Business Report of LVMH
Rining Mutang Beili Yin
Sekit Chubuppakarn Xu Yang
Mahsa Tolou Sharifi
LVMH, the world s largest luxury group, came into being with the mergers of Moët Hennessy and Louis Vuitton in 1987. Besides its traditional strengths in wines & cognac and leather & fashion goods, other three are perfumes & cosmetics, watches & jewelry and selective retailing.
In the external environment of part two, the report analyzed the relevant dimensions of the macro environment by use of the PESTEL framework and the luxury industry by the Five forces framework. The global economy, people s expectations on luxury goods, drive for technological application, rarity of raw materials, and intellectual property laws all have an impact on LVMH in a broad sense. In a narrower sense, market entry into the luxury sector is defined low, threat of substitutes neutral (low to loyal customers but high to those who normally cannot afford), the power of suppliers, the power of buyers and competitive rivalry all high.
Generally the luxury industry can be regarded as in the shake-out stage; however, people in the US, wealthy European countries and different Asian countries are in the different stages of luxury spread process. Following the life cycle of the industry, the cycles of competition model will be illustrated to explain the strategic moves of LVMH and its two main competitors PPR and Richemont.
In the strategic capabilities of part two, the report presented LVMH s physical resources, financial resources, human resources and intellectual capital. The Group s core competencies lie in four key elements and price. product, distribution, communication
In the culture and strategy of part two, LVMH s corporate values and culture, and the cultural web in terms of symbols, organizational and power structure and control system are presented respectively. LVMH stresses on the creative design and quality 1
excellence of its products.
At the corporate level, LVMH expands horizontally and vertically in both backward and forward integration. The Group s good corporate parenting adds value to the individual brand underneath it. LVMH s strategic direction can be defined as diversification, a combination of market penetration, product development and market development. The Group s current product portfolio, as diversified as over 50 brands, is shaped by Bernald Arnault s constant acquisitions.
LVMH s mission is to let art travel around the world, but due to its price mark-up, the country it enters should have sufficient customers who can afford the LVMH products. Therefore, the Group s international strategy more follows the people of high income than particular countries. The way LVMH chooses to enter a foreign market is usua lly by acquisitions of reputational domestic brands.
At the business level, we mainly present the strategy of Louis Vuitton, the star brand under LVMH, which accounts for 60 per cent of the Group s revenue. Louis Vuitton differentiates itself by four approaches stick firmly to the full price, pick store
locations professionally, control the production strictly, and manage its own inventory.
Innovation and entrepreneurship are fundamental drivers in today s economy, even for well-established MNCs like LVMH. Vigorous product and process innovation contributes to LVMH s long-standing success. The challenge for entrepreneurs at the maturity stage is to keep their passion and momentum to create new growth for the company. However, this doesn t seem a problem for Bernald Arnault, who has been the CEO of LVMH since 1988.
1. Introduction 2. The strategic position 2.1 External environment 2.1.1 The macro environment: PESTEL framework a. Economic b. Socio-cultural c. Technological d. Environmental e. Legal 2.1.2 Sources of competition: Five forces framework a. The threat of entry...
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