Competitive Advantage – Christian Louboutin and its infamous Red Soles

Christian Louboutin Ltd. Is one the most sought after shoe heritage brand in the fashion industry, with annual revenue estimated to be worth 300 million. The company was established in France by Christian Louboutin, who has gone on to become one of the world’s most well known shoe designers. Ever since its inception in 1991, Louboutin’s shoe designs have gone on to achieve cult status in the fashion world, boasting a fiercely loyal celebrity following and high-profile clienteles. The company has successfully tapped into the global market by opening over 50 self-branded boutiques in 24 countries across the world.

So, what is it about Christian Louboutin shoes that make them so highly regarded among its highly diverse clientele, ranging from celebrities to business executives? It starts with the brand’s infamous “red soles”, which has become synonymous with luxury and celebrity, and over the course of the company’s existence it has become the brand’s primary “competitive advantage”. Every fashionista worth her grain can spot a pair of Louboutins, or “Loubs”, among a sea of other shoe brands simply by observing the red color of the soles.   Originally, Mr. Louboutin thought he would alter the color each season, but he was intrigued by the idea of a scarlet red flashing as a woman walks and to him, “Red is more than a color. It is a symbol of love, of blood, of passion. It’s like the handkerchief an elegant woman dropped if she saw a man whom she was attracted to.”  

In order to protect its competitive advantage, the company even went on to trademark its signature “red soles” in order to avoid imitation by competitors. Despite this patent, other luxury brands such as Yves Saint Laurent have since copied this design element, forcing the company to take legal actions against it for breaching Louboutin’s trademark of red soles. The lawsuit finally came to an end when the court ruled on Louboutin’s favor by deciding that the company is entitled to its trademark on red soles.    

Louboutin has consistently been regarded as one of the most sought-after shoe brand and the label’s collections have been declared the Most Prestigious Women's Shoes for several consecutive years replacing Manolo Blahnik and Jimmy Choo on occasions. This can be considered as quite an achievement since Christian Louboutin is, in the grand scheme of things, a tiny brand. The company only has 50 boutiques worldwide, doesnot advertise or bombard celebrities with gifts and charges on an average 800 USD for a pair of shoes. But the label’s increasing popularity and trademark sole make it abundantly clear why Louboutin steers clear from obvious logos: the Red Sole says it all. Consumers purchase these shoes because they want to be seen in them, some say that the fashion brand wears the consumer rather than the inverse but the consumer seeks the sex appeal, confidence and poise as well as the silent recognition. The red soles have become a status symbol that masquerade as a simple design detail.  

Christian Louboutin shoes are handmade in Italy from fine leather, and the silhouette of the shoe is streamlined in order to maximize comfort both inside and out. While the real leather sole is painted in their trademark red. The intricate details that goes into making a pair of “Loubs” have greatly increased the brand value and as such, allow it to charger higher price premiums per pair.   

In conclusion, Christian Louboutin has successfully created shoes that cater to women’s ego and has managed to distinguish itself from the wide array of competitors by utilizing its main competitive advantage. Altogether, Christian Louboutin shoes are meant to be exclusive and exquisite making them both timeless yet modern, while still exuding a subtle sex appeal. 

References:

1.  Odell, Amy (24 May 2011). "YSL: Louis XIV Wore Red-Soled Shoes Long Before Christian Louboutin Trademarked Them". NY Magazine. Archived from the original on 2011-05-26. 
2.  "Christian Louboutin explains why women love shoes". YouTube. RTE. 14 May 2011.Archived from the original on 2011-08-04. 
3. Abraham, Tamara (15 August 2011). "Christian Louboutin to appeal after rival YSL wins right to sell shoes with red soles while court battle continues". Daily Mail (London). Archived from the original on 2013-06-09.

Porter's Five Forces Analysis: AT&T Inc.

