MAR 396I Designer Case Study - Prada Italian Fashion House

Designer Case Study - Prada

            Prada is an Italian fashion house, which was founded in 1913. The company offers luxury leather goods, handbags, clothing, eyewear, various accessories and fragrances, all of which are very stylish and belong to the luxury designer products. The company’s principles, Patrizio Bertelli and Miuccia Prada, laid the grounds for the successful operation of the company back in 1970s. Miuccia Prada was the one with a creative and unordinary approach who helped attract the world’s attention to the company. The company is also strongly associated with culture, architecture and art. This definitely sets it apart from its competitors. Prada Company belongs to a Group with three other brand names on board: Miu Miu, Church’s and Car Shoe. The Group’s operation extends across 70 countries and features multi-channel marketing.

Prada’s multi-channel marketing includes various intermediaries worldwide. They are retailers, which are represented by single brand stores (specialty stores called “Prada Epicenters”), and the independent multi-brand stores (department stores and franchises). For example, intermediaries such as Macy’s or Saks Fifth Avenue help Prada customers to obtain the products they really want like sunglasses, fragrance, leather goods or clothing where and when they want them. I believe Prada has effective and more importantly efficient channels that enable the company to be present at most select points of sale at multiple levels of distribution and target multiple markets. For example, their up-to-date inventory is featured in Prada’s own specialty stores or franchises, while what is not trendy any longer is sent to outlet malls for further resale at a more affordable price. There is a direct marketing channel, an e-store for leather goods and accessories, which could be purchased directly from Prada without middlemen. With the differentiated marketing channels there is a definite cooperation among all members because they all try to achieve the same common goal of making long-term profit and providing 100% customer satisfaction. This is why everyone who is involved in the process has to ensure continuous stream of Prada products to consumers in a timely manner. For this reason Prada utilizes an effective supply chain, which is supported by a centralized system that combines retail, logistics and other important factors, which help find answers to financial questions and provide access to current information about distribution and sales of Prada products. The up-to-date information about stock both at warehouse and all the stores helps the company to constantly work towards customer service improvement. This is done by logistics department and the centralized system, which help address the fluctuations in supply and demand as soon as possible. This effective system also helps decrease the total inventory and variable costs. Since Prada manufactures their products outside their headquarters, this effective system is very important in order to make sure everything is done on time for the new trends to be sold. Prada manufactures a lot of its products in countries where costs of labor are much lower than in Italy. For example, Turkey, Vietnam, Romania and China (most likely there are other exterior manufacturers). This is no surprise, as many designers want to cut down on various costs. Plus, the laws that let a company put “Made in Italy” labels are not very strict, so Prada can price their outsourced products the same as they do the ones made in Italy. In addition to that Prada established 12 in house production facilities, 11 of which are located in Italy and one in United Kingdom. The in-house production although not as cheap provides an opportunity to have more control over quality of the products and various costs, as well as constant improvement of the production techniques.

So who is Prada’s end consumer? Miuccia once said this in one of her interviews, “I choose a wider audience. I also think when I’m doing the shows I try to be more obvious, more loud, more clear.” Judging by this statement it is possible to segment the target market by following demographic characteristics: Age – 25-40, Gender  - Male and female, Income - $100,000 and up, Education – minimum a college degree, Social Class – belong to the higher class, Ethnic group/Race – various ethnic backgrounds. However, demographics alone do not fully describe the target market of the company. The company has a unique style and sells various products both for men and women. The company offers exclusivity. Therefore, it is important to further differentiate the market through psychographic segmentation. Business women under 45 could be definitely seen wearing Prada products because the brand provides a sense of self-fulfillment. It also represents class and sophistication. Their suits are all strict, made in business appropriate colors and very elegant. People, who have high interest in fashion world might be also segmented. These are mostly women and men who work in the fashion industry and have to stay up to date with the latest trends. For example, fashion magazine editors and fashion show organizers.

To sum up the description of the target market, the target consumer is the one with an active life style and strong position in society, fashion conscious, wealthy and willing to spend more for quality and exclusivity. This target market does not want to age (especially women) and want to have interesting lives. Prada’s products provide a great opportunity for their target customers to look great, and help them feel self-confident. Prada is the symbol of chic, class, sophistication and taste. Keeping these descriptions in mind, there are several advertising medias that are a great fit for the company’s advertising campaign. I would definitely suggest the company to keep advertising in print publications like fashion magazines (Vogue, InStyle and more). Product placement is another option. Celebrities and other influential figures are great live promoters of the new trends. So providing a beautiful gown for a red-carpet event might be a great option as well as featuring the product in a movie or a music video. Since Prada has an online store for accessories, I would also emphasize the importance of the Internet advertising through side ads, search engine optimization, and direct links to the stores on various supported websites.

