KUNYAWIT CHOATEWATTANAPHUN  CHETNA PALANIAPPAN    JINGJING WANG  LINGTONG WANG  DARIGA YESSIM
Industry Forces• Customers –             Bargaining                              • High entry barriers                    ...
Political & Economic• Xiamen Special Economic                • The industry is resilient to  zone – income tax of         ...
Aging                            population  The desire for theexceptional - made-to-                                     ...
Luxury industry growth by sector, 2012                                      Leather                                  Goods...
Technological trends      Legal regulations• Rate of technological   • Trade regulations  change• Ecommerce – 25%         ...
Eco friendly                   products                                  Eco friendly Employee                            ...
Luxury industry growth by market, 2012                                                                Rest of Asia        ...
Characteristics of a Luxury Brand
….Price                   ….Quality       …. Rarity                       ….Extra ordinary.…Aesthetics                 ….S...
Segmentation of Luxury Goods Market• Traditionally, Brand Managers perceived there is no need for  segmentation of luxury ...
• Luxury Brand managers now try to segment the      market according to the conventional ways:1. Geographical: Market is s...
Positioning of PORTS                                Geographical• Established in Toronto in 1961 and proved as a stylish, ...
DemographicTypical customers for ports were:Females• 25-35 years• With a global soul (Ports 1961)• Young, urban, stylish• ...
PsychographicMost Luxury Brands have identified twogroups of young and wealthy consumers thatmake up the largest sector of...
Important events in PORTS History          PORTS International- founded in Toronto in 1961Later acquired by a Chinese immi...
First international fashion luxury brand to undergo Vertical Integration in China- Saved 17% tax on imports and helped the...
PORTS Corporate Strategies:• To narrow the gap between Chinese and  Westerner’s sense of fashion, PORTS spent lot of  time...
• Corporate culture emphasized training, career development and rewarding  employees.• Perceived sales executives as an im...
• Encouraged foreign perception by using Western models like Kate Moss in  advertising campaigns. On the other hand, well-...
• PORTS products in China were marketed through concessions in major  department stores, retail stores located in shopping...
Business Model Canvas                                                     Customer                    Key activities      ...
Distinctive                 historyCraftsmanship                 Low cost                   Value                proposition
Key ActivitiesEfficient Supply Chain   • Factory in Xiamen     -   Low labor cost     -   Benefit from Xiamen Special Econ...
Key Resources• Human capital  – Ex-employee from designer label company     • Pattern maker form Jil Sander     • Bruce Ba...
Key Partners• Production  – Vertical integration         – The company controls whole production and distribution         ...
Customer Relationship• Employee-customer relationship  – Customer come to buy at the store with personal    assistance fro...
Customer Segment• PORTS  – ‘Interested and knowledgeable about whatís happening with fashion, but    not quite ready to ju...
Market growth                   PORTS           P16                    1961                 PORTS                 MENSWEAR...
Market growth                                                                         MATURITY                            ...
Channels• Stand-alone flagship stores• Selective distribution outlets   – Retail stores located in shopping centers   – De...
Cost Structure• Cost - driven  – Ports produces all of its product in Xiamen and take    advantage of cheap labor cost• Pr...
Revenue Streams• Asset sale  – Selling physical goods to customers• Online website• High turnover
Blue Ocean Strategy• PORTS is the first luxury brand company that  focuses on Chinese market• Potential of the market had ...
SWOT Analysis             STRENGTHS                           WEAKNESSES        Distinctive background                Lack...
PORTS’ success in the Chinese market• 1993 – opens first boutique in Shanghai and Xiamen• 86% of sales are from Chinese ma...
PORTS’ success in the Chinese market    PORTS stores in China                FIRST-TIER CITIES:First-tier cities   Second-...
Success indicators        Background &            Design & Supply          PositionCultivation on fashion                 ...
PORTS’ western background and position in            Chinese market• A China-based company with a Canadian history• Chines...
Horizontal integration (other luxury company)  Manufactory         Design                Distribution    Marketing   Count...
Design and supply of raw materials  “Our Chinese customers didn’t like things that looked obviously Chinese”              ...
