1. The worldwide expansion of luxury firms Forms, objectives, effects
Franck Delpal
Institut Français de la Mode – PARIS

2. Internationalization
CONTENT
Luxury
Internationalization
Retail 3 1 2

3. 1. European luxury on global markets
Luxury and internationalization go hand in hand systematically
The international trade was structured starting from the exchanges of luxury goods for three reasons :
When transportation costs are substantial, only products enjoying a positive or constant price elasticity of demand can be exported
The narrowness of interior markets
The link of luxury goods with culture and the fact that luxury goods have no equivalent abroad

4. 2. Internationalization and retail
The theoretical approaches :
Vernon’s product lifecycle model
The Uppsala Model (Johansson and Vahlne – 1977)
The Eclectic Paradigm (Dunning – 1988)

5. The eclectic paradigm (Dunning – 1988)
Ownership-specific advantages
International experience
Marketing skills
Unique know-how
Trademarks
Internalization advantages
Transaction costs theory
Location advantages
Potential of the host market
Country risk

6. The eclectic paradigm (Chan, Kim and Hwang – 1992)
Strategic variables of the industry
Global concentration
Strategic synergies and motivations
Variables linked to the environment of the companies
Country risk
Uncertainty of demand
Intensity of competition
Transaction-specific variables
Level of firm specific know-how
Tacit nature of know-how
Companies tend to proceed to integration of their subsidiaries when :
1/ Country risk is weak
2/ They have experiment in the country
3/ Global synergies and concentration are strong
4/ Firm know-how is tacit

7. The factors explaining a direct presence on global markets
The eclectic paradigm adapted to the fashion retail sector (Lu, Karpova and Fiore, 2011)
The factors explaining a direct presence on global markets
Company
Specific assets
Significant brand equity
High financial capacities
Strong international experience
Environment
Weak country risk
Cultural proximity
Weak governmental restrictions
Market
Strong potential
Small competition

8. The various forms of global presence
Exchange without controlling interest
Joint ventures (in-stores concessions)
Franchise agreements
Merger or takeover
Internal expansion
Flagship stores (Doherty, Moore and Doyle, 2010)

9. Cases of luxury companies
Europe
Americas
Japan
Asia-Pacific
RoW
Total
LVMH – Fashion and leather goods
29%
18%
16%
30% 7%
100%
Gucci
12%
36% 4%
Hermès
38%
19%
26% 1%

10. Source : Delpal, based on Hata (2004)
Louis Vuitton in Japan
Before1977
Manufacturing
Importation
Wholesale
Retail
Louis Vuitton France
Mitsui & Co
Sann Bros
Retailers (Department stores)
Manufacturing
Importation
Wholesale
Retail
Louis Vuitton France
Louis Vuitton Japan
Louis Vuitton Japan
Retailers (Department stores)
Since the 1980’s
Manufacturing
Importation
Wholesale
Retail
Louis Vuitton France
Louis Vuitton Japan
Louis Vuitton Japan
Louis Vuitton Japan 10
Source : Delpal, based on Hata (2004) 10

11. Hermès

12. Nb of Directly Operated Stores Nb of “Concessionnaires”
Hermès
Nb of Directly Operated Stores
Nb of “Concessionnaires”
Europe 71 56
Of which France 15 20
Italy 11
Germany 10 8
Americas 34
Of which USA 25 9
Asia 81 45
Of which Japan 28 22
China 17 4
Middle East 6
Oceania 7 2
Total
193
124

13. Gucci

14. 3. Retail and luxury
Downstream integration is one of the most important strategic evolution experienced by luxury companies since the late 1970’s
Several advantages :
A better capacity to differentiate the product
Suppression of bargaining power of the purchaser
Access to information concerning the marjet
Fixing of higher prices and margins
Higher cost of market entry