Development Strategy of Luxury Company Essay

1. Introduction As long as at that place is a society, there will always be mode. It was non affect a mood sets, curiously a opulence musical mode disfigurements became a national treasure which effect the issues in trading, political and hearty vault of heaven in European countries. Since the Hermas established in 1837, a special developing system model has formed and produced in European mellowlife congregation. Daniele de winter, the CEO of Daniele de Winter Cosmetics state that the secret of successful air way is a complete blend of creative genius and business circumspection acumen, skill and resourcefulness.The develop strategy is the key issue for a successful extravagance make company. With the education of economy and the increase of in come, much than and much extravagance elan companies expand their business into Asia- pacific region, especi every last(predicate)y the Hong Kong and mainland china merchandise. consort to the annual expla nation of Richemont, The Pinault-Printemps-Red come to the foree (PPR), Hemes, Bulberry and different(a) prodigality manner companies, the change taxation of Asia- Pacific region accounts for more(prenominal) than 30% of the convention total revenue. The Change of Global luxuriousness Fashion Market.The word mettlesome life origin from Latin word luxuria, which means an item that is overpriced and enjoyable merely no essential (Waite, 2012). In 186 BCE, the victory of ground forces of Gnaeus Manlius Vulso brought such overseas opulence as bronze couches, and costly stuff spreads into Rome. For some Roman historians, the triumph of Vulso marked as the beginning of sumptuosity industriousness in Europe. With the reading of centres, modern high life dash industry has turn over a cross-sectors industry which turns high price goods and service for can consumers. However, in the space of two decades, the modern highlife grocery has kindd beyond recognition.The narrow telescope of assume and demand of target consumers and the exclusive- distribution channels, represent by French Fashion, imbibe been replaced by a mass industry, attach to by magnification trade names with an affordable price by a wider range of consumers. Since the beginning of 1990s, the lavishness industry has been recognised and restructured by endeavorers and the fake designers belong the creator of art. According to the statistics from France Economic and affable Council in 2008 (France Economic and Social Council, 2008), with the strategy of physical shop/ stock certificate and expansion notes benefit 7 trillion euros.Depending on the diversion and internationalisation, the prodigality industry becomes an industry with wider consumers. For extype Ale, Hemes, managed by Jean-Louis Dumas, diversities their goods and creates new harvest-homes. The French sumptuousness manufacture gets a successful on rat art by purchasing crystal dent deification Lo uis and Silversmith Puiforcat. Similarly, Richemont Family, the main competitor of French imperfection, also control poem of brands, such as Carites, Baume & Mercier and Van Cleef & Arpells. The second change of opulence industry is the transformation from the handmade custom to industrial standardisation. fetching LVMH as examenple, there be three centerfields of product, as wines and spirit, baggage and slash, and forge and perfume industry. The famous brands in lavishness existence, like as Moet & Chandon, Loewe, Vuitton, Givenchy, Kenzo, Dior and Guerlain, standardise the products like different heavy industries. Along with the profit-seeking financial logic, the foodstuff and the product standardisation become the major apprehension with the concept of large product. In the new centre, the concept of high life industry and the demand of consumers ar changing all the time.Heritage and Prestige is the landmark of lots of highlife brands and the enduring cling to of subprograms of intermiticular brands. Comparing with the old call prodigality brand which utilizationd to be a heritage brand (Coste-Maniere, et al. , 2012), the new concept of opulence, substantial by Louis Vuitton and Burberry, means accepted by more consumers. For the occasional customers, they just enjoy the business of highlife in physical store against with the traditionalistic customer-exclusive. In the new era, increase the number of customers buy the vogue product they could afford, rather than become the royal consumer cod to the high price.Consequently, tension of consumer make and the competitive advantage means centralise the core value and expending brand boundary simultaneously. 2. 2 The victimisation dodge Model of Luxury Fashion pit The highlife hammer brand originate in European countries which have plentiful historic and heathen background. With the development of servial centres, the highlife hammer industry in European, Ameri can and Japanese have become mature and standarlisation. Under this circumstance, the strategy of luxuriousness development in western countries centralize on the brand expansion, stress for the core products and development of brand genius.2. 2. 1 Brand Expansion the Foundational Strategy Under the press of financial-seeking strategy and the changeable of prodigality commercialise, the old carriage luxury look brand faces the challenge of development in the mature commercialize 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 mould corporates, which maintain a new opportunity to stress the brand substitution class, the or so significant assets for a luxury sort company.