Case
Teaching Notes
Abstract
This case study examines LVMH, a global producer of luxury goods such as Fendi dresses, Louis Vuitton handbags, Moët champagne, Hennessy cognac, TAG Heuer watches, and Christian Dior perfumes. A primary focus is how LVMH has grown in China, which is gradually becoming one of its core markets. Background on the strategy and global growth of the group provides context to a more in-depth analysis of the importance of China to the luxury retailer. The case focuses on the evolving strategy of LVMH, which has become increasingly sensitive to consumer perceptions of luxury in China compared to Western countries. The risks and difficulties of marketing in China are stated in the context of the overall significance of Asia in the group and compared to Europe and America. Was the relative decline of Asia and China in terms of their share of group revenues in 2013–2016 only a temporary phenomenon? How could LVMH rekindle its growth in the region?
Case
Learning Outcomes
By the end of this case study, the student should:
- Understand different definitions of a global company and understand the importance of various world regions to a multinational company such as LVMH.
- Demonstrate how various priorities and concepts in global strategy (such as local responsiveness or global integration) can be interpreted within the context a specific organization.
- Evaluate the importance of China to multinational enterprises (MNEs) with global ambitions.
- Discern and describe the different MNE strategies for China compared to developed countries.
- Articulate a specific strategy for China, developed from understanding the specific market and the overarching group strategy.
Introduction
The firm Moët Hennessy Louis Vuitton SE, typically known as LVMH, is a family-run and prominent global luxury goods company. LVMH was created by merging Louis Vuitton with Moët Hennessy in 1987. Operating globally, it is headquartered in Paris, France. The LVMH group run 70 houses across six segments: Wines and Spirits; Fashion and Leather Goods; Perfumes and Cosmetics; Watches and Jewelry; Selective Retailing; and other activities. In addition to Louis Vuitton and Moët Hennessy, the firm owns more than 70 brands, such as Bulgari, TAG Heuer, Christian Dior, Fendi, Kenzo, Givenchy, Guerlain, Marc Jocobs, and Celine.
According to the LVMH2016 Financial Documents (LVHM, 2017), at the end of 2016, LVMH was operating 1,061 stores in Europe (excluding France), 991 in Asia (excluding Japan), 703 stores in the USA, 492 stores in France, 387 stores in Japan, and 314 stores in other markets. LVMH earned a revenue of over 37.6 billion Euro in 2016. Fashion and Leather Goods is the group in which LVMH earns the most (see Table 1). Geographically, revenue from the United States accounts for 27% of world sales and is the largest market for the company, followed by Asia (excluding Japan) with 26%. Europe (excluding France) accounts for 18%, 10% in France, 7% in Japan, and 12% in other markets (see Figure 1). China was not reported separately in the LVMH financial documents. It was a part of the Asian (excluding Japan) total, which is the second largest revenue pool, and only 1% lower than the USA.
| Table 1. Annual total revenue of LVMH by business group (EUR millions) during 2007–2016. | |||||||
|---|---|---|---|---|---|---|---|
| Total revenue by business group (EUR millions) | Wines and Spirits | Fashion and Leather Goods | Perfumes and Cosmetics | Watches and Jewelry | Selective Retailing | Other activities and eliminations | Total |
| 2016 | 4,835 | 12,775 | 4,953 | 3,468 | 11,973 | -404 | 37,600 |
| 2015 | 4,603 | 12,369 | 4,671 | 3,308 | 11,193 | -480 | 35,664 |
| 2014 | 3,973 | 10,828 | 4,006 | 2,782 | 9,520 | -471 | 30,638 |
| 2013 | 4,187 | 9,882 | 3,717 | 2,784 | 8,938 | -359 | 29,149 |
| 2012 | 4,137 | 9,926 | 3,613 | 2,836 | 7,879 | -288 | 28,103 |
| 2011 | 3,524 | 8,712 | 3,195 | 1,949 | 6,436 | -157 | 23,659 |
| 2010 | 3,261 | 7,581 | 3,076 | 985 | 5,378 | 39 | 20,320 |
| 2009 | 2,740 | 6,302 | 2,741 | 764 | 4,533 | -27 | 17,053 |
| 2008 | 3,126 | 6,010 | 2,868 | 879 | 4,376 | -66 | 17,193 |
| 2007 | 3,226 | 5,628 | 2,731 | 833 | 4,179 | -116 | 16,481 |
Source: Data from LVMH Financial documents from 2007 to 2016 (translation of the French financial documents) (LVMH, 2017); table created by authors.
