Strategic Appraisal of LV-Case Report

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ContentsIntroduction and Company Background......................................................................................................3

Part 1: External Analysis..............................................................................................................................4

Political Factors........................................................................................................................................4

Economic Factors.....................................................................................................................................4

Social-Cultural Factors.............................................................................................................................5

Technological Factors...............................................................................................................................5

Environmental Factors.............................................................................................................................6

Legal Factors............................................................................................................................................6

Industry Analysis – Five Forces Model.........................................................................................................6

Threat of New Entrants............................................................................................................................7

Supplier Power.........................................................................................................................................7

Degree of Rivalry.....................................................................................................................................7

Buyer Power............................................................................................................................................8

Threat of Substitutes...............................................................................................................................8

Part 2 – Internal Analysis.............................................................................................................................9

Part 3 – Corporate and Business Strategy..................................................................................................11

Part 4 -----Issues and Challenges................................................................................................................12

Part 5-- Strategic Options for Growth........................................................................................................13

Part 6-- Recommendations and Conclusion...............................................................................................15

References.............................................................................................................................................16

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Introduction and Company Background

The report is about the strategic appraisal of Louis Vuitton which is mainly a French based fashion house

and founded by Louis Vuitton in 1854. The report will incorporate a brief background of the company as

to its core business emulated by the industry it operates in.

As mentioned earlier, the products of Louis Vuitton are fashion based that range from leather goods to

ready to wear, from luxury trunks to shoes, jewelry, watches, sunglasses, books and accessories. Louis

Vuitton is pioneer in the global based fashion houses and the products are offered through lease

departments in high end department stores, e-commerce website and standalone boutiques. This

particular powerhouse of luxury operates around 3385 stores crosswise over North America, Europe and

Asia which incorporates Japan and China as well. However, Europe has 33% of its stores, Asia is Louis

Vuitton's single biggest market that represents above 35 percent of the sales. Louis Vuitton's division

LVMH accounts for more than 20% of the sales in the US while 30% of sales within Europe that

incorporates 11% sales within France.

The mission of the company is to make a provision of the quality products and to make then available to

such a segment of people who can definitely afford to pay for the quality they provide. Their vision is

usually based on the product excellence and make their products innovative and creative with their

product designs.

They key stakeholders for LV incorporates the customers, employees, directors, suppliers, owners

themselves emulated by the community from which the business draws its resources.

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Part 1: External Analysis

The external analysis of the Company will incorporate a PESTEL analysis that incorporates political,

economic, sociocultural, technological, environmental, and legal factors. All such factors are analyzed

below in detail.

Political Factors

The market for luxury goods can segregate into Europe, America, Asia-Pacific, Japan emulated by the

remaining countries in accordance with their region. In general, the countries having significant

consumption of the luxury goods have a political environment that is to some extent stable within the

most recent years. Be that as it may, the financial turmoil of the government along with the some of the

government's measures related to austerity demonstrated a fundamental debilitating demand of such

luxury goods for the local individuals (Manlow, 2015). However, the travelers from different nations filled

gap. The approach related to import duty within diverse nations is another variable ought to be

considered within the industry. The import duty being high could be found to be a significant reason as

to the differences in the prices within different nations. Subsequently, there could be a formation of the

grey market within the nations that have significant differences within the price.

Economic Factors

The industry's significant firms are located within Europe due to which the exchange rate of Euro will be

found to be an industry's essential element. The rate of growth will be quite distinctive which being

measured with nominal and euro terms. Keeping in mind the end goal the eradication of the impact of

exchange rate, the measurement of the constant exchange rate ought to be utilized. Presently, the

market for luxury goods has around steady growth rate of 15% on a nominal basis. Another imperative

factor on an economic basis is the economic condition throughout the world. A recession phase was 4

encountered by the world economic around 2008, which decelerated the price increase rate of the

product. The world economic condition within the world has been slowly recuperated, and in

accordance with the high demand and popularity in the region of Asia Pacific makes a contribution of

significant industry revenues and due to this particular reason, the locale will have high rate of growth by

anticipation within years (McCutcheon, n.d.).

