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Strategy case analysis

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Group 1:
Ngoc Uyen Linh Nguyen – 1593126
Minh Hieu Nguyen – 1576886
Lok Yiu Lam – 1564263
Harry Zhang – 1531036
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Introduction
Louis Vuitton (LV), known as the most luxurious fashion brand globally, originated in a Vuitton
Moet Hennessy (LVMH) Group division. The company has produced highly-priced leather goods,
handbags, trunks, shoes, etc., which follows the concentric diversification by the CEO and chairman
Arnault. Illustrated by the organisation that implemented various changes in the strategies and
operations in order to achieve the long-term goal of creating the world’s leading luxury goods group
and sustaining competitive advantages. The purpose of this report is to discuss Strategic
Management, which Louis Vuitton has applied in its operation. In particular, the strategic
management process encompasses three levels of the strategy of functioning and managing. For this
reason, this report will explicitly discuss the corporate and business levels. Besides, it is notably that
Porter’s Five Forces model is a crucial element that needs to be examined in order to understand
competitive environmental forces accurately.

Corporate level strategy 

Strategy and Corporate level strategy

  In general, strategy refers to a company's overall scope and direction; with a different approach,
the business operation is able to grow among its opponents and global issues in a competitive
market. As a result, the company would cooperate to accomplish common goals based on
evaluating the business environment (Li & Chen, 2019). Specifically, diversification strategy,
acquisitions, new companies, and vertical transformation are part of corporate strategy, leading to
various business developments (Dess et al., 1995). For example, making decisions about
product/market variety, geographical coverage, and the prospect of acquisitions and mergers are all
part of developing corporate-level strategies (Bonn & Fisher, 2011).

Application of theories to the case business

Undoubtedly, the organisation applied corporate-level strategy in its implementation since it is

distinguished for diversification and horizontal integration in functioning by operating across the
different areas that unrelated industries (Kumar, 2012). To clarify, the LVMH group is defined that
has taken concentric diversification as their corporate-level strategy by owning LV as a luxury
goods company and other luxury goods companies. In contrast, LVMH developed businesses
unrelated to the fashion industry, which is conglomerate diversification that provided opportunities
for LVMH to grow the business by increasing sales to existing customers and entering new markets.
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Business level strategy 

Representing the case of LV, it can be determined that the luxury manufacturing industry is an
oligopolistic structure where many competitors earn massive profits without being restrained by the
opponents’ action. In order to sustain organisational development within an oligopoly business
environment, it is crucial to achieve and understand defined market segments as their long-term
competitive advantages when approaching the aggressive market. Therefore, awarning of business-
level strategy is essential for running a successful organization. Business-level strategy is a set of
commitments and actions that the organization uses to gain sustainable competitive advantage
(Nandakumar et al, 2010). It represents the decisions taken by the company on how it intends to
compete in different product markets (Beard & Dess, 1981). Furthermore, business-level strategy
aims to create the difference between their competitors. As a result, business-level strategy is
defined by different business levels: corporate, business, and functional level that should be
combined in operating to accomplish objectives and create sustainable competitive advantage.
Moreover, the business unit strategy also involves basic competition strategy (cost leadership
strategy, differentiation strategy, hybrid strategy), SME competition strategy and blue ocean
strategy (Maillard, 2013).
SME competitive strategy included（Galbraith, 2008）
 Competitive strategy of scattered enterprises.
 Competitive strategy in emerging industries (Pamela, 2000).

Application of business-level strategy

The commission of the business is established on creating perfect products. It is demonstrated by
expert artisans who create LV's leather goods produced with only the most delicate fabrics and
materials, resulting in a perfect handmade product with the best quality. Moreover, as we mentioned
before, the organisation took diversification and horizontal integration in approaching the market;
Vuitton’s approach keeps customers engaged for a lifetime to transition them away from basic tan-
and-brown monogrammed bags and onto newer models. As Emmanuel Mathieu said “We’re always
looking for ways to improve” the business operating strictly on their commission by avoiding brand
degradation by not granting licences to outside firms and never reducing its prices making it
become a unique luxury manufacturer business. In order to maintain the business fresh, Marc
Jacobs, a skilled New York designer, was hired in 1998 to breathe new life into Vuitton's iconic
brown bag designs and appeal to a younger audience making the business sustainable over time. In
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particular, the new designs were less discreet and employed brilliant hues while still being attractive
and expressing the prestige symbol for which Vuitton accessories are known.

Porter’s Five Forces 

Strategy and Porter’s Five Forces

The act of establishing a business direction that will successfully lead an organisation into profit is
referred to as strategy (Kaplan and Norton, 1996). Porter’s Five Forces is the framework that
accesses and analyses the competitive environment through five forces that shape the industry.
Analysing an industry in terms of the five competitive forces will assist a firm in recognising its
strengths and weaknesses in respect to the present level of competition, allowing it to adopt
defensive or proactive efforts to resist the pressure produced by these forces (Ormanidhi & Stringa,
2008). The model is the threats posed by industry competitors, bargaining power of suppliers,
bargaining power of buyers, the threat of new entrants, the threat of substitute (Dobbs, 2014). In
terms of industry competitors, it described the intensity of competitive rivalry, reducing market
attractiveness. The bargaining power of the buyer could be defined as the market of outputs, while
the bargaining power of the supplier is described as the market of inputs. The new rival or
businesses joining the business are referred to as the threat of new entry. Lastly, the threat of
substitutes poses a danger when a product's demand is influenced by switching costs (Porter, 2008). 

