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Chanel Case Study

Brief Introduction

Most current organizations have incorporated technology into their day-to-day activities while others have not yet embraced it. Is there any impact of technology on those organizations that have adopted such facilities? Moreover, what are the effects of technology on the companies from both logistical and financial perspectives? The paper is going to focus on Chanel S.A. It will provide the outline of its history and growth, strengths and weaknesses, financials analysis, external environment, business and corporate level strategies, implementations of the strategies as well as recommend further improvements that will help the establishment achieve higher profit margins. Different ways of employing technology in corporation activities will be presented in addition to the impacts it has had. Furthermore, other forms of technology, which are worth applying in logistics to advance the company’s performance in the world market, will be defined.

History and Growth of Chanel S.A.

Chanel S.A was founded by Gabrielle “Coco” Chanel in 1909 as a fashion and design company. The high-end fashion house has its headquarters in Paris, France and it specializes in luxury goods, fashion accessories, and ready-to-wear clothes, watches and shoes. Chanel is a private corporation; the co-owners are Alain Wertheimer and Gerald Wertheimer who are currently running it after the founder died in 1791, being still a designer of the House of Chanel. Her last work of design was the air hostess uniforms for Olympic Airways between 1967 and 1969. She was succeeded by Karl Lagerfeld who is currently the chief designer of Chanel. The company is known for its perfume No. 5 de Chanel and the little black dress, which is the most famous one for evening and cocktail party functions. Chanel has over 100 boutiques worldwide retailing the Chanel’s perfumes and off-the-peg clothes designs. When Gabrielle “Coco” Chanel became no more, Pierre Wertheimer bought her out and took control of the company since he was her business partner.

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Strengths and Weaknesses

Chanel has been in the market for the last 105 years. The Fashion House is known for its quality products. They are also the pioneers of pret-a-porter (ready-to-wear) clothing (Winkelman, 2000). Moreover, Chanel S.A. brags about its luxury brands of watches, perfumes, handbags as well as other apparels and various accessories. The house of Chanel endorsed spokespersons and models to foster marketing of the company. Some of them include Brad Pitt, Kate Moss and most recently Victoria Beckham amongst others (Dang, 2012). Additionally, the corporation enjoys the presence of a prominent and established designer Karl Lagerfeld who is responsible for new designs and attractive brands in the market (Koda, Bolton, & Garelick, 2005). Chanel has also made the name for itself due to its many outlets across the world. It operates near 310 Chanel boutiques: over 90 shops in Asia, more than 70 ones in Europe and over 128 in the USA.

However, Chanel has its weaknesses. Its products are highly priced. Thus, it affects the sales of the company. Most people are in the middle-income bracket, and they cannot bear the expense of those goods since the latter are expensive, luxurious, and only affordable to the wealthy. Furthermore, Chanel does not retail its items on the Internet. The absence of online services implies that the output units are limited in sales since one has to visit a Chanel store to buy those products. Hence, unavailability of online shops has limited the volume of trade of the company. Besides, the Chanel’s designer has his label and works for other fashion brands like H&H and Fendi as well, with the latter holding the direct competition with Chanel (Dang, 2012). Therefore, this rivalry affects the sales of Chanel S.A. products.

Financial Analysis

In 2014 Fiscal report as released by Bloomberg, Chanel had 40% growth that beat its competitors LVMH, L’Oreal, Prada, Kering, which had -7%, -0.3% -11% -8% respectively (Pendleton, 2015). The owners had a 13% rise in fortunes in the early months of 2014 as per the annual report 2014 released by Bloomberg. Thus, this increase in income made the company raise revenues of $7.5billion and the net profit of $1.4 billion in 2014 fiscal year. Therefore, this financial gain is the evidence that Chanel is highly ranked in the world market compared to its other competitors in the fashion industry. The Chanel brand was valued at $7.2billion in May 2016 by Forbes and ranked as the 80th most valuable brand on the Forbes top list. Chanel is one of the most praised luxury brands among the Chinese consumers (Forbes, 2016). In its current state, Chanel has the ability to maintain its reputation as the leading fashion house around the globe. All it has to do is to keep in mind accessibility if its products to clients and also consider revising the prices to make the items affordable to people of nearly all social statuses without compromising on its output quality.

