Success Factors for Luxury Fashion Management

This assignment provides a detailed examination of the strategic management practices adopted by luxury fashion companies, with a focus on LVMH as a case study. The report highlights key factors that contribute to their success, including product quality, brand image, and staff training. It also discusses how these companies can sustain their competitive advantage through various planning strategies. The assignment draws on relevant literature and online resources to support its findings.

STRATEGIC
MANAGEMENT MODULE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
1.A) Main Characteristics Of Top Range Watch Industry..........................................................1
B) Challenges Faced By The Lvmh In Top Range Watch Industry...........................................2
2. LVMH and Top Market Watch Industry: Response to Competition and
Sustaining Success.....................................................................................................................4
3. How LVMH achieved its success...........................................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
In this report various strategic management used by certain industry is been studied. For
this LVMH is been taken for determining strategies used by top range watch industry. Main
characteristics are being identified for luxury watch market which makes them stand out from the
general watch industry. The report Identifies different strategic approaches and theories used for
measuring the challenges faced by company. Strategies for improving company's current
competitive position in luxury watch market are determined and identifying how they have
achieved its success or position in luxury market.
1.(A) Main Characteristics of Top Range Watch Industry
LVMH also known as Moet Hennessy Louis Vuitton SE, is a French multinational luxury
goods conglomerate, headquartered at Paris. With the merger of fashion house Louis Vuitton
with Moet Hennessy, company was formed in 1987. It is considered as one of the largest luxury
brand worldwide (Watches-jewellery LVMH 2018).
Below listed are some main characteristics of top range watch industry: The global watch industry is dominated by few countries: In luxury segment
Switzerland has a near monopoly position in the market, which manufactures about 29.3
million units and their value are $22.9 billion (Frynas and Mellahi, 2015). The most well-familiar brand is one which sells most: Most of the brands are well
known to everyone as a global brand, but little is known about their business strategies
and they neither make their accounts public. Top range or Luxury watch industry only focus only on single segment: They segment
and target only those customers who are rich and young. Other segment of the people or
market is being completely ignored (Grant, 2016). Strong association to quality: In luxury or top range watch segment customers are
always selective about product’s quality that they use and are ready to pay for it. In
quality and design of their watches Louis Vuitton have set their benchmark.
 Brand recognition: Carrying luxury watches are associated with status and class in
society. Thus people prefers to carry them as a high status and recognition (Cavender and
Kincade, 2015).
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The strategic approaches and theory that LVMH uses is “organisation as a rational
system”. In this perspective company is designed or created for achieving specific objectives or
goals. The main goal of the company is to retain its position in luxury business. For which it has
many brands under them focusing on different segments in market.
B) Challenges Faced by The LVMH In Top Range Watch Industry
Following are the challenges faced by a LVMH in luxury watch industry through
PESTLE analysis: Political factors: Political factors are major factors affecting LVMH, causing great
influence on market environment. Increase in value added tax can create a threat to
market as it would cause hindrance and restrictions on the spending of customers. There
would be a long term influence on customer’s buying behaviour due to certain rise in
amount of tax. Due to which demand for the product will reduce (Brun, Castelli and
Karaosman, 2017). Economic factors: It includes the state’s exchange rates in which company is operating.
In fostering of organisation like LVMH, recession also acts as a main element. Prices of
precious jewels and metals also affects the business of LVMH. Luxury brands like
LVMH business is contributed by the main factor of GDP of a state, as good economy
will be more prone to concern of top range watch company. Social factors: Social factors includes shifting of customer preferences and latest fashion
trends in the society. Brands have to adopt contemporary fashion trends and always have
to welcome innovations in LVMH (Seong and Godart, 2018). Technological factors: Innovation plays a great role as technological attributes in top
range brands like LVMH and plays a key role in their success. Legal factors: Company have to follow the legalities of their region in which they are
operating. LVMH is very much concerned about their legal stuff as they are the brand for
elite or upper middle class in every society. Environmental Factors: It includes different worldwide environment safety laws that
must be followed. Most of the international brands are showing their support to world for
making it beautiful and free of pollution. So LVMH also have to take part in such
supporting campaigns (Som and Blanckaert, 2015).
