LV appraisal report new

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STRATEGIC APPRAISAL REPORT
OF LOUIS VUITTON

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Table of Contents
Introduction and Company Background................................................................ 4
Part I – External Analysis ........................................................................................ 5
1.1 Macro – Environmental Analysis (PESTLE) ......................................................... 5
1.2 Industry Analysis (Porter’s Five Forces of Competition)....................................... 6
1.3 Opportunities and Threats in the luxury goods industry ....................................... 6
Part II –Internal Analysis.......................................................................................... 7
2.1.1Analysis of Louis Vuitton Resources and Competencies ................................... 7
2.1.2 Distinction between Threshold and Distinctive Resources & Competencies..... 7
2.1.3 Appraisal of the Resources and Competencies ................................................ 7
2.2 Strengths and Weaknesses of LV ........................................................................ 7
Part III Louis Vuitton Corporate and Business Strategy....................................... 8
3.1 LV corporate strategy........................................................................................... 8
3.2 LV generic strategy .............................................................................................. 8
Part IV – Louis Vuitton issues and challenges ...................................................... 9
Part V – LV strategic options for growth.............................................................. 10
5.1 Generating Strategic Options ............................................................................. 10
5.2 Evaluating the strategic options ......................................................................... 11
5.3 Implementation................................................................................................... 11
Recommendation & Conclusion ........................................................................... 12
Reference List ........................................................................................................ 13
Reference List for Appendices ............................................................................. 14

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Introduction and Company Background
This report aims to carry out strategic appraisal of Louis Vuitton, where I will analyse
strategic options for LV to develop and grow their business. Further to my research I
will provide evidence of my findings to support any points that require evidence. The
series of tasks to follow are: part 1 – external analysis, part 2 – internal analysis, part
3 – LV’s corporate and business strategy, part 4 – identifying issues and challenges
of LV, part 5 – identification & evaluation of the main strategic options for growth,
part 6 – recommendation & conclusion, reference list and appendices. Louis Vuitton
sells luxury goods such as leather handbags, accessories, jewellery, shoes and
books mentioned on the LV website (Louis Vuitton, 2016). Louis Vuitton was a
French entrepreneur who rose to fame when providing Napoleon’s wife with personal
boxes and a packer, where he realised his business potential towards people who
are willing to pay for his services and quality and wanted to sustain the services and
quality beyond his death, as biography explains (Biography, 2016). Louis Vuitton is
part of the luxury goods industry and LV’s geographical markets are Asia, Europe,
Middle-East, Africa and America (Deloitte, 2015). LV uses a focus differentiation
strategy and their market segmentation is aiming their high quality products at 3
types of consumers absolute, aspirational and accessible (LV case study, 2013).
LVMH who merged with LV have a long-term vision on developing all their brands
whilst respecting their own identity. LVMH values are creative and innovative, deliver
excellence and encourage entrepreneurial spirit (LVMH, 2016). Mission of LVMH is
providing the world with luxury products, alliance, creativity and art de vivre (Retail
industry, 2015). LV stakeholders are employees, other brands, luxury consumers,
suppliers, unions and the government, LV’s current CEO is Michael Burke.

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Part I – External Analysis
1.1 Macro – Environmental Analysis (PESTLE)
Appendix 1 shows that some factors have a positive impact in the luxury goods
industry and LV, technology is an overall positive impact on the industry and LV as
through social sites such as Facebook or Twitter, companies can instantly upload
pictures and videos which will attract more online consumers to buy the product
straight away. LV’s sitemap shows their social media platforms which is attached in
Appendix 2 (Louis Vuitton, 2016), similarly Coach has adapted similar social media
platforms as LV shown in appendix 3 (Coach, 2016), whereas Burberry has gone a
step further where they have included live chat on their website so consumers can
instantly communicate their problem to a Burberry employee which can be resolved
within minutes along with a call back service, shown in appendix 3. There will be
haters on social media sites who are against LV, these are usually animal rights
campaigns or consumers who cannot afford their products, if they spread negativity it
can affect brand image so brands will have to build their reputation and trust
amongst their loyal luxury consumers. The environmental factor has a positive
impact on LV and the industry, as luxury brands are starting to use eco-friendly
material to help sustain the environment globally which can increase brand image
and gaining potential consumers who buy the product in the interest of helping the
environment (SOSE marketing, 2010).
Other factors have a negative impact on the industry and LV. Political power in China
has a strong influence on their people as they encourage their wealthy luxury
consumers to shop locally as Deloitte (Deloitte, 2014) explains in appendix 1. LV
and other luxury brands use real animal skins in their product to enhance product
value which causes protests from animal rights organisations who are trying to stop
animals from being killed for business purposes, however due to powerful brand
image of LV and other brands have managed to quieten them down, however it does
make some consumers switch brand due to disliking of the fact that animal skins are
used to enhance product value, hence LV and other brands lose some sales
(Deeper luxury, 2015). Counterfeit has been a problem for LV and other brands, as
counterfeit sellers sell their goods to consumers who cannot afford genuine LV or
other branded goods, and big brands have to spend millions of dollars on a legal
department to handle counterfeit sellers, which can create a loss for big brands if
they lose a court battle. (The Future of Luxury, 2014)

