LVMH Moët Hennessy - Louis Vuitton is considered to be a world leader in luxury possessing a unique portfolio of over 60 extremely prestigious brands including names like Dom Perignon, Christian Dior, Donna Karan and Louis Vuitton.. The various sectors in which the group is active include Fashion and Leather Products, Watches and Jewelry, Perfumes and Cosmetics, Wines and Spirits and Selective Retailing. Since its creation in 1987, due to its expansion of international retail network and brand development strategy, LVMH had a strong growth dynamic with over 3000 stores worldwide. In the current day, almost 100,000 employees share the group’s value. LVMH carries out numerous initiatives for protecting the environment and community action for human development such as LVMH-ESSEC Chair and LVMH House. The group is also involved in the support of designers and young artists, humanitarian action, heritage, culture, and education.
Purpose of LVMH Group:
Mission: The mission of the LVMH group is to represent the most refined qualities of western “Art de Vivre” around the world. LVMH must continue to be synonymous with both elegance and creativity. Our products, and the cultural values they embody, blend tradition and innovation, and kindle dream and fantasy.
Vision: LVMH pursue authentic quality and uniqueness in their products. The company persists to strive for global growth to remain prominent in the future. They want to maintain their ground to be a pioneer and leader among luxury industry. Through this, the company will increase the share price with their excellent performance to bolster investor's confidence.
Political: A competitive, transparent and modern economy with vibrant and updated information and communication technology sector.
Environmental: World leader in business freedom, property rights and trade freedom, a high level of economic freedom available with a sound banking system and taxes being moderate with a high level of overall taxation.
Social: Scenario of shrinking workforce and a catapulting population.
Technology: Existence of a cutting edge expertise in high tech clusters, availability of wireless solutions, adaptation to the emerging technologies.
Strategic Fit:The potential for the use of synergies between the different businesses has been observed from the corporate value chain. The synergies that can be identified from the value chain analysis of LVMH include the following.
Technology: The development in technology can be utilized across businesses. E-procurement, Intranet aid in exchange of technology across businesses.
CRM, Sales, Marketing, Distribution and Service: In case the target market is common, the different businesses tend to overlap each other for route to market.
Operations: Since the trend of the products fall in the category of luxury, they tend to cater to the same market segments who are the consumer of premium price tagged products, hence the various businesses trade in similar markets. Except for Wine and Spirits, there is a tendency for different businesses to overlap.
The bubble sizes in the above diagram represent the percentage of total revenues of LVMH.
The implication of the resource fit was that the current portfolio of LVMH was well balanced and taking into consideration the nature of the business, it would stay in that way. The portfolios of the businesses were nicely balanced. Due to the timelessness of the products of LVMH, the possibility of the cash cows converting to poor dogs were unlikely. The portfolio of stars were reasonably diversified within the company and such positioned that capitalisation on potential industry growth was possible. Incase of the poor dogs, some products had the opportunity to move up while others had to be divested, which the company did in the year 2002.
Strategic Business Units are a division of an organisation who have unique business missions, competitors, markets and products line relative to other SBU’s in the same corporation, (Hunger, J. and Wheelen, T. 1996). The corporate strategy is the pattern on discussions that determine and reveal the purposes, goals. Objectives etc and also determine the principle policies and plans to achieve the set goals. It also decided the range of business that is to be pursued, the kind of human and economic organisation one should be and the type of economic and non economic contribution that is to be made to the various stakeholders.
From the above it can be understood that the LVMH Group adheres to the portfolio approaches. They have to acquire new businesses on a constant basis with new profitable businesses, invest with specific duration views be it medium term or long term, develop the diversity, try and strengthen the flow of cash and maintain a balanced portfolio in terms of the risks involved.
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