Category: Louis Vuitton

Introduction

The main objective of this report is to analyze the business environment of Louis Vuitton Moet Hennessy, in addition to conducting a market audit. The purpose of the report is to analyse the structure and performance of LVMH. The report shall also provide a brief overview of LVMH. In addition, the company’s SBUs, PESTLE analysis, SWOT analysis, Porter’s 5 Forces, and McKinsey 7S Matrix, shall also be conducted.

Overview of the LVMH

LVMH was formed in 1987 when Moet Hennessy merged with Louis Vuitton (Rugman 2005). The French based company operates in different parts of the world and it has over 100,000 employees (LVMH n.d). The company’s largest market share is in the US (26%), followed by Europe (18%), France (16%), and Japan (15%). Latin America and Asia account for 25% of the company’s market share (Rugman 2005).

LVMH enjoys global presence, and this has enabled the company to diversify its market risk. For example, LVMH managed to withstand major financial crises such as the 1998 Asian crisis and the 2007 global financial recession.

Some of the company’s famous brands include Chadon, Moet, Givenchy, Dom Perignon, and Christian Dior (Rugman 2005). Currently, the LVMH enjoys a 15% of the global luxury goods market share. This is a very competitive market with an estimated annual growth rate of10% (Rugman 2005). Some of LVMH’s major competitors include Bulgari, Richemont, and Gucci.

To remain competitive in the market, the company has mainly focused on shared synergies and costs across its dimensional value chain. In the last three financial quarters of 2012, LVMH has recorded an estimated €19.9 billion in revenue. This represents a 22% increase in revenue, compared with the same period last year (LVMH 2012).

Strategic Business Units (SBU) LVMH

LVMH operates under five SBUs namely, perfumes and cosmetics, fashion and leather goods, watches and jewelry, wines and spirits, and selective retailing (Reuters 2012). The table below is an illustration of LVMH’s SBUs

PESTEL Analysis

Porters 5 force

The diagram below is an illustration of Porter’s 5 forces with regard to LVMH as demonstrated by Prads (2010).

LVMH faces competition from new entrants and existing competitors such as Gucci and Bulgari (Rugman 2005). The presence of close substitutes due to cheap products and imitations threatens its operations (Pradas 2008). As the market leader, the company’s supplier bargaining power is high.

The company is a market leader and this is its competitive advantage as well. As such, buyers have little influence on the prices of the company’s products (Nagasawa 2008). The luxury industry is competitive and new entrants must have enough capital. Therefore, potential entrants have less influence on the market.

Opportunities and Threat

Internal Environment

McKinsey’s 7S matrix

Structure: The organization is divided in five units. Each of these units makes its own decisions (Rugman & Girod 2003)

Strategy: Creativity and technological innovations are the major business strategies adopted by the company (LVMH n.d). The company operates under high competitive pricing strategies supported by focused differentiation.

Systems: LVMH has integrated its IT operations such as online marketing and distribution.

Skills: LVMH’s core competences include training employees and skills development so as to enhance quality service and products (Pradas 2008).

Style: LVMH uses transformational leadership which promotes innovation and creativity (LVMH n.d).

Staff: LVMH has 100,000 well trained staff (LVMH n.d). Employee diversification helps to bring cultural diversity in the workplace.

Shared values: LVMH is committed to a sustainable environment and developing a culture of biodiversity conservation (Arnault n.d).

Marketing mix

Marketing mix employed by LVMH entails the 4ps namely, price, place/distribution, promotion, and products.

Price: Prices of LVM products are extremely high compared to those of its competitors. For example, Louis Vuition handbags are highly priced which prohibit bargains (Nagasawa 2008). The company has adopted seven pricing principles which are prohibit exorbitant pricing, bargain sales, price changes, odd pricing, prestige pricing , and “Louis Vuitton Products are Money” bargains (Nagasawa 2008, p.44).

Product: LVMH products are of high quality and are designed through creativity and technological innovations (Nagasawa 2008).

Promotion: LVMH uses advertisements to promote its products worldwide. For instance, the company sets aside 11% of its sales for advertising (Rugman & Girod 2003). It also endorses celebrities such as Madonna and Jennifer Lopez to promote its products (Rawat 2010). LVMH does not give discounts as part of product promotion (Rawat 2010).

Place/distribution: LVMH products are available in over 3000 retail stores owned by the company. The company has a broad and vertically integrated distribution channels which increases efficiency and effectiveness (Nagasawa 2008).

Strengths and Weakness

Swot Analysis

Corporate Analysis

The table below is an illustration of LVMH performance between 2011 and 2012 as provided in LVMH (2012a).

Wines and spirits recorded a 12 percent revenue growth due to a rise in sales and demand for champagne. Leather and fashion has organic revenue growth of 8 percent, perfume and cosmetics have revenue growth of 8 percent which has been as a result of increased growth for Christian Dior (LVMPH 2012). The business units of LMH have led to increase in its revenues.

