Development Strategy of Luxury Company Essay

1. Introduction As long as there is a society, there will always be appearance. It was non surprised a counterfeit signs, e specially a blue life mien brands became a national treasure which effect the issues in traffic, political and social bowl in European countries. Since the Hermas established in 1837, a special development scheme model has formed and matured in European opulence free radical. Daniele de winter, the chief operating officer of Daniele de Winter Cosmetics state that the secret of successful shape management is a complete blend of creative genius and blood management acumen, skill and imagery.The develop strategy is the key issue for a successful lavishness modality confederation. With the development of economy and the sum up of in hap, more and more luxuriousness fashion companies detonate their business into Asia- Pacific neighbourhood, especially the Hong Kong and mainland China market place place. According to the annual report of Rich emont, The Pinault-Printemps-Redoute (PPR), Hemes, Bulberry and otherwise highlife fashion companies, the sale revenue of Asia- Pacific region distinguishs for more than 30% of the Group total revenue. The Change of Global Luxury Fashion Market.The word extravagance origin from Latin word luxuria, which promoter an item that is expensive and enjoyable hardly no essential (Waite, 2012). In 186 BCE, the victory of army of Gnaeus Manlius Vulso brought such everywhereseas sumptuousness as bronze couches, and pricy cloth spreads into Rome. For some Roman historians, the triumph of Vulso marked as the beginning of highlife persistence in Europe. With the development of centres, modern highlife fashion industry has generate a cross-sectors industry which offers high price goods and service for target consumers. However, in the space of two decades, the modern high life market has changed beyond recognition.The assign range of get and demand of target consumers and the exclu sive- distribution channels, represented by French Fashion, have been replaced by a mass industry, accompanied by working out brands with an affordable price by a wider range of consumers. Since the beginning of 1990s, the luxury industry has been recognised and restructured by designers and the fashion designers become the creator of art. According to the statistics from France sparing and Social Council in 2008 (France Economic and Social Council, 2008), with the strategy of physical shop/ store and expansion brands benefit seven million euros.Depending on the diversion and internationalisation, the luxury industry becomes an industry with wider consumers. For example, Hemes, managed by Jean-Louis Dumas, diversities their goods and creates new products. The French luxury manufacture gets a successful on brand art by purchasing crystallizing brand Saint Louis and Silversmith Puiforcat. Similarly, Richemont Family, the main competitor of French brand, also control numbers of bran ds, such as Carites, Baume & Mercier and Van Cleef & Arpells. The second change of luxury industry is the transformation from the handmade custom to industrial quantityisation.Taking LVMH as example, there be three cores of product, as wines and spirit, luggage and leather, and fashion and perfume industry. The storied brands in luxury world, like as Moet & Chandon, Loewe, Vuitton, Givenchy, Kenzo, Dior and Guerlain, standardise the products like other heavy industries. Along with the profit-seeking financial logic, the marketing and the product standardisation become the study notion with the concept of broad-scale product. In the new centre, the concept of luxury industry and the demand of consumers are changing all the time.Heritage and Prestige is the basin of lots of luxury brands and the enduring set of numbers of particular brands. Comparing with the old style luxury brand which used to be a hereditary pattern brand (Coste-Maniere, et al. , 2012), the new concept of luxury, developed by Louis Vuitton and Burberry, means accepted by more consumers. For the occasional customers, they just enjoy the right hand of luxury in physical store against with the traditional customer-exclusive. In the new era, increasing the number of customers buy the fashion product they could afford, rather than become the royal consumer due to the high price.Consequently, emphasis of consumer need and the agonistical advantage means centralising the core value and expending brand boundary simultaneously. 2. 2 The Development Strategy mock up of Luxury Fashion Brand The luxury fashion brand originate in European countries which have plentiful historical and cultural background. With the development of servial centres, the luxury fashion industry in European, American and Japanese have become mature and standarlisation. downstairs this circumstance, the strategy of luxury development in western countries change on the brand expansion, striving for the core products and development of brand reputation.2. 