LVMH is a global luxury goods company that owns over 70 brands. China has become a key growth market, but slower economic growth has slowed revenue growth there in recent years. LVMH's strategy is built on six pillars - managing brands autonomously while being responsive, significant investment in brands, vertical integration, respecting brand identities while leveraging group strengths, savoir-faire, and a long-term vision of preserving brand identities and excellence. However, China still presents challenges as a growing market where cultural values differ from Western concepts of luxury.

1. Examination revision & preparation
IY1 Introduction to Marketing
By the end of this lecture you should:
Understand the format of the exam
Know how to organise your time in the exam
Know what is required of you in each different section of the
exam
Know how to answer essay questions
Know how to prepare for the exam
Learning objectives
1 hour 30 minutes exam

2. 100 marks
2 parts:
Part A: 20 multiple choice questions
Part B: case study
Exam format
20 questions
Cover all parts of the course
1 mark per question – therefore 20 marks in total
Use Canvas quizzes to:
Revise the content
Practice understanding questions and answer choices
Get quicker
Part A: Multiple choice
2 questions
1 short answer question:
“Identify and explain three …….”

3. 20 marks
1 essay question:
“Evaluate / discuss …..”
60 marks
Part B: Case study
Don’t run out of time!
2 mins reading & thinking time
Part A: Multiple choice – 20 minutes (1 minute per question)
Part B: Case study
Q1 – 15 mins
Q2 – 50 mins
3 mins checking & proof reading time
Timings
Read it thoroughly.
Highlight any words or phrases that you are uncertain of –
clarify their meaning
Read the case study again.
Note key marketing terms and ensure you understand them

4. Read the case study again.
Before the exam: Understanding the Case Study
What is LVMH’s business?
How many brands do they own?
What kind of brands?
Is the business growing? How? How much?
What’s happening with LVMH in China?
Which LVMH brands are doing well in China?
What is happening to LVMH sales in China – is this different
for different brands?
What are the reasons for rising/falling sales?
Before the exam: Analysing the Case Study
What is the current state of the Chinese luxury goods market?
What is the size of the market? Is it growing or shrinking? By
how much?
What kind of luxury goods do Chinese people want to buy? Are
there different market segments?
What are the challenges facing the Chinese luxury goods
market?
Is there any information in the case study say about this?

5. Can you find additional research information about these
challenges?
Do a PESTLE analysis for this market
Before the exam: Analysing the Case Study
What does the case study tell us about the marketing mix of
LVMH brands?
Consider…
the product mix
the pricing strategies
the promotion strategies
distribution strategies (place)
Use additional information from Canvas and your own research
to add depth to your analysis
Do a SWOT analysis for LVMH - include facts & figures from
the case study and your research
Before the exam: Analysing the Case Study
Answer the question asked (don’t write everything you know
about the subject)
Do a plan

6. Use evidence from:
the case study
your research
marketing theory
to support your answers
In the Exam: Essay question
Why?
Essay Plan
To get the structure right
To make sure you don’t forget anything important
To save time & keep you on track
Your introduction should

7. Explain what the essay is about
Define & explain any key terms
Explain the approach you will take and the conclusions you will
come to – your thesis
Essay Plan: Introduction
Introduction
1st point in support of your thesis
2nd point in support of your thesis
Different viewpoint(s) from your thesis
Conclusion
The main body should:
Discuss different viewpoints
Essay questions typically ask you to discuss or consider or

8. evaluate – that is, look at both sides of the argument
Apply marketing terminology & concepts to the business in the
case study
Include evidence from the case study and from your research &
preparation, to support arguments
Main Body
Ensure you get marks for ANALYSIS by saying WHY
something happened or why a decision was made
For example
“LVMH has entered overseas markets (such as) BECAUSE
...growth in the market, economy, population....................... Or
“ The business should adopt a strategy of product development
BECAUSE …… end of life cycle, not enough stars..”
Main Body: Expanding Answers
The conclusion should make judgements that directly answer the
original question
Judgements are rarely ‘black and white’.