USB SWOT Analysis/ Fashion and Leather Goods

Conclusion

LVMH is a key player in the luxury industry with a global market share of 15%. Its major sales come from foreign markets such as Asia, Latin America, China, Malaysia, and Japan. The LVMH group operates under five SBUs namely perfumes and cosmetics, fashion and leather goods, watches and jewelry, wines and spirits, and selective retailing.

Its major strengths include a strong brand that is recognized worldwide and technological innovations. In addition, the company has adopted creativity and technological innovations as part of its strategic plans. The major competitors are Bulgari, Richemont and Gucci. In the third quarter, LVMH has revenue of €19.9 billion which was a 22% increase.

References List

Arnault, B., LVMH and the environment. Web.

LVMH, Group mission and values. Web.

LVMH 2012, Excellent first half for LVMH. Web.

LVMH 2012a, LVMH: 22% increase in revenue for the first nine months of 2012. Web.

Nagasawa, S. 2008, Marketing principles of Louis Vuitton: The strongest brand strategy: Waseda Business & Economic studies, no.44, pp. 41-54.

Pradas, A. 2010, LVMH case evaluation. Web.

Rawat, K. P. 2010, Louis Vuitton. Web.

Reuters 2012, LVMH Moet Hennessy Louis Vuitton SA (LVMH.PA). Web.

Roberts, A. 2012, ‘LVMH skips European austerity raising prices for Chinese’, Bloomberg, 2 May, pp.1.

Rugman, A. & Girod, S. 2003, ‘Retail multinationals and globalization: The evidence is regional’, European Management Journal, vol. 21, no. 1, pp. 24–37.

Rugman, A. M. 2005, The regional multinationals MNEs and “global” strategic management. Cambridge, Cambridge University Press.

Solca, L. & Wing, M. 2009, LVMH: King of the luxury jungle, Bernstein Research, pp. 1-188.

Introduction

LVMH is a multinational firm that is headquartered in Paris (Thompson, Strickland, Gamble, and Gao, 509). It was started in 1987 after the merger of two firms. The company has about 60 subsidiaries that specialize in the management of its prestigious brands (Okonkwo 287; Thompson et al. 509). This paper focuses on highlighting LVMH’s past and current corporate diversification strategy. It provides information about the firm’s portfolio of businesses and analyzes the impact of diversification strategy on the company’s shareholder value. Finally, the paper concentrates on providing recommendations with regard to improving shareholder value.

LVMH’s past and current corporate diversification strategy

It is evident that the multinational company focuses on a corporate strategy that is based on business diversification. The current diversification approach is different from the one applied in the past because the previous one was characterized by fewer brands (Okonkwo 287). However, in the current competitive world, the firm has adopted a variety of high-quality products that would enable it to achieve more market shares and competitive advantage (Thompson et al. 515).

The business is exemplified by a variety of ‘star’ brands, which are important for achieving excellent sales in different global markets. The following are some of the top brands of the company: Hennessy, Krug, Fendi, Kenzo, Dior, Marc Jacobs, Chaumet, Bulgari, and Sephora (Thompson et al. 517). The brands enable LVMH to attain corporate advantage and strategy because they are specifically manufactured for particular customers in the markets. Thus, they record very impressive sales.

The following are the main segments of the firm:

1. Wines & spirits
2. Selective retailing
3. Perfumes & cosmetics
4. Watches & jewelry
5. Fashion & leather goods
6. Other businesses & eliminations

The management adopts specific business strategies in each of these segments. With regard to the watches and jewelry segment, products are designed with a view to reflecting the needs of the upscale sector of the industry. The strategy that is implemented for the perfumes and cosmetics products is based on the use of unique chemicals and other ingredients that are combined to result in unique and innovative goods.

The selective retailing segment concentrates on the identification of unique market niches for excellent sales. The other businesses and eliminations unit have media, art auction, and e-commerce products. The strategy used in the segment is based on the identification of market opportunities. The wines and spirits unit adopts the strategy of producing wines and spirits, which focus on quality. The fashion and leather goods unit uses the strategy of hiring and utilizing talented and creative designers (Thompson et al. 518).

Quality uniqueness is a common strategic approach that is used in the management of all business areas of the organization. Synergy is evident in a number of fragrance and cosmetics brands, which are being developed using common laboratories (Thompson et al. 516).

LVMH’s portfolio of businesses

With regard to LVMH’s diversified businesses, it would be important to use the 9-cell attractiveness/strength matrix to know the positions of the business areas of the company.

The businesses are used to represent the following segments:

• Wines & spirits- business F
• Selective retailing- business A
• Perfumes & cosmetics- C
• Watches & jewelry- business B
• Fashion & leather goods- business E
• Other businesses & eliminations – business D

The relative business positions of each business are as follows:

• Wines and spirits- strong
• Selective retailing- weak
• Perfumes & cosmetics- average
• Watches & jewelry- weak
• Fashion & leather goods- strong
• Other businesses & eliminations – average

The following are the business fit and synergies of each business

• Wines & spirits- high
• Selective retailing- low
• Perfumes & cosmetics- medium
• Watches & jewelry- low
• Fashion & leather goods- high
• Other businesses and eliminations – medium

The following pairs of businesses contribute to LVMH’s common competencies:

1. Wines & spirits and fashion & leather goods
2. Selective retailing and watches & jewelry
3. Other businesses and perfumes & cosmetics

It is important to note that the results that are contained in the 9-cell attractiveness/strength matrix do not change from the case study to 2012/2013.

