18797937 Louis Vuitton Moet Hennessy Expanding Brand Dominance in Asia
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Transcript of 18797937 Louis Vuitton Moet Hennessy Expanding Brand Dominance in Asia
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Presented by Group 7 :Akankha AroraJoseph Robert
Shamil E SatharNidhin VC
Shyam Sunder
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Company ProfileLVMH is the world’s 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.
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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
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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.
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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.
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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 jewelleryCustomers were mostly first time buyers.Asia pacific accounted for 36% of its sales.
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Wines & SpiritsLVMH 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.
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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.
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Perfumes & Cosmetics :
This division account for 18% of company’s 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 company’s sales in
2000.
It has an operating margin of only 10%.
26% of the division’s sales come from Asia.
Tag Heuer, Zenith, Christian Dior,DBS etc.
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Selective RetailingTo 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 retailingThese selective retail shops are
located in Europe, the US and Asia.
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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
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Expansion of LVMH in Asia26% 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
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Japan :
There were 47 Louis Vuitton stores in Japan.
By 2003, Japan accounted for about 20% of Christian Dior’s sales.
Had plans to increase it to 30% in the future.
Tough competition from competitors like Prada.
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China :China a huge market and was expected to play a
pivotal role in the future of brands.
Annual growth rate of premium cosmetic market was a significant 30%.
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.
Area of focus are selling wines, perfumes, watches and jewellery.
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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.
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LVMH launched its first store in India in 2003 Product brands from its watches and jewellery
group- TAG Heuer and Christian Dior. India’s 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. LVMH’s 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.
India :
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Distribution ManagementSelective Retailing
Gray market control: Smuggling control
Private ownership versus franchising
Use of Internet marketing
Distribution density (pull strategy)
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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.
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Brand Analysis
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Brand architectureDivision-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.
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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?
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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%.
Describe some of the country- specific target market for luxury goods?
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Should LVMH reach out to new middle- class 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.
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What advantage does LVMH as a group have over independent brandsKnowledge of marketFinancial strengthUse 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.
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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
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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
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ConclusionUSP of LVMH is its status factor & “Made in
France” tagProduct standardization strategyMacro & Micro economic variables favorable
in Asian marketThus it should aggressively expand in Asia
without diluting its brand identity
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Thank you