Advertising campaign has to be backed up with an overall carefully designed marketing plan in order to attract the target market. This is done through marketing mix, which consists of the four basic elements: product, price, place, and promotion. Let me first introduce in more detail which products the company is selling under Prada brand name. A wide selection of apparel for men and women, luxury leather goods such as handbags, wallets, shoes and other small leather accessories, designer eyewear, fragrances and other products (LG Prada cellphone). These products were all designed to satisfy their customers’ needs and wants.

Pricing strategy is very important for Prada because it reflects the main concept and image behind the company. The average price for a best-selling handbag is around $3000. The price reflects the status and places Prada side by side with its main competitors Chanel, Gucci or Louise Vuitton. Their customers are willing to pay this much because they value the brand’s quality, details and design. Prada’s overall pricing strategy is well formed by the smart management and the whole Prada team that make the brand so desirable. Luxury goods like that are selling at premium prices. The carefully selected target market will definitely pay more to have products by their favorite designer.

Prada products are sold in more than 70 countries, both through directly operated stores, department stores, multi-brand stores and online. The products are available when and where the potential customers want them. As I have already mentioned above, the marketing channel includes both single-brand and multi-brand stores. This ensures the convenient way for the customers to purchase the products. Another point worth mentioning is the e-store that Prada has. The appropriateness of the online store may not be the best for clothing but for accessories it is a faster way for the end consumers to obtain what they want. Prada prefers to sell apparel in stores because of the personal touch they want their customers to feel when they are inside the stores. Prada is an exclusive brand, and therefore their stores are mostly located in big cities where their target market values the fashion and designers. In addition, Prada features state of the art stores, which were specifically designed for the company. This visual appeal helps Prada differentiate its concept from other competitors.

      Promotion as the last element of the marketing mix is very important for the company. It helps the target market to get acquainted with the latest projects, designs and products the company is involved in. Marketers communicate this information through advertising, personal selling, sales promotions, fashion shows, blogs, and more. Prada selected various means of promotion so that their target market stays connected to the company and its offerings. Fashion show is one of the best examples that Prada uses for promotion. Introducing the new collection each season ensures various fashion magazines, blogs, and TV channels (like Fashion TV) talk about the brand. In addition, Prada does not only appreciate the fast changing fashion world but also art, cinema, architecture and other cultural events. This is why the company established Prada Foundation in 1993 to promote "the most radical of intellectual challenges in art and contemporary culture". The foundation is worldwide known. This foundation definitely adds the value to the brand. The company also sponsored various sports teams like Luna Rossa (2000, 2003, 2007 and 2013) at America's Cup campaigns. All of these promotional activities add publicity to the company and make it more recognizable not only among the fashion world but in other spheres of life.

So what makes Prada such haute designer today? I believe it’s the brand equity. It is the marketing and financial value associated with the brand’s strengths in the market. Prada has strong brand equity and this is why its products are recognized worldwide and accepted. This also means that consumers who know about the brand equity will be willing to pay much more for such products. Prada’s brand equity is managed through constant reinforcement of the new and innovative collections. The company has to make sure all the products have a sense of boldness and innovation in addition to distinction from other competitors. The brand’s name is its equity. If Prada licensed the use of its name to any other product, that product would immediately be priced higher than the similar ones just because of the association with Prada name. The association would also imply high standards and quality, which would attract potential customers. Another way how strong brand equity could be supported is by how profitable the company is. Although the economic times are tough, the brand is still somewhat successful.

To sum it up, Prada is doing a great job with its business model because all the components are carefully analyzed and working seamlessly together to achieve some of the common goals across the marketing channels, which are making a profit, customer satisfaction and unique competitive design of the products. The company’s smart management and talented designer set the company apart from its rivals by utilizing the marketing mix elements that work together to establish brand equity. In addition, strong customer base worldwide appreciates the designer brand so much, that they will support it as long as the company will produce the state-of-the-art and stylish products.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!

HIS 113 American Experience: Wealth and American Culture. Biltmore Estate and Merchant's House

How visiting Biltmore Estate and Merchant’s House enhanced the awareness of the course’s subject matter

            The course the American Experience: Wealth and American Culture provided a very deep and detailed insight into the lives of some of the wealthiest Americans of the 19^th and 20^th century, especially during the Gilded Age and dot.com era. In order to have a better understanding of some of the events, it is very effective to visit some of the historic sites, which belonged to those important periods of the US history. I personally visited two sites Biltmore Estate and Merchant’s House, which correspond to the Gilded Age period. The two houses exhibit different levels of wealth owned by their owners because of the class difference. Most importantly visiting these places helped me enhance my awareness of the course’s subject matter and appreciate American culture more through seeing with my own eyes what each family was capable of accumulating and how they utilized their wealth during important times of the US history.