Impact of diversification strategy on LVMH’s shareholder value

The financial features and relative performance of each of LVMH’s six major business segments are shown in exhibit 1, which presents revenue information. Based on the information, the following businesses can be termed as being the cash hogs of LVMH:

• Other businesses & eliminations
• Watches & jewelry
• Perfumes & cosmetics

On the other hand, the following can be described as being the cash cows of the multinational business establishment:

1. Wines & spirits
2. Fashion &leather goods
3. Selective retailing

The management of the firm should focus on milking, investing in, and divesting the following businesses:

1. Wines & spirits
2. Fashion & leather goods
3. Selective retailing

The decision to focus on the above three business segments could be because they are characterized by a steady trend of excellent sales. The trend is constant in 1999 and 2012/2013 (LVMH par. 2; Thompson et al. 509). It is important to note that business enterprises focus on implementing the activities that could bring the most benefits. Thus, LVMH should concentrate on investing more funds in the three businesses so that it can achieve more markets and excellent revenues in the future.

Overall, it is evident that LVMH’s financial performance and that of business segments have improved from 1999-2001 to 2012. It is worth noting that, although the costs of doing business have increased, the revenues have also increased in a significant manner. The improvements are shown in exhibits 2, 3, and 4.

The diversification adopted by the firm has improved shareholder value. The conclusion is based on the analysis of Porter’s three essential tests (Kaplan and Norton 45). First, the attractiveness test shows that LVMH has directed its investments toward actual attractiveness industries. The cost of entry test indicates that the cost that is associated with the entry is not focused on all profits in the future. In addition, the better-off test shows that the firm has established synergy in its business segments. Overall, shareholders should be pleased because two key financial ratios show that they would reap more from their investments. These are dividend per share and shareholder equity ratios (Kaplan and Norton 98).

Conclusion and recommendations to improve shareholder value

Other activities & eliminations and watches & jewelry segments have destroyed shareholder value. In comparison with other segments, it appears that the two areas of business are incurring a relatively high amount of costs for operations. This has the net effect of reducing the expected profits. The recent/proposed acquisitions have the potential to increase the level of competition of the firm. If they would lead to the achievement of improved revenues and net profits, then shareholders would benefit by receiving better dividends. Three important lessons can be adopted from LVMH. First, business diversification is important in attaining improved revenues and better shareholder value. Second, strategic approaches are essential in the identification of markets that are characterized by huge potential. Third, synergy is a key component in business establishments that have many business segments.

Exhibits

Works Cited

Kaplan, Robert, and David Norton. The execution premium: linking strategy to operations for competitive advantage. Cambridge, MA: Harvard Business Press, 2008. Print.

LVMH. 2014.Reports. 2014. Web.

Okonkwo, Uché. “The luxury brand strategy challenge.” Journal of brand management 16.5 (2009): 287-289. Print.

Thompson, Arthur , Alonzo Strickland, John Gamble, and Zeng’an Gao. Crafting and executing strategy: The quest for competitive advantage: Concepts and cases. Vol. 18. New York, NY: McGraw-Hill/Irwin, 2012. Print.

Although the Western economies have not fully recovered from the economic crisis since 2008, the luxury business division has continued to grow steadily. The expansion of this sector has reached more than ten percent in emerging nations (Deepak & Jeyakumar, 2019). Furthermore, luxury commodities with prestige brands, such as Louis Vuitton, have continued to enter the international marketplaces (Deepak & Jeyakumar, 2019). This paper focuses on analyzing Louis Vuitton, its mission statement, and conducting a SWOT analysis of the business. Furthermore, the essay intends to apply the BCG and Ansoff matrix to the Louis Vuitton company and present recommendations to help boost the company’s productivity in the post-pandemic era.

The brand Louis Vuitton is managed by the corporation LVMH, which stands for Louis Vuitton Moet Hennessy. The mission statement of the company reflects five priorities that are shared amongst all the group’s shareholders. It expects that the staff should be creative and innovative so that their products are unique from that of their competitors, and aim for product success, thus presenting the best quality goods to the market (Xu et al., 2021). Furthermore, stakeholders and the employees are supposed to act as entrepreneurs to strengthen the corporation’s brand with determination and represent the image of the company’s trademark. Finally, they are to strive to achieve excellence in all business operations since the perseverance of the firm results in high quality of work.

