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Luxury Goods in Emerging Markets 2013 - Competitive Analysis
W H I C H
B R A N D S
DID THE
BEST IN
2 0 1 2 ?
Luxury Goods 2013 – Competitive Analysis
The 2012 financial results
are in!
Which brands will outperform amidst a Chinese slowdown and
more discerning customer tastes?
Data compiled from annual reports, Bain 
Co., BNP Paribas and Bloomberg, 2012
33
29
17
16.4
16
13
9
8.2
7.6
6
Bottega Veneta
Prada
Christian Dior Couture
Hermes
Salvatore Ferragamo
Yves Saint Laurent
Richemont
Gucci
Tod's
Louis Vuitton
Revenue Growth at Constant Exchange Rates (%)
Industry  Growth  Rate,  2012  
T H E
C H A N G I N G
L U X U R Y
L A N D S C A P E
Luxury Goods 2013 – Competitive Analysis
The Spread of Luxury Model
in Emerging Markets
Subjugation
• Authoritarian rule
• Poverty and
deprivation
Start of Money
• Economic growth
• Elites start buying
luxe
Show Off
• Acquire symbols
of wealth
• Display economic
status
Fit in
• Large scale
adoption of luxe
• Fueled by need to
conform
Way of Life
• Locked into luxe
habit
• Confident,
discerning buyers
HSBC  The Cult of the Luxury
Brand, 2012
India, Brazil
China
Taiwan/S. Korea
Hong Kong, Singapore
Japan
HSBC estimates that over 25% of global
luxury goods sales are made by the
Chinese in 2012, meaning that China
essentially holds great power to make or
break a brand’s profits
Luxury Goods 2013 – Competitive Analysis
Increasing customer
sophistication in China
❧ Luxury customers are getting younger
and more knowledgeable
❧ First-mover disadvantage: Louis
Vuitton  Gucci
❧ “In the Show”  “In the Know”
❧ Leather  Coated Canvas
Luxury Goods 2013 – Competitive Analysis
Where did LV and Gucci’s
market share go?
    
    
    
Adapted from HSBC, 2012
Dior,
Chanel
Bottega Veneta, Goyard,
Valextra, Tom Ford, VBH
Designer Apparel 
 Accessories
Louis Vuitton, Gucci,
Tod’s, Prada, Burberry
Coach, Polo Ralph Lauren,
Tory Burch, Tommy Hilfiger,
Agnes B, Longchamp
Designer Eyewear
Designer Cosmetics 
Fragrances
Armani Exchange, Abercrombie 
Fitch, Jack Wills, Topshop,
Wildfox Couture
Superpremium
Premium Core
Accessible Core
Affordable Luxury
Everyday Luxury
5,000
1,000
300
100
Price points in USD
 Number of
points of sale
SUBSTITUTION
Hermes
Luxury Goods 2013 – Competitive Analysis
“Mass” vs. “Class” 
Exclusivity
Accessibility
Ubiquity
Rarity
Adapted from Financial Times
Research, 2012
C R E A
T I N G
A R T
FROM
COMM
E R C E
Luxury Goods 2013 – Competitive Analysis
Background
❧  Founded in Italy, 1913
❧  Currently headed by Patrizio Bertelli and
Miuccia Prada
❧  Targets an international customer base
that is “modern, sophisticated, attuned to
stylistic innovations, and expects
craftsmanship of the highest quality”
Luxury Goods 2013 – Competitive Analysis
Background
❧ Core business: Bags, 57% of total
revenue
❧ Produces 8 collections each year
❧ Positioned at slightly higher price
points than LV, Gucci, Burberry
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Financial Resources
❧ Listed in HK and raised $2.14
billion in its IPO
❧ Market Capitalization:
HKD 185,642.69 M at 28/4/13
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Physical Resources
❧ Distribution network of 283
directly-operated Prada stores
❧ 4 Epicenter flagship stores
❧ 10 factories in Italy and a
network of 480 external
manufacturers, 20% of them
abroad
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Technological Resources
❧ Patented fabric “Pocone” - a
waterproof type of nylon with a
fine twisted weave that
appeared as light as a silk
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Technological Resources
❧ Saffiano leather with a
patented diagonal cross-hatch
pattern
Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Human Resources
❧ Highly specialized and
dedicated production
employees – most have worked
over 20 years for Prada
❧ Business acumen and risk-
taking disposition of Patrizio
Bertelli, CEO
Luxury Goods 2013 – Competitive Analysis
Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Reputational Resources
❧ 6th most valuable luxury brand
in 2012, with brand value of
$5,788 M (Millward Brown Optimor)
❧ Reputation for 
– Sophisticated and subtly appealing
apparel
– High quality and durable leather
goods
Luxury Goods 2013 – Competitive Analysis
Capabilities
Fabric innovation
❧ Close partnership with Italian fabric
mills to create unconventional fabrics
every season
❧ Unorthodox use of traditional fabrics
Kid Mohair 
in 02 S/S Menswear
“I was forbidden to use it, 
and of course,
it became a best seller for us.” 
