LVMH: World's #1 Luxury Brand - 75 Exceptional Houses, 5 Key Areas - Essay Sample

Introduction

The LVMH Louis Vuitton Moet Hennessy) group is considered the number one brand in luxury products in the world. The group is a multinational Luxury goods conglomerate founded in 1987 and headquartered in Paris, France. The company comprises of 75 exceptional houses that create high quality handcrafted products. From a personal perspective, LVMH is one of the most diverse companies in the world in terms of portfolio. The company has an interest in all the five key areas of the luxury market, i.e., wines & spirits, perfumes & cosmetics, watches & jewelry, fashion & leather goods, and selective retailing. The company is the undisputed leader at the global level, with over 70 brands under its name. Some of the most famous brands under its belt include Moet & Chandon, Louis Vuitton, Dom Perignon, Bvlgari, Dior watches, and many more. Much of the success of the LVMH group can be attributed to excellent leadership and exceptional talent among its employees (LVMH 2019). For instance, the company currently employs more than 156,000 people across the globe. In 2018, the group reported sales of 46.8 billion euros (LVMH 2019). The company is leveraging strategic global vision dedicated to serving every need of the customer and successful marriage of cultures grounded on tradition and elegance.

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The case discusses the critical elements of corporate and business strategies implemented by LVMH in the context of the luxury business. The paper will provide an in-depth analysis of the key performance drivers and the entrepreneurial approach adopted by the luxury industry leader.

Primarily, LVMH's strategy has always been centered on creativity (LVMH 2019). The conglomerate was created in a time when European luxury and fashion businesses were experiencing radical change characterized by an industry dominated by medium-sized family companies to a few multinational groups (Bonin 2012). A conglomerate, in this sense, refers to a large corporation comprised of many unrelated smaller businesses. The shift meant that luxury and fashion groups had to abandon the centralized control over financial resources to embrace a more decentralized and autonomous form of organization. The LVMH group can be termed as the exemplary embodiment of this organizational change. Donze and Wubs write, "passionate about creativity' is the headline that appeared on all LMVH's annual reports from 2002 to 2010 (Donze and Wubs 2017, pp. 64)." Creativity was the core of the significant merger decisions that helped LVMH to dominate Paris. According to Agnew (2019), "The merger between fashion house Louis Vuitton and champagne and cognac producer Moet Hennessey confirmed the course of the company (para. 12)." Over the years, the LVMH group has made several strategic acquisitions that have helped to diversify its creative process and the quest to stand out as a unique enterprise in its sector. From a personal perspective, LVMH has always enjoyed its "fist mover' advantage of going for ventures that most competitors shy away from.

Besides the creative acquisitions, LVMH has also tried to maintain its tradition of artisanship in its talent factory. The company strives to be unique in everything it does and thus the need for a robust craftsmanship strategy. According to Chaboud (2019), "The first key success factor is the group's human capital. Craftsmen, who have been trained over the years, sometimes from generation to generation, combine creativity and high pressure for each new collection (para. 7)." Perhaps this is the main reason why no group can outcompete the French champion because if the absence of players with a portfolio of brands with a sufficient experience inheritance. The LVMH group is anxious to attract the best talent. For this reason, the group's "talent factory," a program designed to test the most qualified candidates to join the workforce, has evolved significantly. The initiative has a primary purpose, which is seeking talent around the world to raise each Maison to the highest potential, ensuring profitability and sustainable growth (Chaboud, 2019). Established firms often focus on profits while leaving innovation behind. However, the LVMH group knows that a creative workforce is its blood. For this reason, the group has focused on creating synergies that foster vertical integration, which allows it to control every link in the value chain (LVMH 2019). Therefore, seeking and supporting the growth of talents is the group's success factor.

Additionally, the organizational structure of the LVMH group has boosted its organic growth. Over the last three decades, the organizational structure of LVMH has evolved to adopt decentralization. Decentralization means that employees are given autonomy to express their opinions regarding the group brands. The company rejuvenated its brands through the creation of line and brand extensions (Da Silva Lopes and Casson 2007). For example, LVMH shows high visibility, particularly in working with celebrity designers and artistic directors such as John Galliano, Tom Ford, and Karl Lagerfeld to create new products, engage provocative shows, and making Paris an event magnet (Donze and Wubs 2017). Through decentralized decision-making, the company has been able to increase motivation within the workforce, encouraging them to show their entrepreneurial spirit (LVMH 2019). From a personal perspective, the ease at which LVMH employees can express their opinions is the primary driver of the innovative ideas that separate it from the rest industry players.

Conclusion

In conclusion, the LVMH group is a success story in terms of entrepreneurship. The paper aimed to discuss the critical elements of corporate and business strategies that make the LVMH group unique. The first element that makes LVMH unique is its undying support of creativity. The creation of the group and the mergers it has made are a result of creativity. Secondly, LVMH emphasizes craftsmanship and talent through its "talent factory" initiative. Finally, LVMH dropped the traditional centralized decision-making and adopted a decentralized system that has allowed it to expand its portfolio through lines and brand extensions. In short, LVMH is more focused on nurturing its human capital rather than profits, as most organizations do.

References

Agnew, H., 2019. Bernard Arnault: 'I always liked being number one' | Financial Times. [online] Ft.com. Available at: https://www.ft.com/content/21f64410-9117-11e9-aea1-2b1d33ac3271 [Accessed 8 Dec. 2019].

Bonin, H., 2012. A reassessment of the business history of the French luxury sector. The emergence of a new business model and a renewed corporate image (from the 1970s) (No. hal-00800367).

Chaboud, I, 2019. LVMH: analysis of the winning strategy of the worldwide leader in the luxury industry. [online] Linkedin.com. Available at: https://www.linkedin.com/pulse/lvmh-analysis-winning-strategy-worldwide-leader-luxury-chaboud [Accessed 8 Dec. 2019].

Da Silva Lopes, T. and Casson, M., 2007. Entrepreneurship and the development of global brands. Business History Review, 81(4), pp.651-680.

Donze, P.Y. and Wubs, B., 2017. LVHM: Storytelling and organizing creativity in luxury and fashion. European fashion: The creation of a global industry. Manchester: Manchester University Press. forthcoming.

LVMH, 2019. Commitments - Social Responsibility - LVMH. [online] LVMH. Available at: https://www.lvmh.com/group/lvmh-commitments/leadership-entrepreneurship/ [Accessed 8 Dec. 2019].

LVMH, 2019. Group - LVMH. [online] LVMH. Available at: https://www.lvmh.com/group/ [Accessed 8 Dec. 2019].

LVMH, 2019. LVMH: Passionate about creativity. 32nd ed. [ebook] pp.4-30. Available at: https://www.lvmh.com/2018interactiveannualreport/en/data/LVMH_RA_GB_2018.pdf [Accessed 8 Dec. 2019].