Louis Vuitton Moet Hennessy (LVMH) in the luxury market

Résumé du document

Louis Vuitton Moët Hennessy, or LVMH, is currently the world leader in the luxury market. LVMH had recorded high profits in 2006, thus making it the best performer in the fashion and luxury industry. This achievement was acknowledged by the present CEO of the group, Bernard Arnault, who stated that the excellent performance recorded in the year 2006 illustrates the vitality of the major brands of the company. This achievement continues to strengthen and help the company gain market share (Finanznachrichten.com, 2007). As mentioned in Arnault‘s speech, LVMH consists of various autonomously run sub-companies, that are composed of distinct brands. In 1987, the conglomerate was established by consolidating Moet et Chandon, Hennessy and Louis Vuitton, which are the three producing and designing companies of the luxury products of champagne, cognac and fashion respectively.
However, being located in the exclusive luxury market brings several opportunities as well as complications. The company offers exclusive and expensive products and has thus created one major limitation in this industry, which is the danger of counterfeit products. The ways and means by which the company decided to deal with this problem by going through the various steps of strategy formation is an interesting topic that is worthy of a discussion. Another issue that stems from this topic is the need to conglomerate the environment through further regulations and by increasing the responsibility that is recognized by LVMH. The paradox of strategic change, as to whether a company tackles its concerns that are revolutionary or evolutionary in nature are applied to this issue and seem to be of absorbing nature. Additionally, in order to analyse the industry of the company, an analysis of the five forces of Porter's model seem to be an adequate tool.
This paper will cover the following mentioned points. An introduction to the strategy of the LVMH group will be presented. After evaluating the performance of the company over the period of five years from the year 2005 until the present day, the paper will provide an in depth discussion about the strategic formation with respect to counterfeit goods. The paradox of strategic change, as mentioned above, will be applied. Following this, the third point, being an analysis of the industry will be provided through the application of Porter‘s five forces to this case. Recommendations on how to improve and sustain the performance of the company will be provided in accordance with the issues highlighted beforehand. In order to clarify the implications of the arguments,a conclusion will bring these together and summarize the outcomes.

Extraits

[...] FAQ - Brand protection. Retrieved Mach from the World Wide Web: http://www.lvmh.com/fonctionalite/pg_faq_lutte.asp Portman, S. (2006). Luxury goods makers declare war on China counterfeits. Retrieved Mach from the World Wide Web: http://www.cosmeticsdesign-europe.com Wit de, B. & Meyer, R. (2004). Strategy, Process, Content, Context (3rd ed.). [...]

[...] In the luxury market, few but very powerful players exist. Due to high competition and strong brand identities, entry barriers are very high. Before a new entrant establishes his presence and name to the degree that LVMH has managed to, a lot of time will be gone and the group has to handle the situation accordingly. The threat of new companies posing a sudden serious competition is therefore rather low. The third factor in the framework of Porter, is the potential substitutes of the luxury market, and create a threat but not as severe as within other industries concerning normal goods or commodities. [...]

[...] Conclusion It can be concluded and believed that LVMH faces a bright future. The company is currently the world leader in the luxury market and is furthermore present in five successful functioning activities, namely: wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewellery and finally selective retailing. The performance of the past few years has been growing for all activities in many regions. New shops opened especially in China, the Middle East and in Eastern Europe. [...]

[...] Secondly, the company showed more engagement then necessary and therefore became proactive. Lastly, this changed the whole processes such as developing a new management system or new production related processes. Audits were conducted in a constant manner, the products needed to be manufactured were monitored under stringent controls and more awareness for the environment was generated(LVMH.com, 2003). However, after this strategic change was implemented, the company followed an evolutionary approach. Smaller changes to the charter needed to be taken into consideration. No dramatic improvements were taken anymore. [...]

[...] The action undertaken by the company were all options pointed out above. Chasing the organized crime was the main target of the company and its realization led to several milestones in the anti-counterfeit war. Over the last three years, the company could work effectively and rapidly because of the strategy it had created. In the counterfeit cluster, several plants and stores could be shut down, particularly in Asia. In his article titled“Luxury goods makers declare war on China counterfeits“ Simon Pitman reports on legal measures of LVMH against dealers of faked products. [...]