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Course BUSI1324: Managing Strategy Course School/Level B/UG

Coursework Strategic Appraisal Assessment Weight 50.00%

Tutor VJ Torlo Submission Deadline 15/01/2016

Coursework is receipted on the understanding that it is the student's own work and that it has

not, in whole or part, been presented elsewhere for assessment. Where material has been used

from other sources it has been properly acknowledged in accordance with the University's

Regulations regarding Cheating and Plagiarism.

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STRATEGIC APPRAISAL REPORT OF LOUIS VUITTON

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Table of Contents

Introduction and Company Background ................................................................ 4

Part I – External Analysis ........................................................................................ 5

1.1 Macro – Environmental Analysis (PESTLE) ......................................................... 5

1.2 Industry Analysis (Porter’s Five Forces of Competition) ....................................... 6

1.3 Opportunities and Threats in the luxury goods industry ....................................... 6

Part II –Internal Analysis .......................................................................................... 7

2.1.1Analysis of Louis Vuitton Resources and Competencies ................................... 7

2.1.2 Distinction between Threshold and Distinctive Resources & Competencies ..... 7

2.1.3 Appraisal of the Resources and Competencies ................................................ 7

2.2 Strengths and Weaknesses of LV ........................................................................ 7

Part III Louis Vuitton Corporate and Business Strategy ....................................... 8

3.1 LV corporate strategy ........................................................................................... 8

3.2 LV generic strategy .............................................................................................. 8

Part IV – Louis Vuitton issues and challenges ...................................................... 9

Part V – LV strategic options for growth .............................................................. 10

5.1 Generating Strategic Options ............................................................................. 10

5.2 Evaluating the strategic options ......................................................................... 11

5.3 Implementation ................................................................................................... 11

Recommendation & Conclusion ........................................................................... 12

Reference List ........................................................................................................ 13

Reference List for Appendices ............................................................................. 14

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Introduction and Company Background This report aims to carry out strategic appraisal of Louis Vuitton, where I will analyse

strategic options for LV to develop and grow their business. Further to my research I

will provide evidence of my findings to support any points that require evidence. The

series of tasks to follow are: part 1 – external analysis, part 2 – internal analysis, part

3 – LV’s corporate and business strategy, part 4 – identifying issues and challenges

of LV, part 5 – identification & evaluation of the main strategic options for growth,

part 6 – recommendation & conclusion, reference list and appendices. Louis Vuitton

sells luxury goods such as leather handbags, accessories, jewellery, shoes and

books mentioned on the LV website (Louis Vuitton, 2016). Louis Vuitton was a

French entrepreneur who rose to fame when providing Napoleon’s wife with personal

boxes and a packer, where he realised his business potential towards people who

are willing to pay for his services and quality and wanted to sustain the services and

quality beyond his death, as biography explains (Biography, 2016). Louis Vuitton is

part of the luxury goods industry and LV’s geographical markets are Asia, Europe,

Middle-East, Africa and America (Deloitte, 2015). LV uses a focus differentiation

strategy and their market segmentation is aiming their high quality products at 3

types of consumers absolute, aspirational and accessible (LV case study, 2013).

LVMH who merged with LV have a long-term vision on developing all their brands

whilst respecting their own identity. LVMH values are creative and innovative, deliver

excellence and encourage entrepreneurial spirit (LVMH, 2016). Mission of LVMH is

providing the world with luxury products, alliance, creativity and art de vivre (Retail

industry, 2015). LV stakeholders are employees, other brands, luxury consumers,

suppliers, unions and the government, LV’s current CEO is Michael Burke.

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Part I – External Analysis

1.1 Macro – Environmental Analysis (PESTLE)

Appendix 1 shows that some factors have a positive impact in the luxury goods

industry and LV, technology is an overall positive impact on the industry and LV as

through social sites such as Facebook or Twitter, companies can instantly upload

pictures and videos which will attract more online consumers to buy the product

straight away. LV’s sitemap shows their social media platforms which is attached in

Appendix 2 (Louis Vuitton, 2016), similarly Coach has adapted similar social media

platforms as LV shown in appendix 3 (Coach, 2016), whereas Burberry has gone a

step further where they have included live chat on their website so consumers can

instantly communicate their problem to a Burberry employee which can be resolved

within minutes along with a call back service, shown in appendix 3. There will be

haters on social media sites who are against LV, these are usually animal rights

campaigns or consumers who cannot afford their products, if they spread negativity it

can affect brand image so brands will have to build their reputation and trust

amongst their loyal luxury consumers. The environmental factor has a positive

impact on LV and the industry, as luxury brands are starting to use eco-friendly

material to help sustain the environment globally which can increase brand image

and gaining potential consumers who buy the product in the interest of helping the

environment (SOSE marketing, 2010).

Other factors have a negative impact on the industry and LV. Political power in China

has a strong influence on their people as they encourage their wealthy luxury

consumers to shop locally as Deloitte (Deloitte, 2014) explains in appendix 1. LV

and other luxury brands use real animal skins in their product to enhance product

value which causes protests from animal rights organisations who are trying to stop

animals from being killed for business purposes, however due to powerful brand

image of LV and other brands have managed to quieten them down, however it does

make some consumers switch brand due to disliking of the fact that animal skins are

used to enhance product value, hence LV and other brands lose some sales

(Deeper luxury, 2015). Counterfeit has been a problem for LV and other brands, as

counterfeit sellers sell their goods to consumers who cannot afford genuine LV or

other branded goods, and big brands have to spend millions of dollars on a legal

department to handle counterfeit sellers, which can create a loss for big brands if

they lose a court battle. (The Future of Luxury, 2014)

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1.2 Industry Analysis (Porter’s Five Forces of Competition)

Appendix 4 shows that threat of new entry is high, this is due to lack of innovation

from the industry where brands in the industry have to come up with new ideas or

innovation to survive in the market, as the author explains (Business strategy

review, 2003). In my opinion these brands are not facing competition globally but

locally as well where consumers can source local brands who provide similar quality

at a cheaper price, this relates to competitive rivalry where the threat is also high as

big brands and small brands are competing against price, product, quality and

service where consumers expect personalised services to keep themselves loyal to

one brand. Bargaining power of suppliers is relatively a low threat, as the author

(luxury leather goods, 2012) explains that suppliers do not have much say in the

relationship with the big brands due to high switching costs, hence they have vertical

integration with big brands, so big brands buy their materials and other products then

the big brands sell the finished product to ultimate customers.

