Marketing and Management Critical Assessment - Research Paper Example

Marketing and Management Critical Assessment Executive Summary The luxury fashion industry has shown a steady growth rate in the past years and is expected to grow in the near future as well. With the rise in the disposable income and growth in the financial of the HNWI, the luxury market has been experiencing a growth rate of 4%. This project report deals with one of the most famous luxury fashion brands which has marked its presence in the luxury fashion world since 1946 and till date has been able to remain at the top of the list. The brand is Christian Dior which is also known as Dior. The paper has taken into consideration the history of the company along with its past situation and present situation. In analyzing the present situation, PESTEL, porters five force, its target market, positing, and branding strategies have been analyzed and it has reached into the conclusion that the brand has been performing well but still faces certain challenges such as global financial crises, environmental issues which need to be catered in order to sustain its sustainability and global pressure. Introduction In the recent years, the luxury industry has been facing increased pressure due to the rise in Euro currency against dollar which has resulted in the reduction of the global consumer expenditure (Riley, Lomax & Blunden, 2004, p. 40). Luxury can be defined as indulgence on goods or services that are not essential for daily existence and is directly proportional to economic affluence. The marketers are trying to invent new terms in order to quantify the concept of luxury which in return has created confusion with regards to the term luxury. Luxury is not only trade or restricted to indulgence on cars or fashionable accessories but a very different way of understanding the needs of the customer and manages the business in an effective manner. The term luxury is often dealt with confusion as everyone tends to understand it but there are hardly people who can agree on the meaning of luxury. The concept of luxury is a relative group and not an absolute category. It can be said that with time span the concept and meaning of luxury keeps on changing, a luxury today can become an essential item in future. A luxury what is it today will have an absolutely different meaning and value in the future (Kapferer & Bastien, 2009, p.39). The luxury industry is one of the global multibillion sectors which comprises of brands which are of high relevance and are also among the most influential brands globally. Despite the fact that the luxury industry is among the largest sectors but the SBU of the luxury industry has been experiencing a slow growth rate. The reason behind this was that the brands were managed mainly through the traditional methods of business where decisions were taken through intuition and also on trial basis. Thus in the environment of global business, the luxury sector has been undergoing certain changes in the process of management. Changes such as valuation of brand assets, brand equity along with the need of e-business has been taken place in the luxury sector. Other factors which have also emerged over the years include the expansion of luxury sector for the consumer market so to target a broader market; increasing competition from other brands; reinterpretation of the concept of luxury by the consumers and with the emerging new markets in the luxury sector such as India, China and Russia have opened up new outlook and opportunities for the fashion luxury sector. Most importantly, with rise in the economy and disposable income, consumers attitude have changed and it can be depicted through the spending pattern of the consumers (Okonkwo, 2007, p.3). The brand to be dealt in is Dior, a well known French company which deals in fashionable apparels and accessories. History Dior was established in the year 1946 and is the retailer and producer of Christian Dior and also holds about 42% of LVMH Moet Hennessy and also Louis Vuitton which are considered as the largest luxury goods in the world. Dior holds a leading position inthe fashion world even after 50 years of its operation in the fashion world. Dior has been organized into two main areas, the “LVMH and Christian Dior Couture”. Christian Dior the founder of the fashion brand started to design from mid 1930s as a freelancer. Dior got his first big break when Marcel Boussac, the fabric maven offered Dior to launch his own range of fashionable clothes. Dior started with only about 85 employees, with a capital of 6 million and with unlimited credit. In 1947, the designer introduced one of his famous and first lines “New Look”. The line of apparel introduced was a huge success and managed to gather clientele from the royal families of Europe to Hollywood stars and was able to generate sales of about 12.7 million by the end of the year 1949. During the post war period, Dior’s splendid collections made his brand famous and he expanded his business into perfumes, furs and into accessories. Dior has revolutionized the fashion world with the introduction of “ready to wear” which has bought fashion at large (Top Fashion designer, 2011). Dior opened an