Luxury Markets & Strategies Prof. Dr. Andrea Bookhagen WS 2017/2018 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 1
LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 2
LVMH – Corporate Film 2012 Source: https: //www. youtube. com/watch? v=NVrb. HJl 7 u 3 g LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 3
LVMH is the largest luxury goods conglomerate worldwide and focuses on creativity and excellence. 1. Company Profile (1/2) Foundation in Paris in 1987 Merger of Moët Hennessy & Louis Vuitton Global Player in Luxury Goods Industry with 70 houses in 5 major sectors CEO Bernard Arnault “Our business model is anchored in a long term vision that builds on the heritage of our Houses and stimulates creativity and excellence. This model drives the success of our Group and ensures its promising future. ” - Bernard Arnault Picture 1 [Sources: LVMH Annual Report (2016); LVMH Corporate Website (2017); Picture 1: LVMH Annual Report (2016)] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 4
LVMH was formed by the merger of two players: Moët Hennessy and Louis Vuitton in 1987. 1. Company Profile (2/2) 1743 – Foundation of Moët 1832 – Moët & Chandon #1 Champagne provider in Europe 1854 – Louis Vuitton opens his own packing and trunkmaking business in Paris 1885 – Louis Vuitton expands internationally 1969 – Louis Vuitton enters the Asian market 1971 – Merger Moët & Chandon and Jas. Hennessy & Company 1984 – Louis Vuitton goes public 1987 – Louis Vuitton and Moët-Hennessy merge in a $4 billion deal Picture 1 [Sources: James Press (2000): LVMH Moët Hennessy Louis Vuitton SA History; Picture 1: LVMH Corporate Website (2017)] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 5
LVMH is divided into the five major BUs Fashion & Leather Goods, Wines & Spirits, Perfumes & Cosmetics, Watches & Jewelry and Selective Retailing. 2. Corporate Structure [Sources: LVMH Annual Report (2016); LVMH Corporate Website (2017)] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 6
LVMH sets the taste of qualities and the art of luxury living. 3. Company Values LVMH has successfully preserved the family spirit focusing on long-term perspective. v BE CREATIVE AND INNOVATIVE v CULTIVATE AN ENTREPRENEURIAL SPIRIT v DELIVER EXCELLENCE «The mission of the LVMH group is to represent the most refined qualities of Western "Art de Vivre" around the world. LVMH must continue to be synonymous with both elegance and creativity. Our products, and the cultural values they embody, blend tradition and innovation, and kindle dream and fantasy» . [Sources: LVMH Annual Report (2016); LVMH Corporate Website ( 2017); James Press (2000): LVMH Moët Hennessy Louis Vuitton SA History] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 7
Visual Merchandising, Celebrity Ambassadors, Special Editions, Impressive Events and Sponsorships are means to draw target customers´ attention. x. Marketing Approach Special Editions Sponsorship Picture 3 Picture 1 Visual Merchandising Picture 2 Picture 5 Celebrity Ambassador Impressive Staging of Events Picture 4 [Sources: LVMH Annual Report (2016); LVMH Corporate Website (2017); Hudson, M. (2017): https: //www. thebalance. com/the-5 -most-important-elements-of-visual-merchandising-2890501; Picture 1: http: //www. itsliquid. com/polka-dots-for-louis-vuitton-by-yayoi-kusama. html; Picture 2: http: //cdn. pursuitist. com/wp-content/uploads/2015/01/cara-delevingne-tag_heuer_2 -e 1422279010295. jpg; Picture 3: LVMH Corporate Website (2017); Picture 4: http: //www. vogue. com. au/celebrity/events/fendi+great+wall+of+china+show, 1283; Picture 5: http: //de. louisvuitton. com/deu-de/lv-for-unicef#/home] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 8
LVMH´s strategy can be subdivided into four segments, all contributing to the overall goal of sustainable growth. x. Strategic Approach – Sustainable Growth The elements of the LVMH strategy. Decentralization Merger & Acquisition Synergy Effects Quality & Control [Sources: LVMH Annual Report (2016); LVMH Corporate Website (2017); Author unknown (2015): https: //www. ukessays. com/essays/marketing/international-strategic-management-of-lvmh-marketing-essay. php ] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 9
BUs Fashion & Leather Goods and Selective Retailing contribute 2/3 to the total revenue, achieving 37. 6 bn € in 2016. x. Facts and Figures – Overview 2016 Revenue: 37. 6 bn € 74% female employees 492 stores in France 1 Perfumes & Cosmetics § Revenue: 4. 95 bn € § Top Market: Europe (37%) § Top Seller: Makeup (44%) Fashion & Leather Goods § Revenue: 12. 78 bn € § Top Market: Asia (40%) § Stores: 1, 508 Wines & Spirits Watches & Jewelry § Revenue: 4. 84 bn € § Top Market: US (31%) § Top Seller: Cognac § Revenue: 3. 47 bn € § Top Market: Asia (42%) § Stores: 397 Selective Retailing § Revenue: 11. 97 bn € § Top Market: US (41%) § Top Store: Sephora [Source: LVMH Annual Report, (2016)] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 10
x. Key Performance Indicators Financial KPIs: § § § LVMH stock market data (Stock Value) Dividend 2016 revenue (by region/business group) Number of stores Profit from recurring operations Non-financial KPIs - LVMH Initiatives For the Environment (“LIFE”): § § § Cut energy-related emissions by 25% between 2013 and 2020 Environmental Performance Index (EPI) of its products Best practice applied in 70% of the supply chains, to reach 100% in 2025 Environmental improvement of 10% between 2013 and 2020, valid for all Maisons, at each of their production sites and stores By 2020, all LVMH sites must be ISO 14001 -certified and must have implemented a system to ensure continuous performance improvement in their operations [Source: LVMH Annual Report, (2016)] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 11
A main focus is put on the reduction of each product´s environmental footprint as well as compliance of suppliers and raw materials. 7. Non-financial KPIs - LVMH Initiatives For the Environment (“LIFE”) (2/3) LIFE 2020 lays out the goals in four strategic areas, a roadmap for LVMH’s progress and sets respective KPIs: Sustainable product design • • improving the environmental performance of all their products sustainable design principles, which seek to reduce the environmental footprint of products over their entire life cycle over 80% of a product’s environmental impact can be attributed to choices made in the design phase Improve the environmental performance of all products KPI: Environmental Performance Index (EPI) of its products Suppliers and raw materials • pursuing a sustainable supply chain strategy by working closely with suppliers and subcontractors • purchase and produce all of their strategic raw materials in compliance with the highest environmental standards for materials and production sites alike • compliance of materials and substances used to manufacture KPI: Best practice applied in 70% of the supply chains, to reach 100% in 2025 [Source: LVMH Annual Report, (2016)] LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 12
Vera Khobotova, Benjamin Munkhart, Anna Viola Thank you very much for listening! LUX 750 Vera Khobotova, Benjamin Munkhart, Anna Sophia Viola © MA IB, Winter 2017/18, page 13
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