April 25, 2020
Japan had always been viewed as the capital of luxury, hence a huge market for luxury brands. Thus, in the 1970s, Louis Vuitton took advantage of the Japanese market and opened a departmental store that sold a single brand of its collection. Thereby, Vuitton became the first multinational house to open luxury shops in the country. Moreover, Vuitton established its own subsidiary, which made it a pioneer of exporting products from France to Japan.
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Strategic Problem Statement
Despite the enormous growth of Louis Vuitton luxury goods, it experienced tremendous losses when the global recession struck in 2008, as most of its products were very expensive. The sluggish economy made Vuitton reduce its prices by 7%. Additionally, the competition with other brands that offered quality products at affordable prices changed the mindset of many Japanese consumers.
Tactical Problem Statement
The economic slowdown experienced in 2002 due to the terrorist attacks of September 2001 in the US caused a decline in sales of luxurious goods. While previously young women were more beauty conscious and imposed by social expression to consume luxurious brands, they declined the toleration of the high prices that had earlier created the desirability. Nevertheless, the challenge remained as to how Louis Vuitton would refuel growth.
By February 2009, HSBC estimated that about 45% of worldwide luxury goods were sold in Japan. It seemed to be a must for the Japanese population to consume luxurious brands for social expression. It is during this time that Louis Vuitton made its largest sales since items became more on-demand as prices rose. To a greater extent, Japanese women had the psychological need to possess something that was considered beautiful. As from the year 2000, the consumer considered luxurious goods differently, as the market changed to more sophistication such that brands no longer represented membership in the urban class. However, it was after the economic crises of 2008-2009 that the Japanese consumers shifted their preference, as young women started changing their perspective on money and luxury.
1. Symptom: Louis Vuitton was a well-established brand named after its founder and was among the oldest fashion houses in France. After the death of Louis, his son Georges Vuitton succeeded him in leading the brand into a multinational corporation. George Vuitton created a monogram canvas whose inspiration came from Japanese designs. In 1936, after Georges Vuitton’s death, his son Gaston Vuitton succeeded him and proceeded with his father’s work.
Issue 1: (Strength) Clearly, Louis Vuitton was largely a family business passed on from generation to generation, so it was of sentimental value to the leaders. Additionally, it is possible that the succeeding leader was well-groomed by their predecessor in preparation for the succession.
2. Symptom: When Gaston Vuitton took over the company, he led it to the modern age and expanded the craftwork and design of leather to smaller goods like wallets and purses. Consequently, the monogram canvas became redesigned in 1959 to incorporate the new products. In 1998, the brand decided to appoint Marc Jacobs as its art director. This was a smart decision, considering Jacobs was a successful international designer. Jacobs guided Vuitton to its first shoe collection that aimed at setting up the company as a trendsetter in high fashion. Henceforth, Louis Vuitton’s marketing strategy involved capturing the attention of consumers through its limited edition collection and reinvigorating the brand’s identity.
Issue 2: (Strength) The issue here is that the company keeps innovating new products to provide variety to its customers.
3. Symptom: In the mid-1970s, Louis Vuitton had the world’s largest market share in the luxury brand. The owner of the brand had mostly focused on the Japanese clientele and earned an annual profit of ten million US dollars by 1977 from its two stores in Japan. It was later in 1983 that the brand tapped to the Asian market. Further growth was experienced when LVMH was established in 1987 to form the world’s largest conglomerate of luxury goods.
Issue 3: (Opportunity) The issue here is the brand market share. Louis Vuitton has enjoyed a large market share and capitalized on the most profitable market, hence made huge profits.
4. Symptom: Louis Vuitton’s marketing strategy was aggressiveness in the opening of extravagant stores like those in Ginza, Namiki-Dori, and Mitsukoshi. The market was so good that, on opening a shop in Omotesando Tokyo, people queued outside to buy its products, and while at it, the sales estimation for the first few days exceeded one million Japanese Yen. This made Japan be among the most profitable markets for Louis Vuitton, as half of the company profits came from Japan.
