Louis Vuitton Enter Chinese Market Essay Example
Louis Vuitton Enter Chinese Market Essay Example

Louis Vuitton Enter Chinese Market Essay Example

Available Only on StudyHippo
  • Pages: 5 (1371 words)
  • Published: August 20, 2017
View Entire Sample
Text preview

In China, the emerging market with a high growth rate and strong consumer base for luxury products, sales of luxury goods are increasing. In contrast, European countries are witnessing a decline in sales. To address this trend, Louis Vuitton (abbreviated as LV) is expanding its presence in China by opening additional stores.

The objective of this report is to analyze the challenges faced by LV in China, particularly the decline in earnings. The report will focus on identifying factors that impact LV's growth in the Chinese market and develop entry strategies accordingly. This will involve assessing both the internal and external environment of LV, analyzing the operational plan for its entry into China, and creating an action plan for its entry strategy.

 Introduction

Louis Vuitton, abbreviated as LV in the following sections, is planning to open more stores in the

...

Chinese market. However, it is currently experiencing decreasing profits in China, which is prompting a need to adjust its entry strategy into the Chinese market.

The purpose of this study is to outline strategies for LV's entry into the China market. This will involve examining the internal and external factors that influence LV's development, such as state factors and internal advantages. Additionally, a SWOT analysis will be conducted to analyze the operational plan for LV's entry into China. Recommendations will be given regarding firm strategy, organization structure and management, entry strategy and modes, manufacturing management, and marketing plan.

Research Methods: The study aims to analyze the fields of accounting and finance management, and develop an action plan for LV's entry strategy. The research method chosen for this study is literature searches, as there is a wealth

View entire sample
Join StudyHippo to see entire essay

of existing studies on the development of luxury goods, allowing for comprehensive literature reviews.

Additionally, there are numerous resources on the one-year studies of Louis Vuitton that provide insights into the financial performance of this company. Nevertheless, luxury goods are highly desired by the majority of individuals.

which makes direct interviews or studies less available.

External and Internal Environment

The section will examine the internal and external factors that influence LV’s development from the perspectives of state factors and internal advantages. This section will also include a SWOT analysis to identify the strengths.

According to analysis on the internal conditions of the company and the external environment, the company is facing a failing chance and menace (Johnson ; Scholes, 2002, p122). The external environment, specifically the political relations, government policy, economy, and China market, will be discussed regarding LV's entry into China.

The text discusses the societal civilization and transit of China, as well as the opportunities and threats for LV's entry into China. In terms of politics and government policy, China is currently embracing global openness and improving trade relationships with international brands, following the reform and opening up policy. Regarding the economy and the Chinese market, Yuval, Vinay, and Cathy (2011) provide insights.

According to analysts from Mckinsey quarterly, China is witnessing a surge in urban cities with an emphasis on dining, including second- and third-tier cities. Furthermore, China possesses the second-largest GDP worldwide, signifying a robust purchasing power for luxury items among Chinese consumers and substantial market potential (paragraph 8). The analysts also forecast that by 2015, Chinese consumers will account for over 20% of the global luxury market. Consequently, numerous luxury-goods companies are venturing into the Chinese

market to capitalize on this considerable market potential.

The competition is becoming more and more intense, which is troublesome for LV as there are numerous counterfeit goods imitating LV's style that are prevalent in China. These counterfeit goods are unlikely to diminish LV's high-end consumers, but they do have a negative impact on consumers' perception and awareness of LV in terms of social culture.

China consumers are particularly attracted to middle- and high-end products and have a strong preference for French luxury goods. They also hold the belief that higher prices are indicative of better quality (Yuval, Vinay, and Cathy, 2011).

paragraph 7 (Exhibit 1). Additionally, the Chinese mindset is deeply ingrained with the traditional value of thrift, leading some wealthy individuals in China to indicate that they would not spend a large sum of money to purchase a product. (Exhibit 1) In terms of transportation.

";

The Emirates group has launched air modus operandis in the chief metropoliss of China, increasing air hoses. Additionally, railway transit and route transit are becoming more available, making cross-national transit convenient and fast. As a result, it can be concluded that the opportunities for LV's entry into China include China's promoting policies on foreign brands entering the country, the presence of dining urban metropoliss and an increasing middle- and upper-class consumer base with strong buying power, Chinese consumers' preference for French high-end products, and the increasingly convenient cross-national transit in China. However, there are threats to LV's entry into China, such as fierce competition from equal companies and brands, the proliferation of forgery products copying LV in China, and Chinese consumers' cautious traditional views on luxury goods buying.

