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Running Head: ASSIGNMENT 1
Strategy Analysis of Michael Kors
[Name of the Student]
[Name of the University]
ASSIGNMENT 2
Executive Summary
Michael Kors is a luxury brand in the fashion industry which operates worldwide. This brand is
continuously growing while maintaining its track record of success. This paper performs a
complete analysis of the external as well as the internal environment of the company. some of
the important conclusions that are drawn on the basis of the analysis conducted in this brief
report include the increase in social media presence and expanding on various geographical
locations. There are few objectives that are also set by the company in their strategic goals which
include the protection of their brand value, becoming a top luxury brand and increasing their
total revenue over the coming years. For this purpose, there are multiple strategies which are
made in the place. At first, this company need to work on introducing new product ranges in the
market especially in children wear. It is also necessary to explore the developments in the online
world with the help of e – commerce to generate more traffic in stores. MK should further work
on maintaining their level of exclusivity for controlling their supply and demand to achieve
success. This report offers a complete plan to improve the status of MK as a recognized luxury
brand. It can achieve global sustainability and growth in all types of circumstances to increase its
profitability level.
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Table of Contents
Executive Summary........................................................................................................................ 2
Introduction..................................................................................................................................... 5
Description of the industry – Major Players................................................................................... 6
General Environments .................................................................................................................... 8
Porters Five Forces Model – Industry Analysis............................................................................ 11
Threat of new entrants............................................................................................................... 11
Bargaining power of the suppliers ............................................................................................ 12
Bargaining power of buyers...................................................................................................... 13
Threat of substitutes .................................................................................................................. 14
Competitive rivalry ................................................................................................................... 15
Company Background .................................................................................................................. 15
SWOT Analysis ............................................................................................................................ 18
Strengths.................................................................................................................................... 18
Weaknesses ............................................................................................................................... 19
Opportunities............................................................................................................................. 21
Threats....................................................................................................................................... 22
Business level Strategy ................................................................................................................. 23
Core Competencies....................................................................................................................... 26
Value Chain .................................................................................................................................. 28
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International Strategy.................................................................................................................... 30
Financial Analysis......................................................................................................................... 34
Corporate Governance .................................................................................................................. 36
Conclusion .................................................................................................................................... 38
Recommendations......................................................................................................................... 39
ASSIGNMENT 5
Strategy Analysis of Michael Kors
Introduction
For people who are fashion fanatics, the name is everything. In the apparel industry, there
are many big brand names like Tiffany, Christian Louboutin, Coach Dolce & Gabbana which
have their tags speaking for them. similarly, Michael Kors is one of those companies which has
performed exceptionally well in the past few decades. This is the brand which is made for the
elites of this world which have their fame from the red carpet to White House. There are many
investors who have been in love with the products and accessories of this company from the very
first day. This is the reason behind having a tremendous increase in their sales pattern and strong
margin in the competition.
Michael Kors is a firm which deals in fashion designing which is named after the name of
its founder. This company became public by the end of the year 2011. It has experienced massive
growth because of its luxury designs and this is the benefit which gives massive strength to this
company. the comprehensive design of their market power includes pricing power, appeal and
availability. The revenue of this company is derived from three important channels which
include the wholesale to the retailers, company’s own outlets and through licensing. The high
demand for their products has also stimulated the brand to work through joint ventures. This
company has taken multiple bold decision such as taking large debts in comparison to their
capital to fulfil the demand in the market.
This paper is a strategic analysis of this company in which there will be two important
parts. In the first part, there will be a complete industry analysis conducted about the
environment in which this company operates. All the external factors in the environment are
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analyzed which can have any kind of effect on their operations and management process. The
important steps here include a description of the industry, general environment prevailing,
porters five forces model and background of this company. in the second section, the analysis of
the company’s own environment is conducted. This includes the strategic assessment of their
actions and how they deal with their capabilities and resources (Moore & Craig, 2008). Some
important components of this analysis include value chain, core competencies, business level
strategy, international strategy, corporate governance, financial analysis and any possible
recommendations that must be followed by them in light of this analysis. Following sections will
present in – depth information about all these elements.
Description of the industry – Major Players
Apparel and luxury brand industry is a competitive industry in which there is a number of
competitors in the market to give tough competition to one another. Similarly, MK also faces a
lot of competition in the market with the presence of multiple high - end brands producing luxury
items for celebrities and other people looking for limited edition products (Thornley, 2014). MK
is a huge multinational designer fashion brand which deals in watches, clothes, shoes, handbags
along with other types of accessories. It was formed in 1981 and it’s a public limited company. it
has a presence in even more than 100 countries with over 233 outlet stores and one thousand
retail stores. The company is headquartered in the US with around 14,846 total employees who
increase with 8 per cent annual rate.
One significant competitor of Michael Kors is Tony Burch which is another brand of
American Lifestyle. This can be called as the personal embodiment of the style of their CEO
Tony Burch. This is a private limited company which deals in accessories, lifestyle, fashion, and
wearable products. It has headquarters in the US which controls all the operations in different
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territories. Burberry is a competitive brand in this industry which is a wholesaler, manufacturer,
and retailer in the industry of luxury items. This is also a public limited company like Michael
Kors and it deals in clothing, fashion, accessories, cosmetics and other retail items. This is
headquartered in London with over 10,135 employees in total. This brand has a presence in 47
countries with 205 retail outlets and 57 outlet stores. The total number of stores it has is 449 and
their stores in Asia are 204 in number.
Kate Spade is the competitor of MK as it deals with innovative ideas including graphic
prints, crisp colour and other types of playful sophistication while making hallmarks in New
York. This is not an independent company while it operates as a subsidiary. The main items of
dealing include consumer goods, clothing, and fashion. It is headquartered in New York, US.
Another important competitor of this brand is LVMH which operates as a company of luxury
products with Wines and Spirits, Perfumes and Cosmetics, Leather and Fashion Items, Jewelry
and watches, and other types of selective retailing. This company was started in 1987 and is
headquartered in Paris. There are 128,637 employees which are now decreasing in number. This
company has a presence in 70 countries with 4.4 K stores and 1.6 K stores in the Asia Pacific
which makes it the biggest brand in comparison to MK.
The biggest rival company of MK is Coach which was founded in 1941. This company
operates in the items which are nondurable households. Coach makes 2.5 billion dollars more in
comparison to MK. It has around 20,80 employees with revenue of 6 billion dollars. From the
beginning, it has always been the biggest player in the luxury market of the US while holding
even more than 36% of the market share. This company reaches out to a customer base of much
larger demographics while giving tough competition to all the other brands including Michael
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Kors, Gucci, Louis Vuitton, Cole Haan and Prada etc. A huge focus of this company is in high
fashion and high - income demographics.
There is a lot of competition in this industry and some of the main competitors including
Cole Haan and Donney & Bourke have almost similar product categories. The primary
competitors that come in the list of Michael Kors include Coach and Kate Spade. When the
market of Singapore is considered, Kate Spade is well – established on this place and Michael
Kors is new here. Although MK is gaining fast growth in this new market and people are
becoming increasingly aware of their offerings, it is not possible to compete with the established
brand in this market.
The price range of these three brands MK, coach, and Kate Spade is also same and they
offer complete American image. There are some of the basic brand values possessed by these
brands. Coach focus on having an authentic, value drives, quality oriented and distinctive style
which has aspirations from American society. Kate Spade has more focus on graphics paintings,
playful look and crisp colour with an element of sophistication. Michael Kors has more emphasis
on the aesthetics in their designing which helps in combining the sporty attitude and touch of
elegance in their style. There are various points of differentiation and points of parity in their
designing and these points are further used in the international market by these brands for
creating their place and establish better competition to get bigger market share.
General Environments
Michael Kors operates in the business of the fashion industry and there are a lot of
different companies that are in the competition. With the increased competition, there is also a
large number of factors which have an influence on the fashion industry of the world. These
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environmental factors have less control of the government and operate independently. So, it is
necessary for the company to make changes in its system according to these factors so that it can
achieve success. In the general environment, there are various political factors such as labour
laws which can influence the business decisions. Also, the changes in the trade policies, as well
as the laws of export, can have an influence on the fashion companies.
In the general environment, there are various economic factors as well which have an
influence on making it a successful business. With the boom in economies of developed
countries in which Michael Kors is operating, the purchasing power of people is increasing day
by day and this gives out more power to people. So, the inclination of customers to buy fashion -
oriented products is increasing. However, as the economic environment experience recession, the
buying power decreases ultimately reducing the sales of companies in the fashion industry.
Society plays a significant role in shaping the environment of the fashion industry. There
are various social factors which include the demographics, cultures and lifestyles of people.
There are various items created by fashion companies which create appeal for the target market.
In comparison, the demographics are also influenced by the behaviour of consumers such as the
birth rate in society has a direct effect on the demand for baby clothes. If the birth rate is slow in
society, this means that the baby clothes will be demanded less. Similarly, as technology
changes, the company has to change its ways of manufacturing, operating and marketing the
products (Jones, 2015).
In the general environment, there are few other factors as well which can be controlled by
the management of the company. some of those factors include the communication about the
offerings of the company’s products. Most of the users of this company have access to social
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media and other components and these channels should be utilized properly by the company so
that customers can get exact information about their operations (Lindsey-Mullikin & Borin,
2017; Manikonda et al., 2015). Similarly, in the areas where the tourism industry is actively
increasingly, the company can also focus on targeting the tourists so that the profitability can be
improved. This is the way in which this company can work in corporate development.
With the increased disposable income in the hands of the young generation, the business
for luxury brands is improving. The urbanization is increasing in various parts of the world and
this has a huge impact on how the money is being spent among the population. The distribution
channels for all the companies operating in this sector is more or less the same. Most of the big
brand names have their suppliers and manufacturing units in China and other Asian countries. If
this import of goods is reduced and companies work on having local distribution, the cost
associated with the distribution channels will be much less.
However, there are some of the other important components in the general environment
including the commitment of these companies for providing high - quality products to the
consumers at fewer prices. This can only be achieved when the products are being manufactured
in places like China where the manufacturing cost is much less than the developed countries.
There is still a lot of competition in the apparel companies operating in China. There are multiple
companies who entered in this competition to take part in the expansion and exploit the available
opportunity.
There are a lot of changes that take place in the business environment of the apparel
industry. The economy has changed from a planned economy to the mixed and then open market
in the previous few years. The control of the government over the international companies is not
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strict anymore and the markets have now changed to attract foreign companies (Quan & Shen,
2017) There are various contractual terms which are now introduced for the penalties, warranties
and guarantees which are done similarly in all the countries. Further, the citizens of most of the
countries now prefer to purchase luxury clothing and the status of Michael Kors is not
transformed from just a celebrity brand because now they are also doing mass production.
Porters Five Forces Model – Industry Analysis
This is a comprehensive framework which is used for taking any strategic action by
analyzing the competition and other important factors in the market. The focus of the five forces
model discussed in this report is to offer a justifiable competitive advantage in the industry of
textile. This analysis can be used by the management of Michael Kors so that a competitive
position can be built in the market. This can further help in giving out some profitable
opportunities in the sector of consumer goods. The very first force in five forces model is the
threat of new entrants which is presented below along with all the other forces.
The threat of new entrants
When companies move into apparel business, they bring in new and innovative products
with them. they have new methods of doing things which puts pressure on the companies which
are already existing in the industry. The new companies can have different types of strategies
such as offering a new type of value proposition, reducing the cost of their products, making new
and low - price strategies. Michael Kors has to manage all these tasks that come with the new
companies so that effective type of barriers can be built for protecting the competitive advantage
of the company. there are various steps that Michael Kors takes to overcome these threats. The
most important step is offering innovation in the form of new services and products. With new
ASSIGNMENT 12
products, new customers are also brought to the company which helps in retaining the old
customers as well.
The company also focus on building economies of scale so that the fixed cost can be
reduced per unit. However, the threat of having new entrant is medium in the apparel industry
because a high - level investment is required to operate a new business with the same level. Also,
it is not an easy task for the new brands in the apparel industry to compete with the main players
and gain the same level of fame. Michael Kors also use their technology in building out new
capabilities and spending their money in the form of research and development. It is less likely
of the new entrants to start their work in a dynamic industry like apparels and give competition
to an established player like Michael Kors. This is the company which defines regular standards
and it will require a new company to invest a large amount of money to make a large system and
infrastructure. Michael Kors reduces any chances of high profits to the new entrants while
discouraging them with their great system. It makes the position of this company strong in the
industry.
