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Chanel Analysis Swot, 6 P'S

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Autor:  viking  16 May 2010
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TABLE OF CONTENTS

Introduction 3
From Coco to Karl - A Legend lives on 3
The 6 P’s 8
Product 8
Price 10
Place 11
Promotion 12
People 13
Positioning 13
Benchmarking 16
SWOT-Analysis 19
Micro economical analysis 19
Macro economical analysis 22
Recommendations 24
Conclusion 25


INTRODUCTION
Elegance, wealth, high class and originality; these are the first words which come to mind, when thinking of Chanel.
We as a group decided to choose Chanel as our subject, because of several reasons and questions that came to our mind. We strive to find out what the image of this brand is like today (classical, dusty or modern), and what Chanel has been doing to constantly promote the image of the label?
It is commonly known that Chanel, impersonated by its famous female founder and designer Coco Chanel, has over time evolved into being a huge fashion empire which is irreplaceable for the development of the fashion branch in the 20th century.
From Coco to Karl - A Legend lives on
COCO CHANEL
In 1912 Coco “Gabrielle” Chanel (1883-1971) founded the label bearing her name in Paris, France (Rue de Cambon) . Coco Chanel was one of the first fashion designers in her country as we know them today. She revolutionized female fashion first and foremost with the famous “Little Black”, the replacement of the Corset. Also trousers and the classical tweed (tweed as a garn was a revolution of the used materials) became socially acceptable thanks to Coco.
After the successes in designing clothes, Coco Chanel decided to enter other markets: fragrances and jewellery. She launched her first and worldwide most successful fragrance called Chanel No.5 as well as the first Chanel jewellery collection .
Due to a lack of financial liquidity, she was forced to enter a corporation with the Wertheimer family in 1924. As a result of this the Wertheimer family soon controlled some 70 % of the Chanel Company, Coco herself owned only 10%, the remaining 20% were held by a friend of Coco Chanel . 30 Years later the Wertheimer family even owned and controlled the whole company.
During the Second World War, Coco Chanel closed her couture house and only her fragrances and accessories were sold in the Chanel boutiques .
After the re-opening of the haut-couture shop in Paris, Chanel introduced the famous quilted bag to the world of accessories in 1955. The innovations of this bag were the used materials and straps which had not been common on handbags before. Chanel was looking for practicality when she was designing. Women of the time should have both hands free to hold a glass of champagne as she would have put it.
Both of these features made the Chanel bag unique and even when Karl Lagerfeld relaunched the bag called 2/55 (named after the historical date of product launch)50 years later having changed the materials (e.g. patent leather) and colours (e.g. yellow beige) it was a huge success.
Two years later, in 1957, Coco Chanel received a Fashion Award for her spring collection and was celebrated as the most influential designer of the twentieth century.
Until her death in 1971, Coco was working as a designer for Chanel .

Even after her death, her legacy greatly influenced the company. In 1978, the first prГЄt-Г -porter collection was designed and launched.
KARL LAGERFELD
In 1983 a new era of Chanel began by employing of Karl Lagerfeld as the art director for haut-couture, prГЄt-Г -porter and accessories, while the fashion label had almost been forgotten, Chanel was at the time only known for the perfumes .
Lagerfeld kept the classical line and additionally created more modern clothes, skirts became shorter and new materials were used. Furthermore new products like watches (1987) and cosmetics (1999) were introduced.
ART MOBILE CONTAINER
The most innovative development of Karl Lagerfeld in his work for Chanel was the building of the Art Mobile Container in 2008, which was started in Hong Kong with 20 international Artists. The Building was designed by Zaha Hadid and as a mobile museum it shows contemporary art all around Chanel .

The Art Container will travel six different cities e.g. London, New York, L.A., Moscow, Tokyo and Paris in two years.
FASHION SHOWS
The latest trend in fashion shows is the creativity and originality of the line (catwalk design), for instance the show we showed earlier in the presentation and as illustrated in the following picture, which took place in the Grand Palais in Paris.
We have seen a huge classical tweed jacket out of which models walked right onto the circular catwalk. Karl Lagerfeld was inspired by the oceans while he designed the collection. Therefore the Models were dressed like shells and walked in ballerinas. By a standardized hair style he kept the proportions right.
Karl Lagerfeld’s range of ideas is immense. A fashion show on St. Monica Airport was organized where the models walked out of two cruisers and an assembly line transported the Models.
Another fashion show contained a big carousel, where the Models walked down.
NEW FACES
Karl Lagerfeld changed the brand Chanel by implementing his own style and perfectionism. This unique, passionate and visionary designer introduced new ideas in fashion, shows as well as new faces e.g. Emma Watson (known as Harry Potter’s “Hermine”) .

