Introduction
How
has globalization and technological lead to the democratization of luxury
brands in fashion industry?
Welcome to globalization. The main focus for luxury
brands to go globalization is that companies want to take up more market share
and try to make more money by providing more options in term of the pricing
strategies. The advantage is that it can make their products more accessible to
different segments of people according to their different needs and
affordability. Democratization of luxury brands can benefit for those who
cannot afford too expansive luxury but want to be involve of owing the brands,
which they can feel a part of the elite (thesis statement). There are three
basic phenomenons that shape and shift of the democratization of luxury to go
globalize and expansion: (1) the evolve of the history of luxury industry, (2)
rise of luxury goods from China and emerging markets and (3) the transform of
culture luxury goods need.
(1) The evolve of the history of luxury industry
Luxury goods have been around for centuries that traditionally
people perceive luxury as the disruptive power of desire. Below is an old-fashioned
chart indicates that when we meet our comfort need we will seek for higher satisfaction
such as self esteem needs like luxury good. The point “enough” in the chart
indicated that differ amount people. Conversely, if we cannot be further satisfied
or being overwhelmed we will fail to delight as showing in the extravagance
part.
Many
of the popular brands like Versace, Hermes, Cartier, Louis Vuitton, Armani,
Dior and Chanel has been around the world for over 100 years. During the period
of 1970’s many of the luxury brands suffered from lack of capital, ownership
problems and diminishing market size. Nevertheless, in 1980’s many of the
famous brands have revitalized their image by using celebrities to promote it
brand awareness. For example, Louis Vuitton has been successful using
celebrities in Academy Awards to showcase their clothing. However, luxury
brands still face the problem of narrow customer segments. In the beginning of
1990s, luxury brands started to adopt brand-expansion strategies to diversify their products toward the mass
market. The phenomenon of trading up has included trading down of accepting a
much bigger market share. LVMH (Moët Hennessy - Louis
Vuitton) is a pioneer that they
used the strategy of differentiation, diversification and segmentation to
increase their market share and also diversify their products. They used
differentiation to ensure each of their brands has it distinction and pricing
different. Also, they used diversification to enlarge their scope of products
offering. These days people wants more about luxury and they are willing to pay
for it: “Everything
is up for grabs and consumers are willing to accept totally new, unexpected definitions of what
luxury is and where luxury can be found” (Danziger, 2005). It is inescapable for luxury brands to keep
growing; therefore, luxury brands must continually enhance and build more
diversity of it products by adding more value into it: “The natural evolution of all
luxury concepts is from class to mass. First luxury is introduced and embraced by the
affluent, and then inevitably it is translated and reinterpreted down to the
masses. Thus today’s luxuries become tomorrow’s necessities” (Danziger, 2005).
(2) Rise of luxury goods from China and emerging
markets
The demand of luxury goods first wave started in Europe 100-200 years ago, second wave is about 50 years ago started in US and now the third wave started in China and other emerging markets. The demand for luxury goods is booming rapidly as there disposable income continues to rise. China is projected to become the biggest luxury goods market within the next four years. By 2020, China is expected to consume 44% of luxury goods from the world, “with Asia projected to lead worldwide consumer consumption by 2030, the race is on for the region’s customers. Those companies that come up with fresh ideas, new products, and outside-the-box marketing strategies will outpace the competition” (Korn/Ferry Institute, 2012). China’s demographics of buying luxury good is differing from the US, which the average age of the customers is between 30’s to 40’s. China’s consumer is also more proactive to buy luxury online, which the marketing strategies has been shifted in order to target the web-savvy group of the consumers in China: “The “social” phenomenon has swept through the popular culture in the past few years, as millions of people joined online communities and started using online social platforms” (Chui, Manyika & Bughin, 2012). So basically marketer in China using the tactics of social networking sites, blogs, ecommerce platforms and as well as building traditional physical stores. The technology has played a big impact and fuels China market to growth faster: “China’s wealthy are shifting away from flashy logos to more understand brands. They have been consuming luxury in its old form before they have ever made a purchase” (Tupot & Stock, n.d.). The large consumption of luxury in China not only affects locally but as well as overseas. Furthermore, the globalization context has broadened the narrative that “more than half of the growth in global demand for imports is now originating in developing countries” (Scenario DNA, 2011).
