The LVMH article describes the management aspects of a multi brand firm. LVMH is globally known as the world leading luxury goods companies. LVMH was established by the merger of two fashion houses, called: Louis Vuitton and Moet -Hennessy. LVMH produces and sells wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewellery and selective retailing. However, the majority of sales comes from the fashion and leather goods division. The luxury group grew due to key acquisitions and the development and innovation of new products. The future focus of LVMH is likely the growth into new markets and regions, where China, Russia and Eastern Europe countries can be considered. But how is such a huge company organized? Every division functions has its own general manager and a management team, besides these divisions also controls and manage sales abroad. The five product groups of LMVH are decentralized into two subsidiaries: production and distribution subsidiaries. Additionally the organizational set-ups are organized regionally. The luxury market is constantly changing, nowadays there is a wide range for luxury products since the middle-class market purchase luxury products as well. Besides the luxury sector is related toward economic conditions. Additionally , the development of growing by acquisitions became an important strategy for many firms in the luxury sector. In many of LVMH ‘s acquisitions it had maintained the creative talent as independent pool and certainly without the generating of synergies between product lines or brands. For LVMH quality in production and product development is essential for their success strategy. Moreover, integration, training and top management seminars are designed in LVMH to support business strategies.
What are the main strategic issues of this case (e.g. go into questions like what is the meaning of globalization in the luxury industry; what is the meaning of a multi-brand strategy; why so many brands in one conglomerate company)?
Formerly, medium sized firms dominated the market. However currently there are just a few big players in the luxury market that grew due to acquisitions. In the luxury industry globalization means the development of conglomerates. The most important strategic issue in the LVMH case is the development and change in the luxury market in relating to the globalization. Additionally, those conglomerates do follow a multi-brand strategy, which can be described as producing and selling of two or more competing products by the same company under different unrelated brands. The goal of a multi-brand strategy is to allow organizations to grow without overexploiting a specific brand and killing exclusivity. Firms seek to stretch their brands to attract new customers. One of the benefits is that the firms become stronger and have to deal with less competitors. Besides , firms dominate the market through padding all quality and price spaces. Nowadays, the range of products in these firms had a massive increase due to globalization.
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LVMH operates globally and in addition to this LVMH has many offices in countries worldwide. Besides , the firm operates in different segments and offers a wide range of different brands. However the international strategy differs per product group. The main strategy in the firm is a mix of multinational and global. In some product groups (like wine and spirits) LVMH has to be aware of local responsiveness, local regulations and norms. The firm has to adjust to the environment. In contrast, product groups like, fashion and leather goods, are more in need of integration instead of local responsiveness, because the global need for the kind of fashion and leather goods is rather equal.
The firm LVMH operates in five different sectors of the market. They offer products in: wine and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewellery and selective retailing. Each product group is individual. There is little influence of the headquarter in each product group. The headquarter basically gives authority to the business divisions. This has the benefit that every business unit is flexible to adjust their structure to what suits their business unit and environment the best. However the organizational values are shared through the whole company. Summarized, looking at chapter 3 of the textbook Laserre ,it is clear that LVMH uses a sort of multi business global product division model.
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The employees have the freedom as long as they meet their targets. In addition to this, Bernard Arnault described innovation as a driver for growth and profitability in the luxury industry. For LVMH quality in production and product development is essential for their success strategy. The firm pursues a strategy of soft human resources, meaning that no real hierarchies exists. This is resulting in that innovation is used in an excellent way. Additionally the firm offers training programmes, on the job training to motivate and in order of the development of the employees.
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