LVMH’s company Essay
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LVMH has a strong brand positioning meaning that the company strongly placed itself as a leader in the luxury sector. The company offers more than 60 brands of high value perception and identity to their customers. Due to high customer loyalty, image of their brands and value perception those brands are less affected by economic cycles. Most evidently, LVMH expressed resilience against the economic conditions specifically in 2009 and 2008. This is an indicator that the strength of their brands enables their revenues to sustain growth even through touch economic situations.
This is due to their huge customer base across the globe accompanied by their loyalty; thus, making their penetration to new markets with quick.
The associations of LVMH with celebrities and major events have enabled them to enhance their luxury positioning. For example, Charlize Theron represents the J’adore perfume by Dior, while Moet & Chandon positioned their communications platform to events like the Oscars and the Golden Globe. Those marketing strategies were aimed in order to increase their brand visibility and recall.
Moreover, their customers are targeted successfully through enhancing their brands images. All in all, those associations would eventually augment the luxury and its value that LVMH aims at building.
A shortcoming in LVMH’s company is their limited presence in the retail division. This means that the company is highly dependant on sales to retailers. This in turn has caused the company’s luxury goods vulnerable to destocking by their retailers in order to avoid losses. Most evidently, the wines, jewelry, and watches departments were highly affected negatively by the retailers destocking. Therefore, this has made LVMH’s revenues in danger of destocking made by retailers.
There is also a weakness evident in the conflict of interest within the company, where LVMH would be categorized into two major segments: fashion vs. liquor markets. However, the company’s broad acquisition of the art auction market Pury & Luxemborg has been questioned due to some criticism that it adds more burden to LVMH. This is yet another criteria to the conflict of interest believed to be internally dealt within the company.
The luxury market is believed to be a growing market in the emerging economies. The growing high net worth individuals (HNWI) in a lot of countries across the globe is an indicator that the sales of luxury products are estimated to increase. In effect, LVMH has been focusing in increasing their investment in emerging countries, such as the Middle East, in their hopes that higher growth rates will be evident. Moreover, LVMH was able to assess the trends in those markets specifically in Asia’s market in order to succesfully penetrate them. Hence, the growth of the HNWI’s wealth accompanied by the structure of investments to reach to a broader customer base would intensify and diversify LVMH’s revenue flow.
LVMH owes a great deal of their market share to their products on women’s accessories. This would include their brands in handbags, jewelry, and watches amongst many others. Although the fashion accessories has seen a downfall during 2009; nevertheless, it is hinting that it is uprising to a recovery into growth since 2010. Most notably, women handbags were the most notable in the accessories market growth inversely reacting to the market’s decrease during the same time. Those leather goods have been a great indicator in both the men and women’s categories in the market share that there is a high growth of sales and revenue. Even if key markets have been experiencing low growth due to the economic collapse and recovery, the accessories market proves as an opportunity to LVMH for growth.
Selective retailing provides an opportunity to LVMH in one of the most growing markets in the world: China. Even though selective retailing has seen a decline in growth due to restrictions in spending due to less amount of travelers; however, China tourism is predicted to show a robust expansion. The economic liberalization; as well as, the constant development and transformation in China boosted their tourism industry. Some indicators have been predicting that China would be a leading tourism destination by 2020. Therefore, LVMH has been focused on launching its selective retailing in China in order to take an advantageous stance from this growing tourism in terms of revenue.