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Lola Garcia

on 3 December 2012

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Transcript of hh

Founded in 2008 by the International Hermes Group, this China-based company is a luxury brand.

Offers ready-to-wear clothing, furniture and tableware

It's an authentic house, with a style, materials and know-how which is anchored in the Chinese culture.


The brand ' Shang Xia ' by Hermes turns to a quite new type of strategy of international development.

Why China ? A daring brand Laure Phame 12039012
Lolita Soligny 12013021
Agathe Le Layec 12012971
Daria Bourgeois 12013072
Benjamin Brard 12014842 Five Forces
Suppliers' power

Few number of suppliers who are
high skilled handcrafters

Inpossible for the brand to substitute
products fully mabe by handcrafters The generic Porter's Strategy
Differenciation focus Theory by Porter
The target is wealthy consumers
Differentiation of the products
Competitive advantage

Context of Shang Xia
Chinese Luxury : NICHE STRATEGY
Uniqueness of the product Buyers' power

Strong brand identity

Prices are so high :
No price sensitivity

Few number of substitutes
products available Threats of substitution
MEDIUM Only 2 brands (Shanghai tang and Qeelin)

Wealthiest customers fly abroad,
the prices in China being higher than overseas

Possible to find cheaper and similar
goods with lower quality standards

No real possibility of substitution
for Shang Xia’s quality researchers Threats of new entrants
LOW Too expensive to break into
he luxury business

Brand’s goods are the result of ancestral knowldeges detained by the best handcrafters Rivalry LOW Only two Chinese luxury brands
Shanghai Tang; Qeelin POLITICS The PEST model • Taxation for luxury goods: 3 taxes:
customs tariffs 4.4% to 60%
VAT 17%
Consumption tax up to 30%

• Employment law: improvement of individual rights
and working conditions 2008-2012.

• Government stability:
ONDD: short term risks 1/7
Middle and long term risks 2/7
War risks 3/7

• Protectionism: Shang Xia doesn’t have the support of the government. GNP annual growth trends:
-010: 10.3%
-2011: 9.2% to $7.3 trillion
-2012 forecast: 8.4%

• Disposable income:
-Urban population: 2012 average $1 960
Maximum at Shanghai $3 289
-Minimum wage: $159

• Unemployment: 4.10% in 2012
•Inflation rate: +1.59% in October 2012
•Interest rate: 6% ECONOMICS SOCIAL CULTURAL • Demographics:
-1.3 billion inhabitant with the unique child policy
-More than a million millionaire
-Second world consumers of luxury goods

• Social mobility:
-60% of the population live in rural areas

• Lifestyle changes:
-Fastest luxury growing market in the world: 25% world consumption
-The brand is more important than the product itself
-Luxury products are excessively expensive in China due to pricing strategies
-The richer consumers go abroad to buy their product given the price difference TECHNOLOGIC • Screen shopping: 70% customers search luxury brands on internet at least once a month, 30% once a week
• Fashion blogs: increasing number of Chinese fashion blogs
• Application on tablets such as the Ipad allows new possibilities with customers Presentation of the company: http://www.shangxia.com ;

Generic Porter's strategy : http://www.marketingteacher.com/lesson-store/lesson-generic-strategies.html#
- Porter’s model of generic competitive strategy- O. Ormanidhi, O. Stringa, July 2008 ( Business Economics)
; - Luxury brand makes links with China’s past - Patti Waldmeir, 20 March 2012 (Financial Times)

Five Forces : http://www.quickmba.com/strategy/swot/ ; http://www.swotmatrix.com
;http://www.luxuo.com/design/shang-xia-store-beijing.html#more-63143 ;

The PEST model
•Howard Shih (2012), Want China Times. Available at: http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1502&MainCatID=15&id=20120321000001. (Accessed: 24 November 2012)
•China Briefing (2012), China Briefing. Available at: http://www.china-briefing.com/news/2012/06/07/luxury-tax-in-china.html
(Accessed: 24 November 2012)
Employment law:
•Eurochinajob (2012), Eurochinajob. Available at: www.Eurochinajob.com
(Accessed: 24 November 2012)
Government stability:
•ONDD (2012), ONDD. Available at :http://www.ondd.be/
(Accessed: 24 November 2012)
•Marketing-Chine (2012), marketing-chine. Available at: www.marketing-chine.com (Accessed: 24 November 2012)
Disposable income:
•Xinhua(2012), China Daily. Available at: http://www.chinadaily.com.cn/bizchina/2012-07/31/content_15633730.htm(Accessed: 24 November 2012)
•Trading economics (2012), Trading Economics. Available at: http://www.tradingeconomics.com/china/unemployment-rate (Accessed: 24 November 2012)
•Inflation China (2012), worldwide Inflation data. Available at: http://www.inflation.eu/inflation-rates/china/inflation-china.aspx(Accessed: 24 November 2012)
Interest rate:
•Trading economics (2012), Trading Economics. Available at:http://www.tradingeconomics.com/china/interest-rate(Accessed: 24 November 2012)
•Howard Shih (2012), Want China Times. Available at: http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1502&MainCatID=15&id=20120321000001. (Accessed: 24 November 2012)
Lifestyle changes:
•Howard Shih (2012), Want China Times. Available at: http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1502&MainCatID=15&id=20120321000001. (Accessed: 24 November 2012)
Consumer profiles:
•Laurie Burkitt, (09/10/2012), “Hermès remains optimist on China”, The Wall Street Journal, p1.
•Research by KMPG (2011), Luxury experience in China.
Richer Class:
•Emily Jane Fox (2012), CNN Money. Available at:http://money.cnn.com/2012/10/03/news/world/china-luxury/index.html (Accessed: 24 November 2012)
•Shaun Rein (2012), Business week. Available at :http://www.businessweek.com/articles/2012-06-27/three-myths-about-chinese-consumers(Accessed: 24 November 2012)
•Research by KMPG (2011), Luxury experience in China.

The value chain : Luxury experience in China, a KMPG study, 2011
http://www.shang-xia.com/uploads/coverages_pdf/33e9e7eded8e110bf42f9891bc4219af78a8d469.pdf REFERENCES Strengths

Unique and genuine products
Hand-made by authentic handcrafts techniques

The company depends of the financial group Hermes international and can lean on the financial power of the group to keep on growing. Conclusion Weaknesses

Design of Shang Xia’s products are out of current trends

Lack of Brand’s communication
in China
Shanghai was not a good choice to first settle because it’s an international town turn to western trends

The market isn’t mature enough to warrantee a success to
Shang Xia
Full transcript