The demand of luxury goods first wave started in Europe 100-200 years ago, second wave is about 50 years ago started in US and now the third wave started in China and other emerging markets. The demand for luxury goods is booming rapidly as there disposable income continues to rise. China is projected to become the biggest luxury goods market within the next four years. By 2020, China is expected to consume 44% of luxury goods from the world, “with Asia projected to lead worldwide consumer consumption by 2030, the race is on for the region’s customers. Those companies that come up with fresh ideas, new products, and outside-the-box marketing strategies will outpace the competition” (Korn/Ferry Institute, 2012). China’s demographics of buying luxury good is differing from the US, which the average age of the customers is between 30’s to 40’s. China’s consumer is also more proactive to buy luxury online, which the marketing strategies has been shifted in order to target the web-savvy group of the consumers in China: “The “social” phenomenon has swept through the popular culture in the past few years, as millions of people joined online communities and started using online social platforms” (Chui, Manyika & Bughin, 2012). So basically marketer in China using the tactics of social networking sites, blogs, ecommerce platforms and as well as building traditional physical stores. The technology has played a big impact and fuels China market to growth faster: “China’s wealthy are shifting away from flashy logos to more understand brands. They have been consuming luxury in its old form before they have ever made a purchase” (Tupot & Stock, n.d.). The large consumption of luxury in China not only affects locally but as well as overseas. Furthermore, the globalization context has broadened the narrative that “more than half of the growth in global demand for imports is now originating in developing countries” (Scenario DNA, 2011).
(3) The transform of culture luxury goods need
Nowadays luxury advertisements are everywhere in the magazines, banner, TV, newspaper and online ads. As you walk into the urban city you will find luxury stores nearby very easily. In China, it is normally for a receptionist to save up to three months of their salary to buy a luxury handbag. Moreover, in Russia they have a psychological habit which they will spend up to 13 percent of their income to buy luxury products. In the culture perspective the functional, financial, social and individualism dimension are very important: “Cultures drive the meaning incited by their specific involvement with certain codes inherent in the brand” (Tupot & Stock, n.d.). The functional aspect means uniqueness, usability and quality. The financial aspect is about the pricing. Social aspect is about how the product will perceive by others. The individualism aspect involves self-identity, belonging and hedonistic. Therefore, these aspects will depend how each cultures weight but the mechanism is the same in worldwide.
Nowadays luxury advertisements are everywhere in the magazines, banner, TV, newspaper and online ads. As you walk into the urban city you will find luxury stores nearby very easily. In China, it is normally for a receptionist to save up to three months of their salary to buy a luxury handbag. Moreover, in Russia they have a psychological habit which they will spend up to 13 percent of their income to buy luxury products. In the culture perspective the functional, financial, social and individualism dimension are very important: “Cultures drive the meaning incited by their specific involvement with certain codes inherent in the brand” (Tupot & Stock, n.d.). The functional aspect means uniqueness, usability and quality. The financial aspect is about the pricing. Social aspect is about how the product will perceive by others. The individualism aspect involves self-identity, belonging and hedonistic. Therefore, these aspects will depend how each cultures weight but the mechanism is the same in worldwide.
The impact of globalization luxury fashion industry
Fashion is both a culture good and business that have worldwide audience and competitive global market, which competitions are extremely complex in the industry: “In order to create brad impact globally, companies must be adept at transferring the product innovation that defines their brands to new markets while taking into account the unique requirements of specific geographies and cultures” (Doyle, 2010). Globalization has becomes to be an enormous part of the fashion industry. Many of the popular fashion brands like Prada, Michael Kors, and Louis Vuitton have taken note that customer relationship management and understanding the cultural consumption of different countries is very important. In order to achieve success across the globe, they must track and obtain customer data through their patterns, behaviors and what they are buying. Also the knowledge management of sharing within the company is very important because it can ease up the time of adopting foreigner culture market and “understand how customers think about sustainability and what they are willing to pay for in connection with sustainable products or services” (Kiron, Kruschwitz & Haanaes, 2013). Especially nowadays, the relationship between globalization and fashion are effect hastily by the new creation trends, production, communication and distribution because business in the fashion industry things are changing enormously quick and every season has its own trends: “The current strategic inflection point has arisen in part because economic globalization and advances in technology have significantly increased market competitiveness. Product life cycles are shorter, production costs are lower, and market demands change faster than ever before” (White Paper Entrepreneurship & Innovation, 2011).
