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LOUIS VUITTON

MOT
HENNESSY:
EXPANDING
BRAND
DOMINANCE IN
ASIA
Case Report GLOBAL MBA II
Centrum-Tulane
June, 2009

I. BRIEF INTRODUCTION OF
THE SITUATION
The French company Louis Vuitton Mot
Hennessy (LMVH) was created in 1987 by the
merger of Louis Vuitton, a luxury goods
maker, and Mot Hennessy , a premium
spirits company
In 1971 Moet Chandon leading manufaturer of
champagne merged with Hennessy leading
manufacturer of cognac
In 1987 Henry Recamier, CEO of LVMH,
invited french entrepenuer Bernard Arnault to
invest in the newly formed conglomerate.
Arnault acquired 24% of LVMH, giving him the

I. BRIEF INTRODUCTION OF
THE SITUATION
The House of Louis Vuitton was founded in
1854.
In perfumes and cosmetics and in fashion, the
companies, were created more recently, have
cultivated their international standing over a
number of years. Guerlein goes back to 1829,
Christian Dior 1947. Givenchy was founded in
1951.
So in fact it was a series of successive
mergers, motivated by the affinity of their core
businesses, which led to the establishment of
the LVMH group.

I. BRIEF
BRIEFINTRODUCTION
INTRODUCTION
OF
OF THE
SITUATION
THE SITUATION
The Group is active in five different sectors:

Wines & Spirits,


Fashion and Leather Goods,
Perfumes & Cosmetics.,
Watches & Jewerly
Selective retailing

Each of the groups contained a number of


recognizable brand names that were each
simbols of the good life including;
Christian Dior, TAG Heur, Givenchy, Dom
Perignon, Mot Chandon and Sephora.

I. BRIEF
BRIEFINTRODUCTION
INTRODUCTION
OF
OF THE
SITUATION
THE SITUATION
Competition in the Industry: Gucci,
Richemont, Bulgari and Hermes were
the mayor competitors in the luxury
goods.
LVMH and Bulgari were mayor players
in the Asia-Pacific region, while
Richemont and Hermes dominated
Europe.
Gucci was a well-entrenched player in

I. BRIEF
BRIEFINTRODUCTION
INTRODUCTION
OF
OF THE
SITUATION
THE SITUATION
For decades the LVMH group had a strong
presence and enjoyed success in both the US
and European markets, after that the company
seeking the explosive economic growth that begin
to take place in the early 1990s in Asia
therefore worked quickly expanded in those
markets
The company opened its first store in China in
1992 after that opening quickly in other asia
countries including South Korea and made its first
foray into India in 2003.
As LVMH began to increase its presence in Asia

II. DESCRIPTION OF THE


PROBLEMS
Main problem:
Was it a strategic decision for LVMH
to center its efforts in the Asian
market, and if so, which path should
they take for their positioning success
and brand growth?
Secondary problems:
How would LVMH entice Chinas new
rich population to pay the full price of

II. DESCRIPTION OF THE


PROBLEMS
Secondary problems (cont):
How would LVMH overcome the
Political, Cultural and Economical
obstacles encountered into entering
the
Asian
Market?
(i.e
luxury
oppositions,
foreign
currency
exposures,
interest
rates,
cultural
differences among countries, religion
differences-muslim)

II. DESCRIPTION OF THE


PROBLEMS
Secondary problems (cont):
How would LVMH fight against its
brand dilution? To maintain its prestige
and reputation while gaining more
bigger market share?
Should the company decide for a
private ownership or a franchising,
with regards to its interest in the
profitability?

III. POSSIBLE ALTERNATIVES FOR


SOLUTION
We believe that LVMH made the right strategic
decision to focus on the rapidly expanding
Asian
markets
LVMH is presented with several alternatives to
develop its Asian business that fall under the
following strategic areas:
Consolidate its position
Expand market share
Protect brand name and reputation

III. POSSIBLE ALTERNATIVES FOR


SOLUTION
Consolidate Position:
Independent stores vs. Franchising
Tapping local market knowledge
Upholding
quality
and
brand
management
Ability to quickly expand into new
markets

III. POSSIBLE ALTERNATIVES FOR


SOLUTION
Market Share
Specific business groups for specific
countries (i.e. watches in India)
Independent stores v. Franchising
Evaluate
what
brands
for
what
countries: Investigate competitors
Targeted brands in specific countries (i.e.
Christian Dior)
Takes advantage of breadth, depth, and
consumer knowledge of brand names

III. POSSIBLE ALTERNATIVES FOR


SOLUTION
When evaluating their alternatives
LVMH needs to focus on their
strengths and select the alternatives
that allows them to leverage these
strengths and not sacrifice their
image and reputation for quality
and the Luxurious Lifestyle.

IV. RECOMMENDED SOLUTIONS


Business Strategy (important issues)
Be focus on its core strengths in order to
achieve that maximum amount of success
on its strategic decision to enter into
emerging economies of Asia, in particular
in China (Competitive Advantages).
Develop their ability to manage multiple
brands and maintain their reputation of
quality while upholding a unique image of
Frenchness.

IV. RECOMMENDED SOLUTIONS


Take advantage of the penetration
market of Luxury goods, as in China in
particular, and the other Asian countries
on a smaller scale, the market is far
from saturated as is the case with the
groups traditional markets and presents
ample growth opportunities for all of
LVMHs business groups.
If China continues to grow as has
been
projected,
the
number
of

IV. RECOMMENDED SOLUTIONS


Own stores and Selective Retailing
A key point in upholding their brands
reputations is that they must keep
developing - and supporting in the
strongest way - their strategy to grow
by building their own selective retailing
stores and also limiting the availability
of the products through authorized
luxury dealers.
Not only will this strategy allow LVMH

IV. RECOMMENDED SOLUTIONS


Even with a strong global brand LVMH
should rely on local managers to formulate
a strategy to reach local consumers. Also
using local designers for their stores.
Develop its online presence through such
websites as eLuxury, to take advantage of a
larger number of consumers making online
purchases.
To fight counterfeiting: LVMH need to work
closely with local and national governments
to either enact or uphold laws and

IV. RECOMMENDED SOLUTIONS


Segmentation
They must limit the growth of the
increasing demand for LVMH brands
among the middle-class, keeping its
condition as a manufacturer/supplier of
high priced/quality goods.
Avoid diluting the market and hurting
the prestige and status of their own
brands.

IV. RECOMMENDED SOLUTIONS


LHMH must obtain benefits from its
presence in wines and spirits, it is
the only luxury goods company that
has a premium wine and spirits
division.
Cross
promotion
has
unlimited potential.
Marketing strategy
Products: Quality and constant
innovation are key points. LVMH is

IV. RECOMMENDED SOLUTIONS


Consistency with
top quality products:
not to off-shore their manufacturing
facilities: prestige damaged for the
cheapest.
Brand management:
Counterfeiting and
knockoffs affects companies taking away
potential customers, diluting the market,
and decreasing the SPV, hurting LVMH's
brand image.
Marketing efforts: quality and uniqueness
of their brands. Advertising and product

IV. RECOMMENDED
IV. RECOMMENDED SOLUTIONS
SOLUTIONS

Pricing: Keep the high priced products


policy. A price competition or attempting to
reach a new consumer segment is not
recommended. A drop in price can have
a devastating effect in luxury companies.
Price is quality, differentiation and help to
stop brand dilution.
In Asia, there will be a consistent stream
of aspiring newly wealthy consumers to
show off their newfound lifestyle