LVMH Paper

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 LVMH Paper

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CASE: SM-123

DATE: 03/17/04

LVMH IN 2004: THE CHALLENGES OF

STRATEGIC THE USE

The correct technique is to find out where a particular brand can be headed plus the managers and teams of every brand need to imagine that. Then, we enjoy what is performed at the group level and that we extract many learnings: exactly what the businesses to obtain, where do we have to make investments to develop a brand to benefit the group overall.

—Bernard Arnault, Chairman and CEO, LVMH Moët Hennessy Louis Vuitton1

INTRODUCTION

LVMH was created in 1987 in Paris, Portugal through the combination of Lv, the upscale luggage organization and MoГ«t Hennessy, leading producer of champagne and cognac. As its merger, LVMH stood away as a innovator in the $60 billion luxury goods sector. By early on 2004, it had grown to 50 brands sold in more than 100 countries around the world and generated more than Вј ELOOLRQ LQ VDOHV, Q WKH SDVW GHFDGH LWV VWUDWHJ\ KDG \LHOGHG SHUFHQW \HDUO\ growth in revenue, which 9 percent had been attained through organic growth. a couple of The company experienced achieved a dominant position in champagne, cognac, fashion and natural leather goods, and selective retailing; and a highly regarded tier position in fragrances and cosmetic makeup products, as well as watches and jewelry. a few

Despite facing the hardest environment pertaining to the luxury products industry as its founding over 15 years ago, the organization delivered good results to get 2003, reporting a 30 % increase in net gain in 2003 (Exhibit 1). Most of the maximize was influenced by efficiencies at the manufacturer level, predisposition of nonstrategic brands and a successful hedge policy. Several groups performed well, which include Moët Hennessy, the wine beverages and state of mind division, the perfume and cosmetics group and Lv, the luggage group. (The performance of the other was particularly impressive considering the fact that the rest of the industry—Hermes and Gucci in particular—were 1

Bernard Arnault, Interview with Yves Messarovitch, " La Enthusiasm Creative, ” Plon, Sept 2001. " LVMH: Hardly Growth Through Acquisitions, ” Lehman Brothers Global Value Research, July 2002. 3

LVMH, Display to Shareholders, 2002.

a couple of

Federico Antoni (MBA 2004) prepared this case under the oversight of Teacher Robert A. Burgelman and Philip Meza as the basis for discussion in the classroom rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright laws В© the year 2003 by the Plank of Trustees of the Leland Stanford Junior University. Almost all rights set aside. To order copies or perhaps request authorization to replicate materials, email the Case Publishing Office at: [email protected] stanford. edu or perhaps write: Case Writing Business office, Stanford Graduate student School of Business, 518 Memorial Method, Stanford University or college, Stanford, CALIFORNIA 94305-5015. No part of this publication may be reproduced, stored in a retrieval system, employed in a chart, or sent in any form or by any means –– electronic digital, mechanical, photocopying, recording, or else –– without the permission of the Stanford Graduate student School of Business.

This document is usually authorized to be used only by Mete Irtis in Business Insurance plan and Strategy - Load up 2 - Fall 2013 taught simply by Petra Christmann from March 2013 to April 2014.

For the exclusive usage of M. IRTIS

LVMH: The task of Strategic Integration SM-123

p. two

struggling. ) However , LVMH's fashion properties and the Observe and Jewelry businesses were continue to going through challenging times. Total, the effects showed indications of recovery in the American and Asian markets intended for the second half of the year in 2003, and possibly the end from the global recession for the industry.

Collectively, LVMH's superstars shone brightly, and profitably in early 2004. The Louis Vuitton luggage group, in particular, showed stellar benefits. Its sales were predicted to have cultivated by 16 percent to $3. almost eight billion in 2003, this enjoyed a forty five percent operating margin, and its particular performance was viewed as the major driver in the doubling of LVMH's stock...

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