Louis Vuitton position in the Japanese market - Case Study Example

Louis Vuitton position in the Japanese market Introduction Louis Vuitton, the world’s largest luxury goods firm had successfully penetrated the Japanese market through its aggressive market strategy of high price marking. The company concentrated its stores along high streets strategically targeting the Japanese luxury market. The company subsequently dominated the Japanese market, making the region its most profitable market. However, Paul and Feroul (2010) noted that the 2008/09 economical crisis triggered the market dynamics of the Japanese economy. Unprecedented shifts in Japanese consumer’s preferences caught the Louis Vuitton by surprise leading to a decline in sales volume. In light of the market trends, Louis Vuitton has strategically adapted new market approaches to the Japanese market. Strategic Problem Statement Following the global economic recession of 2008-2009, Japanese luxury goods consumers have become more price conscious. Vis a vis, Louis Vuitton has been forced to re-evaluate its primary marketing strategy of premium brands in the case of the Japanese economy. Tactical Problem Statement The company lacks a comprehensive Japanese culture-oriented marketing strategy that would differentiate between the dynamics of western market and the Japanese market. Employment of the Louis vuitton global strategy fails to incorporate the cultural aspects of Japanese consumers in terms of price, quality and value addition. Identification of Issues Short term issues Consumer Behavior Change a Key Challenge to Sales Volume The company’s success in the Japanese market has been driven principally by the group- culture that strongly promotes possession of luxury goods by consumers (Paul and Feroul, 2010). However, the market has been characterized by consumers increased value for their money, thereby avoiding premium priced luxury goods. Effective Strategies by Rival Brands in the Japanese Market Louis Vuitton position in the Japanese market has further been weakened by new marketing strategies by rival brands who have lowered their prices to attract price sensitive consumers. To maintain its customer base, Louis Vuitton has been forced to also reevaluate its pricing strategies. Diversification by Other Luxury Goods Companies Present Existence of New Opportunities To cushion themselves from harsh trends in the luxury goods market, rival firms have diversified their services and product portfolio to include non-traditional products. Chocolatier Godiva had announced plans to open up cafes in Tokyo while Vertu a mobile phone company had plans to open up shops in Ginza. Therefore, Louis Vuitton runs the risk of solely depending on luxury goods market. The Cyclical Nature of the Japanese Market Highly Complicates Strategy Formulation The Japanese market has been identified to be cyclical, characterized by periods of extensive consumer spending, which are followed with reduce consumer expenditure. The Louis Vuitton marketing strategy failed to oscillate pricing with the changing consumer spending habits. Market Dilution Louis Vuitton marketing strategy has been significantly impacted by the dilution of the limited edition sales tactic. The growth and expansion of the company’s product portfolio in Japan have resulted in mass possession of the company’s products, thereby weakening the brand exclusivity experience of consumers. Over-concentration of Stores in Major Japanese Cities Traditionally, Louis Vuitton has strategically located, its prestige in the major cities of Japan and avoiding minor cities and towns. Consequently, local fashion houses have successfully penetrated the emergent markets in towns. This has resulted in reduction of Louis vuitton market share in the country. Collaboration with Local Artists Key to Integration of the Brand and the Japanese Culture The inclusion of Japanese culture into the branding of the Louis Vuitton products creates an additional opportunity for the company to capitalize on Japanese inclination towards their cultural heritage. Vis avis Louis vuitton should incorporate Japanese touch into its goods to trigger purchasing by the locals. Expansion Of The Company’s Product Portfolio Louis Vuitton tactical strategy in Japan majorly focuses on the youth and middle aged consumers. In light of the declining sales value, diversification of product portfolio have failed to include children’s fashion. Louis Vuitton Success in the Market Has Attracted New Entrants and Competitive Products Over the last decade, foreign companies have successfully introduced their competitive brands in the Japanese market. In contrary to Louis Vuitton business model, new entrants have transformed the market through their business model founded on affordability. Therefore, Louis Vuitton has been forced to compete with firms offering much cheaper products at relative quality. Challenge of Counterfeit Louis Vuitton Products The prevalence of counterfeit Louis Vuitton products in the Japanese market has led to dilution of brand exclusivity and miscommunication of the brand image. Without implementation of a proper regulatory framework and elimination of products from the market, Louis vuitton prestigious image may deteriorate in the Japanese market. Online Stores Japanese culture has further been identified to be intricately related to technology. The integration of technology into business entities has further been associated with increased efficiency and revenue generation. It’s hence a prime consideration for the Louis Vuitton to invest in IT through online stores and social internet platforms Setting the Objectives 1. The management to incorporate Japanese culture into the strategic management of Louis Vuitton 2. Market expansion into the local towns and product development to include children’s fashion Recommendations Issue 1 and 2: Louis Vuitton should also adopt a low pricing strategy to maintain competitive advantage over its rival firms. Issue 3: Underscored by its market information on the Japanese economy, Louis Vuitton should also diversify into non luxuries goods business sector to cushion it from changing consumer behaviors’ in the market Issue 4: Louis Vuitton’s pricing strategy should be formulated to oscillate with the expenditure cycle of the Japanese consumers. Prices should be set relatively high during spending spree and be lowered when consumers' expenditure minimum. Issue 5: To reduce market dilution of its brands, Louis vuitton will have to focus on its high end products such as leathered and skinned products while minimizing the production of LV logo branded handbags. Issue 6: In light of the declining sales volume and resurgence of competition, it is imperative that Louis Vuitton expand its market geographic to minor cities and towns where it has previously shunned investing in. Issue 7: Adoption of the Japanese culture has been highlighted as the key to the company’s growth in Japan. Therefore, it is advisable that the company partner with local artist to link the western fashion culture with the Japanese cultural heritage in targeting the local market. Issue 8: To increase its sale volume, the current product portfolio should include teenagers and children’s cloth line and accessories Issue 9: To overcome the competition, the company should formulate a mechanism to balance between quality and affordability. Nevertheless, it is imperative that Louis vuitton maintains its high -end brand reputation. Issue 10: Louis Vuitton should partner with key players in the luxury goods retail market to crack down counterfeit goods. Through agreement with online retailers, hypermarkets and importers, counterfeit product should be identified and destroyed before reaching the market. Issue 11: The Company should comprehensively integrate information technologies into its core operations and system. These should be implemented through online stores, Facebook accounts and company websites. Reference Paul, J. and Feroul, C. (2010). Louis Vuitton in Japan. Richard Ivey school of Business,(910M67). Read More