AUCHAPT Sophie Max Weltz 111 227 bin bin FILE ECOG: An important facet of the Franco-Japanese

relations: the luxury market Q3 2004-2005 Teacher: Myriam Davidovici-Nora Introduction The luxury market has specific clients who differ from the populati on as a whole although the number of customers tends to grow. The price and mode of consumption of luxury goods are unique. This forces the companies in this se ctor to behave, particularly in advertising, very specific. France is the countr y with the largest number of companies in the luxury sector and Japan is country that imports a lot of luxury goods. It is then natural to look to the Franco-Ja panese especially for the luxury industry. If Japan is an importer of luxury goo ds, the Japanese market for luxury meets the specific requirements that must tak e into account the firms in this sector. To understand the specifics of the Japa nese market, we look at what are the specifics of the luxury market and the stat e of this market. We will look at the Franco-Japanese relations to see how does the luxury industry in trade between the two countries. Plan: I Characteristics of the luxury industry a. What is luxury? b. Paradoxes of luxury for business c. Evolution of customers d. The luxury market trading II Franco-Japanese a. Frenc h exports to Japan b. French imports v. Bilateral Agreements: Promoting the Fran co-Japanese d. Luxury Market Trends III. An image of quality to sell more expens ive, luxury, France and Japan a. Franco-Japanese relations b. The Japanese marke t v. Competition in the Japanese market for luxury I Characteristics of the luxury industry What products? What are the firms on the market? The role of French companies? W hat consumers? What distribution of consumers? a. What is luxury? A mixed picture of luxury in medieval Europe, the luxury was associated with the decline and fall of civilizations. It was not until the eigh teenth century that luxury is as positive. It is part of countries' wealth and l uxury can stimulate the economy. Today, luxury has an image that is both positiv e and negative. Indeed, on one hand, he was accused of abuse (fur coats) and its elitism and on the other hand, the luxury vehicle with a prestigious image. The vision of a luxury product with a average person can be summarized by these fou r points: • excellent product quality but high prices • • • rarity its futility. This vision of luxury still makes possible the dual view, the company a. Charac teristics of a luxury product is a luxury when told it is rare and very good qua lity. The expected quality of a luxury product consists of four key points: • Qu ality materials, known as "noble" know-how • • • an artistic image These feature s reproduce the vision that the public has the luxury. Note that several definit ions of a luxury item are possible. This definition was chosen because it takes into account both the vision that has a prospect and constraints related to the company (including the production and advertising). The product distribution is made on a small scale and prestigious shops. To add to the scarcity, some produc ts are manufactured in limited editions and are even numbered. b. Paradoxes of l uxury for business Buy an exceptional act of recovery process associated with th e acquisition of a luxury product made the purchase an exceptional act. As such, the presentation is neat and sellers of luxury boutiques are trained to a level above the average. The attitude of clients towards luxury goods demand, therefo re, a specific policy of firms in this sector. The price of the brand, the price of an image if a luxury product is a quality product, its quality does not just ify itself, the price the customer pays. The customer pays, in fact, the higher the prestige of the brand and the social value that the product himself. Indeed, if one compares the cost of the added costs of advertising and marketing with t he sales price, we see that the margin is large. The client is willing to pay th

e luxury product beyond its real value. This willingness to pay more is maintained by the company, it also realizes that she is above the bulk of its turnover.€The consumer's willingness to pay depends hea vily on brand image and that is why firms in the luxury industry have on their p roducts and their image very strict control. The advertising and marketing to cr eate the need Usefulness of luxury goods in daily life is very weak. Thus it is in the luxury industry that the costs of advertising and marketing are the most important. They put forward the most prestigious brand as intrinsic qualities of products. The image of the consumer of a brand has such influence on the sales of brand communication is never soutraitée, while sometimes the production is. E volution of luxury brands' reputation of a brand is based on a very specific act ivity that is directed toward a small number of customers. For reasons of fashio n or change the economic situation, companies are forced to evolve to maintain t heir sales. There are two options: increase the