OVERVIEW OF COMPANY AND COMPETITORS
BURBERRY
Burberry Group plc is a British luxury fashion house, manufacturing clothing
and fashion accessories. Its distinctive tartan
pattern has become one of its most widely
copied trademarks. The company has branded
stores and franchises around the world, and
also sells through concessions in third-party
stores. Burberry became the UK's first
publicly quoted luxury goods label. The
company might originally have become
famous for making the Queen's raincoats, but
now celebrities such as Kate Moss and Victoria Beckham want the checked macs
in their wardrobes.
It was founded in 1856 when 21-year-old Thomas Burberry, a former draper's
apprentice, opened his own store in Basingstoke, Hampshire, England.
1901 The appeared for the first time accompanied by the Latin word ‘Prorsum’,
meaning forwards.
1920 The Burberry check was introduced became
fashionable among the British middle-to-upper classes.
By the mid-1990’s, the Far East accounted for an
unbalanced 75 per cent of Burberry sales. Furthermore,
the team recognized their need to address the problems
associated with their inadequate control over product
design and distribution arising as a result of indiscriminate licensing and
distribution agreements (Fletcher, 2003). Their new strategy sought to re-position
the Burberry’s brand as a distinctive luxury brand with a clear design,
merchandising, marketing and distribution strategy, which would be appealing to
new, younger, fashion-forward customers, while still retaining the traditional
customer base(Burberry IPO Prospectus, 2002).
Derived from their IPO Prospectus of 2002, it is
possible to delineate the defining features of what
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the company described as “the repositioning of the Burberry brand”. The first
initiative was to update the image of the brand by firstly changing the name from
Burberry’s to Burberry. This change was supported with the introduction of a new
brand logo and contemporary packaging.
Burberry launched a radically different advertising strategy that sought to change
perceptions of Burberry through the use of leading models, such as Kate Moss and
reputable fashion photographers, while retaining distinctly British themes as the
content of these advertisements.
The attempt to re-position Burberry as a relevant, contemporary and also credible
high fashion brand also required the opening of a flagship store on New Bond
Street in London. The choice of New Bond Street was critical since it placed
Burberry adjacent to the other leading fashion and luxury brands in London – such
as Gucci, Versace, YSL, Prada, Chanel, Bulgari and Asprey.
Today
Burberry is an internationally recognised luxury brand with a worldwide
distribution network. The luxury goods market is made up of apparel, accessories
including handbags and shoes, perfume and cosmetics and hard luxury, including
watches and jewellery.
Markets in which Burberry operates
Burberry operates in the global luxury sector which, for Burberry's relevant
categories, is estimated to be an approximately £145bn global market.
The luxury goods market has grown on average by 7% per annum during the last
four years. During 2008, growth slowed and industry analysts expect the market to
contract during 2009. Despite current headwinds associated with the global
economic environment, the fundamental longterm drivers of growth in the luxury
market remain:
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Economic growth - the luxury market has grown at 2-3 times the rate of the
global economy
Consumption is rapid and expanding because of the emerging economies
like China and Russia
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Growth in high net worth individuals (HNWIs- are defined as consumers
with financial assets) in both core and emerging markets; HNWIs they have
a higher propensity to purchase luxury goods than other consumers
Increasing demand of luxury –
o Purchasing and spending power increased as more number of women
has started working
o a greater number of men select luxury brands
Boom in tourist sector
Continuous product innovation by luxury brands creating demand for new
products
Burberry – Company Profile
Company Profile:
Burberry Group
Ticker:
BRBY
Exchanges:
LON OTH
2009 Sales:
1,201,500,000
Major Industry:
Apparel
&
Textiles
Apparel
Manufacturers
Sub Industry:
Country:
Employees:
UNITED
KINGDOM
6208
Location of Burberry store in India
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
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DELHI -Emporio mall, Vasant Kunj
BANGALORE -UB city mall, Bangalore
MUMBAI- Taj Shopping Arcade, Taj Mahal Hotel,Mumbai
Burberry in India
Burberry tap Indian luxury market in 2006. Burberry is a luxury brand with a
distinctive British sensibility, strong international recognition and differentiating
brand values that resonate across a multi-generational and dual-gender audience
The Company designs and sources apparel and accessories distributing through a
diversified network of retail, wholesale and licensing channels worldwide.
New President Rose Marie Bravo (now Vice-Chaiman), head designer Christopher
Bailey and her new management team have identified opportunities in high margin
accessories, fragrance and kidswear categories.
In Delhi, the Emporiao in Vasant Kunj and in Mumbai are the store in India.
Which is expected to turn the cities into shopping marts for the world’s rich and
famous who anyway have started to list India as one of the business venues.
Competitors of Burberry
Prada
Prada, a family run business, has no difficulty being seen as a luxury goods brand.
The long established Prada name carries more cachet than the Burberry name which has yet to prove its longevity in the high fashion end of the market. Prada's
financial tale is, however, slightly different. Having bought brands such as Jil
Sander and Church Shoes, it now needs cash to pay off its debts. Some analysts
argue that buying the brands hasn't just led to a debt problem for Prada. It has also
failed to benefit from the brands and they have led to a dilution of time and
management effort. Even when it does float, Prada is unlikely to raise enough to
wipe out its debts. Even as Prada dithers, Burberry remains confident, highlighting
the fact that - while superficially similar - the two companies do have very
different stories to tell.
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The attraction of checked raincoats might once have seemed limited, but not any
more. And Burberry proved you could sell macs even when the sun was shining,
when it opened a store in Beverly Hills.
Burberry's parent company GUS plans to use money from its flotation to pay off
debts, a move which would effectively leave Burberry debt free. Prada's unwieldy
bag of brands were bought to create value, but have yet to do so, whereas Burberry
is the tale of the successful reinvention of an aging brand.
Louis Vuitton
Louis Vuitton Malletier, commonly referred to as Louis Vuitton, or shortened
to LV, is an international French fashion house specializing in trunks, leather
goods, ready-to-wear, shoes, watches, jewelry, accessories, sunglasses, wines and
spirits, perfumes , cosmetics and books. Known the world over for its iconic LV
monogram and logo, Louis Vuitton is one of the most recognizable brands in the
world. A long time symbol of prestige and wealth, the company commands some
of the highest prices in the international fashion market for its products.
Having started in 1854, Louis Vuitton is not only one of the oldest, but also one of
the most legendary houses of fashion in the world. It sells its products strictly
through its own retail stores, small boutiques in high-end department stores, and
online through its website. Louis Vuitton competes directly with such luxury
brands as Versace, Hermès, Gucci, Dolce & Gabbana, Dior, Fendi, Burberry,
Chanel, Armani, and Prada.
The Louis Vuitton Brand and the famous LV monogram are among the world's
most valuable brands. According to a Millward Brown 2009 study, Louis Vuitton
is the world's 29th most valuable brand, right after AT&T and before HSBC. The
brand itself is estimated to be worth USD 19.395 billion.
Overview and Historical growth of Footwear Industry
The footwear sector is a diverse industry which covers a wide variety of materials
(textile, plastics, rubber and leather) and products from different types of men's,
women's and children's footwear to more specialised products like snowboard
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boots and protective footwear. This diversity of end products corresponds to a
multitude of industrial processes, enterprises and market structures.
Indian Footwear Industry
The Footwear Industry is a significant segment of the Leather Industry in India.
India ranks second among the footwear producing countries next to China. The
industry is labour intensive and is concentrated in the small and cottage industry
sectors. While leather shoes and uppers are concentrated in large scale units, the
sandals and Chappals are produced in the household and cottage sector. India
produces more of gents’ footwear while the world’s major production is in ladies
footwear. In the case of Chappals and sandals, use of non-leather material is
prevalent in the domestic market.
The major production centers India are Chennai, Ranipet, Ambur in Tamil Nadu, ,
Mumbai in Maharashtra, Kanpur in U.P. , Jalandhar in Punjab, Agra and Delhi.