Issue 4: (Opportunity) The issue here is that the target market was appropriate, hence yielded great profits. This was an opportunity well taken into account.
5. Symptom: Needless to say, other companies were attracted to the market, hence created a competition. By 2006, brands like Burberry, Gucci Group, Baccarat, and Salvatore Ferragamo also accounted for the 26% total revenues of Japan. In addition, Coach and Tiffany and Company became the second largest brands of luxury goods in Japan.
Issue 5: (Threat) Competitors are a threat to the Louis Vuitton brand, as they are equally determined to attract new customers, hence may attract some of Vuitton’s customers and reduce their customer base.
6. Symptom: The key to successful brands was quality, but foreign brands started challenging the market share by offering high-quality goods at competitive prices. When brands like H&M tapped into the market in 2008, they used their fashion concept to revolutionize the market. Affordability became the new concept that changed the Japanese customers to resemble top fashion models showed on catwalk shows.
Issue 6: (Threat) The issue here is that competitors are engaging in more attractive deals and changing the market direction, hence the need to keep pace with the new market trends.
7. Symptom: Japan was long famous for a group-oriented culture that pushed people to possess status-driven brands. Essentially, most of the urban population owned expensive brand items in a manner that was more deeply ingrained than other developed cities like Sydney, Paris, or New York. This attachment to luxurious brands was due to the Japanese need for social and cultural homogeneity.
Issue 7: (Opportunity) The issue is that culture influences market decisions, hence the need to study it keenly and include its needs in the brand.
8. Symptom: Japanese habits were affected by the high population density and the presence of a largely middle-class society. Furthermore, the people of Japan spent most of their time away from home unlike any other culture, hence making the Japanese society an impersonal society in which appearance played a major part in correspondence with the social status of a person. However, times changed, and Japanese women became more conscious of money value to the extent that lower-priced accessories were reported increasing sales in recent times. Consequently, the luxury market was affected by the changes in women’s choices.
Issue 8: (Threat) The issue here is the change in customer preference from luxurious goods to affordable goods.
9. Symptom: Counterfeit products were also a major setback for the LV brands. Fake bags falsified the LV logo and created a market dilution. It was the end of the 1990s that fake Louis Vuitton products flooded the market in Hong Kong, Seoul, Los Angeles, and Tokyo. Interestingly, when it became difficult to distinguish between the fake and authentic products, consumers never minded buying the counterfeit despite the possibility that they owned some authentic bags. Meanwhile, the Japanese law did not do much for protecting intellectual property, as it got modified in 1985 to mirror the Western laws, hence making counterfeit a big issue in the years that followed.
Issue 9: (Threat) The issue here is that counterfeit products overshadow the authentic products, hence there is a market share, especially when the consumer cannot distinguish between the authentic and counterfeit products.
10. Symptom: The success of Louis Vuitton came from its dedication to constantly improve the quality of its products while offering a lifetime repair guarantee for its customers. The brand strove to increase customer loyalty and attract more consumers. It provided a range of bags, for example, monogrammed bags, suhali bags priced at 2000 dollars, and Murakami bags priced at 1000 dollars. Thus, when Jacobs started working for Louis Vuitton, he had the challenge of attracting younger buyers. Luckily, Jacobs’ product lines tapped younger consumers into the market due to the brand image while older clients were attracted by the quality and free repairs.
Issue 10: (Strength) The issue here is constant loyalty to the customer, which creates trust. Moreover, the expansion of brands attracts more consumers.
Importance of Issues Categorization
1. New competitors threaten to enter the market (Issue 5)
(Louis Vuitton brand must be more aggressive to retain their customers by giving better incentives like discounts).
2. Newmarket trends (Issue 6)
(Louis Vuitton needs to embark on the new trends that attract customers, such as using the entertainment industry to their benefit).
