This website uses cookies to ensure you have the best experience. Learn more

Lvmh's Diversification Strategy Into Luxury Goods

5802 words - 24 pages

TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY3 2.0 INTRODUCTION3 2.1 Background to Organization3 3.0 ANALYSIS3 3.1 Porters 5 Forces (Model of Competition)3 3.2 PESTEL (External Analysis)5 3.3 SWOT6 4.0 KEY FINDINGS OF ANALYSIS/PROBLEM IDENTIFICATION/ KEY STRATEGIC CONCERNS6 4.1 Vertical Integration6 4.2 Diversification7 5.0 POSSIBLE SOLUTIONS & STRATEGIES.8 7.0 CONCLUSION9 8.0 APPENDICES11 Appendix 1: Porters 5 Forces11 Appendix 3: Luxury Goods Group & Brands Top Ten Competitors13 Appendix 4: Industry Map*.14 Appendix 5: Financial Performance14 Appendix 6: PESTLE Analysis15 Appendix 7: SWOT Analysis16 Appendix 8: Evaluating industry Attractiveness and Competitive strength19 Appendix 9: A ...view middle of the document...

In order to analyse this case LVMH's history and financial data has been discussed in terms of its internal environment, its resources and competitive position.
2.1 Background to Organization LVMH is an international group of companies that produces and sells luxury goods. It is associated with a number of product lines such as wines, cosmetics, fragrances, fashion, watches, jewellery and retail and with the most prestigious brands in those sectors. Since it conception in 1987, when Louis Vuitton merged with Moet & Chandon champagne and Hennessy cognac, LVMH was conceived to be a star group. It's business strategy was based on acquiring brands based on the premise that the reputation of such brands "would lead to a long-term corporate advantage" (Thompson, Strickland & Gamble 2005, p. C509). The rapid portfolio diversification took off when Bernard Arnault became president of LVMH in 1989. He expanded the company and acquired a number of specialty retail department stores in Paris.
3.0 Analysis 3.1 Porters 5 Forces (Model of Competition) Given the range of luxury sectors that LVMH has diversified into, the analysis is centred on the LUXURY industry where the game is played by few groups. The appendices illustrate the following: Appendix: 1 Porter's 5 forces diagram Appendix: 2 LVMH's sectors and subsequent brands Appendix: 3 Top 10 Competitors Appendix: 4 Industry Map Industry & Competitors The luxury industry operates in a high competitive environment. The need to maintain desirability and uniqueness of each product/brand puts pressure on cost savings and product life cycles, creating a volatile environment where only companies with strong brands, financial resources and the ability to integrate their activities can survive. Advertising, communication and R&D expenses are very high. This is evidenced by LVMH's expenditure on this to be approximately 11% of sales in 2002 (Antoni 2003).
Training manufacturing employees is another costly element in an industry where the quality is measured by the final consumer in terms of perfection. This last element calls for constant improvement in; however at the same time requires the maintenance of the old manufacturing processes. Key managers that can run each business independently but with a group vision are also part of the equation. Additionally the luxury industry is strongly dependent on tourism which is influenced by economy trends. The 9-11 events and the global economy slowdown have had a great impact on the industry. Finally huge investments were done to win strategic position, having an important impact on revenues. Appendix 5 is an example of the proportion of cost and impact on revenues and the stock performance.
New entrants The risk coming from new entrants is low, except perhaps, for the development of niche brands that can slowly earn a position. The strong financial resources and the "story" of the brand that is needed to succeed are two elements that create a barrier....

Other assignments on Lvmh's Diversification Strategy Into Luxury Goods

Strategic Management Essay

6907 words - 28 pages Development: Puma has expanded their business overseas and gained a market for their products overseas. They have their main distribution channels located in parts of the world like US, Austria, Hong Kong, Australia and Japan. Here they face a high competition and economic problems of the host and home country also. So they have to take it into consideration very responsibly. Diversification is one strategy not followed by Puma. They can diversify

International Portfolio Investment And International Diversification- Benefits And Limits

5036 words - 21 pages technology and policy, support the case for internationally segmented securities markets, with concomitant benefits for those who manage to overcome the barriers in an effective manner. International portfolio diversification has long been advocated as an effective way to achieve higher risk-adjusted returns than domestic investment alone. The main premise underlying this strategy is that international stocks tend to display lower levels of co


1727 words - 7 pages diversification $ 25 million + 100% company Luxury goods $ 70 million (estimated value of Luxury goods as unlisted) - The € / $ exchange at the time of offer is 1.30 The CEO reported to the board of directors of the fund shareholder the situation with the utmost transparency also as a result of its delicate position. The situation of the investment fund is shown below. Portfolio of investments Quote Food 30 % Luxury 40 % Auto motive 20

