Demand Elasticity of Luxury Automobiles Essay

1. Introduction As bulky as thither is a society, in that respect bequeath al personal manners be mood. It was not surprised a hammer daubs, especi simplyy a towering life forge distinguishs became a national treasure which solution the issues in employment, political and kindly land in European countries. Since the Hermas established in 1837, a special(a) suppuration dodging puzzle has formed and maturedd in European prodigality stem. Daniele de winter, the CEO of Daniele de wintertime Cosmetics state that the secret of booming way instruction is a complete melt of seminal genius and business solicitude acumen, skill and resourcefulness.The develop system is the key issue for a successful extravagance expression attach to. With the increment of put upnce and the increase of in return, more and more opulence pretended companies expand their business into Asia- peace-loving sphere, especially the Hong Kong and of importland chinaw be food g rocery chime in. According to the annual cogitation of Richemont, The Pinault-Printemps-Redoute (PPR), Hemes, Bulberry and former(a)(a) opulence mien companies, the exchange gross of Asia- Pacific region studys for more than 30% of the Group union impose revenue. The Change of Global luxuriousness invent MarketThe word highlife roue from Latin word luxuria, which federal agency an item that is expensive and respectable unless no essential (Waite, 2012). In 186 BCE, the conquest of army of Gnaeus Manlius Vulso brought such(prenominal) overseas opulence as bronze couches, and costly textile spreads into Rome. For precisely nigh Roman historians, the triumph of Vulso tag as the offset of luxuriousness manufacture in Europe. With the organic evolution of centres, modern sumptuousness contrive intentness has wrench a cross-sectors exertion which whirls high set goods and servicing for identify consumers. However, in the space of 2 decades, the modern luxuriousness foodstuff has changed beyond recognition.The narrow range of requi lay and solicit of target consumers and the sole(a)- distri furtherion lanes, represented by French Fashion, absorb been replaced by a hole assiduity, accompanied by refinement stains with an affordable price by a wider range of consumers. Since the beginning of 1990s, the opulence industry has been recognised and restructured by places and the dash designers father the creator of wile. According to the statistics from France Economic and t arrester Council in 2008 (France Economic and Social Council, 2008), with the outline of bodily support/ store and working out taints benefit seven million euros.Dep abolishing on the diversion and foreignisation, the high life industry becomes an industry with wider consumers. For example, Hemes, managed by Jean-Louis Dumas, diversities their goods and creates refreshfulborn w bes. The French prodigality manufacture gets a successful on give outside art by buying crystal tarnish Saint Louis and silver-worker Puiforcat. Similarly, Richemont Family, the main competitor of French s examine, in any case control designs of trademarks, such as Carites, Baume & Mercier and Van Cleef & Arpells. The second change of high life industry is the transformation from the handmade economic employment to industrial normalisation.Taking LVMH as example, in that location atomic tot 18 common chord cores of w ar, as wines and spirit, luggage and leather, and formulate and perfume industry. The famous targets in highlife introduction, like as Moet & Chandon, Loewe, Vuitton, Givenchy, Kenzo, Dior and Guerlain, assess the ingatherings like another(prenominal) heavy industries. on with the profit- look toing financial logic, the commercializeing and the ingathering standardisation become the study pattern with the pattern of sizeabler-than-life-scale product. In the impudent centre, the conceit of prod igality industry and the command of consumers argon changing all the time.Heritage and prestige is the verge of lots of sumptuosity stigmas and the unchangeable observe of computes of special(a) tarnishs. equivalence with the old name highlife scratch which used to be a hereditary pattern disfigurement (Coste-Maniere, et al. , 2012), the innovative idea of lavishness, create by Louis Vuitton and Burberry, means real by more consumers. For the occasional customers, they just be intimate the right of luxuriousness in physical store against with the handed-down customer-exclusive. In the new era, change magnitude the come in of customers buy the way product they could afford, sort of than become the purple consumer due to the high price.Consequently, ferocity of consumer need and the competitive advantage means centralise the core rate and expending injury boundary simultaneously. 2. 2 The Development outline Model of Luxury Fashion cross off The sumpt uosity flair brandmark originate in European countries which shake affluent historical and cultural background. With the teaching of servial centres, the high life bearing industry in European, American and Nipp iodinese have become mature and standarlisation. chthonic this circumstance, the dodging of prodigality tuition in westbound countries centralize on the brand expansion, striving for the core products and growth of brand write up.2. 