Louis vuitton - strategic process management

BUSINESS MANAGEMENT FETAC MINOR Level 6
Strategic Management Process AIS Code: 6N4310
Yasmina Rayeh Page | 0Yasmina RAYEH FETAC Minor Level 6
November 2014 AIS Code 6N4310

Yasmina Rayeh Page | 1
The Business environment
This study will cover main aspects of Louis Vuitton (LV)’s strategic processes as an organisation and will underline
the organization type, purpose, mission, vision, and objectives that sustain its organisational structure. A SWOT a
PESTEL tools will be carried out in order to allow a short analysis using the Kotter’s change aspects.
Type
Established in 1854 by a master Louis Vuitton Mattelier, the Company changed status in 1962 as a “S.A” (Limited
liability company-Public Company), and is governed by the provisions of the French Commercial Code. LV belongs to
HVMH group under the Fashion and Leather Goods business group.
Purpose
LV business purpose is profitability by providing a luxury line of products (leather goods, shoes, ready-to-wear
clothing lines, jewellery, and personalised items) designed and crafted by genuine artisans to high profile customers
seeking to liaise their status to a prestigious brand.
Mission
LV statement is: "The mission of the LVMH group is to represent the most refined qualities of Western “Art de
Vivre” around the world. LVMH must continue to be synonymous with both elegance and creativity. Our products,
and the cultural values they embody, blend tradition and innovation, and kindle dream and fantasy1.”
Vision
LV is willing to develop core values in the political, social, societal and environmental spheres of responsibilities as
the core objectives of the top hierarchy level is dictated by code of conducts, charts and as well as a large
documentation depicting its engagement and control over the steps of production transparency2.
Structure
Louis Vuitton is one of the 60 brands/divisions of the holding company LVMH (a French family trust) financially
controlled by Bernard Arnault, Chairman and CEO who personifies the company. However the structure followed a
principle of decentralization of decision-making on the group's brands level where brands are considered houses of
family history. The value of each brand is closely linked with the independence of driving their creativity. Each
company operates independently; Michael Burke, executive of LVMH, is the chairman & executive of the brand since
2012 when his predecessors Yves Carcelle (†2014) and interim Jordi Constans had to step away for health reason.
1
http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/Louis-Vuitton-Mission-Statement.htm
2
http://www.lvmh.com/uploads/assets/Le-groupe/Documents/LVMH_environnment2013EN.pdf

LV is a tall organization having “a long chain of command” from top to bottom, and if strategies and decisions are
centralized at the Board Level, the success of the group is the consequence of a decentralisation and
departmentalisation structure organised by business group (Areas of products regrouping different trade names
within geographical areas).
However, if freedom of creation is provided to each entity, Bernard Arnaud has implemented within each of them
centralized production and distribution control based on his own statement “If you control your factories, you
control your quality, and if you control your distribution, you control your image.3”
Objectives
LV income is generated by selling different kind of products through different channel of distribution. LV objectives
are financially clear as it is to increase the profit of the Group in order to lead globally the luxury market.
LV strong creative dynamic with the development of leather lines and the successful launch of new models in
Monogram are Nicolas Ghesquière’s recipes for improving the brand success4.
3
Duggan S., (2001), p6 cited by Mirela Orlovic in Strategies and Structure of the Luxury Clothing and Accessories Sector: A Critical Analysis based on Porter's
Five Forces, p39
4
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Results/LVMH_HY_2014_RESULTS_VA.pdf

Below the results of Third Quarter Revenue 2014 in comparison with 20135 shows that the business is still growing.
6
Chairman stated that the strategy of the group will continue “to focus on innovation and targeted geographic
expansion in the most promising markets” although the uncertain economic and financial environment. Bernard
Arnault added that “LVMH will rely on the power of its brands and the talent of its teams to further extend its global
leadership in the luxury market in 2014”.
5
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Press_release_PDF/LVMH2014ThirdQuarterRevenue.pdf
6
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Results/LVMH_HY_2014_RESULTS_VA.pdf

SWOT
The swot analysis defines the potential of Louis Vuitton7
7
Source: Louis Vuittonannual-general-meetings2014, AG_2014_VA.pdf, pp4-14