The following table indicates concentration of units in various parts of the country:
Large &
Medium Scale
Tamil Nadu
64
Delhi & up North
4
Agra, Kanpur
9
Calcutta
1
Bangalore
6
Mumbai
3
Others
13
Region
SSI
Household
31
8
34
3
3
11
10
7
2
14
19
4
3
The estimated annual footwear production capacity in 1999 is nearly 1736 million
pairs (776 million pairs of leather footwear and 960 million pairs of non-leather
footwear).
Region-wise share of total estimated capacities is as follows:
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Region
Leather
Shoes
Tamil Nadu
Delhi & up North
Agra, Kanpur
Calcutta
Bangalore
Mumbai
Others
Total
26
10
45
12
3
4
0
100
NonLeather
leather
Shoe
Shoes
Uppers
Percentage
5
54
77
4
0
32
0
2
3
4
2
1
13
3
100
100
Leather
Sandals
Non
Leather
Sandals
1
1
62
3
0
32
1
100
0
60
0
0
0
0
40
100
Shoes manufactured in India wear brand names like Florsheim, Gabor, Clarks,
Salamander and St. Micheal’s. As part of its effort to play a lead role in the global
trade, the Indian leather industry is focusing on key deliverables of innovative
design, consistently superior quality and unfailing delivery schedules.
India in itself has a huge domestic market, which is largely untapped.
The Indian footwear industry is provided with institutional infrastructure support
through premier institutions like Central Leather Research Institute, Chennai,
Footwear Design & Development Institute, Noida, National Institute of Fashion
Technology, New Delhi, etc in the areas of technological development, design and
product development and human resource development.
The availability of abundant raw material base, large domestic market and the
opportunity to cater to world markets makes India an attractive destination for
technology and investments.
http://www.indianshoebazaar.com/ind_india.asp
Growth rate of shoe industry
 The Indian footwear retail market is expected to grow at a CAGR of over
20% for the period spanning from 2008 to 2011.
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 Footwear is expected to comprise about 60% of the total leather exports by
2011 from over 38% in 2006-07.
 Presently, the Indian footwear market is dominated by Men’s footwear
market that accounts for nearly 58% of the total Indian footwear retail
market.
 By products, the Indian footwear market is dominated by casual footwear
market that makes up for nearly two-third of the total footwear retail
market.
 As footwear retailing in India remain focused on men’s shoes, there exists a
plethora of opportunities in the exclusive ladies’ and kids’ footwear segment
with no organized retailing chain having a national presence in either of
these categories.
 The Indian footwear market scores over other footwear markets as it gives
benefits like low cost of production, abundant raw material, and has huge
consumption market.
 The footwear component industry also has enormous opportunity for growth
to cater to increasing production of footwear of various types, both for
export and domestic market.
 The export targets from 2007-08 to 2010-11 as tabulated below reflects the
fact that footwear sector is the most significant segment of the Leather
Industry in India.
The export targets from 2007-08 to 2010-11
(In Million US$)
Product
Leather
Footwear
Garments
Leather Goods
Saddlery &
Harness
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2006-07
Actual
Export
688.05
1212.25
308.98
690.66
81.85
2007-08 2008-09 2009-10
2010-11
726.85 785.00 847.80
1967.88 2597.60 3428.83
358.53 372.87 387.78
733.34 798.69 870.06
105.66 127.85 154.70
915.63
4526.05
403.30
948.04
187.19
Total
2981.79
3892.26 4682.01 5689.17
6980.21
http://footwearsinfoline.tripod.com/ind_footwr_industry_overview.htm
Production capacity of Shoe Industry
The leather industry is spread in different segments, namely, tanning & finishing,
footwear & footwear components, leather garments, leather goods including
saddlery & harness, etc.
The estimated production capacity in different segments is as under
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
Hides:64 million pieces
Skins:166 million pieces
Footwear & Footwear Components
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Shoes:100 million pairs
Leather shoe uppers:78 million pairs
Non-leather shoes/chappals etc:125 million pairs
Leather Garments:6 million pieces
Leather Products:70 million pieces
Industrial Gloves:40 million pairs
Saddlery:6000 pieces
The major production centers for leather and leather products are located at
Chennai, Ambur, Ranipet, Vaniyambadi, Trichi, Dindigul in Tamil Nadu, Calcutta
in West Bengal, Kanpur in Uttar Pradesh, Jalandhar in Punjab, Bangalore in
Karnataka, Delhi and Hyderabad in Andhra Pradesh.
Raw material supplies
There exists a large raw material base. This is on account of population of 194
million cattle, 70 million buffaloes, 95 million goats. According to the latest
census, India ranks first among the major livestock holding countries in the world.
In respect of sheep with 48 million sheeps, it claims the sixth position. These four
species provide the basic raw material for the leather industry.
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The annual availability of 166 million pieces of hides and skins is the main
strength of the industry. This is expected to go up to 218 million pieces by the end
of year 2000. Some of the goat/calf/sheep skins available in India are regarded as
specialty products commanding a good market. Abundance of traditional skills in
training, finishing and manufacturing downstream products and relatively low
wage rates are the two other factors of comparative advantage for India.
http://leather.indiabizclub.com/info/indian_leather_industry_overview
Production and industry capacity of Burberry
Production is the process through which one can change a given good or
commodity from its current status of non-final consumable good to a finished
product or good, using technology and other input factors.
Burberry is a luxury lifestyle brand serving the niche market. Non-apparel was
again Burberry's fastest growing product division in 2008/09, and yet still offers
substantial room for further growth given Burberry's relatively low market share in
certain categories.
Shoes grew strongly in 2008/09 based on the previous investment in design,
technical product expertise and supply chain functions. Through the year, the team
has continued to build out the complete product pyramid while developing core
items to drive the growth of this category. The back of house operations i.e.
infrastructural and functional components are required for Burberry’s success .
Burberry uses the expertise and applies it from one area to another to improve the
performance. In 2008/09, non-apparel revenue increased by 12%, compared to 7%
for Burberry as a whole. Non-apparel accounted for 33% of retail and wholesale
revenue, compared to 32% last year. Burberry is a huge brand with a great
industrial capacity where it produces a variety of products such as handbags, shoes,
belts, apparel, wallets and accessories. Burberry has massive operations and caters
to a huge market with stores and exclusive outlets in a large number of countries.
For its production Burberry outsources the products to be produced. Best quality
material is procured for the production of various products.
Looking to the retail stores, Burberry remains focused on:
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Enhancing store productivity-Through concentration on operational activities,
such as replenishment, planning, merchandising, fixturing and visual, Burberry
continues to drive store productivity. In addition, Burberry has developed and
piloted a sales and service programme which will be implemented globally in retail
stores through 2009/10.
Accelerating new store openings- In 2008/09, Burberry continued new store rollout with 14% net new space added during the year. This included five standalone
children wear stores as Burberry looks to grow this product area.
Continuing e-commerce development.-Burberry now operates e-commerce in the
United States and across 26 European countries. Burberry continues to look to
develop and scale its business in this high-growth channel.
Upgrading store image.-The Group continues to renovate high profile locations
worldwide with a brighter, modern aesthetic and more efficient and productive
design concept.
Distribution channels
The distribution of the various Burberry brands is achieved through the operation
of company owned stores, by company-controlled wholesale
arrangements with third-party stockiest, as well as through license agreements with
partner firms in Japan. Burberry markets two clothing collections each year for
spring/summer and autumn/winter.
Retail distribution
The Burberry retail chain is comprised of distinct formats. Located within the
primary shopping locations in Burberry’s most important
national markets, flagship stores are located in London, New York, Barcelona and
Tokyo (the Tokyo store is owned by their Japanese licensee). The department
stores are the dominant distribution method for premium priced fashion in
important markets, such as Korea, Japan and Spain, these concessions enable
Burberry to access, in a cost-efficient manner, a wide and relevant customer base.
In so doing, the
associated risks and costs of operating a large number of company-owned stores
can be avoided.
Wholesale distribution
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The retail network is complimented by an extensive wholesale distribution
network. Wholesale stockiet include prestigious department stores, specialty
fashion retailers and duty-free retailers. Through the showrooms and agents,
Burberry claims to work with wholesale customers on an individual store basis in
order to select appropriate products and volumes in order to maximise the sale of
products
at full price.
