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Marketing Strategy of Christian Dior S.A.

Marketing Strategy of Christian Dior S.A.

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Anjali Khurana
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Marketing Strategy of Christian Dior S.A. - December 15th, 2010

Christian Dior S.A. (more commonly known as Dior) is a French company which owns the high-fashion clothing producer and retailer Christian Dior Couture, as well as holding 42% of LVMH Moët Hennessy • Louis Vuitton, the world's largest luxury goods firm.[3][4] Both Dior and LVMH are controlled and chaired by businessman Bernard Arnault. The Dior label is the namesake of designer Christian Dior who launched the haute couture empire in 1946. Christian Dior Couture, a division of the whole House of Dior, designs and produces some of the world's most coveted haute couture, as well as luxury ready-to-wear fashion, menswear and accessories. Today, Dior operates about 160 boutiques worldwide with plans to open more in the coming years.

Competitors to the House of Dior include, among many, the fashion houses of Chanel, Louis Vuitton, Yves Saint Laurent, Gucci, Versace, and Prada.[5]

Celebrities such as Madonna, Blake Lively and Ziyi Zhang have all been seen wearing the brand.



Statistics:
Public Company
Incorporated: 1946 as Christian Dior Ltd.
Employees: 55,179
Sales: EUR 12.56 billion ($11.47 billion) (2001)
Stock Exchanges: Euronext Paris
Ticker Symbol: CDI
NAIC: 315232 Women's and Girls' Cut and Sew Blouse and Shirt Manufacturing; 315233 Women's and Girls' Cut and Sew Dress Manufacturing; 315234 Women's and Girls' Cut and Sew Suit, Coat, Tailored Jacket and Skirt Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing; 316991 Luggage Manufacturing; 325620 Toilet Preparation Manufacturing; 551112 Offices of Other Holding Companies


Company Perspectives:
Christian Dior has engineered a remarkable commercial breakthrough based on top quality, highly creative products that appeal to a youthful, refined clientele. The company is undoubtedly the biggest hit of today's fashion world.


Key Dates:
1941: Christian Dior becomes design assistant for Lucien Lélong.
1946: Backed by Marcel Boussac, Dior launches his own fashion house.
1947: Debut of Dior's "New Look" line revolutionizes women's fashion.
1948: Company launches Christian Dior Perfumes.
1949: Dior opens first boutique in New York.
1950: Company begins licensing Dior name.
1952: Company opens London boutique.
1957: Christian Dior dies of a heart attack.
1958: Yves Saint Laurent becomes lead designer for Dior, launching his own career.
1984: Bernard Arnault acquires failed Boussac group--including control of Christian Dior--for one franc.
1990: Christian Dior acquires controlling share of Moët Hennessy Louis Vuitton, founding the LVMH luxury goods empire; begins cutting back number of Dior licenses.
1996: Arnault names John Galliano as lead designer in order to revive Christian Dior image.
1997: Dior buys back control of its ready-to-wear line and retail chain, including 13 stores in Japan.
2001: Hedi Slimane is named to create new men's fashion line; company launches new retail concept, Christian Dior Haute Joaillerie.


Company History:

Christian Dior S.A. remains a leader in the world of fashion after more than 50 years. Yet Christian Dior has grown far beyond its high fashion origins to become one of the world's leading luxury goods holding companies, through LVMH Moët Hennessy Louis Vuitton, led by Bernard Arnault. While Christian Dior continues to lend its name and prestige as the parent company to Arnault's luxury goods empire, it remains a tiny part of the company's overall sales. With EUR 350 million in sales, Christian Dior Couture represents just 2 percent of the company's total sales of more than EUR 12 billion in 2001. Christian Dior S.A. is organized into two main divisions: Christian Dior Couture and LVMH. The latter includes holdings in Wine & Spirits (Moët & Chandon, Dom Pérignon, Veuve Clicquot, Krug, etc.); Watches & Jewelry (TAG Heuer; Ebel; Zenith); Fashion & Leather Goods (Louis Vuitton, Givenchy, Donna Karan, Christian Lacroix, Kenzo); Selective Retailing (DFS; Sephora; Le Bon Marché; La Samaritaine); and Perfumes & Cosmetics (Parfums Christian Dior; Guerlain; Parfums Givenchy; Kenzo Parfums). Other LVMH interests include Art & Auction magazine and the Tajan art auction house. Yet Christian Dior Couture remains the company's flagship--and icon of the worldwide fashion industry--and the primary subject of this profile. John Galiano has served as the fashion house's artistic director since 1996 and is credited with revitalizing the company's image. Since 2001, Galiano has been seconded by Hedi Slimane, in charge of creating a new men's line for the house. In addition to its haute couture apparel, Christian Dior operates a network of 130 boutiques around the world.

