Brand Portfolios & Competitive Advantage:An Empirical Study

Purpose

The research focuses on two questions:

what reasons lead companies to develop, or not, a brand portfolio strategy,

how brand portfolio management can create a higher and stronger level of competitive advantage that is harder to grasp and imitate.

The paper seeks to contribute to the understanding of brand portfolio management by examining the brand portfolio strategies of three leading luxury groups. LVMH; Richemont; Genesis Luxury

Purpose

Introduction

Since among the most relevant problems when referring to brands are those related to the management of a multi-brand system (Hill et al., 2005), a company must formulate its basic strategic brand principles in view of two central themes, which are: brand architecture; anda brand portfolio.

Brand architecture defines the way in which a brand signs a product, and whether it does so independently of another brand (Rao et al., 2004).

corporate branding (one name for all products);

endorsed brands/mixed branding (two brands associated with one product);

branded products/house of brands (each product has its own brand).

Riezebos (2003, p. 184) defines a brand portfolio as “a set of brands owned by one company”

Dawar (2004, p. 34) states, “brands are not superstars but members of a team”

Kapferer (2000, p. 157), asks “how many brands must we offer to consumers within the same product category? [. . .] brand portfolio optimization is a strategic issue because the chosen answer will have a profound and permanent impact on the outcome.

The issue of brand portfolios concerns the number of brands a company should

manage and how to organize the “rules of the game” between these brands.

This raises the questions of the need for positioning those brands in connection

to each other and of the strategic equilibrium of brands in a portfolio (Riezebos, 2003; Hill et al., 2005).

Carlotti et al. (2004) asserted that the brand portfolio is not only critical for financial reasons, but because a brand portfolio allows companies to

establish a strategy for every brand,

determine the need for repositioning,

identify underperforming brands and,

avoid the exposure risks for the company related to a single brand strategy.

Brand portfolio management may change the focus of marketing to a superior, strategic decision-making level (Brown, 2005), as it implicitly involves focusing on the whole instead of on individual brands (Hill et al., 2005).

The paper utilizes an exploratory approach by means of case studies.

Data was collected from the following companies: Moet Hennessy Louis Vuitton (LVMH), Genesis Luxury & Richemont.

The research involved in-depth interviews with company officials.

Methodology

Moet Hennessy Louis Vuitton (LVMH)

A world leader in luxury, LVMH Moët Hennessy - Louis Vuitton possesses a unique portfolio of over 60 prestigious brands. The Group is active in five different sectors: Wines & Spirits; Fashion & Leather Goods; Perfumes & Cosmetics; Watches & Jewelry; Selective retailing

In Euro Millions

LVMH

Turnover (2011)

23659

Profit 3065Turnover by region:EuropeAsia PacificAmericasJapan

33%27%32%8%

Source www.lvmh.com

Richemont

Richemont owns several of the world's leading companies in the field of luxury goods, with particular strengths in jewellery, luxury

watches and writing instruments.  

In Euro Millions RichemontTurnover (2011) 6 892Profit 1079Turnover by region:EuropeAsia PacificAmericasJapan

25882569998737

Source www.richemont.com

Genesis Luxury

The essence of Genesis Luxury lies in their philosophy that luxury brands are an

experience above all. The splendid mix of designer labels from across the globe

ensures that the Indian market is spoilt for choice, from opulent to effervescent, by

brands par excellence, both in quality and design.

Results/FindingsThe process is done in the following steps:

1. Identify the different steps that characterize the brand portfolio building process.

2. Present both the expected and produced effects, and the key factors for transforming a brand group into a brand portfolio.

3. Based on this data, propose a model that helps to clarify the acquisition process of specific skills by the companies at the time of brand portfolio creation, and also the link between a sustainable competitive advantage and a brand portfolio.

Adopting a brand portfolio: a progressive process

A brand portfolio is therefore more than just the sum of its parts. A brand portfolio is built around a group of brands, management

criteria, and key skills combined with the accumulated experience

of the company.