Risks for PORTS• Bottleneck period of opening  retailing shops• Competitive counterparts• Marketing and online campaign
Luxury consumption behavior in Western         developed countries• Restart Consumption    • Confident Consumers & Elite C...
Luxury consumption behavior in Asia: Japan• Despite financial crisis of 2008 and tsunami in 2011, Japanese remain one of  ...
Luxury consumption behavior in Asia: China• Luxury Consumption Heating Up   • Growing Middle Class & Growing Consumption o...
• Conspicuous logos are no  longer a must for social  recognition• Second Generation of rich  families    • One of the mai...
Activities that will support PORTS’ strategic             position and service concept• Improve CRM strategy and bring mor...
Independent family brand vs. Multi-brandSIMILARITIES                          High                                      pr...
Independent family brand vs. Multi-brand DIFFERENCES                 INDEPENDENT                 MULTI-BRAND FEATURE      ...
The basis of luxury industry isIndependent family brand managementmodelLoss of characteristic uniqueness• A mass consumer ...
What can PORTS learn?• Started in 1961, still new• Spirit of fine designs• An icon product e.g. Kelly of Hermès• Multi-bra...
Social issues & criticism against luxury                    industry• Lavishness extravagance  and even waste• Excessive s...
Implications to PORTS• “Made-in-China” brand, tricky positioning• Alfred: “They (foreign luxury brands) just sew the label...
THANK YOU FOR YOUR ATTENTION!
Industry analysis   ports case
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  • Threat of new entrants - High entry barriers Customer loyaltyDifficulty in establishing a brand nameHigh investmentsThreat of substitutes - Large number of firms offering alternatives, from both high and low end market Low switching costsIntensity of competitive rivalry - Use of different technologies to trigger awareness and desire, e.g. events, advertisementsIncreased personal service Heavy promotional campaigns Celebrity endorsementNo/little differentiation in terms of quality Bargaining power of suppliers - Relies heavily on international suppliersHigh switching costs Established brand with good supplier relationshipsVertical integration; work with subsidiaries of the firm Bargaining power of buyers - Customers – demanding and well-informedGreat variety Medium switching costsPrice sensitivity – medium
  • Economic - The industry proved to be resilient to the crisisThe markets in the US and Europe improving fast; Chinese demand continue to soar.BRICs continue to grow at a far higher rate than that of their established counterparts. Brazil, Russia, India and China account for 11% of global luxury sales in 2012 by value, which will grow to 16% by 2017Russia will see the number of households that can afford luxury goods almost double by 2025
  • Accessories – core category in personal luxury goods. leather goods and shoes have become the largest piece of the market (27% of sales). Increasing levels of male spending.
  • http://www.bain.com/about/press/press-releases/bain-projects-global-luxury-goods-market-will-grow-ten-percent-in-2012.aspx €33 bn. 16%€35 bn. 14% growth€1 bn. 13% growth€20 bn. 4% growth€23 bn. 5% growth€27 bn. 9% growth€26 bn. 10% growth€12 bn. 13% growth
  • Rate of technological change – triggers innovationEcommerce is continuing to grow at 25% growth a yearGrowing significance of mobile internet/tabletsIncreasing demand for entertainment and experience
  • Restart Consumption Demand for luxury products are back and often difficult to keep stocked Confident Consumers & Elite Consumers emerged Luxury Consumption Heating Up strong because of the influx of tourists shopping Customer Virtual EngagementBrands continue launching E-commerce sites & other media platforms granting consumers accessibility and 24/7 shopping From Conspicuous to Conscious Consumption Customers are educated and aware of their purchasing repercussions New Luxury Choices New luxury buys in the U.S. such as automobiles, premium denim, & haute cuisine Some of the new high luxury purchases reflects the trend Showing Off Shopping ExperienceEmotional experience, personal service, fabulous atmosphere Younger CustomersNew generations becoming luxury consumers
