LVMH is a French luxury goods conglomerate that owns 70 brands including Louis Vuitton. Louis Vuitton was established in 1854 and is now owned by LVMH. LVMH's purpose is to profitably provide high-end luxury products while representing Western art de vivre globally. Louis Vuitton's mission is to continue being synonymous with elegance and creativity through tradition and innovation. Its objectives are to financially lead the global luxury market by increasing profits through strong brand management, product design, and the development of its leather goods lines.

1. LVMH
THE STRATEGIC MANAGEMENT BY MOHAMED MAZHOUD

2. The Business environment
This study will cover main aspects of Louis Vuitton (LV)’s strategic
processes as an organisation and will underline the organization type,
purpose, mission, vision, and objectives that sustain its organisational
structure.

4. • Presentation:
Established in 1854 by a master Louis Vuitton Mattelier, the Company
changed status in 1962 as a “S.A” (Limited liability company-Public
Company), and is governed by the provisions of the French
Commercial Code. LV belongs to LVMH group under the Fashion and
Leather Goods business group.
• Purpose:
LVMH business purpose is profitability by providing a luxury line of
products (leather goods, shoes, ready-to-wear clothing lines, jewellery,
and personalised items) designed and crafted by genuine artisans to
high profile customers seeking to liaise their status to a prestigious
brand.

5. • Mission:
LV statement is: "The mission of the LVMH group is to represent the
most refined qualities of Western “Art de Vivre” around the world.
LVMH must continue to be synonymous with both elegance and
creativity. Our products, and the cultural values they embody, blend
tradition and innovation, and kindle dream and fantasy.”
• Vision:
LV is willing to develop core values in the political, social, societal and
environmental spheres of responsibilities as the core objectives of the
top hierarchy level is dictated by code of conducts, charts and as well as
a large documentation depicting its engagement and control over the
steps of production transparency

6. • Objectives:
LV income is generated by selling different kind of products through
different channel of distribution. LV objectives are financially clear as it
is to increase the profit of the Group in order to lead globally the luxury
market. LV strong creative dynamic with the development of leather
lines and the successful launch of new models in Monogram are
Nicolas Ghesquière’s recipes for improving the brand success

7. The Structure of LV
Louis Vuitton is one of the 70 brands/divisions of the holding company
LVMH (a French family trust) financially controlled by Bernard
Arnault, Chairman and CEO who personifies the company. However
the structure followed a principle of decentralization of decision-
making on the group's brands level where brands are considered
houses of family history. The value of each brand is closely linked with
the independence of driving their creativity. Each company operates
independently; Michael Burke, executive of LVMH, is the chairman &
executive of the brand since 2012 when his predecessors Yves Carcelle
(†2014) and interim Jordi Constans had to step away for health reason.

8. LV is a tall organization having “a long chain of command” from top to
bottom, and if strategies and decisions are centralized at the Board
Level, the success of the group is the consequence of a decentralisation
and departmentalisation structure organised by business group (Areas
of products regrouping different trade names within geographical
areas). However, if freedom of creation is provided to each entity,
Bernard Arnaud has implemented within each of them centralized
production and distribution control based on his own statement “If
you control your factories, you control your quality, and if you control
your distribution, you control your image.

9. • EXECUTIVE COMMITTEE
The Executive Committee, comprised of executive, operational and
functional directors, defines strategic objectives on the basis of the
orientations decided by the Board of Directors, coordinates their
implementation, ensures that the organization adapts to changes in
the business environment, and oversees both the definition and the
accomplishment of the responsibilities and delegations of authority of
Executive Management.

11. Complex Form Of The Organization: (Timeline)
• 1743: M&C, established in Champagne Province (France). One of the first Champagne French brand, with exports
accounting for a large percentage of its sales by the 20th century
• 1968: Acquisition of Parfums Christian Dior
• 1971: Merger with Champagne Mercier
• 1971: Merger with Henessy & Cie (words second largest producer of cognac) Change name for Moët-Hennessy
• 1987: French government launched an area of privatization – Merger with Louis Vuitton, to avoid takeover from large
international companies. Portofolio of luxury brands – Veuve Clicqot, Dom Pérignon, Canard Duchêne (wine),
Christian Dior and Givenchy perfumes and cosmetics, Gearoges Delbard (grower or roses), Louis Vuitton, M&C,
Hennessy • 1987: Join ventures with Guinness PLC – distribution British cie
• 1988: Bernard Arnault – Owner of Chrstian Dior, Celine, and Christian Lacroix – purchase share of LVMH and join
forces with Vuitton • After a join venture with Guiness, Arnault became the LVMH’s largest shareholder, and ask for
changes in the cie’s management
• 1988: Arnault acquire Givenchy
• 1989: Arnault became LVMH’s president
• 1990: Arnault became chairman

