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Louis Vuitton Case Analysis

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Case Analysis presented at the 2013 NIBS Worldwide Case Competition in Leuven, Belgium.

Published in: Business, Economy & Finance
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Louis Vuitton Case Analysis

  1. 1. LOUIS VUITTON Conlon Cash, Brooke McCarter,Sundeep Shamanur, and Cole Welch
  2. 2. LOUIS VUITTON HERITAGE Founded: 1854LOUIS VUITTON GEROGES HENRI •Three Rules VUITTON RACAMIER •Innovation •Company-owned Stores BERNARD MICHAEL BURKE ARNAULT •Current •Profitability and Efficiency
  3. 3. SITUATION ANALYSISInternal Positive External Positive• Distribution • Asian Market Growth• Manufacturing • Perfume Market• Assets • Economic Rebound• Lean ProductionInternal Negative External Negative• Unstable Other • Volatile Exchange Rate Activities/Eliminations
  4. 4. KEY SUCCESS FACTORS Image Quality Differentiation
  5. 5. FIVE FORCES SUBSTITUTES LowSUPPLIERS COMPETITION BUYERS Low High High NEW ENTRANTS Low
  6. 6. INDUSTRY CUSTOMER SEGMENTS Absolute Aspirational Accessible
  7. 7. ISSUE IDENTIFICATION Is Louis Vuitton’s growth rate sustainable? Can Louis Vuitton balance the core values and heritage of the company under the pressures of growing the business?
  8. 8. AUTOMATED ALTERNATIVE Shift production to a more assembly line modelPro • Higher customer baseCon • Likely loss of high-end market
  9. 9. HERITAGE-BASED ALTERNATIVE Luxury goods use more artisan labor, as when the company was foundedPro • Please high-end customersCon • Lose accessible customers
  10. 10. HYBRID ALTERNATIVE Produce “accessible” goods using automation and “absolute” goods using artisan laborPro • Potential gain in all segments • Highest risk to lose in all segmentsCon • Potential to cheapen the brand
  11. 11. UNIVERSAL IMPLEMENTATION Enter perfume market Decrease secondary sales Increase European prices to combat grey market Attract Asian market to Europe
  12. 12. QUANTITATIVE ALTERNATIVE ANALYSIS Automated Heritage Hybrid Profit 20% 4 3 5 Product Quality 3 5 4 20% Absolute 30% 1 5 4 Aspirational 20% 3 4 4 Accessible 10% 5 2 4 Totals 2.8 4.1 4.2 *Ranked 1-5, 1 = Worst, 5 = Best
  13. 13. RECOMMENDED STRATEGY Louis Vuitton should pursue the hybrid strategy where it continues to make handcrafted goods, while also creating an accessible brand using a cost- effective manufacturing process.
  14. 14. INCOME STATEMENT FORECAST LVMH Income Statement through 2015 2010 2011 2012 2013 2014 2015Revenues 20320 23659 24996 26408 27900 29476Gross Profit 13136 15567 16247 17165 18135 19159Operating Profit 4169 5154 5249 5546 5859 6190Net Profit 3032 3065 3474 3671 3878 4097 *In millions
  15. 15. FORECASTED REVENUE350003000025000 Revenues Revenues*2000015000 2010 2011 2012 2013 2014 2015
  16. 16. FORECASTED NET PROFIT500045004000 Net Profit3500 Net Profit*30002500 2010 2011 2012 2013 2014 2015
  17. 17. IMPLEMENTATIONShort Term Medium Term Long Term(0-6 (6– 12 (12– 18Months) Months) Months) •Figure out •Review legal •Begin sales data issues production •Evalute •Create and sale of current brand and accessible plan logo brand and perfume •Keep with •Research hybrid plan and •Continue or switch development incremental to heritage •Begin to European plan increase price European increase prices
  18. 18. RISKS AND CONTINGENCIES Risk: losing in all segments Contingency: implement Heritage Strategy
  19. 19. When to Exit: Fit Performance Competitive Advantage
  20. 20. QUESTION AND ANSWER SESSION
  21. 21. COMPETITION Hermès Gucci Bottega Veneta Prada Chanel Coach
  22. 22. QUOTES “If you control your factories, you control yourquality” and “If you control your distribution, you control your image.” – Bernard Arnault
  23. 23. QUOTES Absolute Aspirational Accessible 8-10% Growth 6-8% Growth Below Market “Luxury is not how much you can buy. Luxury is the knowledge abouthow to do it right, how to take thetime to understand and choose well. Luxury is buying the right thing”– customer at Daslu in Sau Pualo, Brazil

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