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Louis Vuitton Moet Hennessy:Expanding Brand Dominance in Asia

Presented byGroup 6Nitish Bodake (9010)Sandesh Nayak (9043)Aparna S (9066)Dr.Balamurali (9068)Priya Surendran(9094)Sriprasanna M (9111)

04/11/2023Group 62

Agenda Company Profile Need for Globalization LVMH in Asia and challenges faced Core issues Objectives Competitors Cultural dimensions Tackling the internal issues Recommendations

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Louis Vuitton Leading luxury products group with 150 years

of heritage and with 50 sub companies 1500 retail stores across 60 countries Net income – Euro 2 billion clear leader in directly operated stores with

approximately 350 retail outlets 70%+ is in-house production

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Brand Portfolio

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Why Global? Competition Competitive advantage

Sustainable development in productivity driven by quality of business strategy and operations.

Customers are fragmented and scattered all over the world

Strategic window is open for Asia

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Strategic Windows for the Asian Market Emergence of a high net worth individuals Declining trade barriers Changes in communication Better information and transportation

technologies Increasing middle class income Increasing young population Growing sophistication in lifestyle needs

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LVMH in Asia

Expanded to China, South Korea, India, Japan

In 2004, 40% of sales from Asia (20% from

Japan)

Fashion and Leather segment – 33% from

Japan

18 retail outlet and planning to make 40

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Challenges faced in Asia

Declining Asian tourism

Cultural differences

Embedding the French culture into the Asian culture

Arbitrage businesses in Japan

Counterfeits in China

LVMH fakes accounted 18% of the counterfeit accessories

apprehended in the EU in 2004

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Core Issues Should Asia be given more emphasis than

European markets? Private ownership versus Franchising Cultural influences of Asian markets

No liquor retail in middle east Special consumption tax on luxury goods in Asia

Protecting the brand against dilution the culprits being counterfeits Arbitrage

Managing Political, legal and cultural regulations

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Objective

The strategy to operate in the Asian markets

Strategies to address the legal, political and

government regulations and risk

Addressing the brand dilution

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Luxury products market A good that consumers will pay a premium

which is above and beyond its utility. Level of acceptance and understanding of

luxury in different markets is different. Correlate with GDP Short and finite product life cycle

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Product Portfolio of luxury brands

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Influencing FactorsControllable Price Exclusivity Product design and

style Brand management Distribution

Uncontrollable Political risk

Against luxury brands Economic

environment Cultural barriers

Sales of wine Legal and

government regulations Customs

counterfeits

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Perceptual Mapping of the markets w.r.t to exclusivity

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Perceptual Mapping of the markets w.r.t to indulgence

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Size of the Asian Markets

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Strategic Importance of Markets Japan - must win market

unaffected by recession 25% of the luxury goods Aspirational Market is fairly mature

China - must win market Second largest luxury goods market after US both outsourcing manufacturing as well as end

consumption Will drive a large portion of the growth in the industry No dominant brand High demand for luxury goods coupled with internet,

travel and marketing have accelerated the embrace of different cultures like European

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Strategic Importance of Markets Korean Market – most ‘Luxury friendly’ market

People loves to distinguish themselves from each other

Higher expenditure than Japan, US and Europe 4% of global spending on luxury goods Increased tourism

Indian Market – Potential market Smaller market compared to the other countries 1.7 million Indian qualify as rich (source: consumer

dynamics)

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Cultural Dimensions

China France India Japan Singapore South Korea World0

10

20

30

40

50

60

70

80

90

100

80

68

77

54

74

60

55

20

71

4846

2018

43

66

43

56

95

48

39

50

30

86

40

92

8

85

64

Power distanceIndividualism/collevtivismMasculinity/feminityUA

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ABCD Framework

Japan China South Korea

India

Physical Access

47 stores 9 stores 15 stores High custom duties; against luxury products10 TH and 12 CD

