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This is from the Wake Forest preliminary round for the KPMG case competition for 2011. Our group was given roughly 48 hours to read, analyze, and present the case.
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Nicholas Martino, Chief Consultant
Josh Barber, Operations Director
Amanda Tarlton, Marketing Analyst
Amy Andreasen, Financial Advisor
KPMG International Case Competition
Rise to the occasion.Push yourself.Go beyond.
October 3, 2011
2© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Agenda
Situational Context
Recommendation
Implementation
Financial Analysis
Future Prospects
Summary
3© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Situational Context
• Younger generations in Japan do not associate with brand
• Counterfeiting, and the lack of regulations regarding the practice, is a concern
• Enhance image and reputation without diluting the brand
• Counter market stagnation while upholding core values
Louis Vuitton in the Japanese Market
1977- LV introduced in department stores in
Tokyo & Osaka
1981- First LV retail store opens in Ginza
2007- Expansion strategy results in 250
stores in Japan
2006- Kiyotaka Fujii elected new CEO of
LV
2010- LV faces need for new growth in
Japan
Recommendation
5© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Enter the Beauty Industry
Target wide consumer base
Expand brand into new markets
“Ice breaker” product
Potential for large growth
High inventory/product turnover
Diversifies brand
Keep up with competing luxury brands
6© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Risk-Response Evaluation
Industry experience
Market saturation
Brand reputation
High production costs
Customer loyalty
Create unique product
Maintain values
Increased revenue
Implementation
8© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Market Entry Strategy
Enter the Beauty Industry
Makeup Perfume Cologne
Makeup
10© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Makeup
• Foundation • Powder• Mascara• Eyeliner• Eye shadow• Blush• Lipstick• Brushes• Travel cosmetic case
Introductory Product Line
11© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Product Breakdown
Units Per Year (Avg./Consumer)
FoundationPowderMascaraEyelinerEye ShadowBlushLipstick
12© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Product Timeline
Oct. 2010Start facility construction and R&D
Oct. 2011Facility complete
Dec. 2011Begin production
Aug. 2012Release products in stores
Aug. 2013Assess product profitability
Research & Development:• Finding right raw material mix i.e. high quality inputs
Facility• $200 million estimated construction cost• Hire plant workers and managers• 10 million unit capacity (based on industry averages)
Product Release• Direct distribution within Louis Vuitton retail stores• Indirect distribution within high-end department stores
Feb. 2012Launch advertising campaign
Perfume & Cologne
14© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Product Timeline
Oct. 2010Contract with supplier and begin packaging facility construction
July 2011Packaging facility complete
Aug. 2011Begin packaging phase
Dec. 2011Release products in stores
Dec. 2012Assess product profitability
Sep. 2011Launch advertising campaign
Supplier• Contracting with highest quality fragrance producer in France• Purchase in excess of 73,000 liters
Packaging Facility• Package according to customized bottle and box• 1 million unit capacity• $85 million construction cost
Product Release• Released as an “ice-breaker” product• Indirect & direct distribution
Product Differentiation
16© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Distinguishing Factors
Cultural understanding of consumer base
Unique packaging design
Brand recognition
Consumer loyalty
Outstanding quality control
Marketing Strategy
18© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Product Appearance & Display: Makeup
Appearance
• Compact cases embossed with Louis Vuitton logo
• Classic color scheme of chocolate brown and gold
Display
• Products displayed on vintage French-inspired vanity
• Creates unique buying experience
• Aura of sophisticated glamour
19© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Product Appearance & Display: Perfume & Cologne
Appearance
• Perfume - Crystal Victorian-style bottle with vintage spritzer bulb and gold Louis Vuitton logo charm
• Cologne- Glass bottle with gold hue and cap embossed with Louis Vuitton logo
• Both packaged in velvet lined box with history of the designer
Display
• Vintage velvet-lined armoire that resembles inside of box
• Similar to makeup display
20© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Makeup Advertising Campaign
Interactive Billboard
Smartphone Applications
Celebrity Endorsements
Product Samples
Magazines
21© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Perfume & Cologne Advertising Campaign
Magazines
Billboards
Web Based Marketing
Celebrity Endorsements
Product Samples
Financial Analysis
23© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Cost Analysis
Costs (Makeup)Production Facility $200,000,000.00 Advertising/Marketing $3,057,031.75Variable Costs (total) $61,149,634.97TOTAL $264,206,667
24© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Revenue by Product
Product Units per Year Retail Price ($)Total Units Produced
Manufacturing Price ($)
Potential Sales ($)
Makeup 20 230 40,000,000 161 749,000,000
Perfume 1 80 500,000 56 28,000,000
Cologne 1 80 500,000 56 28,000,000
25© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Financial Timeline
Oct. 2010Construction costs($285,000,000)
Dec. 2011Begin fragrance sales
Aug. 2012Begin makeup sales
Dec. 2012Year 1 NOI$ 87,141,017.81
Dec. 2012Year 2 NOI$ 130,738,442.75
Aug. 2014Makeup break-even(@ $ 369,194,603.18)
Dec. 2014Fragrance break-even(@ $ 159,636,363.60)
26© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Revenue Projections
Looking Ahead
28© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Future Prospects
• Introduce in other markets United States, Europe, India, China
• Expand product line to include new fragrances and cosmetics
• Grow market share
Actual Revenue Potential Revenue
$135,888,077.72 $749,000,000
Actual Profit Potential Profit
$74,738,442.75 $411,950,000
Summary
30© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
Summary
• Problem:
• Regressing growth in Japanese market
• Recommendation:
• Enter the beauty industry
• Makeup, perfume, and cologne
• Key points
• Expand brand name recognition
• Target larger consumer base
• Keep up with competitor strategy
• Diversify product mix
• Enhance position as market leader
Thank you
Nicholas Martino, Chief Consultant
Josh Barber, Operations Director
Amanda Tarlton, Marketing Analyst
Amy Andreasen, Financial Advisor
© 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.
The KPMG name, logo and "cutting through complexity" are registered trademarks or trademarks of KPMG International Cooperative ("KPMG International").