  • Luxury Consumption Heating UpGrowing Middle Class & Growing Consumption of Luxury are the top two reasons for China’s high success and global attentionThe desire to Show Off is still the main reason for buying luxury Travel Shopping Off-shore buying in Europe & U.S.Government plans to take action to bring consumption back to domestic market Secondary Cities are Booming Becoming as crucial for luxury as 1st tier Customer Virtual Experience Increasing customer engagement both in E-commerce & Social MediaCommunication G+G (Gender & Generation) Shift Younger & wealthier customer emerging, with a rising number in women consumers New Luxury Choices Watches and jewelry remain poplar categories because of return on the investment
  • Conspicuous logos are no longer a must for social recognition, at least in first-tier like Beijing and ShanghaSecond Generation of rich familiesOne of the main customers spending huge money in Luxury Goods.Recommend to watch the video: the ka-ching dynasty - china
  • Industry analysis ports case

    1. 1. KUNYAWIT CHOATEWATTANAPHUN  CHETNA PALANIAPPAN  JINGJING WANG  LINGTONG WANG  DARIGA YESSIM
    2. 2. Industry Forces• Customers – Bargaining • High entry barriers Threat of • High investments demanding and well- power of new entrants informed buyers - – low• Medium switching medium costs Bargaining Threat of• Relies power of substitutes – • Large heavily on suppliers – Intensity of number of high international medium competitive suppliers rivalry – alternatives Porter’s 5 Forces Model• Low• High very high switching switching costs costs • Heavy promotional campaigns – trigger awareness and desire • Increased personal service • No/little differentiation in terms of quality
    3. 3. Political & Economic• Xiamen Special Economic • The industry is resilient to zone – income tax of crisis maximum 15% • US and Europe markets are FORCES improving fast• Ban on the use of certain words on outdoor adverts • Chinese demand continue to soar in China • BRICs continue to grow at a• Every G20 government – high rate. Account for 11% protectionist trade of global luxury sales by value measures (2012); will grow to 16% by• Increased taxes directed at 2017 luxury products • Russia – number of households that can afford luxury goods double by 2025
    4. 4. Aging population The desire for theexceptional - made-to- Perceptions of “made order products in China” goods services tailored to their needs Social trendsTourists account for Accessories – 27% of40% of global luxury sales. Increasing levels spending of male spending. The hunt for value
    5. 5. Luxury industry growth by sector, 2012 Leather Goods Watches €33 €35 bn. 16% growth bn. 14% growth Jewelry Shoes €11 €12 bn. 13% growth bn. 13% growth Fragrances € 20 bn. 4% Men’s growth apparel Cosmetics €26 bn. 10% growth €23 bn. 5% growth Women’s apparel €27 bn. 9% growth Extracted from www.bain.com
    6. 6. Technological trends Legal regulations• Rate of technological • Trade regulations change• Ecommerce – 25% • Intellectual growth a year property rights• Growing significance of mobile internet/tablets• Increasing demand for entertainment and experience
    7. 7. Eco friendly products Eco friendly Employee production welfare processes Environmental trendsCommunity Environmentalinvolvement sustainability Ethical trade
    8. 8. Luxury industry growth by market, 2012 Rest of Asia €42 bn. 18% growth Rest of World €10 bn. 5% growth Japan €20 bn. Europe €75 bn. 8% growth 5% growth Americas €65 bn. 13% growth Extracted from www.bain.com
    9. 9. Characteristics of a Luxury Brand
    10. 10. ….Price ….Quality …. Rarity ….Extra ordinary.…Aesthetics ….Symbolism
    11. 11. Segmentation of Luxury Goods Market• Traditionally, Brand Managers perceived there is no need for segmentation of luxury goods.• Changing Luxury market environment enabled brands to seek: WHO are their customers? WHERE to find them? WHAT drives their purchasing behavior?