Bargaining power of the suppliers
The bargaining power of the suppliers is high in the apparel industry. Michael Kors
manufacture their productions in China with the brand which also offer products to its
competitors including Prada, Coach and Fossils. This adds up to the power of suppliers and gives
more decision - making capability to them. if the company has more than one supplier, the
decision can be based on the price availability, however, in case of having a single supplier, there
is very little power of negotiation left with the company. in this case, the supplier has more
power fo changing the prices of products.
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The suppliers of this company are powerful, and they can use their strong position for
getting high prices from the firms. This can have a negative effect on the overall profitability of
the company. there are various ways that can be used by Michael Kors to tackle this high
bargaining power of their suppliers. They can build efficiencies in the supply chain while using
some other powerful suppliers in the industry so that competition can be increased leading to a
reduction in price. They can also experience on making different types of products designs while
using a variety of products so that when the prices of one raw material increase, they can have an
alternative to use while remaining in their budget (Forster, 2017). This company can also
develop dedicated suppliers who solely depend on this firm. This is doing something similar to
Nike and Wal – Mart so that the sole dependency of suppliers on one firm can give them better
bargaining power.
Bargaining power of buyers
The bargaining power of buyers is very less in the apparel industry. Consumers only buy
one or two products at a time unless there is a sale. There are a lot of small buyers of this
company which gives them very less power to bargain. In comparison, when the buyers are less,
there is more power to the buyers. As Michael Kors is a brand which offers luxury products, and
the prices of these luxury items are commonly fixed in the outlets. Although buyers always try to
get hold of the items at low prices which can put pressure on the profitability of the company.
customers try to seek more offers and discounts from the company.
Michael Kors has to do little effort for maintaining this little power of buyers. This is
helpful in multiple ways because it keeps less power for the buyers and gives a better opportunity
to the firm so that they can streamline their production and sales process. The company also
work on bringing new innovations to their products. In this way, the customers only have a say
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in demanding discounts on the old products but when the company keep on coming up with
innovative products, the bargaining power of the buyers is limited. These new products will also
help in reducing the defection of the customers which already exist with the company and they
will not move to the competitors.
Threat of substitutes
As the number of new firms and competition increase in the industry, the threats of
substitutes increase. All the competitors of this company offer similar quality products, and these
are the factors which depend on individual preferences. Michael Kors is considered to be a
luxury products brand of a mid – range as their products are cheap as compared to the brands like
Chanel and Hermes which come in the category of high - end luxury products. When the
customers are price sensitive, they can easily switch among the brands who offer products in a
similar price range. Still, the trend of imitating the products having a threat to the brand image is
increasing.
All these things indicate a high threat of substitutes in the apparels industry in which the
value proposition is completely different from other types of brands. For avoiding all these
issues, Michael Kors is trying to make their company more service oriented rather than just
focusing on the products. Further, they now have more focus on satisfying the core needs of the
consumers while shifting sole focus from what customers are purchasing. The company is also
making strategies for increasing the switching cost of the consumers so that they will not
purchase imitated products from competitors.
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Competitive rivalry
The competitive rivalry in the apparel industry is high. There are various major players in
this industry which give tough competition to Michael Kors. Such big brands include Kate
Spade, Ralph Lauren and Coach in which similar designs are available with almost similar types
of prices. There is a high dependence of industry rivalry on the replicas as well as the base cost
that is incurred on the product and making products completely unique (Wilson et al., 2015). The
selling price of this company is also high which makes customer switch whenever they see any
other brand offering a similar product at less price. The number of replicas is also increasing in
the industry day after day making a brand less unique. So, Michael Kors should now focus on
differentiating their products to increase customer loyalty.
Michael Kors operates in the textile industry mainly where there is a competitive
environment this has an effect on the profitability for the long term. To reduce this rivalry among
the competitors, the company can take steps for making sustainable differentiation in their
products. The company can also build a scale so that the competition can take a positive turn and
company can experience less loss. The best way of implementing these things is to make
collaboration with the competitors so that the market size can be increased, and less effort is
placed on the small markets.
Company Background
Michael Kors is an American company which works in the business of fashion designing.
They deal in clothing, watches, fragrances, foot wear, accessories, jewellery and ready to wear
clothing of both men and women. This brand has a global presence where it is managed by the
world - class management teams and designers who are awarded winners. This brand has always
offered distinctive designs, craftsmanship and materials. There is a complete comprehensive
ASSIGNMENT 16
combination of aesthetics which makes a combination of sporty attitude and stylish elegance.
The vision of this company has taken it to great heights from the very beginning and now it is
known as a luxury sportswear brand in America with a presence in more than 100 countries.
There is a total of three areas in which this business is operated. One is licensing, second is
retailing and at last, they also deal in wholesale.
In order to manage all these types of businesses, Michael Kors has a distribution network
which is controlled on a global level in which main focus is on the leading departmental stores,
retail stores owned and operated by the company, speciality stores, selection of licensing partners
and leading department stores. Even with the change in the global economy, this business has
also its e – commerce networks operating in Canada and the US.
With the global level developments, there are a lot of new changes taking place in the
industry of luxury goods and this is the industry which has always remained resilient even in the
times of economic distress. Even if this industry has slowed in the past few years, there is still
continuous growth analyzed in the luxury goods accessories and industry. There is a slow
performance in the wholesale channels, but retail channels still grow in the form of opening new
channels and growth of e – commerce business. Accessories are the leading item in the business
of Micheal Kors and Jewelry category is also continuously growing. However, regardless of all
these differences, this business is making continuous innovation to increase its product offerings
in the market to offer more variety to the consumers.
This company has a clear goal of creating more value for the shareholders so that the
profits and revenue can be increased while increasing the comparable sales on their respective
stores and making this brand strong on a global level (Fonseca, 2015). There are few prominent
ASSIGNMENT 17
strategic initiatives which are taken by this company as part of their strategic plan. The most
important plan is to offer innovative products offerings in a trend - setting manner. This is a key
to increase the revenue and market share of the company by offering a large variety of new
products in every season so that a new lifestyle portfolio can be created. This thing makes it
possible for the company to make its position as market leader strong and continuously
increasing their business growth.
Another important part of their strategic plan is to have a focus on global diversity in its
product planning strategy. The company continuously expand their luxury items in the product
category so that the success can be strengthened in the overall product portfolio. This thing can
be ensured by the introduction of product categories which are innovative and licensed as well.
These items include wearable technologies and new fragrances. This company also hold runway
shows on semi – annual basis so that the design status of their high – fashion image in the market
can be endorsed. They have press coverage of multimedia press on a global level.
The company focus on creating a personalized shopping experience for customers all
over the world as they get hold of the preferences of their customers. They introduce limited
edition products in an exclusive manner on some of the premium locations. The company now
focuses on having an international presence in the form of e – commerce and making their
position strong in Asia. As the behaviour of the consumer is shifted, they are now giving out
digital experience in the form of mobile devices so that the new expectations of consumers can
be satisfied with the services.
ASSIGNMENT 18
SWOT Analysis
Strengths
Strengths refer to the best strategies adopted by any company which provides an
upper hand on the competitors of the company. There are many strengths of Michael Kors. This
company has a large variety of products. Multiple categories in casual wear clothing are present.
Jewellery, clothes, handbags, watches. shoes etc. for men and women are included in their range.
Jackets are also very popular. Moreover, they have a very successful record of product
innovation. Many celebrities wore their dresses on the red carpet many times.
This brand is also very famous due to its activity on social media. Twitter and Facebook
have about 18 million followers and these followers are increasing day by day. This is done with
the help of ramp shows and live streaming done of the events in which their products are used.
This brand uses many channels for distribution of their products. Online shopping is available in
addition to retailers and shopping centres.
They have a strong seller community. The dealers and distributors are treated well for the
distribution. They are well trained so that they can interact with the customer in a good manner.
These dealers not only sell the products but also explain the benefits of the product to the
customers. The scaling up and scaling down of the products depends upon the needs of the
customer (Halme & Rissanen, 2015). This brand has a very strong brand collection. As this
portfolio is very important for the expansion of the new products.
Management of criticism is also one of the main strengths of this organization. Many
celebrities are also their clients. Majority of their celebrity clients regularly use these products in
their events. Emma Robert, Natalie Portman, Jennifer Lopez are some of their regular customers.
ASSIGNMENT 19
They also maintain positioning in their trends. They have all the newest designs available that are
fit for all those urban women who are fashion conscious. Due to this. MK company is able to get
a huge market share.
They maintain the newest products. product innovation is one of its strengths. due to
these strengths, this organization has succeeded in the market. not only their market share is
protected but also helping it to penetrate into the new markets. Due to these expansions in the
new markets, their economic cycle is diversified. On the basis of demands, the process of scaling
up and down of their products is controlled by the activity’s automation.
One of their greatest strength is the execution of their new projects in a very different
way so that the good returns. The expenditure is retrieved very easily by the formation of the
new business revenues. In a nutshell, activeness on social media, distribution strategies,
positioning, automation, the strength of dealer community, free cash flow and product innovation
are some of their main strengths. Due to these strengths, they are able to make a good name in
the market.
Weaknesses
Weaknesses refer to those areas in any organization where more improvement is needed.
Michael Kors also has some weaknesses which are explained here. Michael Kors is present in
America, Russia, Canada and other developed countries. Its poor presence in Asia is one of its
biggest weakness. India and China are highly populated countries. These countries offer great
potential for the future for the luxury range. Other competitors of Michael Kors have launched
their products in Asia so long ago. The future potential in the region of Asia is supposed to be
more than 100 billion in the coming decade.
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An entertaining Niche market is also one of their biggest weakness. As it is a luxury
brand. customers with high income are usually attracted towards this brand. So the personalized
products are prepared for the customers. The main difficulty experienced by them is the targeting
of volumes. They usually do not cut down their prizes due to this reason. They have faced a lot
of criticism in their management process.
Repetition of colours, fabric, and designs are the main reasons for the criticism faced by
them. Negative publicity due to the criticism done on social media is also faced by them. The
expansion is limited in the other product segments due to its organizational structure. This kind
of structure is useful only for the present model of their business not for the future. This
company is investing less in development and research. In terms of innovation, it is not able to
meet up the level of their competitors.
Training of the employs is one of their most necessary tasks. This needs the expenditure
of a large amount. Their attrition rate is really higher as compared to their competitors. Their
ratio of profitability is very low. The net contribution per cent of this organization is below
average. Their selling style is not really unique. So, the method of marketing is not that
appealing. Their competitors again take advantage of this. Although their product sale is
successful, this segment of this organization can be attacked by their entrants
The compatibility for the integrated firm in this organization is not well known. This
organization can perform very well in the integration of the small companies but that for larger
companies is not very successful. Weakness is supposed to be resolved and reduced. Any
organization is supposed to improve these weaknesses for the improvement of its strategic
situation. Their financial planning is also at fault. The ratio of their current assets to their liquid
ASSIGNMENT 21
assets also suggests that this organization can make the use of cash in a more efficient manner.
Another weakness of Michael Kors is its organizational structure. Although this structure of the
organization is compatible with their business at the present time, it limits the expansion in the
other segments of products.
The high rate of attrition, improper financial planning, faults in the structure of the
organization, absence in Asia, and niche market are some of their weaknesses that are supposed
to be reduced.
Opportunities
Opportunities are those boulevards which can be used by any organization which can
raise its returns. The weaknesses are also the opportunities as one can overcome his weaknesses
and make his strengths. As Michael Kors is present only in a few countries and in Asia it is not
very common. This organization must look at the emerging markets. As Asia is a highly
populated continent and the future potential here is supposed to be 100 billion at least in the
coming decade, so for the attainment of higher volume and enhancing their business, they must
take this step.
Another main opportunity for them is to develop the category of the designer kids wear.
This brand is very popular for its men and women’s designer wear. For this purpose, they don’t
have to develop new strategies of selling the products, as they can use the same channel which
they are using for men and women’s wear. They can enhance the capturing of new customers. As
it is an expensive designer brand. so, for increasing the market share organization have to
increase the customer count. Another main opportunity is the low rate of inflation. If there is a
low inflation rate, the disposable income of a person increases, so they can afford this luxury
ASSIGNMENT 22
brand. Moreover, the new taxation policy has proven to significantly increase the product sale
and thus increasing their market share. By decreasing the rate of shipping, they can also increase
their customers. The decrease in their rate of transportation, their market shares as well as
profitability can be increased.