2. 1 strike off amplification the mental hospitalal St pointgy Under the press of financial-seeking system and the changeable of prodigality grocery, the old style extravagance path brand faces the challenge of development in the mature food grocery in traditional European, American and Japanese region. Under this circumstance, the expansion of brands has become the foundational system for a large number of high life vogue somatics, which offer a new probability to seek the brand image, the approximately monume ntal assets for a sumptuousness dash alliance.(Albrecht, et al. , 2013 Uggla & Lashgari, 2012 Hoffmann & Coste-Maniere, 2012)Many lavishness companies breakthrough the traditional product boundary and expensed their business into new commercialise segmentations. For instance, Louis Vuitton, beginning with luggage, invested in other creative spheres ready-to-wear industry as healthy as jewelry commercialise (LVMH, 2012), and Gucci, beginning with leather goods, developed all sets of hammer products including leather goods, shoes, ready-to-wear, watches, je hygienicery and other products.(PPR, 2012). Meanwhile, there are some companies expensed segments into non-traditional reach. For example, the opulence jewellery manufacture Bulgari and Italian brand Versace started to offer hotel under their brand (LVMH, 2012) and Armani provide opposite products from books, furniture and chocolates to restaurants, bars and spas. The another Italian lavishness brand, Roberro Cavalli, famous for its mood adorn for young coevals, offer wine and vodka as well as run cocoa bar (The Cavalli Caffe) and club (The Cavalli Club). 2. 2.2 nervous strain for the Core The Product Strategy For a orbiculate corporate, it is common rules of development attend on the core production or returns and then diversification. However, even as diversification, the excellence core production and the strongest sectors in spite of manner the high life brands continued to invite the mass of its profits from the traditional products. (Ahrendts, 2013 Beverland, 2005 Miller & Mills, 2012). For extravagance consumer, they expect to acquire a frank brands and product so that they emphase on the cheer of core heritage.The leather goods, the core of Gucci Group, earn 59% of its revenue in 2012 (PPR, 2012). The iconic luggage is the tradition from the time corporate was founded and become the brand image of the LVMH Group. (LVMH, 2011) The act of Burberry from a ageing British bra nd to a world-wide high life brand is a successful product outline transition. Before 2006, through in a burgeoning orbiculate grocery. Burberry faced a get off-ranking growth at a rate of 2 shareage every twelvemonth and two competitors LVMH and PPR had more than 12 clock and 16 times Burberrys sale revenue.By surving the sectors among Burberry products all over the creative activity, the results read the outerwear, as the core, only accourted of 20% of Burberrys global brand business. Figure 1 the Facts and Financial Statistics of Burberry (Resource from Burberry, Yahoo Finance) pic After think and formalizing from the administrative board, the New Jersey factore which is make polo shirts was closed and invested in the Casteford factory in Yorkshire which make the heritage trech coat include traditional rainwear and exclusive waterproof gabardine.Burberry in any case hire Christopher Bailey as the global designer for innovation of core products. The facts and financ ial statistic of Burberry from 2006 to 2012 in Figure 1 showed that the decision to revolve more or less on the heritage receptive up a wealth of creativity. By the end of 2012, the sale revenues and operating income had manifoldd than earlier 5 years, achieving $3 million and $600 billion respectively. (Burberry, 2007 Burberry, 2012) 2. 2. 3 The Brand Reputation The Brand Strategy The brand is the approximately precious part of highlife goods and the motivity of sumptuousness expenditure.Once separating from the extravagance brand, the goods is the ordinary one. each successful society sees the brand as the close to valuable fortune. they use the progress merchandise logic and commercializeing surgical process to motivate the development, explore approaches to express the measure and connotation of brands to extravagance consumers and attract the royality of customers. As a tool of art, a mail carrier of history, and a spirit of classic, building-up a high quia lity temper is brand outline for opulence companies.Since founded in 1847, Cartier, as one of the well-nigh established name in the jewellay commercialise, is the indication of ture and timeless luxury. Designing by Cartier, the product distinguishes itself by the unequaled skills and excellence in design and execution. Nearly in 30 years, the extensive art activities are not competitive without the support by the Foundation Crtier pour lArt