HISTORY
COMPANY
STRATEGY
The Value Chain
LVMH Going Forward
- Is the manner at which LVMH is expanding ruining its reputation?
- Is LVMH expanding too fast?
- Is LVMH too reliant on Louis Vuitton?
The Beginning of LVMH
- 1987: Henry Racamier's Louis Vuitton & Alan Chevalier's Moet Hennessy merge to form LVMH
- Racamier: Executive VP of LVMH
- Alan Chevalier: Chairman & President
- 1989: Racamier partner with Bernard Arnault and their combined shares equaled 47%
- Shortly after the merge, Arnault pushes Racamier out of his majority sharehold
- 1990: Racamier asked to step down, leaving Arnault at the head of LVMH
- From this point, LVMH grew more powerful, acquiring luxury brands such as Givenchy, Tag Heur, and Sephora
Early Environment of LVMH
At the time of LVMH’s creation, the concept of luxury as a market expanded globally and socio-economically
- Greater value is placed on quality and prestige
- Premium pricing enhances brand image
- Products add no additional utility, but are desirable and extraordinary
Onset Values and Strategies
"The mission of the LMVH group is to represent
the most refined qualities of Western "Art de Vivre"
around the world." - Bernard Arnault
A central tenet to Arnault’s business ethic is that you will always be at an advantage by being the first person on on an idea, market, or consumer base. He does not believe in managerial limit setting.
LVMH and its competitors target super affluent and ultra affluent customers
LVMH is an expansive, internationally driven company.
If one sector, such as jewelry, falls in revenue,
it is likely that another sector within LVMH,
such as fashion labels, is on the rise.
LVMH Overview
- Founded in Paris by Henry Racamier (1987)
- World's largest luxury conglomerate
- International retail network of 3,000+ stores.
Organizational Identity
and Initiatives
LVMH establishes itself as the leading provider of luxury goods
LVMH's main strategy is to acquire well-established luxury brands
- Grows brands to a level they cannot achieve without LVMH's expansive resources
Captures value by consolidating operating costs of brands
- Combines shipping and other expenses
- Independent brands cannot capture this value
Value Chain
Buyer Value
High quality product and prestige
Threat of New Kids on the Block
Firm Value
Gets better prices from suppliers
Well-known designers
Globally recognized brand
Supplier Value
Receives bigger orders from firm
Caters to a financially stable firm
- Massive capital requirement to purchase luxury brands
- Requires excellent fashion designers
- Takes time to establish prestigious brand
Supplier Power
Power of Buyers
Manufacturing Suppliers:
- Large supplier power as LVMH purchases eco-friendly textiles and inks with low metal content
- Premium pricing is expected of luxury brands
- Brands sell prestige, not utility
- Industry products are not standardized
- Buyers can’t produce product themselves
Threat of Substitutes
Rivalry Among Competitors
- Price wars are uncommon, instead there are marketing wars
- Whichever brand is seen as more prestigious has more power
- Different mediums of ads- fashion shows, etc.
- Trend-setters
- If a product is currently trendy, the brand has more power
Under "tier one" brands
- Abercrombie & Fitch
- Armani Exchange
- Hollister
Knock-offs
- Upper management has goals beyond business,
- Designers want to spark a ‘cultural revolution’
- Expanding into new markets causes retaliation
- Ex) PPR buys a jewelry brand, LVMH can buy a rival jewelry brand
The "Great Recession" of 2008
- LVMH takes a 40% hit in share value in 2008
- All luxury goods brands take similar damages
- The market recovers much faster than common goods
Emerging Markets
- Asian economies are strong and growing
- Seoul, Shanghai, and Hong Kong are poised to become the centers of luxury fashion
Forces in Current Market
What is LVMH's current strategy
Competitors in the Current Market
Pinault-Printemps-Redoute (PPR)
- LVMH's closest competitor
Compagnie Financière Richemont
- Much smaller and focused market than LVMH
Valentino Fashion Group S.p.A
- Poor strategies through the recession
LVMH Five Fundamental Priorities
1. Be creative and innovative
2. Aim for product excellence
3. Bolster the image of our brands with passionate determination
4. Act as entrepreneurs
5. Strive to do the best in all we do
LVMH... is DECENTRALIZED!
- Arnault sets the core 5 values
- Various brands operate independently
- own creativity & brand image
- 100,000 employees
- Revenue of 23.65 billion Euros (30.53 billion USD) in 2011
LVMH modernizes products without compromising the reputation of the brand
LVMH hires established designers and gives them freedom to grow a brand
LVMH seeks to:
- Acquire more luxury brands
- Target the "hard" luxury goods sector more aggressively
- Expand stores around the world
- LVMH has over 800 stores in Asia
By adding more firms, LVMH is able to spread its overhead cost even further
LVMH maintains exclusivity of its brands through strategies such as fashion shows and limited edition products