Case 3-4: LVMH: Managing the Multi-Brand Conglomerate
1. LVMH’s diversification represents the group’s strong presence in the luxury goods market as a whole with products from the fashion and leather range, wines and spirits range, watches and jewelry range, perfumes and cosmetics range, and finally the selective retailing range. This strategy aims to claim market share in market segments that are interrelated with the specific customer segment as the common denominator. LVMH is a market leader in some markets and has a decent market share in others and aims to be the leader in the luxury market as a whole where the elite customers can recognize its brands from all of its product ranges and the company plans to build brand loyalty within those customers so that a customer who chooses LVMH for watches for instance, is also inclined to choose an LVMH product for wine and spirits. Diversification also spreads the company’s costs over a number of brands and the revenues as well so that it can always insure good rate of return for investors.
2. For a company like LVMH to compete on a scope that includes champagne, jewelry, fashion, cosmetics, and retailing is logical and even necessary for it to keep a competitive edge because its competitors have implemented the same strategy to fight for market share in the luxury market in all of its segments. The company’s policy aims to build the idea in their customers’ heads that they can always expect the same consistent high-end quality when choosing any brand that is owned or associated by LVMH and since elite customers, or simply customers looking for some products for luxury living, usually want to wear high quality jewelry to match their high quality fashion wear or even enjoy the consumption of high quality spirits, they can always have the brand image of LVMH in their heads because they expect that the quality of the jewelry or the wine will match the quality of the fashion wear they are wearing.
3. LVMH adds value to its different businesses by passing down the know-how that made its original products timeless to the brands that are relatively newer so that quality is consistent throughout its different brands. The company does this through human resources departments that have an eye for talents for design as well as the right people to learn the company’s policies and to implement them so that the functioning of the group remains consistent. The value chain for LVMH begins with purchasing raw materials for them to create their product, which of course, they have gained expertise and leadership even in some segments. In operations, handled extensively in France and Spain, they strive to compete for cost leadership. Next comes logistics, which is mainly sea routes and they strive to have their products delivered in timely fashion so they can meet customer demands which sometimes exceeds supply knowing that creating high-end luxury products is time consuming. Next is marketing, where they always depend on their brands’ historic qualities to promote themselves to already-loyal customers and to newer customers seeking luxury goods. Finally, in service, human resources can always insure the best retail outlet partnerships and good sales and after-sales services. 4. In general, LVMH have their value chain synergized whether purchasing, operations, technology, sales and marketing, distribution, and services but since their multi-brand strategy is highly decentralized (this is due to the belief of keeping the independent identity of the brand and its creative process), but technology can be best synergized in this sense only to control quality and oversee the creative process while at the same time assuring the creative processes remain independent and well-backed.
5. LVMH’s core competence begins in its product and service quality which is history timeless and is already infiltrated the luxury market as a whole either as a market leader or a strong competitor...
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