'Louis Vuitton Case Study Essay\r'

'The initiation(a) sumptuousness respectables’ martplace in the past decade has experienced nothing go slightly of a complete evolution and transformation. This industry has resi receivableured spheric sparing downturns in advanced economies much(prenominal)(prenominal) as the linked States requiring them to branch out of their comfort z wholenesss and bil let loose into emerging markets specifically the BRIC countries.\r\nThese Asian nations possess luxuriously GDP rates that atomic number 18 anticipated to augment profoundly in the upcoming years. Luxury appeallys were at one sentence a possession of strictly the wealthy, blot informed guider with a last disposable income. Within these ontogeny economies reside a â€Å" impertinent breed of modern entrepreneurs and noveau abundante consumers”, creviceing large potential in spite of appearance the center class market for lavishness soft touchs (Pan). Although these countries offer signifi sternt promise, access provide come at the embody of fierce competition, potential of spirting and transnational trade barriers.\r\nBernard Arnault, the stage of the Louis Vuitton Moet Hennessy mails, recognizes that penetration, growth and ontogenesis in these emerging markets ar a critical part of the nock’s long-term spheric scheme. LVMH is the p arnt corporation of somewhat 50 sub-companies that conk out autonomously and implements the Star crack formula.\r\nThe play along is determined to capture the maturement Asia market with situation focus on china, Japan, South Korea and India. Although these argonas atomic number 18 quite an affluent and familiar with Western luxuries, LVMH faces difficult challenges such as raising consumer sentiency, counterfeiting, and emphasizing purchase deep down one’s own nation state.\r\nThe recommendations of this shield analysis addresses each of the challenges and offers twain a compendious term and a long-term implementation plan. If LVMH executes the suggested recommendations, the establishment will be a global power arrange by both western and eastern standards. LVMH’s Mission, Vision and Core determine\r\nLVMH Mission:\r\nTo portray the well-nigh refined qualities of Western â€Å"Art de Vivre” around the world. LVMH must continue to be synonymous with both elegance and creativity. Their growths, and the cultural values they embody, blend usance and concept, and kindle dream and fantasy. Five Fundamental\r\nValues:\r\nBe creative and innovative\r\nAim for fruit excellence\r\nBolster the image of brands with passionate function\r\nAct as entrepreneurs\r\nStrive to be the exceed in all they do\r\nChallenges\r\nMaintain attitude as the Leader in the Luxury Goods market\r\nPart of LVMH’s mission is to be the attracter in the global market for opulence goods. LVMH is the world’s largest and most profitable player in the high life goods market. They remove established this with a produce support cycle that emphasized reaping elegance, select and curiousness. The challenge is to stay on top. The vision of the phoner is to maintain its node’s loyalty and its tumesce-knit brand name, while finding new markets worldwide. LVMH is functional(a) hard at keeping its star brands in the limelight and constantly reinforcing the value of its brands. Economic Downturns\r\n menace of New Entrants:\r\nMultiple distri providedions take/marketing strategies\r\nBrand loyalty and recognition of larger companies\r\n bouffant enthronization personify for initial entrance\r\nGovernment incumbrance ( write tariffs)\r\nA plethora of distribution channels argon usable for new entrants into the opulence goods industry. These marketing strategies implicate but be not limited to franchising, mergers and acquisitions. some(prenominal) of today’s largest high life concerns perplex achieved their victory glob ally through implementation of these approaches.\r\nAlthough opportunity exists for new entrants, barriers atomic number 18 quite high in regards to soft and quantitative measures. Mature and established luxury goods brands such as Louis Vuitton and Gucci, open a pie-eyed brand loyalty and recognition amongst consumers, suppliers and retailers (Manning-Schaffel).\r\nLuxury goods raise aw beness and gross r all the sameue to the public through marketing tactics, which are quite costly. With any product in the archeozoic stages of the product development in that respect is a substantive initial investment required to create brand consciousness. This is most felt by atrophied and or independent brands. A typical global advertising c international ampereaign is extremely costly and ultimately drives gross gross sales (Wittner).\r\nLastly, depending on the country a luxury good is looking to penetrate government intervention and meaning tariffs may act as a barrier, oddly in the Asian market. In China alone, import duties have increased from 10% to 30% since 2007 (hktdc.com). regardless the summate of tariffs imposed and transportation costs drive it quite difficult for new entrants into the luxury goods global market place. Bargaining Power of Suppliers:\r\nVarious suppliers on tap(predicate)\r\nIndependent sourcing initiatives\r\nSupplier bankruptcy\r\nWithin the luxury goods industry, a suppliers’ role is to provide stuff and nonsenses such as fabric, and raw goods in articulate to create the end high shade end products. The number of suppliers varies group on geographic location and specific material need. Hence supplier power bath alter but in most cases is quite high.