Challenge statement:
“Despite worldwide softness in the sale of luxury goods, LVMH has cemented its position as the world’s largest and most profitable player in the category. To stay there it must keep its customers loyal and its brand strong and find new markets worldwide” (Hazlett C. 2004). That is why in its mission they state to represent the most refined qualities of Western “ art de vivre” all around the world. Their objective is to be the leader in the luxury market, continuing to transmit elegance and creativity. This poses some major challenges, the main one is to keep being the leader in the luxury market through a sustainable growth. The main problem to achieve it is the high dependency on three main countries, France, Japan and USA. This becomes a threat because if there is an economic downturn in one country it affects LVMH directly that is why.
ANALYSIS
Financial analysis.
LVMH founds itself in a stable financial situation. Being positioned as the market leader they have better financial results than the rest of the competitors. Although the sales results for 2004 were under the industry’s average the overall performance over the last 5 years was 3% higher then the industry. It is important to note that the major owner of the company’s capital is present CEO Bernard Arnault with 47.52% of the control of the company with 64% of voting rights. This may have an Important impact in the overall performance and operating decision taken in the company.
Marketing system
After a 4 P analysis of the company one found that it found itself in a luxury market where product quality and constant innovation are key points for the success. That is why the production process and its design can take even months. Product line is extensive however it is only conformed of high priced products. Price in this case is a guarantee of the quality present in the product. Moreover, high pricing represent an element of differentiation that the customer appreciates. However this is not a setback, LVMH has managed to have world wide presence and success. To accomplish it its selective retailing division is of high importance. Nevertheless, promotion posses the major challenge since its through this that the image of the product its transmitted that is why the company poses a major part of its budget in this section. It is Important to note that the percentage allocated is higher than those of most competitors.
And finally LVMH diversification strategy (Bernard Arnault) is making acquisitions outside the company’s sector. In sector where they don’t have the “know-how” and don’t match the company Image. The current CEO (Arnault Bernard) is also the major shareholder which makes him easier to make decisions on new acquisitions
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