The Success Story of Michael Kors - Case Study Example

Introduction

The luxury goods industry is a fascinating area of business, a more comprehensive definition of which includes products and services and the sector itself is considered as really different from others. This is partially because of the amount of creative talent needed for a luxury brand to be successful and because the industry requires specific market to run for (Chevalier & Mazzalovo, 2012). Over the recent decades, luxury companies have experienced enhanced turbulent environment and the sector has been challenged as competition has increased. Thus, the traditional fragmented industry has become more concentrated and because of the diversification strategies, luxury industry has extended to more accessible products. Real luxury is also about leadership, the makers, who are considered providers of quality and fineness and are evolved in the highest expression of art (Pinkhasov & Nair, 2014). What constitutes a good management style is the ability of luxury company to recover from the global financial crisis, its brand identity and ability to expand activities. Michael Kors Company is one of such brands, which has managed to succeed in this, occupying a niche of the accessible luxury brands. Through the production of goods at lower prices, the label has appealed to cost-conscious consumers and recession-stricken population segment (Som & Blanckaert, 2015). Michael Kors is now a luxury brand with 76 stores across Europe, which sells handbags, watches, shoes and apparel, a company with best-performing indicators in the market and the most impressive activities of the last decade. This paper is aimed to discuss the main concepts of luxury brands, displaying the main trends in luxury for the upcoming years. It also presents strategic analysis of Michael Kors Company.

The concept of luxury brands

Recent marketing studies on luxury try to define what luxury is and what constitutes the notion. Thus, while luxury brands have more than ten characteristics among premium image, products and service quality, luxury brands are the exclusive, well-known brands, which increase brand awareness through perceived quality and which are able to retain their sales and customers’ loyalty at the appropriate level (De Barnier & Falcy, 2012). At the same time, it depends on whether each particular country to consider the brand as luxury. Thus, according to Bilge (2015), BMW represents a luxury brand in Turkey, while Opel is perceived as a car of normal level. Other words, luxury brands and thus brand satisfaction are influenced by how the consumers see luxury, their relationship with luxury and perceptions on luxury. Qi and Dandan (2013), state that in common sense luxury brand is perceived as majority of its products and classified as luxury goods, which researchers use in different ways. Like all other products and services, luxury brand need marketing to remain in from of luxury customers. Therefore, these luxury brands need to discover new and outstanding ways to give the desired expression to the customers. At the same time, it is important to differentiate between the accessible luxury and exceptional luxury where the affordable is luxury, which an individual can afford at least from time-to-time, while the exceptional luxury is affordable to wealthy people (Heine, 2010). The main consumers of accessible luxury are people from the upper middle class, which also can afford exceptional luxury goods.

Trends defined in the luxury industry

Affordability is most recent trend of luxury brands, an oxymoron to the brands, which has given the opportunity to brands like Michael Kors to emboss across their surfaces. Thus, the egalitarian approach of luxury brands is affordable to middle-class consumers and available to the wider range of shoppers consequently. These are the brands of clothing, where the importance is given to the not breaking new stylistic ground, but to the accessible economic and aesthetical items (Fury, 2015). Following the trend of affordability, luxury is given the feature that drives the evolution of premiumisation, which means that the consumers will all grow less motivated by the ordinary. That means that the youngest consumer group is the most aspirational. At the same time, the other trend is at play. Thus, the variable quality is given the greater role within the consumer expectations, where consumers across many markets were threatened by recession and are willing now to address to both quality and value-for-money results (Yeoman, 2011).

At the same time, Luxury Society (2015), presents the results of transformative 2015 for luxury industry, where an emphasis is given to new technologies, digital advances, currencies, wealth, media and marketing as the main factors that shifted role of brands to consumers. In addition, the future impacts of these trends for luxury industry are expected to be great. Thus, the luxury industry has already flourished for the last decades, which speaks about the start of good times.

The latest data shows the outlook for luxury goods to remain optimistic with sales in US$328 billion by 2016, which is the increase of US$317 billion in 2015. At the same time, China market has reported about the decline in sales of luxury. Such decline means that China’s market is not going to overtake Japan to become the second largest luxury goods market in the world. India will also retain its position as the fast-growing market in percentage terms, while Russia’s geopolitical risks will only add growing pains to the luxury sales. The report from consultancy Bain & Co. has stated about the personal luxury market to be hit by weak Chinese consumers. Here, shoppers from China account 31% of global luxury sales, 24% of UK and 18% of Europeans (Kollewe, 2015). Along with the decline in sales across certain countries, the trend of luxury outlet shopping will most likely support the luxury industry as the selling of used goods will free up more income to spend on newer luxury items. In addition, affordability trend appeals to more price conscious luxury consumer and will, thus, encourage the spending of such countries as China. What is also important is the vertical acquisition that will continue to advance in the upcoming years as luxury companies search for control of the entire value chain from raw materials to retail (Global powers of luxury goods 2015).