PEST
PEST will determine the environment that could affect LV
ChangeManagement
8
http://vosdroits.service-public.fr/professionnels-entreprises/F22887.xhtml
9
http://www.instantluxe.co.uk/blog/luxury-brands-on-war
See (http://www.youtube.com/watch?v=0oySyLPAzWg)
10
http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1118&context=jlasc
11
http://www.bovilis.com/diseases/ringworm/control.asp
12
http://publications.lib.chalmers.se/records/fulltext/127812.pdf
Political
1- France (Colbert Committee) clamping down on counterfeit by punishing the buyers8 launching a national
campaign at Airports9:
2- Lobby in China with the “shanzhai” (Social Justice) phenomenon versus IP Laws.
3- War at the edge of Europe (Ukraine)and of the boundaries of Middle East
Impact
1- Awareness of the public against IP thieves.
2- Increase of demand in luxury brands in China equals raise in sales of genuine products10
3- Economic and political uncertainties
Economic
1- Increase price of raw material tied to the market (leather, Oil for PVC material)
Impact
Cost of Engineering and research for new material to deliver High quality standard products.
Social
1- Lobbyists against the leather industry (one of the most polluting industries in the world) to whom LV
answer with a new green approach.
2- ABC1 class “New Rich” in China (raise of salary, raise of sells)
3- Art engagement
Impact
1- LV answer with a new green approach including environmental and social responsibility of suppliers
2- New Niche means growth in sales of genuine LV products.
3- The Louis Vuitton Foundation contemporary art museum has opened at the end of October 2014 in the
Jardin d’acclimatation
Technological
1- Vaccination to prevent ringworms affecting the leather industry amongst calves, “allowing the leather
industry to consistently produce grade 1” 11
2- Footprint on biodiversity: with global climate changes issues, concern arises about preserving the eco-
system, Objective to be conform to ISO 14001 certification (supply chain, workshops) and environmental
considerations included in design.
3- Creation of new web/phone applications
Impact
1- Quality preservation of raw materials and research for other material (coated canvas, PVC
2- Best practices Actions to reducing of greenhouse emissions with the implementation of environmental
friendly manufacturing processes (Alma project)12.
Environmental Preservation (material recovery, solar systems, eco-design, traceability and compliance,
downstream transport, waste management, and social responsibility of suppliers/sub-contractors).
3- Quark Publishing Platform and Amble app. with Apple iTunes: city guides.

LVMH group is a successful organisation in a competitive and rapidly changing market by combining long-term
vision with a fast adaptability to innovation13.
The main challenge for the Fashion and Leather goods Business Group is centred on the environmental concerns as
described below14 15.
Therefore the 8 Step Change Model from J. Kotter (below) seems to be used in order to initiate from the top level of
the hierarchy the changes needed throughout all level of the organisation.
For example, environmental issues became the XXI Century’s main urgency amongst organisations all over the world.
The notion and vision of “corporate citizen” principle sponsored by Bernard Arnaud is implemented through the
“LIFE” program.
This communication enhanced the willing to include the environment in managerial processes in order to facilitate
the development of new management tools and innovation.
13
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Reports/LVMH_RA2013_GB_1.pdf
14
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Reports/LVMH_RA2013_GB_1.pdf , p123
15
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Governance/LVMH_environnment2013EN.pdf p9

“The goal is to systematically include environmental criteria in the choice of supplier, classify leathers according to
performance, and educate designers to encourage the use of the most environmentally friendly leathers.”16
At a company operation level, Louis Vuitton brand is actively participating to this program change and has
established actions in strategic areas of production and indicators of progress to monitor performances.
The Alma project launched in 2010 has dramatically impacted the organizational designs and employee behaviour the
leather factories. The project involved Louis Vuitton’s factories, suppliers and subcontractors and has mostly affected
the purchasing and industrialising divisions around different processes within the procurement department to
improve quality control over raw material.
This strategic challenge is recurrent in the policy of the Group and Louis Vuitton Malletier:
In all aspects of the production, from the first concept to the post production, these changes took place with
different control and evaluation tools.
Question 4 plan motiveate… intro how do they manage their planning….
16
http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Reports/LVMH_RA2013_GB_1.pdf p125

