. Therefore researchers are free to adopt paradigms and assumptions under paradigms to approach their study. “ Men whose research is based on share paradigms are committed to the same rules and standards for scientific practice.” (Kuhn, 1996, p. 11). Furthermore,
Kuhn argues that all researches of science have a common phenomenon, which needs to be studied. To study the phenomenon, the researchers have to structure their research questions and adopt a methodology approach to answer the questions and explain the results of the research. These characteristics of the study phenomenon of science constitute a paradigm. “
Building on this understanding, most scholars of philosophy of science define paradigms in terms of four sets of assumptions – i.e. ontological, epistemological, methodological assumptions and assumptions about human nature
.” (Kuada, 2009, p. 5). There is a change of paradigms, which happens when researchers realize that the previous paradigms do not fit any more with the current situation of normal science. In other words, a transformation of paradigms happens when there is a revolution of science.
In the following, we will define the four assumptions of paradigm using the objectivesubjective perspective in social science as shown in the figure below (Burell and
Morgan, 1979). We believe that the objective-subjective model describes the characteristics of paradigm the best, because it defines the two sides of the nature of science to human beings: external and internal.
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Figure 1 – The objective-subjective perspectives in social science.
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Source: Burrell and Morgan, 1979, p. 3.
2.1.1.
Ontology
“Ontology is a term used in philosophy of science to describe about reality-the nature of what the researcher seeks to know something about.” (Kuada, 2011, p. 32). There are two different ways of defining the reality: realism and nominalism. The nominalist says that reality is not ‘real’ and does not exist, because it is created and can be influenced by the individual. In other words, the individual creates his/her own world and believes that his/her world is the reality. Therefore the reality in the nominalist’s point of view is very different among people. Another point of view in ontology is realism, which states that reality exists and is external to the individuals. Reality in this view is objective and the same for all of us. Bryman and Bell explain realism by an example of organization environment. According to them, people in the objectivism position do the job that they are appointed to do. “ People tell them what to do and they tell others what to do. They learn and apply the values in the mission statement. If they do not do these things, they may be reprimanded or even fired.”
(Bryman and Bell, 2003, p. 19). In this way, reality is the mission statement of the company, which employees have to follow. They can neither build up the mission nor influence it themselves. The mission statement is external to the employees.
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Another example could be the cultural differentiation in organizations. Objectivists say that culture is something that the organization has. For an international organization where there are different people from different parts of the world, culture differentiation exists. It means people might work in different ways or behave differently. There might be misunderstandings between each other during the working process. On the contrary, subjectivists argue that culture is created by the organization. Thus, no matter where people within the organization come from, the organization has to create a ‘culture’, which everyone has to follow. In this sense, subjectivists assume that each organization has a special culture, where people behave and work in the same way within that organization.
2.1.2.
Epistemology
“Epistemology is a term that describes the nature of knowledge and the means of knowing – i.e. ‘how we know what we know’ or what we conceive as a ‘truth’.”
(Kuada, 2009, p. 32). Some scholars, who are called positivists, say that reality can be found out through a cause relationship. They believe that reality and the knowledge they gained is objective. They also say that knowledge is accumulated through observation and by searching for rules. In the process of seeking for knowledge, people will learn and have experience in a particular scientific area. Since people have experience and there are rules in the truth, it is possible that we can research and predict what happens in the reality. In this way the human being dominates the nature of science.
In the positivism point of view scholars can say that they have to go through a seeking and learning process before they know what reality is. Figure 2 shows how positivists approach the reality.
Figure 2 – Positivist’s point of view.
Researcher Learning/Experience Reality/Truth
Source: own creation.
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Realism is a position in epistemology, which is similar to positivism. Both realism and positivism assume that scientific approach to the development of knowledge.
Realists argue that reality is objective and it exists independently of humans’ mind.
The two major forms of realism are direct realism (or empirical realism) and critical realism. Direct realists believe that what you see is what you get. Humans can experience the world through their senses. What humans get out from their experience is exactly the reality of the world. Critical realists say that what humans see is just an image of reality but not reality directly. To understand the reality, the realists need one step to experience things themselves, but the critical realists need one more step to experience the mental processing to make sure if the reality is exactly the same as its impression (Saunders, 2007, p. 104).
Another view of epistemology is anti-positivism which means that the truth is relative and “ can be only understood from the point of view of the individuals who are directly involved in the activities which are to be studied.” (Burrell and Morgan, 1979, p. 5).
Thus the reality can be learned by occupying the frame of reference of individual actors in a specific science area. In this point of view, the reality tends to be subjective to human beings. It is realized by the personal sense, but not experience. In this way, the individual actor is seen as the most important element, which researchers have to learn from, in order to discover the truth. It is shown in figure 3.
Figure 3 – Anti-positivist’s point of view.
Researcher
Source: own creation
Individual actor Reality/Truth
According to the anti-positivism view, the researchers don’t go through the process of learning, but can look at others view to understand what reality is.
2.1.3.
Human nature
Human nature describes if the researchers view the social environment as external to the individuals or if they believe that human being and the social environment codetermine each other (Kuada, 2011). Again, there are two opposite views in human
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Group 11 Aalborg University 12.01.2012 nature. Some researchers, who are voluntarists, say that humans can create their own surroundings and be independent with others’ surroundings. Other researchers who are determinists say that humans are controlled by surroundings and can’t create their own.
2.1.4.
Methodology
“Methodology describes the reasons underlying the choice and use of specific methods in the research process, - i.e. how you may go about gaining the knowledge you desire.” (Kuada 2011, p. 34). If researchers stand for the nomothetic and believe that reality is objective, they will adopt the methodology, which focuses on gaining knowledge through experience and learning because they define reality as: ‘what you see is what you get.’ They will prefer to use a quantitative research to approach their study. But researchers who hold the view of ideographic will look at other individuals to seek for information. These researchers especially look for the individuals, who are internal to a specific organization, which researchers wish to study. Ideographic researchers prefer to adopt qualitative research in their project (Kuada, 2011).
2.2.
Paradigms
The objective-subjective perspective, as described above, has produced a number of typologies of paradigms. The following sub-chapter will present the two most popular paradigms, which “ became popular with business economics researchers and have influenced organizational and management studies in general. They have also influenced studies in specialized functional areas of business such as marketing, accounting, and finance.” (Kuada, 2009, p. 7). These paradigms are: FISI classification (Functionalism, interpretivism, structuralism and interactionalism) and
RRIF classification (Burrell and Morgan four paradigm model of social theory).
2.2.1.
The Functionalism, Interpretivism, Structuralism and
Interactionalism paradigms (FISI)
Back in the 19th and 20th century, sociology scholars including Durkheim, Herbert
Spencer, Talcott Parsons and Robert Merton hold the view of positivism that reality is external to the individuals. “
They have emphasized the importance of studying social phenomena in terms of structures, functions and interactions.” (Kuada, 2009, p. 8).
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Their thoughts have influenced researchers such as Granovetter (1985) and Whitley
(1992) for the classification of functionalism, interpretivism, structuralism and interactionalism paradigms. These paradigms are shown in figure 4.
Figure 4 – FISI paradigms.
Source: Kuada, 2009, p. 8.
Functionalism
As a part of the whole concept of FISI paradigms, functionalism falls under the objectivist, or we can say positivist, type of research. It is the dominant research type in economics, including business economics. Researchers who adopt functionalism say that organizations make structural changes to fit their situation and the environment around them. “ A classical example of this viewpoint is found in the
stimulus – organism – response (S-O-R) model in business economics.” (Kuada 2009, p. 9). This model argues that environmental factors stay externally and can influence the organizations. The organizations will then respond with specific behaviour including strategies. However, some scholars criticize that the changes in organizations can come from the decision of managers, which is subjective and depends on the belief.
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Interpretivism
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Researchers who are interpretivists believe that it is needed to understand how people define the situation in which they are involved. These researchers also say that it is important to study the meaning of the situation from the experience, which is gained during the time people involved in. While functionalism explains the changes of an organization objectively, interpretivism requires investigators to engage to the continuous interpretation to rather understanding than explaining. “ These investigators subscribe to the view that human beings do not passively respond to what is going on around them.” (Kuada, 2009, p. 9).
Structuralism
The structuralism approach views human society as a complex system, which is collective rather than individual. Researchers who hold this view say that the key of humans’ behaviour is ‘structure’, but not ‘function’. Structure of a system defines the position or the role of the individuals within the organization, the relationship and the link between them. “
The structure – conduct – performance (S – C – P) model is one of the well-known models in business studies that exemplify this approach.” (Kuada,
2009, p. 9).
Interationalism
The interationalism approach focuses on studying, how individuals with different experience and interpretations in the world can understand each other. In this approach, the individuals are viewed as an important role in the functioning of social life because they help to connect links within the organization together. Social interactions allow individuals not only to act individually but also to share meanings and expectations. Moreover, individuals can “ act with one another on the basis of shared meanings and understandings.” (Kuada, 2009, p. 9).
Beside these four main approaches of FISI paradigm presented above, there are several combinations, which are described in the following.
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Structural-functionalism
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“
The general understanding among the proponents of this paradigm is that society has an existence over and above individuals.” (Kuada, 2009, p. 10). There are four characteristics of structural-functionalism called adaptation, goals attainment, integration and latency. Adaptation is about the ability to interact and change to fit the external environment. Economic subsystems and technological adaptations in modern social life are examples of this characteristic. Goals attainment is about the capability of the social systems to set goals and methods of implementation. This can be found in the political system. Integration is about capacity to create harmony and convergence through shared values and norms. Integration can be seen clearly in the social network nowadays. Latency is about capacity of establishing stable pattern through socialization of new members into existing values and norms. According to
Kuada (2009), it can be found in well-functioning schools and family systems in modern societies.
Structural-interpretivism
Researchers who adopt this approach argue that society is organized by basic structures, which helps to define the relationship between the individuals. As positivists, they believe that reality can only be defined by those engaged in the experience. Therefore, their methods are to help them discover the subjective experience of the individuals.
Interactional-functionalism
Scholars who adopt this approach say that interaction in society is necessary for the effective functioning of social systems. History is created by interactions and these interactions can influence humans’ behaviour in the future. Thus the individuals’ decisions in an organization can influence the future, although this decision is no longer valid.
Interpretive-interationalism
The view of this approach is that the individuals and their organizations interact internally and externally beyond the organizational boundaries. Thus the way to explain their behaviour is going through their interactions. According to this
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Group 11 Aalborg University 12.01.2012 approach, decisions of managers are not made based on responses to the external environment.
2.2.2.
Burrell and Morgan Four Paradigm Model of Social Theory
Burrell and Morgan four paradigm model of social theory is considered as an assumption about the nature of society, beside the assumption about the nature of social science. Each of the four paradigms is assumed to be either objective or subjective as shown in figure 5. We can see from this figure that Burrell and Morgan built the RRIF paradigms vertically compared to the dimension about the nature of social science which is shown in figure 5.
Figure 5 – Burrell and Morgan four paradigm model of social theory.
Source: Burrell and Morgan, 1979, p. 22.
First, we distinguish between the sociology of regulation and the sociology of radical change. The sociology of regulation explains the nature of social order, social integration, solidarity and the need of satisfaction. This approach states that society is maintained as an entity where individuals hold together rather than fall apart (Burrell and Morgan, 1979, pp. 17-18). The other approach, which is sociology of radical change, tends to deal with changes and conflicts of the world. According to this
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Group 11 Aalborg University 12.01.2012 approach, individuals should be emancipated from being structured and limited. It looks at the potential to be possible rather than the actually of what it is.
The four paradigms are named as functionalist, interpretive, radical humanist and radical structuralist, which are discussed in the following.
The functionalist paradigm
This is considered to provide the dominate framework for studying academic sociology and organizations (Burrell and Morgan, 1970). This paradigm has the assumption of objective and sociology of regulation. Issues or problems in the nature in general and business economics in particular are viewed as objective and have value free (Kuada, 2009). The researchers in this approach should stand independently to the reality of the world; try to find a suitable solution for a practical problem.
The interpretive paradigm
In the dimension of subjective approach, the interpretive paradigm gives an argument that researchers see the nature of the world as subjective and use qualitative method for their study. They will make interviews with the internal individuals of the organization, i.e. employees. Because the interpretive paradigm is closer to the sociology of regulation rather than the sociology of radical change, researchers will tend to examine the subjective experience as it currently exists (Kuada, 2009).
The radical humanist paradigm
The radical humanist paradigm “is defined by its concern to develop the Sociology of radical change from a subjectivist standpoint.” (Burrell and Morgan, 1970, p. 32). It shares the point of view with the interpretive paradigm about subjectivism, includes nominalism, anti-positivism, voluntarism and ideographic. Researchers who adopt this paradigm view the world as powerful and the social change needs the involvement of individuals within the organization (Kuada, 2009).
