LOUIS VUITTON

MOT
HENNESSY:
EXPANDING
BRAND
DOMINANCE IN
ASIA
Case Report GLOBAL MBA II
Centrum-Tulane
June, 2009

I. BRIEF INTRODUCTION OF
THE SITUATION
The French company Louis Vuitton Mot
Hennessy (LMVH) was created in 1987 by
the merger of Louis Vuitton, a luxury goods
maker, and Mot Hennessy , a premium
spirits company
In 1971 Moet Chandon leading manufaturer
of champagne merged with Hennessy leading
manufacturer of cognac
In 1987 Henry Recamier, CEO of LVMH,
invited french entrepenuer Bernard Arnault to
invest in the newly formed conglomerate.
Arnault acquired 24% of LVMH, giving him

I. BRIEF INTRODUCTION OF
THE SITUATION
The House of Louis Vuitton was founded in
1854. In perfumes and cosmetics and in
fashion, the companies, were created more
recently, have cultivated their international
standing over a number of years. Guerlein
goes back to 1829, Christian Dior 1947.
Givenchy was founded in 1951.
So in fact it was a series of successive
mergers, motivated by the affinity of their core
businesses, which led to the establishment of
the LVMH group.
In 2003 the group had revenues of over 12

I. BRIEF
BRIEFINTRODUCTION
INTRODUCTION
OF
OF THE
SITUATION
THE SITUATION
The Group is active in five different sectors:
Wines & Spirits,
Fashion and Leather Goods,
Perfumes & Cosmetics.,
Watches & Jewerly
Selective retailing
Each of the groups contained a number of recognizable
brand names that were each simbols of the good life
including; Christian Dior, TAG Heur, Givenchy, Dom
Perignon, Mot Chandon and Sephora.
In the luxury product business, brands are a company`s
most important asset.

I. BRIEF
BRIEFINTRODUCTION
INTRODUCTION
OF
OF THE
SITUATION
THE SITUATION
Competition in the Industry.
Gucci, Richemont, Bulgari and Hermes were
the mayor competitors in the luxury goods.
LVMH and Bulgari were mayor players in the
Asia-Pacific region, while Richemont and
Hermes dominated Europe.
Gucci was a well-entrenched player in both
Europe and North America, and had been
building a strong presence in Japan.

I. BRIEF
BRIEFINTRODUCTION
INTRODUCTION
OF
OF THE
SITUATION
THE SITUATION
For decades the LVMH group had a strong
presence and enjoyed success in both the US
and European markets, after that the company
seeking the explosive economic growth that begin
to take place in the early 1990s in Asia
therefore worked quickly expanded in those
markets
The company opened its first store in China in
1992 after that opening quickly in other asia
countries including South Korea and made its
first foray into India in 2003.
As LVMH began to increase its presence in Asia

II. DESCRIPTION OF THE

PROBLEMS
Main problem:
Was it a strategic decision for LVMH
to center its efforts in the Asian
market, and if so, which path should
they take for their positioning success
and brand growth?
Secondary problems:
How would LVMH entice Chinas new
rich population to pay the full price of

II. DESCRIPTION OF THE

PROBLEMS
Secondary problems (cont):
How would LVMH overcome the
Political, Cultural and Economical
obstacles encountered into entering
the
Asian
Market?
(i.e
luxury
oppositions,
foreign
currency
exposures,
interest
rates,
cultural
differences among countries, religion
differences-muslim)

II. DESCRIPTION OF THE

PROBLEMS
Secondary problems (cont):
How would LVMH fight against its
brand dilution? To maintain its prestige
and reputation while gaining more
bigger market share?
Should the company decide for a
private ownership or a franchising,
with regards to its interest in the
profitability?

III. POSSIBLE ALTERNATIVES FOR

SOLUTION
We believe that LVMH made the right strategic
decision to focus on the rapidly expanding
Asian
markets
LVMH is presented with several alternatives to
develop its Asian business that fall under the
following strategic areas:
Consolidate its position
Expand market share
Protect brand name and reputation

III. POSSIBLE ALTERNATIVES FOR

SOLUTION
Consolidate Position:
Independent stores vs. Franchising
Tapping local market knowledge
Upholding
quality
and
brand
management
Ability to quickly expand into new
markets

III. POSSIBLE ALTERNATIVES FOR

SOLUTION
Market Share
Specific business groups for specific
countries (i.e. watches in India)
Independent stores v. Franchising
Evaluate
what
brands
for
what
countries: Investigate competitors
Targeted brands in specific countries (i.e.
Christian Dior)
Takes advantage of breadth, depth, and
consumer knowledge of brand names

III. POSSIBLE ALTERNATIVES FOR

SOLUTION
When evaluating their alternatives
LVMH needs to focus on their
strengths and select the alternatives
that allows them to leverage these
strengths and not sacrifice their
image and reputation for quality
and the Luxurious Lifestyle.

IV. RECOMMENDED SOLUTIONS

Business Strategy
Be focus on its core strengths in order to
achieve that maximum amount of success
in following through on its strategic
decision to focus on the emerging
economies of Asia.
Their ability to manage multiple brands
and maintain their reputation of quality
while upholding a unique image of
Frenchness.

IV. RECOMMENDED SOLUTIONS

Another benefit of China in particular, and
the other Asian countries on a smaller
scale, is that the luxury goods market is
far from saturated as is the case with
the groups traditional markets and
presents ample growth opportunities for
all of LVMHs business groups.
If China continues to grow as has been
projected, the number of consumers who
will want and more importantly be able to

IV. RECOMMENDED SOLUTIONS

Own stores and Selective Retailing
A key point in upholding their brands
reputations is that they must keep
developing - and supporting in the
strongest way - their strategy to grow
by building their own selective retailing
stores and also limiting the availability
of the products through authorized
luxury dealers.
Not only will this strategy allow LVMH

IV. RECOMMENDED SOLUTIONS

Segmentation
They must limit the growth of the
increasing demand for LVMH brands
among the middle-class, keeping its
condition as a manufacturer/supplier of
high priced/quality goods.
Avoid diluting the market and hurting
the prestige and status of their own
brands.

IV. RECOMMENDED SOLUTIONS

Competitive advantage:
LHMH must obtain benefits from its
presence in wines and spirits, it is the
only luxury goods company that has a
premium wine and spirits division.
Cross
promotion
has
unlimited
potential.
Marketing strategy
Products:
Quality
and
constant

IV. RECOMMENDED SOLUTIONS

Consistency with
top quality products:
not to off-shore their manufacturing
facilities: prestige damaged for the
cheapest.
Brand management:
Counterfeiting and
knockoffs affects companies taking away
potential customers, diluting the market,
and decreasing the SPV, hurting LVMH's
brand image.
Marketing efforts: quality and uniqueness
of their brands. Advertising and product

IV. RECOMMENDED
IV. RECOMMENDED SOLUTIONS
SOLUTIONS

Pricing: Keep the high priced products

policy. A price competition or attempting to
reach a new consumer segment is not
recommended. A drop in price can have
a devastating effect in luxury companies.
Price is quality, differentiation and help to
stop brand dilution.
In Asia, there will be a consistent stream
of aspiring newly wealthy consumers to
show off their newfound lifestyle