Applied Corporate Strategy

This document provides an analysis of the corporate strategy of LVMH, focusing on the Pestle analysis, Porter's five forces, and internal analysis of resources and competences. It examines the strengths, weaknesses, opportunities, and threats faced by LVMH in the luxury retail industry. The document also discusses the company's financial resources, physical resources, technology, reputation, customer relationships, and human resources. It concludes with a value chain analysis and VRIO framework for LVMH.

Applied Corporate Strategy

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
1.The Pestle analysis to examine the strength or weaknesses of the company...........................3
The five forces according to the low, high or moderate effect and its impact on industry.........4
2. Internal Analysis Resources & Competences.........................................................................5
3. Strategic Evaluation according to the feasibility, suitability and acceptability of the LVMH.
...................................................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
The corporate strategy is defined as a long term vision for the company, acquiring to create the
corporate value and motivate the workforce in order to achieve the customer satisfaction. The
LVMH is largely known for the luxury retail brands that covers the business group of the leather
and fashion goods in the UK. The report explains the detail analysis of the internal or external
environment of LVMH.
MAIN BODY
1.The Pestle analysis to examine the strength or weaknesses of the company.
This analyses help in understand about the operating challenges that any firm appears to face or
take and this may prevent the investors from entering into any risk for instance if its about the
political instability or facing economic recessions. Lets start the LVMH issues regarding the
weaknesses or strength that may impact its business performance more in detail below -
Political – This factor become the threat for the LVMH as the high import duties will effect the
profitability of the company. Countries like China impose the very large amount of the import
duties that creates the significant cost difference from other countries (Shtal,,”and et.al” 2018).
Hence, its vital for the LVMH that its presence in those nations where the tourist attraction are
more because the buyers will purchase from those foreign market where they can enjoy the price
differentiation.
Another threat for the LVMH is that they may face some exemptions from the countries where
it operate. UK's political decisions based on some European union has generate a circumstances
of uncertainty and political instability in United Kingdom nations like in Scotland or England
and that they may create some long term consequences on the LVMH.
Economic – This factor becomes an opportunity for the company if they made their investment
in the developing countries like Bangladesh or India as because this countries will provide the
labour with the vary less cost and as a result the LVMH can reduce its price (Aithal,, 2016) . As
this nations also expand its growth and make huge development, hence they will become the
huge source of profits for LVMH.
Social – This factor is greatly impact the company in terms of providing greater opportunity as
LVMH has already a enjoy its brand value in the European market so the people in the France
always try to attract more on the European brands as compared to Asian or North nation brands.

The company need to more focus on the market segmentation as the LVMH is known for its
luxury brands so they cant sell there products on those countries where the majority is of middle
or lower class people.
Furthermore, if the company should possess a through understanding of the buyers in regard with
their lifestyles, their qualification or the segments or beliefs of the society that would assist the
company in its marketing or production department (Aziri,and Ismaili,2020). The class
distribution is nearly paramount functions for the LVMH tot perform in its management
processes so that they market there goods or services in those sectors where the buyers are more
capable of purchasing the high profile products. All this factor will definitely lead to an
organisation to become a successful venture in the long run.
Environmental – As the LVMH is producing the leather goods, Fur coats which are made from
the animals skins, therefore the company is not rated up to the mark as per the Animal Welfare.
Also, the company is nowhere mention about the importance of the environment like producing
the harmful chemicals or reducing the gases that realises from the factories (Dandage,,
Manthaand Rane, 2019). The LVMH must work on those factors in its operation to bring
sustainable methods as customers like to attract those brands which doing something for the
environment.
The five forces according to the low, high or moderate effect and its impact on industry.
The Porter five forces is refers as guidelines in which an organisation can examine its
competitive environment so that they can shape them accordingly and its effect on the
profitability or growth. Its essential tools for the company in improving the potential and can
adjust its strategy in order to suits its management. The below paragraph will provide those five
factors in detail.
Competition in the industry – The competition is high in the market where the LVMH is done
its market. There are companies available in this industry for example Gucci, Burberry and
Kering Group and have the strong brand value in the UK. They all are competing in the same
market on providing luxury cloth wear and accessory goods in order to fulfil the demand based
on the customers requirement and become the direct competitors of LVMH (Croain, E., 2017).
As those industries is rapidly enlarging and it is expected to develop its market share more in the
future.