The trade-off that since the luxury brands has become more accessible, it will harder for customers to perceive the exclusivity and uniqueness for individual appealing. Therefore, luxury brand used brand-expansion strategies to classify different segments of customers without tarnishing the parent brand. In below, I have listed some of the major fashion evolving shifts through the consumer desire in the globalization:
Fashion is both a culture good and business that have worldwide audience and competitive global market, which competitions are extremely complex in the industry: “In order to create brad impact globally, companies must be adept at transferring the product innovation that defines their brands to new markets while taking into account the unique requirements of specific geographies and cultures” (Doyle, 2010). Globalization has becomes to be an enormous part of the fashion industry. Many of the popular fashion brands like Prada, Michael Kors, and Louis Vuitton have taken note that customer relationship management and understanding the cultural consumption of different countries is very important. In order to achieve success across the globe, they must track and obtain customer data through their patterns, behaviors and what they are buying. Also the knowledge management of sharing within the company is very important because it can ease up the time of adopting foreigner culture market and “understand how customers think about sustainability and what they are willing to pay for in connection with sustainable products or services” (Kiron, Kruschwitz & Haanaes, 2013). Especially nowadays, the relationship between globalization and fashion are effect hastily by the new creation trends, production, communication and distribution because business in the fashion industry things are changing enormously quick and every season has its own trends: “The current strategic inflection point has arisen in part because economic globalization and advances in technology have significantly increased market competitiveness. Product life cycles are shorter, production costs are lower, and market demands change faster than ever before” (White Paper Entrepreneurship & Innovation, 2011).
The trade-off that since the luxury brands has become more accessible, it will harder for customers to perceive the exclusivity and uniqueness for individual appealing. Therefore, luxury brand used brand-expansion strategies to classify different segments of customers without tarnishing the parent brand. In below, I have listed some of the major fashion evolving shifts through the consumer desire in the globalization:
- Globalization has allowed companies rapidly expand into multiple marketing platforms and also allowed for companies to source new suppliers easily.
- A new re-balancing of scale is happening that from the past the market is dominant by the West; however, the global economic has been shifting spontaneously into emerging markets in the East.
- The communication has been shifting from brand-centric to being consumer –centric, that marketing strategies has been shift from retail stores to online shop and promotions.
- The traditional focus from time to market has been shifted to time to consumer in order to keep up with the customer demands and preferences. Since the trends are short lived nowadays the innovation process must process as quickly as possible from deign to production to retail and to the customers.
- There is possibility the paradigm shift from more focusing on seduction on product to seduction on price which many of the people are looking for good quality of product as well as a suitable price. Therefore, affordably luxury becoming more and more popular for customers to adopt nowadays.
Analyze some of the brand extension strategies
Traditionally brand managers used simple business strategies to target the customers. However, nowadays brand managers faced lots of complexities and contingencies such as the revolute of business environment, channel dynamics, market fragmentation and change of global contexts. This sets of provoke has created four basic models for brand architecture strategies that includes house of brands, branded house, endorsed brand and sub-brands. The use of brand architecture strategies can provide consumers clarity and coherent of that brands because it can indicator brand roles, organizing the structure of brand portfolio and identify relationships between brands.
Traditionally brand managers used simple business strategies to target the customers. However, nowadays brand managers faced lots of complexities and contingencies such as the revolute of business environment, channel dynamics, market fragmentation and change of global contexts. This sets of provoke has created four basic models for brand architecture strategies that includes house of brands, branded house, endorsed brand and sub-brands. The use of brand architecture strategies can provide consumers clarity and coherent of that brands because it can indicator brand roles, organizing the structure of brand portfolio and identify relationships between brands.
1. House of brand
House of brand is an independent set of standalone brands that maximizing the impact on a market. The advantage of using house of brand can provide the direct value proposition to dominate the niche customers. Moreover, the visibly positioning allows firms to have explicit functional benefits to leverage brand into different segments of the business. Besides targeting the niche group house of brand also have other functionalities that includes: avoiding channel conflict, provide new offering that will not dilute the existing brand, avoiding brand association that would mismatch and reflect key attributes by using extraordinary and influential name.
House of brand is an independent set of standalone brands that maximizing the impact on a market. The advantage of using house of brand can provide the direct value proposition to dominate the niche customers. Moreover, the visibly positioning allows firms to have explicit functional benefits to leverage brand into different segments of the business. Besides targeting the niche group house of brand also have other functionalities that includes: avoiding channel conflict, provide new offering that will not dilute the existing brand, avoiding brand association that would mismatch and reflect key attributes by using extraordinary and influential name.
