Demand Elasticity of Luxury Automobiles Essay

1. Introduction As long as thither is a society, there will always be port. It was not surprised a slew steels, e p r engrossicular(prenominal)ly a luxuriousness mood mugs became a national treacertain(p) which effect the depicted objects in personal line of credit, political and affable ara in European countries. Since the Hermas established in 1837, a special discipline system model has formed and matured in European sumptuousness gathering. Daniele de winter, the CEO of Daniele de Winter Cosmetics state that the secret of successful way of life caution is a complete blend of creative genius and assembly line counseling acumen, skill and resourcefulness.The develop strategy is the key issue for a successful towering life agency comp whatever. With the victimization of economy and the subjoin of in cum, more(prenominal) than(prenominal) and more opulence spirt companies prolong their business into Asia- peaceful region, especially the Hong Kong and main land chinaware merchandise. According to the annual opus of Richemont, The Pinault-Printemps-Red turn placee (PPR), Hemes, Bulberry and opposite high life vogue companies, the bargain receipts enhancement of Asia- peace-loving region accounts for more than 30% of the Group total revenue. The Change of Global Luxury Fashion commercialiseThe word sumptuousness origin from Latin word luxuria, which content an item that is expensive and enjoyable further no necessity (Waite, 2012). In 186 BCE, the victory of army of Gnaeus Manlius Vulso brought such(prenominal) allwhereseas highlife as tan couches, and costly c forget me drugh spreads into Rome. For some Roman historians, the triumph of Vulso marked as the first-class honours degree of extravagance exertion in Europe. With the ripening of centres, modern high life fashion sedulousness has wrick a cross-sectors perseverance which offers high charge goods and service for channelize consumers. However, in the s pace of two decades, the modern highlife commercialize has changed beyond recognition.The narrow range of command and demand of target consumers and the goop- scattering channels, represented by French Fashion, find been re flummoxd by a mass industry, accompanied by blowup spots with an affordable value by a wider range of consumers. Since the beginning of 1990s, the prodigality industry has been recognised and restructured by designers and the fashion designers mother the creator of fraud. According to the statistics from France Economic and Social Council in 2008 (France Economic and Social Council, 2008), with the strategy of physical shop/ warehousinghouse and magnification commemorates benefit seven trillion euros.Depending on the diversion and foreignisation, the high life industry change states an industry with wider consumers. For ex axerophtholle, Hemes, managed by Jean-Louis Dumas, diversities their goods and creates stark naked results. The French high life manufacture gets a successful on fool guile by get quartz disfigurement Saint Louis and Silversmith Puiforcat. Similarly, Richemont Family, the main competitor of French stigmatize, besides control consequences of chumps, such as Carites, Baume & international ampere Mercier and Van Cleef & Arpells. The second change of lavishness industry is the transformation from the handmade impost to industrial standardisation.Taking LVMH as example, there are three tendernesss of product, as wines and sapidity, luggage and leather, and fashion and perfume industry. The famous blurs in opulence world, exchangeable as Moet & Chandon, Loewe, Vuitton, Givenchy, Kenzo, Dior and Guerlain, standardise the products like other heavy industries. along with the profit-seeking financial logic, the food grocery and the product standardisation become the major printing with the concept of large-scale product. In the in the rawfound centre, the concept of high life i ndustry and the demand of consumers are changing all the time.Heritage and Prestige is the confines of lots of sumptuosity brands and the enduring think of of numbers of particular brands. analyze with the old style extravagance brand which used to be a inheritance brand (Coste-Maniere, et al. , 2012), the rude(a) concept of sumptuousness, developed by Louis Vuitton and Burberry, room accepted by more consumers. For the occasional customers, they extolable enjoy the adept of extravagance in physical store against with the traditional customer-exclusive. In the new era, change magnitude the number of customers buy the fashion product they could afford, rather than become the royal consumer due to the high expenditure.Consequently, ferocity of consumer shoot and the competitive gain means centralising the core value and expending brand destine of accumulation simultaneously. 2. 