Louis Vuitton is one the world biggest brands in the luxury apparel segment. It essentially caters to a niche market segment due to its high prices and exclusive apparels. Louis Vuitton is a flagship of the Moett Hennessy Louis Vuitton (LVMH) Group. The flagship of LVMH, Louis Vuitton has been a major driving force behind the growth of the LVMH Group. The Company has seen various changes in the operations and strategies over the years, which have helped it evolve and maintain its premium luxury market.
The mission of Louis Vuitton has been built on three rules they are ; To master his savoir, to provide excellent service to his customers and to innovate continuously.
After analyzing the case study it is evident that we can place Louis vuitton’s strategy between 1 and 2 at the bowman’s strategy clock, which focuses on product differentiation. This is because the company has differentiated products and the prices of the products are really high but still where the company remains to be very profitable. And also the customers of Louis Vuitton look only at the brand image and reputation of the brand but not at the real value prices of the product.
Resource and capabilities
The Founder-Louis Vuitton Malletier and the other owner till date.Founders Clear vision and creativity, which was a key success factor for Louis Vuitton. Regular Innovation in productions, which helped them in overcoming their competitors. Rich experience in the industry.
Knowledge about the industry.
Brand ImageThe high reputation of the brand helps them have a market edge over the other brand and which also lets them price their products at a higher price. Own stores, no licensing Distribution.No counterfeit of its products, more profits.
Design and Craftsmanship. Tie-ups with designers.New innovative attractive designs with high standards. Focus on innovation. Quality in raw materialThe quality of raw material is very high which helps them in their USP and which also why their customers like them. In house Manufacturing PracticesHigh efficiency and productivity because of in house manufacturing. Which also helps in high quality standards and uniqueness. Financial resources.Helps in global expansion and acquisitions. Also helped in aggressive marketing globally.
Customer service and satisfaction.Helps in retaining the customers. Exclusivity to the customers.
The Founder-Louis Vuitton Malletier and his succesors
Louis Vuitton malletier and the other succefull heads of the organization was one of their key resources. The main reason why they are important is because they were successful and had those different capabilities which proved to be successful.
In Malletier’s case he had a great vision for his company, his creativity w¬¬as one of the main reasons for building and strengthening the brand and the key success factor. He strongly believed in creativity , innovation and service and expertise.
George Vuitton designed the monogram process which was key factor for the company in counterfeiting this shows that he concentrated in innovation as well. Product diversification of the business to different products eg:- handbags proved to be successful. He also believed and was responsible behind the expansion of Louis Vuitton in a global market which also turned out to be successful.
Bernard Arnault appointed Mark Jacobs as the head designer which was huge success. He had a futuristic strategy plan for the company, which was successful for the business. He was the reason behind the partnerships with Moet and Hennessy.
Racamiers decision to open self-owned stores was one of the key resources, which helped LV bring in more profits. He also acquired companies in luxury quality products, which enabled them to broader there, market and tap the competitor’s market share.
The brand Louis Vuitton is a main resource and an asset for the organization. Louis Vuitton being one of the oldest names in luxury fashion industry is an major asset and resource. The Brand image helps them attract more high-end customers who look for brand quality and exclusivity.
Distribution channels, own stores and no licensing
Louis Vuitton has its own stores and it does not provide licensing, this helps them not only in eliminating counterfeit products but also helps in maximizing their profits as there are no merchants and all the stores are company owned.
Design and craftsmanship, tie ups with designers.
LV as mentioned constantly focuses on new innovative designs and high quality. Their tie up with Marc Jacobs proved to be a successful resource for them.
Quality in raw materials.
The quality of product what they use for their products is very high which helps them in their USP and which also why their customers like them. It also helps them in building the brand loyalty.
In house Manufacturing Practices.
High efficiency and productivity because of in house manufacturing. Which also helps in high quality standards and uniqueness. LV reorganized the manufacturing line where it trained its employees in improving the productivity.
The main key resource of the company is its access to huge financial capital, which helped the company in many possible ways. As LV had good financial resources they were able to invest huge money in infrastructure and processes required for designing and manufacturing. This also helped the company in acquiring many other luxury goods businesses and also helped them in global expansions. It also helped in aggressive marketing strategies globally.
Customer service and satisfaction.
The customer service helped them in retaining their customers gave exclusivity and extensive loyalty programs.
Heads and ownersof the organisationYESYESYESYES
Access to financeYESNONOYES
Designs and CraftsmenshipYESYESNONO
In-house Manufacturing PracticesYesNO NONO
Owners: The heads and owners of the LV are very valuable, rare in imitable and non substitutable. All the owners of LV had distinguished qualities, which were unique and distinctive in nature, which is really rare to find. Eg: arnault expand the business in new markets with many mergers, which is not common. Racamiers decision to start self owned stores proved to be successful and it brought in more profits. They are considered to be non imitable and not substitutable because not two persons are alike. Each person has is own perspective. In which LV’s case the characteristics what each owner had was not imitable and not substitutable.