Advancement in new technology also provides an opportunity for the Michael Kors
organization. This can help them to practice new price strategies in the market and increase their
product sale. This causes the improvement in the service of the regular customers and new
customers can also be attracted towards this organization. By developing their distribution,
designing and marketing strategies the core competencies can be enhanced. These strategies
attract the customers and the rate of product sale also increases. The government agreement has
allowed opening new markets. The free trade policies and new standards of technology have
provided them with the opportunities to enter the new developing markets. The development of a
new organizational structure can also help them to improve their market value, as more diversity
attracts more customers.
Procurement of products from the state and other central government has been possible
due to the green drive of government. In short, the low rate of inflation, economic uptick, core
competencies, new technology, and emerging markets are really good opportunities for the
Michael Kors organization that can pave their paths for the better future.
Threats
Threats in an organization refer to any event or thing that can cause any damage to the
sale value. One of the most dangerous threat is the limitation in the stocks. The other competitors
offer a wider range of cuts and styles while they have a limited range of their product designs.
ASSIGNMENT 23
Moreover, similar kind of products with low prices are available on other brands, which reduces
the switching cost. Another threat is the fluctuation in the currency of different countries in
which the organization is operating at the same time specifically due to the different political
environment of different countries.
The threat to the physical infrastructure and supply chain model is due to the changing
buying behaviour of the customers. Usually, the profitable products are seasonal, and their values
are on the peak during the season and an unlikely event during that season can become a threat to
the sale value of the products. Moreover, as this organization is operating in different countries
and it can face different lawsuits due to certain reasons i.e. in terms of quality of the standard
product. Those global markets where there is a shortage of expert workforce offer the threat of
sturdy growth of profits for the organization of Michael Kor in those markets.
In America, the trend of isolationism is increasing day by day, which offers a great threat
to Michael Kor. This organization function greatly in China, if the same trend is adopted
internationally it will cause a negative impact on the sales on an international level. Last but not
least, the Paris agreement on new environmental regulations has also become a threat to the
product categories existing at the present time. In short isolationism, scarcity of skilled
workforce, competition, Paris agreement, and lawsuits in different countries are the main threats
faced by Michael Kor.
Business Level Strategy
Michael Kors is a global brand which is rapidly growing while operating in the luxury
category of the fashion industry. There is world – class management that runs this brand as a
team and makes it a famous brand of designing. The shareholder value is created by increasing
ASSIGNMENT 24
the strength and revenue on a global level. There are various strategies used by this brand for
achieving goals. For this purpose, some of the business level strategies are as follows.
The most prominent strategy they have is innovation in the production process. Some of
the main products of this brand include footwear, apparels and accessories. Company introduce
many innovative products for setting the trend so that the features of unique designing can be
made. this is important for satisfying the needs of the target market and attracting more
consumers. This type of product expansion is helpful to increase the product categories in the
wearable technologies and children line.
This brand is continuously doing efforts to increase their stores in the global market
particularly in the European and Asian markets. MK is creating brand awareness while
increasing its market share in these emerging markets. The accessibility of this brand has
increased globally by taking these steps. The business strategy also includes the step of closing
down the stores which underperform and do not general enough revenue to cover up the cost.
This can help in decreasing the operational expenses and improving the overall profitability of
the company.
Now, e – commerce is considered as a worthy investment by this company and people
these days choose more options like online shopping. This factor makes their online presence
more important. There are various promotional videos used by Michael Kors on the online media
so that they can exhibit the upcoming lines of their business. This is a part of their digital
strategy of marketing. One typical example of their online campaign includes the promotions
using “Monkey around” that took place on WeChat which is a social networking software
operating in China.
ASSIGNMENT 25
For improving the level of customer engagement, the company is continuously making
efforts to spend in their technological initiatives. There is an initiative taken by them as omni-
channel strategy which can be developed to provide a better experience for the customers. These
are some of the specific ways which increase the satisfaction level in consumers while using a
brand. Another important way used as a business strategy of MK is the implementation of
personalized shopping. This is the experience which makes it easy to entertain celebrities and
makes it a luxury brand. There are various new programs in the form of customer loyalty and the
introduction of new mobile technologies which improve the awareness in the market about their
products.
The stores of this brand are operated either directly or by using the licensed partners that
are present in some of the prestigious localities of the world. The market strategy includes
segmentation with the differentiation in the consumption capacity and market size. The company
makes a set of reachable logistics according to the expected growth. This brand is popular among
celebrities because of all the famous products and customized offerings. The positioning of this
brand is done as a luxury brand which offers high - end products for the consumers. This has
more appeal to the customers because of its marketing mix.
The company has a strategy of going with the fashion trends while making collaboration
with the project runways and reality shows on TV. There is a large variety of the audience that
comes in the category of this brand and this is only because stores are present in the fashion
capitals of the brands. There are various capabilities and resources present with this brand
because of their use of massive technology. It has various products in its category including the
women ready – to – wear and foot wear for men. The watches of this company accumulate for
5% of their total revenue and their watches are very famous because of their unique designs.
ASSIGNMENT 26
They are called as the cash cows of their portfolio and the trend of smartwatches has even made
it famous in the international market. The company is bringing on new technology while
innovating new designs of smart watches and other types of wearable technologies so that they
can keep up with the competition and prevent the company from bearing any more losses.
In the business strategy, this company has a global network of distribution in which it has
a presence in over 100 countries in the form of retail stores and leading departmental stores. All
the products of the company are readily available on these stores the shipment is tracked down
by the help of their online tracking system. This shows that this brand has a good presence on the
online channels along with the robust capabilities for delivering the products on different portals
working online.
Even the brand name of this company gives them high coverage over the competition in
the form of financial and competitive benefits. There is a point of differentiation created with the
brand name that comes with the products of MK. This brand has a high level of endorsement
from celebrities and this thing has made it aspirational for attracting more customers on a global
level. The capabilities and resources of this brand are shaped in a way that it goes on with fast
fashion and allow it to be on the upper end which increases its consumer base.
Core Competencies
There are unique products offered by Michael Kors and this is the representation of their
distinctive core competencies which work behind making this brand successful. This is a strong
brand name which has loyal customers in 100 countries of this world. The prices of this brand
are affordable while also targeting celebrities for their customized products so that the customer
base can be increased worldwide. The core competencies set by this brand include their
ASSIGNMENT 27
exclusive raw material and excellent distribution system to deliver completely customized
products to their consumers. These competencies help this brand to set higher prices in the
market because more value is given to this brand in the market. This value can be estimated by
the increase in their total revenue by 52%.
The only weakness that exists in the area of their core competencies is in their lack of
diversification. The company is performing great in the international market and they have also
surpassed their biggest competitor Coach. So, in order to stay relevant with the help of their core
competencies, this brand also joins some of the reality contests so that the project runway can be
utilized while being a judge. This thing has improved the exposure of this brand to this line and
this company has expanded its business to entertain a large portion of the audience in the market.
This is the opportunity given to this brand for the opening of multiple new stores.
Another core competency present with this brand is that they are doing efforts on making
a partnership with the local retail stores including Sak’s, Macy’s and Nordstrom. With all these
strengths, the market also has various threats in store for this brand. It is very difficult to handle
the market of accessories as well as handbags because this market requires a lot of innovation in
offering new products every few days. There are various competitors in the international market
which have the advantage of giving MK a hard fight in this scenario. The most important task
that they are dealing with right now is in the form of price wars. The change in customer
preferences and taste should be handled while also looking out for the substitutes in the market.
When there are very fewer changes made in the products, then it will not be considered as a
luxury brand in the market by the users. The company has a focus on both everyday consumers
and the ones who focus on luxury products. So, the company has to create a balance while
competing hard in the international market with all the high and brands.
ASSIGNMENT 28
The best thing that works the core competencies of this brand is that it has a niche of
entertaining celebrities in the international market which makes it a brand of luxury products.
This company is an award - winning and they have a complete team of designers who work for
making its products successful in the market. With this type of competitive advantage, this
company can expand its operations in the global market easily. When celebrities wear its
products, everyone on the media channels has an eye on their products and thus increase the
exposure of their products on the market. This is the strategy which works best to market their
products in the international market. The audience has to pay attention to the singers and
actresses wearing their products. The market of today wants this company to be more innovative
so that they can adapt to the change in the situation. So, this company is performing quite well in
the global market because of its distinguished core competencies.
Value Chain
The value chain analysis of Michael Kors offers analysis of all the activities which are
conducted by the company to get a competitive edge and more value for the shareholders. The
value chain is a general model which focus on multiple activities to be differentiated in the form
of primary as well as secondary activities. there is multiple sub – components of these activities
which are presented as follows.
 Inbound logistics of Michael Kors has most of its products being manufactured in
the Asian region and the storage takes place in the Virgin Island of British. This
can help the company to save taxes and cost. The manufactured material storage
in the region of British Virgin Island can make it easily accessible to all the major
markets of the world.
ASSIGNMENT 29
 Operations activity is the process in which the inputs are transformed in the form
of finished goods. There are robust operations of this company. as this is a leading
company in the industry so they have focused on having machinery which is
technically advanced as well as the workers are skilled for transforming the
provided input into finished goods along with the services offered by the
company.
 When it comes to outbound logistics, there are primarily three channels used by
Michael Kors for having their product distribution in the form of wholesale
outlets, licensing format, and retail outlets. The company has no participation in
other types of distribution channels such as joint ventures and franchising for
capturing the international market. They are still focusing on a limited market
which mainly consists of the USA and Europe.
 Sales and marketing are other functions of the value chain in which the company
has gained substantial success in recent years in the markets of the US and
Europe. This is only because of using attractive and extensive methods of
marketing. The company has a special focus on the marketing strategy so that
they can also target the affluent class and upper – middle class in the market.
These were some of the secondary activities of the value chain of Michael Kors. Some of
the primary activities operating in the value chain of Michael Kors are discussed below.
 The infrastructure of the firm is the most important primary activity and as
Michael Kors is a leading company in the industry, it has a very structured
infrastructure. even the control system of the company is state – of – the – art and
well – structured.
ASSIGNMENT 30
 Technology is another important component and the company has implemented
technology in all the parts so that the support and efficiency can be improved for
creating value in their activities.
 Human resource management in Michael Kors has carried out in a way that it
provides a competitive edge to the company. the best practices followed by them
include the training and recruitment of their employees in a well – structured
manner so that the best talent in the overall industry can be acquired by them.
there is a lot of emphasis on the development, training and retention of employees
so that the productivity in the company can be improved.
 Procurement is the last function of their supply chain and the company has
worked for years to look into it and establish a robust system in the supply chain
for including different components of supply, equipment and purchase of new
materials in high quality and low prices.
International Strategy
In the international strategy, Michael Kors focus on making the market into different
segments so that the customers with similar needs can be identified. This makes it easier for the
company to develop ideas on the basis of differences in the wants of individuals. This is
necessary to make different segments of the market on an international strategic level so that
effective and efficient services can be provided according to the requirements of the consumers.
Michael Kors is continuously doing expansion from the North American region to the other
geographical areas of the world. These areas include Asia and Europe. There is a strong presence
of Michael Kors in North America because the geographical market in this region is largest. This
company is going through slow expansion in other markets as well. Among the priorities, the top
ASSIGNMENT 31
most favourable market for this company in China because of the growth potential in this market.
This is done so that the company can achieve international brand awareness and increase its sales
volume.
There is a large variety of demographic segments which are attracted towards Michael
Kors and the primary target of this company has always been women from the start who make up
a total of 82%. The primary reason for this focus on women is that women, in general, spend
more on clothing as compared to men. The age range of Michael Kors customers is from 25 to
54 years of customers.
Furthermore, on an international level, this company has two different types of
collections for different consumers. One is Michael Kors while the other one is by the name of
MICHAEL. There is a difference in the pricing patterns of Michael Kors so it has a target on the
individuals who have large income range. This is based on the assumption that the willingness of
a person to spend on income matters more than his income. The growth potential in young
consumers is more as they have different types of demographic trends. In comparison, the line in
MICHAEL contains products for people who belong to middle - class income. This mainly
operated in the accessories, footwear and women clothing. This is the brand which has a high
customer base of the young generation which has high growth potential and continuously
increases its revenue.
There are few important components of the international strategy of Michael Kors and
among them, the most prominent is to focus on expanding the company operations to the
international market especially China and other Asian countries where the chances of getting
success are more. Other than this, some specific international business strategic goals include an
ASSIGNMENT 32
increase in the total revenue. The company is also focusing on adding up the line of children so
that the spending of existing customers can be increased. The company wants to achieve market
penetration in the global market by expanding on the geographical areas and opening new
channels for increasing their revenue.