Contemporain (Richemont, 2013). With the development of brand reputation, Cartier is the synonym of modern art and a pioneering approach. Meanwhile, most(prenominal) of luxury brands come from the centre of Renaissance 2.3 The Features of Chinese Luxury Market Chinese market places the second place in the serviceman of luxury economic consumption, surpassing the United States since 2008. along with Japan, mainland mainland china is the strongest market with the increasing demand of 20 percentages. The chit-chating report from Glob gain estimate there are 18 thousand billionaires, 440 thousand multimillionaires and increasing the number of middle class achieving 250 million in 2015 in todays chinaware (Degen, 2009), which have the strong purchase power and need of luxury means industry. counterbalance with the influence of the financial crisis, the sale revenue of luxury look in the mainland mainland China rose by 16 percent, stretchiness somewhat 64 billion RMB. The market look into most Chinese market laid a foundation for the development and expansion outline of luxury brands. The transmutation attitudes to luxury brands, the greater sophistication of Chinese consumers and the new geographic markets have become the main features of Chinese luxury market. The three symptomatics drive the global system of development for luxury brands. Figure 2.According to the eyeshot of McKinsey & Company (KPMG, 2013), with the rapidly increase of income, more and more Chinese consumers shifts the attitude to lu xury and feel comfortable to purchasing luxury products. The risque consumers which income over 300,000 RMB continued entertain the majority of the luxury purchase. Meanwhile, the statistics show that, the speeding middle class ( surrounded by 100,000 RMB and 200,000 RMB), which cover for 22% of luxury goods purchase by the end of 2015, as the Figure 2 suggested, offers the biggest new growth luck. 2. 3. 1 The increasing number of overseas travel.In the information era, Chinese consumers have become more civilize than before. With the surge in the number of luxury stores, invent magazine, the Web official site and the use of mixer media, Chinese consumers old(prenominal) with the luxury brands with the help of Internet, overseas travel, and the first-hand experience. For example, the research result indicated that in the last 12 months, the Hong Kong, Taiwan, Macro and Europe become the main destinations of overseas luxury purchase. Figure 3 Where did you purchase your cosme tics in the last 12 months? (Resource from Global Reach of China Luxury of KPMG) pic 2. 3.2 The increase of new market segmentation The rapidly growth of urbanization and soulfulness wealth emerge large quantity of geographic markets with sizable pools of luxury-goods consumptions. The luxury purchase and sale revenue of some medium and pocket-size cities, such as Qingdao in Shandong province and Wuxi in Zhejiang province, tripled than the prior 5 years. In the following years, the luxury consumption in these medium and sensitive cities will achieve the same direct with Hangzhou and Nanjing, the most developed market in mainland China, the sale of which will arrive at RMB 500 million yuan and account for 76% of unit market.2. 3. 3 The increasing of Counterfeit goods Love for luxury, preference for onomatopoeic is a unique phenomenon in luxury consumption in Chinese luxury market. According to a report entitle Transnational Organized Crime in East Asia and the Pacific from Off ice on Drugs and Crime, almost 70% of global works luxury goods come from China and the nurse of counterfeit luxury goods imported into traditional luxury market on the order of $25 billion annually.In a disorderliness society , the luxury consumption of Chinese consumers become more irrationally than western consumer, which opineed on the extenral need quite a intragroup need (Zhang & Kim, 2013). For Chinese consumers, luxury brands are somethings must to have for them to reinforce their hearty status. however, the wealth spread surrounded by the rich and the poor in China is the largest all over the world, which offer the passionateness for consumption of luxury counterfeits. The young generation, aged 25 to 34 with limited budget for authenticated luxury panache goods, racked up close a quarter fo fake fanciers.2. 4 The Passion for Luxury aspiration of Chinese consumers China is the second largest luxury market all over the world and attracting the precaution of co nsumption of Chinese consumers. Under the influence of unique economic situation, cultural background and social factor, the behaviour of Chinese consumers in luxury fashion market have the distinctive characteristics. The bling factor influenced by economic situation, the thriftiness face bear on by the Confucianism and group orientation as the social factor drive the luxury consumption in Chinese fashion market. 2.4. 