Louis Vuitton Moet Hennessy (LVMH) is one of the most prestigious companies in Europe. It prides itself in producing and manufacturing luxury goods such as watches, leather goods, fashion, perfume and cosmetics, wines and spirits, and other luxurious selective retailing. Louis Vuitton was founded in 1854 in France by Louis Vuitton; however, in 1987, the conglomerate was created with Moet et Chardon and Hennessey, who are the leading manufacturers of cognac and champagne. The merging created the LVMH brand, the leading luxury goods conglomerate (Cavender, R. and Kincade, D.H., 2014). It has more than 4,000 shops across the world. The primary demand comes from Asia, China, Japan, the United States, and Europe. In 2022, LVMH recorded a revenue of approximately 56.5 billion euros, a 28% increase from 2021 sales. LVMH has maintained its lead because of its dynamic nature of brands dependent on consumer demands. This has strengthened its global spearheading position in luxury goods. LVMH also has approximately 60 subsidiaries which control such as Fendi, Sephora, Princess Yachts, Bulgari, and Christian Dior, among others. For effective management, the subsidiaries are managed under the six main branches; wines and spirits, fashion group, perfumes and cosmetics, watches and jewelry, selective distribution, and other activities.
Mission statement
The mission statement of LVMH is to ’embody unique savoir-faire, to carefully represent the western art of living by showcasing its most refined qualities and the preserved heritage and dynamic engagement with modernity. It aims at being synonymous with creativity and elegance that combines innovation and tradition to reignite and rekindle the dream and fantasies of individuals. It aims at being excellent in creativity. This can be seen through its product quality and its global sale. They have aimed at preserving the family spirit that is focused on expanding and making lives better in the future. It aims to create, produce, and market its products uniquely to respect its identities and autonomy by carefully selecting its distribution outlets (Chen, R., 2021, September). The packaging of their products indicated their significant value of delivering excellence, creativity, and innovation, as well as cultivating an entrepreneurial spirit. Hence, LVMH does not suppress the different groups that constitute the brand; instead, it aims at empowering each by providing resources. As a result, it has maintained its lead in performance in the long term. It also aims at sharing the values and the pillars with all the members to ensure uniformity in mission and vision. As a result, it has employed strategic leadership that identifies talented and creative individuals to spearhead its marketing campaigns. Therefore, LVMH has aligned its employees with the company’s mission. As a result, both benefit in their advancement; the employee advances in their careers, and the company grows in competition and revenue generation.
External scanning
LVMH, in the past, had enjoyed the market as one of the high-profit companies. Still, external factors have recently affected the price of their products, such as the emergence of counterfeit firm brands that demand meager prices, hence affecting their continued existence. Another external factor is the emergence of other luxury brands, such as Gucci and Prada, and the dependence on the Japanese market (Chen, R., 2021, September). The mission of LVMH company of showcasing elegant and quality products reputation has been affected by counterfeit products. As a result, loyal customers have opted for the other brands that are harder to duplicate or fabricate. Although counterfeit products affect most companies, LVMH has been affected the most as customers now associate the LVMH brand with an older generation; hence the young customers opt for the recent brands that are compatible with their needs.
Moreover, LVMH faces competition from other exclusive brands such as Prada and Gucci; however; the company has initiated strategic plans by utilizing high-end designs and participating in fashion shows showcasing prestigious models; they have also sponsored famous artists, movie stars, and football personalities to attract customers from different fields who fancy quality luxury goods. They have also ensured continued appearances in high-end magazine spreads to ensure access to other potential customers, such as women and fashion lovers (Chen, R., 2021, September). These engagements have put LVMH at the top regarding sales and customer trust. Their high-end products target consumers who prefer exclusive, unique, and unique items.