12. • 1990: Purchase interest on Loewe (Spanish brand) and all assets of Pommery (largest vineyard in Champagne region),
increase of LVMH share in Guinness from 12% to 24% : LVMH became the world’s largest alcoholic beverage seller
• 1994: Arnault abandoned his quest to gain a controlling stake in Guinness, agreement to a stock swap
• Between 1990 and 1994, few small acquisitions • Brought additional fashion and fragrance and diversified by
purchasing 2 of France’s leading financial and business publications – Investir, La Tribune Desfosses, L’Agefi •
Expansion of the number of cie-owned retail stores where its LV, Loewe, Celine, CD, Givenchy can be found
• 1996: Arnault strongly believes that the brands should offer high quality customer service, acquisition of Duty Free
Shopper (180 duty-free boutiques in Asia and various international airports)
• 1997: Acquisition of Sephora, French cosmetic retailer, and 30% interest in Douglas International, a German beauty-
goods • Acquisition of Château d’Yquem (Champagne) • Purchase of 11% of Grand Metropolitan PLC – Britsh Food
conglomerate ($1.5 bn wine and spririts sales)
• 1998: Retailing operations: La Belle Jardinière, Le Bon Marché • Laflachère – France leading producer of hygiene
beauty, and Marie-Jeanne Godard, a fine fragrance line
• 1999-2000: Boldest acquisition: TAH Heuer (watches), Ebel (watches), Chaumet (Jewelry), Zenith (Watches), Bliss,
BeneFit, Hard Candy, Make Up For Ever, Fresh, Urban Decay (all make-up artists) Philips, de Pury & Luxembourg,
L’Etude Tajan (all famous auction houses). • Also these years, broadened the company’s media operations, thanks to
a French radio network and magazines, New World wine produces in the US and Australia, retail outlets in the form
of an Italian cosmetcs retailing chain, • KRUG, producer of some of the wordl’t most expensive champagnes • Emilio
Pucci, Thomas Pink and Fendi acquisition
• 2001: Dona Karan International and La Samaritaine, the largest departement store in Paris
• Tried to acquire Gucci Group, but lost against the main competitor, PPR (today Kering)

13. LVMH IS HOME TO 70 DISTINGUISHED HOUSES ROOTED IN SIX DIFFERENT
SECTORS. TRUE TO TRADITION, EACH OF THE BRANDS BUILDS ON A
SPECIALTY LEGACY WHILE KEEPING AN UNWAVERING FOCUS ON THE
EXQUISITE CALIBER OF ITS PRODUCTS.

14. Level of Strategy of LVMH:
LV strategy follows dichotomy segmentation: geographical and psychographic.
LV operates in the High-end of the luxury market using the DIFFERENCIATION
and DIFFERENCIATION FOCUS variants to maintain and expand its revenue in
emergent markets, and DIFFERENCIATION FOCUS is chosen to deliver
customized or scarce items to specific consumers. If the brand has recorded
outstanding results in 2013, it is because of its ability to move into a more high-
end segment of the luxury market focusing on satisfying consumers’ desire for
customization .

15. School of Strategy:
• LVMH is following at present the « resources based » strategy and growth strategy:
Key Resources implemented in order to expand LouisVuitton’s existing product
portfolio, a range of resources and competencies are required.
Physical Assets: numerous factories in France, Spain, Italy; sophisticated
machinery&equipment
Large financial capabilities
Technological resources: artistic creativity & an innovative production process , trademarks,
patents (LVMH Recherche)
Organizational resources: effective planning (carefully planned production process,
distribution ; effective control on distribution & sales

16. Intangible resources:
Well-known designers, high experience & capabilities craftsmen and other
employees, strong managerial skills : innovation capabilities & scientific expertise
Reputation: image and brand names
Creative team and management of acquired firms are preserved
Knowledge is shared but at the same time the culture of company is maintained
• A distinctive competency that is required is brand management
and product design capabilities. The purpose of the growth
strategy is to maintain the business philosophy of savoir faire
and innovation and this must be displayed through the packaging, the desi
gn of fragrance bottle and target market.

17. The BCG Matrix
•Fashion & Leather Goods – foundation of LVMH
success, timeless brands, very integrated in the
company’s strategy of production process
quality&excellence, creativity&innovation
•Perfumes&Cosmetics- good outlook for the future,
LVMH should enhance of competitiveness
•Wine&Spirits, Selective Retailing- main source of
revenue
•Media&Other Businesses- media focused only on
French market, strategic move from LVMH to be
present in this field

18. Stakeholder Strategy
Internal Stakeholders
•Decentralized System: various brands operate independently, with own creativity & brand image
•Small number of managers
•Product design, R&D process carefully planned with the most modern and complete engineering technology
•Top designers
•Special training for craftsmen
Connected Stakeholders
Relationships of activities within LVMH with customers and suppliers
• e-procurement
• All businesses are trading in similar markets (high-end of the market, premium price tag) => common practices in relation with customers
• Premium service After sale
• Loyalty program
• As part of its relations with suppliers, LVMH requires its partners to subscribe to the Supplier Code of Conduct under which it reserves the right to
conduct compliance audits at any time without advance notice.

19. External Analysis
• PESTEL analysis:
It is an analysis of the macro environment when referring to Louis
Vuitton and the ‘personal luxury goods industry’. This is to understand
how these factors influence the industry.