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1.2 Industry Analysis (Porter’s Five Forces of Competition)
Appendix 4 shows that threat of new entry is high, this is due to lack of innovation
from the industry where brands in the industry have to come up with new ideas or
innovation to survive in the market, as the author explains (Business strategy
review, 2003). In my opinion these brands are not facing competition globally but
locally as well where consumers can source local brands who provide similar quality
at a cheaper price, this relates to competitive rivalry where the threat is also high as
big brands and small brands are competing against price, product, quality and
service where consumers expect personalised services to keep themselves loyal to
one brand. Bargaining power of suppliers is relatively a low threat, as the author
(luxury leather goods, 2012) explains that suppliers do not have much say in the
relationship with the big brands due to high switching costs, hence they have vertical
integration with big brands, so big brands buy their materials and other products then
the big brands sell the finished product to ultimate customers.
In my opinion the threat of substitution is a low threat due to not having an alternative
to a luxury good product, however as the author further (Luxury Leather Goods,
2012) explains that, “although mainly purchased for their brands and aesthetics, also
have a functionality element and therefore may be substituted by products which
meet this required”, this quote shows that some of the materials or elements used to
make the final product can be substituted if the alternative material does the same
job, as consumers who are price sensitive may ask brands to make the product with
a different material which is affordable, although there are still ultimate consumers
who are unwilling to change therefore will still pay the normal high price for the
product with the same materials used. In my opinion bargaining power of buyers is a
medium threat as they drive demand and if a certain brand do not have their product
they can easily switch to another brand who have their product, however those who
are brand loyal will stick to the same brand and will wait till the brand has their
product whether it will take days, weeks or months to get the product.
Overall the luxury goods industry is an attractive industry, where brands have found
success and profit, along with gaining brand recognition within months due to quick
spread of word of mouth, despite high threats such as rivalry and new entrants, the
industry is expanding and will need more new luxury goods brands to survive, there
will be a lot of investment involved, however the investment will not be wasted as
these products are specifically aimed at luxury consumers and those who see quality
will never compromise with price.
1.3 Opportunities and Threats in the luxury goods industry
Please refer to Appendix 5 which lists opportunities and threats along with
explanation.

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Part II –Internal Analysis
2.1.1Analysis of Louis Vuitton Resources and Competencies
Appendix 6 shows that LV have a lot or resources inside their organisation, this is
due to LVMH who is the parent company they provide LV and other brands with
resources to develop areas which need development, LV’s infrastructure is
decentralised as power is spread from the middle which is LVMH, LV also work
independently. LV have their own HRM department which controls hiring/firing,
payroll and employee performance. Their primary activities start from the production
of the product to delivering the final product to the consumer, as you can see the
process is very long hence why it takes time for LV to restock the product and why
they offer repair services for their bags. If consumers want extra personalised
service the production process may take even longer. (LVMH, 2015)
2.1.2 Distinction between Threshold and Distinctive Resources & Competencies
Appendix 7 shows LV resources and competencies, which I split into distinctive and
threshold capabilities, LV have more threshold capabilities than distinctive
capabilities, the reason for this is that LV still need basic resources to survive and
sustain in the market, despite surpassing their survival in the market and currently
holding the number 1 position in the market. Their distinctive capabilities will help
them maintain their number 1 position in the market. Brand image is a distinctive
capability as they can use their brand image against competitors and animal right
protestors where LV’s brand image will defend their products to prevent loss of
luxury consumers which will affect their sales and profitability.
2.1.3 Appraisal of the Resources and Competencies
Appendix 8 shows that some of LV’S resources helps achieve and sustain
competitive advantage, one of the resources that sustain LV’s competitive advantage
are intangible assets such as buildings and shops where LV have managed to locate
their shops and buildings where it has been difficult for their competitors to reach,
and in the countries or locations that LV have picked have made LV more successful
and build brand awareness. These buildings or shops that LV own are hard to imitate
as rivals in the market cannot copy the décor or style of LV’s shop as LV can sue
them for copying along with being in constant use by employees who need space to
complete their work successfully and shops are in constant use by employees who
need space to display the products to attract consumers to come inside the shop and
buy their products. Other capabilities mentioned have all sustained competitive
advantage that means LV have used the maximum of their resources and
capabilities to sustain competitive advantage. However unique designs are easy to
imitate hence why there is temporary competitive advantage and a rise of counterfeit
sellers.
2.2 Strengths and Weaknesses of LV
Please refer to Appendix 9 which lists LV’s strengths and weaknesses along with an
explanation.

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Part III Louis Vuitton Corporate and Business Strategy
3.1 LV corporate strategy
LV is part of the LVMH group which they merged with in 1987 (LVMH case study,
2013) and the strategy that LVMH has always followed is vertical forward integration
as they work together to ensure performance is not lacking in any of the input and
output activities along with being successful in their own different ways, LVMH
(LVMH,2016) explains “vertical integration fosters excellence both upstream and
downstream, allowing control over the every link in the value chain, from sourcing
and production facilities to selective retailing”, this shows LVMH allows control to LV
of their upstream and downstream activities which also brings together both
upstream and downstream activities so LV doesn’t have to source different suppliers
or manufacturers, as LVMH can provide suppliers within the organisation which will
save supplier costs and improve the quality of the finished product, LVMH also
creates synergies where all the brands under LVMH share resources and
capabilities to reduce further production costs and other occurring costs such as
hiring craftsmen, warehouse rent, use of machinery or equipment. Even though LV
and LVMH pursue this strategy they are still decentralised so they have their own
identity (LVMH, 2016).
3.2 LV generic strategy
Appendix 10 shows Bowman’s clock model (Mind Tools, 2016) where LV follow a
focus differentiation strategy which is one of Porter’s generic strategies, LV is a
designer brand which charges a high price to their luxury consumers which are:
absolute, accessible and aspirational (LV case study, 2013), so they only market
their products at these types of consumers, absolute are customers who have a high
net worth and are reputable around the world, accessible are consumers who just
want one of LV products to show people that they can afford LV products, and
aspirational consumers are celebrities who will make brand appeal for LV across the
world. These types of consumers do not look for the uniqueness or value of the
brand or product, these consumers only need the brand image of LV to persuade
themselves to buy LV products. High quality products and high profit margins is how
LV survive and dominate the market, as they aim at the niche market where only
luxury consumers buy so LV do not cater their products for everyone, their
uniqueness is the materials they use in their products which will make the product
last longer, whereas cheaper materials such as PVC will not make the product last
long. LV provide a unique service which is to repair any of their LV bags bought buy
these types of consumers, as no other brand provides this type of service as it can
be costly for them.

