Category: Louis Vuitton

Introduction

Most investors sell stock when they feel that holding the stock would lead to a loss. However, buying stocks that drop in value is inherent to the nature of investing (Hafer & Hein, 2015). The objective, therefore, is not to avoid losses but to minimize losses. Realizing a capital loss before it gets out of hand distinguishes successful investors from the rest (Reschreiter, 2014). Many investors are particularly skeptical about their investments, especially following the loss of a significant investment. LVMH Vuitton SA (LVMH) deals in luxury goods. The company operates through five main segments. The five include fashion and leather, watches and jewelry, wines and spirits, perfumes and cosmetics, and selective retailing (Cavender & Kincade, 2014). In this paper, the author will analyze the stock of LVMH Company to come up with a two-year recommendation for a client.

Comparison of LVMHs Main Ratios

Financial ratios form a basis for comparison between figures found in financial statements (Reschreiter, 2014). It is of great importance to compare the ratios of a firm over the past years to assess its growth.

Table 1. LVMHs ratios. Source: (Cavender & Kincade, 2014)

Price-earnings ratio, P/E, indicates the dollar amount an investor needs to invest in a company in order to receive a dollar of the companys earnings (Zhang, 2015). LVMH P/E has risen for the past three years (Cavender & Kincade, 2014). However, a significant drop was seen in 2014 at 11.73. The low P/E indicated that the company was undervalued during the financial year (Cavender & Kincade, 2014). However, the companys P/E rose up again in 2015, indicating that investors could expect higher earnings value in the feature. Though P/B ratios do not directly provide information on the ability of the firm to generate profits or cash for shareholders it is important to note that LVMH price-to-book ratio has remained almost constant over the past three years. During these years, LVMH Moet Hennessy Louiss highest return on equity was 23.22 with a low of 13.39 in 2013 (Cavender & Kincade, 2014).

Comparison with Competitor Firms

LVMH falls under the luxurious goods industry market. Over recent years it has risen to the top and has often being used as a benchmark for other players in the industry. However, the company still faces stiff competition from other brands. Its main competitors are Christian Dior, Burberry, ralph Lauren, and Michael Kors. In this section, the author compares the main ratios of the competitors to get a better understanding of the companys position in the market (see Table 3).

Table3. P/E Ratio Comparison Table

Qualitative Analysis

Definition of Participants in the Sector

The luxury goods market has seen significant growth in the past three years. It is mainly due to the arising of new high-net-worth investors and customers (Zhang, 2015). Able customers seek luxurious goods in order to stand out in the first growing and changing fashion world. As such, luxury goods industries specifically target a class of young wealthy and affluent customers who are extremely brand-conscious. The United States luxury goods industry has a total of 5.2 million employees (Zhang, 2015). The employees in this sector consist of highly specialized and skilled employees well experienced with interacting with high-profile customers and goods. Growth in the personal luxury goods market which involves jewelers, watches and leather goods slowed to 1.3% from 3% in 2014. The section of the industry alone is valued at $253 billion (Zhang, 2015).

Supply and Demand

Supply and demand of luxurious goods is always in complete contradiction of the law of supply and demand (Hafer & Scott, 2015). Demand is proportional to the price asked for the commodities. In most cases, demand rises with price increases. The high prices make the goods more desirable as symbols of the buyers high social status hence a decrease in the price of commodities would lead to a decrease in demand (Hafer & Hein, 2015).

Problems Specific to the Sector

The rise of the internet has posed a series of unique challenges for luxury brands. Luxury goods are best valued and appreciated by customers when seen in person in stores. Display of the items as images in the internet has failed to produce the same luxurious appeal felt by customers when viewing the goods in person (Cavender & Kincade, 2014). Furthermore, customers are not able to tell real from counterfeit over the internet.

Labor

Most workers in the industry are highly skilled and trained. This is mainly because handling and creation of luxurious goods require extreme craftsmanship and discipline (Cavender & Kincade, 2014). Cheap labor is not applicable in this sector.

Quantitative Analysis of the Sector

Table 2. Ratios for Luxury Goods. Source: Zhang (2015)

As is evident above, P/E ratios are still lower than historical average at 15.6. As such, it potentially sets the stage for further growth opportunities in the industry. ROE ratio has constantly risen over the past years. The largest jump was seen in 2015 where the ratio lost from 18.6% in 2014 to 27.7%. It exceeded even the pre-crisis levels as a consequence of a large increase in financial leverage (Zhang, 2015).

From the above chart, it is also clear that the industry has seen a constant growth over the past 20 years. It is crucial to note that even during periods of economic meltdowns, luxury goods were not critically affected as is in the case of other commodities (Zhang & Kim, 2013).

Global Economy

Global economic growth is central to economic development (Fasenfest, 2015). When national income grows, real people benefit. According to the IMF, the total value of goods and services manufactured in 2014 amounted for approximately 77.3 trillion US dollars (Fasenfest, 2015). USA ranked first among the states with the highest gross domestic product with 18 trillion US dollars followed China (Fasenfest, 2015). In the year 2015, there was a significant global economic growth. It was especially higher in developing countries than in industrialized nations. In total global economic growth amounted to 3.43% an increase from 3.31% (Mosca & Re, 2014). The global economy is set to grow at a constant rate owing to the stability of the major trading currencies and improved job markets (William, 2010). The falling of oil prices will also allow for a faster growth (see Table 3).

The information and technology sector of the global economy is posed to see the greatest spikes in income especially in the developing nations. According to IBISWorld, industry revenue in the sector has grown at an average annual rate of 23% over the last 3 years (Manfredi & Luciano, 2014).

Economic Cycle

Economic cycles are phases of economic growth and decline (Manfredi & Luciano, 2014). They include four major stages, contraction stage, trough, expansion, and peak (Manfredi & Luciano, 2014). Currently, the United States economy is at the end of the expansion stage. As such, many investors buy to book profits on recovery of the economy.

Growth Rate and Projections

GDP growth rate is expected to be at 1.50% by the end of the quarter year of 2016 (Fasenfest, 2015). Looking forward, according to econometric models, the GDP growth rate is expected to trend at around 2.00 percent in 2020. It is mainly as a result of the improved job market and the falling of oil prices.

Conclusion

The global economy is set to see a constant growth for the next four years. From the analysis, I advise that the client does not sell his current holdings of stock at the LVMH Company. It is mainly because though the company has enormous competition, it has still managed to maintain its position as the go-to brand for luxurious goods commodities. Additionally, the clients stocks are good growth potential in the long run. However as seen above, the technological sector is set to experience more growth in the coming years, hence the client would be better secure in this sector than in the luxurious goods industry.

References

Cavender, R., & Kincade, D. (2014). Leveraging designer creativity for impact in luxury brand management: An in-depth case study of designers in the Louis Vuitton Moet Hennessy (LVMH) brand portfolio. Global Fashion Brands: Style, Luxury & History, 1(1), 199-214.

Fasenfest, D. (2015) Global economy, global dialog. Critical Sociology, 40(2), 171-172.

Hafer, R., & Hein, S. (2015).The stock market. Westport, Conn.: Greenwood Press.

Manfredi, P., & Luciano, F. (2014). Cycles in dynamic economic modeling. Economic Modeling, 21(3), 573-594.

Mosca, F., & Re, P. (2014). International development strategies of luxury-goods players in China. Chinese Business Review, 13(6), 367-381.

Reschreiter, A. (2014). Extreme equity valuation ratios and stock market investments. Applied Financial Economics, 19(6), 433-438.

William, H. (2010). Financial statement analysis and the prediction of financial distress. Hanover: Now Publishers.

Zhang, B., & Kim, J. (2013). Luxury fashion consumption in China: Factors affecting attitude and purchase intent. Journal of Retailing and Consumer Services, 20(2013), 68-79.

Zhang, Z. (2015). Financial ratios and stock returns on luxury goods market. International Journal of Financial Research, 6(3), 23-45.

Summary

Creating advertising is a complex process that requires energy and strategies for a successful advertising campaign. There needs to be more than a pretty image and a loud headline to make a product sell well and attract customers. Advertising strategies are based on linguistic, visual, and discursive aspects that allow advertising at a high level. Louis Vuitton’s Place in the Sun perfume advertisement combines all the attributes of unique style and visual and linguistic saturation that make the perfume recognizable and marketable.

Description

The linguistic concept applicable to this advertisement refers to interpersonal interaction. Advertisers seek direct interaction with their consumers to reveal their products through feelings and emotions (Goatly & Hiradhar, 2016). This approach is practical for perfume advertising because many fragrances accompany a person and lead to different associations. This explains one of the main features of advertising – addressing the consumer through the constructions “you’re” and “you’ve” (Place in the sun, 2021). This advertisement should be analyzed from the point of view of the consumer who is willing to follow the fragrance for pleasure and to refresh his memories of happy days.

The advertisement includes a short narrative about what the fragrance is all about. It includes a description of the perfume, which includes a selection of certain herbs (rosemary, thyme, pepper, and cloves) and citrus fruits (orange, yuzu). In addition, the text mentions the emotions and sensations the user may experience when using this fragrance. These feelings are described as bright, fresh, and at the same time soothing. The text also uses elements of repetition and the gradual unfolding of each fragrance mentioned at the beginning (Place in the sun, 2021). The description contains a logical beginning, followed by a sharp middle or denouement and a gradual recession of the “plot”.

