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Stratgie de dveloppement
A partir de 1997 : la stratgie de groupe sest plus oriente vers une augmentation du retour
financier des actionnaires et la gnration de cash-flow. Cet objectif pouvait passer par divers
objectifs intermdiaires tels que la consolidation des positions concurrentielles de chaque socit
par laugmentation de leur part de march, laugmentation des marges oprationnelles, le
contrle des cots. Mmoire dentreprise- DESS Ingnierie Financire- IAE BREST- 2003/2004
16 Pour atteindre ces objectifs intermdiaires, LVMH, a mis en place une stratgie de
globalisation et de coordination dactivits. La stratgie de globalisation passe par le
dveloppement de lignes de produits pour les socits du groupe et un marketing d ombrelle .
Ce produit doit satisfaire une clientle mondiale. Afin de diffuser au mieux ces produits, une
stratgie marketing locale des marques est aussi mis en place afin de tenir compte des
spcificits de chaque march national. Malgr cette nouvelle stratgie, le groupe nen a pas
pour autant rduit ses acquisitions, puisquelle a dpass 3,5 milliards deuros entre 1999 et
2001. Afin de faciliter la coordination, une rorganisation du groupe avec un dirigeant pour
chaque division a t mis en place. Cette rorganisation relve dune stratgie industrielle qui a
pour but une rduction des cots grce des synergies entre les socits dans les activits non
visibles cest dire ne touchant pas directement limage de la marque comme
lapprovisionnement, la fiscalit, la logistique ; le reste ( marketing, cration) restant propre
chacun. Cette rduction dans tous les domaines ayant pour but de financer de lourdes
campagnes publicitaires et linnovation. Ainsi, Kenzo fabrique les vtements de la ligne de prt--
porter Bazar de Christian Lacroix, son parfum Jungle sort de lusine de Givenchy Vervins
(nord de la France), les produits de beaut de Dior, de Guerlain et de Givenchy bnficient des
innovations sorties du laboratoire de recherche fondamentale du groupe. Lautre stratgie
permettant daugmenter le retour financier des actionnaires et le freecash flow a t de raliser
une intgration verticale, afin de chercher les marges l o elles se trouvent. Dans ce but, le
groupe a rachet des boutiques, augment le nombre douvertures de magasins et dvelopp le
concept des mgastores (boutiques ayant une surface importante et dvolue une seule
marque). De plus elle a rachet des spcialistes de la distribution slective telles que DFS et
Sphora. Cela permet dajouter la marge du producteur la marge du distributeur tout en
gardant le contrle de limage des marques. Linconvnient de cette stratgie est quelle
augmente les cots fixes ( cots de fonctionnement des magasins), ce qui rend la socit moins
flexible en cas de changement de la conjoncture. Mmoire dentreprise- DESS Ingnierie
Financire- IAE BREST- 2003/2004 17 Enfin le groupe est aussi attach sa performance
socitale et mne cette stratgie au travers de nombreuses initiatives telles que le mcnat
culturel (exposition,..) et le parrainage dvnements sportifs (coupe Louis Vuitton).
Certains analystes s'attendaient au pire. Les rsultats publis par LVMH tmoignent d'une forte
rsistance du numro un mondial du luxe alors que des vents contraires s'attaquent l'industrie
du luxe. Le groupe approche de la barre des 30 milliards d'euros de chiffre d'affaires 29,1
milliards en hausse de 4%. LVMH reste dans les mmes niveaux de rentabilit avec un rsultat
net de 3,4 milliards en hausse de 2%. Des rsultats qui portaient le titre en Bourse, vendredi 31
janvier.
Il a beaucoup t question de la Chine lors de la prsentation de ces rsultats. Car c'est dans ce
pays que se concentre l'essentiel des problmes de l'industrie du luxe. La loi anti corruption a
impact l'horlogerie et les vins et spiritueux notamment les vendeurs de cognac. Si Rmy
Cointreau et Pernod Ricard ont t affects par une rglementation plus svre en Chine relative
la consommation de l'alcool, LVMH a su apparemment prendre les devants.
"Nous avons gr nos stocks de cognac au plus prs en en transfrant une partie d'entre-eux sur
des marchs plus forte croissance comme les Etats-Unis ", a expliqu Christophe Navarre, PDG
de Mot Hennessy. Rsultat cette branche importante de LVMH s'en sort bien avec une
croissance de 6% sur l'anne 2013.
Une performance qui s'explique aussi par l'ouverture de nouveau march notamment l'Afrique.
Les montres et joaillerie auraient pu tre tout autant impact par les nouvelles lois chinoises. "La
politique anti corruption en Chine a eu des effets sur les montres", reconnat Antonio Belloni mais
elle touche surtout les montres les plus chers et les plus exposes. La branche s'en tire avec une
croissance de 4%.