The radical structuralist paradigm
The radical structuralist paradigm has the view of both sociology of radical change and objective standpoint. Like the functionalist paradigm, the radical structuralist is
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Group 11 Aalborg University 12.01.2012 realism, positivism, determinist and nomothetic. Researchers, who hold this point of view, say that reality is socially constructed and there is always a conflict within the society. “
These conflicts generate constant change through political and economic crises.” (Kuada, 2011, p. 50).
There are some critical factors about the RRIF. One of the critics is that the RRIF distinguish between subjective and objective as two totally different views of the reality, while some of the researchers, which are situationalists believe that the nature of the world can be viewed by both subjectivism and objectivism (Kuada, 2011, p.
35). Some authors argue that “ adherents of each of the four paradigms tend to consider particular research problems to be more important than others.” (Kuada,
2009, p. 13).
2.3.
Our paradigmatic considerations
Here our view on the different paradigms and reality is presented. It gives the reader the direction for the project and the view it will be conducted in.
2.3.1.
Ontology
We view the reality as external to us, which can’t be influenced by the individuals.
The reality for us, as realism belief, does exist and is not a result of individual consciousness.
2.3.2.
Epistemology
We will make research by learning the facts through scientific materials, which are written under the positivism view about the reality.
2.3.3.
Human nature
We view that human beings and the environment do not co-determine each other.
Human beings can neither create nor influence their own surrounding.
2.3.4.
Methodological approach
As believing in positivism approach, we are nomothetic in the methodology dimension. As pointed out earlier, researchers who are nomothetic would prefer to use
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Group 11 Aalborg University 12.01.2012 quantitative research for their study. However, due to the lack of time in this project, we will use qualitative approach by looking at scientific materials, which are objectively written.
When doing a project, there are many things a researcher needs to be aware of and follow. It is the plan for the project.
“Methodology describes the reasons underlying the choice and use of specific methods in the research process, - i.e. how you may go about gaining the knowledge you desire.” (Kuada, 2011, p. 34).
2.3.4.1.
Research approach
A common view of the relationship between the theory and the research is the deductive approach. In other words deductive approach means going from theory to research and then revising the theory. Based on a theory a researcher deduces a hypothesis, which will be the guide for the research and specify how the needed data can be collected (Bryman and Bell, 2011, p. 11). The hypothesis is the driver of the research and in the end of the research the hypothesis is either confirmed or rejected and a revision of the theory is done.
The revision of the theory, which is the opposite direction compared to deduction, is called induction. In the inductive approach the results in the research are put back into the theory. A researcher that works within induction often collects further data, when the first data are investigated, to give an even clearer view if the theories can be applied.
Deduction can be explained easily with the following (Bryman and Bell, 2011, p. 13):
Theory
ïƒ
observations/findings
Induction can also be explained in this way:
Observations/findings
ïƒ
theory.
Sometimes induction is shown via a qualitative research, i.e. using interviews to develop a theoretical understanding of a certain metaphor, but it is not always the case, because qualitative research does not always generate a theory. Theory is also often used as a background to qualitative research. Therefore it is not always easy to
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Group 11 Aalborg University 12.01.2012 see deductive and inductive in the light of qualitative and quantitative researches
(Bryman and Bell, 2011, p. 15).
This project is viewed in a deductive light, based on the fact that the theories are the basic of this project and the researchers want to investigate if the theories will be supported by the illustrative example. Therefore the theories build the ground for the analysis. There is a section with theories and then an analysis, where the theories are being used. Afterwards there is a reflection where the theories are revised.
2.3.4.2.
Research methods
When it comes to data collection there are two different methods, qualitative and quantitative, that are found in social science. The choice of methods should be consistent with the choice of research approach. Some argue that both methods can be combined in order to give a better result (Kuada, 2011, p. 56).
The qualitative approach can be seen as a method that does not use any type of statistics. In the qualitative approach there are different methods that are normally used; participant observation, in-depth interviewing, focus groups and conversational interviewing, also known as semi-structured interviews (Bryman and Bell, 2011, p.
205). Another part of qualitative methods is the use of cases to examine different research areas.
One of the advantages with this method is that the researcher gets to see the participant in his/her normal setting, which can give some more accurate and deeper results and the research can be more adapted to the participant and his/her surroundings (Kuada, 2011, p. 57). The researcher is also able to observe the participant during an interview, and read body language, which the researcher is not able to do via i.e. a questionnaire.
A challenge when using the qualitative approach is that the researcher is likely to have the investigation and research is affected by the researcher’s personality but also by the participant’s.
If the researcher makes interviews, then the evaluation of the studies is important, or if the data collected is trustworthy and if it is authentic, referring to if the research is being fair.
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Quantitative techniques are usable if the researcher wants to test a specific hypothesis or find different answers within the same area the researcher wants to research. It is often a broader research, where quantitative data collection would be used.
The quantitative method is appropriate due to the fact that the researcher can investigate different variables at the same time (Kuada, 2011, p. 64).
Quantitative techniques are often less flexible compared to qualitative methods.
Researchers often follow specific standard procedures and techniques when it comes to collecting and analysing data.
Surveys are often used in quantitative data collection. The survey’s questions must have a connection to the problem formulation and the theories used, so the researcher is able to get the needed result to complete the research (Kuada, 2011, p. 68). Surveys often use questionnaires to reach as many people as possible at the same time and are often sent out to respondents via e-mails or put on the Internet, because it is the fastest way to reach people.
The quantitative approach can also consist of a quantitative interview. It can be faceto-face interview, telephone or video based interviews (Kuada, 2011, p. 74).
If the researcher has used i.e. questionnaires it is important to evaluate the data based on reliability, validity etc.
In this project the researchers will use the qualitative method when collecting data. It is based on the use of an illustrative case to investigate and research the problem formulation. The case is used together with theories to give the best results. There might be some difficulties in using the qualitative method together with theories only.
The researchers could have preconceived ideas of the research and the result before the investigation. That is something the researchers need to try to oppose.
Besides the research methods mentioned above, there are also two major approaches to gathering information: primary and secondary data.
Primary data are the ‘raw’ data. They could be a conducted research in a specific area or a case description, which can be used as empiricism for further research. The secondary data are the ones used to interpret the primary data with. It could be theories and other analysis tools (Rienecker and Jørgensen, 2006, p. 238).
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Group 11 Aalborg University 12.01.2012
The primary data in this project is Abercrombie & Fitch’s annual report, because it provides the researcher with the basic information about the company for the case.
Other articles about Abercrombie & Fitch can also be seen as primary data, due to the fact that they help investigate the primary topic in this project.
The secondary data is the theories and other data supporting the case and the analysis.
The secondary data consist of both textbooks, scientific articles and other articles. All are in the project to help solve the problem formulation and bring light to it.
2.3.5.
Our view on FISI and RRIF
As positivists, we adopt the functionalism paradigm in both FISI and RRIF classification. We hold the objective view about the world and the reality because we are external researchers and don’t get the internal information within the company
(Abercrombie & Fitch). We will not adopt approaches about the organizational structure, individual role or internal changing of the organization. In this project, we see the crisis, conflict in social life as the changing of external environment and believe that organization should only change to fit the situation and the environment around. We will not consider the cause of economic crisis and macro factors related to that. We will stay external from the organization (Abercrombie & Fitch) and try to answer the questions, which are stated in the problem formulation.
2.4.
Research criteria
When doing research it is important to evaluate if the research is reliable and valid.
These are some of the criteria that need to be considered and measured, when doing a scientific research to make sure that the reader can trust the research.
2.4.1.
Reliability
Bryman and Bell (2011, p. 718) defined reliability:
“The degree to which a measure of a concept is stable.”
Reliability implies that the researcher measures the quality of the concept and data. It is a quality assurance, when creating knowledge.
Reliability is especially a measurement to be concerned about, when doing quantitative research, because the researcher should make sure that the results are
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Group 11 Aalborg University 12.01.2012 reliable and can be repeated by other researchers. When doing a research it is important to make sure that others can use the result for further research.
2.4.2.
Validity
Validity is explained with the following sentence:
“A concern with the integrity of the conclusions that are generated from a piece of research.” (Bryman and Bell, 2011, p. 720).
As reliability, validity is also very important and used in quantitative researches, but that does not make it any less important in a qualitative research. The researcher needs to make sure that the results carry integrity and that the measures of a concept really reflect the concept it is supposed to (Bryman and Bell, 2011, p. 42).
There can also be found validity in an external way. The result in a research should be able to be generalized in the specific context the research is in. This is one of the reasons why researchers doing a quantitative research are very careful in getting a representative sample to work with.
2.4.3.
Research criteria in this project
It is important to state whether or not the research can be seen as valid and reliable. It can even be questioned if these research criteria are important for researcher using a case in the study (Bryman and Bell, 2011, p. 61). The generalization part is not that easy, but it gives the researcher a certain freedom to research, but it is important for the research to have some objectives that can be used for further research and in some way generalize (Bryman and Bell, 2011, p. 61). This project does have a certain degree of theoretical generalization, which can be used for further research. The case in this project can be seen as a representative or illustrative case. The reliability can be seen in the light of the theoretical analysis in the project. The fact that the conclusions and results for this project will be based on theories and compared to the case to see if the theories are like the real world. Although the generalization should only be based on the theoretical results in this project, the results could open up for further research.
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2.5.
Limitations
Aalborg University 12.01.2012
When one refers to limitations, one could say that they are the boundaries surrounding a specific area or the line beyond which something cannot or may not proceed. There could be some limitations regarding the authenticity, complexity of data, control of data quality, key variables, or lack of familiarity with data (Bryman and Bell, 2003, p.
219).
As the main sources are from mass-media and the Internet, authenticity is sometimes difficult to ascertain. That is why one has to look at the article’s author to be sure that he is looking from an objective point of view. Afterwards, another source is the financial reports from the A&F’s official website. The evidence is usually clear and comprehensible, but may require special awareness of contextual factors relating to the company, i.e. share prices, movements of key personnel or merger speculation.
Also, more caution with the assessment of data quality may be necessary. The quality of the collected information never has to be taken for granted. That’s why the articles that the researchers use are written by professors and specialized writers and the researchers also use the reports made by the company, which are posted on their official website and articles from newspapers. Credibility is also frequently an issue, but in fact it is often the uncovering of error or distortion that is the objective of the analysis.
The inability to assess the significance or otherwise of a theoretically important topic or issue can be frustrating and can arise when a theoretical approach, that has emerged since the collection of the information, suggests its importance (Bryman and Bell,
2003, p. 220). This could be a drawback in meta-analysis, sometimes this makes it difficult for the researchers to generate unambiguous conclusions.
Another limitation is that the researchers do not have complete knowledge about the company and its competitors as the researchers use an etic approach, which is made outside the company (Kuada, 2011). It has some drawbacks such as the data is irrelevant or it can be costly to collect and also the information can be incomplete.
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2.6.
Research design
Aalborg University 12.01.2012
The hermeneutic circle is used to show the structure of this project. “ Hermeneutic circle, as an analytical process aimed at enhancing understanding, offers a particular emphasis in qualitative analysis, namely, relating parts to wholes, and wholes to parts.” (Patton, 2002, p. 497). In order to interpret our understanding of the problem the project structure is combined with the hermeneutic circle and shown in the figure bellow. It includes three phases: pre understanding, understanding and post understanding.
Figure 6 – The structure of the project.
Source: own creation.
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Group 11 Aalborg University 12.01.2012
As it is seen from figure 6 the first phase of our research is pre understanding, which includes background information about Abercrombie & Fitch and the methodology chapter. In the methodology chapter we discuss the characteristics of paradigms, the two most popular ones and our view on them. The research approach (inductive/ deductive), research methods (qualitative/quantitative) and data types
(secondary/primary) are discussed in order to explain how we are going to acquire knowledge.
After identifying our way of thinking about reality and knowledge together with real facts about the case company we move to the second phase of research – understanding. The theoretical chapter contains the internationalization theory, the
Uppsala model, Country-of-origin and branding comprehension, in particular retailer industry branding and connecting branding with the internationalization process. The analysis is built on a theoretical basis. This part plays the most significant role in the project, as here the research questions are answered and the problem formulation is being solved.
The analysis will contain a part about the company’s branding in the US and then the internationalization process will be described. Afterwards we analyse challenges that
Abercrombie & Fitch might face when entering the European market and compare its branding in Europe with the US branding.
The last part of the project, post understanding, is the reflections on the theories and the process of writing the project and in the end is the conclusion.
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Group 11 Aalborg University
3.
The theoretical chapter
12.01.2012
The theoretical chapter has a very central role in this project, because it is the foundation of the analysis. The chapter consists of the Uppsala model, the theory of the Country-of-origin and various branding theories. All theories are supporting the analysis and helping to answer the problem formulation. In the end of this chapter the theoretical framework for the analysis will be presented.
3.1.
The Uppsala model
The Uppsala model is presented in this project because it can help to describe the internationalization process of Abercrombie & Fitch in a better way compared to other theories. Contingency theories were not chosen as there was no correlation found between the primary company`s situation and the following actions (such as ownership, location, internalization advantages or cost saving reasons). Network theory is not applicable because Abercrombie & Fitch’s internationalization process is not relationship directed. Besides that, commitment and experience are always actual attributes in the internationalization process.
