Fashion industry enterprises corporate strategies comparative analysis

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Strategic Studies Center of Mathematical Studies of Complex Systems

Moscow State University

Institute of Lomonosov

Fashion industry enterprises corporate strategies comparative analysis

A.S. Khvorostyanaya

Moscow

Abstract

The developed strategy plays a fundamental role in the industrial enterprise. It helps the organization identify the most important internal and external factors, focus on its unique assets and identify strategic opportunities. Given the volatility of creative industries, strategy is the foundation of long-term growth. Creating a fashion industry commercial product requires considerable effort: a creative designer vision, technological innovation, taking into account industry and consumer trends. All these aspects are reflected in the enterprise strategy. This article identifies and compares corporate strategies used by industry leaders - LVMH and Kering groups of companies.

Keywords: fashion industry, corporate strategy, brand, consumer's cultural characteristics, digitalization, media communications.

Аннотация

А.С. Хворостяная

Центр стратегических исследований Института математических исследований сложных систем МГУ им. М.В. Ломоносова, Российская Федерация, Москва. Кандидат экономических наук, PhD, ведущий научный сотрудник.

Разработанная стратегия играет принципиальную роль в развитии отраслевого предприятия. Она помогает организации выявить наиболее важные внутренние и внешние факторы, сосредоточиться на своих уникальных активах и выявить стратегические возможности. Учитывая волатильность развития креативных индустрий, стратегия является основой долгосрочного роста. Создание коммерческого продукта индустрии моды требует значительных усилий: креативное видение дизайнера, технологические инновации, учет отраслевых и потребительских тенденций. Все эти аспекты отражены в стратегии предприятия. В этой статье идентифицируются и сравниваются корпоративные стратегии, используемые лидерами отрасли - группами компаний LVMH и Kering.

Ключевые слова: индустрия моды, корпоративная стратегия, бренд, потребительские культурные особенности, цифровизация, медиа коммуникации.

Main part

The study identified common and various corporate strategic decisions used by leaders of the modern fashion industry - LVMH and Kering groups. Both groups are financial conglomerates and transnational corporations consisting of well-known Fashion houses.

1. General corporate strategies

Sales strategy focused on the consumers cultural characteristics. Taking into account local culture, traditions and religious norms [1] allows minimizing the risk of a lack of understanding by the consumer audience, respectively, of an increase in stocks and, thereby, capital deadening. Repeatedly, the culture elements become the basis for the new commercial product development. The use of national culture allows to create products that are adapted to a specific consumer segment in a specific geographic area [2]. Like the LVMH group, the Kering group uses the national cultural elements of its markets. For example, world capitals have become the basis for developing a local Gucci brand bag promotion strategy: bags dedicated to Tokyo, Rome, Paris, New York, Shanghai, Dubai and Hong Kong. They are made of classic canvas with the brand logo and are distinguished by decor. For example, a bag in honor of the capital of Great Britain is decorated with roses, and in honor of Japan - with sakura flowers.

Target audience expanding strategy. This strategic decision is one of the most actively implemented by the LVMH group. For example, Donna Karan brand launched the Casual line in 2010, which expanded its customer base. A similar strategy was applied to Marc Jacobs brand - Marc by Marc Jacobs line. The new Tiger and Eye collections at Kenzo brand (LVMH) are most in demand among young people. Similarly, the Kering group of companies applies this strategy. In 2011, the Alexander Mcqueen brand launched the McQ line, which is designed for a young target audience, thus, the brand has diversified to expand the brand's customers as a whole.

Digitalization strategy. In the XXI century, the absence of an enterprise in the online space means its absence in the horizon of potential buyers visibility [3; 4]. The correct online integration strategy for each brand in the fashion industry is specific, but the basic components are the same: a functional mobile application, a presence in social media and an existing online store (geographically adapted). Therefore, in 2014, the LVMH group launched a number of online stores, mobile applications for its Fashion houses (Kenzo, Louis Vuitton, Christian Dior). Similarly, in 2012, the Kering group of companies engaged in the digital capabilities adaptation - the site www.ysl.com (Saint Laurent) was updated and translated into 7 foreign languages, 2 social networks were launched for the Asian market (Weibo and Wechat).

Commercial products expansion strategy. The expansion of product lines allows to generate additional income [5] and increase customer loyalty, providing customers with a wide choice assortment. It should be noted that many Fashion houses have made a real product revolution. For example, the masters of the Hermиs Fashion House (LVMH) for 181 years of their existence began to produce not only the initial product of specialization (riding equipment), but also silk scarves, leather products (belts, bags), perfumes, shoes and clothes of the ready - to-wear segment port.

Large-scale media communication strategy. The communicative strategy plays a major role in the company branding [6]. It includes a large complex of active marketing tools. These tools include external media, territorial media, existing Internet sites (in the local language). Famous advertising campaigns with the world stars participation, brand anniversaries press coverage, new items launch of clothing and accessories facilitates to engage in the fashion world.