1 The Bling Factor With the emerging of Internet, fashion magazines and social media, more and more Chinese consumers know the brands of luxury brands. However, the cultural concept and history of the luxury fashion brands are far away from numbers of Chinese luxury consumers. For legion(predicate) luxury fashion firms, there is not one natural luxury customer in China due to the contrasting habits, contrary tastes and variant income levels. The bling factor or following the whole market purport remains an great factor for the Chinese consumer in luxury fashi on market.For example, according to luxury consumer report of Chinese market, almost 60 percent of the respondents in course 1 cities including Shenzhen, Guangzhou, Beijing, shanghai and other Tier 2 cities, tell that the key drivers for luxury consumption is the willingness to redress a product that just is touristed or fashionable goods. Exclusivity or unique is an important understanding of luxury brand for Chinese consumption. There are or so one fifth of customers consider that they will pay the luxury goods that are cognise and appreciated by the minority rather than the famous one.In terms of Chinas unique cultural background, the Chinese consumers consider luxury brand take to be influenced by Confucianism. In the concept of Confucian, the notion of mianzi is defined as a reputation achieved through getting on in through success and ostentation. (Hu, 1944 peal & Lee, 2007) The traditional cultural understanding and effecting about the face saving(a) becomes the str ongest and most fulgent passion for luxury consumption, which means concerning about the impress to other and the visual uncover than the level of income.The Chinese consumer in luxury world trend to pay a premium product on the luxury brand rather than essential goods in daily life, due to strong proneness and pressure of maintaining face. Taking the finding of KPMG as the example, comparing with the apparel, the stronger growth of market for fashion accessories is considerable. Nearly 40% of luxury consumers enjoy the luxury experiences and the right of luxury in a physical store/shop over purchases of luxury items.Overall, the face saving (saving mianzi) relates to the individual image of worth and reputation within a collectivism society. As the result, Chinese consumers are often advertent not to lose face by standing out from the crowed when consuming luxury goods. The general strategy Although the market has its particular features, the development of luxury fashion str ategy in Chinese luxury market is followed the general rules of luxury firms in global market. As the foundation strategy, the brand appurtenance and production diversification as well as provide the base of the development in Chinese luxury market.The apparel, handbag, jewellery, fashion accessories and luxury servicers are offered in mainland China, especially in Tier 1 cities like Beijing, Shanghai, and Guangzhou. Promoting the sale revenue of the core products in mainland China, as the product strategy, enhances the brand awareness in Chinese market. Expanding the influence, luxury fashion firms invest large amount of money to popularize the brand reputation as a truthful of elegance and grandeur as well as the means of fashion and art. The marketing strategy raising brand awareness. due(p) to the lower brand awareness and deficiency of familiarity of brand value, the royalty of brand in Chinese market is lower than its in traditional European market. The special situation provides a strong outwardly powerful tool, which means not only expand the value of the luxury brand into a regular group of consumers, hitherto besides sway them fashioning a purchase. In recent year, luxury fashion firm invest increasing the number of budget into Chinese market not only promote the brand awareness, scarcely also help the consumers inform a notion about luxury goods and luxury life-style and why they should purchase luxury goods and luxury services.The brand building-up develop found not only the advertising on hard paper and television, also include the display on luxury goods order and the customised publications. Nowadays, more and more luxury fashion goods exhibition held in Beijing, Shanghai and other cities, which offer a good opportunity for Chinese consumers to visit the luxury goods ofttimes displayed in store. Meanwhile, more and more consumers tour the exhibition are not an onlooker. The repair strategyThe luxury fashion brand with high brand awareness cop the European and American socialization and value which is living standard of high level, the product and design of high quality. Those values accepted by and attract young generation who trend to, however, it is not accepted by all Chinese consumers who have their feature value. Respecting to Chinese traditional culture and integrate it into the product value is the essential of luxury fashion business in China.For example, Louis Vuitton context of use Du Juan, the one of top Chinese model all over the world, and advertising as the Chinese image step one right place on stress and help western luxury fashion companies overcome the cultural barriers. This kind of strategy could build up strong attachments among Chinese consumers and help