Presented by Group 7 :Akankha AroraJoseph Robert

Shamil E SatharNidhin VC

Shyam Sunder

Company ProfileLVMH is the world’s leading luxury products

group.

A $13 Bn group of companies with operations across the world- 1,500 retail stores in about 60 countries.

A parent of around 50 sub-companies

In 2004 40% of the sales is from Asian market.

In early 1990s it decided to expand in China, South Korea & India.

Industry Profile : Luxury Goods The sales of luxury products were expected to rise

by 3% to 5%.

Shares in luxury companies tend to go up

Growing middle class is also buying designer goods.

26% of the worlds millionaires are in Asia

8% increase in GDP

Competition in the industry :

Gucci :Well entrenched player in Europe and North

America.

Guccio Gucci originally started as a reseller of luggage imported from Germany.

As of 2003, Gucci Group had 348 directly operated stores.

Competition in the industry :Richemont It was the second-largest luxury goods company in the

world.

Major player in Jewellery and Watches.

Sales of watches and Jewellery accounted for 70% of total

luxury products sales in 2000.

Hermes Relied on single-branded strategy.

Products mainly clothing , fragrance and leather

accessories.

Japan accounted for 25% of its sales in 2000.

Competition in the industry :Bulgari :It operated in seven luxury segments

including watches, perfumes, jewellery etc.Substantial part of its revenue was from

watches and jewelleryCustomers were mostly first time buyers.Asia pacific accounted for 36% of its sales.

Wines & SpiritsLVMH held 40% of the cognac market and

20% to 25% the overall champagne market.

50% share in premium champagne segment.

It is absent in the popular segments of drinks such as beer, whisky, vodka.

Had a steady pricing policy and strict cost control.

Fashion & Leather goods :

60% of sales in this division are concentrated in the Asia-pacific region.

It had several product in this category, including leather goods, ready-to-wear, shoes, watches, jewellery, textiles etc.

Demand often exceeds supply.

Sales in this segment is mainly attributed to Louis Vuitton brand.

Perfumes & Cosmetics :

This division account for 18% of company’s sales.

This division has been able to integrate R&D, production,

distribution, sourcing across brands- resulting in huge

profits.

Watches & Jewellery : The division contributed only 5% of company’s sales in

2000.

It has an operating margin of only 10%.

26% of the division’s sales come from Asia.

Tag Heuer, Zenith, Christian Dior,DBS etc.

Selective RetailingTo create a sales environment that enhance

the image and status of luxury good.

They operate in two segments:Travel retail: To market luxury products to an international travel clientele

Specialised selective retailingThese selective retail shops are

located in Europe, the US and Asia.

Expansion of LVMH in Asia

Declining trade barriers and trade tariffs in the

luxury goods market

Change in communication technology

Capture growing Asian markets

Perception of luxury brand as status symbol

Growing number of tourists from Asian

countries

Expansion of LVMH in Asia26% of people having financial assets more

than $1 million lives in Asia in 2003

Asian buyers accounted for 30-40% of sales

of all luxury clothing, handbags and watches

Less competition in luxury market

Young rich population & mass of nouveau

rich customers

Japan :

There were 47 Louis Vuitton stores in Japan.

By 2003, Japan accounted for about 20% of Christian Dior’s sales.

Had plans to increase it to 30% in the future.

Tough competition from competitors like Prada.

China :China a huge market and was expected to play a

pivotal role in the future of brands.

Annual growth rate of premium cosmetic market was a significant 30%.

In 2003 there were 16 LVMH shops.

LVMH was trying hard to establish an efficient operating model in China. Mainly concentrating on eastern and southern China.

Area of focus are selling wines, perfumes, watches and jewellery.

South Korea :

Even though small in size was a huge market for luxury brands.

By 2003, LVMH had 15 stores.

Here the market was comparatively more stable and secured from external threats.

The young age of customers in the Korean luxury segment also represented a tremendous opportunity.

LVMH launched its first store in India in 2003 Product brands from its watches and jewellery

group- TAG Heuer and Christian Dior. India’s growing economy, its English-speaking

population, its improved social & political stability

and opening of the economy to outside investors

attracted LVMH to invest in India. LVMH’s major challenges are

To create a culture in India to shop luxury goods & make

them aware of the same . Convince Indian customers who shop luxury brand to buy

from India. To face huge competition in watch market A high percentage of duty charge.

India :

Distribution ManagementSelective Retailing

Gray market control: Smuggling control

Private ownership versus franchising

Use of Internet marketing

Distribution density (pull strategy)

Brand management Product dominant ( House of brands)

Core competence of LVMH is the unique capability of

harnessing creative potential to make money

The strategy adopted by LVMH is to position each of its brands

as distinct brands in their own right.

Collectively, they offer competition to other companies under

all segments by occupying the entire category. A customer is

thus retained within LVMH group: Eg : Gitanjali group

Brands thereby complement rather than cannibalize each

other, though they offer overlapping products.

Brand Analysis

Brand architectureDivision-Wise brands catering to distinct

market segments.(Different positioning , product category and sales channels)

Competing brands within the group help beat the competition

Leveraging on the individual identity and image of the brands- Tag Heuer.

Gaining advantage from the cultural origins of acquired brands.

Strengthen the existing distribution.

Japan:Must win market.(Triad)They are big buyers of luxury brands.Japan accounts for 33% of fashion and leather

category.20% of Christian Diors sale is from Japan The brand image is everything in Japan were

there is little difference between the rich and the poor.

Large percentage of single, working women.

Describe some of the country- specific target market for luxury goods?

China:Has a huge population.Growth rate of 8% and negative inflation rate.Policies of the govt are favourable for luxury

brands.Annual growth rate of premium cosmetic

market was a significant 30%.

Describe some of the country- specific target market for luxury goods?

Should LVMH reach out to new middle- class customers who are willing to purchase

luxury items?Yes , if the purchasing power of the new

middle class increases then it is good for LVMH as the customers who can afford it increases .

But LVMH should reach this market segment without tarnishing its brand. They should not decrease the price of their

products.Maintain only exclusive shore rooms.

What advantage does LVMH as a group have over independent brandsKnowledge of marketFinancial strengthUse flanking to fight competition ie., use of

different brands under within same category LVMH group to avoid competition

Bombarding the market with a variety of brands to cater to different segments.

Describe the counterfeit business today. How is this affecting companies and businesses?Counterfeiting is the illegal use of a registered

trade mark

Counterfeits affect the sales of brands by diluting the brand identity

Accounts for 5 to 7% of global merchandise trade i.e. $ 150 billion a year

Fail to perform up to the expectations of the customers

May cause injuries to the customers

How should luxury brand fight against counterfeiting?

Check on internet auction sites for the sale of

counterfeit products

Employ full time staffs to work with investigators

and lawyers to protect the brand

Push for better legislation against counterfeits

Employ coalitions

ConclusionUSP of LVMH is its status factor & “Made in

France” tagProduct standardization strategyMacro & Micro economic variables favorable

in Asian marketThus it should aggressively expand in Asia

without diluting its brand identity

Thank you