2. 1 Brand Expansion the Foundational Strategy Under the press of financial-seeking strategy and the changeable of luxury market, the old style luxury fashion brand faces the challenge of development in the mature market in traditional European, American and Japanese region. Under this circumstance, the expansion of brands has become the foundational strategy for a large number of luxury fashion integrateds, which offer a new opportunity to stress the brand image, the roughly significant assets for a luxury fashion company.(Albrecht, et al. , 2013 Uggla & Lashgari, 2012 Hoffmann & Coste-Maniere, 2012)Many luxury companies break through with(predicate) the traditional product boundary and expensed their business into new market segmentations. For instance, Louis Vuitton, beginning with luggage, invested in other creative spheres ready-to-wear industry as well as jewelry market (LVMH, 2012), and Gucci, beginning with leather goods, developed all sets of fashion products including leather goods, shoes, ready-to-wear, watches, jewellery and other products.(PPR, 2012). Meanwhile, there are some companies expensed segments into non-traditional area. For example, the luxury jewellery manufacture Bulgari and Italian brand Versace started to offer hotel under their brand (LVMH, 2012) and Armani exit antithetic products from books, furniture and chocolates to restaurants, bars and spas. The another Italian luxury brand, Roberro Cavalli, famous for its fashion apparel for young generation, offer wine and vodka as well as run java bar (The Cavalli Caffe) and club (The Cavalli Club). 2. 2.2 Striving for the Core The Product Strategy For a orbiculate corporate, it is common rules of development depend on the core exertion or service and then variegation. However, even as diversification, the excellence core production and the strongest sectors within the luxury brands continued to earn the majority of its profits from the tra ditional products. (Ahrendts, 2013 Beverland, 2005 Miller & Mills, 2012). For luxury consumer, they expect to acquire a honorable brands and product so that they emphase on the value of core heritage.The leather goods, the core of Gucci Group, earn 59% of its revenue in 2012 (PPR, 2012). The iconic luggage is the tradition from the time corporate was founded and become the brand image of the LVMH Group. (LVMH, 2011) The turning of Burberry from a ageing British brand to a spherical luxury brand is a successful product strategy transition. Before 2006, through in a burgeoning global market. Burberry faced a low gain at a rate of 2 percentage every year and two competitors LVMH and PPR had more than 12 generation and 16 times Burberrys sale revenue.By surving the sectors among Burberry products all over the world, the results indicate the outerwear, as the core, hardly accourted of 20% of Burberrys global brand business. Figure 1 the Facts and pecuniary Statistics of Burberry (R esource from Burberry, Yahoo Finance) pic After brainstorming and formalizing from the administrative board, the New Jersey factore which is devising polo shirts was closed and invested in the Casteford factory in Yorkshire which make the heritage trech coat include traditional rainwear and exclusive waterproof gabardine.Burberry also hire Christopher Bailey as the global designer for innovation of core products. The facts and financial statistic of Burberry from 2006 to 2012 in Figure 1 showed that the conclusion to focus on the heritage opened up a wealth of creativity. By the end of 2012, the sale revenues and operating income had doubled than previous 5 years, achieving $3 billion and $600 billion respectively. (Burberry, 2007 Burberry, 2012) 2. 2. 3 The Brand Reputation The Brand Strategy The brand is the close valuable part of luxury goods and the motivity of luxury consumption. formerly separating from the luxury brand, the goods is the ordinary one. Every successful compa ny sees the brand as the most valuable fortune. they use the advanced marketing logic and marketing transaction to motivate the development, explore approaches to express the value and connotation of brands to luxury consumers and attract the royality of customers. As a tool of art, a carrier of history, and a spirit of classic, building-up a high quiality reputation is brand strategy for luxury companies.Since founded in 1847, Cartier, as one of the most established name in the jewellay market, is the reference of ture and timeless luxury. designing by Cartier, the product distinguishes itself by the laughable skills and excellence in design and execution. Nearly in 30 years, the extensive art activities are not competitive without the support by the Foundation Crtier pour lArt Contemporain (Richemont, 2013). With the development of brand reputation, Cartier is the synonym of modern art and a pioneering approach. Meanwhile, most of luxury brands come from the centre of Renaissan ce 2.3 The Features of Chinese Luxury Market