FINANCIAL PART
Not only a closer look on Chanel’s creative side like designers and ideas in fashion is interesting, but the financial development of the company is worth considering as well.
Chanel is one of the few fashion labels, which is privately held, in this case still by the Wertheimer Family with a share 100%. Alain Wertheimer and Chanel are ranked in the Top 20 Fashion Billionaires in the world. With 5.0 Billions US $ Wertheimer is ranked 8th just behind the “H&M”-family (5.3 Billions US $) and ahead of the owners of “Fast Retailing”. Top of the list is the LVMH Group with (10.7 Billions US $) .
LUXOTTICA GROUP
Furthermore the Fashion Label Luxottica Group designes eyewear for the company, as the first licensed manufacture in Chanel History, since 1999 . Chanel owns also ERES, which produces swimming wear in a high end luxury market segment. Its advertising was spread all over Paris’ bullet walls during the May 2008.


THE 6 P’S
Product
Chanel has four major product groups, these are:
• Fashion
• Jewellery and watches
• Eyewear
• Fragrances and beauty
FASHION
This product group includes apparel, which is divided into haute couture and pret â porter. It also includes leather goods such as shoes and bags. Chanel is known for a change in the fashion industry, the company started in 1910 with the concept “back to basics,” incorporating elegance, class, and originality to women’s clothing. At that time, the Chanel suit, with a knee-length skirt and a jacket made of woven wool with black sewing trim and gold buttons, was introduced and became very popular. Except the suit Chanel also became known for the “Little black dress” which was introduced in the 1920th and for the 2.55 bag, introduced 1955. These three fashion items are still famous and desirable today.
JEWELLERY AND WATCHES
Chanel’s jewelleries are manufactured in Paris and there are 8 collections. High Jewellery Collection, Ultra, Comets, Matiless, Camellia, Mademoiselle, Elements of Chanel and Coco, every line should be different and has its own unique design and inspiration. The watches are manufactured in Switzerland and Chanel has four different collections of watches. These are J12, Jewellery Collection, Chocolat and Les Intemporelles de Chanel.

EYEWEAR
The eyewear product group includes glasses and sunglasses. These are elegant and trendy.

FRAGRANCES AND BEAUTY
Chanel no 5 is very famous and is also one of Chanel’s hallmarks. It first came out in 1921 but it was in 1953 when Marilyn Monroe get the question of what she wears while she is sleeping and her answer was “Nothing but a few drops of Chanel No 5”, that it became even more famous. This story is something that almost everyone knows even though they are interested in fashion and beauty or not. This product group also includes makeup.
OTHER
They also have a sport line including for example a bike, tennis racket and weights for exercising.


