Presented by Group 7 :

Akankha Arora
Joseph Robert
Shamil E Sathar
Nidhin VC
Shyam Sunder
Company Profile
 LVMH is the world’s leading luxury products
group.

 A $13 Bn group of companies with operations

across the world- 1,500 retail stores in about
60 countries.

 A parent of around 50 sub-companies

 In 2004 40% of the sales is from Asian

market.
Industry Profile : Luxury
Goods
 The sales of luxury products were expected to

rise by 3% to 5%.

 Shares in luxury companies tend to go up

 Growing middle class is also buying designer

goods.

 26% of the worlds millionaires are in Asia

Competition in the industry :

Gucci :
 Well entrenched player in Europe and North
America.

 Guccio Gucci originally started as a reseller

of luggage imported from Germany.

 As of 2003, Gucci Group had 348 directly

operated stores.
Competition in the
industry :
Richemont
 It was the second-largest luxury goods company in the

world.
 Major player in Jewellery and Watches.
 Sales of watches and Jewellery accounted for 70% of

total luxury products sales in 2000.

Hermes
 Relied on single-branded strategy.

 Products mainly clothing , fragrance and leather

accessories.
Competition in the
industry :
Bulgari :
It operated in seven luxury segments
including watches, perfumes, jewellery etc.
Substantial part of its revenue was from
watches and jewellery
Customers were mostly first time buyers.
Asia pacific accounted for 36% of its sales.
Creating the LVMH
empire
• This company was founded in 1854
• Founder – Louis Vuitton
• In 1971 Hennessy, a leading manufacturer of
cognac, merged with Moet et Chandon, a
leading champagne producer.
• In 1987 the drinks group then merged with
fashion house Louis Vuitton to create what is
now the world’s largest luxury goods business
–
Louis Vuitton Moet Hennessy.
Wines & Spirits
 LVMH held 40% of the cognac market and
20% to 25% the overall champagne market.

 50% share in premium champagne segment.

 It is absent in the popular segments of drinks

such as beer, whisky, vodka.

 Had a steady pricing policy and strict cost

control.
Fashion & Leather goods :
 60% of sales in this division are concentrated
in the Asia-pacific region.
 It had several product in this category,
including leather goods, ready-to-wear,
shoes, watches, jewellery, textiles etc.

 Demand often exceeds supply.

 Sales in this segment is mainly

attributed to Louis Vuitton brand.
Perfumes & Cosmetics :

 This division account for 18% of company’s sales.

 This division has been able to integrate R&D,
production, distribution, sourcing across brands-
resulting in huge profits.

Watches & Jewellery :

 The division contributed only 5% of company’s sales
in 2000.
 It has an operating margin of only 10%.
 26% of the division’s sales come from Asia.
 Tag Heuer, Zenith, Christian Dior,DBS etc.
Selective Retailing
 To create a sales environment that enhance
the image and status of luxury good.

 They operate in two segments:

Travel retail:
To market luxury products to an international
travel clientele

Specialised selective retailing

 These selective retail shops are
located in Europe, the US and Asia.
Expansion of LVMH in Asia
Declining trade barriers and trade tariffs in the

luxury goods market

Change in communication technology

Capture growing Asian markets

 Perception of luxury brand as status symbol

Growing number of tourists from Asian countries

Expansion of LVMH in Asia
26% of people having financial assets more

than $1 million lives in Asia in 2003

Asian buyers accounted for 30-40% of sales of

all luxury clothing, handbags and watches

Less competition in luxury market

Young rich population & mass of nouveau rich

customers
Japan :

There were 47 Louis Vuitton stores in Japan.

 By 2003, Japan accounted for about 20% of

Christian Dior’s sales.

Had plans to increase it to 30% in the future.

Tough competition from competitors like Prada.

China :
China a huge market and was expected to play a
pivotal role in the future of brands.

Annual growth rate of premium cosmetic market

was a significant 30%.

In 2003 there were 16 LVMH shops.

LVMH was trying hard to establish an efficient

operating model in China. Mainly concentrating on
eastern and southern China.

Area of focus are selling wines, perfumes, watches

and jewellery.
South Korea :

 Even though small in size was a huge market

for luxury brands.

 By 2003, LVMH had 15 stores.

 Here the market was comparatively more

stable and secured from external threats.

 The young age of customers in the Korean

luxury segment also represented a
tremendous opportunity.
 India :
LVMH launched its first store in India in 2003
 Product brands from its watches and jewellery group-
TAG Heuer and Christian Dior.
 India’s growing economy, its English-speaking
population, its improved social & political stability and
opening of the economy to outside investors
attracted LVMH to invest in India.
 LVMH’s major challenges are
 To create a culture in India to shop luxury goods & make them

aware of the same .

 Convince Indian customers who shop luxury brand to buy from

India.
 To face huge competition in watch market
 A high percentage of duty charge.
Distribution Management
Selective Retailing

Gray market control: Smuggling control

Private ownership versus franchising

Use of Internet marketing

Distribution density (pull strategy)

Brand management
 Product dominant ( House of brands)

 Core competence of LVMH is the unique capability of harnessing

creative potential to make money

 The strategy adopted by LVMH is to position each of its brands

as distinct brands in their own right.

 Collectively, they offer competition to other companies under all

segments by occupying the entire category. A customer is thus

retained within LVMH group: Eg : Gitanjali group
 Brands thereby complement rather than cannibalize each other,

though they offer overlapping products.

Brand Analysis
Brand architecture
Division-Wise brands catering to distinct
market segments.(Different positioning ,
product category and sales channels)
Competing brands within the group help beat
the competition
Leveraging on the individual identity and
image of the brands- Tag Heuer.
Gaining advantage from the cultural origins of
acquired brands.
Strengthen the existing distribution.
Describe some of the country-
specific target market for luxury
goods?
Japan:
Must win market.(Triad)
They are big buyers of luxury brands.
Japan accounts for 33% of fashion and leather
category.
20% of Christian Diors sale is from Japan
The brand image is everything in Japan were
there is little difference between the rich and
the poor.
Describe some of the country-
specific target market for luxury
goods?
China:
Has a huge population.
Growth rate of 8% and negative inflation rate.
Policies of the govt are favourable for luxury
brands.
Annual growth rate of premium cosmetic
market was a significant 30%.
 Should LVMH reach out to new
middle- class customers who are
willing to purchase luxury items?
Yes , if the purchasing power of the new
middle class increases then it is good for
LVMH as the customers who can afford it
increases .
But LVMH should reach this market
segment without tarnishing its brand.
They should not decrease the price of their
products.
Maintain only exclusive shore rooms.
What advantage does LVMH as
a group have over independent
brands
Knowledge of market
Financial strength
Use flanking to fight competition ie., use of
different brands under within same category
LVMH group to avoid competition
Bombarding the market with a variety of
brands to cater to different segments.
Describe the counterfeit business
today. How is this affecting companies
and businesses?
Counterfeiting is the illegal use of a registered
trade mark
Counterfeits affect the sales of brands by
diluting the brand identity
Accounts for 5 to 7% of global merchandise
trade i.e. $ 150 billion a year
Fail to perform up to the expectations of the
customers
May cause injuries to the customers
How should luxury brand fight against
counterfeiting?

Check on internet auction sites for the sale of

counterfeit products
Employ full time staffs to work with

investigators and lawyers to protect the brand

Push for better legislation against counterfeits

Employ coalitions
Conclusion
USP of LVMH is its status factor & “Made in
France” tag
Product standardization strategy
Macro & Micro economic variables favorable
in Asian market
Thus it should aggressively expand in Asia
without diluting its brand identity
Thank you