Strategic Analysis of Louis Vuitton - Essay Example

? Strategic Management Table of Contents Table of Contents 2 Strategic Analysis of Louis Vuitton 4 Introduction 4 Mission of the Louis Vuitton 5 Innovative and Creative 5 Product Excellence 5 Passionate Determination 5 Act As a Tycoon 6 Struggle to Be the Best 6 Stakeholders of Louis Vuitton 6 Owners 7 External Stakeholders 8 Internal Shareholders 8 Porter’s Five Forces Model 9 Threat of New Entrants 9 Bargaining Power of the Suppliers 10 Bargaining Power of the Buyers 10 Threat of Substitute 10 Rivalry among Competitors 10 Strategy 11 Works Cited 12 Name of the Student: Name of the Professor: Course Number: Date of the Paper: Strategic Analysis of Louis Vuitton Introduction For centuries people all over the world are seen to satisfy themselves by possessing beautiful goods. As a result, luxury goods have had immense attraction and are a matter of debate (Husic and Cicic 231). Today the consumers have more discretionary income at their disposal than ever before. Income has increased especially in the higher social classes. Due to this, the luxury good market has witnessed a rapid global expansion. In 2009, the luxury market recorded an incredible expansion that amounts to $229 billion (Choo and Yoon 81). Louis Vuitton Malletier, commonly known as Louis Vuitton (LV), is a fashion house based in France and founded by Louis Vuitton. It is the leading luxury brand in the world. It belongs to LVMH Group which possesses a portfolio of more than sixty prestigious brands. The Group works in various sectors such as fashion and leather, wines and spirit, cosmetics and perfumes, watches and jewellery and other selective retail segments (LVMH, “LVMH GROUP”). Louis Vuitton originally started its business as a trunk maker and gradually became the legend by creating innovative bags, luggage and accessories that were practical, elegant and redefined the art of travel (LVMH, “Fashion & Leather Goods”). The study focuses on the strategic formulation and business environment of Louis Vuitton. Mission of the Louis Vuitton The main mission of LVHM Group is to provide their customers, present all over the world, with the refined and best quality of Western art. They want the name of the company to be tantamount to creativity and elegance. The cultural values and the products in which they deal signify a perfect blend of dream, fantasy, tradition and innovation. In this context the group aims to fulfil the following mission that is reflected through the five priorities defined by the fundamental values shared by the group stakeholders (LVMH, “Group Mission and Values”). Innovative and Creative The company grows and nurtures its creative resources. The secret behind their long-term success is deeply rooted in the amalgamation of technological innovation and artistic creation. Creation has been its main motto and will remain so forever (LVMH, “Group Mission and Values”). Product Excellence The company pays careful attention towards their products to ensure that the products are created with utter perfection. They denote perfection and aristocracy in the traditional craftsmanship. Each and every item that the customer buys and uses, speaks about the tradition of the brand and all products aim towards impeccable quality (LVMH, “Group Mission and Values”). Passionate Determination The company enjoys an extraordinary reputation. This reputation would not have been sustained if it were not supported by exceptional quality of their products and creative superiority. Without this aura Louis Vuitton would not have been Louis Vuitton. The company established a rigorous control over every smaller detail of the product in order to retain their brand image (LVMH, “Group Mission and Values”). Act As a Tycoon Louis Vuitton follows a decentralized organizational structure that nurtures creativity, productivity and efficiency. This type of organizational structure provides a high level of motivation and dynamics to the employees. It always encourages initiative taken by the individuals, and also offers real responsibility, which is necessary in the early days of one’s career (LVMH, “Group Mission and Values”). Struggle to Be the Best Lastly, the executive team of the company is always engaged in broadening their skill, knowledge and ideas to provide innovation and quality in their products. The group as well as the company encourage this thirst and spirit of progress (LVMH, “Group Mission and Values”). Stakeholders of Louis Vuitton Stakeholders of a company are individuals or groups who interact with the organization and are interdependent upon each other. They can affect or get affected by the decisions, policies, practices and actions taken by the organization. According