The reader learns about a fragrance by immersing himself in its flavors and notes. First, one learns about the sun and the fragrance of yuzu, neroli, and herbs; then about what each note means and what emotions it reveals; at the end, the scene closes with the fragrance of cypress. The description is structured in such a way as to connect the consumer’s feelings with the fragrances. In addition, the description contains many subtle and unique words that are tied to the feeling of certain feelings.

Table 1 shows the detailed connections between linguistic description and visual perception.

Table 1. Linguistic and visual elements

Interpretation

This perfume description is a gradual immersion of the potential consumer in a variety of bright and exciting fragrances, usually associated with sunny summer days. This description can tell that in the view of the creator of the fragrance of summer and the sun. The authors of the text associate sunny days with bright floral and citrus scents, which are firmly remembered and can remind of warm memories. Since the visual interpretation of the fragrance is associated with the sandy coast and the sea, according to the idea of the creators, the perfume also recalls the freshness that water brings (Morin, 2018). The description contains these elements: “sun, surf, and sand,” further reinforces the audience’s perception of this perfume (Place in the Sun, 2021). The authors of the text created it to convey to consumers the need to feel the sun and the sea at all times by creating a sweet and detailed description of the fragrance.

People reading this text may remember not only the recent association with the sea and the sun. It can also appeal to those just about to experience these scents and impressions. The text can talk about those who want to realize their dreams and get the memories of a few happy days in the piggy bank. In addition, the text appeals to people who are discovering something new. The perfume’s description allows the reader to plunge into the atmosphere of summer days and rediscover their desires for summer. The text was created not only to sell the perfume but also with a sincere desire to share their ideas about the fragrance of the sun and the sea with the audience.

Explanation

The authors of the text most likely have social values and beliefs that relate to the need to fill life with vivid moments. The ideology is built on the presence of memories that define the lifestyle. This means that the perfume is a way to convey your mood to the audience – the sea and the sun are essential elements of human life. To experience at least one “sun-drenched summer day” is worthwhile for the memories to become a “caress” and often remind us of how valuable it is to pass them at any time (Place in the sun, 2021). In addition, the text could have been written so that the potential audience would refer more often to everyday minutiae as the glare of the sun, the different smells in the air, and the emotions.

The creators’ values are to follow the dream, gradually immerse themselves in the atmosphere of the place and time, and create a certain level of luxury around them. Although the target audience of the fragrance belongs to the luxury class, the creators can declare themselves in any social strata. This is justified by the fact that the beliefs of the creators of the text are built on available memories and feelings. The authors mix two advertising genres: visual and textual interpretation and direct interaction with customers. The audience wants this interaction, so the ad seeks to create a direct open dialogue and invites the audience to join in by purchasing a fragrance.

References

Goatly, A., & Hiradhar, P. (2016). Critical reading and writing in digital art age. An introductory coursebook. (2^nd ed.). Routledge.

Morin, A. (2018). Commodities, the visual and the senses: Perfume editorials in high-end fashion publications in the 1970s. Open Edition Journals, 7(1484).

Place in the sun. (2021). Fashion Quarterly New Zealand, Autumn 2021.

Our main aim is to retain our esteemed customers while attracting new loyalties from all over the world. Therefore, we focus on quality advertising and providing accurate information about our products to enhance credibility and trust. While we still use billboards, magazines, television, transportations, and other traditional advertising methods, social media is our most preferred advertising means. Social media has not only enabled us to reach a wide variety of customers across the world, but it has also made it possible for our brand to connect with people, outdoing the traditional marketing methods (Godey et al., 2016). Moreover, the virtual internet connection has given Louis Vuitton a new image of cordiality and accessibility that was absent in the years before social media.

We focus on unique marketing strategies for our quality products by incorporating only the best advertising talents and using various celebrities like Angelina Jolie and Billie Eilish. We work with stars because they attract a large pool of loyal fans who follow them religiously, including their fashion sense. We also incorporate exclusivity in the marketing strategy to lure customers attracted to unique products available for a limited period. In addition to consistency in high-quality products, spectacular and strategic marketing has placed our brand on top. For example, from 2006 to 2012, Louis Vuitton was the most valuable luxury brand globally, and in 2019, it was worth 39.3 billion dollars with 15.5 billion dollars in sales (Oliveira & Fernandes, 2020). During this period, the main customers were the young people whom our social media advertising mainly targeted.

Our ultimate plan for 2021 is to increase our sales and remain on top as the world’s favorite luxury brand. We have also partnered with the National Basketball Association (NBA) to promote our brand in the sports sector and market our products to millions of basketball fans. Our goal is to continue providing high-quality products while broadening our market through strategic advertising. We highly value our customers and reaching out to them through quality advertising is our ultimate goal.

References

Godey, B., Manthiou, A., Pederzoli, D., Rokka, J., Aiello, G., Donvito, R., & Singh, R. (2016). Social media marketing efforts of luxury brands: Influence on brand equity and consumer behavior. Journal of Business Research, 69(12), 5833–5841. Web.

Oliveira, M., & Fernandes, T. (2020). Luxury brands and social media: Drivers and outcomes of consumer engagement on Instagram. Journal of Strategic Marketing, 1–19. Web.

Introduction

Most investors sell stock when they feel that holding the stock would lead to a loss. However, buying stocks that drop in value is inherent to the nature of investing (Hafer & Hein, 2015). The objective, therefore, is not to avoid losses but to minimize losses. Realizing a capital loss before it gets out of hand distinguishes successful investors from the rest (Reschreiter, 2014). Many investors are particularly skeptical about their investments, especially following the loss of a significant investment. LVMH Vuitton SA (LVMH) deals in luxury goods. The company operates through five main segments. The five include fashion and leather, watches and jewelry, wines and spirits, perfumes and cosmetics, and selective retailing (Cavender & Kincade, 2014). In this paper, the author will analyze the stock of LVMH Company to come up with a two-year recommendation for a client.

Comparison of LVMH’s Main Ratios

Financial ratios form a basis for comparison between figures found in financial statements (Reschreiter, 2014). It is of great importance to compare the ratios of a firm over the past years to assess its growth.

Table 1. LVMH’s ratios. Source: (Cavender & Kincade, 2014)

Price-earnings ratio, P/E, indicates the dollar amount an investor needs to invest in a company in order to receive a dollar of the company’s earnings (Zhang, 2015). LVMH P/E has risen for the past three years (Cavender & Kincade, 2014). However, a significant drop was seen in 2014 at 11.73. The low P/E indicated that the company was undervalued during the financial year (Cavender & Kincade, 2014). However, the company’s P/E rose up again in 2015, indicating that investors could expect higher earnings value in the feature. Though P/B ratios do not directly provide information on the ability of the firm to generate profits or cash for shareholders it is important to note that LVMH price-to-book ratio has remained almost constant over the past three years. During these years, LVMH Moet Hennessy Louis’s highest return on equity was 23.22 with a low of 13.39 in 2013 (Cavender & Kincade, 2014).

Comparison with Competitor Firms

LVMH falls under the luxurious goods industry market. Over recent years it has risen to the top and has often being used as a benchmark for other players in the industry. However, the company still faces stiff competition from other brands. Its main competitors are Christian Dior, Burberry, ralph Lauren, and Michael Kors. In this section, the author compares the main ratios of the competitors to get a better understanding of the company’s position in the market (see Table 3).

Table3. P/E Ratio Comparison Table

Qualitative Analysis

Definition of Participants in the Sector

The luxury goods market has seen significant growth in the past three years. It is mainly due to the arising of new high-net-worth investors and customers (Zhang, 2015). Able customers seek luxurious goods in order to stand out in the first growing and changing fashion world. As such, luxury goods industries specifically target a class of young wealthy and affluent customers who are extremely brand-conscious. The United States luxury goods industry has a total of 5.2 million employees (Zhang, 2015). The employees in this sector consist of highly specialized and skilled employees well experienced with interacting with high-profile customers and goods. Growth in the personal luxury goods market which involves jewelers, watches and leather goods slowed to 1.3% from 3% in 2014. The section of the industry alone is valued at $253 billion (Zhang, 2015).

Supply and Demand

Supply and demand of luxurious goods is always in complete contradiction of the law of supply and demand (Hafer & Scott, 2015). Demand is proportional to the price asked for the commodities. In most cases, demand rises with price increases. The high prices make the goods more desirable as symbols of the buyer’s high social status hence a decrease in the price of commodities would lead to a decrease in demand (Hafer & Hein, 2015).

Problems Specific to the Sector

The rise of the internet has posed a series of unique challenges for luxury brands. Luxury goods are best valued and appreciated by customers when seen in person in stores. Display of the items as images in the internet has failed to produce the same luxurious appeal felt by customers when viewing the goods in person (Cavender & Kincade, 2014). Furthermore, customers are not able to tell real from counterfeit over the internet.

Labor

Most workers in the industry are highly skilled and trained. This is mainly because handling and creation of luxurious goods require extreme craftsmanship and discipline (Cavender & Kincade, 2014). Cheap labor is not applicable in this sector.

Quantitative Analysis of the Sector

Table 2. Ratios for Luxury Goods. Source: Zhang (2015)

As is evident above, P/E ratios are still lower than historical average at 15.6. As such, it potentially sets the stage for further growth opportunities in the industry. ROE ratio has constantly risen over the past years. The largest jump was seen in 2015 where the ratio lost from 18.6% in 2014 to 27.7%. It exceeded even the pre-crisis levels as a consequence of a large increase in financial leverage (Zhang, 2015).

