Global Strategy High Fashion Fights Recession Essay

1. Using the louver Forces Framework, how would you characterize the tilt in the luxuriously life goods labor?2. Why was discounting looked down upon by constancy peers, all of which were differentiated or focus competitors?3. What would be the resemblingly challenges in uphill markets for prodigality goods signs?OVERVIEWPumping bring out fancy clothing, handbags, jewelry, perfumes, and watches, the high end of the bearing industry differently know as the luxury goods industryhad a challenging quantify in the Great receding. In 2008, banks were falling left and right, unemployment rates sky high, and consumer trustingness at an all-time hapless. In 2009, total luxury goods industry gross revenue fell by 20%. The high-end fashion industry was dominated by the striking Three LVMH (with more than 50 brands much(prenominal) as Louis Vuitton handbags, Mot Hennessy liquor, Christian Dior cosmetics, TAG Heuer watches, and Bulgari jewelry), Gucci Group (with nine brands su ch(prenominal) as Gucci handbags, Yves Saint Laurent clothing, and Sergio Rossi shoes), and Burberry (famous for raincoats and handbags). Next were a number of more specialized players such as king of menswear Ermenegildo Zegna and queen of womenswear Christian Lacroix. By definition, high fashion means high prices. An informal code of conduct (or norm) permeates the industry no discount, no coupons, no price wars pleasein theory at least.But during the Great Recession many theaters cut pricesbut quietly. The tho firm that stood rock solid was the industry leader LVMH, which claimed that it never puts its products on gross sales at a discount. The bloodbath in the Great Recession forced the weaker players such as Christian Lacroix and Escada to file for bankruptcy. But it make stronger players suchas LVMH even more formidable. They benefitted from an established pattern in high fashion the flight to quality. In other words, when people pick up less money, they spend it on the be st. As the recession became worse, many middle-class customers in economically depressed, developed economies began to die hard for value instead of small beer and showing off.In addition to managing interfirm rivalry, how to manage the fickle and capricious customers was tricky. As the recession became worse, many middle-class customers in economically depressed, developed economies began to hunt for value instead of triviality and showing off. Emerging markets, especially China, offered luxury goods firms the best hope eon the rest of the instauration was bleak. Since 2008, while globular sales declined, Chinese consumption (both at home and traveling) had been growing in the midst of 20% and 30%. In 2009, China surpassed the United States to become the worlds second-largest market. In 2011, China rocketed ahead of Japan for the first time as the worlds champion consumer of luxury goodssplashing $12.6 one thousand thousand to command a 28% global market sh are.1. Using the Five Forces framework, how would you characterize the competition in the luxury goods industry?Bargaining force play of supplier very lowBargaining power of customer strong suit but low in big brands like LVMH Threat of invigorated entrants low (potential entrants were not dying to enter when incumbents were struggling) Threat of substitutes very low (strong brand and high quality) Competition among existing firms very high (need to embrace with in order to survive) The high-end fashion industry was dominated by the Big Three LVMH, Gucci Group, and Burberry. Next were a number of more specialized players such as king of menswear Ermenegildo Zegna and queen of womenswear Christian Lacroix. As these firms were relatively differentiated, the leg of rivalry between firms is unlikely to be very high. As practices like discounting and price wars were frowned upon during pre-recession times, competition was likely to convey been understated, and not overt. However, during the Great Recession, when some(prenominal) luxury goods firms began discounting, competition may have increased. In developed countries,the little terror of entry of potential entry of new competitors was low during the recession, while the terror of entry was high in Eurasian countries like China, where the market for luxury goods expanded.2. Why was discounting looked down upon by industry peers, all of which were differentiated or focus competitors? High fashion relies on its high process to say its image and demand. The informal code of conduct that governs the high fashion industry dictates no discount, no coupons, and no price wars between competitors. Discounting, a outline that is frequently used in the low-end fashion industry, is generally viewed as stern and poisonous in high fashion, not only to the occasional firm that uses it, but also to the image and margin of the whole world of high fashion. During the Great Recession, for instance, many firms cut pricesbut did so quiet ly. At Tiffany jewelry stores, salespeople advised customers about diamond ring price reductions, but otherwise there was no publicity. Gucci and Richemont offloaded their excess inventory to discount websites. The only firm that stood rock solid was the industry leader LVMH, which claimed that it never puts its products on sales at a discount. When the going gets tough, it destroys stock instead. This strategy benefitted LMVH during the recession, when cash-strapped buyers, following a well-established pattern in high fashion, opted to spend money on a few, classic items of high quality, rather than many lower-priced pieces. LMVHs avoidance of discounts actually gained market share for the company during the recession, and sales grew from $24 billion in 2008 to $29 billion in 2011.3. What would be the likely challenges in emerging markets for luxury goods firms? Some of the issues that could arise for luxury firms entering emerging markets are issues with costs involved in transpo rting the luxury items into emerging market countries, repressive traffic rights, high import taxes and other challenges with regional governments that can embroil logistics. Adopting or investing in a stronger supply and distribution carry would be important. Also, institutional factors, and possible the liability of its foreignness will have to be strongly considered if the firm plans to function smoothly in an emerging market. Emerging markets, especially China, offer luxury goods firms the best hope while the rest of the world recovers from the recession. As many firms want to enter these markets, competitionwill probably be high, and the luxury goods companies will have to mesh differently from their operations in the developed markets. As cultures and buying patterns susceptibility differ across countries, firms would need to develop a thorough taste of their customers in order to succeed in emerging markets.