The Management of International Luxury Brands - Dissertation Example

?The Management of International Luxury Brands Introduction The concept and management of brands pertaining to luxury commodities are by itself highly distinguishable from the creation and management of brands of other goods. The concept of luxury brands has gained due impetus with regards to the brand practices of developed countries like United Kingdom, United States and other such European countries like Germany, France and Italy. In spite of the brand creation activities practiced in the international sphere the concept of luxury brands welcomes much confusion owing to the changing perceptions of the modern societies. The commodities which once used to be treated as luxury items are often perceived as ordinary products. Similarly the change in tastes of different people also brings about needed confusion. Luxury commodities around the world are taken to be those products which are priced highly above the average limits and reflect a very high standard of quality and designs embedded into it. The position of the luxury brands thus created should be made secured from the entries of average purchasers through the setting of high prices. Furthermore a sustainable approach to luxury brand management as with any brand is spontaneous innovation of its product and service quality to make the brand become the test of times (Principles of Luxury Brand Management, n.d.). Aims and Objectives Aims The main aim of the research paper centers on understanding the management pattern of the global luxury brands. It also aims at understanding the shift in the management styles of these companies with changing market and economic situations. Objectives To understand the management styles of luxury brand companies. To reflect on the changes in management styles of such companies. To interpret the reasons for such changes. Endeavoring to present a practical study of such change in management styles through the use of case study. Literature Review Management of Luxury Brands The concept of luxury brands as understood from the above discussion centers on two specific qualities viz. highly priced and rendering distinctive product and service qualities. The second instance depicting the image of luxury brands is enhanced further to encompass various other products produced by the company. To this end, Quelch (2007) observes that the company should look forward to render a holistic approach of quality enhancement in the different product categories. In terms of design the brand must eke out a distinguishable factor which would work as the brand identification strategy amidst its various competitors. Quelch (2007) further states that the management of luxury brands around the world also focuses on restricted production activities to excite high consumer demand. The art of marketing the luxury brands signify the incorporation of the emotional element with the products of the brand to create a customer appeal for it. Personification of the brand is highly essential to reflect its uniqueness amidst other brand players competing in the same market. The marketing strategy must also highlight the region to which the brand belongs to. In total the management function of international luxury brands is carried out depending mainly on four different aspects viz. management of the product assortments of the luxury companies, managing the uniqueness in its design and communication patterns, managing the interaction of the company with its several customers and finally the management of the company’s distribution channels. Elucidating the above points, Quelch (2007) states that the management of the product lines of luxury companies earns considerable importance for setting high quality designs at reduced quantities. This is because the style and patterns of luxury commodities go on changing with changes in consumer perception of such items. Hence a focus must be rendered in sustaining its profitability in the light of increase in the production costs. Thus increase in the quantity of brand assortments and also in the sizes of individual products helps in making the consumer make a needed purchase. Like ways the management of an international luxury brand is closely interlinked with its brand uniqueness reflected by the innovative designs. Quelch (2007) in the course of elucidation further observes that the luxury brands in order to create a larger market share of its innovative designs must make an endeavor of properly communicating with the external world through marketing and promotion activities like event holding and conducting press meets. Effective luxury brand management also incorporates rendering of proper after sales service to the customers. This helps to enhance the relationship parameters with the customer network of the company which in turn enhances the goodwill of the concern. Finally the management of the international luxury brands like