2. Branded house
Branded house is all products that marketed in one brand name which is often under the corporate name, which the master brand is also called the umbrella brand and under the umbrella brand there are multiple offerings. Branded house is a metaphor of putting all their eggs into one basket that all the company operations are under the same name. However, the disadvantages of this model are sometime it is difficult to maintain all of the business operations into a positive image and it may perhaps difficult to target particular groups of customers. Conversely, the benefits of branded house can maximize clarity and synergy that one positive association of particular product/service that can transfer it into other context of operations.
Branded house is all products that marketed in one brand name which is often under the corporate name, which the master brand is also called the umbrella brand and under the umbrella brand there are multiple offerings. Branded house is a metaphor of putting all their eggs into one basket that all the company operations are under the same name. However, the disadvantages of this model are sometime it is difficult to maintain all of the business operations into a positive image and it may perhaps difficult to target particular groups of customers. Conversely, the benefits of branded house can maximize clarity and synergy that one positive association of particular product/service that can transfer it into other context of operations.
3. Endorsed brand
Endorsed brand is an independent brand but usually guaranteed by the corporate brand. Endorsed brand usually plays a minor role by providing reliability to the offering. So for endorsed brand to work, the firm must need to understand the distinctiveness of the organizational brand and the product brand. Also the endorsing brand should provide some credibility and helpful association into the sights of the consumers.
Endorsed brand is an independent brand but usually guaranteed by the corporate brand. Endorsed brand usually plays a minor role by providing reliability to the offering. So for endorsed brand to work, the firm must need to understand the distinctiveness of the organizational brand and the product brand. Also the endorsing brand should provide some credibility and helpful association into the sights of the consumers.
4. Sub-brands
Sub-brands have close relationship with the parent/master brand, which parent/master brand is the primary frame of reference of sub-brands. The parent/master usually stretched the sub-brands by adding new values or associations into it. The linkages between the parent brand and the sub-brands have closer relationship than the endorsers and endorsed brands; thus, parent brand has a more drive role.
Sub-brands have close relationship with the parent/master brand, which parent/master brand is the primary frame of reference of sub-brands. The parent/master usually stretched the sub-brands by adding new values or associations into it. The linkages between the parent brand and the sub-brands have closer relationship than the endorsers and endorsed brands; thus, parent brand has a more drive role.
Two models for brand stretching the vertical extension
and horizontal extension
Globalization has shape luxury to become very specific good to draw the attention of small market into a big market. Upholding a narrowed product and targeting the niche group can be a safest strategy for luxury brands. However, if the luxury brand cannot sell sufficient number of its products, they must need to stretch it brand in order to boost up their sales. In the following, I will explain the two models in more details.
Globalization has shape luxury to become very specific good to draw the attention of small market into a big market. Upholding a narrowed product and targeting the niche group can be a safest strategy for luxury brands. However, if the luxury brand cannot sell sufficient number of its products, they must need to stretch it brand in order to boost up their sales. In the following, I will explain the two models in more details.
Pyramid Model (Vertical extension)
Vertical extension as know as the pyramid model, it provides varieties of accessibility price range and allows them to create numerous of sub-brands to target different segments. There are varies of strata in the pyramid model. This model is commonly used in the fashion industry because the haute couture usually starts at the top with small series exclusivity at the middle and large series of licensing at the bottom. The benefit of this model is that even upper tier is losing money the lower tier can provide significant support in capital. However, the downside of this model is that the firm may shift its focus on the most earning line in the lower tier rather than focus on the upper tier. Moreover, if the quality is bad in the lower tier it will damages the reputation at the top as well.
Vertical extension as know as the pyramid model, it provides varieties of accessibility price range and allows them to create numerous of sub-brands to target different segments. There are varies of strata in the pyramid model. This model is commonly used in the fashion industry because the haute couture usually starts at the top with small series exclusivity at the middle and large series of licensing at the bottom. The benefit of this model is that even upper tier is losing money the lower tier can provide significant support in capital. However, the downside of this model is that the firm may shift its focus on the most earning line in the lower tier rather than focus on the upper tier. Moreover, if the quality is bad in the lower tier it will damages the reputation at the top as well.
