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LVMH: Diversification Strategy into Luxury Goods
Strategic Issues
By 2002, Moet Hennessy Louis Vuitton was the world’s largest luxury products company, enjoying annual sales of 12.2 billion euros. LVMH carries the most prestigious brand names in wine, champagne, fashion, jewelry, and perfume. Upon entrance of this luxury product industry, LVMH was aware that they produced products that nobody needed, but that were desired by millions across the world. This desire in some way fulfills a fantasy, making consumers feel as though they must buy it, or else they will not be in the moment, and thus will be left behind.
The LVMH business portfolio began to take shape in 1987 with the merger between Louis Vuitton and Moet Hennessy which was a four billion dollar merger. Over the course of time, LVMH has acquired over 50 luxury brands, such as Donna Karen, Fendi, and Sephora. They called it, “a collection of star brands and rising stars.” LVMH found this industry to be timeless and modern, highly profitable, and very rapid growing.
Despite all of the above mentioned, LVMH did experience some bumpy times. Some of these times were induced through internal problems, while others were caused by externalities, like Sept. 11. With such a wide range of product offerings, LVMH was on top of the industry in certain aspects, but has room for growth in other areas. One instance in particular nearly caused a division in the company. Hennessy believed the company should focus on wine, spirits, and champagne, however Vuitton wanted to focus on fashion and leather goods. The decision fell into the hands of Bernard Arnault, who became president of LVMH, and sided with Hennessy.
Analysis and Evaluation
Under Arnault, the company was the world’s leading luxury product group. Arnault believed that LVMH control of retail chains was critical to luxury brand success. The finer points of retailing were believed to be, influencing of the overall image of luxury products, as much as the product attributes.
LVMH was able to broaden the company’s media operations, create new retail outlet, enhance their line of champagne, and open fashion houses, like Fendi. LVMH found their corporate strategy was diversification into a wide variety of luxury products. They grouped all of their brands into six different business units. Their wine/spirits unit poss...
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...at divulges attention to a few aspects in order to do it the best, as opposed to LVMH who does it all.
Recommendations
It is important for LVMH to continue to distinguish themselves from other luxury brands, and by continuing to acknowledge that their products are desires and not necessities. They sell luxury, and image. It would be advisable to have better relations with their customers, to increase customer loyalty, but to also get into the minds of the consumer to give the consumer what they desire, all the while staying ahead of the competition. Researchers should be assigned to each specific business unit; it would be a good idea to treat each unit as a separate entity, all-contributing to the same end. By individually enhancing each unit, and eventually collaborating in the end, LVMH will be most profitable. Internet ventures are very important, we live in a time that thrives on technology, and making efforts easier for consumers will be key. Continuing to portray an image or a message with each product will contribute to the brand differentiation. The continual acquisition of profitable names and organizations will continue to increase the profitability of LVMH.
It is interesting to consider Veblen’s theory of conspicuous consumption as it pertains to the modern day fashion industry, specifically the luxury fashion sector. In The Theory of the Leisure Class, Veblen said “we all find a costly hand-wrought articles of apparel much preferable to a less expensive imitation of it;” however, at the beginning of the 20th century, couture clothing was exclusively available to those who were very wealthy, simply because of how much the garments cost. By the mid-1930’s, businesses were beginning to change their ways of thinking after seeing the enormous profit that the Walt Disney Company received once they licensed the making of Mickey Mouse novelty items. Christian Dior was the first of many fashion designers to foll...
In the past ten years of the company’s great development, Ms Arendts helped Burberry to develop large market of luxury goods. Particularly in China, £70m franchise buyout in 2010 made Burberry get big rewards in the most important market of luxury goods since the year of 2000. She not only made the market value of the company three times bigger, has also kept the company’...
The success was the result of reviving Coach’s brand image. As expressed by Franfort in 1999, “We’re in the midst of a transition from a leather goods brand to a lifestyle accessories brand” (Rewick, 1999). The two legendary people built a sustainable business model that allowed Coach to compete effectively in the coming years. Franfort had confidence in this business model; he said” We see unlimited longevity in being a model brand offering accessible luxury accessories”(Schack, 2005). The following is the VRIO analysis on whether these business results are sustainable in the
The four companies shown above have very different business models. Inditex owned much of the production and most of its stores. Inditex is thus a vertically integrated company. This made Inditex gain a competitive advantage, which is quick response to the market requirements. On the other hand, The Gap and H&M have a different business model. They owned most of the stores, but outsourced all the production. Benetton had a third business model. It invested heavily in the production, but licensees ran its stores.
Resources are being classified into tangible and intangibles assets as the followings: *Resources of *Virgin Group Tangible Resources Intangible Resources Capabilities of Virgin Group are established by the integrated resources that assisted it to stay competitive and to outdo its competitors. Valuable capabilities will aid Virgin Group to effectively tap and explore spotted opportunities as well as to minimize threats in the external environment. Should capabilities are consistently and effectively utilized, they will turn significant and be difficult to be imitated or substituted. With the resources discussed above, 3 capabilities of Virgin Group are identified as follows: - *Capabilities 1: Unique C*ulture of *"Making difference and creating uniqueness"* (*Contributed Resources: *Financial, Organizational, Human, Innovation*, Technological*) Creativity, Innovation are the foundations to Virgin and Richard Branson’s success! Technology push is the spine for innovation and likely to simulate process innovation in how service is provided when looking into Virgin. Technology is more likely to simulate process innovation. Every turn and businesses Branson venture has been with some kind of innovation or creativity element if not something unique, something that has not been seen or heard of before in the relevant market. Virgin Group has achieved a competitive advantage among its competitors by uniformly followed its culture in all business in serving good value and service to the customers in different ways. The basic and the core competence of all Virgin Group's business ventures are to do things just a little bit differently from the rest. And also they always tried to add value by adding a little fun to the business. By differentiating in strategy itself to fit of the activities and the ways of doing business have also differentiated itself from the rivals and make it difficult to imitate Virgin’s strategy. Hence, they have established their business to an untouchable position. How would you characterize the corporate strategy of Branson's Virgin Group? The answer to that question will not be so different from the ones above. However to better understanding we can characterize the corporate strategy of Virgin Group as "Making difference and creating uniqueness" in any kind of customers' service. They are not stuck to any business field so that makes them flexible of thinking and creating new ideas for their customers and the whole consumers around the world who need (or will need) Virgin's service.
