Louis Vuitton Strategic Management
A world renowned fashion and design establishment the Louis Vuitton Company has operated for more than a century to establish a global footprint in the world of fashion and design. The company has products ranging from shoes, clothing, jewelry and watches to designer sunglasses and books. At $25.9 billion worth as of 2012, the company has been branded the most valuable luxury brand in the world (Roberts 2012). This paper will examine the strategic marketing management of Louis Vuitton, including a detailed analysis of its internal and external environment, and how it has remained competitive in a stiff competition.
Background at Louis Vuitton
Louis Vuitton Fashion Company was established in 1864 in France by Louis Vuitton. Initially, Louis Vuitton run the company himself, but he was succeeded by his son Gorge Vuitton who proceeded to market the company in overseas markets and helped it attain an international presence (Martin 1995). The 1987 merger of LV with two companies, Hennesy and Moet et Chandon to form conglomerate marketing luxury goods, successfully expanding their worldwide network to over 130 stores. The LVMH conglomerate now manages sales of leading brands in different categories including Christian Dior, Hennesy, Fendi, 10 Cane, Zenith, Bulgari, Thomas Pink, Hublot, DFS, among others. As of the end of 2011, the company operates more than 3040 stores worldwide (Roberts 2012). The table below shows the group’s income statement for the year 2012.
LVMH had total revenue of $26.33 billion in 2012, and a net income of $3.44 billion for the same period. Other financial indicators in the figure show that LV, as well as its sister brands, are profitable. The group’s share is also publicly traded in the Paris stocks exchange providing a source of financing for expansion purposes.
Louis Vuitton Competitor Analysis
Unlike in general marketing, fashion industry is not driven by demand and supply in the ordinary concept. Customers purchase fashion items to look and feel unique, and price only begins to become important when two designers with the same quality of items come into consideration. In this analysis, brand building, innovation and consumer focus are the three leading success factors and, therefore, have the highest rating. Other emerging factors include strong internet presence, diversification into other consumer products, as well as distribution network. Distribution has received the weakest weight because most consumers requiring high end fashion apparel usually travel overseas and are unlikely to decide against an item due to unavailability in their local markets. It can be noted that upcoming competitors are focusing on distribution as a success factor because their brand names have not yet received a great rating. This is in order to create awareness. LV’s major competitors are also leading brands in international fashion, the major ones of which are Yves Saint Laurent YSL, Versace, Gucci, Piere- Cardin and Giorgio Armani. The table below evaluates LV’s rating against its competitors in the factors listed above.
Loouis Vuitton Marketing Mix
This section focuses on the four P’s marketing strategy used by LV. The favorable combination of product, place, price and promotion variables so as to give the company a competitive edge has worked to generate profits for the luxury brand throughout its lengthy history.
LV has traditionally modeled its products to suit a customer’s needs. In addition, it has diversified into many products in order to capture the widest number of customers. For instance, while LV is a luxury brand, it designed a handbag market with a slogan for simplicity in order to attract the average customer who would, otherwise, have labeled products with the flashy LV monogram as un-affordable.
While general marketing favors the lower priced item of the same purpose, LV’s products, like those of most luxury brands, are more expensive than average. For the company, however, the key selling point is not always the price but the value for money. This value is achieved both through the absolute material and design used for the product and also intrinsically by association with the prestigious company. In the recent past, however, the company has diversified into lower price items especially for the non designer segments of emerging markets in order to attract first time customers. Customers are, therefore, likely to make a purchase from LV due to its unique pricing strategies including prestige pricing, non bargain pricing, price stability, non set selling policies and non exorbitant pricing.
Traditional marketing strategies favor widened distribution channels as a means to increase sales. This principle works only to some extent for luxury brand since, as opposed to general merchandise, luxury goods are often sorted out by customers and not merely bought on convenience. In addition, most luxury goods are beyond the reach for a significant percentage of the general market. What Louis Vuitton has done, in addition to establishing a worldwide network, is an attractive, easy to use online site from where customers may place orders for its products. The website, www.LouisVuittonOutlet2013.com features a segmented marketing space in which one is guided through the various products such as handbags, shoes, and clothing (Louis Vuitton Website 2013).
The firm also has a shipping section in which detailed information is given regarding shipping arrangements both locally and internationally, including the expected shipping duration, selectable shipping services, and normal charges. The website also accepts customer feedback and offers help. This online presence as a marketing place offers manageable, cheap convenience for the company while offering convenience and variety for customers and is definitely a valuable marketing tool for Louis Vuitton. In accordance with the proper principles of Place marketing strategy, LV has used shops situated in prime locations such as busy airports, large town centres and in distinguished buildings. It also sets up flagship stores that carry its brand name and image such as its locations in Champ Elysee in Paris, Manhattan Fifth Avenue, the Galleria in Milan, Italy, among other places.
Promotion is traditionally aimed at creating awareness and reducing apathy or doubt regarding a product or service. Loius Vuitton engages in various forms of awareness creation. In the most general sense, advertisement is an effective means of reaching the market population and a good form of promotion. While the general market believes that a good advertisement reaches the largest number of people, LV does not specialize in mass advertisement but rather chooses its adverts to appear in a limited number of expensive magazines and books, and typically rarely in television. This distinctive technique is effective in sustaining the brand uniqueness, making customers attach a sense of special status to Louis Vuitton products. Extensive advertisement is done, however, in the company’s website with detailed high quality images to support their product visibility. Louis Vuitton does, however, identify with celebrities and has organized for appearance of major celebrities in its fashion shows as a way to market its products. This selective marketing works well for prestigious commodities, much as the limited edition concept works for high end car manufacturers. In this regard, therefore, Louis Vuitton manages to reach just the desired clientele without losing business due to invisibility.