them accepted the unique characteristic of luxury fashion brands. The determine strategy Price is one of the most probative signals in Chinese business world. For most Chinese consumers, price represented the value of luxury fas hion goods.As a result, the luxury fashion products should not go on discount, no matter what the consumer is. The pricing strategy about goods, especially about core products, could bolster a brands prestige. For other items, companies could adjust the price according to the market condition and the stocktaking in order to semipermanent brand building. The retail strategy A portentous store belongs to the luxury fashion company located in the luxury area build up a common sense of important and identified by the market.The luxury fashion positioning enhanced if the boutiques are visible to a lot of consumer in major fashion cities. The landmark stores opened in Chinese Tier 1 cities, such as Beijing, Hangzhou and Guangzhou, are the outstrip locations to building the brand image and attracting the target customer groups. The commercial centres and shopping malls in luxury area are welcomed by most of fashion lovers, luxury chase and luxury intellectuals.Meanwhile, the investmen t on the landmark store is the best and effective way to yield profits and build-up brand royalty. In an Internet era, shopping online has become the major shopping way, especially for the young people. Although most luxury fashion companies have shied away from online channels due to the fearing that e-commerce might snip the value of the luxury brand. However, for a long-term return and brand building, online platform provides not only a purchase channel, but also an information exchange channel between luxury fashion brand and Chinese consumers.With the developing of GDP and individual income of consumers, the global luxury fashion market and such the emerging market as China, have become the strategic focal point of luxury market researcher and the consult company. This report attempts to identify development strategy of the luxury fashion brand, especially in mainland China market through the summary of the change of global luxury fashion brand, over hear of Chinese luxury market and the passion for luxury consumption.All those factors were identified depend on a comprehensive review of luxury fashion goods related researches and market consulting reports. The findings of this study provide a new insight of global and Chinese luxury fashion market for the consumers who interests the luxury fashion brand and a clear strategy guide for market managers of the luxury fashion firms, particular in the time of the company expand their business in mainland China. In addition, the study helps reduce the risks and costs of market research and helps the company overcome the wide gap in a multicultural business environment.First, the findings about the global luxury fashion market and the general development strategy in luxury fashion market all over the world indicated that the achieving the growth while remaining exclusive positioning, and attracting more consumers without losing cachet of brand value is the core strategy for every luxury corporates. The mor e loyal consumers may cushion due to the popular brands launched in the market because they choose pay a premium goods that majority and identified by small group.Consequently, the balance between growth and unique, the price and quality may be tougher in China than in any other market. However, customization develops quickly as the new trend of luxury fashion industry. The customizing activities have launched in diametric business sectors, but which is yet adopted by the luxury industry on a board. At presents, the customization just limited on the area of fashion accessories, apparel, handbags, and jewellery, and emphasising on customizing standard products, point of speech communication customization and service and producing bespoke goods.Secondly, the increasing the number of consumers, overseas traveller, new market segments and the counterfeits goods have become the main features in the Chinese luxury fashion market in recent years. The features are important of stress the benefits of investment in mainland China. found on the research findings, outside(a) marketers should setting wing strategy that is coherent with branding, merchandising and global image by serving Chinas globetrotting shoppers, striking the balance between store numbers and quality and focusing anti-counterfeit goods.For Chinese globetrotting shoppers, the customer relationship management should emphasis global view rather than on mainland China. In the view of higher(prenominal) management board, the corporate organisational structure of the luxury fashion company should reflect the significant of Chinese market by sorting up the processes for generating direct communication between Chinese luxury consumers and the home headquarter. Based on the new market segmentation, the luxury company should upgrade catamenia stores and outlets in order to keep consistent with the global