From the above chart, it is also clear that the industry has seen a constant growth over the past 20 years. It is crucial to note that even during periods of economic meltdowns, luxury goods were not critically affected as is in the case of other commodities (Zhang & Kim, 2013).

Global Economy

Global economic growth is central to economic development (Fasenfest, 2015). When national income grows, real people benefit. According to the IMF, the total value of goods and services manufactured in 2014 amounted for approximately 77.3 trillion US dollars (Fasenfest, 2015). USA ranked first among the states with the highest gross domestic product with 18 trillion US dollars followed China (Fasenfest, 2015). In the year 2015, there was a significant global economic growth. It was especially higher in developing countries than in industrialized nations. In total global economic growth amounted to 3.43% an increase from 3.31% (Mosca & Re, 2014). The global economy is set to grow at a constant rate owing to the stability of the major trading currencies and improved job markets (William, 2010). The falling of oil prices will also allow for a faster growth (see Table 3).

The information and technology sector of the global economy is posed to see the greatest spikes in income especially in the developing nations. According to IBISWorld, industry revenue in the sector has grown at an average annual rate of 23% over the last 3 years (Manfredi & Luciano, 2014).

Economic Cycle

Economic cycles are phases of economic growth and decline (Manfredi & Luciano, 2014). They include four major stages, contraction stage, trough, expansion, and peak (Manfredi & Luciano, 2014). Currently, the United States economy is at the end of the expansion stage. As such, many investors buy to book profits on recovery of the economy.

Growth Rate and Projections

GDP growth rate is expected to be at 1.50% by the end of the quarter year of 2016 (Fasenfest, 2015). Looking forward, according to econometric models, the GDP growth rate is expected to trend at around 2.00 percent in 2020. It is mainly as a result of the improved job market and the falling of oil prices.

Conclusion

The global economy is set to see a constant growth for the next four years. From the analysis, I advise that the client does not sell his current holdings of stock at the LVMH Company. It is mainly because though the company has enormous competition, it has still managed to maintain its position as the go-to brand for luxurious goods commodities. Additionally, the client’s stocks are good growth potential in the long run. However as seen above, the technological sector is set to experience more growth in the coming years, hence the client would be better secure in this sector than in the luxurious goods industry.

References

Cavender, R., & Kincade, D. (2014). Leveraging designer creativity for impact in luxury brand management: An in-depth case study of designers in the Louis Vuitton Moet Hennessy (LVMH) brand portfolio. Global Fashion Brands: Style, Luxury & History, 1(1), 199-214.

Fasenfest, D. (2015) Global economy, global dialog. Critical Sociology, 40(2), 171-172.

Hafer, R., & Hein, S. (2015).The stock market. Westport, Conn.: Greenwood Press.

Manfredi, P., & Luciano, F. (2014). Cycles in dynamic economic modeling. Economic Modeling, 21(3), 573-594.

Mosca, F., & Re, P. (2014). International development strategies of luxury-goods players in China. Chinese Business Review, 13(6), 367-381.

Reschreiter, A. (2014). Extreme equity valuation ratios and stock market investments. Applied Financial Economics, 19(6), 433-438.

William, H. (2010). Financial statement analysis and the prediction of financial distress. Hanover: Now Publishers.

Zhang, B., & Kim, J. (2013). Luxury fashion consumption in China: Factors affecting attitude and purchase intent. Journal of Retailing and Consumer Services, 20(2013), 68-79.

Zhang, Z. (2015). Financial ratios and stock returns on luxury goods market. International Journal of Financial Research, 6(3), 23-45.

The marketing of luxury goods is a worldwide business trend focusing on prestige rather than profits from sales. The Moet Hennessy-Louis Vuitton (LVHM) SA is the most prominent company selling luxurious goods all over the world. The company is a dealer of over 60 brands of goods, with the vision of selling the dream product to customers (Cavender and Kincade 231). Business enterprises within LVHM operate under family ownership, with small luxury brands being disseminated to the consumers. The strategy helps in fulfilling marketing objectives, which are, diminishing risks associated with brand cycling and reducing the cost or eradicating redundancy (Cavender and Kincade 233). This paper, therefore, discusses the marketing management of LVHM.

The LVHM Advertisement

The executive committee of LVHM ventured into luxury advertisements in television programs, which is instrumental for popularizing its products. However, being the first broadcast in prestigious goods marketing, the expense of running the plan would diminish the value of returns (Cavender 26). It follows the fact that television broadcasting is extremely expensive, and customers’ attention would be captured by other products being displayed. Consequently, it would not be easy to make a profit when few customers get active in buying the products (Cavender 44). Following the plan’s outcome, it is conceivable that the consumers targeted by the LVHM managers through television campaigns were potential buyers.

Threats from the Currency Value and Exchange Rates

The low value of the currency with respect to foreign exchange rates is a threat to luxury business since it significantly shifts the demand from prestige to low-cost products. For instance, the devaluation of Yen resulted in instability of marking luxurious goods in Japan, which eventually threatened Louis Vuitton’s cosmetics sales (Cavender and Kincade 243). Consequently, the devaluation of the euro in exchange with dollars required a consistent escalation of prices to maintain the revenue returns. It implies that cutting the costs by 10 percent then exchanging the currency from dollars to euros would result to decrease in the profits generated from the sales (Cavender and Kincade 244). Thus, a weak currency is a threat to the success of luxury goods since the demand shifts to affordable products.

Opportunities in Marketing Prices

Appropriate adjustments of prices of products in specific markets stand as the working solution to the shift of demand from luxury. The demand law states that when all factors are constant, higher prices lead to low demand (Chu, Huang and Zhou 909). Management of the business of prestigious goods whose preference is little by LVHM has been successful in Asia. When wholesale prices were elevated in specific shops, stocking of products by retailers seeking discounts was diminished, especially for the designed leather and cosmetics (Cavender 29). It implies that the demand for luxury goods is high at low supply, but with appropriate adjustments of prices and limiting retail stocking.

The LVHM Strategic Plans

A multi-brand plan drives the business activities of Moet Hennessy-Louis Vuitton (LVHM) SA. Through the strategy, customers’ attention is broadened to eliminate the monotony in the market (Cavender 35). The decisions are made concerning the changing market trends. However, approval of LVHM retailing and advertising plans is done by the chairperson of the company. Moreover, adjustments on prices to gain profit and consumers’ attention constitutes the key strategies that have yielded success of the luxury business (Cavender and Kincade 244). Thus, proper management of prices, retailing shops, and advertisement of products has led to the success of Moet Hennessy-Louis Vuitton (LVHM) SA business all over the world.

Works Cited

Cavender, RayeCarol and Doris Kincade. “Management of a Luxury Brand: Dimensions and Sub-variables from a Case Study of LVHM.” Journal of Fashion Marketing and Management, vol. 18, no. 2, 2014, pp. 231-248.

Cavender, RayeCarol. “The Market of Sustainability and CSR Initiatives by Luxury Brands: Cultural Indicators, Call to Action, and Framework.” Sustainability in Luxury Fashion Business (2018): 29-49. Web.

Chu, Chih-Ning, Ting-Yuan Huang and Wenkia Zhou. “The Pricier the Merrier: How the Law of Demand Informs Value-Based Pricing: An Abstract.” Finding New Ways to Engage and Satisfy Global Customers, edited by Rossi, Patricia and Nina Krey. Springer, Cham, 2018, p. 909.

Consumer Profile

The consumer, who has been featured in this consumer behavior model, is a woman; she was born outside the United States, but has lived in the country for an extensive period. She is in her early 30s and has been married for the last four years. The customer is currently pursuing her MBA degree (marketing option) and works as an assistant marketing manager in one of the best organizations in the country. She is a middle class individual who earns an average of $7,000 per month. She prefers quality products and the same standards apply for hand bags. Due to the nature of her job, she travels a lot and meets the customers of her organization on behalf of her boss.

Recognition of Needs

The occupation of the lady depicted in this plan is marketing, which requires her to attend many business meetings where she meets with the company’s customers. She likes to lead a healthy lifestyle and prefers quality items including classical handbags and dresses. She believes that good business etiquette includes being tidy and attractive in appearance among other qualities. This aspect can be explained through personal motivation. An individual’s motivation is the push factor behind what he/she does to keep himself/herself attractive and tidy. Currently, she is planning to purchase a new handbag because the one she has at the moment is of low quality. She specifically wants a classical handbag that is elegant and official.

Consumer Decision and Search for Information

Although she does not work near the Louis Vuitton shop, most of the meetings she attends are held near it. She likes to visit the shop to research on her favorite handbags. She also prefers the Louis Vuitton Store because it sells the best handbags and other accessories. She went to the shopping store on the public holiday to try to find a handbag that suits her needs and likes. While in the shoe shop, she tried a number of handbags to see the one that goes with most of her clothes and shoes. The lady is a frequenter of only two stores: Women Monogram and Louis Vuitton.

The lady, because of her narrow choices of stores had only two options, but it was still difficult for her to make a quick decision. Her ability to make the final decision was influenced by among other forces, emotional, psychological, and logical factors, and the need to be official and smart before people. The Women Monogram Palermo was selling at $117 and Louis Vuitton was selling at $129.