A Winding Path to Fashion

Christian Dior was born in 1905. As heir to a family fortune built on fertilizer and chemicals, Dior had little ambition to finish college, instead whiling away his 20s in Paris bars in the company of poets and artists. Dior dabbled in art, and in 1928, launched a gallery financed with a large gift from his father. But when heavy borrowing and the Great Depression combined to bankrupt the family business in the early 1930s, Dior's family was forced to sell homes, furniture, jewelry, and other heirlooms.

Dior moved in with a friend in Paris and decided to utilize his artistic talents in the fashion industry. Beginning in the mid-1930s, he designed on a freelance basis, selling drawings of hats and gowns to magazines and couture houses. He snared a full-time position with Robert Piguet's fashion design house in 1938, but was soon drafted into service for World War II. Assigned to "farm duty"--helping farmers' wives and other short-handed agriculturists tend their land--Dior was fortunate to be in unoccupied Provence when the German Army advanced in June 1940 and was subsequently discharged from the service. He returned to Paris in 1941 and found work as a design assistant with the couture house of Lucien Lélong, designing custom-made dresses, suits, and ball gowns for some of the wealthiest women in the world.

Postwar Origins of the House of Dior

In 1946, French fabric maven Marcel Boussac--then the nation's wealthiest man--offered to back Dior's launch of his own maison de couture. Though the new house of fashion became part of a vertically integrated textile business, it was initially a vanity property for Boussac, comparable to his world renowned stable of racehorses. Christian Dior Ltd. started out that year with 85 employees, capital of FFr 6 million, and "unlimited credit." In exchange for his creative genius, Dior negotiated a generous salary; a significant, though not controlling, stake in the firm; legal status as its leader; and one-third of pretax profits. It was quite an unusual arrangement, given Boussac's legendary--and eventually self-defeating--appetite for control. The company was a majority-owned affiliate of Boussac Saint-Freres S.A.

The designer introduced his first and most famous line--dubbed the "New Look" by Carmel Snow of Harper's Bazaar--in 1947. The collection was a striking refutation of the war's deprivation: whereas rationing restricted the amount of fabric used in a dress or skirt, Dior used an extravagant 20 yards of only the finest fabrics in his long, wide skirts. With help from elaborate undergarments, the dresses emphasized the feminine figure, from the tiniest of waists to peplum- or tulle-enhanced hips and tight-fitting bodices, often with deep décolletage.

The line was an immediate and nearly complete success, garnering a clientele ranging from European royalty to Hollywood starlets and generating sales of FFr 12.7 million by 1949. Dior opened a New York outlet before the year was out and established London operations in 1952. From the outset, fully half of the company's sales were made in the United States. By the end of 1953, the company had operations in Mexico, Canada, Cuba, and Italy. Women who could not afford the haute couture copied it at home. Soon enough--and to Dior's chagrin--knock-off artists did the "dirty work" for them. Eventually, the maison fought fire with fire, establishing a prêt à porter (ready to wear, abbreviated in the trade as "rtw") line of somewhat less expensive versions of the couture line. The designer stayed with the "New Look" for seven years, becoming a virtual dictator of hem lines and lengths in the process.

Diversification, Licensing Speed Growth in the Late 1940s

Again backed by the Boussac fortune, Dior launched Christian Dior Perfumes Ltd. in 1948. The namesake owned one-fourth of the new venture, a childhood friend who managed France's Coty perfumery held another 35 percent, and patron Boussac owned the remaining stake. By 1950, a licensing program devised by Dior General Manager Jacques Rouët put the now famous name on dozens of accessories, including ties, hosiery, furs, hats, gloves, handbags, jewelry, lingerie, and scarves. While denounced by Dior's colleagues in the French Chamber of Couture as a cheapening of the high-fashion industry's image, this licensing scheme would become a cornerstone of the company's long-term success and a trend that would only grow stronger in the decades to come.