In my opinion the threat of substitution is a low threat due to not having an alternative

to a luxury good product, however as the author further (Luxury Leather Goods,

2012) explains that, “although mainly purchased for their brands and aesthetics, also

have a functionality element and therefore may be substituted by products which

meet this required”, this quote shows that some of the materials or elements used to

make the final product can be substituted if the alternative material does the same

job, as consumers who are price sensitive may ask brands to make the product with

a different material which is affordable, although there are still ultimate consumers

who are unwilling to change therefore will still pay the normal high price for the

product with the same materials used. In my opinion bargaining power of buyers is a

medium threat as they drive demand and if a certain brand do not have their product

they can easily switch to another brand who have their product, however those who

are brand loyal will stick to the same brand and will wait till the brand has their

product whether it will take days, weeks or months to get the product.

Overall the luxury goods industry is an attractive industry, where brands have found

success and profit, along with gaining brand recognition within months due to quick

spread of word of mouth, despite high threats such as rivalry and new entrants, the

industry is expanding and will need more new luxury goods brands to survive, there

will be a lot of investment involved, however the investment will not be wasted as

these products are specifically aimed at luxury consumers and those who see quality

will never compromise with price.

1.3 Opportunities and Threats in the luxury goods industry

Please refer to Appendix 5 which lists opportunities and threats along with

explanation.

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Part II –Internal Analysis

2.1.1Analysis of Louis Vuitton Resources and Competencies

Appendix 6 shows that LV have a lot or resources inside their organisation, this is

due to LVMH who is the parent company they provide LV and other brands with

resources to develop areas which need development, LV’s infrastructure is

decentralised as power is spread from the middle which is LVMH, LV also work

independently. LV have their own HRM department which controls hiring/firing,

payroll and employee performance. Their primary activities start from the production

of the product to delivering the final product to the consumer, as you can see the

process is very long hence why it takes time for LV to restock the product and why

they offer repair services for their bags. If consumers want extra personalised

service the production process may take even longer. (LVMH, 2015)

2.1.2 Distinction between Threshold and Distinctive Resources & Competencies

Appendix 7 shows LV resources and competencies, which I split into distinctive and

threshold capabilities, LV have more threshold capabilities than distinctive

capabilities, the reason for this is that LV still need basic resources to survive and

sustain in the market, despite surpassing their survival in the market and currently

holding the number 1 position in the market. Their distinctive capabilities will help

them maintain their number 1 position in the market. Brand image is a distinctive

capability as they can use their brand image against competitors and animal right

protestors where LV’s brand image will defend their products to prevent loss of

luxury consumers which will affect their sales and profitability.

2.1.3 Appraisal of the Resources and Competencies

Appendix 8 shows that some of LV’S resources helps achieve and sustain

competitive advantage, one of the resources that sustain LV’s competitive advantage

are intangible assets such as buildings and shops where LV have managed to locate

their shops and buildings where it has been difficult for their competitors to reach,

and in the countries or locations that LV have picked have made LV more successful

and build brand awareness. These buildings or shops that LV own are hard to imitate

as rivals in the market cannot copy the décor or style of LV’s shop as LV can sue

them for copying along with being in constant use by employees who need space to

complete their work successfully and shops are in constant use by employees who

need space to display the products to attract consumers to come inside the shop and

buy their products. Other capabilities mentioned have all sustained competitive

advantage that means LV have used the maximum of their resources and

capabilities to sustain competitive advantage. However unique designs are easy to

imitate hence why there is temporary competitive advantage and a rise of counterfeit

sellers.

2.2 Strengths and Weaknesses of LV

Please refer to Appendix 9 which lists LV’s strengths and weaknesses along with an

explanation.

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Part III Louis Vuitton Corporate and Business Strategy 3.1 LV corporate strategy

LV is part of the LVMH group which they merged with in 1987 (LVMH case study,

2013) and the strategy that LVMH has always followed is vertical forward integration

as they work together to ensure performance is not lacking in any of the input and

output activities along with being successful in their own different ways, LVMH

(LVMH,2016) explains “vertical integration fosters excellence both upstream and

downstream, allowing control over the every link in the value chain, from sourcing

and production facilities to selective retailing”, this shows LVMH allows control to LV

of their upstream and downstream activities which also brings together both

upstream and downstream activities so LV doesn’t have to source different suppliers

or manufacturers, as LVMH can provide suppliers within the organisation which will

save supplier costs and improve the quality of the finished product, LVMH also

creates synergies where all the brands under LVMH share resources and

capabilities to reduce further production costs and other occurring costs such as

hiring craftsmen, warehouse rent, use of machinery or equipment. Even though LV

and LVMH pursue this strategy they are still decentralised so they have their own

identity (LVMH, 2016).

3.2 LV generic strategy

Appendix 10 shows Bowman’s clock model (Mind Tools, 2016) where LV follow a

focus differentiation strategy which is one of Porter’s generic strategies, LV is a

designer brand which charges a high price to their luxury consumers which are:

absolute, accessible and aspirational (LV case study, 2013), so they only market

their products at these types of consumers, absolute are customers who have a high

net worth and are reputable around the world, accessible are consumers who just

want one of LV products to show people that they can afford LV products, and

aspirational consumers are celebrities who will make brand appeal for LV across the

world. These types of consumers do not look for the uniqueness or value of the

brand or product, these consumers only need the brand image of LV to persuade

themselves to buy LV products. High quality products and high profit margins is how

LV survive and dominate the market, as they aim at the niche market where only

luxury consumers buy so LV do not cater their products for everyone, their

uniqueness is the materials they use in their products which will make the product

last longer, whereas cheaper materials such as PVC will not make the product last

long. LV provide a unique service which is to repair any of their LV bags bought buy

these types of consumers, as no other brand provides this type of service as it can

be costly for them.