to R. Edward Freeman, stakeholders are defined as “any group or individual who can affect or is affected by the achievement of the organization's objectives” (Freeman 46). Stakeholders can be categorized as primary and secondary. The primary stakeholders are those who are involved in a high level of interaction with the organization and serve as vital factors in the survival of the company. On the other hand, the secondary stakeholders are less visible and contribution is low (Polonsky 1063-1064; Christensen and Levinson 1338). The stakeholders decide whether they will support the strategy adopted by the firm, thus making them very important for the firm. The shareholders, suppliers, employees, customers as well as the community in which the firm operates are stakeholders of the firm. There are mainly three stakeholders of the firm: the owner, the external stakeholder and the internal stakeholder (See figure given below). Each stakeholder wants their needs to be satisfied, otherwise they withdraw their support. In this context, the process of strategic management is followed by the firm that ensures selection and implementation of the best strategy that would create value for the stakeholders (Ireland, Hoskisson, and Hitt 14-15). Figure 1: Stakeholders of an organization Source: (Ireland, Hoskisson, and Hitt 15) Owners Louis Vuitton promises to respect the right of each and every shareholder of the company. The company as well as the group have always given top priority to the incessant growth of the group and the augmentation of the shareholder’s value. As reports suggest, excellent performance has been shown by LV and other brands. In 2012, the company recorded 7% growth in the organic revenue, and the profits from the recurring operations are also seen to increase by 6% (LVMH, “LVMH Letter”). Better results mean better returns for the shareholders. In 2011 and 2012, the gross dividend paid was 2.60€ and 2.90€ respectively (LVMH, “Shareholders”). External Stakeholders Customers play an important role in the business. It is owing to the customer that the business becomes successful. Quality and innovation are the main objective behind the creation of the products. The company always look towards providing their customer with premium quality goods and every time they purchase, a new surprise is ready for them. LV does not always restrict itself to the finishing, quality and endurance of the goods; it also pays special attention towards the location and layout of the store and items displayed so that the customers always feel a warm welcome in the stores (LVMH, “Group Mission and Values”). LV is a socially responsible brand too. It exhibits its commitment not only towards its customers but also towards the individuals and the local communities in which it is operating. It supports institutions that nurture culture, education and creativity and all other philanthropic initiatives in their own contemporary and traditional expressions (Louis Vuitton, “Embracing Social Responsibility”). The suppliers are regarded to be the integral part of the organization and any initiative taken by the company is informed to the suppliers who are trained as needed and whenever required (Louis Vuitton, “Naturally Creative”). Internal Shareholders LV encourages a passionate, creative and strong team by developing capabilities and opportunities, which is their first priority. For developing skills, knowledge and capabilities, LV uses the method of training that provides the employees with an opportunity of learning and using these skills in accelerating performance and providing better results especially in crucial times. The group supports learning which, in turn, helps the managers and other employees engaged with the company to increase their potential (Louis Vuitton, “Talent Development”). Porter’s Five Forces Model Before starting to plan the business strategy of the firm, it is important to have a clear understanding of the forces that determine the profit in the industry. One effective tool that helps in doing this analysis is Porter’s Five Forces model. The model states that all the firms operating in a particular industry faces forces within the industry that affect their profitability. If the firm understands these forces, it will be able to successfully frame a business strategy that will either help it in taking advantage or protecting itself from the forces (Ahlstrom and Bruton 131-132) Figure 2: Porter’s Five Forces Model (Source: Author’s Creation) Threat of New Entrants The luxury goods industry has shown immense growth in the recent times. Today people have more disposable income with them than what they used to have previously (Choo and Yoon 81). So the consumers are now showing