Bargaining power of supplier – The suppliers power is low in this industries. There are only
few clients for the suppliers and are mostly exclusive. As the switching cost for the buyers is
usually very low because there are majority of number of manufacturers available in the Asian
market where they able to produce the goods at a very low cost. The LVMH has manage to
obtained the Les Tanneries Roux which is the leather supplier and makes the bargaining power
relatively low. The company has also owns many factories in the Europe and there is high
control of quality in its product.
Bargaining power of buyers – The power of buyers is basically low. As the goods in this
industries are heavily differentiated so the buyers have few options to buy those luxury items.
The switching price is also low as a result, the buyers have very less options available in the
marketplace to choose their product and the buyers are not be able to integrate.
Potential of new entrants - It is basically low in these type of industries. First of all high capital
investment is requires before entering into the market where LVMH operates and there are very
few big firms who done its operations in this market (Grebenshchikova, and Yakushev, 2017) .
The emergence of the leather or luxury goods is rapidly increasing in the European market. As
the brand loyalty is usually high for the buyers towards the LVMH so the threat of new entrants
is not a big issue for them.
Threat of substitute products – The products substitution is high in this industries. There are
other famous luxury brands available in this business such as Hermes and Gucci and those
brands dealing in the same type of luxury products while having the same quality standard and
performance of the LVMH. There are other indirect competitors also who supply the same type
of goods but with the better value of cost, hence it becomes very convenient to switch the brand
as it is generally low (Mulders,, 2019). The threat of the counterfoil product is also very high in
this market as buyers know that its the goods are not genuine but they easily attract and buy
those goods as they save the money. If the loyalty towards those brand are strong and buyers are
the up do that about the products tan the bargaining power is consider low.
2. Internal Analysis Resources & Competences
In any company for internal analysis resources and Competences are important factor. Resources
is a origin for company to produce profit. Typically resources are related to different factors such
as culture, reputation, financial, physical, technological and human related. Human related

resources are natural and receive from environment to satisfy human needs. Competence is the
ability of an organization to do something effectively. It only include behaviours that present
best performance.
Resources: Resources is an quality, process, skills, knowledge, ability controlled by company. It
is a strength and weakness both. If it provide competitive advantage then it is companies strength
and if it is not properly used by company then it will be weakness for company (Feldman, 2020).
LVMH have different types of resources such as Tangible Resources in this resource they have
sub factor like Financial and physical, Intangible Resources in this resources there are two sub
categories it include Technology and Reputation and customer relationship and last is Human
Resources. They can generated externally or internally.
Tangible Resources: This resource have sub-category.
Financial: LVMH has strong financial resources.
Physical Resources: It is strength for LVMH. These resources provide equipments, materials,
supplies, facilities and infrastructures. In LVMH physical resource is important to confirm that
company have right physical resource at right time. In company management of physical
resources take care of four processes such as Plan resources management, estimates activity
resources, control resources and acquire resources.
Intangible Resources: These resources include experience, reputation, quality, and staff skills. In
these resources there are sub-factors such as
Technology: This resource is weakness for LVMH because technology resources is changing
with time and if company is not up to date it will be loss for company.
Reputation and customer Relationship: LVMH have fundamental values like be creative and
innovative, deliver excellence and ready for work spirit. This resources is strength for the
company because it fundamental values help them in growth.
Human Resources: It is Strength for LVMH because it is build strong creative and passionate
team and develop their skills by conducting different trainings. Human resources motivate and
inspire employees to work hard and achieve goals and objectives. Human resources are related to
nature or environment. In LVMH human resource help employees to fulfil their professional and
personal objective. It also help to learn or develop new skills. Training is an essential for every
employee it helps them to improve their work for company. Human Resource is strength for the

