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Burberry group is a leading luxury manufacturing company in UK. Burberry group established in 1856 and recently it celebrated its 150 years in history. In this year it announced the closure of its Welsh factory. A PESTEL analysis is conducted to evaluate the external environment of China. It assists the firm to run the business in host country. SWOT analysis also plays an important role to find out the company objectives and identifies the internal and external factors that are favorable and unfavorable to achieve that objective. For the entry in the market of china and recruitment of managerial level employee, company uses the geocentric approach. This approach helps to find the best and experience employee for the company.
Table of Contents
Executive Summery 2
Table of Contents 3
PESTEL Analysis 5
SWOT Analysis 6
Key Issues 7
Sourcing Strategy: 7
Equal Opportunity: 7
Trade Union: 8
Supply Chain: 8
Advantages of Factory Move: 8
Disadvantage of Factory Move: 8
IHRM Approach 8
Geocentric Approach: 8
Action Plan 10
Clarify Goals: 10
Coaching the Employees: 10
Motivation and Performance Appraisal: 10
Employee Satisfaction and Feedback: 11
Burberry is a leading and luxury brand name in UK, deals with the different brands that approach women, men and kids. Burberry was established in 1856 in England and celebrated its 150 years in manufacturing the lifestyle products and its accessories for women, men and for the kids. Burberry has around 260 directly operated stores. Addition, the also sold its products through concession with a wide network of 71 third-party operated retail locations and wholesale customers. All the wholesalers of the firm are leading prestige retailers.
At the end of fiscal year 2006, the company generated £743 million revenue. This revenue generated by the company from Europe, Japan, North America and from Asia (Burberry, 2010).
The PESTEL analysis of China and UK are as follows:
China is governed by the communist party. The communist party is not support the foreign players in domestic market. Some political decisions, taxes, policies are not support the environment of business. As well as in the UK, government has a major impact on businesses. The political party provides the best supportive infrastructure to the companies (Central Intelligence Agency, 2010).
Economic condition is good in China. It shows constant growth rate in GDP with 7 to 8 Percentages every year. GDP per capita income is also shows the growth at US$ 6,100 in 2008 and US$ 6,600 in 2009. UK is one of the most powerful economies in the world with a gross national per capita income of US $ 41,520 in 2009 (Gross National Income Per Capita, 2009).
China is a culture with high power distance, reflecting that there is a large difference between consumers' social status. Language barriers are one of the challenges when western companies entered in Chinese market. In UK, social status of consumers is high and uses the luxury products for the social status symbol (Central Intelligence Agency, 2010).
China has become one of the powerful countries in innovations and technologies. China's 60 percentages of technologies including atomic energy, space, high- energy physics and biology, computer and information technology have reached or are close to the world's advance level. UK is a develop country in the world. UK firms are at or near the forefront in technology advances, especially in aerospace and military equipment. In UK, internet users are increase with the population of 48.755 million and the internet hosts are 7.03 million in 2010 (Central Intelligence Agency, 2010).
China faces the environmental problems like water shortages, water pollution from untreated wastes, and loss of one fifth agriculture land since 1949 due to soil erosion and economic development (Central Intelligence Agency, 2010). UK trying to reduce its greenhouse gas emissions and government also trying to reduce the amount of industrial and commercial waste (Central Intelligence Agency, 2010).
China governed by one communist party so, the companies in china legally bounded with the law of china and work according to the law. But in recent years in UK, there have been many significance legal changes that affected firm behavior like introduction of age discrimination and disability discrimination legislation, an increase in the minimum wages.
The SWOT analysis of Burberry Group plc is as follows:
According to Pahl & Richter (2009) Burberry group is a leading luxury brand in UK. Company's major strength is its brand name, trademarks and other intellectual property. Company growing its licensing channels worldwide, those delivering high incremental return on incremental capital. The company manufactures the heritage products in clothing with the quality, function and modern classic style.
According to Böhm (2009) company has a vertical integration that reduces the profit margin and the value from manufacturing. Company has an apparel segment in its profile that has increased fashion risk and affects the company's profits.
The Company has a good opportunity of expansion of retail network and wholesale distribution in other countries. Company has an opportunity to restructuring of its Spanish operations in order to gain Spain to its global business modal and introduce the Burberry global collection in the market. According to Ferrell & Hartline (2008) Company has an opportunity to extension of its apparel offering to the existing and future customers.
According to Henry (2008) the main threat of Burberry group is to control the over licensees and wholesale accounts. The company refines its sourcing strategy that process affects relationship with suppliers. Company is mono brand and trademark that increasing in fashion risk in the market. Company faces the problem of counterfeiting in the market.
The key issues of Burberry group are as follows:
The sourcing strategy affects relationship with existing and potential suppliers during the transition period because there is evidence in case study that the company refine its sourcing strategy for selection of suppliers to maintain and increase product quality and improving sourcing efficiency ( From Case).
Company creates the policy of equal opportunity to recruit the most capable candidate for the job and develop competent employees. In this policy all employees receive fair and equal environment in the company (From case). There is an evidence that company believes, the communication is important between company and the employees for building relationship and motivating employees.
Trade union played a powerful role in a company decisions and strategies. Employees make a trade union to protect the rights in organization. There is evidence in case that GMB trade union was successful in delaying the closure date of the Burberry factory and warehouse in Treorchy.