    12. 12. • Luxury Brand managers now try to segment the market according to the conventional ways:1. Geographical: Market is segmented according to the geographical location.2. Demographic: Variables such as age, gender and income.1. Psychographics: Lifestyle, personality, values and social class
    13. 13. Positioning of PORTS Geographical• Established in Toronto in 1961 and proved as a stylish, luxury, well tailored brand in North America.• Moved back to China and established stores in Shanghai and Xiamen to test the market.• Branched off to create a more expensive label, PORTS 1961,brought the brand back to North America• 4 principal geographical segments:mainland China, Hong Kong, North America and Europe
    14. 14. DemographicTypical customers for ports were:Females• 25-35 years• With a global soul (Ports 1961)• Young, urban, stylish• Career oriented• Wives of government officialsSuccessful Men• 28-38 years• SuccessfulConsumers• “ Very interested and knowledgeable about… fashion who are not ready to pay for designer prices. ”
    15. 15. PsychographicMost Luxury Brands have identified twogroups of young and wealthy consumers thatmake up the largest sector of luxuryconsumers:• YUP’s : Young Urban Professionals• NEN’s: New Entrepreneurial Nomads
    16. 16. Important events in PORTS History PORTS International- founded in Toronto in 1961Later acquired by a Chinese immigrant entrepreneur Alfred Chan in 1989Brand was made famous in North America and UK during the 1970s and early 1980s Following a global recession, wrapped up in the West and moved all operation to China in 1993 Set up Headquarter and main manufacturing factory in the Xiamen Special Economic Zone In 1994- First retail store in Xiamen and Shanghai
    17. 17. First international fashion luxury brand to undergo Vertical Integration in China- Saved 17% tax on imports and helped the company earn US $20 million In 2003- public on the Hong Kong Stock Exchange & planned comeback in the Western market Branched off to create a more expensive label, PORTS 1961, bring the brand back to North America In 2006- selected as one of the Best “under a Billion businesses” in Asia Pacific by the Forbes magazineIn January 2008, a showcase store for PORTS 1961 was opened at Hong Kong International Airport to became the first luxury fashion- wear showcase at the airport By 2012 -Opened various stores across the globe launching several new collections.
    18. 18. PORTS Corporate Strategies:• To narrow the gap between Chinese and Westerner’s sense of fashion, PORTS spent lot of time educating consumers about wardrobe investment and attire tips. Instilling the concept of “you are what you wear.”• Products were distributed through companies in which PORTS owned a majority share. Thus, assured of a greater control and effectiveness of the distribution channel.• Designers Fiona and Tia observed local consumers tastes and commented, “Our Chinese customers didn’t like things that looked obviously Chinese.”• They adopted a minimalist design, emphasizing simplicity.
    19. 19. • Corporate culture emphasized training, career development and rewarding employees.• Perceived sales executives as an important bridge between the brand and the customers and invested heavily in staff training, to teach corporate culture, the brand’s uniqueness, and store management techniques.• Competitive remuneration schemes were offered to staff and a merit- based advancement programme was designed to provide incentives for employees to achieve greater performance.• Share options were granted to eligible employees, non-executive directors, suppliers, customers or any entity who could contribute to the company through R&D or technological support
    20. 20. • Encouraged foreign perception by using Western models like Kate Moss in advertising campaigns. On the other hand, well-known Asian artists, like Zhang Ziyi were featured on the official website as well as in fashion magazines.• Sponsored clothing for popular television hosts in China, like CCTV’s host Liu Fang Fei• PORTS blended together local sensibility and foreign cachet that many Chinese women craved, making customers believe that the clothes they bought were imported.
