Welcome to Professor Pick. Business school teachers will provide weekly curated FT article selections to connect classrooms to current events and develop critical thinking for students.
Read all submissions at www.ft.com/bschoolpicks. Save this link in Maft and receive an email alerting you with each new edition. Search for tags for related topics to describe educational points. Encourage students to participate in the discussion in the comments section below the article.
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Marketing for luxury brands
Hermes overtakes LVMH by overtaking LVMH after selling weak sales sparks
Tags: Luxury brand value, brand exclusivity and desirability, monobrand vs multibrand strategy, pricing strategy, economic uncertainty
Summary: On April 15, LVMH stock fell 7.9%, reducing its market value to a minimum of 246.5 billion euros since November 2020, after disappointing first quarter results, including a 5% decline in fashion and leather goods sales. Meanwhile, Hermes, which maintains a single-brand model, surpassed the market value of LVMH of 248.1 billion euros. Hermes’ success comes from its exclusive products, wealthy customers and limited production, which allows it to withstand slower economic slowdowns and minimizes the impact of tariffs on profit margins. Coveted bags like Kelly often sell for over 8,000 euros and command high resale prices. As a result, Hermès shares transactions with 50x advance revenue, outperforming its competitors.
Classroom Application: This article provides a clear overview of the contrasting financial performance of two luxury companies, Hermes and LVMH, measured in the ratio of stock market value and earnings to stock prices. It raises several key points, including what makes luxury brands valuable to consumers. It recovers it to economic uncertainty such as trade wars. And what are the advantages of a single brand business model over a multi-brand business model?
question:
Why does Hermes seem resilient due to economic uncertainty compared to other luxury brands, including LVMH? What does this suggest about the brand values and customer base of Hermes and LVMH, respectively?
Are monobrand luxury business models more resilient during periods of economic uncertainty than multi-brand luxury groups? If so, why?
How will increase in tariffs between the US and the EU affect sales and profit margins for luxury brands?
What additional challenges should Western luxury brands face today pose, what strategic adjustments should be considered to stop the downward trend and ensure long-term growth?
Qing Wang, professor at Warwick Business School
bank
Switzerland proposes to force UBS to add $26 billion in capital
Tags: Bank, Capital Requirements, Regulation, Switzerland
Summary: The Swiss government proposes increasing UBS’ capital requirements by up to $26 billion to prevent the repeated collapse of Credit Switzerland. UBS criticized the plan as “extreme” and detrimental to its global competitiveness. The reform requires UBS to fully capitalize its foreign subsidiaries and adjust its capital base, with changes going gradual in stages over several years starting in 2028. The package also includes tightening regulations, accountability for bank executives, and new regulatory authority. Political opposition and the possibility of referendums may delay or change reforms. UBS plans to continue lobbying against them.
Classroom Application: This article provides an opportunity for faculty and students to analyze how they influence the banking sector and how businesses can respond.
question:
How does the Swiss government’s proposal to fully capitalize UBS’s foreign subsidiaries address systemic risks in the banking sector? We assess the effectiveness and potential limitations of this approach
If it is necessary to meet the 100% capital range of foreign subsidiaries, we will analyze the strategic impact on UBS’s international expansion plan. How can banks adjust their global growth strategy?
We critically evaluate the trade-off between financial stability and international competitiveness in the context of Switzerland’s proposed banking reform. How can regulators balance?
Discuss the role of the proposed senior management administration and clawback provisions in improving corporate governance in systematically important financial institutions. What challenges could be raised in implementation?
How should UBS leadership navigate the opposition of stakeholders, including political parties and regulators, while protecting the strategic interests of banks? What stakeholder engagement strategies are most effective?
Stefan Legge, Lecturer at St Gallen University
International Finance
Dollar Datas Stokes Economic Apre
Discipline: Finance, International Entrepreneurship, International Strategy, Currency Exchange
Tags: international finance, dollar, diversification, US Treasury, US trade
Summary: Imports have dropped sharply, and manufacturers have cut inventory in anticipation of new trade collection. One result is that the dollar has slipped towards its three-year low, further increasing US government bonds. Forex strategists said these changes have already added to the problematic momentum. JPMorgan Chase CEO Jamie Dimon is concerned that the US bond market could ultimately end up as a “crack.” Prices for products such as aluminum and steel are currently rising rapidly. The Supply Management Institute could be directly and negatively affected by the S&P 500.
Classroom Application: This article provides a good catalyst for discussion about how economic policy decisions (in this case US manufacturing activities) affect not only consumer spending, but also fiscal and monetary policy. It is a strong reminder that currencies, bonds, and inflation – are intimately connected, and everything in business is closely linked. Ironically, all of these are not commentary on international policy or its impact, but all of them are economic policies in the United States. The survey further confirms these trends.
question:
Do you think the Treasury yields will eventually start to fall?
Currencies tend to follow the “Big Mac Index,” a proxy for purchasing electricity parity. Does this model apply here to weaken the dollar?
Over the past few years there has been a lot of debate about the positive negativity of the strong dollar. The dollar is too high, but now it’s falling, so what are you thinking?
Do you think Moody’s downgrade to US sovereign credit ratings has affected the strength of the dollar?
If you were a manufacturer, are you planning to diversify your own investments now, or are you still going to keep your existing portfolio intact?
Do you think that a moderately strong dollar is in the country’s greatest long-term profit and is for global trade?
Case Discussion Positioning: Other related articles are listed below. The relationship between US bond yields and dollars. Investors are worried about weakening the economic fundamentals. President Trump’s policies are currently directly affecting traditional flights to safety. The bond market cannot be called “slow”. Does this all suffer from long-term damage?
Gregory Stoller, Master Lecturer, Boston University Questrom Business School
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