Chinese market places the second place in the world of luxury consumption, surpassing the coupled States since 2008. Along with Japan, China is the strongest market with the increasing demand of 20 percentages. The consulting report from Glob Advantage estimate there are 18 kelvin billionaires, 440 thousand multimillionaires and increasing the number of middle class achieving 250 million in 2015 in todays China (Degen, 2009), which have the strong corrupt power and need of luxury fashion industry.Even with the influence of the financial crisis, the sale revenue of luxury fashion in the mainland China rose by 16 percent, hit about 64 billion RMB. The market seek about Chinese market laid a foundation for the development and expansion strategy of luxury brands. The shifting attitudes to luxury brands, the greater sophistication of Chinese consumers and the new geographic markets have become the main features of Chinese luxury market. The three characteristics drive the global strategy of development for luxury brands. Figure 2According to the survey of McKinsey & Company (KPMG, 2013), with the rapidly increase of income, more and more Chinese consumers shifts the attitude to luxury and feel comfortable to purchasing luxury products. The rich consumers which income over 300,000 RMB continued occupy the majority of the luxury purchase. Meanwhile, the statistics show that, the upper middle class (between 100,000 RMB and 200,000 RMB), which count for 22% of luxury goods purchase by the end of 2015, as the Figure 2 suggested, offers the biggest new growth opportunity. 2. 3. 1 The increasing number of overseas functionIn the asseverateation era, Chinese consumers have become more sophisticated than before. With the surge in the number of luxury stores, fashion magazine, the Web official site and the use of social media, Chinese consumers familiar with the luxury brands with the help of Internet, overseas travel, a nd the first-hand experience. For example, the research result indicated that in the last 12 months, the Hong Kong, Taiwan, Macro and Europe become the main destinations of overseas luxury purchase. Figure 3 Where did you purchase your cosmetics in the last 12 months? (Resource from Global Reach of China Luxury of KPMG) pic 2. 3.2 The increase of new market segmentation The rapidly growth of urbanisation and individual wealth emerge large quantity of geographic markets with sizable pools of luxury-goods consumptions. The luxury purchase and sale revenue of some medium and small cities, such as Qingdao in Shandong province and Wuxi in Zhejiang province, tripled than the previous 5 years. In the following years, the luxury consumption in these medium and small cities will achieve the same level with Hangzhou and Nanjing, the most developed market in mainland China, the sale of which will suffer at RMB 500 million yuan and account for 76% of whole market.2. 3. 3 The increasing of Coun terfeit goods Love for luxury, preference for counterfeit is a unmatched phenomenon in luxury consumption in Chinese luxury market. According to a report entitled Transnational Organized Crime in eastern United States Asia and the Pacific from Office on Drugs and Crime, almost 70% of global counterfeits luxury goods come from China and the value of counterfeit luxury goods imported into traditional luxury market on the target of $25 billion annually.In a confusion society , the luxury consumption of Chinese consumers become more irrationally than western consumer, which depended on the extenral need rather internal need (Zhang & Kim, 2013). For Chinese consumers, luxury brands are somethings must to have for them to reinforce their social status. however, the wealth bed cover between the rich and the poor in China is the largest all over the world, which offer the passion for consumption of luxury counterfeits. The young generation, aged 25 to 34 with limited budget for genuine luxury fashion goods, racked up nearly a quarter fo fake fanciers.2. 4 The Passion for Luxury intake of Chinese consumers China is the second largest luxury market all over the world and attracting the attention of consumption of Chinese consumers. Under the influence of unique stinting situation, cultural background and social factor, the behaviour of Chinese consumers in luxury fashion market have the distinctive characteristics. The bling factor influenced by economic situation, the salvage face affected by the Confucianism and group orientation as the social factor drive the luxury consumption in Chinese fashion market. 2.4. 