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Part IV – Louis Vuitton issues and challenges
To summarise LV internal and external issues, it is quite obvious that they do face
many problems and as consumers we do not see their problems that may affect LV
performance and profitability. One of the biggest issues LV face is from animal rights
organisations, LV and other brands uses real leather and other animal skins to sell
their product as luxury which enhances the product value, however these
organisations have protested many times and have made public awareness to
ensure that people stop buying luxury products, as Deeper Luxury mentions (Deeper
Luxury Report, 2015). Due to LV’s powerful brand image LV’s loyal consumers do
not pay attention to animal right campaigns, so these campaigns cannot cause much
damage to LV. LV faces counterfeit goods frequently as mentioned above in part 1-
1.1, so counterfeit good being made is still an ongoing issue for LV and other brands
as, it cannot be totally eradicated due to the mass market of counterfeit goods in
different countries.
To remain competitive and grow the business, LV should consider diversifying by
entering a new industry with a new product which will enhance LV’s brand image
along with gaining more public recognition. This will also be a challenge for LV as
they may face a lot of rivalry and they will have to come up with new ways to gain
competitive advantage in order to become number one in that industry. LV have
already entered a new industry which is luggage and travel where they have made
travel goods exclusively for their luxury consumers (LV, 2016), so it is still not aimed
at other types of consumers, however it is a new product and a new industry, but LV
should consider going into a new industry where they can aim their products at
everyone along with industry being attractive and profitable.

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Part V – LV strategic options for growth
5.1 Generating Strategic Options
Ansoff Matrix
Appendix 11 shows that there are options for LV to expand and grow their business
by using their resources and competences to be able to do so. Penetrating the
current market will boost their sales by using marketing techniques to attract
potential consumers and re-establish their relationship with current consumers. LV
can easily diversify in a new industry with a new product as they have enough capital
and profit, one of the industries that LV can go into is the beauty industry, many
luxury goods brands have managed to establish a reputable makeup line which is
affordable for everyone, so even if it’s still aimed at luxury consumers other types of
consumers are able to buy the makeup product, hence LV can attract more types of
consumers from the beauty industry. LV can make use of their Facebook page
where LV can add products on their Facebook page so consumers do not have to go
through LV website to buy the product. This will save money for LV as they will not
have to pay a high fee for maintaining the Facebook page with add-ons.
TOWS Matrix
Appendix 12 shows the TOWS matrix for LV, this model is a combination of
strengths, weaknesses, opportunities and threats where all of them are combined to
make four strategies. The S.O strategy is how LV can use their strengths to take
advantage of opportunities, for example LV emerging in new markets by using their
brand name as a strength. The S.T strategy is how LV uses their strengths to avoid
threats, as mentioned in appendix 12 LV can use their brand image to fight
counterfeit sellers, as these sellers do not have the reputation as LV to fight against
LV. The W.O strategy is how LV can use their opportunities to overcome their
weakness, where LV can emerge in a new market but aim at selling goods at
everyone by discounting goods which are damaged, out of season or discontinued.
The W.T strategy is how LV can minimise their weaknesses to avoid threats, this is
similar to W.O except if LV decide to still aim at luxury consumers it will affect global
economy, other consumers who do not shop regularly at LV will start spending less
and LV will have to suffer with the global economy, LV may have many luxury
consumers who are loyal but they also have accessible consumers and it will not just
be one of them but hundreds of them who do make a difference to LV sales and
profit.

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5.2 Evaluating the strategic options
Strategic option 1 as shown in appendix 13 and 14, is the best strategy for LV as it
fits in with their mission and vision, where they are trying to expand in new emerging
markets and enhancing quality products globally. Option 1 is quite feasible as they
have the suitable resources and competences to carry out their strategy
successfully, I think many of the stakeholders will accept this option as they would
want LV to expand and more importantly grow through retail opportunities where
more jobs are created which can be beneficial for the community and the business,
despite all the advantages of selecting option 1, LV may encounter a few problems
which can affect the strategy being successful, although the strategy may be suitable
for LV some of the stakeholders may disagree by expanding via retail opportunities
as it will reduce their profit along with not having their own shop so they cannot
display their products according to how they want to display it. The strategy is only
feasible if there are no hurdles in the way, so they can only expand in emerging
countries which prevents LV from entering the market, this can be consumers who
are brand loyal to one single brand they do not shop elsewhere for their goods, or if
there is no market for luxury goods and the economy where the economy can
fluctuate anytime in the new market which LV decides to compete in. Acceptability is
when all the stakeholders agree with the strategy as some may analyse it and
disagree which will affect their performance, image and could lead to conflicts.
5.3 Implementation
The resources LV will need to successfully implement strategic option 1 are:
machinery, LV will need to invest in machinery as LV will be working in a new market
and will have to adapt to different machinery which is compatible with the country’s
writing and typing system along with health and safety regulations. LV will need
manufacturers and suppliers who will produce their products as their current
suppliers or manufacturers may not have a second branch, therefore LV may need
to source suppliers and manufacturers themselves or with the help of LVMH, LV will
need storage for raw materials and finished products so they will need warehouses
where rent will vary on capacity and size. LV need new employees to help with
performance of LV improve in emerging markets along with the ability to speak their
native language to prevent language barriers, LV most importantly will need cash-
flow to start up the business in case of any occurring costs in the new market. LV will
need buildings to display their product so it looks presentable and attract consumers
to buy from them and gives employees space to work. LV will need some stock to
sell at the beginning so that LV won’t have to turn away a consumer because they do
not have any products in stock, HR employees will be hired on the basis to look after
new staff and control of hiring and firing new employees, these employees may not
be familiar with the new market but have the experience to cope with new
employees. Brand image is the biggest resource LV will be carrying as they are
globally recognised which will help them to be more locally recognised in the new
market, so even those people who cannot afford their products will still know about
LV.