Galaxy Model (Horizontal extension)
Horizontal extension, also called the galaxy model, provides more products to increase its customer base by building around from the brand. In this model, brand does not downgrade itself to target the lower strata of the markets, which all sub-brands basically strand alone with each other in an equal manner. In other words, all the sub-brands have equal value and the center of the galaxy is the inventor. For example, Ralph Laurent’s sub-brands Polo Ralph Lauren, Purple Label and Black Laruen they all strand in the same manner by represent Ralph Laurent’s lifestyle.
Horizontal extension, also called the galaxy model, provides more products to increase its customer base by building around from the brand. In this model, brand does not downgrade itself to target the lower strata of the markets, which all sub-brands basically strand alone with each other in an equal manner. In other words, all the sub-brands have equal value and the center of the galaxy is the inventor. For example, Ralph Laurent’s sub-brands Polo Ralph Lauren, Purple Label and Black Laruen they all strand in the same manner by represent Ralph Laurent’s lifestyle.
The implication of brand stretching
In the following I have streamline some of the advantages and disadvantages of brand extension.
In the following I have streamline some of the advantages and disadvantages of brand extension.
Advantages
|
Disadvantages
|
|
|
Case sharing: Armani brand extension success story
Armani’s company background and philosophy
Armani was founded in 1975 in Milan and it is Italy’s most glamorous luxury brand. Armani is a high-end label brand specializing in men’s and women’s ready-to-wear, accessories, glasses, cosmetics and perfumes. Currently, Armani is operates over 300 boutiques worldwide in more than 35 counties and last year the company has generated $2.4 billion revenue.
Armani likes all others luxury brands (Versace, Christian Dior, Gucci, Yves Saint-Laurent and etc) were built on the personality of the founders. As everyone knows ‘design’ is the soul of fashion especially for luxury apparel, the individual style of these designers become crucial for innovation and also reflects their personality to differentiate from competitors. Thus these founders are “to bring together distinctive and differentiated knowledge and capabilities from around the world to create unique innovations” (Doz & Wilson, 2012). Through the aspect of the founders’ personality and identity it created a strong sense of differentiation and uniqueness. Giorgio Armani, he is widely viewed as the most talented fashion designer in the world. His methodology of fashion is to blend the delicate of the combination of creativity and commercial know-how together. Thus, the brand Armani’s characteristics are portrait of the personality of Giorgio Armani himself.
Armani was founded in 1975 in Milan and it is Italy’s most glamorous luxury brand. Armani is a high-end label brand specializing in men’s and women’s ready-to-wear, accessories, glasses, cosmetics and perfumes. Currently, Armani is operates over 300 boutiques worldwide in more than 35 counties and last year the company has generated $2.4 billion revenue.
Armani likes all others luxury brands (Versace, Christian Dior, Gucci, Yves Saint-Laurent and etc) were built on the personality of the founders. As everyone knows ‘design’ is the soul of fashion especially for luxury apparel, the individual style of these designers become crucial for innovation and also reflects their personality to differentiate from competitors. Thus these founders are “to bring together distinctive and differentiated knowledge and capabilities from around the world to create unique innovations” (Doz & Wilson, 2012). Through the aspect of the founders’ personality and identity it created a strong sense of differentiation and uniqueness. Giorgio Armani, he is widely viewed as the most talented fashion designer in the world. His methodology of fashion is to blend the delicate of the combination of creativity and commercial know-how together. Thus, the brand Armani’s characteristics are portrait of the personality of Giorgio Armani himself.
Armani brand extension model
Starting the parent brand Armani at the middle, Armani group owns seven fashion sub-brands portfolios such as Armani Prive, Armani Collizioni, Emporio Armani, Armani Junior, Armani Exchange, Armani Jeans and Armani Exchange. Each of the sub-brands has it owns unique proposition and pricing strategies to fulfill different segment of niche groups. For example, Armani Prive and Giorgio Armani style are more couture, Armani Collezioni style is more classical, Emporio Armani style is more fashionable, and Armani Exchange and Armani Jeans view as casual wear fashion.
Starting the parent brand Armani at the middle, Armani group owns seven fashion sub-brands portfolios such as Armani Prive, Armani Collizioni, Emporio Armani, Armani Junior, Armani Exchange, Armani Jeans and Armani Exchange. Each of the sub-brands has it owns unique proposition and pricing strategies to fulfill different segment of niche groups. For example, Armani Prive and Giorgio Armani style are more couture, Armani Collezioni style is more classical, Emporio Armani style is more fashionable, and Armani Exchange and Armani Jeans view as casual wear fashion.
