International Marketing Teaching - Case Study Example

International Marketing Teaching Case Study (Theme 2) In January John Williams was hired by theLouis Vuitton as a marketing consultant. John Williams is known for having helped a number of companies, penetrate some of the peculiar markets other people perceived impossible. His wide experience was regarded as an asset to the performance of Louis Vuitton. The terms of reference for the consultant were to assess the potential entry of the brand to Singapore. Louis Vuitton intention was to expand their operations to Singapore given its homogeneity in its market compared to the China market. The main responsibility of William was to analyze the viability of the market, the assets that are required to fund the liability, some of the best strategies to be used, the likelihood of the Singapore market embracing the brand, some of the benefits that will be accrued in the venture and finally the main issues to be faced during this process. The consultant was expected to carry out an extensive analysis’s of the Singapore market besides understanding the Louis Vuitton internal operatiobns and the products offered. The company The Louis Vuitton is a luxurious fashion brand that originated from France in Paris in 1954. The Louis Vuitton Moët Hennessy Group was started by a French, Louis Vuitton Malletier and it was aimed at producing high quality fashion products that are linked to the art of travel. The company is synonymous with the creativity, prestige and elegance since it has continued to be one of the leading international fashion houses dealing with luxurious bags and luggage. The company operates in over 130 locations across the globe and sells its products mainly through e-commerce section of its website, lease departments in high-end department stores and standalone boutiques. Since most of the products are customized for customer satisfaction, the company strives to use advertisements and store locations to make an impression on their customers in different ways. The company does not operate physically in all the 130 locations since it is an online company. As such, its e-commerce section works effectively to ensure that all the customers can get the products they want regardless of the distance from the stores. In order to ensure customer satisfaction, there is a constant small change on the products lines to suit their target market. It is imperative to note that the company is doing well in the International market since it has been named the most valuable Luxury brand for the last 6 years and its worth over $25 billion USD. Furthermore, the company net profit has been able to quadruple to €3.4 billion in 2013 since 2000. The Louis Vuitton brand has become the most powerful brand not only in china but also in other international markets, employing over 19,000 employees worldwide. There are 17 production workshops with 466 retail stores across the globe in over 66 countries. Fashion is a habitual and distinctive trend in which an individual dress. It is the newest creations and the prevailing styles in behavior of various textile designers. The fashion industry has been on the upsurge with the growing population across the globe. The companies in the industry design and sell footwear, clothing’s and accessories with the products categories including luxury items, underwear, cashmere sweater, alligator skin handbags among others. With the current competition in the industry, it has been hard to draw a line between the retail shots and the wholesale ones. Some of the main competitors of Louis Vuitton includes Abercrombie & Fitch, Levis, Cole Haan, Primark, Fashion Pulse PR, Tencel among other companies with operations across the globe. Brand The Louis Vuitton brand was created under “Art de Vivre” which is one of the most creative, luxurious and elegant brands from one of the most powerful fashion retailers in the world. While the Louis Vuitton Moët Hennessy Group has several brands such as TAG Heuer, Celine, Givenchy and Christian Dior, Louis Vuitton is the most profitable one accounting for 60% of the LVMH profits. The Louis Vuitton brand has acquired a unique marketing position both in its own website as well as in the standalone boutiques based on upscale shopping malls. One of the most luxurious and unique product from this grand that makes it’s the major preference among its rivals is the trunks leather. Other products are diversified into different categories of watches, jewelry, books, shoes, apparel, accessories and leather goods. The brand has risen to become a global brand from the Paris-based hand-crafted product. The distribution channels for the brand has grown to six major regional distribution hubs with two in Japan, two in other parts of Asia, one in Paris and the other in the US (Kapferer & Bastien, 2009). In 1992, the brand was launched in China as the CEO pointed to the fact that the Chinese market for the luxurious brands had the greatest buying power. This luxurious brand got a very successful reception in China and has since experienced a very stable growth with a continuously rate. While other luxurious brands performing well in China such as Cartier and Burberry have been growing at a rate of 20%, Louis Vuitton outgrows them with much higher rates. China has been forecasted to outgrow the luxury market