Values and Lifestyles

Many research institutions such as the Marketing Science Institute (MSI) explain that attitudes, lifestyle and value segmentation shape consumer behavior by dictating how they purchase products in relation to their preferences and the satisfaction they seek in life. The motivation within an individual is the main push factor behind what he/she does in life. Ideas, self-expression and achievement are the motivational factors in an individual’s life and are the points at which people’s personality intersects with their internal environment. The decision of the consumer depicted in the plan is influenced by her career, self discovery, achievement, and desire to be smart and tidy.

Price

The prices in this consumer behavior plan are $117 and $129 for the two bags. Price is known to influence the decisions of consumers when planning to purchase a product. Most consumers believe that products that have relatively higher prices are of greater value and quality, and determine someone’s class. The decision of the lady in this plan was influenced by the urge to remain in a high social class and her desire to associate with the Louis Vuitton brand.

Store Atmosphere

The environment that exists in a store is another factor that influences the purchase decision. The environment that is created on Louis Vuitton attracts many consumers to shop in the store. The shop attendants in the store are welcoming and they assist customers to choose items that suit them the most. The shoes that are sold in the store are classical, stylish and of very high quality.

Purchase Decision

The lady, after considering all the factors including the price of the bags in the two stores, made her final decision. She decided to settle on the Louis Vuitton Palermo PM handbag. She felt that buying the bag would make her more confident and enhance her self-esteem.

Findings

There are a number of conclusions that can be drawn from this lady’s behavior plan. Firstly, the decision to purchase a product by consumers is influenced by the need to have it. In addition, the decision can be influenced by the availability of the same product in different stores. Lastly, the environment created in a particular store also significantly influences the client’s decision to purchase an item. The consumer in the plan, after considering all the necessary factors, made her final decision by buying a new hand bag from the Louis Vuitton Store. She then rationalized her decision and returned to the equilibrium position; after the purchase, the lady consumer prepared herself for the next expenditure chapter.

Illustration of the development of ERP in the organization

Statement of scope & objectives

Company Name: LVMH Moët Hennessy – Louis Vuitton

Line of Business: It sells a variety of luxury products such as wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewelry, etc.

The initiation of Enterprise Resource Planning System Project

The LVMH operated for several years and merged with several companies leading to the formation of the present LVMH Corporation. After the merger, the company had a growth and expansion strategy. Now, the LVMH has more than 2,500 stores worldwide. As its retail network is all over the world, the control of information is very important to the company.

The Enterprise Resource Planning System may help the company to have a better control of the information so that the company may have more competitive advantages (Funding universe 2011).

Problems

The distribution and maintenance of inventory: As the fact that the company sells luxury products, the distribution and maintenance of inventory is very important to the company. Every year, the company has lots of cost for the damage and the loss of the inventory. A company should take actions to reduce this cost (Funding universe 2011).

Meet customer’s desires in time: Things like fashion can change rapidly. The company needs to know what the trend is now and what the customers’ wants are. As the retails are all over the world, different fashion trend exists in different countries. The company should be able to adjust the change of customers’ desires in time (Funding universe 2011).

The negative influences of economic downturn: Nowadays, the economy is getting worse. Less people are willing to buy luxury products. This may hit the company harshly. Customers and suppliers may be bankrupted suddenly without informing the company. The company should keep their information updated to know the change of its economic environment (Funding universe 2011).

Monitoring of employees: The Company now has more than 80,000 employees, 77% of whom are based outside France, share Group’s values. The company is aiming to be creative and innovate and aim for product excellence. This requires that the employee of the company should be creative.

The employee of product design must have a high sense of fashion trend. Managers must be sure that they are using a qualified person for the job. The company also aims to build a good image of the company. This also requires that employees must be integral and moral. Behaviours like stealing or fraud are highly restricted (Funding universe 2011).

Opportunity

Reducing costs of damage or loss of inventory: The Enterprise Resource Planning Systems may help the company to keep track of each product. Managers may be able to keep track of their transactions. Fraud may be reduced. Problems of distributing products may be revealed so that managers may take actions to solve problems (Smith and Raspin 2007).

Better customer satisfaction: The Enterprise Resource Planning Systems may help the company to acknowledge the change of the fashion trend in time. Designers of the products may be able to make changes of their design in time to meet customers’ desires. The customer satisfaction would be increased. Customers may choose the company over its competitors. Potential customers may become their customers and existed customers may be more loyal to the company (Porter 1985).

Get prepared for the impact of the economic downturn: The Enterprise Resource Planning Systems may help the company to get ready for the economic downturn. The systems may help the company to develop closer relationships between the company and its customers and suppliers. Sometimes, customers may use the instalment plan to buy products. If they go bankrupt, the company will not get the money.

With the ERP System, the company may see this situation in advance and negotiate with the customer to find a way to get the money. And the company must develop close relationships with suppliers as well. Luxury products require high quality materials. It would be difficult for companies to find substitutes in a short time if a supplier told them that he went bankrupt. The ERP Systems may help the company to get prepared for this situation (Smith and Raspin 2007).

Better monitoring and controlling of employee: The Enterprise Systems Planning Systems may help the company to get a better internal control of the company. Employees’ performances may be monitored and evaluated easily with the ERP Systems (Funding universe 2011).

Business benefits

The Enterprise Resource Planning Systems may help the company to get a better internal and external control.

Managers may know what is happening within the company with the ERP Systems. Communications between different departments may become more efficient and direct. The ERP Systems enable the company to keep track of its products. Fraud may be reduced. The costs of damage and loss of inventory may be reduced. Problems of distributing products may be revealed and solved. The ERP Systems also help managers to monitor and evaluate employees’ performances (Birkholz 2004).

The Enterprise Resource Planning Systems may help the company to get more competitive advantages. It may help the company to get more customers and increase customer satisfaction. Customers may choose the company over its competitor. The company may also have track of the materials.

They may be able to pay their suppliers. In long-term business, this may help the company to develop a better relationship between them and its suppliers. They may be able to get materials with lower price. It also helps the company to reduce its costs (Birkholz 2004).

System Capabilities

The Enterprise Resource Planning Systems aim to reduce and eliminate the wastage of labor and costs during the manufacturing and selling based on the market’s and customer’s needs so that the internal and external resources can be optimized (Porter 1985).

To managers, the ERP Systems enable them to make responds to any emergencies more efficiently. It also helps managers to make the right decisions and forecast the irregular situations. Managers may be able to communicate with their customers and suppliers more efficiently (Angwin and Smith 2007).

To material purchase department, the EPR Systems can help them to make right purchase plans. They are able to purchase right quantity and quality of materials at the right places and time with right price. This may reduce the costs of the products. The information on the materials can be tracked (Smith and Raspin 2007).

To inventory storage, the inventory turnover may be increased. Overstock may be reduced or eliminated. The information of the stock can be tracked as well. Managers may be aware of the situation of inventory clearly, directly and easily. Disposal of expired goods can be made in time (Angwin and Smith 2007).

To sale department, the ERP Systems may help them to establish customers’ files so that the company may develop close relationships with its customer and get feedbacks from them. This may also help to increase company’s customer service. The management of selling may be easier and more efficient for the managers.

With the internal sharing of information within the company, other department managers such as manufacturing and product design department can make plans based on customers’ needs. The company may know whether their customers are able to pay the money as well (Angwin and Smith 2007).

The ERP Systems enable the company to allocate its resources such as human resources, financial resources, equipments and information to the right department. In this way, the supply chain may be more efficient. The productivity may be increased. The costs may be reduced (Angwin and Smith 2007).

Company information

The company was established in 1987. Now, it has over 2,500 stores all over the world. The revenue of the company is primarily from Europe, United State and Asia (Funding universe 2011).

Business transaction types:

The LVMH sells a variety of luxury products. It sells wines & spirits, fashion & leather goods, perfumes & cosmetics, watches & jewellery, selective retailing. According to the financial documents of LVMH, in 2011, they sold 174.9 million bottles of wines and spirits (including 55.5million bottles of champagne, 63.5million bottles of cognac, 41.8million bottles of still and sparkling wines and 14.1million bottles of other spirits). They also got 8,712million euro for selling fashion and leather goods, 3,195million euro for selling perfumes and cosmetics, 1,949million euro for selling watches and jewellery, and 6,436million euro for selling selective retailing (Funding universe 2011).

Objectives

Improving the communication between departments

The Enterprise Resource Planning Systems centralize company’s information. All departments share the information. This improves the communication of departments. For example, the LVMH focus on luxury products. Sensing the change of fashion trend is very important to the company.

The customer service department can get customers’ feedbacks by establishing customers’ profiles. They can know what customers like and what they do not like. They are close to the customers. If the fashion trend has changed, or the products do not please customers, customer service department would know. They can share this information within the company (Angwin and Smith 2007).

The product design department would see this information and have a meeting to decide if they should change the design and how to change the design. They make plans and managers decide whether to take the plans or not.

Once the new product is sold, customer service can wait and get feedbacks from customers again. This may help the company to gain customer satisfaction and being the leader of new fashion. High efficiency communication between departments enables the company to make response to the changes rapidly (Freeman 2010).

Improving financial management and cost management

In the downturn of the economy, many people go bankrupt including those people who used to be very rich. The LVMH sells luxury products. Part of its customers uses mortgages to buy products. If customers go bankrupt, the company would have lots of bad debts. They cannot get the money.

This would make a big loss of the company (Funding universe 2011). Although customer service department has customers’ profile to see if they can pay the money, they may not inform the financial department in time. So the company lost the best chance to reclaim the money. Using the Enterprise Resource Planning Systems, the financial department is able to monitor customers’ pay back as well. This may enable them to take action to deal with those debts in advance (Freeman 2010).

