'Global Strategy High Fashion Fights Recession Essay\r'

'1. Using the Five Forces Framework, how would you characterize the competitor in the prodigality goods industriousness?\r\n2. why was discounting looked eat upon by application peers, all of which were distinguish or focus competitors?\r\n3. What would be the likely challenges in uphill markets for luxury goods firms?\r\nOVERVIEW\r\nPumping out fancy clothing, handbags, jewellery, perfumes, and watches, the advanced give up of the manner industryâ€otherwise known as the luxury goods industryâ€had a challenging metre in the Great deferral. In 2008, banks were falling remaining and right, unemployment rates sky high, and consumer confidence at an incomparable mortified. In 2009, total luxury goods industry gross sales fell by 20%. The high-end fashion industry was dominated by the swelled Three: LVMH (with to a greater extent than 50 brands such as Louis Vuitton handbags, Moët Hennessy liquor, Christian Dior cosmetics, TAG Heuer watches, and Bulgari jewelry), Gucci Group (with nine brands such as Gucci handbags, Yves Saint Laurent clothing, and Sergio Rossi shoes), and Burberry (famous for raincoats and handbags). Next were a government issue of to a greater extent specialized players such as mightiness of menswear Ermenegildo Zegna and nance of womenswear Christian Lacroix. By definition, high fashion means high worths. An unaffixed code of convey (or norm) permeates the industry: no discount, no coupons, no worth wars pleaseâ€in theory at least.\r\n scarcely during the Great Recession many an(prenominal) firms cut prices†moreover quietly. The only firm that stood fluctuate solid was the industry leader LVMH, which claimed that it never puts its products on sales at a discount. The bloodbath in the Great Recession forced the weaker players such as Christian Lacroix and Escada to accuse for bankruptcy. But it made stronger players such as LVMH make up more formidable. They benefitted from an established pattern in hig h fashion: the flight to quality. In other words, when great deal curb less money, they spend it on the best. As the recession became worse, many middle-class customers in economically depressed, vexed economies began to hunt for time value instead of slimness and showing off.\r\nIn addition to managing interfirm controversy, how to manage the volatile 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, in particular china, offered luxury goods firms the best hope objet dart the relaxation method of the world was bleak. Since 2008, while spheric 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 world’s second-largest market. In 2011, China rocketed ahead of Japan for the first time as the world’s champion consumer of luxury goods†dust $12.6 billion to command a 28% global market share.\r\n1. Using the Five Forces framework, how would you characterize the contention in the luxury goods industry?\r\nBargaining violence of supplier: rattling petty(a)\r\nBargaining power of customer: medium but low in big brands like LVMH Threat of new 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 living firms: very high (need to deal with in rescript 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 degree of rivalry among firms is unlikely to be very high. As practices like discounting and price wars were frowned upon during pre-recession times, argument was likely to have been understated, and not overt. However, during the Great Recession, when some luxury goods firms began discounting, competition may have increased. In developed countries, the menace of entry of potential entry of new competitors was low during the recession, while the threat of entry was high in Eurasian countries like China, where the market for luxury goods expanded.\r\n2. 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 maintain 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 strategy that is frequently used in the low-end fashion industry, is generally viewed as dangerous and baneful in high fashion, not only to the fooling firm that uses it, but also to the imag e and perimeter of the whole world of high fashion. During the Great Recession, for instance, many firms cut pricesâ€but did so quietly. At Tiffany jewelry stores, salespeople advised customers about diamond ring price reductions, but otherwise there was no publicity. Gucci and Richemont offloaded their overmuchness 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 behave 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. LMVH’s avoidance of discounts actually gained market share for the telephoner during the recession, and sales grew from $24 billion in 2008 to $29 billion in 2011.\r\n3. 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 convolute in transporting the luxury items into emerging market countries, restrictive traffic rights, high import taxes and other challenges with regional governments that can complicate logistics. Adopting or investing in a stronger supply and distribution channels would be important. Also, institutional factors, and possible the liability of its foreignness depart have to be strongly considered if the firm plans to hunt down 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 unavoidableness to enter these markets, competition will probably be high, and the luxury goods companies will have to operate other than from their operations in the developed markets. As cultures and purchasing patterns might differ acros s countries, firms would need to develop a thorough understanding of their customers in effect to succeed in emerging markets.\r\n'