– Miuccia Prada
Luxury Goods 2013 – Competitive Analysis
Capabilities
Avant-garde design
philosophy of Miuccia Prada
❧ Non-conformity to trends
❧ Subtle branding
❧ Dedication to create something
completely new every season 

“If you want to make something new, you need to make your
mind blank and just look with your eyes, just judge with
your eyes.” – Miuccia Prada
Luxury Goods 2013 – Competitive Analysis
Capabilities
Global sourcing of skilled
artisans
❧ Miuccia Prada went in search of the
most specialized craftsmen all over
the world
–  eg. Alpaca wool knitters from Peru,
leather weavers from India, traditional
kilt makers in Scotland
❧ Incredible skill of the artisans were
uncovered to the world through
Prada’s design and direction in 2010’s
“Made in…” collection
Luxury Goods 2013 – Competitive Analysis
Capabilities
Effective management of
diverse product portfolio
❧ Products with a range of price
points from high to low
❧ PR and distribution for each
product line tailors to each
target segment
Luxury Goods 2013 – Competitive Analysis
Capabilities
Intimate connection with the art
world
❧ Fondazione Prada is a non-profit
organization that sponsors art projects
for public display
–  Miuccia Prada and Patrizio Bertelli are both
lovers of contemporary art
–  Highly reputed for choosing artists before
they are successful
❧ Long-term partnership with
architect Rem Koolhas
Luxury Goods 2013 – Competitive Analysis
Capabilities
Quirky, edgy advertising with
all-star directors and cast
❧ Short films and videos are often
light-hearted and infused with
humor
Luxury Goods 2013 – Competitive Analysis
Porter’s Value Chain
Research 
Development
Production
Marketing
 Sales
Customer
Service
Company
Infrastructure
Technology
Materials
Management
Human
Resources
Support Activities
Primary Activities
INPUT
OUTPUT
Luxury Goods 2013 – Competitive Analysis
“Austere
Individualism” –
Prada’s unique
design aesthetic
Fabric Innovation
Intimate connection
with the art world
Global network of
skilled artisans
Miuccia Prada’s
avant-garde design
philosophy
Value Creation – RD
Luxury Goods 2013 – Competitive Analysis
“Austere
Individualism” –
Prada’s unique
design aesthetic
Value Creation – RD
Prada’s contemporary designs allow
customers to express their intelligence,
individuality and sophisticated taste by
challenging common ideals of beauty.
Value Creation – Production
“Made by Prada”
– Quality-cost
balance
Highly specialized
craftsmen in
owned factories
Global network of
skilled artisans
Effective management
of diverse product
portfolio 
Patented Saffiano
leather and Pocone
fabric
Value Creation – Production
“Made by Prada”
– Quality-cost
balance
Prada outsources 20% of production
overseas with strict quality controls,
delivering superior products to customers
in a shorter time and with lower costs.
Value Creation – Marketing  Sales
“Accessible
avant-garde” –
dual facets of
Prada’s brand
identity
Intimate
connection with
the art world
Quirky, edgy
advertising with all-
star director and cast
Strong retail network
with architect
designed flagships
Effective
management of
diverse product
portfolio
Luxury Goods 2013 – Competitive Analysis
“Accessible
avant-garde” –
dual facets of
Prada’s brand
identity
Cinema and art projects
enriches Prada’s brand
identity with experimental
creativity. Art installations
and the 4 Epicenter flagship
stores increases customer
engagement.
Value Creation – Marketing  Sales
With its diverse product
range, customers of all price
points are able to own a piece
of the cultured refinement
Prada represents.
