INTERNATIONAL MARKETING STRATEGY OF MOËT HENNESSY – LOUIS VUITTON
Executive Summary
In the dawn of various phenomenons such as globalization, industrialization and technological advancement, the international marketplace including the particular areas and systems is overly affected. Among the observable impacts of such emerging conditions in the business world is competition. Competition among the various industries in every given economy is rapid and stiff. It is as if ‘survival of the fittest, extinction of the weakest’ trend. Today, as various industries are aiming for competitive advantage and sustainable development among its management and operations, there are numerous actions that are being implemented and are directed to the eventual success and growth of the company’s assets. In competition, there is motivation in every business to improve and develop their objectives. For an enterprise to succeed in global competition, hence, there is a continuous plan to develop marketing techniques such as innovation of new products with higher quality than its competitors.
This paper discusses the international marketing strategy of the world’s largest luxury goods multinational company – Moët Hennessy – Louis Vuitton or simply LVMH. Specifically, this report presents the background of the organisation, its driving forces for globalisation as a primary motivational factor in its international marketing (macro, external/internal) operations, and impacts,
Background of Louis Vuitton (LVMH)
The LVMH or Moët Hennessy – Louis Vuitton is considered as the world’s largest luxury goods conglomerate and home of most expensive brands. The Group offers exquisite brands ranging from wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and selective retailing. LVMH holds an exclusive assortment of over 60 globally celebrated brands. According to the information available in their corporate website, the group was formed through mergers of champagne producer Moët et Chandon and Hennessy and Louis Vuitton in 1987. Today, LVMH incessantly excel in the chosen field of industry by using its brand development strategy and uninterrupted expansion of its international retail network. Since its creation in 1987, LVM remarkably established its more than 1,800 stores worldwide through its strong growth dynamics.
LVMH aims to symbolize the most sophisticated qualities of Western “Art de Vivre” around the world. The group also continues to be tantamount with both elegance and creativity. Their products and the cultural values they embody combine both tradition and innovation and stimulate dream and fantasy. In realization of this mission, five priorities reflect the fundamental values shared by all Group stakeholders namely:
- Be creative and innovate
- Aim for product excellence
- Bolster the image of our brands with passionate determination
- Act as entrepreneurs
- Strive to be the best in all we do ( 2007).
FINANCIAL HIGHLIGHTS
Fiscal Year End:
December
Revenue (2005):
16473.60 M
Revenue Growth (1 yr):
(-4.30%)
Employees (2005):
61,088
Employee Growth (1 yr):
2.10%
Currently, the Group was led by as Chairman and CEO. For the record, LVHM reached a total of .84 billion US in 2005. With the help of its more than 61,000 employees, 69% of whom are based outside France, the Group is prominently breaking the grounds of international marketing. Accordingly, “Besides its community action for human development – for example LVMH House, the LVMH-ESSEC Chair and the LVMH Asia Scholarships – LVMH carries out a number of initiatives through its commitment to protecting the environment” (LVHM 2007). Additionally, the Group is also involved in culture and heritage, humanitarian action, education and supporting young artists and designers as part of it truthful vocation as a patron.
Driving Forces for Globalisation (Macro, External / Internal)
Globalisation is currently the catchphrase for the perils and promises facing humanity in the 21st century (1999; 2000; 2000; 2000; 2003). Globalisation of both the economy and the society has confronted the world over the past decade (2000; 1990). A shift of focus and interest from the local market to the international setting has demanded innovation not just in corporate leadership as new information, forms of communication, and technology. These are being offered to be utilised in encouraging and reinforcing interaction among individuals and the operating enterprise through international trade ( 1990). And (2003) stated that globalisation has invaded our consciousness in many forms. Basically, it is an inclusive term for the emergence of a global society in which economic, political, environmental, and cultural events in one part of the world quickly come to have significance for people in other parts of the world (2004) and is often branded as the triumph of capitalism (2000).
The process of globalisation is commonly recognised to be characteristic of contemporary international developments. According to (1991) contemporary processes of globalisation have several dimensions: technological, cultural, religious, economic and political. First, it suggests that political, economic and social activity is becoming worldwide in scope. Secondly, it suggests that there has been an intensification of levels of interaction and interconnectedness among the states and societies ( 1991). Among these relations are those created by the progressive emergence of a global economy, the expansion of transnational links which generate new forms of collective decision-making and the development of intergovernmental and quasi-supranational institutions, among others (1990).
