Lvmh Paper

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  • I. Time Context

    This paper is tabled in the time of 2005

    The focal point of this paper is viewed in the eyes of the

    father of the LVMH Empire, Arnault.

    III. Statement of the problem

    By what means would the LVMH synergize their product

    lines to sustain the thrust of its growth?

    IV. SWOT Analysis

    Strength Implication

    Strong Brand Name

    Long term Experience

    Leading position in their industry

    Premium quality reputation

    The company is known worldwide LVMHs prestige brand focus is a key foundation of the groups strategy. It has the leadership in luxury product market "Strong Brand Name For LVMH" is an easily defendable qualitative factor, so competing institutions will have a difficult time overcoming it.

  • Weaknesses Implication

    Single Market Target

    Diversification

    Conflict of interest within company (fashion vs. wine and spirits)

    Forward and backward integration

    Declining shares

    Though the company targets towards high income earners, this leaves the rest of the market untapped where more sales could be made The luxury goods are very sensitive to the fluctuation of economy; any economic wave could influence its sales. LVMHs business largely depends on the economic situation of the buyer and broad acquisition makes no sense and could bring burden.

    Opportunities Implication

    Merger and acquisition

    New consumer trends

    New buying potential in Emerging markets

    Improvement of way of selling their large product line

    Product Extension

    Celebrities

    The company has been acquiring new emerging star brands which enable them to update themselves with the new trend. This also leads to producing new products to offer their growing customers all over the world. Celebrities have a major influence with what the latest trends are in clothing style. Many celebrities are seen wearing or using high end luxury items. Celebrities can be used as marketing tools to promote the companys latest products.

  • Threats Implication

    Change of trends and consumer taste

    Economic Recession

    Competitor in smaller markets

    Competition ( The strongest one is Gucci)

    Fake Products

    Harms on the companys reputation due to high quality falsification problems in coping with the recent economic downturn. A lingering global recession contributed to a worldwide decline in the purchase of luxury goods plus there are many fake imitators out there that take away from selling their own products to consumers.

    V. Alternative Courses of Action (ACA)

    1. Expand globally through acquiring potential star

    brands and redefining low profit product line.

    2. Product exchange innovation through E-commerce

    and M-commerce.

    V. Discussion and Analysis

    ACA 1

    LVMH includes a portfolio of 60 brands among the most known

    Mot et Chandon, Hennessy and Louis Vuitton, TAG Heuer, Fendi, Marc

    Jacobs, Guerlain, Kenzo and Givenchy. Bernard Arnault the CEO and

    Chairman of the Board driven by strong managerial attitude have

    accomplished a successful integration of the LVHMs portfolio, making the

    company a unique conglomerate and the world's biggest luxury group.

  • LVMH brand success is achieved by strong management and know-how

    in their industry. Bernard Arnault believes that a star brand must be

    Respect for brand autonomy and a distinctive identity is a fundamental

    tenet of LVMHs management philosophy.

    The rationale of LVMHs creation through merger is to build the

    luxury empire and create the largest conglomerate of luxury brands in the

    world. This process entails the redefinition of a bunch of small and

    fragmented industries into coherent and growing sector, which put into a

    good position to dominate the markets. Arnault believed that the action

    should be taken quickly when the few star brands are still available

    before others realize it.

    Tradition and vision lie with the brand, that the brand generates the

    energy and motivation. Thus, the independence of individual brands has

    been guaranteed during the pursuit of cross-brand synergy within LVMH

    Group.

    LVMH reflected the brand-centric culture. The headquarters flexibly

    review each brands business plan on a case by case basis and are very

    involved in deciding and assigning financial resources towards the

    implementation of the strategic plans.

    Strategic integration was established by formal dynamic and was

    gradually institutionalized. It started with the integration of the Perfume

    and Cosmetics branch, and then created the Fashion group and the

    Watches and Jewelry branch. All the Wine and Spirits branch were

    integrated. The Selective retails arm maintained decentralized.

    By integration, LVMH aims to profit more from the synergies and

    growth opportunities, and also take full advantage of the leadership

    position. The centralized R&D team, purchases of supplies and the

    merged critical services such as legal support improved the efficiency.

    The new brand and the start-ups must gain the legitimacy to gain

    access to distributers according to the strategy. Moreover, the niche

    brands that take advantage of being a part of LVMH Empire did better.

    Overall, the corporate strategy and the brand-centric strategies

    succeeded by the improved efficiency, reduced cost and increased

  • revenue. The existed star brands had more resources and funds to

    develop their business globally, whilst the small and new brands increased

    portfolio and competition ability by taking advantage of LVMHs size and

    capabilities in the face of a market consolidation.

    The real synergies among the brands and the endeavor had mixed

    results, but most of them were positive including reduced cost, specialized

    functions, more dominated positions etc.

    For LVMH to maintain its creativity in the luxury and fashion

    business within its increasingly complex and cumbersome corporate

    apparatus it must maintain the independence of the brands, flexibly adjust

    the strategies based on the elements such as economy environment,

    competition situation, the changing status of trend-setting etc., and never

    stop pursuing excellence, maintain the brand aura and the desirability.

    ACA 2

    LVMH going online is one good strategy to boost its growth and at

    the same time advertise its diverse products offerings to a wide range of

    consumers.

    The boom of the dot com era opened a lot of opportunities to

    diverse business and institutions. LVMH can take this opportunity to make

    its product line be known at a global scale. Investing in Information

    Technology can also be LVMHs new lead against its competitors.

    Through the creation of its website, LVMH can showcase its

    product lines. It has to conceive a catchy website design and layout that

    matches its brand image and luxury. Apart from aesthetics, it has to be

    stable, dynamic, easy to navigate, and will be able to withstand the

    demands of the payment process whilst ensuring safety and protection

    against online theft.

    Moreover, LVMH can also look into mobile commerce. Since it

    caters high profile consumers who are mostly adept to the latest

    technological and fashion advancement, mobile commerce can be a hit as

    well. It has to develop application for mobile devices such as new product

  • offerings and LVMH news updates to its consumers. It also has to enable

    its website to mobile compliant.

    Focusing IT can present new business opportunities and LVMH

    must adapt to the changing environment and consumer trend.

    However, IT venture can entail huge amount of money for the

    company. LVMH would be spending a lot for its website development and

    maintenance, as well as for its M-commerce venture.

    In addition, security is another issue that it needs to consider since

    websites and online payments are most likely to be attacked by hackers.

    VI. Recommendation

    LVMH would be triumphant with ACA 1 (Expand

    globally through acquiring potential star brands and

    redefining low profit product line) in its course to address

    the issues of expansion and leveraging its profit through

    product line synergy.

    VII. Action Plan

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