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Recommendation & Conclusion
To conclude this report, I found it amazing how far LV has come in terms of quality
and brand, however LV still faces competition globally, especially where political
power influences decisions of consumers when buying from global brands, so LV will
face strong competition in countries where political power is strong.
A lot of brands under LVMH have taken retail opportunities and have found success
through retail, this is a step which LV should consider as they have their own store
but only few people will know about one LV store in every city, whereas department
stores are all over the city and there thousands of concessions where consumers
come in and out, LV will be that brand that brings consumers in, however to sustain
that consumer behaviour they really have to lower their prices in order to remain
competitive in retail as their prices will not work in department stores unless there
are loads of luxury consumers. In department stores every consumer look for
bargains and they know if they find a bargain in LV they will spread word of mouth
quicker than any other type of advertising which costs LV, so this is another way to
sustain competitive advantage.
As mentioned above a lot of luxury goods brands have gone into a new industry to
sustain competitive advantage such as Chanel, Marc Jacobs, Tom Ford where they
have their own makeup line so they are getting the best out of the brand, although
there is a lot of rivalry in beauty, however LV is a recognised brand it is easier for
them to promote their new products to all types of consumers who are fans of their
brand or make up lovers who blog about new makeup products and give reviews of
the product, if the review is good consumers will consider buying the makeup
product no matter what the price is. Another ongoing problem LV will face is from
animal rights organisations where they will continuously try and defame LV for using
animal skin in their product, so LV should use more eco-friendly products to prevent
themselves from being defamed.

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Reference List for Appendices
Appendix 1:
Deloitte, (2014), Global Powers of Luxury Goods 2014, [online], available at:
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deloitte/GP_Luxury_2014.pdf (accessed 15th January 2016)
Economist, (2014), Disillusioned Hedonist Shoppers, [online], available at:
http://www.economist.com/blogs/schumpeter/2014/02/luxury-goods-market
Guardian, (2014), Burberry and Mulberry facing branding challenges in luxury
market, [online], available at: http://www.theguardian.com/media-
network/2014/nov/06/mulberry-burberry-luxury-branding-challenges (accessed 8th
January 2016)
Guardian, (2015), LVMH says slowdown in china affected sales, [online], available
at: http://www.theguardian.com/fashion/2015/oct/13/lvmh-third-quarter-results-china-
slowdown-affected-sales-growth-louis-vuitton (accessed 8th January 2016)
Deeper Luxury, (2015), Deeper Luxury report, [online], available at:
http://www.wwf.org.uk/deeperluxury/_downloads/DeeperluxuryReport.pdf (accessed
15th January 2016)
Angella Jiyoung & Eunji Ko, (2010), Impacts of Luxury Fashion Brand’s Social Media
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15th January 2016)
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(accessed on 10th January 2016)
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http://www.tiffany.co.uk/CSR/Protecting.aspx (accessed on 9th January 2016)

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Louis Vuitton, (2016), Environment, [online], available at:
http://uk.louisvuitton.com/eng-gb/la-maison/environment (accessed on 12th
January 2016)
Rachel Dodes & Sam Schechner, (2010), Luxury Goods industry is changing the
way it conceives and markets its businesses, socially and environmentally speaking,
[online], available at: http://www.sosemarketing.com/2010/06/07/the-luxury-goods-
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and-environmentally-speaking/ (accessed 8th January 2016)
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2016)
Appendix 2:
Louis Vuitton, (2016), Louis Vuitton sitemap follow us, [online], available at:
http://uk.louisvuitton.com/eng-gb/homepage (accessed 15th January 2016)
Appendix 3:
Burberry, (2016), Contact us, [online], available at: https://uk.burberry.com/customer-
service/contact-us/ (accessed on 15th January 2016)
Coach, (2016), Sitemap, [online], available at: http://uk.coach.com/sitemap?cid=site-
map (accessed on 15th January 2016)
Appendix 4:
Violeta Cebreros, (2012), luxury leather goods, [online], Google Scholar, p. 12-20,
available from:
http://ibobel.pbworks.com/w/file/fetch/70077775/Cebreros%20Violeta%20Industry%2
0Analysis-%20Leather%20Goods%5B1%5D.pdf (accessed 15th January 2016)
Coach, (2016), bargaining power of buyers, [online], available at:
http://fashionwithcoach.blogspot.co.uk/2011/05/coachs-bargaining-power-of-buyers-
and.html (accessed 8th January 2016)
Appendix 5:
Forbes, (2015), LV knows all too well counterfeiting is a costly bargain, [online],
available at: http://www.forbes.com/sites/realspin/2015/06/25/as-louis-vuitton-knows-
all-too-well-counterfeiting-is-a-costly-bargain/ (accessed 8th January 2016)
Appendix 6:
Louis Vuitton, (2015), Louis Vuitton, [online], available at:
http://www.louisvuitton.cn/content/dam/lv/online/picture/allcountry/careers/downloads
/metiers_logistics_supplychain_job_sheet4_en.pdf (accessed 15th January 2016)
LVMH, (2015), LVMH Model, LVMH, [online], available at:
http://www.lvmh.com/group/about-lvmh/the-lvmh-model/ (accessed 15th January
2016)