Therefore the internationalization process of a company can be described with the help of the Uppsala model, which was developed by Johanson and Wiedersheim-Paul in 1975. The Uppsala model is a stage model in which internationalization is seen as a sequential process. The main idea of a stage model is that the company goes through a series of successive stages in its international development with extended operation and a higher degree of commitment for every new stage (Hollensen, 2007, p. 63).
The Uppsala model presents four principal insights: market commitment, market knowledge, current activities and commitment decisions (see figure 7). These four insights are divided into state aspects and change aspects. The two state aspects (left column in the figure) are market commitment, which is the resources committed to foreign markets, and market knowledge, which is the knowledge about foreign markets and operations owned by the company at a given time. Both general knowledge and market-specific knowledge is required. The two change aspects (right column in the figure) are current activities and commitment decisions. The four core insights are connected and influence each other (Johanson and Vahlne, 2009).
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Group 11 Aalborg University
Figure 7 – The basic mechanism of internationalization.
12.01.2012
Source: Johanson and Vahlne, 2009, p. 1412.
The Uppsala model is based on two assumptions. Firstly, the involvement/commitment of firms into the markets is performed through stages shown below; these represent higher degrees of international involvement:
Stage 1: No regular export activities (sporadic export)
Stage 2: Export via independent representatives (export modes)
Stage 3: Establishment of a foreign sales subsidiary
Stage 4: Foreign production/manufacturing units.
Secondly, the order of entering new markets is determined by the familiarity with the manufacturer`s home market, such as cultural, language, political systems, working methods, etc. So the company first enters the closest markets and then goes to more distant markets. Companies will enter foreign markets step by step, choosing markets with small psychic distances and entry modes with few marginal risks, thereby developing the market commitment. Increased market knowledge will lead to increased market commitment and vice versa (Hollensen, 2007, pp. 63-64).
However the internationalization process cannot be explained fully today by the
Uppsala model. There are several critiques of the Uppsala model, which will be looked into bellow.
The Uppsala model dates from 1975, since then there have been noticeable changes in the business environment. Globalization of markets caused division of labour migration of capital, labour resources, standardization of legislation, economic and technological processes, reduction of trade barriers, development of telecommunication, transport and production process, as well as rapprochement between different cultures. Secondly services take a great share of gross domestic
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Group 11 Aalborg University 12.01.2012 product of developed nations and world trade. Besides that e-business and high technology have a great impact on marketing and management. Since there have been changes in the environment the internationalization model has to evolve as well
(Axinn and Matthyssens, 2002).
Besides the changing context within the company performs, internationalization theory also has certain limitations. The first drawback concerns the speed of internationalization. Companies sometimes leapfrog certain stages and internationalize quickly from their birth (Johanson and Vahlne, 2009). The leapfrogging tendency does not only involve entering distant markets. It can also be expected that the company leapfrog some intermediate entry modes (Hollensen, 2007, p. 65). The second drawback refers to the psychic distance concept; from this point of view it is difficult to explain e-business expansion. The third disadvantages appeals to the learning conception. Nowadays firms get easier access to knowledge about foreign markets and doing business in general. The fourth issue is the focus of the
Uppsala theory on individual firms rather than network or supply chains (Axinn and
Matthyssens, 2002). Fifth – the Uppsala internationalization model focuses mostly on manufacturing and doesn`t take into consideration service industries (Hollensen,
2007, p. 65).
The sixth drawback refers to the underestimation of the manager`s role in deciding which way to choose in the internationalization process . “Uppsala model is criticized for being deterministic thereby neglecting managerial actions.” (Axinn and
Matthyssens, 2002, p. 444).
Despite the criticism the Uppsala model is presented in the given project because of the commitment, experience, as well as stages reviewed above and cultural differences are vital factors in the internationalization process.
3.2.
Country-of-origin
Country-of-origin (COO) is in this project, because it can help bring another reason, besides branding and the product, why customer would buy Abercrombie & Fitch.
Country-of-origin can be seen as a marketing strategy and from this perspective, it is a way for a company to differentiate its products. Country-of-origin of a product is often associated with the quality perception of the product. Consumers can also have a certain preference or willingness to buy the product based on there it is from in the
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Group 11 Aalborg University 12.01.2012 world (Hollensen, 2011, p. 478). Normally if a company uses country-of-origin it is seen as more important than the brand itself, which can be a good thing when a company is trying to go to a new market where the brand is not that well known. The entering company still needs to keep in mind the product positioning and to target the right customers (Hollensen, 2011, p. 479).
Researcher often only uses COO as a cognitive cue, due to the fact that it can entirely be explained by a quality signalling process. In addition to this quality cue it also has symbolic and an emotional meaning to the customers, which is a more affective cue.
It may even associate a product with status, social or authenticity, which shows a more normative cue. Customers could buy a certain product just to support the country economy.
3.3.
Branding
This section is about the theory of brands and branding. It explains and clarifies different terms of branding that are used in the analysis and shows the importance of a brand for companies. Furthermore the global brand with its characteristics is presented. Then a theory about the process of globalizing a brand is given. This is supposed to give a theoretical overview of the steps, the various options there are and the issues a company should be aware of when internationalizing its brand to new regions. It builds the framework for the analysis that uses the case of Abercrombie &
Fitch. The process of brand globalization has been used because it describes the phase
A&F is in at the moment. Theories that focus on building a brand are not used because A&F actually has already built a strong brand over the time in the US and the company’s focus is not on building a new one. Even though the company probably starts at low brand awareness in Europe and needs to change some of the brand identity, it does not mean that a new brand is being built (this would also include a new logo, name etc.). The challenges and the activities of the company include a lot about what the company actually has got and how the process of internationalization influences the branding.
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3.3.1.
Definition of a brand, brand image and brand identity
12.01.2012
A brand is a name, an image, a logo, a script, a design or others, which is identified by the customers, the potential customers and sometimes even by not-targeted market segments. It represents a certain product, product range or service (Kotler et al., 2009, p. 425). But additionally to being known, it must add value to the product; the customers have to perceive the brand as an additional value compared to the competitors. If the brand reputation does not add any value, then it is not beneficial to the company and the investments are not paid back. A good branding should communicate to the target segments what the special, better and unique values of the product are; in the branding process, the company tries to show how the people should see the product. A brand can focus on function and on tangible things or on intangible and emotional attributes, which can be a feeling of elegance, beauty, affection and joy (Kotler et al., 2009, p. 426). Emotional branding is nowadays very important, not only to offer the customers an experience added to the physical product, but also to give them an emotional satisfaction. This is done to build up a closer relationship between the customers and the brand, which leads to higher customer loyalty (Kotler et al., 2009, p. 426). Brands can also represent lifestyles and reflect people’s characters. For example, a surfer might not only wear special clothes, but also eat, drink and drive other brands than a conservative politician. Brands can become symbols to express oneself, with the specific choice of brands, a person shows one’s character to the others through the perceived attributes of the brands
(Kotler et al., 2009, p. 426).
These perceived attributes that the people associate with the brand is called brand image. There is furthermore the brand identity, “ the way a company aims to identify or position itself or its product or service.
” (Kotler et al., 2009, p. 436). So, a company needs to have a goal, what its brand should stand for, what people should associate with it, in order to position it in the market and get competitive advantages compared to the competitors, and then the company needs to have a suitable strategic marketing plan and mix to achieve this. The result is the brand image. In the end, the better the branding process of a company works, the more similar are the brand identity and the brand image.
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3.3.2.
Brand equity
Aalborg University 12.01.2012
The brand equity or brand value is “ the added value given to products and services.
”
(Kotler et al., 2009, p. 446). The marketing communication contributes to the brand equity, which includes the brand awareness, its image, its responses and its relationships (Kotler et al., 2009, p. 693). It is often a vital asset of the company, leading to higher revenues. The brand equity is intangible, but can be converted into a cash flow, when selling the brands’ products or even the brand name itself. By license agreements or mergers and acquisitions, the brand equity plays a very important role, sometimes a much higher one than the physical assets. The building and maintaining of high brand equity usually is the result of years or decades of investments that are hard to reach by starting from zero, sometimes even the history and the certain inventions of the company are used for branding. That is why huge amounts of money are paid for brand equities and companies focus strongly on protecting them.
3.3.3.
Benefits of a brand
A brand can become a company’s most valuable asset, which means that maintaining and improving it could result in one of the marketing’s department main activities.
By giving the people a brand with associations to the products, these can be tailormade towards customer segments. A product can be marketed to fit to a very special group of people, who feel especially attracted by its attributes. The associations can also be very broad to attract broad customer bases, depending on the product positioning. The company can also become more attractive to potential employees by having a superior reputation compared to its competitors, which gives the company the opportunity to choose from the best talents. The branding is a way to differentiate from others; this means that the product is perceived as unique and better than others
(Kotler et al., 2009, p. 429). It becomes easier for the consumers to identify the product and be aware of its existence and differentiation. This leads to the consequence that not only the offered price can be higher, but also the customer loyalty can increase. If the company is able to be competitive with a premium price, the efficiency and the profit margin improve, making the product more profitable in general (Kotler et al., 2009, p. 429).
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3.3.4.
Brand valuation
Aalborg University 12.01.2012
Brand valuation differs from brand equity and refers directly to the estimation of the financial value of a brand (Kotler et al., 2009, p. 446). It illustrates the importance of the branding and the size it can reach nowadays. Table 1 shows the ten brands with the highest brand valuation in 2011.
Table 1 – Best Global Brands 2011.
Brand value (in $m)
71.861
69.905
59.087
55.317
42.808
35.593
35.217
33.492
29.018
28.479
3.3.5.
Global brand
A global brand is a brand that can be found in several countries with similar marketing strategies and brand associations. It does not mean that the total positioning and success of the brand is the same, but basic values must match across borders
(Kotler et al., 2009, p. 460). Differences in the language and cultural associations can lead to changes to fit to local conditions, whereas the overall image, the brand value must follow the same way (Kotler et al., 2009, p. 460). As the term global states, a global brand should not only be present in different countries, but in actually all main regions of the world and have more than one-third of its revenues from international activities (Kotler et al., 2009, p. 460).
Brands that do not have a strong focus on their domestic market from early stages of their activities are called “born global”. They can relatively often be found in the ITindustry that naturally does not have a strong focus on natural boundaries (Kotler et
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Group 11 Aalborg University 12.01.2012 al., 2009, p. 461), but also in small countries, where companies need to internationalize to reach a competitive size with their activities, and in companies that do business in niche markets to find a broader customer base.
Today global brands can be found in pretty much all industries. Even traditionally local or national products have developed and built global brand images. There are global food brands, banks, TV programs, hotel chains, online stores, personal care product brands, retailers etc. (Kotler et al., 2009, pp. 462-463).
3.3.5.1.
Differences between global, local and glocal marketing
A global brand usually follows a global marketing plan. This means that the marketing mix reflecting a brand with its product or product range focuses on global standardization. The branding strategy tries to use the similarities in consumers’ preferences and behaviour across nations. The communication and distribution channels are synchronized and mostly led by the headquarter for all international activities of the specific brand. The fact that all global performances work strongly together in the same direction means that the global brand image is pretty much the same everywhere, so there is one particular way of perceiving the brand. It is furthermore a way of lowering marketing costs and creating economies of scale. It is based on the idea of a homogenization of the global consumers (Kotler et al., 2009, pp. 66-67).
The opposite approach is the local marketing, where the focus is on adaptation. The brand identity and image are different in the markets and the branding and marketing efforts are tailored to the specific needs of individual consumer segments. This is based on the idea that global consumers are different, they have different preferences and behaviour, and therefore the brand and the products need to react, be flexible and change in order to fit to the local needs. This can lead to the face that the brand image differs strongly from one market to another. Local subsidiaries are more independent and separated from the global headquarter. Adaptations are seen as a need to be successful on a global scale (Kotler et al., 2009, p. 67).
Then there is the glocal marketing strategy, a mix between the global and the local one. Its challenge and goal is to find the best balance between standardization and adaptation of the products and their branding. So, standardization is made where it is possible, efficient and demanded by the consumers, this should include the core
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Group 11 Aalborg University 12.01.2012 competence of the product, but it also includes some
“local lifestyles – (…) a local soul.” (Kotler et al., 2009, p. 67). Some elements can be the same globally, like the product quality or the distribution channels, whereas others are different in the markets, like the pricing or the communication. This means that the global headquarter and the local subsidiaries need to work strongly together. By following this idea, the companies try to benefit from standardization and adaptation and perceive the combination as the most successful way of doing business globally, seeing their international consumers as segments that have similarities and differences
(Kotler et al., 2009, p. 67).
These marketing strategies can also be seen in the branding of the company. The branding strategy and the marketing strategy should be a coherent unit. A brand can therefore also be a global one, with no or few differences to the markets, it can be positioned very differently and adapt strongly to local preferences or it can be different in some parts and the same in others (Kapferer, 2008, p. 459).