Regardless, LV's success or

failure in tapping into the desires and demands of Chinese consumers when it comes to luxury goods could either be an opportunity or a threat for the company's expansion in China. On a national level, LV has the advantage of having a preference for and the opportunity to greatly expand its business in China due to its extensive experience operating in the country's market for about twenty years.

and its strong influence on and attraction to Chinese consumers, as well as customer loyalty towards it. However, there are also disadvantages such as the high price of the products, which can greatly affect the willingness of Chinese consumers to purchase them, and the potential for easily imitated appearance and style that some Chinese manufacturers exploit to produce counterfeit goods. Internal environment based on company level

 The Characteristics of LV's Products

According to Dubois and Czellar and Laurent (2001), luxury goods are products that possess exceptional quality and come with a high price tag.

The passage on page 156 emphasizes the unique and exquisite qualities, as well as the aesthetic appeal and historical significance, which contribute to a sense of superiority over others.

According to Yacine, Johnathan, and Motohiro (2004), the production and design of luxury goods should encompass manual crafting and diligence. These researchers concluded that LV's products can be described as unique, rare, excellent in quality, and extraordinary.

According to Kapferer (1996), the luxury industry caters to the unique demands and desires of affluent individuals, particularly notable figures in society, by producing exceptional products that serve as status symbols for the wealthy (p251). In addition, Heine (2010) noted that the luxury industry is also focused on

fashion and ensures high quality, aligning closely with the needs of the wealthy.

Based on these studies and the current promotion of luxury products, the industrial characteristics of luxury goods can be summarized as exceptional quality with high warranty, highly personalized with unique designed fashion, strong brand recognition and customer loyalty, and highly profitable sales based on its high price.

The internal environment for LV on house degree has both pros and cons. A key pro is its robust brand image, which plays a role in its success. Moreover, LV boasts a varied product range and has witnessed substantial growth in China, especially in major cities. Another advantage lies in the company's ability to oversee product design. These benefits are evident in the following areas.

LV is highly regarded for its superior quality and outstanding services, earning it the top spot in the 2012 Hurun Ranking of the Top 10 luxury brands in the world (see Appendix 1). In this ranking, LV surpasses Hermes, the second brand on the list, by approximately 43%.

Additionally, Louis Vuitton provides unique, hand-crafted merchandise tailored to specific clients. Moreover, the company offers long-lasting after-sales services to its customers (Paul, 2012, p79).

The main drawbacks of LV are its lower production rate and higher cost, resulting in less affordability. This is due to the fact that creating high-quality products takes time and manual effort (Jill ; Glenn ; Taro, 2009).

Selling Potencies

In recent old ages, the China authorities

has made accommodations towards Foreign Direct Investment. It cancelled the excess fillip policy which had existed since the 1980s when China actively encouraged investing on foreign endeavors ( Dan.

In 2009, the general inclination to attract foreign companies to come to China is still unabated. Therefore, para1.) Anyway.

Authorities policies and ordinances in China still support the promotion of LV. This suggests that China still has a great market potential for LV as long as it adjusts itself to take advantage of opportunities and avoid disadvantages in the environment. In the following section, an operational plan will be created based on an analysis of the external and internal environment to assist LV in entering and effectively competing in the Chinese market. This plan will also consider firm strategy.

Organisation construction, direction, scheme, and manners of LV's entry into China, fabrication direction, and overall selling program.

LV is confronting the entry of rivals in the accounting and finance industry. The corporation has implemented a scheme to guide the future development of businesses, which includes a distinction strategy and a low cost strategy (Gerry & Keven & Richard, 2008).

The suggested house scheme for LV to compete in the China market is to differentiate itself from other luxury companies and brands, as well as reducing costs. This strategy includes not only the regular release of new products and quality control measures typical of most luxury companies, but also aims to lower expenses.

LV is expected to prioritize client services, providing an exceptional experience. This includes offering individualized consultancy to understand each client's needs and helping them align their personal values with LV's values. Additionally, they are exploring ways to reduce costs.

