Executive Summary
Michael Kors is expanding in different countries, and different business operations in China are streamlined. The study focuses on different business aspects to drive several insights. Michael Kors is using the retail business model, which is depicted through its workability in China. Critical evaluation has helped to rationalise this business model. Furthermore, through using several strategic tools such as pestle analysis and porter five forces, some opportunities and channels are identified. Accordingly, through using the 8 Ps of marketing, some future strategic changes or considerations are proposed along with some valuable insights. Several Ansoff’s matrix insights such as product development, market penetration, marketing development and diversification are also used to build or propose the strategic changes to attain the success in the competitor’s Chinese fashion market. In China, there is a need for an effective marketing communication plan to support these changes. Along with different steps such as goals and objectives, target audience, developing contents or messages, strategy development, communication channel selection, implementation, evaluation, and success measures, the marketing communication plan is streamlined. In the marketing communication plan, there are some key elements. For Instance, the company has to make some goals and objectives and identify the target audience. Developing the content and strategies are the next steps for the management. After this, the firm has to choose the pertinent communication channels, which can streamline the content effectively. Accordingly, the implementation should be conducted with improvisations. The firm has to define the evaluation criteria along with some success measures. The management of the company is emphasising on both, customers and market to implement these strategic changes effectively. The evaluation of the market environment of the company is necessary to make the successful entry into the country. Michael Kors is looking to make this successful entry.
Introduction: Michael Kors
Every organisation is looking to make some effective and lucrative marketing and branding strategies to gain the competitive advantage in the competitive market. Interestingly, the focus of the management is on customers and responsiveness to justify these strategies, especially, when conducting the international business. The management of the company has to come up with some different strategies, which can help to dominate in the presence of other competitors. The fashion industry has become quite competitive in this new business era. Accordingly, the management of the company has top products some market changes and challenges to build and propose some effective and lucrative strategies. Obviously, the good marketing communication plan is the best approach to support these strategic changes in an intense rivalry.
Company Background: Michael Kors
Michael Kors is a prominent luxury fashion company of the United States. Main product segments of the company are footwear, watches, apparel, handbags and other accessories. Michael Kors founded the company in 1981.The company is in the limelight due to its high-quality luxury products for an immense range of customers (Flannery, 2017). Due to some effective strategies in the United States fashion market, the company has sustained the success an ensured the competitive advantage over other competitors. However, in this intense rivalry, some strategic moves have been evolved with the passage of the time. The revenue of the company is US$ 4.71 billion. The business expansion of this company is remarkable. Based on different revenue streams, the company has expanded in different countries successfully (Wong, 2017)
Country: China
Michael Kors has expanded in China successfully. The management of the company has sustained the business operations with some good strategies, which are triggered by both, marketing and production (McGhie, 2012). The company has made its name in the fashion industry of China. The company has gained an immense customer response. Michael Kors management has considered this country as a great opportunity for the business (Walters & Jackson, 2013). It seems interesting to emerge in a country, which is containing the big population. It seems a good chance for the company to emerge successfully in 88 cities of China. The middle class is expected to increase 40-50 million in this country, and targeting these people have become the main preference of the company. Thus, China is the best option to build and propose the strategy along with an appropriate plan.
Brand Success: Michael Kors
Due to the popularity of middle class and e-commerce of in China, the company has gained the incredible growth. It is a fact that the company has made the difference through the social media integration. The company in this region has attained the success through the effective positioning process, which made customers responsive and assertive. Targeting middle class of the country is the best approach for the company, which is good to grab the customer range and increase the revenue streams (Trout & Rivkin, 2009). Of course, the company has come up with the redefined strategy in this region, which ensured the sustainability as well. In China, it has been observed that 70% people customers are under 45 years. Thus, remarkably, the company makes the product and marketing strategies to attract these customers and enhance the viability of targeting. Buying products for prestige and social status are modern customer trends in the Chinese fashion market. Thus, the success has been attained by the company through integrating with these new trends (Walters & Insch, 2018). The assertiveness and responsiveness of customers in this market show the success, and the company is looking to sustain it for a long run. The company depicts the increases in the sales process, as total sales rose 7.8% to $4.7 billion rises (Bain, 2016). It is a fact that the long-term estimated sale in China of is $500 million. Thus, the company is targeting and investing in this country to demonstrate its dominance (Bain, 2016).