Asset rebranding strategy. All assets in groups of companies (Fashion House) regularly undergo a rebranding process every 3-4 years - visual concepts and key ideas of advertising campaigns change that reflect the spirit of the times and thereby bring the asset closer to the consumer and mental attitudes.

Art positioning strategy. The collaboration of various cultural and creative industries allows to expand the target audience of consumers and to shape future customers. The fashion phenomenon is part of world culture [7]. The LVMH group is trying to emphasize relationship between creative industries: in October 2014, a special exhibition center «Fondation Louis Vuitton» was opened, in which various events are regularly held. In April 2015, an exhibition dedicated to the great modernists was held, in 2016 - Chinese art. In March 2015, the Kering group held a retrospective exhibition of the work of Alexander McQueen «Savage Beauty» at Victoria and Albert Museum in London. The group also uses representatives from other creative industries to collaborate. For example, the famous Chinese photographer Chen Man introduced to the public new brand Qeelin jewelry collections.

HR strategy. One of the strategic priorities of the LVMH group is to increase its creative potential, which is why it interacts with young graduates of world educational institutions. In 2014, the LVMH Prize for Young Fashion Designers was established, which is specially held for young designers with the aim of supporting them and further creative development. The Kering group appreciates the creative component of the design process for creating a commercial product, therefore for several years it continues to cooperate with the global institutes of the fashion industry, which form a new class of innovative designers. Since January 2015, the workshop of the Kering La Scuola dei Maestri Pellettieri di Bottega Veneta group of companies began cooperation with the University of IUAV of Venice with the aim of creating a 3-month course on the design of leather items and the new products development. The participants, knowing the production technology, in the future can apply for employment in this enterprise.

2. Various corporate strategies

Expanding sales markets strategy. One of the key strategic decisions of the LVMH group is the geographical expansion of the retail network in order to meet the needs of consumers in clothing, accessories, shoes etc. By 2019, LVMH group stores are present in America, Asia, Africa and Europe.

The Kering group uses a different strategy - market orientation strategy. The group strives to orient each of its assets to a specific market and improve its quality of interaction. The Bottega Veneta brand began to consolidate its presence in world markets, focusing on emerging markets without investing in developed ones (USA, Europe). The plans of the Kering group include the development of the Saint Laurent brand in the Middle East, Latin America and Southeast Asia. The Balenciaga brand plans to open boutiques in Madrid, Macau and Florence. The Dodo brand focuses in its further development only on mature markets - Europe, the USA and Japan.

Unique manufacturing technologies implementation strategy. This strategy is typical for the Kering group. In 2015, the Ulysse Nardin brand released a new version of Anchor Tourbillon watches using a unique silicon technology, which was the 8-year research result. These watches won a number of high awards in watchmaking: Tourbillon Watch Prize at the Grand Prix d'Horlogerie de Genиve, the Watch of the Year Prize at the International Salon of Haute Horlogerie in Mexico, Prix Orlogio dell'Anno 2015 from the Italian magazine L' Orologio.

Enterprise сonsolidation strategy. The opening of new minor lines forces each company to increase production costs, conduct a separate marketing campaign, which reduces economic efficiency [8]. Therefore, since 2015, the Donna Karan and Marc Jacobs brands (LVMH) announced a strategic repositioning of their collections and organizational structures consolidation. The Marc Jacobs brand has grouped its design collections of other lines into one for a single advertising campaign and fashion shows, developed and implemented a single store concept.

The financial indicators and corporate strategic decisions correlation should be identified. Strategies for expanding sales markets and target audiences are illustrated by the positive dynamics of the groups profit and the profitability of sales (Fig.1 and Fig. 2). An increase in inventory turnover allows us to conclude that the strategy for expanding commercial products has been successfully implemented.

Fig. 1. Economic performance indicators of the LVMH group in 2006-2017

URL:https://www.lvmh.com/investors/publications/? publications=29&pub_year=&pub_mont h=#)

In summary, the applied strategic decisions of leading companies in the light industry and the fashion industry are identified and their comparative characteristics are carried out. The strategy of expanding sales markets, expanding the target audience and targeting a specific market is aimed at working with potential and existing consumers. The digitalization strategy is connected with the integration of the enterprise into the Internet space, the strategy of enterprise consolidation and the strategy of introducing unique production technologies are aimed at changing the industrial production of commercial goods. The expansion strategy of commercial products is associated with the development of new assortment positions. Culturally-oriented sales strategy, strategy large-scale media communications, an asset rebranding strategy, an enterprise art-positioning strategy are aimed at increasing consumer loyalty, improving communications with customers, taking into account their interests and needs, thereby increasing the economic efficiency of the enterprise. Given the role of representatives of the creative class in the industry, both groups of companies apply a strategy for the formation of human resources.

References

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