LVMH Decision Making Assignment

Chan Chee Mang TP021569 BM014-3-3-DMKG

Table of Contents
Non-Financial Plan.....................................................................................................................3
1.0 Introduction ................................................................................................................................. 2
2.0 Demographic and Social Trends ................................................................................................. 3
3.0 Counterfeit Issues........................................................................................................................ 4
3.1 Recommendations ......................................................................................................................... 5
4.0 Competition (Porter‟s 5 Forces) .................................................................................................. 6
4.1 Bargaining Power of Buyers ................................................................................................... 7
4.2 Bargaining Power of Suppliers ............................................................................................... 8
4.3 Threats of New Entrants ......................................................................................................... 8
4.4 Threats of Substitute Products or Services ............................................................................. 9
4.5 Rivalry amongst Existing Competitors ................................................................................... 9
5.0 Marketing .................................................................................................................................. 10
5.1 Product .................................................................................................................................. 10
5.2 Price ...................................................................................................................................... 11
5.3 Place ...................................................................................................................................... 11
5.4 Promotion.............................................................................................................................. 12
6.0 Environmental Issues ................................................................................................................ 12
7.0 Plan 1 ........................................................................................................................................ 14
7.1 Maximax ............................................................................................................................... 14
7.2 Maximin ................................................................................................................................ 14
7.3 Minimax Regret .................................................................................................................... 15
7.4 Hurwicz (Criterion of Realism) ............................................................................................ 16
7.5 Expected Value Approach .................................................................................................... 16
7.6 Expected Opportunity Loss Approach .................................................................................. 17
7.7 Expected Value of Perfect Information (EVPI) .................................................................... 17
8.0 Plan 2 ........................................................................................................................................ 18
9.0 References ................................................................................................................................. 19
10.0 Appendices................................................................................................................................ 24
10.1 Appendix 1 ............................................................................................................................ 24
10.2 Appendix 2 ................................................................................................................................ 25
10.3 Appendix 3 ............................................................................................................................ 26

Asia Pacific University of Technology & Innovation Page | 1


Non-Financial Plan

1.0 Introduction

Louis Vuitton Malletier, a well-known brand which always referred as Louis or LV. LV has
become a dream, icon, representatives of elegance essence which is widely used by the
fashion media when being described (Pub Articles, 2012). In the year 1854, Louis Vuitton,
started his French fashion in Paris with a suitcase store concept using his own name and the
brand itself was later widely spread through the areas for its leather products for almost one
century time. In addition, LVMH- Moët Hennessy Louis Vuitton SA, was then created
through a $4 billion merger in 1987, is the world's leading luxury goods vendor, providing
products –perfumes, designer handbags, jewelry, accessories, sunglasses and books (Funding
Universe, 2000). The successful merging is one of the important aspects which made LV‟s
luxurious fashion image.

LVMH group mission is to represent around the world with the most refined qualities of
Western `Art de Vivre‟ and continues improvement in synonymous with both elegance and
creativity. LVMH emphasizes on the word „Perfection‟ by paying close attention towards
every details in their products, at the same time making their products and cultural values
embodied with blending tradition and innovation, kindle dreams and fantasies.

Nowadays, Louis Vuitton diversified their product lines. Besides bags and leather products,
LV logo and monogram is not only on accessories, shoes, sunglasses, timepieces, and
jewelries, but also other trend indicators such as books and stationeries. LV is the global
current leading international fashion selling their products in authentic LV boutiques, upscale
department stores and also through its online website. This is because LV products are high
standard in terms of quality and status which are highly priced; their market is targeted and
segmented for luxurious consumer which made them not easily affordable for regular
consumer. With its increased market, LV has gained many rivals in the luxury brand industry
such as Versace, Hermes, Burberry, Chanel, Prada, Gucci, Versace, Hermes and so on.

LVMH has become the star brand whilst focusing on their brand history, quality control,
marketing buzz, and right designs as the key elements. Having its corporate strategy focuses



on business diversification, merger and acquisition, LVMH has become the top producer of
luxury products, engaging on all luxury market segments and global renowned brand, and its
marketing activities are the organisation‟s competitive advantages and core competencies
through product quality, service quality, innovation and skills.