Figure 1. LVMH group revenue by region.
Source: Data from LVMH 2016 Financial Documents (LVMH, 2017, p. 2); figure created by authors.
During the past decade, the total revenues from Europe and Japan have been declining. The US revenue initially fell, reflecting the financial crisis of 2008, but has since recovered. On the other hand, Asia (excluding Japan) shows an upward trend (see Figure 2). It surpassed the USA and had the highest regional revenues for 7 years in 2009–2015 (see Table 2). However, the Asian share of the total revenues has fallen in 2013–2016 compared to the United States (see Figure 2). This trend was partly caused by the weakness of the Chinese market during this period. China had become a key growth market for luxury goods by 2010, but slower economic growth and anti-corruption legislation put somewhat of a halt on revenue growth around 2015. Will China continue to rise and become a key market for LVMH? Should LVMH adjust its strategy for this market? What exactly should its strategy for China be, and how should this be integrated with the LVMH overall global strategy?
| Table 2. Annual total revenue of LVMH by geographic region of delivery (EUR millions and %) during 2007–2016. | |||||||
|---|---|---|---|---|---|---|---|
| Total revenue by geographic region of delivery (EUR millions and %) | France | Europe (excluding France) | United States | Japan | Asia (excluding Japan) | Other markets | Total |
| 2016 | 3,745 (10%) | 6,825 (18%) | *10,004 (27%) | 2,696 (7%) | 9,922 (26%) | 4,408 (12%) | 37,600 (100%) |
| 2015 | 3,552 (10%) | 6,408 (18%) | 9,345 (26%) | 2,487 (7%) | *9,636 (27%) | 4,236 (12%) | 35,664 (100%) |
| 2014 | 3,212 (10%) | 5,830 (19%) | 7,262 (24%) | 2,107 (7%) | *8,740 (29%) | 3,487 (11%) | 30,638 (100%) |
| 2013 | 3,144(11%) | 5,510 (19%) | 6,652 (23%) | 2,066(7%) | *8,669 (30%) | 3,108 (10%) | 29,149 (100%) |
| 2012 | 3,107 (11%) | 5,455 (20%) | 6,390 (23%) | 2,363 (8%) | *7,895 (28%) | 2,893 (10%) | 28,103 (100%) |
| 2011 | 2,866 (12%) | 4,797 (21%) | 5,237 (22%) | 1,970 (8%) | *6,430 (27%) | 2,359 (10%) | 23,659 (100%) |
| 2010 | 2,725 (13%) | 4,236 (21%) | 4,611 (23%) | 1,784 (9%) | *4,991 (25%) | 1,973 (9%) | 20,320 (100%) |
| 2009 | 2,478 (14%) | 3,664 (21%) | *3,840 (23%) | 1,683 (10%) | *3,850 (23%) | 1,538 (9%) | 17,053 (100%) |
| 2008 | 2,464 (14%) | *4,095 (24%) | 3,925 (23%) | 1,779 (10%) | 3,404 (20%) | 1,526 (9%) | 17,193 (100%) |
| 2007 | 2,348 (14%) | 3,790 (23%) | *4,124 (25%) | 1,856 (11%) | 3,044 (19%) | 1,319 (8%) | 16,481 (100%) |
* Marks the region/country with the highest revenue of that year.
Source: Data from LVMH Financial documents from 2007 to 2016 (translation of the French financial documents) (LVMH, 2017); table created by authors.
Figure 2. Graphic of annual total revenue of LVMH by geographic region of delivery (as %) during 2007–2016.
Source: Data from LVMH Financial documents from 2007 to 2016 (translation of the French financial documents) (LVMH, 2017); figure created by authors.
Role of China in the LVMH group
China is very important for LVMH. Bernard Arnault, Chairman and Chief Executive Officer (CEO) of LVMH, believes that LVMH has a strong pioneer advantage in China. He said in a 2007 interview, “It’s an advantage because we became the leaders of the market. In cosmetics, for example, Dior is the most well-known and strongest cosmetic brand. And as we invest strongly year after year, we will try to maintain this advantage.” He also said “The fact that we were first gives us a strong position. It’s the same thing for Vuitton. We are very, very far ahead of number two” (Socha, 2007, p. 5).
Furthermore, LVMH responded several times to sales declines in China. For example, in 2013, Jean-Jacques Guiony, the LVMH finance director, explained that demand slowdown in China was due to waning economic growth, the rise of the Chinese currency (RMB) against the Euro, and a new anti-corruption law, forbidding government officials to accept expensive gifts (Daneshkhu, 2013).