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Louis Vuitton, (2016), Product Development, [online], available at:
/metiers_product_development_job_sheet4_en.pdf (accessed on 15th January
2016)
Appendix 9:
Ahuja,V. (2014), LV: using Digital Presence for brand, [online book], marketing in
contemporary globalism, p.315, available at:
https://books.google.co.uk/books?hl=en&lr=&id=maF_BAAAQBAJ&oi=fnd&pg=PA31
5&dq=+Louis+Vuitton:+Using+Digital+Presence+for+Brand&ots=5qPLBVOC-
O&sig=q0UbZjiouYZsv22AU-
PB26QPABc#v=onepage&q=Louis%20Vuitton%3A%20Using%20Digital%20Presen
ce%20for%20Brand&f=false (accessed 15th January 2016)
Appendix 10:
Mind Tools, (2015), Bowman’s Strategy Clock Model, [online], available at:
https://www.mindtools.com/pages/article/newSTR_93.htm (accessed on 15th
January 2016)
Appendix 11:
Louis Vuitton, (2016), Product Development, [online], available at:
/metiers_product_development_job_sheet4_en.pdf (accessed on 15th January
2016)
Mind Tools, (2016), Ansoff Matrix, [online], available at:
https://www.mindtools.com/pages/article/newTMC_90.htm (accessed 15th January
2016)
Appendix 13:
Boundless, (2015), Making Strategy Effective, [online], available at:
https://www.boundless.com/management/textbooks/boundless-management-
textbook/strategic-management-12/strategic-management-86/making-strategy-
effective-417-1404/ (accessed on 14th January 2016)

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Appendix 1 – PESTLE Analysis affecting the luxury goods industry
Political Deloitte (Deloitte, 2013) suggests the political power that affects the luxury goods industry is brand power, as those brands with
higher reputation and image will influence government and luxury consumers to buy from their brand, however China has noticed
the power of brands therefore China has taken the step to encourage Chinese luxury consumers to buy their luxury goods locally
from china, the Chinese government has set out proposals where SEO’s (State Owned Enterprises) can increase competition
against big brands in China and other local competitors along with SEO’s having more control over their business which enables
them to grow and expand across China, this will not only increase China GDP but luxury customers will find it cheaper to buy from
local businesses who have same or similar quality as the big brands.
Economical Most countries have recovered from the recession in late 2007, countries like China, Russia and Middle East where luxury
consumers are found in these countries according to the guardian (Guardian, 2014), therefore businesses in the luxury goods
brand try to aim consumers from these counties, although this is more or less a positive impact, the economy has affected other
companies in the luxury goods industry such as mulberry and Burberry which is why these companies are preventing expansion
plans due to not enough sales or profit being made (Guardian, 2015). According to the economist (Economist, 2013) despite the
economy being slow in 2013 the number of luxury consumers has tripled less than 20 years the number of wealthy consumers are
approximately 130 million about 50 million of them are from China and spending has risen to €217billion.
Social Luxury goods companies use a lot of real leather or fur to sell to high end customers who purchase this for home décor or other
uses and these customers are not aware of the processes of making these goods, hence why they spend money without knowing
about animals rights and welfare and the product process. Due to this there have been many protests but the big brands in the
industry have always managed to keep them quiet, but now more consumers are getting to know about how their products are
made and have either switched to a brand that does use real leather or fur or have completely stopped using the product and
found alternative. Another social factor which affects the luxury goods industry is the fair trade policy where the brands use labour
in other countries to produce their goods, where these big brands sell their goods at a high price but giving so little to the people
who work day and night to produce the product. (deeper luxury report, 2015)

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Technological Brands in the luxury goods industry are starting to adapt to new technology, where they use social media sites such as
Facebook, Instagram, Snapchat and other social media sites to promote their brand, offers and products. Through social
media they are also able to communicate with customers instantly where customers do not have to wait a week or months
to get a reply they will get it instantly whether it’s a recent order they purchased other queries regarding the company or any
other products. Luxury goods brand also use social media sites to upload videos or photos about any events they have
taken part in such as fashion show or catwalk and through this they can attract potential new consumers and current
customers will see their new collection and will start spending money due to the brand updating its product or services.
(Angella Jiyoung Kim & Eunju Ko, 2010)
Environmental The Luxury goods industry and LV have started to protect the environment by reducing carbon footprint, waste, preserve
natural resources and other activities or factors that affect the environment, to do this LV and other brands have started
using eco-friendly materials which are expensive to buy but to help sustain the environment LV buy these materials and sell
the product at a higher price, where the money goes towards organisations that help protect the environment (Purse Blog,
2009). Other brands which have adopted a CSR which is an optional choice however many companies are advised to follow
and it mainly revolves around the society and environment and the business should have an positive impact on the
environment and society, one of the brands in the industry who have maintained CSR is Tiffany & Co where on their
website it shows all the CSR they follow such as environment, fair trading, charity, climate change (Tiffany & Co, 2015).
Legal Luxury goods brands in the industry are facing a lot of counterfeit of their goods which they sell at a high price for luxury
consumers which has affected some of their brand image and have made losses in fighting for court cases against fraud
sellers who have made fake goods. Some brands have managed to protect their products and designed by patenting them
or by designing products which are hard to copy and through this they have not been to any court cases as they fraud seller
would have lost due to the product or design being patented, and because the design or product would be hard to copy
these sellers give up trying to make the luxury good product. (the future of luxury, 2014)

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Appendix 2 – Screenshot of LV social sites
As you can see LV is active in most social sites,
popular one being Facebook and twitter, most
companies only have a few social sites they are
present in but LV shows that they are in different
social media sites to cater to all luxury consumers
who do not have Facebook or other common social
media sites.

