Brand Analysis Of Michael Kors And Propose Fashion Marketing Strategies for Chinese Market

ABSTRACT

This article carried out a brand situational analysis of American luxury brand: Michael Kors and proposed marketing strategies, marketing programmes and marketing communication plan for it. This article analyzed its brand situation through PESTEL, SWOT Analysis Model and Positioning Map. It also made use of the Porter’s Five Force Analysis and Business Model Canvas to clear the company's development model, brand opportunities and threats. Based on the above research, this article had worked out a series of marketing strategies for its future development in China.

KEY WORDS: Michael Kors, SWOT, PESTEL, Chinese Market, Marketing Strategies 

1.Introduction

Michael Kors was established in 1981 by Michael Kors in New York. It was initially famous for American apparel, accessories and footwear and with the development, it became one of the world-famous top luxury brands in the millennium(SuccessStory, 2020). Michael Kors shares a massive market in fashion industry of which products sold under the brand is men’s wear, women’s wear, hand bag, fragrance, cosmetics, accessories and etc. (Michael Kors, 2020). By 2019, Michael Kors has over 1200 stores and approximately 17700 thousands employees in 90 countries around the world(Statista, 2020).

Nevertheless in the fourth quarter of fiscal in 2017, according to Michael Kors’ finance report, its sales of stores open at least a year down 7.6%(Business Insider, 2017). In addition customers held many debates online about ‘Michael Kors is a luxury brand or not’(Distractify, 2019). In terms of these factors, Michael Kors began to lose its luxury status due to some inefficient marketing strategies which misled the brand image(Business Insider, 2017). Based on these factors, this article selects this brand to be research object.

As western luxury brands globally developing, in recent 10 years, Michael Kors is putting marketing efforts on expanding Asian market(Jing Daily, 2019). On account of the large population and ability of consumption, China is the centre of Asian Market. Hence in 2019 Michael Kors future business profile by geography, it puts 20% of its marketing work in China which was only about 10% in previous years(Jing Daily, 2019). Due to these factors, this article selects Chinese market as the target for Michael Kors to specify the marketing strategies.

In this article, firstly it will apply SWOT, PESTEL, Business Model Canvas and Position Statement, these analysis methods to inspect the marketing environment and situation of Michael Kors. After this, it is going to focus on one product range: Michael Kors’ handbag to carry out its current marketing strategies research and analysis. Based on previous analysing results, it is starting to develop marketing programmes to implement the proposed strategies to achieve Michael Kors’ sales growth in the Chinese market.

Ultimately, this article will accord to the proposed marketing strategies, evolving an integrated marketing communications plan for Michael Kors’ handbag in Chinese market.

2.Situational Analysis

2.1 External and internal marketing environment

2.1.1 Michael Kors external marketing environment 

According to figure 1, it is obvious that in Chinese market, luxury brands like Michael have a huge consumer base in China. With the growth of China's wealthy group (Family income of more than RMB 300,000), this consumer group will continue to expand year by year. Therefore, multi-channel developments of the Chinese market is critical to Michael Kors marketing efforts(McKinsey & Company, 2017).

In terms of competitors, Michael Kors’s biggest opponents are Coach and Tory Burch. These three brands have surprisingly similar selling prices for handbags, and Chinese consumers have roughly the same acceptance of these three brands(Craft,2020). In the same price range, it also has some strong competitors of emerging designer brands. The handbags of these brands have unique and novel styles, are also produced by overseas designers, and the products are limited which forms a shortage in the market and satisfies consumers' desire for difference(Jing Daily, 2019).

Obviously, in terms of product range, Michael Kors also has some competitors of different brand levels such as Burberry and Kate Spade. The handbags of these two brands are also the main source of their annual sales, especially Kate Spade which is especially known for producing handbag. However the price of their handbags is much higher than that of Michael Kors. Hence they can meet the needs of consumer groups of different consumption levels(Jing Daily, 2019).

In terms of suppliers, Michael Kors mainly has relationships with two major suppliers, one of which is responsible for the production of clothing, denim and fabrics, called Ci jeans sa cra. And another one is Sitoy Group Holdings Ltd. which is special to produce leather goods. Sitoy Group Holdings Ltd locates is a famous Chinese manufacturer, it also supplies many other luxury brands such as Michael Kors’ competitor: Coach(Reference, 2020).Cooperation with Chinese suppliers has greatly reduced the pressure on production costs and transportation costs for developing the Chinese market.

Michael Kors has distributors of different levels: the inventory in previous years will be sent directly to the global Outlets, new products and classic styles will be sold in physical stores and major e-commerce companies. In 2018, it also created a Tmall flagship store with the support of Alibaba, specifically for online sales in the Chinese market. Meanwhile because Michale Kors discount products can be bought on many platforms, this way of handling stock also weakens its brand value. 

