Hugo Boss: Analysis of Profit Strategies and Brand Management

This essay provides a comprehensive analysis of Hugo Boss, a German luxury fashion house, focusing on its strategies for generating profits and managing its brand. It begins by examining the company's past and current strategies, including its emphasis on premium brands, effective distribution channels, and CRM approaches. The essay then explores various luxury management approaches employed by Hugo Boss, such as differentiation focus and building a strong brand image. It delves into theories and models, particularly the consumer conversion model, to understand brand management. The essay further evaluates the strengths and weaknesses of Hugo Boss's luxury management strategies, including distribution, product-based strategies, global strategies, and resource management. Finally, it identifies major issues and offers recommendations to enhance the company's profitability and brand management, providing a well-rounded perspective on the luxury fashion industry.

ESSAY
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TABLE OF CONTENTS
INTRODUCTION ...............................................................................................................................4
Previous and current strategies followed by HUGO BOSS to generate profits and list of luxury
management approaches or strategies the company has been followed..........................................4
Theories or models on managing luxury brand profitability and other aspects related to luxury
brand management...........................................................................................................................5
Strengths and weaknesses of luxury management strategies...........................................................6
Evaluation of the organization approached towards managing its brand........................................9
Major issues that emerged from the analysis of HUGO BOSS with a list of recommendations
that strength the company's ability to improve its profitability and consequently manage its brand
efficiently.......................................................................................................................................11
CONCLUSION .................................................................................................................................12
REFERENCES...................................................................................................................................14
BIBLIOGRAPHY..............................................................................................................................16
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ILLUSTRATION INDEX
Illustration 1: Consumer conversion model.........................................................................................6
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INTRODUCTION
Globalization has provided wider platform to large number of businesses so that they can easily
carry out business operations. Further, in the modern era, fashion industry has started to operate
efficiently by offering a wide range of products to the target market (Kim and Ko, 2012). Moreover,
competition at global level is quite high due to which businesses have to develop effective strategies
so that overall performance in the market can be enhanced at a faster pace. Apart from this,
customers prefer to purchase the products of company which can provide them value for money
experience and the entire product range meet with their requirement in the market (Brand, 2011).
Customer preferences play a crucial role in the fashion industry as products are purchased by
customers as per their needs and requirements. For the present essay, organization chosen is Hugo
Boss which is a German luxury fashion house. Business offers a large number of products to its
customers such as high fashion, accessories and footwear. Main products of company are boss
black, orange, selection, green, etc. (Hugo Boss AG, 2016). Various tasks have been covered in the
present research which involves strategies followed by company to generate profits, organization’s
approach towards managing brand, etc.
Previous and current strategies followed by HUGO BOSS to generate profits and list of luxury
management approaches or strategies the company has been followed
Hugo boss has undertaken large number of strategies in order to operate efficiently and this
has directly become one of the basic reasons of company behind success (Li, Li and Kambele,
2012). In past company only focused on its premium brand where majority of the customers
perceive Hugo boss as distributor of male oriented products where high quality products are offered
at premium price. Further, company has strongly focused on exclusive luxury and high fashion
brands. Business totally relies on strengthening its customer base by offering them wide variety of
products (Rageh Ismail and Spinelli, 2012). One of the main motive behind rise in profits of
business is effective distribution channel where no intermediaries are present and the products
directly reaches to target market in short period of time. The distribution policies of Hugo Boss rely
on two points where business operates its stores on its own to develop brand image. Moreover, the
second point is associated with trading partners where focus is on maintaining control on the
quality. Apart from this, effective training program carried out for staff members in relation with
sales and product technique are also fruitful (Nagurney and Yu, 2012). Through this it becomes easy
for enterprise to satisfy need of its target market and has assisted to generate higher profits.
On the other hand, the current strategies being employed by Hugo Boss are also effective
where CRM approach has been considered which has lead to rise in level of customer loyalty in the
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market. Effective communication sources have been employed by company so that information
linked with products can be easily shared with those of target market (Kim and Ko, 2010).
Appropriate media sources along with other tools have supported Hugo Boss in sharing proper
information with its target market. Business has undertaken resource led approach which is linked
with stretching organizational resources along with the competencies with the motive to provide
value for money experience to its target market. Organization is efficient enough in differentiating
its product range from those of target market and due to this reason annual sales along with profits
of business are high (McColl and Moore, 2011). The present strategy of Hugo Boss also focuses on
elevating the brand by engaging customers emotionally, leveraging the brand potential in women’s
wear and shoes, building more effective retail online and offline channels and exploiting growth
opportunities being present at the global level. The entire ranges of present strategies have allowed
Hugo Boss to enhance overall performance at global level where enterprise can easily gain
competitive advantage (Jansson and Power, 2010).