9. The answer will usually depend on:
The circumstances
How the business environment changes in the future
Essay Plan: Conclusion
To enable it to take advantage of these opportunities the
business needs to.........launch new products, develop
promotions.... for example
Before launch it needs to conduct some MR – what type? To
find out what?
This should help it achieve its objective such as..........?
Say what you think and why something is a good idea or not a
good idea – remember to have a BALANCE in your judgement
A good way of getting these EVALUATION marks when you
are discussing a business concept or the potential success of a
strategy is to say – “it depends on.....”
Conclusion: Expanding Answers

10. It depends on ……
Competitors reaction – might launch similar product
Availability of Government Assistance – at home or from
abroad
Results of Market Research – understanding customer needs in a
segment
Economic Conditions – income, wealth,employment issues
Finance Available – to invest in launch or anything else!
Legal Requirements – at home and abroad
Resource Availability – labour,operations
International Cultures – consumer perceptions/understanding
abroad
DONT JUST QUOTE THE ABOVE – PICK OUT ONE OR TWO
POINTS AND SAY HOW IMPORTANT THEY COULD BE
WITH REFERENCE TO THE CASE STUDY
Conclusion: Expanding Answers
IN ALL YOUR ANSWERS YOU ARE EXPECTED TO USE
YOUR KNOWLEDGE OF MARKETING. TRY TO INCLUDE
SOME OF THE FOLLOWING:-
Marketing – what does it mean, is there any marketing taking
place - is it effective? Why is marketing important?
Marketing Objectives - examples

11. Micro and Macro Factors - how could these influence marketing
success?
Marketing Mix – any marketing strategy is based on a balance
between all parts of the mix - mention them even if you are
only discussing one predominantly
International Marketing – strategies for entering new markets;
using a standardised marketing mix vs an adapted mix?
Key Terms
Awarded for
Knowledge – definitions, explanation of a marketing term and
use of other terms which are relevant
Application – knowledge applied to specific circumstances in
the case study or examples of theory in practice in an essay
Analysis – of a business situation – why something has/might
happen and what the result might be – “cause and effect”
Evaluation - making a judgement, recommendation
drawing a conclusion – these are “consider”, “discuss” ,
“evaluate” questions
Marks

12. 3 Top ExamTips
Read the question carefully
Read the question carefully
Read the question carefully
Market size / market shares / market features
Competition and competitors in this market
Market segments – features / size
Marketing mix (how LVMH use the 4 – or 7 – Ps to offer a
value proposition that the market wants)
Impact of PESTLE factors on this market
Revision Topics
IY1 - Introduction to Marketing
Pre-release Case Study
LVMH: Is China Still a New Market?

13. (Adapted from a Sage case study by Yang Liu & Peter
Zámborský, 2018)
Introduction
The firm Moët Hennessy Louis Vuitton SE, typically known as
LVMH, is a family-run and
prominent global luxury goods company. Operating globally, it
is headquartered in
Paris, France. The LVMH group run 70 houses across six
segments: Wines and Spirits;
Fashion and Leather Goods; Perfumes and Cosmetics; Watches
and Jewellery; Selective
Retailing; and other activities. In addition to Louis Vuitton and
Moët Hennessy, the firm
owns more than 70 brands, such as Bulgari, TAG Heuer,
Christian Dior, Fendi, Kenzo,
Givenchy, Guerlain, Marc Jocobs, and Celine.
According to the LVMH2016 Financial Documents (LVHM,
2017), at the end of 2016,
LVMH was operating 1,061 stores in Europe (excluding
France), 991 in Asia (excluding
Japan), 703 stores in the USA, 492 stores in France, 387 stores

14. in Japan, and 314 stores
in other markets. LVMH earned revenue of over 37.6 billion
Euro in 2016. Fashion and
Leather Goods is the group in which LVMH earns the most (see
Table 1).
Fig 1. shows revenue by region while Fig 2. shows how revenue
has changed over the
past 10 years in different regions. China had become a key
growth market for luxury
goods by 2010, but slower economic growth and anti-corruption
legislation to some
extent put a halt on revenue growth around 2015. Will China
continue to rise and
become a key market for LVMH? Should LVMH adjust its
strategy for this market? What
exactly should its strategy for China be, and how should this be
integrated with the
LVMH overall global strategy?
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15. important; famous
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designed to prevent dishonest or fraudulent conduct, especially
in a political context.
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stop
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combine one thing (the China strategy) with another (the global
strategy) to form a whole.
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Source: Data from LVMH Financial documents from 2007 to
2016 (translation of the
French financial documents) (LVMH, 2017); figure created by
authors.
Role of China in the LVMH group
China is very important for LVMH. Bernard Arnault, Chairman
and Chief Executive Officer

