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Louis Vuitton Case Analysis

1654 words - 7 pages

Louis Vuitton Case Analysis

Key Issue
Louis Vuitton is a flagship group of LVMH, which had double digit growth during 2010 and 2011. Michael Burke, the new CEO of LV group is uncertain about whether the group can grow sustainable. The main issue he current encounter is that how to push LV to grow steadily and protect LV’s values and heritage from being undermined.

External Analysis

PESTEL Analysis
Political: The global luxury goods market can separate into America, Europe, Japan, Asia-Pacific, and rest of countries by region. Overall, the major luxury goods consumption countries have relatively stable political environment in recent ...view middle of the document...

Sociocultural: In the global luxury goods industry, most of customers regard luxury goods that made in Europe as more valuable products than those made in Asia and US. This behavior brings competitive advantages to the European luxury brands. Moreover, customers in different countries have different purchase behaviors. For instance, some countries’ customers are willing to move away from common recognized brand, because they want to purchase more exclusive products. Furthermore, because of the increasing speed of globalization, people are more likely willing to travel between different countries. These travelers will buy luxury good during their trips. In fact, Chinese tourists contributed over one third of sales in Europe. The luxury goods industry should notice to adjust the actual demand between local people and tourists in Europe region.
Technological: As the popularization of online shopping method, most of luxury companies opened their online shop to provide more convenient shopping experiences for customers. This method can help companies reach more potential customers who live in areas that do not have brands’ physical stores. The technology development also helps the industry manufactories products more efficiently. The introduction of automotive machine partly reduced employees’ level of specialization and increased productivity. However, the improvement of automation also can undermine the appeal of the brands, because the absolute and aspirational customer segments generally want products which are produced by artisans.
Environmental: The global personal luxury goods industry may have negative impact to environmental aspect if the manufactories have poor pollution control abilities. Some companies also destroy instead of discounting their excess product in order to keep the products’ value, which may cause additional waste and recycle pressure, but the case did not provided enough information for the environmental aspect.
Legal: For some companies, acquisition is one of important method to grow companies’ size and profitability, but the acquisition is restricted by law. For example, French law requires that one company should report its purchase action to the other company if it holds more than 5% ownership. If the company uses other ways to circumvent the law, it may face lawsuit issues later on.
Conclusion: Overall, the global luxury goods industry still has high potential to growth sustainably in the future. Since the market of this industry is worldwide, companies’ revenues will not largely affected by a single country or region. The important thing is to keep the balance of expansion between different countries. Companies should also be carful about increasing production effectiveness while retain the heritage value of the brands.

Five-forces Model
Degree of Rivalry: The degree of rivalry is moderate in the global personal luxury goods industry. The industry is very concentrated and occupied by...

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