To implement this international strategy, it is necessary for the company to do proper
research on the needs and wants f the consumer's demands as they change with the geographical
regions. It is also important to set the location of these stores in a way that maximum benefit can
be achieved. In this way, the marketing efforts can also be tailored to the specific regions on the
international level. The company also focus on appointing celebrities for marketing their
products and brand endorsement. The celebrities are chosen according to their relevance with the
brand in terms of their lifestyle so that the brand can get approval in the respective market.
Another important international factor for their business strategy is their lack of effective
strategy in e – commerce. Customers are only able to purchase their products online in the USA
and Canada. MK is now focusing on developing new distribution channels so that they can
transfer their traffic from real channels to online business as well. This is a profitable strategy for
their marketing campaign and distribution channels. The online traffic can further be transferred
in the real - life stats in terms of profit and sales.
In the digital campaign strategy of MK, having a digital marketing plan is very important.
This is the biggest platform for social media including YouTube, Facebook, Twitter, Instagram
and Pinterest. Although the company is doing well in comparison to its competitors in the online
world, they need to continue their efforts more precisely and practically to execute the critical
factors of search engine optimization so that more online traffic can be captured. These are the
ASSIGNMENT 33
social media campaigns which highlight the important components of engaging followers, brand
differentiation, acceptance of brand and further looking into converting their customer base in
faithful fanatics. The main objective here is to increase overall awareness in the market about
their products and improving the impact of the online campaign.
An important part of this company’s global strategy is to protect their brand value. As it
is mentioned before that for doing this they have segregated their offerings in two different
brands. Michael Kors and MICKAEL have different price ranges and even target consumers
because they need to prevent their status of a luxury and premium brand in the market with the
help of controlling price. It is necessary that all the products of MK should be sold under fixed
prices and adjustments should be made in the prices according to the rate of inflation in the
global market. Further, the retail spaces of this brand in the existing departmental stores should
not offer any kind of discounts. In this market position, having price discounts can make their
position disadvantageous. This is mainly because it can have a negative effect on their brand
value and market image of an aspirational brand.
The customers on a global level have the willingness to paying high prices for their
products. Also, if the prices will not remain stable for a long time, customers will switch from
the brand. Another necessary point of consideration here is that if everyone in the market will
have this product, it would become difficult for them to remain a premium brand in the market.
So, the best way of protecting the brand value of MK is to continue being exclusive for all the
consumers. The quantity of the product offered in the market should be planned carefully
according to the appropriate supply and demand functions. So, MK does not offer mass
production to reduce the exclusivity of the products specially made for celebrities. It is necessary
for the image of the brand to make these people feel special about their products and honoured.
ASSIGNMENT 34
The exclusivity can be further used to protect and increase the brand value of MK. So, based on
all these strategies of international level, MK can make a proper action plan which can help in
implementing these strategies to maintain a better market position.
Financial Analysis
Michael Kors is a company which has the investors who have a reliable and strong belief
on the investment they make in this company. when this company conduct global business, it has
a diversified stream of revenues and giving out attractive returns on capitals. These investments
are made reliable so that the risk can be reduced in the portfolio. The key to getting success in
this business is to have better financial health of the company. this analysis will provide a
financial analysis of MK so that the position of this company can be made clear to get an
advantage in the form of potential acquisitions and enduring the downturns in future
comfortably.
Whenever the financial condition of a company is analyzed, the most important question
is about whether the company is capable of producing enough cash in relation to the debt. Over
the period of last year, the debt level of MK has increased from 155.8 Million dollars to 821.1
million dollars. This is the collection of it both short term and long - term debt. The debt of this
company is continuously increasing, and this has an effect on the short - term investments and
current cash levels which conclude to be 169.9 million dollars. The company generates its cash
through their operations amounting to 1.07 billion dollars in this time period which gives out the
operational cash to debt ratio to be 131%. This means that the company has enough operating
cash to cover its debts. This is the ratio which also indicates that the company has enough
amount of cash for entertaining its debt. This is the sign that the company is operationally
ASSIGNMENT 35
efficient which gives out an alternative for sufficient return on the assets. This company is
capable of generating 1.31 times more cash as compared to its debt.
Another important indicator of the financial condition of this company is its ability to pay
short term liabilities. Currently, the liabilities of this company collectively make a total of 945.7
million dollars. It is true that the company is capable of satisfying all the liabilities that are under
the company. the asset - liability ratio of this company is 1.37 × with 1.29 billion of assets. This
is a reasonable ratio for a luxury brand because it enables it to create enough cash buffer with
holding less capital on the investments which offer low returns.
The debt to equity ratio of this company is 40.2% which is above average as compared to
the company that has above average leverage in its financial system. This is not an uncommon
situation for such a big company as the interest payment that is incurred on the debt are also tax
deductible. This shows that the debt can be achieved on cheaper rates as compared to the
investment in capital. When the financing is available on cheap rates, this is best for large
companies as compared to the small companies. The earning generated by the company after
deducting taxes and interest payments is three times more than net of the interest payments that
they have to make. This shows that the company is financially stable. The investment made by
these large – caps companies is said to be a safe investment as their ability can improve the
ability to earn in multiple times of the interest payments.
Although the debt of this company is on a higher end, the cash flow coverage of this
company is still adequate, and it can meet the obligations while efficiently utilizing all the
available resources. This shows that all the debt taken is utilized sufficiently and is giving out the
high return on the leverage taken by them. as all the obligations are being met, there is no need to
ASSIGNMENT 36
have concerns about the liquidity needs. The capital structure of this company is optimal
according to the situation, however in future, if the company do not generate enough cash flows,
it will be difficult for them to satisfy the interest payments.
The liquidity ratio of MK is high which indicate that this company has high working
capital which is engaged in their debtors and inventories. Among the profitability ratios, the
profitability of MK grows by 1.49% in previous years. The gross profit margin is witnessed to be
decreasing in the previous years, but it was not on a drastic level. The net profitability of this
company increased along with a 2.68% increase in their return on capital employed.
The solvency ratios of this company are also high which show that they have high
liquidity and it is not difficult to get the cash out of their operations. All these financial ratios and
analysis indicate that MK is doing well on an exceptional level for fulfilling the high demand for
accessories in the growing market. All the ratios of this company are regarded as high and this s
mainly because of tying up their capital in debtors and inventories. In comparison, the ratios of
Coach were lower as compared to MK showing that it has better liquidity status.
The return on capital in MK is more as it has increased to 2.68% in comparison of Coach
which decreased in the previous year. The solvency of MK is weak as compared to the solvency
rate of Coach. So, all these things show that investors should make an investment in MK so that
they can get better returns on their investment. This company is performing exceptionally well in
comparison to its competitors giving it a strong competitive position in the global market.
Corporate Governance
The board of directors in Michael Kors has a size of 5 to 12 members. Majority of the
directors in the board are set according to the standards set by the New York Stock Exchange.
ASSIGNMENT 37
All the independent directors in their board should make notification to the board in case of any
conflict in interest among the company and director. There are proper criteria selected for taking
board membership. The people who have a diverse professional, as well as personal background,
are selected for this position and they create a spectrum of expertise while having a reputation of
integrity. The director must have enough attention and time to be devoted to the company to
fulfil all the obligations given to him.
The directors must be able to understand and read the fundamentals stated in the financial
statements so that he can be aware of the decisions taken from the financial ratios as well as the
information required to access the financial performance of any particular company. in MK, the
directors have complete knowledge and experience in the corporate governance to understand the
duties and issues of the directors and all the shareholders involved. Some of the important
characteristics required in the board members should be accountability, responsibility, integrity,
high - performance standards, courage, responsibility and judgement. These are certain
expectations from all the directors appointed in this company because they must be dedicated to
the rules and offer compliance with their duties. There is a set Code of Business Conduct and
Ethics presented in the company which must be followed in the formulation of all types of
conflicts and policies.
This is the complete code for business conduct which is set by the company in which it is
also expected of the chairman and other board members to notify before leaving their position.
These board members are given appropriate opportunity for reviewing their decision and
becoming a member of the board under any circumstances. This board is selected for providing
strategic guidance to the shareholders. So, it is their strategic responsibility to access the business
situation using their power of judgement for acting reasonably. Even in the board meetings, the
ASSIGNMENT 38
agenda is already set in the form of executive sessions. All the board staff must conduct 4
meetings in a year according to the standard set by Michael Kors corporate governance policy.
All the information provided to these board members is expected to be confidential and
should only be used for the business of the company. there are three committees in the board
including a compensation committee, nomination and governance committee and audit
committee. The agendas of these committees are set by giving them substantive inputs and
approving their agendas before conducting these meetings. CEO compensation and succession
planning are also part of their corporate governance policy. The key management positions
should be used in succession planning.
Conclusion
MK is a famous luxury brand which is also known to be the power house of fashion in
the modern world. With the multiple new strategies of making expansion in the international
market, this company is surpassing its competitors on a massive level. This company has a
competitive advantage which must be sustained for the long run sustainability of the business.
The marketing and strategic plan of this company put forward the idea of putting forward efforts
on digital marketing, increasing their revenue, as well as protecting the value of the brand by
using multiple strategies. Some of the important strategies highlighted in this project include
having a global presence on key geographical locations and increasing their products offerings.
There is a need to increase the awareness on a global level so that the point of differentiation can
be made clear while maintaining a status of a luxury brand and overall controlling the supply and
demand patterns on the exclusive level. This is the plan which does not only help with increasing
the sustainability of this brand but also makes a resilient system against the uncertainties coming
in the way of the economic process.
ASSIGNMENT 39
Recommendations
Based on the analysis conducted in this detailed report, there are few important
recommendations which must be followed by Michael Kors to increase their business standing in
the market. This is a luxury fashion brand which has a presence in all the key markets of the
world but still, there are various areas in which this brand does not exist. So, the very first
recommendation for this brand is to do geographical expansion especially in Asian countries
including China and India. These are big international markets with a lot of potentials. Also, the
economic status of the people living in these countries is increasing day after day which makes a
lot of potential consumers in these countries.
The second important recommendation made here is to expand its product lines.
Currently, this company is focusing on women primarily while offering a lot of product
categories. This is mainly because a large number of target consumers are women as they spend
a large proportion of their earning on accessories. However, this company should also focus on
making children products so that a bigger portion can be grabbed out of the pocket of consumers.
The third recommendation is to increase public awareness about this brand. As this is a
luxury brand mostly it created customized products for the celebrities on demand which makes it
distinguished. However, it is also important for the general public to know about this brand so
that the people who can afford their products can switch from famous competitors like Coach to
this brand. For this purpose, the most important step that can be taken by them is to do celebrity
endorsement because everyone wants to wear the products which are used by famous celebrities.
So, while finding out the celebrities whose personality matches with the image of this brand,
they can easily make a presence in the global market while increasing their customer base.
ASSIGNMENT 40
The fourth important recommendation is to create a strategic alliance with other
companies in the industry. The best step that they can take is to make an alliance with Nike
which is a famous brand. MK has a reputation of selling sporty products and if they make an
alliance with Nike it will be in the best interest of both companies. In the end, the company
should also focus on creating better in - store experience for the consumers. According to the
online surveys, there are 84% of people who visit their online stores, among which only 53%
make visits to the stores to make the ultimate decision and 76% people only visit to have in –
store experience. The trend of online shopping is also increasing day after day and this company
should also focus on improving their e – commerce experience so that their market share can be
increased.
All these recommendations show that they are logical steps that must be taken by MK to
improve their business in the market and to build a global presence as a recognized brand.
Overall, it is a big brand which needs expansion in some of the Asian countries as well so that
awareness in people can be increased.
ASSIGNMENT 41
References
Fonseca, C. R. G. G. D. (2015). How can Michael Kors learn from Coach Inc.'s mistakes and
transformation plan in the paradox of growth and brand identity safekeeping? (Doctoral
dissertation).
Forster, G. (2017). On theme. Superfunds Magazine, (424), 16.
Halme, M., & Rissanen, A. (2015). The Influence of Finnish Culture on the Success of Luxury
Brands: Case Michael Kors.
Jones, S. A. R. A. H. (2015). Snapchat enables intimate storytelling during fashion
month. Luxury Daily, 13.
Lindsey-Mullikin, J., & Borin, N. (2017). Why strategy is key for successful social media
sales. Business horizons, 60(4), 473-482.
Manikonda, L., Venkatesan, R., Kambhampati, S., & Li, B. (2015). Trending chic: Analyzing the
influence of social media on fashion brands. arXiv preprint arXiv:1512.01174.
