Lvmh Report

This expansion demonstrates how the luxury industry is now run by massive corporations whose focus is only on growth, visibility, brand awareness, advertising, and most importantly, PROFITS! With growth and expansion, has come a decrease in quality and rarity. The luxury garments produced are mostly not handmade but are even outsourced to large factories in places such as China and Turkey. Also, to meet quarterly turnover projections, “designers churn(ed) out increasingly trendy collections of clothes, handbags, and shoes.” (Thomas, Pg. 246) With hundreds of new stores around the globe the surplus of designer labeled merchandise is immense hence, the proliferation of outlet malls.

The consumption of luxury goods in China is mounting sharply. Not only those born to elite families, but also many common people are greedy for luxury brands (China, a Booming

in 2011, and their spending jumped by 13 percent. Compare this to single women, whose spending grew less than 2 percent, and the average Japanese consumer, whose spending dropped.5 Young men, it seems, saw the March 11 disaster as a good reason to live for the moment, and Japan’s luxury goods market appears to be a beneficiary. Finally, when we look at segmentation by income, Japanese who spend more than a million yen (about $12,000) a year on luxury goods are more than three times as likely to say they are switching to high-end brands than to low-end brands (Exhibit 3). Those who spend less than half as much are reporting the opposite.

Most luxury brands have been family-owned or -controlled and, consequently, were single-brand firms for the most part. However, mergers and acquisitions have been growing in the industry, with LVMH leading the way. Our strategic recommendation is to follow LVMH’s lead and acquire a multitude of diverse companies to build the Gucci portfolio.

   Tariffs have been a main factor affecting the development of China’s luxury market. After joining the WTO in 2001 China committed to reduce tariffs. Despite this people still prefer to buy luxury goods overseas because the existing tariffs create higher prices. A survey of 20 luxury brands sold in China shows prices are 45% higher than in Hong Kong and 51% higher than in U.S (Lan, 2011).

LVMH, known as Moët Hennessy • Louis Vuitton, is a French conglomerate and the largest producer of luxury goods in the world. LVMH was formed in 1987 with the merger of Moet et Chandon a champagne manufacturer, Hennessy a cognac manufacturer, and Louis Vuitton a fashion house.

It is hard to imagine that after the financial crisis swept across Europe, many great transitional enterprises had to face collapse and bankrupt while the luxury goods industry become more prosperous. Recently, the French luxury goods group LVMH announced their recent business condition. The volume of the first week in October had incredibly increased by 12% the previous week. The Hermes Corporation also said that in order to meet the increasing number of market demand, it would open 15 branch stores in the latter half of the year. These aroused some fierce debates, the public held a skeptical opinion towards the questions: How can the luxury companies maintain their positions? Why didn’t they strike down by financial crisis?

of the Luxury Brands group with Starwood, and were directly involved in developing the “W”

Louis Vuitton is considered under the luxury goods industry. The luxury goods industry is a high profitable industry with low outside threat. There are only few large players in the industry and they server to the wealthiest people in the world. The luxury companies have high power to control the price so they have ability to grow sustainably.

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.

The overall sales of luxury goods in the year 2009 is expected to be more than US$150 billion and Asia contributes 10% to it. The concept of luxury is now not confined to only to Europe and US, the Asian subcontinent contributes majorly to it, with India and China as the newly emerging markets. Professor James Twitchell (2002) comments on the democratization of luxury and the changing consumer psychology These new customers for luxury are younger than clients of the old luxe used to be, they are far more numerous, they make their money far sooner, and they are far more flexible in financing and fickle in choice. They do not

Louis Vuitton Moet Hennessy, a luxury goods provider is looking to expand their brand dominance in Asia. In order to expand successfully LVMH must evaluate challenges that may arise and get in the way of their successful expansion. In the Asian market, LVMH must deal with political and cultural uncertainties, the threat of counterfeit products, and the increased cost of products in Asia compared to France.

LVMH’s brand portfolio is a catalogue of the finest things money can buy. Arnault said, “A Star brand is timeless, modern, fast growing and highly profitable.”[iii] LVMH has positioned its brands strongly in the luxury segment offering more than 50 different brands under their five core competencies. LVMH has been successful through all of their various brands in their portfolio giving them each their independence and creativity. “LVMH is well known for leaving much operational and marketing freedom to the various brands it owns.”[iv] “LVMH has done an excellent job of brand positioning, says Ben Cavender, senior analyst at China Market Research Group. It has succeeded in securing the particularly enviable position of gaining a following among the top percentage of China’s wealthy. As the financial crisis stretches on, LVMH customers in China still have money to spend.[v] “LVMH’s brand imaging, which relies heavily on pushing its European heritage, is so successful that it has benefited other brands by proxy, says Paul French, one of the founders of Access Asia, a group dedicated to tracking regional consumer and marketing trends. “Everyone hangs on the coattails of Louis Vuitton’s brand imaging in China.”[vi]

Luxury product sales boost in the emerging marketing like China, which has extraordinary growth and strong potential consumers for the development of luxury goods in the China market. With gradually lower and lower increase of revenue in the European countries, Louis Vuitton (abridged as LV in the following sections) commits itself to set up more stores in China. However, LV is faced with the problems of declining profits in China, which urges it to adjust its entry strategy into the China market. In this case, this report will focus on distinguishing the factors that influence LV’s development in China and

With the development of the global economy, the interaction between environment and companies became more important, therefore, throughout macro environment analysis, which includes political, economic, social, environment, legal and technology (PESTEL) that provides an indispensable part in the comprehensive list to understand opportunities and threats on the businesses (Searle and Barbuto, 2010). In this industry, political, economy and technology would mainly influence the strategies, thus