outlet in New York and the company made half of its profit from its operation based on the US. However, the company opened stores in Canada, Italy, Mexico and Cuba. In the year 1948 Dior launched its range of perfumes and by the mid of 1950s, the empire of Dior included 8 companies under its name and 16 affiliates and had employed about 1700 people on five different continents. Dior’s fashions had constituted by 1949 about 75% of Paris exports and 5% of exports from France revenues. Dior had launched many successful brands such as “A”, “Y”, “Magnet” and “Arrow” but none did have the impact that the “New Look” had with its introduction of fashionable apparels. After the death of Christian Dior, Arnault took charge of the fashion brand and Dior thus became the cornerstone of one of the largest and important fashionable company in the world. In the year 1996, Arnault tried to work on French feathers by way of appointing a British designer named John Galliano in order to succeed the Gianfranco as the head of Dior. The company started opening new stores which have helped it to boost its retail boutiques to about 130 by the year end of 2002. Christian Dior had managed to build a brand for women fashion but in the year 2001 the brand became equally famous for men apparel. 2001 has also marked the beginning of new concept of retail of luxury jewelry which has helped the company to climb and achieve revenue of about 300 EUR million in 2000 and about 350 EUR million by 2001 year end (Funding Universe, 2003). Present Analysis Target market Dior has targeted the premium section of the society as the products of the brand falls under the category of luxury fashion apparels and accessories. Besides targeting the female segment, Dior has introduced a full range of men wear targeting the male segment of the society. Dior Homme launched for men wear has been designed in order to cater to the growing interest of the male consumers and thus shower the male segment with the experience of Dior Homme. Differentiation & Positioning Dior has positioned itself as French designer (Michman & Mazze, 2006, p.133) dealing in premium products ranging from apparels both for women and men to accessories such as perfumes, jeweler and watches, targeting the premium sections of the society. The brand has been positioned as a luxury brand which is affordable only for the premium segment of the society. Figure 1: Positioning Map of Dior High Quality Low Price High Price Low Quality Assuming Chanel to be the closest competitor to Dior, the above map describes that Dior is superior both in terms of quality as well as price with respect to its competitors. The differentiation strategy adopted by Dior is of focus strategy as it has targeted the niche segment of the society. In the focus strategy, companies concentrate mainly into a specific region. In order to gain the market share, companies goes for either the low cost strategy or the differentiation strategy (DuBrin, 2011, p.136). Dior adopted the focus strategy by adopting the differentiation strategy. Dior’s premium segment comprises of women brand, men brand including accessories and other items. The products are priced highly and follow the differentiation strategy by differentiating the products in style, design and quality. The products are specialized and are not catered to the general mass of customers; they are only available to the higher segment of the society, the niche segment. Therefore Dior has positioned it as a French brand dealing with luxury fashion goods and catering to a niche segment of the society and thus adopted the focus strategy and focuses on the premium segment such as the royals of Europe and the Hollywood stars. Micro Environment The micro environment deals with the internal factors concerning the organization. Thus in order to deal with internal factors SWOT analysis is performed to know about the internal factors of Dior fashion luxury brand. SWOT Analysis Strength: Dior is one of the leading luxury fashion brands which deals in clothing and accessories. Its major strength lies in the fact that it is the leading manufacturers of goods, distributor and also retailer of luxury fashionable goods along with accessories, cosmetics and fragrance. Dior product line has also proved to be strength for the company. The product line of Dior is huge and consists of fashion, fragrance, accessories, beauty products, apparels both for women and men, footwear, skin care, jeweler watcher and others (Thompson, 2011). It is rare to see a luxury brand having such a huge product portfolio and each brand performing equally well. Weakness: Till 2001 the brand did not emphasis on the men wear, it was mainly concentrating on the women wear, in the recent year also it has not been able to earned a brand recognition for its men apparel as it has for women apparel. Dior being a luxury brand the goods is not available for purchase for the normal people or the consumers. Thus it can be termed as weakness for the brand as the product is relatively expensive. The sale of Dior product hugely depends on the high growth markets. Opportunity: The brand has a huge opportunity in the market as the luxury retail market is growing at a steady rate. The year 