company because it is important part for the company. This will provide a solution for
employees and organizational problem.
Culture Resources: These resources are most important for LVMH because company creates
design and this depend on culture resources. This resource include historic sites, buildings, and
structures. It also include traditional culture properties such as traditional gathering areas, sacred
sites and community values.
Organizational Resources: This strength of LVMH. These resources includes effective planning
distribution, carefully planned production process, control on sales & distribution.
Competences: It is important term for organizations. It has two types Threshold and Distinctive
competences. Threshold Competences is to improve consumer values, experience and product
quality of customers. Distinctive Competences is delivered excellent customer service to growth
in market. In this LVMH name is effectively used in sales promotions. It also include operational
efficiency system in this production process reduce employee training and specialization.
Competence also include VIRO and Value Chain Analysis.
VRIO: It look at internal resources of LVMH to provide continuous competitive advantage. It
also mention each stage of resources can improve to growth of the company. VIRO stands for
valuable, rare, imitable and organization (Mukhezakule, and Tefera, 2019).
Valuable: It shows LVMH resources are highly valuable and help to invest in external
opportunity. For LVMH its patents are valuable because it provide sells without competitive
interference.
Rare: According to VRIO analysis financial resources is rare for LVMH. Employees are rare in
LVMH.
Imitable: In LVMH employees and food are not imitate costly but financial resources and
distribution network are very imitate costly.
Organization: Financial resources and distribution network of LVMH are organised as defined
by VRIO analysis.

VIRO Framework for LVMH
Valuable? Rare?
Difficult to
Imitate?
Exploitable by
organization?
Competitive
Implications
Financial
Competence
YES YES NO YES
Temporary
Competitive
Advantage
Human
Resources
YES YES YES YES
Temporary
Competitive
Advantage
Brand
YES YES YES NO
Temporary
Competitive
Advantage
Innovation
and Savoir
Faire
YES YES YES NO
Sustainable
Competitive
Advantage
Quality
YES YES YES NO
Sustainable
Competitive
Advantage
Value Chain Analysis: It offer LVMH various advantages like identify competitive advantage
sources and complex inter-relationships and interdependencies. It also improve flow of materials
and it formulate effective LVMF specific strategies. Value chain analysis is use by LVMH for

competitive strategies, decision making (Knott, 2016). It include LVMH primary activities such
as inbound logistics, operations, outbound logistics, marketing and sales, and services. It also
include secondary activities such as firm infrastructure, human resource management,
technology development and procurement.
Value Chain Analysis for LVMH
Primary Activities Secondary Activities
Marketing
and sales
Services Outbound
Logistics
Operations General
administrati
on
Human
resource
management
Technology
development
Procurement
LVMH
control
over the
sales and
distributio
n
LVMH
provide
loyalty
programs
Company
owns its
stores.
Company
manufactu
re its
products
in-house
with the
company.
LVMH
has few
managers.
They
provide
specialize
d trainings
to
employees
They
invest in
R&D.
It adopts
common
supply
chain
manageme
nt.
Invest
heavy
amount on
media and
advertisin
g
It also
provide
after sales
services
Company
uses
external
supply.
LVMH
has a team
who
provide
best
operations.
It has
centralised
systems.
It focuses
on training
and
developme
nt of
employees
Use of
modern
and
advanced
engineerin
g
technolog
y.

Core Competence: The main core competences of LVMH are potential leadership, unique
product development process and distribution processes. It also maintain it efficiency and image
in market. It has one of the top best designers in the industry (Zamora, 2016). LVMH designs
skills and talents and factors is different from each other. It creates values for consumers and
that's why its products are expensive. These core competences are help LVMH to growth in
market and to achieve it goals and objectives.
3. Strategic Evaluation according to the feasibility, suitability and acceptability of the LVMH.
Suitability
The TOWS matrix cab be defined to examine the threat and opportunity and assist to adopt the
long term strategies.
TOWS Matrix Weaknesses
 The updated
technology every time
will prove to be the
loss for LVMH.
Strength
 The financial resource
is the powerful point
for the LVMH.
 The equipments or
other physical
resources is strength
for the company.
 The customer
relationship is
paramount.
Threats
 The high import duties
will effect the
companies growth.
 The company may face
the exemption from
other countries.
WT
In this strategy weaknesses is
identified and than to examine
to how to handle the threats
(Navarro,Minaand Campos Jr
2020).
If the company is investing in
ST
This strategy involves the
capitalisation of threats so that
the threats can be controlled.
The companies main strength
involves the human resource
or its connection with the