distribution and / or diversific ation. Risks and benefits of diversification Luxury goods are reserved for the e lite. Haute couture is an example with 4000 customers it has in the world. Howev er, to reach more customers, brands, haute couture are a range of ready-to-wear and accessories. It is possible to buy luxury goods cheaper. According to the Fe deration of Couture, 43% of turnover comes from the great fashion accessories in 2001. The company must however be careful that this does not lead to the commod itization of the product which would put the wealthier clientele. The emergence of new products in the range of a mark must be in accordance with the image conv eyed by the mark. This is especially important in the luxury that is the image t hat you pay dear. Thus, it is not surprising that Dior whose image is that of th e bourgeois elegance, creating a collection for babies. This would not have been possible for a fashion house in the most sulphurous reputation as Yves Saint La urent. Distribution The increase in the distribution looks to emerging markets w here the upper class wants to stand out. The distribution is generally in the br and stores. Indeed, one would doubt the value of a luxury product if sold in sup ermarkets. Just as diversification may be a risk, uncontrolled distribution can tarnish the image of a brand. They cite as an example Lacoste. Counterfeiting is another phenomenon that affects the image of a brand. To control the distributi on of its products, Vuitton does not sell products in retail outlets, including the company does not control at least 51%. There is a paradox here in the luxury market, increasing circulation, thus increasing the reputation and the demand. But in the same spirit, the material dimension of luxury increases, which affect s the image of the same product. The development of a brand in terms of image is never assured. Chess (Lacoste1 example) and successes (Anais Anais by Cacharel) is cotoyent. Who is not a financial failure The need to innovate in the luxury industry, turnover is a function of willingne ss to pay the customer. But this willingness to pay is not stable. This pushes l uxury companies to continuously innovate. In haute couture, has two collections each year (spring-summer and autumn-winter). On the fragrance market, there are 80 new products per year, half in the last three months of this year 2. A dynami c branding It consists of three axes. The first is the renewal of the offer. The second is to maintain brand image and the last to control the rent. v. Evolutio n of customers Democratization of luxury goods, new customers and products that were described yesterday as "luxury" products become available to a majority of people. This is the case of smoked salmon (you can find 250g to 3 euros), foie g ras or computers. Generally with diversification, luxury goods are no longer res erved for an elite. In fact, one in two Europeans bought a luxury brand in the l ast 12 months3. A typical customer? Among the people who buy luxury goods, there is obviously people with higher incomes. However, they are not the only ones to be customers of luxury companies (as outlined in the previous paragraph). More generally, in 2000 in France,€among those over 25 who have pursued higher studie s and an income above average, 80% were customers of luxury and 40% bought at le

ast once a month for a luxury product. d. The luxury market Different markets lu xury luxury companies have several opportunities to settle in different markets. The mature markets (Europe, USA and Southeast Asia) encourage department stores (specialized or not, multi-brand or not). The markets are less safe shot to the duty free shops or implantation in small volume in supermarkets for convenience fallback in case of commercial failure. Note also selling novel methods such as mail (Tiffany United States carries 10% of its turnover in Mail Order) or large shopping centers that specialize in luxury (the Emporium in Bangkok, Thailand i ts 45,000 sqm dedicated to luxury). In Japan, in the leather products exported b y France, one finds that 38% will be sold in specialty stores, department stores by 30% and 7% in supermarchés4. These different expectations differentiation be tween markets is not done only at the level of sales methods, but also in terms of customer expectations. Thus the United States emphasize the creativity and va lue for money where Japan prefers the traditional aspect of a production. Counts 2 1995 3 Based on data from the Institute Risc 4 Source: CTC ( Centre Technique du Cuir Markets are indeed very different, and in Europe and Korea, it seems superficial to buy luxury items (bags brand for example) while in Japan, this does not rais e any of a social prejudice. In contrast, in countries emerging luxury is a rewa rding product because of high levels of social disparities in the population. Th e luxury companies now market leader in the luxury group LVMH (Louis Vuitton-Moe t Hennessy) (see Table 1), followed by Vendome and Gucci. On the top three two