http://www.lvmh.com/uploads/assets/Le-groupe/Documents/LVMH_environnment2013EN.pdf p34-36
As part of its relations with suppliers, LVMH requires its partners to subscribe to the Supplier Code of Conduct
under which it reserves the right to conduct compliance audits at any time without advance notice.
In 2013, 750 social and/or environmental audits were carried out, almost 80% of them by independent experts, at
624 of the Maisons’ suppliers. The Group’s Purchasing Department established a tool comprising a database which
allows the sharing of the results of social and environmental audits of suppliers carried out by each of the Maisons in
the Group.
Each Maison also conducts a large number of initiatives in this area which evaluate and involve its suppliers. Since
2013, Loewe has applied a new process of evaluating and approving its suppliers in accordance with its “Animal
Sourcing Policy” code of conduct.
In fur purchasing, for example, Loewe has embarked on a process aimed at limiting the use of furs solely to certain
species of livestock, certain countries of origin and certain suppliers. The Purchasing Department has developed a
risk assessment matrix that classifies suppliers based on social and environmental criteria and economic
interdependence risks. And Guerlain instigated the “Responsible Purchasing” charter developed within the Perfumes
& Cosmetics business group, the goal being to formalize the terms of a responsible relationship between the Maisons
and their partners in the following areas: quality and sustainability of relations with suppliers; improvement in
mutual economic performance; selection of sustainable materials and responsible suppliers; and innovation and
preservation of materials and know-how.
At the end of 2013, an evaluation chart pertaining to the above was being developed to rate suppliers and help them
improve their practices. Guerlain’s goal is to involve its suppliers on a systematic basis by including environmental
and social screening in the most signifycant calls for tender.
OTHER COLLECTION AND RECOVERY METHODS
In its international network of stores, Louis Vuitton is gradually establishing a sorting policy for traditional materials
(paper/cardboard boxes, plastic bottles, cans and glass), as well as appropriate management of environmentally
hazardous waste (batteries, ink cartridges, etc.) in addition to more specific waste such as corks.

Business Management techniques
The Luxury Industry is assessed by the Porter 5’s Forces as follow
Threats to the luxury industry following the Porter’s 5 Forces17 are relatively weak. “A firm's relative position within
its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis
of above average profitability in the long run is sustainable competitive advantage”18.
17
Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free Press. New York.
18
http://www.ifm.eng.cam.ac.uk/research/dstools/porters-generic-competitive-strategies/

Therefore Porters competitive advantage tool can apply to LV segmentation strategy.
LV strategy follows dichotomy segmentation: geographical and psychographic. LV operates in the High-end of the
luxury market using the DIFFERENCIATION and DIFFERENCIATION FOCUS variants to maintain and expand its
revenue in emergent markets, and DIFFERENCIATION FOCUS is chosen to deliver customized or scarce items to
specific consumers. If the brand has recorded outstanding results in 2013, it is because of its ability to move into a
more high-end segment of the luxury market focusing on satisfying consumers’ desire for customization19.
19
http://www.interbrand.com/it/best-global-brands/2013/LouisVuitton

The Porter's value chains evaluate the added-value activities that underpin LV success as described in the schema
below20:
LV Efficiency is achieved through vertical (VMS), horizontal and digital channel integrations, where administration
strategies in place are effective in gaining quality control over raw materials, manufacturing and finally, over selective
distribution channels.
An effective administration system controls each step of the production, and quality through vertical (VMS),
horizontal and digital integrations channels.
20
Porter, Michael E. (1985). Competitive Advantage: Creating and Sustaining Superior Performance. New York.: Simon and Schuster. pp. 11–15