16. (CEO) of LVMH, believes that LVMH has a strong pioneer
advantage in China. He said in
a 2007 interview, “It’s an advantage because we became the
leaders of the market. In
cosmetics, for example, Dior is the most well-known and
strongest cosmetic brand. And
as we invest strongly year after year, we will try to maintain
this advantage.” He also
said “The fact that we were first gives us a strong position. It’s
the same thing for
Vuitton. We are very, very far ahead of number two” (Socha,
2007, p. 5).
Furthermore, LVMH responded several times to sales declines
in China. For example, in
2013, Jean-Jacques Guiony, the LVMH finance director,
explained that demand slowdown
in China was due to waning economic growth, the rise of the
Chinese currency (RMB)
against the Euro, and a new anti-corruption law, forbidding
government officials to
accept expensive gifts (Daneshkhu, 2013).
LVMH reported a quarterly sales decline in 2015, especially for

17. Louis Vuitton, largely due
to the China stock market collapse. According to Reuters
(2015), Jean-Jacques Guiony
spoke at an investor conference regarding the third-quarter
sales, and reported that
“The Chinese stock market collapse has taken its toll and we
expect this to have an
impact only for a few months… We are seeing more Chinese
tourists but they are
spending a little bit less, that is … the growth rate is not as high
as it was in the first
half.”
China as a new emerging market
Despite the growth of luxury goods markets in recent years,
luxury goods companies
faced new challenges from new directions. Namely, emerging
markets and new
entrants.
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among the first to open a business in a country or area
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18. Highlight
refuse to allow
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a sudden and large fall in the value of stocks and shares
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to harm or damage someone or something, usually in a gradual
way
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new competitors in the market
Since 2010, China has had the second highest gross domestic
product of any nation,
only behind the United States. Since 2012, China has been the
largest luxury goods
market in the world (Bain & Company, 2013). Chinese
consumers play a major role in
the growth of luxury spending worldwide. They account for the
largest portion of global
purchases (31%), followed by Americans (24%) and Europeans
(18%). Furthermore,
China in 2015 represented approximately one-third of the global
market, and has
increased dramatically from only 1% in 2000 (D’Arpizio,

19. Levato, Zito, & Montgolfier,
2015).
However, it is still a growing market for luxury companies,
even though China opened its
door to international business in 1978. Surprisingly, LVMH has
been doing business with
China for more than a century. Many companies operating in
China still only have a
vague understanding of the market. This is especially true for
luxury goods companies,
who rely on China’s huge waves of economic growth to
compensate for this strategic
shortcoming. However, this strategy comes with a huge caveat,
the effects of economic
recessions always hit luxury companies first. This effect is
further emphasized in China –
in Chinese culture, the meaning of luxury holds a critically
different overtone compared
to its original definition in Latin, or in English.
The word luxury translated into Chinese is she chi (奢侈), which
is a derogatory term
holding the connotation of wasting money on extravagant
(unusual, unnecessary, or

20. improper) things. Traditional cultural values conflict with the
consumer purchasing
behaviours and motivations that those in the Western world are
familiar with (Lu, 2008).
Nevertheless, Mr. Arnault has continued to be confident about
the Chinese economy for
many years. In a 2007 interview, several hours before the Fendi
(a LVMH brand) spring–
summer collection was displayed on the Great Wall of China, he
said of China, “It’s still
technically a socialist country, but it operates with a free
market economy that is many
times more liberal and efficient than a number of European
countries……If the economy
continues at the same rate, 25 years from now China will be the
greatest global
economic power, which means we will have a potential
comparable to the United States
today.” He confirmed “If things continue at this rhythm, (China)
will be the most
important country on the economic agenda for a business like
ours.”

21. Throughout 2016 LVMH recorded revenue growth in China,
focusing on two business
groups: Wines & Spirits; and Watches & Jewellery. (LVMH,
2017).
Strategy and Business Model of LVMH
Mr. Arnault describes the business strategy of LVMH: “Our
business model is anchored in
a long-term vision that builds on the heritage of our Houses and
stimulates creativity
and excellence. This model drives the success of our Group and
ensures its promising
future.”
This unique operating model is anchored by six pillars
(descriptions adapted from LVMH
annual reports and website):
s
are both autonomous
and responsive. This allows LVMH to be close to its customers
and facilitate rapid,
effective, and appropriate decisions. This approach also
improves the motivation and
entrepreneurial spirit of employees, according to LVMH.

