Marketing Audit of Nike's Strategies

Nike is the leading footwear company in the world. PEST Analysis sums up how the company's business strategies fare in the macro environmental level.

Nike, Inc. is an incorporated company that designs, develops and markets worldwide athletic footwear, apparel, equipment and accessories. Nike employs both traditional and non-traditional distribution channels in almost 200 countries with primary market regions in the United States, Europe, Asia Pacific, and the Americas.

Nike has some 20,000 retailers worldwide including Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and Web sites which sell Nike's sports and leisure products. Nike accounts for 33% of the global market share in the athletic footwear industry.

PEST Analysis of Nike

Nike, being an international organization, needs to focus on macro environmental factors. Macro environmental factors comprise Political, Economics, Society, and Technology, viz, PEST Analysis.

Political Analysis

The government must create economic policies that will foster the growth of businesses. Nike, fortunately, has been helped by the US policies which enable it to advance its products. The support accorded to Nike by the US government, particularly in the general macroeconomic stability, low interest rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth.

Economic Analysis

In economy, the biggest threat for Nike would be economic recession. During recession, Nike’s growth will be adversely affected. The US economy is experiencing a downturn right now. Consumer purchases are slowing down. Currently, Nike's feeling the pinch of the economic recession. The Asian economic crisis also affects Nike since its goods are manufactured in Asia. The labor costs and material prices are going up.

Nike's growth is not just affected by the local economy but also in the international economy. A weak Euro and an Asian recession could mean weak sales for Nike. The overall results in the sales generated by Nike in athletic footwear, however, remained stable. The global market makes up for the variances in sales particularly between peak and lean seasons.

Society Analysis

People are more health conscious nowadays. Diet and health are getting more prominence. Consequently, more and more people are joining fitness clubs. There is an accompanying demand for fitness products particularly exercise apparel, shoes and equipment. Nike is at the forefront of this surge in demand as people are looking for sports shoes, apparel and equipment.

Nike, however, failed to foresee problems brought about by a sweatshop expose pertaining to labor and factory conditions at production locations in Asia. This caused bad publicity and declining sales as society and consumers demand more socially responsible companies.

Technology Analysis

Nike uses IT in its marketing information systems very effectively. Nike applies marketing information systems to the economics of innovation, segmentation and differentiation for most of its businesses. Nike’s leadership status owes in large part to the use of extremely valuable Information Technology, and applying it to every aspect of the product from development to distribution.

Nike, being the world leader in the athletic footwear industry, is able to effectively harness its environment to boost its marketing efforts. This strategy has translated into robust sales of Nike's products.

Marketing Audit of Nike's Strategies

Nike is the leading footwear company in the world. PEST Analysis sums up how the company's business strategies fare in the macro environmental level.

Nike, Inc. is an incorporated company that designs, develops and markets worldwide athletic footwear, apparel, equipment and accessories. Nike employs both traditional and non-traditional distribution channels in almost 200 countries with primary market regions in the United States, Europe, Asia Pacific, and the Americas.

Nike has some 20,000 retailers worldwide including Nike factory stores, Nike stores, NikeTowns, Cole Haan stores, and Web sites which sell Nike's sports and leisure products. Nike accounts for 33% of the global market share in the athletic footwear industry.

PEST Analysis of Nike

Nike, being an international organization, needs to focus on macro environmental factors. Macro environmental factors comprise Political, Economics, Society, and Technology, viz, PEST Analysis.

Political Analysis

The government must create economic policies that will foster the growth of businesses. Nike, fortunately, has been helped by the US policies which enable it to advance its products. The support accorded to Nike by the US government, particularly in the general macroeconomic stability, low interest rates, stable currency conditions and the international competitiveness of the tax system, form the foundation critical to Nike’s growth.

Economic Analysis

In economy, the biggest threat for Nike would be economic recession. During recession, Nike’s growth will be adversely affected. The US economy is experiencing a downturn right now. Consumer purchases are slowing down. Currently, Nike's feeling the pinch of the economic recession. The Asian economic crisis also affects Nike since its goods are manufactured in Asia. The labor costs and material prices are going up.

Nike's growth is not just affected by the local economy but also in the international economy. A weak Euro and an Asian recession could mean weak sales for Nike. The overall results in the sales generated by Nike in athletic footwear, however, remained stable. The global market makes up for the variances in sales particularly between peak and lean seasons.