o ut of three French companies. Italian and French Domination The luxury market is mainly dominated today by French and Italian houses (Table 1). Of the top 14 co mpanies on the luxury market, 5 are in fact French and Italian 6. If they are mo re oriented towards the United States, the implementation of hexagonal firms is stronger in South Asia (Singapore, Hong Kong and Japan). By the way other market s such as Europe and emerging markets (South America, Eastern Europe, Russia). F rench companies have monpole the market for champagne (Table 2) and represent ov er 50% market modemaroquinerie of wine, perfumes ouncore spirits. A closed marke t The luxury market is experiencing a fairly high cost of entry. Indeed in 1995, it took 30 to 200 million francs for the launch of a perfume and 4 to 10 millio n francs for a presentation of high couture5. It's mainly a cost of representati on or movement, because the luxury market, it must be known with a good image. 5 These transactions may nevertheless bring 10 times the original bet. II The Franco-Japanese trade What products are affected? What do the luxury goods? a. French exports to Japan In general, French exports to Japan are doing well: b etween 1999 and 2004 they have experienced 23% increase, going from 4.3 billion euros to 5.34 billion euros) 6. They put us yet France as the 16th place of the best customers in Japan in 2004. It is immediately apparent in Figures 3, 4 and 5 that, in our exports, consumer products, the majority (51% of our exports in 1 995 were consumer products for particuliers7) and especially so-called " luxury ": fashion items and alcohol prance in mind. For example, models of brand in lea ther goods sector, representing 70% of exportations.8 another example, in 1995, Cognac represented 6% of the profits of French exports to Japan. These peculiari ties of our sales to Japan make us inherently loss (5.3 billion euros 20,049) in our trade with that country. Anywhere in Japan that very few of our technology products (our automotive exports in 1995 represented only 2% of our exports, wel l below the only Cognac) 10. Increased French investment level of investment, Fr ance has recently gained prominence in Japan€from ninth largest investor in 1998 at the rank of second in 2004 behind the USA, through measures incitatives.11Ai nsi creating bilateral programs (see below) allowed the French to assist SMEs to large multinationals that were previously the only sources of French investment s in Japan. Obviously more French investment in Japan would increase as a side e ffect our exports to that country. To remedy this situation, France seeks to pro

mote knowledge and technology products, through accords12, communs13 projects an d academic exchanges. Let us not forget that travel of President Chirac, accompa nied by ministers and industry has helped enhance our image as well as our vario us sites on place.14 Importance of French luxury exports to France are one turno ver approximately 15 billion euros of which 58% AN15 export. This brings out a n et trade balance of 6.5 billion euros. This is equivalent to the industry aérono tique and space. The luxury industry is therefore of great importance for French exports. 6 7 8 9 10 11 12 13 14 15 Sources: French diplomacy and its web site, http://dip Source: Senate Source: CTC ( Centre Technique du Cui r Source: Economic Mission French Source: Senate Source: French Foreign Technica l Cooperation Agreement in 1991 and Scientific ITER Project Implementation in 20 00 of second office in Japan CNES (Centre National d'Etudes Spatiales) A study o f the Cerna September 1995 b. Imports French French imports of Japanese products are very important. France has in fact acquired in 2003 for 10.3 billion euros japonais16 products, mainly technology products. According to statistics françaises17 imported into France in 1999 to 7.6 billion francs in hardware, three billion francs électroniques18 components or to 5 billion francs of cars. The automotive sector is also one of the most discussed during the 90s and between 1991 and 1998-ton attended the ope ning of unrestricted imports of Japanese cars in France. French imports have inc reased by 8% with Japan between the first quarter 2003 and first quarter 2004 an d 4% between 2004 and 200519. This increase is characteristic of Japan and is no t really linked to French tendencies, one of the reasons for this increase is th e depreciation of the yen. This has accentuated the passing trade deficit of Fra nce vis-à-vis Japan in the same time as our exports have grown by only 1%. The F rench trade balance deficit All this explains why our trade balance with Japan i s so deficient in spite of regular improvements. Imports that France makes are i ndeed more necessities, while Japanese imports are more focused on comfort and p leasure. More specifically, Japan is the fourth trade deficit of France 20 with a coverage rate of 50% (ie twice France imports more goods than it exports) .21 Somewhat astonishing to be reported, the statistical differences between