It can

be achieved by reducing the operational cost of LV and implementing cost control in the supply chain of LV. For example, the company can integrate its resources and improve its supply chain by collaborating with trusted partners who specialize in logistics management. This collaboration can lead to price reductions in transportation costs and save time for product updates.

 Organization Structure and Management

The management of organizational structure is crucial for effectively achieving specific goals at Gerry & Keven & Richard.

According to LV (2008, p137), departmentalization is the suitable organizational structure for LV as an international company. Through departmentalization, human resources are gathered and the organizational structure is formed.

The introduction of the deputation process aims to delegate certain authority and responsibilities to staff members, promoting harmony and trust between leaders and staff (Robbins & Mary & Nancy, 2005, p165). LV has numerous stores in China, and it would be advantageous for the headquarters to delegate authority to the branch directors in China.

Those who have the ability to efficiently and quickly handle the shops can implement the form of departmentalization and delegation. This allows for the adoption of decentralization. If a company's business is fast-paced and prone to frequent changes.

It operates in various countries and follows a decentralized approach (Robbins & Mary & Nancy, 2005, p165). LV, being an international luxury company with operations across different regions of China, prioritizes timeliness and adaptability in response to the constantly evolving fashion world.

Decentralization is well-suited for LV's development in the Chinese market.

Entry Scheme and Manners

The entry modes for international companies include strategic confederation, exporting, licensing or franchising, joint venture, and establishing a new entirely owned subsidiary.

According

to David & Cynthia (2004, p147), established endeavors strive to achieve success. LV is a luxury brand that distinguishes itself as high-end, exclusive, and expensive.

According to Giacalone (2006, p33), it would be more advantageous for the company to establish its own stores in the specific country. LV, which already has its own stores in China, chooses the wholly owned subsidiary approach to maintain its distinct and autonomous identity.

In order to enforce global standardization and successfully operate in China, it is imperative for LV to establish a presence in various locations across the country. Currently, LV has opened stores in all the different regions of China according to Exhibit 2. Furthermore, LV primarily focuses on first-tier cities with less emphasis on second-tier cities as an example.

Approximately 33% of LV's shops in China are found in Hong Kong, Macau, and Taiwan (Exhibit 2). Meanwhile, there are numerous second-tier cities in mainland China where a significant number of affluent individuals reside. According to the table of index of China's cities for luxury merchandise operation (Exhibit 3), second-tier cities such as Shenyang and Dalian are included.

Hangzhou and Chengdu are both cities with great potential for luxury merchandise operations. Additionally, second-tier cities like Dalian, Hangzhou, and Chengdu are popular destinations for tourism in China. Tourists visiting these cities are more likely to purchase luxury goods during their enjoyable vacations, often with planned shopping lists.

In addition, the rental rates in second-tier cities are significantly lower compared to first-tier cities such as Beijing and Shanghai. This is especially beneficial for LV, whose stores often occupy a substantial amount of space. Opting for second-tier cities will enable LV to save a significant amount

of costs.

Therefore, LV should prioritize second-tier cities as the main focus of their operations in the Chinese market.

Manufacturing Direction

Manufacturing direction involves producing goods for global markets and managing outsourcing and logistics (Philip & Gary, 2009).

Chapter 13. Regarding LV, its production is exclusive and highly regarded by consumers because they are made in France and known for being high-quality and luxurious.

In this particular instance, the production activities of LV should be based in France. In terms of logistics, it would be beneficial for LV to outsource logistics management to professionals in this field as LV lacks experience in logistics and should focus on production and sales of products instead.

Selling Plan

The marketing strategy can be developed by considering the following aspects: product attributes.

Distribution methods, methods of communication for attacks, and pricing scheme (Alan and Simon, 2012).

p399). Besides the four aspects mentioned above, sales strategy is primarily influenced by market segmentation (David & John, 2012, p102). Regarding age.

The text discusses the socio-cultural, economic, and psychological factors in relation to LV's target market in China. Specifically, LV targets individuals under the age of 40, primarily focusing on adults.

LV should focus more on the younger generation, who are potential clients for LV in the future. Additionally, the young people from wealthy families in China often have the advantage of their parents' support and financial assistance to purchase luxury goods. As a result, it is important for LV to pay attention to this demographic.

Focusing solely on merchandise for young people is highly lucrative and can also contribute to LV's growth. The characteristics of the product are crucial for product development, as long as they meet the customer's needs.

