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Case Analysis presented at the 2013 NIBS Worldwide Case Competition in Leuven, Belgium.
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LOUIS VUITTON
Conlon Cash, Brooke McCarter, Sundeep Shamanur, and Cole Welch
LOUIS VUITTON HERITAGE
LOUIS VUITTON• Three Rules
GEROGES VUITTON • Innovation
HENRI RACAMIER
• Company-owned Stores
BERNARD ARNAULT
• Profitability and Efficiency
MICHAEL BURKE• Current
Founded: 1854
SITUATION ANALYSIS
Internal Positive• Distribution• Manufacturing• Assets• Lean Production
External Positive• Asian Market Growth
• Perfume Market• Economic Rebound
Internal Negative• Unstable Other Activities/Eliminations
External Negative• Volatile Exchange Rate
KEY SUCCESS FACTORS
Image Quality Differentiation
FIVE FORCES
COMPETITIONHigh
SUBSTITUTES
Low
BUYERS High
NEW ENTRANTS
Low
SUPPLIERSLow
INDUSTRY CUSTOMER SEGMENTS
Absolute
Aspirational
Accessible
ISSUE IDENTIFICATION
Is Louis Vuitton’s growth rate sustainable?Can Louis Vuitton balance the core values and heritage of the company under the pressures of growing the business?
AUTOMATED ALTERNATIVE
Pro • Higher customer base
Con • Likely loss of high-end market
Shift production to a more assembly line model
HERITAGE-BASED ALTERNATIVE
Pro • Please high-end customers
Con • Lose accessible customers
Luxury goods use more artisan labor, as when the company was founded
HYBRID ALTERNATIVE
Pro • Potential gain in all segments
Con • Highest risk to lose in all segments• Potential to cheapen the brand
Produce “accessible” goods using automation and “absolute” goods using artisan labor
UNIVERSAL IMPLEMENTATION
Enter perfume market Decrease secondary sales
Increase European prices to combat grey market
Attract Asian market to Europe
QUANTITATIVE ALTERNATIVE ANALYSISAutomated Heritage Hybrid
Profit20% 4 3 5
Product Quality
20%3 5 4
Absolute30% 1 5 4
Aspirational20% 3 4 4
Accessible10% 5 2 4
Totals 2.8 4.1 4.2
*Ranked 1-5, 1 = Worst, 5 = Best
RECOMMENDED STRATEGY
Louis Vuitton should pursue the hybrid strategy where it continues to make handcrafted goods, while also creating an accessible brand using a cost-effective manufacturing process.
2010 2011 2012 2013 2014 2015Revenues 20320 23659 24996 26408 27900 29476Gross Profit 13136 15567 16247 17165 18135 19159Operating Profit 4169 5154 5249 5546 5859 6190Net Profit 3032 3065 3474 3671 3878 4097
LVMH Income Statement through 2015
*In millions
INCOME STATEMENT FORECAST
2010 2011 2012 2013 2014 201515000
20000
25000
30000
35000
RevenuesRevenues*
FORECASTED REVENUE
2010 2011 2012 2013 2014 20152500
3000
3500
4000
4500
5000
Net Profit Net Profit*
FORECASTED NET PROFIT
IMPLEMENTATIONShort Term (0-6 Months)
• Figure out legal issues
• Create brand and logo
• Research and development
• Begin to increase European prices
Medium Term
(6– 12 Months)
• Begin production and sale of accessible brand and perfume
• Continue incremental European price increase
Long Term (12– 18 Months)
• Review sales data
• Evalute current plan
• Keep with hybrid plan or switch to heritage plan
RISKS AND CONTINGENCIES
Risk: losing in all segmentsContingency: implement Heritage Strategy
When to Exit:FitPerformanceCompetitive Advantage
QUESTION AND
ANSWER SESSION
COMPETITION
Hermès Gucci Bottega Veneta Prada Chanel Coach
QUOTES
“If you control your factories, you control your quality” and “If you control your distribution, you control your image.” –
Bernard Arnault
QUOTES
Absolute Aspirational Accessible
8-10% Growth 6-8% Growth Below Market
“Luxury is not how much you can buy. Luxury is the knowledge about how to do it right, how to take the time to understand and choose well. Luxury
is buying the right thing”– customer at Daslu in Sau Pualo, Brazil