Apart from this, different luxury management approaches have been followed by Hugo Boss
such as differentiation focus strategy, effective distribution, effective design of products, building
brand image on cultural values and lifestyle, developing products on the basis of customer’s culture
etc (Miller and Mills, 2012). These approaches being undertaken are fruitful for business and have
become one of the main reasons behind success in every market where it operates. Moreover,
product development only takes place after considering the overall need of customers and through
this Hugo Boss has earned higher profits.
Theories or models on managing luxury brand profitability and other aspects related to luxury brand
management
In order to better understand about the concept of brand management model of consumer
conversion model is quite effective. Further, it takes into consideration series of stages which are
beneficial for companies in development of brand (Matthiesen and Phau, 2010). First stage is
unaware where customers are not at all aware about the brand and due to this reason they does not
prefer to purchase products of enterprise. Second stage is name awareness where the marketing
efforts applied by organization leads to name awareness and majority of the customers are
interested in knowing about the brand. Next stage is brand familiarity where target market knows
about the brand and this develops positive image in their mind. In every stage customers apply large
number of efforts so that customers can know about the brand and they can take purchase decision
easily (Kim and Ko, 2010). With the rise in level of familiarity customers are convinced to try the
product and this in turn allows them to indulge into practices of purchase. Acceptance is the next
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stage where majority of the customers tries to accept product and this leads to rise in satisfaction
level. This stage is considered to be beneficial for business as when acceptance starts then
profitability along with the sales volume of company enhances which is one of the main objective
of company. Last stage is linked with usage on regular basis where customers prefer to consume the
product on regular basis. In short, customers are only influenced to purchase products when they are
satisfied with the same and in case if satisfaction level is low then it leads to decline in performance
level of organization in the market (Yan, Hyllegard and Blaesi, 2012). Therefore, in this way
consumer conversion model is effective enough to understand about brand awareness and the stages
through which any particular brand is known in the entire market.
Illustration 1: Consumer conversion model
(Source: Lam, Liu and To, 2011)
Strengths and weaknesses of luxury management strategies
According to the case scenario, Hugo Boss Corporation used different kind of strategies in
internal and external environment. Most of the strategies are based on its customers need and desire
as well as how the organization beat competition in the market. There are strength and weakness of
different strategies which have been used by HUGO BOSS and they are as follows:
Effective distribution strategy
Hugo Boss Corporation follows three level of distribution strategy where clients give their
order to retailer and this person take all the material from the store of the organization. By following
this strategy, company fulfil the demand of its customers across the world (Venkatesh, Joy, Sherry
and Deschenes, 2010). Moreover, the organization also upgrades its website where its customers
can easily book their orders and get the fashion products on time.
Strength of distribution strategy
 Easy to understand.
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 By using three level of distribution firm reduce the percentage of unemployment.
 By using distribution strategies, company can easily make strong relationship with other
suppliers
Weakness of distribution strategies
 It is time consuming.
 Due to recession time it is hard for Hugo Boss Company to pay the profit percentage to their
distributor. It is time consuming as compare to other distribution channel.
One product base strategy
According to the case scenario, it shows that Hugo Boss Corporation put its focus on only
product development process (Workman and Cho, 2012). For the same, this company only
produced and sell fashion products. By doing this they can easily full fill the need and desire of
their UK customers and also maintain their brand images into the competitive market.
Strength of one product base strategy
 The main advantage is for company is it is time and money saving. The reason behind this is
for development planning, managers do not need different secession. They can easily make a
plan for their all products.
 By putting the concentration in one field, managers easily fulfil the demand of their
customers and also give their concentration on productivity (Kapferer, 2012).
 Company can easily do marketing for their all products by using one advertisement.
Weakness of one product base strategy
 By using this strategy organization lose the diversification into products.
 Due to high competition in market, sometimes company are not able to satisfy their
customers. For maintaining their current status, firm have to put lots of money into research centre
because head department do not have other choices (Kim, 2012).
Global strategy
Hugo boss is an international fashion firm and famous for good customer services (Phan,
Thomas and Heine, 2011). For the same, at the time of production, company follow all the
legislations of different country and their culture.
Strength of global strategy
 The major advantage of this strategy is based on centralization, where company manager
develop their all fashion products for all kind of culture peoples.
 By taking feedback from the customers of different countries, company is planning and
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development department analysis the need mad desire of their customers and then change
their production strategy.
 By using global strategy head department of Hugo Boss Company easily make a customer
portfolio (Al‐Mutawa, 2013).
 Further, this strategy also put their focus on efficiency of their employees.
