1. Case Study LVMH: Managing A Multi-brand ConglomerateTeam 5:Ilario Fulvio GiannettiChen PengPriyesh SalunkeHarjeev SabherwalInna Zinina
2. What does globalization mean to the luxury industry? Opportunities Threats • Market expansion • Counterfeiting • Low-cost raw materials, equipment and • “Grey” market labor available in the local market • Vulnerable to PEST-EL Factors • To achieve economies of scale and • Successive decrease in brand value scope • Increased competition • Increased margins due to pricing policy • Creation of new competition by • New consumer groups available in the sharing know how local market • Extension of the definition of luxury • To adapt local and new trends for the local market • To source talent globally • Transfer of skills and strengths Conclusion Although there are significant number of threats to the luxury industry, globalization is unavoidable for continuous growth.
3. Assessment of LVMH’s diversification LVMH diversification 5% 25% 8% 4% 18% 60% 35% 38% 18% -2% Sales Operating profit Wines&Spirits Fashion&Leather Goods Perfumes&Cosmetics Watches&Jewelry Selective Retailing
4. Assessment of LVMH’s diversification Strengths Weaknesses • Share operational resources and • Difficulty to manage various competencies across brands and divisions divisions • Different organization structures in • Maintaining exclusivity by multiple countries may cause problems in brands under one division administration and coordination • Strong Balance Sheets help to • Lack of attention and neglecting the absorb losses from unprofitable smaller brands divisions and maintain position • 98% of operating profits are • Selective retailing complements generated by 2 major divisions other brands by providing easy access to all brands Conclusion Although diversification helps in leveraging the synergies, it creates difficulty in the management of the various divisions. Disproportionate profit generation is an evidence of under utilization of non – core division