2010 has bought good news for the luxury market which was estimated to grow by 4%. The brand has an opportunity to expand in US and Japan as it has seen a growth in the luxury market. It has an opportunity to grow in the luxury watch market especially in countries like China and the emerging countries which continues to be the biggest drivers for the Dior. Also a huge opportunity lies in the male segment as this segment was not concentrated at an earlier stage and also because the male segment has been opting for premium brands and accessories, Dior has a huge opportunity to capture the market share of male segment. Threat: Dior faces tough competition from competitors such as Chanel, Gianni Versace and PPR SA (Hoovers, 2012) to name a few competitors. Apart from its competitors, Dior faces a threat of vertical integration. Consumers who cannot afford the product of Dior often tend to go for vertical integration hampering the brand name of the company and affecting the profitability ratio. The current global economy can also be regarded as one of the threats to Dior. Macro Environment PESTEL Analysis Political factors: The political factors play a huge role especially when it comes to retail business in the luxury sector. Due to the expansion of the companies the political factors should be in favor of the organization so that it can operate successfully. Economic factors: The recovery in the luxury segment began in the year 2010 when most of the countries showed positive growth rate. The luxury market depends on the HNWIs thus the financial prospect of the HNWI and their willingness to spend the disposable income on the luxury goods is one of the major key for the growth of the luxury industry (Euro monitor International, 2011). Social Factors: The luxury sector depends on the HWNIs population but the economic downturn affected the HWNIs globally. The rich population contracted globally both in the developed and emerging countries. In countries such as Canada, USA, Spain, Italy including Brazil the percentage of the NWNIs population declined by 20% further in countries like Russia, India and UK it declined by 30% (Euro Monitor, 2011). Technological factors: The premium market seems to be technologically sound as most of the premium brands have adopted a sound supply chain to survive in the competitive world. The luxury fashion industry tends to give its customers the best shopping experience. The luxury stores tend to have a customer employee ration of 2:1 which encourages the interaction between the customers and the employees. Applying the appropriate technology along with innovations has helped in the growth of the luxury fashion segment. With in store technology, the store focuses mainly on simplicity and thereby reducing the focal point in the process of transactions (Aquino & Suleski, 2008). Environmental Factors: In light of going green and green lifestyle which has swept the world the luxury industry is also becoming aware of the socio economic condition (Howard, 2008). Thus the luxury industry is making all the necessary changes in order to contribute to the concept of going green. The luxury fashion industry needs to adopt the concept of going green in order to achieve sustainability and to save the environment. Legal Factors: The legal factors concerning the luxury sector is the use of leather and fur made out of animal skin. Most of the countries prohibit of using animal skin and companies dealing in leather and fur can face legal actions. Overall corporate/business/marketing strategy Porter’s five forces Porter’s five forces will help to reveal the business strategies of Dior as it takes into consideration the bargaining power f both the suppliers and the buyers, the rate of threat of new entrant, substituted products and the rivalry among the industry. Bargaining power of suppliers in the luxury industry is high. The supplier supplies raw materials to the company and therefore can charge away a huge price from the retail outlets. But in case of Dior, it manufactures its own product and thus it can be said that the bargaining power of suppliers is low. The bargaining power of customers is high because customers in the luxury fashion market are usually few in number as compared to the general market and hence more demanding and are willing to pay a higher price for its product. Threat of new entrant is primarily low because the goods are way too costly and a huge capital is required for setting up an industry in the luxury market. Also building up the brand name and capturing the market share will not be an easy task for any new entrant. Moreover to gain the trust of the customers would also be difficult due to the presence of big brands like Dior, Chanel and others. Threat of substitute is high and this is because the percentage of unbranded stores are relatively high and most of the people usually buy stuffs from the unbranded market which provides look alike products at a much cheaper rate. However the rivalry among the industry is high as with the rise in the disposable income the consumers are opting for the best brand and best product thus making the competition high for each brand and in order to achieve the competitive advantage luxury brands