chronic Japanese and French on this front are that in recent years, both countries felt as common deficit in their trade, finally in 2004, Japan has obtained statistic s balanced, but still far therefore, the French statistics. After a few years wh en France was beginning to fill its trade deficit, she began to lose ground duri ng 2004, including due to an overall decline in imports japonaises.22 v. Bilater al Agreements: Promoting Franco-Japanese trade in 1992 was launched the "Japan i s possible." In collaboration between the Presidents Mitterrand and Chirac and P rime Minister Hashimoto, the campaign aims to promote the Japanese market with F rench industry and help open the Japanese market for French exports. In 2000, th is agreement was terminated and was replaced by the campaign "France-Japan partn er spirit", always with the same goals. It has also been extended in 2003. It pr omotes mutual investment and partnerships between SMEs of both countries. 16 17 18 19 20 21 Source EEP and French economic n.html Capital goods account for 60% of our imports from Japan, as against 32% w orldwide Source: French Economic Mission 1: China€2nd: Germany 3rd: Sweden is to say that our imports are double our exports. Source: French Economic Mission, 2 004 22 Source: French Economic Mission In 1995, established jointly by MM. Juppe and Hashimoto, both prime ministers of their countries, the Forum Franco-Japanese Dialogue brings together personaliti es from political, scientific, economic and artistic and is an important sphere of influence playing on the relationship between our two countries (last topic a ddressed by this forum: youth exchanges, the next topic: sustainable development ) .23 The presence of both Japan and France in many international organizations (G8 or ASEM24) provide good cohesion between the two countries. The signature of the past "a plan for the 20 stocks for 2000" between the two countries is an ad ditional vector of this agreement. Finally, according to French diplomatic sourc

es, there is an average monthly government contact between the two countries. To use the examples cited above, the share of automobiles in our exports increased from 2% in 1995 to 8% in 2004. Sales of cars produce 19% believed in one year. Pharmaceuticals and related products to the nuclear industry have each experienc ed a sharp increase, respectively 114 and 57 million euros between 2003 and 2004 . We should also mention the software industry that saw its exports increase by a factor of 5 in just over a year. Unfortunately these good statistics are quali fied, in fact, some products (eg software) starting from a small market so they may as getting excellent results even on a simple thrill of their market. To ill ustrate this fact, we can look at aeronautics and space industry, which fell 80% between 2003 and 2004, due to excellent results in 2003. It is therefore clear that the French industry in the leading sectors is not yet fully established in Japan and the conquest of this great market remains to be done. d. Market Trends luxe25 The presence of France on the luxury market in Japan is much better than on the technology sectors. For example, leather goods, France is the second lar gest supplier to Japan with 20.6% market share, behind China (45.2%) which leads in putting through the entry-level products gamme.26 On the market for jewelry and watches, France is the third largest exporter of Japan, just behind the Unit ed States and Italy (respectively 19.6%, 22.3% and 20.5%). Among the top 5 impor ted luxury brands in Japan, there are three French brands (Louis Vuitton, Hermes and Chanel) 27 totaling 17.4% (226 billion yen) of total imports (1300 billion yen). The luxury market in Japan is a market paradox. Indeed, activity in Japan fell 0.6% in 2002 and that same year, Chanel has grown its sales by 30% in 2001 and 18% (700 million) in 2002. In fact, the crisis in Japan in recent years is a n advantage for foreign companies selling luxury goods, since it seems that this crisis does not affect the desire of the Japanese face these kinds of products, but also it allows businesses to relocate to lower cost (see the openings of th e single-brand stores Chanel or Hermes, for example). In addition, the strong pr esence of French brands into the Japanese market is important because Japan is t he second largest market behind the United States for 23 Source: French diplomacy 24 Asia-Europe Meeting, linking Europe and Asia on g lobal issues in economics as in politics 25 Main source of this paragraph: Frenc h Economic Mission 26 Source: Centre Technique du Cuir 27 See Figure 6 jewelry or accessories fashion and above all, Japan accounts for 18% of global l uxury goods, excluding purchases of Japanese overseas (eg Louis Vuitton-Moet Hen nessy, purchases made by the Japanese abroad or in their countries are equal, or approximately 15% of LVMH each). The Japanese market has the added advantage fo r foreign brands to be especially open to imports, they are indeed 9.6 billion e uros. The Japanese market for imported luxury goods is also fairly concentrated: 12 brands account for 35% .28 In addition, this concentration is constantly inc reasing (+30% between 2000 and 2002). It is therefore crucial for French brands to establish itself firmly in Japan. And that's what they do, in 2003 all French brands have seen their turnover increase by 10-40%.