Analyzing Product Development for LVMH in the Chinese Cosmetics Market

This report examines LVMH's product development strategy within the context of the Chinese luxury market. It focuses on the potential of developing a new range of environment-friendly and natural luxury cosmetics to address the company's recent revenue challenges in China. The report includes a SWOT analysis, highlighting strengths like a positive global brand image and opportunities such as the strong GDP in China, despite economic slowdown, as well as weaknesses and threats. It then outlines segmentation, targeting, and positioning strategies, identifying the target customers as high-income individuals aged 14-80 in urban areas with access to online shopping and a preference for a luxurious and healthy lifestyle. The positioning of the new product is described as high-priced and high-quality, appealing to customers with sophisticated tastes and a desire for innovation. The report concludes that developing natural and environment-friendly cosmetics is a viable strategy for LVMH to improve its revenue in the Chinese luxury market.

Running head: PRODUCT DEVELOPMENT
PRODUCT DEVELOPMENT
Name of the student
Name of the University
Author note

1PRODUCT DEVELOPMENT
Introduction
In the age of rapid globalization, international business organizations have sought to
increase the scope of their business operations through expansions into new markets. China
has been one of the most lucrative markets for organizations operating in the luxury industry,
as the purchasing power of the customers in country is significantly high due to its strong
GDP (Donzé and Fujioka 2015). However, the luxury brand LMVH has faced lower revenues
in China due to several factors such as slower rate of economic growth in the country and
thereby a reduction of disposable income of the customers (Bloomberg.com 2020). The essay
will further highlight the scope of development of new range of environment friendly and
natural luxury cosmetics in China.
Discussion
Product development is an effective strategy that can be adopted by LMVH in order
to increase the revenues of the company through their business operations in China. One such
product that can be effective in China is environment friendly and natural cosmetics. An
analysis of the strengths, weaknesses, opportunities and threats helps such business
organizations in strategy making processes.
SWOT Analysis
Strengths Weaknesses
 Positive global brand image and
identity
 High potential of the Chinese beauty
industry (Wu 2020)
 High standards of product quality
 High investment for product
development
 Investments in marketing the product
Opportunities Threats

2PRODUCT DEVELOPMENT
 Strong GDP in the country in spite of
reduction in economic growth rate
 Strength of beauty industry in the
country
 Presence of luxury beauty brands in
LMVH
 Increasing environmental
consciousness among the customers
(Kestenbaum 2020)
 Presence of large number of
competitors in the beauty industry
 Reduction in purchasing power of the
customers
In this regard, it can be mentioned that the Chinese customers tend to engage in the
consumption of skin care cosmetics from a young age, thereby providing LMVH with a large
customer base (Kestenbaum 2020). Furthermore, natural cosmetics are highly preferred
among the customers in high income groups, who have the purchasing power to lead a
healthy and sophisticated lifestyle (Wu 2020).
Segmentation, Targeting and Positioning
The targeted customers of the brand LMVH can be segmented in the following
manner:
Demographic Geographic
 Customers between the age group of
14 to 80
 Individuals belonging from high
income groups
 Individuals living in the urban areas
of the country where the stores are
located
 Individuals with access to online

3PRODUCT DEVELOPMENT
 Both male and female customers shopping facilities
Behavioral Psychographic
 Customers with high brand loyalty
 Environmentally conscious customers
who prefer natural products
(Kestenbaum 2020)
 Customers preferring luxurious
lifestyle
 Customers who want a healthy and
luxurious lifestyle
 Customers conscious about their
beauty
 Important personalities in the
entertainment and beauty industry
who want to look flawless
The positioning of the brand and the new product of natural and environment friendly
luxury cosmetics can be identified as having high price and high quality in the beauty
industry of China (Wu 2020). In this regard, the product is positioned in the luxury segment,
which is made available to customers having sophisticated tastes and high purchasing power.
The product also has high innovation as it is completely natural and suitable for all skin
types.
Conclusion
From the above discussion, it can be noted that in order to improve its revenue in the
luxury market of China, LMVH may develop a new category of products as natural and
environment friendly cosmetics. This product would be positioned as high priced and high in
quality and targeted towards high income group customer between the age of 14 and 80.

4PRODUCT DEVELOPMENT
References
Bloomberg.com, 2020. Bloomberg - LVMH Eases Fears Of A Luxury Slowdown In China.
[online] Bloomberg.com. Available at: <https://www.bloomberg.com/news/articles/2019-01-
29/lvmh-eases-fears-of-china-luxury-slowdown-on-fashion-leather> [Accessed 13 April
2020].
Donzé, P.Y. and Fujioka, R., 2015. European luxury big business and emerging Asian
markets, 1960–2010. Business History, 57(6), pp.822-840.
Kestenbaum, R., 2020. The Biggest Trends In The Beauty Industry. [online] Forbes.
Available at: <https://www.forbes.com/sites/richardkestenbaum/2018/09/09/beauty-industry-
biggest-trends-skin-care-loreal-shiseido-lauder/#5aa222c26982> [Accessed 13 April 2020].
Wu, J., 2020. How China Is Fueling The Growth Of Beauty Brands And Boosting Luxury
Players. [online] CNBC. Available at: <https://www.cnbc.com/2019/10/08/how-china-is-
fueling-the-growth-of-beauty-brands-luxury-players.html> [Accessed 13 April 2020].