image and emphasis on the business in Tier 1 cities.As the market statistics indicated that the luxur y counterfeit goods have become the barriers for development in China, including prehend sale revenue and weakening brand value. Luxury fashion companies should co-operate with customs officials to pound fake goods at ports. Working with multinational national organisation or international associations should be the third path for anti-counterfeit activities. The co-operation should ranges from such international associations as World keen Property to regional groups like US-focused International Anti-Counterfeits Coalition.Thirdly, the research findings about the passions for Chinese luxury fashion consumption indicated that the bling customers who lack of knowledge about luxury fashion goods or just following the trend account of a part of Chinese luxury consumers. Besides that, Chinese luxury consumption deeply influenced by saving faces and group orientation, which are the part of traditional astonishment value. Targeting different drivers of luxury consumption, managers sh ould have different strategies.For the bling customers, the global luxury firms should invest in improving the brand awareness and expanding the brand value, which could offer a global opportunity to attracting potential customers and building loyalty and excerpt customer groups. For the consumers who care about saving face, International luxury fashion markers should redact the outline of visual and outward appearance of rank and status when unfolding their marketing activities. Meanwhile, the companies should emphasise the brands plain of origin, so the Chinese consumers have the positive to identified and distinguished with other mass products.In addition, the package of luxury goods also need to be recognisable in order to fit the moderate and life style associated with Chinese consumers. Furthermore, in light of the results about group orientation, the management board company should stress the profit of luxury fashion goods as a symbol of social marker and the sale assist ants inspire consumer purchases because of the goods could generate a sense of group be and conformity of the elite. Due to the group belonging, a special attention should be attached to the layout of the physical store and the luxury service of sale staff.No matter who is the consumer, friends will be involved during the decision making process and become potential consumers in the future. Proving high-quality services and creating luxury experience for non-buyers also benefit for making sure that the brand accepted by group and that the consumer does not stand out from others. Finally, about the current expansion strategy in mainland China market, most of luxury fashion companies emphasis the strategy on marking, localization, pricing and retail coherent with the global business aims. elevator brand awareness and expressing the luxury lifestyle lay the foundation of marketing strategy. In order to respect to Chinese traditional culture, luxury brands should integrate Chinese cul ture and art into design, package, and store layout of products, which accepted slow by Chinese consumers in different social class. Meanwhile, the research findings indicated that the price is the most important factor which influenced Chinese luxury consumption. Luxury marketers should balance the price between Chinese market and overseas.As for the retailing strategy, the luxury brand stresses the developing of boutiques store and the setting up online distribution channels. However, there are several special attention should be given to price gap between China and overseas, and the online distribution channels. On one hand, comparing with that rarely go on discount in mainland China, the luxury fashion goods is often at a discount at overseas, especially for the non-core products and in the time of Christmas or Summer Sale.On the other hand, the high rate of valuate and fees raise up the price of luxury fashion goods in mainland China. According to the police and regulations in China, a luxury fashion goods, such as the eye filling of Estee Lauder native to the UK, is imported into Chinese market with 10% import tariff, 30% consumption tax, 5% sales tax and 17% value-add tax. Including the managing fees, advertising costs and other issues, the price of the eye cream is double in the UK.In the respect of the luxury company, the appreciate discount in Chinese market could promote the desire of consumption and boost the sale revenue in the respect of tax policy makers in mainland China, reducing the rate of import tariff and consumption tax of international luxury fashion goods could Finally, luxury fashion goods, as a subject of nature, play different or scenarios, different income level, education background, and social economic factors, as well as exam the type of relationship that seek from luxury fashion brands.On the view of passions for luxury consumption, there are many other drivers, such as collection, appreciation, should take the considerati on into further research.