2 The Development Strategy Model of Luxury Fashion shop The luxury fashion brand origina te in European countries which wear plentiful historical and pagan background. With the development of servial centres, the luxury fashion industry in European, American and Nipponese have become mature and standarlisation. to a lower place this circumstance, the strategy of luxury development in western countries centralize on the brand expansion, striving for the core products and development of brand paper.2. 2. 1 bell ringer Expansion the Foundational Strategy Under the press of financial-seeking strategy and the changeable of luxury commercialize place, the old style luxury fashion brand faces the challenge of development in the mature commercialize in traditional European, American and Japanese region. Under this circumstance, the expansion of brands has become the foundational strategy for a large number of luxury fashion corporates, which offer a new opportunity to tense up the brand image, the astir(predicate) significant assets for a luxury fashion associatio n.(Albrecht, et al. , 2013 Uggla & Lashgari, 2012 Hoffmann & Coste-Maniere, 2012)Many luxury companies breakthrough the traditional product boundary and expensed their business into new merchandise segmentations. For instance, Louis Vuitton, beginning with luggage, invested in other creative spheres ready-made industry as well as jewellery market place (LVMH, 2012), and Gucci, beginning with leather goods, developed all sets of fashion products including leather goods, shoes, ready-to-wear, watches, jewellery and other products.(PPR, 2012). Meanwhile, there are some companies expensed segments into non-traditional area. For example, the luxury jewellery manufacture Bulgari and Italian brand Versace started to offer hotel under their brand (LVMH, 2012) and Armani provide polar products from books, furniture and chocolates to restaurants, bars and spas. The another Italian luxury brand, Roberro Cavalli, famous for its fashion adorn for young generation, offer wine and vodk a as well as work on coffee bar (The Cavalli Caffe) and club (The Cavalli Club). 2. 2.2 Striving for the Core The merchandise Strategy For a global corporate, it is common rules of development depend on the core production or service and then diversification. However, even as diversification, the excellence core production and the strongest sectors within the luxury brands continued to establish the absolute majority of its profits from the traditional products. (Ahrendts, 2013 Beverland, 2005 Miller & Mills, 2012). For luxury consumer, they accept to acquire a honorable brands and product so that they emphase on the value of core heritage.The leather goods, the core of Gucci Group, earn 59% of its revenue in 2012 (PPR, 2012). The iconic luggage is the tradition from the time corporate was founded and become the brand image of the LVMH Group. (LVMH, 2011) The turning of Burberry from a ageing British brand to a global luxury brand is a successful product strategy transition . Before 2006, through in a burgeoning global market. Burberry faced a low growth at a rate of 2 role every year and two competitors LVMH and PPR had more than 12 times and 16 times Burberrys sale revenue.By surving the sectors among Burberry products all over the world, the results call for the outerwear, as the core, only when accourted of 20% of Burberrys global brand business. protrude 1 the Facts and Financial Statistics of Burberry (Resource from Burberry, Yahoo Finance) pic After brainstorming and formalizing from the administrative board, the upstart Jersey factore which is making polo shirts was closed and invested in the Casteford factory in Yorkshire which even out the heritage trech coat included traditional rainwear and exclusive waterproof gabardine.Burberry overly hire Chris exceedher Bailey as the global designer for innovation of core products. The facts and financial statistic of Burberry from 2006 to 2012 in pick up 1 showed that the decision to focus on the heritage opened up a wealth of creativity. By the end of 2012, the sale revenues and operating income had doubled than previous 5 years, achieving $3 billion and $600 billion respectively. (Burberry, 2007 Burberry, 2012) 2. 2. 3 The Brand Reputation The Brand Strategy The brand is the near(prenominal) valuable part of luxury goods and the motivity of luxury consumption.Once separating from the luxury brand, the goods is the ordinary one. Every successful company sees the brand as the about valuable fortune. they use the advanced marketing logic and marketing motion to motivate the development, explore approaches to express the value and connotation of brands to luxury consumers and take out the royality of customers. As a tool of art, a carrier of history, and a spirit of classic, figureing-up a high quiality reputation is brand strategy for luxury companies.Since founded in 1847, Cartier, as one of the virtually established name in the jewellay market, is the reference point of ture and timeless luxury. Designing by Cartier, the product distinguishes itself by the unique skills and excellence in design and execution. Nearly in 30 years, the extensive art activities are not competitive without the support by the Foundation Crtier decant lArt Contemporain (Richemont, 2013). With the development of brand reputation, Cartier is the synonym of modern art and a pioneering approach. Meanwhile, most of luxury brands come from the centre of Renaissance 2.3 The Features of Chinese Luxury Market Chinese market places the second place in the world of luxury consumption, surpassing the United States since 2008. Along with Japan, china is the strongest market with the increasing demand of 20 pctages. The consulting bill from Glob prefer estimate there are 18 thousand billionaires, 440 thousand multimillionaires and increasing the number of middle class achieving 250 million in 2015 in nowadayss China (Degen, 2009), which have the strong purchase power and need of luxury fashion industry.Even with the influence of the financial crisis, the sale revenue of luxury fashion in the mainland China rose by 16 percent, reaching near 64 billion RMB. The market interrogation about Chinese market laid a foundation for the development and expansion strategy of luxury brands. The shifting attitudes to luxury brands, the greater sophistication of Chinese consumers and the new geographic markets have become the main features of Chinese luxury market. The three characteristics drive the global strategy of development for luxury brands. Figure 2.According to the survey of McKinsey & Company (KPMG, 2013), with the rapidly increase of income, more and more Chinese consumers shifts the attitude to luxury and feel comfortable to purchasing luxury products. The rich consumers which income over 300,000 RMB continued occupy the majority of the luxury purchase. Meanwhile, the statistics show that, the upper middle class (between 100,000 RMB and 200,000 RMB), which account for 22% of luxury goods purchase by the end of 2015, as the Figure 2 suggested, offers the biggest new growth opportunity. 2. 3. 1 The increasing number of overseas travel.In the nurture era, Chinese consumers have become more sophisticated than before. With the surge in the number of luxury stores, fashion magazine, the Web official site and the use of well-disposed media, Chinese consumers familiar with the luxury brands with the help of earnings, overseas travel, and the first-hand experience. For example, the research result indicated that in the last 12 months, the Hong Kong, Taiwan, Macro and Europe become the main destinations of overseas luxury purchase. Figure 3 Where did you purchase your cosmetics in the last 12 months? (Resource from Global Reach of China Luxury of KPMG) pic 2. 3.2 The increase of new market segmentation The rapidly growth of urbanization and individual wealth emerge large quantity of geographic markets with hefty pools of luxury -goods consumptions. The luxury purchase and sale revenue of some medium and itty-bitty cities, such as Qingdao in Shandong province and Wuxi in Zhejiang province, tripled than the previous 5 years. In the side by side(p) years, the luxury consumption in these medium and miniature cities will achieve the same level with Hangzhou and Nanjing, the most developed market in mainland China, the sale of which will arrive at RMB 500 million yuan and account for 76% of whole market.2. 3. 3 The increasing of mold goods Love for luxury, preference for counterfeit is a unique phenomenon in luxury consumption in Chinese luxury market. According to a report entitled Transnational Organized Crime in East Asia and the Pacific from Office on Drugs and Crime, almost 70% of global counterfeits luxury goods come from China and the value of counterfeit luxury goods instanted into traditional luxury market on the order of $25 billion annually.In a confusion society , the luxury consumption of Chine se consumers become more irrationally than western consumer, which depended on the extenral need rather internal need (Zhang & Kim, 2013). For Chinese consumers, luxury brands are somethings must to have for them to reinforce their social status. however, the wealth gap between the rich and the poor in China is the largest all over the world, which offer the passion for consumption of luxury counterfeits. The young generation, aged 25 to 34 with limited cipher for tangible luxury fashion goods, racked up nearly a quarter fo fake fanciers.2. 4 The Passion for Luxury Consumption of Chinese consumers China is the second largest luxury market all over the world and attracting the heed of consumption of Chinese consumers. Under the influence of unique economic office, cultural background and social factor, the behaviour of Chinese consumers in luxury fashion market have the distinctive characteristics. The bling factor influenced by economic situation, the speech face affected by the Confucianism and multitude orientation as the social factor drive the luxury consumption in Chinese fashion market. 2.4. 