Managing the multi-brand conglomerate of LMVH


Term Paper, 2009

14 Pages, Grade: A


Excerpt

Table of Content

1.Itroduction

2 Global Structure of LVMH
2.1 Multi-Business Global Production Model

3 Multi-Brand Strategy

4 International Strategy
4.1 Strategy Type
4.2 Impact of Globalization
4.3 Innovation Dependence
4.3.1 Strategy
4.3.2 Structure
4.3.3 Processes
4.3.4 Skills

5 Conclusion

6 References

Figures

Figure 1 - Capital Structure of LVMH

Figure 2 - Capital and Voting Rights of LVMH

Figure 3 - Revealing key attribute and underlying competences

1 Introduction

LVMH is a French based top luxury brand, which has established its name successfully in the market and represents one of the biggest luxury conglomerates in the world. With over 2,314 stores worldwide, employing over 77,087 employees, of whom 74% are employed abroad, LVMH has quite the firm stand in the market. LVMH has throughout the years of its establishment applied the multi-brand strategy, which is thoroughly discussed in this paper.

Besides an analysis of the multi-brand strategy, its strengths and weaknesses, while assessing future opportunities and threats for LVMH, this paper also gives an overview of the structure of LVMH. The paper also comprises an overview of LVMH’s applied international strategy model, while keeping in mind possible effects of globalization and innovation dependence on the firm.

2 Global Structure of LVMH

LVMH’s structure is quite difficult to pinpoint, since some activities tend to point into one direction and others shift the focus on a different model. Needless to say that some types of structure are indeed mutually exclusive and if combined in a differentiated way can lead to catastrophic results for the company.

In case of LVMH’s applied structure, the choice lies in the multi-business global product division model, which offers a clear and thorough way of analysing LVMH’s structural activities and putting them in into a well-functioning framework.

2.1 Multi-Business Global Production Model

The multi-business global product division model implies that the organisational structure is composed of different business divisions, which do not interact much, and are each responsible for a product or a service. LVMH’s wine and spirits sector for example does not interact much with the fashion and leather division, since these two divisions do not have much in common. Further, the multi-business product model states that within a certain division the organisational design can vary between global functional, matrix or even geographical. This model does indeed describe much of LVMH’s activities and way of doing business.

One crucial point where this model does not fully fit LVMH is the disadvantage of local responsiveness. Local responsiveness includes flexibility, proximity and response time. These three factors are crucial for any business, especially for LVMH, where one advertisement could cause major complications for LVMH’s sub-division in that specific region. If e.g. the firm is launching a new product in Japan, but advertisements show Caucasians wearing or using the product then demand will, most likely, not be as high as the business would have wished for. This is of course a very simple example and describes a situation which LVMH has mastered by now i.e. this would not happen nowadays, since LVMH has years of experience in Japan. On the other hand, it does describe a similar situation in which any company can find itself in, if they do not consider local responsiveness.

Flexibility describes the capability of customisation, where all needs and cultural elements of a certain customer group are taken into account and adapted to. Proximity describes the ability to stay ‘close to market’ and therefore know when certain changes are occurring and be able to respond to them, which implies the importance of the last point: response time. Timing is crucial, especially in the fashion business, where, if the moment passed, it is safe to assume that there will be no second chance.

Local responsiveness is not completely disregarded by LVMH, since, as stated above, it relies much on customer satisfaction and customisation, in terms of marketing and PR, but it certainly lacks in product design, since products are not customised per se (only in very rare cases).

In conclusion, it can be said that LVMH adopted the multi-business global production model, but has almost completely mastered its disadvantages, which include lack of local responsiveness through extensive and continuous acquisition of foreign firms, designers and market research, which enables the conglomerate to stay ‘close to market’ and reduce risk.

3 Multi-Brand Strategy

The LVMH conglomerate applies the multi-brand strategy, and has done so from the very beginning of acquisitions. A multi-brand strategy is defined as the ‘marketing of two or more similar and competing products by the same firm under different and unrelated brands’ (businessdictionary.com). LVMH has done so since the first acquisition of Celine Fashion House in 1987 and the further on expansion into the wine business with the acquisition of the Champagne brand Pommery in 1991, the perfume company Kenzo and cosmetics company Guerlain.

In order to fully assess all possible benefits and reasons behind this adopted strategy, a SWOT analysis will be performed and each point specifically described and analyzed.

Strengths

1. Brand Name

A very well-known and respected brand name is the foundation of LVMH. Many top brands back the company e.g. Donna Karan, Marc Jacobs, Christian Dior, Louis Vuittton, Henessey and others.

The most important point LVMH effectuates is customer loyalty. Since the LVMH brand is established in over five different divisions, ranging from wine to perfumes to fashion, customer will find it easy to recognize the well-known brand name on each of these products. LVMH guarantees amongst differentiation and premium designs, the most influential characteristic of all: high quality; high quality that reaches every department and product with the LVMH label.

Another point is the massive potential of market force LVMH can help developing brands with. This not only helps the developing brand to establish its name in the market under one of the biggest luxury conglomerates in the world, but also allows LVMH to set foot into new markets and expand in new directions.

2. Distribution Channels

Today LVMH has over 2,314 stores worldwide (2008, LVMH Annual report), around 300 stores more in comparison to the year 2007. Having said that, it is not the stores themselves that are so impressive, but rather the fact that LVMH is completely retail. This allows LVMH to stay in control of all its stores and the therefore connected variables such as staff, product, and merchandising at all times. This method is rather rarely applied, even in the same industry competitors apply a (healthy) mix of retailers and wholesalers. Adapting this method for its own benefit, LVMH and soley LVMH defines prices and stores selling policies, completely uninfluenced by any ‘outside’ factors, except the market itself.

3. Broad Portfolio

Being set-up in over five quite different divisions, LVMH diminishes the risk factor, since if one division makes less profit than estimated, the other four divisions act as a balance and the company has successfully diminished the risk factor.

[...]

Excerpt out of 14 pages

Details

Title
Managing the multi-brand conglomerate of LMVH
College
University of Groningen  (Faculty of Economics and Business)
Course
International Strategic Management
Grade
A
Author
Year
2009
Pages
14
Catalog Number
V183134
ISBN (eBook)
9783656074151
ISBN (Book)
9783656074205
File size
681 KB
Language
English
Tags
managing, lvmh
Quote paper
MSc. Jon Gruda (Author), 2009, Managing the multi-brand conglomerate of LMVH , Munich, GRIN Verlag, https://www.grin.com/document/183134

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