question archive W20540 LLADRÓ: JOURNEY OF A LUXURY PORCELAIN BRAND IN INDIA Ankita Tomar and Priyanka Joshi wrote this case solely to provide material for class discussion

W20540 LLADRÓ: JOURNEY OF A LUXURY PORCELAIN BRAND IN INDIA Ankita Tomar and Priyanka Joshi wrote this case solely to provide material for class discussion

Subject:MarketingPrice:13.86 Bought3

W20540 LLADRÓ: JOURNEY OF A LUXURY PORCELAIN BRAND IN INDIA Ankita Tomar and Priyanka Joshi wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs Copyright © 2020, Ivey Business School Foundation Version: 2020-07-02 According to The Economic Times, “India is now among the top five markets for the Spanish luxury figurine brand Lladró.”1 Headquartered in Valencia, Spain, the company officially entered the Indian market in 2006 through a joint venture (JV) to satiate the demands of Indian luxury buyers by offering a vast array of porcelain collections. Throughout its journey in the Indian market, Lladró SA (Lladró) embraced several strategies, such as offering an India-focused “Spirit of India” product collection, carefully crafting distribution through boutique stores in select cities and employing experience-driven marketing to attract buyers. “Some of our current deliberations include getting our brand into better locations, tapping into [a] younger audience through product diversification, and working on design pieces,” said Nikhil Lamba, chief executive officer (CEO) of Lladró India. By the end of 2019, the Spanish brand was committed to its future expansion in India but needed to address some pertinent questions to further fuel its future growth in one of the world’s most promising luxury markets. What marketing strategies needed to be adopted by the company to help drive profits and further expand its base in India? What strategies did Lladró need to adopt to target millennial luxury buyers in India? Would the company benefit from its expanding product portfolio or run the risk of diluting its “exclusive luxury” image with this growing product portfolio? LLADRÓ: THE HISTORY Lladró, a Spanish company founded in 1953 by three brothers—Jose, Juan, and Vicente—was a global luxury art brand specializing in handcrafted porcelain figurines. The company was a world leader in designing and manufacturing high-quality artistic porcelain creations, handcrafted in Valencia, the site of the only Lladró factory in the world. All products were handmade, fusing traditional and cultural art, and took various forms, including sculptures, lighting, home accessories, and jewellery. The Lladró brothers were born into a farming family but enrolled themselves in the Valencia School of Arts and Crafts, where they took an interest in porcelain manufacturing and, in the process, created their formula for porcelain paste. They began to craft ceramic flowers and sell them in the local market, and they soon began to produce porcelain figurines. By 1958, they had set up a factory in Tavernes Blanques, laying the foundation to what would become known as the Porcelain City, home of Lladró’s porcelain art. This document is authorized for use only in Saalem Sadeque's MKTG5406 Sem 2 2021 at University of Western Australia from Jul 2021 to Jan 2022. Page 2 9B20A055 The brothers limited production runs either by volume or period and documented each statuette’s rarity and history in their catalogues.2 Over the years, Lladró perfected techniques such as single-firing, creating pastel tones, and using new materials such as gres and matte porcelain. They were constantly conducting research and development on different materials, finishes, and colours, and the ingredients involved in the manufacturing process were kept under heavy guard. International Expansion Lladró’s international expansion started in the early 1970s, and the company was present across five continents by 2019. Lladró made its first effort in international expansion in 1973 by acquiring a 50 per cent stake in the U.S. company Weil Ceramics & Glass, Inc., and later acquiring full control of the company.3 After gaining a stronghold in North America, the brand continued its expansion in Europe in countries that had a strong tradition in porcelain, such as the United Kingdom and Germany.4 The popularity of Lladró creations within Anglo-Saxon culture helped facilitate its entry into New Zealand and Australia.5 Expansion into the Japanese market started in the 1980s when Lladró entered into a JV with its distributor, Mitsui. The process of internationalization steadily continued in emerging markets, such as those of Russia, Eastern Europe, and China. By the early 1990s, the company earned the Prince Felipe Award for internationalization, with sales surpassing 1.5 million pieces which sold across 140 countries accounting for 60 per cent of all Spanish porcelain figurine exports. The year 2014 ended with eight new openings