Moreover,
Armani Collezioni and Armani Prive is slightly target the market lower than
Armani. This tier of sub-brands is targeted for those who aspire to wear Armani
apparel but cannot afford ultimate signature line. Emporio Armani and Armani
Junior are targeted at young professional segment in 25-35 year old age that
provides contemporary designs. Armani Jeans in the lower price range in Armani
apparel, which focusing to target young adults in the 18 to 30 year old age
group to provide trendy and fashionable fashion. Armani Exchange is the
licensed brand of chain of retail outlets by Armani fashion house, which provide
varieties of apparel and accessories in a complete feel of luxurious. Therefore,
customers perceive each of the sub-brands style and quality differently.
Armani
used the ‘pyramid business model’ for their brand extension strategy and to
positions itself to occupying different group of customers. The ‘pyramid model’
starts with a very high end brand (haute couture) at the top and mass market at
the bottom, which each level is aimed at different customer’s segment with
different price points and distribution channels. According to the reading ‘A
Framework for Strategic Innovation’, “To truly leverage core competencies for
strategic innovation, consideration of both technical and operating
capabilities is essential – capabilities that are integral to an organization’s
success, that yield significant customer benefits, and that provide competitive
differentiation. Such competencies may include unique relationships with
suppliers and partners, brand equity, organizational speed and agility,
innovative business practices and proprietary technology” (A Framework for
Strategic Innovation, 2002). By using the ‘pyramid model’ it offers Armani
rapid growth and ability to reach different level of customers. Hence,
creativity, quality and excellence of the lower level must congruent with the
haute couture at the top. The benefit of ‘pyramid model’ provides opportunities
for Armani to diversify their product into different segments. Therefore, the
brand extension creates a synergy without tarnishing the parent brand.
Armani marketing strategy analysis
Product: Armani has wide range of sub-brand categories to address different segments of luxury good consumers. All Armani’s sub-brands have it unify factor of elements linked to the parent brand such as quality, craftsmanship and precision.
Product: Armani has wide range of sub-brand categories to address different segments of luxury good consumers. All Armani’s sub-brands have it unify factor of elements linked to the parent brand such as quality, craftsmanship and precision.
Pricing: Armani used premium-pricing strategy; however, some of the Armani’s sub-brands used lower pricing strategy.
Distribution: Armani distribute their product through their own retailer and selected distributors. Armani retailer stores can be easily reached in the major cities urban area. For the online channel in the US market, not all the products are sold in US, only particular selected products were sold there. Armani also has their stores in outlet shopping mall and value retail outlet villages to capture customers worldwide.
Promotion: Giorgio Armani was the pioneer designer to promote luxury goods in the film and the cinema. Besides himself being ambassador of Armani, Armani also used celebrities and movie stars to promote their brand. The Academy awards have become an important event for them to get involved because it allowed stars to wear their exclusive fashion walking in the red carpet. The success relationship between celebrities and the cinema has consequently built into extraordinary chemistry with internationals stars. Also Giorgio Armani will vivid their designers to become into a popular icon.
Major benefits of Armani brand extension
The benefit of Armani brand extension is that each of the sub-brands is linked to the parent brand Armani. Each of their sub-brands has different perception of quality of desire and style which Armani can eliminate overlapping. Each brand line have their own division serving, distinct market and running it own functional units. Each brand line has its own committed style, product and brand manager, sales and communications and pricing strategies. As a result, the pyramid model offers benefits such as economies of scale, resource allocation, create a synergy without tarnishing the parent brand and responsiveness while still controlling economic risks.
The benefit of Armani brand extension is that each of the sub-brands is linked to the parent brand Armani. Each of their sub-brands has different perception of quality of desire and style which Armani can eliminate overlapping. Each brand line have their own division serving, distinct market and running it own functional units. Each brand line has its own committed style, product and brand manager, sales and communications and pricing strategies. As a result, the pyramid model offers benefits such as economies of scale, resource allocation, create a synergy without tarnishing the parent brand and responsiveness while still controlling economic risks.
Armani brand extension challenges
(1) Brand dilution due to over-stretch: After many years of building brand image with the
customers, Armani has very well-built brand equity which it is a not surprise
that Armani can easily enhance their shareholder to invest into their brand
extension or new product categories. However, Armani has stretched their brand
extension a bit too far. Besides their using the term ‘Armani’ for their
fashion apparel, they also used the term ‘Armani’ for the luxury hotels categories
and franchising their brand names to other products/services. Since their brand
names have been used for diversity of things, their brand names have been
diluted their brand equity.