Licensee distribution
The two license partners are jointly responsible for the wholesale distribution of
the Burberry ranges to department stores and specialty stores across Japan. As part
of their responsibility as licensees, both firms provide product, visual
merchandising and sales staff to their department store customers.
Demand and Supply Scenario for Burberry
The amount of a good that a consumer is willing to buy and able to purchase over a
given period of time, at a certain price is the quantity demanded of that good.
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The amount of a good that a supplier or a manufacturer is willing to sell at a given
price over a given period of time is supply.
Burberry has a wide range of shoes in a variety of designs including the patent and
other ones. The demand for shoes has increased over time due to cheaper price,
making it more affordable and accessible. Burberry has opened a number of stores
worldwide and has undertaken advertising campaigns which has made people
aware of the brand.
Burberry targets the niche market that is the upper class and the various ways by
which it has accelerated the demand are:
•
Maintaining brand momentum-Consistent projection of Burberry's
distinctive luxury message across all mediums is a core objective. The
building expresses the Burberry brand to its customers , partners and
employees.
•
Reinforcing outerwear heritage and leadership- it has given
priority to the outerwear for men and women and has given the full
variety of colors and styles.
•
Capitalizing on menswear opportunity- Burberry tapped the market
for menswear by designing exclusive men footwear collection.
•
Enhancing marketing- marketing and PR functions have been
intensified
ACCELERATING RETAIL-LED GROWTH
Shift company culture and processes from a static wholesale model to a dynamic
retail model. Retail-led growth refers not only to the operation of Burberry's own
stores, but also to a fundamental shift in the Group's operating culture. Burberry
continues to move from a relatively static, traditional, wholesale structure to a
more dynamic, retail culture and mindset. The organization is more consumer
oriented and responsive due to directly operated stores, franchise partners,
wholesale customers and licensing partners worldwide.
Burberry takes care of the supply by[Type text]
•
Focussed collections-collections are made more balanced, styleefficient and disciplined through reorienting design and merchandising.
•
Flow frequency- Increasing the frequency of new goods flowing to
stores
•
Replenishment- Developing a more extensive and responsive
replenishment programme in all product divisions.
All this has helped Burberry increase its sales and supply.
Factors affecting the demand of Burberry
The six main factors affecting demand are :
1. Price of goods
The demand for Burberry products majorly depends upon the pricing of the
goods. Since, it is a luxury brand which is highly priced the Burberry products
are demanded by the niche segment of people who can afford expensive
products.
2. Income of consumers
If the income of the potential customer group increases the demand for the
products will increase too. customers who are wanting to buy the product but
don’t have the appropriate budget due to inefficient income, willnot buy which
adversely affects demand.
3. Price of related goods
The demand for the products of one luxury brand depends upon the price of
other branded products. Suppose LVMH has launched footwear of lower range
as compared to Burberry. Many people will prefer buying LVMH products
unless the customer is very brand loyal.
4. Taste patterns of consumers
People who are brand conscious and can afford to purchase luxury products will
buy Burberry products only if it matches their tastes and preferences. it is very
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important for the people to have a favorable image of the brand to make a
purchase. If the customer doesn’t have a good perception of the Burberry brand
the demand for Burberry products will decrease.
5. Expected future price of products
If it is expected that Burberry will raise the prices of its product ,the current
demand for the products will increase.
6. Number of consumers in the market
The larger the niche market the more would be the demand for the
end luxury products.
high
Other factors affecting Demand
1. Travel Patterns
A significant proportion of the Group's sales are generated by customers (in
particular Middle Eastern, Russian, Japanese, Chinese and other Asian customers)
who purchase products while travelling either overseas or domestically. If people
stop traveling abroad they will not be exposed to the brand. It is very important for
the people to be aware of the international luxury brands to make a purchase and
this can be possible only when people travel to countries where these brands are
popular.
2. Burberry faces increasingly intense competition
Competition in the luxury goods sector has intensified in recent years and Burberry
is faced with increasing competition in many of our product categories and
markets. The Group competes with international luxury goods groups who control
a number of luxury brands and may have greater financial resources and
bargaining power with suppliers, wholesale accounts and landlords. If Burberry is
unable to compete successfully, operating results and growth may be adversely
impacted. This affects the demand for Burberry products. If other brands are also
available and satisfy the customers people would prefer other brands over
Burberry.
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3. Enhancing marketing
Due to extensive marketing and PR activities Burberry has been able to reach a
larger section of the society. This has made people notice the brand even more and
form a positive image of Burberry. This has therefore accelerated the demand for
the products.
4. Increasing status consciousness
In the present times people have become more status and brand conscious. People
associate status with brands and using luxury branded products gives them a
feeling and a sense of self esteem and recognition. This has increased the demand
for branded products and thereby Burberry has been able to reach many people in
UK and abroad.
Factors affecting the Supply
The main factors affecting supply;
1) Price of goods
since the price of Burberry products is very high and people have a taste for it,
the company would like to sell more of the products to earn higher profits. The
retail stores and suppliers of the Burberry products would want to sell more
because the prices are high and sales revenue would be higher.
2) Input prices
prices of the raw materials affect the supply of the products. If the input
prices are high it would not be very profitable to sell the products so the
company would decrease the sales to not to lose on the profits.
3) Prices of goods related in production
The prices of products of other brands such as LVMH, Fendi affects the
supply of the Burberry products. If the price of other branded products
increase the sales for the Burberry products will increase.
4) Technological advances
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An advancement in the technology would decrease the production costs and
would provide higher profits to the company. The brand would prefer to
produce more due to advancement in the technology and thereby the supply
of the products will increase.
5) Expected future price of products
If the future prices of the products is expected to increase the current supply
of the Burberry products will decrease because Burberry would want to sell
its products when the prices will rise so that they can earn higher profits.
Other factors affecting Supply
1. Customer relations
The Group has a number of key customers whose business represents a substantial
portion of sales. The Group dedicates resources to these customers and maintains
close relationships with such customers to understand and respond to their needs.
The Group closely manages its relationships with key suppliers and customers
which includes monitoring their financial and non-financial performance.
2. Licensing
A significant source of profit is derived from the royalties received from licensees,
specifically the Group's licensees in Japan, and the fragrance licensee InterParfums
S.A. Burberry relies upon licensees, among other things, to maintain operational
and financial control over their businesses. Should these licensees fail to
effectively manage their operations the Group's income from royalties would
decline. Failure to manage these key relationships effectively could have a material
impact on the sales, profitability and reputation of the Group.
3. Third party operators
In key emerging markets, including China and the Middle East, Burberry is largely
dependent upon third-party operators with the associated lack of direct control and
transparency
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In key emerging markets, Burberry operates through third-party franchisees. In
particular, a third-party retail operation has been developed in China. The Group
largely depends upon the expertise of these franchisees given its relative lack of
experience in this region. During the year, the Group has strengthened its resources
internally, and where appropriate has its own staff based within these operations
who work closely with franchisees to further develop operational models to enable
greater control and visibility.
During the year, the Group established a company in the Middle East with its
longstanding franchisee to enable both parties to capitalise on further opportunities
in certain parts of the Middle East.
This has helped increase the sales and thereby the supply of the products.
4. Competitive price, Timeliness and Product Quality
Burberry could suffer if its supply chain is unable to produce and deliver goods at a
competitive price, on time and to its specification
Burberry continues to evolve its sourcing strategy, refining its selection of
suppliers to maintain and enhance product quality whilst improving sourcing
efficiency. During the year, the Group announced a global cost efficiency
programme which included the restructuring of its Spanish operations and
consolidation of its UK manufacturing operations; the implementation of these
initiatives is well advanced. These initiatives may adversely affect relationships
with existing suppliers during the transition period. If Burberry's suppliers failed to
ship products on time, or quality is substandard, this could result in the Group
missing delivery dates to its customers, potentially resulting in cancelled orders or
price reductions. Further, such a failure could affect wholesale customers'
confidence which could adversely affect subsequent seasons' sales. The Group
continues to rationalise its distribution network to minimise unnecessary costs and
to improve delivery timeliness and accuracy.
