Strategy For Theoretical Developments In Louis Vuitton

University: Arden University

  • Unit No: 6
  • Level: Undergraduate/College
  • Pages 12 / Words 3000
  • Paper Type: Assignment
  • Course Code: BMA776
  • Downloads: 14
Question :

Strategic management governs the assessment, planning and implementing all the necessity of the organisation. Louis vuitton is the French luxury brand deals with the jewellery and watches. You will have to submit a strategic management assessment report by referring the student handbook. You will receive all the general information and the detail about their programmes assessment in it. Kindly do address all the learning outcomes which are mentioned below:

  • Explain different theoretical models and there potential for developing the strategy by strategic decision.
  • Elaborate the strategy for theoretical developments in Louis Vuitton.
  • Analyse the strategy making process in the multinational organisation.
  • What will be the strategies recorded for the expanding volatile and turbulent environment.
  • What are the significance along with the difficulties in the formulation and implementation of strategy.
Answer :
Organization Selected : Louis Vuitton

INTRODUCTION

Strategic management is combination of three stages of strategic process that includes strategy development, implementation and evaluation. It helps in understanding the strategic position of company, their choices for future and analysis of overall corporate strategy of the system. LVMH stands for Moet Hennessy Louis Vuitton is French multinational luxury goods conglomerate and is headquartered in Paris (Annie, 2012). The company was established in 1987, organisation undergo merger of Louis Vuitton with Moet Hennessy. They are currently employing more than 82,000 employees form which 30% of staff works sin France. Bulgaria family had transferred major shareholdings to LVMH (Moet Hennessy Louis Vuitton). Bulgaria is one of the renowned company and is the major player in jewellery and watch section. This assignment will cover relevant theories and discussion of characteristics of top range watch industry and different challenges faced by company in this industry. It will also cover competitive position in watch industry and how it has improved its position.

1. A) Relevant theories and characteristics of watch industry

Strategic management (SM) is a process which specifies an organisation's goals, objectives, developing policies, programmes, paradigm and plans to achieve these objectives, and collecting resources so as to implement the above mentioned elements (policies, programmes, paradigm and plans) (Arienti, 2013). Strategic management theory is a system of ideas that intended to explain the origin, principles as well as application of SM. Following are some theories of strategic management:

Resource – Based Theory : Every organisation requires resources in order to manufacture a product. These resources and capabilities are made up of financial, physical, human and intangible assets. If company wants to achieve strategic advantage, they produce their products which cannot be imitated by other company, is rare and valuable. They should exploit these resources in an organised manner.

Top range watch industry manufacture luxury and expensive watches. They allocate resources that are unique and rarely available in order to make it more valuable and of top range. It become difficult to explain the prices of expensive watches, in order to justify the value of expensive watches, company can use resources which are less available in the market and no other industry is using rare raw materials. Only, then they can achieve competitive advantage and retain their position as “Top range watch industry” in market. Top range watch industry focuses mainly on the value there are providing in their watches against the price paid by consumer. Company manufactures watch by using rare resources which are hard to find in markets and produced by latest and highly efficient technologies (Arnault, 2012). In order to maintain image of “Top range”, company has to maintain their quality and has to provide justification for their expensive prices to customers. If consumers are satisfied with their uniqueness and premium prices, then they will buy their product. Mainly, high class society prefer luxurious watches in order to maintain their status in society. Luxurious brands mainly develop products which are rare and hard to imitate by competitors, this make them unique and high class.

Knowledge – based view : This application extends the Resource based view. As knowledge is critical part for an industry to run their venture successfully and become experts in their profession. It is an special and specific resources of the firm. Knowledge is highly inimitable, heterogeneous and is very much difficult to understand by those who are not related to that firm, basically outsiders.

Knowledge is a great characteristics of top range watch industry as it is difficult to duplicate and imitate. With idea and information, they develop valuable and limited edition watches. Knowledge is considered as the most strategically significant resources of a company. As they are hard to duplicate and are heterogeneous, it is easier for company to attain competitive advantage and superiors corporate performance (Bertelli, 2012). Top watch brands consist of highly efficient designers and creators who are capable enough to develop classified watches which have unique qualities. Without knowledge, they can not implement their ideas into practical in right direction. Knowledge of proficient designers and creators are imitable and are highly heterogeneous. With greater knowledge, they can give tough competition to other rival teams as competition is very high and tough between top range industry.

Institutional theory : This theory mainly considers the impact of company's environment and regulative structures that surrounds the firm. This theory explains how these structures can impact the actions as well as boundaries of firm (Bradford, 2013). These structures leads to stability to actions, routines and cultures and also defines legitimacy and constrain actions. This focuses on how institutions are created, how they pervade societies and industries and how industries change over time. In this company analyses their external environment in order to identify competition level and managing and formulating their strategies in order to tackle unpredictable situations.