The ERP Systems may also improve the company’s cost management. For example, the manufacturing department can decide the quantity of products they are going to produce based on the information shared by the customer service. As the fact that the LVMH produce luxury products, the cost of products is higher than other regular products.

And due to the reason that the products which are out of fashion are not easily selling and they may end up with being sold at a very low price which make a loss for the company, the company must strictly control the quantity of products they plan to produce. The ERP Systems may help the company avoid purchasing surplus materials. The cost of material may be reduced (Freeman 2010).

Establishing a high efficient supply chain

The supply chain includes the material supply, product design, manufacturing, products distributing and selling. The ERP Systems centralize all the information from all the departments. One change from the part of the supply chain can be informed to other parts (Angwin and Smith 2007). This enables other parts to make response rapid. The manufacturing and selling of the products can be more efficient than before. The improvement and maintenance of equipments can be reported to the directors directly (Freeman 2010).

Feasibility report and relevant to business strategy

Technical feasibility

ERP system may be effective in the company due to several reasons, for instance, integration of functions. ERP system enables integration of both departmental and individual functions. It also enhances easy tracking of work flow among departments and branches of the respective organization.

This is effective in reduction in cost of operation hence increases profit level. Furthermore, it also establishes a unified reporting system within an organization. It can also further be developed and used in the provision of business intelligence services or functions (Angwin and Smith 2007).

Therefore, the organization should adopt and effectively implement the system to gain competitive advantage over other companies in the industry and achieve its growth strategy at reduced costs. The ERP system is a technological system. This system has been used by other organizations in the past especially those that respond to technological developments and advancements. Since LVMH had effectively implemented website selling, and increased its efficiency. The company can easily implement ERP system and enhance operation.

Technology is basically tested before being approved for use. Similarly, ERP system has been tested by developers, and like website selling ERP is workable. Therefore, considering the ERP system is cost effective because it will assist LVMH reduce operation costs, it will be easy to implement it. Furthermore, it is efficient because it increases efficiency in operation (Angwin and Smith 2007).

Economical feasibility

The ERP system is based on technology. Its implementation requires finances like any other project that an organization may initiate. However, implementation costs may differ due to differentials in the nature of projects. LVMH has implemented technological strategy in the past, for instance, a website selling.

This is an indication that the company is aware of the nature and requirements of implementing a technological system. Furthermore, the company has an overview of the expected costs and time in implementation of such projects because it had implemented a technological system in the past, website selling (Funding universe 2011). Therefore, ERP system may be effectively implemented by LVMH and made operational in the organization.

This is because the management of the company may apply procedures they used in implementation of websites selling in implementing ERP systems. Website selling and ERP system are related because they are technological systems hence can be implemented similarly. Moreover, the company may implement the ERP system at lower costs because the company already has a technological system in operation hence implementation of ERP system may only require few updates of the existing website selling system.

Considering the financial status of the company and the cost of implementing an ERP system, the system can be implemented by the company. This is because it requires limited finances to implement while the company has adequate finances, which it can use in implementing the system without strain or affecting its operations (Koontz and Weihrich 2007).

Operational feasibility

ERP systems are among the systems that developed in operations due to technological advancements. The system greatly increases efficiency in operation due to several reasons. The system involves control of different departments and coordination of different branches or offices in different geographical locations. This will assist the company reduce its cost of operation and management.

The company has a strategy of enhancing operation and ensuring it maintains its profit level in the industry. This system can easily be implemented in the operation of the organization due to several reasons apart from the strategies developed by the company. The system can be easily introduced and implemented in the company considering customers’, employees’, management and suppliers’ willingness in embracing technological use (Smith and Raspin 2008).

In the recent past, technological development and use have greatly increased and most customers prefer services offered technological. This is because most consumers have subscribed to internet services and are well versed with technological use. The ERP system is a technological system and uses several technological concepts. Considering increased knowledge of technological services and use by most consumers (Funding universe 2011).

This system can be easily introduced and implemented. This is because consumers can easily adapt to the new system considering they are well versed with technological applications. It will also be easier to introduce the system among consumers. Furthermore, since most consumers are well versed with technological applications, it will be easy for the company to easily introduce the system and start using it efficiently (Smith and Raspin 2008).

LVMH has in the past embraced technological use in operations. It is also among the first companies to introduce online selling through the company website.

Technological applications are basically approved by the management team. Furthermore, introduction of online selling through the company website was introduced by the management of the company. This is a clear indication that the management of the company may easily enhance implementation of the system considering they had implemented a technological application in operation.

Moreover, the management is in charge of operations in an organization, and introduction of any change in the organization must require their approval (Funding universe 2011). Management of LVMH has also portrayed willingness in implementation of strategies that can enhance the performance of the organization.

Therefore, the management may easily approve implementation of the system in the company. Additionally, the management is in charge of overseeing the achievement of organizational goals and objectives, and adoption or implementation of ERP system may enable the company to achieve its goal of gaining competitive advantage in the industry where it operates. This is because ERP enhances service delivery to customers (Angwin and Smith 2007).

In an organization, human resources are considered the most important resource. Implementation of ERP at LVMH requires an employees’ willingness because the introduction of the new system directly affects their operation in the business entity. LVMH frequently and consistently responds to technological developments and advancements.

This is because it offers updated services technologically. Therefore, its employees are well versed with technological advancements and introduction of new operational methods. Since its employees have always embraced these changes and increased quality of services to customers, it is evident that LVMH employees can effectively enhance implementation of ERP in the organization (Angwin and Smith 2007).

This is because the employees are flexible and easily adapts to changes in operation. Therefore, considering the flexible nature of LVMH employees in operation, it is evident that they can easily adapt to the new system and enhance its implementation in operations in the organization.

This can enhance operations in the company because employees are willing to implement the system. Basically, LVMH employees will enhance the implementation of ERP system because strategies of the company embrace technological developments and advancements incorporation in operation to increase efficiency (Angwin and Smith 2007).

Organizational strategies especially long term are applicable to both employees and suppliers. Therefore, suppliers are adequately informed and trained by organizations when necessary in case it intends to introduce changes in operation.

This is because suppliers are also part of an organization hence contributes to achievement of goals and objectives. LVMH adequately informs their suppliers and keeps them updated on changes that may affect operations in the organization (Angwin and Smith 2007). Furthermore, its suppliers supported the introduction of website selling, which is a technological selling technique.

This is an indicator that its suppliers also embrace technological application in operation. Therefore, since its suppliers supported website selling and are adequately informed on technological changes and advancements, they might easily support implementation of ERP.

Furthermore, suppliers operate in line with organizational goals and objectives, and strictly adhere to organizational strategies. Therefore, since its suppliers adhere by its strategies, they will enhance the implementation of ERP because it is part of the LVMH strategy of enhancing service delivery through technological developments (Angwin and Smith 2007).

List of References

Angwin, D and Smith, C 2007, The Strategy Pathfinder: Core Concepts and Micro – Cases. New York: Blackwell Publishing.

Birkholz, A 2004, Business Analysis and Enterprise Resource Planning. Germany: GRIN Verlag.

Freeman, E 2010, Strategic Management: A Stakeholder Approach. Cambridge: Cambridge University Press.

Funding universe, 2011, LVMH Moet Hennessy Louis Vuitton SA. Indiana: Pearson Education.

Koontz, H and Weihrich, H 2007, Essentials of Management. New Delhi: Tata McGraw-Hill Publishing Company Limited.

Porter, M 1985, Competitive Advantage: Creating And Sustaining Superior Performance. New Jersey: Simon & Schuster, Inc.

Smith, B and Raspin, P 2008, Creating Market Insight: How Firms Create Value From Market Understanding. London: John Wiley & Sons Ltd.

Introduction

LVMH is a France-based company known for wines and spirits. LVMH manufacturers have also expanded their operations in other foreign countries like United States, United Kingdom, Africa, and Asian countries.

France cultural values

The best way to analyze France cultural values is by using Hofstede’s model (Piepenburg, 2011). In this respect, the following cultural dimensions will be critical in understanding the county’s cultural values.

Power dimension

France has a score of 68 in terms of cultural power dimension index (Patel, 2007). From this perspective, inequality among society members is prevalent. Individuals perceived as superior are not accessible from a hierarchical perspective. An example of such inequality is evidenced in administrative powers given to authorities in government departments and crucial economic sectors. In organizations, managers possess immense power, and the flow of information follows the organization hierarchy.

Individualism

France has a score of 71 in terms of cultural individualism index (Patel, 2007). From this context, it is clear that the country’s culture is individualistic, and people often subscribe to their own private opinion. This means that organizations contract services, thus providing autonomy and independence to workers. In most cases, people prefer communicating directly. Workers are managed individually and recognized for their work performance.

Masculinity

According to Hofstede’s cultural model, France is not a masculine country. Femininity defines the quality of life in the country. This means that the country does not harbor competitive and ambitious instincts among individuals. The country’s social welfare system advocates that people should work for 35 hours a week. From this perspective, competition among workers is discouraged. Organizations prefer being supportive, especially in resolving work-related conflicts. The country has a femininity index of 43 (Patel, 2007).

Uncertainty avoidance

The country has a higher score of 86 on the uncertainty avoidance index (Patel, 2007). This means that the country is keen on responding to uncertainties through education and other forms of training. France-based business organizations prefer planning and expertise in handling changes that affect their security, policies, and performance.