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Part IV – Louis Vuitton issues and challenges

To summarise LV internal and external issues, it is quite obvious that they do face

many problems and as consumers we do not see their problems that may affect LV

performance and profitability. One of the biggest issues LV face is from animal rights

organisations, LV and other brands uses real leather and other animal skins to sell

their product as luxury which enhances the product value, however these

organisations have protested many times and have made public awareness to

ensure that people stop buying luxury products, as Deeper Luxury mentions (Deeper

Luxury Report, 2015). Due to LV’s powerful brand image LV’s loyal consumers do

not pay attention to animal right campaigns, so these campaigns cannot cause much

damage to LV. LV faces counterfeit goods frequently as mentioned above in part 1-

1.1, so counterfeit good being made is still an ongoing issue for LV and other brands

as, it cannot be totally eradicated due to the mass market of counterfeit goods in

different countries.

To remain competitive and grow the business, LV should consider diversifying by

entering a new industry with a new product which will enhance LV’s brand image

along with gaining more public recognition. This will also be a challenge for LV as

they may face a lot of rivalry and they will have to come up with new ways to gain

competitive advantage in order to become number one in that industry. LV have

already entered a new industry which is luggage and travel where they have made

travel goods exclusively for their luxury consumers (LV, 2016), so it is still not aimed

at other types of consumers, however it is a new product and a new industry, but LV

should consider going into a new industry where they can aim their products at

everyone along with industry being attractive and profitable.

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Part V – LV strategic options for growth

5.1 Generating Strategic Options Ansoff Matrix

Appendix 11 shows that there are options for LV to expand and grow their business

by using their resources and competences to be able to do so. Penetrating the

current market will boost their sales by using marketing techniques to attract

potential consumers and re-establish their relationship with current consumers. LV

can easily diversify in a new industry with a new product as they have enough capital

and profit, one of the industries that LV can go into is the beauty industry, many

luxury goods brands have managed to establish a reputable makeup line which is

affordable for everyone, so even if it’s still aimed at luxury consumers other types of

consumers are able to buy the makeup product, hence LV can attract more types of

consumers from the beauty industry. LV can make use of their Facebook page

where LV can add products on their Facebook page so consumers do not have to go

through LV website to buy the product. This will save money for LV as they will not

have to pay a high fee for maintaining the Facebook page with add-ons.

TOWS Matrix

Appendix 12 shows the TOWS matrix for LV, this model is a combination of

strengths, weaknesses, opportunities and threats where all of them are combined to

make four strategies. The S.O strategy is how LV can use their strengths to take

advantage of opportunities, for example LV emerging in new markets by using their

brand name as a strength. The S.T strategy is how LV uses their strengths to avoid

threats, as mentioned in appendix 12 LV can use their brand image to fight

counterfeit sellers, as these sellers do not have the reputation as LV to fight against

LV. The W.O strategy is how LV can use their opportunities to overcome their

weakness, where LV can emerge in a new market but aim at selling goods at

everyone by discounting goods which are damaged, out of season or discontinued.

The W.T strategy is how LV can minimise their weaknesses to avoid threats, this is

similar to W.O except if LV decide to still aim at luxury consumers it will affect global

economy, other consumers who do not shop regularly at LV will start spending less

and LV will have to suffer with the global economy, LV may have many luxury

consumers who are loyal but they also have accessible consumers and it will not just

be one of them but hundreds of them who do make a difference to LV sales and

profit.

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5.2 Evaluating the strategic options

Strategic option 1 as shown in appendix 13 and 14, is the best strategy for LV as it

fits in with their mission and vision, where they are trying to expand in new emerging

markets and enhancing quality products globally. Option 1 is quite feasible as they

have the suitable resources and competences to carry out their strategy

successfully, I think many of the stakeholders will accept this option as they would

want LV to expand and more importantly grow through retail opportunities where

more jobs are created which can be beneficial for the community and the business,

despite all the advantages of selecting option 1, LV may encounter a few problems

which can affect the strategy being successful, although the strategy may be suitable

for LV some of the stakeholders may disagree by expanding via retail opportunities

as it will reduce their profit along with not having their own shop so they cannot

display their products according to how they want to display it. The strategy is only

feasible if there are no hurdles in the way, so they can only expand in emerging

countries which prevents LV from entering the market, this can be consumers who

are brand loyal to one single brand they do not shop elsewhere for their goods, or if

there is no market for luxury goods and the economy where the economy can

fluctuate anytime in the new market which LV decides to compete in. Acceptability is

when all the stakeholders agree with the strategy as some may analyse it and

disagree which will affect their performance, image and could lead to conflicts.

5.3 Implementation

The resources LV will need to successfully implement strategic option 1 are:

machinery, LV will need to invest in machinery as LV will be working in a new market

and will have to adapt to different machinery which is compatible with the country’s

writing and typing system along with health and safety regulations. LV will need

manufacturers and suppliers who will produce their products as their current

suppliers or manufacturers may not have a second branch, therefore LV may need

to source suppliers and manufacturers themselves or with the help of LVMH, LV will

need storage for raw materials and finished products so they will need warehouses

where rent will vary on capacity and size. LV need new employees to help with

performance of LV improve in emerging markets along with the ability to speak their

native language to prevent language barriers, LV most importantly will need cash-

flow to start up the business in case of any occurring costs in the new market. LV will

need buildings to display their product so it looks presentable and attract consumers

to buy from them and gives employees space to work. LV will need some stock to

sell at the beginning so that LV won’t have to turn away a consumer because they do

not have any products in stock, HR employees will be hired on the basis to look after

new staff and control of hiring and firing new employees, these employees may not

be familiar with the new market but have the experience to cope with new

employees. Brand image is the biggest resource LV will be carrying as they are

globally recognised which will help them to be more locally recognised in the new

market, so even those people who cannot afford their products will still know about

LV.

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Recommendation & Conclusion

To conclude this report, I found it amazing how far LV has come in terms of quality

and brand, however LV still faces competition globally, especially where political

power influences decisions of consumers when buying from global brands, so LV will

face strong competition in countries where political power is strong.

A lot of brands under LVMH have taken retail opportunities and have found success

through retail, this is a step which LV should consider as they have their own store

but only few people will know about one LV store in every city, whereas department

stores are all over the city and there thousands of concessions where consumers

come in and out, LV will be that brand that brings consumers in, however to sustain

that consumer behaviour they really have to lower their prices in order to remain

competitive in retail as their prices will not work in department stores unless there

are loads of luxury consumers. In department stores every consumer look for

bargains and they know if they find a bargain in LV they will spread word of mouth

quicker than any other type of advertising which costs LV, so this is another way to

sustain competitive advantage.

