Louis Vuitton Case Analysis

Topics: LVMH, Luxury good, Richemont Pages: 6 (1607 words) Published: June 25, 2014


University of Windsor
04-75-498
Strategic Management

Louis Vuitton Case Analysis

Key Issue
Louis Vuitton is a flagship group of LVMH, which had double digit growth during 2010 and 2011. Michael Burke, the new CEO of LV group is uncertain about whether the group can grow sustainable. The main issue he current encounter is that how to push LV to grow steadily and protect LV’s values and heritage from being undermined.

External Analysis

PESTEL Analysis
Political: The global luxury goods market can separate into America, Europe, Japan, Asia-Pacific, and rest of countries by region. Overall, the major luxury goods consumption countries have relatively stable political environment in recent years. However, in southern Europe, the governments’ financial turmoil and austerity measures indicated an underlying weakening demand of luxury goods for local people. But the gap was filled by travelers from other countries. The import duty policy in different countries is another factor should be considered in the industry. The high import duty will be part reason of high price differences between different countries. Consequently, the grey market can be formed in the countries which have high price differences. Economic: The major companies in this industry are based in Europe, so the euro exchange rate will be an important factor to the industry. The growth rate will be different by being measured with euro terms and nominal terms. In order to eliminate the exchange rate influence, the constant exchange rate measurement should be used. Currently, the luxury goods market has about 15% constant nominal growth rate. Another important economic impact factor is the world’s economic condition. The world economic encountered a recession phase around 2008, which slowed down the products’ price increase rate. Recently, the world economic condition has been gradually recovered, and the high demand in Asia-Pacific region contributes more revenues to the industry, and the region will have high growth rate in years by estimation. Sociocultural: In the global luxury goods industry, most of customers regard luxury goods that made in Europe as more valuable products than those made in Asia and US. This behavior brings competitive advantages to the European luxury brands. Moreover, customers in different countries have different purchase behaviors. For instance, some countries’ customers are willing to move away from common recognized brand, because they want to purchase more exclusive products. Furthermore, because of the increasing speed of globalization, people are more likely willing to travel between different countries. These travelers will buy luxury good during their trips. In fact, Chinese tourists contributed over one third of sales in Europe. The luxury goods industry should notice to adjust the actual demand between local people and tourists in Europe region. Technological: As the popularization of online shopping method, most of luxury companies opened their online shop to provide more convenient shopping experiences for customers. This method can help companies reach more potential customers who live in areas that do not have brands’ physical stores. The technology development also helps the industry manufactories products more efficiently. The introduction of automotive machine partly reduced employees’ level of specialization and increased productivity. However, the improvement of automation also can undermine the appeal of the brands, because the absolute and aspirational customer segments generally want products which are produced by artisans. Environmental: The global personal luxury goods industry may have negative impact to environmental aspect if the manufactories have poor pollution control abilities. Some companies also destroy instead of discounting their excess product in order to keep the products’ value, which may cause additional...
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