of the United States, despite the fact that the US market has been the largest for many decades given the great labor force and the gigantic income from the import goods people get in the US economy. Currently, China is the world second prime market for Louis Vuitton brands and other luxurious brands. The country accounts for 28% of luxurious purchases annually in relation to worldwide purchases. While Japan holds the leading position in consumption of luxurious brands, it is expected that China will outgrow Japan given the fast trend in the consumption of luxurious brands. Before the introduction of the Louis Vuitton mainland stores in China in 1992 at the Beijing’s Peninsula Hotel, the Chinese market had had no experience with luxury goods. However, by now, Louis Vuitton brand has a greatest customer base compared to all the operating hubs across the globe (Kapferer, 2006). Singapore- Target market The target market of Louis Vuitton brand is the wealthy people shopping in upscale shopping malls. The company has proved this by launching retail stores in high density stores in their target markets such as Russia, China, India and Brazil among many more. The fashion industry mainly consists of women swear, menswear and children swear. The fashion industry in Singapore has grown in the recent past in terms of value, a trend which is expected to continue. By 2009, the Singaporean fashion industry had total revenue of $1,934.4 Million which represented an annual growth rate of 7.2% for the period from 2005 to 2009. In comparison South Korean and Chinese industries grew at a compounded annual growth rate of 3.9% and 7.9% over a similar period of time, reaching the values of $15,187.7 million and $102, 291.5 million in 2009. During the year, the sales of the women wear was regarded as the most lucrative in the Singaporean market in 2009 with the total revenues being recorded at $941 million which was an equivalent of 48.6% of the total growth of the market. The sale of the menswear generated total revenues of $608.1 Million in 2009 being 31.4% of the total aggregate revenue for the industry. Analysts projected a similar trend to be witnessed in the next projected period of 2009-2014. Market Model of Target Market Marketing in the target markets is a very key business model for the Louis Vuitton brand. due to the discreteness of the brand, marketing takes place in diversified areas such as in the internet, upscale shopping malls and in the airports due to its association with the art of travelling. The company tries to change the brand to accommodate new tastes and preferences but maintain the original brand, therefore, most of their products such as watches and handbags have remained the same over the years. This can be explored as its competitive advantage since it ensures retention of its original brand unlike competitors such as Prada and Dior who introduce new collections into the market annually. Brand Issues One the biggest challenges inherent in the Chinese market is the prevalence of fake bags and other luxurious products from the Louis Vuitton brand. Some of the girls in China take even years to save in order to purchase a single piece of the Louis Vuitton brand and therefore, they want to be reassured that the products they are buying are real. For instance, the Silk market in the downtown Beijing is known for luring tourists into buying fake luxurious brands which are very similar to the original ones. Singapore is however very strict when it comes to the sales of fake products being sold to the market. The products which imported to Singapore usually involves close scrutiny by the Singaporean government authorities. Promising Target Markets Furthermore, Japan has also come out as a very promising market for the Louis Vuitton brand. The demand for the luxurious brands has increased tremendously in the recent past. According to research on the Japanese market, it was reported that 94% of Tokyo women already has a piece of the Louis Vuitton brand in their 20’s. With the internationalization of the Louis Vuitton brand, the company is able to positively generate great economic opportunities from a diversified market while at the same time reducing the risks associated with economic downturns of a single economy (Kotler et al, 2009). Competition The extent to which the luxury brands experience intense competition in moderate in luxury brads compared to other brands due to brand loyalty. While there are several big rival companies that compete with Louis Vuitton brand, they do not compete on the basis of lowering their prices to attract a competitive edge. Louis Vuitton brand has been able to develop a great reputation in the market making it stand out as the most preferred luxurious brand. However, the brand till faces major competition from both international and local brands. In the fashion industry, most competitors such as Ferragamo, Salvatore, Gucci, Channel, Christian Dior and Prada came into the market to share. Other brands have improved their competitive position by customizing products for their customers and also by creating an enabling environment that allows their customers to create products similar to those of Louis Vuitton, but at a relatively lower price matching quality and a variety of designs. This is a great threat both economic-wise and environment-wise