As mentioned above a lot of luxury goods brands have gone into a new industry to

sustain competitive advantage such as Chanel, Marc Jacobs, Tom Ford where they

have their own makeup line so they are getting the best out of the brand, although

there is a lot of rivalry in beauty, however LV is a recognised brand it is easier for

them to promote their new products to all types of consumers who are fans of their

brand or make up lovers who blog about new makeup products and give reviews of

the product, if the review is good consumers will consider buying the makeup

product no matter what the price is. Another ongoing problem LV will face is from

animal rights organisations where they will continuously try and defame LV for using

animal skin in their product, so LV should use more eco-friendly products to prevent

themselves from being defamed.

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Reference List

Johnson.G, Scholes.K, Whittington.R, (2012), Fundamentals of Strategy, 2nd edition, [hardback book], p. 51, 52, 60, 112,141, 142, London: Pearson Education Limited Manu Mahbubani, (2013), Louis Vuitton Case Study, p.1-19, [online case study], University of Western Ontario Jose Luis Nueno & John A. Quelch, (1998), The Mass Marketing of Luxury, 41 (6), [online], Science Direct, p.61-68, available from: http://ac.els-cdn.com/S0007681398900234/1-s2.0-S0007681398900234-main.pdf?_tid=e1d5a03c-b876-11e5-9d85-00000aacb35e&acdnat=1452525824_4e25f05758b01723ac8baac2fe513e02 (accessed 10th January 2016) Facebook, (2016), open your store on Facebook today, [online], available at: https://apps.facebook.com/aradium/?keyword=%2Bsell%20%2Bfacebook&matchtype=b&campaign=137172814&adgroup=7745941534&creative=44204406574&keyword=%2Bsell%20%2Bfacebook&position=1t2 (accessed on 15th January 2016) Kim A.J & Ko, E, (2012), Do Social media marketing activities enhance customer equity? , Journal of Business Research, (65)10, p.1480-1486 http://ac.els-cdn.com/S0148296311003584/1-s2.0-S0148296311003584-main.pdf?_tid=35af2116-bb69-11e5-a5e0-00000aacb35e&acdnat=1452849805_8c86c6d5bcba43883086f2cf2803f44b (accessed 9th January 2016) Forbes, (2013), LVMH, [online], available at: http://www.forbes.com/companies/lvmh-moet-hennessy-louis-vuitton/ (accessed on 15th January 2016) (accessed 9th January 2016) Bain & Co, 2014, Luxury goods worldwide market study, [online], available at: http://www.bain.com/bainweb/PDFs/Bain_Worldwide_Luxury_Goods_Report_2014.pdf (accessed 2nd January 2016) Forbes, (2015), LV knows all too well counterfeiting is a costly bargain, [online], available at: http://www.forbes.com/sites/realspin/2015/06/25/as-louis-vuitton-knows-all-too-well-counterfeiting-is-a-costly-bargain/ (accessed 4th January 2016) Jen King, (2015), LV continues to raise brand value despite industry challenges, Luxury Daily, [online], Available at: http://www.luxurydaily.com/louis-vuitton-continues-to-raise-brand-value-despite-industry-challenges-report/ (accessed 5th January 2016) Biography, (2016), Louis Vuitton biography, [online], available at: http://www.biography.com/people/louis-vuitton-17112264#synopsis (accessed 5th January 2016) Euro monitor, (2014), Diversification key to the future of LVMH, [online], available at: http://blog.euromonitor.com/2014/02/diversification-key-to-the-future-of-lvmh.html (accessed 15th January 2016)

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Ahuja,V. (2014), LV: using Digital Presence for brand, [online book], marketing in contemporary globalism, p.315, available at: https://books.google.co.uk/books?hl=en&lr=&id=maF_BAAAQBAJ&oi=fnd&pg=PA315&dq=+Louis+Vuitton:+Using+Digital+Presence+for+Brand&ots=5qPLBVOC-O&sig=q0UbZjiouYZsv22AU-PB26QPABc#v=onepage&q=Louis%20Vuitton%3A%20Using%20Digital%20Presence%20for%20Brand&f=false (accessed 4th January 2016) Louis Vuitton, (2016), Louis Vuitton travel accessories, [online], available at: http://uk.louisvuitton.com/eng-gb/women/travel/to-2 (accessed 15th January 2016)

Reference List for Appendices

Appendix 1:

Deloitte, (2014), Global Powers of Luxury Goods 2014, [online], available at:

http://www2.deloitte.com/content/dam/Deloitte/it/Documents/about-

deloitte/GP_Luxury_2014.pdf (accessed 15th January 2016)

Economist, (2014), Disillusioned Hedonist Shoppers, [online], available at:

http://www.economist.com/blogs/schumpeter/2014/02/luxury-goods-market

(accessed 14th January 2016)

Guardian, (2014), Burberry and Mulberry facing branding challenges in luxury

market, [online], available at: http://www.theguardian.com/media-

network/2014/nov/06/mulberry-burberry-luxury-branding-challenges (accessed 8th

January 2016)

Guardian, (2015), LVMH says slowdown in china affected sales, [online], available

at: http://www.theguardian.com/fashion/2015/oct/13/lvmh-third-quarter-results-china-

slowdown-affected-sales-growth-louis-vuitton (accessed 8th January 2016)

Deeper Luxury, (2015), Deeper Luxury report, [online], available at:

http://www.wwf.org.uk/deeperluxury/_downloads/DeeperluxuryReport.pdf (accessed

15th January 2016)

Angella Jiyoung & Eunji Ko, (2010), Impacts of Luxury Fashion Brand’s Social Media

Marketing on customer relationship and purchase intention, [Journal of Global

fashion marketing], p. 164,171, available from:

http://www.tandfonline.com/doi/pdf/10.1080/20932685.2010.10593068 (accessed

15th January 2016)

Purse Blog, (2009), LV donates to the climate project, [online], available at:

http://www.purseblog.com/louis-vuitton/louis-vuitton-donates-to-the-climate-project/

(accessed on 10th January 2016)

Tiffany & Co, (2016), protecting the environment, [online], available at:

http://www.tiffany.co.uk/CSR/Protecting.aspx (accessed on 9th January 2016)

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Louis Vuitton, (2016), Environment, [online], available at:

http://uk.louisvuitton.com/eng-gb/la-maison/environment (accessed on 12th

January 2016)

