Amer Eagle Outfit (AEO)

The business model of Amer Eagle Outfit (AEO) using the six components from QuickMBA

1. Value proposition is a component that describes the customer problem, the product that can address the customer problem and how the product is being valued by the customer. American Eagle Outfit is a U.S Company based in clothing and accessories. The company was at first a purveyor of outdoor things but on realizing the problem and the need of the consumers, it now supplies jeans and polos in order to address the customer desires. The company operates over 950 American Eagle stores and over 100 aerie outside stores (Investor's Business, 2015). There are over 100 stores in more than 15 countries operated by third party. Its products are sold to over 80 countries around the world through online.
2. Market segment is a component of business model that tells the targeted group of customers, recognizing the different needs of various segments. American Eagle Outfitters targets the young men and women of age between 15 and 25, with its casual apparel which include jeans, t-shirts, panties and bras (Investor's Business, 2015). It carries out most of its operations in the US, Canada, China, Hong Kong, Puerto Rico, UK and Mexico. It mainly targets teenage girls with its aerie brand.
3. Value chain structure is a component that shows the firm’s activities and position in the value chain. American Eagle Outfit has over 85% of its sales in the US, with over 100 stores in Canada and this is its largest market (Investor's Business, 2015). Additionally, there are international stores in over 15 countries. The company’s products are typically transported from vendors to their distribution centers.
4. Revenue generation and margins is a component that describes how revenue is generated, the cost structure plus the target profit margins. American Eagle Outfitters put efforts to promote their sales in order to generate more incomes for the company. They have incredible marketing strategies and skills for instance daily emailing of customers informing them of the discounts, trend and the existing new products (Investor's Business, 2015). Amer Eagle outfitters also carry out expansion strategy by expanding its stores domestically and internationally. These expansions enlarge the income capacity to generate income.
5. Position in value network is a component of business model that helps a business firm to identify competitors, complementors and other network effects used to deliver more customer value. American Eagle Outfit Company performs its retail activities similar to its competitors Aereopostale, Abercrombie & Fitch. American Eagle makes itself affordable than its competitors and this makes teenagers run for it (Investor's Business, 2015). Additionally, its stores are more retail stores compared to those of its competitors making it more accessible to the customers.
6. Competitive strategy is a component in business model that helps the company on how to come up with a sustainable competitive advantage. To maintain its competitive advantage, Amer Eagle Outfit is aiming at improving the quality of its clothing (Investor's Business, 2015). The company needs to maintain its target market and advertise its products favorably.

A PEST analysis for Amer Eagle Outfit

PEST analysis refers to the analysis of Political, economic, social and technological factors that affect the performance of the company. The company recently hired Chad Kessler as the chief merchandising. Therefore Kessler can leverage experience and expertise in boosting the merchandising capacity. Several initiatives have been introduced to reduce the rate of energy consumption in the distribution centers and in stores. Water is an important resource in the manufacturing process when washing and dyeing garments (International directory of company histories, 1988). However its usage has a negative impact to the environment such as shortage of fresh water which affects the social life of people.

A five forces model for Amer Eagle Outfit

Supplier power

The bargaining power for supplier is low just because there are many suppliers of raw materials such as cotton and lycra in the clothing industry (American Eagle Outfitters, 2015). Therefore a company is ready to abandon any supplier who raises the costs of raw materials.

Customer bargaining power

There is a high bargaining power for buyers due to the fact that America has relatively high-end clothing. As it is not taken as an essential product, it makes it price elastic (American Eagle Outfitters, 2015). Additionally, it is simple to switch companies and this makes customers selective.

Competitive rivalry

There is high competition in the market due to a variety of clothing brands such as urban outfitters, Aereopostale, etc (American Eagle Outfitters, 2015). There are many companies competing with Amer Eagle Outfit and this calls for constant innovation in order to get new customers.

Threat of new entrants

This is relatively low because the company has a stronger form of brand loyalty that cannot be threatened by new entrants (American Eagle Outfitters, 2015).

Threat of substitutes

 There are no substitutes for clothes and therefore there is no threat of substitution in the industry. However customers can switch between high-end and low-end brands (American Eagle Outfitters, 2015).

The company’s chief competitors

The company’s chief competitors include Abercrombie &Fitch and Aereopostale. Abercrombie & Fitch is an American clothing company headquartered in New Albany focusing on upscale casual wear for young consumers (American Eagle Outfitters, 2015). Aereopostale is a US shopping mall focused on casual apparel targeting men and women of age between 14 and 17 years through Aereopostale stores and those between the age of 4 to 12 through its P.S. According to customer’s point of view, Amer Eagle Outfit gives affordable products compared to the rest of the competitors making it look different (Hoover's handbook of American business, 2007). However, Abercrombie &Fitch and Aereopostale produce variety unique brands for children hence a threat to the company.

References

Hoover's handbook of American business 2008. (2007). Austin, Tex: Hoovers, Inc.

International directory of company histories. (1988). Chicago, Ill: St. James Press.

American Eagle Outfitters, Inc. SWOT Analysis. (2015). American Eagle Outfitters, Inc. SWOT Analysis, 1-8

Investor's Business, D. (2015, December 3). American Eagle Outfitters. Investors Business Daily. p. A02.