Weakness of global strategy
 Macroeconomic risk- The major disadvantage of global strategy is, it is not necessary that
one strategy can work in all different market (Ko and Megehee, 2012). The main reason
behind this is all market has different taste and culture. Du to this, it is not possible for the
Hugo Boss Company to fulfil all demand of their different customers. Operational risk- The government of UK time to time changes their policies so this put
negative impact on the performance of company. For this, company have to change their
product price as per the instruction of the government. So, this thing raises the brand image
of company and reduces the percentage of sale.
Resource strategy
The human resource strategy of Hugo Boss Company is based on how this department
recruit the best candidate for right position (Amatulli and Guido, 2011). It is a process which are
based on planning, where HR department analysis their whole department and then take a final
decision.
Strength of human resource strategy
 The main advantage of this strategy is HRM department know each employees skills and
negative points so they can easily hire the right person at right place.
 Only this department reduce the misunderstanding among all departments.
Weakness of human resources strategy
 Hugo Boss Company every year spends approximately 1000 dollars in HRM training
department due to this, company financial system goes down. It is not possible for HRM department to take information of other country internal
management system (Kim and Ko, 2012).
High quality and price strategy
This strategy explains the quality of Hugo Boss Company products. This organization is
famous for their high quality services as well. For this company manufacturing department use their
own raw material and this organization also having their own manufacturing department In UK.
High quality strategy is based on how organization raises their quality standard. For this
organization used total quality application where they measure the quality of their all fashion
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products.
Strength of high quality and price strategy
 By using total quality application, company can easily identify their quality for their
products and services. This application explains the negative points into manufacturing
process, due to this, organization by using appropriate strategy planning department change
into positive points (Brand, 2011).
 At the time of price setting firm first analysis the actual rate of their raw material then select
a final price of their all product.
Weakness of high quality and price strategy
 It is expensive so Hugo Boss Company most of the time avoid to use total quality
application. On other hand, it is hard to understand the techniques of this application. Due to
this, all employees cannot use this application.
 For providing high quality services company raise the price of their fashion item, so most of
the people cannot afford Hugo boos company products (Li, Li and Kambele, 2012).
Evaluation of the organization approached towards managing its brand
From the given case study, it has found that HUGO BOSS has been used various brand
management approaches. These all have helped the organization to maintain its brand image at
international level (Rageh Ismail and Spinelli, 2012). To determine the effectiveness of approaches
to manage brand, evaluation is required and in this context, first approach is resources led. At the
time of opening the business, HUGO BOSS was adopting this tactic because that time, company
had limited resources. With this concept, firm wanted to grew as a world leading fashion
organization. After the evaluation process, it has found that resource-led approach makes HUGO
BOSS Company as a leading firm at the international level in fashion world (Nagurney and Yu,
2012). It offers quality products to its customers which are the combination of European designs. So
it can be said from the assessment process that resource-led approach has effectively manage
HUGO BOSS brand at international, national and local level.
On the other hand, the cited firm has followed value chain approach to manage its brand at
all the level (Kim and Ko, 2010). Basically, the aim of this model is to create or add value in the
products for the customers so that they can get value added services all the time by meeting the
demand of the market. For HUGO BOSS, the objectives behind the use of value chain approach is
to maximize business activities that can create values in the products and minimize costs of
unproductive operations. From the evaluation of this strategy, it has determined that company has
achieved its objectives and it lead to manage its brand in different nations (McColl and Moore,
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2011). The value chain of organization consists of different elements which are new collection
development, material procurement, manufacturing, sales and distribution and customer services.
All these activities have effectively managed HUGO BOSS operations and deliver the right with
value added products to the end users in minimum time. It has lead to minimize the operating costs
as well as storing cost of finished goods within the warehouse of the long time (Jansson and Power,
2010). Therefore, it can be concluded that value chain approach of the company has helped in
managing its brand.
Beside this, one of the most important approaches that have been followed by HUGO BOSS
for managing its brand is global approach. Under this strategy, the organization has treated the
world as a large and single market for the business. Along with this, there has one single source of
supply of the products with small variations (Miller and Mills, 2012). So, to keep the control over
supply of the goods and to gain competitive advantages, organization has adopted this strategy.
From the assessment process, it has been discovered that global approach has helped HUGO BOSS
to take advantage of cost efficiency via achieving economic of scale. Major reason behind this is to
maintain the dependency of subsidiaries on parent company. By doing this, it has not brought the
large variations in the products features and characteristics (Matthiesen and Phau, 2010). Therefore,
it has lead to maintained brand all across the world. Along with this, the evaluation process shows
that global approach has increased efficiency of HUGO BOSS by extend the product life cycle and
bring flexibility in operational activities. In addition to this, it has minimized diversified
macroeconomic risks such as variations in quality of the goods etc. Hence, from the evaluation
process, it has proved that HUGO BOSS has taken competitive advantages with the help of global
approach and effectively manages its brand image at international level (Kim and Ko, 2010).