Moore, L., & Craig, L. (2008). Intellectual capital in enterprise success: strategy revisited. John
Wiley & Sons.
Quan, V., & Shen, B. (2017). Evolution of luxury fashion brands. In Luxury Fashion Retail
Management (pp. 11-18). Springer, Singapore.
Thornley, P. (2014). Examining the role of bloggers in the fashion industry: a public relations
strategy for new designers.
ASSIGNMENT 42
Wilson, J., Eckhardt, G., & Belk, R. (2015). Luxury branding below the radar. Harvard Business
Review, 26-27.

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Michael Kors marketing assignment swot analysis

  • 1. Running Head: ASSIGNMENT 1 Strategy Analysis of Michael Kors [Name of the Student] [Name of the University]
  • 2. ASSIGNMENT 2 Executive Summary Michael Kors is a luxury brand in the fashion industry which operates worldwide. This brand is continuously growing while maintaining its track record of success. This paper performs a complete analysis of the external as well as the internal environment of the company. some of the important conclusions that are drawn on the basis of the analysis conducted in this brief report include the increase in social media presence and expanding on various geographical locations. There are few objectives that are also set by the company in their strategic goals which include the protection of their brand value, becoming a top luxury brand and increasing their total revenue over the coming years. For this purpose, there are multiple strategies which are made in the place. At first, this company need to work on introducing new product ranges in the market especially in children wear. It is also necessary to explore the developments in the online world with the help of e – commerce to generate more traffic in stores. MK should further work on maintaining their level of exclusivity for controlling their supply and demand to achieve success. This report offers a complete plan to improve the status of MK as a recognized luxury brand. It can achieve global sustainability and growth in all types of circumstances to increase its profitability level.
  • 3. ASSIGNMENT 3 Table of Contents Executive Summary........................................................................................................................ 2 Introduction..................................................................................................................................... 5 Description of the industry – Major Players................................................................................... 6 General Environments .................................................................................................................... 8 Porters Five Forces Model – Industry Analysis............................................................................ 11 Threat of new entrants............................................................................................................... 11 Bargaining power of the suppliers ............................................................................................ 12 Bargaining power of buyers...................................................................................................... 13 Threat of substitutes .................................................................................................................. 14 Competitive rivalry ................................................................................................................... 15 Company Background .................................................................................................................. 15 SWOT Analysis ............................................................................................................................ 18 Strengths.................................................................................................................................... 18 Weaknesses ............................................................................................................................... 19 Opportunities............................................................................................................................. 21 Threats....................................................................................................................................... 22 Business level Strategy ................................................................................................................. 23 Core Competencies....................................................................................................................... 26 Value Chain .................................................................................................................................. 28
  • 4. ASSIGNMENT 4 International Strategy.................................................................................................................... 30 Financial Analysis......................................................................................................................... 34 Corporate Governance .................................................................................................................. 36 Conclusion .................................................................................................................................... 38 Recommendations......................................................................................................................... 39
  • 5. ASSIGNMENT 5 Strategy Analysis of Michael Kors Introduction For people who are fashion fanatics, the name is everything. In the apparel industry, there are many big brand names like Tiffany, Christian Louboutin, Coach Dolce & Gabbana which have their tags speaking for them. similarly, Michael Kors is one of those companies which has performed exceptionally well in the past few decades. This is the brand which is made for the elites of this world which have their fame from the red carpet to White House. There are many investors who have been in love with the products and accessories of this company from the very first day. This is the reason behind having a tremendous increase in their sales pattern and strong margin in the competition. Michael Kors is a firm which deals in fashion designing which is named after the name of its founder. This company became public by the end of the year 2011. It has experienced massive growth because of its luxury designs and this is the benefit which gives massive strength to this company. the comprehensive design of their market power includes pricing power, appeal and availability. The revenue of this company is derived from three important channels which include the wholesale to the retailers, company’s own outlets and through licensing. The high demand for their products has also stimulated the brand to work through joint ventures. This company has taken multiple bold decision such as taking large debts in comparison to their capital to fulfil the demand in the market. This paper is a strategic analysis of this company in which there will be two important parts. In the first part, there will be a complete industry analysis conducted about the environment in which this company operates. All the external factors in the environment are
  • 6. ASSIGNMENT 6 analyzed which can have any kind of effect on their operations and management process. The important steps here include a description of the industry, general environment prevailing, porters five forces model and background of this company. in the second section, the analysis of the company’s own environment is conducted. This includes the strategic assessment of their actions and how they deal with their capabilities and resources (Moore & Craig, 2008). Some important components of this analysis include value chain, core competencies, business level strategy, international strategy, corporate governance, financial analysis and any possible recommendations that must be followed by them in light of this analysis. Following sections will present in – depth information about all these elements. Description of the industry – Major Players Apparel and luxury brand industry is a competitive industry in which there is a number of competitors in the market to give tough competition to one another. Similarly, MK also faces a lot of competition in the market with the presence of multiple high - end brands producing luxury items for celebrities and other people looking for limited edition products (Thornley, 2014). MK is a huge multinational designer fashion brand which deals in watches, clothes, shoes, handbags along with other types of accessories. It was formed in 1981 and it’s a public limited company. it has a presence in even more than 100 countries with over 233 outlet stores and one thousand retail stores. The company is headquartered in the US with around 14,846 total employees who increase with 8 per cent annual rate. One significant competitor of Michael Kors is Tony Burch which is another brand of American Lifestyle. This can be called as the personal embodiment of the style of their CEO Tony Burch. This is a private limited company which deals in accessories, lifestyle, fashion, and wearable products. It has headquarters in the US which controls all the operations in different
  • 7. ASSIGNMENT 7 territories. Burberry is a competitive brand in this industry which is a wholesaler, manufacturer, and retailer in the industry of luxury items. This is also a public limited company like Michael Kors and it deals in clothing, fashion, accessories, cosmetics and other retail items. This is headquartered in London with over 10,135 employees in total. This brand has a presence in 47 countries with 205 retail outlets and 57 outlet stores. The total number of stores it has is 449 and their stores in Asia are 204 in number. Kate Spade is the competitor of MK as it deals with innovative ideas including graphic prints, crisp colour and other types of playful sophistication while making hallmarks in New York. This is not an independent company while it operates as a subsidiary. The main items of dealing include consumer goods, clothing, and fashion. It is headquartered in New York, US. Another important competitor of this brand is LVMH which operates as a company of luxury products with Wines and Spirits, Perfumes and Cosmetics, Leather and Fashion Items, Jewelry and watches, and other types of selective retailing. This company was started in 1987 and is headquartered in Paris. There are 128,637 employees which are now decreasing in number. This company has a presence in 70 countries with 4.4 K stores and 1.6 K stores in the Asia Pacific which makes it the biggest brand in comparison to MK. The biggest rival company of MK is Coach which was founded in 1941. This company operates in the items which are nondurable households. Coach makes 2.5 billion dollars more in comparison to MK. It has around 20,80 employees with revenue of 6 billion dollars. From the beginning, it has always been the biggest player in the luxury market of the US while holding even more than 36% of the market share. This company reaches out to a customer base of much larger demographics while giving tough competition to all the other brands including Michael
  • 8. ASSIGNMENT 8 Kors, Gucci, Louis Vuitton, Cole Haan and Prada etc. A huge focus of this company is in high fashion and high - income demographics. There is a lot of competition in this industry and some of the main competitors including Cole Haan and Donney & Bourke have almost similar product categories. The primary competitors that come in the list of Michael Kors include Coach and Kate Spade. When the market of Singapore is considered, Kate Spade is well – established on this place and Michael Kors is new here. Although MK is gaining fast growth in this new market and people are becoming increasingly aware of their offerings, it is not possible to compete with the established brand in this market. The price range of these three brands MK, coach, and Kate Spade is also same and they offer complete American image. There are some of the basic brand values possessed by these brands. Coach focus on having an authentic, value drives, quality oriented and distinctive style which has aspirations from American society. Kate Spade has more focus on graphics paintings, playful look and crisp colour with an element of sophistication. Michael Kors has more emphasis on the aesthetics in their designing which helps in combining the sporty attitude and touch of elegance in their style. There are various points of differentiation and points of parity in their designing and these points are further used in the international market by these brands for creating their place and establish better competition to get bigger market share. General Environments Michael Kors operates in the business of the fashion industry and there are a lot of different companies that are in the competition. With the increased competition, there is also a large number of factors which have an influence on the fashion industry of the world. These
  • 9. ASSIGNMENT 9 environmental factors have less control of the government and operate independently. So, it is necessary for the company to make changes in its system according to these factors so that it can achieve success. In the general environment, there are various political factors such as labour laws which can influence the business decisions. Also, the changes in the trade policies, as well as the laws of export, can have an influence on the fashion companies. In the general environment, there are various economic factors as well which have an influence on making it a successful business. With the boom in economies of developed countries in which Michael Kors is operating, the purchasing power of people is increasing day by day and this gives out more power to people. So, the inclination of customers to buy fashion - oriented products is increasing. However, as the economic environment experience recession, the buying power decreases ultimately reducing the sales of companies in the fashion industry. Society plays a significant role in shaping the environment of the fashion industry. There are various social factors which include the demographics, cultures and lifestyles of people. There are various items created by fashion companies which create appeal for the target market. In comparison, the demographics are also influenced by the behaviour of consumers such as the birth rate in society has a direct effect on the demand for baby clothes. If the birth rate is slow in society, this means that the baby clothes will be demanded less. Similarly, as technology changes, the company has to change its ways of manufacturing, operating and marketing the products (Jones, 2015). In the general environment, there are few other factors as well which can be controlled by the management of the company. some of those factors include the communication about the offerings of the company’s products. Most of the users of this company have access to social
  • 10. ASSIGNMENT 10 media and other components and these channels should be utilized properly by the company so that customers can get exact information about their operations (Lindsey-Mullikin & Borin, 2017; Manikonda et al., 2015). Similarly, in the areas where the tourism industry is actively increasingly, the company can also focus on targeting the tourists so that the profitability can be improved. This is the way in which this company can work in corporate development. With the increased disposable income in the hands of the young generation, the business for luxury brands is improving. The urbanization is increasing in various parts of the world and this has a huge impact on how the money is being spent among the population. The distribution channels for all the companies operating in this sector is more or less the same. Most of the big brand names have their suppliers and manufacturing units in China and other Asian countries. If this import of goods is reduced and companies work on having local distribution, the cost associated with the distribution channels will be much less. However, there are some of the other important components in the general environment including the commitment of these companies for providing high - quality products to the consumers at fewer prices. This can only be achieved when the products are being manufactured in places like China where the manufacturing cost is much less than the developed countries. There is still a lot of competition in the apparel companies operating in China. There are multiple companies who entered in this competition to take part in the expansion and exploit the available opportunity. There are a lot of changes that take place in the business environment of the apparel industry. The economy has changed from a planned economy to the mixed and then open market in the previous few years. The control of the government over the international companies is not
  • 11. ASSIGNMENT 11 strict anymore and the markets have now changed to attract foreign companies (Quan & Shen, 2017) There are various contractual terms which are now introduced for the penalties, warranties and guarantees which are done similarly in all the countries. Further, the citizens of most of the countries now prefer to purchase luxury clothing and the status of Michael Kors is not transformed from just a celebrity brand because now they are also doing mass production. Porters Five Forces Model – Industry Analysis This is a comprehensive framework which is used for taking any strategic action by analyzing the competition and other important factors in the market. The focus of the five forces model discussed in this report is to offer a justifiable competitive advantage in the industry of textile. This analysis can be used by the management of Michael Kors so that a competitive position can be built in the market. This can further help in giving out some profitable opportunities in the sector of consumer goods. The very first force in five forces model is the threat of new entrants which is presented below along with all the other forces. The threat of new entrants When companies move into apparel business, they bring in new and innovative products with them. they have new methods of doing things which puts pressure on the companies which are already existing in the industry. The new companies can have different types of strategies such as offering a new type of value proposition, reducing the cost of their products, making new and low - price strategies. Michael Kors has to manage all these tasks that come with the new companies so that effective type of barriers can be built for protecting the competitive advantage of the company. there are various steps that Michael Kors takes to overcome these threats. The most important step is offering innovation in the form of new services and products. With new
  • 12. ASSIGNMENT 12 products, new customers are also brought to the company which helps in retaining the old customers as well. The company also focus on building economies of scale so that the fixed cost can be reduced per unit. However, the threat of having new entrant is medium in the apparel industry because a high - level investment is required to operate a new business with the same level. Also, it is not an easy task for the new brands in the apparel industry to compete with the main players and gain the same level of fame. Michael Kors also use their technology in building out new capabilities and spending their money in the form of research and development. It is less likely of the new entrants to start their work in a dynamic industry like apparels and give competition to an established player like Michael Kors. This is the company which defines regular standards and it will require a new company to invest a large amount of money to make a large system and infrastructure. Michael Kors reduces any chances of high profits to the new entrants while discouraging them with their great system. It makes the position of this company strong in the industry. Bargaining power of the suppliers The bargaining power of the suppliers is high in the apparel industry. Michael Kors manufacture their productions in China with the brand which also offer products to its competitors including Prada, Coach and Fossils. This adds up to the power of suppliers and gives more decision - making capability to them. if the company has more than one supplier, the decision can be based on the price availability, however, in case of having a single supplier, there is very little power of negotiation left with the company. in this case, the supplier has more power fo changing the prices of products.
