Lvmh

Case: LVMH: Diversification Strategy into Luxury Goods

Situation Analysis (SWOT)

Strengths

1. LVMHЎЇs prestige brand focus is a key foundation of the groupЎЇs strategy. It has the leadership in luxury product market

2. Its presence in wines and spirits constitutes an advantage for the group. Thanks to its strong position in champagne and cognac,

Weaknesses

1. The luxury goods are very sensitive to the fluctuation of economy; any economic wave could influence its sales. LVMHЎЇ s business largely depends on the economic condition, if economy was depressed, its sales growth slow down sharply like it did in 2002, since demand for luxury goods declines markedly when recession or depression happens.

2. Broad acquisition makes no sense and could bring burden, such as it acquired Pury & Luxembourg, which is criticized since there was no room for art auction market.

Opportunities

1. The demand of luxury products is rising.

2. There is a trend of mergence, acquisition, alliance. The small companies are seeking shield to exist in fierce competition.

Threats

1. In 2003 economic growth remained slow in some of LVMHЎЇs markets, resulting in generally weaker demand. The 5.8% reduction in revenues during that time shows that the company has had problems in coping with the recent economic downturn.

2. A lingering global recession contributed to a worldwide decline in the purchase of luxury goods.

Identification of Key issues

1. Most of products they sell are same each year, itЎЇs not helpful to be a fashion leader, and consumerЎЇs taste is changing.

2. 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 equal to elegance and creativity.

Alternatives

1. Focus on the core competences

In order to make more profit in the successful business units, the strategy is focus on the companyЎЇs core competences. As it is seen in the financial performance, LVMH is doing well in