Society Analysis

People are more health conscious nowadays. Diet and health are getting more prominence. Consequently, more and more people are joining fitness clubs. There is an accompanying demand for fitness products particularly exercise apparel, shoes and equipment. Nike is at the forefront of this surge in demand as people are looking for sports shoes, apparel and equipment.

Nike, however, failed to foresee problems brought about by a sweatshop expose pertaining to labor and factory conditions at production locations in Asia. This caused bad publicity and declining sales as society and consumers demand more socially responsible companies.

Technology Analysis

Nike uses IT in its marketing information systems very effectively. Nike applies marketing information systems to the economics of innovation, segmentation and differentiation for most of its businesses. Nike’s leadership status owes in large part to the use of extremely valuable Information Technology, and applying it to every aspect of the product from development to distribution.

Nike, being the world leader in the athletic footwear industry, is able to effectively harness its environment to boost its marketing efforts. This strategy has translated into robust sales of Nike's products.

SWOT Analysis of Dell Computers

Dell Computers relies on its Direct Method to sell its products. This model is not perfect.. Addressing its flaws is key to maintaining Dell's competitive edge.

Dell Computer Corporation started in 1984 by Michael Dell with this very simple premise as its basic foundation: that personal computers could be built and sold directly to customers and by doing this, Dell could address their specific needs and provide the best computing solutions that meet those needs.

Dell’s Direct Method provides two distinct advantages: 1. reducing marketing and sales cost by eliminating markups of distributors and retailers and 2. building to order reduced inventory costs and risks of retaining inventories.

Dell’s Direct Model is the main reason why it has achieved its stellar status in business today. This strategic model enables Dell to interact with customers directly providing them with fast, reasonably-priced and friendly means of production and distribution.

SWOT Analysis of Dell Computer

Strengths

Dell's Direct Model approach of enables the company to offer direct relationships with customers such as corporate and institutional customers. Their strategic method also provides other forms of products and services such as internet and telephone purchasing, customized computer systems; phone and online technical support and next-day, on-site product service. This extensive range of products and services is definitely one of Dell’s strengths.

Dell Computer's award-winning customer service, industry-leading growth and consistently strong financial performance differentiate the company from competitors for the following reasons:

Price for Performance – Dell boasts a very efficient procurement, manufacturing and distribution process allowing it to offer customers powerful systems at competitive prices.

Customization - Each Dell system is built to order to meet each customer’s specifications.

Reliability, Service and Support – Dell’s direct customer allows it to provide top-notch customer service before and after the sale.

Latest Technology – Dell is able to introduce the latest relevant technology compared to companies using the indirect distribution channels. Dell turns over inventory for an average of every six days, keeping inventory costs low.

The company's application of the Internet to other parts of the business --including procurement, customer support and relationship management -- is growing at a rate of 30 percent. The company's Web site received at least 25 million visits at more than 50 country-specific sites.

Weaknesses

Dell’s biggest weakness is attracting the college student segment of the market. Dell’s sales revenue from educational institutions such as colleges only accounts for a measly 5% of the total. Dell’s focus on the corporate and government institutional customers somehow affected its ability to form relationships with educational institutions. Since many students purchase their PCs through their schools, Dell is obviously not popular among the college market yet.

For home users, Dell’s direct method and customization approach posed problems. For one, customers cannot go to retailers because Dell does not use distribution channels. Customers just can’t buy Dell as simply as other brands because each product is custom-built according to their specifications and this might take days to finish.

Opportunities

Personal computers are becoming a necessity now more than ever. Customers are getting more and more educated about computers. Second-time buyers would most likely avail of Dell’s custom-built computers because as their knowledge grows, so do their need to experiment or use some additional computer features.

Demand for laptops is also growing. As a matter of fact, demand for laptop has overtaken the demand for desktops. This is another opportunity for Dell to grow in other segments.

The internet also provides Dell with greater opportunities since all they have to do now is to visit Dell’s website to place their order or to get information. Since Dell does not have retail stores, the online stores would surely make up for its absence. It is also more convenient for customers to shop online than to actually drive and do purchase at a physical store.

Threats

In a volatile market such as personal computers, threats abound. Computers change in a constant sometime daily basis. New software, new hardware and computer accessories are introduced at a lightning speed. It is essential for Dell therefore to be always on the lookout for new things or introduce new computer systems.