According to the PESTEL analysis in the above table, it shows that luxury brands have great advantages and potential in the three aspects of Economy, Social and Technology in the Chinese market.With the improvement of the Chinese people's material living standards, people have more material foundations, and society has formed a trend of consuming luxury products. Many consumers of well-off families have a fixed consumption budget of luxury products every year. In addition, people try to prove their economic power and social status through pursuing and wearing luxury pieces, which is very beneficial to the development of Michael Kors in China. In terms of technology, China is booming E- commerce business due to the huge number of Internet users. Chinese government also strongly supports e-commerce in policies. For Michael Kors, it can be benefit to reduce the investment cost of physical stores. And the establishment of e-commerce platform is conducive to more quickly achieve the conversion rate of commodities.

In terms of Political and Environmental aspects, Michael Kors’ development in China faces some challenges. Due to China's political form, in the brand's external publicity, it must meet the needs of the Chinese political form, and the output of the brand culture needs to be adjusted according to the Chinese culture.

And since 2005, China has introduced corresponding measures to protect the natural environment. Michael Kors is also compulsory to innovate in the raw materials and production of commodities to achieve the goal of sustainable development. 

2.1.2 Michael Kors internal marketing environment 

Apart from strengths and weaknesses in above SWOT analysis table, Michael Kors’ internal marketing environment is also affected by following issues in company structure and Resource&Capabilities aspects:

1) In Michael Kors company, decision making takes too much time resulting in an expensive delay in launching new products to the market(Case48, 2018).

2) The ability of establishing new product lines or new brands has been reduced by poor project management practices(Case48, 2018).

3) The cost of recruitment can increase in terms of Michael Kors’ high employee turnover rate and lacking of organisation commitment. And it indirectly influence the productivity.

4) When the organisational culture does not match the strategy / business goals, the organisational culture will also transfer into a major internal weakness. If there is a common risk avoidance attitude in company culture, it can prevent employees from creative thinking.

5) The inconsistency between the organisation's leadership style and its core strategic goals is able to lead business to lose direction(Case48, 2018).

6) Less spending on research activities may influence the company's profit because of lacking international market knowledge.

7) The liquidity condition of Michael Kors is no good which is negatively affected by shortage of cash and inadequate current assets(Marketing 91, 2019).

8) Due to poor inventory management practices, brands may lose their luxury status.

To sum up, in the aspect of Michael Kors’ internal marketing environment, there are many obvious strengths and opportunities however it also has several deficiencies in the company's working methods and working structure. Hence before entering the Chinese market on a large scale, it is necessary to study the local market situation and make timely adjustments to the company's internal working logic. 

2.2 Competitors and competitive environment

2.2.1 Competitors analysis of Michael Kors 

In figure 4, through comparing market commonality and resource similarity, it is clear that Michael Kors’ direct competitors in the Chinese market is Coach and Tory Burch. And Coach had better sales permanence in 2019(McKinsey, 2019) which undoubtedly became the strongest competitors of Michael Kors. 

2.2.2 Competitive environment analysis

Porter’s 5 Five Force Analysis is an effective tool that can be used to assess pressure within a competitive business environment. In this chapter, the article will analyse Michael Kors’ competitive environment in Chinese market from the bargaining power of suppliers, the bargaining power of buyers, entry threat, rivalry and substitute threat these 5 aspects. 

Figure 6 indicates that Michael Kors’ expansion and development in China still encounter some challenges. In terms of customer groups, although Chinese consumers' purchasing power for luxury products has increased year by year, since Michael Kors is still not developed in Chinese consumer groups at this stage, consumers have a stronger willingness to choose independently, and will compare the prices of similar brands and similar products quality which indirectly affects the production and pricing of Michael Kors’ commodities. And Michael Kors is heavily rely on a Chinese manufacturer in the production of handbags so that it is constrained in the production price of the product. For the long term development, more suppliers should be considered to reduce suppliers’ bargaining power. 

2.3 The Business Model of Michael Kors 

2.4 Current Brand Position and Brand Values

2.4.1 Brand Position 

Michael Kors posits it itself as a luxury brand with a sense of innate charming and timeless fashion(Marketing91, 2019). And because of providing a lower-cost diffusion line with price ranging from $100-$400 for most items(Prezi, 2014), Michael Kors has become the top searched brand on the Internet and gained wider customer base(Bhasin, 2019). Comparing to its competitors(Figure 8), Michael Kors’ positioning of “Affordability” and “Mass Market” could help it expand the market in China under the circumstance of huge population.

2.4.2 Brand values

Michael Kors has four important brand values, they are following:

· Self Esteem

It advocates: When someone has self-esteem, they will have the power to love others and become happy. By loving oneself, individuals can achieve any life goals(Values, 2020). It motivates consumers to become confident.

· Responsibility

Michael Kors approves of personal and social responsibility. Individuals should be responsible for life and work, and contribute to the society within ability.