Tous les observateurs ont surtout guett les chiffres de la branche mode et maroquinerie, 70%
truste par la marque Louis Vuitton. La croissance s'est ralentie comme attendue mais rien de
catastrophique. Avec 5% de hausse du chiffre d'affaires on est loin des performances double
chiffre mais la marque rsiste.
Bernard Arnault a rexpliqu que ce ralentissement est d'abord le fait de la moins grande mise
en avant des sacs en toile au profit du cuir. Un tournant stratgique qui impacte la croissance de
Vuitton et qui prendra du temps. Cette dmarche dcoule d'une conclusion: les Chinois sont
devenus trs regardant sur le degr d'exclusivit et de sophistication des marques de luxe.
Vuitton devait s'adapter. Apparemment la griffe volue vite. Des nouveaux sacs plus haut de
gamme sont dj sur le march et en croire Bernard Arnault, "la production a du mal suivre".
Les chinois ne la boudent pas tant que ca puisque la consommation de produits Vuitton par les
chinois "a progress de 5% en incluant les dpenses des touristes chinois", a rvl Jean-Jacques
Guiony, le directeur financier du groupe. Rendez-vous est fix maintenant pour le 5 mars date de
prsentation de la premire collection de Nicolas Ghesquire, le nouveau crateur de Vuitton qui
a remplac en octobre dernier Marc Jacobs.
En revanche, la branche mode et maroquinerie accuse une baisse marque de sa rentabilit qui
chute de 4%. Mais la cause n'est pas aller chercher chez Vuitton, jure la direction du groupe,
mais chez les autres marques du groupe : Celine, Fendi, Berluti notamment qui ont fait l'objet
d'un soutien financier important pour dvelopper leurs rseaux de boutiques en propre ou largir
le territoire de la marque.
Pour 2014, le groupe reste confiant. Les fondamentaux sont solides. 2014 va tre l'anne de
dveloppement de la marque trs haut de gamme Loro Piana. "Nous avons beaucoup
apprendre de la qualit de service de cette marque", a estim Bernard Arnault. Par ailleurs, la
Chine "devrait dlivrer une croissance trs lgre", a pronostiqu Antonio Belloni, le numro
deux du groupe, avant d'tre corrig par le numro un : "le potentiel a 10-15 ans de ce pays est
considrable, LVMH voit plus loin que 2014".
Peu de commentaire sur Herms, un sujet qui a largement occup le groupe ces dernires
annes. Bernard Arnault a simplement comment qu'il tait "un actionnaire content" et qu'il
gardait espoir que les relations s'arrangent avec le clan d'en face. Rponse dans quelques
semaines lors de la publication des rsultats d'Herms.
Pour les produits de luxe, l'ADN culturel et local est trs souvent l'origine de l'histoire qu'on va
pouvoir raconter sur le produit.
Au troisime trimestre, la mise en jeu de ces quatre leviers a permis au groupe
d'chapper tous les piges de la conjoncture.
Les ventes globales ont fortement progress essentiellement grce la maroquinerie (marque
Vuitton, mais pas seulement) et aux parfums et les cosmtiques (Dior mais pas seulement). Ces
locomotives ont plus que compens le tassement de la croissance sur les vins et alcools et sur
les montres.
Au niveau gographique, l'activit a continu de progresser en Chine, grce un dveloppement
de l'appareil commercial, alors que la croissance de l'conomie chinoise ralentissait et que le
Japon s'est retrouv une fois de plus en panne. Les Etats-Unis et l'Europe sont rests bien
orients, sauf la France qui a t dlaisse par les touristes trangers.
Cela dit, les touristes ont dpens leurs devises dans les magasins de Londres essentiellement
dans les marques de LVMH.
En fait, la puissance de la marque Vuitton a servi de locomotive pour la maroquinerie et
comme ce secteur ralise plus de la moiti du rsultat oprationnel, c'est tout bon pour le
groupe.
Dans les parfums et cosmtiques, c'est l aussi la puissance des marques (Dior en
particulier) qui a permis d'chapper la baisse qui a touch tout le secteur.
Par contre, les vins, champagne et spiritueux n'ont fait que 4 % de mieux au 3e trimestre contre
16% de croissance au deuxime trimestre. Les montres et la joaillerie ont piqu du nez cause
de l'Asie. Les super-riches chinois n'ont pas achet de bijoux trs chers, mais la classe moyenne
suprieure de Shanghai ou de Chenzen continuer de faire la queue chez Vuitton.