are trying to apply different marketing techniques. The 4P’s Product: Dior product ranges from apparels to accessories, to cosmetics to footwear, perfumes and other products. Dior’s extensive product lines are equally successful and famous. However this project report would deal only with the apparel sectors. Dior has launched its apparel both for women and men and also for babies. Price: Dior is a luxury fashion brand and therefore the price charged for its products are premium; relatively higher process than the normal brands and also higher than its competitors and this is because Dior is the world leading fashion luxury brand. Place: Dior manufactures, distributes the good and also has its own retail outlet. It has expanded its business globally and has its outlet based in Europe, UK, US, Asia Oceania. Dior distributed its product through licensed agreement in order to provide effective distribution channel so that Christian Dior's goods were made displayed and available in a manner by keeping up with the aura of luxury (Curtis & Tilbury, 2010). Promotion: Dior makes extensive use of the advertising campaign and through online advertisements. Dior also set up websites for its advertising campaign. The reopening of Stoleshnikov boutique was accompanied by exhibition in the museum of Pushkin which had publicized its unique heritage of wide range of apparels. In Paris, the fashion brand took part in the event of LVMHs thus providing a glimpse of its savoir-faire of its designers. Further advertisement campaigns featured Marion Cotillard drive the lines of Miss Dior and Lady Dior into the spotlight (Christian Dior, 2011, p.6). Life Cycle The product life cycle tends to provide inputs into the decision making process of the product and thereby formulating the strategies. PLC is concern with the life of the product and follows the sequence of stages which includes the introduction stage, growth stage, maturity and finally the declining stage (Hollensen, 2009, p.435). The luxury industry has entered the growth stage in the recent years and mainly after the post recession period thus it can be said that the luxury fashion industry represents the growth stage in the PLC curve. Dior, a well known fashion luxury brand can be categorized into the growth stage as it has marked its entry into the fashion industry with the existence of the luxury fashion industry. Thus it can be assumed that both the luxury fashion industry and the Dior fall together into the growth stage of the product life cycle curve. The apparels section of Dior has established itself in the market and faces a tough competition from its rivals. With respect to the promotional campaign, Dior being in the growth stage mainly focuses on how to distinguish its product from that of its competitors and less emphasis is put on generating brand awareness. New distribution channels are added such as the internet in order to increase the volume of sales and enlarging the offline stores. Pricing decisions are made taking into consideration ways to increase revenue. Therefore it can be said that Dior falls under the growth stage. Figure 2: PLC of Dior Y Axis X Axis Brand strategies Dior has been able to make its presence in the luxury fashion industry since it has enter the field of luxury goods. Dior has been able to create a brand name for its product and has been able to create variety of brand portfolio under its brand name. Dior product caters to the female, male and for the children and in a way it has been able to generate brand awareness about the product. It has been successful in sending the message to its target customers that it is a premium brand and has targeted the high class section of the society. The brand image for Dior has helped its customers to repeat purchase of its product and Dior promotes its product through advertising, events, publicity and others. Dior has generated awareness about its fashionable clothing range by participating in fashion shows and displaying its design. It has helped Dior to create a brand image that the products are mainly for the higher section of the society such as the royals, the Hollywood stars and other well known people. Dior hires the top most model for its show. In one such show Dior featured its model dressed in paper bags and newspaper. This resulted in controversy which in turn induced the sale of its clothing range and also of accessories and perfumes. Dior also takes care of its franchisee and retail stores which has enhanced its branding strategies and has lift up its brand image. Online presence Dior has also marked its presence in the online market and has created its own website through which customers can glace at its product and shop online. A well defined offline branding strategy can be successfully implemented into online strategy. This in return helps to boost the customer’s response towards a new channel of sales which is likely to be high than the offline stores. Dior.com has been able to successfully develop a website and has captured the essence of its brand, Dior. The cool, trendy at the same time luxurious elements of its brand are very apparent in its homepage and on the corresponding pages. The atmosphere created into its websites