Bus 508

1266 words - 6 pages Amazon’s Business Model Regina Wood Dr. Linda Hargis Strayer University Bus 508 July 19, 2011 1. Discuss the pros and cons of Amazon’s growth and diversification of business and specialization, and make recommendations about what Amazon could have done differently. Amazon’s empire was found in 1994 by Jeff Bezos. Its main core as an e-retailer was book sales, which later lead them to diversify into selling more goods online including


1086 words - 5 pages Life as being Versatile A strategy will be defined as the distribution of the firm resources, and hence the distribution of its output among industries. Corporate businesses always pose the question about their diversification strategies, and the advantages and disadvantages associated. Many companies became bothered by putting all its eggs into one basket; therefore companies had to come up with certain strategies. Conglomerates are


6665 words - 27 pages Joint Venture Strategy. 4. Horizontal Diversification Strategy. 5. Horizontal Diversification Strategy. ST Strategies 1. Horizontal Diversification Strategy. 2. Backward Integration. 3. Intensive Market Penetration. WO Strategies 1. Intensive Market Penetration. 2. Defensive Joint Venture Strategy. 3. Intensive Product Development Strategy. WT Strategies 1. Horizontal Integration Strategy. 2. Intensive Product Development Strategy. 3

How Will I Protect My Brand, Logo Or Patent In South Korea?

688 words - 3 pages suffered by European right holders relate to registered trade marks, designs, copyright and related rights. These infringements affect mainly the sectors of fashion and luxury goods, as well as music industry and video games (in particular online piracy). South Korea has enforcement mechanisms are available and effective in a number of sectors, but still unable to tackle the problems listed above. On certain sectors, such as entertainment

Ford Restructuring

1446 words - 6 pages the Premium Automotive Group. The original plan may have been to allow Ford to become a part of the luxury car industry but it has proven to be very unprofitable for the company. As stated in the case study, Henry Ford’s vision was the production of cars that was affordable to the masses. Luxury cars simply did not line up with the vision of the company. The formation of the PAG is an example of unrelated diversification. Although they have

Peace In World

5335 words - 22 pages Coach Company Analysis Recommendation: Sell Coach The current recessionary environment has had a strong negative impact on individual income levels, consumer spending and consumer credit availability. As a producer of high priced luxury goods Coach stands to suffer from the state of the economy as conspicuous consumption is frowned upon and consumer frugality is in fashion. These are factors that significantly impact Coach’s financial


9350 words - 38 pages Objectives 13 6.2 Apple’s Resources 14 6.3 Apple’s Capabilities 15 6.4 Apple’s Core Competencies 17 6.5 Apple’s Value Chain Activities 17 6.6 Apple’s Financial Condition 18 6.7 Apple’s Current Situation 18 6.8 Apple’s Diversification Strategy 18 7. SWOT Analysis 17 8. Recommendations 20 9. Implementation 22 10. Conclusion 22 References 22 Appendices 22 Executive Summary Today Apple Inc, is one

Case Solution Of Mark And Spencer

3005 words - 13 pages Part 01 Executive Summary M&S as an organization has faced a number of challenges in its 130 year existence, but has successfully weathered each challenge as it presents itself with relative aplomb. The foundation upon which the whole business has rested since its inception in 1884 was in its initial form, involved selling carefully chosen, good quality goods with low margins, and achieving volume sales (relatively speaking, at least) through

Similar Documents

Coach Case Study

3864 words - 16 pages . Attractive Pricing Strategies Coach (COH) products are part of the luxury goods market. Luxury consumers typically fall into certain categories, mostly according to level of affluence and age bracket. Coach offers quality products that are considered affordable luxuries. Coach is one of the pioneers of the affordable luxury industry. While handbags often retail at prices of over $1,000 at LVMH, Hermes, Burberry, or Prada. Coach’s price

Bmw Analysis

6156 words - 25 pages making on buying goods and services compared to other nations (Barbosa, 2012). It is clear that BMW is committed to finding new ways to conduct business. Over the years, BMW has stayed true to their company characteristics of quality, class, functionality, and reliability. Their corporate strategy has been to maintain these traits while delivering industry leading products. BMW is also seeking to broaden its production, moving into the North

Luxuray Product Competitive Analysis

394 words - 2 pages headquarter is located in Paris, France. Currently, the sharp rise in sales placed LVMH on the leading position in the luxury product industry among their main competitors such as Christian Dior, Prada, Gucci and Fendi. The major business LVMH is involved in is divided into five divisions: Fashion and Leather Goods, Wines and Spirits, Selective Retailing, Perfumes and Cosmetics Watches & Jewelry based on the share of total profit over the first

Business Strategy Essay

3960 words - 16 pages on sound strategy, strong team and period of highest risk with diversification of business. Vision, Mission and Objectives Vision of any organization is a statement that sets out what the organization wants to accomplish, and should inspire members, staff and supporters. The vision of Tesco is “Most highly valued business in the world” (Chew, 2005). The mission statement helps to identify the major goals and performance objectives. The