Critical analysis of brand business model: Michael Kors
The company is containing the retail business model. The company owns the manufacturing process, and the distribution process is depicted through different Michael Kors stores. In China, the company wants to expand the number of stores. The business model of the company depicts the value of different stores, which are to be increased to make the difference in the competitive Chinese market. In the United States, the company is expecting 100 stores in at some high-class locations to target customers effectively. Similarly, this retail business model can help the company to open different stores and enhance the visibility of sales. The company has owned the manufacturing process. Based on the needs and demands of customers in this market, the company can keep the balance (Rowley, 2009).
The advantages and disadvantages of this particular business model are as under
The big advantage that the company has gained in China through this business model is the customer response. For instance, the retail outlet helps the customer to see or observe what they are buying. Instant gratification is quite helpful in making customers loyal and satisfied in different stores. Normally, people like to go to different retail outlets to experience the instant gratification. Also, with the perspective of the customer, they can inspect different products closely (Sengupta, 2005).
Critically, the most important thing for this retail business to maintain good relations with customers, For Instance, if this brand does notation good retailers with customers in retail stores, the business model may become worse for both, the company and the customer.
Business Canvas Model: Michael Kors
| Key Partners
Suppliers Shopping Malls Strategic Partners Textile Producers
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Key Activities
Designing Manufacturing Retailing E-Commerce Logistics Customer services Forecasting |
Value Propositions
Differentiation & Uniqueness Reasonable pricing for middle class Competitive positioning
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Customers Relations
Customer Feedback customers Pulse Events Brand Awareness |
Customer Segments
Customers (20-54) Customers (10-23) Price conscious Fast Growing children |
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| Key Resources
Integrated with fashion trends 133 licensed stores $3.2 billion revenue Effective structure Supply chain efficiency Operational excellence
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Channels
Stores Online E-Commerce Social Media Apps |
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| Cost Structure
Activity-based costing Investing in new stores Design, manufacturing, IT commerce, demand-based production and change process costs |
Revenue Streams
Retail Sales Sponsorship E-Commerce (Online)
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Competitive Positioning in China: Michael Kors
The company management has enhanced the competitive positioning in China through the high-quality products. The high quality products, and differentiated have helped the company management to create value for customers (Schmid, 2013). This value of customer depicts the competitive positioning, which makes this company different from other international and local fashion giants in China. Four different aspects influence the competitive positioning. For Instance, these four aspects are market profile, customer segments, approaches to deliver value and competitive analysis. Based on different insights, derived from these aspects, the company makes decisions accordingly (Olivier, 2015).
Michael Kors is holding limited is depicting the competitive positioning in China through differentiation. Interestingly, barriers to entry for different international fashion retailers are low as compared to other industries. Thus, making fashion products different from other competitors is the best approach to position better in the minds of the customer (Seeking Alpha, 2016). Now, particularly in China, there is a need to contain the big shift for this company to maintain the difference. The differentiation and competitive positioning are triggered by each other. Operational excellence, product leadership, and customer intimacy are several elements, which are to be increased to keep the differentiation in the limelight. It seems the competitive positioning, which can make the minds of customers. The company intends to position in customers’ minds to augment the positive buying decisions in the competitive market. In China, increasing the number of lifestyle stores is another factor, which creates value for customers. The perception of the customer regarding the brand is positive, which is a prominent output of the competitive positioning (Sengupta, 2005).
Chinese fashion market is quite competitive, and almost every company is looking to exploit different opportunities. There are some future opportunities and challenges for this brand in China, and these can be analysed through different strategic tools.
Future opportunities and challenges for the brand: Michael Kors
Pestle Analysis: Michael Kors
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Political
The political stability in China is in the limelight, and it has emerged as a big opportunity for the business. For Instance, to stabilising the political environment, the company can expand the business regarding different fashion products and stores. The political system supports the business and investment in the country, which depicts the low barriers regarding the entry. Thus, in China, the political stability creates different business opportunities for this company (Mulholland, 2015).
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Economical
The economic condition of the company looks good. The GDP of China is increasing, which also shows the increasing income level of people. The middle-class range of people is emerging in this market, which creates the opportunity for this company regarding targeting and positioning (So et al., 2013). Relative to challenges, the high property rates can create hurdles in opening new stores in China. Also, the inflation rate in China is also increasing, which can hit the buying power of people (Olivier, 2015).
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Social
In China, family size and different social behaviours direct people make different decisions. The literacy rate in China is 90%. People in this region containing the sense of fashion and they can understand different initiatives, which have been taken by the company. Almost 420 million people are internet users, and it seems a great opportunity for this company to initiate the direct sales through online channels (Chevalier & Gutsatz, 2012).
