Lvmh - Expanding Brand Dominace in Asia

1. Country specific advantages are the advantages which can be captured by any producer in that particular country. For LVMH, which is originated from France, can benefit from some privileges of France:

Country of Origin: ÐŽ§Made in FranceЎЁ represents classics and quality so that people are loyal to the luxurious products manufactured in France. France is also a leading luxurious market worldwide which brings France reputation on high-end product.

Good supply: Excellent and the best textiles, leather or even grapes are possessed by France or maybe its neighboring countries (for example, Italy). Those are important raw materials of LVMHÐŽ¦s major products like leather for briefcase, grapes for champagne, etc. In addition to the tangible raw materials, France, has a distinguish history of arts, brilliant sense of beauty, brings up many talented designers to develop and sustain French fashion sense, are very critical and essential to luxurious products

Skilled labor: The reputation of craftsmanship of French labor is famous around the world. Long history in arts nourishes French to fine soa.

2. Firm specific advantages are the benefits or assets owned by the company uniquely and cannot be duplicated by other firms. The following would be the three most important factors utilized by LVMH:

Vertical integration: This can be explained by the example of Moet and Hennessy. They were leading manufacturers of cognac and champagne before they merged with fashion house Louis Vuitton. Therefore, some of the best-selling wine brands such as Moet Chandon and Veuve Clicquot are exclusive to LVMH because those grapes, used as raw materials in the fermentation, are directly come from the grape orchard of Moet and Hennessy and are definitely exclusive to LVMH.

Brand insistence: Many targeting customers of the luxurious markets are stick to particular brands of LVMH. Their loyalties enhance LVMH to maintain a good profitability.

Personal charm: Marc Jacobs of brands LV and Marc Jocobs (and its second line Marc by Marc Jacobs), as well as Hedi Slimane of Christian Dior and Dior Homme are contemporarily most talented and attractive fashion designers. Their personal charms make even more people addict to their designs.

3. When compared to other independent brands, LVMH as a group may at first enlarge customer base by differentiation of different types of products so as to reach different needs in separate segments. For example, through Sephora.com and eLuxury.com, LVMH is able to reach markets and consumers in countries that had limited LVMH products and retail stores. Also, a portfolio of investments in different types of product lines may reduce the risk borne by the company. The profits generated from one of the daughter companies can counterbalance the loss of the other daughter company. For example, in Exhibit 5, the total income of LVMH was still be maintained even if some business groups were suffering losses. Last but not least, the diversification of product lines enables easy and better chance to raise capitals because each daughter brand may go public at its own sake to increase equity.

However, LVMH as a group cannot concentrate its investment on the most profitable business to make the maximum potential profits. In addition, cash flows on each sub-branding become less liquid because of sharing resources. The most adverse situation would be the inability to dominate each markets, thus the brand names under the same business category become enemy as they share the same customer base.

4. LVMH can control its business effectively