3.3.6.
Retailer industry branding
The branding strategy in the retailer industry differs in some aspects from manufacturers’ branding. This section explains branding options in this industry including some challenges that this particular industry has to deal with. It is not based on the internationalization process, but whenever a retailer goes abroad, it has to deal with these branding decisions in the new market and needs to decide whether it changes its branding strategy or it follows the one in the domestic market.
Retailers either sell private labels, different brands of the manufacturers or a combination of both. Especially when a retailer sells external brands, an own branding is important, because direct competitors often sell exactly the same products and brands. The own branding creates differentiation and improves the bargaining power towards the producers. This leads to lower costs and higher revenues, customer loyalty and finally to more profit. It is furthermore important that the combination of the product branding and the retailer branding are coherent and support each other.
The branding of the retailer aims to improve the perceived quality of the offered products and services (Ailawadi and Keller, 2004, p. 332).
By offering an own brand, the retailer can become more independent from the manufacturers, build a stronger market position and brand awareness; also the power
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Group 11 Aalborg University 12.01.2012 over the product and its branding increases. Five important aspects of the retail industry’s branding are explained next, which are: access, in-store atmosphere, price and promotion, cross-category product assortment and within-category assortment
(Ailawadi and Keller, 2004, p. 333).
The access refers to the location of the stores as well as to the distance between them.
The stores can either be close to each other for convenient and regular shopping experiences or there can be few stores in strategic and special locations. The brand identity also influences whether the stores are mostly located in residential areas, in shopping malls or near the city centre.
The in-store atmosphere can be a strong tool for a company to differentiate from competitors and establish an own shopping experience. It should follow the overall branding strategy and can strongly influence consumers’ behaviour in the store. Tools that can be used include colour, music, design, light, layout, smell, employee availability and friendliness, and the store size (Ailawadi and Keller, 2004, p. 333).
Potential benefits include a higher probability of people entering the store, more time and money each customer spends in the store, higher satisfaction, perceived quality and price expectations. In general it’s an effective way to position the brand because every customer that enters the store is aware of the different associations and reacts to them; they cannot be denied as easily as for example TV commercials. It can furthermore make use of different senses and therefore establish a very unique brand image.
The price and promotion strategy can be used in different ways to give the costumers a perceived price level of the store. The Every Day Low Price (EDLP) strategy tries to position the store as the general price leader in the market and aims to get a high volume of sales per customer. The average, daily price level should be considered low, promotions are less important. On the other hand there is the strategy of High-
Low Promotional Pricing (HILO). This positions the stores as a more premium brand in the market and focuses stronger on promotions to get people into the stores. This strategy aims to get people visiting the stores more frequently (Ailawadi and Keller,
2004, p. 334).
The cross-category product assortment represents the amount of different kinds of products and services a retailers offers or the perception of that. This creates different brand images, the store can be a one-stop shopping or a store for specific needs. The
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Group 11 Aalborg University 12.01.2012 more types of products a store offers, the more people are attracted to enter the store; they might buy things they otherwise would have bought elsewhere. By offering too many or the wrong products, the brand image can change in a wrong direction and become worse, differentiation and core competences can lose clarity and costs can increase (Ailawadi and Keller, 2004, pp. 334-335).
The within-category assortment is the amount of products a retailer sells in one product category. This means that there are more or less brands, flavours and sizes available. It is important that the basic ones that make the costumers choose the store are available, whereas less popular ones might be taken out to increase profitability.
It’s also a way to position in the market, to differentiate and to build a specific brand image. Like in the cross-category product assortment, a larger amount can be perceived as superior and attract more people, but efficiency and profitability might suffer (Ailawadi and Keller, 2004, p. 335).
In conclusion, the retail companies have different options to brand themselves and to be different compared to direct competitors, even though some or all of the products sold are external brands. Still the own branding is very important in today’s retail industry.
3.3.7.
Internationalizing a brand
This part is about internationalizing a brand. It includes some drivers that influence the branding strategy of a company when going to foreign market, the challenges and problems that can occur and have to be overcome in order to be successful abroad.
There are given some theoretical strategies how and through which steps the process can be done to establish a brand image internationally.
3.3.7.1
Drivers of international branding strategy
This subchapter describes three important drivers of a company’s international branding strategy. These factors have a big influence on how the company tries to build up a brand image and how this brand image should actually look like in the specific market. The three factors are firm-based characteristics, market-based characteristics and market dynamics (Douglas et al., 2001, pp. 99-114). It shows that the way of internationalization has an effect on the branding strategy, depending on which market a company enters, how this market looks like and how it is entered, the
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Group 11 Aalborg University 12.01.2012 branding strategy differs. But it also describes that a company should reflect its own values and make use of them to make the most benefit in international branding.
The firm-based drivers show how the uniqueness of the company with its different attributes influences its branding strategy. It includes the company’s organizational structure, the management style, but also its history, in fact how it has grown in the past, by mergers and acquisitions or in an organic way via differentiation and innovation. Also the strategic alliances and networks play an important role. The corporation’s core competence, its product lines and range, its vertical and horizontal integration and the way the brands are positioned in the home market are firm-based drivers of the branding strategy. Additionally the company’s own vision, where it wants to be in a mid- and long-term view, what the goals are of the internationalization determine the branding decisions (Douglas et al., 2001, pp. 99-
114).
This driver is more important for companies with fewer products and brands and with narrow, well defined target markets (Douglas et al., 2001, pp. 99-114).
The market-based characteristics show how the market situation influences the branding strategy. It includes the size of the market, the strengths and availability of competitors, how homogeneous the interests of the population are and how the culture reflects the needs and preferences. Answers have to be found to questions like: ‘Do the consumers prefer global or local brands?’ ‘What distribution channels are most popular?’ ‘What media are used by which segment?’
Sometimes these structures are very similar across borders, but more different within borders. This means that a market segment (or a niche market) with very similar preferences and behaviour can be found in several European countries, whereas the others that are not within the segment are more different compared to their countrymen of the segment. Then the branding can address regional segments, like
Euro-consumers (Douglas et al., 2001, pp. 99-114). An example for the market-based driver is a market where local brands dominate the market, then a company could use a global brand as a way of differentiation (Douglas et al., 2001, pp. 99-114).
The market dynamics influence the branding strategy due to the changes. When the market situation changes, the branding strategy might have to follow and change as well. This can be seen on a national and international perspective. It includes political, economical, social and technological changes. Examples for this are people changing
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Group 11 Aalborg University 12.01.2012 their habits, making more use of the Internet, changes in the importance of religion, a slowdown of economical prosperity, changes in the amount of global interaction, political activities that change the reputation of a country or a lifestyle becoming unpopular (Douglas et al., 2001, pp. 99-114).
These are three different types of drivers that influence the branding strategy of the company and explain why there is not one single way, how to do it, but instead a company needs to include different and partly unique characteristics in its planning and implementation process.
3.3.7.2
Shot-in-the-dark method
The shot-in-the-dark method is a strategy to establish a domestic brand in international markets. This strategy uses standardization and refuses to invest much in analysing the new countries the company wants to enter. The idea is to take the brand and just sell it in the same way abroad. It bases on homogeneous consumers worldwide that have similar preferences and therefore react in the same way the consumers do in the home market. So if the brand is successful in one market, it will also be in others. Due to the few investments in research, development and market analysis, new markets can be entered quickly and with lower costs. It can be used to build a global brand. Nevertheless this theory includes high risks because important national characteristics can be missed and necessary adaptations are not implemented.
Another option of using this approach is to test one market, to find out if the brand works, what current trends are, what changes need to be done in order to be successful and how they could be implemented. It can be used as a quick and cheap way to access a market and then to gain first-hand knowledge to then build up a global brand.
Heineken, McDonald’s and Coca-Cola have followed this method (Onkvisit and
Shaw, 1989, p. 28).
3.3.7.3
The process of brand globalization
This section states how to globalize a brand, it is subdivided in six key stages according to Kapferer (2008, pp. 487-489). These stages are: choosing a brand identity, choosing regions and countries, accessing the markets, choosing the brand architecture, choosing products adapted to the markets and constructing global campaigns (Kapferer, 2008, p. 488).
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So, the first step is to decide what brand should be globalized. The company must have clear ideas of the identity of the future global brand. Attributes must be defined and communicated. Here coherence and international values are important. If the national brand has strong national associations, it must be changed in order to fit globally. Since a global brand does not have a strong focus on adaptation, universal words, needs and attributes must be used (Kapferer, 2008, p. 488). One way to find the own brand identity is to state the differentiation, the core competence and naming what the brand is not about. When a brand is globalized, it could for example get a national dimension like the ‘Country-of-origin’ effect and get a more premium association just because of coming from another country. Often a brand that has a strong position and attracts a broad consumer base in the home market is even forced to become a premium brand because of higher costs (transportation and customs) and smaller brand awareness in the new markets (Kapferer, 2008, p. 488). This must be taken into account when creating the brand identity for globalization.
The choice of the markets and regions to enter and also the order and the time focus are important. The globalization process takes time and depends on the success in the entered markets. The company must find out where its products with the formulated brand identity fit to the local consumer preferences. Not every market has the same need of the specific product/brand (Kapferer, 2008, p. 490). Some markets might actually have a need for the product, but not for the specific brand strategy. In this case, the global branding approach should not be used.
The next step is how to access the new markets. Even though the process of establishing the brand image takes time, the first contact between the consumers and the brand and the first image, the first associations in the people’s minds are vital for future, long-term activities (Kapferer, 2008, p. 492). Mistakes or misunderstandings in this step can have fatal consequences. The company must also decide how the brand should be positioned in the market. It could be a pioneer in a new niche category, i.e. via a daughter brand, or it could focus on differentiation in an established category, focusing early on larger volume (Kapferer, 2008, p. 492).
The next step is the brand architecture. This raises the question to what extend the branding can and should be the same globally or what needs to be locally adapted.
The company should also be aware of the time frame it has to establish the brand and to become profitable (Kapferer, 2008, p. 493). There are two types of brand
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Group 11 Aalborg University 12.01.2012 architecture: the ‘horizontal crunch’ and the ‘vertical crunch’ (Kapferer, 2008, p.
493). The horizontal crunch cuts down the product range of a brand and focuses only on fewer products that represent the brand and that seem to be most successful in the new market. This reduces complexity and lowers the investments and specializes the products and the brand in niches. The vertical crunch reduces the levels of branding.
A company can have different levels of positioning its brands in the home market, and reducing them in the international market can increase profitability and practicality
(Kapferer, 2008, p. 493). The establishment of fewer products makes it easier, quicker, less complex and sometimes also more efficient for the company to build up a brand image.
The introduction, the development and the adaptations of the products in the markets are part of the globalization process of the brand. The company should have a longterm orientation and plan how to pursue that. It should be coherent to the branding plan and the brand identity and image in the markets, revised constantly and be adapted to changes (Kapferer, 2008, p. 494). The company might have plans to change the branding strategy after getting a certain amount of brand awareness and the product portfolio should follow this strategy. Otherwise the brand image could change in an unintended way. The products the company is willing to introduce in a new market must also be revised in order to fit to the local standards, they might have to be adapted differently in different countries to be successful (Kapferer, 2008, p.
494). The necessary adaptations do not have to be fixed they can develop over time.
In terms of marketing campaigns to support the brand identity, some companies tend to give this part of the value chain to their local subsidiaries, whereas others try to keep it centralized. If a company wants to build up a global brand, it should rather choose the second option, otherwise it faces the danger that local companies differ strongly from the company’s brand identity and market the products in different ways.
Then a common brand image cannot be formed globally (Kapferer, 2008, pp. 494-
495). Still the companies often benefit from local adaptation in their campaigns. Local market knowledge and creativity can increase the success in the specific markets, since they can also include the current product portfolio and the market image and awareness and the success in the market. So, marketing and branding campaigns can also be developed locally and support the global brand image, if they are coherent with the common brand identity. So basic standardized directions can be given and
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Group 11 Aalborg University 12.01.2012 then the local subsidiary can build suitable campaigns within this framework
(Kapferer, 2008, p. 495).
To sum up the strategy to build a global brand, it is important to have common basic rules to build a similar or identical global brand image. The brand identity should be clear and build a framework for all the activities. This framework must be followed in all stages and be coherent in the different markets. It can be implemented in more local ways or strongly centralized. The globalization process of a brand is a steady process that has a long-term orientation and should be verified and adapted on a regular base. Since different levels of local adaptations are used in most of the cases, a good communication is necessary.
3.3.8
Connection of internationalization and branding
In this subchapter it will be explained that the internationalization process itself and the international branding process are not two separate activities a company deals with and it shows that the processes follow very similar steps and ideas. They can be or are indeed two things that should work together to lead to the highest success of a company going abroad.
The first question in the internationalization process is whether to do it or not, the same can be referred to branding. The next step is whether the company internationalizes via an external agent or by itself, in the branding the question is whether the own brand is used or an external one. In both cases the second choice would be preferred in general on a long-term view.