According to Alan and

Simon (2012, p.399), the merchandise will definitely increase sales. LV's merchandise is recognized for its exceptional quality and high price.

The rarity and singularity, along with the aesthetic entreaty and respectful long history, create a high-toned consciousness that perfectly caters to customers' demands for a supreme experience and extraordinary gustatory sensation.

Therefore, LV should focus on creating merchandise designs that set its products apart from those of other brands in order to maintain customer loyalty. When it comes to distribution methods, LV should stick to its strategy of selling its products directly to consumers through its independent shops and distribution system.

Despite the circumstances of the China market, it is possible for LV to establish online shops. China is currently experiencing a dominant trend in internet shopping, and its electronic commerce industry is gradually maturing.

According to The Economist (2011), online shopping giants Amazon and China's T-Mall have experienced significant growth in recent years. This is particularly true for Chinese consumers, both young and old, who have a preference for online shopping.

As internet availability continues to increase in China, there is great potential for LV's online stores in the Chinese market. LV mainly focuses on direct marketing and advertising for communication strategies. Additionally, direct merchandising through physical stores is also important for LV's efforts.

The communication between consumers and LV staff is enhanced by creating opportunities. When it comes to advertising, LV carefully selects spokespersons to promote its values and product features to consumers. Choosing spokesmen for LV is beneficial for its growth in China, especially for attracting the younger generation.

For representation, Bingbing FAN, the newly chosen and sole ambassador for LV in China, perfectly embodies the essence of LV:

distinctive, autonomous, and refined. This has significantly increased the attention given to LV in China and heightened public interest in the brand recently.

Therefore, the selection of a spokesperson who can appeal to the Chinese market would benefit LV. However, the country-of-origin effect has an impact on the Chinese people, who have a strong belief in French luxury products (Glamheden, 2006).

According to the pricing strategy, it is more advantageous for LV to maintain consistent prices across different countries. This implies that the amount spent by consumers in an LV store in China should be equivalent to the amount spent in France. The rationale behind this is that some Chinese individuals choose to travel to France to purchase LV products at a lower cost. The objective is to increase sales in the Chinese market.

It is preferable to utilize the identical pricing structure.

Accounting and Finance Direction

In terms of LV's accounting direction in China, it is necessary for LV to closely monitor the increasing price conditions in the Chinese market. These prices have been steadily rising in recent years, affecting both food and non-food items (Jay and Azhar, 2011).

para2) LV should align its pricing scheme and accounting direction with the inflation conditions in China. This is important because if inflation rises, the value of assets will decrease, and the original price of LV's products will not accurately represent their real value (Mankiw).

According to Mankiw (2011, p643), the increase in prices leads to the devaluation of money, resulting in the advantage of exporting from the domestic country and disadvantageous for importing from foreign countries. This highlights why LV should adjust its monetary value based on China's inflation conditions in order

to maintain a competitive advantage.

LV's fiscal direction should prioritize fiscal control and money management (Alan ; A; Simon. 2012. p423). Now that LV has decided to enter the Chinese market, the emphasis should be on fiscal decision-making and money management.

In terms of financial decisions, Alan and Simon's theory (2012) suggests that LV may choose to use local debt funding in the Chinese market, where the local currency has recently depreciated. As for money management.

LV should aim to reduce the dealing costs that occur when a house transfers hard currency from one currency to another (Alan & A; Simon, 2012, p433). Recommendations - action plan: With the assistance of discussing the China market environment for LV.

The text below provides an analysis of LV's entry into China in the old subdivisions and presents recommendations for action programs. It suggests that LV should focus on high quality and unique client services to distinguish itself from other luxury companies.

The organization should incorporate resources from its supply chain and form long-term partnerships with professional logistics partners in order to follow the cost-cutting scheme and reduce transport expenses. It is recommended for the organization to adopt a departmentalization structure that combines functional forms such as product, consumer service, and geographic area.

LV can introduce the method of deputation to authorize directors in China shops. Additionally, implementing decentralization will enhance LV's effectiveness and efficiency in China. Lastly, entry schemes and manners should also be considered.

LV should select its targeted locations in China with completely owned subsidiaries. Besides first-tier cities, second-tier cities with strong purchasing power and lower rental costs would be suitable for LV to establish new stores. Regarding manufacturing management.