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Challenges within the company: Excessive centralization: Louis Vuitton rely on centralized decision making which could
bring down the morale of employees. They are known to be tough employer and focus on
making patent or copyright of most of their designs exclusivity. Employee Morale Is at an All Time Low: The watch industry is already shrinking
dramatically, when it comes to human resources. LVMH watches are identified as one of
the major watch brands. Far faster than they can acquire it, top range watch industry has
been losing talent. Luxury Watch industry had an enormous problem keeping their talent
within, even when economic times were better. Europe suffers from a few cultural issues
based on oppressively closed management structure which is main problem faced by this
industry (Rigaud-Lacresse and Pini eds., 2017). Employees in top range watch industry
are not able to anticipate risks involved in decision making. Big Watch Brands Are Managed Incorrectly: Top range watch companies are often
publicly traded as well as operated like finance companies. The majority of big reputed
expensive watch brands are owned by large luxury conglomerate firms. These companies
avoid risks by not engaging in creative undertaking unless there is evidence to support the
risk of creativity from case studies, and they overall demand and return on investment for
shareholders rises. It turns out to be a terrible framework within which to manage a
premium watch brand. Luxury watch brands requires exclusivity instead of growth as a
factor in order to survive. Luxury is about limited availability of product and doesn't
matter the cost. Watch brand can plan for new strategies for growth only when they
determine precisely how many units they are selling to consumers and need to produce
only as much unit being sold to consumers (Donzé, 2018).
 Marketing Professionals are asleep at the wheel: Watch industry especially, luxury
brands are mostly reliant on marketing. Top range watch brands spends lavishly on
activities related to advertising, but across more traditional areas of marketing related to
messaging campaigns and communication, spending on promotion has slowed down
recently. Very few of the advertisements is well planned in luxury brands even though a
healthy amount of money is being spent on marketing. To ensure that marketing is
effective there is no system of checks and balances in top range watch industry (Mark-
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Herbert and Holmsten-Carrizo, 2017). For mainstream awareness campaigns, most
luxury watch brands advertising is being designed.
All those factors that affects LVMH determined through PESTLE are short term, as factors
like political, economic, social, technology, etc. changes frequently and never remain constant.
Whereas, the morale of the employees, marketing tactics adopted by them can be considered as
medium term challenges, as it could be improved or solved through proper planning and strategy.
Centralized system and management of its operations can be a long term challenges for LVMH
as they can affect company for a longer period and takes much time to correct or take measures
for them.
2. LVMH and Top Market Watch Industry: Response to Competition and Sustaining Success
LVMH's competitive position in top-range watch industry:
LVMH is one of the fashionable and trendsetter brand which uses mix of demographic
and psychographic segmentation or poisoning strategies. Over a period of time LVMH have built
a good reputation and positioned their products as a symbol of superiority. It has over 125,000
dedicated employees worldwide. LVMH is financially strong company and is operating six
diversified businesses. In developed as well as under-developed countries, they are aggressively
expanding their operations, which helps them to increase their sales. It has been named as most
valuable brand globally in luxury segment for six consecutive years. LVMH commonly practices
celebrity endorsements as a brand building tactics. Better service to customer is been focused for
retaining their position.
Contributions to improve its current competitive strategic position
For sustaining the growth of an organisation LVMH have come up with a unique
strategy, which is essential for maintaining current brand image. LVMH uses various models and
theories or strategies for competitive positioning, such as Porter's 5 force model, Porters generic
Strategies, etc.
Following are some strategies for improving current competitive position:
 Porter's 5 forces analysis: It is one of the vital tool used for analysing degree and nature
of competition in top range watch industry.
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◦ Barriers to entry: Barriers to entry in this competitive market are high due to
economies of scale, unique factors, unrecoverable expenses, sustained brand loyalty
within target market, etc (Seong and Godart, 2018).
◦ Industrial rivalry: Differentiation and growth rates are high. Competition is on
realised quality, royalty, extravagance, intangible image and stylishness of products
instead of their price.
◦ Threat of new entrants: Entry of new luxury brands like Hermes, Prada, etc. If new
brands remain connected they can be a threat and risk for LVMH and become
successful and acquired by competitors. Customer loyalty can't be attained by new
brands as barriers to entry are high (Kernstock, Brexendorf and Powell, 2017).
◦ Bargaining power of buyers: Bargaining powers of LVMH are low as they have
two types of customers, one with high net worth who are loyal and are growing and
the other is Middle market customers who changes their preferences.
◦ Bargaining power of Suppliers: To keep quality of product at high, LVMH directly
deals with their suppliers at low price.
◦ Threat of substitutes: Threat of substitutes are relatively high due to presence of
other luxury brands like Rolex, Hermes, Kering, Prada, etc. LVMH focuses on their
core competency, uniqueness of their products and services, etc (Som and Blanckaert,
2015).
 There are some other strategies that LVMH uses to improve their competitive position:
◦ All new artisans or technicians and employees are selected or recruited carefully and
have to go through three-day in-house training sessions. To make their employees
feel close and involved with company's values, philosophy and culture.
◦ Two-year training is mandatory for craftsman before they start working in LVMH. It
slows down manufacturing time, to maintain company's philosophy of exclusivity and
scarcity (Rigaud-Lacresse and Pini eds., 2017).
◦ Brand association: Through various brand association LVMH have different brands
of watches under them, such as Bulgari, Chaumet, Hublot, Tag Heuer, and Zenith.
These groups of luxury watch brands target different segments. With such wide
number of brands under them they have a large reach worldwide and more customers
targeted.