LVMH reported a quarterly sales decline in 2015, especially for Louis Vuitton, largely due to the China stock market collapse. According to Reuters (2015), Jean-Jacques Guiony spoke at an investor conference regarding the third-quarter sales, and reported that “The Chinese stock market collapse has taken its toll and we expect this to have an impact only for a few months… We are seeing more Chinese tourists but they are spending a little bit less, that is … the growth rate is not as high as it was in the first half.”
China as a new emerging market
Despite the growth of luxury goods markets in recent years, luxury goods companies faced new challenges from new directions. Namely, emerging markets and new entrants.
Since 2010, China has had the second highest gross domestic product of any nation, only behind the United States. By 2012, China has been the largest luxury goods market in the world (Bain & Company, 2013). Chinese consumers play a major role in the growth of luxury spending worldwide. They account for the largest portion of global purchases (31%), followed by Americans (24%) and Europeans (18%). Furthermore, China in 2015 represented approximately one-third of the global market, and has increased dramatically from only 1% in 2000 (D’Arpizio, Levato, Zito, & Montgolfier, 2015).
However, it is still a growing market for luxury companies, even though China opened its door to the international business in 1978. Surprisingly, LVMH has been doing business with China for more than a century. For example, Hennessy shipped its cognac to China for the very first time in 1859. Louis Vuitton opened their first store inside the prestigious Peninsula Beijing hotel in 1992. Many companies operating in China still only have a vague understanding of the market. This is especially true for luxury goods companies, who rely on China’s huge waves of economic growth to compensate for this strategic shortcoming. However, this strategy comes with a huge caveat, the effects of economic recessions always hit luxury companies first. This effect is further emphasized in China – in Chinese culture, the meaning of luxury holds a critically different overtone compared to its original definition in Latin, or in English.
The word luxury translated into Chinese is she chi (奢侈), which is a derogatory term holding the connotation of wasting money on extravagant (unusual, unnecessary, or improper) things. Traditional Chinese cultural values, such as Confucian values, Buddhist values, and Taoist values, do not view this kind of lifestyle in high regard. On the contrary, these cultures insist that people should abandon materialism and live a simple, economical, and humble life. In addition, saving is treated as an outstanding moral quality. These traditional cultural values conflict with the consumer purchasing behaviors and motivations we are familiar with in the Western world (Lu, 2008).
Nevertheless, Mr. Arnault has continued to be confident in the Chinese economy for many years. In a 2007 interview, several hours before the Fendi (a LVMH brand) spring–summer collection was displayed on the Great Wall of China, he said of China, “It’s still technically a socialist country, but it operates with a free market economy that is many times more liberal and efficient than a number of European countries……If the economy continues at the same rate, 25 years from now China will be the greatest global economic power, which means we will have a potential comparable to the United States today.” He confirmed “If things continue at this rhythm, (China) will be the most important country on the economic agenda for a business like ours.” During the show, Mr. Arnault and his empire got a positive reception from the Chinese government. “Private enterprises are more appreciated (in China) than in a certain number of countries…When you take a survey on the free market economy in China and do the same poll in France, public opinion in China is better in terms of the impression of the advantages a free market economy can bring to the population” (Socha, 2007, p. 5).
Even during economic volatility, Mr. Arnault still held confidence in China. He insisted: “Analysts underestimate the Chinese economy…The fundamentals are good. Household spending is still increasing, and that’s important to us” (Chow, 2016).
Throughout 2016 LVMH recorded revenue growth in China, focusing on two business groups: Wines & Spirits; and Watches & Jewelry. Estates & Wines, Hennessy, Bulgari, and Hublot are the companies who saw the largest gains in this regard. We will analyze these groups in the next section (LVMH, 2017).
Background on LVMH Business Groups in China
Estates & Wines reported portfolio expansion of Icons wines, with the launch of Ao Yun in China (LVMH, 2017). However, it is interesting to note that Estates & Wines does not have a translated Chinese brand name, nor a Chinese website that displays products in Chinese. This is unusual because normally a foreign company sells in China using a translated name. For example, the Hennessy Chinese brand name is 轩尼诗, and the Bulgari Chinese brand name is 宝格丽. According to the English-language website for Estates & Wines (http://www.estates-and-wines.com/), it does business in China through only a single distributor, Moët Hennessy Diageo China, located in Shanghai.