3. Change in customer preference (Issue 8)
(Vuitton needs to adjust its product range and prices to those that suit the market).
4. Inform consumers about the difference between counterfeit products and authentic products.
(Vuitton needs to take the initiative of informing consumers of how to differentiate between fake and real products).
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1. Empower future leaders through grooming (Issue 1)
(Louis Vuitton should embark on empowering its employees for better management and growth in the future).
2. Encourage innovation (Issue 2)
(Vuitton brand should keep inventing new ways of keeping the consumers interested in their products).
3. Expand market share (Issue 3)
(Vuitton should exploit new markets and tailor products to their needs).
4. Proper target market (Issue 4)
(Vuitton should keep targeting other suitable markets for its product).
5. Cultural practices examined (Issue 7)
(Before venturing into new markets, it is advisable for Vuitton to identify with the culture of the people living in the region, as it affects consumer choices).
6. Constant Loyalty to customers (Issue 10)
(Vuitton should continue ensuring that customer loyalty is maintained in order to create a strong unwavering customer base).
On issue 1
Alternative 1: Empower other employees to feel part of the brand.
Alternative 2: Appoint more capable employees into leadership.
On issue 2
Alternative 1: Look for alternative raw materials.
Alternative 2: Keep encouraging innovation of new products.
On issue 3
Alternative 1: Expansion into other unexploited markets would lead to a larger customer base.
Alternative 2: Encourage consumer consumption through incentives.
On issue 4
Alternative 1: Vuitton did well in choosing a target market.
Alternative 2: Conduct market research on what the target market would like to be improved.
On issue 5
Alternative 1: Retain consumers through the benefits of loyalty and attract more consumers.
Alternative 2: More marketing of the brand’s products.
On issue 6
Alternative 1: Louis Vuitton needs to adjust to consumer trends.
Alternative 2: Louis Vuitton could use similar techniques of competitors to woe the customers.
On issue 7
Alternative 1: Culture needs to be considered before setting up the brand in an area.
Alternative 2: The brand could introduce a new product into the market through the provision of samples.
On issue 8
Alternative 1: The brand could find cheaper sources of raw materials.
Alternative 2: The brand needs to reduce brand prices to an affordable price.
On issue 9
Alternative 1: Produce products with an alternative material.
Alternative 2: The company could sue the producers of counterfeit products.
On issue 10
Alternative 1: The brand should continue being loyal to its consumers.
Alternative 2: The brand should undertake market research on what could be more profitable to the business.
For all the above issues, alternative 1 is recommended. In regards to issue 1, empowering all employees towards managerial levels would assist in making them feel like part of the brand, hence work towards improving it. As for issue 2, looking for alternative raw materials would promote the invention of better and possibly cheaper products that would attract consumers. When it comes to issue 3, a plan to expand into untapped markets would be a good way of expanding the customer base, hence increase profits. As for issue 4, Vuitton should use the same or better procedure in identifying the target market. Meanwhile, in issue 5, consumer appreciation programs should be put in place to ensure their loyalty. Next is issue 6 where Louis Vuitton needs to consider evolving as per customer needs in order not to lose consumers. In issue 7, the culture of a new market needs to be understood and adhered to before establishing the brand in the area. The other issue is number 8, and it requires the brand to invent ways that facilitate lowering the brand’s prices. As for issue 9, the brand needs to find alternative materials that could be equally good in making their products. Lastly, issue 10 requires that the brand loyalty to consumers be maintained, as this will retain its reliability.
Louis Vuitton enjoyed its golden days when it was the largest luxury business in the world, as it made huge profits. Unfortunately, conditions started changing after the global recession when luxury brand prices were considered very high, and the consumers started changing their perspective. The young women in Japan started valuing money more and preferred to seek affordability. Moreover, competitors came with new tactics while counterfeit products increased in the market. It is these changes that create the need for Louis Vuitton to rethink their marketing strategy in order to produce affordable collections.
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