During the year, the Group established a global planning function to further
improve inventory management processes and effective product flow. Further
opportunities exist to improve inventory management processes and these will help
ensure that the Group continues to produce merchandise of the right quality, in
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accordance with its ethical policy and delivered in accordance with its
requirements.
The inability to anticipate and respond to changes in consumer demand and
product category trends on a timely basis could adversely impact sales
5. Innovative and Fashionable Products
The Group's business depends, in part, on the ability to shape, stimulate and
anticipate consumer demand by producing innovative, fashionable and functional
products. Categories are cyclical, so it is critical the Group builds responsive
product teams to exploit trending categories, launch new categories and balance
core apparel and non-apparel categories. The Burberry Check and outerwear are
both an integral part of the brand's success. The Group has evolved its design
calendar to enable increased product refreshment and replenishment so as to be
more responsive to fashion and consumer trends and to respond more efficiently to
changing circumstances and to reduce the risks associated with placing excessive
capacity with key product suppliers.
Burberry continues to protect its classic core market by adding innovation to
further stimulate sales to current customers, while attracting new customers to the
brand. The Group balances and plans all categories and brand icons through a strict
product hierarchy. To continue brand momentum, and to protect market share in
apparel and non-apparel categories, the Group features outerwear and the Burberry
Check icons as part of seasonal marketing initiatives.
6. Seasonal Fluctuations
Burberry's operating results are subject to seasonal fluctuations and vary based on
the weather
In recent years, the world has seen more unpredictable global weather patterns.
Burberry's business, particularly with respect to apparel, broadly operates on a
seasonal basis (Spring/Summer and Autumn/Winter) and the Group has
experienced, and expects to continue to experience, substantial seasonal
fluctuations in sales and operating results. In particular, results vary based on the
weather because of the large proportion of outerwear products Burberry offers and
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the effect of the weather on retail markets generally. Burberry offers products
keeping in mind seasonal changes.
7. Trademark and Property Rights
Burberry is dependent on the strength of its trademarks and other intellectual
property rights Burberry's trademarks and other proprietary rights are
fundamentally important to the success and competitive position of the business.
Unauthorized use of the ‘Burberry’ name, the Burberry Check and the Prorsum
horse logo as well as the distribution of counterfeit products damage the Burberry
brand image and profits. If a third-party registers one of the Group's trademarks, or
similar trademarks, in a country where the Group does not currently trade, this
would create a barrier to commencing trade under those marks in that country. In
addition, if a third-party publishes harmful material using our trademarks,
Burberry's brand image could suffer. This would adversely affect the sales of the
brand.
8. Major incident
A significant incident such as a natural catastrophe, global pandemic or terrorist
attack affecting one or more of the Group's key locations could significantly
impact the operation of our businesses. In such circumstances, the uninterrupted
operation of the business cannot be ensured, particularly in the short term. This has
a major impact on the sales of the Burberry products
Export and Import overview
India's export of Leather & Leather
Products has reached US $ 3.47
billion in dollar terms and Rs.14,000
crore in rupee terms. In dollar terms,
there has been an export growth of
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13.67% and in rupee termsl.13%Footwear alone holds a major share of 42.44% in
India's total leather products export trade. As against the export target of US $
3042 million for the financial year 2007-08, the achievement was 114.32%
Footwear is the engine of growth for the entire Indian leather industry and India is
the second largest global producer of footwear after China, accounting for 14% of
global footwear production. of 14.52 billion Pairs.
India Produces 2065 million pairs of Different Categories of Footwear (Leather
Footwear 909 million pairs, Leather Shoe uppers 100 million pairs and Non-leather
footwear 1056 million pairs)
India exports about 115 million pairs. Thus, nearly 95% of its production goes to
meet its own domestic demand.
Footwear exported from India are Dress Shoes, Casuals, Moccasins, Sport Shoes,
Horrachies, Sandals, Ballerinas, Boots, Sandals and Chappals made of rubber,
plastic, P.V.C. and other materials.
MNC Brands sourced
from India
Acme, Clarks,
ColeHann, Deichmann,
Ecco, Elefanten,
Florsheim, Gabor,
Hasley, Hush Puppies,
Double H, Justin,
Marks & Spencer,
Nautica, Nike, Nunn
Bush, Reebok,
Salamander, Stacy
Adams, Tony, Lama,
Next, Bally
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MNC Brands Sold in Indian Brands sold in
India
India
Aldo, Bally, Clarks, Red Tape, Bata, Liberty ,
Ecco, Florshiem,
Khadims, Lakhani,
Ferragammo, Hush
Metro, Action
Puppies, Lee cooper,
Lloyd, Marks &
Spencer, Nike, Nine
West, New Balance,
Reebok, Rockport,
Stacy Adams
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Nearly 75% of India’s Export of Footwear is to the European Countries and
the USA.
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The Indian Footwear Industry provides employment opportunities to a total
of 1.1 million people, mostly from the weaker sections of the society. Out of
this, about 0.2 million are employed in the organized sector, 40% of whom
are women. Remaining 0.9 million people are engaged in unorganized
footwear sector like rural artisans, cottage and household units etc.
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The Footwear Sector is now de-licensed and de-reserved, paving the way for
expansion of capacities on modern lines with state-of-the-art machinery. To
further assist this process, the Government has permitted 100% Foreign
Direct Investment through the automatic route for the Footwear Sector.
Footwear export has increased from US$40.15 million in 1977-78 to US$
1475.83 million in 2007-08
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Chart showing Global Import of footwear Vs. Indian Export of Footwear
India ’s Exports of Footwear – Country-wise Share in Total Exports (2007-08)
– Source: DGCI& S
http://footwearsinfoline.tripod.com/export_import.htm
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The European Union and the USA are the major markets for Indian Footwear
accounting for 79.95% and 9.22% share respectively in India’s total footwear
export. The major markets for Indian Footwear are Germany 16.66%, UK 16.31%,
Italy 15.32%, USA 9.22%, France 7.81%, Spain 5.10%, Netherlands 4.91%,
Portugal 2.50%, UAE 2.48% and Denmark 1.18%. These 10 countries together
accounts for nearly 81.49% of India’s total leather products export.
IMPORT AND EXPORT OVERVIEW OF BURBERRY
Burberry ,UK imports its apparel and non apparel products from importers located
all over the world. It’s a business to business model where the retail brand
Burberry imports its product from different suppliers and wholesalers.
Some of the exporters in India supplying to Burberry are:
 Uma Fashion
 Bajrang Internationals
 Evershine Exports
 Leo Internationals Limited
 Ridddhi Siddhi Exports
 Star Apparels
Since Burberry is an international brand and imports products from all over the
world it uses the means of air and ship to import the goods. Burberry imports not
only from India but, from countries like USA, Australia, China and Japan and
European Countries like Italy, Germany, France and Spain.
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Luxury brand products are driving the fashion world. The prices of designer
handbags and apparels have been rising rapidly for the last several years. However,
few analysts feel that the growth of Burberry sales in US market might slow down
compared to rapid growth in recent years.
The premium luxury brand companies mainly include luxury brands as well as
private label retailers. Europe has dominated the luxury handbag market for long
with brands like Burberry, Louis Vuitton, Chanel, Gucci and Prada. But now
American designers are fiercely competing with new strategies and branding
initiatives. A key issue is the addition of lower-priced lines by several American
designer brands. The handbag marketplace has become extremely competitive with
a large number of independent designers launching their own stores.
BURBERRY EXPORTS OVERVIEW
Burberry has recognized the changing trends of the global market realizing the
brand consciousness among people and started spreading the brand outside UK
,including Asian countries like China, Japan and India. Burberry has tied up with
international firms to position the brand successfully in foreign countries.
A key trend is of US and European firms entering the Asian market. Coach
expects expansion opportunities in China, Southeast Asia and the Middle East.
Burberry has planned a series of store openings in emerging markets, including
two in India, and others in Macau, Prague and Budapest. It plans to open five to 10
stores in Asia over the next three years.
