Income elasticity of demand Essay Example for Free

Income elasticity of demand EssayLuxury product gross sales pressurize in the emerging securities industrying similar mainland China, which has extraordinary growth and bullnecked potential consumers for the victimization of sumptuousness goods in the China market. With gradually lower and lower increase of revenue in the European countries, Louis Vuitton (abridged as LV in the following sections) commits itself to set up more than(prenominal) than stores in China. However, LV is faced with the problems of declining loot in China, which urges it to adjust its entry strategy into the China market.In this case, this report go out focus on distinguishing the factors that illustration LVs development in China and personateing out schemes for LVs entry into China market by initially examining the inside and away environment for LV analyzing the available contrive for LVs entry into China based on the environment exam, and generating an action plan for LVs entry str ategy at the end of the report.Content 1. 0 Introduction Louis Vuitton (abridged as LV in the following sections) is planning to set up more stores in the China market. However, it is directly faced with the problems of declining profits in China, which urges it to adjust its entry strategy into the China market.In this case, this report is to lay out schemes for LVs entry into the China market by distinguishing the home(a) and external factors that influence LVs development from the perspectives of country factors and internal advantages of LV with reference to the SWOT analysis model analyzing the operational plan for LVs entry into China based on the environment examination and including suggests on quick strategy, organization structure and management, entry strategy and modes, manufacturing management, marketing plan, and accounting as to the highest degree as financemanagement and generating an action plan for LVs entry strategy at the end of the report according to the s pecifications of the business operational plan. 2. 0 Research Methods The research method of literature searches is adopted to generate this report. This method is chosen because there are plenty of existing studies on the development of luxuriousness goods, which makes it possible for abundant literature searches.Also, there are a great many resources on the annual reports of Louis Vuitton available which offer insights into the financial performance of this beau monde. Anyway, luxury goods are indeed possessed by the majority of people, which makes direct interviews or surveys less available. 3. 0 Findings External and Internal Environment The internal and external factors that influence LVs development will be examined in this section from the perspectives of country factors and internal advantages of LV.A SWOT analysis will be involved in this section, which aims to find out the strength, weakness, luck and threat of the company according to analysis on the internal conditio ns of the company and the external environment the company is faced with (Johnson Scholes, 2002, p122). 3. 1 External environment Country factor analysis The external environment for LVs entry into China will be discussed in terms of the politics and government insurance policy of China, the economy and the China market, the social culture and transportation of China, and will be concluded from the perspectives of opportunities and threats for LVs entry into China.In terms of politics and government policy, China is now actively opening up to the world and enhancing trade relationships with world scrapes since the reform and opening up policy. In terms of the economy and the China market, according to Yuval and Vinay and Cathy (2011), the analysts of Mckinsey quarterly, China has increase booming urban cities including the second- and third-tier cities and the world second-largest GDP which means strong acquire power the China consumers for luxury goods and great market potentia ls (para 8).They also pointed out that by 2015, Chinese consumers will account for more than 20 percent of the global luxury market. On the other hand, the large market potential has drawn a host of luxury-goods companies to enter the China market, which makes the competition fiercer and fiercer. And it is troublesome for LV that there are plenty of phony goods imitating LVs style prevailing in China, which are actually not likely to reduce LVs high gear-end consumers, but would exert negative influences on consumers image and awareness of LV.In terms of social culture, for one thing, the China consumers are attracted by middle- and high-end products and somehow more attracted by French luxury goods, and they believe that the higher the price, the better the caliber (Yuval, Vinay and Cathy, 2011, para7) (Exhibit 1). For another thing, the conventional integrity of thrift is rooted in the mindset of the Chinese, with which some of the wealthy in China indicate that they would not spend a large sum of money to get a product.(Exhibit 1) (Chinese consumers increasingly prefer internationally well-known brands. Retrieved on Jan 3rd 2013 from http//www. mckinseyquarterly. com/Tapping_Chinas_luxury-goods_market_2779) In terms of transportation, glorylines are increased like the Emirates group which launched air routines in the main cities of China, and railway transportation as well as road transportation is more and more available, making it convenient and fast for cross-national transportation.Therefore in conclusion, the opportunities for LVs entry into China can be concluded as Chinas encouraging policies on foreign brands entering into China Chinas booming urban cities and increasing middle- and upper- class consumers with strong purchasing power Chinese consumers purchasing preference for French high-end products and the more and more convenient cross-national transportation in China.While the threats for LVs entry into China entail the fierce competit ion from the colleague companies and brands the trouble coming from increasing produced counterfeit products imitating LV in China China consumers cautious traditional views on luxury goods purchasing. Anyway, when it comes to China consumers rational attitude towards luxury goods purchasing, it may be an opportunity for LV if it succeeds in drawing out their desires and needs for LVs products, otherwise it may turn out to be a threat for LVs expansion in China.3. 2 Internal environment Based on national direct and firm level 3. 2. 1 Internal environment based on national level The advantages of internal environment for LV on national level lie in the its preference and prospect to greatly expand its business in China, its experiences of operating in China market for about twenty years, and its strong influence on and temptation to the China consumers, as well as customer loyalty for it.On the contrary, the disadvantages lie in its high price which will greatly influences China co nsumers will to purchase the products, and in its could-be easily imitated appearance and style which is made used of by some China manufacturers in producing fake goods. 3. 2. 2 Internal environment based on firm level 3. 2. 2. 1 The nature of LVs products Dubois and Czellar and Laurent (2001) delineated Luxury goods as products with extraordinary quality as well as high price, rareness and uniqueness, aesthetic appeal, respectful long history, and the sense of being superior to others (p156).Yacine and Johnathan and Motohiro (2004) argued that luxury goods manual crafting and attention should be involved into the manufacturing and designing of luxury goods (para 2). Based on these studies, the nature of LVs products can be heedless as unique, rare, and excellent-quality, and extraordinary. 3. 2. 2. 2 Industry characteristics of luxury goods Kapferer (1996) suggested that luxury industry distinguishes the needs and demands of the wealthy people like prominent social figures, and produce unique superior products for them, which acts like a status symbol for the rich (p251).While Heine (2010) stated that the luxury industry is also fashion-oriented and high-quality guaranteed. And it is closely associated with the needs of the wealthy. Judging from these studies and the advancement of luxury products nowadays, the industrial characteristics of luxury products can be concluded as extraordinary quality with high guarantee, exceedingly personalized with unique designed style, strong brand recognition and customer loyalty, and highly profitable sales based on its high price.3. 2. 2. 3 Advantages and disadvantage of internal environment for LV on firm level The advantages of LV on firm level mainly lie in its good brand image, abundant product portfolio, wide expansion in the China markets covering most of the first- and second-tier cities, and its control on the designs of products. This can be told from the following aspects.Above all, LV enjoys a good reputati on of high quality and excellent services that it has occupied the first place of the 2012 Hurun Ranking of the Top ten luxury brands in the world (see Appendix 1), in which LV beats Hermes, the second in the list by nearly 43%. Also, LV offers manual crafting designed products which are special for certain customers. Whats more, it offers permanent after-sale serves to its customers (Paul, 2012, p79). In terms of geographical expansion, LV has reached many areas of China (Exhibit 2).