Social-Cultural Factors

In the industry for global luxury goods, a large portion of the customers give prominence to the luxury

products that are usually Europe based than those made in US and Asia. Such a behavior results in a

competitive advantage within the luxury brands of Europe. Also, clients in diverse nations have

distinctive buying behaviors. Here the example could be that the customers of some nations are willing

and agreeable to move far from regular perceived brand, on the grounds that they need to buy more

products which are exclusive in nature (McCutcheon, n.d.). Moreover, in light of the expanding pace of

globalization, individuals prefer to travel between distinctive nations. Such travelers are found to

purchase different luxury goods amid the trips. Moreover, the tourists from China contributed more than

33% of the European sales. The industry for the luxury goods ought to notice to conform the basic

demand between the tourists and local people in the region of Europe.

Technological Factors

Since the online method of shopping became more widely popular, the vast majority of luxury

organizations developed their shops online to make a provision of the convenient and reliable customer

experiences. Such a method can offer organizations some assistance to be able to reach more potential

clients living in regions that don't have physical stores of the brands. The advancement of the technology

additionally offers some assistance to the industry to efficiently manufacture products. In accordance

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with the automotive machine introduction, it diminished specialization level of the employees partly and

expanded efficiency and productivity. On the other hand, the automation enhancement and

improvement likewise can weaken the brand appeal, on the grounds that the absolute segments of the

customer by and large need products which are artisans produce (McCutcheon, n.d.).

Environmental Factors

The worldwide industry for luxury products can have a negative effect or influence to environmental

viewpoint if the factors of manufacturing have poor abilities related to the control of pollution

(McCutcheon, n.d.). A few organizations likewise demolish as opposed to marking down their product in

excess with a specific end goal to keep the value of the product, which may recycle pressure and cause

additional waste, yet the case did not make a provision of the adequate information to the

environmental viewpoint.

Legal Factors

Acquisition is one of imperative strategy to develop the size of organizations along with profitability,

however it is mainly confined by law. For instance, the requirement within the French law is that one

organization ought to detail out its purchase related activity to the other organization on the off chance

that it holds an ownership of more than 5%. In the event that the organization utilizes different

approaches to go around the law, it may confront the issues of lawsuit later on.

Industry Analysis – Five Forces ModelThe five forces model will incorporate the degree of rivalry, threat of new entrants, supplier power, buyer

power, and threat of substitutes. This will make an analysis of the industry as below:

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Threat of New Entrants

In this particular industry, the threat of new entrants is generally very low. A large portion of the

organizations have a history of over 100 years and that the brands of such organizations rely on their

tradition and legacy. Indeed, if a new company wants to step within the industry, there would be a need

to invest a significant amount of initial capital and that it would be entirely hard for the organization to

develop a significant reputation within a short time period throughout the world. In this specific industry,

the customers would value the products by the brands they mainly prefer.

Supplier Power

The supplier power is extremely low since they are decentralized relatively and more than this, there are

only few significant luxury companies that dominate the fashion industry. Numerous organizations only

source the component parts and have their own particular facilities related to in house manufacturing.

Moreover, within the industry, suppliers ought to fulfill the requirement of significant quality of the parts

of components and in addition to this, contending with the qualified facilities of the manufacturing

throughout the world (Raymundo and Moon, 2014). The facilities of manufacturing in distinctive nations

have diverse material and labor costs that can prove to be a significant factor restricting the power of

suppliers.

Degree of Rivalry

Within the industry of personal luxury goods, the degree of rivalry is found to be moderate. Due to this

particular fact, the industry has some of the large players and therefore, it is concentrated. These

organizations don't need contend over price; be that as it may, they have a significant overlap of the

category of the products. A large portion of organizations have some characteristics that are particularly

common. They initialize their business in European zones and have basically a long history; they all make

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a provision of the services and products that are exclusive and hence, reputable due to their bands and

that they have served throughout the world a little quantity of wealthiest customers (Raymundo and

Moon, 2014).