Application of Porter’s Five Forces 

1) Competition in the industry: While Louis Vuitton is the most valuable luxury brand on a
worldwide scale, Gucci and Prada have had the most substantial growth in the last two years, rising
alongside Hermes as prospective market leaders. 
How to deal with Competition in the industry: To maintain the brand's reputation, Vuitton has opted
to focus on exclusivity at the expense of its mass-market affluent, aspirational consumers and
reconnect with its uber-wealthy clientele.  Vuitton's global expansion has been halted, and the
company's handbag costs have been raised to reject "low-end" clients.  A new creative director has
been appointed to bring an innovative contemporary concept for the women's collection based on
refinement and excellent quality. When there are new and strong competitors in the industry, LV
changes its strategies and copes with the problem.
2) Threat of substitute products:  Counterfeiting is a problem for Vuitton and the high-end fashion
sector it symbolises; Louis Vuitton is the most counterfeited handbag brand in the world.  
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How to handle the threat of substitute goods: In order to protect its intellectual property, revenue,
and reputation for quality, LV has to fight increasingly sophisticated global counterfeiting rings
constantly. The company has been battling various cases in courts, including several against eBay
for allowing the sale of counterfeit handbags and other products claiming to be made by Louis
Vuitton, with some success.

Appendix 1: STEPP model

Socio-cultural

 Marc Jacobs re-designed Vuitton’s classic brown bag to revitalise and appeal to a
younger generation
 Introduced new products: ready-to-wear shoe lines for Vuitton’s younger customers
 L.Vuitton products are sold only through limited distribution channels: e.g. in Vuitton’s
stores, high-end departmental stores, and online retailers.
 Ghesquière believes in bringing a modern creative vision to the women’s collection and
building on the values of refinement and extreme quality.
 Focus on exclusivity at the expense of its mass-market affluent, aspirational consumers,
and preserve the brand's representations.

Technological

 Louis Vuitton built test laboratories providing the mechanical arm, ultraviolet trays and
zipper testing machine.
 Products are sold exclusively through limited distribution channels: e.g. in Vuitton’s
stores, high-end departmental stores, and online retailers.

Economical

 Avoiding brand degradation by not granting licences to outside companies and never
decreasing their prices. 
 Target populous countries such as China and India, where the rising influence of the
middle classes is creating a significant demand for luxury goods.
 Marc Jacobs re-designed Vuitton’s classic brown bag in order to revitalise and attract
the younger generation. 
 Focus on exclusivity at the expense of its mass-market affluent, aspirational consumers,
and preserve the brand's representations.
 Ghesquière believes in bringing a modern creative vision to the women’s collection and
building on the values of refinement and extreme quality.
 Providing purchasers with lifetime products by allowing them to replace from the
classic tan-and-brown monogrammed bags to more innovative lines.
 Instead of discounting its slow-moving products, Vuitton’s policy is to destroy any
surplus stock. 

Physical-natural 
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 Vuitton has been opening new stores worldwide, and it now owns 460 shops in 50
countries.  
 Operating at the global scale.
 Shortening time of releasing a new product to 6 months instead of 12 months

Political-legal

 The company is putting pressure on government agencies to halt counterfeiting.

 Louis Vuitton is the most counterfeited handbag brand in the world since it has
constantly fought the growth of sophisticated global counterfeiting rings to protect its
intellectual property, revenue, and reputation for quality. 

Appendix 2: SWOT analysis

Strengths Weaknesses

 China and the USA have  Mr Arnault stopped Vuitton’s global

become Vuitton's most expansion by raising its handbags prices to
enormous customer base and discourage ‘low-end’ customers. 
even surpassed Japan.   Drop-in sales were considered to be the
 The reputation received from its result of a combination of economic threats.
stylish and the status symbol of  Dilution of LV brand exclusivity because of
Vuitton accessories combined the increasing number of people owning
with the new design for the authentic and counterfeit Louis Vuitton
younger customer.  handbags. 

Opportunities  Threats

 In China, affluent consumers,  The high-end fashion industry is

not the super-rich, will drive at
least 70% of future growth in
luxury spending.
 Skilfully manage the trade-off
between exclusivity and
affordability in order to gain
market share.  
encountering counterfeiting.
 Customers at the highest end of the market,
those who shop the most frequently and
spend the most money, were reported to
perceive Vuitton as a brand that caters to a
less sophisticated market segment.
The recent severe worldwide recession
drove middle-income earners to reduce their
expenditure on luxury items.
 Counterfeiting, resulting in many copies of
the Vuitton handbags being sold cheaply and
dragging down the ‘exclusivity of the brand;
and
 Rivals are becoming more adept at
managing the trade-off between exclusivity
and affordability and gaining market share.
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 Gucci operates mainly in North America and

Western Europe, whilst Prada has been
proactively expanding and opening stores
worldwide putting efforts on approaching
the Asian market. 

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