In the internationalization theory the choice of markets has to be made and in the branding the choice of products to be branded. Therefore the markets and their preferences need to be analysed. How homogeneous are the markets and how similar are they compared to the home market?
Internationalization and branding are connected in practice. When deciding to enter new markets, the branding strategy must be addressed as well. In the theory, the
Uppsala model bases the company’s activity on market knowledge, which is gained over the years of international activities. At the beginning the companies tend to enter countries with similar preferences and behaviour, the activities might be done over an external retailer. In the branding theory, this can also be a first step of branding. Since low brand awareness and market knowledge are available, only a single brand might
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Group 11 Aalborg University 12.01.2012 be internationalized through an external retailer. This means that the own brand is supported by another, locally known brand. This helps the company to establish the own one and gain own brand awareness. If the market knowledge is low, an external retail can support the company in the beginning. Since the first step of the Uppsala model includes close countries, similar branding strategies tend to be more successful.
The theory then shows that the more knowledge the company gains, the deeper it bases its activities in the markets and the more different markets are entered. For the branding, this means that with more knowledge a company gains. It is able to do independent branding decisions, it can rather focus on its own brands, which can be differentiated to various segments, adapted to the different, local markets and the communication becomes more effective and efficient. It can also extend its brands including a broader product range or its own stores. More consumers can be addressed in a better way through effective communication and distribution channels.
So, the gained market knowledge can lead to the next step in the internationalization process and in the branding strategy of the company.
To sum up, the idea is that both the internationalization theory and the branding theory can be connected, because on the one hand they can be used at the same time for the company and on the other hand both follow the idea of a step by step development based on market knowledge acquired by the company’s activities. The achieved knowledge and the developments of the company can be used to improve in both ways. In addition, the knowledge in one of the two divisions can be also be used to improve in the other one (Onkvisit and Shaw, 1989, pp. 22-33).
3.3.9
Limitations of the theory
The theory of the process of brand globalization is about building a global brand. This has a focus on global and standardized activities and a very similar brand identity worldwide. It is therefore a narrow view compared to the process of internationalizing a brand where it can position rather differently in the markets. Still, adaptations and local differences are included in the theory, but it mainly follows the vision of building a global brand image and less on the process of how to build or transfer the brand to a particular new market. Additionally it bases a lot on a brand representing a wide product range or that the brand that should be globalized is actually an ‘umbrella
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Group 11 Aalborg University 12.01.2012 brand’ that can be subdivided in other brands in different levels with different positioning.
Many textbooks and comments about internationalization of a brand put a strong focus on the question to what extent the product should be standardized or adapted locally; few and obvious past mistakes are described in the textbooks. It is for sure an important issue for internationalizing companies, but it is a pretty wide theme that has to be taken down to several levels in order to help the company. It furthermore only includes the markets’ and consumers’ perspectives, it does not reflect the corporate identity, history and internationalization strategy or the market dynamics.
Another topic that is often referred to in this context are the social and cultural preferences of consumers. This also follows the idea that the corporation has to follow and adapt to existing demands, so the company has to react to what had been there before.
Finally, most of the literature takes the perspective and relates the situations to internationalizing brands that have their home market in North America or Europe.
Most of the texts are also written by authors from these regions. This reflects the point of view and then leads to the addressed issues and theories (Whitelock and Fastoso,
2007, pp. 261-267).
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3.4
Theoretical framework
12.01.2012
The following analysis will be based on the theories discussed above. The drawing below illustrates what approach has been chosen in order to combine theories and perform the analysis of Abercrombie & Fitch`s branding strategies and internationalization process.
Figure 8 – The theoretical framework.
Source: own creation.
As it is seen from the drawing, branding in the internationalization process (from the
US to Europe) is the main topic. The rectangular boxes on the left and right part of the drawing define Abercrombie & Fitch as a retailer brand in the US and Europe. In the middle, one can observe the internationalization process of the company. The triangle below shows drivers that influence the internationalization strategy of the company.
Underneath it all there is a rectangular with the main marketing strategies (global, local and glocal), which is the framework for international global activities. The right side is where the branding in Europe is presented.
First the US branding is discussed. Besides five aspects of the retail industry’s branding (access, in-store atmosphere, price and promotion, cross-category product
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Group 11 Aalborg University 12.01.2012 assortment and within-category assortment), brand image, identity and equity will be analysed here. In order to be successful, A&F has to consider all those issues when internationalizing to Europe.
Next significant point in the analysis is the internationalisation process, which is observed on the ground of the Uppsala model.
Drivers of international branding strategy such as firm-based characteristics, marketbased characteristics and market dynamics have an influence on the branding strategy of the company. Here it is essential to define what marketing strategy A&F uses.
Afterwards challenges that A&F faces are examined and then the analysis reaches branding in Europe. Building and maintaining of high brand equity usually is the result of years or decades of investments that are hard to reach by starting from zero.
Besides, the similarities and differences of A&F’s branding in the US compared to
Europe will be analysed here. To draw the line marketing strategy in is defined and the brand globalisation is described.
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4.
Analysis
Aalborg University 12.01.2012
This chapter will be based on the theories, explained in the previous chapter and they will be illustrated in this part, to see if they fit or not to the case.
In the analysis there will be a part about Abercrombie & Fitch’s branding in the US and then the internationalization process of the company will be discussed, containing different areas, i.e. the drivers for international branding strategy and the process of brand globalisation. Afterwards the branding in Europe will be discussed and the similarities and differences to the US branding will be highlighted.
4.1
Branding in the US
This part is a starting point for the further analysis, as it examines the current
Abercrombie & Fitch brand in the US. First, A&F’s brand image, identity and equity will be considered. Five essential factors of A&F in capacity of the retail industry’s branding are discussed next. These are access, in-store atmosphere, price and promotion, cross-category product assortment and within-category assortment.
Brand image and identity
As described earlier brand identity personifies firms’ reality; brand image-perception of consumers. In other words identity means ‘who you really are?’, image ‘how market perceives you?’
A&F has a strong brand reputation, customers know what the brand stands for and its looks are relevant. Much of A&F's popularity arose from scandalous ad campaigns, slogans, and over-sexualized clothing (AF-7, 2010).
A&F tries to figure out where teens want to belong to and try to provide them with that and at some point
“A&F merchandisers visit a different college campus every weekend to keep a tab on what teenagers are wearing.” (Perman, 2000). In this way the company adjusts itself in compliance with trends of youth culture.
On the other hand there is another opinion on A&F brand image. Firstly, branding is based on a beauty and erotic concept. The advertisement is not associated with clothes, as there are almost only naked people in daring poses, but with the physical beauty of the models and sexual desire, in the campaigns. Thus teenagers buying
A&F products believe that their body is comparable to the Abercrombie & Fitch models and that this certain lifestyle is within the grasp (AF-10, 2009). Moreover, the
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Group 11 Aalborg University 12.01.2012 ads with sexual connotations fuelled A&F’s growth by becoming the ‘forbidden fruit’ brand, as one could think that parents do not agree with the brand’s connotations due to the sexual character (AF-7, 2010).
As mentioned in the introduction of the company, A&F is a brand among four brands, which is owned by Abercrombie & Fitch. The Abercrombie & Fitch brand is the source of privilege and casual luxury. A&F supply an inspiration to this youthful all-
American lifestyle. A&F targets the group from 18 to 22 years old. A combination of classic and sexy creates a charged atmosphere that is confident and a bit provocative.
Idolized and respected, Abercrombie & Fitch is timeless and always fashionable. (AF annual report, 2010)
All the collections are designed by A&F designers, which mean the company only sells its own private labels. The private label collection with special logo or tag in the products makes the collection in A&F being differentiated compared to other retailers. The other reason that increases the specification of A&F is that customers can only purchase products in A&F stores and the official web shop. In this way, the company can take care of all the purchasing and selling activities because giving out products to any not owned-retailers may not allow the company to control the service quality, brand image and price of products. With the own brand name, A&F is independent from any other manufacturers which make it is easier to create brand awareness. On another hand, the private brand products and own retailers, which have the same brand, will support each other in marketing the brand name A&F and the name probably can get easier to customers’ mind.
“The Abercrombie & Fitch®, abercrombie®, Hollister Co.®, Gilly Hicks®, Gilly
Hicks Sydney® and the ‘Moose,’ ‘Seagull,’ and ‘Koala’ trademarks have been registered with the U.S. Patent and Trademark Office and the registries of countries where stores are located or likely to be located in the future.
Each registered trademark has a duration of ten to 20 years, depending on the date it was registered.
”
(AF annual report, 2010). As the company believes that its products are highly associated with trademarks it is one of the essential issues to keep and guard them. It is the company`s intend to continue to use its main trademarks.
The company pays a great attention to the quality of its products. “The Company has established supplier product quality standards to ensure the high quality of fabrics and other materials used in the Company's products.” (AF annual report, 2010).
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Group 11 Aalborg University 12.01.2012
Brand identity should be tightly connected with quality, every luxury brand has to ensure appropriate quality of its products.
Brand equity
The brand equity is intangible, but can be converted into cash flow, when selling the brands’ products or even the brand name itself. Next the A&F value will be presented in accordance with Top50 Best Retail Brands in the US, compiled by Interbrand, a
New York-based consulting firm. A&F was ranked as 49 th
in 2010 with 484 $M.
Compared to 2009 the change in brand equity was -81% (A&F was on the 27 th place).
In 2011 A&F dropped off this list. The main reason of such a dramatic fall is inability to defend their prices (Best Retail Brand 2010, Best Retail Brand 2011).
Ailawadi and Keller suggest the five important aspects for the retailer industry branding as access, in-store atmosphere, price and promotion, cross-category product assortment and within-category assortment (Ailawadi and Keller, 2004, p. 333). They will be examined next.
Access
The access refers to the location of the stores as well as to the distance between them.
Historically A&F stores are located in mostly upscale malls across the country in the
US (AF-7, 2010). Now stores location is much more differentiated, they are not only situated in the upscale malls. At the end of Fiscal 2010, the company operated 316
Abercrombie & Fitch stores. At the end of Fiscal 2009, the company operated 340
Abercrombie & Fitch stores (AF annual report, 2010). Herby it can be concluded that
A&F has a vast network stores all over the US and has created brand awareness within the US market. There are up to 41 stores in the different states in the US, the biggest amount of stores is situated in California (41), Texas (22) and Florida (19)
(AF-11, 2011). Brands that are targeting the mass market, distance among the stores is relatively small, especially in the eastern and south-western part of the country (see the drawing below).
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Figure 9 – Map of Abercrombie & Fitch’s stores in North America.
12.01.2012
Source: MapMuse.
Additionally, A&F operates the www.abercrombie.com website, which strengthens the brand's lifestyle (AF annual report, 2010). In this way store access can be viewed as virtual accessibility, which means customers can purchase goods where ever there is an internet connection. It might be considered as indirect access because it is not possible to try or touch the merchandise or have personal assistance. However online shopping has its own benefits and can be ranked among Abercrombie & Fitch store network.
In-store atmosphere
Visiting A&F could remind one of visiting a night club, as the atmosphere in the shop is dark, loud music is played, strong perfume is overall, walls are decorated with black and white photos of semi-nude models. Night club atmosphere could be associated with a good time with friends, no problems, good memories, distraction from everyday life problems; with the help of such associations A&F makes customers visit the store again and again. Models are displaying A&F clothes, so visitors involuntarily associate themselves with the A&F lifestyle and with the whole
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Group 11 Aalborg University 12.01.2012 concept. The company's in-store marketing is designed to express the principal elements of the A&F brand.
“The store design, furniture, fixtures and music are all carefully planned and coordinated to create a shopping experience that reflects the
Abercrombie & Fitch lifestyle.” (AF annual report, 2010).
The unique atmosphere in an A&F store definitely suits its target of young people who like music and eroticism.
The company has been very successful in tying clothes and nakedness. “ No firm in history has applied the use of sexuality and physical beauty in marketing better than
Abercrombie and Fitch.”
(AF-10, 2009). Perfume and music can be perceived from outside the store, making people aware of that special store and it aims to make them entering the store. People should feel comfortable in the store, to stay and buy. A&F tries to use as many different senses as possible to strengthen the brand. This is one of the main parts of A&F’s branding and a way of differentiation from all others. This will be described in the next subchapter.
Price and promotion
It can be assumed that the prices are high because the brand is positioned as luxury casual brand. Furthermore, lowering prices has become a reason of A&F`s fall on the list of Best Retail Brands, like mentioned earlier, according to Interbrand.
In light of price promotion A&F does not use aggressive price promotion campaigns, but A&F tends to make small discounts (Smith, 2011). And there are several reasons for that. First, A&F targets customers that have a higher willingness-to-pay for its product. These customers tend to be relatively price insensitive and therefore price discounts will not increase sales. Secondly, “ utility sensitive customers are unlikely to switch to lower valued goods even in light of a price discounts on lower valued brands.” (Smith, 2011).
