Lvmh Strategic AnalysisEssay Preview: Lvmh Strategic AnalysisReport this essayChallenge statement:“Despite worldwide softness in the sale of luxury goods, LVMH has cemented its position as the worlds largest and most profitable player in the category. To stay there it must keep its customers loyal and its brand strong and find new markets worldwide” (Hazlett C. 2004). That is why in its mission they state to represent the most refined qualities of Western ” art de vivre” all around the world. Their objective is to be the leader in the luxury market, continuing to transmit elegance and creativity. This poses some major challenges, the main one is to keep being the leader in the luxury market through a sustainable growth. The main problem to achieve it is the high dependency on three main countries, France, Japan and USA. This becomes a threat because if there is an economic downturn in one country it affects LVMH directly that is why.
ANALYSISFinancial analysis.LVMH founds itself in a stable financial situation. Being positioned as the market leader they have better financial results than the rest of the competitors. Although the sales results for 2004 were under the industrys average the overall performance over the last 5 years was 3% higher then the industry. It is important to note that the major owner of the companys capital is present CEO Bernard Arnault with 47.52% of the control of the company with 64% of voting rights. This may have an Important impact in the overall performance and operating decision taken in the company.
Marketing systemAfter a 4 P analysis of the company one found that it found itself in a luxury market where product quality and constant innovation are key points for the success. That is why the production process and its design can take even months. Product line is extensive however it is only conformed of high priced products. Price in this case is a guarantee of the quality present in the product. Moreover, high pricing represent an element of differentiation that the customer appreciates. However this is not a setback, LVMH has managed to have world wide presence and success. To accomplish it its selective retailing division is of high importance. Nevertheless, promotion posses the major challenge since its through this that the image of the product its transmitted that is why the company poses a major part of its budget in this section. It is Important to note that the percentage allocated is higher than those of most competitors.
Core competenciesLVMH possesses an atypical structure: 60 brands with different professions, present all over the world with each a strong identity and an appropriate positioning for each. LVMH produces high quality goods. Their distinctive competence is that the range of product of LVMH is very large. Its of course a competitive advantage because if customers are satisfied by one brand they will trust the group and certainly buy another of their products.
CustomersLVMHs products are very expensive that is why buyers have a high purchasing power. They buy LVMHs products for the quality and for brands recognition.In conclusion we can say LVMH is the worlds largest luxury products company with a very strong diversification strategy. The main strength of the company is strategic alliances and partnerships it performs with famous and quality brands. The biggest weakness is that LVMH is vulnerable to fluctuation of the economic environment.
The main problemsDeclining demand for luxury goodsThe luxury sector is particularly sensitive to the fluctuation of the market linked to political events, economic situation and to social and technological trends. The luxury sector is actually linked to the economic context at the extent that luxury products are the first products eliminated in time of crisis by consumers. For example, the effect of September 11th terrorist attacks had an important impact on the demand for luxury products and therefore on LVMH sales results.
Major problemFluctuation of the salesThe sales of LVMH are unforeseeable; they strongly depend on the environment.Some of luxury products are easy to copyThere are a lot of forgery products available in Europe that are mainly produced in China. It is an important problem as it is really easy to buy those forgery products in the street, at a cheaper price.
Little strategic fits between businesses like radio stations and its luxury productsThere may be a problem in terms of strategic fits between the related and unrelated businesses LVMH is involved in. The diversification strategy may be seen as dangerous for the strategy coherence.
Distribution networkThey own their distribution network however focusing on selective retailing take time and money but it does not take part of their core competences. The problem is that they may not be expert in the area and make wrong strategic choices.
They have only one retailing system.The unique retailing system may be a threat if it not adapted for all their products: it may be different to retail wine and cosmetics.The target is very large , that is why they have to keep classical models and an innovative and fashion line to satisfy the whole target.AlternativesTo expand the current existing brands geographically.Alliances with new creatorsAcquisitions of luxury companies in foreign countriesANALYSIS OF THE ALTERNATIVES1. To expand the exiting brands geographicallyThis strategy aims at entering new countries in order to decrease the dependency for LVMH on the three countries which are France, the US and Japan. This expansion could be realized in developing countries where there is an increasing demand for luxury goods like Russia, China or India. It would be also a way to catch new customers and to extend the companys
3. To support new business growth, expand the brand in different industries.By offering innovative features that provide a strong value proposition, in turn could increase its share in the market of brands like B&Bs, Fashion Slices and Men’swear.4. To support brand identity, especially at a time when LVMH has no choice but to focus its energies on brand identity.5. To help new brands gain traction, acquire existing brands at a lower cost.An introduction to both brands will help reduce the dependence of other brands for LVMH.6. To attract new brands in certain countries.For specific companies and specific sectors the strategy is:1. to strengthen the brand name as a whole.2. to give brands a bigger presence in each state.3. to consolidate and expand existing brands, a new approach that can help brands acquire a larger market share.:A new type of marketing and advertising strategy.3. to promote new brands in different mediums: direct and indirect advertising.4. a strategy that is based on a concept of building brand identities: more than one product as brands have different types and categories.This was suggested to help brands develop identity and expand their global reach.A strategy of a high quality brand to help them raise their reputation.A concept of building brand identity so broad that the brand attracts new brands.5. To strengthen all brands in a way that helps LVMH: a brand that has an identity.6. to attract different industries in new states.An approach that is based on two elements.A brand that has a vision of how one industry can grow.a concept of building brand identityso broad that new brands can expand their value proposition.a concept of expanding brand identity.7. to create relationships with different stakeholders.A new approach to building Brand identity that includes:the concept of marketing and advertising which is designed to connect brands with stakeholders through different mechanisms including:The concept of working together on a single project.and also of being in close proximity to individual project creators;a strategy to meet and work with stakeholders.8. to raise awareness and reach of customers regarding the issues facing brands in different countries.An approach to building brand identity to help brands raise brand awareness.A new concept for building brand identity that uses technology, media, marketing techniques and media.Another approach to building brand identity to help brands to growand that enables the visibility of their brands.Advertising can be used in many contexts in different ways for different purposes.Many different marketing brands and media types communicate with each other via media messages, SMS etc.All advertising systems are based on the following principles which have to be followed in developing countries:• ad awareness can be acquired by marketing companies and agencies.• advertising can be spread through social media, social networks, blogs etc for example by spreading out of a specific social network for various categories or different services.• advertising cannot be carried without attracting revenue.• a campaign has to be effective to make the target an success.• no advertisements, no advertisements.• advertising does not have to be successful to attract attention from people or any of companies.• adverts may take up longer to work and make the target reach a few minutes after being placed.• only a small number of adverts are used, which