Luxury Goods 2013 – Competitive Analysis
Value Creation –
Customer Service
Decreases
customer
satisfaction
and sours retail
experience
Unpleasant,
unhelpful, and
impolite staff
Reluctant to repair
faulty items
Inability to give
public feedback on
Facebook
Luxury Goods 2013 – Competitive Analysis
Core Competencies
❧ Forerunner of style and trends
❧ Iconic nylon bags and Saffiano
leather bags
❧ Brand identity infused with
cinema and art
M O R E T H A N
T H E T R E N C H
A N D C H E C K
Luxury Goods 2013 – Competitive Analysis
Background
•  Founded in 1856 in Britain
•  Currently headed by Angela Ahrendts and
Christopher Bailey
•  Targets customers who want functionality as
well as timeless elegance, across genders and
generations
•  Core business: Outerwear
Luxury Goods 2013 – Competitive Analysis
Background
Burberry
Prorsum
Burberry
London
Burberry Brit
Luxury Goods 2013 – Competitive Analysis
Financial Resources
❧ Listed in London since 2002
❧ Market Capitalization: 
GBP 5,968.76M as at 29/4/13
Resources - Tangible
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Physical Resources
❧ Wide network of distribution
channels
–  192 Mainline stores
–  208 Concessions within department
stores
–  44 Outlets
❧ 2 factories in Britain and 90
external manufacturers, mostly in
Italy
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Technological Resources
❧ Patented fabric “Gabardine” –
waterproof, anti-wrinkle twill widely
used in Burberry’s trench coats
❧ Patented trademark check pattern
Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Human Resources
❧ 1,500 employees worldwide
❧ Artistic vision of Christopher
Bailey
– British
– Designer of the Year (2009),
British Fashion Awards
– Menswear Designer of the Year
(2007, 2008)
Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Reputational Resources
❧ 10th most valuable luxury brand
in 2012, with brand value of
$4,090 M (Millward Brown Optimor)
❧ Reputation for 
– Rich British heritage
– Casual, wearable, affordable
luxury with high fashion appeal
Luxury Goods 2013 – Competitive Analysis
Capabilities
Close association with all
things British
❧ Diverse cast of British musicians,
actors, and models in ads 
–  “It” Girls like Kate Moss, Emma
Watson, Cara Delevingne
❧ Burberry Prorsum stages runway
shows in London Fashion Week
❧ Burberry Acoustic showcases
emerging British bands
Luxury Goods 2013 – Competitive Analysis
Capabilities
Pioneer in Digital Marketing
❧ Well-established presence on social
media platforms
❧ “Art of the Trench” 
–  Users could upload photos of
themselves wearing Burberry trench
coats
–  Aspirational customers can participate
by commenting, liking, and sharing
–  Existing customers can click-through to
make a purchase
Luxury Goods 2013 – Competitive Analysis
Capabilities
Burberry at Regent Street: Retail
Entertainment
❧ Flagship store that has become a
local and tourist attraction
❧ Museum-like brand exhibits
❧ Huge event space with monthly
music gigs by Burberry Acoustic
❧ Mirrors transform into screens and
display relevant video content when
triggered by RFID tags in products
Luxury Goods 2013 – Competitive Analysis
Capabilities
Burberry Bespoke: Mass
Customization of trench coats
Luxury Goods 2013 – Competitive Analysis
Capabilities
Commitment to corporate
responsibility
❧ Sustainable production
❧ Burberry Foundation - helps
young people develop their skills,
confidence and connections in the
fashion industry
❧ Extensive employee training and
performance-based remuneration
Luxury Goods 2013 – Competitive Analysis
Capabilities
Operational Excellence
❧ Streamlined supplier, IT, and
logistics networks
❧ Use of SAP worldwide
Value Creation – RD
“Classicism with
a Twist” – Non-
stop reinvention
of the iconic
trench and plaid 
Iconic and
patented check
pattern and
garbadine trench
Artistic vision of
Christopher Bailey
Burberry Bespoke:
Mass Customization
Operational
Excellence
“Classicism with
a Twist” – Non-
stop reinvention
of the iconic
trench and plaid 
Value Creation – RD
Burberry’s relentless reinterpretation of
the trench and plaid allow customers to
capture a slice of British heritage that
reflects modern trends and personal
tastes.
Value Creation – Production
“Designed in
Britain” –
delocalization of
production
Close association
with all things
British
Reputation for rich
British heritage
2 factories in Britain,
one specialized in
trench coats
Operational
Excellence
“Designed in
Britain” –
delocalization of
production
Value Creation – Production
Delocalization of production does not
disassociate Burberry with Britain.The
lower labor costs and faster delivery allow
more collections to be delivered to
customers, who continue to identify
Burberry with British high society.
Value Creation – Marketing  Sales
“Great Brand,
Great Company”
– inspiring
emotional
connections
Pioneer in Digital
Marketing
Regent Street
flagship: Retail
Entertainment
Commitment to
Corporate
Responsibility
Operational
Excellence
“Great Brand,
Great Company”
– inspiring
emotional
connections 
Value Creation – Marketing  Sales
Aggressive digital and in-store marketing
reaches a broad audience and invites them
to participate in the world of Burberry and
foster a deep identification with the brand.
Efforts in corporate responsibility builds
an image of conscientiousness as well.
