LOUIS VUITTONMOËT HENNESSY: EXPANDING BRAND DOMINANCE IN ASIA Case Report GLOBAL MBA II Centrum-Tulane June, 2009 CEO of LVMH. Arnault acquired 24% of LVMH. giving him the . invited french entrepenuer Bernard Arnault to invest in the newly formed conglomerate. a premium spirits company • In 1971 Moet Chandon leading manufaturer of champagne merged with Hennessy leading manufacturer of cognac • In 1987 Henry Recamier. BRIEF INTRODUCTION OF THE SITUATION • The French company Louis Vuitton Moët Hennessy (LMVH) was created in 1987 by the merger of Louis Vuitton. and Moët Hennessy . a luxury goods maker.I. I. motivated by the affinity of their core businesses. which led to the establishment of the LVMH group. • So in fact it was a series of successive mergers. the companies. Guerlein goes back to 1829. Christian Dior 1947. have cultivated their international standing over a number of years. In perfumes and cosmetics and in fashion. were created more recently. Givenchy was founded in 1951. BRIEF INTRODUCTION OF THE SITUATION • The House of Louis Vuitton was founded in 1854. . Watches & Jewerly Selective retailing • Each of the groups contained a number of recognizable brand names that were each simbols of the “ good life “ including. Christian Dior. Perfumes & Cosmetics. .I. Moët Chandon and Sephora.. Givenchy. Fashion and Leather Goods. Dom Perignon. TAG Heur. BRIEF BRIEFINTRODUCTION INTRODUCTION OF OF THE SITUATION THE SITUATION • The Group is active in five different sectors: – – – – – Wines & Spirits. . while Richemont and Hermes dominated Europe. Bulgari and Hermes were the mayor competitors in the luxury goods. BRIEF BRIEFINTRODUCTION INTRODUCTION OF OF THE SITUATION THE SITUATION • Competition in the Industry: Gucci.I. • Gucci was a well-entrenched player in . Richemont. • LVMH and Bulgari were mayor players in the Asia-Pacific region. • As LVMH began to increase its presence in Asia • .I. after that the company seeking the explosive economic growth that begin to take place in the early 1990’s in Asia therefore worked quickly expanded in those markets • The company opened its first store in China in 1992 after that opening quickly in other asia countries including South Korea and made its first foray into India in 2003. BRIEF BRIEFINTRODUCTION INTRODUCTION OF OF THE SITUATION THE SITUATION For decades the LVMH group had a strong presence and enjoyed success in both the US and European markets. and if so. DESCRIPTION OF THE PROBLEMS Main problem: • Was it a strategic decision for LVMH to center its efforts in the Asian market. which path should they take for their positioning success and brand growth? Secondary problems: • How would LVMH entice China’s new rich population to pay the full price of .II. II.e luxury oppositions. religion differences-muslim) • . DESCRIPTION OF THE PROBLEMS Secondary problems (cont): • How would LVMH overcome the Political. cultural differences among countries. Cultural and Economical obstacles encountered into entering the Asian Market? (i. foreign currency exposures. interest rates. DESCRIPTION OF THE PROBLEMS Secondary problems (cont): • How would LVMH fight against its brand dilution? To maintain its prestige and reputation while gaining more bigger market share? • Should the company decide for a private ownership or a franchising.II. with regards to its interest in the profitability? . POSSIBLE ALTERNATIVES FOR SOLUTION We believe that LVMH made the right strategic decision to focus on the rapidly expanding Asian markets • LVMH is presented with several alternatives to develop its Asian business that fall under the following strategic areas: – Consolidate its position – Expand market share – Protect brand name and reputation .III. Franchising – Tapping local market knowledge – Upholding quality and brand management – Ability to quickly expand into new markets .III. POSSIBLE ALTERNATIVES FOR SOLUTION Consolidate Position: • Independent stores vs. III.e. depth. Christian Dior) – Takes advantage of breadth.e. Franchising – Evaluate what brands for what countries: Investigate competitors • Targeted brands in specific countries (i. POSSIBLE ALTERNATIVES FOR SOLUTION Market Share • Specific business groups for specific countries (i. watches in India) – Independent stores v. and consumer knowledge of brand names . POSSIBLE ALTERNATIVES FOR SOLUTION When evaluating their alternatives LVMH needs to focus on their strengths and select the alternatives that allows them to leverage these strengths and not sacrifice their image and reputation for quality and the Luxurious Lifestyle. .III. in particular in China (Competitive Advantages). RECOMMENDED SOLUTIONS Business Strategy (important issues) • Be focus on its core strengths in order to achieve that maximum amount of success on its strategic decision to enter into emerging economies of Asia.IV. . • Develop their ability to manage multiple brands and maintain their reputation of quality while upholding a unique image of “Frenchness”. as in China in particular. • If China continues to grow as has been projected.IV. the market is far from saturated as is the case with the group’s traditional markets and presents ample growth opportunities for all of LVMH’s business groups. RECOMMENDED SOLUTIONS • Take advantage of the penetration market of Luxury goods. the number of . and the other Asian countries on a smaller scale. and supporting in the strongest way . RECOMMENDED SOLUTIONS Own stores and Selective Retailing • A key point in upholding their brand’s reputations is that they must keep developing .their strategy to grow by building their own selective retailing stores and also limiting the availability of the products through authorized luxury dealers.IV. • Not only will this strategy allow LVMH . . RECOMMENDED SOLUTIONS • Even with a strong global brand LVMH should rely on local managers to formulate a strategy to reach local consumers. • Develop its online presence through such websites as eLuxury. Also using local designers for their stores.IV. to take advantage of a larger number of consumers making online purchases. • To fight counterfeiting: LVMH need to work closely with local and national governments to either enact or uphold laws and . . RECOMMENDED SOLUTIONS Segmentation • They must limit the growth of the increasing demand for LVMH brands among the middle-class. • Avoid diluting the market and hurting the prestige and status of their own brands. keeping its condition as a manufacturer/supplier of high priced/quality goods.IV. RECOMMENDED SOLUTIONS LHMH must obtain benefits from its presence in wines and spirits. Cross promotion has unlimited potential.IV. Marketing strategy • Products: Quality and constant innovation are key points. it is the only luxury goods company that has a premium wine and spirits division. LVMH is . Advertising and product . RECOMMENDED SOLUTIONS • Consistency with top quality products: not to “off-shore” their manufacturing facilities: prestige damaged for the “cheapest”. and decreasing the SPV. • Marketing efforts: quality and uniqueness of their brands. diluting the market. • Brand management: Counterfeiting and knockoffs affects companies taking away potential customers.IV. hurting LVMH's brand image. . . IV. RECOMMENDED SOLUTIONS SOLUTIONS • Pricing: Keep the high priced products policy. RECOMMENDED IV. • In Asia. differentiation and help to stop brand dilution. • Price is quality. A price competition or attempting to reach a new consumer segment is not recommended. A drop in price can have a devastating effect in luxury companies. there will be a consistent stream of aspiring newly wealthy consumers to show off their newfound lifestyle .
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