Louis Vuitton, Prada, Gucci and many others hint at rendering efficiency in the distribution parameters. The luxury brand companies must draw a feasible distribution strategy which would help them to cover large market bases in foreign territories. They can go for selling through exclusive stores or conducting sales through multi brand outlets like departmental stores. A study of customer tastes and profiles of a certain region must be efficiently carried out before setting the distribution channel (Quelch, 2007, pp.100-112). Shift in Management Styles of International Luxury Brands The management styles of luxury fashion brands in the global context are countering a shift owing to the rapid changes in the firm’s external environment. The major players in the global fashion industry like Louis Vuitton, Hermes, and Gucci among others though in a position of high profitability and large market share have failed to counter significant changes in terms of their strategic position. Okonkwo (2007) observes that the main reason attributed to this end is the conducting of production, distribution and marketing operations based on conservative business processes. Complex developments in the firm’s external environment necessitated the shift from traditional to more sophisticated and scientific management styles. Newer dimensions of management like management of the brand equity and maintaining valuation of brand assets are gradually emerging. Similarly the consolidations and mergers of different brands are being carried out to intensify the market positions the global brands. Okonkwo (2007) further states that the need for a shift in the management styles of the luxury brands is further enhanced with the development of the economic conditions of emerging economies like Russia, China and India. Development of the emerging economies led to the expansion of the market for the luxury products thereby intensifying competition. Further the development of internet communication systems has changed the face of the luxury commodity market. People around the world can conduct purchase and sales activities through the use of internet sites like eBay. Thus the manufacturers of luxury retail products on a global scale are rendering more focus on product and design innovations to strategize their sales and product mixes. Thus to cultivate brands as the identity parameters for products and companies special emphasis is required to effectively enhance its image in the public eyes through modern management techniques and upcoming business concepts (Okonkwo, 2007, pp.3-5). In the light of the above discussion a case study of the takeover of the Hermes Group by Louis Vuitton is dealt with to generate a better understanding. Luxury goods market In the global luxury market firms like Louis Vuitton and Hermes occupy a considerably important position. In fact, Louis Vuitton has a far greater share in the luxury goods market by possessing a range of product categories. To this end, Bruce, Moore & Birtwistle (2004) state that Moet Hennessey Louis Vuitton as a part of its brand strategy to acquire a range of different products carries on large scale mergers and acquisitions. This helps the company to diversify its product and brand portfolio to cater to the rising demands of the global market. Bruce, Moore & Birtwistle (2004) observe that other than specializing on production and sales of leather commodities, Louis Vuitton also has large product assortments in segments like toiletries and in the drinks segment (Bruce, Moore & Birtwistle, 2004, pp.161-162; Roberts, 2010). The Hermes is also considered to be one of the most admirable brands in the luxury group segment. Roberts (2010) observes that Hermes mainly specializes in the production and sales of luxury bags. The company sets high prices for its products and thus generates a huge profit margin. (Roberts, 2010) The luxury commodities market in the global sphere is countering a whole gamut of changes owing to changes in the demand for the luxury goods around the world. Even the people in the emerging economies like Russia, China and India are looking forward to own such lucrative designs and technologies. Thus big brands like Louis Vuitton, Gucci, Prada and Hermes apart from working on product diversification strategies are largely putting focus on introduction of newer management models and concepts in place of traditional ones. Activities like acquisitions and mergers are on the rise to intensify the potency of product offerings to the customers in order to gain a larger market. Methodology The research on the management of international luxury brands requires a considerable study of different literatures showing the traditional management pattern and changes in such. Thus the research methodology used in the paper is secondary or library form of research. Secondary form of research is prioritized in this case for firstly it helps in gaining access to larger amount of data