2.0 Demographic and Social Trends

It is vital for Louis Vuitton to have well understanding in demographic and knowledge in
social trends from time-to-time in order to identify the target market to get the right market
segment, continuously improve with innovated and creative products to cater the market
demands in order to achieve competitive edge in the luxury industry. LV brand has been
strategized to target different nation, both men and women ranging from the age from 22
years old to 65 years. LV consumers has been revealed in through the increase of aging
population of minority from the loyal baby boomers, majority generation X and Y which
shares the same attitude of going after luxurious lifestyles with a certain degree of social
status and education level. LV consumers are similar in their buying power and spending
power which are greater from very rich to middle class, as it evolve the economies of some
developing countries such as China, India and Brazil. A good example would be the result
which LV has contributed in China and Japan with the rapid rise of net profit since 2000s.

LV should strategies on alternating their design products made for niche consumer meaning a
specific product made for only a certain demographic groups. With this, it will also allow the
company to correctly identify the needs of the marketing target and segments to ensure the
brand‟s milestone.

Compared to its origin country, LV has stronger brand reputation in Asian countries like
Taiwan, Japan and Hong Kong. This happen especially on the LV leather bags product. By
the bags products itself, LV has achieved 40 per cent sales among Japanese Woman since
year 2000s. With the result, LV has successfully captured the Asian market by changing their
lifestyles through the unique monogram and high quality products (Marketing to China,
2012).

Moreover, LV should also consider scheming products for big sized women or tall men
markets. In fact, nowadays there are changes in the Western consumer groups especially



Americans on their attitude and behaviour towards luxury products. Due to the population
average weight of American citizens, many of them find it difficult for branded products to
suit them (Nguyen, 2004). If only LV can cater their design product to this wildest upward
segment in the market with characterising their product, they will be able to gain another
potential profitable market (Pew Research Center, 2012). This can be proven according to
researches, Asian Americans are the highest income, best educated and fastest growing racial
group in the United States America‟s child population grew more far diverse over the past
decade as a decline in the ranks of white children was offset by surging growth of Asians and
Hispanics (Dougherty, C., 2011). Asian Americans and Hispanics may be the minorities but
these groups in particular are experiencing growth in buying power that greatly exceeds that
of the general population which will be the good opportunity for LV products (Fahmy, S.,
2010).

3.0 Counterfeit Issues

Louis Vuitton is one of the world famous owners of registered and common law trademarks.
As the following are the common “LV trademarks”:

(Sources from: Fashion Law Notes, 2012, LOUIS VUITTON WINS IMPORTANT RULING
IN THE BATTLE AGAINST COUNTERFEITING, available at:
http://www.fashionlawnotes.com/2012/04/louis-vuitton-wins-important-ruling-in.html)



(Sources from: Detailed trademark information from the official, 2012, European Union
trademark database (CTM), available at:
http://trademark.markify.com/trademarks/ctm/lv's+dairek+usa./003939501)

George Vuitton, Louis Vuitton‟s son created the “Toile Monogram” pattern, comprised with
the initials LV and 3 distinctive design elements- a circle with a four-leafed flower inset; a
curved beige diamond with a four-point star inset; and its negative, in the 1890‟s to protect
the Louis Vuitton brand products from the unlawful imitators. Since that time, Louis Vuitton
has manufactured and sold their products bearing from Toile Monogram and secured numeral
federal trademark registrations for LV trademarks, including the Toile Monogram and every
elements of the pattern. Since its founding in 1854, Louis Vuitton has built up its reputation
worldwide for its design, innovation, quality and style in women‟s and men‟s leather goods,
fashion apparels and accessories. To help protect its valuable trademarks and to preserve the
good will and exclusivity of Louis Vuitton designs, Louis Vuitton closely controls the sales
of its products and the use of its trademarks, and has devoted and continues to devote
substantial resources to protect LV trademarks.

3.1 Recommendations

In the numerous fake LV products, the biggest sources are from Turkey, China, Thailand,
followed by Italy, South Korea and Morocco (Toy, S., 2012). Since LV has counterfeited
many issues on the violation of the trademarks, they should emphasise on providing proper
education on the brand itself and knowledge on the trademarks towards their customer as
premeasures by encouraging the customers on its genuine product. With the increase of
awareness on differentiating the real and the fake product (substitutes), can prevent and
reduce the number of substitutes in the market. And yet, LV is able to sustain their brand in



the marketplace. Assisting with the brand education, LV should set up an expert team made
up by auditors and attorney generals in order to be responsible in presenting law suits or
special investigation on trademark issues.