Price
Chanel is a luxury brand and their prices are in the higher level.
FASHION
The clothes are very expensive, a Chanel tweed jacket costs about € 4000 . The 2.55 bag costs about €1300 for the less expensive.
JEWELLERY AND WATCHES
The prices are in the medium price level. The less expensive jewelleries are a pair of earrings which costs about €70.
EYEWEAR
Prices of glasses and sunglasses are also in the higher price level comparing to other sunglasses but are not so expensive comparing to other product groups of Chanel. A pair of sunglasses is around €200 - €300.
FRAGRANCES AND BEAUTY
The prices of perfume is very high, comparing to other perfume, the Chanel no 5 is €100. But comparing to other products in their assortment its not expensive and its also Chanel’s cash cow, which mean that it is the product they earn the most money from.
Place
Chanel sells their clothes, bags and shoes only through directly owned stores. Except for one store in Tokyo where you can buy the bags. Their eyewear, sunglasses and makeup can be bought in licensed stores within the same product category. For example can you buy sunglasses in stores where you find other brands of sunglasses. The reason of only having this kind of distribution is so that Chanel can have total control over the selling of the products and in that way keep a better control over the brand.
The Chanel stores are only placed at very exclusive areas such as, in Paris at Place VendГґme where the first store was opened in 1910, and at Bon Marche and Lafayette. In New York, at 5th Avenue and Madison Avenue. In London, at Harrods Knightsbridge. They are often located at those selected areas where other luxury brands has stores and in gallerias where you can find the same kind of luxury brands. One market that is increasing for luxury brands and for Chanel is the Asian market. In 2002 they had stores in two cities and in the end of 2005 they had stores in 23 cities and plans to be in 40 cities by 2008.
Chanel does not sell fashion online but you can find sunglasses, fragrances and beauty on other large online shops with that kind of products. The only place where you can buy online direct from Chanel is in the US, where thy have started an online beauty shop for just cosmetics and fragrances. But they have a search service at their homepage where you can search for what kind of product you are looking for and where you live and you will get the closest store where to find what you’re looking for.
Promotion
Chanel uses advertisement in Magazines as Vogue and Elle and they also uses street billboards and commercials. Chanel’s commercial for Chanel No 5 is one of the most expensive commercials that have been done. In 2004 the rumours about the new advertisement for Chanel No 5 started months before it was launched. It was a three minutes long commercial directed by Buz Luhrmann, the director of Moulin Rouge and Romeo and Juliet. This commercial introduced Nicole Kidman as the new face of Chanel no 5. They use direct marketing, a newsletter that you can subscribe for on their homepage. They also promote the brand through their fashion shows, which are very spectacular. They always have their shows at Grand Palais in Paris and in 2007 the Chanel cruise fashion show was held in the hangar of Santa Monica Airport where a full-sized plane, bearing a Chanel Airlines logo on its side was the opening of the fashion show. The mobile art in Hong Kong is also a way of promoting, it’s an innovative way of promotion by using an exhibition together with different artists and it will be contemporary at different places around the world with a start in 2008.
People
This is the brands costumer, their employees and their ambassadors, people that provide the brand with a life. The founder Gabrielle Bonheur Chanel herself has of course made a high value for the brand. Karl Lagefeld who is seen as one of the most influential fashion designers in the late 20th century is also of course very important for the brand image. Chanel was one of the first designers that started to use stars to promote the brand. Important persons who have made a higher value for the brand are Marilyn Monroe, Nicole Kidman, Greta Garbo and Audrey Hepburn. Chanel often attract elder women with its elegant and feminine style but it also attract younger women interested in fashion like for example Vanessa Paradis,Lindsey Lohan and Kate Moss.
Those famous people using the brand will also been seen as some kind of ambassadors because people who will see them wear the clothes will connect them with the brand.
Positioning
Positioning is the strategic placement that a brand wishes to have in the market.
It’s the choices a company makes to compete in a certain market. It’s about how they target, the quality of the products, pricing and place were to sell their products. Chanel is positioning itself as a luxury brand with high design and high image. For better understanding, see the diagram in the pp.



COMPETITORS POSITIONING
A comparison with HermГЁs, Louis Vuitton, Yves Saint Laurent was made to define how the different brands images is perceived and what their focus lies on.
The main competitors were based on, heritage (French), product range (fashion, cosmetics, perfume etc) and price range (premium). These parts all contributes to and are important parts of the image.
Louis Vuitton has together with Chanel the highest image turnover thanks to a very consistent brand identity and widely spread promotion. Their famous Louis Vuitton monogram has increased the brand image and made it very recognisable. Chanel also uses it monogram, the famous logo, as a symbol for its exclusivity and heritage on many of their products. But their lack of consistency and reinvention has made their image dropped slightly. HermГЁs has a more finite but strong brand image, thanks to its heritage but according to their product range their image is more focused to the leather, silk scarves compared to the Chanel and Yves Saint Laurent, which has a higher design turnover.
Yves Saint Laurent could be considered to have a higher design turnover than the other brands according to sophisticated design and the absence of a logo. The symbol is instead in the design, black tuxedo like, which also can be find in the Chanel brand with the jackets, pearls and tweed. HermГЁs has their H logo on products like belts.
According to a global luxury brand survey in november 2007 by The Nielsen Company Gucci is number one coveted luxury brand. Chanel and Calvin’s was rated the second. And third place was achieved by Louis Vuitton . Giorgio Armani, Christian Dior and Versace was considered to be the forth most coveted luxury brand.
PROMOTION SURPRISE STRATEGIES
The customer expects to be surprised all the time. The companies compete in their ways of reinventing the brand and how to surprise the most. One way to surprise is through promotion.
The promotion of Chanel is very selected and the company spend a lot of money in their perfume advertising. Chanels perfume promotion strategy is different from its competitors. Louis Vuitton promotion is focused on their bags and Yves Saint Laurent on the fashion.
The celebrity endorsement has been an important mean of both Louis Vuitton and Chanel. Louis Vuitton has recently promoted their products by having Russia’s former president Gorbatjov in their advertising to target the market reading The Economist. Yves Saint Laurent has focused on top fashion models with recently Kate Moss in the Stefano Pilati styled campaign, which indicates that their target group is more “fashion” people. On the other end we have Hermés that doesn’t include any kind of celebrity endorsement or people in their promotion. This is a strategy to keep the brand image independent of trends in the fashion industry.
PRICING COMPARISON
The pricing tells a lot about the exclusivity of the brand. We have chosen to compare the most famous and probably the most desirable bags at this time.