La rsultante de toutes ces volutions est videmment trs positive. Et dune certaine faon si on
compare le luxe la franaise au luxe du digital, l'activit dun LVMH est beaucoup plus
scurise et peine que l'activit d'un Apple condamn l'innovation permanente avec un risque
de saturation du march assez prvisible. A priori, le march de Vuitton ou de Dior est loin
d'tre satur.
Le groupe franais, numro un mondial du luxe, vient dannoncer le 26 janvier 2017 des rsultats
records pour 2016. Le fleuron tricolore affiche un chiffre daffaires de 37,6 milliards deuros, en
progression de 5 % et un rsultat net part du groupe de 3,9 milliards deuros soit une hausse de
11 % par rapport 2015. Au-del des performances financires, le groupe brille linternational
par lexcellence de ses marques et de ses produits et nest pas prt de sarrter. Comment
analyser cette ascension continue ? Quels sont les lments cls de la stratgie du groupe qui
permettent LVMH daller toujours plus haut ?
LVMH affiche des performances financires exceptionnelles en 2016. Prsent dans cinq secteurs
dactivits principaux vins et spiritueux, mode et maroquinerie, parfums et cosmtiques,
montres et joaillerie, distribution slective , il est le leader incontest du luxe au niveau mondial
avec un portefeuille de plus de 70 marques (notamment Mot & Chandon, Dom Prignon, Veuve
Cliquot Ponsardin, Chteau dYquem, Louis Vuitton, Cline, Loewe, Kenzo, Givenchy, Fendi, Marc
Jacobs, Berluti, parfums Christian Dior, Guerlain, Sephora, Le Bon March, Bvlgari, TAG Heuer,
Chaumet et Dior montres). Certes la diversification des activits et des marchs gographiques
permettent de pallier un contexte dinstabilit gopolitique et conomique, mais notre avis
lattractivit des marques repose sur une recherche permanente de lexcellence grce aux
talents des collaborateurs, une priorit donne linnovation, un esprit entrepreneur au sein
dun grand groupe et une prise en compte toujours plus importante de la dimension socitale et
environnementale.
Aux tats-Unis par exemple, Sephora, lenseigne de distribution slective dans lunivers de la
beaut a lanc il y a un an le programme Sephora Stands et annonce une extension dans ses
efforts encourageant lentreprenariat fminin. Consciente du fait que, mme dans lunivers de la
beaut, les entrepreneurs femmes sont sous reprsentes, lenseigne a lanc, dans le cadre de
son initiative Sephora Accelerate, une nouvelle plateforme pour encourager les initiatives des
femmes. Le groupe propose notamment de slectionner et daccompagner dici 2020 plus de 50
femmes entrepreneures dans le monde de la beaut.
lheure o nombre de nos marques franaises, nos industries ont t ou sont absorbes par
des groupes trangers (reprise de la branche nergie dAlstom par lamricain General Electric,
du Club Med par le chinois Fosun, de Lafarge par le groupe suisse Holcim), cest au contraire le
groupe LVMH qui rachte des socits ltranger : Bvlgari en 2011, Loro Piana en 2013 ou
encore dernirement le groupe Allemand Rimowa comme indiqu prcdemment.
Non seulement le groupe affiche des performances financires solides et prometteuses mais
cest aussi limage de la France quil vhicule travers le monde. La rputation et la dsirabilit
de ses marques en font un leader incontest. Un groupe dirig de main de matre par un
visionnaire dont la stratgie sarticule autour de la recherche de lexcellence grce aux talents de
ses collaborateurs, la place omniprsente de linnovation tout en inscrivant son dveloppement
dans une dmarche de responsabilit sociale et durable.
Le 3 fvrier 2017, laction cote 188,65 euros en milieu de matine et la capitalisation boursire
du groupe LVMH slve 95,64 milliards deuros, ce qui place le groupe en 4 eposition derrire
Total (115,49 milliards deuros), Sanofi (97,74 milliards deuros) et lOral (96,25 milliards
deuros), de quoi rjouir ses actionnaires, auxquels il proposera, lors de lAssemble gnrale du
13 avril 2017, un dividende en hausse de 13 % 4 euros par action.
Les crateurs de mode ne sont pas les seuls engendrer de linnovation, ils ne sont pas les seuls
inventeurs. Dans le groupe LVMH, plusieurs dpartements de recherche et dveloppement ont vu
le jour, et ce partout dans le monde. Des laboratoires pour la parfumerie, des centres de
recherche en cosmtique, des groupes dtudes en innovation technologique travaillent tous les
jours pour atteindre ce niveau dexcellence que le groupe sest fix.
Afin damliorer le travail de ces quipes et leur communication, a t inaugur fin 2013 un tout
nouveau centre centralis, Hlios. Situ en France, dans le Loiret, ce centre accueille des
scientifiques et techniciens spcialistes de la cosmtique. Ils participent aux crations des
marques comme Guerlain, Dior ou Givenchy. Et pour parfaire le projet, les quipements sont
ouverts dautres chercheurs, dans le cadre de la politique d open innovation du centre.
