Presented by Group 7 : Akankha Arora Joseph Robert Shamil E Sathar Nidhin VC Shyam Sunder

Company Profile
LVMH is the worlds leading luxury products group.
A $13 Bn group of companies with operations across

the world- 1,500 retail stores in about 60 countries.

A parent of around 50 sub-companies In 2004 40% of the sales is from Asian market. In early 1990s it decided to expand in China, South

Korea & India.

Industry Profile : Luxury Goods

The sales of luxury products were expected to rise by 3%

to 5%.
Shares in luxury companies tend to go up
Growing middle class is also buying designer goods.

26% of the worlds millionaires are in Asia

8% increase in GDP

Competition in the industry :

Gucci :
Well entrenched player in Europe and North

America.
Guccio Gucci originally started as a reseller of luggage

imported from Germany.

As of 2003, Gucci Group had 348 directly operated

stores.

Competition in the industry :

Richemont
It was the second-largest luxury goods company in the world.
Major player in Jewellery and Watches. Sales of watches and Jewellery accounted for 70% of total

luxury products sales in 2000.

Hermes
Relied on single-branded strategy. Products mainly clothing , fragrance and leather accessories. Japan accounted for 25% of its sales in 2000.

Competition in the industry :

Bulgari :
It operated in seven luxury segments including

watches, perfumes, jewellery etc. Substantial part of its revenue was from watches and jewellery Customers were mostly first time buyers. Asia pacific accounted for 36% of its sales.

Wines & spirits

Fashion & Leather

Watches & jewellery Perfumes & cosmetics

Selective Retailing

Wines & Spirits

LVMH held 40% of the cognac market and 20% to

25% the overall champagne market.

50% share in premium champagne segment.

It is absent in the popular segments of drinks such as

beer, whisky, vodka.

Had a steady pricing policy and strict cost control.

Fashion & Leather goods :

60% of sales in this division are concentrated in the

Asia-pacific region. It had several product in this category, including leather goods, ready-to-wear, shoes, watches, jewellery, textiles etc.
Demand often exceeds supply. Sales in this segment is mainly

attributed to Louis Vuitton brand.

Perfumes & Cosmetics :

This division account for 18% of companys sales.

This division has been able to integrate R&D, production,

distribution, sourcing across brands- resulting in huge profits.

Watches & Jewellery :

The division contributed only 5% of companys sales in 2000. It has an operating margin of only 10%.

26% of the divisions sales come from Asia.

Tag Heuer, Zenith, Christian Dior,DBS etc.

Selective Retailing
To create a sales environment that enhance the image

and status of luxury good.

They operate in two segments:

Travel retail: To market luxury products to an international travel clientele Specialised selective retailing These selective retail shops are located in Europe, the US and Asia.

Expansion of LVMH in Asia

Declining trade barriers and trade tariffs in the luxury

goods market
Change in communication technology Capture growing Asian markets Perception of luxury brand as status symbol Growing number of tourists from Asian countries

Expansion of LVMH in Asia

26% of people having financial assets more than $1

million lives in Asia in 2003

Asian buyers accounted for 30-40% of sales of all

luxury clothing, handbags and watches

Less competition in luxury market Young rich population & mass of nouveau rich

customers

Japan :
There were 47 Louis Vuitton stores in Japan.

By 2003, Japan accounted for about 20% of Christian Diors

sales.
Had plans to increase it to 30% in the future. Tough competition from competitors like Prada.

China :
China a huge market and was expected to play a pivotal role

in the future of brands. significant 30%.

Annual growth rate of premium cosmetic market was a In 2003 there were 16 LVMH shops. LVMH was trying hard to establish an efficient operating

model in China. Mainly concentrating on eastern and southern China. jewellery.

Area of focus are selling wines, perfumes, watches and

South Korea :
Even though small in size was a huge market for

luxury brands.
By 2003, LVMH had 15 stores. Here the market was comparatively more stable and

secured from external threats.

The young age of customers in the Korean luxury

segment also represented a tremendous opportunity.

India :
LVMH launched its first store in India in 2003 Product brands from its watches and jewellery group- TAG

Heuer and Christian Dior.

Indias growing economy, its English-speaking population, its

improved social & political stability and opening of the

economy to outside investors attracted LVMH to invest in

India.
LVMHs major challenges are
To create a culture in India to shop luxury goods & make them aware of

the same .
Convince Indian customers who shop luxury brand to buy from India. To face huge competition in watch market A high percentage of duty charge.

Distribution Management
Selective Retailing
Gray market control: Smuggling control Private ownership versus franchising Use of Internet marketing Distribution density (pull strategy)

Brand management
Product dominant ( House of brands) Core competence of LVMH is the unique capability of harnessing creative

potential to make money

The strategy adopted by LVMH is to position each of its brands as distinct

brands in their own right.

Collectively, they offer competition to other companies under all segments

by occupying the entire category. A customer is thus retained within LVMH group: Eg : Gitanjali group
Brands thereby complement rather than cannibalize each other, though

they offer overlapping products.

Brand Analysis

Brand architecture
Division-Wise brands catering to distinct market

segments.(Different positioning , product category and sales channels) Competing brands within the group help beat the competition Leveraging on the individual identity and image of the brands- Tag Heuer. Gaining advantage from the cultural origins of acquired brands. Strengthen the existing distribution.

Describe some of the country- specific target market for luxury goods?
Japan:
Must win market.(Triad)

They are big buyers of luxury brands.

Japan accounts for 33% of fashion and leather category. 20% of Christian Diors sale is from Japan

The brand image is everything in Japan were there is

little difference between the rich and the poor. Large percentage of single, working women.

Describe some of the country- specific target market for luxury goods?
China:
Has a huge population.

Growth rate of 8% and negative inflation rate.

Policies of the govt are favourable for luxury brands. Annual growth rate of premium cosmetic market was a

significant 30%.

Should LVMH reach out to new middleclass customers who are willing to purchase luxury items?
Yes , if the purchasing power of the new middle class

increases then it is good for LVMH as the customers who can afford it increases .

But LVMH should reach this market segment without tarnishing its brand.
They should not decrease the price of their products.

Maintain only exclusive shore rooms.

What advantage does LVMH as a group have over independent brands

Knowledge of market
Financial strength Use flanking to fight competition ie., use of different

brands under within same category LVMH group to avoid competition Bombarding the market with a variety of brands to cater to different segments.

Describe the counterfeit business today. How is this affecting companies and businesses?
Counterfeiting is the illegal use of a registered trade

mark
Counterfeits affect the sales of brands by diluting the

brand identity
Accounts for 5 to 7% of global merchandise trade i.e.

$ 150 billion a year

Fail to perform up to the expectations of the customers
May cause injuries to the customers

How should luxury brand fight against counterfeiting?

Check on internet auction sites for the sale of

counterfeit products
Employ full time staffs to work with investigators and

lawyers to protect the brand

Push for better legislation against counterfeits Employ coalitions

Conclusion
USP of LVMH is its status factor & Made in France

tag Product standardization strategy Macro & Micro economic variables favorable in Asian market Thus it should aggressively expand in Asia without diluting its brand identity

Thank you