Also, LV should find ways in aligning with the government policy regards to intellectual
property rights in each state along with the copyright policies stating in the constitution law.
By this, help contributions from the government will allow LV to have legislative effect to
encounter the copycats. For example, a French maker of luxury goods, has successfully
lobbied the French parliament to make the import of even one counterfeit article a criminal
offense (Toy, S., 2012). Furthermore, the order got into effect in 60 days unless President
Barack Obama overrules it on public policy grounds, directs Customs and Border Protection
to turn away any products that are made in a way that is similar or copies the Louis Vuitton
trademarks (Slind, V., 2012). This shows that in USA and France, only genuine LV products
are able to enter to the market and the action reduces the chances for counterfeit products in
the market.

As the world leading luxury brand, everyday Louis Vuitton knowingly faces the stark of
reality battling and interdicting the proliferation of infringements of LV trademarks. LV has
been facing many counterfeiting issues especially in protecting their intellectual property
rights (IPR). As time passed, LV has become one of the most counterfeited fashion brands in
global. Recently, there is a rise in counterfeiting luxury products because numerous
manufacturing has been shifted to countries with poor intellectual property rights and with
the opportunity provided to those countries by technology such as Vietnam. But still, Louis
Vuitton is proud of its reputation for protecting intellectual property and creativity.

4.0 Competition (Porter’s 5 Forces)

To appraise the competition in the luxury brand industry, it is compulsory for company like
LVMH to adopt Porter‟s Five Forces model in order to identify their position in the
marketplace, to analyse the attractiveness and productivity of LVMH‟s products, and to
predict and determine approaches of the 5 forces (factors) which are risk of new entrants,
bargaining power of buyers, bargaining power of suppliers, rivalry among established firms
and the threat of substitutes.



4.1 Bargaining Power of Buyers

In LVMH case, the bargaining power of buyers is relatively low. This is because the targeted
customers of LVMH are smaller in terms of market size, limited in amount of number of
customers resulted less need of buyers to intellect with company‟s total orders.

There are two types of customers which are the super-rich and middle-market customers, who
selectively trade-up to higher levels of quality, taste and aspiration. The super-rich customers,
also known as the High Net worth Individuals, seem not subject to the world economic cycles.
In addition, they are a growing number. Estimates predict that their number will increase
from 26 million in 2000 to 40 million in 2005 shows an increase of 9% p.a.

The middle-market customers are those that are willing to buy luxury goods, but "they want
the hottest, trendiest design, which increasingly have to be marketed in creative and
expensive ways". They can potentially expand the market quite dramatically, as they are part
of the upper-middle class. They are considered to be both a great opportunity (show no price
sensitivity when buying the "hottest" product) but they are also a threat. "They are more
demanding, more selective and show less brand loyalty than the super-rich class". This
implies for the luxury goods industry a difficult equilibrium between the two kinds of
customers, because both are not necessarily compatible. This can lead to a difficult trade-off
between satisfying a smaller number of loyal customers and a larger number of more volatile
customers.

In summary, LVMH customers are grouped up in the categories of the extremely high
income people, rich to middle income level customers and for so, LV products are highly
priced. The company emphasises on brand loyalty and customer loyalty. Since the product
differentiation is high, customers including the retailers and end users will not be able to have
negotiation or bargain on their products. With this reason, high end products of LVMH
doesn‟t offer discount sales.



4.2 Bargaining Power of Suppliers

The bargaining power of the suppliers depends on the segment. As some tended to have
increased bargaining power, this leads to the concentration and vertical integration trend in
the industry, one of the reasons for which is to lessen the bargaining power of the suppliers.

Until now, there is not observed concentration among the suppliers of the luxury goods
industry among themselves. There is however a trend for larger houses to buy smaller
suppliers and to deprive the market forms access to those suppliers. For example, LVMH has
recently taken over Les Tanneries Roux, a Romans-sure-Isere-based leather supplier
(Accessories Magazine, 2012). With this move to acquire key suppliers will reduce the
bargaining power of suppliers in terms of leather products. By limiting the capability to play
suppliers contrary to each other, LVMH would be able to save costs on storage space and
capable in making sure of the quality of products supplied.

In the case of LVMH‟s bargaining power of suppliers is relatively low. This is because the
company often purchase raw materials from suppliers in basis of consignment. With this
method, it reduces the loss marking and establishes economies of scale.