Louis Vuitton’s popular Speedy bag is way less expensive than the other brands. Even though they have somewhat affordable prices they manage to keep the luxury and exclusive image. By this pricing they can increase their sales and offer some products to be more available.
Yves Saint Laurent’s it bag ”muse” doesn’t have any logo except for the discrete Y print. This bag is an ”it bag” and a seasonal bag. Yves Saint Laurent must have a mid-price within premium prices to sell in the seasons but at the same time keep the exclusivity.
Chanel’s most famous bag 2.55 is expensive due to its size. The starting price is high which makes this bag very exclusive and luxurious.
HermГ©s Kelly bag is the most expensive and really puts HermГ©s on the number one of premium prices. HГ©rmes sets itself apart from the rest of the brands by excluding a lot of customers that are willing to pay premium prices.
Benchmarking
CONTROLLING RETAIL CHANNELS AND HERITAGE OF COCO
The competitive strategies of Chanel are primary to keep and enhance the exclusive and luxury brand image by controlling the retail channels. Chanel only sells through independent stores except for one exception where they sell their bags.
To differentiate from competitors they indeed focus on their heritage of Coco Chanel and her classic design but also enrich the collections with new trendy cuts and design.
CUSTOMERS
Through this carefully selected upgrades of their design they manage to keep old customers like the wealthy Parisian ladies in their Chanel dresses as well as attracting young women buying expensive handbags but also apparel from the ready to wear shows. This positioning makes Chanel unique as a luxury fashion brand. Competitors in the fashions industry such as ChloГ© or Balenciaga often attract a younger 25-50 segment. However companies such as HermГЁs attracts older customers as well.
RISK DUSTY AFFECT PERFUME SALES AND LOST PROFITS
But the classic design and Chanel’s 2000 € handbags or jackets is also a problem. As Chanel’s CEO says “"The risk of any great luxury brand that has its history in the past is that it can get dusty." If Chanel’s image will be perceived as out-of-style and dusty they could fear a decrease in their sales of perfumes, which actually is what made the company rich once with the famous No.5. Chanel loses money every year on its fashion division, which is carried by the perfume profits.
LIMITED EDITION OR CONSTANT DEMAND STRATEGIES
Competitors like Louis Vuitton doesn’t have a perfume or cosmetic line but can increase sales by limited edition lines and a few basic products in a more affordable price range. Hermés strategy to handle the sales is to keep on the top of premium prices but also offer more affordable silk scarves that have a constant demand.
COMPETITION ABOUT THE NEW GENERATION AND NEW WEALTH
A new target market is the “new wealth." More and more customers are acquiring wealth at earlier ages, with net worth over $1 million. These women have more cutting-edge fashion tastes, and find Chanel's strict boutiques intimidating and high-end department stores boring. Therefore Chanel must like its’ competitors done, try new strategies to attract this segment.
CUSTOMER TREATMENTS STRATEGIES
Many competitors offer their important customers different events like lunch shopping etc. I.e. YSL offers champagne and chocolate on specific occasions to every person visiting the boutiques.
MANAGEMENT STRATEGIES CENTRALIZE GLOBAL CONSISTENCY
Intense competition in the luxury business has led Chanel to create a global leadership position. Competitors like Louis Vuitton and Gucci belongs to big groups owning hot and smaller brands like for example Bottega Venetta. Hence, they’re not only competing against the big competitors but also the new brands. LVMH and Gucci group has managed to centralize the control which given them an advantage in managing consistent global brands. Chanel on the contrary has five different regional headquarters. When factor in the competitive luxury business it has to be very consistent and fast-decision making. Louis Vuitton has also managed to respond their different market demands, and could therefore adapt the product range in different markets according to the demand. Chanel on the contrary has the same product range in all their different markets.