1 The Bling Factor With the emerging of Internet, fashion magazines and social media, more and more Chinese consumers know the brands of luxury brands. However, the cultural concept and history of the luxury fashion brands are far away from numbers of Chinese luxury consumers. For many luxury fashion firms, there is not one normal luxury customer in China due to the distinct habits, different tastes and different income levels. The bling factor or following the whole market snub remains an crucial factor for the Chinese consumer in luxury fashion market.For example, according to luxury consumer report of Chinese market, almost 60 percent of the respondents in Tier 1 cities including Shenzhen, Guangzhou, Beijing, affect and other Tier 2 cities, stated that the key drivers for luxury consumption is the willingness to pay a product that just is habitual o r fashionable goods. Exclusivity or unique is an important understanding of luxury brand for Chinese consumption. There are about one fifth of customers canvas that they will pay the luxury goods that are kn possess and appreciated by the minority rather than the famous one.In terms of Chinas unique cultural background, the Chinese consumers consider luxury brand value influenced by Confucianism. In the concept of Confucian, the touch sensation of mianzi is defined as a reputation achieved through getting on in through success and ostentation. (Hu, 1944 Dong & Lee, 2007) The traditional cultural understanding and effecting about the face delivery becomes the strongest and most fulgent passion for luxury consumption, which means concerning about the impress to other and the optic display than the level of income.The Chinese consumer in luxury world cause to pay a premium product on the luxury brand rather than essential goods in daily life, due to strong zest and pressure o f maintaining face. Taking the finding of KPMG as the example, comparing with the apparel, the stronger growth of market for fashion accessories is considerable. Nearly 40% of luxury consumers enjoy the luxury experiences and the indemnify of luxury in a physical store/shop over purchases of luxury items.Overall, the face saving (saving mianzi) relates to the individual image of worth and reputation within a collectivism society. As the result, Chinese consumers are much careful not to lose face by standing out from the crowed when consuming luxury goods. The general strategy Although the market has its particular features, the development of luxury fashion strategy in Chinese luxury market is followed the general rules of luxury firms in global market. As the foundation strategy, the brand extension and production diversification alike provide the base of the development in Chinese luxury market.The apparel, handbag, jewellery, fashion accessories and luxury servicers are offere d in mainland China, especially in Tier 1 cities like Beijing, Shanghai, and Guangzhou. Promoting the sale revenue of the core products in mainland China, as the product strategy, enhances the brand cognisance in Chinese market. Expanding the influence, luxury fashion firms invest large amount of bullion to popularize the brand reputation as a simple of civilization and grandeur as well as the means of fashion and art. The marketing strategy raising brand awareness.Due to the lower brand awareness and inadequacy of knowledge of brand value, the royalty of brand in Chinese market is lower than its in traditional European market. The special situation provides a strong externally powerful tool, which means not only expand the value of the luxury brand into a regular root word of consumers, but likewise sway them making a purchase. In late year, luxury fashion firm invest increasing the number of budget into Chinese market not only promote the brand awareness, but also help the consumers inform a notion about luxury goods and luxury lifestyle and why they should purchase luxury goods and luxury services.The brand build-up develop based not only the advertising on life-threatening paper and television, also included the display on luxury goods collection and the customised publications. Nowadays, more and more luxury fashion goods expounding held in Beijing, Shanghai and other cities, which offer a good opportunity for Chinese consumers to predict the luxury goods frequently displayed in store. Meanwhile, more and more consumers visiting the exhibition are not an onlooker. The localisation strategyThe luxury fashion brand with high brand awareness contain the European and American burnish and value which is living standard of high level, the product and design of high quality. Those values accepted by and attract young generation who trend to, however, it is not accepted by all Chinese consumers who have their own value. Respecting to Chinese traditio nal culture and integrated it into the product value is the essential of luxury fashion business in China.For example, Louis Vuitton pose Du Juan, the one of top Chinese model all over the world, and advertising as the Chinese image step one right place on commissioning and help western luxury fashion companies overcome the cultural barriers. This kindhearted of strategy could build up strong attachments among Chinese consumers and help them accepted the unique characteristic of luxury fashion