Ainsi de jeunes chercheurs de luniversit voisine, Orlans, pourront venir travailler dans les
laboratoires, et pourquoi pas, par la suite, partager leurs rsultats avec les quipes de LVMH. Le
groupe dveloppe ainsi de nouvelles mthodes et souvre de futurs jeunes talents.
Les maisons du groupe ne se contentent pas d'investir les rseaux sociaux, elles crent aussi
leurs propres dispositifs mobile first . L encore, Louis Vuitton est novateur avec l'application
Louis Vuitton Pass qui offre un accs en avant-premire aux campagnes de communication et
permet de commander directement les produits prsents sur les visuels.
La ralit virtuelle et sa capacit d'immersion dans des expriences fortes en motion a
notamment t utilise par Dior pour l'opration Dior Eyes ; celle-ci fait pntrer, casque sur la
tte, dans les coulisses d'un dfil et partager la prparation du maquillage des mannequins.
Avec ces technologies, le groupe LVMH rpond une attente de ses clients, qui ne veulent pas
seulement possder un objet mais souhaitent vivre une exprience sensorielle globale. Ces
innovations lui permettent de crer de la proximit avec ses consommateurs, de se diffrencier
de ses concurrents, et dtre en position de force vis--vis des distributeurs.
Ainsi, Amazon a propos au groupe de distribuer ses produits, mais celui-ci s'y est jusqu'
prsent toujours refus. Nous pensons que lentreprise Amazon ne correspond pas LVMH. Elle
nest pas adapte nos produits de marque , a dclar Jean-Jacques Guiony, le directeur
financier. On peut interprter ce refus comme une volont de rsister la banalisation, ou
comme la crainte d'une cannibalisation par le gant du e-commerce.
Il semble clair que LVMH veut conserver la matrise de ses canaux de distribution digitale, et les
faits lui donnent raison. Lorsque Dior a t la premire marque de luxe vendre un sac sur
WeChat en Chine, elle a puis ses stocks en 24 heures. Et lorsque Bulgari a lanc sa nouvelle
collection B. zero1 sur le canal digital, ses ventes ont connu une croissance deux chiffres.
Selon le site Fashion Network, LVMH s'apprterait mme lancer son propre site e-commerce de
luxe, une sorte de Net--Porter rassemblant ses propres marques mais aussi des marques de
crateur ou de luxe accessible. Un soft launch serait prvu en avril-mai, avant une
inauguration officielle en juin. En septembre 2015, LVMH avait dbauch Ian Rogers de chez
Apple pour le placer la tte de ses activits numriques, tmoignant du rapprochement entre
luxe et technologie.
In the following statement, it is aim at evaluate the corporate strategy being pursued at LVMH. In
order to have an in-depth analysis, it will have a brief identification of corporate strategy in LVMH
and an explanation of the rationale for the strategy in the beginning. Based on those parts, it will
have an evaluation of corporate strategy at LVMH.
Summary statements of strategy
In the following, it is going to identify the nature of the corporate strategy being implemented at
LVMH. The first part is going to explore the composition of LVMH.
There is one way to evaluate the corporate-level strategy to compare and evaluate each
individual investment in the portfolio to determine whether or not the investment is currently
performing to expectations and what the future prospects are for the investment. The Boston
Consulting Group (BCG) matrix is a relatively simple technique for assessing the performance of
various segments of the business (Johnson et al 2008 and Advameg Inc 2010). It classifies
business-unit performance on the basis of the unit's relative market share and the rate of market
growth as shown in Appendix Figure 1.
The five different LVMH business spectrums are put into the four quadrants. The perfumes and
cosmetics spectrum is as a question mark, which had the lowest market growth within other
spectrums, compared with Figure 2. The strategy for these products have to continually gain
market share through strong communication and innovation in this spectrum such as new
product launching, new product line or strengthen existing products.
A high market share becoming a BCG matrix star and it is belongs to Fashion and leather goods,
which means this spectrum has a high-growth market. Stars can generate large cash flow for the
business, as same as the largest account for the revenue from LVMH in Figure 2. Stars are the
targets of large expenditures for advertising and research and development to improve the
product and to enable it to establish a dominant position in the industry. For instance, Louis
Vuitton entered into new markets, Lebanon and Dominican Republic; accelerate global expansion
of Marc Jacobs; and to maintain policy of targeted investments and rigorous cost management
for other brands.
The spectrum of Watches and Jewelry is located at the middle of star and question mark, which
has the high potential in market growth but account for a little market share. The strategy is to
continue gain the market share, pursue up-market positioning through strong innovation and
selective expansion of mono-brand store network.