In comparison, Hennessy not only has an official website in Chinese, but also has an official distributor online store on jd.com (NASDAQ: JD), which is one of the largest business to customer (B2C) online retailers in China. Hennessy is famous in China. In terms of Chinese traditional liquor culture, Hennessy is not only a luxury good but also a luxury gift. Consumers purchase it for both individual and collective motivations. The Chinese traditional liquor culture acquiesces with its collective social behavior. Chinese people hold group relationships in very high regard. People even do business over dinner. During this kind of business dinner, drinking is necessary. The better the liquid, the better the business. In addition to its online distribution, Hennessy is operating in a digital market space with a weibo account. Weibo is the biggest Chinese online media company, owned by SINA Corporation (NASDAQ: SINA).
Bulgari is also a famous brand in China. Beside its Chinese website, it is also operating in the digital markets weibo and weixin (We chat). Weixin had 697 million customers in 2015.
Wendlandt (2016) reported concerns regarding digital marketing for luxury companies. Luxury companies still have doubt regarding digital marketing. Some believe that “The question is no longer whether luxury brands should enter the digital world, but how,” stated Nathalie Remy, a partner at McKinsey consultancy. Others argue that “For many luxury firms, digital is a hard, new reality.” The Boston Consulting Group (Boston Consulting Group, 2016) reported, “They have to confront the new tension between their traditional world of exclusivity and the web world of access for everyone.” Even within LVMH, some managers think product availability and location information should be posted online. Others disagree and insist this will discourage in-store visiting, leading to a decrease in sales eventually since customers may purchase something else when they are in stores. If they stop visiting stores, the potential expenditure disappears with them.
Hublot (宇舶) is not a very famous brand in China. The brand is still new to the Chinese, and does not compare to the more well-known luxury watches, such as Rolex, Patek Philippe, and Cartier. It does have a website that includes some Chinese information, but it does not translate everything into Chinese. In addition, the “News and Events” section of their website has its title translated into Chinese. However, out of the 10 news articles listed, only one is in Chinese. Furthermore, among the 24 partnerships, only one is Chinese (with Lang Lang, who is the brand ambassador). The lack of Chinese partnerships may have affected brand recognition in China.
Louis Vuitton (路易威登) is one of the top five brands in the Chinese market (Bain & Company, 2016). It has a well-designed official site, where customers can check prices. But customers cannot place orders online – “in-store” is the only way to purchase Louis Vuitton in China. Moreover, in 2015, Louis Vuitton opened one store, but closed four stores (Bain & Company, 2016).
Strategy and Business Model of LVMH
Mr. Arnault describes the business strategy of LVMH: “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.” This unique operating model is anchored by six pillars (descriptions adapted from LVMH annual reports and website):
- Decentralized organization. The group ensures that its Houses are both autonomous and responsive. This allows LVMH to be close to its customers and facilitate rapid, effective, and appropriate decisions. This approach also improves the motivation and entrepreneurial spirit of employees, according to LVMH.
- Organic growth. The LVMH group prioritizes organic growth and commits significant resources to develop its Houses. It also encourages creativity of its employees and supports their career growth.
- Vertical integration. The group places an emphasis on vertical integration to foster excellence both upstream and downstream. This allows control over every link in the value chain, from sourcing and production to retail, according to LVMH.
- Creating synergies. Sharing of resources on a Group scale creates synergies while respecting the individual identities and autonomy of the Houses, according LVMH. The combined strength of the LVMH Group is leveraged to benefit each of its Houses.
- Sustaining savoir-faire (the ability to act or speak appropriately in social situations). LVMH and its Houses pursue a long-term vision rooted in history and craftmanship. To preserve their distinctive identities and excellence, LVMH and its Houses have developed initiatives to transmit savoir-faire and ensure that craftsmanship and creative métiers are valued by younger generations.
- Balance across business segments and a geographic distribution: LVMH has the resources to sustain regular growth thanks to the balance across its business activities and a well-distributed geographic footprint. They believe that this balance positioned them well to withstand the impact of shifting economic factors.
Strategies in China
Foreign direct investment is a very important strategy, as well as enhancing the brand network among the LVMH group. For instance, LVMH purchased a 55% stake in Wen Jun Distillery, which is a Chinese superior white spirits producer. In addition, Groupe Arnault invested in Belle International Holdings Ltd., (a Chinese shoe retailer) in 2007. Furthermore, Groupe Arnault and L Capital Asia formed a 50:50 joint venture with Genesis Luxury Fashion to showcase ethnic haute couture in 2011 (Mamgain & Chatterjee, 2011).