€Louis Vuitton is also the f irst brand of luxury goods in Japan with an inhabitant of 6 featuring a branded product. One of the perverse effects of this success is the establishment of a p arallel market. The Japanese do not hesitate to sell their old bags to buy an ar ticle of the new collection. In addition to this market opportunity, is establis hed trafficking of illegal imports or illegal resale of items purchased abroad, permits de facto by the Japanese government and therefore not regulated. French brands have responded by restricting sales of their Parisian stores to the Japan ese. Including Louis Vuitton, which refuses to pay in cash from its Asian custom ers and keep their credit card number to prevent them from buying more than one article per year in France, contrary to a number of French law ( RTDs and lawles sness on Informatics and Liberties). 28 See Figure 6 III. An image of quality to sell more expensive, luxury, France and Japan What is the image of France? Where is she? Why Japanese (es) are they (they) maj

or consumers of luxury goods? a. Relations between France and Japan's place in history Franco-Japanese ties ba ck to the opening of Japan to the West during the second half of the nineteenth century. The Japanese then left to discover the western Red (German, American, R ussian and French in particular). Yet it was France who holds a special place in the hearts of Japanese. In fact, Japan entered the war turn against Russia, Ger many and the United States. Moreover, even if Japan conforms generally to the U. S. wishes, there is some resentment towards these former enemies and occupiers. France, which opposed the United States, like David against Goliath, we must the refore respect the culture of countries Japonais.29 France France is also going to a foreign culture, evidenced by the popularity of certain actors or singers i n French Japan (Jean Reno (as evidenced by his film Wasabi, shot in Japan), Math ieu Booggaerts). The Japanese feel close to the French culture in particular bec ause of the importance it attaches to the traditions and ancient cultures in gen eral, as pointed out by the Japanese Ambassador, Mr Matsuura during the year of Japan in France in 1997. French culture has also been conveyed by Malraux, Sartr e and Claudel who stayed in Japan. The Impressionists, painting, were also a veh icle for exchange of French and Japanese cultures because they were inspired by Japanese artists. Note that the connected image of France, a country of high fas hion, is also displayed in unexpected areas, in fact, the couple's favorite Japa nese, according to a study of Destina Japan, a matchmaking agency, is the couple Alesi ( Jean Alesi, a former pilot and Forumule Kumiko Goto, actress), a Franco -Japanese. In addition, French is the second most taught language after English in Japan, with only 250,000 élèves.30 A relationship not smooth Yet Franco-Japan ese relations are not free of clashes. About The 1991 Edith Cresson calling the Japanese "ants" or about the latest Nicolas Sarkozy addressing the sumo sport "r eally non-intellectual" does not necessarily go in the direction of a good cultu ral friendship between peoples . On the other hand, the atomic tests at Mururoa in 1995 and the current wrangling over the location of the ITER site (new genera tion nuclear reactor) show that there are also different in the international be tween France and Japan. In October 2003, the Japanese public believed to 54.2% t hat relations between Japan and the European Union were good. This puts Europe b ehind the USA, Korea, Australia and New Zealand. About 29Selon of Kishi Shu, reported in an article in the AFP March 24, 2005 30 Source: Ministry of Foreign Affairs b. The Japanese market The Japanese market has its own specificities which shoul d take into account industries that locate here, especially in the case of luxur y industries. A lot of purchasing power First Japan is a country with high purch asing power (in 2003 purchasing power of a Japanese was 66,000, three times th e purchasing power of a Français31), which makes a country demanding. This expla ins, for example the opening of major chain stores in major districts of Tokyo. Chanel opened a store in December 2004 occupying an entire building in the heart of Ginza,€the fashionable district of the capital and also houses a French rest aurant created especially for the occasion. Another sign of this requirement and the image conveyed by the products of major French: prices. These were 40% high er in Japan than in France in 2003 by Hermes for example. The Japanese were thus a real need in terms of image and luxury. Especially strong that Japan is emerg ing from a crisis, so that