1) What are the defining characteristics of the luxury goods industry? What is the industry like? Defining characteristic of the luxury goods industry are the market size and growth rate, scope of rivalry presence of forward/backward vertical integration Consumer characteristics Degree of product differentiation. The global luxury goods industry was expected to grow by 7% during 2006 to reach $112 billion. The scope of rivalry in the industry was global with Italian luxury goods companies accounting for 27% of industry sales in 2005, French luxury goods companies controlling 22% of the industry, Swiss companies holding a combined market share of 19%, and U.S. companies accounting for 14% of industry revenues. Most luxury goods manufacturers were vertically integrated into the operation of retail stores. Signature like Armani, Versace, and other designers were handcrafted under the supervision of the designer. Coach products and diffusion lines offered by other luxury companies were produced by low-cost contract manufacturers. Traditional luxury consumers in the U.S. ranked in the top 1% of wage earners with household incomes of $300,000 or better, a growing percentage of luxury goods consumers earned substantially less, but still aspired to own products with higher levels of quality and styling. Manufacturers of the finest luxury goods sought to exploit middle-income consumers’ desire for such products by launching “diffusion lines” that offered “affordable” or “accessible” luxury . Key differentiating features include product quality, image and reputation, customer service, styling, and store ambiance.
2) What is competition like in the luxury goods industry? What competitive forces seem to have the greatest effect on industry attractiveness? What are the competitive weapons that rivals are using to try to outmaneuver one another in the marketplace? Is the pace of rivalry quickening and becoming more intense? Why or why not? The competition for luxury goods is strong due to low barriers for entry One of the competitive forces that have a great effect on industry attractiveness is the threat of new entrants and how hard it is to build up brand name that can compete with the likes of Coach, Louis Vuitton, Dolce & Gabbana, and Versace. Another Luxury items are known for their quality and their status. It can prove as difficult for new entrants to build this status. Even if their product is high quality competing against well established brands may be challenging. Another competitive force can be the bargaining power with suppliers. Some leather manufactures would rather be linked to larger brand names such as Coach and Louis Vuitton. The competitive weapons that rivals are using to try to outmaneuver one another in the marketplace are mostly pricing, and offering high quality products and offering economy levels of products. Some brands my use celebrity star power to help them sell products and promote the brand image. New fashion trends and product innovation is another weapon used in the luxury industry. Some brands hold annual fashion shows to promote the latest fashion trends. Lastly providing superior customer can lead to customer satisfaction as well as brand loyalty.
3) How is the market for luxury handbags and leather accessories changing? What are the underlying drivers of changeand how might those driving forces change the industry? The market for the luxury handbags and leather accessories is highly competitive. the market for luxury handbags and leather accessories is changing rapidly. The middle class is expanding and become younger and they are gaining disposable income. They also have different perspective on change, the are more educated when it comes to their fincances , and are knowlegable about the latest fashion trends.
The drivers of change
The growing demand for ‘accessible luxury’ goods in developed countries. Consumer...
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