LVMH’s Corporate-Level Strategy
Corporate level strategies in many institutions are formulated based on their overall objectives and prevailing market conditions. For international companies, such as Moet Hennessy Louis Vitton (LVMH), the methods adopted should be in line with the growth and competitive frameworks developed by the management (Dess et al. 661). Over the years, the LVMH group has engaged in different business models, including acquisitions and joint ventures, which have helped in increasing its control in the industry.
The enterprise has adopted a growth corporate strategy in ensuring its expansion to different markets around the globe. Considerably, the approach evaluates methods that the entity can use to increase its revenues and sales both in the local and international spectrums (Dess et al. 663). Essentially, the policy can be divided into two that encompass vertical and horizontal approaches
The vertical strategy involves expanding the activities of the company to other areas that have direct impact to its operations. For instance, the firm can gain control over the undertakings of its suppliers to help in managing its distribution process in the different markets it serves From the case presented, LVMH has over the last decade engaged in acquisition practices that have helped it expand its business in various markets. Some of the firms acquired by the institution include Givenchy, Celine Fashion and Perfume Chains Sephora (Dess et al. 662). Equally the entity also increased its stakes in firms producing luxury goods such as Fendi.
The horizontal growth strategy involves the expansion of a company’s activities in new geographical areas so as to increase the total revenues recorded by the institution and its overall competitiveness in the industry. For example, through the acquisitions, LVMH was able to develop its foundation in different markets including Europe, Asia and in the United States. However, the expansion must be done strategically to limit the number of challenges that might face the company.
LV’s Corporate Strategy Influence the Performance
Growth corporate strategy adopted by the institution has helped the institution to achieve different aspects of the industry. Notably, the firm has over the years diversified its portfolio to include the production and distribution of various products including wines and spirits, leather and fashion goods, perfumes and cosmetics and jewelry (Dess et al. 663). The broadening has helped the company to limit the number of risks it faces in the international market and also increased its liquidity ratio.
Furthermore, the growth strategy has enabled the entity to identify effective avenues to increase their profitability. The company developed numerous brands that increased sales in different customer segments. The firm also established distinct pricing mechanisms for its products depending on the class of clients they were targeting (Dess et al. 666). These methods enabled the institution to not only identify the needs of their customers in the various markets but also produce quality goods that served all the classes in the community.
Through the adoption of both the vertical and horizontal corporate growth models, the company was able to identify some of the challenges that reduced both its profitability and its competitive level. For instance, the organization resorted to the manufacture of its products rather than contracting third parties. This approach helped the firm to control quality of their products, distribution channel and its management methods. Considerably, it was able to build factories in different parts of the globe thus helping to control the supply and demand patterns in these regions (Dess et al. 663). In the long run, the entity was able to determine the pricing of their commodities and the production pattern for their customers.
Similarly, the growth strategy helped the organization to improve its level of competition both in the local and international markets. Diversification outlay of the entity increased the liquidity levels and the number of resources employed in the business. In 2011, the institution recorded and overall profits of 23 billion euros that were higher than other businesses in the industry. Other Bigger conglomerates such as PPR and Richmont recorded sales totaling to 12 and 9 billion euros respectively.
LV’s Performance Compare Its Competitors
The constant growth of LV over the years resulted into increased level of competition from companies like Richmont and PPR. Compared to other companies, the institution developed a better pricing and customer segmentation models that enabled it to satisfy the needs of their clients (Dess et al. 665). The institution developed a mechanism that promoted private shopping for clients that valued the confidentiality of their spending.
Through developing its own distribution stores, LV was able to manage its production and distribution methods that consequently increased its profitability. All the distribution centers of the company directly communicated with the main office in France thus enabling uniform implementation of strategies. Similarly, the firm resorted to in-house production methods that supported it to not only train its employees but also to employ the best skills in the market. Additionally, it allowed LV to increase its total productivity and overall revenue. For example, the company recorded a 12.7 million increase in its capital due to the new distribution method which was higher than those recorded by its competitors Prada and Gucci (Dess et al. 665).
Dess, Gregory et al. Strategic Management Text And Cases. 7th ed. New York, NY 10121: Published by McGraw-Hill Education, 2 Penn Plaza, 2014.
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