The global luxury goods’ marketplace in the past decade has experienced nothing short of a complete evolution and transformation. This industry has endured global economic downturns in advanced economies such as the United States requiring them to branch out of their comfort zones and expand into emerging markets specifically the BRIC countries. These Asian nations possess high GDP rates that are anticipated to increase significantly in the upcoming years. Luxury goods were once a possession of strictly the wealthy, brand conscious consumer with a high disposable income. Within these developing economies reside a “new breed of young entrepreneurs and noveau riche consumers”, offering large potential within the middle class market for luxury brands (Pan). Although these countries offer significant promise, access will come at the cost of fierce competition, potential of counterfeiting and international trade barriers.
Bernard Arnault, the head of the Louis Vuitton Moet Hennessy brands, recognizes that penetration, growth and development in these emerging markets are a critical part of the brand’s long-term global strategy. LVMH is the parent company of around 50 sub-companies that run autonomously and implements the Star Brand formula. The company is determined to capture the growing Asia market with particular focus on China, Japan, South Korea and India. Although these areas are quite affluent and familiar with Western luxuries, LVMH faces difficult challenges such as raising consumer awareness, counterfeiting, and emphasizing purchase within one’s own nation state.
The recommendations of this case analysis addresses each of the challenges and offers both a short term and a long-term implementation plan. If LVMH executes the suggested recommendations, the organization will be a global powerhouse by both western and eastern standards. LVMH’s Mission, Vision and Core Values
To represent the most refined qualities of Western "Art de Vivre" around the world. LVMH must continue to be synonymous with both elegance and creativity. Their products, and the cultural values they embody, blend tradition and innovation, and kindle dream and fantasy. Five Fundamental Values:
Be creative and innovative
Aim for product excellence
Bolster the image of brands with passionate determination
Act as entrepreneurs
Strive to be the best in all they do
Maintain Status as the Leader in the Luxury Goods Market
Part of LVMH’s mission is to be the leader in the global market for luxury goods. LVMH is the world’s largest and most profitable player in the luxury goods market. They have established this with a product life cycle that emphasized product elegance, quality and uniqueness. The challenge is to stay on top. The vision of the company is to maintain its customer’s loyalty and its strong brand name, while finding new markets worldwide. LVMH is working hard at keeping its star brands in the limelight and constantly reinforcing the value of its brands. Economic Downturns
LVMH is a multinational company that can be affected by economic downturns either globally or in specific markets. The Asian crisis of 1998 hit LVMH hard because it represented approximately 50% of LVMH’s total sales (Kerns). As identified by the case study, LVMH was able to reduce the impact by renegotiating rents, cutting head-office staff, adjusting sales forces and reducing stocks. The current global economic crisis has not hit LVMH as hard as the Asian crisis did in 1998. In 2009 the Fashion & Leather Goods sales increased by 5%, Selective Retailing increased sales by 4% while Watches and Jewelry fell by 13%, Wines and Spirits fell by 12 % and Perfumes and Cosmetics fell by 4% (Newhouse). The global marketplace can be very challenging during tough economic times, especially when you are selling big ticket luxury items. LVMH has a positive outlook for 2010 and plans on rigorously managing all of its...
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