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Appendix 3 – Social media sites of other luxury brands

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Appendix 4 – Porter’s five Forces of Competition framework of the Luxury Goods Industry
Threat of New Entry
 Needs large investments to
build a brand that will sustain in
the future
 Brand recognition and loyalty
will attract middle-high income
earners, will difficult for new
players to achieve this
 All these top brands have
experience and competing
against them may be difficult to
understand buyer behaviour
Buyer Power
 Most of the brands customers in the industry are
mainly ultimate customers who buy the product
from the brand once.
 However those that are loyal make up half of the
brands profit and sales.
 Buying power is high as ultimate and immediate
customer can switch easily to another brand if
there is low switching cost and buyer competition
threat.
 Counterfeit has effected bargaining power luxury
good customers as consumers are willing to
spend less.
Threat of Substitution
 Counterfeit items can be a threat to
substitution for the industry who aims to sell at
high end customers.
 Over years counterfeit items have been
improving quality over the years so it is hard to
tell sometimes which luxury product is genuine
and fake.
 However counterfeit sellers of luxury goods
have not got the same status as these top
brands in the industry.
Bargaining Power of Suppliers
 Leather and other luxury goods are sourced in countries like
India or China due to low production costs
 So luxury goods brands have to build a good relationship with
their suppliers, a brand may have 40+ suppliers so if one
supplier does not supply good quality the brand can switch to
another one
 So there is low bargaining of supplier power, so suppliers do
not have much control of price and quality
 Since these brands are recognised globally even if the brands
switch it will not ruin their brand image
Competitive Rivalry
 There is a lot of competition in the luxury
goods industry as each company tries to
beat each other by either providing best
price, quality and product overall.
 Many top brands have the resources and
capabilities to gain and sustain
competitive advantage.
 Many top brands have also been around a
long time which gives them competitive
advantage over others as they will have
experience on their products and the
business
Intensity Level
High Threat
Medium Threat
Low Threat
Bargaining power of
Suppliers
Competitive
rivalry
Threat
of new
entry
Buyer Power
Threat
Of
Substitution

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Appendix 5 – Threats and Opportunities of the luxury goods industry
Opportunities Reason
Emerging markets Since the luxury goods industry is growing, brands can start to grow and expand in emerging markets
such as Middle east or Africa or even BRIC countries which are recently developed countries which
include Brazil, Russia, India and China, this will be profitable for brands as these countries are low in
production costs so production in these countries will be cheap along with selling their products they will
gain a lot of profit due to the population in these countries.
Expansion and growth via
concessions in
department stores
In my opinion brands in the industry can expand in local department stores or concession to make it
convenient for luxury consumers so they do not have to travel all the way to the big branded shop,
instead they can just go to their local department store and purchase the item they want from there.
Using more
environmental friendly
materials and support
environmental
organisations/charities.
In my opinion big brands in the industry can make more use eco-friendly materials not just on clothing
but on other luxury goods as well and the more big brands are encouraged the better the brand image
will be in the brand and in the industry, this will change views of consumers who didn’t like big brands
due to animal use in their product. Also a lot of big brands do not support environmental causes or
organisations if they support some of these causes or organisations a lot of people will increase their
brand image and reputation along with luxury consumer’s awareness of environmental causes so they
will put money towards these causes.
Threats Reason
Global economy In my view the global economy is a threat to the industry as mentioned in 1.1 where the economy growth
on some countries are slow which can decrease profit and slow down sales, recently LV has been hit
with slow growth in china due to their economy which means the economy is a threat to the luxury goods
industry.
Counterfeit goods This is a threat as a lot of counterfeit goods are still around no one has eradicated them despite facing
heavy penalty fines or prosecution, this will effect big brands in the industry as they charge expensive
prices for the same product that these sellers make except they charge a much lower case which
attracts customers who cannot afford the genuine luxury goods, therefore these sellers are making a
profit as they get it made at a cheap price but similar quality to the big brands so it will not affect their
recurring costs as they sell their goods via EBay or Amazon which have seller rights.
Consumers spending
less
As mentioned in 1.1 Chinese luxury consumers are being encouraged to buy from local sellers in China
to help increase the value of GDP of china economy and these luxury consumers know that the local
businesses have similar quality as the big brands so to save money they will buy from local businesses.

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Appendix 6 – Value Chain Framework of Louis Vuitton
PRIMARY ACTIVITIES
Firm Infrastructure – Decentralised structure as brands under LMH have the power to
control their own brand.
Human Resource Management – Hire crafted HR advisors or leaders to make sure that employees
In Louis Vuitton are working effectively. They are in control of payroll, along with rewards/bonuses for
individual & punishment for those who are not performing well up to LV standards.
Technology Development – Product design, R&D process carefully planned with modern
& complete engineering technology, along with daily use of technology such as tills or other processes which
Cannot be handled manually needs to be up to date to prevent delays and problems from arising.
Procurement – LV have procurement officers inside the organisation to obtain goods and services to help with
Primary activities.
Inbound Logistics
LV have one
international supply
chain of all who supplies
LV with leather goods,
ready to wear, shoes,
watches and
accessories
Operations
LV have a central warehouse
in Cergy where LV products
made and are met with high
environmental quality
standards.
Outbound
Logistics
LV have one
international
logistics centre
and nine regional
warehouses in
Hong Kong,
Osaka, Tokyo,
Singapore,
Ontario,
Cranbury,
shanghai, Cergy
and Dubai.
Marketing &
Sales
LV have control
over their own
sales and
marketing where
their distribution
channel is 100%
exclusive as they
do not rely on
other distribution
channels to
promote their
products.
Distribution channel
100% exclusive
Service
Provide information
On how to care for
their product.
Can repair
Customer’
Damaged
Bags.