Value Creation – Customer Service
“Democratic
Luxury” –
building positive
relationships 
Pioneer in Digital
Marketing
Regent Street
flagship: Retail
Entertainment
Commitment to
Corporate
Responsibility
Operational
Excellence
“Democratic
Luxury” –
building positive
relationships
Value Creation – Customer Service
Flexible communication channels online
and friendly, courteous, helpful staff in
stores enable Burberry to understand their
customers better and provide an
accessible, human touch to the brand.
Luxury Goods 2013 – Competitive Analysis
Core Competencies
❧ Inimitable British heritage
❧ Signature trench coat and plaid
pattern
❧ Integrated online and offline
marketing to deliver
synchronized products and
experience
W H E N Y O U R
O W N I N I T I A L S
A R E E N O U G H
Luxury Goods 2013 – Competitive Analysis
Background
❧ Founded in 1966, Italy
❧ Acquired by PPR in 2001
❧ Currently headed by Marco Bizzari
and Tomas Maier
❧ Targets uber-wealthy, modest and
discreet customers
Luxury Goods 2013 – Competitive Analysis
Background
❧ Core business: Bags, 85% of revenue
in 2012
❧ Price points much higher than
competitors, most over 2000 euro
and reaching 50,000 euro for some
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Financial Resources
❧ Company under PPR, listed in
Paris since 1988
❧ Market Capitalization of PPR:
€20,977.02M
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Physical Resources
❧ 1 factory in Vicenza, Italy
❧ 196 directly-operated retail
stores
Luxury Goods 2013 – Competitive Analysis
Resources - Tangible
Technological Resources
❧ Intrecciato – a leather weaving
technique that allows thin leather to
work with sewing machines while
achieving the strength and body for
leather accessories
Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Human Resources
❧ Over 100 artisans in BV’s
factory, all skilled in Intrecciato
❧ Tomas Maier, head designer
–  Precise perfectionist who seeks
understated elegance
–  Saved BV from the brink of
bankruptcy and increased sales by
800% since joining in 2001
Luxury Goods 2013 – Competitive Analysis
Resources - Intangible
Reputational Resources
❧ Reputation for 
– Artisanal craftsmanship
– High quality and durable leather
goods
Luxury Goods 2013 – Competitive Analysis
Capabilities
Philosophy of “Stealth
Luxury” Branding
❧ No logo on its products
❧ Maintains high quality
❧ Generates a sense of exclusiveness
Luxury Goods 2013 – Competitive Analysis
Capabilities
Long-term sustainability
of craftsmanship
❧ Craftsman school in Italy
– Generates a new generation of
craftsman
❧ Only those with more than 15
years of experience with the
brand will participate in the
production of Intrecciato
Luxury Goods 2013 – Competitive Analysis
Capabilities
Effective management of a
less diverse product portfolio
❧ Products with very limited
discounting and sales
❧ Focuses mainly on leather
goods with high quality
Value Creation – RD
“Covetable
classics” –
Timeless designs
with a singular,
evolving vision
Contemporary
functionality
Impeccable
quality and
craftsmanship 
Tomas Maier’s
understated yet
current design
aesthetic
Gradual expansion of
diversified product
lines
Value Creation – RD
“Covetable
classics” –
Timeless designs
with a singular,
evolving vision
Bottega Veneta focuses on the fundamental
integrity of the product, making sure that they
are rare and valuable in themselves, not
because of a logo or a tag.The timeless designs
make it easy for customers to wear or use them
for a long period of time, regardless of trends.
Value Creation – Production
“Made in
Veneto” – The
assurance of
uncompromising
quality 
Production takes
place even before
runway shows
Higher quality
materials than other
luxury brands
Produced pieces are
handpicked by creative
director Tomas Maier
Goods are only made
in Veneto, Italy
Value Creation – Production
“Made in
Veneto” – The
assurance of
uncompromising
quality 
With its price points set in a higher and narrower range
than most luxury brands, Bottega Veneta knows its target
customer expects higher quality materials and
craftsmanship from them. “Made in Veneto” promises as
much. But they took it one step further and started the
manufacturing process before the runway shows,
ensuring first dibs on the finest materials.
Value Creation – Marketing  Sales
“Less is More” –
discreet yet
recognizable to
the initiated
Logoless,
understated
designs
BV Initials Project:
When your own
initials are enough
Slower expansion into
emerging markets
Less discounting
than other luxury
brands
Value Creation – Marketing  Sales
“Less is More” –
discreet yet
recognizable to
the initiated
The high net worth individuals in Bottega Veneta’s
target segment do not aspire to own products marked
by logos to prove their status. Instead, the brand
molded itself to represent the anti-thesis of many
other luxury brands – a quiet, stealth type of luxury
that wealthy customers in the know appreciated.