Cash cows are Wine & Spirits and Selective Retailing spectrums that have high market share in a
low-growth market. They are usually well-established products with wide consumer acceptance,
so sales revenues are usually high. LVMH has to continually maintain rigorous management of
costs and inventories and increase marketing programs like e-commerce in order to retain the
market growth.
Dogs are the businesses with low market share in low-growth markets. In LVMH, no one is
belonging to this quadrant.
Diversification
Diversification is a strategy to increases the corporation scope radically from existing markets
and products (Johnson et al 2008). It is the most radical strategic direction and more value
creating than others. According to Porter, there are also three tests for diversification.
Attractiveness test is the business which must be structurally attractive or capable of being
made attractive. Cost of Entry test is the cost of entry must not capitalise all the future profits.
Better-off test is either the new unit must gain competitive advantage from its link with the
corporation or vice versa (Porter 1987). LVMH has the below reasons for diversification with
potential value-creating.
Efficiency gains: LVMH keep its companies at human size and group them in a separate Business
Groups or Branches, allow the brands in each business to coordinate strategies and develop
synergies with common interests such as research, purchasing, logistics and international
distribution. Companies can take the benefits from synergies to share the existing Group
resources once acquired new companies. It allows sharing variety departments and resources
such as financial, administration, R&D etc. Sharing resources can help LVMH to experience the
economies of scale to reach efficiency and effective into a new activity (Johnson et al 2008).
Stretching corporate parenting capabilities: LVMH had a wide range of business covering fashion,
wine, perfumes to financial media that share very few operational resources or competences but
creates value by adding parenting skills. The philosophy of creativity and the nurturing of
creative talents are relevant to each business spectrum.
Increasing market power: LVMH is obviously gaining market power with a diverse range of
business by acquired new companies, invested with a medium or long-term view. The
investments had permitted LVMH to finance in new development and strengthen cash flow that
developed a balanced and diversified corporate portfolio. In order to increase the market power,
the group expansion and the development of new subsidiaries had supported around the world.
Value-adding to LVMH
In this part, it is going to identify the activities by LVMH can add value.
Envisioning: LVMH provide a clear vision that guide and motivate the business to maximize
corporate-wide performance. The vision in LVMH is ''product quality, creativity, image,
entrepreneurial spirit and the willingness of its people to always question their achievements and
the striving to be the best'', which is indissolubly linked to the entrepreneurial spirit. Each
company was free to adopt the marketing and retailing strategies best suited to its needs,
capitalize on distinctive positioning.
Coaching and facilitating: can help to develop strategic capabilities by improving skills and
confidence. It can also facilitate cooperation and sharing across the business. In order to provide
high-caliber training to the employees, the group institutes a comprehensive training program in
several regions such as Paris, Hong Kong, Tokyo to focus on development of personnel
management and integration of LVMH. In addition, it launched a Global Leadership Program in
order to step up the professional development of the most promising future executives through
discussions on risk-taking and innovation moderated by business group leaders and the CEOs of
Group companies. These kinds of programs are provided opportunities to learn management
skills and build relationships for the group.
Providing central service and resources: LVMH offer opportunities to management-level
employees with internal mobility within the company, transferred to new position within the
group by developed with special assignments to facilitate broadening of experience and
perspective. It allows the employees to work for a defined period in a company and enable them
to have varied and changing work environment and tasks.
Intervening: Once the new graduates come into the company on management level are
immediately given real jobs but not send to have training program first. It helps to find out if
someone is not suitable for the work quickly at LVMH or find the initial responsibility too
overwhelming leave soon. The way is helping them to find the people are interested by being
part of something, have a dream to be achievable so that it becomes challenge to work at LVMH
in order to monitor the performance and encourage performing better.
