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Management in Action
Authority & Function at A&F
“Paying $90 for torn jeans isn’t that cool anymore.”
—Analyst on declining sales at Abercrombie & Fitch
Along with American Eagle and Aéropostale, Abercrombie & Fitch (A&F) is one of
the “Three A’s” of retailing for younger consumers, the three largest specialty
retailers catering to young adults ages 18 to 22 (and up). Look around your
college classroom and you’ll probably spy at least one A&F item—a cap, a shirt,
a pair of jeans. Abercrombie & Fitch, a line of “casual luxury” apparel and other
products, is actually one of five brands owned by Ohio-based A&F Corporation.
The company’s other brands include abercrombie (“classic cool” for preteens),
Hollister (“SoCal” for teenagers), RUEHL 925 (a higher-priced brand for post-
collegiates that recently closed), and Gilly Hicks (Australian-themed lounge and
underwear for women).
Obviously, A&F’s businesses are related, and its overall corporate strategy
is best characterized as one of related diversification. Based on this strategy,
one would assume that A&F’s organizational design reflects a divisional
structure, a form favored by companies that operate multiple related
businesses. It is interesting, however, that A&F relies instead on a functional
design based on functional departments (groups responsible for specific
company functions).
In general, some form of divisional structure is preferred by most firms that
pursue strategies of related diversification. Limited Brands, for example, a close
competitor (and one-time parent) of A&F, uses a divisional structure to coordinate
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brands such as Victoria’s Secret, Bath & Body Works, Pink, and the White Barn
Candle Company. Each unit is empowered to make autonomous decisions but
can also access companywide staff support in areas such as logistics,
information technology, real estate, and store design. At A&F, on the other hand,
every employee is assigned to one of eight basic business functions, such as
planning, purchasing, distribution, or stores, each of which is headed by a
president. Why this design? Basically, A&F wants every employee to develop
highly specialized skills within a functional area. This design is also more
effective in coordinating activities within a function.
The company’s history also accounts in part for its choice of a functional
structure. From its founding in 1892 until a bankruptcy in 1977, Abercrombie &
Fitch was a high-end sporting-goods retailer. In 1978, Oshman’s, a Houston-based
sporting-goods chain, purchased the company brand and trademark and, for
11 years, operated a combination retail chain and catalog company, selling
an eclectic line of products ranging from tweed jackets to exercise machines.
Limited Brands purchased the brand in 1988, putting it on preppy, upscale
clothing for young adults. Nine years later, Limited sold 16 percent of the
company through a public stock sale, and when the remaining shares were sold
to the public in 1998, A&F became an independent company. In its current
incarnation, then, A&F started out as a division of a larger firm, so it makes sense
that its structure would be much like that of one division in a multidivisional
corporation.
It’s also interesting to note that, even before the spinoff from Limited, A&F had
begun to establish its own culture and its own pattern of growth. Michael Jeffries,
Nano
C
alvo/Alam
y
Abercrombie & Fitch has been a fashion mainstay for younger consumers for years. Although the
firm has grown to be a huge retailer, it still uses a form of organization design more commonly
found in much smaller businesses.
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