tends to exude the emotions that are being experienced in the Dior store. Therefore it can be said that the branding effect has been achieved through effective use of online branding strategy such as the features involved in the atmosphere of the website, animations, visuals, sounds, pictures layout and finally review on customer care. The main element in the online branding strategy is the homepage which should lead to the contact between the brand and the shoppers. Dior definitely has a high and strong homepage which has helped it to generate its presence in the online market and generate awareness among the luxury shoppers (Okonkwo, 2007, p.213). Relevance of Corporate and Social Responsibility The luxury brands are growing at a steady rate despite the global economic slowdown. As per the reports the spending on luxury goods has increased drastically in 2011 where it rose to 8%. But the luxury brands are often criticized for being over priced, extravagant, and also wasteful when half of the population is financially weak. Thus it has become a necessity for the luxury industry and companies to increase their extent to CSR a sustainability issues and simultaneously apply them in their business. In case of Dior, it has been a part of the charitable shows as part of its CSR activates. One of the biggest charitable benefactors is the LGFB charity, “Look Good, Fell good” charity. LGFG charity helps the female patients who are suffering from cancer by conducting beauty workshop in hospitals in UK. These workshop aims to show the female section of the society how to define their beauty with products which are being donated by companies such as Dior, L’Oreal, Revlon and other beauty brands. Dior tends to support the LGFG charity and is one of the core participants for the charity. Dior with other brands supplies products which are packed properly in goody bags which provide its volunteers to support the makeup and skincare that the charities run every week. Apart from the goody bags, the brands also tend to provide financial support in funding and running of the charity (Cosmetics Business, 2009). Future of the brand The luxury sector has been facing tough challenges due to the ongoing global crises and also with relation to global warming and sustainability issues. Most of the companies are often faced with regulations that they do not perform sustainability or CSR activities with respect to the environment. The Go Green factor has impacted the luxury fashion industry to a great extend. Apart from the go green challenge, the luxury industry also faces legal issues from the animal rights as most of the furs and leathers are made out of animal skins. These three factors have posed high challenge for the luxury industry. Similar is the case with Dior, though the global financial crises have show a positive growth rate in past years and is expected to grow at a steady rate but with a recession hitting the market again, would definitely hamper the business of Dior as the products are highly priced and no customers would opt to buy clothes from a big and costly brands. Dior has been practicing CSR activities in association with LGFG charitable trust but at the same time it should work on Go green factor. As the issue has been rising, Dior in order to achieve sustainability should opt for green products. It can introduce eco friendly range of clothing which would help it to sustain in the global competitive world and at the same time protect the environment. Most importantly Dior should discourage the use of animal skin in the process of making leather and fur which would keep it free from issues arising from animal rights. Customers are slowly boycotting the use of leather and fur as a symbol of affection towards the animal. Therefore it would be recommended to Dior to manufacture eco friendly products and for sustainability in the industry to concentrate on the concept of go green. However it can be said that Dior has been performing well and its brand portfolio has also recorded profits and has been regarded as the number one luxury fashion brand in the world. Along with its offline stores, Dior also caters to a wide range of customers through its online stores and has achieved success both ways. Executive Summary 1 History 3 Present Analysis 4 Target market 4 Differentiation & Positioning 5 Micro Environment 6 SWOT Analysis 6 Macro Environment 8 PESTEL Analysis 8 Overall corporate/business/marketing strategy 9 The 4P’s 11 Life Cycle 12 Y Axis 13 X Axis 13 Brand strategies 13 Online presence 14 Relevance of Corporate and Social Responsibility 14 Future of the brand 15 Reference 18 Reference Aquino, D. & Suleski, J., 2008. Luxury Goods Retail: A Value Chain worth Knocking Off. [Online]. Available at: < http://www.supplychainbrain.com/content/general-scm/hr-labor-management/single-article-page/article/luxury-goods-retail-a-value-chain-worth-knocking-offnbspnbspnbsp/> [Accessed 1 May 2012]. Christian Dior, 2011. Management report of the Board of Directors. [Pdf]. Available at: < http://www.dior-finance.com/en/pdf/Management_report.pdf> [Accessed 1 May 2012]. Cosmetics Business, 2009. CSR - You reap what you sow. [Online]. 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