Impact of the Leadership on the organisation
Bernard Arnault
LVMH
Chairman and Chief Executive
Officer
Yves Carcelle
(1948-†2014)
Michael Burke
Louis Vuitton Malletier
Chairman and Chief Executive Officer
There are fundamental differences between Leadership and Management, the definition of Leadership is “the action of
leading a group of people or an organization and the ability to do it”21. And Management is defined as “the process of
dealing with or controlling things or people”, but also “the responsibility for and control of a company or
organization”22.
Kotter stated that “Management is about coping with complexity … Leadership, by contrast, is about coping with
change”, he has also underlined the complexity for both roles and defined them as being “distinctive and
complementary systems of action ... [but] both are necessary for success in an increasingly complex and volatile
business environment23”.
Louis Vuitton is part of the one of the most profitable industry and known luxury brand in the world. On
Interbrand’s Best Global Brands 2013, the brand was ranked number 17 and represents “the highest of any other
luxury apparel and accessories brands24”. Such a success is the result of a combination of creativity, craftsmanship,
entrepreneurship, respected and outstanding Identity, an exclusive approach to distribution, innovation and
environmental performances and last but not the least, the work of men who believed they could change the luxury
industry.
Yves Carcelle, who has led LV Malletier from 1990 to 2011 and who was credited with having made Louis Vuitton one
of the most profitable and ubiquitous luxury goods brand, and Bernard Arnaud have both side by side embodied
Louis Vuitton House and group as transformational leaders. Michael Burke, an American, is the new personality
embodying LV Malletier since December 2012 and is similar in style to Yves Carcelle25.
He joined the LVMH Group in 1986 where his responsibilities continue to grow throughout his successful career:
First in charge of the US subsidiary of Christian Dior (1986-1993), then the US division of LV (1993-1997). He
became successively the Managing Director of Christian Dior (1997) of Fendi house (2003), before taking charge of
21
http://www.oxforddictionaries.com/definition/english/leadership
22
http://www.oxforddictionaries.com/definition/english/management
23
Kotter, J. (1990) “What leaders really do?” Harvard Business Review, vol. 68, no.3,pp. 104–11.
24
http://www.luxurydaily.com/cartier-louis-vuitton-and-prada-among-top-100-global-brands-interbrand/
25
Vanessa Friedman of the Financial Times description cited in http://www.businessoffashion.com/michael-burke

Bulgari and finally became the new Chairman and CEO of Louis Vuitton Malletier (2011). Michael Burke is also an
executive committee of the LVMH group.
He is trusted by the charismatic Bernard Arnaud to transform LV Malletier and all of the 3 personality described
have a great influence, providing vision and sense of mission, are inspirational gaining respect and trust from all
employees and use a democratic sense of leadership to promote new ideas and individual considerations.
HumanResources
Role of HRM
HRM
Recruitment
Planning
Training and
Development
Performance
Appraisal
Pay and Benefits
Selection

HumanResources functions
LVMH (Holding)
Sourcing & Development Coordinator / Executive Recruitment
Recruitment and Mobility at the international level
- Coordinate recruitment assignments for different companies of the LVMH (and key creative positions) Group.
- Encourages recruitment by internal mobility inter-company and inter divisions.
- Organize custom integration programs.
Skills Development - Corporate University
- Identify the Senior Executives and define High Potentials succession planning and development.
- Participate in the design of a new forum of the LVMH House such as "The Art of Luxury Branding".
HR Cross-Projects - Internal Communications - Compensation & Benefits
- Write and distribute press releases appointments; (intranet / internet).
- Reflect on the establishment of systems for Assessing candidates attached to Group companies.
- Assist in the Harmonization of wage policy (external/ internal benchmark).
Louis Vuitton Malletier
Recruitment and Mobility - Structuring and Change
- Conduct recruitment and make compensation proposals, present the benefits.
- Managing the careers of employees.
- Advise the business to optimize the organization of their department on a daily basis and at the annual review
organizations (succession planning and career).
Skills Development - Training - Evaluation
- Integrate new employees; design training.
- Define and build the training plan after analyzing the needs of employees.
- Assist in the operational evaluation of their employees during the annual process (MPP).
Personnel management
- Consolidate staff budgets and payroll with revised.
- Conduct disciplinary and administrative support personnel management.
- Dealing with the IRP.
HR cross-projects
- Implement projects related to Corporate Social Responsibility.
- Develop partnerships with attend forums.26
26
Translated from http://www.viadeo.com/fr/profile/corinne.borie

APPENDIX II
ENVIRONEMENTAL STRATEGY (2012-2013)
27
27
Louis Vuittonannual-general-meetings2014, AG_2014_VA.pdf, p12

