Formative Feedback - Macro Economic Analysis

Original Macro Economic Analysis:

Throughout the 1990s Abercrombie and Fitch experienced a huge increase in financial performance as sales went from $110,952 in 1993 to $1,042,056 in 1999. They are now experiencing sales in the billions and so arguably are more successful than ever, this is true financially, however popularity wise they were more successful in the 90s than they are now.

Abercrombie and Fitch’s financial performance suffered from 2014 to 2017 with sales revenue dropping consistently each year from 2015. It dropped from $4.12b in 2014 to $3.74b in 2015, $3.52b in 2016 and $3.33b in 2017. In 2018 their sales revenue began to rise again with it increasing to $3.49b.

Abercrombie and Fitch need to take into account changes in their external environment and react to these changes to ensure that they can compete in their market.

Political – Tax policies such as an increase in income tax will lead to a decrease in Abercrombie and Fitch’s sales as customers will be more cautious of spending, especially with a more highly priced brand such as A&F, as they will have less disposable income.

Economic – If exchange rates were to rise it would be more expensive for Abercrombie and Fitch to import and export goods and so could lead to them to reducing the quality of their products to accommodate for cheaper labour or materials, which could in turn effect sales as people won’t be investing in the same quality as they previously have experienced.

Social – A change in consumer tastes can affect sales, for example if a brand’s typical style isn’t on trend then their products won’t sell. For instance, with Abercrombie and Fitch people’s views tends to be that it used to be very popular but it is now becoming out of date.

Technological – With their website and app it is now easier than ever for people to shop Abercrombie and Fitch as it opens them up to multiple distribution outlets, therefore increasing sales. However, there is a negative side to being online as if A&F found themselves in a controversy, consumers would know about it instantly through social media which could negatively affect their reputation.

Legal – Abercrombie and Fitch need to abide my employment laws as they have suffered from issues in the past such as refusing to employee a Muslim woman because she wore a Hijab.

Environmental – Abercrombie and Fitch have had problems in the past with their environmental status as they have used dangerous forms of manufacturing such as sandblasting. They need to ethically source materials and manufacturing processes to create a positive brand image and add value to their products. This will increase demand as people will see the product as worth more because it was ethically sourced and so prices could be increased which will therefore increase revenue.

Feedback:

Some very good PESTLE factors identified in this sector. Please reference your findings especially where you use statistical data. More critique as well would be welcome. Here, you could justify your views in terms of the evidence from the past and the likely impact in the future of any particular influence.

Macro Economic Analysis after Feedback:

Abercrombie and Fitch need to take into account changes in their external environment and react to these changes to ensure that they can compete in their market.

Political – Tax policies such as an increase in income tax will lead to a decrease in Abercrombie and Fitch’s sales as customers will be more cautious of spending, especially with a more highly priced brand such as A&F, as they will have less disposable income.

Economic – If exchange rates were to rise it would be more expensive for Abercrombie and Fitch to import and export goods and so could lead to them to reducing the quality of their products to accommodate for cheaper labour or materials, which could in turn effect sales as people won’t be investing in the same quality as they previously have experienced.

Social – A change in consumer tastes can affect sales, for example if a brand’s typical style isn’t on trend then their products won’t sell. For instance, with Abercrombie and Fitch people’s views tends to be that it used to be very popular but it is now becoming out of date.

Technological – With their website and app it is now easier than ever for people to shop Abercrombie and Fitch as it opens them up to multiple distribution outlets, therefore increasing sales. However, there is a negative side to being online as if A&F found themselves in a controversy, consumers would know about it instantly through social media which could negatively affect their reputation.

Legal – Abercrombie and Fitch need to abide my employment laws as they have suffered from issues in the past. For example, in 2015 Samantha Elauf filed a lawsuit against Abercrombie and Fitch for denying her employment in 2008 when she was 17 as her interviewer outright told her she could not be employed due to her being Muslim and so would have to wear a head scarf which does not fit in with Abercrombie and Fitch's "Look policy". The case made it all the way to the US Supreme Court which voted in Samantha's favour.

Environmental – Abercrombie and Fitch have had problems in the past with their environmental status as they have used dangerous forms of manufacturing such as sandblasting. They need to ethically source materials and manufacturing processes to create a positive brand image and add value to their products. This will increase demand as people will see the product as worth more because it was ethically sourced and so prices could be increased which will therefore increase revenue.

Based on Abercrombie and Fitch’s History with their external environment they can make improvements especially with their legal factor as they have suffered with issues in the past. For instance, if they continue to discriminate against employees, their reputation will suffer and they may find themselves in more legal battles in the future like they have experienced with Samantha Elauf.

Comments:

I removed the first two paragraphs from this section as I have decided that I will make the information into infographics to fit in with the macro economic analysis. I also added a more specific example to my legal factor section and added a justification after all of my factors to finish the section off.