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Transcript of Louis Vuitton
FranceOriginally a luggage manufacturer. (Was famous for flat bottom trunks and unique combination locks)
Current Company Value 25.9 billion dollars
Global leader in luxury luggage, handbags, and leather goods as well as apparel. Background Information External Analysis Demographic:
GDP per Capita is $50,436
on average HDI is .908 (Very high)
Canada is resolving from recession.
Current unemployment rate is 7.4% as of 2012, which is much better the 2009 rate of 8.3%.
15.1 billion in goods and services was purchased online in Canada during 2009.
Canada is a vey diverse and complex society composed of many different ethnic groups, cultures, lifestyles and status’s showing.
Government regulation can decrease counterfeit circulation of luxury goods. Opportunities Threats Demographic:
Canada population distribution limits the number of stores in Canada. (Stores cannot be opened in every city)
•No Online Store available in Canada.
•Equipment and mass production allows for optimal counterfeit production.
•Individuals may have attitudes and feel that luxury brands serve a damaging purpose to society. Internal Analysis Strengths Finance:
•Parent Company LVMH
•Current brand value worth 25.9 Billion Dollars•35% operating Margin
•Current company Value up 7% from previous year.
•LVMH Parent company assets are currently 47.06 billion euros.
•LVMH profits for 2011 amounted for 3.065 billion euros. Research & Development:
•New product line for middle class with reduced production cost by using mass production methods.
•Counterfeit Prevention: You can use registration system (prevent against theft), banknote security feature integration, cereal number on in seem of bag.
•Web Development for Online Store in Canada. Operations:
•All bags are hand stitched and made in France. (No mass production methods are used which has a high appeal for luxury brand consumers). Marketing:
•Uses many varieties of media
•Celebrity Endorsements•Product Placements Information Systems:
•12 online stores that serve countries including the USA, China and UK. Suppliers/Supply chain:
•Louis Vuitton has invested in revamping their factory production by using modern methods to produce the same amount of bags but with only 6-12 workers which would formally have required 20-30 workers)
•New method of manufacturing does not use mass production equipment, and allows for new shipments to stores every 6 weeks, which is much better than several months, which was the previous supplying time. Marketing Intermediaries:
•Louis Vuitton does have 3 small stores in Canada that are located within Holt Renfrew’s. (Similar to Wine Rack’s in Loblaw’s) Competitors:
•Louis Vuitton Has many competitors but still has a leading share in the global luxury goods market Publics:
•Media has extensive coverage of brand though product placements. Customers:
•Consumers of a more advantaged economic status. Becoming more common as incomes increase.
•Individuals who go into debt for purpose of owning status symbol, or stimulate counterfeit goods market. Weaknesses Finance:
•Potentially speaking, Louis Vuitton may be at a risk as close competitors or suffering financially
•Gucci down 14%
•Chanel down 2% (probably because of creepy Brad Pitt ad) Research & Development:
•Counterfeit Manufactures are still consistently perfecting knock offs as studies of bags reflect exact replica counterfeits. Purchasing:
•For the most part, Louis Vuitton products can only be purchased from LVMH managed stores, or online stores. You cannot buy them at convenient department stores. (This is a common practice among competitor Hermes). Information Systems:
•No online store in Canada, as well as many other countries. (You can only buy online in 12 countries. Marketing Intermediaries:
•Other than the three small locations in Holt Renfrew locations, Louis Vuitton has limited intermediaries.
•Gucci, Hugo Boss, and other competitors can be purchased at all Holt Renfrew locations, Harry Rosen and in other small luxury shops. Competitors:
•Louis Vuitton has many competitors on the market.
•Other competitors are growing more quickly than Louis Vuitton•Hermes up 61%
•Rolex up 36%•Burberry up 21%•Louis Vuitton only up 7% Publics:
•Many groups believe that Luxury brands are UN nessicary and have dislike for them.
