Marketing Strategies for Luxury Brands

This assignment requires a thorough analysis of Prada's marketing strategies. Students must employ the PESTLE and Porter's Five Forces frameworks to evaluate Prada's external environment and competitive landscape within the luxury goods industry. The analysis should shed light on Prada's strengths, weaknesses, opportunities, and threats, ultimately providing insights into the effectiveness of its current marketing approaches.

INTERNATIONAL MARKETING
MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Globalization: Advantages and disadvantages.......................................................................1
Environmental Analysis.........................................................................................................2
Competitive Advantage of PRADA.......................................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
International marketing management is a multinational process of expanding a company's
operations in the global market. In the modern era, marketing does not involve only selling and
distribution process but also covers the aspects of finance, production and personnel activities.
Here, Prada, an Italian luxury fashion house is an ample example to understand the significance
of international marketing in the contemporary world. It is a 103 years old fashion house
specializing in clothing, cosmetics, perfumes, watches and other fashion accessories. Company
faces great influence on its market operations due to globalization and high level
competitiveness.
Globalization: Advantages and disadvantages
Concept of globalization has recently developed to integrate economic, finance, trade and
communication activities at the international level. There is free flow of people, commodities
and services across all parts of the world without much intervention (Jean, Sinkovics, and Kim,
2010). It is considered as an integrated system that has opened national and international
perspectives to a broader outlook for exchanging of services and technologies. Due to
globalization, nations that produce a particular product in effective manner or specialize in it get
exposure to enter into the global market. Different countries liberalize their procedures and
protocols related to export and import of goods and also permit people to move from one country
to another.
Earlier, Prada was largely a domestic fashion boutique promoting retail fashion products
and accessories in the streets of Italy. Through globalization in the fashion retail industry,
company also developed its brand image not only in the native market but also at the global
heights (Leonidou, Palihawadana and Theodosiou, 2011). This fashion house got benefited
through internationalization of its market. Some good aspects of it are as follows:
 It helps in making optimum utilization of materials and resources available across the
world. Designers and manufactures have many options related to raw materials to be used
in producing fruitful apparels and accessories.
 Fashion house is able to produce products and services at the most competitive price.
Since, there are varied resources available in the market with reasonable prices and
sometimes, even at very cheap rates.
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 Investors and shareholders have wide range of opportunities to invest in new venture.
Capital generation has become much more easy and convenient process that provides
advantage to the firm to improvise its present product quality (Ghauri and Cateora, 2010).
 Also, there are increased employment generation activities in the economy. Business
entity is recruiting and selecting professional designers from different parts of the world.
Although, there are few bad impacts of globalization over Prada, which are discussed below:
 First demerit for the company is that it faces extensive cut-throat competition in the
global market. There are numerous iconic fashion firms already existing in the native
countries along with few eminent business houses.
 Another disadvantage faced by the firm is inconsistency in buyer behavior. In the global
market, each country has its own varied culture, trends and preferences which company
needs to identify and avail products accordingly (Advantages and Disadvantages of
Globalization. 2016).
 Political and legal interference from government authorities of a country hinder the
growth prospects of Prada. However, global agencies like WTO actively participate in
regulating global business activities; therefore, the firm is affected by political and legal
scenario.
 Sometimes designing, packaging and other promotional activities lead to the
environmental pollution and degradation in that particular country where Prada’s
franchises operate.
Environmental Analysis
It is a strategic tool to identify all the external and internal elements affecting the
performance of organization. Environmental analysis entails assessment of different opportunity
and threat levels arrived from these factors. Day-by-day, modern market is facing changes that
require proper analysis of these elements to frame strategies. Further, business is greatly
influenced by its micro and macro environment to perform routine operations. Prada also
understands significance of environmental analysis of its organization to operate efficiently in
the global market (What is Environmental Analysis?, 2016). Now days, company poses a
valuable position in domestic and international market. It uses several strategic tools to study and
research, one of them is – PESTLE Analysis. This is considered as bird eye view of the business
in context of its current market conditions.
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PESTLE Analysis is a framework that determines and monitors macro-environmental
elements that influence working of a corporation. There are various acronyms used for it such as,
STEP, ETPS, PEST and STEEPLE. A detailed audit of external factors is performed and
information acquired guides in making strategic decision-making process. This useful tool
interprets risk associated with the market growth and decline of Prada. It is often used as a
generic orientation technique to figure out that, products of mentioned entity has established
proper balance between activities happening outside and inside its boundaries (PESTLE analysis.