Identify and evaluate the human resource tools and techniques that may be used to recruit and select employees for the various
roles listed above.
For example in a large corporate the managing Director, who is the highest person in rank (as plays the role of full-
time executive) of a company will be responsible for the daily operations and the performance of the company28.
Her/his duties would be either to:
Successfully implement the organization policies, handle the direction and operation of the company, develop strategic
operation plans, monitor, operate and check the financial results. Basically he/she will be controlling the resources and
expenditures.
Therefore, as she/he is in charge and responsible for the company (nonetheless for the good conduct of the employees
but also for the financial results), she/he takes actions where and when they are required. Her/his responsibility and
duties enclose the fact that she/he will be accountable in front of shareholders and of the Board of directors e.g. in a
PLC.
Taking actions where/when necessary and informing the board of any change will be intrinsic part of the duty.
At a lower level, a Production manager will be involved with the planning, coordination and control of Manufacturing
Process. She/he will ensure that goods and services are produced efficiently and that the correct amount is produced
the right way, cost and quality
The typical activities will be to oversee production, make sure products are produced on time, draft a time scale for
the job, be responsible for the selection and maintenance of equipment, reviewing workers performance, supervising
and motivating team workers.
We can also add some similar definition and statement to explain the differentiation: If management “is the process of
assembling and using sets of resources in a goal-directed manner to accomplish tasks in an organisational setting29”,
leadership is more the process of “influencing and directing the performance of group members towards the
achievement of organisational goals30” and delivers reward or recognition in return for the commitment or loyalty of
followers31.
28
http://www.wisegeek.org/what-is-a-managing-director.htm
29
Hitt et al, 2007
30
Chadwick & Beech, 2008
31
Leadership theory in a nutshell © GB Learning Consultancy, Gritton, 2006.

There are fundamental differences between Leadership and Management, the definition of Leadership is “the action of
leading a group of people or an organization and the ability to do it”32. And Management is defined as “the process of
dealing with or controlling things or people”, but also “the responsibility for and control of a company or
organization”33.
Kotter stated that “Management is about coping with complexity … Leadership, by contrast, is about coping with
change”, he has also underlined the complexity for both roles and defined them as being “distinctive and
complementary systems of action ... [but] both are necessary for success in an increasingly complex and volatile
business environment34”.
D.A. Statt35 described the differentiation between managers and leaders in the following terms:
1. Long range view versus short rangeview: Firstly, Leadership will have to view and plan for the long term the
goals of the company and set the means to execute these goals. By opposition Management will see in a short
term basis and operate on a step-by step basis.
2. Trust Model: leaders have to be trustable. They are often idealised as role Model with high standards of
behaviour by employees. That is one of the ways to inspire.
3. Motivate: The leadership will motivate all employees (management and workforce) to develop new objectives.
The management motivates by recognizing and rewarding the accomplishments of staff.
4. Emotional versus Rational: management is very rational, which means task-oriented. Managers will implement
the ideas of the leadership to achieve the goals.
5. Leadership draws policies versus Managers who focus on system and structure; Management follows and
applies policies using the tools defined by the leader.
6. Maintains versus develop: Leadership develops a common shared vision to spread team spirit. Management
efficiently and in a practical way implement, maintains and gets the job done.
7. Focus on system versus focus on People: Leadership believes in people and in their capacity to fill up the right
position in the company e.g. by putting them on training. That potentially can increase performances and
achieve the goals set faster.
8. Challenging the Status quo versus accepting the Status quo:
By taking measurable risks to improve the organisation (policy, structure or the way the thing are done)
leadership improve the performances. Management accepts the status quo by following directions to
implement changes made at the upper level..
9. “Doing the right things” versus “doing the things right”. Leadership thinks out of the box, challenging new
ideas and opportunities, overviewing the whole picture external and internal elements while management sees
the pragmatic way and does things right36.
32
http://www.oxforddictionaries.com/definition/english/leadership
33
http://www.oxforddictionaries.com/definition/english/management
34
Kotter, J. (1990) “What leaders really do?” Harvard Business Review, vol. 68, no.3,pp. 104–11.
35
Statt, D. A. 1994. Psychology and the World of Work. New York: New York University Press
36
Statt, D. A. 1994. Psychology and the World of Work. New York: New York University Press

Louis vuitton - strategic process management

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Louis vuitton - strategic process management

Similar to Louis vuitton - strategic process management (13)

More from Yasmina Rayeh

More from Yasmina Rayeh (9)

Recently uploaded

Recently uploaded (10)

Louis vuitton - strategic process management