around the world, including in Hong Kong, Osaka, St. Martin, Panama, Guatemala, Teheran, Istanbul, and St. Thomas. Some of the most recently opened Lladró stores were located in the world’s biggest financial cities such as New York, London, Tokyo, Singapore, Shanghai, and Madrid. Evolving Product Portfolio Lladró prepared for two main launches every year—for the spring/summer and the fall/winter—with approximately 100 new creations and other pieces introduced throughout the year. The company’s first release of an annual limited-edition series coincided with the formation of the Lladró Collectors’ Society in 1985. Its pieces were gradually gaining popularity among the world’s collectors, and some pieces were added to the collections of world-renowned museums such as the Brussels Royal Museum of Art, Hermitage Museum in Saint Petersburg, and the Modern Art Museum in Santa Domingo. The company expanded its collections in the lower price bracket of US$30 to US$60 with its Nao collection in the latter half of the 1980s. The objective was to extend its operations by pursuing different approaches, for example, extending into new categories such as leather goods, which included handbags and accessories. However, by the end of the 1990s, the leather line had to be closed, and by the early 2000s, Lladró began cutting down its range of lower-priced items. The company sought to reposition itself as a luxury giftware group and moved to eliminate its presence in down-market venues, such as airport gift shops. The company developed a new system of stamps at the base of its figurines to identify dealers that were unloading stock with discounters so that Lladró could stop dealing with them. The challenging question for Lladró as a brand was the same as that which confronted most luxury brands in the world: should it make itself more affordable or continue with its premium positioning? In most of its foreign markets, and especially those of Southeast Asia, Lladró had notable success with its localized porcelain products. For instance, the design team at Lladró researched the different types of dragons a Korean or Chinese consumer would seek and attempted to interpret and incorporate the characteristics of these dragons into their pieces. Its sculptures, such as “Oriental Garden,” paid homage to This document is authorized for use only in Saalem Sadeque's MKTG5406 Sem 2 2021 at University of Western Australia from Jul 2021 to Jan 2022. Page 3 9B20A055 the importance of nature in Japanese culture. Lladró’s “Guardian Lions” was another example of its art pieces reflecting Chinese, Balinese, and Indonesian cultures. By the early 2010s, the company was trying to reinvent itself to suit the evolving tastes of consumers and, in that effort, expanded its product base into lighting, home accessories, and fashion accessories. Lladró started collaborating with multiple designers, such as U.K. fashion icon Paul Smith, US artist Gary Baseman, and Japanese designer Hisakazu Shimizu, in its push towards diversity and relevance across different markets. In 2018, to keep its focus on innovation and new-design integration, the company associated itself with luxury furniture brand Boca Do Lobo Exclusive Design (Boca Do Lobo) to showcase its creations along with the unique furniture pieces of Boca Do Lobo in its New York showroom. “The time for collectors is over, so we have to adapt,” said Ana Rodriguez Nogueiras, Lladró’s global CEO, at a new store launch in Delhi.6 The company was reorienting its strategy from figurative pieces to lifestyle-related products such as jewellery, furniture, and lighting. Lladró’s porcelain and other figurines, however, continued to build the company’s international reputation (see Exhibit 1). Product Quality From ideation to creation, everything was done by hand, without any technology. Approximately one year was required to produce each product, and only 15 master sculptors were involved in the entire production process. The company believed in the philosophy that art was about innovation and patience, which required self-motivation that was achieved by concentrating the entire production process in one place; for this reason, all the sculptures were made in Valencia, Spain. Every figurine was handmade, meaning the entire process was time-consuming. Every new collection launched by Lladró involved a considerable amount of research. The brand had a creative committee, the function of which was to evaluate the economic viability of potential collections. Once this evaluation was done, sketches were made before clay models were prepared. The selected clay models were reproduced in plaster of Paris for the first stage of molding. Different parts of the sculpture were produced in different molds by pouring liquid porcelain and setting it. Each fragment of the figurine was then put together using liquid