Phase Aggregation Phase (Phase 1)

Reformation Phase ( Phase 2)

Theorisation Phase ( Phase 3)

Description

Main objective is to answer tocustomers’ very different needsCompeting against oneself in many segment in order to growOpportunistic acquisitions

Reformation is first a strategy of brand reductionBrands are considered as part of a whole

Definition of criteria for operating the group of brands and makinga competitive advantage of this management

Main Drivers

Limits within existing brandsMarket segmentationConcentration of the distribution

GlobalizationCutback in the number of brandsIntegration of the concept of diversity in the marketing policy

Economic and industrial optimizationResearchOrganizational optimization

A brand portfolio’s expected & produced effects

More than 60% students wish to pursue the course from fashion institutes like NIFD, NIFT, YWCA and Pearl Academy of Fashion

Remaining 40% wish to pursue the course from Amity, DU, etc

Product effects AdvantagesGrowth Relay To grow and move into other segments, to master

new marketsTo reach and appeal to different generations of customers

Balancing Funds Harmonious growthTo counterbalance the success or failure of one brand or anotherTo provide flexibility

Critical Size Effect of size in relation to distributionPresence within different distribution circuitsSpeeding up globalization

Sharing costs for research and industry

SynergiesEasier amortization

Proposition Of A Model

Luxury in India (CII-AT Kearney report 2011)

Luxury consumption starts by consumers who have an income of INR 10 lakhs and becomes serious by those who have an

income of INR 1 crore and above.

Luxury in India (CII-AT Kearney report 2011)

Indian luxury market has grown 13% in the past three years. It is currently at 4.76 billion USD.

It is expected that the market will grow three times by 2015. But even then there will be significant latent demand.

The barriers to the growth of Indian luxury industry

Difficulty to reach the consumer since the target population is scattered.

Consumer’s reservations about luxury purchases (there is a low penetration among rupee millionaires and there is reservation about

lesser known brands)Lack of talent in the industry (low experience and lack of

training)100% FDI awaited

Rationale….

Many leading Global Luxury brands in India desperately need professionals

Not even a single focused Luxury course in India

We can have ‘First –Mover- Advantage’.

It is proposed to fill the need gap by launching Luxury Course.

PLXR – Luxury Goods and Services At the end of the programme, a student should be able to demonstrate:

Comprehensive understanding of the world of Luxury, its concepts, evolution, structure, dynamics & the environment in domestic & international market.

Sound understanding of Luxury consumer behavior & dynamics of decision making process of high net worth individuals

Appreciation of demand for Luxury brands, its commercial value, how it is generated, merchandised, communicated and promoted

At the end of the programme, a student should be able to demonstrate:

Comprehensive understanding of Luxury boutique/store operations, customer service parameters, supply side commerce, logistics and legal issues

Good understanding of Luxury brand management, marketing, customer relationship management and visual merchandising.

Sound and comprehensive understanding of E- Luxury and digital marketing and ICT in Luxury business

PLXR – Luxury Goods and Services

Skills, Qualities and AttributesAt the end of the programme, a student should be able to:

Use apt selection and application of communication and computing skills method and technique situation ally

Display reflective capability and self-awareness, and self-management skills, time and sensitivity to social and cultural diversity

Act and conduct oneself with responsibility, initiative, maturity, integrity, professionalism, ethics and commitment

Demonstrate professional attitude, integrity, ethic , commitment , ability to work and cooperate in a team and people management.

Multi tasking capabilities for managing independently

Prudent in identifying for convertibility.  

Conformity to Attributes of Graduate ProfileThe programme will enable and facilitate a student of Luxury to achieve the diverse attributes of PAF graduate awardees: 

extensive knowledge of the disciplineinformed respect for the chosen values and ethics of the professionconfident oral as well as written expression and communication skilled in analysis and problem-solvingskilled in visualizationproficient in contemporary technology and softwarecapable of critical thought, rational enquiry and self-directed learningable to work in a planned manner with sound time managementable to work collaborativelyopen and intellectually curious

Thank You