  • 13. ASSIGNMENT 13 The suppliers of this company are powerful, and they can use their strong position for getting high prices from the firms. This can have a negative effect on the overall profitability of the company. there are various ways that can be used by Michael Kors to tackle this high bargaining power of their suppliers. They can build efficiencies in the supply chain while using some other powerful suppliers in the industry so that competition can be increased leading to a reduction in price. They can also experience on making different types of products designs while using a variety of products so that when the prices of one raw material increase, they can have an alternative to use while remaining in their budget (Forster, 2017). This company can also develop dedicated suppliers who solely depend on this firm. This is doing something similar to Nike and Wal – Mart so that the sole dependency of suppliers on one firm can give them better bargaining power. Bargaining power of buyers The bargaining power of buyers is very less in the apparel industry. Consumers only buy one or two products at a time unless there is a sale. There are a lot of small buyers of this company which gives them very less power to bargain. In comparison, when the buyers are less, there is more power to the buyers. As Michael Kors is a brand which offers luxury products, and the prices of these luxury items are commonly fixed in the outlets. Although buyers always try to get hold of the items at low prices which can put pressure on the profitability of the company. customers try to seek more offers and discounts from the company. Michael Kors has to do little effort for maintaining this little power of buyers. This is helpful in multiple ways because it keeps less power for the buyers and gives a better opportunity to the firm so that they can streamline their production and sales process. The company also work on bringing new innovations to their products. In this way, the customers only have a say
  • 14. ASSIGNMENT 14 in demanding discounts on the old products but when the company keep on coming up with innovative products, the bargaining power of the buyers is limited. These new products will also help in reducing the defection of the customers which already exist with the company and they will not move to the competitors. Threat of substitutes As the number of new firms and competition increase in the industry, the threats of substitutes increase. All the competitors of this company offer similar quality products, and these are the factors which depend on individual preferences. Michael Kors is considered to be a luxury products brand of a mid – range as their products are cheap as compared to the brands like Chanel and Hermes which come in the category of high - end luxury products. When the customers are price sensitive, they can easily switch among the brands who offer products in a similar price range. Still, the trend of imitating the products having a threat to the brand image is increasing. All these things indicate a high threat of substitutes in the apparels industry in which the value proposition is completely different from other types of brands. For avoiding all these issues, Michael Kors is trying to make their company more service oriented rather than just focusing on the products. Further, they now have more focus on satisfying the core needs of the consumers while shifting sole focus from what customers are purchasing. The company is also making strategies for increasing the switching cost of the consumers so that they will not purchase imitated products from competitors.
  • 15. ASSIGNMENT 15 Competitive rivalry The competitive rivalry in the apparel industry is high. There are various major players in this industry which give tough competition to Michael Kors. Such big brands include Kate Spade, Ralph Lauren and Coach in which similar designs are available with almost similar types of prices. There is a high dependence of industry rivalry on the replicas as well as the base cost that is incurred on the product and making products completely unique (Wilson et al., 2015). The selling price of this company is also high which makes customer switch whenever they see any other brand offering a similar product at less price. The number of replicas is also increasing in the industry day after day making a brand less unique. So, Michael Kors should now focus on differentiating their products to increase customer loyalty. Michael Kors operates in the textile industry mainly where there is a competitive environment this has an effect on the profitability for the long term. To reduce this rivalry among the competitors, the company can take steps for making sustainable differentiation in their products. The company can also build a scale so that the competition can take a positive turn and company can experience less loss. The best way of implementing these things is to make collaboration with the competitors so that the market size can be increased, and less effort is placed on the small markets. Company Background Michael Kors is an American company which works in the business of fashion designing. They deal in clothing, watches, fragrances, foot wear, accessories, jewellery and ready to wear clothing of both men and women. This brand has a global presence where it is managed by the world - class management teams and designers who are awarded winners. This brand has always offered distinctive designs, craftsmanship and materials. There is a complete comprehensive
  • 16. ASSIGNMENT 16 combination of aesthetics which makes a combination of sporty attitude and stylish elegance. The vision of this company has taken it to great heights from the very beginning and now it is known as a luxury sportswear brand in America with a presence in more than 100 countries. There is a total of three areas in which this business is operated. One is licensing, second is retailing and at last, they also deal in wholesale. In order to manage all these types of businesses, Michael Kors has a distribution network which is controlled on a global level in which main focus is on the leading departmental stores, retail stores owned and operated by the company, speciality stores, selection of licensing partners and leading department stores. Even with the change in the global economy, this business has also its e – commerce networks operating in Canada and the US. With the global level developments, there are a lot of new changes taking place in the industry of luxury goods and this is the industry which has always remained resilient even in the times of economic distress. Even if this industry has slowed in the past few years, there is still continuous growth analyzed in the luxury goods accessories and industry. There is a slow performance in the wholesale channels, but retail channels still grow in the form of opening new channels and growth of e – commerce business. Accessories are the leading item in the business of Micheal Kors and Jewelry category is also continuously growing. However, regardless of all these differences, this business is making continuous innovation to increase its product offerings in the market to offer more variety to the consumers. This company has a clear goal of creating more value for the shareholders so that the profits and revenue can be increased while increasing the comparable sales on their respective stores and making this brand strong on a global level (Fonseca, 2015). There are few prominent
  • 17. ASSIGNMENT 17 strategic initiatives which are taken by this company as part of their strategic plan. The most important plan is to offer innovative products offerings in a trend - setting manner. This is a key to increase the revenue and market share of the company by offering a large variety of new products in every season so that a new lifestyle portfolio can be created. This thing makes it possible for the company to make its position as market leader strong and continuously increasing their business growth. Another important part of their strategic plan is to have a focus on global diversity in its product planning strategy. The company continuously expand their luxury items in the product category so that the success can be strengthened in the overall product portfolio. This thing can be ensured by the introduction of product categories which are innovative and licensed as well. These items include wearable technologies and new fragrances. This company also hold runway shows on semi – annual basis so that the design status of their high – fashion image in the market can be endorsed. They have press coverage of multimedia press on a global level. The company focus on creating a personalized shopping experience for customers all over the world as they get hold of the preferences of their customers. They introduce limited edition products in an exclusive manner on some of the premium locations. The company now focuses on having an international presence in the form of e – commerce and making their position strong in Asia. As the behaviour of the consumer is shifted, they are now giving out digital experience in the form of mobile devices so that the new expectations of consumers can be satisfied with the services.
  • 18. ASSIGNMENT 18 SWOT Analysis Strengths Strengths refer to the best strategies adopted by any company which provides an upper hand on the competitors of the company. There are many strengths of Michael Kors. This company has a large variety of products. Multiple categories in casual wear clothing are present. Jewellery, clothes, handbags, watches. shoes etc. for men and women are included in their range. Jackets are also very popular. Moreover, they have a very successful record of product innovation. Many celebrities wore their dresses on the red carpet many times. This brand is also very famous due to its activity on social media. Twitter and Facebook have about 18 million followers and these followers are increasing day by day. This is done with the help of ramp shows and live streaming done of the events in which their products are used. This brand uses many channels for distribution of their products. Online shopping is available in addition to retailers and shopping centres. They have a strong seller community. The dealers and distributors are treated well for the distribution. They are well trained so that they can interact with the customer in a good manner. These dealers not only sell the products but also explain the benefits of the product to the customers. The scaling up and scaling down of the products depends upon the needs of the customer (Halme & Rissanen, 2015). This brand has a very strong brand collection. As this portfolio is very important for the expansion of the new products. Management of criticism is also one of the main strengths of this organization. Many celebrities are also their clients. Majority of their celebrity clients regularly use these products in their events. Emma Robert, Natalie Portman, Jennifer Lopez are some of their regular customers.
  • 19. ASSIGNMENT 19 They also maintain positioning in their trends. They have all the newest designs available that are fit for all those urban women who are fashion conscious. Due to this. MK company is able to get a huge market share. They maintain the newest products. product innovation is one of its strengths. due to these strengths, this organization has succeeded in the market. not only their market share is protected but also helping it to penetrate into the new markets. Due to these expansions in the new markets, their economic cycle is diversified. On the basis of demands, the process of scaling up and down of their products is controlled by the activity’s automation. One of their greatest strength is the execution of their new projects in a very different way so that the good returns. The expenditure is retrieved very easily by the formation of the new business revenues. In a nutshell, activeness on social media, distribution strategies, positioning, automation, the strength of dealer community, free cash flow and product innovation are some of their main strengths. Due to these strengths, they are able to make a good name in the market. Weaknesses Weaknesses refer to those areas in any organization where more improvement is needed. Michael Kors also has some weaknesses which are explained here. Michael Kors is present in America, Russia, Canada and other developed countries. Its poor presence in Asia is one of its biggest weakness. India and China are highly populated countries. These countries offer great potential for the future for the luxury range. Other competitors of Michael Kors have launched their products in Asia so long ago. The future potential in the region of Asia is supposed to be more than 100 billion in the coming decade.
  • 20. ASSIGNMENT 20 An entertaining Niche market is also one of their biggest weakness. As it is a luxury brand. customers with high income are usually attracted towards this brand. So the personalized products are prepared for the customers. The main difficulty experienced by them is the targeting of volumes. They usually do not cut down their prizes due to this reason. They have faced a lot of criticism in their management process. Repetition of colours, fabric, and designs are the main reasons for the criticism faced by them. Negative publicity due to the criticism done on social media is also faced by them. The expansion is limited in the other product segments due to its organizational structure. This kind of structure is useful only for the present model of their business not for the future. This company is investing less in development and research. In terms of innovation, it is not able to meet up the level of their competitors. Training of the employs is one of their most necessary tasks. This needs the expenditure of a large amount. Their attrition rate is really higher as compared to their competitors. Their ratio of profitability is very low. The net contribution per cent of this organization is below average. Their selling style is not really unique. So, the method of marketing is not that appealing. Their competitors again take advantage of this. Although their product sale is successful, this segment of this organization can be attacked by their entrants The compatibility for the integrated firm in this organization is not well known. This organization can perform very well in the integration of the small companies but that for larger companies is not very successful. Weakness is supposed to be resolved and reduced. Any organization is supposed to improve these weaknesses for the improvement of its strategic situation. Their financial planning is also at fault. The ratio of their current assets to their liquid
  • 21. ASSIGNMENT 21 assets also suggests that this organization can make the use of cash in a more efficient manner. Another weakness of Michael Kors is its organizational structure. Although this structure of the organization is compatible with their business at the present time, it limits the expansion in the other segments of products. The high rate of attrition, improper financial planning, faults in the structure of the organization, absence in Asia, and niche market are some of their weaknesses that are supposed to be reduced. Opportunities Opportunities are those boulevards which can be used by any organization which can raise its returns. The weaknesses are also the opportunities as one can overcome his weaknesses and make his strengths. As Michael Kors is present only in a few countries and in Asia it is not very common. This organization must look at the emerging markets. As Asia is a highly populated continent and the future potential here is supposed to be 100 billion at least in the coming decade, so for the attainment of higher volume and enhancing their business, they must take this step. Another main opportunity for them is to develop the category of the designer kids wear. This brand is very popular for its men and women’s designer wear. For this purpose, they don’t have to develop new strategies of selling the products, as they can use the same channel which they are using for men and women’s wear. They can enhance the capturing of new customers. As it is an expensive designer brand. so, for increasing the market share organization have to increase the customer count. Another main opportunity is the low rate of inflation. If there is a low inflation rate, the disposable income of a person increases, so they can afford this luxury
  • 22. ASSIGNMENT 22 brand. Moreover, the new taxation policy has proven to significantly increase the product sale and thus increasing their market share. By decreasing the rate of shipping, they can also increase their customers. The decrease in their rate of transportation, their market shares as well as profitability can be increased. Advancement in new technology also provides an opportunity for the Michael Kors organization. This can help them to practice new price strategies in the market and increase their product sale. This causes the improvement in the service of the regular customers and new customers can also be attracted towards this organization. By developing their distribution, designing and marketing strategies the core competencies can be enhanced. These strategies attract the customers and the rate of product sale also increases. The government agreement has allowed opening new markets. The free trade policies and new standards of technology have provided them with the opportunities to enter the new developing markets. The development of a new organizational structure can also help them to improve their market value, as more diversity attracts more customers. Procurement of products from the state and other central government has been possible due to the green drive of government. In short, the low rate of inflation, economic uptick, core competencies, new technology, and emerging markets are really good opportunities for the Michael Kors organization that can pave their paths for the better future. Threats Threats in an organization refer to any event or thing that can cause any damage to the sale value. One of the most dangerous threat is the limitation in the stocks. The other competitors offer a wider range of cuts and styles while they have a limited range of their product designs.
  • 23. ASSIGNMENT 23 Moreover, similar kind of products with low prices are available on other brands, which reduces the switching cost. Another threat is the fluctuation in the currency of different countries in which the organization is operating at the same time specifically due to the different political environment of different countries. The threat to the physical infrastructure and supply chain model is due to the changing buying behaviour of the customers. Usually, the profitable products are seasonal, and their values are on the peak during the season and an unlikely event during that season can become a threat to the sale value of the products. Moreover, as this organization is operating in different countries and it can face different lawsuits due to certain reasons i.e. in terms of quality of the standard product. Those global markets where there is a shortage of expert workforce offer the threat of sturdy growth of profits for the organization of Michael Kor in those markets. In America, the trend of isolationism is increasing day by day, which offers a great threat to Michael Kor. This organization function greatly in China, if the same trend is adopted internationally it will cause a negative impact on the sales on an international level. Last but not least, the Paris agreement on new environmental regulations has also become a threat to the product categories existing at the present time. In short isolationism, scarcity of skilled workforce, competition, Paris agreement, and lawsuits in different countries are the main threats faced by Michael Kor. Business Level Strategy Michael Kors is a global brand which is rapidly growing while operating in the luxury category of the fashion industry. There is world – class management that runs this brand as a team and makes it a famous brand of designing. The shareholder value is created by increasing
  • 24. ASSIGNMENT 24 the strength and revenue on a global level. There are various strategies used by this brand for achieving goals. For this purpose, some of the business level strategies are as follows. The most prominent strategy they have is innovation in the production process. Some of the main products of this brand include footwear, apparels and accessories. Company introduce many innovative products for setting the trend so that the features of unique designing can be made. this is important for satisfying the needs of the target market and attracting more consumers. This type of product expansion is helpful to increase the product categories in the wearable technologies and children line. This brand is continuously doing efforts to increase their stores in the global market particularly in the European and Asian markets. MK is creating brand awareness while increasing its market share in these emerging markets. The accessibility of this brand has increased globally by taking these steps. The business strategy also includes the step of closing down the stores which underperform and do not general enough revenue to cover up the cost. This can help in decreasing the operational expenses and improving the overall profitability of the company. Now, e – commerce is considered as a worthy investment by this company and people these days choose more options like online shopping. This factor makes their online presence more important. There are various promotional videos used by Michael Kors on the online media so that they can exhibit the upcoming lines of their business. This is a part of their digital strategy of marketing. One typical example of their online campaign includes the promotions using “Monkey around” that took place on WeChat which is a social networking software operating in China.
  • 25. ASSIGNMENT 25 For improving the level of customer engagement, the company is continuously making efforts to spend in their technological initiatives. There is an initiative taken by them as omni- channel strategy which can be developed to provide a better experience for the customers. These are some of the specific ways which increase the satisfaction level in consumers while using a brand. Another important way used as a business strategy of MK is the implementation of personalized shopping. This is the experience which makes it easy to entertain celebrities and makes it a luxury brand. There are various new programs in the form of customer loyalty and the introduction of new mobile technologies which improve the awareness in the market about their products. The stores of this brand are operated either directly or by using the licensed partners that are present in some of the prestigious localities of the world. The market strategy includes segmentation with the differentiation in the consumption capacity and market size. The company makes a set of reachable logistics according to the expected growth. This brand is popular among celebrities because of all the famous products and customized offerings. The positioning of this brand is done as a luxury brand which offers high - end products for the consumers. This has more appeal to the customers because of its marketing mix. The company has a strategy of going with the fashion trends while making collaboration with the project runways and reality shows on TV. There is a large variety of the audience that comes in the category of this brand and this is only because stores are present in the fashion capitals of the brands. There are various capabilities and resources present with this brand because of their use of massive technology. It has various products in its category including the women ready – to – wear and foot wear for men. The watches of this company accumulate for 5% of their total revenue and their watches are very famous because of their unique designs.
  • 26. ASSIGNMENT 26 They are called as the cash cows of their portfolio and the trend of smartwatches has even made it famous in the international market. The company is bringing on new technology while innovating new designs of smart watches and other types of wearable technologies so that they can keep up with the competition and prevent the company from bearing any more losses. In the business strategy, this company has a global network of distribution in which it has a presence in over 100 countries in the form of retail stores and leading departmental stores. All the products of the company are readily available on these stores the shipment is tracked down by the help of their online tracking system. This shows that this brand has a good presence on the online channels along with the robust capabilities for delivering the products on different portals working online. Even the brand name of this company gives them high coverage over the competition in the form of financial and competitive benefits. There is a point of differentiation created with the brand name that comes with the products of MK. This brand has a high level of endorsement from celebrities and this thing has made it aspirational for attracting more customers on a global level. The capabilities and resources of this brand are shaped in a way that it goes on with fast fashion and allow it to be on the upper end which increases its consumer base. Core Competencies There are unique products offered by Michael Kors and this is the representation of their distinctive core competencies which work behind making this brand successful. This is a strong brand name which has loyal customers in 100 countries of this world. The prices of this brand are affordable while also targeting celebrities for their customized products so that the customer base can be increased worldwide. The core competencies set by this brand include their
  • 27. ASSIGNMENT 27 exclusive raw material and excellent distribution system to deliver completely customized products to their consumers. These competencies help this brand to set higher prices in the market because more value is given to this brand in the market. This value can be estimated by the increase in their total revenue by 52%. The only weakness that exists in the area of their core competencies is in their lack of diversification. The company is performing great in the international market and they have also surpassed their biggest competitor Coach. So, in order to stay relevant with the help of their core competencies, this brand also joins some of the reality contests so that the project runway can be utilized while being a judge. This thing has improved the exposure of this brand to this line and this company has expanded its business to entertain a large portion of the audience in the market. This is the opportunity given to this brand for the opening of multiple new stores. Another core competency present with this brand is that they are doing efforts on making a partnership with the local retail stores including Sak’s, Macy’s and Nordstrom. With all these strengths, the market also has various threats in store for this brand. It is very difficult to handle the market of accessories as well as handbags because this market requires a lot of innovation in offering new products every few days. There are various competitors in the international market which have the advantage of giving MK a hard fight in this scenario. The most important task that they are dealing with right now is in the form of price wars. The change in customer preferences and taste should be handled while also looking out for the substitutes in the market. When there are very fewer changes made in the products, then it will not be considered as a luxury brand in the market by the users. The company has a focus on both everyday consumers and the ones who focus on luxury products. So, the company has to create a balance while competing hard in the international market with all the high and brands.
  • 28. ASSIGNMENT 28 The best thing that works the core competencies of this brand is that it has a niche of entertaining celebrities in the international market which makes it a brand of luxury products. This company is an award - winning and they have a complete team of designers who work for making its products successful in the market. With this type of competitive advantage, this company can expand its operations in the global market easily. When celebrities wear its products, everyone on the media channels has an eye on their products and thus increase the exposure of their products on the market. This is the strategy which works best to market their products in the international market. The audience has to pay attention to the singers and actresses wearing their products. The market of today wants this company to be more innovative so that they can adapt to the change in the situation. So, this company is performing quite well in the global market because of its distinguished core competencies. Value Chain The value chain analysis of Michael Kors offers analysis of all the activities which are conducted by the company to get a competitive edge and more value for the shareholders. The value chain is a general model which focus on multiple activities to be differentiated in the form of primary as well as secondary activities. there is multiple sub – components of these activities which are presented as follows.  Inbound logistics of Michael Kors has most of its products being manufactured in the Asian region and the storage takes place in the Virgin Island of British. This can help the company to save taxes and cost. The manufactured material storage in the region of British Virgin Island can make it easily accessible to all the major markets of the world.
  • 29. ASSIGNMENT 29  Operations activity is the process in which the inputs are transformed in the form of finished goods. There are robust operations of this company. as this is a leading company in the industry so they have focused on having machinery which is technically advanced as well as the workers are skilled for transforming the provided input into finished goods along with the services offered by the company.  When it comes to outbound logistics, there are primarily three channels used by Michael Kors for having their product distribution in the form of wholesale outlets, licensing format, and retail outlets. The company has no participation in other types of distribution channels such as joint ventures and franchising for capturing the international market. They are still focusing on a limited market which mainly consists of the USA and Europe.  Sales and marketing are other functions of the value chain in which the company has gained substantial success in recent years in the markets of the US and Europe. This is only because of using attractive and extensive methods of marketing. The company has a special focus on the marketing strategy so that they can also target the affluent class and upper – middle class in the market. These were some of the secondary activities of the value chain of Michael Kors. Some of the primary activities operating in the value chain of Michael Kors are discussed below.  The infrastructure of the firm is the most important primary activity and as Michael Kors is a leading company in the industry, it has a very structured infrastructure. even the control system of the company is state – of – the – art and well – structured.
  • 30. ASSIGNMENT 30  Technology is another important component and the company has implemented technology in all the parts so that the support and efficiency can be improved for creating value in their activities.  Human resource management in Michael Kors has carried out in a way that it provides a competitive edge to the company. the best practices followed by them include the training and recruitment of their employees in a well – structured manner so that the best talent in the overall industry can be acquired by them. there is a lot of emphasis on the development, training and retention of employees so that the productivity in the company can be improved.  Procurement is the last function of their supply chain and the company has worked for years to look into it and establish a robust system in the supply chain for including different components of supply, equipment and purchase of new materials in high quality and low prices. International Strategy In the international strategy, Michael Kors focus on making the market into different segments so that the customers with similar needs can be identified. This makes it easier for the company to develop ideas on the basis of differences in the wants of individuals. This is necessary to make different segments of the market on an international strategic level so that effective and efficient services can be provided according to the requirements of the consumers. Michael Kors is continuously doing expansion from the North American region to the other geographical areas of the world. These areas include Asia and Europe. There is a strong presence of Michael Kors in North America because the geographical market in this region is largest. This company is going through slow expansion in other markets as well. Among the priorities, the top
  • 31. ASSIGNMENT 31 most favourable market for this company in China because of the growth potential in this market. This is done so that the company can achieve international brand awareness and increase its sales volume. There is a large variety of demographic segments which are attracted towards Michael Kors and the primary target of this company has always been women from the start who make up a total of 82%. The primary reason for this focus on women is that women, in general, spend more on clothing as compared to men. The age range of Michael Kors customers is from 25 to 54 years of customers. Furthermore, on an international level, this company has two different types of collections for different consumers. One is Michael Kors while the other one is by the name of MICHAEL. There is a difference in the pricing patterns of Michael Kors so it has a target on the individuals who have large income range. This is based on the assumption that the willingness of a person to spend on income matters more than his income. The growth potential in young consumers is more as they have different types of demographic trends. In comparison, the line in MICHAEL contains products for people who belong to middle - class income. This mainly operated in the accessories, footwear and women clothing. This is the brand which has a high customer base of the young generation which has high growth potential and continuously increases its revenue. There are few important components of the international strategy of Michael Kors and among them, the most prominent is to focus on expanding the company operations to the international market especially China and other Asian countries where the chances of getting success are more. Other than this, some specific international business strategic goals include an
  • 32. ASSIGNMENT 32 increase in the total revenue. The company is also focusing on adding up the line of children so that the spending of existing customers can be increased. The company wants to achieve market penetration in the global market by expanding on the geographical areas and opening new channels for increasing their revenue. To implement this international strategy, it is necessary for the company to do proper research on the needs and wants f the consumer's demands as they change with the geographical regions. It is also important to set the location of these stores in a way that maximum benefit can be achieved. In this way, the marketing efforts can also be tailored to the specific regions on the international level. The company also focus on appointing celebrities for marketing their products and brand endorsement. The celebrities are chosen according to their relevance with the brand in terms of their lifestyle so that the brand can get approval in the respective market. Another important international factor for their business strategy is their lack of effective strategy in e – commerce. Customers are only able to purchase their products online in the USA and Canada. MK is now focusing on developing new distribution channels so that they can transfer their traffic from real channels to online business as well. This is a profitable strategy for their marketing campaign and distribution channels. The online traffic can further be transferred in the real - life stats in terms of profit and sales. In the digital campaign strategy of MK, having a digital marketing plan is very important. This is the biggest platform for social media including YouTube, Facebook, Twitter, Instagram and Pinterest. Although the company is doing well in comparison to its competitors in the online world, they need to continue their efforts more precisely and practically to execute the critical factors of search engine optimization so that more online traffic can be captured. These are the
  • 33. ASSIGNMENT 33 social media campaigns which highlight the important components of engaging followers, brand differentiation, acceptance of brand and further looking into converting their customer base in faithful fanatics. The main objective here is to increase overall awareness in the market about their products and improving the impact of the online campaign. An important part of this company’s global strategy is to protect their brand value. As it is mentioned before that for doing this they have segregated their offerings in two different brands. Michael Kors and MICKAEL have different price ranges and even target consumers because they need to prevent their status of a luxury and premium brand in the market with the help of controlling price. It is necessary that all the products of MK should be sold under fixed prices and adjustments should be made in the prices according to the rate of inflation in the global market. Further, the retail spaces of this brand in the existing departmental stores should not offer any kind of discounts. In this market position, having price discounts can make their position disadvantageous. This is mainly because it can have a negative effect on their brand value and market image of an aspirational brand. The customers on a global level have the willingness to paying high prices for their products. Also, if the prices will not remain stable for a long time, customers will switch from the brand. Another necessary point of consideration here is that if everyone in the market will have this product, it would become difficult for them to remain a premium brand in the market. So, the best way of protecting the brand value of MK is to continue being exclusive for all the consumers. The quantity of the product offered in the market should be planned carefully according to the appropriate supply and demand functions. So, MK does not offer mass production to reduce the exclusivity of the products specially made for celebrities. It is necessary for the image of the brand to make these people feel special about their products and honoured.