4.3 Threats of New Entrants

There are a few new entrant threats which LVMH can focus on evaluate how much of a
threat of new entrants are for LVMH it is critical to scrutinise the blockades of entry into the
business. First of all, new entrants made up mainly by new designers- starters of new own
brand in the industry. Normally, if these new entrants are successful, they would be quickly
acquired by the more famous brand of the industry to provide them facilities and needed
infrastructure for growth. In return, if the new entrant remained independent, this would
represent a threat to company like LVMH by capturing the volatile middle market customers
(Hills and Jones, 2010). These customers go after the established name and the perception
build around it, after the quality and design. All these elements take time to be built, which
makes the threat of new entrants less significant.



In contrast, threat of new entrants can be low as barriers to entry are high. As LVMH has
fashioned and already built a strong brand image and perception in the market for long time,
customer‟s loyalty and trustworthy deep-rooted for its brand name, product service and
quality are undeniable whereby a new entrant cannot be compatible for short period of time
which is why barriers to stay are also relatively high as company has to engage between elite,
durable, and fashionable reputation. Big Brand Company like LVMH has been functioning in
the luxury products market for a century gives them the complete cost advantage in business
key development which is absolute to new entrants by playing well in engaging their image
in the marketplace to sustain their perception to cater not only customer‟s needs and wants
but also the customers‟ desires. Later on, many new entrants find it difficult to survive and
would easily be kicked out from the market. A very good example of new entrant is Hermes
newly launched in Shang Xia, China. Not for long, they have to close down due to unable to
sustain in the China market.

4.4 Threats of Substitute Products or Services

In LVMH case, threats of substitute products or services are relatively high. This is due to,
besides Louis Vuitton, there are many other luxury products such as Prada, Dior, Chanel,
Hermes, Armani Exchange and so on. However, the main direct competitor to LVMH is
Pinault-Printemps-Redoute (PPR), a French luxury holdings company that includes such
brands as Yves Saint Laurent and Gucci, and Compagnie Financiere Richemont. Another is a
Swiss luxury company that includes such brands as Cartier and Montblanc. Each major
luxury brand has their own reputation and quality. Thus, it is important for LVMH to
emphasise on the company core competency, uniqueness of product and service, to well-
manage counterfeit issues and to attract and retain capable employees in order to have better
value chain and distribution to reach the final users. Also, due to the uniqueness of LVMH on
their “Toiler Monogram”, substitutes find it hard to earn in the market when the loyal
customers are well-knowledge on the differences.

4.5 Rivalry amongst Existing Competitors



The competitiveness in the industry can be qualified as relatively high, but given the high
margins and the customers' perception about the price, the competition is not on price, but
rather on quality and image perception, as well as on the ability to attract the right designers
with right abilities. This created “Wars of Talents”. For example, LVMH has the star
designer-Marc Jacobs.

For the rivalries, the barriers to entry are very high. LVMH has built the intangible image and
the perception built around the brand. The barriers to stay are also very high: there is a
continuous need to "feed" the image, to maintain the perception but still to respond to
customers' needs and changing expectations. The trade-off between exclusivity, stylishness,
extravagance and lasting image makes it difficult to be for a long time in the business. There
are hardly any barriers to exit given the high barriers to entry and to stay and the low barriers
to exit, the dynamics of the industry are: few big players and only the best, as the others
either cannot get in, or are easily out.

Moreover, LMVH have to bear copycats as the high level of fakes as an open publicity and
competition from other brands, as there is only a limited group of customers who can afford
to buy the genuine products due to limited brands.

5.0 Marketing

The marketing mix 4Ps which are mainly product, price, place and promotion work as the
basic elements for marketing plan for LVMH in projecting their products and services into
the marketplaces.

5.1 Product

Louis Vuitton becomes one of the best luxury brands in the global market with products
designed by the well-known and talented designer-Marc Jacob and high quality of raw
materials (Louis Vuitton, 2012). LV‟s main products ranging with leather bags and wallets
including luggage, handbags and cosmetic bags with monogram as its product line. Later on,
LV starts to expand its product line to monogram denim, multicolour, vernis, and damier
canvas. Also, there are increased of variety on product types as well offering jewelleries,
sunglasses, belts, timepieces, scarves, accessories and lots more. Each product is labelled



with the brand name, Louis Vuitton. Furthermore, product of Louis Vuitton are divided into 3
levels mainly the core product which is luxury, the actual product which includes brand,
fashion, durable, quality, and lines of product, the augmented product which includes
customer care, service, gift wrappings, and warranties. Below is the 3-leves of LV‟s products.