As one of the top luxury brands in its trade, the firm has several strengths that can support it in remaining productive in the markets. These fortes help safeguard its marketplace portion and penetrate new marketplaces. The mechanization of operations has conveyed steadiness to the eminence of the brand and has assisted the enterprise in balancing up and down the request settings in the marketplaces (Xu et al., 2021). Also, the corporation, with its committed consumer interaction organization subdivision, has enabled it to realize a significant quantity of client fulfillment between loyal customers and good brand quality in the new markets.

Furthermore, the successful integration of complementary companies through acquisitions and mergers inclusive of technology companies has enabled it to restructure its operation and develop a stable logistics system. Over the years, Louis Vuitton has financed the establishment of a strong trademark collection which has enabled it to successfully expand to new territories (Sakhamuri & Sherman, 2019). The company has further focused on investing significant funds in the preparation and improvement of its workers resulting in an employee network that is extremely skilled and determined to attain supplementary success.

Despite having numerous strengths, Louis Vuitton’s weaknesses have also impacted its success in various operations. The business has a higher erosion frequency and is compelled to spend more on the training and development of workers compared to its competitors (Xu et al., 2021). The company has continuously spent more than its competitors in R&D but has not successfully competed with the principal firms in commerce in terms of invention. Finally, the business’ day inventory is usually high compared to that of its rivals, thus making it invest more in the channel and impacting the long-term growth of the company.

However, opportunities, such as increased consumer spending and economic uptick after an economic slump and decelerated growth proportion of the business sector, will enable the organization to capture potential consumers and gain market advantage. The presence of an online client channel has also compelled the company to invest a significant amount of capital into the online market, thus opening a new sales network for the brand (Sakhamuri & Sherman, 2019). Finally, the state administration green drive presents a prospect for obtaining the corporation goods by the government and federal government contractors.

The company has faced various risks throughout its business operations, such as the new environmental regulations that could be a threat to certain existing goods. Also, new technological innovations established by the competitor and market disruptor can present lasting damages to the trade (Sakhamuri & Sherman, 2019). The changing consumer purchasing trends from the online network can also present risks to the current corporal organization determined by the logistics method.

The BCG Matrix is founded on goods rather than services despite applying to both. Louis Vuitton can use the model to review a variety of products, especially before starting to develop new commodities. Considering the luxury brand, the company has a wide range of merchandise and many different lines. The star products of a company are the merchandises that generate more Return On Investment than other commodities. Louis Vuitton is known as the place for shoes, jewelry, watches, and books at a time when choice is unlimited (Xu et al., 2021). However, in a multi-channel surrounding, the trademark is still the Western market leader with high growth and market share. Regarding question mark products, the company has developed hundreds of products before achieving a successful product, such as the Louis Vuitton shoes and bags.

Furthermore, the dog product of the luxury brand has significantly drained resources from the organization. For instance, the high pricing of the firm’s watches and jewelry has compelled consumers to purchase from other brands, such as Gucci, that have premium prices on such products (Xu et al., 2021). Finally, the trademark’s cash cow products, such as bags and wallets, have strong supporters and a high market share despite having slow growth. Therefore, the Louis Vuitton company should implement the BCG model to help it determine the appropriate products that will boost its profitability in the fast-growing luxury business industry.

The Ansoff Model is a tool employed by companies to assess and plan their growth strategies. Therefore, the Louis Vuitton company can use the matrix’s market penetration and product development approaches to help it develop and analyze the risks associated with its markets. In the marketplace penetration strategy, the company uses its products in the existing markets to gain a market advantage and attract new clients (Schawel & Billing, 2018). The brand has successfully executed the approach by decreasing its prices, increasing its distribution and promotion channels, and collaborating with designers such as Stephen Sprouse to introduce the iconic patterns in most of its products.

Conversely, in the product creation approach, the Louis Vuitton company develops products that cater to the current market. The move has included extensive Research and Development and expansion of the corporation’s goods category. Since the organization has a significant understanding of its existing market, it has presented innovative solutions to help satisfy the needs of the current marketplace (Schawel & Billing, 2018). The Ansoff matrix has therefore played a significant role in building the luxury brand’s current status in the ever-changing business industry.

Considering the post-pandemic business operational plans, the adoption of online business operations will significantly influence the success of the company. For instance, Louis Vuitton had established a private pull-down retailer for Valentine’s Day via the We-Chat sub-program that permitted clients to make purchases online (Deepak & Jeyakumar, 2019). The associates shared exclusive offline promotions to consumers through QR codes which ensured that all orders were delivered within time.

In conclusion, the paper has explored marketing management as a business issue and analyzed how it influences the success of businesses by looking at three significant models. Marketing is, therefore, a commerce issue that still needs further thorough research to determine its merits and demerits to the operations of the Louis Vuitton Moet Hennessy company. Further study will help the company formulate effective policies and strategies that will enable it to remain productive despite the current COVID-19 pandemic and changing business industry.

References

Deepak, R. K. A., & Jeyakumar, S. (2019). Marketing management (pp 13-15). Educreation Publishing.

Sakhamuri, T., & Sherman, H. (2019). Going “Green” at Mulberry: Managing brand transitions (pp 20-22). International Journal of Business and Social Science, 10(9).