Rachel Dodes & Sam Schechner, (2010), Luxury Goods industry is changing the

way it conceives and markets its businesses, socially and environmentally speaking,

[online], available at: http://www.sosemarketing.com/2010/06/07/the-luxury-goods-

industry-is-changing-the-way-they-conceive-and-market-their-businesses-socially-

and-environmentally-speaking/ (accessed 8th January 2016)

The future of luxury, (2014), TFOL At: the luxury law summit, [online], available at:

http://www.thefutureofluxury.co.uk/tfol-at-luxury-law-summit/(accessed 8th January

2016)

Appendix 2:

Louis Vuitton, (2016), Louis Vuitton sitemap follow us, [online], available at:

http://uk.louisvuitton.com/eng-gb/homepage (accessed 15th January 2016)

Appendix 3:

Burberry, (2016), Contact us, [online], available at: https://uk.burberry.com/customer-

service/contact-us/ (accessed on 15th January 2016)

Coach, (2016), Sitemap, [online], available at: http://uk.coach.com/sitemap?cid=site-map (accessed on 15th January 2016) Appendix 4: Violeta Cebreros, (2012), luxury leather goods, [online], Google Scholar, p. 12-20,

available from:

http://ibobel.pbworks.com/w/file/fetch/70077775/Cebreros%20Violeta%20Industry%2

0Analysis-%20Leather%20Goods%5B1%5D.pdf (accessed 15th January 2016)

Coach, (2016), bargaining power of buyers, [online], available at:

http://fashionwithcoach.blogspot.co.uk/2011/05/coachs-bargaining-power-of-buyers-

and.html (accessed 8th January 2016)

Appendix 5:

Forbes, (2015), LV knows all too well counterfeiting is a costly bargain, [online],

available at: http://www.forbes.com/sites/realspin/2015/06/25/as-louis-vuitton-knows-

all-too-well-counterfeiting-is-a-costly-bargain/ (accessed 8th January 2016)

Appendix 6:

Louis Vuitton, (2015), Louis Vuitton, [online], available at:

http://www.louisvuitton.cn/content/dam/lv/online/picture/allcountry/careers/downloads

/metiers_logistics_supplychain_job_sheet4_en.pdf (accessed 15th January 2016)

LVMH, (2015), LVMH Model, LVMH, [online], available at:

http://www.lvmh.com/group/about-lvmh/the-lvmh-model/ (accessed 15th January

2016)

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Louis Vuitton, (2016), Product Development, [online], available at:

http://www.louisvuitton.cn/content/dam/lv/online/picture/allcountry/careers/downloads

/metiers_product_development_job_sheet4_en.pdf (accessed on 15th January

2016)

Appendix 9:

Ahuja,V. (2014), LV: using Digital Presence for brand, [online book], marketing in

contemporary globalism, p.315, available at:

https://books.google.co.uk/books?hl=en&lr=&id=maF_BAAAQBAJ&oi=fnd&pg=PA31

5&dq=+Louis+Vuitton:+Using+Digital+Presence+for+Brand&ots=5qPLBVOC-

O&sig=q0UbZjiouYZsv22AU-

PB26QPABc#v=onepage&q=Louis%20Vuitton%3A%20Using%20Digital%20Presen

ce%20for%20Brand&f=false (accessed 15th January 2016)

Appendix 10:

Mind Tools, (2015), Bowman’s Strategy Clock Model, [online], available at:

https://www.mindtools.com/pages/article/newSTR_93.htm (accessed on 15th

January 2016)

Appendix 11:

Louis Vuitton, (2016), Product Development, [online], available at:

http://www.louisvuitton.cn/content/dam/lv/online/picture/allcountry/careers/downloads

/metiers_product_development_job_sheet4_en.pdf (accessed on 15th January

2016)

Mind Tools, (2016), Ansoff Matrix, [online], available at:

https://www.mindtools.com/pages/article/newTMC_90.htm (accessed 15th January

2016)

Appendix 13:

Boundless, (2015), Making Strategy Effective, [online], available at:

https://www.boundless.com/management/textbooks/boundless-management-

textbook/strategic-management-12/strategic-management-86/making-strategy-

effective-417-1404/ (accessed on 14th January 2016)

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Appendix 1 – PESTLE Analysis affecting the luxury goods industry

Political Deloitte (Deloitte, 2013) suggests the political power that affects the luxury goods industry is brand power, as those brands with

higher reputation and image will influence government and luxury consumers to buy from their brand, however China has noticed

the power of brands therefore China has taken the step to encourage Chinese luxury consumers to buy their luxury goods locally

from china, the Chinese government has set out proposals where SEO’s (State Owned Enterprises) can increase competition

against big brands in China and other local competitors along with SEO’s having more control over their business which enables

them to grow and expand across China, this will not only increase China GDP but luxury customers will find it cheaper to buy from

local businesses who have same or similar quality as the big brands.

Economical Most countries have recovered from the recession in late 2007, countries like China, Russia and Middle East where luxury

consumers are found in these countries according to the guardian (Guardian, 2014), therefore businesses in the luxury goods

brand try to aim consumers from these counties, although this is more or less a positive impact, the economy has affected other

companies in the luxury goods industry such as mulberry and Burberry which is why these companies are preventing expansion

plans due to not enough sales or profit being made (Guardian, 2015). According to the economist (Economist, 2013) despite the

economy being slow in 2013 the number of luxury consumers has tripled less than 20 years the number of wealthy consumers are

approximately 130 million about 50 million of them are from China and spending has risen to €217billion.

Social Luxury goods companies use a lot of real leather or fur to sell to high end customers who purchase this for home décor or other

uses and these customers are not aware of the processes of making these goods, hence why they spend money without knowing

about animals rights and welfare and the product process. Due to this there have been many protests but the big brands in the

industry have always managed to keep them quiet, but now more consumers are getting to know about how their products are

made and have either switched to a brand that does use real leather or fur or have completely stopped using the product and

found alternative. Another social factor which affects the luxury goods industry is the fair trade policy where the brands use labour

in other countries to produce their goods, where these big brands sell their goods at a high price but giving so little to the people

who work day and night to produce the product. (deeper luxury report, 2015)

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Technological Brands in the luxury goods industry are starting to adapt to new technology, where they use social media sites such as

Facebook, Instagram, Snapchat and other social media sites to promote their brand, offers and products. Through social

media they are also able to communicate with customers instantly where customers do not have to wait a week or months

to get a reply they will get it instantly whether it’s a recent order they purchased other queries regarding the company or any

other products. Luxury goods brand also use social media sites to upload videos or photos about any events they have

taken part in such as fashion show or catwalk and through this they can attract potential new consumers and current

customers will see their new collection and will start spending money due to the brand updating its product or services.