By the mid-1950s, the Dior empire included eight companies and 16 affiliates, and employed 1,700 people on five continents. In 1949 alone, Christian Dior fashions constituted 75 percent of Paris fashion exports, and 5 percent of all French export revenues. Though Christian Dior launched several successful lines--including the "A," "Y," "Arrow," and "Magnet"--from 1954 to 1957, none would surpass the initial introduction of the "New Look" in impact. By the time the house celebrated its tenth anniversary in 1957, it had sold 100,000 garments. Though in his early 50s, Dior was by this time preparing for his retirement, having suffered two heart attacks. A third seizure took his life that same year, ironically while he was on a recuperative trip to Italy. Though his couture career spanned scarcely a decade, he had established himself as one of the modern era's best known fashion designers. Writing for Contemporary Fashion, Kevin Almond asserted that "By the time Dior died his name had become synonymous with taste and luxury."

New Generations of Design Leadership After Dior's Death in 1957

The founder's death left the house in chaos. Jacques Rouët considered shuttering the worldwide operations, but neither Dior's licensees nor the French fashion industry--which owed 50 percent of its export volume to the House of Dior--would consider it. Instead, Rouët--who would continue to guide the company's day-to-day operations into the 1980s--promoted 22-year-old Yves Saint Laurent, whom Dior had hired just two years previous, as lead designer. Launched in 1958, the young designer's trapeze line was successful, but his 1960 "bohemian" look met heavy criticism from the press, especially the influential fashion industry magazine Women's Wear Daily. When Saint Laurent was drafted into the armed service that year (he went on to found his own house in 1962), he was succeeded by Marc Bohan, another protégé of Dior hired to head the London outlet shortly before the founder's death. Bohan would go on to serve Dior until 1989, far longer than the founder. Contemporary Fashion's Rebecca Arnold credited Bohan with keeping the House of Dior "at the forefront of fashion while still producing wearable, elegant clothes," and Women's Wear Daily, not surprisingly, claimed that he "rescued the firm."

Troubles at Dior's parent company, Boussac, would visit drastic change on the maison de couture in the 1980s. The roots of the problems reached back to the 1970s. Still owned and led by its octogenarian founder (known as "King Cotton" in his home nation), Group Boussac had by this time grown to encompass 65 textile mills and 17,000 employees. Despite its size, several imperatives of the maturing industry--consolidation, competition from imports, the shift to synthetics--had knocked Boussac from the top of France's fabric heap to a struggling number five by 1971. Reluctant to close money-losing plants and lay off workers, King Cotton did little to prevent his textile operations from suffering heavy losses in the 1970s. Money generated by his remaining one-third share of Dior helped to prop up the Boussac group for several years, and the parent company raised millions by selling its stake in Dior Perfumes. In 1981, the government-owned Institute de Development Industriel took control of the insolvent company, infusing FFr 1 billion (almost $200 million) in the company from 1982 to 1985. When Boussac finally went bankrupt, a group of investors led by Bernard Arnault acquired it for "one symbolic franc" in December 1984. The 34-year-old Arnault divested the textile group's industrial operations, focusing on its Bon Marché department store and Christian Dior.

Evolution into a Luxury Powerhouse in the 1980s

Under Arnault, Dior became the cornerstone of one of the world's largest and most important fashion companies. The new leader formed Christian Dior S.A. as a holding company for the fashion house, then used the holding company as a vehicle to purchase a controlling stake in Moët Hennessy Louis Vuitton (LVMH) in 1990. (His Au Bon Marché and Financière Agache companies were also involved in the complex acquisitions.) Before long, Arnault had woven an intricate web of high-end brands, including the Christian Lacroix and Celine fashion houses; the Hubert de Givenchy fashion and fragrance operations; and the Dior fragrance business. By 1991, when Arnault sold a minority stake in Dior on the public market, LVMH had grown to become France's top luxury goods group and its second largest publicly traded firm.

Dubbed "king of luxury goods" by Time, Arnault took part in the supervision of Dior's design direction as well as its operations. Though the couture division was by this time an unprofitable operation, Arnault considered it a fundamental element of the Dior brand cachet. In 1989, he hired Italian designer Gianfranco Ferré to succeed Marc Bohan as the maison's artistic director. In keeping with his standing as the first non-Frenchman to guide the house, Ferré broke from the romantic and flirtatious traditions set by Dior and Bohan, respectively, opting instead to continue in his own well-established vein with a collection described by Kevin Almond in Contemporary Fashion as "refined, sober and strict."

