Question

Does it make good strategic sense for lvmh to compete in all of its current segments? which of its product lines — wine and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, selective retailing, and other — do you think is/are most important to lvmh's future growth and profitability? should one or more of these current segments be discontinued? why?

Answer 1

goods, in that also specially bags where it enjoys a king like status. At one hand having varieity in segments helps to be survive in the market when the economy is down and there are steep falls in purchasing of products by consumers. On the other side its get difficult to maintain various products as costs are associated with each. We can take cue from that Vuitton's ability to offset the steep falls in other divisions shows the value of the diversified conglomerate model in luxury goods. Richemont, the industry's second-largest company, has a less varied portfolio and greater exposure to watches and jewellery, demand for which has been especially weak.

Since the customer segment is also changed in recent times and mostly 60% of the revenues coming from middle class. Also the growth and demand for luxury products now coming from the developing countries from Asia where luxury goods are a new style statement and way of showing how prosperous one is.

If we see sales and margin of different segments in LV then we can clearly see that watches and jewelry are not only low in revenues but also in profits too while wine and spirits are good in margin despite having low sales. so its not wise and doesn’t make strategic sence to compete in all of current segments but one factor which is due to new markets like Asia where people are buying watches and jewellery if its associated with LV so one should take care of that in mind also

Out of its Wine and Spirits, Fashion and Leather Goods, Perfumes and Cosmetics, Watches and Jewelry, Selective Retailing, and Other we think that fashion and Leather goods is most important for LVMH’s future growth and profitability as we can see that LV is very much strong in that area and it has got some USP to lead in that . Beneath the gloss of advertising campaigns, catwalk shows and each season's fleeting trends, Vuitton brings a machine-like discipline to the selling of fancy leather goods and fashion. It is the only leather-goods firm, for instance, which never puts its products on sale at a discount. It destroys stock instead, keeping a close eye on the proportion it ends up scrapping.

Also Unlike most other luxury marques, Vuitton never gives licences to outside firms, to avoid brand degradation. Its factories use techniques from other industries, notably carmaking, to push costs down ruthlessly and to allow teams of workers to be switched from one product to another as demand dictates. It has adopted methods of quality control, too: one quality supervisor came from Valeo, a French auto-parts supplier. The result is long-lasting utility, beyond show, which is valuable in difficult times.

So we can say that it enjoy its brand position in this segments due to its own manufacturing and innovative ides and very active participation in the fashion and other relevant events.

Yes, as i mentioned above that watches and jewellery is the segment which is lower revenues and lower margins as well. In this segments things are changing rapidly specially in watches where techniques becoming more important day by day. And to mentioned another important point is that there are so many competitors in the markets apart from global to local that it becomes very difficult to penetrate in the growing market like asia and others. Also for traditional upper class there are many brands like Tag huer among others which make sense for them to choose one over LV products. So its like watches of Tag, Suit of Aramani, shoes of Jimmy choo and Bag or leather jacket of LV. So one thing which LV can do about its watches and jewelary segment is that it can associates its new customers like Asians with its LV brand to increase sales in this segment however there is a fear that it will impact its fashion and leather brands in negative sense.