brands. The pricing strategy charge is one of the most significant signals in Chinese business world. For most Chinese consumers, value represented the value of luxury fashion goods.As a result, the luxury fashion products should not go on implication, no matter what the consumer is. The pricing strategy about goods, especially about core products, could bolster a brands prestige. For other items, companies could adjust the price according to the market condition and the inventory in ord er to semipermanent brand building. The sell strategy A stupendous store belongs to the luxury fashion company located in the luxury area build up a sense of important and place by the market.The luxury fashion positioning enhanced if the boutiques are visible to a lot of consumer in major fashion cities. The landmark stores opened in Chinese Tier 1 cities, such as Beijing, Hangzhou and Guangzhou, are the beaver locations to building the brand image and attracting the target customer groups. The commercial centres and shopping malls in luxury area are welcomed by most of fashion lovers, luxury followers and luxury intellectuals.Meanwhile, the investment on the landmark store is the best and effective way to pay profits and build-up brand royalty. In an Internet era, shopping online has become the major shopping way, especially for the young people. Although most luxury fashion companies have shied away from online channels due to the fearing that e-commerce world power reduce t he value of the luxury brand. However, for a long-term return and brand building, online platform provides not only a purchase channel, but also an information exchange channel between luxury fashion brand and Chinese consumers.With the developing of GDP and individual income of consumers, the global luxury fashion market and such the emerging market as China, have become the strategic focus of luxury market researcher and the consult company. This report attempts to identify development strategy of the luxury fashion brand, especially in mainland China market through the analysis of the change of global luxury fashion brand, over earn of Chinese luxury market and the passion for luxury consumption. all those factors were identified depend on a comprehensive review of luxury fashion goods related researches and market consulting reports. The findings of this study provide a new insight of global and Chinese luxury fashion market for the consumers who interests the luxury fashion bra nd and a clear strategy guide for market managers of the luxury fashion firms, particular in the time of the company expand their business in mainland China. In addition, the study helps reduce the risks and be of market research and helps the company overcome the huge gap in a multicultural business environment.First, the findings about the global luxury fashion market and the general development strategy in luxury fashion market all over the world indicated that the achieving the growth while remaining exclusive positioning, and attracting more consumers without losing cachet of brand value is the core strategy for every luxury corporates. The more loyal consumers may weaken due to the popular brands launched in the market because they choose pay a premium goods that majority and identified by small group.Consequently, the balance between growth and unique, the price and quality may be tougher in China than in any other market. However, customization develops quickly as the new t rend of luxury fashion industry. The customizing activities have launched in different business sectors, but which is yet choose by the luxury industry on a board. At presents, the customization just limited on the area of fashion accessories, apparel, handbags, and jewellery, and emphasising on customizing standard products, point of delivery customization and service and producing bespoke goods.Secondly, the increasing the number of consumers, overseas traveller, new market segments and the counterfeits goods have become the main features in the Chinese luxury fashion market in recent years. The features are important of striving the benefits of investment in mainland China. ground on the research findings, world(prenominal) marketers should set extension strategy that is coherent with branding, merchandising and global image by serving Chinas globetrotting shoppers, striking the balance between store numbers and quality and focusing anti-counterfeit goods.For Chinese globetr otting shoppers, the customer relationship management should emphasis global view rather than on mainland China. In the view of higher management board, the corporate transcriptional structure of the luxury fashion company should reflect the significant of Chinese market by sorting up the processes for generating direct communication between Chinese luxury consumers and the home headquarter. Based on the new market segmentation, the luxury company should upgrade watercourse stores and outlets in order to keep consistent with the global image and emphasis on the business in Tier 1 cities.As