Buyer Power

In the industry for luxury goods, the level of buyer power is low to moderate. There are mainly three

segments of customers within the industry that incorporate aspirational, accessible and absolute. The

absolute and aspirational segments value the quality of the products than the price of products. They

look for products that are impeccable and have a high net worth. Such customers are found to be within

the group that is categorized as price insensitive while expecting products that have high price which

cannot be found affordable by most of the people (Solomon, 2010). Apart from this, the other segment

named as accessible segment is found to be price conscious yet they willfully purchase products with

high price due to their quality which is comfortable in nature. Subsequently, the price can be controlled

within the industry and that a high level of annual growth can be retained.

Threat of Substitutes

There is absolutely no direct substitution for the luxury goods. In spite of the fact that the products, for

example, watches, jewelry, perfumes, cosmetics that are found to have substitutions with lower price,

the aspirational and absolute won't prefer such substitutions. The customers being accessible might buy

products that have relatively lower price, however they additionally have lower commitment to the

growth of the industry as compared to the other customer segments.

By and large, the industry for the worldwide luxury goods has still a high potential of growth within the

future. However, the market for the luxury goods is globally based, the revenues of the organizations

won't be influenced significantly by a one region or a country. The significant thing is to keep the parity 8

of development between distinctive nations. Organizations ought to additionally be cautious about

expanding effective production and retain the brand's heritage value. The industry for luxury goods is an

industry with high potential growth opportunities and minimal external risk. There are just couple of

extensive players in this particular industry and they serve to the most affluent individuals throughout

the world. Such companies have a great authority over price control and therefore, they have the

capability to grow in a sustainable manner.

Part 2 – Internal Analysis

The internal analysis can be explained in three steps. The first will be the value chain analysis of Louis

Vuitton emulated by the Competency framework and lastly, the VRIN framework.

It is a true fact that a company needs to have a competitive advantage over the competitors within the

industry. This mainly depends on the unique capabilities that a company has. They are generally needed

for the survival of the company on a long term basis. While looking at the value chain model of Louis

Vuitton, it can be easily distinguished. The LV resources can be explained as to what they mainly have

and hence, two main groups can be witnessed. They are named as Tangible, which incorporates testing

robots, factories or buildings, licensed stores, distributors, yachts or apartments, tools for the processing

of leathers, machines, trucks, leather farms and customers. However, the intangible resources would

include the knowledge or idea as to how the leather can be processed emulated by the skills in the

manufacturing of luxury and leather goods. This would also incorporate creative and design talent,

whole distribution control, e-commerce website, possibility of the VIP membership, guarantee of the

lifetime repair along with the knowledge of potential customer segments.

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Their capabilities include the control over the process of manufacturing the products that Louis Vuitton

make and such control make sure that the products are manufactured as per the acceptable standards.

They also implement a program for the employee training and also make an adoption of the reorganizing

of the manufacturing line. With the involvement of the machines into the production, they have the

capability to enhance the production efficiency (Vuitton bags the affluent customers, 2005). They also

have a strong control over the distribution and that everything is mainly provided and delivered at an

exact time and appropriate place and situation.

While associating the competencies and resources, strategic capabilities can be attained that are found

to be vital components for the survival on a long term basis along with the company's competitive

advantage. A company has a dire need for the capability to recreate and renew the strategic capabilities

with a specific end goal to address the issues of an evolving situation, which acquaints with the idea of

strategic capabilities. Within such strategic capabilities, there can be a recognition of the two particular

types. This incorporates distinctive capabilities which are generally required for the competitive

advantage and threshold capabilities which are needed in order to fulfill the basic requirements needed

within a particular market (Vuitton bags the affluent customers, 2005). For identifying the competitive

advantage, a VRIN framework is identified. The VRIN framework is detailed out below:

Value: LV is a valuable brand as it makes a provision of value to the customers and along with this, the

brand makes a contribution of high profits for the company.

Rarity: From the attributes of LV, the brand is found to be rare. Only some companies are based on

quality and heritage but there is no company which contains the exact perception of the brand in

accordance with the quality craftsmanship.

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Implacability: This particular brand LV is not easy to imitate as it is based on quality and heritage and it is

not well known as to what can make a contribution to the brand success.

Non sustainability: The brand of LV is found to be at a substitution risk. Customers that are not that much

loyal to the brand would definitely prefer to purchase from different brands within the industry of luxury

goods.