(Angella Jiyoung Kim & Eunju Ko, 2010)

Environmental The Luxury goods industry and LV have started to protect the environment by reducing carbon footprint, waste, preserve

natural resources and other activities or factors that affect the environment, to do this LV and other brands have started

using eco-friendly materials which are expensive to buy but to help sustain the environment LV buy these materials and sell

the product at a higher price, where the money goes towards organisations that help protect the environment (Purse Blog,

2009). Other brands which have adopted a CSR which is an optional choice however many companies are advised to follow

and it mainly revolves around the society and environment and the business should have an positive impact on the

environment and society, one of the brands in the industry who have maintained CSR is Tiffany & Co where on their

website it shows all the CSR they follow such as environment, fair trading, charity, climate change (Tiffany & Co, 2015).

Legal Luxury goods brands in the industry are facing a lot of counterfeit of their goods which they sell at a high price for luxury

consumers which has affected some of their brand image and have made losses in fighting for court cases against fraud

sellers who have made fake goods. Some brands have managed to protect their products and designed by patenting them

or by designing products which are hard to copy and through this they have not been to any court cases as they fraud seller

would have lost due to the product or design being patented, and because the design or product would be hard to copy

these sellers give up trying to make the luxury good product. (the future of luxury, 2014)

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Appendix 2 – Screenshot of LV social sites

As you can see LV is active in most social sites,

popular one being Facebook and twitter, most

companies only have a few social sites they are

present in but LV shows that they are in different

social media sites to cater to all luxury consumers

who do not have Facebook or other common social

media sites.

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Appendix 3 – Social media sites of other luxury brands

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Appendix 4 – Porter’s five Forces of Competition framework of the Luxury Goods Industry

Threat of New Entry

Needs large investments to

build a brand that will sustain in

the future

Brand recognition and loyalty

will attract middle-high income

earners, will difficult for new

players to achieve this

All these top brands have

experience and competing

against them may be difficult to

understand buyer behaviour

Buyer Power

Most of the brands customers in the industry are

mainly ultimate customers who buy the product

from the brand once.

However those that are loyal make up half of the

brands profit and sales.

Buying power is high as ultimate and immediate

customer can switch easily to another brand if

there is low switching cost and buyer competition

threat.

Counterfeit has effected bargaining power luxury

good customers as consumers are willing to

spend less.

Threat of Substitution

Counterfeit items can be a threat to

substitution for the industry who aims to sell at

high end customers.

Over years counterfeit items have been

improving quality over the years so it is hard to

tell sometimes which luxury product is genuine

and fake.

However counterfeit sellers of luxury goods

have not got the same status as these top

brands in the industry.

Bargaining Power of Suppliers

Leather and other luxury goods are sourced in countries like

India or China due to low production costs

So luxury goods brands have to build a good relationship with

their suppliers, a brand may have 40+ suppliers so if one

supplier does not supply good quality the brand can switch to

another one

So there is low bargaining of supplier power, so suppliers do

not have much control of price and quality

Since these brands are recognised globally even if the brands

switch it will not ruin their brand image

Competitive Rivalry

There is a lot of competition in the luxury

goods industry as each company tries to

beat each other by either providing best

price, quality and product overall.

Many top brands have the resources and

capabilities to gain and sustain

competitive advantage.

Many top brands have also been around a

long time which gives them competitive

advantage over others as they will have

experience on their products and the

business

Intensity Level

High Threat

Medium Threat

Low Threat

Bargaining power of

Suppliers

Competitive

rivalry

Threat

of new

entry

Buyer Power

Threat

Of

Substitution

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Appendix 5 – Threats and Opportunities of the luxury goods industry

Opportunities Reason

Emerging markets Since the luxury goods industry is growing, brands can start to grow and expand in emerging markets such as Middle east or Africa or even BRIC countries which are recently developed countries which include Brazil, Russia, India and China, this will be profitable for brands as these countries are low in production costs so production in these countries will be cheap along with selling their products they will gain a lot of profit due to the population in these countries.

Expansion and growth via concessions in department stores

In my opinion brands in the industry can expand in local department stores or concession to make it convenient for luxury consumers so they do not have to travel all the way to the big branded shop, instead they can just go to their local department store and purchase the item they want from there.

Using more environmental friendly materials and support environmental organisations/charities.

In my opinion big brands in the industry can make more use eco-friendly materials not just on clothing but on other luxury goods as well and the more big brands are encouraged the better the brand image will be in the brand and in the industry, this will change views of consumers who didn’t like big brands due to animal use in their product. Also a lot of big brands do not support environmental causes or organisations if they support some of these causes or organisations a lot of people will increase their brand image and reputation along with luxury consumer’s awareness of environmental causes so they will put money towards these causes.

Threats Reason

Global economy In my view the global economy is a threat to the industry as mentioned in 1.1 where the economy growth on some countries are slow which can decrease profit and slow down sales, recently LV has been hit with slow growth in china due to their economy which means the economy is a threat to the luxury goods industry.

Counterfeit goods This is a threat as a lot of counterfeit goods are still around no one has eradicated them despite facing heavy penalty fines or prosecution, this will effect big brands in the industry as they charge expensive prices for the same product that these sellers make except they charge a much lower case which attracts customers who cannot afford the genuine luxury goods, therefore these sellers are making a profit as they get it made at a cheap price but similar quality to the big brands so it will not affect their recurring costs as they sell their goods via EBay or Amazon which have seller rights.

Consumers spending less

As mentioned in 1.1 Chinese luxury consumers are being encouraged to buy from local sellers in China to help increase the value of GDP of china economy and these luxury consumers know that the local businesses have similar quality as the big brands so to save money they will buy from local businesses.

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Appendix 6 – Value Chain Framework of Louis Vuitton

PRIMARY ACTIVITIES

Firm Infrastructure – Decentralised structure as brands under LMH have the power to

control their own brand.