The threat to become outmoded is a pulsating reality in a computer business. Not only that, companies must produce products that are high in quality but low in price. This is one challenge that Dell contends with.

One of the biggest external threats to Dell is that price difference among brands is getting smaller. Dell’s Direct Model attracts customers because it saves cost. Since other companies are able to offer computers at low costs, this could threaten Dell’s price-conscious growing customer base. With almost identical prices, price difference is no longer an issue for a customer. They might choose other brands instead of waiting for Dell’s customized computers.

The growth rate of the computer industry is also slowing down. Today, Dell has the biggest share of the market. If the demand slows down, the competition will become stiffer in the process. Dell has to work doubly hard to differentiate itself from its substitutes to be able to continue holding a significant market share.

Technological advancement is a double-edge sword. It is an opportunity but at the same time a threat. Low-cost leadership strategy is no longer an issue to computer companies therefore it is important for computer companies to stand out from the rest.

Technology dictates that the most up-to-date and fastest products are always the most popular. Dell has to always keep up with technological advancements to be able to compete.

4 Ps of Wedding Travel Package Marketing

4 Ps of wedding travel package marketing help the business determine the viability of this business strategy to lure potential clients.

The 4Ps of marketing are applied in wedding travel packages to determine the effectiveness of this growing air travel market strategy. If you are planning a destination weddings or honeymoon get-away to some exotic places, wedding travel packages can help save money.

Product

The product is the Wedding Travel Package for a group of 10 or more people going to a similar destination city with the desire to attend a wedding ceremony or an after-wedding party or a commitment ceremony. This is good for couples who intend to transport their family or friends to a specific destination to celebrate the wedding.

This is a very good way to save money on group travels. Not only that, the group can also avail of amenities/perks offered by the airline specifically for a group of ten or more people traveling together. The airfare savings may not be that enormous but it can add up and it does help make your travel more comfortable. Also, the bride and groom get to enjoy some incentives for bringing their pals along.

Price

Depending on the airline, the price of the wedding travel package could be anywhere between five to 10 per cent discount on regular, published airfare price or the lowest applicable air fare. The savings may not be that huge but it is definitely cheaper compared to what one pays when traveling alone. Also, if one has frequent flyer miles there will be more discounts to enjoy. Discounts however do not extend to restricted fares and excluded sale fare inventories.

Promotion

Some airlines have complimentary wedding invitation inserts to inform out of town guests of the discount. The information drive on wedding travel packages are directed towards bride and grooms/ the couples or the travel planner.

Airlines provide perks or incentives to the travel planner such as 2,500 bonus flyer miles. Bride and groom who prearranged the discounts also get incentives such as first-class upgrades for the couple.

Newspaper advertisements also help promote wedding travel packages. American Airlines promoted wedding travel packages through interviews published in the papers, television appearances and the internet. Most airlines provide information on group travel discounts in their websites.

Place

One can avail of the promo by booking online or by calling the support desk of the airline. Most airlines offer discounts for group travel that is why it is always good to ask even if they do not advertise. Also, if the airline does not specifically promote a wedding travel program, then one can always negotiate for price deals that can translate to fare discounts for a group of 10 travelers or so.

One can also book through a human travel agent or reservationist instead of online. Let the person know the purpose of your travel and the number of people traveling with you to be able to avail of discounts.

Group travelers can avail of discounts to any destination the airline flies to. It is not limited to the US territories alone. It extends to their flights in Europe, Asia, Africa and other wonderful destinations the couple choose to celebrate their wedding.

The Measurable Effects of Sales Promotions

Sales promotions are easier to control and implement. Also the results are easier to measure particularly when it comes to the increase in volume sales.

Sales promotions are marketing strategies adopted by the company for various reasons. Most companies use the ability to deliver volume sales to attain a certain result or results.

Reasons for Sales Promotions

This could be a way of monitoring the performance of product management. Since sales promotion can possibly provide immediate impact on consumer sales, it is not unusual for product managers to use these strategies to attain their sales objectives.
Also, companies have to cope with pressure on sales margins which they can achieve through paying closer attention to cost-effective sales volume. Since the results of using sales promotional techniques can be determined accurately, product management can easily predict sales volumes.
And more importantly, sales promotions are not only effective in attaining short-term sales they are also more cost-effective compared to other integrated marketing communications tools such as advertising. The progressive fragmentation of audiences and the increase in media costs have tipped the balance in favor of sales promotion techniques which are more likely to deliver demonstrable results.
Popularity of Sales Promotions

The reason sales promotions are gaining popularity is due to the fact that product and sales management are very confident in their ability to handle the techniques of sales promotion. Other forms of integrated marketing communication tools need to go through a lot of thought and internal debates before funds are allocated or decisions are arrived at.