Long-term orientation

France is a conventional country in terms of traditions and culture. Therefore, France can be termed as one of the societies that are short-term oriented (Patel, 2007). From this perspective, the country depends on short-term results. An example of such is exhibited by companies’ evaluation method of using quarterly results. In any case, society is highly sensitive to current social trends. Immediate gratification and self-reliance are common features in France culture.

LVMH products and services

LVMH produces a wide range of wines and spirits. An example of a popular product produced by the company is champagne. Other products made by the company include clothes made and leather apparels. The company has invested heavily in the fashion industry and has been involved in manufacturing designer clothing lines.

Other important products manufactured and sold by LVMH include perfume and cosmetics. LVMH has also unleashed notable designer watches for both men and women. For a long time, LVMH has also been involved in buying and rebranding jewelry for sale. LVMH is known for its involvement in selective retailing.

LVMH provides a wide range of services. Such services are offered through LVMH subsidiary companies like Miami Cruiseline Services. LVMH group of companies offers services in the hospitality industry. Examples of such services include catering services in luxurious hotels and ships. Example of services offered by LVMH and the subsidiary companies include watch repair and the making of designer clothes and apparels.

Advantages of global activities

LVMH global markets are instrumental in the improvement of the company’s products and services. The global markets help the company to grow and foster better ideas in developing effective products. LVMH has been able to harness and use various cultural dimensions from other countries to achieve competitive marketing strategies.

Also, LVMH has been able to achieve a competitive edge over other companies within the same industry. LVMH Company has been able to spread its marketing risks beyond France. This has made the company specialize in markets, products, and services that are value-adding. LVMH marketing strategy and global market expansion have been instrumental in improving customer awareness.

This has been made possible by the strategic location of subsidiary firms all over the world. The use of online stores has also been essential in harnessing customer awareness all over the world (Dholakia, 2002). It is essential to note that LVMH’s global activities have greatly increased the company’s profits and reduced costs.

Global marketing strategies

LVMH manufacturers have used branding as a strategy for global marketing. Today, LVMH has a consistent brand culture that is familiar to all consumers (Douglas & Craig, 1995). Lack of a consistent brand culture can be detrimental to an international organization. In essence, a consistent brand culture makes a company stand out among its competitors in the global markets. This means that such a brand culture must be communicated in a language that resonates and is familiar to everyone.

Product location using strategically located distribution and subsidiary firms across the globe is essential. LVMH has used this strategy to ensure that products and services available in the market are strongly felt. The integrated global marketing mix used by the company has been significant in ensuring customer satisfaction in each market segment.

The use of foreign products has been significant in gaining a market entry advantage in foreign counties. That has been made possible by obtaining a license to manufacture products in other countries under the same brand name. This has saved the company from hefty production costs and instead increased its global marketing initiatives.

LVMH organization structure

LVMH has over 31 subsidiary companies that operate in different parts of the world. LVMH is managed by a board of directors who form an executive committee. LVMH has over 2400 stores across the globe, and each is headed by a manager. The manager oversees stores operations. LVMH products are sold through boutiques, which are strategically positioned in luxurious stores, malls, and hotel lobbies. LVMH is owned by shareholders across the globe.

Global human resource challenges

LVMH has faced challenges in lacking qualified experts and managers in various divisions and production lines at various global locations. Moreover, the company has faced challenges in countering the impact of conventional career development strategies used in other countries. Aligning foreign cultural values to those of the LVMH Company has been difficult.

Future challenges at the global level

The entry of LVMH into global markets will be met by cultural, political, and economic challenges. Moreover, the competition at the global level is intense and requires effective market entry strategies. Maintaining a strong brand culture at the international level will also be a challenge for the company.

Interest in a career with the company

Yes, I would prefer working with the company in the future. The company’s production technology is advanced and appealing to young professionals. Moreover, LVMH is a reputable organization that harnesses talent, professionalism, and competency.

References

Dholakia, N. (2002). Global e-commerce and online marketing: Watching the evolution. Westport, CT: Greenwood Publishing Group.

Douglas, P., S. & Craig, S., C. (1995). Global marketing strategy. New York, NY: McGraw-Hill.

Patel, T. (2007). Stereo types of intercultural management: A dynamic appreciation of viability of French-Indian strategic alliances. Amsterdam, AMSTR: Eburon Uitgeverij B.V.

Piepenburg, K. (2011). Critical analysis of Hofstede’s model of cultural dimensions. Berlin, BER: GRIN Verlag.

Introduction

Louis Vuitton is one of the most famous and successful brands in the world. It is famous for its quality and exclusivity. The history of the company suggests that major values of their business are creativity, expansion, quality, and luxuriousness (Paul & Feroul, 2010). It has gained significant popularity in the world and in Japan, in particular.

Synopsis of the Situation

Notable, Louis Vuitton heavily relies on its Japanese market as 55% of the company’s revenue comes from Japan (Paul & Feroul, 2010). It is necessary to note that the company’s profits are growing each year steadily, but recent years show modest growth in Japan due to weakening of the Japanese yen and some financial constraints the country faces (Yamaguchi & Chan, 2013).

Key Issues

One of the key issues is certain company’s dependence on the Japanese market as risks of this market can make the entire company vulnerable. Another key issue is counterfeiting, as the company loses huge sums of money (Paul & Feroul, 2010). Clearly, the company has lots of potent competitors in the market, like Bulgari, Tiffany, Hermes, and so on (Yamaguchi & Chan, 2013).

Define the Problem

The company focuses on the Japanese market and fails to come up with solutions to diminish counterfeiting and become more competitive in the world as well as Japanese markets.

Alternative Solutions

Effective solutions which can help the company restore its truly leading and safe position are the development of unique products to diminish counterfeiting (creating new technologies or accessories and so on), online launch shopping with only a few stores in largest cities and expansion to new markets (it will diminish risks).

Selected Solution to the Problem

Online shopping will enable the company to reduce costs as there will be no need in maintaining numerous retail units. At the same time, they will keep the sense of exclusivity as the prices will be still high (though reasonable). Admittedly, Japanese people love technology, and they will be glad to be able to shop and buy their luxury favorites online. The stores will be in the largest cities where customers will be able to touch and ‘try on’ some products as window shopping is popular in Japan (Yamaguchi & Chan, 2013).

Implementation

Admittedly, this strategy requires thoughtful consideration and comprehensive advertising campaign. People should learn about the new opportunity, but they should also get a clear message that their luxury items can be reached via the Internet. The brand does not become ordinary, but its exclusivity is tied with innovation, technology, and modernity.

Recommendations

The company should consider the possibility to develop online shops. It should also focus on diversification and further expansion. The company should invest in R&D to create truly unique products which can diminish counterfeiting.

Conclusion

On balance, it is possible to note that Louis Vuitton remains one of the most successful companies in the world market. Its products are still seen as luxury items for a special club of chosen. The company has implemented numerous effective strategies, and it can remain of the leaders.

References

Paul, J., & Feroul, C. (2010). Louis Vuitton in Japan. Web.

Yamaguchi, Y., & Chan, V. (2013). Vuitton to Tiffany seen pressured in Japan by weaker yen. Bloomberg. Web.

Appendix

SWOT Analysis

China is emerging as a very attractive international business destination. This situation arises from the growing middle class in the country. In the last two decades, economic growth in the country has spurred it into the limelight as a serious investment destination. Many companies manufacture their products in China because of the competitive labor costs in the country.

The manufacturing boom has contributed to the emergence of an economically empowered middle class. In the recent years, the portfolio of businesses setting up their operations in the country has expanded. The portfolio now includes businesses seeking to take advantage of the Chinese market in addition to its competitively priced labor.

This explains the interest of LVMH in the Chinese market. LVMH is the holding company of several French luxury brands. The company is interested in establishing businesses in China to take advantage of its emerging luxury market.

Any company that tries to enter into the Chinese market must take time to understand the operating environment in the country. The business culture in China is different from the business culture in the West. The Chinese people are historically frugal. Therefore, it is important to take time to understand their needs and expectations.

However, the country’s emerging middle class has a lot in common with any middle class in the world. Therefore, the main issue that a company needs to explore before getting into China is the correct market entry strategy. This report examines the business environment for luxury products in China. It also looks at the internal characteristics of LVMH in order to prepare a strong market entry strategy for the company.

Methodology

The method used to meet the two broad objectives of the project was a literature review. Literature review is an acceptable form of research that makes it possible for researchers to evaluate a broad range of issues. The range of issues that required consideration in this case exceeded the number of issues that could be covered using empirical research. This reasoning informed the choice of the research method.

In addition, the resources needed for an empirical research were not available. The second reason for choosing a literature review as the main research method was that a lot of research already existed in relation to the main issues defined in the research objectives.

It was unnecessary to carry out research into these issues from the scratch. The primary tools employed in the analysis of the data were the analytical instruments available to strategic planners. These tools include PESTLE Analysis, SWOT Analysis, and Porter’s Five Forces Analysis.

PESTLE Analysis of Competitive Landscape

Strategic thinkers use a PESTLE Analysis to conduct environmental analysis as the basis for determining whether an organization has the capacity to interact favorably with its operating environment.

A PESTLE Analysis involves an examination of the political, economic, social, and technological issues in a given location. In addition, strategic planners study the legal framework governing a business environment, coupled with the condition of the physical environment of the area being analyzed.