            One of the historic sites, which helped me shape my opinion about how rich people lived in the 19^th century, was Biltmore Estate.  The house was built as a vacation home for George Vanderbilt’s prominent family with 175,000 square feet of space. Judging by the outside view that opens up when you approach the property, one can be sure this family amassed large amounts of wealth and was not afraid to utilize it in the most exquisite ways. The House is incredibly beautiful on the inside and outside. The best architects for the house, landscaping and materials were used to build it. This house is a true example of the lavish lifestyles the wealthy people led during the Gilded Age. They purchased only the best for their home and had the latest gadgets for the time, which helped ease the life back then and were considered high-tech. For example, there is an electric elevator that still operates, refrigerator, fire alarms, indoor pool with heated water, washing machine, and other devices. The fast accumulation of wealth during this period let Vanderbilt spend it in elaborate ways. For example, stunning chandelier with 72 light bulbs, triple fireplace, enormous library with 16^th century tapestries, famous paintings, and many other unbelievably beautiful things around the house. He would bring something interesting like art or a piece of furniture every time he came home from abroad. The estate is very important historically not only because of the wealthy owner but because it helped raise the level of life and changed Ashville forever. Vanderbilt wanted the mansion to be self-sustaining and for this reason the village was built around it and railroad tracks, which helped bring materials directly.

            Visiting Biltmore helped me personally visualize and experience bygone lifestyle of almost indescribable prosperity. Even though this house is definitely an example of excessive lifestyle, George Vanderbilt actually helped the region during tough economic times by providing jobs. I definitely recommend this historic site for a visit because it also is a great museum for the enormous amounts of things gathered in one place from the 19^th century.

The second historic site belonged to the wealthy merchant class family of Tredwell. It is the New York's only 19th century home located in the NoHo neighborhood, which has the original decorations, furniture items from the best New York cabinetmakers and personal things left by the Tredwells. This house helped me understand and experience the domestic life of a wealthy merchant, who made his fortune through selling hardware, and his family. It also shows how the Irish servants lived and worked during those times. According to the known facts, despite the fact the last owner had financial hardship and the area was changing to more commercial one, she managed to save it in its original form, which helped later on for it to become a museum. It is restored to its 1850 s condition and there is still some work being done. Just because this house belonged to a totally different class, it still has some of the beautiful works of art, furniture items, and personal belongings. The house provides an insight into the lives of the merchant’s family and their staff. Each room served its purpose relevant for the time. For example, Eliza's bedroom was not only used for sleeping but it had multiple purposes. When the guests arrived, ladies would come up and undress their coats and got ready to come down. Then the bedroom was used to care for the sick children, giving birth, it was also a bathroom and her office. As for the Seabury's bedroom it was also used as death chambers. The room also had an access to a smaller room used as an office or a smaller guest bedroom. It is really amazing how this 19^th century home is still standing among other buildings. This is a great historic site to experience the lives of the wealthy. It is also very educational on how New York evolved from a colonial seaport and became one of the utmost business emporiums of America. 

To sum it up, the two houses provide us with enough information on how wealthy people lived during the 19^th century. It also helped me better understand the concept of wealth because various groups view it differently. The amount of wealth one possesses plays a crucial role in what this person surrounds himself with, be it things or people. Vanderbilt and Treadwell, coming from different class, accumulated wealth on a different scale but wanted to have the best things they could afford for the time. It has not changed as people who make enough today also tend to surround themselves with better quality and generally more things. Consumerism on different levels at different times.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!

FIN 260 Strategic Planner and Macro Data Interpretation

If you were a strategic planner for a large firm think about how you would interpret the macro data (jobs, inflation, interest rates, GDP) with what you know from your order book and your customers.

           

Each organization’s ultimate goal is to grow and be profitable. In order to achieve that managers have to be ready for various changes that get on the way and adjust the business activities. This process is called strategic planning. It involves defining the organization’s strategy or direction and deciding on allocation of the organization’s resources. The selected strategy also influences what goals have to be achieved in order to pursue this strategy.  The organization’s strategy and goals depends on numerous aspects but one of them is macro environment. It is a set of uncontrollable factors that influence the decision-making process. The organization cannot control these factors but can come up with a quick response plan to change. Macro data is analyzed at the situation analysis step of the strategic planning. This macro data examination is also known as PEST or PESTLE analysis: political, economic, social, technological analysis, legal and environmental.

Economic macro data strongly affects the purchasing power and spending of the people. Some of the economic macro data examples are jobs, inflation, interest rates, and GDP. There are several interpretations of this macro data that could be derived from looking at the order book and paying attention to the customers buying behavior and their reviews. The macro data can also help make forecasts in various areas such as revenues, sales, materials cost, labor costs, and other important areas. Example of the economic macro data would be unemployment rate or jobs. It could indicate the overall economic health of the country and therefore the spending power of the potential customers. If the people are employed, they have set household income. Any discretionary income left is what they spend on various goods and services in addition to the necessity products. If the unemployment rate is high in the area where the company is offering its goods or services, then the projected sales are not going to be as much. If the organization is not in the essential product and services area, then its sales would be decreased by the high unemployment rate.