And finally, price promoting a premium brand is known to destroy the brand’s position, thus failing future pricing power (Smith, 2011).
Abercrombie & Fitch`s marketing has a strong accent on senses in order to make customers believe that they follow the lifestyle represented by the brand. The company considers the in-store experience to be its primary marketing strategy (AF annual report, 2010). Ability to attract customers to the stores also depends on the success of the shopping malls in which most of the stores are situated. As discussed above to be a dominate retailer in the fashion industry using sexuality in marketing,
A&F is able to gain the attention from people who have already been inside the
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Group 11 Aalborg University 12.01.2012 stores. With such a special feeling of A&F stores, people are willing to tell the experience to their family and friends, which creates word of mouth marketing for the company and it is one of the strongest tool for marketing. The special atmosphere in the A&F stores also makes it different to its competitors and brings the brand of A&F in a higher position, which therefore increases brand value for the company.
Besides this, A&F engages its customers through social media and mobile commerce.
In such a way not only national, but also international customers are appealed (AF annual report, 2010).
“The Abercrombie & Fitch failure to protect our reputation could have a material adverse effect on brand.” (AF annual report, 2010).
Thus the company needs to avoid legal scandals, such as discrimination in the employment practices, treatment of customers, and clothing styles. However, the situation with Jersey Shore, a reality
TV-show, when Abercrombie & Fitch offered money in order for the cast not to wear its clothes seems contradictory (Sweney, 2011). A&F explains this by trying to protect the brand image, but it also can be viewed as a promotion campaign, because it gave international attention. It seems that A&F wants to be controversial to make people talk about the brand. In this manner being controversial and rebellious, adversative makes people talk about the company, all this aims at the target segment of young adults.
In order to keep its pricing position A&F has to respond fast to the changes in the fashion trends, as the competition in this field is rather high. Furthermore, A&F faces additional competitive challenges as many retailers continue promotional activities regardless of economic conditions. In response to these conditions, A&F has increased its promotional activity while continuing to focus on preserving the value of its brands (AF annual report, 2010). The main competitors of Abercrombie & Fitch are American Eagle Outfitters Inc., at Hot Topic Inc., Pacific Sunwear of California
Inc. and Aeropostale. All these competitors use strong price promotions to retain customer traffic, besides this they offer products for lower prices than A&F (Smith,
2011). A&F`s advantage is the in-store atmosphere, that makes shopping a unique experience.
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Cross-category product assortment
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The cross-category product assortment is not very wide. A&F sells mainly clothes for men and women, such as casual sportswear apparel, jeans, dresses, t-shirts, sweaters and outwear. Cross category products are accessories (hats, totes, belts, ties) and perfume.
Within-category assortment
The within-category assortment has relatively big variety, however, the design is pretty similar, differs only a logotype and colour. Concerning sizes Abercrombie &
Fitch tends to sell small clothes sizes.
“The Company strives to maintain sufficient quantities of inventory in its retail stores and DCs to offer customers a full selection of current merchandise. The Company attempts to balance in-stock levels and inventory turnover, and to take markdowns when required to keep merchandise fresh and current with fashion trends.” (AF annual report, 2010).
4.2
Internationalization of Abercrombie & Fitch
If one takes a look at the internationalization process of Abercrombie & Fitch, it was founded in 1892 in downtown Manhattan, New York. Firstly, it was only in its home market, the US for a long period of time (114 years), which is the first stage of the
Uppsala model. In 1928, A&F started its acquisitions, purchasing a similar business from New York, Von Lengerke & Detmold, as well as that company’s Chicago branch, Von Lengerke & Antoine. Also, it has acquired a third company, Griffin &
Howe (AF-12, 1996). During the first stage, A&F continued to expand in the US. In
1958, it opened a large branch in San Francisco.
In November 1977 A&F officially closed its doors due to big losses. One year the internationalization process was interrupted, but in 1978, Oshman acquired A&F and he opened an A&F store in Beverly Hills, California and one in Dallas, Texas. Then, stores continued to open throughout the US.
In 1992 A&F, under The Limited Inc. leadership, was repositioned as a more fashionoriented casual apparel business, as it changed the product portfolio. One could say that from 1992 A&F starts being the brand that it is today.
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The second stage of the Uppsala model was skipped because the sales have always been done by A&F in its own stores. It did not export via and to external dealers (AF annual report, 2010).
A&F moved to the third stage of the Uppsala model in 2006. It entered the international market by opening own stores in Toronto and Edmonton, Canada. By the fall 2006, a third A&F store opened in the Toronto Eaton Centre (Eaton, 2007). It continued to go internationally, and in 2007 A&F opened its first European flagship store in London, UK (AF-13, 2007).
This decision, which A&F made, fits to the Uppsala model. The company chose
Canada and England first before moving further, because these countries are close in culture, language, and political system. Also, experiencing the European market through the store opened in London, A&F acquires knowledge and thus can be extended across the whole Europe. In that way, the company gains market knowledge.
Even though A&F had financial downturns (AF annual report, 2009), after two years of being in Europe, it opened its second flagship store in Milan, Italy. It was enough time for A&F to explore the European culture and people’s lifestyle.
The first A&F store in Latin America was opened in December 2010 in San Juan,
Puerto Rico (Diaz, 2011). This can also be explained by the Uppsala model. It is politically a territory of the US and culturally and structurally between the US and
Latin America. English and Spanish are the official languages, the legal system follows the Spanish Civil Code and the US federal system; there is duty-free access to the US, the Puerto Ricans have US nationality and a lot of the islands’ infrastructure has been built with support from the US (CIA, 2011). Therefore the store in Puerto
Rico can be seen as an expansion within the home market or it can be seen as a first step into the Latin American market. Within this market, Puerto Rico is one of the closest ones for the US in terms of culture and hence fits to the Uppsala model as a way of getting knowledge about the Latin American market and how to make business there. Then later other countries like Mexico, Argentina and Colombia could follow.
A&F had gained experience and knowledge from the flagship stores in London and
Milan and in 2010 the company opened a flagship store in Copenhagen, Denmark and one in 2011 in Paris, France. At the end of the year 2011, more and more flagship stores were opened in Europe, such as: Madrid – Spain, Dusseldorf – Germany and
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Brussels – Belgium. Thus, there are a lot of resources committed in the European market and one could say that A&F has an ascending market commitment. In 2012,
A&F plans to open more European stores in Hamburg, Dublin, Barcelona, Munich and Manchester (AF annual report, 2010).
After almost three years of staying in the European market, A&F moved forward with plans to bring its brand to the rest of the world. Therefore, in December 2009, a flagship store was opened in Tokyo, Japan
,
marking the first ever A&F location in
Asia (Prasso and Bra, 2009). After a year of gaining knowledge about the Asian market the brand opened a store in Fukuoka, Japan. According to the Uppsala model, the step to go to Japan was made too early, because there were other closer countries or regions for the brand to explore. After one more year of being in Asia, A&F opened a flagship store in Singapore in 2011 (A&F Facebook, 2011). This is the third store opened in Asia. Through these stores, A&F is closer to the customers and gains more market commitment in the Asian market.
A&F did not reach the fourth stage of Uppsala model, as it has not opened any manufacturing units either in the home market or abroad. A&F purchases its goods from vendors located throughout the world, primarily in Asia and Central and South
America and there is no need of a production line (AF annual report, 2009, p. 4).
In conclusion, in the internationalization process of Abercrombie & Fitch, the
Uppsala model applies well from the beginning when the company tried to enter to its close markets – first, Canada and England and then Latin America, to reduce uncertainty and take advantage of the similar business environment as well as culture, language and political system. Before entering the Asian market, A&F had only two flagship stores opened in Europe. So, one can say that A&F entered the European and
Asian market quite at the same time. Then, the company entered some more European countries. From 2009 to 2011 A&F entered five new countries in Europe: Denmark,
France, Spain, Germany and Belgium. In this way the company gained a lot of market commitment. At this point, it is clear that knowledge and market commitment described in the Uppsala model should be developed together during the internationalization process of the firm. Sometimes there might be some missing steps of psychic distance markets or stage of market commitment. The internationalization process should depend on how fast a firm can learn and how much opportunity there is in a specific market, that a firm can see.
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4.2.1
Drivers for international branding strategy
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The firm-based drivers play an important role for A&F’s branding. The company operates the A&F brand as a unique brand, which means that the A&F brand is the only one used, the stores and all the products in the stores have the same brand. The other brands the company uses are sold through separated distribution channels. This strategy is used globally: in the home market and in all the international markets. The vertical product range is quite narrow and the main customer segment as well.
Therefore A&F is able to make a focused way of branding, aiming at a differentiation that targets exactly the narrow customer segment. The brand’s history in the US, the
US product style and the different way of branding are assets that can be used in
Europe as a competitive advantage because it differs from traditional European competitors.
This fits to the theory, saying that companies with a well-defined, narrow product range and customer segment should focus strongly on the firm-based drivers as part of differentiation in international branding and that’s what A&F does (Douglas et al.,
2001, pp. 99-114).
The differentiation from the European competitors is also part of the market-based characteristics. The closest competitors in terms of distribution channel and style in the US are Aéropostale and American Eagle. They have not opened any stores in
Europe so far (Aéropostale, 2010, p. 3 and American Eagle, 2011). This is an example of how the market situation influences and changes the consumers’ reactions towards
A&F’s branding, comparing the US and Europe. Are people used to that kind of products or is it something new? The size of the market is not so important for A&F’s branding, because the brand does not try to target the whole market, but the size, the national positioning and the purchase power of the cities seem to be important. So far,
A&F has neither entered small cities nor economically weaker ones in Europe, which had been done in the US though. The branding therefore does not focus strongly on nations as potential markets, which is supported by the fact that many different countries are entered. This strategy bases on the idea that there are similar consumers spread over Europe that are potential customers for A&F. There is apparently a need across nations for A&F’s branding, including the international or the US origin and style, the distribution channel, the pricing and the special in-store atmosphere. This
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Group 11 Aalborg University 12.01.2012 fits to the idea of Euro-consumers being alike (Douglas et al., 2001, pp. 99-114), since the branding is very similar within Europe.
The market dynamics also has an influence on the A&F branding. Traditionally the pricing strategy was against promotions, but the developments in the economical environment made the brand to eventually offer price promotions (Smith, 2011).
Technological changes had the consequence that A&F’s branding nowadays includes
Facebook, Twitter, applications for smartphones and its own online shop. Changes in the ethnical demographics and social movements could lead to changes in the way the sensuality and the models are represented to address the customer segments.
So, the three drivers are important for A&F’s international branding. The brand’s strengths must be used as a way of differentiation in Europe, where the best fitting markets must be addressed. The markets are not specific nations, but rather regions or cities that have (relatively and absolutely) many potential customers. Current national and international trends and dynamics must be included to find the right way and time for the branding. The firm-based characteristics play the most important role for
A&F. The branding strategy in Europe does not mainly focus on analysing a market and a specific way to brand A&F in that market, including a whole variety of national characteristics. Most of the branding done in Europe uses the strengths and the competitive advantages the brand has in a very similar way without making basic adaptations and reactions to it.
4.2.2
Shot-in-the-dark method
Taking into account the internationalization of A&F branding, one could say that
A&F implemented the shot-in–the-dark method. The theory stresses the fact that a company takes its brand and use it just in the same way in foreign markets as the home market (Onkvisit and Shaw, 1989, p. 24). According to the case, A&F entered the European market and also the Asian market with the same brand image and products. It has only adjusted the prices according to the foreign countries’ economy.
Also the theory is based on the fact that customers have the same buying habits and preferences for clothes as the consumers from the home market. But also, the theory is very risky due to the lack of knowledge about national characteristics. However, in order to reduce some risks, A&F firstly entered Canada and England, because they are the nearest markets, with language, cultures, employment and political systems.
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According to the theory, if a brand is successful in one country, it will also be in the other countries (Onkvisit and Shaw, 1989, p. 28).
One could say that A&F tested the European market through the flagship store from
London. It could observe the customers from a close approach to see their shopping habits, preferences and behaviours. As the London store was successful, A&F opened another flagship store in Milan, Italy. There A&F explored more of the European lifestyle and current trends. Both stores had a great success among Europeans and this led to the opening of five more stores across Europe after another two years. The first flagship stores in Asia (Tokyo and Singapore) could be opened to test the Asian market. In this way, the theory fits to A&F’s internationalization process.
On the other hand, it could be assumed that A&F did a lot of investments in analysing the market before entering Europe and the store locations have been chosen strategically. It will be explained later. A&F had gained knowledge in advance and acted according to it. One more critical thing could be said about this method, as the branding has been changed in Europe, with the use of only flagship stores, compared to the regular stores in the US.
In conclusion, one could say that A&F applied the shot-in-the-dark method as it entered the foreign markets, after A&F explored it for a couple of years through direct participation. In this way, A&F observed the lifestyle, shopping behaviour of
Europeans, the amount of money they spend on clothes. Through direct observation
A&F reduces the risk when decided to enter other foreign markets. One could say that
A&F did not apply the shot-in-the-dark method, because A&F probably did market research, strategic planning and changed some of its branding.