· Fashion Animal

Encourage consumers to cultivate fashion taste, and pursue fashion rationally and focus on practical value of fashion.

· Respect

Michael Kors advocates respect in brand value. Respect in a broad concept means respecting for everything that exists. In a narrow sense includes: respecting for different lifestyles, differences in choice, respecting for intellectual achievements, respecting for artistic value, etc.

2.5 Target Market 

Based on Figure 9 and Figure 10, Michael Kors’ first-level target market is working women between the ages of 25-45, and their annual household income is higher than $50,000. These women have the ability to think independently, are intellectually elegant, and enjoy outdoor sports. Moreover, with the improvement of education level, there are women groups between 25-45 years old with high education who are still attending university, which is also Michael Kors target market.

2.6 Current Marketing Mix

Marketing mix strategy of Michael Kors cover 4 aspects: Product, Price, Place, and Promotion which is called 4Ps. The following table (Figure 11) analysis it in details: 

3.Michael Kors’s handbag marketing objectives

It would be wonderful to assume that Michael Kors could potentially conquer the Chinese handbag market, nevertheless to overcome competitors in the Chinese market, a lot of work needs to be done.There is also a series of marketing programmes that may be costly to occupy the market and cultivate customers’ loyalty.

Hence the main objectives will be following:

1) Expand new target customers in the Chinese market

These consumers are mainly millennials, 18-24 year-old university students. Because this group is the only child in each family, their expenditure accounts for most of the total family income.They are passionate about fashion and luxury products, and their consumption behaviour has conformity. Expanding this group can bring huge benefits to Michael Kors whatever from economy aspect or transforming brand image in China.

2) Establish a new brand image

As a relatively independent production line of Michael Kors, handbags can have more unique designs within the brand value range to attract new consumer groups.

The consumer group of 18-24 year old Chinese university students have following features:

? Monthly consumption level is around $ 500(JingDaily, 2019).

? Apparel and handbag cost accounts for 40% of monthly consumption.

? Willing to participate in various flash events.

? Like unique products, being different from others.

Based on the above characteristics of consumers, Michael Kors can be more unique, lively, high-end in the design of handbags with limited edition.

3) Opened flagship stores in Beijing, Shanghai, Chengdu and Shenzhen

These four cities are all China's first-tier cities, with leading GDP and consumption levels. 18-24 year old college students in these cities have better education, higher consumption demand for luxury goods with imagination and creativity. This group of young people have responsiveness and publicity for Michael Kors’ product fast sales activities

4) Establish sales channels in Outlets in China

Michael Kors is famous for being good at handling inventory in Outlets currently. However, in China, Outlets do not symbolise “big sales" or “very cheap" , they still represent the world-brand shopping malls.Therefore, it is still necessary to build the sales channels of Chinese Outlets. And the pricing of Michael Kors in these outlets is slightly higher than those in European and American countries, which is not only conducive to reorganising the image of high-end brands, but also conducive to handling inventory in different quarters.

4.Propose Marketing Strategy for Michael Kors

4.1 Big Picture Strategy

There is an expert analyse tool named Ansoff’s Growth Matrix which is aiming to analyse and plan the brand strategies for grow. In the following matrix, it shows four main strategies that can be benefit for growth with attached the extent of risk. Hence I develop my big picture marketing strategies according to the frame of this theory as figure 12. 

4.2 Repositioning and additional target market

In the first part: Situational Analysis, it indicates that the target market of Michael Kors in American and European countries is 25-45-year-old working class women whose annual household income is above $ 50,000. However, to expand the Chinese market, this positioning is not in line with Chinese cultural status and consumption level of age group.

From a cultural perspective, Chinese urban women aged 25-45 are mainly working women and housewives, and the average age of marriage for Chinese women is 23 year-old, which means that this age range’s group of consumers are married or have children. Moreover, in Chinese marriages, the husband will hand over some assets to his wife, which makes most of the married women who live in urban area owe more money per month than their salary. According to the 2019 Chinese Urban Women's Expending Survey, this group of consumers are willing to spend $1000 on handbag seasonally in every half year(McKinsey, 2019). And, they show their marital and social status by who is able to carry more expensive luxury handbags(JingDaily, 2019). Hence, comparing Michael Kors’s handbag pricing(range from $300 -$550), Michael Kors is not only not the best choice for this consumer group, but also does not meet their consumption purpose.

Therefore, this article proposes that if Michael Kors aims to develop the Chinese market on a large scale, it needs to repositioning. Michael Kors’s new target market in China can be a group of 18-24 year old university students. According to social surveys, Chinese students want to show an affluent lifestyle and be forgotten by others(Tamsin Smith, 2019). And the monthly living expense of urban university students is between $180 and $500(McKinsey, 2019). The students in some first-tier cities may receive a living fee of more than $ 500 per month from their parents(JingDaily, 2019).