Product managers also are more in control of the determination and implementation of sales promotional activities. They have a freehand when it comes to what sales strategies to use.

The importance of sales promotions as an integrated marketing communications tool could be attributed to the the increase in number of specialist sales promotions agencies operating in certain places. In the past, sales promotion was viewed as part of other marketing communications techniques. Today, it is one of the stand-alone effective marketing tools.

Disadvantages of Sales Promotions

On the downside, the sales promotions, unlike other integrated marketing communication tools, work often on a short-term basis only.
Also, unlike advertising or public relations, for instance, sales promotions strategies may have no lasting impact on the brand.
Research conducted by Ehrenberg et al. (1991) showed that "Consumer promotions have large immediate sales effects, but do not appear to be brand building."
A similar study of 25 grocery brands across four countries showed that:

- For established brands, sales are not constantly high after the sales promotion is over. The benefit only lasts the length of the sales promotions and a negligible increase of just 1 per cent in sales was noticed.

- Buyers who bought during the sales promotions are actually familiar with the brands. Therefore, sale promotions have not really attracted new, additional buyers or encouraged brand switching.

- Price promotions only cater to a limited number of customers, usually 10-20 percent.

In conclusion, it can be gleaned that sales promotions do not really have long-term impact on sales. Increases in sales often last only during the entire period of sales promotions. Also, no after-effect on consumer loyalty is noticeable because the majority of extra buyers in a sales blitz have tried the brand already. Around 80-90 per cent said they bought the brand within the last twelve months.

Sales promotions may be effective in the short-term but these marketing strategies do not have long-term impacts.

Audit on Nike's Marketing Strategies

Nike implemented a number of marketing strategies to sell its products. One of the most important consideration is its marketing mix, better known as the 4Ps.

Nike is a global sports shoe giant company. It is the largest seller of athletic footwear in the world, holding the lion share of 33% of the global market. The company has production facilities in Asia, sales facilities in almost 200 countries, and customer service and other operational units worldwide.

The marketing mix or the 4 Ps of Marketing are Product, Price, Place (distribution) and Promotion. Nike's 4Ps are the following:

1. Product

Nike offers a wide range of shoe, apparel and equipment products, all of which are currently its top-selling product categories. Nike started selling sports apparel, athletic bags and accessory items in 1979. Their brand Cole Haan carries a line of dress and casual footwear and accessories for men, women and children.

They also market head gear under the brand name Sports Specialties, through Nike Team Sports, Inc. They sell small amounts of plastic products to other manufacturers through Nike IHM, Inc. Bauer Nike Hockey Inc. manufactures and distributes ice skates, skate blades, in-roller skates, protective gear, hockey sticks and hockey jerseys and accessories.

2. Price

Nike’s pricing is designed to be competitive to the other fashion shoe retailers. The pricing is based on the basis of premium segment as target customers. Nike as a brand commands high premiums. Nike’s pricing strategy makes use of vertical integration in pricing wherein they own participants at differing channel levels or take part in more than one channel level operations. This can control costs and influence product pricing.

3. Place

Nike shoes are carried by multi-brand stores and the exclusive Nike stores across the globe. Nike sells its product to about 20,000 retail accounts in the U.S. and in almost 200 countries around the world. In the international markets, Nike sells its products through independent distributors, licensees and subsidiaries. Independent distributors need not adapt to local pressures because the 4Ps of marketing are managed by distributors.

4. Promotion

Promotion is largely dependent on finding accessible store locations. It also avails of targeted advertising in the newspaper and creating strategic alliances. Nike has a number of famous athletes that serve as brand ambassadors such as the Brazilian Soccer Team (especially Ronaldino, Renaldo, and Roberto Carlos), Lebron James and Jermane O’Neal for basketball, Lance Armstrong for cycling, and Tiger Woods for Golf.

Nike also sponsors events such as Hoop It Up and The Golden West Invitational. Nike’s brand images, the Nike name and the trademark swoosh, make it one of the most recognizable brands in the world. Nike’s brand power is one reason for its high revenues. Nike’s quality products, loyal customer base and its great marketing techniques all contribute to make the shoe empire a huge success.