    21. 21. • PORTS products in China were marketed through concessions in major department stores, retail stores located in shopping centers and flagship stores.• Combining premium quality fabric with affordable pricing, continued to be ranked as one of the top 5 most desirable fashion brands in China.• PORTS developed several customer relationship management initiatives to cater and retain their VIP customers, which were usually the high-volume affluent shoppers.• To court more celebrities, PORTS 1961 launched an evening-wear collection called Par Mains in 2007• The brand actively participated in fashion events worldwide, presenting its collection with themes inspired by different cultures impressed high-end fashion retailers and captured media attention.• Further strengthening the brand image internationally and in China
    22. 22. Business Model Canvas Customer Key activities relationships Value CustomerKey partners proposition segments Key resources Channels Cost structure Revenue streams
    23. 23. Distinctive historyCraftsmanship Low cost Value proposition
    24. 24. Key ActivitiesEfficient Supply Chain • Factory in Xiamen - Low labor cost - Benefit from Xiamen Special Economic ZoneCelebrity Endorsement • To overcome the stereotypeEmployee Empowerment
    25. 25. Key Resources• Human capital – Ex-employee from designer label company • Pattern maker form Jil Sander • Bruce Bass from Bergdorf Goodman for Vice president of sales• Financial – Ports Design Ltd listed in HK stock exchange in 2003
    26. 26. Key Partners• Production – Vertical integration – The company controls whole production and distribution channels• License – BMW /Ferrari • License was given to Ports for production of all lifestyle products in China
    27. 27. Customer Relationship• Employee-customer relationship – Customer come to buy at the store with personal assistance from salesperson• Loyalty program – VIP privilege – Special discount – Delivery at home during SARS epidemic in China (2003)• Social media – Website
    28. 28. Customer Segment• PORTS – ‘Interested and knowledgeable about whatís happening with fashion, but not quite ready to jump into designer price points’ Michael Fink, the women fashion director at Saks• PORTS 1961 – Made-in-Italy / Higher price• P16 – Urban, young and stylish• Other retailing business – BMW / Ferrari lifestyle products• Original equipment manufacturing – Products were branded under different labels and exported to retailers in North America and Europe 29
    29. 29. Market growth PORTS P16 1961 PORTS MENSWEAR MID-MARKETMarket share PORTS MENSWEAR INTERNATIONAL
    30. 30. Market growth MATURITY GROWTH DECLINE INTRODUCTION Women of 25-35 DEVELOPMENT Affluent shoppers International womenEVOLUTION OF MARKET Men of 28-38 Price conscience Young, urban & stylish TIME
    31. 31. Channels• Stand-alone flagship stores• Selective distribution outlets – Retail stores located in shopping centers – Department stores 75% of total stores • PCD stores, high-end Chinese department stores owned by Ports
    32. 32. Cost Structure• Cost - driven – Ports produces all of its product in Xiamen and take advantage of cheap labor cost• Products price – Range from $100 to $3000
    33. 33. Revenue Streams• Asset sale – Selling physical goods to customers• Online website• High turnover
    34. 34. Blue Ocean Strategy• PORTS is the first luxury brand company that focuses on Chinese market• Potential of the market had not been explored before• PORTS advantage – No competitors – Rapid growth – Profitable
    35. 35. SWOT Analysis STRENGTHS WEAKNESSES Distinctive background Lack of brand history Vertical integration Stereotype : China-made products Low production cost Operational level : Language barrier THREATS OPPORTUNITIES High competition North American market World economy Trend : Origin of product Political instability Move entire production to Italy Censorship in China36 Other market
    36. 36. PORTS’ success in the Chinese market• 1993 – opens first boutique in Shanghai and Xiamen• 86% of sales are from Chinese market• 2003 – went public on the Hong Kong Stock Exchange• Third most desirable brand in China; after Louis Vuitton and Chanel• Have 63 mega stores in 29 cities in mainland China, 3 stores in Hong Kong and 1 in Macau• Women accounted for three-quarters of PORTS’ sales in China
    37. 37. PORTS’ success in the Chinese market PORTS stores in China FIRST-TIER CITIES:First-tier cities Second-tier cities Beijing, Shanghai, Guangzhou SECOND-TIER CITIES: 20% Changchun, Changsha, Chongqin g, Chengdu, Dalian, Guiyang, Ha ngzhou, Hefei, Kunming, Nanjin g, Suzhou, Taiyuan, Tianjin, Wenz hou… 80%
    38. 38. Success indicators Background & Design & Supply PositionCultivation on fashion Pricing Advantage sense Multi-brand collaboration