Considering the PESTEL analysis, LVMH company has been affected politically by the decision of the United Kingdom to exit the European Union. Hence, the import duties imposed on Louis Vuitton’s products have increased. This results in countries such as China charging high import duties, creating an extreme price difference, resulting in customers purchasing it in foreign countries to get the price advantage. Consequently, it has predisposed LVMH to invest in the tourist market (Cavender, R. and Kincade, D.H., 2014). Economically, other countries put up the price of LVMH products, creating a significant price difference and the sale decrease. Recently with the economic regression as a result of covid 19 pandemic, potential customers have reduced their purchases. Hence increasing prices resulted in a decline in sales. However, LVM has strategically invested in countries such as Bangladesh and India because they provide cheap labor, which can help the company cut costs and increase its sales while still maintaining its mission. Other factors include the recent changes in technological advancement as a marketing platform and the social perception of the brand products that change hence the need to keep up with customer preferences.
Internal scanning
Some internal environmental factors that LVMH has employed to ensure its success include its decentralized organization; it has ensured that Maison maintains its autonomy as it operates under the company brand. This has contributed to its ability to meet the needs of the customers. It has also contributed to easy and effective decision-making as the management responds to the customer preference (Cavender, R. and Kincade, D.H., 2015). As a result, it has motivated their employees to be excessive in their entrepreneurial spirit, which positively impacts the company’s progress. The company has also invested in its strength by prioritizing organic growth; it has channeled its resources to develop and improve its independent groups while encouraging creativity. Therefore, it has invested in human resources by supporting career growth. Compared to other competing companies, LVMH has invested in famous personalities by showcasing their talents while marketing its products. This approach has made it one of the most prestigious brands to work for.
Another significant internal factor that has led to the success of LVMH is its vertical integration. It has invested in fostering excellence in both the downstream and the upstream. As a result, links in product sourcing, marketing, and selective retailing have been controlled. This has contributed to the effective management of the market and its products (Chen, R., 2021, September). Vertical integration has also been made possible because strategic leaders are aware of the independent groups and how the employees can be effectively motivated to ensure the company’s success.
LVMH has also invested in creating powerful synergies that allow sharing of resources among the different groups. This ensures that the group maintains its identities and autonomy while strengthening the bond between the groups. As a result, they maintain that savoir-faire because it recreates their vision toward future initiatives (Donzé, P.Y., 2018). These initiatives ensure that innovation, creativity, and craftsmanship are fully utilized to provide job opportunities for the young generation and that they develop in their careers. Also, it promotes balanced business activities among the groups by carefully selecting the geographical positions that record the highest sales of luxury products. Consequently, it has made it effective in withstanding and maintaining its position as the leading brand despite the shift in economic factors.
Strategy formulation
LVMH has formulated strategies to effectively compete in the market by having a broad business portfolio of luxury products. The company is known for its fine craftsmanship, prestigious brand image, and high-quality materials. Therefore, they have specialized in producing artistic pieces that appeal to high-end customers (Donzé, P.Y., 2018). It has employed the corporate strategy to create operational synergies in corporate announcements, advertising, management speeches, and the choice of designers. Formulating this corporate strategy has promoted the evolvement of new products, diversification of the company’s portfolio, and ventures with other subsidiaries. As of December 2021, LVMH had approximately 70 subsidiaries, making it one of the leading brands.
Also, LVMH has employed a mixed strategy, global and multi-domestic, because the different groups have unique strategies that concern the preferences and tastes of the local consumers. The unique strategy is decentralized into production and distribution. Groups such as wine and spirits require awareness of local responsiveness and the legal requirements that pertain to norms and values of the immediate economy (Jackson, T., 2007). Therefore, LVMH has formulated policies on the multi-domestic environment. Other groups, such as fashion, require different strategies to identify the recent trends in the industry and their implication for creativity and innovation. Consumer preferences and tastes are recently changing, especially in the fashion industry; hence diversification and expansion should also consider developing countries. The fact that talented craftsmen assembled Louis Vuitton products has made a brand with a unique brand name; hence this has been used to appeal to consumers of the older generation.
As a result of the combined formulation of strategies, LVMH has witnessed significant growth in financial performance. This has increased its profit in the united states and Europe and recently in developing economies such as China and India.