Human Resource Management – Hire crafted HR advisors or leaders to make sure that employees

In Louis Vuitton are working effectively. They are in control of payroll, along with rewards/bonuses for

individual & punishment for those who are not performing well up to LV standards. Technology Development – Product design, R&D process carefully planned with modern & complete engineering technology, along with daily use of technology such as tills or other processes which Cannot be handled manually needs to be up to date to prevent delays and problems from arising. Procurement – LV have procurement officers inside the organisation to obtain goods and services to help with

Primary activities.

Inbound Logistics

LV have one

international supply

chain of all who supplies

LV with leather goods,

ready to wear, shoes,

watches and

accessories

Operations

LV have a central warehouse

in Cergy where LV products

made and are met with high

environmental quality

standards.

Outbound

Logistics

LV have one

international

logistics centre

and nine regional

warehouses in

Hong Kong,

Osaka, Tokyo,

Singapore,

Ontario,

Cranbury,

shanghai, Cergy

and Dubai.

Marketing &

Sales

LV have control

over their own

sales and

marketing where

their distribution

channel is 100%

exclusive as they

do not rely on

other distribution

channels to

promote their

products.

Distribution channel

100% exclusive

Service

Provide information

On how to care for

their product.

Can repair

Customer’

Damaged

Bags.

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Appendix 7 – Strategic Capability Competency Framework of Louis Vuitton

Resources (Productive input or valuable asset the company owns)

Competences (Is the way they use their resources to make the company run efficiently.

Threshold Capabilities (required to be able to survive or compete in the market, minimum capabilities required at this stage)

Machinery & Computer systems

These are the basic resources needed so that LV can produce the finished, prototypes or even use of tills, if there is no machinery they will not be able to produce the goods likewise with computer systems.

Manufacturers and suppliers

LV needs these resources from suppliers or manufacturers to help produce the finished product, without these suppliers or manufacturers they will not be able to make the product at all, and will have obtain raw materials elsewhere.

Storage for raw materials

LV needs storage for raw materials to later be used in the manufacturing process to make the finished product, these raw materials can be leather, plastic, metal, another reason why they need separate storage for these materials is to prevent material smell which can cause to health and safety issues of employees who work in the production department may suffer from lung cancer or other diseases which may be harmful for the body.

Storage for finished product

LV needs to store their finished product in a separate warehouse so that the product does not get rusted, smell or have dust which can damage the product and the product will become unsellable.

Employees

LV needs employees to carry out business functions across the company to maintain good performance of the company and to help sell the products to customers.

Cash-flow LV needs cash-flow to keep inflow and outflow of cash consistent by checking financial figures and reports to see where cash flow is needed the most.

Intangible assets e.g. buildings, shops

LV needs buildings and shops, buildings because there needs to be a place where employees who work in other departments other than the sales department need space to carry out their job role successfully. For example if LV have helpline they will need space where a telephone is available to communicate with customer and advise them how to solve the query. LV need a shop to sell their products in a shop to make it appealing for a customer to come in and buy the product, in a shop to attract consumers lots of businesses make use of their shop window where they put the latest collections or new products which entices consumers to buy the product. By having a shop LV creates more jobs so it benefits the community.

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Stock LV needs minimum amount of their stock to sell to customers, if they do not have any stock they cannot sell anything to their customers. Other than advising them to buy online or check in another store.

Debtors and creditors LV needs creditors where they are given a time period to buy stock and pay later so when LV sell more of their products they can payback their creditors early. LV need debtors so that when there is not enough inflow of cash their debtors can pay them immediately.

Distinctive Capabilities ( required to be able to win and achieve competitive advantage over competitors in the market)

Intellectual capital e.g. patents, business systems

LV have patents to help protect their designs and products from counterfeit sellers, so if they do have a counterfeit case they will be protected and so the fraud seller will have to pay to LV for copying. LV need customer databases to build client loyalty by sending them offers to those who opt in for subscription.

Other brands who work with them under the control of LVMH

LV is part of LVMH who owns other brands which work in different industry such as wine and brewery, jewellery, perfume, beauty. This will help LV to sustain themselves so if they need support or finance from other brands they don to have to worry as LVMH will provide it, and if one of the brands in LVMH doesn’t work it will not affect the other brands, so LV have a lot of protection from different brands and LVMH themselves.

Unique designs and prototypes

LV have unique designs or prototypes to test whether the product will work in the market and will it help gain competitive advantage.

HR employees who are intangible assets

LV have employees who have experience and knowledge on how the market for luxury goods work and knowledge on how to improve the brand which can be an advantage to LV to gain competitive advantage and to sustain the company in the future.

CEO

Likewise LV CEO is a distinctive capability as he may have years of experience in various companies which he has worked for so he will have knowledge on how to dominate the market, along with a suitable leadership skill which will shape the LV into performing more effectively and efficiently along with building the vision of LV.

Brand image LV’s brand image is an intangible asset as they can use this against new entrants and current rivals.

Skilled craftsmen

LV have skilled craftsmen who know how to make their products which can be useful if they decide to bring a new product out they will know how to make it.

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Appendix 8 - VRIO framework of Louis Vuitton

Resources/ Capabilities

Valuable Rare Difficult to Imitate

Useable by the organisation

Competitive Implications

R1 Machinery & computer systems

Yes No No Yes Competitive parity

R2 Employees Yes - - Yes Competitive parity

R3 Intangible assets (Building, shops)

Yes Yes Yes Yes Sustained competitive advantage

R4 Stock of finished products Yes No No Yes Temporary competitive advantage

C1 Intellectual property (Patents, business systems)

Yes Yes Yes Yes Sustained competitive advantage

C2 CEO Michael Burke Yes Yes Yes Yes Sustained competitive advantage

C3 Unique designs & prototypes Yes Yes Yes Yes Sustained competitive advantage

C4 Skilled craftsmen or specialised employees

Yes Yes Yes Yes Sustained competitive advantage

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Appendix 9 - Strengths and Weaknesses of Louis Vuitton

Strength Reason

Biggest and powerful brand in the world

This is their biggest strength as everyone in the world knows about Louis Vuitton even those who cannot afford their luxury products, and through luxury consumers LV become more powerful as these luxury consumers will have base of other customers who may be interested in their products.

Known for skilled handwork and use of delicate materials

Since the 19th century LV was known for handwork on their products where specialist skilled employees were hired to make their luxury products proving to customers that machinery is not needed to make a product, they are also known for using delicate materials where other businesses use PVC or other materials which will not last long, whereas LV use genuine leather or fur to make the product last longer.