Luxury Goods 2013 – Competitive Analysis
Core Competencies
❧ Bottega Veneta applies
Intrecciato across most of its
categories.
❧ “Stealth luxury” branding to
position itself in the market
positioning 
❧ Able to capture consumers’
changing tastes and preferences
The End,Thank You!

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Luxury Goods in Emerging Markets 2013 - Competitive Analysis

  • 2. W H I C H B R A N D S DID THE BEST IN 2 0 1 2 ?
  • 3. Luxury Goods 2013 – Competitive Analysis The 2012 financial results are in! Which brands will outperform amidst a Chinese slowdown and more discerning customer tastes? Data compiled from annual reports, Bain Co., BNP Paribas and Bloomberg, 2012 33 29 17 16.4 16 13 9 8.2 7.6 6 Bottega Veneta Prada Christian Dior Couture Hermes Salvatore Ferragamo Yves Saint Laurent Richemont Gucci Tod's Louis Vuitton Revenue Growth at Constant Exchange Rates (%) Industry  Growth  Rate,  2012  
  • 4. T H E C H A N G I N G L U X U R Y L A N D S C A P E
  • 5. Luxury Goods 2013 – Competitive Analysis The Spread of Luxury Model in Emerging Markets Subjugation • Authoritarian rule • Poverty and deprivation Start of Money • Economic growth • Elites start buying luxe Show Off • Acquire symbols of wealth • Display economic status Fit in • Large scale adoption of luxe • Fueled by need to conform Way of Life • Locked into luxe habit • Confident, discerning buyers HSBC The Cult of the Luxury Brand, 2012 India, Brazil China Taiwan/S. Korea Hong Kong, Singapore Japan HSBC estimates that over 25% of global luxury goods sales are made by the Chinese in 2012, meaning that China essentially holds great power to make or break a brand’s profits
  • 6. Luxury Goods 2013 – Competitive Analysis Increasing customer sophistication in China ❧ Luxury customers are getting younger and more knowledgeable ❧ First-mover disadvantage: Louis Vuitton Gucci ❧ “In the Show”  “In the Know” ❧ Leather Coated Canvas
  • 7. Luxury Goods 2013 – Competitive Analysis Where did LV and Gucci’s market share go?             Adapted from HSBC, 2012 Dior, Chanel Bottega Veneta, Goyard, Valextra, Tom Ford, VBH Designer Apparel Accessories Louis Vuitton, Gucci, Tod’s, Prada, Burberry Coach, Polo Ralph Lauren, Tory Burch, Tommy Hilfiger, Agnes B, Longchamp Designer Eyewear Designer Cosmetics Fragrances Armani Exchange, Abercrombie Fitch, Jack Wills, Topshop, Wildfox Couture Superpremium Premium Core Accessible Core Affordable Luxury Everyday Luxury 5,000 1,000 300 100 Price points in USD Number of points of sale SUBSTITUTION Hermes
  • 8. Luxury Goods 2013 – Competitive Analysis “Mass” vs. “Class” Exclusivity Accessibility Ubiquity Rarity Adapted from Financial Times Research, 2012
  • 9. C R E A T I N G A R T FROM COMM E R C E
  • 10. Luxury Goods 2013 – Competitive Analysis Background ❧  Founded in Italy, 1913 ❧  Currently headed by Patrizio Bertelli and Miuccia Prada ❧  Targets an international customer base that is “modern, sophisticated, attuned to stylistic innovations, and expects craftsmanship of the highest quality”
  • 11. Luxury Goods 2013 – Competitive Analysis Background ❧ Core business: Bags, 57% of total revenue ❧ Produces 8 collections each year ❧ Positioned at slightly higher price points than LV, Gucci, Burberry
  • 12. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Financial Resources ❧ Listed in HK and raised $2.14 billion in its IPO ❧ Market Capitalization: HKD 185,642.69 M at 28/4/13
  • 13. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Physical Resources ❧ Distribution network of 283 directly-operated Prada stores ❧ 4 Epicenter flagship stores ❧ 10 factories in Italy and a network of 480 external manufacturers, 20% of them abroad
  • 14. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Patented fabric “Pocone” - a waterproof type of nylon with a fine twisted weave that appeared as light as a silk
  • 15. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Saffiano leather with a patented diagonal cross-hatch pattern
  • 16. Luxury Goods 2013 – Competitive Analysis Resources - Intangible Human Resources ❧ Highly specialized and dedicated production employees – most have worked over 20 years for Prada ❧ Business acumen and risk- taking disposition of Patrizio Bertelli, CEO
  • 17. Luxury Goods 2013 – Competitive Analysis