What is Marketing

Marketing nowadays is made easier and faster with the aid of internet technology. Internet technology particularly affects the marketing mix or 4Ps of products/services.

Marketing means the utilization of marketing mix to stimulate exchange of goods, services or ideas among individuals and organizations. Learn That website has this to say about marketing “Marketing includes identifying unmet needs; producing products and services to meet those needs: and pricing, distributing, and promoting those products and services to produce a profit.”

Once goods and services are produced they do not remain within the company for long. This is where marketing becomes necessary. They need to be promoted and sold in order to generate income for the company. The business cycle starts with production, marketing, sales then go back to production.

Importance of Marketing

Marketing is important because marketing drives the sales of the products or services of company. Without these marketing ploys, sales would not follow. Or, if sales do occur it would be minimal compared to using marketing strategies.

Marketing of products and services are made easier by today’s technology particularly the internet. Companies currently make use of one of the greatest resource in our generation – the internet phenomenon. Technology has certainly make things easier for people to communicate, transact business anywhere in the world.

The Effect of Internet on the Marketing Mix - 4 Ps

The company’s marketing strategies will not be complete without a marketing mix. The marketing mix refers to the basic, strategies of a marketing plan. It is also known as the Four P's, the marketing mix elements are product, price, place and promotion.

Marketing mix is definitely affected by the internet technology. Benefits from online access are reaped by both the customer and organization. Transactions are being carried out in the net making it easier for both to sell and buy goods or services.

Products - with the aid of internet technology, determining the products or services that would most likely sell or flop among customers is becoming easier. Clients can also check the products being offered by a particular firm. At the same time, firm can readily make available the list of products or services they offer through the internet.

Pricing - another important element of marketing. Marketing strategies should include the proper pricing of products. Affordable and reasonably-priced products often attract attention. For companies that do the bulk of their marketing online, it is easier to reduce the price of their commodities or services because advertising expenses are effectively lessened by technology.

Place - this is the marketing aspect where probably most companies see the most benefit using internet technology. Selling is no longer contained to a physical place such as stores or in malls; the internet marketing of these companies allows the customer to do transaction online.

The internet makes transfer of information faster and easier. Orders are made in real-time. The internet stores are open 24/7 even if the physical store closes. Therefore, the opportunities for more sales and profit for the sellers are greater.

Promotion - since more and more people are using the internet, a wider base of audience is being reached by internet promotions. There is no limit on the scope and breadth of their promotions since there are no physical barriers to contend with. All businesses can offer their products and services to a broader range of audiences of people from different countries.

The convenience offered by the internet makes products and services readily available without exerting a lot of physical effort such as driving to the store.Therefore, internet technology greatly facilitates the purchase of goods or service both for the customers and the business.

What are Sales Promotions

Sales promotion is one part of the promotional mix that is becoming an important tool in Integrated Marketing Communication. This marketing strategy help boost sales.

Sales promotion is an important tool in Integrated Marketing Communication. It provides several distinct benefits in the achievement of company objectives that may account for it becoming one of the fastest growing IMC tools. It is one of the four aspects of promotional mix. Advertising, personal selling, and publicity/public relations are the other three.

Uses of Sales Promotions

First, they effectively increase the level of company’s profits because they allow price discrimination. This way, sellers can sell their products at a lower price without incurring a loss.

Second, sales promotion s can influence trade and customer behavior. There are different purposes for doing sales promotions. It could be to increase the number of customers, boost sales, attract new customers, to compete effectively or reward loyal customers.

Sales Promotion Strategies

One of the trademarks of sales promotions is in providing incentives to satisfy the needs of consumers. This growth in marketing strategy is spurred by the changing attitudes among marketers. Sales promotion strategies employed by firms to attract customers include:

1. Price discrimination – promotions allow companies to use price discrimination by charging different prices to different customers depending on the price sensitivity of the said target market. Coupons and special prices, for instance, are directed to the price-sensitive consumers of the market who are attracted to such sales promotion strategy. Money-off strategies can be readily implemented. The impact of this strategy is huge because it is very appealing to all kinds of consumers.

2. Coupons – this is one way of providing money-off offers to buyers. The coupon could be found in the manufacturer’s product or using other means such as magazines and newspapers. Some use door-to-door distribution of coupons.

