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Chapter 2 Strategy in Action 2.1 – High Fashion Fights Recession 1 Chapter 2 Strategy in Action 2.1 – High Fashion Fights Recession University of the Incarnate Word PMBA 6317 – Global Strategies/Policy/Regulation Dr. Murat Tash Melody Colunga March 5, 2024
Chapter 2 Strategy in Action 2.1 – High Fashion Fights Recession 2 1. Using the five forces framework, how would you characterize the competition in the luxury goods industry? There are a few key factors that, while using the Five Forces structure, help represent the opposition inside the business. Buyers, under typical conditions, don't have a lot of haggling power inside the business. However, luxury brands built their competitive advantage on value and focus (Barbieri, 2022). The quantity of purchasers is expanding as new business sectors arise for example China comparative with the number of providers. These developing business sectors additionally help fuel a developing interest in different nations and expanded customer spending. There is likewise a low possibility for reverse reconciliation as the size of these extravagant brands is past the purchaser's buying force and there is no genuine need as utilization of these products is prompt and direct. Providers are just hardly more fruitful as far as haggling power. The quantity of providers is low because of a deficiency in exceptionally gifted laborers need to create top of the line merchandise. These organizations can only with significant effort switch providers either, as the danger may demonstrate to extraordinary if the lower quality is a possible aftereffect of exchanging. This additionally makes forward joining a low chance, as these organizations are regularly bigger than their produces. 2. How much bargaining power did consumers as buyers have during the Great Recession? Though the bargaining power of consumers in the luxury goods industry is less the recession period proved advantageous to the consumers and increased their bargaining power. As the recession hit income levels and purchasing powers of consumers, they intend to spend less on non-essential products hence impacting the firms in the industry. These firms thus had to change
Chapter 2 Strategy in Action 2.1 – High Fashion Fights Recession 3 their surviving strategies to attract the consumers who stuck to buying their products. They cut the inventory prices, offered the customer cheaper products with new product lines, and offered them discounts on products with a hidden strategy as advertising discounted prices was not the norm of this industry. Many firms also dropped out of the market not able to survive the impacts of recession on their business. Other than the leading firm of the industry who destroyed their stock rather than lowering their prices, all the other firms gave a high bargaining power to the consumers. 3. Why was discounting looked down upon by industry peers, all of which were differentiated or focused competitors? Each of the industry players had specific markets that they targeted and sold to, and though they were nuanced, they all overlapped to a degree. It would be considered brand weakening if something was on sale and likely something that is not as good as it could be, and therefore not worth the time or money for the consumer to purchase. As the recession became worse, many middle-class customers in economically depressed, developed economies began to hunt for value instead of triviality and showing off (Peng, 2022). If even one firm was associated with discounting items, it would sully the entire high end fashion industry. By not making their products cheaper, high-end brands attract a specific customer who wants to pay the full price because it feels exclusive. However, trends post-pandemic has shifted buyer habits. According to Yokta, paying full price for something might not seem such an unbelievable thought at first, but coupled with a global economic recession, U.S. unemployment numbers in the tens of millions, and a corresponding 63% decline in spending for clothing this May, buying a new $2,800 bag, $1,590 dress, or $950 pair of shoes starts to feel more like a dream and less like a reality (2020).
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Chapter 2 Strategy in Action 2.1 – High Fashion Fights Recession 4 4. What would be the likely challenges in emerging markets for luxury goods firms? Culture assumes a gigantic part in working globally, influencing numerous strategic approaches including dynamic, arranging, the board, affinity for hazard taking, promoting, deals, dissemination, and so on with countless components being influenced, obliviousness behind an unfamiliar culture can and will prompt firms to disappointment in those business sectors. A distinction in societies additionally implies a distinction in government and guidelines. Extravagance firms must know about what laws or guidelines are set up when entering another country. In any market, it is critical to have brand mindfulness, yet when the enterprises like extravagant merchandise depend so vigorously on it, it turns into an issue for those organizations that give those products. The framework is likewise a possible issue for these organizations too.
Chapter 2 Strategy in Action 2.1 – High Fashion Fights Recession 5 References Barbieri, M. (2022, December 06). How New Luxury Brands Can Use Time As A Competitive Advantage. Forbes Magazine. Retrieved from: https://www.forbes.com/sites/forbesbusinesscouncil/2022/12/06/how-new-luxury-brands- can-use-time-as-a-competitive-edge/ Peng, M. W. (2022). Global Strategy (5th ed.). Cengage Learning US. https://bookshelf.vitalsource.com/books/9798214344669 Yotka, S. (2020, June 30). ‘Discounting Is Not a Luxury Strategy’—The Voices Behind an Open Letter to Retail Address Fashion’s Full Price Future. Vogue Magazine. Retrieved from: https://www.vogue.com/article/discounting-is-not-a-luxury-strategy-fashion-forum-letter- dries-van-noten

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