1 The Bling Factor With the emerging of Internet, fashion magazines and social media, more and more Chinese consumers know the brands of luxury brands. However, the cultural concept and history of the luxury fashion brands are far away from numbers of Chinese luxury consumers. For many luxury fashion firms, there is not one typical luxury customer in China due to the different habits, different tastes and different income levels. The bling factor or following the whole market trend remains an important factor for the Chinese consumer in luxury fashion market.For example, harmonize to luxury consumer report of Chinese market, almost 60 percent of the respondents in Tier 1 cities including Shenzhen, Guangzhou, Beijing, Shanghai and other Tier 2 cities, stated that the key drivers for luxury consumption is the willingness to pay a product that just is popular or fashionable goods. Exclusivity or unique is an important understanding of luxury brand for Chinese consumption. There are about one fifth of customers consider that they will pay the luxury goods that are known and appreciated by the minority rather than the famous one.In terms of Chinas unique cultural background, the Chinese consumers consider luxury brand value influenced by Confucianism. In the concept of Confucian, the notion of mianzi is defined as a reputation achieved th rough getting on in through success and ostentation. (Hu, 1944 Dong & Lee, 2007) The traditional cultural understanding and effecting about the face saving becomes the strongest and most conspicuous passion for luxury consumption, which means concerning about the impress to other and the visual display than the level of income.The Chinese consumer in luxury world trend to pay a premium product on the luxury brand rather than essential goods in daily life, due to strong desire and pressure of maintaining face. Taking the finding of KPMG as the example, comparing with the apparel, the stronger growth of market for fashion accessories is considerable. Nearly 40% of luxury consumers enjoy the luxury experiences and the right of luxury in a physical store/shop over purchases of luxury items.Overall, the face saving (saving mianzi) relates to the individual image of worth and reputation within a collectivism society. As the result, Chinese consumers are often attentive not to lose face b y standing out from the crowed when consuming luxury goods. The universal strategy Although the market has its particular features, the development of luxury fashion strategy in Chinese luxury market is followed the general rules of luxury firms in global market. As the foundation strategy, the brand character reference and production diversification also provide the base of the development in Chinese luxury market.The apparel, handbag, jewellery, fashion accessories and luxury servicers are offered in mainland China, especially in Tier 1 cities like Beijing, Shanghai, and Guangzhou. Promoting the sale revenue of the core products in mainland China, as the product strategy, enhances the brand awareness in Chinese market. Expanding the influence, luxury fashion firms invest large amount of money to popularize the brand reputation as a simple of elegance and grandeur as well as the means of fashion and art. The marketing strategy raising brand awareness.Due to the lower brand awaren ess and lack of knowledge of brand value, the royalty of brand in Chinese market is lower than its in traditional European market. The special situation provides a strong externally powerful tool, which means not only expand the value of the luxury brand into a regular group of consumers, but also sway them making a purchase. In recent year, luxury fashion firm invest increasing the number of budget into Chinese market not only promote the brand awareness, but also help the consumers inform a notion about luxury goods and luxury lifestyle and why they should purchase luxury goods and luxury services.The brand building-up develop based not only the publicise on hard paper and television, also included the display on luxury goods order of battle and the customised publications. Nowadays, more and more luxury fashion goods exhibition held in Beijing, Shanghai and other cities, which offer a good opportunity for Chinese consumers to visit the luxury goods frequently displayed in store . Meanwhile, more and more consumers see the exhibition are not an onlooker. The localisation strategy.The luxury fashion brand with high brand awareness contain the European and American culture and value which is living standard of high level, the product and design of high smell. Those values accepted by and attract young generation who trend to, however, it is not accepted by all Chinese consumers who have their own value. Respecting to Chinese traditional culture and integrated it into the product value is the essential of luxury fashion business in China.For example, Louis Vuitton setting Du Juan, the one of top Chinese model all over the world, and advertising as the Chinese image step one right place on direction and help western luxury fashion companies overcome the cultural barriers. This kind of strategy could build up strong attachments among Chinese consumers and help them accepted the unique characteristic of luxury fashion brands. The pricing strategy Price is one o f the most significant signals in Chinese business world. For most Chinese