sources in a much faster manner than in other research methods. Secondly the use of secondary research helps in reduction of the cost of research activity. Thirdly, the views and data obtained are quite authentic in nature being rendered by experts. Fourthly, use of secondary research becomes an integral part of conducting any research study (Jugenheimer, Bradley, Kelley & Hudson, 2010, p.30). The research paper in question makes use of a case study of Louis Vuitton’s taking over of Hermes International. The use of case studies while formulating the research helps in focusing on a specific point rather than making a general study. Further through the use of case studies the researcher can draw practical examples of real life situations in relation to the research topic. It also helps the researcher to present a holistic view of the event in relation to practical circumstances (Cohen, Manion, Morrison and Morrison, 256). Louis Vuitton case introduction During 2010, the European luxury goods brand, Louis Vuitton declared that the company had earned around a 14 percent share in the luxury brand Hermes. The management body of Louis Vuitton also declared that they were aiming to raise the stake holding percentage from 14 to 17 percent and is ready to expend around 1.45 billion Euros for the same (Blessig, 2010). The buying of Hermes’ share by Louis Vuitton reflected a positive turn for both the fashion retailers in the competitive luxury commodity market. The positive effect rendered on both sides made the share prices for both the companies increase. Market experts expected that such a move would help Louis Vuitton to enhance its designer product portfolio to capture world markets (Silverstein, 2010; Harris & Jarvis, 2010). However the purchase of Hermes’ shares by Louis Vuitton was criticized by many owing to the rising number of units which reached around 20 percent during the close of 2010. References 1. “Principles of Luxury Brand Management”,(n.d.)management-hub.com, available at: http://www.management-hub.com/brand-luxury.html (accessed on February 8, 2011) 2. Quelch, J. (2007), Readings in Modern Marketing, Chinese University Press. 3. Okonkwo, U. (2007), Luxury fashion branding: trends, tactics, techniques, Palgrave Macmillan. 4. Bruce, M., Moore, C. & G. Birtwistle (2004), International retail marketing: a case study approach, Butterworth-Heinemann. 5. Roberts, A. (2010), “Louis Vuitton Tops Hermes, Gucci as Most Valuable Luxury Brand”, available at: http://www.businessweek.com/news/2010-04-30/louis-vuitton-tops-hermes-gucci-as-most-valuable-luxury-brand.html (accessed on February 8, 2011) 6. Roberts, A. (2010), “LVMH `Playing a Waiting Game' for Hermes Takeover, Analysts Say”, available at: http://www.bloomberg.com/news/2010-10-24/lvmh-playing-a-waiting-game-for-hermes-after-buying-stake-analysts-say.html (accessed on February 8, 2011) 7. Jugenheimer, D., Bradley, S., Kelley, L. & J. Hudson. (2010) Advertising and Public Relations Research, New York: M.E. Sharpe 8. Cohen, L., Manion, L., Morrison, K., and K. Morrison,(2007), Research methods in education, New York: Routledge. 9. Blessig, M. (2010), “LMVH takes 14.2% in Hermes, no takeover planned”, available at: http://ultimate-luxury-community.com/lvmh-takes-14-2-in-hermes-no-takeover-planned (accessed on February 8, 2011) 10. Silverstein, B. (2010), “LMVH Takes Stake in Hermes, Fueling Takeover Talk”, available at: http://www.brandchannel.com/home/post/2010/10/25/LVMH-Takes-Stake-in-Hermes-Fueling-Takeover-Talk.aspx (accessed on February 8, 2011) 11. Harris, H. & P. Jarvis, (2010), “Hermes Shares Jump in Paris After LVMH Increases Holding to More Than 20%”, available at: http://www.bloomberg.com/news/2010-12-21/lvmh-raises-hermes-stake-to-20-percent-defying-family-s-takeover-defense.html (accessed on February 8, 2011) 12. “LMVH grabs more Hermes Shares: Louis Vuitton Company increases stake in French Fashion House”, (2010), bagbunch.com, available at: http://bagbunch.com/lvmh-grabs-more-hermes-shares-louis-vuitton-company-increases-stake-in-french-fashion-house/ (accessed on February 8, 2011) 13. “LMVH Hermes Takeover Blocked: AMF Rules against Buying Minority Shares”, (2010), bagbunch.com, available at: http://bagbunch.com/lvmhs-hermes-takeover-blocked-amf-rules-against-buying-minority-shares/ (accessed on February 8, 2011) 14. “French Regulator says M&A Rules Slack: Probes LMVH’s Hermes Buy”,(2010) advfn.com, available at: http://in.advfn.com/news_French-Regulator-Says-M-A-Rules-Slack-Probes-LVMHs-Hermes-Buy_45095628.html (accessed on February 8, 2011) 15. Dobson, C. (2010), “Hermes Guards Against LVMH Takeover”, available at: http://www.theepochtimes.com/n2/content/view/47105/ (accessed on February 8, 2011) 16. “Hermes Deflects possible takeover plan by LMVH” (2011), ibtimes.com available at: http://in.ibtimes.com/articles/98883/20110108/hermes-deflects-possible-takeover-plan-by-lvmh.htm (accessed on February 8, 2011) Read More