Two issues characterize the political environment of China. First, the communist government is very keen on controlling the key sectors of the Chinese economy. For instance, the country does not have an exchange rate that rises and fall according to the forces of a free currency market alongside other international currencies.

Instead, the government determines the exchange rate. This issue at times puts foreign companies at a disadvantage. The second issue affecting the Chinese political environment is that the country uses a communist system of government.

In the recent years, the country has started conducting democratic elections at the local level. However, the communist superstructure still allows the central government to control all the political activities in the country. In this regard, regional party officials tend to exert a lot of influence in the conduct of business.

On the economic front, China has experienced unprecedented growth in the last two decades. The country’s economy grew at almost ten percent per annum in the last ten years. This is the leading cause of the emergence of China as a significant market. Prior to the economic boom characterized by unprecedented growth in the manufacturing sector, China’s main attraction was its low cost labor.

International manufacturers set up shop in China to take advantage of its low labor costs. As more companies started manufacturing in China, the disposable income of the Chinese people grew. This turned the country into one of the largest markets in the world. Business is now shifting from manufacturing only, towards taking advantage of the growing market resulting from the emergence of the new middle class in China.

The social situation in China varies depending on the parameters in use. One of the best-known Chinese policies is the one child policy, which prohibits couples from getting more than one child. This policy is also an illustration of the tight control the communist government exerts on the Chinese people. In the recent years, a lot of Western influence has crept into the Chinese social scene.

For instance, China has become the one of the locations that directors from Hollywood plan to launch new blockbusters. The Western pop culture characterized by the idolization of media personalities is also taking root in China.

From a business angle, it means that the Chinese consumers are developing a taste for the Western cultural experience. This is fuelling demand for Western products. This explains the popularity of Western brands such as Apple, and in the recent years, the proliferation of Western style eateries such as MacDonald’s fast food stores.

The technological environment in China is very competitive. The Chinese have invested resources in manufacturing technologies turning it into what a commentator called, “the world’s workshop” .

The dual investment by the Chinese government on high tech production facilities, and the Foreign Direct Investments (FDI) from international investors trying to take advantage of the low labor costs in China, have made China a manufacturing and technology hub.

However, Chinese manufacturers tend to pay little attention to quality control. Unlike Japanese manufacturers who have a strong interest in efficiency through programs like Kaizen, the Chinese tend to compete on cost by making cheaper knock off items to sell them to the poorer masses.

The economy of China is difficult to analyze. The reason for this is that the Chinese government is the only body that releases economic data on China. The data at times seem unrealistic based on estimates made by other economists. In addition, much of the Chinese economy is state controlled.

For this reason, it is better to develop a business strategy that takes into account these factors. In spite of this, there is consensus that the Chinese economy, together with Brazil, Russia, India, and South Africa (BRICS), is growing very rapidly.

The physical environment in China is a major concern to international environmental agencies. Chinese cities such as Beijing are becoming polluted and have artificial fog brought about by industrial emissions. The state pays some attention to environmental issues, but it prioritizes economic the well-being of the country over environmental conservation.

Rivers and other natural features located in places with high population are becoming polluted. In the rural areas with smaller population densities, the environment is in good condition. In fact, China has some of the most spectacular sceneries such as rivers, waterfalls, mountains, and world life.

These areas can serve as the inspiration for including environmental protection measures as part of the Corporate Social Responsibilities (CSR) strategy when establishing a business in China.

Hurdles and Obstacles Facing LVMH

In order to discuss the hurdles and obstacles that LVMH will need to deal with before making a proper entry into the Chinese market, it is important to review the application of a SWOT Analysis because it is the most suitable tool for this purpose. Hurdles and obstacles to a business constitute the weaknesses and the threats a business must deal with in order to operate successfully in a specific market.

Weakness and threats are two measures within SWOT that examine the difficulties associated with a business situation. Weaknesses are internal issues that bar the company from growing optimally. On the other hand, threats are external issues that the company does not control that can hamper its business objectives.

LVMH, alongside other international brands trading in China have two main weaknesses. The first weakness is that the company has a wide portfolio in a very narrow segment of the Chinese market. Secondly, China is relatively new to luxury spending. Unlike Europe and America, many of the Chinese luxury spenders are people who have recently made money from the changing fortunes of the country.

While the short-term outlook is impressive, the long-term performance of the Chinese luxury market is difficult to predict. If the country runs into any economic problem, the Chinese luxury spenders will revert to their old spending habits. In other words, the new middle class of China is still skilled in frugal living. Those skills will come into play as soon as there is an economic bump.

The situation in the West is different because many luxury spenders grew up in affluent families. They do not know how else to live. If they cannot afford to drive an expensive car, they will look for one that is easier to maintain. In China, the luxury spenders can discard the car all together because they have lived most of their lives without it.

The threats that accost LVMH in China are as follows. First, the brands produced by the company will suffer from threats associated with the counterfeiting of products . The results of counterfeiting include loss of revenue and loss of brand reputation. The counterfeit system in China is one of the most organized counterfeiting operations in the world. Chinese manufacturing capacity does not match its R&D capabilities.

Therefore, manufacturers choose to take shortcuts in order to make profits from popular brands. This situation is compounded by weak legislation on the issue. The Chinese government tends to protect the local industries whenever there is a conflict with international manufacturers.

The problem with counterfeit products is that they usually do not meet the performance criteria of the original product. Their goal is to eat into the market of established brands. As a result, the products are cheaper to buy, but they are also of poorer quality. This damages the image of the brand.

The second threat that LVMH will need to be aware of is that the patenting system in China is weaker than in most advanced economies. The Chinese government views patents as a bottleneck in its manufacturing sector. This makes getting patents very difficult in China.

In addition, the enforcement of laws relating to patents is lackluster. In this sense, LVMH will be at the risk of losing its intellectual property rights to Chinese firms if the company does not take aggressive steps towards securing patents on all the products produced in China.

The third threat that most international organizations face while operating in the Chinese market is political interference. Chinese politicians are very powerful. They can frustrate the process of acquiring licenses, or the opening of new stores. In addition, they may make demands for kickbacks and bribes before giving approvals for various business initiatives.

While China’s bribery index is not as bad as many other countries, it is still a reality that everyone who does business in China must deal with it very often. The challenge with this situation is that by towing the line, a company can lose its international reputation. On the other hand, refusing to comply with demands for kickbacks and bribes may lead to the frustration of the business by government and party officials.

The third threat that LVMH needs to put into account is that it is not the only player eyeing the luxury market in China. The competition for the emerging luxury market in China is growing, from both international players and local manufacturers .

The competition in the luxury market is becoming more intense with time. It is anticipated that luxury goods marketers will soon opt for “diffusion strategies” to create rapport with the younger generation as a form of initiation into the luxury brands .

In conclusion, while China represents a significant opportunity for LVMH as a luxury products market, the company will face several stiff challenges over the coming years.

Strategy Recommendations for LVMH

In order to deal with the threats and weaknesses identified in the Chinese market, the company has several strategic options. This section examines the options available for use by the company in China based on PESTLE Analysis, and the examination of the weaknesses and threats the company will experience in the Chinese market.

The main issues regarding the business environment in China include a powerful political system that carries a lot of influence in the business environment, and a people who are subservient to the system. There new wealth in China is leading to the emergence of a luxury goods market. The market is projected to grow in the coming years.

The country has a very strong manufacturing sector, but the level of innovation is not commensurate with the manufacturing capacity leading to a culture of product counterfeiting. The economy of the country is centrally controlled.

This makes it impossible to determine the actual price of goods and services based on an open market system. The company needs to use two sets of strategic guidelines to deal with the strategic issues arising from the analysis. These two sets are internal measures, and external measures.

The internal measures LVMH needs to use include staffing, manufacturing decisions, choice of advertising strategy, and the choice of a distribution strategy. The choice of staff members to work in LVMH will have a significant impact on the operations of the company in China. The Chinese marketplace is very different from most Western markets.

It is imperative to find people who are familiar with the system and can run a profitable enterprise. At the same time, the choice of staff must reflect the desire of the company to maintain its corporate culture within the Chinese environment.

The best way to approach staffing is either to find Chinese nationals who have international business experience, or to find Westerners who have Chinese business experience. This issue can also be resolved by having a board and management team in China that includes local staff, and staff seconded by the headquarters.

Secondly, the company needs to consider its manufacturing decisions carefully. China has the best economics when it comes to manufacturing. The cost of labor is relatively low, and the availability of manufacturers is high. Manufacturing in China will also reduce transport and warehousing costs for the company.

The main threat associated with manufacturing in China includes the risk of losing proprietary information to local competitors, paving way for counterfeiting. There is also a threat associated with quality control, especially if the company employs local workers who have low regard for standardized production.

On the other hand, manufacturing in Europe may prove unsustainable in the end in light of the fierce competition for luxury products shaping up in China. The best strategy in this case is to maintain the main manufacturing sites in Europe, and to use local manufacturing for generic parts such as packaging. This way, no one will be successful in counterfeiting the entire product.

LVMH needs to be very careful as it develops its marketing strategy. The main issue of concern is the advertising mediums it will choose to market the products. As a young luxury market, China will not follow the same trends shown by countries with mature luxury markets.

The purchasing decisions will not be identical to the buying decisions of customers in other luxury markets. LVMH needs to develop a marketing campaign that is relevant to the Chinese market to ensure that is gets a proper foothold in the market. It needs to keep a keen eye on how consumer behavior changes when the economic conditions change.