SWOT-ANALYSIS
Micro economical analysis
STRENGTHS OF CHANEL

Chanel is the allegory for “luxury”.
By observing the strengths of Chanel the established French company is in a very attractive position for investors. The results out of the SWOT-analysis listed the following part are giving a deeper view behind the curtain of the luxury label.
Throughout its well known heritage brand it established since 1910 Chanel is one of the most famous luxury companies of the world. The big advantage of having a well known brand name is the fact that people know “who you are!”. In case of Chanel its traditionally quality and its location at the “Place de Verdome” supports its brand image.
By associating Chanel with Coco, who gave the company the rights to use her name as well as her style and image, customers perceive Chanel as “luxury”. Coco Chanel as a core personality of Chanel is one of the company’s strongest strengths. The chick she presented and the “little black dress” she designed made her immortal . Because of her legendary lifestyle and the fact that she is celebrated still as icon after her death, shows the strong personality she had and projects a perfectly fitting image for Chanel to the brand. The mix of immorality and ladylikeness of Coco gives Chanel an extravagant touch of deluxe by proving a consistency and relevance to the nowadays market needs.

The change of image in the 1980th by Karl Lagerfeld turned out to be another great strength after changing the couture house to new levels, with shorter cuts and eye capturing designs, still continuing the woo and awe in the fashion world. His uncanny ability to interpret Mademoiselle’s work and translates in to the present made him to an icon for Chanel and brought the label to the 18-25 age group . Through his designs the luxury brand achieved the high level of exposure among its target customer audience of the 21th century.
Besides that, a strength of Chanel is its celebrity endorsement of for example Kate Moss, who was the main personality for Coco Mademoiselle from 2001 till 2005, and Charlize Theron, who is still in all the advertisements for the very popular watch J12. Chanel’s policy of celebrity endorsement started already in 1921 when Marilyn Monroe promoted Chanel No. 5 .
The design houses new global CEO, Maureen Chiquet should take the brand to the next level of luxury, the ultra-luxe height. This redeployment will provide the brand a leadership position in the intense competition of the luxury business. Her experience at GAP and Loreal will wind up the sucked company .
WEAKNESSES OF CHANEL
One of Chanel’s biggest strength is at the same time one of its weaknesses. The traditional private owned business has a long lasting history of being owned by the Wertheimer family . This is a weak point because of the stuck towards changes and innovations. It is very typically for heritage brands to be more conservative adverse modifications. In case of Chanel this is a problem because the image of the whole brand is very dusty and old-fashioned in many opinions .
Also a big weakness of Chanel is that the company is not offering an online-shop at its homepage. The adoption of the internet as a sales channel is nowadays essential for luxury brands that aim to maintain a competitive edge . By not providing an e-retail options the company losses enormous profits and customers.
Another fact, which is implementing a weakness of Chanel is their fragile promotion of Pret-a-Porter wear. Karl Lagerfeld designed fashion for the millenniums but the clothes are almost nowhere to find and not advertised at all. Specially the in-store representation of the apparel is very weak and not attractive to the young public.
As earlier mentioned the strength of Lagerfeld could also seen as weakness, because of its long-lasting relationship with Chanel. Even though he brought a new appeal into the brand, he is now designing for Chanel for more than 20 years. Besides that he also designs for his own label as well as other brands like Fendi or H&M.
The separation of the headquarters in 5 different parts is in comparison to other giants like Gucci and the LVMH Group a real disadvantage for the process of decision making . The five regional heads have a fair degree of autonomy thereby a big imbalance is created in the organization structure.
In conclusion of the micro-economical analysis there are a number of very considerable strengths but also weaknesses, which should be thought of in terms of future acting as a world leading luxury fashion brand.