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External Environment

Other fashion companies who are the direct competitors surround Chanel. They include Kering Holland N. V., PRADA SPA and MOET HENNESSY LOUIS VUITTON. Besides, these establishments are also prominent in the fashion industry, and as it was mentioned in the weaknesses section, most of these institutions have done so much in terms of technology and products accessibility to its clients worldwide. Their goods are pocket-friendly compared to those of Chanel. A fashion house such as Louis Vuitton has explored markets in South Africa where it has two stores in Johannesburg and Cape Town. Thus, this exposure of products in new markets has enabled it to acquire more customers around the globe. With regard to retail outlets in Africa, Chanel has three shops in South Africa; two of them are located in Johannesburg and one in Cape Town. In the aspect of the external environment, the House of Chanel needs to expand its selling places to other parts of Africa, India, and Russia where most countries are still developing so that the company will be able to maximize its sales.

Chanel Business Level Strategy

Chanel has employed a push business strategy in its business. Firstly, Chanel has a website where they post new products, information about the goods in order to familiarize its clients with upcoming items. The fashion house has also provided contact details where interested parties can reach the company at any time to make requests and ask questions. Moreover, Chanel has a subscription model of customer engagement to which the purchasers may subscribe to be able to get product reports and updates in real-time through their emails. Therefore, this direct client engagement has improved the customer base and helped win the trust of loyal buyers.

In addition, Chanel has its adverts in the famous fashion magazines, for example, the Vogue Magazine where the fashion establishment gets to show their products and receives an opportunity to spread information about its goods to the readers. The House has also been airing commercials with prominent celebrities starring, for instance, Nicole Kidman who promotes the Houses famous perfume Chanel No5. Chanel: Inspiration and Influence, 2010).

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Chanel S.A. has derived support of several models who are the ambassadors of its products. Hence, these endorsements are the good way of marketing the company and its products in the events on different occasions. Such personalities include Cara Delevigne, Angela Lindvall, and Ines de la Fressange among others who have been featuring in the Vogue magazine (Anderson, 2015).

Chanel generates some of its capital by hosting fashion shows, which are also a strategy of raising finances that is used to pay over 1300 employees across the world. Furthermore, the fashion show acts as a platform to display, advertise and retail its items, which reduces the cost involved in marketing.

Long ago the House of Chanel concentrated on women products, but in recent past, they have also included men accessories e.g. watches, shoes and perfumes, for example, the Allure perfume. Therefore, creation of these goods has helped Chanel diversify its market to attract more customers around the globe. With these business strategies employed by the House of Chanel, the targets of the company are achievable.
Chanel has its mission statement as

“To be the Ultimate House of Luxury, defining style and creating desire, now and forever.”
As it is commented by Jordan Reynolds (2013) in his article about Chanel, the aspect of style and luxury are attainable because they have one of the best designers in the world. However, to have the mission statement fulfilled in full they have to be more aggressive in getting loyal customers who will boost their sales into the future. Moreover, they have to invest in technological workforce by establishing a user-friendly online store where clients will not get products of their choice at any extra cost.

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Implementations

In order to to meet goals, Chanel has to provide capital for E-Marketing, which is gaining international popularity. The world has become a global village where nearly all people are connected to the Internet via their mobile phones and computers. The company’s customer target include upper-class individuals, fashionable women who appreciate luxury goods and those females who consider Chanel a symbol of elegance (Zou, 2014). Thus, this group of persons are social enthusiasts, which implies that they are reachable through E-Marketing. Additionally, they have to focus on men products since it is a category that they have not exploited fully yet.

Recommendations

Having analyzed the company, the management needs to re-examine the following matters to improve its sales:
They should diversify their products to cater all genders including children since the main focus is on women.
The management of Chanel should also invest in E-Marketing, which has the ability to reach many people across the world.

Chanel should set up stores in the developing countries, which will act as a new niche for their company.
They should invest in online shops with up-to-date products.

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