Lvmh and Luxury Goods Marketing

1. Bernard Arnault has built LVMH into a luxuriousness slap-ups empire by making numerous achievements. Describe the dodging is creation used here? Discuss wherefore you gybe or disagree with this type of strategy. If you disagree, what alternative maneuver would you use?Actu every(prenominal) toldy Mr. Bernard Arnault, one of the richest men in the world who took control of LVMH in 1990, has been snapping up luxuriousness brands during past two decades one after a nonher. He has build LVMH into a high life good empire by conducting a selective acquisition strategy with which I agree. Now LVMH has more(prenominal) than 60 brands to a depleteder place control and is still pursuing any(prenominal) others including the darkened famous family descent Hermes.LVMH structure is make up of Wines and Spirits, Fashion and Leather goods, Watches and Jewelry, Perfumes and Cosmetics and Selective Retailing. Although some whitethorn argue that at that place be issues such as lack of cin one casentration on core channel thereby exclusivity and rarity which are main characteristics of luxury brands can be faded, I firmly entrust that not only has Mr. Arnault saved these special features of the business and is still focused on prestige, he has better the profitability of each division by creating synergism amongst subsidiaries in terms of speak to, corporate and steering synergy.Synergy, in general may be delineate as two or more agents works together to disclose a result not obtainable by any of the agent independently. integrated synergy occurs when plentys interact congruently. A corporate synergy refers to a financial benefit that a corporation expects to realize when it merges with or acquires another corporation (Synergy).As result of corporate synergy and this partnership, LVMH now has a bigger merchandise share, wider range of ingatherings and less contention because the competitors are now members of the group and are all working together in a interconnected way. On top of that, they can take wageoff of the existing selective retailing outlets to differentiate their products by adding value in their offering and demonstrate them as distinctive. Also, prestige, luxury and quality associated with the brand LVMH influences every degree being presented in these shops.A cost synergy refers to the opportunity of a combined corporate entity to castrate or eliminate expenses associated with running a business. court synergies are realized by eliminating costs that are viewed as duplicate within the merged entity. (Synergy) This content reducing promotional and advertising costs, sales cost, conveyance cost, endure cost and also some managerial cost such as certain executives, human resources and head quarters office cost which lastly influences companies bottom-line.Synergy in terms of management and in relation to team working refers to the combined causal agency of individuals as participants of the team. The co ndition that exists when the organizations parts interact to produce a joint effect that is greater than the contribute of the parts acting alone (Synergy) As utter in the text of this case study, Arnault implemented a corporate restructuring that groups the companys subsidiaries into divisions. Previously, the heads of individual subsidiaries inform directly to Arnault now, division heads meet with him to discuss strategy. Notes Arnault, Its much more efficient, because it allows us to put into rule all the synergies amongst the different brands in a coordinated way.Francesco Trapani, CEO of the Bulgari Gruop, the luxury brand latterly acquired by LVMH, said The 2010 financial results show how the fraternity was able to brilliantly overcome the sparing slump, reaping the benefits of the aptitude and cost containment strategy and therefore becoming more solid. At the said(prenominal) time, the intense creative and product development activity generated an even more agonis tic product offer, which enjoyed great success in all product categories. (Knowel) He added At this positive scrap of strong top-line increment, our alliance with the LVMH Group has created new synergies that volition enable Bulgari to strengthen even more and attend its long-term, worldwide growth. (Knowel)In conclusion, I believe that Mr. Bernard Arnault has made LVMH into the word biggest luxury brand by adopting acquisition strategy and creating cost, corporate and management synergy between divisions of the group.2. How do LVMH executives adjust bells in response to ever- changing economic conditions, and why?In response to changing economic conditions, LVMH executives adjusted prices in sepcific ways in each market. In Asian markets, Patrick Choel, president of the burden and cosmetics division has plusd wholesale prices in baffle to discourage discount retailers from selling the products to consumers at low price. Instead, he has reduced the advertising budget to set off profitability in case the company faces a decline in sales. In countries where LVMH faced money devaluation, managers ski liftd the price to counteract the effect of coin depreciation. In Indonesia, the chairman of Vuitton, Mr. Yves Carcell canceled the plan for opening a new store.Since Japan market is sluggish and there has not been a sign of soon economic recovery, Japanese consumers are reluctant to invest in stock market. Mr. Arnault figured out the difference between Japan where most of his business is, and the rest of Asia. He noted Japan is in a growth slump, but it isnt going to have the same difficulties as Korea or Indonesia. Japanese had not numerous other spending option and executives decided to raise prices at Louis Vuittons Japanese store.Also Louis Vuiton manageres has worked closely with magical spell operators to predict the number of Japanese tourists traveling in Asia and to Hawaii whom 75% of sales depends on. At summit of tourism, they increase the price by 10 to 22 percent to maximize profit.Furthermore LVMH took advantage of crisis by renegotiating store leases in Asian cities. In some cases, the company extended lease terms long-range than in front and reduced the rate by as much as one-third which resulted saving for the company.The overall result has been an increase in price and the precept behind this decision is the fact that price experience is a critical component of luxury goods appeal. In fact, executives know that sales volume would decline astutely due to the effect of crisis and they have lost a big number of their customers. It is not a good time for expansion and opening new stores, so they decided to stay focused on the c erstntrate market segment of their loyal customers. Those who still had noted disposable income shaped a niche market which was still large enough to be profitable. On the other hand, LVMH helped profitability by reducing the cost and cutting expenditures on advertisements. This was the adjustment executives made as opposed to the other alternative reducing the price and presenting products to a bigger number of consumers.3. Explain why some customer might think the uplifted retail prices charged for luxury goods are charge paying?As peoples income increases, they are more involuntary to buy luxury goods because the demand of luxury items increase as people get richesier. According to wikipedia.com once the consumption of luxury was limited to the elite classes which meant any(prenominal) the poor cannot have and the elite can was identify as luxury.Consumers are willing to pay full(prenominal) prices for luxury goods because the brand is associated with quality, durability, scarcity and beauty. In fact, consumers pay for these values that they obtain by purchasing a luxury item.Several researchers focus on exclusivity ratio and argue that luxury evokes a sense of be to a certain elite group. Prof. Jean-Noel Kapferer, takes an experiential come along a nd defines luxury as items which provide extra enjoyment by flattering all senses at once (Luxury). Using luxury goods is a lifestyle and shows the wealth of consumer. These can also be reasons behind why some pay high retail prices charged for such items.4. How were luxury goods marketers affected by the slowing in tourism that followed especially after the attacks of phratry 11, 2001?If we take a look at trade mix, we can see what has been affected by slowing in tourism is place, where a good or service is presented. Luxury goods are mainly presented in duty free shops at airports, in hotels and prepossessing places as tourist destinations. With the slowdown in tourism, as people are less willing to travel, airports hotels and pleasant places are not that busy compared to the days before September 11 terrorist attack. Even those who still travel might care less about luxury because their main concern is security during the flight and at destination. I think this is how luxu ry goods marketers were affected by slowdown in tourism.