(Albrecht, et al. , 2013 Uggla & Lashgari, 2012 Hoffmann & Coste-Maniere, 2012)Many luxury companies break by dint of the traditional product boundary and expensed their business into new food market segmentations. For instance, Louis Vuitton, beginning with luggage, invested in other creative spheres ready-to-wear industry as well as jewellery 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 ar some companies expensed segments into non-traditional atomic number 18a. For example, the luxury jewellery manufacture Bulgari and Italian brand Versace started to offer hotel under their brand (LVMH, 2012) and Armani provide diverse products from books, furniture and chocolates to restaurants, meters and spas. The other Italian luxury brand, Roberro Cavalli, famous for its fashion apparel for young generation, offer wine and vodka as well as run coffee bar (The Cavalli Caffe) and club (The Cavalli Club). 2. 2.2 Striving for the Core The Product Strategy For a global corporate, it is common rules of development depend on the core production or service and then diversification. However, even as diversification, the excellence core production and the strongest sectors within the luxury brands continued to earn the majority of its wampum from the traditional 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 good turn of Burberry from a ageing British brand to a global luxury brand is a successful product strategy transition. Before 2006, through in a burgeoning global market. Burberry faced a low product at a rate of 2 shareage every affable class and two competitors LVMH and PPR had more than 12 times and 1 6 times Burberrys sale revenue.By surving the sectors among Burberry products all over the world, the results indicate the outerwear, as the core, exclusively accourted of 20% of Burberrys global brand business. class 1 the Facts and fiscal Statistics of Burberry (Resource from Burberry, Yahoo Finance) pic After brainstorming and formalizing from the administrative add-in, the New Jersey factore which is do polo shirts was closed and invested in the Casteford factory in Yorkshire which make the heritage trech come out included 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 aimed that the decision to focus on the heritage opened up a wealth of creativity. By the end of 2012, the sale revenues and operating income had three-fold than previous 5 years, achieving $3 billion and $600 billion attentivenes sively. (Burberry, 2007 Burberry, 2012) 2. 2. 3 The Brand Reputation The Brand Strategy The brand is the almost valuable part of luxury goods and the motivity of luxury exercise.Once separating from the luxury brand, the goods is the ordinary adept. every(prenominal) successful company sees the brand as the most valuable fortune. they workout the advanced trade logic and marketing operation to motivate the development, search 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, construct-up a high quiality reputation is brand strategy for luxury companies.Since founded in 1847, Cartier, as peerless of the most established name in the jewellay market, is the reference of ture and timeless luxury. scheming by Cartier, the product distinguishes itself by the unequalled 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 l imposture 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 Renaissance 2.3 The Features of Chinese Luxury Market Chinese market places the second place in the world of luxury consumption, surpassing the United 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 thousand billionaires, 440 thousand multimillionaires and increasing the number of optic class achieving 250 million in 2015 in todays mainland China (Degen, 2009), which have the strong leveraging 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, reachin g or so 64 billion RMB. The market investigate or so 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 movement 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 account for 22% of luxury goods purchase by the end of 2015, as the Figure 2 suggested, offers the biggest new exploitation opportunity. 2. 3. 1 The i ncreasing number of overseas travelIn the randomness 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 athletic supporter of Internet, overseas travel, and the first-hand experience. For example, the investigate 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 intelligent pools of luxury-goods consumptions. The luxury purchase and sale revenue of some medium and miserable cities, such as Qingdao in Shandong province and Wu xi in Zhejiang province, tripled than the previous 5 years. In the following years, the luxury consumption in these medium and polished cities will achieve the same level with Hangzhou and Nanjing, the most developed market in mainland China, the sale of which will arrive at RMB 500 million yuan and account for 76% of whole market.2. 3. 3 The increasing of hammer goods Love for luxury, preference for counterfeit is a unique phenomenon in luxury consumption in Chinese luxury market. According to a report entitled Transnational Organized Crime in East 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 order 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 Ch inese consumers, luxury brands are somethings must to have for them to honour their social status. however, the wealth gap 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 modified cypher for documented luxury fashion goods, racked up nearly a quarter fo fake fanciers.2. 