    39. 39. PORTS’ western background and position in Chinese market• A China-based company with a Canadian history• Chinese customers prefer to buy a brand with a foreign birth place• PORTS positions as an imported Western brand• PORTS trick strategy to avoid saying made-in-ChinaPORTS’s cultivation on Fashion sense“Every consumer was a blank piece of paper.” Alfred, Director of PORTS
    40. 40. Horizontal integration (other luxury company) Manufactory Design Distribution Marketing Country 1 Partnership 1 Europe Partnership 1 Country 2 Partnership 2 Asia Partnership 2 Combined to an individual brandPORTS’S Vertical Integration Manufactory Owned and controlled Design by PORTS Distribution Marketing
    41. 41. Design and supply of raw materials “Our Chinese customers didn’t like things that looked obviously Chinese” Tia Cibani, Designer of PORTS• International design team+ Local production• PORTS invites and collaborates with many world famous designers and designers’ workshops.• Most of PORTS’s fabric and materials were imported from Europe and produced in ChinaPORTS’ pricing advantagePORTS’ multi-brands collaboration
    42. 42. Risks for PORTS• Bottleneck period of opening retailing shops• Competitive counterparts• Marketing and online campaign
    43. 43. Luxury consumption behavior in Western developed countries• Restart Consumption • Confident Consumers & Elite Consumers emerged• Luxury Consumption is still strong• Customer Virtual Engagement• From Conspicuous to Conscious Consumption• New Luxury Choices • New luxury purchase trends SHOWING OFF• Shopping Experience• Younger Customers
    44. 44. Luxury consumption behavior in Asia: Japan• Despite financial crisis of 2008 and tsunami in 2011, Japanese remain one of the largest consumers of luxury goods• New customers:• 2008: 5% decline of Luxury market• Consumer behavior & attitude maturing• Focused on exclusive products, discrete brands, fast fashion• Women in 30s & 40s more likely to spend more on luxury goods• Increase of online shopping
    45. 45. Luxury consumption behavior in Asia: China• Luxury Consumption Heating Up • Growing Middle Class & Growing Consumption of Luxury • The desire to Show Off – main reason of luxury purchases• Travel Shopping • Off-shore buying in Europe & USA • Government plans to take action to bring consumption back to domestic market• Secondary Cities are Booming • Becoming as crucial for luxury as 1st tier Customer Virtual Experience • Increasing customer engagement both in E-commerce & Social Media• Communication G+G (Gender & Generation) Shift • Younger & wealthier customer• New Luxury Choices • Watches and jewelry
    46. 46. • Conspicuous logos are no longer a must for social recognition• Second Generation of rich families • One of the main customers • Recommend to watch the video: the ka-ching dynasty - china
    47. 47. Activities that will support PORTS’ strategic position and service concept• Improve CRM strategy and bring more experience to customers• Upgrade the website and social media platforms• Explore sources of growth by seeking market potential beyond the mega cities in China, maybe try to open more stores in third-tier cities• Expand product category and improve men clothes line• Expose the brand image more often
    48. 48. Independent family brand vs. Multi-brandSIMILARITIES High prices An intangibl Excellent e quality• Classic products symbolis• A solid BM & a high- m Key end international Rich traits brand image brand Scarcity history & heritage Emotion al value
    49. 49. Independent family brand vs. Multi-brand DIFFERENCES INDEPENDENT MULTI-BRAND FEATURE Conservative Progressive FOCUS ON Heritage & craftsmanship Expansion & acquisition PRODUCTION Limited Increasing quantity PREFERANCE Maintain uniqueness & Profit & investment Endogenous growth
    50. 50. The basis of luxury industry isIndependent family brand managementmodelLoss of characteristic uniqueness• A mass consumer product• Price cannot be justified
    51. 51. What can PORTS learn?• Started in 1961, still new• Spirit of fine designs• An icon product e.g. Kelly of Hermès• Multi-brand strategy through licensing, distribution and acquisition, e.g. BMW• Position in the global market, e.g. advertising, marketing, icons…
    52. 52. Social issues & criticism against luxury industry• Lavishness extravagance and even waste• Excessive spending and hedonistic lifestyle• Conspicuous consumption• From exclusivity to a wider access• Made-in-China products
    53. 53. Implications to PORTS• “Made-in-China” brand, tricky positioning• Alfred: “They (foreign luxury brands) just sew the label in Europe, but much of it is made in China. We can do this, and better”.• Lack of distinctive differences between PORTS International and PORTS 1961.
    54. 54. THANK YOU FOR YOUR ATTENTION!

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