B) Critically evaluation of challenges faced by company in watch industry.

Luxury watch industry has been benefited growth and boom in business after 1990's. Due to rising economies and emerging markets, company offer substantial growth opportunities for the luxury watch industry. This industry faces many challenges and are mentioned below:

Exports are growing but demand is weak : The demand for luxury watches is not much as they are only preferred by high class societies and elite people. Companies are developing luxury watches and exporting them to different countries but are not getting true value against their watches as its sales is less and number of high class people is not very much.

Tough competition : There are many companies that are manufacturing elite watches which have unique features and designs that are distinctive from other companies. They uses rare resources and creative designs that attracts people towards their products (Cabrini and Kawata, 2012). As there is zero switching cost so buyers can switch to other companies where they get more value in less price. There can be an exception when, people have strong brand loyalty and preferences towards their company and prefer only those while buying watches. This switching increase tough competition between different companies operating in similar industry.

The challenges of e – commerce : As there are numerous e – commerce websites that are offering luxurious watches online. It become difficult for companies to sell their elite watches online as the cost of watches are very high and the quality might be not assured by the dealer. Fake and first copies are very popular online these days and are being offered in large numbers. There is no guarantee and authenticity of luxury watches, so it become difficult for consumers to rely on and they avoid buying expensive watches online (Cavender and Kincade, 2014). This thing can be encountered if they provide certificate of authenticity with luxury watches and with proper guarantee periods. Then, they might win the confidence and trust of consumer.

Requirement of expensive watches: Luxury watches are less preferred by people as they are very expensive and number of high class people are low. The market trend of watches keeps on changing with time and fashion. Luxury watches are only preferred by people who love to wear classy watches and those who belongs to high class society. People having brand loyalty might prefer luxury watches but this result in selling of less few of watches. Companies mainly manufacture watches at reasonable prices and amount of luxury watches is less as there is less requirement. Middle and lower class people cannot afford luxury watches and they are in large number so it is one of the great challenge for top range watch industry (Panchout and Molas, 2012). Due to this reason, top range watch company might face severe losses.

Hiring the right staff : It is necessary for top range watch industry to hire and recruit eligible and efficient people in order to manufacture elite and highly unique watches. Sometime, company is unable to find talented people as there is lack of candidates with high skills and knowledge (Danziger, 2011). This become a great challenge for them to face. Without employees, they cannot manufacture elite watches and will ultimately have to bear losses.

Maintaining reputation : In tough competitive environment, it is difficult for a company to hold a position in market as there are numerous rival team available in market. Maintaining reputation is one of the greatest challenge for top range watch industry. It is difficult to achieve a good position in the market but the most difficult part of to retain that (Donzé and Fujioka, 2015). Other competitors work hard in order to gain first position in market and for that they continuously invent something new and offer them to customers at good prices. If they don't introduce new things and unique features in market then they can lack behind and will loose their reputation and image.

2) Competitive position of LVMH's in top range watch industry

Competitive positioning refer to the condition where company differentiate their offerings and products from others in order to develop value of the product in market. It helps company to establish a unique position in the market as compared to other rival teams. A good positioning is influenced by market profile, customer segments, competitive analysis and methods for delivering value (Godart, 2015). When market sees company's product with different perception, than it become easier to influence the market and win mind share. Their main aim of the business is to control the brands they managers in order to maintain and heighten the perception of luxury relating to their products. LVMH is one of the strongest player in luxury goods industry. Bernard Arnault is the Chairman and CEO of LVMH and is achieving great success with every passing year. Continued innovation, entrepreneurial spirit and quest for excellence, all of them have asserted their core values while maintaining their rigorous execution of their strategies.

LVMH is kind of hybrid generic strategy competitors as it has followed differentiation and focused differentiation market positioning strategy by differentiating and continuously innovating its product, services and channels by making them unique. This help them to fulfil objective of company as a leader in luxury industry and to continue to transmit elegance and creativity. LVMH has the highest number of Non Mega Brands as compared to their competitors and is the referred as world's biggest luxury goods group and the watch section of LVMH is world's biggest luxury company.

They have achieved a great reputation and position in the premium market as they are capable enough to value the price given by customers against their luxury products. They have unique quality of products and services, that is the reason the customers are willing to pay premium price for them (Iannuzzi, 2017). In order to attract people towards their products, they have used strong marketing and social media presence to educate potential customers about the USP of products, controlling the creativity and manufacturing products that have high status and sales. They are achieving growth due to continuous improvement and up gradation in price, product, support, service, delivery,quality and designs.