Durable Fashion
Customer
Warranties
Care
‘Luxury’
Quality Brand

Lines of Product
Gift
Service Wrappings

5.2 Price

LV‟s main target customers are from rich to middle class populations. These two
groups of people are sharing the same attitude of going after luxurious and have disposable
income. LV priced their products highly, not easily affordable by anyone using skimming
strategy and wouldn‟t offer discount because of its brand name, service and quality of its
products. Its premium pricing is supported by its luxury image and limited quantity for every
product designed. Also, this is to ensure LV is able to maximise its revenue before any
substitute appear in the marketplace.

5.3 Place

Louis Vuitton only sells expensive and luxurious products, they do not apply wide range for
distribution channels. So majority of their products are displayed only at limited stores like
upscale department stores, LV‟s authentic boutique, its official website, and mostly at



national borders.This is to ensure LVMH can monitor efficiently of the distribution channel
closely and to protect their intellectual property.

Suggestion for LV in strengthening their place strategy along with market expansion is to
establish more stores at the capital city of developing counties in East Asian regions like in
India with the existing 4 stores (Louis Vuitton, 2012). This is because countries like China,
Japan, Taiwan, Singapore and others are having high demand in changes, creativity and
innovation with fast growing economies and the increase of income level.

5.4 Promotion

Louis Vuitton has been focuses for personal product selling for many years and not with
discount sales or promotion in order to maintain the brand luxury reputation. LV promotes
their products especially new designs by advertising in upscale and fashion magazines as
marketing tool such as Vogue and Elle, sometimes billboards in countries like South Korea
and Japan in order to create customer awareness and quality recognition. There are also
various advertisements done by LV to increase on customer knowledge and recognition.

In Western countries, LV has been using celebrities like Madonna and Angelina Jolie. In
Asian region, LV should elect their brand ambassador who are having the closest image and
personality in the media towards their product as promotion spokesperson, in order to attract
for attention and generate more sales from their products. For example, Girls Generation
(also known as SNSD), the “Gorgeous Goddesses” of Korean- Pop idol icon in group who
already won over the hearts of Asian countries, Los Angeles and even Paris. Recently, this
group of girls had won over with the highest voting as country representative icon of South
Korea in London Olympic 2012 with their elegance, splendid, pretty princesses look in
fashion, not Justin Bieber or any other international super star.

6.0 Environmental Issues

Environmental, social and ethical pressures on the global textiles and fashion sector emerged
in Europe in the early 1980s. The main driver was consumer concern over the safety of the
materials. However in parallel with this trend, a minority group of ethical consumers
demanded “chemical-free” and low environmental impact clothing and fashion goods. This



resulted in the European and later the US organic labelling system being extended to include
criteria for clothing and textiles, such as organic cotton (United Nation Global Compact,
2006). As of 2007, the sector was the fastest growing part of the global cotton industry with
growth of more than 50% a year. With reference to safety standards, primarily addressing
consumer concern over chemicals in textiles, the Oeko-Tex standard has become highly
popular in the industry. Although unknown to consumers, it tests for chemicals such as flame
retardants in clothes and categorizes goods according to their likely exposure to humans.
Thus the issue of chemicals in clothing has become largely one of liability risk control for the
industry with the consumers obviously expecting products to pose no risk to their health.

Louis Vuitton-a niche brand at the top end of the luxury fashion industry, has emerged which
promote themselves primarily on sustainability grounds People Tree in the UK states that it
“creates Fair Trade and organic clothing and accessories by forming lasting partnerships with
Fair Trade, organic producers in developing countries. Leading fashion journal Marie Claire
ranked its “top 10” eco brands in a recent issue. The key issues remain chemicals in clothing
with certified by organic and Fair Trade labels), worker treatment also certified by SA 8000
and Fair Trade, and increasingly mainstream environmental issues such as climate change.
The Carbon Reduction Label verifies LVMH product‟s cradle-to-grave carbon footprint,
although is not specific to clothing (LVMH Environment Report, 2011).

The Fair Trade movement has also had a significant impact on the luxury product business.
The standard combines a number of ethical issues of potential concern to consumers such as
environmental factors, fair treatment of developing country suppliers and worker welfare
(including child labour, minimum wages, working hours and employee benefits).

