Lvmh and Luxury Goods Marketing

1. Bernard Arnault has built LVMH into a highlife sounds empire by making legion(predicate) acquirements. Describe the strategy is being employ here? Discuss why you h older up or disagree with this type of strategy. If you disagree, what substitute tactics would you use?Actu each(prenominal)(a)y Mr. Bernard Arnault, maven of the richest men in the world who took potency of LVMH in 1990, has been snapping up high life grasss during historic two decades one after another. He has build LVMH into a opulence ethical empire by conducting a discriminating acquisition strategy with which I agree. promptly LVMH has to a bulkyer extent than 60 brands under swan and is fluid pursuing some others including the old famous family line of descent Hermes.LVMH structure is make up of Wines and Spirits, Fashion and Leather goods, Watches and Jewelry, Perfumes and Cosmetics and discriminating Retailing. Although some may argue that thither ar issues such(prenominal) as over type face of c at oncentration on core business thereby exclusivity and rarity which atomic fare 18 briny characteristics of opulence brands provide be faded, I firmly believe that not further has Mr. Arnault saved these special features of the business and is still focussed on p moderationige, he has amend the profitability of each division by creating synergy in the midst of subsidiaries in wrong of greet, corporate and management synergy.Synergy, in ecumenical may be defined as two or more than agents running(a) to educateher to produce a forget not winable by whatever of the agent independently. Corporate synergy occurs when great deals move congruently. A corporate synergy refers to a financial benefit that a familiarity expects to realize when it merges with or acquires another corporation (Synergy).As result of corporate synergy and this partnership, LVMH now has a big(a)ger commercialise share, wider range of productions and less competition because the comp etitors 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 existing selective retailing outlets to differentiate their products by adding pry in their offering and demonstrate them as distinctive. alike, prestige, luxury and quality associated with the brand LVMH influences any item 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. court synergies are realized by eliminating cost that are viewed as duplicate inside the merged entity. (Synergy) This means reducing promotional and advertising costs, sales cost, shipping cost, prompt cost and also some managerial cost such as certain executives, human resources and head quarters attitude cost which finally influences companies bottom-line.Synergy in terms of management and in sexual relation to team working refers to the combined exe rtion of soulfulnesss as participants of the team. The condition that exists when the organizations parts move to produce a joint flake that is greater than the sum of the parts performing alone (Synergy) As stated in the text of this case study, Arnault implemented a corporate restructuring that groups the bon tons subsidiaries into divisions. Previously, the heads of individual subsidiaries reported directly to Arnault now, division heads dependmly with him to discuss strategy. Notes Arnault, Its much 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 Company was able to brilliantly overcome the stinting slump, reaping the benefits of the efficiency and cost containment strategy and therefore becoming more solid. At the same time, the intense original and product dev elopment activity generated an tear down more competitive product offer, which enjoyed great success in all product categories. (Knowel) He added At this positive moment of strong top-line growth, our alliance with the LVMH Group has created bran- rude(a) synergies that will enable Bulgari to strengthen change surface more and pursue its long-term, worldwide growth. (Knowel)In conclusion, I believe that Mr. Bernard Arnault has made LVMH into the pronounce 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 sets in response to changing economic conditions, and why?In response to changing economic conditions, LVMH executives adjusted wrongs in sepcific ways in each merchandise. In Asian markets, Patrick Choel, death chair of the perfume and cosmetics division has gaind sweeping prices in order to discourage dismiss retailers from selling the products to consu mers at low price. Instead, he has reduced the advertising budget to commencement exercise profitability in case the company faces a decline in sales. In countries where LVMH faced currency devaluation, managers raised the price to counteract the outlet of currency depreciation. In Indonesia, the chairman of Vuitton, Mr. Yves Carcell canceled the plan for opening a new store.Since Japan market is huffish and there has not been a signboard of soon economic recovery, Japanese consumers are reluctant to invest in form 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 umpteen other spending option and executives unconquerable to raise prices at Louis Vuittons Japanese store.Also Louis Vuiton manageres has worked closely with tour operators to predict the number of Japanese tourers traveling in Asia and to hello whom 75% of sales depends on. At teetotum of tourism, they increase the price by 10 to 22 percent to maximize profit. what is more LVMH took advantage of crisis by renegotiating store leases in Asian cities. In some cases, the company extended lease terms hourlong than before and reduced the rate by as much as ternion which resulted saving for the company.The overall result has been an increase in price and the rationale tramp this decision is the fact that price experience is a critical component of luxury goods appeal. In fact, executives know that sales mint would decline sharply 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 narrow market member of their loyal customers. Those who still had notable fluid income shaped a niche market which was still large enough to be profitable. On the other hand, LVMH helped profitabilit y by reducing the cost and cutting expenditures on advertisements. This was the adjustment executives made as contrary to the other alternative reducing the price and presenting products to a bigger number of consumers.3. apologize why some customer business leader think the high retail prices charged for luxury goods are worth nonrecreational?As flocks income increases, they are more impulsive to buy luxury goods because the demand of luxury items increase as people get wealthier. According to wikipedia.com once the consumption of luxury was limited to the elect(ip) classes which meant whatever the measly cannot have and the elite can was place as luxury.Consumers are willing to acquit high prices for luxury goods because the brand is associated with quality, durability, scarceness and beauty. In fact, consumers deliver for these values that they obtain by purchasing a luxury item.Several researchers focus on exclusivity holding and argue that luxury evokes a common sense of belonging to a certain elite group. Prof. Jean-Noel Kapferer, takes an experiential approach and defines luxury as items which provide extra pleasure by flattering all senses at once (Luxury). Using luxury goods is a modus vivendi 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 modify by the meantime in tourism that followed especially after the attacks of September 11, 2001?If we take a look 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 in the principal(prenominal) presented in duty free shops at airports, in hotels and pleasant places as tourist destinations. With the slowdown in tourism, as people are less willing to travel, airports hotels and attractive places are not that busy compared to the geezerhood before September 11 terrorist attack. plane those who still travel might make out less about luxury because their main concern is security during the flight and at destination. I think this is how luxury goods marketers were affected by slowdown in tourism.