2015). Now, PESTLE Analysis of Prada is discussed below:
It has six most commonly assessed factors to study Prada's external environment analysis: Political Analysis: It comprises of those factors that are derived from the current global
political scenario for the business entity. This analysis helps mangers of Prada to study
the degree of government intervention in its targeted international market. Political
stability in global market on one hand expands Prada's fashion market while instability
results in contraction of its business activities. Like, the upcoming US presidential
elections will help the company to determine its taxation and foreign trade policies
according to which party's government will be framed. Environmental Analysis: According to this factor, the geographic location and climatic
changes of different countries influences trade and commerce of an organization. Prada’s
outlets constituted in Japan faces various climatic disorders like cyclones, earthquakes
and volcanic eruptions every year (Hollensen, 2015). It hinders manufacturing and
distribution activities of the business firm. Apart, from this other environmental elements
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Illustration 1: PESTLE Analysis of
Prada

influencing its working are energy consumption regulation, waste disposal laws and
attitude of society towards its atmosphere. Social Analysis: The socio-cultural factor involves shared beliefs, traditions, trends and
attitude of the population. Every country has a distinctive mindset, its own culture that
helps to decide style and patterns used for designing apparel and accessories for the
clients. The mentioned business entity take social and cultural factors seriously in
consideration as this factor reflects properly the wants and demands of its potential
buyers (Zeithaml, Bitner and Gremler, 2010). Therefore, Prada prefer to design western
outfits for the European market while it develops traditional and conventional clothing
for Asian market. Technological Analysis: Prada performs environmental analysis of this factor in order to
stay connected with the current technological development in the market. It greatly
influences production, marketing and packaging techniques. Nowadays, use 3D graphics
on clothing, travel accessories and leather handbags is becoming popular. The developed
countries like Australia and Netherlands promote and appreciate its idea to use of such
innovative ideas in its creations. Thus, advanced technical aspects of global market
encourage business activities of Prada. Economic Analysis: This is most crucial factor in determining how the fashion house
does its business and the measure it takes to increase its profitability. It includes
prospects related to interest rates, exchange rates, disposable income and economic
growth in the global market. Inflation is integral part of economic analysis that hampers
profitability and market shares of Prada (Ghauri and Cateora, 2010). Government
mechanisms like interest rate control, taxation policies and government expenditure helps
to reduce negative impact of inflation on the fashion entity.
 Legal Analysis: The legal factors include health and safety laws, equal opportunities
among competitors, consumer rights and regulations and advertising standards. The
Arabian market for Prada is restricted with many rules and regulations as monarchy
government rule is followed. Therefore, stringent policies are framed and implemented in
the market (Berthon and et.al., 2012).
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Competitive Advantage of PRADA
Competitive advantage describes attributes that allow the business entity to surmount its
competitors in the market. Different parameters considered as the basis for competitor y
evaluation such as, highly skilled personnel, entry and exit barriers or geographic locations.
Technological advancement in each and every step goods and services production also influences
competitive environment in an industry. However, success of an organization depends on its own
production and performance (Smith and Zook, 2011). But many times services offered by rival
enterprise hampers the target market of that particular company.
The fashion house makes competitive analysis to ensure long-term profit opportunity and
determine the strength and weaknesses of the company. Prada has many opportunities to excel in
the global economy for which it requires fragile and flexible system to manage its
competitiveness in the market. The mentioned company makes use of Porter's five force analysis
to understand the level of competition it is facing within the fashion industry. It is a simple yet
powerful tool to understand strength and current competitive position of Prada in the global
market (Lee and Carter, 2011). According to Porter Five force Analysis there are five important
forces that determine competitive power of the mentioned organization that is as follows:
 Supplier Power: If the suppliers have strong bargaining power they will sell their
products at a very high price squeezing enterprise profits. This happens generally where
there are few large suppliers and resources are scares. The cost of switching to an
alternative supplier is high and there are no close substitute resources available. Prada
competitiveness is not much hindered by bargaining power of suppliers as it has many
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Illustration 2: Porter's Five Force Analysis of PRADA

quality-based substitute suppliers to enhance its productivity (Papadopoulos and Heslop,
2014.). Buyer Power: Customers and clients exert great pressure on industry's profitability
element. Smaller number of consumers possesses greater influence on the price of
products. Also, the size of order placed influences bargaining power of the buyers. Prada
is an international brand that avails luxurious clothing and accessories in the global
market. It can be claimed that it serves elite class and fashion lovers that have powerful
influence over pricing policy of the company. Competitive Rivalry: Prada faces intense rivalry in the global fashion industry that
influences it to adopt competitive price reductions strategies. There are good amounts of
competitors in the market such as Zara, Avon and Mary Kay Cosmetics that provides
pool of quality products to the potential markets (Kotler and Keller, 2011). Still, Prada
maintains moderate level of competitive rivalries with its strong marketing strategies. Threat of Substitution: Those products which are produce in different industry but
significantly satisfy customer’s needs are regarded as substitute goods. This factor
generally depends upon customer loyalty and switching cost of the goods. Although,
Prada faces limited amount of substitution threat as its clients are satisfied with its
services.