Repairing damaged products

LV offers repair services to consumers who have bought their bag and is damaged so LV will fix the damaged bag, the repair cost is not listed on the website, however as these bags are owned by luxury consumers they will not care how much it will cost to repair the bag.

Weakness Reason

Products are only aimed at luxury and elite customers

This is LV’s biggest weakness as they only aim their luxury products to consumers who can afford their products not at those who cannot afford it, and even if the person can afford it LV will expect them to buy something of their every month or week. LV should make an outlet or discounted goods for consumers who are not able to afford their luxury goods to increase brand awareness and appeal of luxury goods amongst middle class people, LV have said on their website that they only sell through their stores or websites and no goods are discounted even if its second hand which can be suspicious as it can be fraudsters claiming all this.

Not known for offering products at a discount rate

This is related to the first weakness, as LV do not offer discounted goods which could have made it more affordable for those who cannot pay the full price of LV products but can pay the price of discounted goods which can increase customer loyalty as customers will be willing to come back when LV have discounts on their products.

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Appendix 10 - Strategy Clock Model

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Appendix 11 – Ansoff’s Matrix for LV

Market Penetration Product Development

Develop a new marketing strategy to gain more sales in current market

Introduce special offers or promotions on existing products

Identify which LV products creates more sales and increase the product quantity, and disregard products which are not selling.

LV can advertise to encourage more people to use their products

Buy a competitor company to have both customers bases to increase sales and profit

Continuous improvement for perfection by inventing innovative products that are popular trends which customers are enticed to buy

Fast availability of new products in various occupations

1300 new products are launched every year

500 models produced in prototype workshops

Re-package the products to make it more appealing

Improve customer service or quality

Market Development Diversification

Target areas or countries which do not have LV, but have a rich culture and economy, where risks are low and profit is high

LV can use different channels to sell to countries which do not have LV so making the products available in them countries via online site, direct sales team.

Use market segmentation to target other types of customers who may be willing to buy LV products

LV should use the marketing mix to reposition their product and brand, and make more people aware of their existence

LV could go invest in new products such as makeup where the market segmentation will be aimed at everyone from luxury consumers to middle class consumers who want to have branded makeup if not their bags.

There will be a risk of the make-up line not producing enough sales or profit to sustain itself, however LV bags and leather goods will not be affected.

This will be an opportunity for LV to create a new product such as makeup products where people will still pay the high price but it will still be affordable for everyone.

Joint ventures such as MAC, Max-factor

Acquisitions of a company operating in a new industry.

Existing Products New Products

Existing

Markets

New

Markets

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Appendix 12 - LV TOWS matrix model

Opportunities

1. Emerging markets

2. Expansion and growth through retail opportunities

3. Using more eco-friendly materials

Threats

1. Global economy

2. Counterfeit goods

3. Consumers spending less

Strengths

1. Biggest and

powerful brand in

the world

2. Known for skilled

handwork and

use of delicate

materials

3. Repair of

damaged bags

Strength & Opportunity (SO) Strategy LV can use their brand name to emerge in new markets, where new markets will welcome LV with everything set up for them, so they will not have to do anything extra to set their business in a new country. Through expansion & growth in department stores LV can set up a repair service where they can charge consumers who have bought their bags at a reasonable rate, but also for those consumers who haven’t bought their bags LV can charge them a repair fee which can vary on the damage done to the bag. Since LV is known for using delicate materials they can invest more on eco0friendly materials and get their skilled craftsmen to switch materials and us eco-friendly materials instead to create a high quality bag that will last longer.

Strength & Threat (ST) Strategy LV can use their strength which is brand image to fight counterfeit goods to prevent luxury consumers switching from original LV bags to counterfeit by informing them that they use genuine leather in their products which may prevent them from buying counterfeit goods also, tarnish the reputation of the counterfeit seller by naming and shaming them. LV can offer discounted repairs service to consumers who buy bags or other goods from LV, this will increase luxury consumers spending.

Weaknesses 1. Products aimed

only at luxury consumers

2. Does not offer products at discounted rates

Weakness & Opportunity (WO) Strategy LV can emerge in a new market but aim at selling at everyone by selling their goods discounted for those who cannot afford their products. If LV expand and grow via department stores LV will eventually aim at everyone through department stores as people will want to but their item, therefore they will spend extra cash to buy their products,.

Weakness & Threat (WT) Strategy As mentioned in WO strategy, LV can aim products at everyone not at luxury consumers only therefore gaining new customers and increase of sales and by offering products at discounted rates products that are out of season or discontinued. LV can emerge in new countries where the global economy hasn’t affected them such are rich countries where their wealth and GDP growth is high. As mentioned in ST strategy LV can name and shame counterfeit sellers so they are not capable of selling anything.

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Appendix 13 - SFA Framework for LV

Suitability Feasibility Acceptability

The fit test:

I do not think the S.O strategy exploits

LV’s strengths, it encourages more

opportunities with the least amount of

risks and can create further new

strengths. I think the S.O strategy

does fit with the company’s

positioning as they are already

expanding and growing business

globally, however they still have to

consider expanding and growing

through retail opportunities.

Will the S.O strategy work in

practice?

I think the S.O strategy will work in

practice, as LV has the resources and

capabilities to deliver this strategy

successfully, however the main concern

is that whether LV will be able to

persuade itself and people who work in

the company to join retail opportunities,

as some employees and customers may

not like expanding and growing via retail

opportunities due to their high brand

image which lives up to the expectations

of employees and customers.

Performance outcomes & expectations

of stakeholders

I think the return will be high if LV

consider using the S.O strategy most of

the opportunities outlined have already

the strengths needed to carry out the

strategy successfully which will

encourage sales and profit which will be

in line of the expectations of the

stakeholders where ROE, image, EPS,

net profit and net revenue is concerned.

Return of risk may be low, however

there will be some unexpected risks

which can affect the performance of LV,

however it will be a short-term risk.

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Appendix 14 – Strategy Selection for LV

Criteria Strategic option 1 Strategic option 2 Strategic option 3 Strategic option 4

Suitability 4 3 3 2

Feasibility 3 4 2 2

Acceptability 4 4 3 3

TOTAL 11 11 8 7

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