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Appendix 7 – Strategic Capability Competency Framework of Louis Vuitton
Resources (Productive
input or valuable asset
the company owns)
Competences (Is the way they use their resources to make the company run efficiently.
Threshold
Capabilities
(required to be
able to survive or
compete in the
market, minimum
capabilities
required at this
stage)
Machinery & Computer
systems
These are the basic resources needed so that LV can produce the finished, prototypes or
even use of tills, if there is no machinery they will not be able to produce the goods
likewise with computer systems.
Manufacturers and
suppliers
LV needs these resources from suppliers or manufacturers to help produce the finished
product, without these suppliers or manufacturers they will not be able to make the
product at all, and will have obtain raw materials elsewhere.
Storage for raw
materials
LV needs storage for raw materials to later be used in the manufacturing process to make
the finished product, these raw materials can be leather, plastic, metal, another reason
why they need separate storage for these materials is to prevent material smell which can
cause to health and safety issues of employees who work in the production department
may suffer from lung cancer or other diseases which may be harmful for the body.
Storage for finished
product
LV needs to store their finished product in a separate warehouse so that the product does
not get rusted, smell or have dust which can damage the product and the product will
become unsellable.
Employees LV needs employees to carry out business functions across the company to maintain
good performance of the company and to help sell the products to customers.
Cash-flow LV needs cash-flow to keep inflow and outflow of cash consistent by checking financial
figures and reports to see where cash flow is needed the most.
Intangible assets e.g.
buildings, shops
LV needs buildings and shops, buildings because there needs to be a place where
employees who work in other departments other than the sales department need space to
carry out their job role successfully. For example if LV have helpline they will need space
where a telephone is available to communicate with customer and advise them how to
solve the query. LV need a shop to sell their products in a shop to make it appealing for a
customer to come in and buy the product, in a shop to attract consumers lots of
businesses make use of their shop window where they put the latest collections or new
products which entices consumers to buy the product. By having a shop LV creates more
jobs so it benefits the community.

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Stock LV needs minimum amount of their stock to sell to customers, if they do not have any
stock they cannot sell anything to their customers. Other than advising them to buy online
or check in another store.
Debtors and creditors LV needs creditors where they are given a time period to buy stock and pay later so when
LV sell more of their products they can payback their creditors early. LV need debtors so
that when there is not enough inflow of cash their debtors can pay them immediately.
Distinctive
Capabilities
( required to be
able to win and
achieve
competitive
advantage over
competitors in the
market)
Intellectual capital e.g.
patents, business
systems
LV have patents to help protect their designs and products from counterfeit sellers, so if
they do have a counterfeit case they will be protected and so the fraud seller will have to
pay to LV for copying. LV need customer databases to build client loyalty by sending them
offers to those who opt in for subscription.
Other brands who work
with them under the
control of LVMH
LV is part of LVMH who owns other brands which work in different industry such as wine
and brewery, jewellery, perfume, beauty. This will help LV to sustain themselves so if they
need support or finance from other brands they don to have to worry as LVMH will provide
it, and if one of the brands in LVMH doesn’t work it will not affect the other brands, so LV
have a lot of protection from different brands and LVMH themselves.
Unique designs and
prototypes
LV have unique designs or prototypes to test whether the product will work in the market
and will it help gain competitive advantage.
HR employees who are
intangible assets
LV have employees who have experience and knowledge on how the market for luxury
goods work and knowledge on how to improve the brand which can be an advantage to
LV to gain competitive advantage and to sustain the company in the future.
CEO Likewise LV CEO is a distinctive capability as he may have years of experience in various
companies which he has worked for so he will have knowledge on how to dominate the
market, along with a suitable leadership skill which will shape the LV into performing more
effectively and efficiently along with building the vision of LV.
Brand image LV’s brand image is an intangible asset as they can use this against new entrants and
current rivals.
Skilled craftsmen LV have skilled craftsmen who know how to make their products which can be useful if
they decide to bring a new product out they will know how to make it.

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Appendix 8 - VRIO framework of Louis Vuitton
Resources/
Capabilities
Valuable Rare Difficult to
Imitate
Useable by
the
organisation
Competitive Implications
R1 Machinery & computer
systems
Yes No No Yes Competitive parity
R2 Employees Yes - - Yes Competitive parity
R3 Intangible assets (Building,
shops)
Yes Yes Yes Yes Sustained competitive advantage
R4 Stock of finished products Yes No No Yes Temporary competitive advantage
C1 Intellectual property (Patents,
business systems)
C2 CEO Michael Burke Yes Yes Yes Yes Sustained competitive advantage
C3 Unique designs & prototypes Yes Yes Yes Yes Sustained competitive advantage
C4 Skilled craftsmen or
specialised employees

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Appendix 9 - Strengths and Weaknesses of Louis Vuitton
Strength Reason
Biggest and powerful
brand in the world
This is their biggest strength as everyone in the world knows about Louis Vuitton even those who cannot afford
their luxury products, and through luxury consumers LV become more powerful as these luxury consumers will
have base of other customers who may be interested in their products.
Known for skilled
handwork and use of
delicate materials
Since the 19th century LV was known for handwork on their products where specialist skilled employees were
hired to make their luxury products proving to customers that machinery is not needed to make a product, they are
also known for using delicate materials where other businesses use PVC or other materials which will not last
long, whereas LV use genuine leather or fur to make the product last longer.
Repairing damaged
products
LV offers repair services to consumers who have bought their bag and is damaged so LV will fix the damaged
bag, the repair cost is not listed on the website, however as these bags are owned by luxury consumers they will
not care how much it will cost to repair the bag.
Weakness Reason
Products are only
aimed at luxury and
elite customers
This is LV’s biggest weakness as they only aim their luxury products to consumers who can afford their products
not at those who cannot afford it, and even if the person can afford it LV will expect them to buy something of their
every month or week. LV should make an outlet or discounted goods for consumers who are not able to afford
their luxury goods to increase brand awareness and appeal of luxury goods amongst middle class people, LV
have said on their website that they only sell through their stores or websites and no goods are discounted even if
its second hand which can be suspicious as it can be fraudsters claiming all this.
Not known for
offering products at a
discount rate
This is related to the first weakness, as LV do not offer discounted goods which could have made it more
affordable for those who cannot pay the full price of LV products but can pay the price of discounted goods which
can increase customer loyalty as customers will be willing to come back when LV have discounts on their
products.