Macro economical analysis
OPPORTUNITIES FOR CHANEL
First of all there is the great opportunity of market expansion in new and not satisfied areas as Asia and Russia. Chanel for example has already boutiques in 23 cities in China, there is still huge demand . Japan’s, India’s and Russia’s upper-class societies are nevertheless having great potential and offering huge opportunities for luxury brands.
There as well as in the European market the development of the upper-class society is increasing. This socio-economical change is presenting another chance for the luxury business. By considering for example the demographical movement of Paris, it could be noticed a disappearance of the middle class either into richer or poorer . This means an increase of the high-society and a growing demand for luxury products.
For satisfying the wealthy people continuously the range of products needs to be adapted. Therefore the upper-class needs to be separated into the ultra rich individuals, so called High Net Worth Individuals (HNWI) and the upper-class society . In order to adjust their needs to the range of products leather goods above the current collection status could be implemented.
Therefore maybe another designer besides Karl could be taken into consideration. The opportunity to recruit another designer, who could work in cooperation with the icon of Chanel, might acquire new customers to the brand. This could be focused for example on the Asian pretensions in order to enter this market entirely.
THREATS FOR CHANEL
The probably biggest threat for Chanel is a buyout from a large group like the LVMH Group for example. Because of its private-ownership Chanel is one of the family businesses in the luxury business. Since private-owned business are mostly in a very good financial situation, as Chanel with a worth of 1,5 billion out of a 4,5 billion perfume industry – it is very attractive for investors.
Another threat is the financial situation of Chanel. Even though Alain Wertheimer said "Chanel ne donne pas des chiffres" – Chanel doesn’t mention numbers the factoring of assets could become a threat if the cash flow is too low.
The highly competitive market of the fashion business is of course a further dangerous factor for the couture house. By not realizing for example a new trend or sales channel Chanel could suffer enormous losses.
In addition the problematic of the fake market harms the company seriously. Thereby an image loss could occur, which is another threat the company has to face. By presenting one of the most established fashion houses of Paris Chanel has a very concentrated image relied on Coco Chanel and nowadays its icon of Karl Lagerfeld. This close connection could turn very quick into a threat when the designer might get in contract with other brands or having private troubles. The same is obviously relevant for its current celebrities.
Recapitulatory can be said that the SWOT-analysis of Chanel discovered strengths as well as opportunities which should the company focus on. But on the other hand the haute couture label is also allocating weaknesses and threats. Therefore our group came up with a list of recommendations to Maureen Chiquet which can be gleaned in the following chapter.
RECOMMENDATIONS
The recommendations we created for the CEO of Chanel, Maureen Chiquet are presented in this chapter. To give an overview the main points are listed in the following:
 Increase sales and markets for fashion
 Attracting the New Generation
 Consistency of the Brand
 Strengthen the HNWI-Attract
 Promote Men’s fashion
 Reinvent the Brand

In order to increase the sales and revenues Chanel has to acquire new markets and distribution channels into their strategy. Therefore we recommend to open stores in so called “it-locations” as for example Soho in NY or the 6th arrondissement in Paris. The shop design of these stores should be more focused on the new generation, by offering the hippest trends and collections.
Furthermore we recommend to focus on the consistency of the brand, what should be realized by centralizing the headquarters, which are so far divide into 5 separated locations. The advantage of this centralization is a higher communication consistency and a better controlling of the whole brand.
Another strategy we recommend is strengthening of the HNWI-customers. By offering ultra-luxe goods as for example this alligator bag amounting to € 26,000 new target markets are developed.


Besides that, we recommend the extension of Chanel’s product lines, by implementing new sub-brands, as for example a interior decoration line in the heritage Coco Chanel style, as you can see on the following picture, the brand would set new trends and increase their market presentence.


CONCLUSION

As a conclusion our analysis of Chanel shows a well performing brand, with great potential for advancement recommendations as mentioned above.
Our personal opinion about Chanel is that the brand provides excellent future perspectives, since we are going become their target group and we all ardent by the company and its performance.

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