3. The Pack – this is bonus or multi-packs. It is similar to price discount since if you buy in packs or bulk, there is an additional product at no extra charge. It could either be a bigger product at a similar price or an additional product included in the pack with no extra cost.

4. Free gifts – companies offer free gift items together with the product. For instance, a free toothbrush when buying a large pack of toothpaste.

5. Free mail-ins – this is using proofs of purchase in exchange for a gift item. The customer needs to make several purchases in order to have proofs of purchase and so he/she can redeem the free gift.

6. Self-liquidating offers – this is when a consumer will pay for only a fraction of the total price of the item if he/she can present proof of purchase of a product. For instance, a bracelet worth $30 will be sold at $15 plus proofs of purchase of a certain item.

7. Contests and competitions – consumers are offered a prize of sizeable amount. It could be a car or house and lot if he/she purchases certain items.

Sales promotion techniques vary from store to store. They are limited only by the creativity and imagination of the marketing strategist. If done well, this marketing strategy could help stimulate sales.

The Marketing Strategies of Gucci

The House of Gucci, or simply Gucci is one of the more established premium fashion brands in the world. Its success depends largely on its effective marketing strategies.

The House of Gucci or simply Gucci is an Italian fashion icon company. Founded by Guccio Gucci in Florence, 1906, it is now the most famous luxury brand in the world.

Gucci earned US $ 7 billion in revenues in 2006. It ranks 46th in Business Week’s Top 100 Brands. It now has 425 stores worldwide and a number of franchisees and high-end department stores that carry its brands.

Gucci, being one of the premium brands, has to contend with a number of factors both internal and external in order to maintain its current status. The following is the analysis on Gucci’s strengths, weaknesses, opportunities and threats.

SWOT Analysis of Gucci

Strengths

The strength of Gucci is in its established, very strong brand image and international presence. Gucci has also the ability to control its distribution channels. This is part of Gucci’s defensive strategy in the chain value to capture the value added instead of giving it to the middlemen such as suppliers and retailers.

The company has also increased the number of their Directly Operated Stores (DOS) as part of the defensive strategy of taking more control of the distribution process. The 2003 figure showed that DOS accounted for 61.3% of revenues compared to a much lower 32.5% in 1999.

Its aggressive strategy accomplished through diversification and communication is also another of Gucci’s strengths. Gucci changed its strategy of carrying a single brand to branching out to a multi brand group. This strategy is also adopted by other conglomerates such as Louis Vuitton and Prada.

Some luxury companies use the strategy of focusing only on one brand and add other business segments such as what Armani, Polo Ralph Lauren, and Versace did.

This strategy is done in order to allow the positioning of the brand in the industry to differ depending on the number of brands and the number of business segments the company wants to compete in. This is the idea behind focus (mono brand) versus diversification (multi-brand). Gucci Group has more than 10 brands, including Gucci, Yves Saint Laurent, YSL Beauté and Sergio Rossi.

Weaknesses

The weaknesses of Gucci include instability in management and financial base. The instability of its management can affect the group’s corporate strategy and vision.

The financial base is weak and alarming, with a long term debt increase from $17 million in 1998 to $143 million in 1999 and to $1.3 billion in 2003. Some brands in the Gucci group’s portfolio are still not profitable, and there is a need to promote and market them aggressively.

Opportunities

Opportunities for Gucci abound especially in the emerging luxury markets in growing economies from Asia such as India and China. People who come from these places who recently amassed huge wealth due to the excellent performance of the economy would definitely want to try luxurious brands such as Gucci.

There is opportunity in the consolidation of other brands too. The opportunity exists in creating competitive advantage in different business segments. There are various business segments Gucci can venture into should the need to expand and create more luxurious products arise.

Threats

The luxury goods carry premium products designed for very wealthy individuals. This demanding market spares on expense to get the best product in terms of quality, style and design. Price, therefore, is not a basis of competition in this kind of industry.

Competition largely exists on how potent and valuable the brand image has become. This is the focus of Gucci’s thrusts. Its competitor Louis Vuitton may have made its mark in size with more than 50 luxury brands in its belt and sales of 12.6 billion euros in 2004 alone but it is not exactly the single dominant player in the market.

This is because in the luxury products market, companies can carry several brands and business segments which could change their positions depending on the segments such as leather & shoes, cosmetics, jewelry & watches, wine and spirits and others.