porcelain. Painting was the next stage, and a glossy finish, if required, was added through a coat of varnish. In the last stage, the sculptures were kept in a kiln at over 1300 degrees Celsius for about 24 hours, during which time the varnish crystallized, the porcelain vitrified, and the colours intensified. Lamba, Lladró India’s CEO, summarized the company’s production process: We believe in nurturing our team. Art is all about patience and innovation, which needs selfmotivation, and that’s what we ensure by restricting the entire production to one place. There is no cut-copy-paste strategy followed in art. From ideation to creation, everything is done by hand without any technology.7 Financial Problems The company had been in a delicate financial situation, facing declining sales since 2008. In 2014, the company registered losses of €4.5 million (see Exhibit 2). Impacted by the economic crisis and a yearslong downward trend in the new generation’s interest in its products, Lladró had even been suffering from falling sales in Spain and other mature markets. Sales had seen a continuous decline from 2013, with revenues falling from €43.5 million in 2013 to €35.4million in 2015 (see Exhibit 2) and reserves declining This document is authorized for use only in Saalem Sadeque's MKTG5406 Sem 2 2021 at University of Western Australia from Jul 2021 to Jan 2022. Page 4 9B20A055 from €129 million in 2013 to just €29 million by 2015. Changes in consumers’ taste and preferences, changing luxury patterns, and the increase in popularity of other types of decorative products created a challenge for the management that was trying to revitalize the company’s growth.8 In 2017, Lladró (as a porcelain and home décor business) was sold to PHI Industrial Group to restore its profitability and ensure the continuity of the business. Within the first year of its acquisition, the company ended up with lower losses than seen in the previous year. Sales showed a slight increase, from €29.5 to €31.4 million, mainly arising from exports. INDIA’S LUXURY MARKET: AN OVERVIEW According to the Bain & Company report in 2018, the global luxury market grew by 5 per cent in 2018 to reach an estimated value of €1.2 trillion.9 The luxury market had several segments: wearable luxuries such as apparel, perfumes, and jewellery; services such as travel and hospitality; and assets such as cars, houses, paintings, and other collectibles. According to a report of the Associated Chambers of Commerce and Industry of India (ASSOCHAM), India’s luxury market was expected to reach a value of $50 billion by 2020, up from $30 billion in December 2018.10 Metro cities such as, Delhi National Capital Region (NCR), Mumbai, Bengaluru, and Chennai accounted for a substantial portion of the demand for luxury products. Non-metro cities such as Ahmadabad, Hyderabad, Chandigarh, Pune, and Ludhiana were also steadily catching up in the luxury marketing space. About 16 per cent of sales in the luxury segment in India came from these non-metro cities.11 Several factors fuelled this growth: the increased purchasing power of consumers located in Tier 2 and Tier 3 cities, the entry of international luxury retailers into the market, the higher disposable incomes of consumers, and rapid urbanization.12 Despite the increasing opportunities, making inroads into this segment was a huge challenge for luxury marketers, mainly due to the lack of support infrastructure, skyrocketing real estate prices, difficulties in fulfilling value-driven demand for luxury buyers, and the sale of counterfeit products.13 India was a distinctive and multifaceted market showcasing a potpourri of cultures, customs, and history. With people from different religions and linguistic groups who had diversified needs, luxury brands faced many challenges in capturing the luxury segment. LLADRÓ IN INDIA Entry into the Indian Market The existing Indian legislation allowed for 51 per cent foreign direct investment (FDI) in multi-brand retail and 100 per cent FDI through the automatic route in single-brand retail. In addition, the government had established a stricture that in case of proposals involving foreign investment greater than 51 per cent, the company was required to fulfill local sourcing requirements; specifically, 30 per cent of the value of goods purchased had to be sourced from India, preferably from micro, small, and medium enterprises (MSMEs), artisans, and village and cottage industries.14 This was challenging for luxury brands as it forced them to rethink their business models.15 The most popular modes of entry into the Indian luxury market were through a franchise or JV model.16 Lladró entered India through a distributor model in 2000 by importing products from its factory based in Valencia, Spain, and selling through its dealers. In 2006, India opened up its FDI limits in single-brand retail, increasing