  • 18. Luxury Goods 2013 – Competitive Analysis Resources - Intangible Reputational Resources ❧ 6th most valuable luxury brand in 2012, with brand value of $5,788 M (Millward Brown Optimor) ❧ Reputation for – Sophisticated and subtly appealing apparel – High quality and durable leather goods
  • 19. Luxury Goods 2013 – Competitive Analysis Capabilities Fabric innovation ❧ Close partnership with Italian fabric mills to create unconventional fabrics every season ❧ Unorthodox use of traditional fabrics Kid Mohair in 02 S/S Menswear “I was forbidden to use it, and of course, it became a best seller for us.” – Miuccia Prada
  • 20. Luxury Goods 2013 – Competitive Analysis Capabilities Avant-garde design philosophy of Miuccia Prada ❧ Non-conformity to trends ❧ Subtle branding ❧ Dedication to create something completely new every season “If you want to make something new, you need to make your mind blank and just look with your eyes, just judge with your eyes.” – Miuccia Prada
  • 21. Luxury Goods 2013 – Competitive Analysis Capabilities Global sourcing of skilled artisans ❧ Miuccia Prada went in search of the most specialized craftsmen all over the world –  eg. Alpaca wool knitters from Peru, leather weavers from India, traditional kilt makers in Scotland ❧ Incredible skill of the artisans were uncovered to the world through Prada’s design and direction in 2010’s “Made in…” collection
  • 22. Luxury Goods 2013 – Competitive Analysis Capabilities Effective management of diverse product portfolio ❧ Products with a range of price points from high to low ❧ PR and distribution for each product line tailors to each target segment
  • 23. Luxury Goods 2013 – Competitive Analysis Capabilities Intimate connection with the art world ❧ Fondazione Prada is a non-profit organization that sponsors art projects for public display –  Miuccia Prada and Patrizio Bertelli are both lovers of contemporary art –  Highly reputed for choosing artists before they are successful ❧ Long-term partnership with architect Rem Koolhas
  • 24. Luxury Goods 2013 – Competitive Analysis Capabilities Quirky, edgy advertising with all-star directors and cast ❧ Short films and videos are often light-hearted and infused with humor
  • 25. Luxury Goods 2013 – Competitive Analysis Porter’s Value Chain Research Development Production Marketing Sales Customer Service Company Infrastructure Technology Materials Management Human Resources Support Activities Primary Activities INPUT OUTPUT
  • 26. Luxury Goods 2013 – Competitive Analysis “Austere Individualism” – Prada’s unique design aesthetic Fabric Innovation Intimate connection with the art world Global network of skilled artisans Miuccia Prada’s avant-garde design philosophy Value Creation – RD
  • 27. Luxury Goods 2013 – Competitive Analysis “Austere Individualism” – Prada’s unique design aesthetic Value Creation – RD Prada’s contemporary designs allow customers to express their intelligence, individuality and sophisticated taste by challenging common ideals of beauty.
  • 28. Value Creation – Production “Made by Prada” – Quality-cost balance Highly specialized craftsmen in owned factories Global network of skilled artisans Effective management of diverse product portfolio Patented Saffiano leather and Pocone fabric
  • 29. Value Creation – Production “Made by Prada” – Quality-cost balance Prada outsources 20% of production overseas with strict quality controls, delivering superior products to customers in a shorter time and with lower costs.
  • 30. Value Creation – Marketing Sales “Accessible avant-garde” – dual facets of Prada’s brand identity Intimate connection with the art world Quirky, edgy advertising with all- star director and cast Strong retail network with architect designed flagships Effective management of diverse product portfolio
  • 31. Luxury Goods 2013 – Competitive Analysis “Accessible avant-garde” – dual facets of Prada’s brand identity Cinema and art projects enriches Prada’s brand identity with experimental creativity. Art installations and the 4 Epicenter flagship stores increases customer engagement. Value Creation – Marketing Sales With its diverse product range, customers of all price points are able to own a piece of the cultured refinement Prada represents.