Schawel, C., & Billing, F. (2018). Ansoff-Matrix. In Top 100 management tools (pp. 31–33). Springer. Web.

Xu, A., Xie, Y., Su, J., & Xiao, C. (2021). Analysis of Louis Vuitton’s marketing strategies in Chinese luxury fashion market. Frontiers in Economics and Management, 2(1), (pp 1–20). Web.

Executive Summary

We will be analysing the company, Louis Vuitton, identifying the trends within the luxury jewellery industry and the future opportunities available for the brand. It will discuss the several analyses regarding the company of Louis Vuitton and then make recommendations based on information presented within the previous analysis sections. Louis Malletier Vuitton founded Louis Vuitton in 1821, and he was previously a farmer. The company started with flat canvas trunks and then continuously expanded into other industries like jewellery, clothing, and fashion items. The iconic LV monogram was only introduced after the death of Louis Vuitton, George had included it in the print of the luggage to honour his father in 1892, and it also successfully prevented counterfeiting.

Focusing on the jewellery industry and Australia’s market size, it was predicted that the market would be four billion dollars in 2020, as the statists show. In 2015, the market had already reached the size of 4.1 billion dollars. Due to the growth in the e-commerce fashion industry, it has opened new channels for jewellery retailers. The company has to feature the potential for the future industry market and generate sales with its current product portfolio.

To avoid imitation and losing product quality, Louis Vuitton has registered all their designers and artisans, resulting in the exclusivity and uniqueness of their products. Many challenges are confronting the luxury market. Consumers are looking for authenticity and honesty when purchasing products, along with factors of new competitors arising with lower-priced brands that offer comparable quality. In the new digital age, the growth of the online market grew. It helps expand the demographics and geographics and attract new customers.

Introduction

We will be analysing the company, Louis Vuitton, identifying the trends within the luxury jewellery industry and the future opportunities available for the brand. It will discuss the several analyses regarding the company of Louis Vuitton and then make recommendations based on information presented within the previous analysis sections.

Louis Malletier Vuitton founded Louis Vuitton in 1821, and he was previously a farmer (Koyaana.R, 2020). The first bag was designed in 1858, known as the Trianon trunk. His son, George, invented the locking system in 1886 to make it impossible to pick, and the lock is still used today (Koyaana.R, 2020). The iconic LV monogram was only introduced after the death of Louis Vuitton, George had included it in the print of the luggage to honour his father in 1892, and it also successfully prevented counterfeiting (Louis Vuitton GMX, 2014).

This report will be going through two different background analyses, and the first background analysis will contain the industry, competitor, and consumer analysis. The research used within this report will discuss the luxury jewellery or personal accessories industry. The second section will discuss the sales approach and the sales management found in the chosen company, mentioning the strengths and weaknesses. It will continue to the recommendation section for Louis Vuitton. Four recommendations will be included in this section, stating the justification of the recommendation and how it can be implemented within the organisation.

Background Analysis: InduStry, Competitor and Consumer

Industry Analysis

Focusing on the jewellery industry and Australia’s market size, it was predicted that the market would be four billion dollars in 2020, as the statists show. In 2015, the market had already reached the size of 4.1 billion dollars (Statista, 2016). Due to the growth in the e-commerce fashion industry, it has opened new channels for jewellery retailers. (Statista, 2016). According to the Boston Consulting Group (BCG) matrix, Louis Vuitton company can be considered a star. The company has to feature the potential for the future industry market and generate sales with its current product portfolio (Morgan, 2018).

To avoid imitation and losing product quality, Louis Vuitton has registered all their designers and artisans, resulting in the exclusivity and uniqueness of their products (MBA Skool Team, 2021). Many challenges are confronting the luxury market, as consumers are looking for authenticity and honesty when purchasing products (Brown, 2017), along with factors of new competitors arising with lower-priced brands that offer comparable quality (Danziger, 2019).

The trends that have surfaced recently are re-commerce. During the pandemic, the sales of second-hand jewellery grew as the consumers desired more sustainable purchases, with the bonus of it being good deals (MOF Team, 2022). The sales were conducted in a quiet setting with an expert in the past. However, in the new digital age, the growth of the online market grew. By 2025, it is estimated to grow to 21 per cent. It helps expand the demographics and geographics and attract new customers. (Becker, Berg, Harris, & Thiel, 2021). The availability of genderfluid jewellery lines is more common, as 35% of Generation Z identify themselves as they/them, which opens an opportunity to expand on collections for all types of individuals (MOF Team, 2022).

Competitor Analysis

Louis Vuitton’s competitors in the luxury market are Chanel, Gucci, Hermes, and Dior. However, when focusing on the high-end jewellery industry competitors, they are known to be exclusive, with no discounts offered at their main official branches. However, Hermes does hold sales twice a year and previously had student discounts. The competitors are Chanel, Gucci, Cartier, and Hermes (Bhasin, 2018).