4.3
Challenges for A&F’s brand internationalization
One challenge for internationalizing a brand is to find out whether the same brand name can be taken for all the global activities or not. This can be divided into two aspects, the legal one and the cultural one. A&F needs to make sure that the name and the symbols it uses to represent the brand had not been protected by another company before. If this was the case, it cannot just be used by A&F. This legal part can differ from country to country. The A&F brand name and the “moose” logo are very important for the brand’s positioning and must therefore be protected in the different countries, so that others do not use A&F’s trademarks for their own benefits. If others
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Group 11 Aalborg University 12.01.2012 use worse quality or different ways of branding with non-registered trademarks of
A&F in some international markets where A&F is also in, the associations and A&F’s brand image could be damaged (AF annual report, 2010).
The second aspect is the culture. A&F needs to be aware of the consequences its own brand name creates in the new markets. Differences in the language could lead to misunderstandings, but furthermore the logos (i.e. the moose for A&F) might create different associations. The brand name can also cause associations towards the country-of-origin, A&F has to decide whether the people should connect the brand with fashion coming from the US or not. The word ‘Fitch’ also represents one of the biggest rating agencies in the world, which is currently in the media, but mostly in a negative way. The danger is that people connect negative associations with A&F that do not have anything to do with the brand. Therefore A&F needs to find out about the consequences of using its brand name and the other trademarks before entering a new market and make proper changes if necessary.
As explained before, the choice of the store locations is very important for retail companies and their branding (AF annual report, 2010). The stores are of high importance for A&F’s success, they communicate and represent a lot of the lifestyle the brand stands for. As shown in the subchapter about branding in the US, most of the A&F stores in the brand’s home market are traditionally located in shopping malls
(AF annual report, 2010) all across the country (over 300 stores). When A&F accesses the European market it cannot create this density of stores so quickly. One way to do that would be by acquiring local chains and convert them into own stores.
That would be capital intensive and highly risky. The system of shopping malls in the way they exist in the US, play historically a smaller role in the retailer and fashion industry in Europe, even though there are several of them (Jackson, 1996, pp. 1113-
1116). So, A&F needs to decide where to build its stores in Europe. They could be placed in the most expensive areas in the city centres or in cheaper, but remote areas, like industrial areas but also in residential zones. Then the stores could be located close to each other, covering a smaller area, or they could be further away from each other, covering a bigger area.
Since it does not seem like A&F’s strategy in Europe is to reach the mass market (at least so far), fewer areas have to be chosen, the company has to decide which country, which area, which city and even which part of a city is entered. These decisions in the
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Group 11 Aalborg University 12.01.2012 end affect A&F’s success and branding. According to the Uppsala model, the first stores should be opened where the customers are most similar to the customers in the home market. The brand origin, style and image should be appreciated and the people should be able and willing to pay the prices.
The pricing is another challenge for the internationalization process of the brand. Due to uncertainties in the exchange rate and increasing cost of transportation or customs
(AF annual report, 2010), the prices in the international markets are usually higher than in the domestic market. In some European countries, the salaries, taxes and rents are higher, which increases the costs for A&F. Also, the competitive situation and the
Purchase Power influence the pricing strategy. For A&F, which in the domestic market already offers a premium price needs to find out at what level the prices should be in the European markets and if the price premium is even higher, it must be explained and communicated to the customers to make them appreciate that.
A global branding strategy must be created and implemented. The A&F internationalization process focuses on entering many countries with a small amount of stores within a short amount of time (2011/2012). This means that the company has to deal with different cultures, languages, preferences, shopping behaviours and competitive situations. Therefore a global branding strategy is necessary. As mentioned before, this can be done by using a global, local, glocal approach or the process of brand globalisation. To choose the best method A&F needs to know whether its branding attributes are accepted in the new markets or not. It should get market knowledge about the consequences of the country-of-origin, local lifestyle and fashion style, the association with the brand, the needs of European customers and regional differences within Europe. So, from the very beginning of the internationalization process, it must be clear what parts of the brand are seen as the main core competence that will be used globally and what parts should be adapted to local differences.
In order to make the best global branding strategy, good market knowledge is necessary. This is another challenge for A&F, since the brand has not been present in the markets, it has not made any own experiences and therefore lacks practical firsthand knowledge. A&F needs to know whether its own core competence and competitive advantage is also a competitive advantage in the new markets. It could be that the concept of the brand is already established and the brand’s strength is
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Group 11 Aalborg University 12.01.2012 neutralized (Dupuis and Prime, 1996, p. 35). This challenge is also described in the
Uppsala model, which says that only by being in a market, necessary knowledge for further growth is acquired. Hence, the first steps in the internationalization are based on limited knowledge. Some knowledge though can and should be acquired as good as possible before. Important market attributes include i.e. the price levels, the shopping behaviour, the competitive situation, the style of fashion, the legal and economic environment and cultural differences. A&F has to try to figure out how to get access to that information and when. So, what needs to be known before going to a market and what will be learned during the process? The brand must be able to adapt during the learning process. A&F has had legal problems in the US and has been criticized due to the use of semi-nude, mostly white models. This is an issue that the company has to deal with when entering new markets. Is the use of this marketing strategy socially, religiously and legally acceptable or are problems that also affect the brand image negatively to be expected? Some countries also have strong lobbies that try to support local companies and fight foreign global players, so the acceptance of the brand must be ensured, bad publicity can affect the brand negatively and then the whole success of the activities (AF annual report, 2010).
The competitive situation is different from country to country, some having stronger competition in the discount and others in the premium segment, therefore A&F needs to make sure where to position the brand and benefit from its differentiation. The need for a good strategy of differentiation is needed, since the European market in general is not a growing market, like China is, in fact, strong and well established local brands exist and the current economic crisis affects the consumer behaviour especially in the premium segment (Miller, 2010). Since the number of A&F stores is diminishing in its home market (AF annual report, 2010), the future development and growths of the brand strongly depend on its international activities, making a success necessary (AF annual report, 2010).
Furthermore A&F has to come up with a change in strategy. After over 100 years in its home market, new markets are entered, which means that the company now has to deal with problems that it had not ever dealt with before in its long history. This might lead to the fact that new resources are necessary, i.e. people with experience in the new markets might have to be hired, to meet the new needs the brand expansion has been creating (AF annual report, 2010). Then the focus in the new markets is strongly
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Group 11 Aalborg University 12.01.2012 on building up brand awareness, which is not a focus in the home market, since brand awareness is there already. So the brand cannot benefit from its experiences in the market, its existence in people’s minds, but has to create the awareness first. The image of a domestic brand with a long history changes to a new, foreign brand, even though it can still base on its history, but in a different way. The overall reaction to the branding strategy and the way of communication can lead to different, new reactions that the company has no idea of. Hence changes in the way of branding are necessary.
4.4
Branding in Europe
Abercrombie & Fitch first entered the European market in 2007 with a flagship store in London. After two years of being in Europe and gaining market knowledge, it has begun to accelerate its international expansion opening more and more stores throughout the Europe and it has plans to open more stores in the next years (AF annual report, 2010). A&F has opened flagship stores in Italy, Denmark, France,
Spain, Germany and Belgium. “ The flagship stores are being positioned as the highest and best that the brand has to offer, and are being used as testing grounds for innovation and experimentation. With the prestige that the term now garners, flagship stores grab headlines, draw crowds, and provide retail organizations with an opportunity to turn an ordinary expansion into a notable global event.” (World
English Dictionary, 2011).
This subchapter gives an overview of the brand in Europe, it examines the differences and similarities in the US and European branding and finally, based on this the marketing strategy is defined.
Access
As A&F has only flagship stores, not ordinary stores in Europe, they are situated at long distances one from another. Regarding the locations of the stores, they are placed in high-profile shopping centres or on the most famous boulevards. For instance, in
Paris it is placed on Avenue des Champs-Élysées, which is the most famous streets in
Paris or on Königsallee in Dusseldorf (AF-14, 2011). So far, there are seven flagship stores in Europe as following: London, Milan, Copenhagen, Paris, Madrid, Dusseldorf and Brussels (see the picture below).
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Figure 10 – Map of Abercrombie & Fitch’s stores in Europe.
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Source: own creation.
The first flagship store was located in London, which is the capital city of the United
Kingdom and it is the largest and most populated urban zone (with 7,825,177 inhabitants (ONS, 2011)) in the European Union. London is a global leading city and it is famous for its art, fashion, tourism and culture. It has the most international visitors of any city in the world (Euromonitor International, 2011) with 14.059.000 arrivals each year. This is a real advantage for A&F as most of their customers are tourists (Hines, 2011).
The second opened flagship store is situated in Milan. The metropolitan area of Milan has 7.4 million people and it is the area with the highest population and industrial density in Italy. Milan is recognised as a world fashion and design capital as it has been ranked as an Alpha world city in 2010 and the 42nd most important global city
(GaWC, 2011). Also, at Milan is held The Fashion Week every year and attracts a lot of international visitors. In 2009 it had 1.894.000 arrivals (Euromonitor International,
2011).
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Copenhagen was the third city in Europe, where A&F opened a flagship store. It is the capital and the largest city of Denmark, with a metropolitan population of 1.930.260
(Brinkhoff, 2011). It has a strategic location and great infrastructure, having the largest airport in Scandinavia (Københavns Lufthavn, 2008). It is also a touristic and economic centre of Northern Europe (Copenhagen, 2011).
Also, A&F opened a flagship store in Paris, the capital of France. Paris is considered an international capital as it „shares the same reality and concerns as all major cities across the world: social, democratic, environmental, economic and cultural issues”
(Paris, 2011). Paris metropolitan area is the most populated metropolitan area in
Europe (Paris Region, 2011, p. 17). Paris is the most visited city in the world, with annually approximately 42 million tourists (Paris Region, 2011, p. 21). Also, it is one of the most expensive cities therefore Paris is a good location for A&F to practice its prices (AF-15, 2011).
A&F continued its openings in Madrid, which is the capital city of Spain. The population of the city is about 3.3 million inhabitants (Instituto Nacional de
Estadistica, 2010). One reason why A&F chose Madrid for a flagship store could be that it is the third largest city in the European Union after London and Berlin and its metropolitan area is the third largest in the European Union after London and Paris
(Demographia, 2011). Madrid is the most touristic city of Spain being the most popular destination of Spain and it is known for its quantity of cultural attractions
(Demographia, 2011).
Dusseldorf is known for its fashion and trade fairs and it is a good location for an
A&F flagship store. Every year more than 4.5 million people visit the city’s largest fair on the Rhine. It is also close to many other big cities, which builds the largest agglomeration in Germany (Rhine-Ruhr area). Königsallee (‘King's Avenue’), is a popular shopping destination, which hosts some of the best known jewellery shops, designer labels, and galleries (AF-16, 2007). Hamburg, where the 2 nd
store will be opened is a rich, large and tourist city as well.
In Brussels A&F opened a store on 8 th of December 2011 and it has a lot of potential customers there. Brussels is the capital and the largest urban area in Belgium. The metropolitan area has a population over 1.8 million, making it the largest in Belgium
(Statistics Belgium, 2008). Brussels serves as capital of the European Union, hosting the major political institutions of the European Union.
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In conclusion, A&F has chosen some of the most important cities in Europe, taking into account the population, how many tourists visit the city or their importance in the fashion area. Every city so far has the largest agglomeration in its country, is relatively rich, it is an economic, political, cultural or fashion centre. This shows that
A&F has not randomly picked some locations for its flagship stores, but A&F has a clear strategy. The choice of these locations influences the brand image. Moreover, these cities are visited by millions of tourists every year and this definitely helps to increase A&F’s brand awareness.
In-store atmosphere
The in-store atmosphere is similar to the US flagship stores, which is dimly-lit, perfumed, sex appealing and loud. So visiting a store makes it an unusual experience, as there are no analogues in Europe. In contrast to usual stores throughout the US it is possible to get pictures taken with models.
Price and promotion
Prices in Europe are much higher than in the US. A&F internationalization process fits well with a pricing strategy. A basic term of pricing is that a company should serve and capture customers that are willing to pay for the product, and withdraw those that are not (Smith, 2011). Rather than losing sales in the US from customers that demonstrated a lack of willingness to pay for their product, Abercrombie & Fitch increased their efforts to serve international customers that value their products and are willing to pay premium prices to obtain them (Smith, 2011).
“Europeans spend a lot on clothes - 5.7 percent of total household expenditure, and as much as 7.7 percent in Italy, went to clothing in 2010, according to data compiled by the
European Commission. Meanwhile, Americans spent an estimated 3 percent of their disposable income on clothing last year.” (Hines ,2011).