AT&T Inc. is the leading wireless telecommunications provider, as well as the largest telecommunications company on the basis of revenue in the U.S. market. AT&T was established in 1876 by Alexander Graham Bell, who was one of the primary inventors of the telephone. Ever since its inception in 1876, AT&T has been a leader in innovation and optical communications system. It continues to be on the forefront in providing optimal services in the market and has gone on to successfully adapt to the ever changing business landscape. The merger between AT&T and Bellsouth Corporation, which is estimated to be worth 86$ billion, made AT&T the largest telecommunications company in the United States of America
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AT&T has divided its business operations into four operating segments: 

1. Wireless Division, including cell phone and internet services.

2. Wireline Division, which comprises of voice product lines for both local and long-distance services for businesses, government, and consumers. As well as data product lines, including Internet access, video services, and other various business services provided by the company.

3. Advertising Solutions Divisions, comprising of print directory advertising.

4. Other Subsidiaries, including operating services, payphones, and other business services.

Porter five forces analysis is a framework to analyze level of competition within an industry and business strategy development. n the following paragraphs, the elements of Porter’s Five Forces relative to AT&T has been analyzed and explained:

Degree of Competitive Rivalry (HIGH)
Before the patents expired in 1890s, AT&T was the only company providing telecommunications services, but after the patents, 6000 new companies entered the market and hence the degree of competitive rivalry was high. But AT&T was still a monopoly in the industry till the 1980s when the US government and the Justice department split up AT&T into smaller companies. Currently, there are four major companies in the telecommunications industry: AT&T, Verizon, Sprint and T-Mobile. AT&T’s main rival would be Verizon, which has currently more wireless subscribers than AT&T. The wireless market is highly saturated with 91% of users already using cell phones and the only way to increase sales is by poaching clients from competitors.

Threat of substitute products/services (Moderately High)

The main service AT&T provides is communication and over the years, people have used different tools of communication. The direct substitute of traditional wireline telephones would be the wireless cellphone communication. With the emergence of internet, many forms of internet voice communications services have become popular like VOIPs, Skype, Viber, and Whatsapp. Even Facebook can be considered as a tool for communication. For AT&T’s other products like cable TV, the internet has become a big substitute, as people can stream TV shows, news, podcasts directly from any devices that have internet connection, hence the number of cable subscribers are also dropping.

Bargaining power of buyers (High)

Previously, the telecomm industry was a monopoly with AT&T having majority of the market share, but over time, patents held by AT&T expired and US government split up AT&T into smaller companies which lead to them losing market share and increasing competition in the industry. With more competitors in the market, the customers had more option to choose from and are also price sensitive, looking for better subscription plans. The customer base has also grown from 300k subscribers to over 3 million. To try and keep consumers from subscribing to other telecomm companies, most companies have started using long term contracts that makes its beneficial for consumers to stay with the company and also increases their switching costs.

Threat of New Entrants (Low)

During AT&T’s early days, they faced little challenge from other competitors since they had patents and hence the Threat of new entrants was higher. But after 1890s, when the patents expired, there was an influx of new competitors, around 6000, coming into the industry. The capital requirements for starting a business in this industry are also high, because there is a huge capital required to setup the network towers. Currently, the wireless network market is also heavily saturated at 91%, so it’s not profitable for new companies to enter the market.

Bargaining power of Supplier (Moderate):

For the wireline/landline business, transmission line constructors are important for which they need copper wires, while for the wireless business, they need suppliers for building network towers. AT&T employs two network equipment suppliers, Alcatel-Lucent and Ericsson and this strategic alliance has helped them enjoy economies of scale. These suppliers hold a great deal of leverage over AT&T, since they need quality materials in building the networks. So bargaining power of Suppliers is relatively moderate.

References:

1. J.D. Power Consumer Center “Business Wireless Ratings.” Retrieved November 20, 2014 from the World Wide Web:   http://consumercenter.jdpower.com

2. By Associated Press, Wired News: Cell-Phone Industry Courts VOIP, Published April 9, 2006.  Retrieved on November 20, 2014 on the World Wide Web

http://www.wired.com/news/wireservice/0,70629-0.html?tw=wm_wn_index_7

3. (n.d.). Retrieved 11 16, 2014, from AT&T Inc.: http://www.att.com/