BURBERRY IMPORTS OVERVIEW
Burberry being an international luxury brand ,operates at a global level. It imports
raw materials for the production of its high quality products. It also out sources the
production of its apparel and non-apparel products to various manufacturers and
exporters all over the world due to: Cheap labour available in other countries
 Availability of certain raw materials in selected countries
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 To secure cost effectiveness
 To receive the benefit of returns to scale due to the bulk production done by
the suppliers
Factors affecting cost
Global license
Burberry relies on licensees, among other things, to maintain operational and
financial control over their businesses. However, if these licensees fail to
effectively manage their operations the Group's income tends to show a downward
slope. Failure to manage these key relationships effectively could have a material
impact on the sales, profitability and reputation of the Group.
Third party
In key emerging markets, including China and the Middle East, Burberry is largely
dependent upon third-party operators with the associated lack of direct control and
transparency. In key emerging markets, Burberry operates through third-party
franchisees. In particular, a third-party retail operation has been developed in
China. The Group largely depends upon the expertise of these franchisees given its
relative lack of experience in this region.
Supply Chain
If Burberry's suppliers failed to ship products on time, or quality is substandard,
this could result in the Group missing delivery dates to its customers, potentially
resulting in cancelled orders or price reductions. Further, such a failure could affect
wholesale customers' confidence which could adversely affect subsequent seasons'
sales.
Competitive price
Burberry faces increasingly intense competition . Competition in the luxury goods
sector has intensified in recent years and Burberry is faced with increasing
competition in many of its product categories and markets. The Group competes
with international luxury goods groups who control a number of luxury brands and
may have greater financial resources and bargaining power with suppliers,
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wholesale accounts and landlords. If Burberry is unable to compete successfully,
operating results and growth may be adversely impacted.Burberry could suffer if
its supply chain is unable to produce and deliver goods at a competitive price, on
time and to its specification.
Consumer Demand
The inability to anticipate and respond to changes in consumer demand and
product category trends on a timely basis could adversely impact sales.The Group's
business depends, in part, on the ability to shape, stimulate and anticipate
consumer demand by producing innovative, fashionable and functional products.
Significant growth within the business
If Burberry loses key management or is unable to attract and retain the talent required for its business, its operating results could suffer .The cumulative change
and significant growth within the business places a significant pressure on
resources. The combination of the continued development of the Group's IT
infrastructure, the development of the global supply chain and the implementation
of the global cost efficiency programme combine to exert significant pressure on
the business.
Currency fluctuation
Burberry is exposed to foreign currency fluctuations
Burberry derives a significant percentage of its profits from its Japanese licensing
arrangements. As a consequence, the Group is exposed to a significant risk
associated with the Yen to Sterling exchange rate.In addition, the Group is
continuing to expand its operations in the United States and Europe as part of its
strategy to accelerate retail expansion in key underpenetrated markets. As the
Group's presence in the United States and Europe increases, it is exposed to an
increased risk associated with the US Dollar to Sterling exchange rate and Euro to
Sterling exchange rate.
Major incident
A significant incident such as a natural catastrophe, global pandemic or terrorist
attack affecting one or more of the Group's key locations could significantly
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impact the operation of our businesses. In such circumstances, the uninterrupted
operation of the business cannot be ensured, particularly in the short term.
Steps taken to minimize the cost
Royalty reviews and audits of licensees
To minimize the risks, Burberry has spread its operations in Tokyo and closely
monitors its relationships with licensees. The Group regularly implements royalty
reviews and audits of licensees, but cannot guarantee that they will reveal any noncompliance with the terms of the relevant license. The Group has strengthened its
resources internally, and where appropriate has its own staff based within these
operations who work closely with franchisees to further develop operational
models to enable greater control and visibility. The Group established a company
in the Middle East with its longstanding franchisee to enable both parties to
capitalize on further opportunities in certain parts of the Middle East.
Global cost efficiency program
The Group announced a global cost efficiency programme which included the
restructuring of its Spanish operations and consolidation of its UK manufacturing
operations; the implementation of these initiatives is well advanced. The Group
continues to rationalise its distribution network to minimise unnecessary costs and
to improve delivery timeliness and accuracy. The Group established a global
planning function to further improve inventory management processes and
effective product flow, facilitated by improved reporting and visibility provided by
SAP. Further opportunities exist to improve inventory management processes and
these will help ensure that the Group continues to produce merchandise of the right
quality, in accordance with its ethical policy and delivered in accordance with its
requirements.
Responsive product teams
Categories are cyclical, so it is critical the Group builds responsive product teams
to exploit trending categories, launch new categories and balance core apparel and
non-apparel categories. The Burberry Check and outerwear are both an integral
part of the brand's success. The Group has evolved its design calendar to enable
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increased product refreshment and replenishment so as to be more responsive to
fashion and consumer trends and to respond more efficiently to changing
circumstances and to reduce the risks associated with placing excessive capacity
with key product suppliers. Burberry continues to protect its classic core market by
adding innovation to further stimulate sales to current customers, while attracting
new customers to the brand. The Group balances and plans all categories and brand
icons through a strict product hierarchy. To continue brand momentum, and to
protect market share in apparel and non-apparel categories, the Group features
outerwear and the Burberry Check icons as part of seasonal marketing initiatives.
Governance from top management
Governance processes have been put in place for each major programme to
monitor and manage the progress of these initiatives and these are supplemented
by monthly operational meetings with senior management to review operational
performance. The senior management team has been strengthened to further
support these key initiatives and external consultants are used to supplement
internal skills where required. Burberry's performance depends largely on its senior
managers and design teams. The resignation of key individuals and the inability to
recruit people with the right experience and skills to facilitate future business
growth could adversely impact Burberry's results.
Forward exchange contract
The Group manages a significant proportion of the foreign currency exposures by
the use of forward exchange contracts. Currency fluctuations affecting the Yen,
Euro, US Dollar and other currencies will nevertheless affect results and
profitability.
Recent Trends in the Industry regarding technology, product
differentiation, Manufacturing and Sourcing
Role of Technology:
Technology has expanded operations of the apparel and footwear industries to a
more global scale. It has also provided closer working relationships between
retailers and manufacturers. Technology has improved efficiency and has reduced
the amount of manual labor.
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Computer Technology:-Rapid improvements in computer technology have
helped to shorten the new product development phase from years to practically
months, especially in the fashion/style/high- performance areas. apparel marketers
who are linked with retailers through quick-response programs and other
technology go a long way toward making themselves indispensable to their
customers.
EDI Technology collects information (such as the bar code that is attached to each
item sold, the price of the product(s) sold, and details such as color and size) from
the retailers’ checkout counter and relays the information back to the manufacturer.
The data is then used for manufacturers to automatically reorder the stock of
merchandise to replenish their shelves in a timely manner. EDI also makes
distribution and shipping information more efficient
Other new technologies in a new growing apparel market are:
1) ew tracking –ribbon and sequin device: normal embroidery which is done
usually lacks fashion and 3d effect. But the tracking ribbon device presented
by rich peace can break through the existing embroidery style. The device
has a unique design, which can make sure the ribbon on follow the designed
path with ease. It can be grafted on any existing embroidery machinery
whether it is rich peace or not.
The embroidery head and the tracking ribbon device Secan be switched
automatically by the designed software, and thus it becomes easy to make
the gorgeous embroidery. The maximum embroidery speed that can be
achieved by this device is 100 rmp . The ribbon wide and the stitch length
can be charged to realise the different 3d effects.
Sequin Device With Richpeace sequin device, without even investing a lot
of money you can make impossible embroidery through improving your
existing equipments. You can graft richpeace sequin equipment with your
old embroidery machine, whatever brand it is.
In domestic companies of sewing machinery, this is the only company that has
ability of mechatronics. For the technological strength it can supply customeroriented design. Customers can choose different sequin device according to their
needs. It is now possible to embroider a maximum of four different sizes(from
3mm to 9mm),sharps and colours on each head. Variety of embroidery designs
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such as single sequin, twin sequin, overlap sequin, continued sequin and batches of
sequin can be done easily with it.