The fourth strategic issue that LVMH needs to address is the distribution strategy that it needs to be successful in the Chinese market. The decision between opening new stores and using established distribution networks is important. While LVMH already has over one hundred stores in China, it still needs to keep reviewing the performance of these stores against the market potential of its products.

This decision will have an impact in the distribution of counterfeit products. A string of shops owned and operated by LVMH will ensure that customers are sure that they are buying original products.

However, the cost of establishing and operating an exclusive store may hinder the growth of the company by constraining profits. At this point, an exclusive chain seems like the best option. In the future, the company will need to consider getting distribution partners to increase its footprint in the Chinese luxury market.

The external issues that the company needs to consider are the development of a PR strategy, and becoming part of the advocacy efforts to make intellectual property rights more respected in China. The need for a PR strategy as part of the company’s strategic plan comes from the realization that the company will run into certain problems with government officials at one point or another.

It is important to declare and maintain a clear ethical line when dealing with officials. On the other hand, the issue of intellectual property rights in China is a common problem for all international firms that set up shop in China. Their combined voice will make it easier for the government to act on concerns relating to the breach of intellectual property rights. In the same breath, this will help to address the counterfeiting of products.

Porter’s Five Forces Analysis

The discussion in previous sections concentrated on the business environment and the strategic fit of LVMH in the Chinese market. There is a need to reexamine the competitive position of LVMH by using Porter’s Five Forces Analysis in order to develop further recommendations in line with the analysis.

Porter (1998) identified five forces that define the competitive climate of any business. These forces are the buyer power, supplier power, threats of new entrants, threats of substitutes, and the degree of rivalry in the competitive marketplace .

Buyer power refers to the control that the consumers of a product exert on the prices. In other words, it refers to the bargaining power of the consumers. This power can erode profits if the business has no way of dealing with it. In markets controlled by a monopsony, the purchasing power of the buyer can be very high.

The situation in the Chinese luxury market is such that the demand for luxury goods does not give much bargaining power to the customers. In many cases, LVMH can set its prices as high as it wants. Provided the price is within the reach of the intended market, the company can control the prices.

The second force that needs consideration is supplier power. The power of suppliers can also squeeze margins if the company relies on a monopolistic supplier, or a cartel. This situation may also result if the country in which the business operates uses price controls. LVMH has very many suppliers located in various parts of the world.

The only way the supplier power will increase to unmanageable levels is if the company decides to switch to local suppliers in China. In addition, the situation may change if the government institutes price controls or tax measures on inputs. Either way the price of inputs may rise.

The third force identified by Porter (1998) is the threat posed by new entrants. The nature of this threat can be evaluated by considering the entry barriers in the industry. The luxury market tends to handle high quality materials and uses rare production processes. In addition, it takes time to develop a reputation as a luxury brand.

Most luxury brands use the duration they have served the markets as a means of gaining competitive advantage over younger players. In this sense, the barriers to entry in the luxury market are very steep. However, the Chinese market is very young. A company that has the resources to position itself as a luxury goods provider will receive the same attention as the older companies such as LVMH.

Fourthly, the competitive climate of a business is determined by the threat posed by substitute products. Substitute products refer to items that can fulfill the same functions as the products marketed by a given company. The main threats from substitute products come from other international players in the Chinese luxury goods market. For instance, there is intense rivalry between Omega and LVMH in the Chinese market.

Substitute products usually present more challenges if they have better prices for the same level of performance. The Chinese luxury market is still in the stage where many people are making the transition from a low-income culture to a high-income culture. These consumers have not yet developed strong brand loyalties. Therefore, within the same performance climate, these consumers make choices based on the cost tradeoffs.

The fifth force that determines an organization’s competitive effectiveness is the degree of rivalry with other players in the industry. The degree of rivalry in the Chinese luxury market will increase as more players enter this market. The intensity of rivalry will also increase if the exit barriers in the industry are high. For instance if LVMH sets up production facilities in China, the company will find it difficult to leave China.

Advantages and Disadvantages of Domestic Firms in the Sector

The application of Porter’s Five Forces in the determination of the relative advantages and disadvantages of the domestic firms in the sector yielded the following results. The advantages that the local firms enjoy in relation to buyer power arise from their familiarity with the needs and the demands of the Chinese consumer. Local players in the luxury goods market know the tastes and preferences of the Chinese people.

In addition, local firms have a working knowledge of the purchasing behavior of the Chinese people. They can assess their prices better based on this knowledge. The main disadvantage that local firms have when it comes to the buying power of consumers is that the Chinese people do not have the same amount of confidence in local firms to produce high quality luxury goods.

On the question of supplier power, local players have the following advantages. First, the local players have greater knowledge of the sources of raw materials. Therefore, they can make buying decisions based on the market rates of the raw materials. This reduces the power of suppliers in their favor.

On the other hand, the power of local players in bargaining reduces the interest of local suppliers of raw materials to sell to them. There is little incentive to supply raw materials to a local firm that wants to negotiate prices downwards, compared to selling to a foreign owned firm that may buy the materials at a better price.

The threat of new entrants is not very serious to local firms. There are few players in the luxury market of Chinese origin. The advantage that local firms derive from this position is that any new player that comes into the market cannot be a local player.

This leaves the competitive advantage to the local firms because their only significant competition is from foreign firms. The associated disadvantage is that local firms have a harder time establishing themselves as producers of luxury brands.

The threat of substitutes is a challenge to local firms. The reason for this is that the local people compare their products to a wide range of luxury products in the country. In this sense, the main challenge these products face is the threat of competing with products from foreign firms such as LVMH.

Foreign luxury players seem to have a better reputation in the country because of the consistency in the quality of foreign products. On the other hand, local firms can adjust their offers to counter the prices of foreign firms based on their superior understanding of the local environment.

Local firms deal with rivalry better than foreign firms do. The reason for this is that the local firms rely on their knowledge of the market to determine how to position their products. They are also flexible to changes because managers are in contact with the daily operations of the firms and they make decisions locally. However, the strength of foreign firms can overwhelm the local firms.

This can happen if the foreign firms have the financial muscle to fight for market share and can leverage its competitive advantages. There is already a struggle for market share in the Chinese luxury goods market occasioned by the entry of many foreign firms to the Chinese market.

In conclusion, the main source of competitive advantage for local firms is their knowledge of local conditions, which include customer preferences and superior understanding of the supply chain. In addition, these firms are very flexible when it comes to making decisions to increase the profitability of their operations. These advantages are not impossible to surmount.

Advantages and Disadvantages of Foreign Firms in the Sector

The application of Porter’s Five Forces in the evaluation of the relative advantages and disadvantages of foreign firms yielded the following results. Buyer power works in the favor of foreign firms. The local market is relatively inexperienced when it comes to the pricing of luxury goods. In addition, foreign products feel authentic to the luxury market in China.

Therefore, foreign firms can set higher prices for their products. The disadvantage associated with this is that a foreign firm can price itself out of the luxury goods market. It can set prices that are too high for a significant portion of the luxury goods market.

Supplier power works to the advantage of foreign firms when it comes to availability, but it works against foreign firms when it comes to pricing. Local suppliers prefer to sell their products and services to foreign firms because they are usually ready to pay more for the same raw materials.

However, this comes at a price. The local suppliers set their prices to foreign firms above the prevailing rates to take advantage of their demand. Suppliers enjoy a lot of power when dealing with foreign firms because foreign firms tend to lack full knowledge in regards to the availability of raw materials.

The threat of new entrants is significant to foreign firms if the new entrant is another foreign firm. However, if the new firm is a local firm, the degree of the threat is lower. Foreign firms tend to rely on the same sources of competitive advantage compared to the local firms.

Dealing with a new luxury market tends to push foreign firms to select similar strategies, which results in fierce competition for market share. On the other hand, local firms rely on their understanding of the market to gain market share.

The threat of substitutes is also significant when pitting foreign firms against other foreign firms. If two foreign firms produce products that can substitute each other, they increase the options their customers have. In the process, these two products can become rivals in the market.

Substitute products from local firms become a threat whenever the foreign firm prices itself out of the market. The local demand will move towards the substitute products that have the same performance characteristics as compared to the products produced by the foreign firm.

The degree of rivalry in the marketplace usually works in favor of the foreign firms this advantage springs from stronger brands, and robust marketing efforts. Local firms are not big spenders on luxury advertising. At a certain level, all types of rivalry affect the businesses in the industry. Local firms cannot compete too well with international brands because of their brand recognition.

Conclusion

LVMH is in a good position to make money in China. However, the company needs to make several decisions regarding how it will establish itself as a player in the luxury goods market.

The company must remain vigilant to changes in the economic fortunes of the country. The luxury goods market is still very young. This means that it is still very vulnerable to economic changes. Therefore, LVMH needs to plan in a way that it can maximize its short-term profits and position itself for survival in case the luxury markets shrinks

On the issue of manufacturing, LVMH should organize itself in a way that makes it possible for it to take advantage of the low labor costs in China. At the same time, the company must ensure that none of its proprietary technologies falls in the hands of rivals.

Finally, LVMH must take into account the management needs of its business in China. It should be careful when selecting the board of directors to run the Chinese division. It must find people who understand the Chinese market well. At the same time, it needs to ensure that the corporate culture of the company survives entry to the Chinese Market.

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