Emerging Market Entry Analysis

Current Markets: 267 Stores / 38 Countries

V. Pisipati & E. Molder | February 26, 2015

V. Pisipati & E. Molder | February 26, 2015

Market Entry: Mexico and Colombia

Market Opportunity:• 46% of population is 24 or under• 155,150 millionaires• Many luxury brands are already present• Increasing brand awareness and demand

Regulatory Evironment:• World-class transportation infrastructure• Economic stability and liberalization• Record $35.5B of FDI in 2013• FTA with 45 countries• Policies favorable to MNCs

ColombiaMarket Opportunity:• GDP per capita tripled in the past 10 years• More millionaires than Saudi Arabia and UAE• Competitors already doubling retail presence• 22% annual growth in shopping mall purchasesRegulatory Evironment:• Laws favorable to FDI and MNCs• Employment policies similar to USA• No restrictions on fund transfers• Improving IP protection; No import quotas

Mexico

SWOT Analysis: Mexico and Colombia

V. Pisipati & E. Molder | February 26, 2015

S WO T

Strengths

Opportunities Threats

Weaknesses

• Limited knowledge of brand within MX and CO

• First-mover disadvantage with e-commerce cost

• High import tariffs will impact pricing

• Potential confusion about French v. Japanese brand

identity in new market

• Development of local competitors – Kenzo

differentiation is based on aesthetic

• Currency fluctuations and inflation

• Maintaining a qualified sales team

• Growing upper-middle class and upper classes

• E-commerce adoption increasing

• First-mover advantage with e-commerce

• Operational efficiency – improving laws for MNCs

• Unique design aesthetic

• LVMH already has brands within markets

• Backing from LVMH group (financial, resources)

• More affordable price-point than high-luxury –

ability to capture “aspirational luxury” purchases

• Mexican and Colombian young-adults are buying more clothing in edgy or alternative designs, hipster aesthetics, and defining unique pesonal styles

• Due to proximity to the US, Mexican and Colombian trends tend to closely follow American trends

Brand Positioning:

V. Pisipati & E. Molder | February 26, 2015

Styled

Classic

Premium LuxuryPrice Point

Bran

d Ae

sthe

tic

$3,000

$3,000

HNWI’s

Total Population: 21.5 M

Population by Wealth ClassMexico City, Mexico

Population by AgeMexico City, Mex

Estimated Target Market:

575,400 x 16.4% = 94,365 Females575,400 x 15.7% = 90,337 Males

184,702 Individuals

Target Market: Mexico City, Mexico

V. Pisipati & E. Molder | February 26, 2015

Population by Wealth ClassBogotá, Colombia

Population by AgeBogotá, Colombia

10,237 Individuals

Target Market: Bogotá, Colombia

V. Pisipati & E. Molder | February 26, 2015

Estimated Target Market:

32,500 x 15.8% = 5,135 Females32,500 x 15.7% = 5,102 Males

Centro Commercial AndinoBoutique Size: 130 M2

Distributor and Franchisee:Executive S.A.S.

Monthly Rent: $16,470$122 / M2

Monthly Wages: $6,800Wage / Staff Member: $850 No. of Staff: 8

Franchise Setup: $340,500

Import Tariff: 15% - 20%

VAT at Sale: 16%

Retail and Distribution Strategy:

V. Pisipati & E. Molder | February 26, 2015

Mexico

Antara Fashion HallBoutique Size: 150 M2

Company-Owned Boutique:LVMH already in Mexico City

Monthly Rent: $21,000$140 / M2

Monthly Wages: $6,400Wage / Staff Member: $800 No. of Staff: 8

Store Setup: $400,000

Import Tariff: 11.5%

VAT at Sale: 16%

Colombia

V. Pisipati & E. Molder | February 26, 2015

Promotional Strategy:

MagazineAdvertising

Mexico / Colombia

Mexico / ColombiaColombia

Launch Events with Brand Ambassadors:

Eugenio Siller

Andres Mercado

Altaír Jarabo

Duina del Mar

Mexico: Colombia:

Questions

• http://mcgladrey.com/content/mcgladrey/en_US/what-we-do/services/tax/tax-alerts/mandatory-

electronic-filing-in-mexico-begins-in-january-2015.html

• http://www.worldbank.org/en/news/press-release/2013/10/28/mexico-among-the-top-improvers-

in-business-regulation-since-2005

• http://www.doingbusiness.org/Reforms/Overview/Economy/mexico

• http://www.economia.gob.mx/trade-and-investment/foreign-trade/international-trade-negotiations

• http://www.promexico.gob.mx/en/mx/tratados-comerciales-inversion

• http://www.tradingeconomics.com/mexico/foreign-direct-investment

• http://www.shift-schedule-design.com/Staffing_Calculator

• http://www.latameconomy.org/outlook/2011/the-middle-sectors-fiscal-policy-and-the-social-

contract/who-pays-the-taxes/

• http://www.state.gov/e/eb/rls/othr/ics/2013/204622.htm

• http://www.startupoverseas.co.uk/expanding-a-business-in-mexico/entering-the-market.html

• http://www.pwc.com/es_MX/mx/industrias/archivo/doing-business-maquiladora.pdf

V. Pisipati & E. Molder | February 26, 2015

Works Cited: