According to the Boston Consulting Group, Burberry had settled into a position somewhere in between a cash cow and a dog. The market for fashion, particularly in the UK, was in a state of maturity and slow growth. The Burberry brand was successful, a trait of a cash cow, but had also grown tired, a dog trait. Thus, the brand was beginning to move in the wrong direction. The response on the part of management was to reposition in the brand so that the brand would grow, no matter what the state of the market in the UK was like.
The Ansoff Matrix breaks down a company in terms of how it can grow, with a combination of existing or new markets and existing products and new products. At Burberry, the company decided to grow using both new products and new markets, but without ignoring the traditional success of the company. So for example, the firm brought in new designers in order to freshen up the company's designs -- the people that made Burberry hip in the early 60s are now elderly, so have little appeal to a younger generation. Thus, the company has moved to bringing out new designs and new products in order to appeal to younger consumers.
In addition, Burberry has recognized that there is only so much growth to be had in the British market, and taken its expansion plans overseas. The company saw growth in markets in the Middle East, Asia and China in particular, in addition to gaining strength in other Western markets. While pursuing these new markets and new products, the company retained its brand strength by continuing to use staple designs of the company. The biggest issue for Burberry was actually maintaining the strength of its brand in the UK, where it became associated with chav culture, arguably through knockoffs. That said, the company never wanted to lose the strength of its core UK market.
The UK image challenge actually is a challenge of positioning. According to Porter's typology, Burberry pursues a differentiated strategy. The company aims to reach a relatively mass market, but to do so with a highly differentiated product lineup, based on signature motifs, unique product designs and strong branding. What the image problem in the UK was causing was that the brand was becoming too mass market, or least that is what the brand perception was. Strategically, this erodes the differentiation that the company has worked hard to achieve, and as a consequence the company loses some of its prestige, which relates directly to its bargaining power over buyers.
One of the strategic responses of Burberry to the challenges that it faced was to identify and target new segments for its business. The company needed to identify the new buyers and find ways to target them, lest it be consigned to selling to "grandpa" until it went out of business. Burberry identified the different segments within the British market, and pursued them with a combination of design and marketing. The company also identified that there was significant growth in luxury goods in overseas markets, and therefore sought to reach these markets as well. Burberry realized that while Western markets often responded to fashion-forward designs, consumers in emerging markets were mostly new money types who bought luxury brands for image. Therefore, success in those markets would be dependent on building out distribution channels but simultaneously creating a brand image based on the idea of authenticity.
Burberry realized that to evolve, it had to change its target market and targeting strategy. The company had become fixated on meeting the needs of its existing customers, rather than on meeting the needs of the large potential market for its products. Some of the strategies that the company embarked on, such as adding fragrances and upgrading the selection of accessories, directly played to the need to expand its product market to appeal to modern consumers. The company saw the two distinct target markets in the West and in the East and sought to understand the needs of these markets, and then design new products to meet the needs of these markets. It was not enough to simply add to the existing product lines, the company had to focus on developing new products and new product lines that would appeal to the nouveau riche in Asia and to the aspirational upper middle class in Western markets.…