more interest in the luxury goods, which has instigated an increase in the number of new competitors. But the reputation and brand image that LV has is difficult to replace. At the same time they also look for constant innovation and upgrading of their quality. Hence, there is almost no threat for them. Bargaining Power of the Suppliers The suppliers of the company are regarded to be the integral part, and when any initiative is taken by the company or growth s is experienced by it, the supplier is also regarded to have their share in it. LV is operating in a healthy position in the market, so the suppliers are also satisfied with them. Since it is the market leader, the suppliers have a low bargaining power (Louis Vuitton, “Naturally Creative”). Bargaining Power of the Buyers LV has a separate aura that distinguishes itself from the other companies dealing in the same industry. The company provides the customers with premium quality products backed by innovation. The customers for whom quality and luxury are the priority rather than money, will only come to this while others may find a cheaper alternative. Thus bargaining power is low. Threat of Substitute Counterfeit is the main threat from which LV is suffering. Many local and unknown companies have started stealing their skill and creativity, thus posing a serious threat (Louis Vuitton, “Respecting Heritage”). Rivalry among Competitors Prada, Hermes, Coach and Gucci are some of the competitors of Louis Vuitton. But LV is the most profitable brand among them because of its unique manufacturing efficiencies and designing skills. Thus, the distinct competencies make LV superior and better than its competitors (Ireland, Hoskisson, and Hitt 14). Strategy The only problem with Louis Vuitton is the problem of counterfeit. Many of the unknown brands are stealing its skills and are manufacturing same products. Thus, customers buying a fake bag by paying the same price may hamper their image and branding. They should employ a proper team of experts who will be monitoring this problem. LV has enormous presence in the international market. They should devise a proper communication strategy and make their customers aware of fake products. This will develop awareness among the customer and also prevent them from getting cheated. Since the luxury goods industry is experiencing a massive expansion, a threat of new entrants is always there. The company should design a proper plan by which they can make themselves upgraded and meet up the expectations of the consumers. They should undertake proper measures in order to implement adequate monitoring of the changing needs of the customers. These strategies will help them in not only increasing the shareholders value but also the brand image of the organization. Works Cited Ahlstrom, David, and Garry D. Bruton. International Management: Strategy and Culture in the Emerging World. Connecticut: Cengage Learning, 2009. Print. Choo, Ho Jung, and Namhee Yoon. “Luxury customer value.” Journal of Fashion Marketing and Management 16.1 (2012): 81-101. Print. Christensen, Karen, and David Levinson. Encyclopedia of Community: From the Village to the Virtual World. London: SAGE, 2003. Print. Freeman, R. Edward. Strategic Management: A Stakeholder Approach. Boston: Pinnan, 1984. Print. Husic, Melika, and Muris Cicic. “Luxury Consumption Factors”. Journal of Fashion Marketing and Management 13.2 (2009): 231-245. Print. Ireland, R. Duane, Robert E. Hoskisson, and Michael A. Hitt. Understanding Business Strategy: Concepts Plus. Connecticut: Cengage Learning, 2011. Print. Louis Vuitton. “Embracing Social Responsibility.” Louis Vuitton, n.d. PDF File. Louis Vuitton. “Naturally Creative.” LVMH Group, 2002. PDF File. < http://www.lvmh.com/uploads/assets/Le-groupe/Documents/EN/Rapport_env_2001_gbr.pdf>. Louis Vuitton. “Respecting Heritage.” Louis Vuitton, n.d. Web. 13 April 2013. . Louis Vuitton. “Talent Development.” LVMH Group, n.d. Web. 13 April 2013. < http://www.lvmh.com/talents/your-career-at-lvmh/talent-development>. LVMH. “Fashion & Leather Goods.” LVMH Group, n.d. Web. 13 April 2013. . LVMH. “Group Mission and values.” LVMH Group, n.d. Web. 13 April 2013. . LVMH. “LVMH GROUP.” LVMH Group, n.d. Web. 13 April 2013.< http://www.lvmh.com/the-group/lvmh-group>. LVMH. “Shareholders.” LVMH Group, n.d. Web. 13 April 2013. < http://www.lvmh.com/investor-relations/shareholders>. LVMH. “LVMH Letter to Shareholders March 2013.” LVMH Group, 2013. PDF File.< http://www.lvmh.com/uploads/assets/Com-fi/Documents/en/Letter%20to%20shareholders/LVMH-LettreAuxActionnaires-Mars2013-EN_-_e-accessible_version.pdf>. Polonsky, Michael Jay. Stakeholder Thinking in Marketing. West Yorkshire: Emerald Group Publishing, 2005. Print. Read More