Hermes is more focused on premium luxury, making it less accessible than Louis Vuitton, enhancing Hermes’s exclusiveness (MBA Skool Team, 2022). But it doesn’t reach the potential market available (Louis Vuitton GMX, 2014).

Gucci is known for the variety of products sold compared to Louis Vuitton and Hermes, who are more recognised for their bags (Louis Vuitton GMX, 2014). Compared to others, Gucci and Cartier have an excellent online presence making it more advantageous for them.

Consumer Analysis

The general consumer market is separated into two segments for Louis Vuitton. First, its wealthy middle-aged women aged 35 ~ 54, and the other segment is affluent young fashionable females aged 18 to 34 years old, who have disposable income and are brand aspirants. The second consumer segment can also be known as ‘chardonnay girls’; their crucial motivator is sharing their life and making moments unique. (Perch, 2020)

Background Analysis: Sales approach and Sales management

Sales Approach Analysis

As a luxury brand, Louis Vuitton has a sales approach focused on customers’ desire to acquire status symbols. Thus, consumers act as users and not influencers of style, which the company dictates (Seo & Buchanan-Oliver, 2019). The decision-making process is inspired by a customer’s need to purchase a unique, luxury product. Information search happens either through print media – the main traditional marketing channel on which the brand still relies – or influencers’ social media accounts and Louis Vuitton’s online store.

The choices’ evaluation is limited to a few luxury brands and depends on specific needs, as most luxury products are perceived differently and have easily distinguishable designs. Purchases can be completed in brick-and-mortar stores or on the official website and some resellers (Guilbault, 2021). The sales cycle focuses on investigating the consumer’s needs and introducing a small number of selected articles. Closing is soft, and sales associates can engage in cross-selling, not upselling, as the items are already high-class (Sudjono, 2020). As the brand does not actively advertise or offer its products, the methodology is based on collaboration in different industries. Sales associates act as advisors and storytellers, presenting each product as a part of history (Sudjono, 2020). Therefore, customers are attracted to the brand’s status rather than individual items.

Strengths

• With more than 150 years of history.
• The Louis Vuitton logo and brand are easily recognisable.
• The brand has a well-known global presence as a luxury and retail brand.
• Offers custom-tailored products for its few elite customers (MBA Skool Team, 2021).
• Louis Vuitton is recognised as one of the most valuable luxury brands (Swant, 2020).
• The product portfolio has a wide range of products. (Perch, 2020).
• Maintains production within France – reducing the cost of outsourcing (BusinessEssay, 2022).
• Efficient collaborations with top designers (Perch, 2020).

Weaknesses

• Limited customer targeting (Kenneth, 2013).
• Lack of interest in other cultures (Perch, 2020).
• Product pricing – overly priced, making it expensive.
• Lack of product innovation over the years.
• Weak online presence.
• The LV monogram within the product design is excessive (BusinessEssay, 2022).

Sales Management Analysis

The information about the sales management structure of Louis Vuitton is limited. However, it is stated that the brand’s parts are autonomous, and the organization is decentralized (MBA Skool Team, 2021). Thus, employees are expected to demonstrate entrepreneurial qualities and have a high level of self-organization. Salespeople are called client advisors, as noted above; in some countries, they do not get commissions for each sale – they have bonus programs instead, which leads to less aggressive and more relationship-based sales (HandbagHolic, 2021; Ingram et al., 2019). Other motivations include an employee discount, benefits, accessories as a part of one’s uniform, goal-based incentives. The sales results are built not on individual sales and internal competition but the overall success.

Recommendations

Recommendation #1 – Reducing production

Louis Vuitton has the opportunity to reduce the production and emphasise some of its collections as limited-edition models (BusinessEssay, 2022). It would utilise the waiting list, establishing the exclusivity and visibility of the brand. This strategy is used by one of the competitors, Hermès, which produces a small supply of bags, driving the demand for limited luxury items. This recommendation is consistent with Louis Vuitton’s current sales approaches of storytelling and relationship building. A limited line of accessories could be created with a story behind it, which would further strengthen the brand’s image.

Recommendation #2 – Social media presence

The second advice is to further pursue growth in the social media sphere, where Louis Vuitton has a presence among aspirational lifestyle influencers. As a frequent collaborator in online and technological ventures, Louis Vuitton can easily integrate new social media advertising campaigns to attract a young audience (Sudjono, 2020). By using social media, the brand can expand its presence outside of print media and its official website. While Louis Vuitton already uses some online media for marketing, its current strategy does not directly engage social media (Sudjono, 2020). The company can reach out to social media influences and make them brand ambassadors, similar to its celebrity connections.

Recommendation #3 – Promoting unisex collections

Based on the growing percentage of young individuals identifying themselves outside the gender binary, the introduction and marketing of unisex collections can attract new customers. Unisex collections fall in line with Louis Vuitton’s strategy of following current developments in the social sphere while being a trendsetter in fashion (Sudjono, 2020). Thus, creating a collection for all customers regardless of gender can be a part of the brand’s recognition of new customer interests.

