After a thorough study of your company and a meticulous analysis the information you have given me, I have concluded that if Yves Saint Laurent changes from a differentiation strategy to a differentiation focus strategy, it is possible for YSL to double its profit within three years. The upsides of the change are a 150-percent increase in profit and strong brand awareness in a niche segment whose profile will be described in details hereafter. On the other hand, there are downside risks, including high possibility that Louis Vuitton, Tods and Bulgari will attempt to replicate YSL products since they are close to the targeted positioning as well (See Appendix A). The specific goals for YSL in the next 3 years include focusing on a specific segment of the fashion industry. YSL’s current operations and net sales of $145 million are small, compared to Gucci and even YSL Beauté but they make differentiation focus strategy a suitable and viable option. Furthermore, the prospect of targeting a niche market also arises from YSL’s prominent image as sophisticated sexy and European-chic. Hence, I recommend that YSL develops a focus on men and women who are “thirty and thriving”. These clienteles are those who are beautiful and sophisticated with a promising career. They are quite successful for their age and seem to “have, but still want it all” such as young successful entrepreneurs or middle-management investment bankers. The benefits of focusing on clientele who are in their 30s are the solidity of their earnings which will drive stable sales and their tendency toward elegance and departing from pure chic and hip. The other goals that coupled with a targeted niche segment are improving operating margin and sales. With the declining trend in royalties, I recommend that YSL should discount them and focus mainly on operating margin excluding royalties. The milestones are 20% in the 2004, 24% in 2008 and 28% in 2005 which will bring YSL’s operating margin to Vuitton’s...
References: Mary, Kwak, 2001. Gucci Group N.V (A). Havard College, Boston: Havard Business School Publishing
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