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Case #8: Global Strategies
Critically evaluate Dolce & Gabbana's decision to launch 15 new stores in China
Dolce & Gabbana's decision to launch 15 new stores in China is a smart one. First, the U.S. Visa process is making it difficult for Chinese tourists to shop here, so D&G will have to take business there in order to get to those Chinese consumers who cannot buy here. Secondly, sales of luxury goods in mainland China were expected to reach $16.9 Billion dollars in 2011, which is a huge market, so G&B is going after some of those Billions. Third, G&B already has 26 stores there, so they are already known in China and G&B already know they can successfully sell in China. Fourth, they can sell a lifestyle of D&G, just as Ralph Lauren did, so that people will buy new products that support that imagined lifestyle.
As we saw in class and in our reading, there are some risks. First, they already have 26 stores and 15 stores might be too many to support; they have to compete with other competitors who might know the Chinese market even better. It does seem, though, that the possible benefits of putting even more stores into mainland China outweigh these risks.
b. What marketing strategies would you recommend that Dolce & Gabbana use to support the successful launch of its new stores in China?
D&G should stress the fact that they are going to the Chinese because the Chinese are having a difficult time with U.S. Visa process. Also, D&G should stress that they already have 26 stores there and are established there. Third, D&G should continue to learn about Chinese culture and honor their culture in order to attract their business. Fourth, D&G should hire Chinese people for every aspect or nearly every aspect of their business in China, so D&G has a Chinese culture within their corporate interests in China.
c. What do you think Dolce & Gabbana could do to leverage the increasing trend of wealthy Chinese travelers shopping for luxury goods in Europe and the U.S.
D&G can leverage the increasing trend of wealthy Chinese travelers shopping for luxury goods in Europe and the U.S. In several ways. First, they can open more stores in Europe and the U.S. To take advantage of that trend. Second, D&G can use the expertise it already has from selling to Chinese people in its 26 stores on mainland China to market its products to Chinese people all over the world, including Chinese travelers shopping in Europe and the U.S. Third, it can market to these Chinese travelers by telling them that G&B already sells quite a bit of merchandise in China, which will make the Chinese travelers more comfortable in dealing with a huge manufacturer who already knows them and sells to them.
d. What do you think of Dolce & Gabbana's partnership with P&G to launch high end cosmetics lines in the Chinese Market?
D&G's partnership with P&G for high end cosmetics is a good idea for several reasons. First, D&G is already known for luxury items, so the partnership is logical and consumers will see the logical connection. Second, sales of luxury goods in mainland China were expected to reach $16.9 Billion dollars in 2011, which is a huge market, so there is plenty of money to go after there. Third, P&G is an expert in cosmetics and people have known that for a long time, so D&G can use P&G's reputation and expertise to make and market a great line of high end cosmetics.
2. Case #9: Branding Strategy
a. Benefits and Risks of luxury brands pursuing brand extensions
The benefits are: they can squeeze more revenue out of the market because their brands might be powerful enough to attract buyers to the products sold under the brand extension; if the brand extension is a logical extension of the original brand, consumers might logically buy the extension products; if the luxury brand can sell a whole lifestyle, just as Ralph Lauren did, people will buy all sorts of products that support that imagined lifestyle. The risks are: it might be too much of a "stretch" for the brand; the slowing economy might mean that consumers will spend less; attaching the brand to too many products could "dilute" the brand's meaning; attaching the brand to low quality products could tarnish the brand's image; if consumers do not see a logical connection between the original brand and the extension, they might not buy it because they will think the original brand lacks expertise in the new area; they are entering a market in which they have to compete with established brands that make and market the product.
b. Why some of the brand extensions may be inappropriate or highly risky
Ferragamo is known for leather goods, not for quality timepieces; the watch is expensive and consumers might not buy it in this slow economy; consumers might not make the logical connection between Ferragamo and a watch and might believe Ferragamo lacks the expertise to make a high quality watch; Ferragamo now has to compete with established watchmakers who already make and market high-quality watches. Cavalli has the same risks: it is known for women's clothing, not for vodka; an $85.00 bottle of vodka might not sell in the poor economy; it is harming its brand by selling a product that is not logically connected; consumers will see there is no connection and might believe Cavalli lacks the expertise to make high quality vodka; Cavalli must compete against vodka brands that are already established in making and marketing vodka. Armani's LCD TVs would have the same risks: Armani is known for luxury clothing and accessories, not for TVs; the TV will be expensive because of the brand and might not sell in the poor economy; connecting Armani to televisions could tarnish the brand image; consumers will see there is no logical connection, so they will believe that Armani lacks expertise in making TVs and will not buy the product; Armani will have to compete in a market that is flooded with established TV manufacturers and marketers. The Pizza clothing could work, depending on the type of clothes. The problem will be if the pizza brand tries to sell negligees or tuxedos or some other type of apparel that is not logically connected with Pizza. Then the pizza brand would have to deal with all the risks that Ferragamo, Cavalli and Armani have to face.
c. Why the Oral B. And Crest connection has been tougher than anticipated
The connection between Oral B. And Crest has been more difficult than because: Oral B. employees had to move from Boston to Cincinnati, where Crest is headquartered, so people quit rather than move and talent was lost; there were too many "chiefs" running the company because the companies both kept their top executives; there was a "culture clash" because the two companies have different ways of doing business, with Oral B. liking meetings while Crest likes memos and Oral B. liking quick decisions while Crest likes deliberate moves.
d. The extent of P&G's "ProHealth" advantage over Colgate
The Crest/Oral B "ProHealth" brand could appeal to people who are interested in healthy lifestyles. Also, they have launched a line of "Pro-Health" products such as mouthwash and toothpaste, presenting the face of a "healthy" or "healthier" way of oral care. It could work because Americans are supposedly more health-conscious now: consumers might believe that this "healthier" way of oral care is a new and better way compared to Colgate's old way of oral care.
3. Case #10: Growth Strategies
a. In its early decades, Toys R Us ran roughshod over all competitors. Yet today, bigger, with more resources and experience, it is faltering. How do you explain this?
Toys R Us is faltering for several reasons: Toys R Us is generally known for traditional toys aimed at a certain market of children but children are in a hurry to grow up, maybe because advertisers are pushing them to grow up, and would be more likely to ask for an iPod than a doll; children have more pressures on them and less time to play, so they demand toys to be clean, fun and quick, so they want electronics; huge retailers like Wal-Mart have made so many inroads into toys that are as good but cost less money that Toys R Us is finding it hard to compete with them.
b. The toy market can be generally classified into the submarkets of traditional toys, electronic toys, and education toys. What do you think is the market potential of these submarkets as of today? Elaborate your reasons.
The market for "traditional toys" is in trouble because: children are in a hurry to grow up, maybe because advertisers are pushing them to grow up, and would be more likely to ask for an iPod than a doll; children have more pressures on them and less time to play,…[continue]
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