Globalisation represents the shift of the main venue of capital accumulation from the national to the supranational or global level ( 2000). In globalisation, information and money flow more quickly than ever. Goods and services produced in one part of the world are increasingly available in all parts of the world. International travel is more frequent. International communication is commonplace ( 2004). However, this phenomenon has both positive and negative effects. Included in the negative aspects are the rapid spread of diseases, illicit drugs, crime, terrorism, and uncontrolled migration. On the other hand, globalisation’s benefits are a sharing of basic knowledge, technology, investments, resources, and ethical values (2004). Globalisation, has acquired considerable emotive force. For some, globalisation is a process that is beneficial, i.e. a key to the future world economic development and also inevitable and irreversible. Others regard it with hospitality even fear, believing that it increases inequality within and between nations or organisations, threatens employment and living standards and thwarts social progress. Globalisation has become identified with a number of trends, most of which have developed since World War II. These include greater international movement of commodities, money, information, and people; and the development of technology, organisations, legal systems, and infrastructures to allow this movement which includes ( 2004; 2002).
In the case of KVHM, the two companies seemed to be cut out of the same mold from the very beginning – both Moët-Hennessy and Louis Vuitton were in the business of producing luxury goods; they thrived on cultivating a certain “image”; both were based in France; and each had product lines that required and had instant name recognition; they had similar, and in some cases competing, product lines ( 1990). In LVM, there are many driving forces for globalisation namely: competition and competitive advantage.
Generally, LVHM’s driving force for globalisation is competition. Since globalization represents the shift of the main venue of capital accumulation from the national to the supranational or global level (2000) and due to the adverse effects of such phenomenon, international businesses plan to venture into new horizons catering to the needs of the new markets and countries. Competition among the various industries in every given economy is rapid and stiff. It is as if ‘survival of the fittest, extinction of the weakest’ trend. (1995) states that the global market is considered to be in hyper competition mode and its rate is increasing as technology and industry concentration also intensified. As the world becomes smaller in terms of business coverage and operations and as companies capitalize on intercontinental borders, the competition among various industries increases. Every management wanted to break even and gain competitive edge among its competitors. For LVHM, their major competitors are PPR (formerly Pinault-Printemps-Redoute), R魹 Cointreau, and Compagnie Financi貥 Richemont. To combat competition, they recognized the benefits as well as drawbacks of the phenomenon and used it on their own advantage.
The technological upheaval and intense international competition tender significant challenges to an organisation’s capability to keep up their competitiveness (1998; 1995; 1993; 1991; 1990; 1989; 1989; 1985). Competitive advantage is also among the driving factor for globalisation in LVHM. In a micro economic sense, competitiveness is defined as sustainable development in productivity motivated by the quality of business strategy and operations, the quality of business and environment and the prevalent macro economic environment ( 2001). In a macro economic point of view, competitiveness is the degree to which a country can under free and fair market conditions, produce goods and services which meet the test of international market, while simultaneously maintaining and expending the real incomes of its people over a long term (2002). This is evidently projected in the case of LVHM wherein the challenges of global competition and technological advancement triggered or contributed to its eventual economic progression.
Impact of Globalisation on the International Marketing Strategy of LVMH
- Situation analysis
LVHM operating in the globalised setting allows its products to reach every continent or part of the world. As of 2003, the Group accumulated approximately 12 billion euros with a net income of 2 billion euros as earnings. Today, its current business plan aims to strongly be in command of the brands it manages with the purpose to maintain and increase the perception of luxury relating to their products. To implement such aim, Louis Vuitton products are sold exclusively in selected Louis Vuitton boutiques found in chic locations in wealthy cities worldwide. Also, the products are in concession in other luxury goods shops like Harrods in London. This practice goes greatly in contrast with the less exclusive brands distributed and bought in shopping malls worldwide. Aside from expanding and maintaining its luxurious collection of brands, the Group incessantly expands its operations globally. The Louis Viutton brand is also implementing its worldwide battle against counterfeiting. Being the most counterfeited brand, the efforts of its management to prevent such criminal acts increases its worldwide marketing status. As case, Louis Vuitton fakes accounted for 18% of counterfeit accessories apprehended in the European Union in 2004. With the excellent brand development strategy and the effective application of globalisation trends, the Group holds a relatively prestigious and profitable standing.