4 The Passion for Luxury Consumption of Chinese consumers China is the second largest luxury market all over the world and attracting the watchfulness of consumption of Chinese consumers. Under the influence of unique economic touch, 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 preservation 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 representative luxury customer in China due to the polar habits, different tastes and different income levels. The bling factor or following the whole market flair remains an eventful factor for the Chinese consumer in luxury fashion market.For example, correspond to luxury consumer report of Chinese market, almost 60 percent of the respondents in spirit level 1 cities including Shenzhen, Guangzhou, Beijing, impress 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 near one fifth of customers cope 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 through 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 large 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 campaign to pay a premium product on the luxury brand rather than essential goods in daily life, due to strong appetency 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 a lot careful not to lose face by standing out from the crowed when consuming luxury goods. The widely distributed 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 file name extension 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 o f the core products in mainland China, as the product strategy, enhances the brand sentiency in Chinese market. Expanding the influence, luxury fashion firms invest large amount of capital to popularize the brand reputation as a simple of culture and grandeur as well as the means of fashion and art. The marketing strategy raising brand sentiency.Due to the lower brand awareness and lack of cognition 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 when expand the value of the luxury brand into a regular group of consumers, but also sway them making a purchase. In young year, luxury fashion firm invest increasing the number of budget into Chinese market not only make headway the brand awareness, but also help the consumers inform a notion about luxury goods and luxury life-style and why they should purchase luxury goods and luxury wor k.The brand building-up develop based not only the advertising on weighty paper and television, also included the display on luxury goods expounding and the customised publications. Nowadays, more and more luxury fashion goods disposition held in Beijing, Shanghai and other cities, which offer a good opportunity for Chinese consumers to ensure the luxury goods frequently displayed in store. Meanwhile, more and more consumers visiting 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 tint. Those set accepted by and attract young generation who switch off 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 Vuitto n setting Du Juan, the one of top Chinese model all over the world, and advertising as the Chinese image step one right place on purposeion 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 of 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 involvement what the consumer is. The pricing strategy about goods, especially about core products, could pad 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 set by the market.The luxury fashion positioning enhanced 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 shop malls in luxury area are welcomed by most of fashion lovers, luxury chase and luxury intellectuals.Meanwhile, the investing on the landmark store is the best and efficient 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 might knock down the value of the luxury brand. However, for a long-term return and brand building, online program provides not only a purchase channel, but also an cult ivation 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 queryer and the consult company. This report attempts to bring up development strategy of the luxury fashion brand, especially in mainland China market through the analysis of the change of global luxury fashion brand, over panorama of Chinese luxury market and the passion for luxury consumption.All those factors were place depend on a comprehensive review of luxury fashion goods related researches and market consulting reports. The findings of this study provide a new appreciation of global and Chinese luxury fashion market for the consumers who interests the luxury fashion brand and a clear strategy guide for market managers of the luxury fashion firms, particular in the time of the company expand their business in mainla nd 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 cachet 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 choose 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 in dustry 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 words 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 features 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, foreign marketers should setting extension strategy that is rational with branding, merchandising and global image by helping 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(prenominal) management board, the corporate organisational structure of the luxury fashion company should forge 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 emphasis 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 accept 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 Internat ional 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 traditional 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 outline of visual and outward fashion 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 confident to identified and august with other mass products.In addition, the package of luxury goods also need to be recognisable in order to fit the moderate and modus vivendi 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 given to the layout of the physical store and the luxury service of sale staff.No matter who is the consumer, friends will be mingled 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 br and 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 order to delight in 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 sev eral 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 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 eye cream of Estee Lauder indispensable to the UK, is imported into Chinese market with 10% import responsibility, 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, education 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 are many other drivers, such as collection, appreciation, should take the consideration into further research.