From the perspective of social culture, this group of university students also fancy to purchase luxury products, and there is a trend of herding consumption among of them. However, in terms of limited funds, they are willing to choose to those luxury brands which are cheaper but more fashionable and interesting. Michael Kors’ product pricing just meets the needs of this group consumers. Hence as the aspect of product development, Michael Kors is expected to add interesting detail designs or launch selling points with other brands through co-branding in its handbag design. 

5.Marketing Programmes for Michael Kors

5.1 Marketing programmes statements 

As addition of product part in the below figure13, this article also provides some product design case of this co-branding product development in figure 14. American art brands KAWS and Michael Kors share similarity in culture point. And in recent years, KAWS has achieved very good sales performance with luxury brand such as Dior and Superme. Moreover, it is well known that the cooperation between KAWS and Uniqlo in 2019 has set off a crazy panic buying trend in China. Not only achieved commercial profits, but also expanded Uniqlo's target market and popularity in China(Zhuang, P., 2019). Based on this Chinese mass consumer psychology, Michael and KAWS’ co-branding products are very likely to be a huge success, and help Michael Kors achieve the brand image established in China. 

5.2 Explanation and Justification

In market management knowledge system, there is a theory called BCG Matrix Model can analyse the feasibility of the marketing strategy in chapter 5.1.

The Boston Consulting Group ’s BCG Matrix facilitates long-term strategic planning by reviewing its product portfolio to determine where to invest, stop production or develop products, thereby helping companies consider growth opportunities.Based on the analysis of market growth and relative market share, the matrix is divided into four quadrants, as shown in the figure below(Smart Insights, 2019). 

1)Dogs Products:

These are products with low growth or low market share. According to figure 13, such commodities are: existing products, products that are outdated and do not have market competitiveness. For example: 2017 Michael Kors’ unpopular wallets, phone cases or outdated garments, etc. For these products, the strategy in Chapter 5.1 is to transfer them to outlet stores for sale. The objective is to clear inventory and reduce cost losses.

2)Question Marks:

This concept means products with low market share but in high-growth markets. In the strategy formulated in chapter 5.1, phone case products related to co-branding handbags are question mark products. Their market share is not large, but they have high growth potential. So it is a sales target which is needed to be observed.

3)Star Products:

Products with high market and share in high-growth markets. In the marketing strategy mentioned in 5.1, this range is obviously handbag products. Handbags originally occupied a high market share in Michael Kors’ sales, and the new co-branding handbags with Kaws has a high growth market in young university group.

4) Cash cows:

Products with higher market share in low-growth markets. Among Michael Kors handbag products, cash cows is a classic popular style handbag that has sold well in previous years. They have a high market share, but the growth rate is decreasing year by year. Therefore, in the chapter 5.1 strategies, it still maintains the sales status of these products, but does not give vigorous publicity and marketing efforts.

6. Marketing Communications Plan for Michael Kors

In the field of market communication, we have three main methods to achieve promotion: storytelling, campaign and sustainability. Among these three, story telling has the most emotional resonance and interaction with consumers. And those well-told stories than facts are easier to remember and persuade to take action(Escalas, 2004). Through emotional influence, storytelling creates the whole brand image, can convey the information needed by consumers(Mossberg 2008). In response to the current status of media throughout China, Michael Kors can output its storytelling on three main platforms: WeChat Official Account, Weibo, and Tiktok.

In the following figure 16, this article works out a proposal of Michael Kors’ marketing communication in the form of Storytelling Canvas: 

7. Conclusion

Michael Kors is a luxury brand based on American culture. Its price is affordable and the quality of its products is good. However, in recent years, Michael Kors has caused a decline in the status of luxury brand due to excessive brand exposure and changes in the target market, which directly affects sales.

In addition, Michael Kors' development in the Asian market is relatively slow. Headed by China: Asian countries such as Japan, South Korea, Singapore and Thailand all have very high consuming power. This article aims at the Chinese market and deeply investigates many factors such as Michael Kors' competitors, development, and policy support. Based on these factors, a brand new direction was established for it.

Michael Kors is positioned as a white-collar woman in the United States and European countries. However, in China, combined with Michael Kors’ pricing system, commodity characteristics and Chinese women's spending power survey. It best meets the consumer needs of young women aged 18-24. Therefore, the brand's positioning and user operations need to make younger and personalized adjustments.

As for marketing communication plan, this article works out a relatively complete plan from the perspective of storytelling, combining the psychological conditions of young Chinese consumers: differentiation and personalization. Through the launch and promotion on WeChat Official Account, Weibo, Tiktok and other Chinese main stream social media platforms, the brand's value and philosophy will be conveyed to consumers. This plan will directly resonate with the target market, thereby promoting brand transformation and profit growth. 

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