22. scrathern
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a problem or negative aspect of a business' long-term plans and
objectives
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a warning of specific conditions, or limitations
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showing strong disapproval or expressing criticism or insult
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an idea or feeling which a word invokes in addition to its literal
or primary meaning
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lacking restraint in spending money (spending on unnecessary
or improper things)
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luxury goods companies rely on economic growth to compensate
or make up for, their lack of understanding of the market
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give special importance or value to (something)
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23. a small difference in meaning that is not obvious
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the business model comes from and is fixed to the long-term
vision of the company
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encourage or arouse interest or enthusiasm in.
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the 'pillars' provide essential support for the business model
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where many decisions are made across the organisation, not just
at the top - in the case of LVMH, this could mean in different
countries and by different brands
and commits significant
resources to develop its Houses. It also encourages creativity of
its employees and
supports their career growth.
vertical integration to foster
excellence both upstream and downstream. This allows control
over every link in the

24. value chain, from sourcing and production to retail, according
to LVMH.
creates synergies while
respecting the individual identities and autonomy of the Houses,
according to LVMH.
The combined strength of the LVMH Group is leveraged to
benefit each of its Houses.
-faire (the ability to act or speak
appropriately in social situations).
LVMH and its Houses pursue a long-term vision rooted in
history and craftmanship.
To preserve their distinctive identities and excellence, LVMH
and its Houses have
developed initiatives to transmit savoir-faire and ensure that
craftsmanship and
creative métiers are valued by younger generations.
siness segments and a geographic
distribution: LVMH has the
resources to sustain regular growth thanks to the balance across
its business
activities and a well-distributed geographic footprint. They
believe that this balance
positioned them well to withstand the impact of shifting

25. economic factors.
Challenges of Growing in China
Compared to mature markets, where the environment is more
stable, luxury companies
are operating in volatile environments when in emerging
markets, such as in China. In
2015, Bain & Company reported closures of 58 luxury retail
stores in China (Prada, Louis
Vuitton, Hugo Boss, Chanel, Giorgio Armani, Hermes, Versace,
Tiffany, and others).
Simultaneously, 78 new stores were opened by the same brands
in the same country
(Bain & Company, 2016).
Chinese customers, as new entrants to the global luxury goods
market, are different
from mature Western customers. The Chinese customers are
young and eager for luxury
brands. However, Chinese customers exhibit several purchasing
behaviours distinctive
from their Western counterparts who largely grew up in a
mature luxury goods market.

26. A key difference is saving to purchase a luxury good. Some
young customers will save
money for several months (Chadha & Husband, 2007; Yu,
2014). In terms of income
level, tariffs, quotas, and price distortion, luxury goods are
comparatively expensive for
Chinese consumers. Luxury fever (a phenomenon that people act
as though they have
an illness preventing them from pursuing luxury goods) emerges
in this environment.
Moreover, Chinese consumers purchase more low-priced luxury
goods. Bain & Company
(2016) reported that in 2015, the accessories consumption
accounts for most of the
personal luxury goods expenditure, which is 30% of the global
market, followed by
apparel (24% of the global market), then hard luxury (22% of
the global market). On
the other hand, Chinese consumers spend the most on cosmetics,
perfume, and personal
care categories (more than 30%), followed by watches (around
20%), then suitcases
and handbags (around 13%). Comparatively, the accessories

27. consumption is the lowest
at around 7%.
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Organic growth is the growth rate a business can achieve by
increasing output and sales. This does not include growth
arising from takeovers, acquisitions or mergers.
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Vertical integration is when a company controls more than one
stage of the supply chain. For example, the Moet brand owns
vineyards where it grows grapes (primary production); it then
processes the grapes to make champagne (secondary
production); and finally it sells the champagne (tertiary)..
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the combined power of a group of things when they are working
together that is greater than the total power achieved by each
working separately
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liable to change rapidly and unpredictably, especially for the
worse
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the quality of design and work shown in something made by
hand
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28. Highlight
puts first / makes the most important
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the ability to act or speak appropriately in social situations - for
LVMH this means that all their brands should represent this
idea and their products should portray this image of social
appropriateness
All in all, the purchasing power of the Chinese population is
strong. China’s fast-growing
economic development will support market expansion. This is
especially true for the
luxury companies since the Chinese are still new to this market
and they display a huge
passion for luxury goods. However, neither research institutions
nor luxury companies
show a deep enough understanding of Chinese luxury
consumers, who are different from
Western customers in many respects. It is also important to
understand that the
differences between marketing luxury products in China and
selling non-luxury fast
moving consumer goods are often subtle. The availability of
affordable luxury branded
accessories has reduced the distance between luxury and mass

29. market offerings. For
example, BCG (2012) found that a typical price difference
between a luxury product and
a mass market product for categories such as fragrances and
makeup could be quite
small.
Conclusion
Foreign multinationals in China need to be sensitive to the
distinct characteristics of this
market. Without doing this they cannot hope to be successful in
this potentially lucrative
growth market.
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small but important