In accordance with the framework of VRIN model, it is obvious that the strategic capabilities of Louis

Vuitton satisfies each of the four criteria within the framework of VRIN to a great extent. Such imperative

strategic capabilities are interrelated. The brand of LV dis primarily based on history and heritage due to

the fact that they have qualify craftsmanship. All the three attributes of VRIN are found to be

cornerstones for the success of LV. In the meantime the quality of the goods of LV is particularly

identified with their image emulated by the product quality for which they don't compromised.

Therefore, when LV introduces new products within their effective range that exists already, they do it

gradually to guarantee the product quality while satisfying the desires of the customers and particularly

that it satisfies what their brand is known for i.e. quality craftsmanship.

Part 3 – Corporate and Business Strategy

The business level strategy incorporates Generic and Functional Strategies. In accordance with the

generic strategy, LV mainly focus on differentiation within the manufacturing and product design. They

make a provision of the high quality products that appeal to a narrow customer segment. As per the

functional strategies, LV utilize the operational method to manufacture and distribute the products. The

materials are of a premium quality for all of the products. Such high quality with high price appeals a

narrow customer segment as mentioned earlier and this is generally know as the narrow market scope

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strategy. They have also adopted vertical integration that allows them to have a control on their products

directly. This indicates that all of the products that are produced by LV can only be bought through the

verified stores of LV. They have substantial resources that can react to the dynamics of the

competitiveness of the luxury industry. Their have their own manufacturing equipment and distribution

centers. Their brand image is reputable, stable financial health and have qualified materials. Along with

this, the have an efficient and quick production of the products. Their global product structure deals with

different aspects and products of the business segregate. This develops a significant link between

customers and product development personnel which places the experts of the brand within the control

center for their specific products (When art meets fashion, 2014).

Their Corporate level strategy significant includes global strategy. They merged with LVMH in 1987. It

mainly deals with the luxurious fashion based products that range from wines, jewelry, leather products

and spirits. They focus usually on the uniqueness and quality of the products. Their corporate level

strategy is associated with LVMH which is a parent company. It does not incorporate a unique

organizational structure and that the group members have their own organizational structure. The

control measures are employed for meeting the organizational goals and that one control within that

incorporate website and specific outlets. This indicates that the culture within the organization targets

class and quality.

Part 4 -----Issues and Challenges

The issues and challenges of Louis Vuitton include both internal and external challenges. In accordance

with their distribution network, it has generally a significant competitive advantage. But it has definitely

faced and still has to face the marketing challenges in order to remain reputable and within a top notch

position within the industry. Apart from this, it does not incorporate authenticate street resellers. They 12

have been going through some of the significant challenges that is associated with international

marketing i.e. their establishment in Asia (When art meets fashion, 2014). This incorporates the

expansion of Louis Vuitton in India or generally the marketing of this particular brand in low to moderate

income nations. They had to face the challenges to make a recognition of the potential target markets,

absence of media for its establishment and awareness and lack of open stores. Along with this, it also

has to file a trade complaint within US in order to seek for the imports of US from China for the

handbags, accessories and other luggage which imitate the look of LV.

Part 5-- Strategic Options for Growth

For strategic options for growth, Ans-off matrix will be analyzed. This is detailed out below:

Ans-off matrix is significant tool for marketing which basically determines a direction for the marketing

team to plan for the current and non current products within the new and existing markets. The first

quadrant for the Ans-off matrix is market penetration. It can be said that LV is already competing for the

counterfeit market which damages the brand equity. For the purpose of this, they can solidify the brand

exclusivity and enhance sales while increasing the advertisements that could target the painting and hot

stamping services. Their approach could be through the depicting of the appealing and attractive models

along with customized and personalized handbags for the purpose of creating their label within the

target market regarding their services (David, 2015). More than this, advertising through the vehicles like

Vogue magazines could be the best approach. This would particularly develop the authenticity of their

product symbol and status which would be developed through the personalization and customization.

