Assignment 1

Analytical Report
Strategies of a Fashion Organisation,
Moet Hennessy Louis Vuitton

By Melissa Dockery
Executive Summary

The aim of this report is to analyse the strategies of the Moet Hennessy Louis Vuitton

(LVMH) group. and the complex business environment in which it must operate within. This

is to be achieved by further examining the groups historical, geographical, brand and

business scope as well as the groups key strengths and weaknesses.

Further analysis will be later discussed with the use of various strategic marketing models.

The models that will be discussed include the PESTEL framework where the political,

economic, social, technological, environmental and legal environments will be explored.

These factors will be further investigated and discuss and how the conditions in each of these

environments may impact on the business decisions/strategies of the LVMH group.

Another model that will be analysed is the TOWS analysis where external threats and

opportunities in relation to the group are identified and internal weaknesses and strengths are

highlighted. It is then identified how the group can utilise and leverage their strengths to

harness opportunities and overcome potential threats and weaknesses that the business group

may be subjected to.

The Porter Five Forces model will also be used to help develop strategies and further identify

the strengths and weaknesses of the group. The five forces that make up this model are;

Competition in the industry

Potential of new entrants into the industry

Bargaining power of suppliers

Bargaining power of consumers

Threat of substitute products

The final model explored in the report is the GE Mckinsey Model where industry

attractiveness and business unit strength are examined and suggestions are made as to

whether the company should grow, harvest or divest part of their portfolio.

Based on the background knowledge gained in the first part of the report and the analysis of

various business strategy models, recommendations will be suggested for the LVMH group

to assist them in continuing to grow and remain profitable in the future.

Analytical Report Strategies of a Fashion Organisation, Moet Hennessy Louis

Vuitton

1.0 Introduction

The aim of this report is to analyse the Moet Hennessy Louis Vuitton (LVMH) organisation

and the complex business environment in which it must operate within. This also includes

exploring its competitive position and the market situation so that appropriate strategies for

future growth may be recommended. The report further examines the fashion industry

through the exploration of several business strategies including TOWS analysis, Porter Five

Forces and GE Mckinsey Model.

1.1 Historical Scope

In 1987 Moet Hennessy and Louis Vuitton merged together to create LVMH, becoming a

world leader in luxury goods (LVMH 2015). 1989 marked the ascent of Bernard Arnault to

CEO and chairman of LVMH (Cavender & Kincade 2013).

The LVMH group founds a division in the organisation which focuses on the environment in

1992. In 1999 LVMHs watches and jewellery division is established as well as opening their

headquarters in New York (LVMH 2015). Founded in 1999, Nowness is a digital platform

that creates interactive fashion, culture and art content, allowing the luxury lifestyle to now

be experienced online (Cavender & Kincade 2013).

1.2 Geographical Scope

The LVMH group is a global organisation, with a reputation for producing high-end luxury

products that are highly recognisable (Rugman 2005). Due to the symbolic nature of luxury

brands the LVMH group enjoys high brand awareness that extends beyond their intended

target market (Cavender & Kincade 2013). This high level of brand recognition creates a

unique opportunity for companies when developing their marketing vision (Cavender &

Kincade 2013).

1.3 Brand and Business Scope

Comprising of 70 houses the LVMH group is the only group that is present in all five sectors

of the luxury market (wines and spirits, fashion and leather goods, watches and jewellery,

perfumes and cosmetics and selective retailing) (LVMH 2015). In 2012 Louis Vuitton was

ranked as the highest luxury brand by two major brand valuation reports, indicating that

Louis Vuitton in the luxury sector of the retail industry is both a financial and market leader

(Cavender & Kincade 2013).

The LVMH business model aims to stimulate creativity and build upon the heritage of their

houses, driving the success of the group and ensuring its future. There are six pillars in which

the group operates upon, these include;

Decentralized organisation allowing the houses to be both autonomous and responsive

(LVMH 2015).

Organic growth commitment of resources to develop houses as well as to encourage and

protect creativity (LVMH 2015).

 Vertical integration both upstream and downstream allowing for control in every link of

the supply chain (LVMH 2015).

Creating synergies, the sharing of resources on a group scale, this combined strength of

the group is used to benefit each of its brands (LVMH 2015).

Sustaining savoir-faire, initiatives to perverse the unique identities of each of the groups

brands and ensure the value of craftsmanship (LVMH 2015).

Balance across business segments and geographies, this balance allows the group to be

well positioned to withstand changing economic conditions (LVMH 2015).

1.4 Key Strengths and Weaknesses

Key strengths of the LVMH group include its strategic back-to-basics approach in 2002

(Cavender & Kincade 2013). This approach aimed to provide added value, transfer

knowledge and capitalize on economies of scale amongst the brands in its portfolio whilst

still maintaining existing brands (Louis Vuitton, Hennessy, Moet & Chandon) and growing

potential brands (Fendi, Celine) (Cavender & Kincade 2013).

LVMH have embraced a new marketing orientation that has come from the desire by

consumers to be constantly entertained, known as experiential marketing (Cavender &

Kincade 2013). Luxury marketers are in a unique position to apply experiential principles to

their marketing approaches, across the LVMH operating group strategies such as; utilizing

digital technologies to enhance customer service (Sephora), personalization services (Benefit,

Thomas Pink) and specialty exhibitions designed at consumer interaction and education

(Dior, Fendi) can be observed (Cavender & Kincade 2013).

Operating on a global scale the LVMH group is more susceptible to unforeseen political,
economic, cultural and social occurrences (Cavender & Kincade 2013). How brands choose

to respond to such events may potentially affect how the brand is viewed by consumers in

that country, especially if it is a new or emerging market (Cavender & Kincade 2013).