Recommendation #4 – Jewellery design

Most luxury companies have their own chosen animal as their motifs and are featured within the jewellery lines. For example, Gucci’s competitors have tigers and a bee; Cartier incorporates the panthers; Chanel has lions in their high jewellery collection; Bulgari has serpents. The new group released by Louis Vuitton, the Wild at heart collection, features leopard prints (Louis Vuitton, 2021). Expanding the current collection to the jewellery design will bring more interest from consumers as it is something different from past jewellery designs

Conclusion

Louis Vuitton is a popular luxury brand with a wide variety of products and a long history of success. Currently, it is established in many countries, and its customer segmentation shows two distinct categories, older and younger affluent females interested in high-end living. The brand’s sales approach is rooted fulfilling one’s need for luxury products and experiences. Customers are attracted to stories behind products and non-aggressive selling techniques. However, the brand uses a limited range of advertising channels, lowering the interest among younger customers. It is advised for Louis Vuitton to introduce limited collections, increase its social media presence, promote unisex products, and present a distinguishable jewellery design.

References

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Introduction

LVMH is a luxury brand that is famous around the world. It was created in 1987 and boasts 50 luxurious brands that have a unique history and culture. The main aim of the organization is to improve its profitability in the industry. It also ensures that the authenticity of its brands remains at the highest possible levels while meeting its goals. Although LVMH started as an international company, it lacked human resource managers with international expertise. This led to the company choosing to invest in ensuring that it is able to acquire these types of managers in order to ensure the development and growth of the organization.

Most of the companies that comprise LVMH are located in France. The group is structured around five business groups where each consists of several strong brands. The group has 50 companies which in turn have 450 subsidiaries. These companies run almost independently where each has its own president and an executive committee which makes decisions about some of the activities of the company.

LVMH International Mobility Program

The main features of the LVMH International mobility program include the idea that the company held. The company believed that the development of its managers was not through subjecting them to formal training but by increasing their mobility. This means that the managers moved to different countries and interacted with new environments to aid in their development. They were also subjected to new challenges and experiences which enabled them to be able to cope with the current changing needs of the business environment. The company believed that staying in the same geographical region and being subjected to the same challenges and environment does not result in the development of the managerial skills of an individual.

The company also did not support the development of experts from outside their areas of expertise in regions that are outside their home areas. This is because the company believed that allowing this to happen will not be beneficial to the company and instead it will only benefit the person involved.

The company also found out that promoting the practice will not be cost-effective as far as the company’s economic front. The experts who are accorded mobility, therefore, are given this on the basis of their carrier paths and are only subjected to tests that will be helpful in their development in their field of study. Exceptions however exist but the overall intention is to ensure the development of the person in training and therefore benefit the company.

The company also ensured that it offered exciting career development prospects as opposed to economic incentives. The company was in a position to offer economic incentives and also the package that they offered was amongst the best in the market. However, the development of the managers was their primary objective, and offering the chance to develop in their field of work as they gain more experience proved to be a very important part of their development.

The company also offered its training managers more challenging opportunities and the freedom to work and make important decisions. These factors were important since they encourage the involvement of the training managers in the actual processes of the company decision making and consequently acting as a very important part of their learning curve.

Another feature is the use of expatriates. This did not mean that local talent was not available but ensured that the mix between the local people and these expatriates ensured that the sharing of experiences and information was two ways. The local people got the chance to learn a lot from the expatriate and at the same time, the expatriate learned from the local people. This relationship was therefore symbiotic since the development of the training manager also resulted in the development of the local talent that is available in the area where the expatriate is placed. The expatriate, therefore, was able to develop his/her skills and also gain exposure as a result of being in a new environment. Sometimes the expatriate was posted in a given place to ensure that he/she protects the interests of the group.

Human resource management also focused on ensuring the globalization of its top management. This was by ensuring that they recruit highly promising managers in their fields and aiding them in their development. This results in the group having a human resource department that has representation from most parts of the world and therefore globalizing it (William, Pamela and Kacmar 75). This is important in the growth of an international business since the diversity of the cultures and thoughts of all these managers may prove important when it comes to making important business decisions for the company.

The whole nature of the performance appraisal system is also another feature of the LVMH international mobility program. It ensured that the system was not only result-oriented but also focused on the implementation and coming up with new ideas. This is important since the development of a company cannot only be measured by the returns from its investments. The ability to cope with the changing business environment and introducing new products to the market also ensures the growth of a business entity (Cathy 86). The company, therefore, focused also on the ability of its managers to come up with new ideas that would help them in their development and at the same time ensuring the growth and profitability of the company.

The length of time in which the expatriates stay in a foreign country is limited. This period is limited to two to three years to ensure that the expatriate does not lose the ties with his/her home country. At the start of a career in LVMH, one is initially attached to his home country for a given period of time in order to gain experience while still in his or her home country. The home country is maintained throughout the period in which the person will be an expatriate. As much as the expatriate will be involved in moving throughout the world, at some point he/she will be required to go back to his/her home country and also aid in the development there.

