Google and its subsidiary, Motorola, recently announced that their new Moto X smartphone is “first smartphone ever to be designed and assembled in the U.S.A”. [1] This statement is clearly an attempt to attract consumers towards purchasing the phone.
From an American consumer’s perspective, the words “Made in America” may create a sense of patriotism or evoke images of American workers being treated and paid fairly. The consumer is now given the opportunity to support their people with the purchase of this phone. From an outsider’s perspective, this is a brilliant marketing campaign because Google has capitalized on a perceived notion and is profiting from it. The market for smartphones is extremely competitive, so what better way to differentiate your product than to give people a sense of empowerment that they may not necessarily receive from purchasing an iPhone or an Android device. Despite being assembled in the United States, a breakdown of the Moto X shows that it only costs 9% more to produce than Apple’s iPhone 5. [2] From an accounting perspective, a 9% increase is massive, but consider how many more units Google is able to sell and the strategy seems to pay off.
Original Article: Bloomberg
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[1] Motorola’s Moto X Product Page
[2] Teardown of the Moto X
French luxury good conglomerate, LVMH, is currently under fire as concern about the future of the company has been raised. Louis Vuitton, which makes up more than half of LVMH’s financial profits, is suffering from slow sales. [1]
Louis Vuitton suffers from brand saturation as the company has marketed itself to be a luxury brand that is available to middle to high-class consumers. This is a mistake because if middle-class consumers are hurt by a slow economy, Louis Vuitton’s profits will follow. The choice to market to a broader market has also reduced the brand’s prestige and has been affected by the production of counterfeit products. This failure to occupy a niche market and create new designs is now hurting the company, whereas ultra-luxury brand, Hermès, does not share this issue.
Despite this pessimistic outlook, LVMH can still recover. The conglomerate owns major fashion house, Dior, which could be a major outlet into the ultra-luxury market. Louis Vuitton now faces the choice of continuing with its current strategy or revamping the name into a more prestigious brand. While I believe the latter option is viable, it proves to be a gamble as there is no guarantee consumers will follow.
Original article: Reuters Canada
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[1] LVMH’s First Half of 2013 Financial Report