There is evidence in annual report 2005/06 that company come with some initiatives to redesign its supply chain. The corporate social responsibility committee of Burberry Company considers supply chains that include maintain acceptable labour, environmental and social practices.
Advantages of Factory Move:
Move the factory in other country; gain the market reputation in other country.
Company gains the competitive advantages
In China raw material and labour is cheap rather than Treorchy. So, company gains the cost efficiency in their production.
To moving the factory in other country, company can increase in market share.
Disadvantage of Factory Move:
To moving factory in other country, employee losses his job.
Company faces the cultural differences to move the company in other country.
Company faces language differences to move the company.
China is communist country, there are some policies, rules and regulation for establish a company. This makes difficulty for Burberry group to move the company in china.
Company can adopt the geocentric approach for the international human resource management in china. The geocentric approach is as follow:
According to Briscoe, Schuler & Claus (2008) geocentric approach, the firm can hire best people in all executive position according to their ability and knowledge rather than nationality. Burberry group can use its human resource most efficiently by transferring the best person to the job. In Geocentric approach, company coordinates its subsidiaries and headquarters for decision making activities. It can be helpful to make a stronger relationship network among the entire global management team because of continues interaction and networking help to understand the country culture and work place among the team members (Briscoe, Schuler & Claus, 2008).
The advantage of geocentric approach is that this approach offers the good opportunity to all executive level employees work in different countries. This approach helps to build a team of executives who understand the international operations. According to Vance, Vance & Paik (2006) this approach helps to build a global limited vision and loyalty for the company. In this approach the HR director can follow the standardization policy for recruitment of executives. In this policy, HR director can follow the standard criteria for recruitment of managerial level employees.
There is evidence in the case that Burberry group established a corporate social responsibility committee in 2005 for giving the equal environment and opportunity to the employees in the manner of money and facilities. In this environment employees are rewarded according to their contribution in the company. Company has some standard to recruit the candidate to gain the most capable job candidate and develop competent employees.
China is a communist country so, most of the large foreign company, especially multi-national companies operate its business with the association of china government partners. In this approach company can face the implication of cross culture conflict and control. In an analysis of high performing companies with the multinational management teams proved that culture difference gives the advantages of business. There is evidence Wei (2001) that this culture difference might even contribute to a competitive advantage by providing a broader range of perspectives for managing the company within such complex economic and cultural system.
On the analysis of china HRM and the market position of the company, it is recommended that the company should conduct a market analysis in the china. It can be helpful to understand about the competitors in the market. According to Wei (2001) in order to enter in the Chinese market, company should use the joint venture strategy with Chinese luxury product manufactures. It would be helpful in the growth of the firm in Chinese market. There is evidence in case that Burberry group has worldwide network of licensed directly operated stores, concessions, third party operated retail location and a network of wholesale customers. This would be helpful to growth in market share of china.
According to Courtis, Ratcliffe & Allsop (2006) China is a number one in population in the world so, the labour easily available at less cost for the production. It would be helpful to produce the products at cost efficiency. That will be helpful to increase in market share and competitive advantage. In china, company should enter with the joint venture with other company; this can be helpful to gain managerial advantage in the market because the employees of other company and management know about the culture and language of the country. They have a deep knowledge about the market and situations, it would be helpful to grow in the market and increase in market share.
The Burberry group PLC makes the action plan to manage the people aspects in both Wales and China are as follows:
To manage the people aspects of this problem, HR director should define the company goals to all the employees in the organization. It will be helpful to understand about the mission and vision of the company. By the clarify goals, employees will be motivate to do work with effectively and efficiency (Bratton, & Gold, 2001).
The HR director should recruit the most skilled and motivated employees for the organization. The employees should have the knowledge of their field as well as roles and responsibilities. The entire process of recruitment is monitored by the human resource manager.
Coaching the Employees:
Training of the employees is another function of the HR director. By the training, an employee can communicate and develop strong relations with the other people. Training provides the knowledge about the organization. It defines the company's long term vision and mission.
Motivation and Performance Appraisal:
By the motivation an employee can give the best performance in the company. A human resource director should organize a session and lectures that keep the employee update about the competition in the market (Bamberger & Meshoulam, 2000). Performance appraisal and compensation is also one of the main responsibilities of the HR director.
Employee Satisfaction and Feedback:
A HR director should provide the facilities to the employees for motivating. It should be in term of monetary and other criteria. HR director should take the feedback from the different departments about the employees (Courtis, Ratcliffe & Allsop, 2006). HR director should understand the feedback of the workers and this lead to a well-organized management of the workers.
From the above discussion, it can be concluded that Burberry group Plc is a leading company in manufacturing the luxury products for women, men and kids. Its corporate management strategy involves selling high quality products at lower cost to the customers. Company operates its business through licensed retail network and has a good opportunity to expend this network in other countries. Company gives god working environment to employees through corporate social responsibility committee. Burberry group is going to redesign its supply chain network and sourcing strategy for gaining the competitive advantages from the market.
It can be concluded that company decides to closure its factory in the other country to gain the global competitive advantages and produce the low cost products. For this, company should merge with other global based company and open new stores in country.