LVMH in 2011: Sustaining Leadership in the Global Luxury Goods Industry

LVMH in 2011: Sustaining Leadership in the Global Luxury Goods Industry

By
Robert Burgelman, Debra Schifrin
2011|Case No.SM197

The case on Luxury goods conglomerate Louis Vuitton Moët Hennessey (LVMH) focuses on three main strategic topics: Management processes; growth and acquisitions; and geographical expansion to China and other emerging nations.

In 2011 LVMH had several critical management processes in place. The first was strategic and financial, which involved figuring out where each brand fit into the overall LVMH strategy, and in some cases shifting cash from one brand to another. The second was managing talent across very different businesses. LVMH had 65 brands, all with different cultures. Creativity was considered a key element in the company’s success, and therefore LVMH strived to let brands keep their own cultures and maximize differentiation and uniqueness between the brands. The third management process was adaptability and responsiveness to change – keeping an ear close to the ground in the constantly changing fashion industry. The fourth process was ensuring a high level of diversification in the LVMH portfolio.

LVMH’s growth strategy had evolved significantly in the previous 14 years. Between 1997 and 2001, LVMH grew from 24 to 63 brands. What followed were several years of an extremely tense cash situation due to the high price of many of its recent purchases. Out of this situation grew a policy of more selective acquisitions. A purchase would have to step-change LVMH’s presence in a category or else strengthen the capabilities of an existing brand.

The case also focuses on the explosive growth in the Chinese luxury goods market. LVMH needed to adopt new sales methods to be successful with Chinese customers, who shopped for high-end goods both in mainland China and in Europe. The demographics of these shoppers differed from those in LVMH’s traditional geographic markets. Consumers in China’s burgeoning middle class were willing to spend a much larger percentage of their income on luxury goods compared to their European counterparts. This was an opportunity for LVMH to acquire new customers, but also presented a challenge. LVMH had to ensure its products were exclusive enough to keep its high end customers interested in its brands.

Also see SM123 LVMH in 2004: The Challenges of Strategic Integration.

Learning Objective
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