Evaluate the corporate strategy being pursued at LVMH
According to Rumelt, there are four criteria for strategy evaluation:
Consistency: The strategy must not present mutually inconsistent goals and policies. The
atmosphere of LVMH vision is scattering in each company. Its autonomy disciplines and the
philosophy of creativity also bring employees loyalty toward working at LVMH. People in the
group tended to have a strong feeling of ownership of ''their'' brands and cherished that they
contribute to the development of the company without a lot of bureaucratic procedures and
constraints. (Rumelt, 1980)
Consonance: The strategy must represent an adaptive response to the external environment and
to the critical changes occurring within it. LVMH had a foresight that hired new designers to run
conservative traditional business become as profitable. Marc Jacobs had created new lines of
product which were much more modern and identifying the brand with the desirable fashion
world. He took the 146 year old LV logo and put it everywhere, starting off the trend of
''logomania''. Thus, LVMH had given a new generation of designers the chance of their lifetime on
creative design freely. It also dedicated people who are passionate about doing something of
outstanding quality. (Rumelt, 1980)
Advantage: The strategy must provide for the creation and / or maintenance of a competitive
advantage in the selected area of activity. This is usually the result of superiority in resources,
skills, or position. Customers who came to buy the products are not acquiring for functionality,
they bought an image and a lifestyle, an intangible value. The employees who worked at LVMH
professed to love the products they worked with and wanted to make sure that others loved their
products. They were proud they were be the part of the ''Christian Dior family'' of the ''Louis
Vuitton family'' and felt prestige involved in LVMH companies. (Rumelt, 1980)
Feasibility: The strategy must neither overtax available resources nor create unsolvable sub-
problems. The strategy should be reasonable in the light of the organizations resources: money
and capital; management, professional and technical resources and time span. Companies did
not go to Headquarters for specific support, they can be done the tasks by group level, tax
planning, and recruitment of senior management level positions. The shared and synergies group
resources enable companies increase their problem-solving capabilities and empowerment.
(Rumelt, 1980)
Conclusion
Porter's concluded that Portfolio approach is not a valid corporate level strategy in advanced
economies. The first key element is to associate with corporate level strategy, to ensure that a
corporate entity can achieve more profitability than the collection of different businesses under
their control. There are four concepts for corporate level strategy to achieve (Porter 1987).
To conclude based on the above findings, it evidence that LVMH had pursued those four
corporate strategies. When LVMH choosing an effective corporate strategy, it identifies the
interrelationships among the existing business spectrums and select the spectrum of fashion and
leather goods as core business to become the foundation of the corporate strategy. The LVMH
group structure also facilitates interrelationships among the core businesses and lays the
groundwork for future related diversification. Its shared resources provide diversification
opportunities and allow transferring superior skills. Restructuring is seldom used at LVMH since it
had an excellence management level people with high-caliber. The remuneration for them was
based on a fixed base salary, a bonus, and stock options which are merit based. Finally, the
diversified and balanced portfolio enables LVMH to share organization-wide core competencies
successfully.
Appendix
The companies that are most vocal about environmental and social issues tend to be big, mass-
market brands well-known retailers, consumer products giants, and tech firms that are telling
a new story to consumers who increasingly care about sustainability. It might seem that luxury
goods companies would not feel the same pressure, but the high-end brands face important
questions about the way their businesses impact the world. These companies cant ignore
sustainability.
One luxury leader, LVMH, provides a great example of how to build a robust sustainability
program. The company is a 36 billion decentralized collection of valuable brands which they
call houses (or maisons) covering fashion, wine and spirits, cosmetics, and jewelry. To
understand its sustainability journey better, I spoke with the companys head of
environment, Sylvie Benard, and the CEOs of two of its wine and spirits brands.
The center of the corporate program is a framework it calls LIFE (LVMH Initiatives for the
Environment), a strategic backbone for programs that address nine environmental challenges.
LIFE focuses attention on the full life cycle of products, from supply chain to production
excellence to designing longer-lasting and repairable products. Each brands strategic business
plans now include a LIFE plan, with actions and targets laid out for the next five years.
Looking at LVMHs efforts, Ill highlight three areas where I see great impact and innovation:
managing carbon and energy, building a connection with customers around brand purpose, and
working closely with suppliers. Ill then discuss some of LVMHs challenges.
The LVMH leaders I spoke with believe strongly that Millennials, more so than previous
generations, care about sustainability. As Gibb puts it, Until recently, marketing would focus
mainly on product and brand image. But now people look for whether youre both socially and
environmentally responsible. People look at brands and ask what they do for the world. If you
dont do this stuff, youre not a modern brand.
One of the ways the company is telling a more sustainable story to customers is through the use
of the Butterfly Mark, a symbol a first in the luxury industry that at a glance helps people
identify brands committed to social and environmental sustainability. (Disclosure: Im an unpaid
advisor to Positive Luxury, the company behind the mark.) The Butterfly Mark will soon appear
on Krugs Champagne. Krug also uses a fun, innovative tracking system to share information with
consumers. Every bottle has a unique six-digit number, which you can input on its website to get
that bottles story.
Maggie Henriquez, CEO of Krug Champagne, says that its focus on environmental and social
impacts, and the story the company tells about it, stems from looking inward at its own history.
Like many luxury brands, Krug was struggling after the 2008 financial crisis. Henriquez says
there was a deeper problem than just economic conditions: It had lost its connection to the
founders 19th-century ideals about craftsmanship, humility, and quality.
