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Corporate Strategy - Luxury Industry

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by

Paul Boret

on 21 November 2012

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Transcript of Corporate Strategy - Luxury Industry

The luxury goods
industry Industry Overview PESTEL Analysis - Luxury goods industry Group's
analysis Recommendations BCG
Matrix Personal
Notations To conclude - Diversification = rentability

- Specifics goods

- Choice : Security Porter’s 5 forces:

Threat of new entrants:
- Luxury market is a mature market.
- Concentration in few groups.

Competitive rivalry:
- Growth on core business.
- Economy of scale.
- Risk of change.
- Advertising level.

Supplier power:
- Vertical integration.
- Low bargaining power.
- Internal growth.

Buyer power:
- Low bargaining power.
- Low volume.
- High income target.
- High brand values.

Threats of substitution:
- Low propensity to substitute.
- Know-how Porter’s 5 forces:

The threat of new entrants(Moderate) : The cost of building a brand is expensive, if there is new entrants the costs can increase. Possibility of copying products at lower cost (ex: Louis Vuitton bags)/ good quality of products.

The bargaining power of buyers(Low) : Customers can decide luxury goods for discount, they chose the way of consumption. The number of luxury brand is weakened by the low number of customers for this segment. There will always be buyers.

The bargaining power of suppliers (Low) : Rarity of raw materials

The threat of substitute products (Moderate to High): Mid range product which wants to have a premium image

Industry rivalry (Moderate) : Economy of scales and brand recognition.

If you want to develop a luxury brand, you need huge investments, and it is hard to launch a luxury brand without history.
Porter’s 5 forces:

The threat of new entrants(Moderate to High) : A lot of copying products at lower cost and particularly for the trench(ex: Louis Vuitton bags)/ Always having a lot of ready to wear clothes

The bargaining power of buyers(Low): The number of luxury brand is weakened by the low number of customers for this segment. There will always be buyers for luxury market

The bargaining power of suppliers (Low): Always have textiles and goods for the brand

The threat of substitute products (High): A lot of competitors are doing good quality products with low prices as COS.

Industry rivalry (Moderate): A lot of English luxury and traditional brands are over the market as Barbour.
Porter’s 5 forces:

The threat of new entrants(Moderate to High) : A lot of copying products at lower cost and particularly for the trench(ex: Louis Vuitton bags)/ Always having a lot of ready to wear clothes

The bargaining power of buyers(Low): The number of luxury brand is weakened by the low number of customers for this segment. There will always be buyers for luxury market

The bargaining power of suppliers (Low): Always have textiles and goods for the brand

The threat of substitute products (High): A lot of competitors are doing good quality products with low prices as COS.

Industry rivalry (Moderate): A lot of English luxury and traditional brands are over the market as Barbour. Porter’s 5 forces:


•Threat of new entrant: LOW
•- Tod's is a well known brand and very competitive with their famous “moccasin”
•- High prices and luxury goods
•- Lot of competitors on the same level of brand equity
•Buyer power: LOW
•-Rich people will always buys our products whatever the price, specially the loyal customers
•- The crises didn't touch the rich
•- Tod's is controlling their prices and the crisis in not an issue for them
•Threat of substitution: HIGH
•- Lot of competitors as Gucci which are leader on the leather market and which are doing bags and shoes
•- Difficulties with the North America market which are not really profitable
•Supplier power: LOW
•- Leather prices are decrease, the suppliers are not too much profitable
•- Difficulties to find suppliers because of the Italian crises
•Competitive rivalry: MODERATE
•- Lot of directly operated stores
•- Luxury market is always in competition with strong and old brands
•- Tod's is a strong brand it's difficult to decrease rapidly Porter’s 5 forces:

The threat of new entrants(Moderate) :The cost of building a brand is expensive, if there is new entrants the costs can increase. Possibility of copying products at lower costs.

The bargaining power of buyers(Moderate): Customers can decide luxury goods for discount, they chose the way of consumption. The number of luxury brand is weakened by the low number of customers for this segment.

The bargaining power of suppliers(Low): diversity of luxury products and the important number of brand in the sector can easily help suppliers to increase the price.

The threat of substitute products (Moderate to High): luxury brand offer high prices. Substitute products can offer quality products at lower prices.

Industry rivalry(Moderate): Economy of scales and brand recognition. Porter’s 5 forces:

Threat of new entrants (LOW): Luxury market is very hard to penetrate, their is to main strong and old competitors, the market is saturated

Threat of substitut products (Moderate): Ethic issues about diamonds extraction, Different kind of loyalty according to all countries.

Power of suppliers (High): Depends of diamonds prices and controlled by extractors companies (law and process)

Power of customers (Low): Luxury market and clients are always buying whatever the price and the crises

Industry rivalry (High): Intense competition and difficulty to be different from competitors as Tiffany’s and Cartier (Richemont)
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