since Louis Vuitton is not flexible in designs. The brand has for the longest time used the concept of the monogram printed, however, there are new and advanced trends I design that are adopted by the rival companies thereby making at risk of losing customers who prefer changing trends. Advertising The promotion of Louis Vuitton brand serves to enhance its reputation and it’s based on its communication strategy (Schmidt et al, 2006). For the longest time, the company has restrained from using media such as TV and radio to advertise their products since they are more concerned with “rich” as opposed to “reach” with the latter being the target of mainstream advertisement. Such channels have been considered unsuitable for luxury brands and even through there are accessible to many people, the strategy is not convenient for luxurious brands, since they are not interested in creating awareness of their products to the wider population, but rather to a target population of wealthy people (Pickton, & Broderick, 2005). However, due to the monotony and the fear of becoming too commonplace, Louis Vuitton recently launched a big television ad campaign in order to promote their upscale cities outlets since they are hesitant to open their hubs in second and third-tier cities in China E-Commerce It is axiomatic to squabble that e-commerce provides an opportunity for buyers and sellers to buy and sell various products online. The e-commerce revenue of Louis Vuitton has always grown in the recent and it’s projected that it will continue to grow. The impressive performance is attributed to different online ads that the firm has posted across various sites. The firm has also engaged in social network campaigns that are intended to improve the presence of the brand amongst its potential customers across the globe. Pricing While in consideration for a pricing strategy of a company, low prices plays a general marketing role, it is not the case with Louis Vuitton brands. Their products are highly priced. The high prices are based on the value of the brand, being absolute value as opposed to relative value (Okonkwo, 2007). Most principles of pricing employed in the company today were innovated when Kyojiro Hata became the president of the brand in Japan. With time, the strategies were adopted in other global hubs (Keith & Hughes, 2008). The pricing strategy of Louis Vuitton incorporates the notion of prestige pricing, otherwise known as premium pricing. This means that it is not easy to base the quality of luxury products based on other factors other than price. The price is used by this brand to enable thee consumers to judge the value and worth of the products there are buying (Nagasawa, Ohizumi & Maeda, 2007). The pricing stagey of Louis Vuitton exhibits the principle of prohibiting exorbitant pricing between stores. This prevents some consumers from paying extra for the same products based on their income level or geographical location. thee prices of their products are keep at the 40% increase compared to the local prices in order to make its acceptable in the market, while at the same time build trust with the target consumers. The pricing strategy of the brand also discourages any forms of differentiating price such as discounts, value sets, or bargain sales. Teaching Note Learning objectives The case will help the student have an in-depth knowledge of Louis Vuitton in terms of its history, branding, marketing and operations and quick statistics It will give the students an opportunity to understand the operations of Singapore operations and industry Students will learn some of the key issues when a company is venturing into a new market It gives students an opportunity to compare the current performance of various outfits in the Singapore market and be able to compare the same with operations with other neighboring countries. It is an opportunity to understand the need to conduct a clear market research before expanding its operations to other countries Students will adopt the acq1uired knowledge of marketing to provide suggestions on whether Louis Vuitton should expand its operations to Singapore. Scope of the case The case study is intended to help students understand international marketing concepts. The case presents the need to have a thorough market research before a company penetrates a new market. The study should be able to inform the readers the current operations of Louis Vuitton. The case will help studies in fashion industry especially with regards to which markets to enter and some of the strategies to be applied by the company. The international marketing topic is of great importance given the competition that is faced by companies across the globe. Students are expected to gain a substantive knowledge with the regards of adopting some best business practices. Besides, the case will inform readers of some of the best methods to adopt in ensuring that there is success with the regards of the firm expanding to other areas. Students are also expected to adopt a critical thinking especially when understanding some of the best strategies of ensuring success. Recommendations on whether the company should expand to Singapore The company is currently doing well in China besides other locations it has its opresence. The Japan offices have witnessed tremendous growth in the recent past. Being