LV's

production activities are expected to be based in France, which has a positive impact on Chinese consumers who value goods made in France for their reliability and high quality. In terms of logistics, LV is known to outsource its logistics management to specialized companies.

When it comes to selling the program, LV should emphasize the attributes of its merchandise, such as high quality and unique design, to consumers. The company should use advertising strategies that involve spokespersons to effectively communicate its message. Additionally, LV should aim to keep prices consistent across different countries without making drastic changes. As for accounting and finance management,

LV needs to align its pricing strategy and financial approach with the inflationary situation in China. Additionally, it should prioritize its financial and money management decisions. In particular, LV could consider adopting local debt funding in the Chinese market.

And seek to reduce the dealing costs.

Mentions

     

  1. Alan M. ; A ; Simon C. (2012).
  2.  

  3. International concern. London: Pearson. Dan H. (2009).
  4.  

  5. Foreign direct investing in China-the times has changed. Retrieved from: hypertext transfer protocol: //www. chinalawblog.com/2009/04/foreign_direct_investment_in_c_1. hypertext markup language David C.

; A ; Cynthia M. ( 2004 ). Corporate scheme. New York: McGraw-Hill. David J. ; A ; John F. ( 2012 ). Foundations of selling.

New York: McGraw-Hill. Dubois, B. and Laurent, G.

;A; Czellar. S. (2001). Consumer resonance to luxury: analyzing composite and ambivalent attitudes. Retrieved from: hypertext transfer protocol://ideas.repec.

org/p/ebg/heccah/0736. html Gerry J. . Kevan S. ; Richard W.

(2008).

  • Researching Corporate Strategy. New Jersey: Prentice Hall. p245-p266. Giacalone.
  • J. (2006). The market for luxury goods: the instance of the Comite Colbert. Southern Business Review. 32 (1). 33-40. Glamheden A.

    (2006).

  • Country-of-origin effects and consumer attitudes towards luxury trade
  • names. Doctoral thesis. University of St. Gallen. Retrieved from: hypertext transfer protocol: //www.

    gbv. department/Heine. K. (2010).

  • The personality of luxury fashion brands. Journal of Global Fashion Marketing.
  • 1 (3). p88. Jay H. ; A; Azhar I. Does China have an inflation problem? Wells Fargo Securities.

    The following text is retrieved from hypertext transfer protocol: //www. realclearmarkets. com/blog/ChinaInflation_03292011_final % 5B1 % 5D. pdf

  • Jill G.
  • Glenn B. ; A; Taro I. (2009). Art, manner, and architecture.

    New York. Publisher: Rizzoli. Authors: Johnson, G; Scholes, K.

    The text includes the following  and content:

    (2002).

  • Researching corporate schemes. New Jersey: Prentice Hall.Kapferer. J. (1996).
  • Pull offing luxury trade names.
  • unified:

    The text contains information about a book published in 2002 on researching corporate schemes by Kapferer, as well as another book written by Kapferer in 1996 on managing luxury trade names.

    The Journal of Brand Management. 4 (4). 251-260. Mankiw G. ; A; Mark P. (2011).

  • Economics.
  • 2nd Revised erectile dysfunction. UK. New York: Cengage Learning. Paul G. P. .

    On December 1, 2012, Louis Vuitton emerged as the epitome of modern luxury in the United States.

    New York: Abrams. Philip K. ; Gary A. (2009).

    Principles of selling. U. S. A. Washington: Pearson Education.

    Robbins p. ; A; Mary C. ; A; Nancy L. (2005).
    Management. 8th edition. Canada.

    Washington: Pearson Education. The Economist Journal. (2011).

  • E-commerce in China: the great leap online. Retrieved from hypertext transfer protocol://www.
  • Economic expert. com/node/21540260Yacine A. . Johnathan A. ; A ; Motohiro Y. ( 2004 ).

  •  Luxury goods and the equity premium. The Journal of Finance. Vol. 6. No. 6. p46.
  •  Taping China’s luxury-goods market. Mckinsey quarterly. Retrieved from hypertext transfer protocol: //www.

  • mckinseyquarterly. com/Tapping_Chinas_luxury-goods_market_2779

    Get an explanation on any task
    Get unstuck with the help of our AI assistant in seconds
    New