FIVE FORCES SUBSTITUTES LowSUPPLIERS COMPETITION BUYERS Low High High NEW ENTRANTS Low
INDUSTRY CUSTOMER SEGMENTS Absolute Aspirational Accessible
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?
AUTOMATED ALTERNATIVE Shift production to a more assembly line modelPro • Higher customer baseCon • Likely loss of high-end market
HERITAGE-BASED ALTERNATIVE Luxury goods use more artisan labor, as when the company was foundedPro • Please high-end customersCon • Lose accessible customers
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
UNIVERSAL IMPLEMENTATION Enter perfume market Decrease secondary sales Increase European prices to combat grey market Attract Asian market to Europe
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.
FORECASTED NET PROFIT500045004000 Net Profit3500 Net Profit*30002500 2010 2011 2012 2013 2014 2015
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
RISKS AND CONTINGENCIES Risk: losing in all segments Contingency: implement Heritage Strategy
When to Exit: Fit Performance Competitive Advantage
QUOTES “If you control your factories, you control yourquality” and “If you control your distribution, you control your image.” – Bernard Arnault
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