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Appendix 10 - Strategy Clock Model

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Appendix 11 – Ansoff’s Matrix for LV
Market Penetration Product Development
 Develop a new marketing strategy to gain more sales in current
market
 Introduce special offers or promotions on existing products
 Identify which LV products creates more sales and increase the
product quantity, and disregard products which are not selling.
 LV can advertise to encourage more people to use their
products
 Buy a competitor company to have both customers bases to
increase sales and profit
 Continuous improvement for perfection by inventing
innovative products that are popular trends which
customers are enticed to buy
 Fast availability of new products in various
occupations
 1300 new products are launched every year
 500 models produced in prototype workshops
 Re-package the products to make it more appealing
 Improve customer service or quality
Market Development Diversification
 Target areas or countries which do not have LV, but have a rich
culture and economy, where risks are low and profit is high
 LV can use different channels to sell to countries which do not
have LV so making the products available in them countries via
online site, direct sales team.
 Use market segmentation to target other types of customers
who may be willing to buy LV products
 LV should use the marketing mix to reposition their product and
brand, and make more people aware of their existence
 LV could go invest in new products such as makeup
where the market segmentation will be aimed at
everyone from luxury consumers to middle class
consumers who want to have branded makeup if not
their bags.
 There will be a risk of the make-up line not producing
enough sales or profit to sustain itself, however LV
bags and leather goods will not be affected.
 This will be an opportunity for LV to create a new
product such as makeup products where people will
still pay the high price but it will still be affordable for
everyone.
 Joint ventures such as MAC, Max-factor
 Acquisitions of a company operating in a new industry.
Existing Products New Products
Existing
Markets
New
Markets

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Appendix 12 - LV TOWS matrix model
Opportunities
1. Emerging markets
2. Expansion and growth through retail opportunities
3. Using more eco-friendly materials
Threats
1. Global economy
2. Counterfeit goods
3. Consumers spending less
Strengths
1. Biggest and
powerful brand in
the world
2. Known for skilled
handwork and
use of delicate
materials
3. Repair of
damaged bags
Strength & Opportunity (SO) Strategy
LV can use their brand name to emerge in new markets,
where new markets will welcome LV with everything set
up for them, so they will not have to do anything extra to
set their business in a new country. Through expansion &
growth in department stores LV can set up a repair
service where they can charge consumers who have
bought their bags at a reasonable rate, but also for those
consumers who haven’t bought their bags LV can charge
them a repair fee which can vary on the damage done to
the bag. Since LV is known for using delicate materials
they can invest more on eco0friendly materials and get
their skilled craftsmen to switch materials and us eco-
friendly materials instead to create a high quality bag that
will last longer.
Strength & Threat (ST) Strategy
LV can use their strength which is brand image to
fight counterfeit goods to prevent luxury consumers
switching from original LV bags to counterfeit by
informing them that they use genuine leather in their
products which may prevent them from buying
counterfeit goods also, tarnish the reputation of the
counterfeit seller by naming and shaming them. LV
can offer discounted repairs service to consumers
who buy bags or other goods from LV, this will
increase luxury consumers spending.
Weaknesses
1. Products aimed
only at luxury
consumers
2. Does not offer
products at
discounted rates
Weakness & Opportunity (WO) Strategy
LV can emerge in a new market but aim at selling at
everyone by selling their goods discounted for those who
cannot afford their products. If LV expand and grow via
department stores LV will eventually aim at everyone
through department stores as people will want to but their
item, therefore they will spend extra cash to buy their
products,.
Weakness & Threat (WT) Strategy
As mentioned in WO strategy, LV can aim products at
everyone not at luxury consumers only therefore
gaining new customers and increase of sales and by
offering products at discounted rates products that are
out of season or discontinued. LV can emerge in new
countries where the global economy hasn’t affected
them such are rich countries where their wealth and
GDP growth is high. As mentioned in ST strategy LV
can name and shame counterfeit sellers so they are
not capable of selling anything.

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Appendix 13 - SFA Framework for LV
Suitability Feasibility Acceptability
The fit test:
I do not think the S.O strategy exploits
LV’s strengths, it encourages more
opportunities with the least amount of
risks and can create further new
strengths. I think the S.O strategy
does fit with the company’s
positioning as they are already
expanding and growing business
globally, however they still have to
consider expanding and growing
through retail opportunities.
Will the S.O strategy work in
practice?
I think the S.O strategy will work in
practice, as LV has the resources and
capabilities to deliver this strategy
successfully, however the main concern
is that whether LV will be able to
persuade itself and people who work in
the company to join retail opportunities,
as some employees and customers may
not like expanding and growing via retail
opportunities due to their high brand
image which lives up to the expectations
of employees and customers.
Performance outcomes & expectations
of stakeholders
I think the return will be high if LV
consider using the S.O strategy most of
the opportunities outlined have already
the strengths needed to carry out the
strategy successfully which will
encourage sales and profit which will be
in line of the expectations of the
stakeholders where ROE, image, EPS,
net profit and net revenue is concerned.
Return of risk may be low, however
there will be some unexpected risks
which can affect the performance of LV,
however it will be a short-term risk.

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Appendix 14 – Strategy Selection for LV
Criteria Strategic option 1 Strategic option 2 Strategic option 3 Strategic option 4
Suitability 4 3 3 2
Feasibility 3 4 2 2
Acceptability 4 4 3 3
TOTAL 11 11 8 7

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