\r\n and so because some raw materials are limited and/or much(prenominal) costly across the globe umteen concerns are taking matters into their own hands. The brand Hermes is a perfect example of this. In the past the classify had worked with crocodile suppl iers in Louisiana, but due(p) to high supercharged costs this changed (Wheeler). Instead the luxury group nowadays breeds its own crocodiles in Australia independently in ordination to address global demands for the Birken handbag (Jlieman).\r\nDuring the occurrent sparing times and conditions many another(prenominal) suppliers have been strained to file bankruptcy. This has a unwholesome effect on many luxury concerns. According to one condition, â€Å"the caller-out would lose time trying to deal materials directly, resulting in a delay in the construction” (Jieman). The time it takes to switch suppliers is also one that is quite costly to the luxury concern. Bargaining Power of Buyers:\r\nGlobal economic & credentials crisis\r\nBrand recognition and comprehend value\r\nHigh parsimony of distribution channels\r\n there have been several notable economic and security crises that have occurred globally, which have had significant daze on the luxury goods ma rket place. Therefore buyers (consumers) have a significant possess a wondrous amount of power. The last few years have shown that no country is invincible to recession. This speckle is apparent(a) in the Asian financial crisis, the current United States recession and most recently, the debt\r\ncrisis of the European Union. Strict financials are not the only woes causing decrease sales in the luxury goods industry.\r\nDecline in belong is also attributed to security issues. These security concerns include the terrorist beleaguer on the United States in 2001, as well the SARS outbreak and chicken flu at heart Asian in 2003. Each of these events has had a detrimental effect on the luxury goods market (Prince Associates 2008).\r\n protection measures have escalated tremendously and are conducted far more than thoroughly therefore increasing travel. The luxury goods market therefore has manipulaten considerable growth (Prince Associates 2008). Many residents inside Asia will tra vel internationally for western goods due to sensed quality and value associated with specific brands, such as Louis Vuitton (Chadha).\r\nThere is a high concentration of distribution channels of luxury goods ranging from high-end retail handcuffs to privately owned boutiques. Due to the global recession, buyers within these channels have a substantial amount of bargaining power. It is important to note that this bargaining power varies significantly around brand. For example, Louis Vuitton and Hermes offer no sales or discounts to their products regardless of geographical location. Therefore there is little bargaining power possessed by buyers. It is this lack of negotiation to both consumers and buyers that increased the perceived value of brands (Noor). Threat of Substitutes:\r\nCounterfeit swap charge\r\nIncrease in discounted decorator goods\r\nPurchase of designer goods oversea versus in home country\r\nAlthough many financial opportunities exist for luxury brands to expa nd their availableness internationally, there is also a presence for holy terrors of counterfeits. These risks are most often associated to Asian markets, in peculiar(prenominal) China and Hong Kong. According to a USA at present article, it has been calculated that 80% of all confiscated counterfeit luxury goods originate from China (O’Donnell).\r\nThis imitation merchandise is available through an array of distribution channels ranging from the road vendors to online store sites. These outlets throw overboard for individuals to purchase these goods at a low cost regardless of geographical residence. Therefore, threat\r\nof substitutes is radically high.\r\nIn a time of global recession, many designers have adjusted their products to a cost effective strategy. Products such as Prada and Gucci for example deed over for their high-end merchandise to be sell at a discounted price in direct to reduce inventory. In addition, designers such as Vera Wang and Dana Buchman hav e created lines to be sold at retailers such as Target and Kohls to magic spell to the gist class (Coffey).\r\nJimmy Choo who also offers a special line to H&M in certain geographical areas implements this sales strategy (Sibbles & Pidd). Louis Vuitton as mentioned above does not offer sales or discounts on any agency or leather goods merchandise and therefore runs a high risk of substitution to price splendid consumers (Noor).\r\nPrices are raised internationally in order to offset the price of import tariffs to certain geographical settings. For example for European luxury brands in order to import goods to the Asian market the price of the good significantly greater than one would pay in a European country. This has caused the threat of substitutions to rise. Competitive contention:\r\nLarge concerns economies of scale\r\nAvail top executive of counterfeit merchandise\r\nShift from â€Å"superluxe to simpleluxe” (Wheeler)\r\nCompetitive rivalry is exceptionall y high globally in the luxury goods market. This occurs because of the existence of many large economies of scale, availability of designer counterfeit merchandise, low cost designer products, and a shift from dearly-won elaborate brands to more simplistic less pricey ones.