Louis Vuitton SWOT Analysis
The Strength, Weaknesses, Opportunities and Threats analysis helps depict LV’s current standing in the competitive world and project its future growth opportunities.
LV relies on its very solid and prestigious brand name to ensure steady sales even in economic downturns. In addition, the company is ranked the top luxury brand in the world currently placing it in a positive to enjoy customer loyalty and attract new customers. Another key strength is its strong financial position with a huge asset net worth and a reduced leverage. This gives it a good rating and high chances of survival in events of asset depreciation, such as occurred in the 2008/09 global financial crisis during which period luxury brands such as LV and Ralph Lauren increased their net worth while other companies were getting devalued.
The most significant threat to LV’s success is competition from rivals, especially Yves Saint Laurent, which has diversified into small markets with vast numbers of flexible products. This is particularly significant in the current market situation whereby globalization is challenging the old concepts of fashion, prestige and value for money. LV’s rigidity might become its greatest weakness.
The single largest opportunity for Louis Vuitton is, perhaps, its capitalization on online business. The current global trend is to connect online and avoid inconvenience of site visits. While LV has already rolled out an effective internet presence, it needs to incorporate more functionality in its site. For instance, its site currently offers international shipping as an option. What it might need to do is expand its existing range of destinations in order to capture more clients and establish a competitive edge due to pioneering services. Its robust art and design departments may also greatly increase its presence in the changing world through all-round innovation in line with customer needs.
The company, like any other company in this market, is likely to be affected negatively by the rapidly changing global cultural and social economic setting. This is particularly so in the advent of globalization of values, cultures, outlook towards traditional fashion concepts and a complete paradigm shift in the way marketing is done. In particular, any luxury brand house, which will not adopt e-trade and conduct extensive research into emerging global trends in fashion, is likely to be beaten by competition (Mull 2011). In addition, the proliferation of internet marketing even for small enterprises have enable anyone with a commodity to sell to gain an immediate equal platform through individual sites and business sites such as eBay, Amazon, among others.
Louis Vuitton External Environment Analysis
Porter’s Five Force Analysis
The Porter’s five forces will analyse LV’s position with respect to external forces. This section will also evaluate the strategies the company has taken to deal with the external environment.
Threat of New Entrants
Louis Vuitton’s brand strength has acted as a sufficient buffer against new entrants in the fashion world. This is because the industry, unlike other industries, is not driven by the cheapest products of the same function but by prestige. Therefore, the company has not been significantly affected by new entrants in the past. However, the changing global outlook towards fashion may present a challenge for LV unless it continually re-aligns its products and services to suit market demands.
Threat of Substitute Products
This has always been a big threat for all luxury companies as fashion trends change. Louis Vuitton, however, has demonstrated versatility in innovation and diversification that has helped it maintain a top position in the fashion world. The originality and outstanding quality of its products, together with brand loyalty, has shielded it from substitute products entrance in the market. For example, its more than 100 years of innovation has presented many changes in trendy fashions from jeans to dresses, bell bottom trouser and platform shoes. Its ability to pioneer fashion changes and not merely adapt to changes have enabled it to retain its customers for generations. Its products have been so authentic that others counterfeit them.
Rivalry among Current Competitors
Business competition is, perhaps, the greatest force that can put a company out of business. The fashion world, unlike other industries, rely on specialization and establishing a niche which gives a company the necessary authenticity and prestige, enabling its customers to identify and wish to remain with it while attracting new customers to try its products. LV has used different approaches to remain competitive in the market. Firstly, its merger to form the LVMH conglomerate was its first major strategy to attain financial might and shield itself against economic downturns. The group can enjoy economics of large scale for similar product lines, among other benefits (Mull 2011). In addition, it capitalized on building its brand name to the expense of reducing its sales, thereby creating a strong brand with a sustainable customer loyalty. Currently, its selling point is prestige, an attribute which differentiates it from most of its competitors.
Bargaining Power of Customers
While customers have the ultimate control on a business success, a customer will only feel obligate to try another design option if the preferred fashion house is no longer innovative enough, or has compromised the quality of products. This force, therefore, is within the control of Louis Vuitton as the company has a design and art team that ensures that sufficient variety is available for customers. In addition, while pricing is not a key factor in fashion, LV ensures that pricing is done so as to avoid exorbitance.
Bargaining Power of Suppliers
This factor is not a major challenge for the company. However, it relies on aggregation of resources, as well as economics of large scale during procurement, supplies and other logistics through partnership with other companies in the LVMH umbrella.
Louis Vuitton has adopted a dynamic approach to fashion and design to emerge a top brand in the luxury world through more than 100 years of dedicated product development, as well as reliance on a unique combination of quality products, prestigious affiliation and selective advertisement. It has also shown flexibility to changing times through adoption of e-commerce and formation of mergers to gain financial strength. It is well placed for the future but needs to demonstrate more robustness in creativity to match the accelerated change in global fashion trends.