LVMH has also made their company commitments on the full range of ethical issues, due to
the difficulties of switching their supply chains and products lines completely in favour of
organic or Fair Trade certified or other standards and norms, they tried to move as fast as
possible. Although, LVMH is moving slowly, to ensure they capture the market if it becomes
significant, the world‟s largest fashion brand Louis Vuitton recently acquired an eco fashion
label (LVMH, 2012). It is clear certain issues can be overcome, as a demand by Western
consumers that leading brands manage the Corporate Social Responsibility (CSR) properly.



Financial Plan

7.0 Plan 1

State of Nature
Decision Competitive Foreign Conditions ($) Poor Competitive Conditions ($)
Expand 800,000 500,000
Maintain status quo 1,300,000 -150,000
Sell now 320,000 320,000

7.1 Maximax

State of Nature
Decision Competitive Foreign Poor Competitive Maximax ($)
Conditions ($) Conditions ($)
Expand 800,000 500,000 800,000
Maintain status quo 1,300,000 -150,000 1,300,000
Sell now 320,000 320,000 320,000

Therefore, according to Maximax approach showing with the figure $ 1,300,000,
Louis Vuitton should accept decision to Maintain Status Quo of their company in
order to remain their finance situation in long run.

7.2 Maximin

State of Nature
Decision Competitive Foreign Poor Competitive Maximin ($)



Expand 800,000 500,000 500,000
Maintain status quo 1,300,000 -150,000 -150,000
Sell now 320,000 320,000 320,000

Therefore, according to Maximin approach showing the figure $ 500,000, Louis
Vuitton should accept decision to Expand the Market for their company in order to
gain more sales and revenue.

7.3 Minimax Regret

State of Nature
Competitive ($) Poor ($) Minimax
Decision Foreign Competitive Regret ($)
1,300,000 – 500,000 –
Expand 800,000 800,000 = 500,000 500,000 = 0 500,000
500,000
1,300,000 – 500,000 – (-
Maintain status 1,300,000 1,300,000 = 0 -150,000 150,000) = 650,000
quo 650,000
1,300,000 – 500,000 –
Sell now 320,000 320,000 = 320,000 320,000 = 980,000
980,000 180,000

Therefore, according to Minimax Regret approach showing the figure $ 500,000,
Louis Vuitton should accept decision to Expand their Market in order for the
company to generate more sales and revenue and yet higher return in investment.



7.4 Hurwicz (Criterion of Realism)

Competitive Poor
Alternatives Foreign Competitive Criterion of Realism ($)
D1 500,000 0 (0.3)(500,000) + (0.7)(0) = 150,000
D2 0 650,000 (0.3)(650,000) + (0.7)(0) = 195,000
D3 980,000 180,000 (0.3)(980,000) + (0.7)(180,000) = 420,000

Therefore, according to Hurwicz approach showing the highest value which is
$ 420,000 of Criterion of Realism, Louis Vuitton should accept the decision of D3
which is to Sell their Business as the best option to gain more finance capital from
company‟s share.

7.5 Expected Value Approach

Alternatives Competitive Foreign Poor Competitive Expected Value ($)
Conditions $ (0.7) Conditions $ (0.3)
D1 $800,000 $500,000 (800,000)(0.7)+(500,000)(0.3) = 710,000
D2 1,300,000 -150,000 (1,300,000)(0.7)+(-150,000)(0.3) =
865,000
D3 320,000 320,000 (320,000)(0.7)+(320,000)(0.3) = 320,000

Therefore, according to Expected Value approach with the maximum expected value
of $ 865,000, Louis Vuitton should accept the decision of D2 which is Maintain
Status Quo in order to remain the company financial situation in the long run.



7.6 Expected Opportunity Loss Approach

Alternatives Competitive Poor Expected Opportunity Loss ($)
Foreign Conditions Competitive
$ (0.7) Conditions
$ (0.3)
D1 500,000 0 (500,000)(0.7) + (0)(0.3) = 350,000
D2 0 650,000 (0)(0.7) + (650,000)(0.3) = 195,000
D3 980,000 180,000 (980,000)(0.7) + (180,000)(0.3) = 740,000

Therefore, according to Expected Opportunity Loss approach with the least expected
opportunity loss figure of $ 195,000, Louis Vuitton should accept the decision of D2
which is to Maintain Status Quo for the company to strengthen their position for
now in order for avoid any possible for future financial risks or crisis which may
happen to them.