Normal embroidery head can be changed to sequin device head automatically
through a pulse motor. With its lost sequin can be embroidered again by manual
table-filter. The maximum speed that can be achieved by this device is 950 rmp.
2) New wet finishing system introduced by Hong Kong research center:- the
center have jointly conducted a research on development of an innovative finishing
system for wet processing of garments and accessories.
3) Cluster: new mantra to enhance garment production capabilities:- cluster
is a new and revolutionary definition of the manufacturer. In this process, a
manufacturer is solely involved in fob garments, and is located in close proximity
to the close material suppliers. It is an initial attempt to define the suppliers as a
FACTORY+, where the manufacturer owns the factory and also has access to
material suppliers. Here, the manufacturer becomes a vertically integrated
collective of independent producers to join together for supplying the customers
with a range of services. this edits the conventional customer-supplier relationship
and increases the sales figure.
4) Continue fusing machine:
Fusing is a right technical approach-because of different yarn and special
characteristics of materials, modern technologies are required for fusing. Therefore
there isIt has the advantage that the operator has not to wait for the fusing machine until
the fusing has been done. Piece by piece can be loaded on the loading belt and will
be served into machines automatically.
Products Mix
With a clear positioning as an authentic British lifestyle brand, the range extends
from men’s, women’s and children’s apparel to include “soft” accessories, such as
scarves, shawls and ties, alongside “hard” accessories, including handbags, small
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leather goods, women’s shoes, luggage, umbrellas, eyewear and timepieces. At an
individual level, Burberry classifies their products as either continuity or seasonal.
Product ranges – apparel
Burberry has a multi-level brand strategy that is comprised of six key brand levels.
Burberry Prorsum is the couture/high fashion range that serves as the focus for
fashion shows and editorial interest/coverage. Produced in limited quantities in
order to satisfy the demand for exclusivity among affluent consumers, the range is
distributed through Burberry’s flagships stores, as well as through prestigious
department stores including Barneys in New York and Harvey Nichols and
Harrods in London.
The Burberry London
The Burberry London line is the company’s core ready-to-wear range which is
presented in two collections for spring/summer and autumn/winter for men and
women. In womens wear, between 450 and 500 lines are offered each season,
while in menswear, the range has an average of between 330 and 350 lines.
Diffusion brands
The Thomas Burberry range is one of three diffusion brands. This is targeted
towards the younger age 15-25 year old customer group. With its emphasis upon
casual fashion and its newly modernised brand logo, the range is differentiated
from the Burberry London brand (according to the company), by its design,
marketing, distribution and pricing.
The Burberry Blue and Burberry Black brands are the two other diffusion lines that
are sold exclusively within Japan. The former, introduced in 1996, is a casual
collection for younger women, while the latter brand is targeted at the younger
professional male and is comprised of tailored clothing and sportswear.
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Manufacturing and sourcing
Re-positioning of Burberry in the was the company’s determination to ensure that
it maintained full control over the development, sourcing and manufacturing of the
various collections. Furthermore, their use of this near-to-market capability
eliminates the problems associated with managing a global supply chain within a
very significant profit-generating market.
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ROLE OF GOVERNMENT IN SHOE INDUSTRY IN INDIA
Jairam Ramesh Minister of state for Commerce has announced Rs.1.6-billion
(Rs.160-crore) package to boost the local shoe industry, but the state government,
chief minister opposed this. Ramesh made the announcement on Saturday when he
was inaugurating an international fair on leather, footwear components and
technology at the Kalakriti Grounds near the Taj Mahal.
The package comprises of Rs.600-million Leather Park, Rs.200-million footwear
design development centre, Rs.100-million design studio, a testing laboratory and a
permanent exhibition ground to be developed on investment of Rs.500-600
million, on similar to Pragati Maidan exhibition in New Delhi.
Local shoe manufacturers have been asked to look for land. But there’s a problem
the land for the projects has to be released by the state’s ruling party (which is the
Congress’s opposition party).
Agra’s old shoe industry directly and indirectly supports 100,000 families, mostly
from the dalit community. Mayawati of BSP opposed to Ramesh of Congress Party
that heads the United Progressive Alliance (UPA).
According to shoe industry sources, Mayawati won’t be in a hurry to release land
for any of the projects announced.
But the industry believes once the schemes starts, exports could reach Rs.30 billion
(Rs.3000 crore) from the present level of around Rs.8 billion (Rs.800 crore).
More than 200 national and international components and raw materials
manufacturers have put up their stalls at the exhibition.
http://www.thaindian.com/newsportal/politics/big-boost-for-agras-shoe-industryif-state-government-helps_100116975.html#ixzz0XAkn7VPx
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Design-cum-Resource Centre for Footwear & Leather Industry: Leather goods
and shoes as well as items of fur are being manufactured in the Small Scale
Industry/Tiny sector traditionally in Srinagar and Jammu. The Central Government
would make an initial contribution of Rs. 1.00 crore as grant for setting up a
Design/Resource Centre and National Leather Development Programme (NLDP)
will provide assistance for machinery, training and salaries of professionals. Under
the National Leather Development Prograramme, exclusive assistance will be
provided to market finished leather products of the artisans of the State in the form
of buyer seller meets and exhibitions.
jammu.gov.in/departments/.../Central-Policy%20and%20Procedures.pdf
KEY RAW MATERIAL FOR SHOES
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Synthetic leather
Shoe leather
PU leather
Air blown PVC soles
PU welted sole
TPR soles for men
PU sleeper sole
PVC gents sole
PU shoe sole
Emulsion polymers (latexes)
Pell ethane thermoplastic polyurethane elastomers
Polyurethanes
Voralast polyurethane system
Microfibre leather
www.tradeindia.com/seller...38/shoes-materials-accessories. html
www.dow.com/products-services/division/textiles.html
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INDUSTRIAL POLICY
 Maharashtra State Power Generation Co. Ltd., Vaijnath, said that there is a
requirement for the supply of industrial safety shoes.
 LIBERTY Shoes Ltd, the Indian leather footwear manufacturer, is looking
to raise funds through the private equity (PE) route. According to the
company officials, the funds are essential for the expansion plans that the
firm has chalked out.
 FDDI in collaboration with department of industrial policy and promotion
(DIPP) and ministry of commerce & industry has started a programme of
placement linked skill development programme under HRD Mission scheme
of the eleventh 5 year plan for the Indian leather and footwear industry.
 Footwear materials manufacturing and technology (FMM&I) in association
with Indian footwear components manufacturer association (IFCOMA) is
organizing an exhibition in India expo centre in 2010.
www.liberty.com
www.fddi.com
www.aplfindia.com
Implication of Fiscal Policy
Fiscal policy, also know as Keynesian economics proposed by British economist
john Maynard Keynes.
The theory basically states that government can influence macroeconomic
productivity levels by increasing or decreasing tax levels and public spending.
There are two main instruments of fiscal policy:1) Government spending
2) Taxation
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The changes in both have impact on following variables in the economy:
 Aggregate demand
 Level of economic activity
To counter the negative fallout of global slowdown of Indian economy,
government responded by providing three focused fiscal stimulus packages in form
of tax relief and increased expenditure on public projects along with RBI taking a
number of monetary easing and liquidity enhancing measures.
GOVERNMENT SPENDINGS:
INFRASTRUCTURE: According to government budget 2009-2010, infrastructural
development will be given a big boost. IIFCL (INFRASTRUCTURE FINANCE
CO.) will evolve a takeout financing scheme in consultation with banks to facilitate
incremental lending to the infrastructure sector.
A new scheme, Rajiv Awas Yojna will be introduced with the aim to make the
country slum free in next 5 years.
Footwear industry plans to raise fund from domestic and overseas economic
sectors in form of joint venture, association, establishment of shareholding
companies, issuance of shares and bonds in stock market.
Footwear industrial parks will be built, encompassing good infrastructure
conditions and environmental treatment facilities, in a bid to draw and facilitate
investment in footwear industry.