A critical part of going back to its roots, Henriquez says, required connecting in a deeper way to
growers. The quality of the crops, and the care of the growers, are key to the success of the
business. Henriquez started a program to work with growers on sustainability and quality, going
plot by plot to review harvest times and implement modern best practices. Together they reduce
waste and agricultural inputs (such as fertilizer and water) to get better yields, which reduces the
overall footprint. Some of LVMHs other businesses, such as jewelry brand Bulgari, have also
implemented supply chain tracing programs for critical inputs with potentially troubled histories
(like some metals and diamonds).
In one sense, none of this is surprising or cutting edge. Most large companies with agricultural
supply chains, like Kellogg and General Mills, have developed elaborate, robust supplier
programs to improve yields and cut water use and greenhouse gas emissions. And on the jewelry
side, companies like Tiffany employ extensive tracking programs to avoid conflict minerals and
blood diamonds.
But LVMH does some unusual things. Henriquez decided that growers were so important to the
Krug story that she wanted them engaged in a deeper way. Henriquez, growers, and the
winemaking team enjoy product tastings together, allowing growers to enjoy the end results of
their work and their crops. It sounds so simple, but Henriquez says, Its not normal in our
business, and its such a moment of connection.
The Challenges
The sustainability and operating execs at LVMH talk openly about some of the challenges they
face. As usual, short-term pressures on financial performance are a concern, and change takes
time. Environmental exec Sylvie Benard comments that changing behavior can take a few years,
and you have to keep hammering home the message and find the right moment to act.
However, its a bit easier for the brand CEOs to stay focused on the long term when some of
the maisons are three centuries old. They have to plant trees today, for example, to have the
right wood for casks 150 years from now. As Gibb puts it, If youre not thinking about the brand
over a 10-year period, youre not doing your job.
Perhaps the biggest hurdle is more existential: Can luxury goods ever be sustainable? On one
level, probably not, since these products almost by definition are not an inherent human need.
But while it would be easy for sustainability people to assert that none of these products should
exist, thats more than just unrealistic its probably counterproductive. Everyone has different
definitions of what makes for a thriving life; for many, it can easily include some wants, or things
that provide fun and beauty.
The challenge, then, is to make sure sustainability and beauty are inseparable. LVMH is on the
right track, talking about sustainability as core to excellence, quality, and brand image and
central to how the company operates. As Sylvie Benard says, when the marketing director,
financial director, logistics director, and so on take the environment into account when making a
decision, then life will be beautiful.
Corporate and Business Level Strategy Louis Vuitton Mot Hennesseys corporate strategy is a
conglomerate diversification with business lines in fashion and leather goods, watches and
jewelry, perfumes, wines and spirits, retail stores and more. While in recent years conglomerates
have not been able to sustain highlevel performance, LVMH has because its businesses are not
so dissimilar that management logic and performance measures wont stretch. LVMHs
competitive advantages are what set it apart from the competition. One source of Louis Vuittons
strategic capabilities is in its brand names, reputation, and marketing know-how. The company is
able to avoid competitors by securing a niche and is able to outperform competitors because of
their focused differentiation strategy. Within this strategy, LVMH is able to price their items at a
premium, give consumers products with superior quality, prestige, and exclusivity, and invest in
rapid innovation and high customer service. LVMH can then mitigate buyer power and the ability
of substitutes to take business because customer sensitivity to price increases is low and
consumers stay brand loyal. Vision and Leadership LVMHs website states the following as their
mission statement, The mission of the LVMH group is to represent the most refined qualities of
Western Art de Vivre around the world. LVMH must continue to be synonymous with both
elegance and creativity. Our products, and the cultural values they embody, blend tradition and
innovation, and kindle dream and fantasy. (The Group) LVMH works hard to ensure all of their
products fall under of this mission of representing an acute combination of elegance and
creativity, blending tradition and innovation, and kindling dream and fantasy. The mission serves
a backbone to all of the business lines, contributing to the relatedness nature of its corporate and
business strategy. The group cites five priorities in relation to their mission: be creative and
innovative, aim for product excellence, bolster the image of their brands with passionate
determination, act as entrepreneurs, and strive to be the best in all they do. These priorities
ensure the cohesiveness that LVMH shows even with its diverse portfolio. Long-term success is
rooted in the combination of artistic creativity and technological innovation, the perfection of
products through traditional craftsmanship, the intolerance of anything less than excellent, the
fostering of exceptional reputation and stringent control of brand image, the decentralized
organizational structure, and the ambition to be the very best. One of LVMHs key strategic
advantages is in its strong leadership. Chairman Bernard Arnault has spent over 25 years helping
to build LVMH from a small, nearly defunct clothing manufacturer to a conglomerate comprising
approximately 60 of the worlds most powerful Keshia Mae Jeantel 7 brands (Arnault). His style of
leadership and management focuses on the limitless and radical innovation. He believes in
pushing the envelope, thinking completely outside the box, and that there is no room for
financial and commercial concerns at any stage of production, especially the creative process.