one of the upcoming fashion destinations in the world besides South Africa, Brazil among others, Singapore is one of the best destinations for the firm’s penetrations. The economy of Singapore has been performing very well in the recent past. Analysts have projected that the economic performance of the country will increase further. The growth has seen the creation of new dollar millionaires which means that a number of people will be able to access some of the products sold by the company. References Barthes, R. 1977. The photographic messages. In R. Barthes, Image, music, text (pp.15-31). New York: Hill and Wang. Bradley, Frank, Dawsonera, 2005, International marketing strategy, New York: : FT/Prentice Hall. Brioschi, A. 2006, Selling dreams: The role of advertising in shaping luxury brand meaning . In Schroeder, J. E., & Salzer-Mörling, M (Eds.), 2009, Brand culture (pp. 198-209). New York: Routledge. Chevalier, M., & Mazzalovo, G 2008, Luxury brand management: A world of privilege. Singapore: Wiley. Corbet, E. P. J., & Connors, R. J. 1998, The three modes of persuasion. In Corbet, E. P. J., & Connors, R. J. 2015, Classical Rhetoric for the Modern Student (pp. 31-33, 71-72). New York: Oxford University Press. Fellowes, J. 2008, Financial crisis: Luxury brands boom as rich fly to quality. The Telegraph. Gilligan, Colin, Hird, & Martin, 2012, International marketing: strategy and management, London: Routledge. Kapferer, J. N. 2006. The two business cultures of luxury brands. In J.E. Schroeder & M. Salzer-Mörling (Eds.), Brand culture (pp. 67-76). New York: Routledge. Kapferer, J. N., & Bastien, V. 2009. The luxury strategy: Break the rules of marketing to build luxury brands. London: Kogan Page. Keith J. P., & Hughes, M., 2008, “Entrepreneurial decision-making in internationalization: Propositions from mid-size firms,” International Business Review. Kies, D. 1995. Short articles by Daniel Kies on ethos, pathos and logos. In H. Kasch (Ed), Supplementary texts for textual semiotics (pp. 18-31). Kotler, P., Keller, K., L., Brady, M., Goodman, M. & Hansen, T. 2009. Marketing management. Essex: Pearson Education Limited. Louis Vuitton 2015, http://hk.louisvuitton.com/eng-hk/stores Nagasawa, Shin’ya 2002, An Unpainted Face of the Empire of Luxury Brands: LVMH Moët Hennessy. Louis Vuitton, Nihon Keizai Shimbunsha. Nagasawa, S., Ohizumi, K., & Maeda, K., 2007, The Principles of Louis Vuitton: The Strongest Brand Strategy, Toyo Keizai Shinposha. Okonkwo, U. 2007, Luxury fashion branding: trends, tactics, techniques. New York: Palgrave Macmillan. Pickton, D., & Broderick, A. 2005. Integrated marketing communications (2nded.). Essex: Pearson Education Limited Schmidt, Marcus J., Hollensen, Svend, Dawsonera, 2006, Marketing research: an international approach, Harlow: Prentice Hall. Appendix Market segmentation in Singapore In terms of market segmentation, Women swear is the largest segment if the fashion industry in Singapore with the ratio being distributed as below. Category Percentage share Women swear 48.6% Menswear 31.4% children swear 19.9% Singapore Fashion industry segmentation in the region Category Percentage share China 38.9 % Japan 36.8 % South Korean 5.8 % Taiwan 2.4 % Singapore 0.7 % Rest of Asia Pacific 15.4 % Despite the economic challenges and pressure from different quotas, the fashion industry has grown in the recent past at a healthy rate. The rivalry in the industry is more than average given that there are no switching costs for consumers coupled with great product differentiation. The fashion industry in Singapore is important to the economy in terms of revenue, investment, terms of trade and employment. The industry has short life cycles and high level of product differentiation which is characterized by the high demand pace coupled with inflexible and very long supply chain processes. Clothing is no doubt important to consumers who are individuals that are key drivers towards the growth of any economy. The entry into the retail business in Singapore does not require one to have huge sum of capital and setting up a single retail outlets is within the means of all citizens and investors. Some of the economies of scale that is associated include the ability to build brands in different retail outlets and higher buying power when it comes to supplier negotiations. One of the barriers faced by new entrant is the launch of price war which has been witnessed ina number of other economies. Over ally, given the healthy business operations in Singapore, it is possible that other companies can explore the market and grow considerably. The fashion industry in Singapore is fragmented and there is a room for both small and large players to enter. The expansion of large outlets however requires large capital base. The rivalry can be dealt with through the diversification of the product line. Questions to Students According to your understanding, what is the mode of entry for Louis Vuitton Louis Vuitton should use the current existing platform to penetrate the Singapore market. The company should use its existing supply chain to distribute its merchandize. To fully penetrate the market, it is advisable that the firm comes up with retail outlets, which will; ensure that there is clear penetration. Question 2 Present a detailed discussion of Louis Vuitton SWOT analysis Read More