7.7 Expected Value of Perfect Information (EVPI)

EVwPI = (1,300,000)(0.7) + (500,000)(0.3) = 1,060,000

EVPI = EVwPI – EvwoPI

EVPI = $1,060,000 – 865,000

= $195,000

The expected value which Louis Vuitton can get for correct and accurate information
for the company is $ 195,000.



8.0 Plan 2

Stock Price Change ($) Probability Cumulative Interval of Random
Probability Number
-2 0.05 0.05 0-0.05
-1 0.10 0.15 0.06-0.15
0 0.25 0.40 0.16-0.40
+1 0.20 0.60 0.41-0.60
+2 0.20 0.80 0.61-0.80
+3 0.10 0.90 0.81-0.90
+4 0.10 1.00 0.91-1.00

Random Numbers 0.1091 0.9407 0.1941 0.8083
Price Per Share -1 +4 0 +3

Average stimulated price per share = [ (-1) + 4 + 0 + 3 ] ÷ 3 = 2

Random Numbers 0.2540 0.7144 0.0563 0.0125
Price Per Share 0 +2 -1 -2

Average stimulated price per share = [ 0 + 2 + (-1) + (-2) ] ÷ 3 = - 0.33



9.0 References

Accessories Magazine, LVMH Buys another Top Leather goods Supplier [online]. Available
at: http://www.accessoriesmagazine.com/45096/lvmh-buys-another-top-leathergoods-
supplier [Accessed 23 September 2012]

Articlesbase (2009) Louis Vuitton – Introduction [online]. Available at:
http://www.articlesbase.com/sales-articles/louis-vuitton-introduction-1380955.html
[Accessed 23 September 2012]

Asian Fashion Law (2011) Hermes and Louis Vuitton Fight Counterfeiters and Win [online].
Available at: http://www.asianfashionlaw.com/2012/05/hermes-and-louis-vuitton-fight-
counterfeiters-and-win/ [Accessed 23 September 2012]

Boorstin, J. (2005) Louis Vuitton tests a new way to fight the faux [online]. Available at:
http://money.cnn.com/magazines/fortune/fortune_archive/2005/05/16/8260140/index.htm

Boston (2010) Louis Vuitton sues to stop knockoffs [online]. Available at:
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10.0 Appendices

10.1 Appendix 1

Louis Vuitton has won a landmark ruling in the US in the battle against counterfeiting. On
April 17, 2012, the US International Trade Commission (ITC) upheld a ruling which will
help stop goods being imported into the US bearing Louis Vuitton trademarks, and will
penalise companies (like Paypal) which facilitate the trade of those goods.
"As the first luxury goods company to seek redress at the ITC, we are pleased with the
significant remedy that has been recommended. [...] The chief administrative law judge
recognises the importance of protecting intellectual property and took the welcome step of
ensuring that its orders include all merchandise that infringes on our Toile Monogram Marks,
and not just products of the respondents in this case. [...] Preservation of creativity is of the
utmost importance to Louis Vuitton and we will continue to protect our brand and customers,
and to preserve the rights of designers, artists and brands." (Valerie Sonnier, global
intellectual property director of LV to WWD)

Other brands like Tory Burch, Polo Ralph Lauren and True Religion have reached for the
ITC with similar cases, but none of them has won a comparable ruling.

BACKGROUND - The April 17 ruling was issued in the context of Louis Vuitton complaint
filed at the ITC on December 03, 2010 (Certain Handbags, Luggage, Accessories and
Packaging Thereof (Inv. No. 337-TA-754)) requesting investigation pursuant to Section 337
against a group of respondents from Guangzhou China, Texas and California, for the
unlawful sale for imporation, import and sale into the U.S. of handbags, luggage, accessories
and packaging that infringe Louis Vuitton's US monogram trademark registrations (nos.
1,643,625; 1,653,663; 1,875,198; 2,773,107; 2,177,828; 2,181,753; and 1,519,828).



Louis Vuitton US Trademark Registrations

The respondents were identified as House of Bags, Ronett Trading, Inc., EZ Shine Group,
Inc., Master of Handbags, Choice Handbags, Handbag Warehouse, T&T, and The Inspired
Bagger.
(Sources from: Detailed trademark information from the official, 2012, European Union
trademark database (CTM), available at:
http://trademark.markify.com/trademarks/ctm/lv's+dairek+usa./003939501)

10.2 Appendix 2

Table showing the raw material restrictions on clothing and fashion goods legislative in
different countries.

(Sources from: Waller and Hingorani, 2012)



10.3 Appendix 3


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