TYPICAL PROJECT PROFILES OF FOOTWEAR INDUSTRY:
PROJECT
COST (in millions)
COST (in Euros)
Leather Shoes
50.00
0.898
Polymer shoes
152.00
2.732
Leather shoe uppers
Finished Leather Shoes
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35.00
420.00
1.438
7.551
EMPLOYMENT: Although India’s share in global economy is low, however being
a labour-intensive industry, its contribution to employment is significant.
In recent study, it was highlighted that the total employment in footwear sector
would amount to 2.5 million ( 30%of which are women).
Footwear industry provides employment to uneducated population-40% of
employment is represented by unskilled workers doing table work operation in
assembly line. The footwear industry has potential to provide employment across
all sections of the economy. The estimated employment potential of footwear
industry is to provide 3 lakh jobs in next 3 years.
INTREST PAYMENTS: Due to fiscal consolidation in last four years, interest
payments as percentage of total revenue receipts (net) of central government has
shown a significant improvement. According to the budget estimation 2009-10 it is
estimated as 36.7% from 36.7% in 2008-09.
The 2% interest subvention scheme provided by Indian government for certain
labour intensive sectors, has been extended from september30, 2009 to
march31,2010 which includes footwear sector of the industry. This will facilitate
reduced interest rate @BPLR minus 4.5% for leather footwear sector on preshipment and post-shipment rupee export credit.
TRANSFER OF PAYMENTS: are the form of government spending .It is
defined as redistribution of income in market system. Eg:-for welfare(financial
aid),social security and government subsidies for certain business(firms).The boost
the footwear industry the Indian federal government has earmarked a Rs.4.5 billion
Grant to be made available to the industry over a span of 5years but that’s not
without any string. The fund availability is conditional upon the sector’s attracting
an annual investment of 2.2 trillion.
SUBSIDIES: Government plan to spend Rs.1,11,276 crore (us $23.03 bn.) on
providing subsidies in budget 2009-2010.
There are various subsidies provided by Indian government to boost footwear
industry in India. The lowering of value addition norms under DFRC scheme from
33% to 25%, would benefit the exporters of leather goods including leather
footwear. Funding is available to enable tanners to modernise manufacturing
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facilities in footwear sector. Machinery also benefits from duty free/concessional
import regulation.
There is concessional rate of interest on export credits to mitigate the effects of
rupee appreciation which has led to tightening of credit.
On the smaller scale, there is a scheme known as “support to rural artisans scheme,
marketing and technical support for traditional and ethnic Indian footwear products
such a mojpuri, jooti and kohlapuri is being provided. Government also provided
support in terms of improved infrastructure .Duty free import of raw material
(namely raw skins, hides etc...)
EXPORT GROWTH: Exports can become engine of growth for the entire
economy as it develops. India is largest producer footwear producer after China. It
comprises 42.44% export of footwear.
In this view to boost exports Indian government has taken various measures:
 Adjustment assistance scheme to provide enhanced exports credit and
guarantee corporation (ECGC) cover at 95% to badly hit sectors extended
upto march 2010.
 Interest subvention of 2% on preshipment credit for 7 employment oriented
export sectors extended beyond the current deadline of september30, 2009 to
march31, 2010.
 To facilitate flow of credit at reasonable rate, Rs.4000crore provided as
special fund out of rural infrastructure development fund to small industry
development of India, This will incentivise banks and state finance
corporation to lend to micro and small enterprises by refinancing 50% of
incremental lending to MSE’s during current financial year.
PUBLIC DEBT: Due to the slowdown in the economy in few last years
government raised its borrowings. Footwear industry shall raise funds from
domestic and overseas economic sectors in form of shares and bonds in the
stock market.
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FDI (FORIEGN DIRECT INVESTMENT): Liberalizing FDI was another
important part of India’s reform, driven by belief that this would increase total
volume of investment in Indian economy.
A list of investment projects will be prepared in bid to call for investors at home
and abroad encouraging the involvement of domestic foreign economic sector
in investing in footwear industry.
IMPLICATION OF NATIONAL INCOME:
Footwear industry has major contribution in country’s national income. The
sector is pride of India’s leather industry and ranks second in the world, next to
China.
Global trade in leather footwear is US$30 Billion and non leather is US$ 18
Billion.
The footwear industry has made a strong contribution to Indian economy.
India’s share in global trade remains low, however being labour-intensive
industry, It has a strong contribution in employment.
The sector provide 2.5million employment(of which 30% women).By reduction
in unemployment the growth of economy increases and hence per capita income
increases which lead to higher standard of living. In total national income of the
economy increases.
FDI(FORIEGN DIRECT INVESTMENT) play an important role in
increasing national income. As India is developing economy it has an attractive
profit making opportunities for the foreign investors. Because of its production
strength it attracts more international players and also duty free or concessional
imports and reduction in excise duty help in increasing FDI.
Opportunities and Threats faced by Industry
SWOT analysis of Shoe Industry
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Strengths
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High Growth
Ready availability of highly skilled and cheap manpower
Large raw material base
Policy initiatives taken by the Government
Capability to assimilate new technologies and handle large projects
Continuous emphasis on product development and design upgradation.
Weaknesses
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Lack of warehousing support from the government
International price fluctuation
Huge labour force resulting in high labour charges
Lack of strong presence in the global fashion market
Unawareness of international standards by many players
Opportunities
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Rising potential in the domestic market
Growing fashion consciousness globally
Use of information technology and decision support software to help
eliminate the length of the production cycle for different products
Use of e-commerce in direct marketing
The Indian footwear retail market is expected to grow at a CAGR of over
20% for the period spanning from 2008 to 2011, and also expected to
comprise of 60% of the total leather exports by 2011.(india-reports,2008)
Footwear retailing in India remain focused on men’s shoes, there exists
plethora opportunities in the exclusive ladies and kids footwear segments
with no organized retailing chain having a national presence in either of
these categories.(india-reports,2008)
For leather industry, duty free entitlements of import trimmings,
embellishments and footwear components is increased to 3% of FOB value
of exports, for leather sector, duty free import increased to 5% of FOB value
of exports and the machinery and equipment for effluent treatment plants are
to exempt of custom duty.(Indianindustry, 2009)
http://www.indianindustry.com/trade-information/foreign-trade-policyhighlights.html
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Threats
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Major part of the industry is unorganised
Limited scope for mobilising funds through private placements and public
issues (many businesses are family-owned)
Difficulty in obtaining bank loans resulting in high cost of private borrowing
Stricter international standards
High competition from East European countries and other Asian countries
Lack of communication facilities and skills
http://leather.indiabizclub.com/info/indian_leather_industry_overview
Opportunities for Burberry:
Asia represents significant growth opportunities for Burberry, as it dose for other
luxury brands. The industry is truly global as the products of the luxury brands are
distributed or sold through-out the world both to domestic consumers and to tourist
buying in European and American markets. Having an innovative product or
service can open markets where none existed before challenging the existing
competitive landscape. It allows BURBERRY to build anew monopoly (even if
just for a short while), which will allow you to grow without competition.
The opportunities which BURBERRY should or is looking forward: There is potential schism emerging as eastern markets desire western
branded fashion, leather goods and accessories in large quantities, whereas
western consumers are seeking something different.
 Burberry has announced a joint venture in the Middle East with franchisee
Jashanmal Group. Burberry Middle East will manage all the group’s retail
and distribution in the region under a 15-year contract. Like-for-like sales
have increased by more than 40% in the region in the year to date. Burberry
also announced a joint venture with Japanese licensing partners Sanyo
Shokai and Mitsui & Co to grow its distribution of non-apparel merchandise
through retail stores in the country.
 Pacific Brands Finally Closes Doors:- Pacific Brands are closing the doors
of its Palmerston North and Christchurch factories with combined job loss
of 90. The union understands that despite a number of approaches from
investors wanting to purchase the Liberty underwear brand made by the
Palmerston North factory, no sale has been made.
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 South Korea, EU Reaches free trade agreement:-South Korea and the EU
have reached a free trade agreement earlier, which is expected to eliminate
tariffs on 96% of the EU goods and 99% of South Korean goods within
three years after the accord takes effect. South Korea has sought greater
access to the EU’s auto, textiles, and electronics markets.