Brand Name: Brand name of LV is very valuable to the company. Being a company that deals with high quality luxury goods the brand name matters the most. It is the brand name which attracts people and is one of the main USP’s of LV. And it is very rare because very few brands that are as equal to what LV is. The size of Louis Vuitton is big when compared to many other Brands. It cannot be imitated and substituted because creating a brand name for a company does not happen overnight it takes many years and hardwork.
Finance: finance is very valuable to a company as because it is the most needed and valuable thing to any organization. It helps in aggressive marketing campaigns and mergers and accquisitions. Finance is not rare and it is imitable because many other firms can generate and have access to money and may have financial resources as what LV has. But money cannot be substitutable because imitability is different from substitution.
Craftsmen: This resource is very valuable to Louis Vuitton as they sell products to a very niche markets where customers are willing to pay high prices for high quality and customized products. Louis Vuitton was known for its top design and creative talent that helped them to stay ahead of the competition. LV Craftsmen are considered a rare capability as their designs are approved and used by a top firm like Louis Vuitton. This can be imitated as craftsmen belonging to other rival companies can copy the design. It is substitutable as one can substitute the work of a craftsman to a machine that can do the creative designs. .
In-house Manufacturing Practice: The production practice followed by Louis vuitton is very valuable because it helps them in improving the quality , productivity and efficiency. These are supposed to be the key success factors for an organization. This is considered to be valuable. It is not rare because any company can follow this particular practice and it is not imitable and substitutable because any other company can follow the particular process of manufacturing. They may invent new way to improve efficiency and productivity so it is substitutable.
Distribution: Distributions channels for LV are valuable as it gives them control over where to sell and prevents the products being counter fitted and lost during distribution. This resource is not rare and can be imitated as other companies can also adopt a control over their distribution network.
Also it is very substitutable as there are other ways of distributing products through distributors and agents.
Weakness found from Main case study, resources and VRIN Analysis:
1)Louis Vuitton adapted lean manufacturing technique of manufacturing to improve its efficiency, which was a good move but the technique adapted does not go well with the brand image because the brand prides itself for selling handmade exclusive crafted products which may not go well with its customers. 2)Louis Vuitton not having an online store in china is one its most important weakness because the case clearly mentions that china is one of its biggest markets.
PoliticalPolitical Instability in the Eurozone because of the banking crisis all over Europe which has led to the change of governments in countries like Italy and Greece this may lead to closure of manufacturing units it the above countries due to strikes and riots.
There may be Labor problems while outsourcing production to developing countries. Which may lead to shutting down the units.
The exchange rate is fluctuating in the global currency exchange market. International companies will face the risk in transaction charges, which may be a loss.
The economic fall will affect the total sales in the affected countries as the cash flow and income level of the general customers will be very low.
SocialChange in consumer buying behavior. . Which may tempt many existing
customers to switch to many other luxury brands.
Change in fashion trends.
TechnologicalAdvancement in technology may help Louis Vuitton in improving their productivity and craftsmanship which may be profitable. LegalChange in the acquisition laws may affect the expansion plans of large companies.
Labour laws may play an important role in the function.
EnvironmentalThe growing trend of consumers preferring organic or eco friendly products will force the industries to adapt and change the production process to suit such wants and customers.
PORTERS FIVE FORCES
Porter Five Forces:
Power of BuyersLow
Power of Suppliers low
Threat of New EntriesLow
Threat of Substitutesmedium
Industry Rivalry High
The bargaining power of buyers— low
The bargaining power of buyers is low because customers will have to choose from a very few luxury brands which already exist in the industry. As is it a high end niche market customers are willing to pay firms high prices in turn for a high quality and unique customized product.
The bargaining power of suppliers— low
Most luxury goods firms design and manufacture their products in house. Only other components are sourced from external suppliers. There are a very few luxury firms so they purchase from a very selective suppliers where they are asked to meet the standards. Therefore it tends to be weak an low.
The threat of new entry—low
The luxury industry involves high capital for entry. A new firm that enters the luxury goods industry will require huge financial resources to deal with the high operating and production costs. Threat of entry can be considered low as firms that already exist in the industry have been for many years now and have a strong history. So any new company who wants to enter this industry will have to compete with experience, heritage and brand loyalty of the existing companies in the industry. So the threat of entry to both the industry and the firm is low
The threat of substitutes
•is low to moderate for the industry
The threat of substitute is low in terms of the luxury goods industry as it is a niche market and customers prefer the product not in terms of its functionality but for its brand image, sheer quality and customer service.
•is high for the firm
The threat of substitute is high in terms of a firm in the luxury goods industry, as there exists many brands in the market that a customer can choose from.
The extent of rivalry between competitors—High
The extent of rivalry between firms is considered to be high, because there are many similar products and brads available in the luxury industry.
KEY PERFORMANCE INDICATORS
•In house production.
•High quality product.
•Lean manufacturing practices.
•Strong distribution network
•Craftsmanship and design.