\r\nOne reason in particular is that there are several large concerns of economies of scale. These concerns include but are not limited to Louis Vuitton Moet Hennessey, Gucci and Cartier. According to hoovers.com, â€Å"Large companies have advantages in economies of scale in operations, can more easily raise capital, and have strong name recognition”. It is with this available capital that productive advertising campaigns have been launched, driving market carry on and consumer brand loyalty.\r\nAs mentioned previously, the availability and demand of counterfeit designer goods is on the rise. Availability of this merchandise decreases sales of the legitimate designer products. According to one article by Donald Brown a journalist from the Independent, â€Å" look into has found as many as heptad out of 10 buyers of luxury goods are ordain to â€Å"mix and match” designer brands alongside cognize fakes. And evidence has emerged of a soaring market for â€Å"lookalike” goods in which cheaper products are passed off as the real thing, just now without the designer label” (Brown).\r\nThe depressed global scrimping has been named the main culprit in even the rich and wealthy seeking â€Å"simpleluxe vs. superluxe” (Wheeler). This transition defined in an article by Karen Wheeler is that many people, â€Å"…are looking for now is simple-luxe †smaller, accessibly priced luxuries that improve everyday life rather than flaunting your wealth” (Wheeler). This phenomenon has been seen across continents, as individuals are not willing to drop dead a month’s salary on a luxury good, therefore impacting the luxury goods industry tremen dously, especially on sales of their bigger price tag items.\r\nAlternatives\r\nLVMH should stick in security labels to eliminate counterfeiting and for â€Å"gray-market” protection. Pros:\r\nImplement â€Å"intelligent security labels”, a unique label that will let out genuine Louis Vuitton products from counterfeited products. Louis Vuitton created the signature monogram Canvas to prevent counterfeiting. The company takes counterfeiting seriously and employs a team of lawyers and special investigating agencies that are actively pursuing offenders through the courts worldwide. LVMH is allocating a significant budget amount to counteract plagiarization of its goods.\r\nThe company closely controls the distribution of its products; Louis Vuitton sells its products strictly through its own retail stores, small boutiques in high-end surgical incision stores and online through its website. Cons:\r\nLouis Vuitton is one of the most counterfeited brands in the panache w orld due to its image as a status symbol. LVMH faces a ”gray-market” in Asia, where handbags cost 40% more in Japan than they do in France. Arbitrage business of handbags †people fly to France to buy handbags for the purpose of resale through parallel channels in Japan.\r\nLVMH should increase the number of Duty free shops and airport stores presence around the world. Pros:\r\nOver 100 meg of Chinese travel annually and Duty-free shops are important shopping locations for Chinese travelers. On average Chinese travelers spend $928 on shopping in duty-free shops and airport shopping during their outbound trip. shop is considered a â€Å"must-do” by most Chinese travelers when travelling overseas.\r\nChinese outbound travelers tend to be junior (20-39 years old), well educated and with high income, working professionals, tech-savvy and sortable (interested in cutting-edge gadgets and latest fashions). Confectionery, fashion, fashion accessories and cosmeti cs are the most popular or international branded items purchased by Chinese travelers during their foreign overseas trips. India has been ranked as one of the fastest growing travel and tourism economies in the world both for inbound and outbound travel. India has an increasingly affluent middle class with growing disposable income willing to spend on luxury items.\r\nThe product categories mostly purchased by the Indian outbound travelers on their trip oversea are confectionery, fragrances/perfumes, fashion and accessories, leather goods and cosmetics. Duty-free shops and stores at overseas airports are the most frequented purchasing places for Indian travelers. Shopping at Duty-free shops and airport stores is more impulse driven than pre-planned for Indian travelers which they expect to see various offers available such as sole(a) fine gifts or exclusive fashion collections.\r\nThere is not much else to do at most airports other than walk around window-shopping and occasionally devising purchases. Cons:\r\nPrice difference can be quite large from one duty-free to another, depending on its location, sometimes for the same size, brand and product purchased. Even though Duty-free shops do no apply topical anaesthetic or national taxes and duties, shoppers may still have to pay duties in their home country on items purchased from a duty-free shop. LVMH should reach out to the bourgeoisie customers who are willing to purchase luxury items. Pros:\r\n sales of luxury products are on the rise in Asia-Pacific area. Growing middle class in India and China is increasingly get designer goods. In India, shoppers mainly comprise of â€Å"status seekers” and â€Å"technology savvy”. Cons:\r\nIn order to make their products more affordable for middle-class consumers, LVMH might have to compromise on quality, by lowering labor costs or pathetic production offshore. Using less skilled workers and the ability to provide more merchandise lines to their s tores, could make the brand less exclusive in the long run because of increase in popularity and mass appeal. Open manufacturing plant for handbags in India\r\nPros:\r\nReduce/Eliminate tariffs and transportation costs.