  • 32. Luxury Goods 2013 – Competitive Analysis Value Creation – Customer Service Decreases customer satisfaction and sours retail experience Unpleasant, unhelpful, and impolite staff Reluctant to repair faulty items Inability to give public feedback on Facebook
  • 33. Luxury Goods 2013 – Competitive Analysis Core Competencies ❧ Forerunner of style and trends ❧ Iconic nylon bags and Saffiano leather bags ❧ Brand identity infused with cinema and art
  • 34. M O R E T H A N T H E T R E N C H A N D C H E C K
  • 35. Luxury Goods 2013 – Competitive Analysis Background •  Founded in 1856 in Britain •  Currently headed by Angela Ahrendts and Christopher Bailey •  Targets customers who want functionality as well as timeless elegance, across genders and generations •  Core business: Outerwear
  • 36. Luxury Goods 2013 – Competitive Analysis Background Burberry Prorsum Burberry London Burberry Brit
  • 37. Luxury Goods 2013 – Competitive Analysis Financial Resources ❧ Listed in London since 2002 ❧ Market Capitalization: GBP 5,968.76M as at 29/4/13 Resources - Tangible
  • 38. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Physical Resources ❧ Wide network of distribution channels –  192 Mainline stores –  208 Concessions within department stores –  44 Outlets ❧ 2 factories in Britain and 90 external manufacturers, mostly in Italy
  • 39. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Patented fabric “Gabardine” – waterproof, anti-wrinkle twill widely used in Burberry’s trench coats ❧ Patented trademark check pattern
  • 40. Luxury Goods 2013 – Competitive Analysis Resources - Intangible Human Resources ❧ 1,500 employees worldwide ❧ Artistic vision of Christopher Bailey – British – Designer of the Year (2009), British Fashion Awards – Menswear Designer of the Year (2007, 2008)
  • 41. Luxury Goods 2013 – Competitive Analysis Resources - Intangible Reputational Resources ❧ 10th most valuable luxury brand in 2012, with brand value of $4,090 M (Millward Brown Optimor) ❧ Reputation for – Rich British heritage – Casual, wearable, affordable luxury with high fashion appeal
  • 42. Luxury Goods 2013 – Competitive Analysis Capabilities Close association with all things British ❧ Diverse cast of British musicians, actors, and models in ads –  “It” Girls like Kate Moss, Emma Watson, Cara Delevingne ❧ Burberry Prorsum stages runway shows in London Fashion Week ❧ Burberry Acoustic showcases emerging British bands
  • 43. Luxury Goods 2013 – Competitive Analysis Capabilities Pioneer in Digital Marketing ❧ Well-established presence on social media platforms ❧ “Art of the Trench” –  Users could upload photos of themselves wearing Burberry trench coats –  Aspirational customers can participate by commenting, liking, and sharing –  Existing customers can click-through to make a purchase
  • 44. Luxury Goods 2013 – Competitive Analysis Capabilities Burberry at Regent Street: Retail Entertainment ❧ Flagship store that has become a local and tourist attraction ❧ Museum-like brand exhibits ❧ Huge event space with monthly music gigs by Burberry Acoustic ❧ Mirrors transform into screens and display relevant video content when triggered by RFID tags in products
  • 45. Luxury Goods 2013 – Competitive Analysis Capabilities Burberry Bespoke: Mass Customization of trench coats
  • 46. Luxury Goods 2013 – Competitive Analysis Capabilities Commitment to corporate responsibility ❧ Sustainable production ❧ Burberry Foundation - helps young people develop their skills, confidence and connections in the fashion industry ❧ Extensive employee training and performance-based remuneration
  • 47. Luxury Goods 2013 – Competitive Analysis Capabilities Operational Excellence ❧ Streamlined supplier, IT, and logistics networks ❧ Use of SAP worldwide
  • 48. Value Creation – RD “Classicism with a Twist” – Non- stop reinvention of the iconic trench and plaid Iconic and patented check pattern and garbadine trench Artistic vision of Christopher Bailey Burberry Bespoke: Mass Customization Operational Excellence
  • 49. “Classicism with a Twist” – Non- stop reinvention of the iconic trench and plaid Value Creation – RD Burberry’s relentless reinterpretation of the trench and plaid allow customers to capture a slice of British heritage that reflects modern trends and personal tastes.
  • 50. Value Creation – Production “Designed in Britain” – delocalization of production Close association with all things British Reputation for rich British heritage 2 factories in Britain, one specialized in trench coats Operational Excellence
  • 51. “Designed in Britain” – delocalization of production Value Creation – Production Delocalization of production does not disassociate Burberry with Britain.The lower labor costs and faster delivery allow more collections to be delivered to customers, who continue to identify Burberry with British high society.
  • 52. Value Creation – Marketing Sales “Great Brand, Great Company” – inspiring emotional connections Pioneer in Digital Marketing Regent Street flagship: Retail Entertainment Commitment to Corporate Responsibility Operational Excellence
  • 53. “Great Brand, Great Company” – inspiring emotional connections Value Creation – Marketing Sales Aggressive digital and in-store marketing reaches a broad audience and invites them to participate in the world of Burberry and foster a deep identification with the brand. Efforts in corporate responsibility builds an image of conscientiousness as well.
  • 54. Value Creation – Customer Service “Democratic Luxury” – building positive relationships Pioneer in Digital Marketing Regent Street flagship: Retail Entertainment Commitment to Corporate Responsibility Operational Excellence
  • 55. “Democratic Luxury” – building positive relationships Value Creation – Customer Service Flexible communication channels online and friendly, courteous, helpful staff in stores enable Burberry to understand their customers better and provide an accessible, human touch to the brand.