the FDI cap to 51 per cent.17 This regulatory change provided the company the opportunity to cater to Indian markets through a direct presence in the country and to enter into a JV with an Indian This document is authorized for use only in Saalem Sadeque's MKTG5406 Sem 2 2021 at University of Western Australia from Jul 2021 to Jan 2022. Page 5 9B20A055 company called Spa Agencies (India) Pvt. Ltd., acquiring a 26 per cent stake of the new entity—Lladró India Pvt. Ltd.18 This JV route allowed the company to bring its product and luxury retail expertise to the market and to capitalize on the local partner’s knowledge of the Indian market. For Lladró, India was among the top five lucrative markets globally. In this context, Lladró’s global CEO Rodriguez Nogueiras said, “Japan is our number one market followed by the United States of America and Spain. India is the fourth [most] significant market for Lladró now. A total of 7 per cent of our revenue comes from India. We have been witnessing a 10 per cent year-on-year growth.”19 As of 2018, the brand had a total of eight boutique stores across India, and the company had witnessed an average annual sales growth rate of 15 per cent. “Spirit of India” Collection Lladró was offering most of its global product categories in India, consisting of world-acclaimed porcelain figurines, home fragrances, candles, chandeliers, decorative lighting, and smart lights, such as wireless light-emitting diode (LED) table lamps, among other things. The company’s product portfolio was not conventionally need-based but rather focused on collectibles or exclusive luxury items. However, with the changes in the luxury paradigm and the need to target young millennials, the company was striving to reorient its brand as a lifestyle luxury brand with a focus on functionality and utility in its product offerings. Selling porcelain figurines and sculptures ranging from ?15,000 to ?2.5 million20 to Indian buyers was a challenge for this handmade porcelain brand especially when these figurines did not offer functionality to value-conscious Indian luxury buyers. In 2000, the Spanish luxury brand came up with the ingenious idea of entering into the divinity goods market to draw Indian luxury buyers. The company rolled out figurines of Hindu gods and goddesses as a part of its “Spirit of India” series. This series primarily focused on creating India-centric products and was initially launched in 1986 with Hindu children figurines. The collection included gifts as well as ornamental items that were based on theological stories and deities. The first product of this series was the limited-edition idols of Lord Ganesha. The results of the launch were positive as 499 pieces priced at ?750,000 each were sold within 4 weeks. Subsequently, the Spanish brand launched figurines of many other deities, such as the goddess of wealth Lakshmi, Saraswati, Ram Darbar, Hanuman, Radha Krishna, and Lord Shiva. However, the figurine of Lord Ganesha, the god of auspicious beginnings, remains the bestseller in India. Lladró India’s CEO, Lamba, explained, “Ganesha is something people across the globe relate to; its popularity is universal.”21 About 45 per cent of the company’s revenue came from selling idols of the Hindu pantheon. This revenue reflected how crucial the Spirit of India series was for the brand. Porcelain figurines and sculptures were highly popular among high-net-worth individuals and notable corporate leaders for gifting on special occasions such as religious festivals and wedding anniversaries.22 Exclusive Luxury with Limited-Edition Series The brand followed a limited-edition marketing strategy for high-end porcelain figurines and many other products. For limited-edition series, products were not repeated and were often supplied in limited quantities. For example, for figurines of Lord Ganesha, Lord Shiva, and Ram Darbar, the Spanish company relied heavily on limited-edition collections to add exclusivity to the brand. In 2010, the company launched a porcelain sculpture of Lord Ganesha, which was originally priced at ?700,000 under its limited-edition series, with only 99 pieces on sale. Once the entire stock was sold, some customers who could not buy it This document is authorized for use only in Saalem Sadeque's MKTG5406 Sem 2 2021 at University of Western Australia from Jul 2021 to Jan 2022. Page 6 9B20A055 earlier were willing to pay as much as ?1,200,000 for it. However, the company did not reintroduce the Ganesha idols. In such scenarios, buyers generally looked to purchase such pieces from private sellers. Lladró’s products were imitati...
 

Option 1

Low Cost Option
Download this past answer in few clicks

13.86 USD

PURCHASE SOLUTION

Option 2

Custom new solution created by our subject matter experts

GET A QUOTE

rated 5 stars

Purchased 3 times

Completion Status 100%

Related Questions