  • 34. ASSIGNMENT 34 The exclusivity can be further used to protect and increase the brand value of MK. So, based on all these strategies of international level, MK can make a proper action plan which can help in implementing these strategies to maintain a better market position. Financial Analysis Michael Kors is a company which has the investors who have a reliable and strong belief on the investment they make in this company. when this company conduct global business, it has a diversified stream of revenues and giving out attractive returns on capitals. These investments are made reliable so that the risk can be reduced in the portfolio. The key to getting success in this business is to have better financial health of the company. this analysis will provide a financial analysis of MK so that the position of this company can be made clear to get an advantage in the form of potential acquisitions and enduring the downturns in future comfortably. Whenever the financial condition of a company is analyzed, the most important question is about whether the company is capable of producing enough cash in relation to the debt. Over the period of last year, the debt level of MK has increased from 155.8 Million dollars to 821.1 million dollars. This is the collection of it both short term and long - term debt. The debt of this company is continuously increasing, and this has an effect on the short - term investments and current cash levels which conclude to be 169.9 million dollars. The company generates its cash through their operations amounting to 1.07 billion dollars in this time period which gives out the operational cash to debt ratio to be 131%. This means that the company has enough operating cash to cover its debts. This is the ratio which also indicates that the company has enough amount of cash for entertaining its debt. This is the sign that the company is operationally
  • 35. ASSIGNMENT 35 efficient which gives out an alternative for sufficient return on the assets. This company is capable of generating 1.31 times more cash as compared to its debt. Another important indicator of the financial condition of this company is its ability to pay short term liabilities. Currently, the liabilities of this company collectively make a total of 945.7 million dollars. It is true that the company is capable of satisfying all the liabilities that are under the company. the asset - liability ratio of this company is 1.37 × with 1.29 billion of assets. This is a reasonable ratio for a luxury brand because it enables it to create enough cash buffer with holding less capital on the investments which offer low returns. The debt to equity ratio of this company is 40.2% which is above average as compared to the company that has above average leverage in its financial system. This is not an uncommon situation for such a big company as the interest payment that is incurred on the debt are also tax deductible. This shows that the debt can be achieved on cheaper rates as compared to the investment in capital. When the financing is available on cheap rates, this is best for large companies as compared to the small companies. The earning generated by the company after deducting taxes and interest payments is three times more than net of the interest payments that they have to make. This shows that the company is financially stable. The investment made by these large – caps companies is said to be a safe investment as their ability can improve the ability to earn in multiple times of the interest payments. Although the debt of this company is on a higher end, the cash flow coverage of this company is still adequate, and it can meet the obligations while efficiently utilizing all the available resources. This shows that all the debt taken is utilized sufficiently and is giving out the high return on the leverage taken by them. as all the obligations are being met, there is no need to
  • 36. ASSIGNMENT 36 have concerns about the liquidity needs. The capital structure of this company is optimal according to the situation, however in future, if the company do not generate enough cash flows, it will be difficult for them to satisfy the interest payments. The liquidity ratio of MK is high which indicate that this company has high working capital which is engaged in their debtors and inventories. Among the profitability ratios, the profitability of MK grows by 1.49% in previous years. The gross profit margin is witnessed to be decreasing in the previous years, but it was not on a drastic level. The net profitability of this company increased along with a 2.68% increase in their return on capital employed. The solvency ratios of this company are also high which show that they have high liquidity and it is not difficult to get the cash out of their operations. All these financial ratios and analysis indicate that MK is doing well on an exceptional level for fulfilling the high demand for accessories in the growing market. All the ratios of this company are regarded as high and this s mainly because of tying up their capital in debtors and inventories. In comparison, the ratios of Coach were lower as compared to MK showing that it has better liquidity status. The return on capital in MK is more as it has increased to 2.68% in comparison of Coach which decreased in the previous year. The solvency of MK is weak as compared to the solvency rate of Coach. So, all these things show that investors should make an investment in MK so that they can get better returns on their investment. This company is performing exceptionally well in comparison to its competitors giving it a strong competitive position in the global market. Corporate Governance The board of directors in Michael Kors has a size of 5 to 12 members. Majority of the directors in the board are set according to the standards set by the New York Stock Exchange.
  • 37. ASSIGNMENT 37 All the independent directors in their board should make notification to the board in case of any conflict in interest among the company and director. There are proper criteria selected for taking board membership. The people who have a diverse professional, as well as personal background, are selected for this position and they create a spectrum of expertise while having a reputation of integrity. The director must have enough attention and time to be devoted to the company to fulfil all the obligations given to him. The directors must be able to understand and read the fundamentals stated in the financial statements so that he can be aware of the decisions taken from the financial ratios as well as the information required to access the financial performance of any particular company. in MK, the directors have complete knowledge and experience in the corporate governance to understand the duties and issues of the directors and all the shareholders involved. Some of the important characteristics required in the board members should be accountability, responsibility, integrity, high - performance standards, courage, responsibility and judgement. These are certain expectations from all the directors appointed in this company because they must be dedicated to the rules and offer compliance with their duties. There is a set Code of Business Conduct and Ethics presented in the company which must be followed in the formulation of all types of conflicts and policies. This is the complete code for business conduct which is set by the company in which it is also expected of the chairman and other board members to notify before leaving their position. These board members are given appropriate opportunity for reviewing their decision and becoming a member of the board under any circumstances. This board is selected for providing strategic guidance to the shareholders. So, it is their strategic responsibility to access the business situation using their power of judgement for acting reasonably. Even in the board meetings, the
  • 38. ASSIGNMENT 38 agenda is already set in the form of executive sessions. All the board staff must conduct 4 meetings in a year according to the standard set by Michael Kors corporate governance policy. All the information provided to these board members is expected to be confidential and should only be used for the business of the company. there are three committees in the board including a compensation committee, nomination and governance committee and audit committee. The agendas of these committees are set by giving them substantive inputs and approving their agendas before conducting these meetings. CEO compensation and succession planning are also part of their corporate governance policy. The key management positions should be used in succession planning. Conclusion MK is a famous luxury brand which is also known to be the power house of fashion in the modern world. With the multiple new strategies of making expansion in the international market, this company is surpassing its competitors on a massive level. This company has a competitive advantage which must be sustained for the long run sustainability of the business. The marketing and strategic plan of this company put forward the idea of putting forward efforts on digital marketing, increasing their revenue, as well as protecting the value of the brand by using multiple strategies. Some of the important strategies highlighted in this project include having a global presence on key geographical locations and increasing their products offerings. There is a need to increase the awareness on a global level so that the point of differentiation can be made clear while maintaining a status of a luxury brand and overall controlling the supply and demand patterns on the exclusive level. This is the plan which does not only help with increasing the sustainability of this brand but also makes a resilient system against the uncertainties coming in the way of the economic process.
  • 39. ASSIGNMENT 39 Recommendations Based on the analysis conducted in this detailed report, there are few important recommendations which must be followed by Michael Kors to increase their business standing in the market. This is a luxury fashion brand which has a presence in all the key markets of the world but still, there are various areas in which this brand does not exist. So, the very first recommendation for this brand is to do geographical expansion especially in Asian countries including China and India. These are big international markets with a lot of potentials. Also, the economic status of the people living in these countries is increasing day after day which makes a lot of potential consumers in these countries. The second important recommendation made here is to expand its product lines. Currently, this company is focusing on women primarily while offering a lot of product categories. This is mainly because a large number of target consumers are women as they spend a large proportion of their earning on accessories. However, this company should also focus on making children products so that a bigger portion can be grabbed out of the pocket of consumers. The third recommendation is to increase public awareness about this brand. As this is a luxury brand mostly it created customized products for the celebrities on demand which makes it distinguished. However, it is also important for the general public to know about this brand so that the people who can afford their products can switch from famous competitors like Coach to this brand. For this purpose, the most important step that can be taken by them is to do celebrity endorsement because everyone wants to wear the products which are used by famous celebrities. So, while finding out the celebrities whose personality matches with the image of this brand, they can easily make a presence in the global market while increasing their customer base.
  • 40. ASSIGNMENT 40 The fourth important recommendation is to create a strategic alliance with other companies in the industry. The best step that they can take is to make an alliance with Nike which is a famous brand. MK has a reputation of selling sporty products and if they make an alliance with Nike it will be in the best interest of both companies. In the end, the company should also focus on creating better in - store experience for the consumers. According to the online surveys, there are 84% of people who visit their online stores, among which only 53% make visits to the stores to make the ultimate decision and 76% people only visit to have in – store experience. The trend of online shopping is also increasing day after day and this company should also focus on improving their e – commerce experience so that their market share can be increased. All these recommendations show that they are logical steps that must be taken by MK to improve their business in the market and to build a global presence as a recognized brand. Overall, it is a big brand which needs expansion in some of the Asian countries as well so that awareness in people can be increased.
  • 41. ASSIGNMENT 41 References Fonseca, C. R. G. G. D. (2015). How can Michael Kors learn from Coach Inc.'s mistakes and transformation plan in the paradox of growth and brand identity safekeeping? (Doctoral dissertation). Forster, G. (2017). On theme. Superfunds Magazine, (424), 16. Halme, M., & Rissanen, A. (2015). The Influence of Finnish Culture on the Success of Luxury Brands: Case Michael Kors. Jones, S. A. R. A. H. (2015). Snapchat enables intimate storytelling during fashion month. Luxury Daily, 13. Lindsey-Mullikin, J., & Borin, N. (2017). Why strategy is key for successful social media sales. Business horizons, 60(4), 473-482. Manikonda, L., Venkatesan, R., Kambhampati, S., & Li, B. (2015). Trending chic: Analyzing the influence of social media on fashion brands. arXiv preprint arXiv:1512.01174. Moore, L., & Craig, L. (2008). Intellectual capital in enterprise success: strategy revisited. John Wiley & Sons. Quan, V., & Shen, B. (2017). Evolution of luxury fashion brands. In Luxury Fashion Retail Management (pp. 11-18). Springer, Singapore. Thornley, P. (2014). Examining the role of bloggers in the fashion industry: a public relations strategy for new designers.
  • 42. ASSIGNMENT 42 Wilson, J., Eckhardt, G., & Belk, R. (2015). Luxury branding below the radar. Harvard Business Review, 26-27.