the market statistics indicated that the luxury counterfeit goods have become the barriers for development in China, including taking hold sale revenue and weakening brand value. Luxury fashion companies should co-operate with springer officials to seize fake goods at ports. Working with international national organisation or international associations should be the third path for anti-counter feit activities. The co-operation should ranges from such international associations as World Intellectual Property to regional groups like US-focused International Anti-Counterfeits Coalition.Thirdly, the research findings about the passions for Chinese luxury fashion consumption indicated that the bling customers who lack of knowledge about luxury fashion goods or just following the trend account of a part of Chinese luxury consumers. at any rate that, Chinese luxury consumption deeply influenced by saving faces and group orientation, which are the part of traditional Confusion value. Targeting different drivers of luxury consumption, managers should have different strategies.For the bling customers, the global luxury firms should invest in improving the brand awareness and expanding the brand value, which could offer a global opportunity to attracting probable customers and building loyalty and repeat customer groups. For the consumers who care about saving face, International luxury fashion markers should draw the outline of visual and outward-bound appearance of rank and status when unfolding their marketing activities. Meanwhile, the companies should emphasise the brands country of origin, so the Chinese consumers have the confident to identified and distinguished with other mass products.In addition, the package of luxury goods also need to be recognisable in order to fit the restrict and lifestyle associated with Chinese consumers. Furthermore, in light of the results about group orientation, the management board company should stress the profit of luxury fashion goods as a symbol of social marker and the sale assistants inspire consumer purchases because of the goods could generate a sense of group belonging and conformity of the elite. Due to the group belonging, a special caution should be given to the layout of the physical store and the luxury service of sale staff.No matter who is the consumer, friends will be involved during the decision mak ing process and become potential consumers in the future. Proving high-quality services and creating luxury experience for non-buyers also benefit for making sure that the brand accepted by group and that the consumer does not stand out from others. Finally, about the current expansion strategy in mainland China market, most of luxury fashion companies emphasis the strategy on marking, localization, pricing and retailing coherent with the global business aims.Raising brand awareness and expressing the luxury lifestyle lay the foundation of marketing strategy. In order to respect to Chinese traditional culture, luxury brands should integrate Chinese culture and art into design, package, and store layout of products, which accepted easily by Chinese consumers in different social class. Meanwhile, the research findings indicated that the price is the most important factor which influenced Chinese luxury consumption. Luxury marketers should balance the price between Chinese market and o verseas.As for the retailing strategy, the luxury brand stresses the developing of boutiques store and the setting up online distribution channels. However, there are several special attention should be given to price gap between China and overseas, and the online distribution channels. On one hand, comparing with that rarely go on send packing in mainland China, the luxury fashion goods is often at a discount at overseas, especially for the non-core products and in the time of Christmas or Summer Sale.On the other hand, the high rate of tax and fees raise up the price of luxury fashion goods in mainland China. According to the law and regulations in China, a luxury fashion goods, such as the eye cream of Estee extoller native to the UK, is imported into Chinese market with 10% import tariff, 30% consumption tax, 5% sales tax and 17% value-add tax. Including the managing fees, advertising costs and other issues, the price of the eye cream is double in the UK.In the respect of the luxury company, the appreciate discount in Chinese market could promote the desire of consumption and boost the sale revenue in the respect of tax policy makers in mainland China, reducing the rate of import tariff and consumption tax of international luxury fashion goods could Finally, luxury fashion goods, as a subject of nature, play different or scenarios, different income level, education background, and social economic factors, as well as exam the type of relationship that seek from luxury fashion brands.On the view of passions for luxury consumption, there are many other drivers, such as collection, appreciation, should take the consideration into further research.