(2) Managing brand architecture: Since
Armani has diversity of portfolio of brands in different segments and target audiences;
it is difficult to keep the consistency of marketing activities across all channels.
The dilemma is that brand extension can gives Armani advantage to build a very
strong corporate brand but on the other hand it gives them a huge risk of
diluting their brand equity. Therefore, Armani should build their brand carefully
and should not lose their focus as new challenges accumulate.
(3) Sustaining consistent brand personality: The
key aspect of building sustaining consistently is very crucial for brand
personality. Since Armani has wide brand portfolio and diverse markets, they
faced challenge of building relevant brand personality, which its personality
and its identity in the marketplace are not congruent. This is a challenge for
Armani ahead as competition become more competitive and also the growing of
their brand portfolio.
References:
A Framework for Strategic
Innovation: From Breakthrough Inspiration to Business Impact (2002).
Strategic Innovation Group, 1-20.
Aaker, D. A & Joachimsthaler,
E. (2000). The Brand Relationship Spectrum: The key to the brand
architecture challenge. Retrieved April 29, 2014 from http://www.iuc-edu.eu/group/sem1_L3/2013%20DNPBM/Lecture%2012%20Brand%20Relationship%20Spectrum.pdf
Chui, M., Manyika, J. &
Bughin, J. (2012). The Social Economy: Unlocking Value and Productivity Through
Social Technologies. McKinsey Gobal Institute, 1-184.
Danziger, P. N. (2005). Let
Them Eat Cake: Marketing Luxury to the Masses - As Well as the Classes.
Dearborn Trade Publishing : A Kaplan Professional Company.
Doyle, M. (2010). Transferring
Innovation to Global Markets. Product Development, 64-66.
Doz, Y. L. & Wilson, K.
(2012). 10 rules for managing global innovation. Harvard Business Review, 86-90.
Equibrand Consulting. (n.d.). Brand
Architecture Examples. Retrieved April 29, 2014 from http://equibrandconsulting.com/services/brand-consultant/brand-architecture/examples
Globalization 101 (2011). The
Globalization of Luxury. Retrieved April 29, 2014 from http://www.globalization101.org/the-globalization-of-luxury-3/
Gómez, J. B. (2013). The
impact of brand stretching. Retrieved April 29, 2014 from http://www.creativeblogmarketing.com/the-impact-of-brand-stretching/
Isabella Brusati Consulting – the
Change Management Expert.
(2013). Brand Extension: How Far Can You Go?. Retrieved April 29, 2014
from http://isabellabrusati.com/wp-content/uploads/2013/04/Brand-Extension-How-Far-Can-You-Go.pdf
Jim.shamlin.com.
(n.d.). 7: Luxury Brand Stretching. Retrieved April 29, 2014 from http://jim.shamlin.com/study/books/4912/07.html
Kiron,
D., Kruschwitz, N. & Haanaes, K. (2013). The Innovation Bottom Line .
MIT Sloan Management Review and The Boston Consulting Group, 1-22.
Korn/Ferry
Institute (2012). Asia’s innovation imperative: The consumer-driven boom in the
region demands business leaders who can turn creativity into value.
Luxury Studies (2011). The
History of Luxury . Retrieved April 29, 2014 from http://luxurystudies.blogspot.hk/2011/02/history-of-luxury.html
Okonkwo, U. (2007). Luxury
Fashion Branding, New York: Palgrave Macmillan.
Scenario DNA.
(2011). The Culture of Luxury . Retrieved April 29, 2014 from http://www.slideshare.net/scenariodna/the-culture-of-luxury-2011-brand-packaging
Tupot, M. & Stock, T. (n.d.).
The Culture of Luxury. Retrieved April 29, 2014 from http://www.ibsturkiye.com/ders_notlari/Emel_Goker-2.pdf
Venture Republic (n.d.). Giorgio
Armani - the ultimate fashion brand. Retrieved April 29, 2014 from http://www.venturerepublic.com/resources/giorgio_armani_-_the_ultimate_fashion_brand.asp
White
Paper Entrepreneurship & Innovation (2011). The Path to Growth:
Accelerating Entrepreneurship and Innovation Through ICT.