His management style stresses a decentralized organizational structure because he feels it
fosters efficiency, productivity, creativity, and dynamic motivation. Each individual brand is
responsible to infuse an entrepreneurial spirit in their operations (The Group). Quality and
attention to detail has afforded the company sustained success. There is strict discipline in
complete control in manufacturing processes and meticulous planning. Arnault has a strong
resolve that is a driving force in the companys success. In an interview, with Harvard Business
Review, his answers inherently reflect the LVMH mission. When asked how the company responds
to the marketplace in the creative process he is quoted as saying, You cant charge a premium
price for giving people what they expect, and you wont ever have break-out products that way
the kinds of products that people line up around the block for. We have those, but only because
we give our artists freedom. (Arnault) His main strategy is to trust creators and to strike a
balance between the classics and the new and innovative, in fact, only 15% of profits come from
new products, most of it comes from the traditional products consumers have grown to love. He
has a great track record in purchasing large and almost defunct companies and turning them into
profitable powerhouses, i.e. Christian Dior, Celine, and Sephora (The Empire of Demise). To
develop a sustainable and lucrative brand, Arnault identifies four characteristics: timeless,
modern, fast growing, and highly profitable, a strategy he has perfected and that is not easily
duplicated across the marketplace (Arnault). Culture and Brand Position LVMH Mot Hennessy
Louis Vuitton S.A. has a well-established culture and brand position. The group has a
commitment to environment and philanthropy, revealing its culture and level of corporate social
responsibility. Under the environment value, Louis Vuitton follows the 5 Rs: recycle, reduce,
review, repair and renew. Within this capacity there is a focus on the greater environment and
reducing the companys carbon footprint. The group also uses environment as an opportunity to
integrate environmental innovation and creativity (LVMH and the Environment). The group has
over 100,000 employees that join an ecosystem that is described as fascinating, passionate,
stimulating, and meaningful. This ecosystem represents a slew of mtiers: create and innovate
produce and achieve excellence, sell and develop, manage and support. The group encourages
functional and geographic mobility, holds effective talent development and training as a
necessity, and has a commitment to diversity. Branding positioning for a luxury conglomerate
could be difficult, however LVMH does an exceptional job in focusing on each individual brands
positioning but also ensuring it is cohesive with the LVMH group brand. The development of the
corporate brand is done to address needs of investors, employees, and other stakeholders. The
development of the individual brands and their positioning adheres to the consumer. To maintain
both facets of the brand message, each individual brand has to have its own established brand
message and personality however, whatever this is, it must reflect the luxury quality of the
goods or services (Okonokwo, 116-118). For example, when purchasing any product from a LVMH
group brand, consumers are buying into much more than a tangible product, they are buying into
an Keshia Mae Jeantel 8 experience, a culture, and a prestigious lifestyle, representing the
corporate brands position. When specifically purchasing a Louis Vuitton product, the LV symbols
and monogram represent the individual brands identity and personality. The company burns
remaining inventory at years end to maintain the value of their products and ensure they never
go on sale, preserving the value to consumer, representing the individual brands position.
Striking the balance between the groups brand and each subsidiarys brand gives the group the
opportunity to control pricing, marketing, and other significant factors. Potential Threats It is
important to note some possible problems LVMH may face. Much of the groups success has been
due to the dynamic leadership of Chairman and CEO, Bernard Arnault. Losing him as a leader due
to health or death could leave the group susceptible to reorganization of management by a new
figurehead. Arnault should be grooming a successor in case an unforeseeable tragedy occurs
that forces him out that can continue to take the group in the direction that has given it such
success. Other issues include dealing with creatives, which has proved to be a challenge. Just
this past year, Arnault had to make the decision to fire John Galliano, Former Creative Director at
Christian Dior for making anti-Semitic remarks, going against the groups mission and values
(Phelan). Firing him showed that the company would not tolerate insubordination, however, the
split became very public. There are reports Galliano sued Christian Dior over an
employee/employer dispute for over $18 million and Arnaults son has been quoted as saying,
towards the end, my father just couldnt talk to John Galliano at all, it was impossible- he
wouldnt listen to anything. At that point, it crashes (Mau). Controversy like these can severely
dilute shareholder value and deteriorate interest. Furthermore, the luxury goods industry can
come under attack by several adversaries, one being animal rights groups and another
counterfeit products. In the wake of economic downturns, there is the threat of increased
frugality from consumers. Finally, it is important to note that while LVMH is a global brand, it
should be sensitive to differing target customers based on diverse geographical cultures.