As far as the interest rates are concerned, they also influence the strategic planning in the organization. Whether the interest rate is high or low requires an adjusted strategic plan. The customer’s spending can also indicate if the interest rates are low or “affordable”. Low interest rates can help increase the expenditure and therefore decrease the unemployment rate. If the spending goes up, I could make sure the organization has enough stock for the suggested period of the potential increase in spending. If the interest rates would be too high, it would be also hard to take out loans for the business to fund the operation. Higher rates mean higher prices, and therefore some customers may not be able to purchase the products any more.

One of the important aspects that could also affect the strategic planning is the inflation. It is the rate at which the prices rise for the goods and services during a certain period of time and the purchasing power falls. Unfortunately, the relationship between the inflation rate and the income growth is not direct. Therefore, while the prices rise, many consumers do not get paid adjusted for the inflation. So it is important to keep track of the inflation rate so that the organization does not operate at a loss. However, some companies like H&M prefer to keep the same prices even though the cotton prices rose enormously.

Another economic factor that can influence large business operation is the GDP (gross domestic product) number. This measure is used to indicate the overall country’s economic health. If the GDP is low, then government would try to implement certain policies to increase the number. For example, keep the interest rates low, so that it would facilitate purchases. This in turn would mean that the savings that the consumers have in banks would not accumulate enough interest credit to cover for the inflation. This would affect the purchasing power of consumers once again.

All things considered, the economic macro data if analyzed on a daily basis could help prevent drastic changes or failure of the business. Organizations have to be proactive when it comes to responding to macro environment changes. All of the aspects are related to consumer purchasing power and therefore wise strategic planning would also take them into consideration.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!

Federal Reserve under Bernanke and Yellen and Great Recession of 2007-2009

Think about the last 5 years in which the Federal Reserve under Bernanke and Yellen have kept rates at historic lows and created massive monetary growth in hopes of creating a robust recovery from the "Great Recession" of 2007-2009

The recovery that actually is taking place is moderate/modest (their words)...why do you think this policy has resulted in that outcome?

The financial crisis of 2007-2009 was one of the most intense periods in the global economy. Not only the USA but also other countries felt the impact of it that resulted in the deep economic downturn. The US economy after the crisis could not find the way to the fully recover. The situation reminded Japan in the 1990s. There was no economic growth and inflation fell below the allowed 2% mark.

Therefore, something serious had to be done in order to stabilize the financial situation in the country. The Federal Reserve Bank had certain plan in order to make that happen. The monetary policy that it decided to implement involved low (near zero) short-term interest rates, which were supposed to promote the recovery from the recession. In order to decrease the long-term rates, Bernanke, the former Federal Reserve Chair, had the courage to challenge the recession and came up with an ultimate solution that seemed to be perfect at the time. He insisted to implement “quantitative easing” and purchasing large quantities of long-term Treasury securities and other long-term securities, which were guaranteed by organizations such as Freddie Mac, which were sponsored by government. The main reason behind lower rates strategy lays in the fact that lower rates are more helpful for both businesses and households because they help support asset values and lower borrowing costs. This strategy continued to be implemented under the new Chair, Janet Yellen.

The main idea behind this policy was that it would help increase the spending, which eventually lowers the unemployment rate by creating necessary jobs. Lower rates create more attractive and competitive loan options for individuals and businesses. There is a direct link between the economy and consumer spending; this is why I could understand why such strategy was proposed to help facilitate economic growth. In addition, if the Federal funds rate is low for a long period of time, it decreases the value of a dollar in the foreign markets. This means that it would be more costly to buy overseas products. This will encourage businesses to buy domestically, which in turn will infuse money into US economy. Spending is t he key to the growth.

If we look at the recovery process right now, it is considered be moderate. If the ultimate goal of the Federal Reserve to achieve maximum employment, stable prices, and moderate long-term interest rates, I do not see how these factors are getting any better, maybe only at a very slow pace.  According to a research by Harvar’s Reinhart and Rogoff the full recovery can only be visible after the decade has passed. That’s why we only see the moderate pace of recovery now. Business owners are also a bit more cautious when it comes to hiring even though the profits are good. Another problem that would hold back the recovery is the aging baby-boomers population. The government will have to come up with extra funds to support that population.

Please Note! All of the work posted in my blog is my personal insight into problem solving and answering questions. It is subjective opinions based on scholarly readings. The information may have some errors. I am not a professor.

If you see something you would like to contribute to or correct, you are more than welcome to comment below. I would appreciate it!