Lvmh's Diversification Strategy Into Luxury Goods

5816 words 24 pages
TABLE OF CONTENTS 1.0 EXECUTIVE SUMMARY3 2.0 INTRODUCTION3 2.1 Background to Organization3 3.0 ANALYSIS3 3.1 Porters 5 Forces (Model of Competition)3 3.2 PESTEL (External Analysis)5 3.3 SWOT6 4.0 KEY FINDINGS OF ANALYSIS/PROBLEM IDENTIFICATION/ KEY STRATEGIC CONCERNS6 4.1 Vertical Integration6 4.2 Diversification7 5.0 POSSIBLE SOLUTIONS & STRATEGIES.8 7.0 CONCLUSION9 8.0 APPENDICES11 Appendix 1: Porters 5 Forces11 Appendix 3: Luxury Goods Group & Brands Top Ten Competitors13 Appendix 4: Industry Map*.14 Appendix 5: Financial Performance14 Appendix 6: PESTLE Analysis15 Appendix 7: SWOT Analysis16 Appendix 8: Evaluating industry Attractiveness and Competitive strength19 Appendix 9: A Nine Cell Industry Attractiveness-Competitive …show more content…
Advertising, communication and R&D expenses are very high. This is evidenced by LVMH's expenditure on this to be approximately 11% of sales in 2002 (Antoni 2003).
Training manufacturing employees is another costly element in an industry where the quality is measured by the final consumer in terms of perfection. This last element calls for constant improvement in; however at the same time requires the maintenance of the old manufacturing processes. Key managers that can run each business independently but with a group vision are also part of the equation. Additionally the luxury industry is strongly dependent on tourism which is influenced by economy trends. The 9-11 events and the global economy slowdown have had a great impact on the industry. Finally huge investments were done to win strategic position, having an important impact on revenues. Appendix 5 is an example of the proportion of cost and impact on revenues and the stock performance.
New entrants The risk coming from new entrants is low, except perhaps, for the development of niche brands that can slowly earn a position. The strong financial resources and the "story" of the brand that is needed to succeed are two elements that create a barrier. Bernard Arnault explained that a brand needs a heritage; you can not cross cut and succeed (Thompson, Strickland & Gamble 2005 and Antoni

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