B6016 - Managing Business Operations
Louis Vuitton’s Challenges
I. Company Overview
a) LVMH (Louis Vuitton Moet Hennessy)
LVMH is one of the most successful luxury goods conglomerate, headquartered in Paris, founded in 1987. Well-known luxury goods group, Christian Dior is the main holding company of LVMH, owning 43% of its share. The company holds about 60 subsidiaries world-wide and some are managed independently. The Group is active in five different sectors; Wine & Spirits, Fashion & Leather Goods, Perfumes & Cosmetics, Watches & Jewelry, and Selective retailing. There are more than 3,000 retail stores worldwide. By looking its financial data, it has achieved significant growth over the last 5 years. Sales in 2010 have been improved by 32% since 2006. We would like to focus on Fashion & Leather Goods business sector, which is represented by Louis Vuitton. LVMH fashion and leather goods line is gaining the largest revenue from Asia market and it represented 46% of the aggregate revenue in 2009.
b) Louis Vuitton (LV)
Louis Vuitton, a trunk-maker in Paris since 1854, became a legend in the art of travel by creating luggage, bags and accessories. LV is now active in other creative spheres: ready-to-wear, shoes, watches and jewelry. Under the artistic direction of Marc Jacobs in 1997, the new collections met with immediate success and renown. Continually expanding, LV today boasts 17 production workshops, an international logistics center, and exclusive shops worldwide. In 1987 LV became a subsidiary of LVMH, the world's leading luxury goods group.LV has 456 stores around the globe, over 100 more than rival Gucci. Its omnipresence has pushed it to be more selective in its openings
c) Key Success Factors of LV
There are three eternal values of LV’s success. Those values are 'original know-how', 'craftsmanship' and 'icons'. Firstly, in order to sustain its 'original know-how' and the finest quality, LV has never depended on outsourcing concerning manufacturing and procurement even if there are chances for LV line either to cut down its cost or to take advantage of geographical merits. Secondly, 'craftsmanship' means offering every customer every flawless product through hand-made manufacturing of skillful craftsman. To maintain this principle, LV is focusing on lean production of small units. Lastly, 'icons' can be stated as a sort of differentiation. LV goods are striving to assign significant shapes and color so as to retain its identity.
d) Outstanding Growth of LV
Despite the latest global financial turmoil, LV turned in a remarkable performance for the year, again recording double-digit revenue growth based on published figures. The brand has made outstanding headway in Asia and continues to benefit from strong momentum in Europe. Fendi and Marc Jacobs also confirmed their potential, showing a good level of resilience to the economic slowdown in Europe and reporting strong revenue increases in Asia.
II. LV Operations System
How Louis Vuitton is relying on operations to support its growth
LV’s tall task is how to grow sustainably without diluting its image. LV is operating its international stores by themselves without any franchising agreement. The reasons that it is not allowed for franchisee to manage a store of LV is related to its management philosophy. Even though, this strategy requires high management cost and might have a weakness in terms of setting up localized specific plans, this action enables LV to manage quality control and exclusiveness of its brands directly. Besides, this action can also give loyal customers more satisfaction since LV is able to reinforce a consistent brand image. LV has grown significantly and is now much bigger than rivals such as Gucci. That raises some interesting challenges as it tries to keep up its growth while maintaining its exclusivity. Part of the way it is trying to optimize all of...
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