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Technological
Chinese retail firms are willing to use modern technology to reshape the production, marketing and sales process (Valaskivi, 2016). Thus, this is a great opportunity to integrate with the latest technology to enhance the visibility of different customer touch points (Hendriksz, 2015).
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Legal
As far as the e-commerce business is concerned in China, the process is still at the early stage, which is a big challenge for this company. For Instance, privacy and digital signature recognition have not been standardised in the country.
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Environmental
Some green business practices have been initiated by different retail and manufacturing companies in China. Thus, the production process can be shaped by the company to contain the long-term business sustainability (Garcia, 2015).
Porter Five Forces: Michael Kors
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Bargaining Power of Buyer
The bargaining power of buyers is low in this industry. Many people in the country are willing to have luxury brands. They do not bargain on price, which depicts the low bargaining power. Also, due to limited fashion brand options in the country, people want to pay the price, set by the company.
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Bargaining Power of Supplier
Interestingly, as far as the operations of the luxury brand in China are concerned, the bargaining power of suppliers looks high. Suppliers are playing a role in determining the pricing of luxury fashion products for customers. Customers can be shifted from a shopping mall if relations with suppliers are not sustained (Wong, 2017).
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Threats of substitutes
The threat of substitutes is high, especially in premium malls in China. The target customer of the company is 20 to 54 years old along with the annual income of $50,000. Similarly, other competitors are coming up with the same targeting strategy and products. The availability of different fashion brand increases this threat (Sengupta, 2005).
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Threats of New Entrants
Due to regulation regarding the real estate, the different firm may avoid the business expansion in China. Threats of new barriers are low, and despite having flexible business regulations, companies may take much time and investment to create and maintain the brand image (Craik, 2016).
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Competitive Rivalry
China is struggling to come up with a prominent global fashion brand. However, the competitive rivalry is quite high. For Instance, different competitors are OCHIRLY, BELLE, ANTA, METERSBONWE, TATA, and SEPTWOLVES. Moreover, Burberry is an international brand, which created the urgency regarding the competition and differentiation in the Chinese fashion market (Gomes, 2014).
Proposing and justifying strategic changes to address current and future trends in the market
Now, by using Ansoff’s Matrix and 8Ps of marketing, the illustration of strategic changes to address current and future trends in the market
Ansoff’s Matrix: Michael Kors
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Market Penetration
People in China are looking to adopt different international fashion trends, which can force the company to execute the market penetration strategy. The company can expand the same product line in the country (Hendriksz, 2015). Thus, regarding the future trends and strategic changes, existing products can be offered at low prices as compared to competitors (Bain, 2016).
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Product Development
In the product development process, Michael Kors can streamline the competitive positioning through containing strategic alliances with fashion designers of the country. The big change will be the cultural integration, which can enable the pertinent product development process in a Chinese fashion market (Booker, 2013).
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Market Development
China is the new market for Michael Kors holding limited brand. The market development process is linked to the new market culture. The strategic future change in the company is to create some new market segments to develop the market. The purpose is to target the middle class instead of just focusing on the rich people (Craik, 2016).
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Diversification
In this new market, the company plans to develop some new products for different market segments. From 10 to 20 years old customers can be targeted along with some new products in this new market to make the difference (Clifton, 2010).
8Ps of Marketing: Michael Kors
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Products
Product, which can be streamlined in China are leather goods, handbags, footwear, jewellery, eyewear, and watches. Interestingly, 70% of the business is controlled by these products in different parts of the world. Similarly, in China, the difference can be made through redefining some quality measures and differentiation, as it can ensure the general acceptance in China (Mulholland, 2015).
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Price
For grabbing the immense range of customers in this new market, an appropriate strategy is necessary to come up with the penetration pricing strategy. The purpose is to keep product margins low to target some new segments, designed by the management.
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Place
The target of the company is to focus on different shopping malls. Opening the retail outlet in a mall, which depicts the big customer traffic, is the best placement strategy in China. The placement strategy a must be integrated with the targeting and segments (Dhamdhere, 2016).
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Promotion
The company is willing to focus on both traditional and modern media channels to attract customers. Social media channels are to be considered to interact with customers through different advertisement campaigns. Promotions can be enhanced through celebrity endorsement in China, which can also accelerate the positioning (Olivier, 2015).