The LVMH also offers support for the spouse of the person who chooses to become an expatriate. This is because many people who have parental responsibilities are found to not consider being mobile. This limits the organization to only consider the young graduates who do not have these responsibilities. By offering support to the spouse, the number of the older group that is accepting to be part of the mobile team is increasing.

The security benefits are also another important feature of the LVMH international mobility program. The expatriates are subjected to security benefits that compare to those that are available in their home countries. They are not subjected to penalties that may make their benefits different from that they would have been subjected to had they been working in their home country. Benefits such as retirement benefits need to be extended even when the expatriates are in a foreign country. Failure to do this result in putting the expatriates in a disadvantaged position and this may impede other expatriates who had the desire to join the team (Cathy 125).

At the time, LVMH was not successful at ensuring the mobility of key employees of any nationality. This was because this move was considered to be very risky as stated in the case study and at that time the company was not ready to take the risk. The expatriates were first required to work in their home countries for a given period of time and at the same time being evaluated. This was to ensure that they had gained valuable experience before they were exposed to different cultures and working conditions.

The deployment of the expatriates was also affected by the reluctance of the expatriates to be mobile because at the time the incentives to move to these places were not as developed as they are at the moment. The organizations also had not established their markets across the world and therefore the key employees of the organization were kept where they would add move value to the organization as opposed to moving them to new places which will not aid them in their development. This would result in the company suffering losses at the expense of the benefit of the expatriate and this was not accepted.

Career Mobility

Career mobility is an important factor when considering the nature of the business environment and the changes that this environment faces. There are measures that need to be taken in order to ensure that this important part of the employment world is maintained. This is because it results in influencing the group positively and also produces managers who are exposed and are ready to lead the company to greater heights. The methods that may be used to foster career mobility within a group are discussed below.

An important factor in ensuring that career mobility is effective is ensuring that there is no optimal career path. When the career path in an organization has optimal positions, then the employees will want to get a place where they will get a position that surpasses the current optimum position given by the group. The carrier path should be made in such a way that it is flexible and therefore a person can always switch to a given line provided he/she has the qualifications for that particular position. Limiting the available options in the organization will ensure that the employees move in order to find another job which to them will be more favorable. The career path which is clearer in terms of how someone is able to rise through the ranks is also preferred (Phyllis 226).

Another factor that fosters carrier mobility is the structure of the company and how its culture affects the employees who work in the company. The working conditions of a company play an important role in the extent of time the employees will stay in a particular company. If the conditions are unfavorable, the employees may decide to quit the current work and go to another job which may be offering less in the form of incentives but value the quality of the work delivered by the employee.

Therefore setting good structures in a company and allowing the employees freedom in doing their duties as long as it does not affect the operation of the company negatively can act as a way of maintaining them in the group. On the other hand, failure to take good care of them and the working conditions will result in them leaving to find a place where the conditions will be better.

The education system also acts as a way that offers a way to foster career mobility. The system allows people to study the field of their choice. This means that a person can decide to change his/her professional field at any time of his/her choice. The ability to be able to do this means that if the incentives are better in a different field, through studying and acquiring the qualifications of that field a person can be able to shift to the other job. The advancement in technology has also made it possible to be able to study online and this also acts as an advantage since a person does not have to resign from their current job in order to register for the studies they intend to be involved in.

Another factor that fosters mobility is the dynamism of the working environment. This may involve how activities such as issuing promotions in the company are carried out and how often they take place. The factor of what is considered before someone is promoted also comes in. In some organizations, career growth is limited and when it happens it is not based on merit and service delivery. In these cases, it is based on interpersonal relationships between the employer and the employee.

These circumstances may force an employee to quit the job and move to one that will enable him/her the chance to advance in his/her career path. The static nature of some organizations where a person may remain in a particular position for his/her working period encourages mobility in such a dynamic working environment. This dynamism is brought about by the modernization of the society which demands vibrant individuals who are driven by the desire to always get better.

Career mobility is not necessitated only by offering more benefits as opposed to organization culture. The organization culture in more situations plays an important role in fostering this activity. The culture may involve the conditions that affect the employees directly (Phyllis 241). These may be social, cultural or economical. For example, some companies may have poor working conditions yet they are among the market leaders when it comes to the incentives and payments they give to their employees.

Such companies may find it difficult to hold on to some of their most effective employees who may opt to move to other companies which may be offering fewer incentives. In some situation the opposite of this happens but research shows that this happens less often. Companies therefore need to ensure that their organizational culture favors the working of its employees even when they offer more incentives compared to other players in the market.

Works Cited

Cathy, Lee Gibson. Professional in HUman Resources. Upper Saddle River: Pearson, 2007. Print.

Phyllis, A Wallace. The Career Mobility of Young Managers. Boston: Ballinger Publishers, 1989. Print.

William, P Anthony, L Perrewe Pamela and K Mitchele Kacmar. Human Resources Management. Reading: Dryden Press, 2009. Print.