consumers, price represented the value of luxury fashion goods.As a result, the luxury fashion products should not go on discount, no matter what the consumer is. The pricing strategy about goods, especially about core products, could bolster a brands prestige. For other items, companies could adjust the price according to the market condition and the inventory in order to long-term brand building. The retailing strategy A stupendous store belongs to the luxury fashion company located in the luxury area build up a sense of important and identified by the market.The luxury fashion positioning enhance if the boutiques are visible to a lot of consumer in major fashion cities. The landmark stores opened in Chinese Tier 1 cities, such as Beijing, Hangzhou and Guangzhou, are the best locations to building the brand image and attracting the target customer groups. The commercial centres and shopping malls in luxury area are welcomed by most of fashion lovers, luxury followers and luxury intellectuals.Meanwhile, the investment on the landmark store is the best and effective way to generate profits and build-up brand royalty. In an Internet era, shopping online has become the major shopping way, especially for the young people. Although most luxury fashion companies have shied away from online channels due to the fearing that e-commerce cleverness reduce the value of the luxury brand. However, for a long-term return and brand building, online platform provides not only a purchase channel, but also an data exchange channel between luxury fashion brand and Chinese consumers.With the developing of GDP and individual income of consumers, the global luxury fashion market and such the emerging market as China, have become the strategic focus of luxury market researcher and the consult company. This report attempts to identify development strategy of the luxury fashion brand, especially in mainland C hina market through the analysis of the change of global luxury fashion brand, overview of Chinese luxury market and the passion for luxury consumption.All those factors were identified depend on a comprehensive review of luxury fashion goods related researches and market consulting reports. The findings of this study provide a new insight of global and Chinese luxury fashion market for the consumers who interests the luxury fashion brand and a clear strategy claim for market managers of the luxury fashion firms, particular in the time of the company expand their business in mainland China. In addition, the study helps reduce the risks and costs of market research and helps the company overcome the huge gap in a multicultural business environment.First, the findings about the global luxury fashion market and the general development strategy in luxury fashion market all over the world indicated that the achieving the growth while remaining exclusive positioning, and attracting more consumers without losing seal of approval of brand value is the core strategy for every luxury corporates. The more loyal consumers may weaken due to the popular brands launched in the market because they have pay a premium goods that majority and identified by small group.Consequently, the balance between growth and unique, the price and quality may be tougher in China than in any other market. However, customization develops quickly as the new trend of luxury fashion industry. The customizing activities have launched in different business sectors, but which is yet adopted by the luxury industry on a board. At presents, the customization just limited on the area of fashion accessories, apparel, handbags, and jewellery, and emphasising on customizing standard products, point of delivery customization and service and producing bespoke goods.Secondly, the increasing the number of consumers, overseas traveller, new market segments and the counterfeits goods have become the main featu res in the Chinese luxury fashion market in recent years. The features are important of stress the benefits of investment in mainland China. Based on the research findings, International marketers should setting extension strategy that is coherent with branding, merchandising and global image by serving Chinas globetrotting shoppers, striking the balance between store numbers and quality and focusing anti-counterfeit goods.For Chinese globetrotting shoppers, the customer relationship management should emphasis global view rather than on mainland China. In the view of higher management board, the corporate organisational structure of the luxury fashion company should reflect the significant of Chinese market by sorting up the processes for generating direct communication between Chinese luxury consumers and the home headquarter. Based on the new market segmentation, the luxury company should upgrade current stores and outlets in order to keep consistent with the global image and emp hasis on the business in Tier 1 cities.As the market statistics indicated that the luxury