In a 2013 interview (Zheng, 2013), Andrew Wu (Yue Wu), Group President at LVMH China, said to the Yicai Global journalist, “Chinese Middle Class is still rising, of course, the luxury market in China has great expectations.” In this interview, Mr. Wu clarified a question of “do luxury brands go mass market?” He said, “I think this is a fake proposition…A luxury brand has survived decades even hundreds of years, its branding position must be consistent. China is a big country, so the consumption of luxury goods is huge, but the proportion of luxury consumption is not. Luxury goods are still only owned by a minority of individuals, not by the majority.” Furthermore, regarding E-business he said, “The E-business in China has huge potential, but the lack of regulation, copyright protection, and credibility and integrity shall be resolved first.”
In September 2016, in a news item entitled “Wind direction changed: LVMH embraces Alibaba Group – Yue Wu, Group President at LVMH China, announced that Tmall.com (formerly Taobao.com), is an icon of China” revealed some new strategies that LVMH are applying in China (Ling, 2016). Comparing the Fendi runway on the Great Wall (2007) with the Guerlain Living Sell Show on Tmall.com (2016), we can track these strategic adjustments.
The Fendi Runway on the Great Wall (2007)
Almost all the world media reported the Fendi runway on the Great Wall. According to the Mail Online (2007) and Reuters (2007), during October 2007, Fendi launched its 2008 spring–summer collection show on the Great Wall of China. This is a milestone that is believed to be unrivaled. This was the first time the Great Wall hosted a fashion show. The runway was more than 1,500 miles long and featured 88 supermodels who exhibited designs by Karl Lagerfeld. Half of the models were Chinese, and the other half were foreigners.
This is the first and maybe the last fashion show on the Great Wall. Michael Burke, the CEO of Fendi, said this show was surrounded by uncertainty because the Chinese government consider the Great Wall as a historic landmark and have tried very hard to protect it (China’s Great Wall gets first major fashion show, 2007). The Great Wall was built 220–206 BC by Qin Shi Huang, the first Emperor of China. It is one of the new seven wonders of the world, which evokes great pride from the Chinese people. These characteristics simultaneously made the Great Wall an excellent and terrible place for a foreign luxury fashion show. On the one hand, it attracted significant attention in China and globally; conversely, some Chinese felt the Great Wall was defiled by a foreign company.
The Guerlain Living Sell Show on Tmall.com (2016)
In 2016, Alibaba Group Holding Inc. reported a total trading transaction of 3,000,000,000,000 RMB (about 500,000,000,000 USD), which made it the biggest online retailer in the world. Tmall.com (owned by Alibaba) is the biggest online B2C and C2C (customer to customer) retailer in China. However, it is also considered as the seedbed of fake goods made in China, especially luxury goods.
Recently, Alibaba tried to cooperate with luxury companies, but some of the companies had reservations about the collaboration. For example, although Alibaba joined the International Anti-Counterfeiting Coalition (IACC) in April 2016 (Fan, 2016), according to the news reported in Reuters (2016), in May 2016, the membership of Alibaba Group Holding Inc. was suspended by the IACC because of the complaints of several member companies. Gucci America and Michael Kors subsequently left the group.
Conversely, on September 7, 2016, LVMH opened an official flag store of Guerlain on Tmall.com. During this event, as the Group President at LVMH China, Andrew Wu (Yue Wu) gave the speech, “Today, Tmall.com is an icon of China, showing its improvement. The development of China attracts all the fashion consumers. Therefore, it is inevitable for luxury brands to locate to Tmall.com. In this digital era, the interaction between online and offline is unavoidable, even for our luxury brands. I believe this event urges the whole LVMH group to take notice” (Ling, 2016).
Moreover, the report “A live show, 10,000 lipsticks, how can this happen?” (2016) described the situation as Yang Yang, a famous actor who starred in many TV shows and movies, was selling on air for approximately one hour. It was more like a reality TV show than a commercial. His fans could see and interact with him online, as well as in store simultaneously. In one hour, more than 10,000 lipsticks were sold. On Tmall.com, KissKiss lipstick (a lipstick of Guerlain) had 3,600 preorders, worth 1.2 million RMB (around $200,000 USD) (Ling, 2016).
