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LVMH Case Study (Questions-Answers)

by Suleman
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  1. What are the Fundamental Forces in the General and Industrial Environments that Affect LVMH’s Strategy Choice?

Answer) LVMH holds a large global market, and it is a diversified brand having large global market shares. According to the data of the company, the company recorded the sales of 15,306, 16,481, 17,193, 17,053, 20,320, 32,659, and 28,103 million Euros in 2006, 2007, 2008, 2009, 2010, 2011, and 2012 respectively. According to the company’s financial data, its sales level has increased over the multiple subsequent years. The company has realized, over the years, that net profit from the international operations of the company is; 3,065 in 2011 with total equity of 23,512, 3,032 in 2010 with total equity of 18,204, 1,973 in 2009 with total equity of 14,785, 2,318 in 2008 with total equity of 13,887, 2,331 in 2007 with total equity of 12,528, and 2,160 million Euros in 2006 with total equity of 11,594. Moreover, the company has recorded strong results in the United States and Europe in 2-15, with a 19 percent increase in revenue.

One of the close competitors of LVMH is PPR that deals with luxury goods and retail. The size and earning of the company is almost similar to LVMH. However, LVMH has the edge of being diversified in the global market. There are some other indirect competitors of LVMH, such as McQueen, Alexander, Balenciaga, and Veneta. The essential things that have placed LVMH in an excellent global and national market position are globalization and diversification.

  1. How Has the Leather and Fashion Group, of Which LV is the Anchor Business, Been Performing? Why has LV Been so Successful?

Answer) The goods business of leather and fashion recorded a 4 percent revenue growth in 2015 of Louis Vuitton, and the percentage of revenue based on documented reports was 14 percent. An increase in the rate of profit was recorded as 10 percent to the year has been exceptional for Louis Vuitton because both of the company’s iconic products, related to leather and fashion, were well received in the market along with the new models that Nicolas Ghesquiere had created. The growth of the Louis Vuitton brand continued, and particularly outstanding sales were seen in leather products.

Louis Vuitton is the leading luxury items group in the world. The brand has been successful mainly due to the brand’s commitment to excellence, the capacity of the brand to innovate, and, last but not least, passion for high-quality products. The company is sustaining in adopting the strategies and decisions making to the worldwide changes driving the brand ahead that so within an uncertain period. The LV brand is highly desirable and wanted in almost the whole world that shows that the brand is enjoying and securing exceptional success at a worldwide level.

  1. What are the Challenges Facing LV?

Answer) Following are the challenges facing LV:

  • Economic Crisis: One of the major problems is an economic crisis in LV operations in the worldwide market. These crises are responsible for shifting the consumption habit and purchasing habits among the consumers of the brand. Such shifts adversely affect the attitude and behavior of the brand consumers while decreasing consumers’ buying confidence regarding luxury products. The steady and weak Euro appreciation in the worldwide market is also responsible for affecting people’s purchasing behavior and reducing their demand for luxury items.
  • Alternative Products and Product Saturation: Most of the time, markets are crowded with multiple products, and the gradual increase of the imported brands and new luxury products in the international markets have posed a threat to the existing and old market players. Modern luxury brands’ prices are relatively low, causing the shifts in the demand curve for LV products. According to the law of demand, the new product brand’s entry has a low price allocation, adversely impacts the need for the old and existing products in the market. Hence, different alternatives are available to loyal customers so that they could choose the other products and remain faithful to the particular brand. LV has to readjust the existing and latest global market trends and product quality to maintain a competitive edge.
  • Customer Satisfaction and Global Financial Crisis: due to the increasing number of competitors, the global financial crisis took the place that has affected the behavior and mindset of the consumers. The higher proceeding items that LV offered are easily attackable and inimitable by the brand competitors that reduce the product demand. In the lifestyle, preferences, and tastes, the consumers are more flexible, and changes follow the trend in consumer purchase behavior. It is perceived as well as presumed that everything will return to normal in the international market upon the market competition.
  1. What are the Options Available to LV? As a Senior Manager at LV, What Chance Would you Recommend LV Adopt?

Answer) Options

There are multiple options available to LV. LV has an adequate opportunity to invest and spend money on extensive research and development where customers are focused on diversified markets. Current market performance should be exploited by the study so that customer information could be gained and the connection with other brands so that its performance could be boosted in the international market. One of the problems faced by LV is product saturation, so LV has the option to create innovative ventures so that luxurious brands could be developed.

Recommendations

  • LV should carry out extensive consumer and product research, and consumers should be assessed on the terms of changes in the demand for the product. Quality must be ensured to earn the product and brand loyalty of the customers.
  • Consumer imagination is one of the most significant areas where LV should be investing because it can help avoid market saturation.
  • The brand’s price strategy should be altered in a way that suits the changing preferences and tastes.
  • LV must be thinking strategically so that the current market phenomenon could be adopted, and the brand knows how its strength can be aligned with the market approach.

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