  • 56. Luxury Goods 2013 – Competitive Analysis Core Competencies ❧ Inimitable British heritage ❧ Signature trench coat and plaid pattern ❧ Integrated online and offline marketing to deliver synchronized products and experience
  • 57. W H E N Y O U R O W N I N I T I A L S A R E E N O U G H
  • 58. Luxury Goods 2013 – Competitive Analysis Background ❧ Founded in 1966, Italy ❧ Acquired by PPR in 2001 ❧ Currently headed by Marco Bizzari and Tomas Maier ❧ Targets uber-wealthy, modest and discreet customers
  • 59. Luxury Goods 2013 – Competitive Analysis Background ❧ Core business: Bags, 85% of revenue in 2012 ❧ Price points much higher than competitors, most over 2000 euro and reaching 50,000 euro for some
  • 60. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Financial Resources ❧ Company under PPR, listed in Paris since 1988 ❧ Market Capitalization of PPR: €20,977.02M
  • 61. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Physical Resources ❧ 1 factory in Vicenza, Italy ❧ 196 directly-operated retail stores
  • 62. Luxury Goods 2013 – Competitive Analysis Resources - Tangible Technological Resources ❧ Intrecciato – a leather weaving technique that allows thin leather to work with sewing machines while achieving the strength and body for leather accessories
  • 63. Luxury Goods 2013 – Competitive Analysis Resources - Intangible Human Resources ❧ Over 100 artisans in BV’s factory, all skilled in Intrecciato ❧ Tomas Maier, head designer –  Precise perfectionist who seeks understated elegance –  Saved BV from the brink of bankruptcy and increased sales by 800% since joining in 2001
  • 64. Luxury Goods 2013 – Competitive Analysis Resources - Intangible Reputational Resources ❧ Reputation for – Artisanal craftsmanship – High quality and durable leather goods
  • 65. Luxury Goods 2013 – Competitive Analysis Capabilities Philosophy of “Stealth Luxury” Branding ❧ No logo on its products ❧ Maintains high quality ❧ Generates a sense of exclusiveness
  • 66. Luxury Goods 2013 – Competitive Analysis Capabilities Long-term sustainability of craftsmanship ❧ Craftsman school in Italy – Generates a new generation of craftsman ❧ Only those with more than 15 years of experience with the brand will participate in the production of Intrecciato
  • 67. Luxury Goods 2013 – Competitive Analysis Capabilities Effective management of a less diverse product portfolio ❧ Products with very limited discounting and sales ❧ Focuses mainly on leather goods with high quality
  • 68. Value Creation – RD “Covetable classics” – Timeless designs with a singular, evolving vision Contemporary functionality Impeccable quality and craftsmanship Tomas Maier’s understated yet current design aesthetic Gradual expansion of diversified product lines
  • 69. Value Creation – RD “Covetable classics” – Timeless designs with a singular, evolving vision Bottega Veneta focuses on the fundamental integrity of the product, making sure that they are rare and valuable in themselves, not because of a logo or a tag.The timeless designs make it easy for customers to wear or use them for a long period of time, regardless of trends.
  • 70. Value Creation – Production “Made in Veneto” – The assurance of uncompromising quality Production takes place even before runway shows Higher quality materials than other luxury brands Produced pieces are handpicked by creative director Tomas Maier Goods are only made in Veneto, Italy
  • 71. Value Creation – Production “Made in Veneto” – The assurance of uncompromising quality With its price points set in a higher and narrower range than most luxury brands, Bottega Veneta knows its target customer expects higher quality materials and craftsmanship from them. “Made in Veneto” promises as much. But they took it one step further and started the manufacturing process before the runway shows, ensuring first dibs on the finest materials.
  • 72. Value Creation – Marketing Sales “Less is More” – discreet yet recognizable to the initiated Logoless, understated designs BV Initials Project: When your own initials are enough Slower expansion into emerging markets Less discounting than other luxury brands
  • 73. Value Creation – Marketing Sales “Less is More” – discreet yet recognizable to the initiated The high net worth individuals in Bottega Veneta’s target segment do not aspire to own products marked by logos to prove their status. Instead, the brand molded itself to represent the anti-thesis of many other luxury brands – a quiet, stealth type of luxury that wealthy customers in the know appreciated.
  • 74. Luxury Goods 2013 – Competitive Analysis Core Competencies ❧ Bottega Veneta applies Intrecciato across most of its categories. ❧ “Stealth luxury” branding to position itself in the market positioning ❧ Able to capture consumers’ changing tastes and preferences