V. Internationalization & Porsche Flashcards
1
Q
Standardization vs. Adaption
A
- Global strategy = Considering expectations of foreign consumers/ Importance of country of origin for the brand identity
- Not applicable for all industries = If needs are not the same E.G. cosmetics/ If taste is not the same E.G. Food/ If resources are not transportable E.G. Eiffel tower
2
Q
Brands Worldwide distribution general
A
- Core product in Home country = The original company
- Core product in Worldwide distribution = Distribution systems
- Licensed products in Home country = Licensing
- Licensed products in Worldwide distribution = Distribution systems for licensing
3
Q
Different systems for international distribution
A
- Exclusive sales
- Subsidiaries
- Local distribution
- Joint Ventures
- Franchises
4
Q
Exclusive Sales
A
- Exporting products on their own
- International fairs once or twice a year = E.G. Fashion shows
- Open buy on budget of the department stores
- Difficult for new brands
- E.G. Watches and wonders trade show
5
Q
Subsidiaries
A
- Expensive = Not recommendable if sales are less than €4m
- Slower growth
- Only for big brands
- Not the most common strategy in internationalization
- Not always possible
- E.G. Dior in Mexico/ Corbet in China
6
Q
Local distributions
A
- Exclusive right to distribute a brand in a given territory
- Allows to represent several brands at the same time
- Pro = Less financial risks/ Knowledge about local market
- Con = Expensive/ Hard to control
7
Q
Joint Venture system
A
- Subsidiaries that belong partly to a partner
- In order to facilitate relationship with local distributor
- Back office activities and local market knowledge
- Possible increase in market share price
- E.G. Chalhoub in Middle East = LV + Dior
8
Q
Franchise
A
- Franchise company manages the brand following international guidelines
- Franchise is clone of the brand
- Franchisee pays a franchise fee
9
Q
Flagship Store
A
- Specific market entry strategy for luxury brands
- Company owned stores that only carry a single brand
- Intention to build brand instead of solely focusing on generating profit
- Pros = Reinforces credibility of the brand/ Space to innovate/ Strengthens relationship with stakeholders
10
Q
Best way to grow internationally
A
- Average global Luxury brand deal includes:
- 10 fully owned subsidiaries
- 5-20 joint ventures with former distributors
- 40-60 independent distributors
11
Q
Tourism and business travel to reach international consumers
A
- Tourism to buy luxury products in targeted cities
- Luxury travel retail = Duty-free shops (Airports and downtown)
- E.G. Kering = Collections exclusively for travel retail/ Opened travel retail shops
12
Q
Duty-frees in airports
A
- Strategic source of sales and growth
- Consumers mostly from emerging countries
- Named the 6th continent
- 36% products sales, Average growth rate 8.6% since 2002
13
Q
Duty-frees and Covid
A
- Sales collapsed by two thirds due to C-19
- 60% of luxury consumer cant wait to travel again
- Prada and Hermes made +40% during pandemic in China
- Acceleration of pre-existing trends = Duty frees shift away from airports but are popping up across mainland China
- Dutyfrees drift eastward of China to Hainan in form of a free trade port
14
Q
Chinese consumers
A
- Source of growth with 30% of global sales
- Choice of travel destination by = Geographical distance/ Attractivity of exchange rate/ Exciting character of duty free zones
15
Q
Pricing
A
- Highest = Japan/ Lowest = Germany, UK, France
- Dior most consistently priced brand geographically
- Less consistent brands = Gucci, LV, Balenciaga with up to 35% variety
16
Q
Factors influencing pricing
A
- Distribution costs
- Import taxes
- Exchange rate
- WTP in the market
17
Q
Different price zones
A
- Three different price zones = 1. Paris/ Milan/ 2. NY/ 3. Tokyo
- European price serves as anchor price = EU duty free 80% of it
- NY price between 0-5% than anchor price
- Tokyo price between 35-50% higher
18
Q
Luxury travels general
A
- Luxury travels are the most price sensitive
- Online comparison gets more and more easy = Fear of brands that price could get harmonized worldwide
19
Q
Porsche case- Porsche a luxury brand?
A
- Unique position in car industry = Niche between premium and luxury car segment
- Latest engineering + timeless and exclusive design
- Exclusive brand image = Significant price premium
- Unique distribution strategy = Made in Germany/ Worldwide distribution by subsidiaries
20
Q
Luxury cars in China
A
- Most cars are chauffeur-driven = No one drives car himself/ Fear of be mistaken as chauffeur/ Problematic for sport cars
- Important sign of social status (marker)
- High WTP
- Raising middle class desires to have an exceptional status
- Car serves as differentiation = As expensive, big, rare as possible
21
Q
Porsches motivation to enter China
A
- Booming market
- High growth rates for foreign premium and luxury cars
- Rapidly growing upper class
- Porsches cars have been proven to be attractive in several markets = Confident about success
- Undeveloped market for sport cars
22
Q
Market entry strategies
A
- Market existing + Product existing = Market penetration
- Market new + Product existing = Market development
- Market existing + Product new = Product development
- Market new + Product new = Diversification
23
Q
Weaknesses and Threats to enter China
A
- Weaknesses = 1. Low brand awareness/ 2. Sports cars were not yet desired/ 3. No experience in Chinese market/ 4. No local partners
- Threats = 1. Weak road infrastructure unsuitable for sports cars/ 2. Cultural differences in role of car/ 3. Narrow customer base
24
Q
How did Porsche succeed in China?
A
- Created a market of sports cars in China
- Adapted products to local expectations = Market Development + Diversification (Cayenne SUV)
- Driving school for rich Chinese
- Advertising campaign towards upper-class
- Strong dealership network
- High pricing (Twice of EU price)
- Staff training to diffuse sports cars culture
25
Q
Future Challenges of Porsche in China
A
- Political = Governmental actions to regulate imports/ Prohibit excessive pricing
- Economic = Competition/ Decline in market growth/ Market saturation (Sättigung)
- Social = Rising middle class sales lead to less attractiveness for upper-class
- Technological = Imitation of local manufacturers
- Environmental = Government demands to reduce pollution
- Legal = Change in legal environment with regards to fuel consumption and carbon emission
26
Q
Potential options for Porsche to face challenges
A
- Further portfolio diversification = Pro = Growing customer base, Leverage brand in car segment/ Con = Moving away from core competence sport cars, Loss of brand exclusivity
- Produce locally in China = Pro = Cost reduction, Uncertainty reduction, Increased production capacity/ Con = Loss of made in Germany, Threat of knowledge transfer, Hard to replicate Porsches production system
27
Q
Porsche case key take aways
A
- Chinese luxury market differs strongly from Western market = Governmental influence/ Economic development/ Different perception of luxury/ Pricing
- Need to “show off” for Chinese customers
- Importance of digital/ travel retail/ Hainan