Strategic analysis of the luxury retailers: Michael Kors Company

Despite the unfavourable conditions to certain companies across the world, Michael Kors is an anomaly, which has managed to build its brand worth £12.8bn through its accessible stuff and not on its mainline. The success of the company was called by a form of promotion and not in cheapening the name. Thus, according to Fury (2015), the company’s accessible line has driven awareness and demand for luxury goods of Michael Kors.

Despite much criticism as to the brand to be really luxury, the products of Kors are accessible goods, which offer something new and are considered as the new luxury for the twenty-first century. Thus, the main strengths of Michael Kors Company are related to the brand affordability as new and trendy lifestyle, positive brand image and high-quality products (Halzack, 2015). In addition, the price range that appeals to the large demographic group. Michael Kors himself is also a lead designer, well-established in fashion world.

Among the main weaknesses, Halzack (2015), considers that extraordinary speedy growth, which made it possible to purchase company’s goods by wider audience, creates risk for the company at losing the veneer of exclusivity that is essential to the brand. In addition, ubiquity is also what makes company less unique and its belonging to luxury brands (Lawrence, 2013).

The main opportunities of Kors are related to the growing overseas operations, such as China. In addition, the company has a significantly smaller presence in the markets of Japan and Europe, thus more opportunities to capture new customers appear (Mulkerrins, 2015). The new technologies and online potential, in particular, open more opportunities for the company as well.

The main threat to Kors performance is associated with the challenge of right mix of merchandise. Thus, for instance, the bucket bag in the most recent line was not sold well as it was incorporated and the shape was not related to the high-fashion types. In addition, high competition of other luxury companies is among the main threats. Thus, the company should consider such factors in building and sustaining its strategy.

To better consider external factors that can influence the company, PEST analysis can be utilised to understand political, economic, social and technological aspects. The underlying assumption under the understanding of PEST analysis is that the company can react to changes in the external environment and then reflect the idea in the strategy (Gupta, 2013). Thus, the main political factor that can affect Michael Kors Company is associated with the instability that impacts luxury brands such as Michael Kors Company in treating markets and those it strives to capture. However, in search for lower risk and faster growth, company can look at less risky countries such as Mexico or Turkey (Luxury 2020: the trends that will shape the future luxury market, n.d.). Among the main economic factors that affect luxury companies is the effect of recession on operational performance, which means the recovering of global economy. Whether economic growth is observed across some countries, it is slow in much of Asia, which to the company means inability to reach income the level the company expected. With the crisis came in Europe, that also has called for loss of confidence in the durability of the euro and the ability of certain countries to service their debts and thus it made an impact on the performance of Michael Kors (Global Powers of Luxury Goods 2014 in the hands of the consumer, n.d.). Social factor affecting luxury company of Michael Kors refers to intent of consumer to buy counterfeits to products.

Stravinskiene, Dovaliene and Ambrazeviciute (2013), state that due to the mass production and information overload that occurred in the current time has made customers look for more individuality and exclusivity, however, cost is also what makes consumers buy counterfeits. For luxury company of Michael Kors, this means that more products of the organisation are copied and falsified thus negatively impact the brand image and revenue obtaining. In terms of technological factor that affects companies like Michael Kors’, the impact of digital marketing is great (De Angelis, 2015). Thus, electronic commerce, social networks, direct marketing tools and other services of technological advances help in conducting business activities and remain competitive.

The luxury industry has experienced dynamic changes and especially that refers to the creation of new competitive environment. However, brand and its image are among the main competitive advantages in building competence for luxury goods companies. Thus, for Michael Kors to achieve competitive advantages, it should address to its dimensions of uniqueness. Here, the accessibility is among the most valuable. Fast-growing operations are also important. Product integrity and premium prices as well as service and culture of the company are the aspects, which help Michael Kors to reach competitive advantage over its competitors (Loeb, 2014).

Conclusion

As the modern conditions demand that luxury industry to be more available to individuals other than elite and rich class, such demand boosts improvement of luxury in order to reach democratic and positive attitudes of the consumers towards it. Andjelic (2015), states that with that demand, luxury brands should redefine the way they do business. It is now among the main perspectives that a product could be bought by various consumers with different demographic characteristics and expectations. The executives of the luxury brands should now target these consumers and prioritize the factors such as quality, functionality and cost in getting more consumers. This paper showed how Michael Kors Company has managed to succeed in making its luxury products more affordable and what factors contributed to reaching of new organizational objectives.