20. • Political :
This industry faces problems regarding import duties when operating
internationally. According to the case, it is highlighted that countries that suffer
from high import duties such as China, is causing customers to purchase luxury
items overseas to take advantage of the huge price difference. Also, looking
further, D’Arpizio (2012) cited by the case states outside Europe and America there
are 33% of regions involved in the luxury goods market meaning government
stability is imperative in this industry. According to Cebreros (2012), this industry
is heavily dependent on tourism so factors involving terrorism is essential to
consider.
• Economic :
One of the biggest economic factors in this industry is the tax rates being placed on
luxury goods. According to Chilkoti & Hidayat (2015), the ‘luxury goods tax’ is
impacting regions without a luxurious reputation so countries such as Indonesia
have scraped this taxation policy in order to boost consumption. In terms of Louis
Vuitton, a potential price gap may cause uncontrollable issues.

21. • Social :
As referenced by the case study, the luxury industry has diversified to services that
include luxury travel experiences showing one of the most contributing social
factor in this industry is the shift change in customer preference. Organisations
operating in the ‘personal’ industry face issues as consumers can achieve luxury
status by their lifestyle and experiences which firms such as Louis Vuitton cannot
offer. Also demographics are a factor to consider. A big difference in culture
highlighted by the case is the importance of logo brands. Where in China logos
are seen as less exclusive, in Japan it doesn’t dampen the brand image at all.
• Technological:
According to the case the revolution of the Internet has meant technology has had
a massive impact on this industry. In order to gain competitive advantage, firms
had no option but to start selling products online. The issue with operating
online is it takes away an aura of exclusivity, which potentially reduces market
share from the ‘absolute’ target segment. Furthermore, the case claims customer
demands in this industry include being ‘unique and crafted by artisans.’ This
means technology involving manufacturing isn’t a major factor.

22. • Environmental :
Protection of the environment is a huge factor to consider in this industry. As
stated in the case many firms that operate sell leather goods, which have a huge
impact on the environment. According to PETA (2015) turning skin to leather
involves high-energy consumption and use of dangerous chemicals. This is why
organisations should consider limiting their carbon footprint and preserve
natural resources in order to counteract the harm they are inflicting.
• Legal :
Being in this luxury goods industry, there are many laws to consider with the
biggest legal factor to consider is counterfeiting. This issue is uncontrollable as
referenced by the Anti-Counterfeiting Group (2012) 10% of UK sales in the luxury
industry is lost due to counterfeiting. This means $37 billion is lost in sales every
year.

23. • Porter’s 5 Force’s analysis :
The luxury goods industry means Louis Vuitton face a variety of
competition that is easily explained using Porter’s 5 forces model.

24. • Threat of New Entrants – ‘Extremely High’
In this industry, it is considered to be extremely high as it is argued the industry has
stagnated relating to the product life cycle. As referenced by the case, companies
fiercely promote the history and heritage of their brands; so in order for new
entrants to build a reputation, it would take large amounts of capital to build a
marketing platform and will be hard to convince customers to switch from
successful brands such as Louis Vuitton.
• Bargaining Power of Suppliers - ‘Low / Medium’
In this industry, the case provides evidence that methods of vertical integration
have been extremely successful. With these firms manufacturing products in
house means firms only have to source minimal materials, therefore reducing
supplier power. However, the reason why bargaining power of suppliers is
debatably medium is due to the high quality desired of raw materials. Such as
Louis Vuitton, they only source their leather from North Europe. The perfection
required in the luxury goods industry means limited suppliers can provide it.

25. • Threat of Substitute- ‘High’
When referring to Blythe (2012) a substitute is a different product that satisfies the
needs of the consumer. As mentioned in the case, the threat of one substitute
are intangible experiences such as travelling and spas. This is due to a change in
how customers express their social status. Furthermore, with research one new
player that is a huge substitute product is artificial leather. An article by Kinge et
al. (2013) states this material is preferred by the younger generations and vegans.
As it is cheap to manufacture it would be hard for luxury companies to promote
it as high quality material.
• Bargaining Power of Buyers- ‘Medium’
With this sort of industry where price isn’t the main concern, it gives a clear
indication that customers have a preference and loyalty to specific brands.
Referring back to Cebreros (2012) she claims customers form an emotional
attachment to brands. However, referring to the case, customers demand unique
designs and a brand image based on rich heritage. Therefore, with limited
brands to choose from, this why brand loyalty occurs.

26. • Rivalry Among Existing Competitors – ‘High’
When referring to an article by Deloitte (2013) there are over 100 different players
in this industry, with the top 15 being extremely consolidated. For example, in
this industry, Moet Hennessy-Louis Vuitton (LVMH) achieved to manage $21,761
(million) in sales in 2013 and ranked 15 is Prada who attained $4,776 (million)
sales revenue. With reference from the case, Chanel has mastered it strategy and
puts strains on all competitors by increasing brand quality, customer experience
and social status. This shows clear evidence this industry is extremely profitable.

27. SWOT Analysis
Now the macro environment has been analysed, opportunities and threats of
Louis Vuitton from a traditional SWOT can be identified. These include:

28. THANK YOU
LVMH
THE FUTURE OF TRADITION