Victoria's Secret Strategy: Porter's Five Forces & SWOT

Company Profile and Mission

Limited Brands, of which Victoria's Secret is the dominant brand globally, has defined its mission statement as follows (Investor Relations, 2007): "Limited Brands is committed to building a family of the world's best fashion brands offering captivating customer experiences that drive long-term loyalty and deliver sustained growth for our shareholders." Implicit in this mission statement is a multi-brand strategy that looks to deliver a highly unique, differentiated, and captivating series of experiences for customers to earn their loyalty, with profitability being the result.

Limited Brands (LTD: NYSE) is a publicly traded corporation and one of the leading fashion, apparel, and fragrance companies in the United States, with significant operations across hundreds of product lines. The more dominant lines include apparel, cosmetics, lingerie, fashion accessories, fragrances, and personal care products sold through branded stores globally. The company's brands include Aura Science, Bath & Body Works, Henri Bendel, The Limited, The White Barn Candle Company, and Victoria's Secret.

Limited Brands had previously supported two apparel businesses—Express and The Limited Stores—but due to pricing and margin pressures in the retail sector, sold Express stores earlier in the period under review. Limited Brands is organized around its three strongest brand areas: its apparel business, Bath & Body Works, and Victoria's Secret. Because real estate is integral to its retailing operations, a separate division is specifically dedicated to managing the company's investments in store locations and leases.

A financial analysis of Limited Brands shows both revenues and operating income from 2003 to the most recently available financial period, fiscal year 2007. Victoria's Secret grew from 37% of total revenues in 2003 to 48% in 2007, an 11% increase. Victoria's Secret also offset declining sales in the Apparel segment of the business and contributed 70% of net income in 2003, growing to 81% in 2007. This analysis is based on accumulated filings of the company with the Securities and Exchange Commission (2007).

Competitors to Victoria's Secret include American Eagle's Aerie stores, which have launched a campaign to capture market share, Liz Claiborne Inc., the Gap, and smaller boutique shops that feature lingerie and undergarments for young women. What contributes to the continued growth of Victoria's Secret in both market share and profitability is the company's exceptional understanding of its target customer base, the effective use of in-store promotions, ample fitting room space for trying on bras, and multiple opportunities for customers to sign up for an Angel credit card. On the specific point of why Limited Brands designs stores with many dressing rooms: internal research found that once a bra has been tried on, the same customer purchases that bra or another one 70% of the time (Marketing Leadership Council, 2002).

References

Investor Relations (2007). Frequently asked questions of Limited Brands investor relations. Accessed from the Limited Brands website on May 30, 2007.

Marketing Leadership Council (2002). Insights into how Victoria's Secret harnesses customer requirements. Corporate Executive Board. Accessed via EBSCO Host on May 30, 2007.

Porter, M. E. (1979). How competitive forces shape strategy. Harvard Business Review, 57(March–April), 86–93.

Securities and Exchange Commission (2007). Form 10-Ks and annual reports for the years 2002–2007. Accessed via EBSCO Host and the Limited Brands website on May 30, 2007.