LVMH: Diversification Strategy into Luxury Goods Essay

LVMH: Diversification Strategy into Luxury Goods Essay

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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...


... middle of paper ...


...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.

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