\r\nIndia has an communicatory population.\r\nImproved social and political stability in India.\r\nIndia has cheap labor force and will cost the company less to manufacture the handbags. Growing middle-class with disposable income willing to spend on luxury items. Cons:\r\nâ€Å"Made in France” was an important selling point at LVMH, although 2 of 14 factories were in Spain and one in California. Customers expect western quality. Buyers in India are concerned with being offered the latest products and designs. The myth of the brand is linked to where the product is manufactured. Compromise on quality by slashing labor costs and making the products in India. Conditions in operations in India are not promising.\r\nCreate new markets and advantages by introducing LVMH brands to children/teenagers Pros:\r\n get in LVMH brands to kids †they become lifetime customers. Create new markets by offering merchandise specifically to children/teenagers. These offerings will allow for womb to tomb mentality and increase customer lifetime value as well as brand loyalty. Cons:\r\nInvestment and research is costly.\r\nVery doubtful.\r\n baseborn market segment.\r\nRecommendations\r\nCombat Counterfeiting\r\nDiversification of product lines and innovation is essential for LVMH to stay ahead in the luxury goods market. One-way LVMH to achieve this is to extend their customer base to include children and teenagers. â€Å"Many reports indicate luxury buying is supported more from Baby Boomer grandparents and relatives who are eager to spare no expense. Some experts even theorize that the lavish spending and pampering is due to an opposite psycho-economic creation to a person’s own strict upbringing,” (Mesa).\r\nParents are also experiencin g higher incomes and tend to save on certain items the families consume but are â€Å"trading up on products for loved ones †specifically children and pets,” (Mesa). Children also have more say in regards what products they prefer. Children and teenagers are experiencing higher allowances than we’ve seen in the past (Mesa).\r\nLouis Vuitton would not be the only luxury goods brand when launching children’s and teenage product line. Luxury goods producers such as Dolce & Gabbana and Versace embraced this opportunity and broadened their product lines by launching clothe lines. Dolce & Gabbana launched the ready-to-wear line D&G Junior and â€Å"offers a unique 2004/2005 collection aimed at newborns and pre-teens,” (Mesa). Versace rolled out a clothing line that target kids ages 4 to 14 (Mesa).\r\nThis strategy may prove to be risky and LVMH will have place investments towards research and development and eventual marketing and advertising costs upon launch. The children’s market, although potentially lucrative for a business, is a small segment. However, Louis Vuitton, among other luxury brands, has already entered in the blow market through products like fluff bags. This will provide LVMH with leverage in that particular product segment.\r\nâ€Å"Since baby bags are more about a fashion accessory with functional benefits for parents to carry, it is not affect that luxury handbag makers have jumped on the baby bandwagon,” (Mesa). Many products such as mini-handbags, jewellery, and shoes can be diversified and included in the children’s product line.\r\nWorks Cited\r\n(2009). DATAMONITOR: LVMH Moet Hennessy Louis Vuitton SA. LVMH Moet Hennessy Louis Vuitton SA SWOT Analysis, 1-8. Retrieved from melody ejaculate Complete database. Boorstin, J. (2005). Louis Vuitton Tests a New Way to beseech the Faux. Fortune, 151(10), 34. Retrieved from Business Source Complete database. CLCB Website (2009, October 22). LVMH Acquires Chinese handed-down Spirits Distillery: Could Westerners Be Sipping Baijiu In coming Years? Retrieved February 21, 2010, http://chinaluxculturebiz.wordpress.com/2009/10/22/lvmh-acquires-chinese-traditional-spirits-distillery-could-westerners-be-sipping-baijiu-in-coming-years/ EU Business Website (2007, March 31). India in Advanced Talks with EU to ‘Correct’ High Liquor Duties. Retrieved February 23, 2010, http://www.eubusiness.com/topics/trade/india-eu.34 Fitszimmons, E. (2008, family line 8). LVMH to Boost Awareness. Retrieved February 21, 2010, http://www.media.asia/searcharticle/LVMH-to-boost-awareness/2008/32488?src=relate Foster, D. (2007, February 21). Dressing Lean: Louis Vuitton Edition. Retrieved,\r\nhttp://www.evolvingexcellence.com/blog/2007/02/dressing_lean_l.html Haisma-Kwok, C. & Jones, G. (2009). Arnault Bullish On LVHM, China. WWD: Women’s grind Daily, 197(109). Retrieved from Business Source Complete database. K erns, J. LVMH Moët Hennessy Louis Vuitton SA. Retrieved February 20, 2010, http://www.answers.com/topic/lvmh-mo-t-hennessy-louis-vuitton-sa\r\n'