Economic access

High per capita income ; hence affordable

Average percapita income. Partially affordable

affordable growing middle class. so partially affordable

Buying behaviour

•Quality and premium goods•status driven

•Price sensitive•Status driven

•Quality (finer) premium goods

Value for money

Consumption pattern

•Both urban and rural•Modern culture•Mass appeal for western goods

•Conservative•Affordable for urban

•Modern culture•Urban•homogenous culture

•Traditional •Urban•Nascent stage

Disposal Tradition of passing on to the next generation

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Resource Based ViewTangible Resources Presence in many

countries Skilled labor Financial strength Multiple successful

products High Productivity

Intangible Resources

Design innovation Brand Image

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Competencies & Capabilities

Competencies Creating exclusivity ,

production, distribution, sourcing and R&D

Designing, manufacturing, marketing, advertising and branding

LVMH is the only company in the segment with substantial holdings in alcohol.

Capabilities Unique capability to

harness the creativity potential hidden in people

Massive cost savings and unique product differentiation

Ability to penetrate easily into a new market

Reinvent itself every season

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Managing Political Risk Activist groups against the popularization of

luxury market Tolerate to win over the Asian markets Use of business environment risk intelligence

systems like-Historical Ratings Research Package (HRRP), Financial Ethics Index (FEI), Quality of Workforce Index (QWI), Labor Force Evaluation Measure (LFEM), and Government Proficiency Measure (GPM)

Use of operation risk intelligence system

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Managing RegulationsCountry Issue and Importance Mode of tackle

South Korea

Importance-Comparatively smaller market size but high potential for luxury goods, young age of customers, stable and secure marketTo retain the market for lifeStand alone market cum Must win market

Ally/ Accede- to manage the regulatory changes

China Huge marketStand alone cum Must-win market

Accede -to manage the regulatory changes

Japan Growing market for luxury goodsMust win cum Lead market

Accede for time being then gain a strong foot and Alter

India Issue: 85% duty on luxury goods+ve : conducive environmentPotential market

Alter- to manage the regulatory changes

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Hopes Increasing growth in GDP Substantial growth in the number of Millionaires

especially in India and China Reduction in tariffs in luxury brands in China Increasing ‘Mall culture ’ in China Women gaining economic independence Increasing Chinese Travellers to Europe ‘Little Emperors’ – young buyers Increasing Asian Tourism Emerging Asian markets like Taiwan, Thailand Chinese government is helping build up brands

that require IPR protection to check counterfeits

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Recommendations Asian Markets should be given emphasis Product adaptation – Chinese Lantern, Indian

traditional designs Give exclusivity and status to the products Use internet as a source of inspiration and ideas

of luxury brands Where to buy Email newsletter from reputed brands Establishing brand’s loyalty and authenticity

Near luxury opportunity Affordable luxury goods for middle class

Evergreen market

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Recommendations Poor brand image for Chinese manufactures

products Get IPR protection to check counterfeits For China, tap the potential cities like Shenzhen,

Hangzhou and Macau Spend on advertisements in Chinese media more

which only very few brands like LVMH can afford Faster pace and reference to tradition

China – Ownership (DOS) rather than licensing Create a ‘luxury culture’ through fashion shows,

special events and other public relations efforts Increased distribution of alcohols – higher margin

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Recommendations Simultaneous product launches in India to reduce the

time lag and to build brand loyalty Tap the lavish Indian wedding markets along with

product adaptations. Utilization of International airport retail space since it

speaks out aspect of modern life and international lifestyle

“The strength of Louis Vuitton is its high recognition among people of wide generations, so opening more shops in middle-size cities makes sense.” ~  Mitsubishi

UFJ Securities. Japanese market is not mature for LVMH Prevent arbitrageurs by maintaining a profile of the

customers

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Recommendations Finer Accessories for the South Korean Market Provide more exclusivity

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Learning Lower/ value for money pricing necessarily is

not the best strategy Mature market entry may not be always a bad

option Effective Usage of Internet and Marketing to

build brand image Brand building through providing exclusivity

and status

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A journey is not a tripA journey is life itself,,