louis vuitton case analysis

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