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Strategic Appraisal of LV

-Case Report

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Contents
Introduction 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

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.

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

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 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
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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

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 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 Model


The 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:

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.
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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 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
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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 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
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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.

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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.
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.

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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 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
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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 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.

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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 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

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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 childrens 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:

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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.
Acceptability: The Companys stakeholders would accept the strategy since they are
well aware of the fact that with the venturing into this specific product would let the
companys 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 dont 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
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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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References
David, 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.
2.

Please adjust word count from 3150 to 3500 words (excluded references)

3.
4.

Please spell check and check the grammar check


Please fill in the table of content. It should not have any page number on this.

Word count of introduction and company background is expression as lecturer advises to


me that dont too long.

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