Competition is also effectively minimized by the intense rivalry of established luxury goods. New firms would definitely find it next to impossible to penetrate such an exclusive market. The cost of maintaining and promoting this image are also prohibitive.

Companies are forced to invest huge money in brand promotions in order to maintain their image. Expenses such as advertising and marketing expenses, acquisition of competitors, control of the distribution channel and other strategies take the bulk of company’s operating budget.

The barriers to exit in this industry are low which means that survival is for the fittest. If the company cannot compete with other players in the industry then it has to fold or sell to other bigger firms which make exit quite easy and quick.

In this industry, the barriers to entry are really high and the barriers to exit are low, therefore only the select few can maintain their position in the market, while others could give up altogether or are bought by bigger firms.

Also, luxury goods do not have direct substitutes like other ordinary goods but the threat could come from imitation. Counterfeits often penetrate the market. This could take away a portion of the sales that should go to luxury goods companies.

There is also the threat of substitutes to contend with. These are products that are considered ordinary or the medium brands but can eventually expand their product lines to premium brands in the future such as Zara and Gap.

Internal threat could also come from French holding company Pinault-Printemps-Redoute (PPR) who currently owns 68% of Gucci’s stocks.

Benefits of Sales Promotions

Sales promotion is an Integrated Marketing Communication strategy that is said to produce several benefits to the business.

Sales promotions produce very pronounced effects to businesses. It is undeniable that sales promotions offer manufacturers a series of benefits which other forms of marketing communications cannot duplicate.

Increase in Profit Levels

Sales promotions enable companies to stand out in a competitive retail environment. This is done by creating on-shelf differentiation between their products and those of their competitors. Real product differentiation is quite hazy these days due to the convergence of technology.

Since the appeal of retailer products is to a huge extent determined by price, sales promotions enable companies to adjust the retail price of the product for short periods of time and with minimal price difference.

Sales promotions aim to increase sales in the short-term. Mass-production techniques are now usual in the business environment. This causes an increase of competition for market share. Sales promotion techniques enable increases in sales volume while at the same time improving the market share of the company. For manufacturers, it could also help in the using excess manufacturing capacity by creating more products.

Influence Trade and Customer Behavior

Price promotions, one of the functions of sales promotions, allow companies to change prices depending on supply and demand forces without changing permanent list prices. These changes in price enable companies to influence trade and customer behavior.

This is because price promotions enable companies to come up with strategies that would increase sales during the lean season. Price reductions during slow sales enable companies to attract more consumers to buy their products.

For instance, when foot and mouth disease became a problem, consumers refrained from buying pork products. As a way to attract more buyers to their products, companies reduced their prices to almost half of the original. Within days, sales had recovered.

Since original prices are often priced high in order to cope with sudden fluctuations in the market such as price controls, to offset rapid increases in commodity prices and to determine sustainable price levels, reducing prices then would not affect profits severely.

Sales promotion costs depend to a large extent on volume. Small businesses are able to compete against bigger brands by using smaller budgeted on-shelf sales promotional activity.

New products that are intended for smaller markets would also benefit from sales promotion activities instead of spending on large-scale advertising. This is particularly applicable in markets where the product idea is quite familiar to potential buyers, a store-based sales promotion may be all that is necessary to introduce the said product.

Retailers could also make use of this strategy. Encouraging consumers to try new products and discounting retail inventories of obsolete products, price promotions effectively lessen the retailer’s risks.

Sales promotions enable consumers to try out different products thereby creating more consumer choice. On-shelf differentiation of any product category becomes more diverse due to the different sales promotional techniques. Since different items are on promotion every week, consumer choice is increased in the process and there will be more options to buy more products.

Short-term sales promotional activity may reduce out-of-stock problems since retail can increase purchases due to an increase in sales. Sales promotions also enable the trade to offer temporary displays of the products, price cuts and/or free advertising, which could result in more sales. These activities could help customers take notice of otherwise unnecessary products.

Sales promotions could increase demand of the product by encouraging consumers to try out new products that are being advertised. Advertising and promotions together would create the maximum impact to the desired target market.

Providing good, irresistible deals to consumers will force them to make short-term decisions. The consumers usually based their decisions on the price of the product therefore with reduced prices, consumers might just be forced to make purchases even if they did not originally intend to do so.