On the other hand, another approach follow by HUGO BOSS for managing its brand, a
centralized management approach has used. The reason of using this is to coordinate all business
relevant decisions to ensure high level of consistency (Yan, Hyllegard and Blaesi, 2012). From the
assessment process, it has identified that the aim behind the use of the following approach is to
reduce Investment & Cost related risks. Along with this, to keep tight control over core business
activities so that homogeneous products can be easily deliver across the worldwide to maintained
brand image. In addition to this, with the application of centralized management approach, product
quality has maintained according to the set standards and monitored time to time (Lam, Liu and To,
2011).
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Major issues that emerged from the analysis of HUGO BOSS with a list of recommendations that
strength the company's ability to improve its profitability and consequently manage its brand
efficiently
There are many major issues which are faced Hugo boss corporation international market
which are described below in the points.
Major issues
Corporation faces many complexities to enter in the India which affect its business
operations.
Less compatibility with western lifestyle
As per case study, products price of Hugo boss is very high in the market. Most of Indian
people are not able to spend more money on these goods which issues to expand its business in
India (Venkatesh, Joy, Sherry and Deschenes, 2010). In addition to this, western lifestyle is also
different from Indian culture which also creates issues of Hugo boss in the market.
Custom rules and regulations
As per data of 2005, taxes and tariffs are very higher (Approx 33%) which create
complexities for Multinational organization like Hugo boss to export its products in Indian market.
Along with this, they also increase cost of goods which produces to set up its business of
organization in the Indian market (Walters, 2013).
Inappropriate infrastructure
Due to lack of infrastructure facilities, management of Hugo boss face many problems to
establish its business. In addition to this, organization realises complexities to develop effective
strategies due to inappropriate environment in Indian market (Workman and Cho, 2012). So, this
infrastructure affects the Hugo boss organization to manage its operations.
Lack direct control and distribution
As per case study, Indian law prevented multinational organizations in India to achieve
majority stack which create issues to control on the business activities in the Indian market. Along
with this, these rules and regulations affect the distribution network of Hugo boss which produces
issues to manage its business operations in India. Further, they create issues for management of
organization to expand its business in the market (Kapferer, 2012).
Brand inconsistency
Management of Hugo boss also face brand inconsistency issues in much international
market which also increase complexities to increase its sales. Further, it produces problems to
enhance market share and growth in the international market. Generally, it is also typical for
corporation to maintain its brand image in all countries.
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Recommendations
Hugo boss organization can follow many recommendations which can aid to overcome its
issues in the international market. It is described below in the points.
Corporation should emphasize on intensive promotional and advertisement strategies in the
market. This process can help the organization to increase awareness in people about the new
fashion products in Indian market. In addition to this, Hugo boss should generate needs and
requirement of its products by conducing fashion shows in India (Kim, 2012). This strategy can
help the organization to establish its business by increasing sales luxurious fashion products. It can
play important role for management of Hugo boos organization to increase its brand value in
international markets. So, it can help the organization to remove its brand consistency issues in the
market.
Management of Hugo boss should communicate with government officials regarding taxes
and tariffs. This process can contribute effective role for organization to reduce its expenditure in
Indian market. Along with this, it can help the corporation to enhance its market share and growth
in India (Phan, Thomas and Heine, 2011).
Hugo boss should develop effective relations with government and other private
organizations in the market. This strategy can play important role for organization to achieve
effective resources to manage its business operations. Further, it can help corporation to reduce
infrastructure issues which can contribute effectively to increase its efficiency and performance in
the Indian market.
Management of Hugo boss can do joint venture or mergers with Indian organization to
establish its business in the market. This strategy can contribute effective role for corporation to
expand its business. In addition to this, it can provide better reliability to take effective decision
which can aids to sales of Luxury fashion products. It can give offer better control to manage its
business activities in the market (Al‐Mutawa, 2013). Further, it can provide appropriate flexibility
to reduce distribution issues in India which can help to increase its profit.
CONCLUSION
From the above essay, it can be concluded that HUGO BOSS has a world leading fashion
organization. For maintaining its brand image at international and domestic level, it has used
various kinds of strategies, models and approach for luxury management. Along with this, some
strengths and weaknesses of various strategies have also defined that maintained its brand image.
The evaluation process has explored that the approaches used by HUGO BOSS has most effective
and efficient to maintained brand image of the firm at international level. It is found that
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