Business Analysis: Hugo Boss

Inhaltsverzeichnis

1.History of the firm

2.Company Description

3.History of the industry ( Porter´s 5 Forces Model)

4.SWOT Analysis

5.Corporate Strategy of Hugo Boss
5.1. The Project D.R.I.V.E

6.Financial Analysis

7.BCG Model

8.Team recommendation- “buy”, “sell” or “hold”

1. History of the firm

The founder, Hugo Ferdinand Boss (born 1885 died August 1948), opened his first factory in 1924. At the beginning he had approximately 20-30 employees. After the World-Economy-Crisis in 1929 Hugo Boss couldn’t avoid insolvency anymore but was able to recover thanks to the production of military uniforms for the NSDAP. Until 1942 the turnover rose increasingly and reached finally the one million mark

After World War II the whole production was improved and the company sold the first tuxedos. At this time Hugo Boss counted 128 employees with a constantly rising number. In 1960 they started the lean production of tuxedos which was a milestone for the company and its evolution. Few years later, in 1977, the brand Boss was created and registered. During the same decade Hugo Boss started improving their popularity by sponsoring Formula 1. This was the first step for international fame. In 1984 Boss got the license and launched their first fragrance. Since this time fragrances of Boss have been appearing at the top seller chart constantly. One year later the Hugo Boss AG went public at the stock exchange in Germany. During this year Hugo Boss also appeared at the golf and tennis sport events. They started a successful campaign and since then Hugo Boss has been sponsoring the Davis Cup. At the end of the 80’s the first glasses were produced and sold. In 1993 Hugo Boss started the 3-Brand-Strategy. Besides Boss, Hugo and Baldessarini, two new brands were created. Hugo Boss aimed to expand and get new target groups. The range of Boss got bigger with selling shoes, besides fashion, fragrances and glasses in 1995. Few months later cooperation with the Solomon Guggenheim Foundation was built, which was the first step into the art industry. With the created Hugo Boss Award (endowed 100.000 USD) for innovation and creativity a new era began. To enlarge the range again, Hugo Boss got the license to sell watches in 1996

Near to the millennium, the company set a big milestone by creating fashion for women. Around this time Boss Orange was launched. It appeared as casual fashion which was a mixture of Hugo and Boss. In the upcoming years many different selections like Boss Black Womens wear, Boss Green or Boss Skin created a new and incredible image. In 2006 the company Baldessarini was sold. The same year Hugo Boss started charity cooperation with Unicef. This support was dedicated to Africa’s education system. Since September 2008 Hugo Boss also provides the possibility to shop online for their customers^[1]

2. Company Description

2.1. Facts and Figures

Hugo Boss AG: key facts (AG: Aktiengesellschaft)

Head office: Dieselstrasse 12 72555 Metzingen, DEU

Telephone: 49 7123 94

Fax: 49 7123 94

Website: www.hugoboss.com

Financial year-end: December

Stock exchange: Frankfurt Shares are traded on the MDAX (MDAX)

Managing Board of Hugo Boss:

Claus-Dietrich Lahrs
Chairman of the Managing Board and
Chief Executive Officer (CEO)

Mark Langer
Chief Financial Officer (CFO)

Christoph Auhagen
Chief Brand Officer (CBO)

Supervisory Board until 2015:

Supervisory Board Chairman: Dr. Helmut Albrecht

Damon Marcus Buffini, Antonio Simina, Sinan Piskin, Luca Marzotto, Bernd Simbeck, Gert Bauer, Monika Lersmacher, Helmut Brust, Dr. Martin Weckwerth, Gaetano Marzotto

2.2. Core Competencies

Hugo Boss manufactures clothes for the international fashion market. It produces men's and women’s ready-to-wear clothing, sports and leisure wear, accessories, eyewear, watches, and shoes. The company operates in 124 countries throughout Europe, the Americas and Asia. The company operates through two business segments: menswear and women’s wear^[2]

Hugo Boss is represented in the fashion market by the BOSS and HUGO brands. These brands include BOSS Black, BOSS Selection, BOSS Orange, BOSS Green and Hugo lines, as well as the accompanying accessory collections which are a part of the core BOSS brand

The BOSS Black women’s wear and menswear collection offers business ensembles, casual sports clothing, and evening wear designed for special occasions

BOSS Selection menswear is a premium brand, made of superior materials and with fine workmanship

The BOSS Orange collection offers casual fashion for men and women

The BOSS Green line offers fashion-oriented sports collection

The HUGO brand offers men and women an avant -garde fashion collection^[3]

In order to show the above mentioned brands and distribution within the company`s portfolio please see the next table (source annual report 2008)

Abbildung in dieser Leseprobe nicht enthalten

As already mentioned, the company also offers accessories and non-textile products including eyewear, fragrances, watches and cosmetics. Hugo Boss grants licenses to partner companies for products that are outside its core clothing competence. Brand extensions are an interesting brand strategy option, as they may attract new segments of customers who, for various reasons, have not considered the brand before though contemporarily this strategy is dangerous as it nourishes the peril of brand inconsistencies: you have to have a “core business” to be known for to be able to use this strategy efficiently^[4]

As HUGO BOSS Group is one of the world market leaders in the premium fashion and luxury segment of the apparel market we think that brand extension will not lead to dilution of the image

3. History of the industry ( Porter´s 5 Forces Model)

Introduction

We may introduce you to today’s fashion industry saying that is characterized by a highly volatile demand and by rapid changes caused by the continuous increase in market globalization^[5] . A side effect of market globalization is product similarity where brand differentiation is crucial to survival for companies. These circumstances lead to a highly competitive environment for market players on one hand and on the other make branding a core challenge in order to survive. We will refer later to this topic when explaining the threats deriving from brand inconsistencies^[6]

Industry from the point of view of Porter´s model

Our analysis will also consider emerging markets, being part of the company’s strategy and also useful to better understand this industry in established markets

Bargaining power of suppliers in established markets may be defined as low

Traditional relationships between luxury firms and suppliers are based on mutual loyalty and reliability. For this reason it is evident how supplier’s switching costs in the luxury fashion industry might be higher than in other industries. Also we may assume the presence of plenty of suppliers in the industry, a circumstance that weakens their overall power^[7] . The products offered are not differentiated: the players don’t rely upon a specific know how and may easily change supplier. The suppliers are under pressure to offer quality at reasonable, meaning competitive prices

[...]

^[1] Hugo Boss Annual REPORT

^[2] Hugo Boss Annual REPORT

^[3] Rasa Stankeviciute and Jonas Hoffmann, 2011, The slippery slope of brand extension in MARKETING MANAGEMENT - WINTER 2011, p

^[4] INSA MATTHIESEN - IAN PHAU, June 2005, The ‘HUGO BOSS’ connection: Achieving global brand consistency across country, BRAND MANAGEMENT VOL. 12, NO. 5, pp.325-

^[5] Idem, cit. Czerniawski, R. D. and Maloney, M. W., 1999, ‘Creating brand loyalty: The management of power positioning and really great advertising’, AMA Publications, New York

^[6] Datamonitor, November 2011,Textiles in Germany, p

^[7] Roberto La Rocca, June 2010, Luxury Brand Management: Hugo Boss Corporate Strategy, Master Thesis, Universitá della svizzera italiana - Faculty of Economics