Tommy hilfiger casestudy Coursework Example | Topics and Well Written Essays - 1500 words

Tommy hilfiger casestudy - Coursework Example The CEO at Hilfiger shifted the bulk of design output to the European headquarters and this led to an overall price hike. For one thing, the costs of production in Europe are higher. Operational and distribution costs are also very high in Europe compared to the United States based on the different retail and wholesale systems. In the U.S., mid to high tier department stores are utilized to stock the merchandise and reach the customers. Due to the â€Å"mall† culture of United States, this strategy worked very well and at lower distribution costs the company could easily reach its target market. In contrast, the retail culture in Europe is very â€Å"small boutique†, where shoppers go to small, exclusive shops to buy clothing rather than bigger departmental chains. These chains, such as Galeries Lafayette in France, are costly distribution options. As a result, the associated costs spiked. To compete with European brands that are tagged at higher prices (up around $50 o n average on a single T-shirt, for example) Hilfiger merchandise was priced higher in Europe to make them competitive. Lastly, to convey the message of premium quality and compete with higher end European brands such as LV, Prada and Gucci, the company positioned the product in the top tier category and had to mark prices accordingly. In branding, the Law of Quality described by Al and Laura Ries (2009) shows that the higher the price of a brand, the greater the perception of quality. This law was seen in practice in the European Hilfiger market. The company has been able to establish a European customer base and market presence. As a result, the European market accounts for 40% of the total sales of the company. The American market has suffered due to lower pricing strategy and inability to compete on the fronts that the Hilfiger brand was traditionally known for. Competing on different price levels in different regions does not have as big an impact if the two are compared; howeve r, as standalone businesses, the European region has benefitted and North American region has suffered. 2. Hilfiger’s CEO would like to harmonise the European and U.S. collections by having Hilfiger move more upmarket in the US. What problems might the company face in doing this? What might it do to make this strategy successful? Building on the tested idea that higher prices are equated with higher quality, associations that the Hilfiger brand strives for, the company intended to move more up-market in the U.S. The major problems that might result from this strategy are mentioned below: Changes might hurt the overall brand. Branding is achieved through a consistent face of the company and its products. With standard designs in collections, it would be damaging in the long run for a brand to have a changed strategy and pricing policy in Europe and US. Resistance from the traditional buyer of Hilfiger. The traditional buyer comes to Hilfiger expecting the All-American, classic casual wear that is affordable. A higher price tag will disillusion the buyer, making him think the brand he loves to wear has changed and is not what he has always wanted. This will result in lost sales for the company. Lose the essence that made it famous. A higher price tag will demand a change in the design strategy also because charging a premium for the standard material and design will confuse the buyer. For example, when the company changed the logo design, a Hilfiger trademark, the company faced lower