Wednesday, May 29, 2013

Can a strategy of arrogance work? A Closer Look at Abercrombie and Fitch’s Business Strategy


 
After reading about the importance of investing time into strategy discussion and planning, I started to wonder about Abercrombie and Fitch’s business strategy. A few weeks ago, the CEO, Mike Jeffries’ comments about excluding fat people that are uncool and not good-looking from his stores was a huge topic of conversation. Across social media, people rallied support against Jeffries and his brands and decided to boycott. Someone actually took the step to gather Abercrombie and Fitch (A&F) clothes from second hand stores to give to homeless people in an attempt to mock the CEO and his exclusionary ideals.

Along with the masses, I do not agree with Mike Jeffries’ attitude towards people. Some people put their emotions aside and said that Jeffries’ was simply focusing on his target market; that from a business perspective, he was just playing the game and no one can fault him for that.  While it is necessary for business’ to focus on a target market, in my opinion it definitely is not necessary to offend those that are on the outside.

Nonetheless, it makes me wonder how his view of people plays a role in the business strategy at A&F. Your Strategy Needs a Strategy by Reeves, Love, and Tillmanns identifies such a business as needing an adaptive strategic style. They say that businesses, such as specialty fashion retailing, have their best bet to “set up their organizations to continually produce, roll out, and test a variety of products as quickly as they can, constantly adapting production in the light of new learning.”

Although this strategy would seem to work well for them, it does not appear that A&F uses it. In 2006, the company began to slash jobs and cut corporate spending dramatically. However, top management decided to keep the high prices on their products the same. Jennifer Black, a stock analyst and president of Jennifer Black & Associates LLC said, “I think they’re doing the right thing, as tough as it might be. If they were to play the discount game in an overt way, it would destroy the brand.”

While revenues and stock are currently positive and increasing from a few years ago, their overall financial health is decreasing again. Whether people believe Mike Jeffries is Hitler incarnate or just a simple business man, his business strategy looks like it could use considerable evaluation and redirection.

 If you worked with Jeffries, what would you suggest? Do you think his decisions have worked? Will they continue to work? Can an attitude of arrogance work towards the success of a company? If so, what other factors need to be put in place?

 

References:






The Real Value of Strategic Planning (Kaplan and Beinhocker, MIT Sloan Management Review, Winter 2003)
Your Strategy Needs a Strategy (Reeves, Love, and Tillmans, Harvard Business Review, September 2012)

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