 Pakistan to Set Up Textile Support Fund:- The Pakistan government has
pledged to set up an Export Investment Support Fund to boost the country’s
textile export earnings as part of the federal budget of 2009-10.
 Although the Indian economy has begun to come out of slowdown and
major industrial sectors such as cement and steel are now showing signs of
recovery, the country’s second largest employment provider i.e. textile
sector has not yet showed any signs of recovery, acc to Assocham Eco
Pulse. Hence the government should create an investment friendly
environment and provide low interest rate loans to investors. Export profits
should be made tax free during the slow down to encourage the export.
 The government has released 25,46 billion rupees of subsidies to textile
firms to upgrade their technology.
 Technopak Apparel Forum Focuses on Global Meltdown an Opportunity in
diversity. The first edition of Technopak Apparel Forum was held in
Bangluru on july25 2009. The event with the theme Global MeltdownOpportunity in Diversity discussed various issues related global textile and
apparel scenario and the steps apparel manufacturers and exporters need to
undertake in order to be globally competitive.
 Demand for luxury goods is also driven by more aspirational lower-end
consumers across most regions. Consumption of luxury goods tends to
widen to more occasional customers during strong economic growth and
contracts to more wealthy people at the time of economic instability.
 Texsoco Inc. Announces a Joint Venture with Mimaki:- Mimaki Kanphor
India Pvt. Ltd will be the name of the new company. They will be the
exclusive distributor of Mimaki industrial and textile printing machines.
Texsoco has been providing digital printing solutions for various garment
exporters since 1993.
 Better Work Vietnam to Support Apparel Enterprises in Southern
Provinces:- the programme aims to help improve in working conditions for
more than 700,000 workers and boost the international competitiveness of
the sector. The goal is to find practical solutions that will decrease costs of
project participants, enhance factory competitiveness in international
market.
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Threats faced by the Company:-
 Clothing union on War Path Over Wages Hike:- Clothing industry
workers in south Africa have threatened to go on nationwide strike if
their demand for a R70 increase in weekly wages is not met by the
garment manufacturing companies. This is a sort of internal threats
which BURBERRY might face.
 The flip side of democratization has lead to the hijacking of its
distinctive checks by untypical Burberry customers who have been able
to buy into it brands at low price accessories level. The problem is more
with the Burberry checks because they are more readily identifiable than
the small logos of it peer luxury brands.
 Export orders for Garments Drop by 40% in Pakistan:- Export orders of
the country for garments for the Christmas season have dropped by 30%40% as the production cost has increased due to increase prices of yarn
by 10%-15%. The local suppliers could not enter into time bound
agreements with the local buyers because they refused to take delivery if
prices went down. Similarly suppliers stops supplies if prices went up.
This is hampering long-term planning of the exporters who buy inputs
from local markets.
 GAP Inc to Increase Sourcing from India, says AEPC:-the retail chain
headquarters in San Francisco imports products worth a billion dollars
annually from Indian manufacturers. This increases peer competition for
Burberry.
 Lerros launches its first exclusive retail store in Hyderabad: - Lerros a
premium German apparel brand for everyday wear, which currently has
retail presences in Delhi, Mumbai, Bangluru and Chandigarh. Launching
of new brand is threat to Burberry growth and sell due competition.
 Burberry announced a global cost efficiency programme which included
the restructuring of its Spanish operations and consolidation of its UK
manufacturing operations; the implementation of these initiatives is well
advanced. These initiatives may adversely affect relationships with
existing suppliers during the transition period. If Burberry's suppliers
failed to ship products on time, or quality is substandard, this could
result in the Group missing delivery dates to its customers, potentially
resulting in cancelled orders or price reductions.
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 Protest against the proposed closure of a Burberry factory in Wales has
gone global. The GMB union organised the action as part of attempts to
save the designer clothes plant in Treorchy, South Wales, which is due
to shut at the end of March with the loss of 300 jobs. These kind of
protests hinders the company’s brand image.
 The brand is currently faced with the challenge of balancing Burberry’s
accessibility while maintaining its exclusivity and protecting its tradition
and heritage while striving to be innovative and inspiring.
Recommendations:The success of some luxury goods manufacturers is through tailoring their
marketing strategies to both the traditional luxury goods consumer and the
aspirational luxury goods consumer, which causes the luxury goods market to split
into two. As the luxury goods market is growing, consumers are becoming more
educated and factors like quality, workmanship, and utility have become just as
important as the brand name itself. The recommendation for the company to
maintain the consistency, good will, brand image, uniqueness and cost effective
methods for production are as follows:-
 BURBERRY ETHICAL TRADING POLICY:The Policy exists for the purposes of promoting safe and fair working
conditions and the responsible management of environmental and social issues
in the Burberry supply chain.. This policy is mandatory and applies to all
members of the Burberry Group their suppliers and their sub-contractors on a
global basis. Standards of Conduct:
1. There is no forced, bonded or involuntary prison labour.
2. Workers, without distinction, have the right to join or form trade
unions of their own choosing and to bargain collectively.
3. Working Conditions are Safe and Hygienic.
4. Child labour shall not be used.
5. Wages and benefits paid for a standard working week meet, at a
minimum,
national legal standards or industry benchmark standards, whichever
is higher. In any event wages should always be enough to meet basic
needs and to provide some discretionary income.
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 In Asia luxury spending was expected to grow between 6 and 7 percent in
the year starting July, compared to a decline of up to 15 percent in the United
States and a drop of up to 5 percent in Europe. Burberry retailers need to
educate potential customers about their wares, especially during this crisis,
when they're more reluctant to buy on the spur of the moment. Burberry sales
teams should appeal to customers' emotions, online or at the store, to succeed.
 Burberry should adopt recycling of textiles. It is cost effective process and
company input cost will be reduced.
 It should inculcate “Lean Sigma” adopting the latest technology of waste
reduction and improving efficiency level. This is cost cutting and time saving
adoption.
 I.T provides with a platform to cut lead times, improvements in
communication channels, increase accountability as well as gain more visibility
as a part of supply chain. Adopting NGC will provide powerful platform to
Burberry to be in touch with all suppliers on a day basis and it also have ability
to integrate with any software application and provide flow of information.
 Strengthening the pre production processes as apart of over all supply chain
to enhance the operational efficiency.
 Many industries are adopting the strategy of going green highlighting their
initiatives and future plans towards a cleaner environment. Though the initial
investment in setting up a green factory is about 30%-40% higher, the
investment pays back in couple of years through various savings achieved as a
part of this initiatives. Burberry should also adopt this as it will enhance its
brand image.
 Looking at elementary factors such as staff welfare and training to enhance
overall performance level in Burberry, if investment is done in manpower
resources and all other factors such as improved efficiency and lower
production costs will automatically fall in place.
 Need to anticipate customer demand in advance to ensure buyer retention,
like TAL group based out of Hong-Kong has taken the initiative of having a
group of designers closer to their buyers ho help in anticipating color forecast
and creating their own line plans that find instant favor with the buyers.
 The Indian footwear market is dominated by casual footwear market that
makes up nearly 2/3rd of the total footwear retail market, so Burberry should
focus on the market demand and also provide rest 1/3 rd market with its new and
innovative formal footwear too
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 Indian market is dominated by men’s footwear i.e. about 58% so there huge
untapped sector of women and children footwear in India thus Burberry should
try tapping these sector.
 The profitability of individual company depends upon effective
merchandizing and competitive pricing, thus Burberry should source raw
material and industries to produce shoes so that at the time of recession it can
cut down its input prices and can also add on the economy by providing the
employment and add on money flow into the country.
 Indian government have policy towards the protection of children and youth
against exploitation and not to be employed in the factory or mine as hazardous
employment so Burberry while sourcing products from India should check age
verification certificates to check the labour working is not under privileged or
work at ones own will.(joem,2009)
 Worldwide epidemiological studies shows that the employment in the shoe
industry is associated with high risk of cancer so Burberry should keep records
of his workers health.(joem,2009)
http://www.ijoem.com/temp/IndianJOccupEnvironMed9175037142_135931.pdf
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