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◦ Quality: LVMH maintains their competitive position in market as the largest supplier
of quality products and remains as a leader in terms of quality (Donzé, 2018). With
excellent craftsmanship, design and innovation their products stand out from their
competitors.
Sustain competitive advantage in industry:
There are three main strategies that LVMH can use to sustain their competitive advantage
in the top range watch industry, which includes: Cost Leadership: Company can offer discounts to their customers in order to have a cost
advantage over their competitors. This would also attract medium class customers to buy
their products along with rich class people who don't care about price of the product. Differentiation: LVMH have to adopt strategies which distinguishes their products from
their competitors in terms of their benefits and features (Mark-Herbert and Holmsten-
Carrizo, 2017). Through differentiation they create unique and innovative products in
industry and charges premium prices and earns maximum profits. Focus: Company can focus on limited part or segments in the market for better
marketing strategies or planning.
3. How LVMH achieved its success.
LVMH is considered as Mercedes in the world of luxury watches as they are esteemed,
classy and instantly recognizable.
Below discussed are factors through which LVMH achieved their success: Celebrity endorsement: Product of LVMH like their watches are been endorsed by
celebrities, which could help them in getting their customers trust. People believe that
endorsement by well-known personality, makes impression of the product that it is
genuine and is worth that much price (Brun, Castelli and Karaosman, 2017). LVMH uses
this strategy to capture their customers to increasing their market share at a greater speed. Being consistent in brand image and strategy: LVMH is been consistent in retaining
their brand image and strategies that are being used, which is one of the main strategy of
company for their success. They ensure that their brand value is been maintained through
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providing customers with quality products and after sales services (Louis-vuitton-
marketing-strategy 2017). Superior customer services: By keeping customer service demand in perspective would
greatly benefit company in increasing their brand value. Customers are not just provided
with superior product, but also with first class services, which makes them feel satisfied
and confident in the brand being best in market. This would help to achieve success and
retain competitive position (Cavender and Kincade, 2015). Innovation and developing new products: Company being innovative, constantly
develops new products for attracting customers who would like to try new products
(Grant, 2016). Being innovative in the competitive market helps LVMH to become
successful and have better position. Investing in online retail and balancing distribution channels: Through investing in
online retail distribution, company is being able to establish a wider market base for their
products. Due to which more customers are able to reach for the LVMH products and can
buy them through online stores. This strategy helps them to be successful and have a top
position in competitive market. Staff training: They provide on the job training to their newly recruited employees and
provides training for manufacturing new items, so that their quality of products and brand
image is been retained (Frynas and Mellahi, 2015). This is a vital factor for achieving
success for LVMH and maintains their competitive position in market.
CONCLUSION
From this report it can be concluded that through strategic management company can
achieve success and retain competitive position in the market. There are various factors which
could affects or act as a challenge for organisation. Which can be determined through PESTLE
analysis and other strategies or theories. Through various planning company can sustain their
success and competitive advantage in industry.
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REFERENCES
Books and Journals
Brun, A., Castelli, C. and Karaosman, H., 2017. A focused supply chain strategy for luxury
fashion management. Journal of Fashion Marketing and Management: An International
Journal, 21(4), pp.544-563.
Cavender, R. and Kincade, D.H., 2015. A luxury brand management framework built from
historical review and case study analysis. International Journal of Retail & Distribution
Management, 43(10/11), pp.1083-1100.
Donzé, P.Y., 2018. The Birth of Luxury Big Business: LVMH, Richemont and Kering. In Global
Luxury (pp. 19-38). Palgrave, Singapore.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press,
USA.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Kernstock, J., Brexendorf, T.O. and Powell, S.M., 2017. Introduction: Luxury Brand
Management Insights and Opportunities. In Advances in Luxury Brand Management (pp.
1-24). Palgrave Macmillan, Cham.
Mark-Herbert, C. and Holmsten-Carrizo, C., 2017. Luxury marketing strategies related to ethical
sourcing. In Sustainable Luxury (pp. 51-62). Routledge.
Rigaud-Lacresse, E. and Pini, F.M. eds., 2017. New Luxury Management: Creating and
Managing Sustainable Value Across the Organization. Springer.
Seong, S. and Godart, F.C., 2018. Influencing the Influencers: Diversification, Semantic
Strategies, and Creativity Evaluations. Academy of Management Journal, 61(3).
Som, A. and Blanckaert, C., 2015. The Road to Luxury: The evolution, markets, and strategies of
luxury brand management. John Wiley & Sons.
Online
Louis-Vuitton-marketing-strategy 2017. [online] Available through:
<https://www.referralcandy.com/blog/louis-vuitton-marketing-strategy/>
Watches-jewellery LVMH 2018. [online] Available through:
<https://www.lvmh.com/houses/watches-jewelry/>
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