The second quadrant is the market development. It incorporates the taking of a current product and

making an entry to the new market. Louis Vuitton should consider the new product line of sunglasses

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which got developed in 2005 to the new segment of the market. Since this product is found to be

evolving as a symbol of trendy status. The market is found to be saturated with designers like Dior, Fendi

and Dolce and Gabbana. Such brands are targeted to men and women but the fact is that eye-wear is

generally prominent to the women. Positioning this for men as a luxury eye-wear would be considered

generally profitable.

The third quadrant i.e. the product development incorporates the development of a new product within

the current market. It is a well known fact that the Dior brand is owned by LVMH that has a great

increase in the fragrance business market share and Louis Vuitton can adopt for the capitalization of this

particular market and develop a line of flagrance related products which would target both men and

women that would purchase the current luxury accessories and apparel (Raymundo and Moon, 2014).

The last quadrant will incorporate diversification which means the introduction of a new product to the

new target market. This can include a development of the products for children. LV has already launched

a significant quality of children shoes. They can attain a significant profit from this. There is a major

amount of the households that can find the LV products affordable and hence, LV can definitely retain a

great market share within the industry for children’s apparel. Some of the popular brands for children

like Juicy Couture and Diesel cannot be considered as a luxury products for the defined target market

and LV can have a competitive advantage for this.

Moreover, the strategic choices made above should be evaluated in accordance SFA framework to

explore if such options can be adopted by LV. In accordance with the product development, the SFA

framework can be detailed out below:

Suitability: The strategy is found to be quite appropriate since the product establishment would result in

having a product in almost each and every group of the industry for luxury goods. 14

Acceptability: The Company’s stakeholders would accept the strategy since they are well aware of the

fact that with the venturing into this specific product would let the company’s revenues to enhance and

be competitive within the industry.

Feasibility: The product development will prove to be determinant in accordance with the ability to

provide innovative and quality products and hence the financial strengths would get to be stronger.

From the above illustrations, it can be said that the product development implementation can be chosen

as the best one. This would further indicate that LV would be capable enough to have this particular

product within the only zone that they don’t have any current product. With the launching of the above

mentioned new product, it would mean that they need to invest a lot in R&D and hence, it will definitely

allow LV to generate significant revenues due to their increasing demand.

Part 6-- Recommendations and Conclusion

From the above analysis, the company LV has a strategic benefit to enhance profits and revenues. They

can enhance their firm as one of the pioneers within the industry. The brand image and recognition can

be enhanced through the product development. Their production capabilities can also be expanded.

Their production line will incorporate a new product. They can gain a lot from their investment in

research and development. This can further lead to the foundation of new manufacturing facilities for

the product production. However, there are some of the threats and risks for this. This can incorporate

an increase in expenses without any success assurance. There would be substantial costs for the research

and development (Manlow, 2015). They had seek for a new expertise for the development of the

perfume with high quality grade. Ultimately, there is a significant and general expense risk.

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ReferencesDavid, S. (2015). A Study on Color Sensibility Image: Focus on Louis Vuitton

Advertisements from 2003 to 2009. Journal of Investigative Cosmetology, 11(2), pp.163-173.

Manlow, V. (2015). Experiential luxury shopping at the Louis Vuitton Flagship in Paris: Dramas of identity. Clothing Cultures, 3(1), pp.23-40.

McCutcheon, J. (n.d.). Designs, Parody and Artistic Expression A Comparative Perspective of Plesner v Louis Vuitton. SSRN Electronic Journal.

Raymundo, J. and Moon, C. (2014). New York, Paris: Schiaparelli, Prada, Louis Vuitton and Marc Jacobs. Critical Studies in Fashion & Beauty, 5(1), pp.175-195.

Solomon, J. (2010). Learning from Louis Vuitton. Journal of Architectural Education, 63(2), pp.67-70.

Vuitton bags the affluent customers. (2005). Strategic Direction, 21(7), pp.5-7.

When art meets fashion. (2014). Strategic Direction, 30(2), pp.5-7.

Comment

1. Please adjust word count from 3150 to 3500 words (excluded references)2. Word count of introduction and company background is expression as lecturer advises to

me that “don’t too long”.3. Please spell check and check the grammar check4. Please fill in the table of content.  It should not have any page number on this.

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