its people are more interested in "values-shelters" t hat these products are often seen as indestructible. According to Yves Saint Lau rent, the Japanese are less likely to travel after Sept. 11, their costly travel expenses can therefore enjoy the luxury market in their country. Their strong b uying power allows prices of luxury goods from all sources, to be 50% higher in Japan than anywhere else in the world, says Yves Saint Laurent. In fact, accordi ng to Yano Research Institute, luxury goods are up to 60% more expensive than in Europe and 40% more expensive than in the United States. In addition to their h igh purchasing power, especially the Japanese and the Japanese do not hesitate t o allocate a large percentage of their income on such expenditures: Japanese wor

king women (between 25 and 35 years in particular) to invest 10% of their annual income on fashion items, including ready to wear, which represents 26% of their annual budget allocated to spending mode. Note that as in France, the luxury ma rket men also began to develop in this country. Therefore, the marks of all coun tries are diversifying their offerings to capture the market as possible. Thus t he ranges of Hermes, Chanel and Dior together they ready to wear, fragrances, sh oes, bags and jewelry, Hermes is launching in the same cloth interior. The Japan ese vision of luxury According to a 1993 study from the Institute RISC32, both i mportant features for the Japanese history of the brand (44%) and traditional kn owledge (37%). High prices (54%) and the image of a product for the elite (15%) are points lower than in Europe or the USA. A tradition of gifts favorable Anoth er explaining the importance of the luxury market in Japan, consumerism and trad itional gifts are deeply embedded in Japan. The opportunities for exchanging gif ts are many: for example visit or move back but also another gift, he 31Article Eric Chol in the February 27, 2003 issue of the Express 32 Research In stitute of Strategic Information and Competitive creates a constant exchange of gifts, theoretically increasing values. There is a period specifically devoted to gifts, thanks, around Christmas, and another in June, not to mention Valentine's Day in Japan where boys must give gifts to the ir daughters who have done this if possible even more valuable. Sensitivity to t he ephemeral The Japanese are also very sensitive to the novelty of a product an d are willing to pay dearly for being the first to have a product. This explains , for example, their passion for Beaujolais Nouveau, but also their sensitivity to fashion trends, especially in terms of high fashion and other luxury products . The attraction of novelty is also one of the reasons for which Chanel, among o thers, a house that produces collections only in Japan, sold exclusively in its new store (see above a lot of purchasing power). Sensitivity craftsmanship Japan is a country that has combined tradition and modernity, and this particular one of the reasons why the Japanese feel close to the French. But it is also one re ason why Japan loves the traditional aspect of luxury goods, which benefits Fran ce, famous worldwide for its craftsmanship. We cite two examples: Hermes and Bac carat. Baccarat, the famous French house of crystal and jewelry, and is particul arly popular for its traditional Japanese and manufactures (the Meurthe-et-Mosel le is always the same since the late eighteenth century, employs only 664 person nes33). Indeed, the imperial family has commissioned its first piece to the Fren ch firm in the nineteenth century. Its first store opened in Japan in 1983 and n ow has 11 shops in Asia (including five stores in Japan) and two bars in Japan, these small numbers over-emphasizing the traditional aspect of the product. Bacc arat products are also all signed a pledge of authenticity and manual labor. Sig n of the times€aritisanal this aspect appears today on the Internet since site34 (available in French, English or Japanese seulement35) includes videos showing the various stages of implementation of an object signed Baccarat. Baccarat part s are considered as objects of art, both in France where they are exhibited in m useums in Japan where an exhibition was devoted to them in four of the largest n ational museums in 1998 and 1999. Hermes, meanwhile, enjoys the status of intern ational artisans. It is also one of the few luxury brands have been listed in it s own name. Created in 1837 the company has kept its family character which acce ntuates its appeal to the Japanese consumer. Fields of expertise of Hermès leath er goods are, ready to wear, silk, "the lifestyle" (for home and travel), watche s, perfumes, tableware, in order decreasing turnover. Although the company did n ot open for export and the last forty years, its policy is clear she understood the challenges it faces. His policy is indeed to preserve the fiber craft that m akes the success of Hermes on the international level. The handbags are sewn by hand. Most of Hermes products are manufactured in the country where they are mos t representative, or France, which will always be perceived as a guarantee of qu ality. For example, porcelain 33 Source: Le Figaro Etudiant 34 site and also from the data in this paragraph 35 This internationalization of the brand is easily explained by the fact that it achieves 80% of its turnover to half of which export to Japan a

