Lvmh's Diversification

LVMH’s Diversification

Strategy into Luxury Goods

The problem

After the case and readings the problems of LVMH there are several problems such as the declining demand for luxury goods because it is linked to political events, situation and social trends. (After the attacks of 9/11 an impact on luxury goods has dropped and had automatically an impact on LVMH sales)

Secondly luxury products are easy to counterfeit, some countries such as china, turkey, and other still have to improve their IPR policies

And finally LVMH diversification strategy (Bernard Arnault) is making acquisitions outside the company’s sector. In sector where they don’t have the “know-how” and don’t match the company Image. The current CEO (Arnault Bernard) is also the major shareholder which makes him easier to make decisions on new acquisitions

The swot analysis

Strength:

• Name recognition which makes them the largest product marketplace

• Their experience during the time

• Leading position

• Quality provider

• Distribution

• Public Relation

Weaknesses

• Their Diversification

• Conflict of interest (fashion vs. wine and spirits)

• Forward and backward integration

• Luxury goods are easy to imitate. (Perfumes, Louis Vuitton bags…)

• Finance problems: net sales decreased by nearly 6% in 2003

• Declining shares

Opportunities

• Merger and acquisition

• Consumer trends

• Current increase in wealth

• Emerging market

• Improvement