Their watch and Jewellery business have recorded the organic growth of 12%. Their revenue growth was 10% their profits has increased by 12%. Bvlgari has achieved an excellent market share and their growth is prevailing in Asia, United States and Europe. In the year of 2017, they have inaugurated new manufacturing facility in Valenza and flagship store in New York. TAG Heuer and Hublot continue their growth. They have introduced a new generations of smartwatches with unique features such as multiple customization possibilities.

LVMH can attain competitive advantage form collective and effective utilization of various resources of a company that is hard for competitors to imitate. Firms are composed of various tangible, intangible resources as well as human capabilities which are needed for fostering growth of company for diversification purpose or for value creation purposes. They should maintain their innovation strategy and creativity and also retain best talents and top designers in company, this will help them to manufacture unique products as compared to other competitors. Company consist of design skills and talents and each of the staff is run be independent by their own creative designer (Kapferer and Tabatoni, 2012) . This differentiate them from others. They can try to build new competencies by using rare resources and new materials and manufacture products according to customer's expectation. LVMH research identifies emerging aspirations in different areas in order to discover new growth patterns and blend tradition to modernity while creating products. Innovation is the pillar of LVMH Business model and they keep on innovating something new. Their main focus is to provide better quality and premium products against their prices. LVMH never compromises with quality because they embody the world of craftsmanship in its most noble and accomplished form. They concentrate on every detail of their product and to perfection. LVMH respects the value they offer to their customers and that is why they have established a great and strong position in market all round the world.

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3) Critically discuss why LVMH achieved a position of success in the luxury market?

LVMH is a popular French company which is dealing with manufacturing luxurious goods associated with clothing, watches, perfumes and various other fashion commodities. It is to be noted that this is a conglomerate organisation that is operating at international level. LVMH has established a great position since the date of establishment and winning hearts of millions of customers with their quality, uniqueness and creativity. They hire highly efficient candidates for the production of their watches so that they can manufacture world classified product for their customers. They have strong rules and regulation related to imitability and duplicacy of their products as they are implementing innovative ideas while producing luxury watches. According to the view point of (Masè and Cedrola, 2017), LVMH has acquired strong position in luxury market because of following reasons :

  • Delivering quality based products and services : This company is offering good quality merchandises to their end users and thus seeking attention of large number of customers towards their corporation. It is considered as one of the reason of its attainment. People are ready to pay high amount if they are receiving products of their choices. Workers of LVMH are thus focusing on current need of civilians and trying to satisfy common public.
  • Attaining competitive advantages : It has been found from a survey that LVMH are concentrating on manufacturing innovative goods and services. These productions are designed by examining the models of their competitors. Hence, staff members of referred company is attempting to design such a unique commodity which have not been ever created by their rivals (Pouillard, 2013). At the same time, these goods are of best quality in comparison to products of challengers. Therefore, LVMH are able to gain competitive benefits in efficient and effective manner.
  • Innovative and creative culture : The main vision and mission of LVMH is to design unique products and services. Thereby, the primary focus of this corporation is creating a innovational and originative tradition. Because of developing unique merchandises, LVMH is achieving popularity among civilians and thus treated as a factor of making revolution in luxurious market place. Success is drawn by workers as they are the only one who is contributing in accomplishing goal of firm. Company believes in producing more creative and good quality of products and services so that maximum customers are to be targeted towards products or services. they got maximum outcomes and best possible results through selling better quality of products in an effective manner. They are providing unique designs of watches, grocery items to satisfy customers desired expectations. It is essential in creating better position among competitors. company is innovative as they focus on adopting new innovative thoughts and ideas for producing better quality of goods and services so that maximum customers can be attracted towards firm. They have adopted best strategy to enhance growth and productivity in better ways.
  • Delivering excellence : They are giving excellent products and services as their product's design are unique and innovative and compare to other competitors. It is the reason behind the product differentiation and better quality of items at reasonable price. They mainly focuses on value which is provided to customer through their commodities. Their main aim is to achieve customer satisfaction and work in that direction so that they can achieve this target. By delivering excellence, company can build loyal relationship with their customers and clients and they will prefer them over other rival teams.

CONCLUSION

It has been concluded from the above report that strategic management is important aspect which helps in providence of direction to employees of organisation by taking the assistance from the objectives framed by top management. There are many theories are implemented by LVMH to get maximum outcomes. The level of competition was high in watch industry which negatively impacts the profit and sales figure of organisation. E-commerce is one of the emerging platform which adversely impacts the performance of organisation. LVMH has high competitive position which enables them to maintain their position in market and earn sufficient amount of profits for the benefit of different stakeholders. There are many potential benefits are achieved by organisation through utilisation of their successive position in market includes adoption of premium pricing, attraction of the customers of competitors etc. Overall formulation of strategies after assessment of the impact of the external factors aid in accomplishment of desired predetermined objectives.

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