•(Why do people buy a $2000 bag when they can feed so many people in Sub Saharan Africa) Customers:
•Only wealthy people (automatically limiting their potential customer population)
•Everyone can afford to shop at Wal-Mart or Dollarama, but only a small fraction can afford to shop at Louis Vuitton. Market Segmentation Primary segmentation:
1st Primary: Generation X (includes people born between 1965 and 1976)
Income between USD 55,500 –237,800
Graduate professionals with sense of self-worth and novelty seekers
2nd Primary: Millennials (include those born between 1977 and 2000)
Have their own income
Have financial support from Generation X Secondary segmentation:
1st secondary: generation X and Y with income under USD 55,500look forward to the life-style of Louis VuittonNot enough money, may be influenced by the counterfeitWould be potential customer
2nd secondary: Baby boomersEnough moneyNot novelty seekers Strategic Alternatives Alternative # 1: Develop a partnership with luxury stores to authorize the retail of LVMH products. Target Market: The target market for this proposal would basically be a current consumer. They are however at a disadvantage because of where they live. They are plenty of wealthy people who live in smaller municipalities that cannot support a store, but may have a Holt Renfrew as well as a Harry Rosen or independent store were needs can be met. Strengths: Holt Renfrew is expanding their number of stores as well as the new HR2 project. Harry Rosen is investing $100 million into new stores on top of their current 16-store operation. Alternative #2: Develop New product line Summary:
We suggest that an idea to boost revenue would be creating a new product line that can serve customers of lower income levels are consumers who or on the cusp of real LVMH products and lower priced luxury brands. Pricing: Quality goods will still be made, and may have a slight differentiation from the classic line. Similar to J Crews process, good quality fabrics, canvasses, and leathers will be purchased from Italy and other fashion capitals. Cost will be cut however, by outsourcing the labor process to a third world country. This way the new line can possibly sell their bags for $400, $800 instead of $1,500 and up. Target Markets:Middle class, and upper class consumers. Individual incomes generally above $60,000. Strengths:Many brands diversify their offerings, and have great success in doing so. (Gap, Old Navy, Banana Republic, J Crew, Armani labels)J Crew Annual sales grew from $3 million to more than $100 million over five years Weaknesses: Many people may start underestimating the brands real true value and treat it more like a common every day brand than a luxury brand. Alternative # 3: Develop online store for Canada Summary: Canada may be at a disadvantage of the products availability, and Louis Vuitton may be at a disadvantage of market share simply because of no online availability. Pricing: The initial startup cost would be low. All that is required is web design and online marketing help. Strengths: LVMH can now reach everybody in Canada’s population and take care of their luxury brand needs without the customer having to travel to a metropolitan area. Weaknesses:Customers are not physically seeing, and touching the product. Shipping cost may be high (Insurance and who will pick up the tab), must insure it’s a genuine website. Not a knock off lookalike. Recommendation Alternative #2: Develop New product line Why?Maximizes potential profitability by unlocking more potential markets and not limiting markets.
Could threat competitors as our timeless image may have other consumers switch to our brand loyalty.
Will create many jobs globally and help the economy
Because products are cheaper, Counterfeiting may be less of an issue. Implementation Short Term Product:Have all of Louis Vuitton’s designers develop new products with a creative budget in mind. Fashion shows should be conducted to have critical opinions noted. Price:The Current actual price to make a real Louis Vuitton bag currently cost between $600-$700. The new product line will try to make the cost between $250-400 and sell for between $400-800 while maintain good margins. Place:The new product line will have its own separate store where products or sold. Initially in the first year, stores will be opened in Toronto, Vancouver, Montreal and Calgary. After a few years expansion may take place to Ottawa, Edmonton, Winnipeg and then gradually smaller cities. People: We will target as many people as possible with an average Canadian income Process:The process must be established before operations begin. Materials contracts, as well labor contracts and production agreements will be established so production increases accordingly to demand. Long Term: Promotion: Once stores or renovated/built, Celebrity endorsements will be introduced for this separate brand entity. Unlike the classic line, we will also have sales only to remove inventory in place for new products. Overall, we would hope to have the first store running within a year from starting the process of product development. Problem Statement
Conclusion Louis Vuitton is a global luxury icon. Due to current counterfeit issues, and Canadian demographics, the luxury retailer struggles to maintain high profitability. Conclusion Louis Vuitton has been targeting the upper class population for well over a century. By developing a new production line and introducing products that would be affordable for the middle class can significantly increase the scale of their business model. The end Thanks For Watching