 Threat of New Entry: The entry of new firms in the industry distributes the market gain
to the existing firms. Fashion industry provides many opportunities to the new entities but
strong existence of prevailing fashion houses suppress their efforts to moderate level.
Many business houses already have strong goodwill in the market that obstructs the path
of new firms (Navarro and et,al., 2010).
Prada can use Porter's five forces model in order to understand its competitive
environment in the international market. It helped to determine the position of fashion retail firm
in comparison with its rivalries like Avon, Mary Kay. Company has established its brand image
in the market that has weakened the bargaining power of its clients.
Apart from this analysis, company also follows global branding strategy to ensure successful
selling of its products in the international market. According to this theory, Prada focuses on
providing standardized product line rather than producing apparel on the basis of particular
region’s demand. International uniformity and standardization are the two key elements that
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prevail in Prada's potential market. Company enjoys a strong brand identity and strengthens its
reputation which results in selling large quantities of goods in different nations. It helps Prada to
focus more on its quality and do not stick to the principle of adaptability. Excellent monitoring
and communication takes place between company, suppliers and the clients. So, through this,
global brand strategy of Prada is able to increase its sales and market share in the global context.
CONCLUSION
From the above report, it can be articulated that Prada has many opportunities to expand
itself in the international market. Company is benefited with the recent concept of globalization
that offers it optimum utilization of potential market to highlight its commodities and services.
There are different countries especially the developed nations offering huge investment in the
field of fashion industry. European and US market encourage the company to display exclusive
clothing and cosmetic accessories to the desired clients. Further, the report makes environmental
analysis of Prada external market forces influencing its performance. PESTLE Analysis of the
firm reflects that it needs to focus on economic factors of the global market. It is because;
inflation may hinder its growth prospects and profitability (Hultman, Katsikeas and Robson,
2011). The management needs to monitor and plan strategies according to government policies
and guidelines. It also addresses that gulf nations have monarchy system so the company
requires keen attention while functioning in their market. The assignment also makes
competitive analysis of Prada through Porter's five force analysis model. It signifies strong and
positive image on the ground of suppliers bargaining power while less dynamic buyer’s power
and threat to substitution. While, there is moderate rate of threat from new firm’s entry due to
presence of big and renowned fashion companies.
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REFERENCES
Books and Journals
Berthon and et.al., 2012. Marketing meets Web 2.0, social media, and creative consumers:
Implications for international marketing strategy. Business horizons, 55(3), pp.261-271.
Ghauri, P.N. and Cateora, P.R., 2010. International marketing (pp. 15-16). McGraw-Hill Higher
Education.
Hollensen, S., 2015. Marketing management: A relationship approach. Pearson Education.
Hultman, M., Katsikeas, C.S. and Robson, M.J., 2011. Export promotion strategy and
performance: the role of international experience. Journal of international
marketing, 19(4), pp.17-39.
Jean, R.J.B., Sinkovics, R.R. and Kim, D., 2010. Drivers and performance outcomes of
relationship learning for suppliers in cross-border customer-supplier relationships: The
role of communication culture. Journal of International Marketing, 18(1), pp.63-85.
Kotler, P. and Keller, K., 2011. Marketing management 14th edition. Prentice Hall.
Lee, K. and Carter, S., 2011. Global marketing management. Strategic Direction. 27(1).
Leonidou, L.C., Palihawadana, D. and Theodosiou, M., 2011. National export-promotion
programs as drivers of organizational resources and capabilities: effects on strategy,
competitive advantage, and performance.Journal of International Marketing. 19(2). pp.1-
29.
Navarro and et.al ., 2010. Antecedents and consequences of firms' export commitment: An
empirical study. Journal of International Marketing. 18(3). pp.41-61.
Papadopoulos, N. and Heslop, L.A., 2014. Product-country images: Impact and role in
international marketing. Routledge.
Smith, P.R. and Zook, Z., 2011. Marketing communications: integrating offline and online with
social media. Kogan Page Ltd..
Zeithaml, V.A., Bitner, M.J. and Gremler, D.D., 2010. Services marketing strategy. John Wiley
& Sons, Ltd.
Online
Advantages and Disadvantages of Globalization. 2016. [Online]. Available
through<http://www.buzzle.com/articles/advantages-and-disadvantages-of-
globalization.html>. [Accessed on 9th March2016].
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PESTLE analysis. 2015. [Online]. Available
through<http://www.cipd.co.uk/hr-resources/factsheets/pestle-analysis.aspx>. [Accessed
on 9th March2016].
What is Environmental Analysis?. 2016. [Online]. Available
through<http://pestleanalysis.com/what-is-environmental-analysis/>. [Accessed on 9th
March 2016].
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