A&F clothes are positioned as a luxury casual brand, not so widely spread in Europe, so customers are ready to pay more for exclusivity. As many Europeans had first heard about the A&F brand while travelling to the US, this brand is associated with the US. The country-of-origin affects the brand image. Since A&F opened its first store in Europe in 2007, its products were unavailable in Europe for a long time. That is why it is important to keep associations with the country-of-origin in minds of
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Group 11 Aalborg University 12.01.2012 customers and not to open so many stores, in this way the brand exclusivity can be preserved. A&F wants to keep the price premium, many stores could be opened in the future, but the image and pricing would change.
Opening a store attracts a lot of people, so making campaign hold the hype about the
A&F brand. Just afterwards a lot of pictures with well-shaped models appear in the mass and social media. The day of the opening of a European flagship store is an event and also used as a marketing and branding campaign. It differs strongly from the competitors and aims on getting brand awareness. Typically, many models representing rather the lifestyle than the products stand in front of the stores welcoming the first visitors, which have come in high numbers (Hines, 2011). For the opening of the store in Dusseldorf, the police, the fire department and the regulatory authority (Ordnungsamt) were alerted, because of the amount of people expected.
This had been done because of an event some days before, where 50 A&F models caused a chaos in the Königsallee (Vidovic and Altenhofen, 2011). This and also the contact with the police in Paris (Hines, 2011) support the rebellious character, that
A&F seems to try to create in Europe. It fits to the main customer segment, since young adults are in a phase where rebellion is a part of life and considered cool.
However, there is not much information in advance. Information about when a store will be opened and where are not always communicated clearly. It seems like the company tries to create a mystery about stores` new location. The mystery is also shown in the look of the stores. The day before the opening of the Dusseldorf store, it was presented to the press, but no pictures were allowed to be taken (Vidovic, 2011), the information is published step by step, making it almost an event and something special, when details are communicated. In such a manner it forces the people to
‘gossip’ in social media or by word-of-mouth about the company trying to access information together. It makes people more committed to the brand.
Product assortment
Product assortment is fully transferred to Europe from the US, the flagship stores in
Europe have exactly the same items as the other flagships across the world (Chan,
2011). There could be several reasons why Europeans can adopt A&F`s style. Firstly, it is comfortable and causal that is always topical in everyday life. At the same time due to advertisements, products are associated with sexual desire and perfectionism.
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Teenagers irrespectively of location tend to worry about their appearance and be dependent on someone else`s opinion. And finally, American culture invaded Europe through fast food restaurants, cinematography, celebrations, etc. Thus true American brand could be assumed to become popular.
To sum up the company is present in many US cities, accounting for over 300 shops countrywide. The brand is as a consequence well-known and easily recognized. Sale revenues are much higher in the US compared to Europe, where only seven shops are present. Stores location in Europe is chosen cautiously taking into account the population, economic situation, fashion actuality and popularity among tourists, while stores in the US are located throughout the whole country in different types of cities and regions. The main difference in store atmosphere is possibility to take pictures with models. There are models who you can take picture with only in flagship store in the US, but in all European stores. Besides that the size of the stores in Europe tend to be bigger than most of the stores in the US. The share amount of buyers in the US means that the products are looked upon as clothes for the masses. When addressing such a large segment of the population it is only natural that the product loses some of its exclusivity and as consequence must be retailed at lower price than in Europe. In
Europe the situation is different. A&F is a brand that is hard to find and looked upon as something exclusive, which in turn means that prices are much higher than in the
US. When addressing to the competition, there are not so many companies that offer a similar clothes style in Europe, besides that the main competitors, such as American
Eagle and Aeropostale, that are represented in the US are not in Europe.
4.5
Brand globalisation
This subchapter sums up the globalisation of the brand A&F and the used marketing approach. Connections between the internationalization process and the branding of
A&F will be described.
Abercrombie & Fitch is an all-American brand in the US. The question is, if the brand has been transferred to Europe or if it has been changed; so, is A&F building a global brand, a local or a glocal one?
Abercrombie & Fitch developed its brand through the 1990s and the brand identity is mainly the same today. According to the theory, before internationalizing, the company has to decide which parts of the domestic brand it wants to globalize and
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Group 11 Aalborg University 12.01.2012 how the international brand identity should look like, focusing on the core competences and the competitive advantages the brand should have in the new markets. A&F focuses on universal needs, offering clothes that can be worn in Europe as well as in the US. The special store atmosphere, the use of models and sensuality appeal to Europeans as well as to Americans and were therefore transferred. The style of clothes and the all-American lifestyle might become a problem in the international markets, but A&F decided to use a very similar style for the stores in Europe making them even more unique and differentiated, since the closest competitors are not present there. The country-of-origin supports that differentiation strategy, which means that people buy A&F’s products because they are American. According to the theory, a brand tends to become more premium in the international markets because of higher costs and therefore higher prices. This is also done by A&F, higher prices and exclusivity make the brand almost a luxury one.
After choosing the brand identity, the company has to choose which countries to target and how to access these markets. A&F first went to countries that are close in culture and language and therefore similar branding to the home market is more likely to succeed. The internationalization process is based on opening own stores and on selling only one brand in them, which follows the same strategy in the US and in
Europe. The time frame of several years it took A&F to enter the biggest European countries gave the company time to learn and to experience the markets and the development of the brand. Nevertheless the locations of the stores, their sizes and the pricing strategy give the European branding a more exclusive, special and unique shopping experience. As mentioned earlier, there has not been a major change in the product portfolio, Kapferer’s ‘horizontal’ and ‘vertical crunch’ have not been used.
Abercrombie & Fitch has chosen not to adapt locally brand wise, which means that within Europe the same branding strategy is used. A&F has not chosen either to adapt locally in the sense of products. It sells all-American clothes, accessories and perfumes in all European stores. The marketing campaigns seem to follow the same strategy in all international markets; models attracting publicity when opening a new flagship store have been used i.e. in Paris, Düsseldorf and Singapore. Coherence and international values are applied for the international branding process.
According to Jeffrey Klinefelter (a retail analyst), Abercrombie & Fitch does not have many competitors in Europe in the casual and classic American lifestyle sportswear
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Group 11 Aalborg University 12.01.2012 category (Hines, 2011), which obviously gives the brand an advantage. Policemen made A&F’s shirtless models wear a sweatshirt, because nudity was not allowed in public places, when opening the flagship store in Paris – so Abercrombie & Fitch is the cool rebellion in Europe, which it also is in the US (Hines, 2011).
Therefore it can be concluded that A&F follows an international branding strategy to build a global brand, focusing strongly on homogeneity between the markets and standardisation of its branding. Several main parts of its branding in the US market are transferred to the international markets and local adaptations are small. Still, as mentioned earlier, there are a few general differences in the US and the European branding.
The internationalization process has influenced strongly these differences. The small amount of stores in Europe, located in tourist, economic, fashion centres of different countries made A&F a brand that is rare and exclusive, but also exotic and a tourist attraction. It has come from the US and also represents this fashion- and lifestyle, which is not common in Europe. These attributes are used and strengthened by A&F to make this differentiation even stronger. The few stores in Europe are bigger than the ones in the US, they include more model-like employees and the general price level is higher. So, by only doing little changes in the branding, a more up-scale and luxury brand can be established and thereby the internationalization can be used as part of the branding.
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5.
Reflection
Aalborg University 12.01.2012
When looking back at this project there are some elements that can be reflected on.
These things will be presented in the order they appear in the project to make the overview simpler and easier to understand.
The process of the problem formulation is often difficult, because it is the part that is binding the project and the problem formulation is likely to change throughout the process of the project.
First there are a lot of thoughts going into the methodology chapter, because it is the guideline for the project. It is presented, how the researchers see the reality and create knowledge and how the researchers will make the project, which data and methods should be used, etc. The researchers see the reality in an objective view, and therefore it will affect the whole project and the process of writing the project. After being objective throughout the project, it is hard to say whether or not, there was some writing that did not measure up to being objective. Likewise for the theory writing it is also important to maintain an objective view, to present the theories in its purest form.
The theories are selected especially for this project and the analysis, to make sure that there is a connection and a link between the problem formulation and the theories.
The research is based on the theories - therefore it is important that they represent different fields and topics in the area with internationalization and branding.
The Uppsala model is tangible and there are some specific steps to analyse. When looking back at the Uppsala model, it fits to the case in some areas and does not fit that well in others, but it still seems like the theory that explains, the internationalization process of the company, the best. There are some limits in the
Uppsala model, because maybe it is more suitable for manufacturing companies, but the theory and analysis get around this fact.
The branding theories are not that complex; they are more open in the interpretation of the understanding, because they are wider than some other theories, i.e. the
Uppsala model. One of the strengths of the branding theories is the fact that they are so wide, and therefore it leaves more of the analysis up to the researchers, but it can also be a weakness in the meaning, that it can be too broad and unclear.
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Reflections on the case can be the fact that the researchers could not gain complete knowledge about the company, due to the little information there is about the company, besides the financial data. Due to that the researchers are external and did not have access to the company and the research is therefore based on someone`s opinion and the annual report. If the researchers had chosen a bigger company, it would probably have been easier to collect data for the case and project. Another thing the researchers found during the process with the project was that the company has a strategy not to give out to much information, i.e. when opening a new flagship store. Most of the financial information is available because the company is on the stock exchange market and the annual reports are on the Internet.
It could have been interesting to do a survey to analyse people’s knowledge and opinion of the case company. A survey would have taken time, that the researchers did not have and it would be expected to have been a rather big survey, to analyse as much as possible and different countries and populations. Likewise it could have been interesting and helpful for the researchers to go to a European flagship store and a normal store in the US, so gain information for the project and see the differences, but it has not been possible due to time and a budget.
The process has been educational, because it is a free topic for the project. Therefore the topic was something that interested the researchers. There is a lot of work with the problem formulation and getting the project connected in all the different areas.
Working with the methodology has also been a good learning process and it is one of the things that connect the project in a deeper meaning.
All in all it has been a good experience, with more freedom for the researchers and some academic learning by self-learning, in the meaning that the data for the whole project has been collected and structured ourselves.
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6.
Conclusion
Aalborg University 12.01.2012
In this project, the researchers are objective, adopt the view of realism, positivism, determinism and nomothetic. Therefore the researchers did not give their opinions on the reality. Instead of that, the researchers looked into the objective literatures, which are written by other academics. The research approach that has been used is the deductive approach, because it uses theories to apply to the real problems and afterwards the theories are revised. The research method used is the qualitative research and an illustrative case to bring light to the problem formulation.
In order to analyse and research the problem two types of areas were chosen, internationalization and branding. Theories within these areas have been selected.
The Uppsala model helps to explain Abercrombie & Fitch’s internationalization process. A&F stayed at the first stage in the model for a long time, before skipping the second stage, to go directly to stage three in the Uppsala model, when A&F started its international expansion, opening stores in Canada, Europe and Asia. One of the limitations in the Uppsala model, is the fact that it mostly refers to manufacturing companies, and therefore A&F did not go to the fourth stage (opening foreign manufacturing units), because A&F does not produce themselves.
Abercrombie & Fitch sells its own brand in its own physical and online stores and positions its products as luxury casual style. Therefore the prices are high compared to others. A&F focuses on differentiating its brand and builds a clear brand image towards young adults. Important factors of its differentiation are the unique in-store atmosphere, provocative and rebellious advertisements by using semi-nude models.
All the above factors describe A&F’s general branding strategy.
When internationalizing there are some challenges that a company has to overcome, and this is also the issue for A&F. First it is important to define the brand identity for the international markets in order to build brand awareness in the minds of potential customers. In order to do that, cultural, legal and economical differences in the markets have to be considered. A&F has to figure out whether the brand name and the symbols can be transferred to another country or whether they need to be changed.
Also differences in language and associations in the different markets can be challenging for A&F’s branding. The brand image can be influenced by the countryof-origin effect, so customers may wish to purchase American products. A&F needs to assure its quality of the products and at the same time deal with higher costs.
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Before entering new markets A&F lacks some experience and important knowledge about the market.
Having challenges in mind, Abercrombie & Fitch has expanded from the US to
Europe and there are some similarities and differences in the branding strategy.
The general in-store atmosphere, the product portfolio and style and the distribution channels are very similar in the US and in Europe. The price strategy, offering high prices compared to its closest competitors and few promotions are comparable as well. A&F targets the same customer segment and addresses its lifestyle branding towards young adults. Concerning the differences, A&F’s flagships stores in Europe are bigger than the average stores in the US. There are only a few stores in Europe, but many in the US. This makes the brand more unique and exclusive in Europe, and the price level higher. In the European store, which are only flagship stores, customers can get a photo taken with semi-nude models by the entrance as part of the shopping experience; this is not possible in the ordinary stores in the US. The fashion style can be seen as more special in Europe, because it is an American style.
The internationalization process could bring exclusivity or superior aspects to the brand, and therefore influence the whole brand image. The country-of-origin can also be a positive factor to the company’s branding; this can be used and benefitted from especially when internationalizing.
Abercrombie & Fitch’s branding has evolved during the internationalization to
Europe. Some parts of the branding have stayed the same, while others have changed.
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Aalborg University 12.01.2012
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