nd the United States is made in Limoges, women's shoes in Italy, Men's shoes are in England and watch es in Switzerland. Hermes knows so much play his image to win the hearts of Japa nese, so fond of authenticity. For information, Hermes realized in 2001, 27% of its sales in Japan (with an upward trend compared to 2000), higher than France ( 21%), and had 41 stores in Japan (In comparison, throughout the U.S., Hermes did not have the same period of 45 shops) .36 c. Competition in the Japanese market luxe37 The three countries from which Japanese imports in the sector "bijouteri ejoaillerie" are the USA, Italy and France. It is also the three countries that dominate the luxury market worldwide. These three countries represent almost 65% of imports in this market. While Japan is an exporting country, this market tra de balance is clearly negative. Between 2002 and 2003, imports in this market ar e falling, those from France, however, drop very little compared to the trend. d . LVMH, which represents the market for a Japanese firm French origins Company C ompany Louis Vuitton - Moet Hennessy was founded in 1987 by the merger of two ho uses: Moet Hennessy Louis Vuitton, both specialized in any one area The first in fine spirits and spirits, the other in the making, leather goods and perfumes. Both consist of old marks with a prestigious past, Moet & Chandon back to 1743 a nd Guerlain to 1829.38 The new entity also houses Christian Dior or society Veuv e Cliquot Ponsardin, famous for its champagne. LVMH has recently acquired the se rvices of many family homes to meet its specialized products, adding to its symp athy with the Japanese capital, much attracted by the traditional aspect of our products. The Japanese market Louis Vuitton-Moet Hennessy carries 16% of its sal es in Japan and 30% by counting the Japanese buying abroad. The sales of LVMH in Japan was 858 million euros in 2004, that on the rest of Asia, 895 million. As background, one on France in the same period was 945 million. It goes without sa ying that the Japanese market is very important for LVMH. This is reflected by t he presence of 240 stores on Japanese soil (or 15% of the total number of stores worldwide LVMH), against 302 for the rest of Asia and 279 in France (17%). Note also that the different brands of the group are on the market, such as Louis Vu itton and Dior. The results of LVMH market rising sun are very good and constant ly increasing as evidenced in Figure 8. In addition, it must be remembered that Louis Vuitton is the leading imported brand in the luxury goods sector.€The evol ution of LVMH results in the Japanese market is crucial, and between 2001 and 20 03 the turnover of the company rose 25% in the Japanese market while at the same time its total turnover decreased. 36 Sources for this paragraph: ADEM and ABC-Luxe. 37 See Table 1 38 Source: webs ite of LVMH,, as most documents of this part Louis Vuitton-Moet Hennessy group whose activity is divided into four parts: win es and spirits, fashion and leather goods, perfumes and cosmetics and finally wa tches and jewelry. The leather sector is the works to offer the best in Japan be cause 32% 39 of turnover achieved in this sector is by LVMH in Japan. It is on t he Japanese market that the firm achieves the largest share of its turnover in l eather. Then the watches and jewelry sector represents 16% of the company. The J apanese market provides 9% of turnover for each sector of wines and spirits and perfumes and cosmetics. 15% of stores located on Japanese soil, which also repre sents 15% of turnover. In general, the Japanese market a product almost as much turnover as the French market. In the first quarter of 2005, there was a general increase in sales of luxury goods in Japan (Figure 9). The LVMH group arrives t o grow by 9%. Each of these business units is home to brands presitigieuses: Veu ve Cliquot for wines, Louis Vuitton, Kenzo and Celine for fashion, Givenchy and Guerlain perfumes, Tag Heuer watches and other brands yet. The presence of LVMH in the Japanese market is such that 18 of its brands have offices in Japan (abou t fifty marks in total), thus facilitating the management of brand image, its di stribution and examining the customers. In addition to this performance brand by brand, LVMH has its own distribution company in Japan, and a holding.40 For the record, include the brands represented by an office in Japan: • Wines and Spiri ts Veuve Cliquot o o Jardines Wines & Spirits Fashion & Leather Goods • o o Loui