Arnault even served as managing director of Dior from the December 1990 firing of Beatrice Bongibault to September 1991, when he hired former Au Bon Marché President Philippe Vindry. Vindry's strategies included a 10 percent average reduction in the retail price of Dior prêt à porter. (A wool suit still cost more than $1,500.) The change helped increase sales at Dior's headquarters store by 50 percent from 1990 to 1991. Vindry also reorganized Dior into three divisions: women's ready-to-wear (also encompassing lingerie and childrenswear), accessories and jewelry, and menswear. Management also strove to rein in internal management of the Dior brand and image by reducing licensees and franchised boutiques. Arnault and Vindry nearly halved the number of Dior licensees from 280 in 1989 to less than 150 by 1992, opting for quality and exclusivity over quantity and accessibility. By mid-decade, Christian Dior S.A. had added company-owned stores in Hong Kong, Singapore, Kuala Lumpur, Cannes, and Waikiki to its core shops in New York, Hawaii, Paris, and Geneva. This strategy held out the potential to increase direct sales and profit margins while maintaining high-profile locations. François Baufume, who succeeded Vindry as managing director of Dior Couture in 1993, continued to reduce licensees, which numbered around 120 by mid-decade.

Christian Dior Couture's sales increased from FFr 673 million ($129.3 million) in 1990 to just over FFr 1 billion ($177 million) in 1995, while net income grew from FFr 115 million ($22 million) to FFr 156 million ($26.9 million).

New Designer to Lead House in the Late 1990s

In 1996, Arnault "ruffled some French feathers" by appointing British designer John Galliano to succeed Gianfranco Ferré as Dior's head. Arnault noted that while he "would have preferred Frenchmen," he chose a Briton "for a very simple reason: talent has no nationality." The CEO even compared maison Dior's newest designer to the founder in a December 1996 Women's Wear Daily article, noting that "Galliano has a creative talent very close to that of Christian Dior. He has the same extraordinary mixture of romanticism, feminism, and modernity that symbolizes Mr. Dior. In all of his creations--his suits, his dresses--one finds similarities to the Dior style."

Galliano was instrumental in reviving Dior's image--stirring up continued controversy with such events as a "homeless show," featuring models dressed in newspapers and paper bags, and an "S&M show." The resulting controversy helped stimulate sales of Dior clothing, as well as accessories and perfumes. Meanwhile, President and CEO Sidney Toledano continued trimming away at the company's list of licensees, taking control of the ready-to-wear clothing and accessories bearing the Christian Dior brand name. Dior also adopted a policy of taking control of the Dior franchise- and licensed retail network, buying up 13 stores from Japan's Kanebo in 1997, and acquiring its Spanish distributor in 1998, among others. The company began opening new stores, boosting its chain of retail boutiques to 130 by 2002.

Christian Dior Couture had built its fame on women's fashions. But in 2001 the company gambled that it could become equally famous for its men's fashion. In that year the company hired Hedi Slimane, who, at age 32, had already gained famed as a designer for Yves Saint Laurent. Slimane's first show in January 2001 was an instant success and the company quickly noted among its customers such luminaries as Mick Jagger and Brad Pitt. In that year, also, the company launched a new retail concept, Christian Dior Haute Joaillerie, under the artistic direction of Victoire de Castellane, in an effort to lend the Christian Dior prestige to its luxury jewelry market. These efforts helped the division's sales begin to climb, nearing EUR 300 million in 2000 and topping EUR 350 million by 2001. By then, Christian Dior Couture had beat the odds, reviving its image and reclaiming its place as one of the world's most innovative fashion houses.

Principal Subsidiaries: Christian Dior S.A. has more than 600 subsidiaries worldwide.

Principal Competitors: Bulgari S.p.A.; Cartier SA; Chanel S.A.; Gianfranco Ferre SpA; Gianni Versace SpA; Gucci Group N.V.; Hermès International; I Pellettieri d'Italia S.p.A.; LVMH Inc. (U.S.); Montres Rolex S.A.; Puig Beauty & Fashion Group; Compagnie Financière Richemont AG; S.T. Dupont S.A.; Tiffany & Co.
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