Week 7: Written Case Assignment - Case 22 - LVMH in 2016: Its

Diversification into Luxury Goods

TASK #1: Briefly describe the key elements of LVMH’s corporate strategy.

1. Increasing sales and growth through acquisitions, joint ventures, subsidiaries, and
expanding the company’s portfolio in diverse market segments; perfumes, watches,
alcohol, luxury retail brands, cosmetics, etc.
2. Strong corporate/management control of brand image; through advertising,
corporate announcements, and speeches by management and designers
3. Control over distribution and sale of products; allowed division access to customer
needs and preferences, refine its brand image, consistent retailing approach, and
irreproachable customer service
4. Strategic approach to managing its portfolio of star and rising brands trough; product
quality, innovation, image, craftsmanship and the production process

LVMH's Business Groups: Wine & Fashion & Perfume & Watches &
Spirits Leather Goods Cosmetics Jewelry
TASK #2(A) Place a "X" in the
columns (to the right) if the
business group is one that can
1 combine purchasing activities with x x x
one or more of the other business
groups.

TASK #3(A) Place a "X" in the

columns (to the right) if the
business group is one that can
share technology, transfer
2 x x x
technical skills, or combine
research & development with one
or more of the other business
groups.

TASK #4(A) Place a "X" in the

columns (to the right) if the
business group is one that can
combine sales and marketing
activities, use common
3 distribution channels, leverage use x x x x
of a common brand name, and or
combine after-sale service
activities with one of more of the
other business groups.

TASK #2: Justify your choices in Part A, by describing some specific

products, supplies or services, and the Value Chain Activities in which

This study source was downloaded by 100000881998269 from CourseHero.com on 03-07-2024 04:55:50 GMT -06:00

https://www.coursehero.com/file/29393825/LVMH-Case-Studydocx/
 there are potential opportunities for cross-business strategic fit among the
business groups.

LVMH’s has a large portfolio of luxury clothing brands such as Louis Vuitton, Givenchy, Fendi,
that don’t only specialize in clothing and accessories, but also perfumes, cosmetics,
jewellery and watches. Because LVMH has a very diversified portfolio in these industries, my
suggestion for the brand would be to combine their purchasing activities. For example: If we
take any of the fashion brands like Louis Vuitton or Marc Jacobs which sell watches, and a
specialized watch and jewellery brand they fully own such as Bulgari. Bulgari has the
necessary resources for producing watches, and therefore fashion brands like Louis Vuitton
could order their watches from Bulgari under their brand name. Since both brands are under
the same parent company, they will have the same criteria for quality, craftsmanship,
innovation, technology, etc., to produce a luxury good. This is just an example; however, this
can be done with most of their brands within these three business groups. They will gain
access to control over supply, lower costs, opportunities for cross-business strategic fit,
which would potentially increase value.

TASK #3: Justify your choices in Part A, by describing some specific

technologies, technical skills, or research & development projects, and the
Value Chain Activities in which there are potential opportunities for cross-
business strategic fit among the business groups.

To answer this question, I want to use the same suggestion I used above, because this can
also be implemented in technical skills, R&D, and technologies. LVMH owns brands that
focus at producing specific goods such as wines, or jewellery, but then they also own fashion
labels that produce more than just clothing or leather goods/accessories. The brands that
produce the specific goods, can be combined with the fashion brands that also focus at
selling goods the specific brands produce. If for example we take the luxury fragrance
industry, nearly all of the LVMH fashion brands have their own fragrance line. Producing
fragrances is a very complex process as it requires testing, chemists, labs, professional
workers, specific machinery, etc. My suggestion would be, instead of having separate R&D
departments for each fashion brand in fragrances, rather to combine them. The employees
are specialists, they would benefit from each other’s know how and inspirations, and the
technical skills required are the same. Why would this produce more value? I would say that
out of all the LVMH brands, Dior produces the most popular lines of perfumes. On the other
hand, Louis Vuitton is not famous for their fragrances, as they haven’t mastered the tastes
and preferences in scents their customers desire. Dior and Louis Vuitton target the same
customers; therefore, Louis Vuitton would benefit from the resources and know-how of the
Dior fragrance department. This would be an effective cross-business strategic fit which
would potentially increase value.

TASK #4: Justify your choices in Part A, by describing some specific sales
and marketing activities, common distribution channels, use of common

This study source was downloaded by 100000881998269 from CourseHero.com on 03-07-2024 04:55:50 GMT -06:00

https://www.coursehero.com/file/29393825/LVMH-Case-Studydocx/
 brand name, or after-sale activities, and the Value Chain Activities in
which there are potential opportunities for cross-business strategic fit
among the business groups.

There are a lot of things LVMH can do, with all their brands, in sales, marketing and common
distribution channels.

1. A strategy many brands are using today are joint ventures to create a temporary
fashion line. LVMH has so many brands, and I never saw them collaborating with
each other, as this has proven to be a very successful marketing strategy. For
example, they can increase brand awareness by having Moet (champagne) and Louis
Vuitton collaborate on limited edition champagne, or they can have Bulgari design
limited edition jewellery for Louis Vuitton. There are endless things they could do
with their brand in terms of joint ventures/collaborations. It would give them access
to the different customer segments by using common distribution channels,
combining their brand name for one or more products, etc.
2. LVMH, as mentioned in the case study, spends a lot on marketing for their fragrance
lines. Rather than having different advertisements for watches, fragrance, handbags,
clothes, they could potentially include many of their diverse brands products into
one advertisement.

TASK #5: What evidence is there that LVMH's diversification strategy is

actually building shareholder value? Give evidence from the LVMH case to
support your answer.

 Their diversification strategy includes investments into different brands and different
industries. They don’t only target fashion, but target companies from diverse
industries that could potentially increase their value. Having a diversified portfolio is
the smartest decision you could do as a manager, because e.g. their brand Dona
Karan failed which cost the company a lot of money as the brand lost value, however
their other acquisitions made up for the loss of Dona Karan.
 Their increasing numbers in acquisitions of brands has increased their Capital giving
them access to money that can be invested into different ventures, resources, etc.
This has another importance as well, it allows them to compete in the market; their
competition doesn’t have access to as much capital as LVMH does, this means that
the company can invest a lot more into resources like staff, machinery, materials,
than the other luxury brands.

TASK #6: INSIGHTS GAINED:

1. I learned how important it is to diversify your portfolio, as it allows financial security.

2. I learned how to better evaluate the mode of entries into a market. There are certain
criterias one should take into consideration such as; the question of speed, entry
barriers, resource and capabilities, etc., evaluating your company before deciding
how to best enter, as there are a lot of channels and possibilities. Also, its important
to consider, as this can cost a lot of time and money.

This study source was downloaded by 100000881998269 from CourseHero.com on 03-07-2024 04:55:50 GMT -06:00

https://www.coursehero.com/file/29393825/LVMH-Case-Studydocx/
 3. The difference between diversifying in related or unrelated businesses, and the
advantages and disadvantages that may occur. If I relate back to the LVMH case, I
could find a way to relate watches, fashion and perfume, however I couldn’t find a
way on creating a valuable cross-business value chain with wine and spirits. Of
course, diversifying into related companies is more beneficial as it can cost you less;
as you have the resources, however diversifying into an unrelated business can allow
you market entry into another unrelated industry, which can be a great advantage for
a company seeking more brand awareness, increase in consumers, etc.

This study source was downloaded by 100000881998269 from CourseHero.com on 03-07-2024 04:55:50 GMT -06:00

https://www.coursehero.com/file/29393825/LVMH-Case-Studydocx/
Powered by TCPDF (www.tcpdf.org)