Louis Vuitton Moett Hennessy (LVMH)
The case discusses the key elements of corporate and business strategy employed by LVM. It first develops the context of the luxury business, providing an in-depth look at the performance drivers, key players and their strategies. Set in the landscape, it then examines the specific strategies adopted by the biggest player LVMH. The company wants to double its current sales ($10 billion in an $80 billion industry) and profits by 2005. In marching towards this goal LVMH has entered into multiple business lines ranging from leather goods to wines and spirits to art auctions. Many of these acquisitions have come at steep premiums and none have turned a profit yet. Investors and analysts feel that the company should divest some of its holding and get back to its roots in leather goods and wines. Mr. Arnault the CEO of the company however feels that there are significant synergies that emerge when operating a portfolio of global brands across the entire landscape of luxury businesses. This sets the stage for a good evaluation of its value chain and value adding activities, the promised synergies and their potential impact on revenues and profits. It also raises questions on how LVMH can grow in this business, which geographic regions it should invest in and which product-market it should retain
This case can be used in an advanced strategic management class or marketing strategy class. If it is used a strategy course, it would be ideally used towards the end when the students have exposed to some of the fundamentals of resource based advantage. The case can be used to illustrate:
1. The performance drivers in a global industry and the role of a variety of elements that specifically relate to location-specific advantage (drawing on Porter's (1990) work on the competitive advantage of nations.
2. The difficulty in defining competitive scope for the organization when aggressive growth is a major goal.
3. The concept of "relatedness" and synergies in building a corporate portfolio of global brands spanning multiple industries.
4. The influence of "parenting" advantage in the performance of a diversified portfolio of firms.