MICHAEL KORS HOLDINGS LIMITED (Research Paper Sample)

MICHAEL KORS HOLDINGS LIMITED Name Institution Date Case Objective This case is intended for a graduate corporate strategy section of a business strategy course. Synopsis Michael Kors Holdings is a global luxury company with headquarters in Hong Kong. It employs over 10,000 people and specializes in offering design and distribution for clothing and luxury for both men and women. The company’s products are sold worldwide, with retail stores in locations such as Milan, Paris, Tokyo, and Rio de Janeiro. The women products offered retail from between $500 and $6000 for the handbags while the footwear retails from between $300 and $1200, and other apparel between $400 and $ 4000.These high priced products are marketed under the famous Michael Kors brand. However, the company also offers cheaper products that are sold to middle and low-income earners, with handbags ranging between $200 and $800 and footwear from $50 to $500.While this has been a good marketing expansion strategy, the luxury line is facing reduced sales in their high-end product line, since most consumers buy luxury goods because of their uniqueness and unavailability. Offering the brand to more people at lower prices has rendered the luxury line too mundane, pushing away most of their high-end customers to other luxury brands that are strictly exclusive. Consumers now feel that the brand image has become basic, which has hurt the sales in the recent past. The need to increase their customer demand while maintaining their brand authenticity, therefore, needs a strategy. Case Description Pricing is largely fundamental in any product marketing strategy and is extremely needful for companies to set the right prices.Target market, a margin of profit and growth strategy for the company all are used in the determination of the pricing strategy employed. In the case of Michael Kors, the company uses premium pricing Premium pricing is the strategy that companies acquire, to set prices at higher bars than similar products in the market. Luxury brands like Michael Kors majorly use this strategy to set their prices. Also known as skim pricing, because it involves targeting the “cream part’ of society, who are the rich and wealthy. Such pricing is to maximize profits of the company by making the customers feel happy and willing to pay more for a product that will be unique and exclusive to very few people. The products also have no substitute, which makes it even the more pricey, which means barriers to entry in this market are very high Premium pricing is also used to create a certain look on the brand identity of the product. Price quality signaling is associated with this pricing strategy, which refers to the identification of high-quality products to high signals. For example, BetaNews, Apple have a 91% share of computers in the market that retail for more than $1000.Premium pricing Hs enable such companies to use such products to target the high-end customers in the market. The brand has been on an expansion strategy, with their stores increasing from 145 to 221. This is attributed to its numerous acquisitions in countries such as China and South Korea and consolidation of its operations in Latina America. Despite the expansion, total revenues in America have reduced by 5%.The case has been killed by these increased outlets. Michael Kors status was greatly affected by the distribution to more popular retail stores such as Macy’s. Sale of items on premium will be harder to achieve when the clients can get the same products at retail prices. Luxury products are not associated with details, which are common in retail stores. Association with the retail outlets will also lessen the brand value since association does not guarantee its luxurious status anymore. Macy’s as stated earlier has destroyed the Michael Kors reputation. The handbag category, for example, has been greatly affected, due to the association with these department stores. Big luxurious brands can create a specific brand image with a certain allure, but once the products are in the department stores, they have no control over the image the products get on the shelves. Macy’s effort to increase foot traffic through their sales promotions will damage the reputation of a Michael Kors product in the same store. Business Insider commented on the recent Michael Kors insufficiency stating that the company loses the control of their brands through wholesaling strategies. With such information, Michael Kors has not been fulfilling its end as a luxury designer. It has lost its luster. The famous brand had a drop in the sales of some relatively new stores opened in 2016, down to 7.6%.Even with the drop in sales; the company has still continued to open more stores, which continues to have an effect on the brand identity and the uniqueness of the product. The result of this has been the customers shifting to other brands such as Ralph Lauren that continue to maintain their identity. A few years ago, Michael Kors consumers were willing and able to spend hundreds and thousands of dollars on the brand, a case that seems to be on the decline. In the fashion Industry, however, it is a classic tale that when a brand has been too exposed or is too available in the market, its luxurious effect slowly becomes obsolete. The aim of luxury products is for the consumers to have enviable product. The coach had the same issue before but has recently been working on re-establishing their luxurious image. Background Michael Kors is an internationally recognized brand based in New York that deals in American Apparel, accessories and footwear, for both men and women. The designer company is present in more than 100 countries worldwide. Commenced in 1981, the brand is by famous designer and philanthropist Michael Kors. It operates in three main segments, Retail, Wholesale, and Licensing. It has created a huge global network over the course of time and has created a huge network of retailers all over the world. They also have specialty stores and exclusive licensing partners all over. In America alone, the company had 343 retail stores spread all over America as if 2015.These retailers include the concessions and the e-commerce website in the US. There are around 183 more retailers globally, mainly in Japan and Europe. Wholesalers, on the other hand, are more than 2,540 in specialty and departmental stores in North America, while the rest, 1,497, are internationally based. In the licensing division, the company gives some chosen companies and individuals licensing rights to produce, sell and distribute Michael Kors products, largely dependent on the geographical factor. The company initially started as an all-women’s wear in 1981, with the major retailers of the product being high end stores such as Bloomingdale’s, Lord & Taylor, Bergdorf Goodman, Neiman Marcus, among others. However, in 1990, the KORS Michael Kors line was started, although it did not survive due to bankruptcy. In 1997, the Kors line was re-launched, only that there was a dramatic drop in the prices of the prices offered, and in 2002, the men’s wear was finally launched. In 2004, the MICHAEL Michael Kors label was launched, and a new KORS Michael Kors line, to join the already pre-existing brand. The new MICHAEL Michael Kors was based on the handbags, shoes and ready to wear apparel for women. As of 2016, the company had more than 770 designer stores concentrated on its products in more than 100 countries. The brand name of this company has done well in the previous years, creating designs for famous personalities, such as the former US first lady, Michelle Obama. The brand has however been popular among teenage girls of late, with their handbags being purchased by a huge demographic of the upper-class teenage girl. The following is a tabular representation of the net sales in the fiscal years that ended. (2016 Annual Report-Michael Kors Holdings Limited) Retail Operations Michael Kors Holdings Limited, which appears as (NYSE: KORS) in the stock exchange market, a luxury designer and retailer. Recently, it has been suffering disappointing results, a prediction from the third quarter results of 2017.The company registered a 3.2% decrease in total revenue with the average of $1.35 billion.Despite the drop not being as disastrous as it may seem, the downward trend is set to continue. Retail sales dropped by 6.9%, and the net sales decreased by 17.8%, with the licensing revenue down by 22.9%. As a result, their stock value has followed in the downward pursuit. Three years back, the stock rate of the company was at $100, while today, the same stock today rates $30.The stock rate is however set to continue dropping until there is a change in the management form of convincing investors to accelerate the growth. (Kors data by YCHARTS) . https://www.fool.com/investing/2017/02/28/michael-kors-is-down-but-is-it-out.aspx) Although the drop is widespread through the retail industry, Michael Kors struggles are far much worse. With the rise of the e-commerce trade in the recent years, Michael Kors has also adapted the practice, although the practice seems to be affecting the trade for the company, since it seems that the practice is cannibalizing the physical store sales. Also, online platforms create access to almost everyone, creating the problem of Basic and common products, that are unfavorable to high end buyers who prefer unique items. For example, the in the recent report released, the CEO, John Idol realized that the same issue was observable in the European e-commerce market. There are other factors that have been affecting the sales and stock process of the company. There has been a bigger trend leaning towards small sized handbags and apparels, which leads to lower sales. The strong dollar has also been detrimental to the revenue of the since the exports are affected. However, the management has been blamed for the...