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Process
The process of this fashion brand can be changed through acquisition or strategic alliance with the local Chinese fashion brand. The process is customer oriented, and it is to be sustained in the Chinese market.
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People
The people’s strategy is in the limelight due to the possible contributions of people in the brand success in China (Ul-Hassan et al., 2016). Focusing on local labour in the business process is a good approach to understand the market and increase the market share (Chevalier & Gutsatz, 2012).
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Physical evidence
In different retail outlets, the Michael Kors company can create the attractive and differentiated environment, which can increase the brand appeal. The physical evidence will be different varieties, which are available in different Michael Kors stores (Garcia, 2015).
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Productivity
The company intends to reduce the cost of products, and therefore, the company will initiate the production process in this new market. New technology and cheaper labour cost will help to differentiate the process and increase the competitive advantage.
Building & Proposing Strategy: Michael Kors
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Who is our target?
The target customers of the company are 20 to 54 years old. Also, the new target segment is 10 to 20 years old.
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Where are we now in the mind of the consumer?
The perception of the customer in China is positive, as they perceive that the company has high-quality fashion products, which help to build the social status (Hendriksz, 2015).
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Where is our competition in the mind of the consumer?
The competition is in the mind of the customer is the uniqueness and available. Different designs should be available for customers to boost the attraction and gain the advantage.
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Where would we like to be in the mind of the consumer?
The company would like to position in the minds of customers through attractive pricing, differentiation and new product development (Juggessur & Cohen, 2009).
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What is the consumer promise, the “big idea”?
The consumer promise is the change, which can be carried with the passage of the time; the company has to ensure some changes in the product development to meet demands according to expectations.
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What is the supporting evidence?
According to derived insights from 8Ps, the supporting evidence can be the customer’s response, loyalty, and satisfaction. In China, the shift in the market share and profitability are other supporting evidence.
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What is the tone of voice for the advertising?
The tone of voice regarding the advertisement process will be aggressive, which make people assertive. Aggressive advertisement campaigns or tone increases the strong brand appeal (Red Luxry, 2015).
Marketing communications plan to support the proposed strategic changes: Michael Kors
The proposed strategic changes are new segments, penetration pricing, emphasising local labour, differentiation, redesigning the targeting and acquisitions to share the market share and process. The effective marketing communication plan is good to support these strategic changes.
Several steps of the marketing communication plans are as under
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Goals and Objectives
The goal of the company is to increase the attraction through depicting design, style, and innovative technology to make customers responsive. The objective of the plan is streamlining the content on famous media channels in China (Lutz, 2013).
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Identify Target Audience
Different customer segments, which have been defined by the management, can be identified by marketing management to streamline the content.
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Developing Contents or Messages
The focus of the management is to develop the content or message, which depicts some Chinese cultural values. Through content, the company is willing to engage customers at different touch points (Mahadzir, 2016).
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Strategy Development
The company intends to combine the marketing process through combining traditional and social media channels in China. It is helpful in the brand building process.
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Communication Channels Selection
After the strategy development, the company may select several communication channels. Social media, print media, television, and websites are some appropriate channels to contain the marketing communication (Magrath & McCormick, 2013).
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Implementation
The implementation of the marketing communication plan in China needs evolvement due to changing customer and market trends. Inappropriate marketing hierarchy is required to make the marketing communication successful in China (Verot, 2017).
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Evaluation
Marketing management of Michael Kors will evaluate this plan through making the customer reach predictable.
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Success measures
Customer feedback, response, and sales growth are some key success measures for a Michael Kors holding company.
Conclusion
In the end, it is to conclude that Michael Kors can gain the success Chinese fashion market through some strategic changes. Rends of doing business have been changed, and therefore, the company is looking to increase the business intelligence to derive several insights and make decisions in the best interest of the company. Michael Kors, being global firm has to dominate in the Chinese market through successful implementation of all proposed strategies. Executing different strategies effective in the company seems worthy for the management to improve the overall organizational functionality. For implementing the strategic changes to make some improvements, it is better to come up with the pertinent marketing communication planning process. All strategies and changes are to be depicted to business stakeholders along with the pertinent rationale. It is to mention that the management has to create the urgency regarding the rational decision making to think about the future of the company. The marketing communication plan and strategic changes are integrated. The combination of these two processes definitely creates the roadmap for this fashion company in the fashion industry. Michael Kors can consider these strategic changes as some change interventions, which can help the company to gain an edge over different competitors.
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