Lvmh and Luxury Goods Marketing

1. Bernard Arnault has built LVMH into a last life goods conglomerate by making numerous acquisitions. Describe the system is being used present? Discuss why you agree or disagree with this type of strategy. If you disagree, what utility(a) tactics would you use?Actu aloney Mr. Bernard Arnault, hotshot of the richest men in the domain of a function who took control of LVMH in 1990, has been snapping up mellowedlife brands during past two decades one after some other. He has build LVMH into a luxury good empire by conducting a selective acquisition strategy with which I agree. straight LVMH has more than 60 brands under control and is still pursuing roughly others including the old famous family dividing line Hermes.LVMH structure is made up of Wines and Spirits, vogue and Leather goods, Watches and Jewelry, Perfumes and Cosmetics and Selective Retailing. Although some may argue that there atomic frame 18 issues such as lack of c at a timentration on core bloodline t hereby exclusivity and rarity which are main characteristics of luxury brands can be faded, I firmly believe that not only has Mr. Arnault saved these limited features of the business and is still concentrate on prestige, he has improved the advantageousness of each division by creating synergy between subsidiaries in term of cost, corporate and perplexity synergy.Synergy, in general may be outlined as two or more promoters working together to introduce a result not procureable by any of the agent independently. Corporate synergy occurs when corporations 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 at present has a bigger market share, wider range of products and less competition because the competitors are now members of the group and are all working together in a coordinated way. On top of that, they can take advantage of the animate selective retailing outlets to differentiate their products by adding value in their crack and demonstrate them as distinctive. Also, prestige, luxury and quality associated with the brand LVMH influences every particular being presented in these shops.A cost synergy refers to the opportunity of a combined corporate entity to reduce or eliminate expenses associated with running a business. Cost synergies are realized by eliminating costs that are viewed as duplicate within the merged entity. (Synergy) This means reducing promotional and advertising costs, gross revenue cost, shipping cost, turn on cost and excessively some managerial cost such as certain executives, human resources and head quarter office cost which finally influences companies bottom-line.Synergy in call of management and in relation to team working refers to the combined effort of individuals as participants of the team. The condition that exists when the orga nizations parts interact to produce a joint deed that is greater than the sum of the parts acting alone (Synergy) As tell in the text of this case study, Arnault implemented a corporate restructuring that groups the guilds subsidiaries into divisions. Previously, the heads of individual subsidiaries reported directly to Arnault now, division heads meet with him to talk of strategy. Notes Arnault, Its often fourth dimensions more efficient, because it allows us to put into practice all the synergies between the different brands in a coordinated way.Francesco Trapani, CEO of the Bulgari Gruop, the luxury brand recently acquired by LVMH, said The 2010 financial results show how the social club was able to brilliantly overcome the economic slump, reaping the benefits of the efficiency and cost containment strategy and therefore becoming more solid. At the same time, the intense productive and product development activity generated an even more competitive product offer, which enj oyed great success in all product categories. (Knowel) He added At this positive moment of strong top-line produce, our alliance with the LVMH Group has created new synergies that volition enable Bulgari to strengthen even more and pursue 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 prices in response to 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 perfume and cosmetics division has increase wholesale prices in order to discourage discount retailers from selling the products to consumers at low price. Instead, he has reduced the advertising budget to offset positiveness in case the company faces a decline in gross sales. In countries where LVMH faced gold devaluation, managers raised the price to counteract the effect of currency 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 currently economic recovery, Japanese consumers are reluctant to invest in furrow 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 many other spending option and executives decided to raise prices at Louis Vuittons Japanese store.Also Louis Vuiton manageres has worked closely with tour operators to signal the number of Japanese tourists traveling in Asia and to Hawaii whom 75% of sales depends on. At peak of tourism, they increase the price by 10 to 22 percent to maximize profi t.Furthermore LVMH took advantage of crisis by renegotiating store leases in Asian cities. In some cases, the company extended lease terms longer than before 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 rationale behind this decision is the fact that price sensing is a critical component of luxury goods appeal. In fact, executives know that sales volume would decline sharply due to the effect of crisis and they have befuddled 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 narrow market segment of their loyal customers. Those who still had noteworthy disposable income shaped a niche market which was still adult 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 unconnected to t he other alternative reducing the price and presenting products to a bigger number of consumers.3. Explain why some customer might think the high retail prices charged for luxury goods are worth paying?As commonwealths income increases, they are more willing to buy luxury goods because the demand of luxury items increase as people get wealthier. According to wikipedia.com once the usance of luxury was limited to the elite group classes which meant whatever the poor cannot have and the elite can was identified as luxury.Consumers are willing to pay high 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 dimension and argue that luxury evokes a sense of belonging to a certain elite group. Prof. Jean-Noel Kapferer, takes an experiential approach and defines luxury as items which come through extra pleasure b y flattering all senses at once ( extravagance). 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 bear upon by the meantime in tourism that followed especially after the attacks of September 11, 2001?If we take a olfactory sensation at marketing mix, we can see what has been affected by slowdown 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 attractive places as tourist destinations. With the slowdown in tourism, as people are less willing to travel, airports hotels and attractive places are not that vigorous compared to the days before September 11 terrorist attack. Even those who still travel might care less about luxury because their main reach is security during the flight and at destination. I think this is how luxury goods marketers were affe cted by slowdown in tourism.