counterfeit goods have become the barriers for development in China, including seizing sale revenue and weakening brand value. Luxury fashion companies should co-operate with customs officials to seize fake goods at ports. Working with international national organisation or international associations should be the third path for anti-counterfeit activities. The co-operation should ranges from such international associations as World Intellectual Property to regional groups like US-focused International Anti-Counterfeits Coalition.Thirdly, the research findings about the passions for Chinese luxury fashion consumption indicated that the bling customers who lack of knowledge about luxury fashion goods or just following the trend account of a part of Chinese luxury consumers. Besides that, Chinese luxury consumption deeply influenced by saving faces and group orientation, which are the part of tra ditional Confusion value. Targeting different drivers of luxury consumption, managers should have different strategies.For the bling customers, the global luxury firms should invest in improving the brand awareness and expanding the brand value, which could offer a global opportunity to attracting potential customers and building loyalty and repeat customer groups. For the consumers who care about saving face, International luxury fashion markers should draw the intimate of visual and outward appearance of rank and status when unfolding their marketing activities. Meanwhile, the companies should emphasise the brands country of origin, so the Chinese consumers have the assured to identified and distinguished with other mass products.In addition, the package of luxury goods also need to be recognisable in order to fit the halt and lifestyle associated with Chinese consumers. Furthermore, in light of the results about group orientation, the management board company should stress the profit of luxury fashion goods as a symbol of social marker and the sale assistants inspire consumer purchases because of the goods could generate a sense of group belonging and conformity of the elite. Due to the group belonging, a special attention should be disposed to the layout of the physical store and the luxury service of sale staff.No matter who is the consumer, friends will be involved during the decision making process and become potential consumers in the future. Proving high-quality services and creating luxury experience for non-buyers also benefit for making sure that the brand accepted by group and that the consumer does not stand out from others. Finally, about the current expansion strategy in mainland China market, most of luxury fashion companies emphasis the strategy on marking, localization, pricing and retailing coherent with the global business aims.Raising brand awareness and expressing the luxury lifestyle lay the foundation of marketing strategy. In orde r to respect to Chinese traditional culture, luxury brands should integrate Chinese culture and art into design, package, and store layout of products, which accepted easily by Chinese consumers in different social class. Meanwhile, the research findings indicated that the price is the most important factor which influenced Chinese luxury consumption. Luxury marketers should balance the price between Chinese market and overseas.As for the retailing strategy, the luxury brand stresses the developing of boutiques store and the setting up online distribution channels. However, there are several special attention should be given to price gap between China and overseas, and the online distribution channels. On one hand, comparing with that rarely go on discount in mainland China, the luxury fashion goods is often at a discount at overseas, especially for the non-core products and in the time of Christmas or Summer Sale.On the other hand, the high rate of tax income and fees raise up the price of luxury fashion goods in mainland China. According to the law and regulations in China, a luxury fashion goods, such as the nub cream of Estee Lauder native to the UK, is imported into Chinese market with 10% import tariff, 30% consumption tax, 5% sales tax and 17% value-add tax. Including the managing fees, advertising costs and other issues, the price of the eye cream is double in the UK.In the respect of the luxury company, the appreciate discount in Chinese market could promote the desire of consumption and boost the sale revenue in the respect of tax policy makers in mainland China, reducing the rate of import tariff and consumption tax of international luxury fashion goods could Finally, luxury fashion goods, as a subject of nature, play different or scenarios, different income level, culture background, and social economic factors, as well as exam the type of relationship that seek from luxury fashion brands.On the view of passions for luxury consumption, there ar e many other drivers, such as collection, appreciation, should take the consideration into further research.