- Competitive advantage and market position
The rise of the global economy has been an important element in the international business agenda since the 1980s (2002). The infrequent, spontaneous, outwardly focused approaches to international strategic planning needed to be superseded by more formal models of global strategy and the multitude ways of doing international business, particularly strategic alliances and international joint ventures of LVMH served as its competitive advantage. Not to mention, its outstanding brand development strategy distinguishes them from other luxury brands. As stated, LVMH offers a wide assortment of luxury brands. It is their products that define their market position. Today, LVMV is considered the largest luxury goods conglomerate. This alone can identify their monopoly in their area of industry.
- Strategic fit and strategy at different levels
The notion of competitiveness became prominent to LVMH. Competitiveness often was taken to mean simply out-competing rivals in the global market (2002). Plans to achieve competitiveness were formulated at national, industry, firm and sub-unit of the firm (1988). The LVMH management applied such strategic planning scheme. A national level formulation of this interpretation (how to do better than your rivals) was famously formulated by (1990) and his “diamond” framework and it attracted criticism and modification from international business scholars (1997; 1993).
At the business level strategy, knowing what the market demands and the latest trends could help LVMH to fully exploit its research and development capabilities and come out with new practical and applicable strategies or plans which are cost-effective but high in quality and performance. The strategic option can even be used as marketing tool where the focus is on staying close to the customers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on the Group.
At the corporate level strategy, understanding the strategic importance of its subsidiaries is something LVHM has to be familiar with. This allows information dissemination to be retained at the corporate headquarters of the whole company ( 2002).
At the network level strategy, there are various strategic options available for LVMH. A tie-up or merger with various related companies offers tremendous benefits in terms of access to LVMH consumers, infrastructures and even its resources. However, the firm must not lose sight of its core competencies while pursuing these tie-ups. Otherwise, its image might be put in jeopardy. Meanwhile, the collaboration with its major competitors can be seen as a ridiculous move at first. However, upon close examination, this move could pave the way to increase even more its market shares and revenues. The bottom line is both sides would be able significantly gain financially in such an alliance. One possible setback, however, is the differences in the cultures of the companies involved. Another possible setback could be whether any of competitors has the need to form alliances. The third option also focuses on alliances, but this time with either one of the suppliers specializing in manufacturing of software technologies. The benefits of these alliances should outweigh the costs in the long run.
- Planning and control
Marketing is about satisfying the wants and needs of customers. By doing so, it also facilitate the achievement of an organization’s objectives. By paying attention to customer wants and needs, organizations are more likely to achieve their objectives in the marketplace (2002). Analyzing the status, strategies and resources of businesses and their products or services is very essential as it allows the management to determine how they will progress in the years to come. In terms of planning and control of LVMH, all options are able to directly address the current issues brought about by globalisation. However, the question remains whether LVMH could be able to implement any of these options, and whether these options can be acceptable to the key stakeholders. Thus, the management is solely in control with what will be taken as next strategic option. Any further merger or alliances may also involve the sharing of expertise. LVMH has traditionally relied on the inside-out approach. It is important to note that any merger transactions would have many implications on the firm’s values and culture as well as the resources. The key stakeholders definitely would be concerned with such options and need to be convinced of the positive aspects. Somehow, it will be able to overcome this barrier in managing strategic changes in the process of implementing any of the above mentioned strategic options.
Conclusion
Based on the discussions above, it is found out that the marketing strategy of LVMH is influenced by globalisation trends. The discussion above also revealed that through effective and efficient strategic planning and management, the organization’s resources and systems, organization administrators can add value to the services delivered to customers, reduce risks in the organization’s business, reduce the costs of business development and service delivery and encourage improvement in internal business processes and external service implementation. In the case of LVMH, employing the trends of globalisation in business operations require a lot of strategic planning and careful studying of processes, use, and the effectiveness in the locale or the setting. Intensiveness is needed to consider the risks, the opportunities, and the ability of the management to preserve the most appropriate marketing strategy that will ensure that these systems are successful and are able to perform its planned tasks or functions. The shaped information regarding marketing strategy and strategic planning will have value and increases insight into LVMH’s organizational needs and the way the business is looked at. Adding more and more advantages to the whole organization and solving the problems as they occur will eventually lead to success and growth as mentioned. Having an experienced strategist in helping the management utilizes its resources, economic progression and corporate growth and success is promising.
The emergence of technological advancements and globalization in all operating industries in the world paved way to the further improvements of all the aspects related to marketing and management techniques. Regardless of the unprecedented drawbacks of such when being used, every company and its management like LVMH, must manage and control the best possible and beneficial ways possible. Every decision made by the management must be directed to the welfare of the whole industry. With the right marketing and management strategy as well as strategic planning, eventual growth, market dominance, competitive edge, and success are not really far at hand.
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