 The environmental
factor become the
issue for the company.
more in the research and
development than the threat
will decrease as its help in the
reducing the environmental
degradation and should invest
in those countries where the
high import will not effect it.
buyers so that the threat of the
brand is consider harmful for
climate will reduce because the
management should focus
more on this issue.
Opportunity
 The economic factor
will become the
opportunity for the
company because the
developing countries
will provide them
resource at a very low
cost (Mugo,
KamauMukabi and
Kemunto,,2017) .
 As the brand value is
strong for the company
so its enjoy the
sustainability of the
product.
 The importance of the
products classification
is vital for the LVMH
as its strong its brand.
WO
In this type of strategy the
weaknesses is address and than
to take the benefits of
opportunity.
As the LVMH is lacking in the
technology so it should take
the opportunity of its brand
value image and create the
more sales and can increase its
profitability.
SO
This includes the advantages
of strength and how take the
benefits of the opportunity.
As the financial resource are
one of the paramount tools in
LVMH so its easy for them to
invest more in its resources
and did class classification to
implement more focus on its
brand image.

If the company is using the strategy of Strength or weaknesses (SO) than its will definitely
increases the profitability or help in building its image even more better. As its maintain net
income till date, the LVMH is enjoying the loyalty from the its targeted buyers because its fulfil
the requirement of its customers.
Acceptability
Investors – This involves both the debt-holders or shareholders. The actual job of the
shareholders is that they make the capital investment and expect to earn a certain amount of
return while the investors are bothered about the shareholders value (HASHIM, 2020). All the
shareholders are basically stakeholders. If the investors is making investment in the those
countries where the resources is providing at a low cost than its will strengthen the company
economically.
Government - The responsibility of the government is to collect tax from the company and
from the people it employees so they are considered the major stakeholders of the company. The
government will take advantage from the contribution of the company as its contribute to Gross
Domestic Product. Its a opportunities for the government to increase the GDP if the LVMH is
contributing more to the society.
Employees - One of the most important asset for the company to expand its development or
achieving the overall goal. The LVMH is group is has many employees all over the world from
which the bigger workforce is in France design and operational tasks (MZ, SA and Saliluddin,
2019). The other department like selling or retailing activities is spreading in the other parts of
the world. The LVMH group includes the exceptional houses that actually creates the high
quality goods likes the perfumes & Cosmetics, watches and jewellery hence its employees sector
is increasing. The SO strategy will motivate the employees and make work more effective in
order to make contribution for achieving overall growth for the company.
Clients - As the LVMH is selling the luxury brands goods like apparels, bags or perfumes so its
generally target the high income people for its goods. The strategy behind this is those who
earning comparatively high income is actually contributing a signification of total wealth as they
involve extremely high purchasing capacity. If LVMH is focusing in the requirement of the
clients than the sales of the company will rise in future.
Feasibility – the financial resources and the how the company will obtain it.

The LVMH is already creating its brand value in the market and includes almost 75 luxurious
brands, with approx. 53.7 billion Euro in 2019 and spreads it network of over 4910 stores all
over the world. The LVMH will require the huge amount of financial resource in the next few
years because the demand of their products is increasing day by day (Singh and Yamaguchi,
2018.) . The LVMH is follow the method of diversification strategy as its always need to
maintain its brand value and through its mergers with strong make the company more financially
strong along with the better use technological environment in order to do the marketing and
mixed marketing actions to increase its sales.
CONCLUSION
It has been concluded that, the following report involves the external analysis of the company in
which the Pestle or five forces is explained in the LVMH and discussed six essential issues
pertaining as the threats or opportunities along with porters forces as those are assessed as low,
moderate or high. Furthermore, the LVMH resources is analysis in the second part along with
the VRIO or Value chain. Finally, the TOWS is explained in the context of sustainability,
acceptability or the feasibility.

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Online
About LVMH. 2020. [online]. Available through; <https://www.lvmh.com/investors/>