Lvmh Case
Autor: Dariel545 • April 3, 2019 • Coursework • 921 Words (4 Pages) • 1,120 Views
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- What are the major elements of LVMH’s competitive strategy in the branded luxury products industry? How well do the pieces fit together? Is the strategy evolving?
- The major elements of LVMH’s competitive strategy is to diversify their portfolio in luxury brands. Have 70 brands. Such prestigious brand names in wines, spirits, and champagnes, fashion, watches and jewelry, and perfumes and cosmetics.
- While the products are not everyday necessities, LVHM’s products sell very well and are extremely profitable. The fit together because they are all high-end luxury brands.
- The strategy has remained constant but has evolved into acquiring radio stations, newspapers, and footwear amongst others.
- High focus on creativity, innovation, and image in product creation.
- Importance on Asia market because of its size and potential growth. Asian people (Chinese) pay close attention to detail and enjoy high luxury products.
- Double digit product growth would soon go down in china for luxury products.
- Great customer loyalty that comes from the inability to imitate brand.
- Attention to detail
- How have LVMH’s corporate strategy choices strengthened or weakened its competitive position in the branded luxury products industry?
- The corporate decisions of the LVMH has strengthened its competitive position as they have constantly been evolving and acquiring rising stars. For example, in 1987 the families who controlled Moët-Hennessy and leather goods designer Louis Vuitton saw a merger between their two companies as their best strategy to prevent the companies from becoming takeover targets of large international corporations that were making investments in France.
- Revenues have been constantly growing and LVMH is a staple in the branded luxury products.
- Acquisitions of brand and diversifying portfolio. Horizontal integration, buying competitors. Advantages of horizontal integration include easier distribution channel, reduce cost, increases bargaining power for LVMH, brand recognition.
- Is LVMH’s international strategy best characterized as a multi-domestic strategy, global strategy, or transnational strategy?
- LVMH employs a transnational strategy because LVMH offers a more personalized approach to selling and marketing its products, with a specific target audience in mind. For example, when ads are placed in North America promoting Cognac liquor, the ad probably will display African American people. This would be an attempt to capture such audience as this specific type of liquor is popular in African American communities.
- Does it make good strategic sense for LVMH to compete in all of its current segments? Which of its product lines — Wine and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, Selective Retailing, and Other — do you think is/are most important to LVMH’s future growth and profitability? Should one or more of these current segments be discontinued? Why?
- It does make good sense for LVMH to compete in all its current segments. The reason is simple, diversification. Diversifying a portfolio allows the holder to take chances and evolve into other markets to capture profits from different angles. For the future success of LVMH it is clear that Fashion & Leather Goods needs to remain a successful segment of their business. On the other hand, I believe that the Watches & Jewelry segment should be discontinued. For the high-end market that LVMH is targeting, most of those customers personalize their jewelry from independent jewelers. If LVMH was focusing on the sale of diamonds and not Watches & Jewelry then this segment of business would be a better idea; but as is, the sale of Watches & Jewelry should be discontinued as it is one of its lowest segment revenue generator.
- Also the other activites segment is not profitable enough to continue.
- What is your assessment of LVMH’s financial performance over the 2012 – 2015 period? (Use the financial ratios in the Appendix of the text as a guide in doing your financial analysis.)
- From 2012-2014 net profit for LVMH was increasing. While in 2015 thy obtained their highest revenue in the 2011-2015 span, the company obtained less net profit than the previous year, by roughly 2 euros million per share. That can be explained by the higher cost of goods sold incurred in 2015 compared to 2014 and the higher marketing expenses incurred in 2015 compared to 2014. LVMH earnings per share also declined in 2015 compared to 2014 with an earnings per share of €7.11 and €11.27 respectively. The conclusion can be drawn that despite LVMH having higher revenues in 2015 than any other year, the company performed better in 2014.
- What strategic issues confront LVMH in 2016? What market or internal circumstances should most concern CEO Bernard Arnault and his company’s senior leadership team?
- The other activities division was not worth the investment as it had never earned an operating profit and required substantial annual operating investments
- The company’s Other activities division recorded a €123 million loss during the first six months of 2016 compared to a €75 million loss during the first half of 2015.-The loss of the company in this division increased greatly.
- The refusal to divest nonperforming LVMH brands and purchase of other brands. Arnault had long dismissed suggestions that the company should consider the sale of DFS, Star Cruise Services, Le Bon Marché, La Samaritaine and Sephora.
- What recommendations would you make to Arnault to address the strategic issues confronting LVMH in 2016 in order to sustain its impressive growth in revenues and profitability?
- Eliminate Watches &Jewelry and eliminate other activities of business segment.
- Ask in class.
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