The Greek poet, Hesiod, once said not to “put your work off till tomorrow and the day after (Jaffe, 2013).” According to the Cambridge dictionary, procrastination is the putting off of something important. When one first sees Hesiod’s quote, it sounds as if it is just one of those phrases that have been repeated so much that it has lost virtually all meaning. Hesiod’s quote reveals that procrastination has been around for a really long time, and since early times, people have tried to warn against it. De Paul professor, Joseph Ferrari discovered that up to 20% of people are chronic procrastinators(Jaffe,2013). That is not including the rest of the population that fall between occasional procrastinator and the procrastinator that does it just to see what they can get away with. There are many causes that can lead to procrastination, which is a hint as to why it is such a big issue. The result of those causes is procrastination, which is not without consequence. Procrastination can lead to a decline in one’s mental and physical health, mental stability, and emotional well-being. However, along with those negative effects, there are ways to combat procrastination.
Judas Iscariot tells the story of a tumultuous court case to decide whether Judas Iscariot should go to hell. The play opens with Judas’s mother describing having to bury her only son alone and in “empty, acrid silence”(Guirgis, 2). The scene shifts to a twenty-first century courtroom in downtown Purgatory. We are introduced to Fabiana Cunnigham, Judas’s defense lawyer and to Yusef El-Fayoumy, the prosecutor. The judge denies Fabiana’s writ from Saint Peter and aruges
A project manager should be aware of the key challenges and threats an organization would face as well as he/she should have the skills to tackle the crises effectively and efficiently. In addition to that, a project manager should also be able to convey the thoughts and ideas in a convenient manner who is responsible to make a framework for an effective communication to ensure clear communication between the team members even though the style of communication would be different based on the situation.
Project management is a discipline based on careful planning, organization, motivation and control of resources to achieve specific goals and meet specific success criteria. Since every project is unique in nature, a project manager must learn to adapt and identify key areas to drive success. Thus, as a learning initiative, we were given a project to manage through a simulation program named Sim4Project. The emphasis of this simulation was on learning-by-doing, just like in a real-life project. Sim4Project provided a good mix of theoretical knowledge as well as hands-on experience. Professor Leonie gave feedbacks at the end of each period to ensure we were incorporating the project management principles learned in the classroom.
The high pressure luxury brand industry has evolved over the last few decades from a small and selective to a multibillion dollar arena offering significant potential and growth opportunity for the luxury brands that compete within its realm. With many luxury brands competing for over $225 billion (The Economist, 2009) in revenue each year it is easy to see how strategy plays an important role.
However to make a brand “luxury” your audience must feel the brand, go on a historic journey to their roots and in the end make you want to buy their product, as Chip Compton states (brittonmdg, 2014) “Luxury is, well, a luxury. You like it, but you don’t need it!” a luxury brand has to give you this sense of amazement to enforce the idea that what your spending on is the best of the best, this is not only done verbally through the shop assistants influence but its also don’t visually through the interior design, the logo, color pallet and even the packaging. It’s the extra mile the brand goes to make you as a client of theirs to feel special and unique to them. The branding has to be powerful enough for you to feel something; each brand does not follow trends. They set trends, the set their own fashion and do their own vision of what fashion is today. As Dr. Dan Herman states (the manager, 2015) “ “the dream is not to own a crown. It is to be a king” Gian Luigi Longinotti Buitoni ”, enforcing the fact that a well presented brand will set off emotional connections with you and the product. I think this is all down to the brand image, and how the brand is represented through different media. Take look-books for example, the style of photography will be different from brand to brand, it will have the slight hint of modern techniques and maybe trends but most of all the essence of the brand and its heritage. Even the printing can set it apart from non luxury brands, the smell of the paper and feeling each paper’s attributes sets off different thoughts as to what each look which is presented to you on the page and what it means to you as an
The act of consumption has been the primary means through which individuals in society participate and transform culture. Culture is not something already made which we consume; culture is what society creates through practices of everyday life and consumption involves the making of culture. When attempting to understand certain acts of consumption it is necessary to observe the relations involved in production and consumption. Through technological innovation, the fashion industry has been expanded to play a prominent role in consumers’ purchasing decisions and styles are becoming less difficult to obtain. With the expansion of department stores and shopping being viewed as a leisurely activity, this has continued to transform the act of fashion consumerism. The functional interests feature a rational attachment to clothing items. Symbolic benefits involve status and prestige to fulfill the achievement for positive self-esteem. Further benefits include a provided experience for the individual consumer and the created use of imagery and desire used to enrich one’s life.
-Status symbols: Sophisticated customers who value the distinctive, exclusive collection seem to value the corporate-branded version of luxury. –Philip Martiz, chairman of the board
[a] company may have a unique vision, a superior product, strong management and an efficient distribution system – yet if it is not able to convey the core benefits of the brand to its target audience it will ultimately fail. [5]
“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.