Strategy implementation
LVMH has done high-end brand awareness, and it has also diversified its portfolio and sources of revenue. It has selected exclusive distribution and supply system by employing a global expansion strategy. They have established outlets in the potential market and employed the multinational branding approach. The combination of the international and multinational strategy has enabled the company to overcome negative external factors, such as the political influences on the company and its sales (Lai, C.S., 2022, December). As a result, it has established a loyal customer base in emerging economies and markets such as China and Asia. In 2015 LVMH recorded a revenue collection of approximately 35.7 billion dollars, demonstrating its resilience in the economic environment. Therefore, formulating corporate, international, and global strategies has made LVMH one of the best luxury companies.
It has also implemented its strategies by controlling the distribution and sale of its products to ensure that they get the customer’s feedback for future decision-making. The taste and preferences and the shift in social factors are effectively considered, hence understanding where there is weakness and how the opportunities in the immediate environment can be utilized to achieve the company’s mission and vision.
Recommendation
LVMH should consider venturing into products that appeal to the younger generation in design and packaging. It should diversify its strategy with consideration of the stagnated brand image. It should take into consideration of the shift and changes in the environment (Jackson, T., 2007). It should analyze the demographic demands to develop influential segments to focus on new territories and developing countries with a middle-class population with high purchasing power. Diversifying would ensure that the brand image becomes solid and relevant to compete with other brands.
Secondly, it should make plans to reduce counterfeit products by creatively making its trademark impossible to duplicate (Lai, C.S., 2022, December). They should do this by engaging law enforcement to track the counterfeit items to the factory and the warehouses and impose extreme measures such as fines to inhibit more counterfeit factories.
It should open stores in countries that attract tourists. The political stability in the United Kingdom has affected the import duties making it impossible for potential customers to purchase the items. Hence, LVMH should have strategies to expand and diversify in politically stable countries. Also, it should consider partnering with other subsidiaries to ensure profitability and effective distribution of its products (Li, J., 2021). It should also take advantage of the technological advancement in marketing and advertising because other competing companies are investing in social media advertising platforms. Therefore, it should invest in technology to increase sales and a broader demographic.
In conclusion, LVMH has succeeded in its sales and performance as one of the leading luxury companies because of employing a mix of strategies and leadership strategies. International, corporate and multinational strategies have been effective in promoting the brand image, production, and distribution; hence, it has maintained its dominance in the market. It is unique from other brands such as Prada and Gucci because of its extensive portfolio of products and other selective retailing. However, the company should diversify its strategies to cater to the younger generation and customer preferences. It should take advantage of technological advancement and the trends affecting sales and production of the goods.
References.
Cavender, R. and Kincade, D.H., 2014. Management of a luxury brand: Dimensions and sub-variables from a case study of LVMH. Journal of Fashion Marketing and Management.
Cavender, R. and Kincade, D.H., 2015. A luxury brand management framework built from historical review and case study analysis. International Journal of Retail & Distribution Management, 43(10/11), pp.1083-1100.
Chen, R., 2021, September. Analysis on How LVMH Can Be the Leader of the Luxury Industry. In 2021 International Conference on Financial Management and Economic Transition (FMET 2021) (pp. 77-81). Atlantis Press.
Donzé, P.Y., 2018. The birth of luxury big business: LVMH, Richemont and Kering. In Global luxury (pp. 19-38). Palgrave, Singapore.
Jackson, T., 2007. A contemporary analysis of global luxury brands. In International retail marketing (pp. 155-169). Routledge.
Lai, C.S., 2022, December. The Strategy and Competitor Analysis of LVMH. In 2022 2nd International Conference on Financial Management and Economic Transition (FMET 2022) (pp. 549-557). Atlantis Press.
Li, J., 2021, March. Analysis on the Acquisition of LVMH on Tiffany& Co. In 6th International Conference on Financial Innovation and Economic Development (ICFIED 2021) (pp. 426-430). Atlantis Press.
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