s Vuitton Loewe Celine o o o Fendi Givenchy Kenzo o • Perfumes and cosmetics o L CS (LVMH Cosmetics) Cosmetics o New o LVMH Parfums Christian Dior Parfums Givenc hy o o Guerlain • LVMH Watches and Jewelry o Watches and Jewelry o o TAG Heuer Z enith 39 The figures in this paragraph are to 30 June 2004 and comes from 40 A Holding is a company that is dedicated to group shareholders who wish to ga in significant influence in the various companies owned. The creation of a Holdi ng allows majority to increase their power in the affairs managed. Through finan cial contributions, the holding company manages and controls companies with comm on interests. It is often described as "parent company" since it merely make up its balance sheet in various accounting positions of its holdings. (From Wikiped ia) o Christian Dior watches Chaumet o Note however that the transition team spirit remains because these companies have their offices located on only four sites, t he holding company located on the most important of them. The distribution compa ny is in turn on a fifth. Obviously, all these sites are in Tokyo. Conclusion As noted, the luxury market is very atypical compared to other markets. For exam ple, the Japanese crisis does not affect any of the sales of luxury goods, they even continued to increase. The commercial aspects of the sale are also exceptio nal, first by the gigantism of the means (see the French new stores in Japan), s econdly by the attitude of consumers. Indeed they are willing to pay, and even w illing to pay more than they should do a product, the price being so high a guar antee of quality, even elitist. But if the quality is generally preferred by the customer, is required here, the Japanese rafollent crafts, handmade in small qu antities. Thus, quality research joined the search for elitism, however, qualify , the Nippon looking much more quality than the elitism and the will to show his difference, his wealth is more the result of wealthy people in the countries of Eastern Europe or the Third World. The Japanese are more aware of new and very fond of fads. Fortunately, Europe and especially France and Italy respond well t o this image of handicrafts. France enjoys also generally a very good image in J apan,€both culturally and politically. Culturally because of some of our singers and actors, and our capital's popular with Japanese tourists. Politically with the French resistance against the United States. But above all, a civilizational perspective, the Japanese feel close to the French, both being of the peoples w ho have managed to remain close to their roots, their traditions, without renoun cing modernity. The Japanese market is a market where luxury can claim a large p lace. Indeed, the Japanese are among the richest in the world, their purchasing power is very high and they do not invest in items whose value is high and espec ially do not depreciate over time. Nippon mentality is also very propisce the lu xury market: they have no moral barriers against the purchase of products that s ome might describe as unnecessary. In addition there is a tradition in Japan rel ated gifts deeply rooted in the mores. The luxury sector is 15 billion euros in France, more than half for export. Exports to Japan are often a significant turn over of our societies. Finally, sales of French luxury goods are doing well and steadily improving in Japan. This trend is set fair allows French companies to s tate their location: immense stores of French brands in Japan, diversification o f fields of activity of the major French brands. Unfortunately our luxury goods tend to overshadow our classic production, causing an imbalance in our trade wit h Japan deficit. This explains the proliferation of agreements, treaties with Ja pan and the regular visits of our representatives in this country. The major cha llenge for France is to maintain its sales of luxury goods while affirming its i mage of technology. It is also necessary that our companies are beginning to ada pt because the Japanese crisis may well one day or another, to push the sales of our products. They must also cope with the Italian competition which is becomin g stronger. Appendices:

Table 1: Ranking of luxury companies in 1999 according to their turnover in mill ions of dollars Business Sales Business nationality Vendome LVMH Gucci Max Mara + Sanofi Tiffany Escada Giorgio Armani Hermes Versace Prada Chanel Bally Burberr y Ferragamo 8091 French 2452 French 1703 Italian 1169 U.S. 941 Italian 894 Itali an 855 Italian 762 German 842 French 629 French 553 French 527 Italian 456 Itali an 418 English Table 2: Position of France on the different market (%)% Product-Fashion Champag ne Wine Spirits Leather Crystal Perfume Ready-to-wear, couture Jewelry 100 85 75 70 68 60 50 40 Figure 3: Principal French exports to Japan in 2001 5% 3% 16% 36% Energy Industry and various self Capital goods Intermediate goods Agro Food cons umption 18% 22% Figure 4: Figure 5: Distribution of the Franco-Japanese by sector Figure 6: Figure 7: Attitudes of Japanese on their global partners Figure 8: The success of LVMH despite economic difficulties in Japan Figure 9: Increased sales in Japan in the first quarter 2005 (source: www.lvmh.f r)