Louis Vuitton Case Analysis
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Louis Vuitton is a luxury goods company founded in 1854 known for leather goods and luggage. It has grown under CEO Bernard Arnault to become highly profitable through vertical integration of manufacturing and distribution. Key success factors are maintaining the brand image of quality and differentiation. The hybrid alternative of producing both artisanal and accessible goods using different manufacturing models could appeal to all customer segments while balancing heritage and growth. Forecasts show continued revenue and profit increases through 2015 if this strategy is implemented through expanding production, entering new markets, and adjusting pricing. Risks include losing across all segments, and the contingency plan would be to shift to the heritage production model.
Louis Vuitton Case Analysis
- 1. LOUIS VUITTON Conlon Cash, Brooke McCarter, Sundeep Shamanur, and Cole Welch
- 2. LOUIS VUITTON HERITAGE Founded: 1854 LOUIS VUITTON GEROGES HENRI •Three Rules VUITTON RACAMIER •Innovation •Company-owned Stores BERNARD MICHAEL BURKE ARNAULT •Current •Profitability and Efficiency
- 3. SITUATION ANALYSIS Internal Positive External Positive • Distribution • Asian Market Growth • Manufacturing • Perfume Market • Assets • Economic Rebound • Lean Production Internal Negative External Negative • Unstable Other • Volatile Exchange Rate Activities/Eliminations
- 4. KEY SUCCESS FACTORS Image Quality Differentiation
- 5. FIVE FORCES SUBSTITUTES Low SUPPLIERS COMPETITION BUYERS Low High High NEW ENTRANTS Low
- 6. INDUSTRY CUSTOMER SEGMENTS Absolute Aspirational Accessible
- 7. 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?
- 8. AUTOMATED ALTERNATIVE Shift production to a more assembly line model Pro • Higher customer base Con • Likely loss of high-end market
- 9. HERITAGE-BASED ALTERNATIVE Luxury goods use more artisan labor, as when the company was founded Pro • Please high-end customers Con • Lose accessible customers
- 10. HYBRID ALTERNATIVE Produce “accessible” goods using automation and “absolute” goods using artisan labor Pro • Potential gain in all segments • Highest risk to lose in all segments Con • Potential to cheapen the brand
- 11. UNIVERSAL IMPLEMENTATION Enter perfume market Decrease secondary sales Increase European prices to combat grey market Attract Asian market to Europe
- 12. QUANTITATIVE ALTERNATIVE ANALYSIS Automated Heritage Hybrid Profit 20% 4 3 5 Product Quality 3 5 4 20% Absolute 30% 1 5 4 Aspirational 20% 3 4 4 Accessible 10% 5 2 4 Totals 2.8 4.1 4.2 *Ranked 1-5, 1 = Worst, 5 = Best
- 13. 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.
- 14. INCOME STATEMENT FORECAST LVMH Income Statement through 2015 2010 2011 2012 2013 2014 2015 Revenues 20320 23659 24996 26408 27900 29476 Gross Profit 13136 15567 16247 17165 18135 19159 Operating Profit 4169 5154 5249 5546 5859 6190 Net Profit 3032 3065 3474 3671 3878 4097 *In millions
- 15. FORECASTED REVENUE 35000 30000 25000 Revenues Revenues* 20000 15000 2010 2011 2012 2013 2014 2015
- 16. FORECASTED NET PROFIT 5000 4500 4000 Net Profit 3500 Net Profit* 3000 2500 2010 2011 2012 2013 2014 2015
- 17. IMPLEMENTATION Short Term Medium Term Long Term (0-6 (6– 12 (12– 18 Months) Months) Months) •Figure out •Review legal •Begin sales data issues production •Evalute •Create and sale of current brand and accessible plan logo brand and perfume •Keep with •Research hybrid plan and •Continue or switch development incremental to heritage •Begin to European plan increase price European increase prices
- 18. RISKS AND CONTINGENCIES Risk: losing in all segments Contingency: implement Heritage Strategy
- 19. When to Exit: Fit Performance Competitive Advantage
- 20. QUESTION AND ANSWER SESSION
- 21. COMPETITION Hermès Gucci Bottega Veneta Prada Chanel Coach
- 22. QUOTES “If you control your factories, you control your quality” and “If you control your distribution, you control your image.” – Bernard Arnault
- 23. 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