Comparison of the two campaigns
Comparing these two milestones of LVMH in China, we can see the business strategy has been adjusted significantly. The Fendi show isolated luxury goods from the majority of the Chinese people, with only the minority who belong to a special group or the upper social class allowed to attend. It was a typical Western show displaying the typical Western world cultural values of individualism. However, in a socialist country, like China, isolation is insulting. The Chinese traditional logic is, if you do not cherish me, I will not cherish you either.
“You are what you wear” in the Western world. However, in many Confucian countries, especially China where Buddhism, Confucianism, and Taoism are the values guiding people’s daily life, the operative phrases are “I am who shall never be judged by anything but myself,” or “I shall not be judged from outside but inside.”
Guerlain applied the opposite strategy to Fendi, one which embraced the majority. It sent forth a delicate flowery note stating “embrace me,” just like its Chinese translated brand name: 娇兰, which means “Precious orchid”. Embracing the majority is an alternative strategy in China. More and more luxury companies are forced to leave the cloud palace in China in search of untapped potential among the majority of the Chinese.
Challenges of Growing in China
Compared to mature markets, where the environment is more stable, luxury companies are operating in volatile environments when in emerging markets, such as in China. In 2015, Bain & Company reported closures of 58 luxury retail stores in China (Prada, Louis Vuitton, Hugo Boss, Chanel, Giorgio Armani, Hermes, Versace, Tiffany, and others). Simultaneously, 78 new stores were opened by the same brands in the same country (Bain & Company, 2016).
Chinese customers, as new entrants to the global luxury goods market, are different from mature Western customers. The Chinese customers are young and eager for luxury brands. However, Chinese customers exhibit several purchasing behaviors distinctive from their Western counterparts who largely grew up in a mature luxury goods market.
A key difference is saving to purchase a luxury good. Some young customers will save money for several months (Chadha & Husband, 2007; Yu, 2014). In terms of income level, tariffs, quotas, and price distortion, luxury goods are comparatively expensive for Chinese consumers. Luxury fever (a phenomenon that people act as though they have an illness preventing them from pursuing luxury goods) emerges in this environment.
Moreover, Chinese consumers purchase more low-priced luxury goods. Bain & Company (2016) reported that in 2015, the accessories consumption accounts for most of the personal luxury goods expenditure, which is 30% of the global market, followed by apparel (24% of the global market), then hard luxury (22% of the global market). On the other hand, Chinese consumers spend the most on cosmetics, perfume, and personal care categories (more than 30%), followed by watches (around 20%), then suitcases and handbags (around 13%). Comparatively, the accessories consumption is the lowest at around 7%.
All in all, the purchasing power of the Chinese population is strong. China’s fast-growing economic development will support market expansion. This is especially true for the luxury companies since the Chinese are still new to this market and they display a huge passion for luxury goods. However, neither research institutions nor luxury companies show a deep enough understanding of Chinese luxury consumers, who are different from Western customers in many respects. It is also important to understand that the differences between marketing luxury products in China and selling non-luxury fast moving consumer goods are often subtle. The availability of affordable luxury branded accessories has reduced the distance between luxury and mass market offerings. For example, BCG (2012) found that a typical price difference between a luxury product and a mass market product for categories such as fragrances and makeup could be quite small.
Conclusion
This case study focuses on the role of China in the LVMH global strategy. It starts with placing China within the regional context of Asia, analyzing the relative importance of key world regions (Asia, America, and Europe) in the LVMH strategy and growth. Strategies for growth in China are described, with analysis focusing on some of the salient differences between Chinese and Western markets. The evolution and the future of the LVMH strategy for China are discussed, and we suggest that foreign multinationals in China need to be sensitive to the distinct characteristics of this market. Without doing this they cannot hope to be successful in this potentially lucrative growth market.
Discussion Questions
- Is LVMH a global company? Why? Consider different definitions, starting with LVMH’s global spread of revenues. A popular definition of a “global” company (suggested by Alan Rugman and Alain Verbeke) is that for a firm to be “global”, it has to derive at least 20% of revenues from each of the world’s major regions (Europe, North America, and Asia).
- How would you characterize LVMH’s strategy, especially in a global context? For example, does it stress adaptation to local markets or global integration and economies of scale?
- How important is China to LVMH? How important will it be to LVMH in the future?
- Are LVMH’s strategies in China different from its strategies in developed markets, such as the USA, France, or Japan? If so, please point out how they are different.
- Does LVMH need a different strategy in China? What should this strategy be? Propose two concrete alternative strategies for China and discuss their pros and cons.
Further Reading
References
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