- Definition of the luxury industry and identification of its segments
- determinants of industry evolution
- Competitive forces, influences of the environment: assessing the potential of the Industry and of each segment
- Analysis of the strategic positioning of firms
- Analysis of the strategy of creating value from the "growth model"
Petit Robert defines luxury as "lifestyle characterized by large expenditures for purchases of goods by unnecessary taste for ostentation and the greatest welfare." In light of this definition luxury is something expensive, superfluous and ostentatious.
The common characteristics of these luxury products are: the quality of materials used for the perfection of the production, the scarcity of the product, the reputation and prestige of the brand, selective distribution, sales environment etc. However, to maintain a place in this industry, a company must produce high quality products consistently, and distribute them across the world, thus maintaining the standards and prestige of the brand.
The luxury sector is attractive in terms of its vigorous growth and its high levels of profitability. In this market, competitive luxury companies are forced to increase their presence in the market by investing in distribution, innovation, marketing and communication. Given the inflation of these costs, the economic downturn of 2001 confronted the luxury industry to a severe margin pressure. However, in the past (during the Gulf War and the Asian crisis) the sector has shown an ability to rebound fairly due to the strength of its fundamentals.
In this document, we are going to first define the luxury industry and identify its segments, the determinants of industrial evolution, and its competitive forces and its influences on the environment. Then we will analyze the strategic positioning of the firms, and finally an analyze the growth model of European companies in the luxury industry.
[...] Study of the luxury industry Annual market growth, and firms that were operating in the luxury market from 2000 to 2002 The study will focus on four SBAs: ready-to-wear (for mean as well as women), accessories, jewelry and watches, perfumes and cosmetics. I have reduced it to four SBAs because these are the SBAs with the most number of firms in the luxury market. So the study, allowing comparisons and rankings, is of interest and relevance to the analysis. The SBAs of some companies: Annual Growth Rate of Sales of the Companies (2002/2000) Accessories Ready to wear Jewelry and watches Perfumes and cosmetics C. [...]
[...] Strategies of groups of the luxury industry In the following strategic figure, the size of the bubble represents the group depending on the strategic importance of sales. The financial performance of firms is based on the degree of specialization: Specialization: Extension of the range differs in two ways, when the products are less, the companies offer a confined range whereas when the products are more, the company could vary its range in a broader manner. Financial Performance: It shows the difference between the stock performance in 2002/2003 and the change in the reference index. [...]
[...] The major changes that have occurred in the luxury industry The industry is still in a growth phase The growth of the market’s potential is very important in places where luxury is virtually non-existent, for the establishment of highly developed markets (e.g. China). Developing brand specific distribution networks (where margins are higher). With time, the industry has lost its status as a "refuge area" Purchase behavior have evolved. Evolution of the customer: The phenomenon of democratization of luxury. Phenomenon of intense concentration since 1999. [...]
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