Louis Vuitton

Problems 1. Counterfeiting. A flood of fake Louis Vuitton products coming to Japan from Seoul, Hong Kong, Tokyo and Los Angeles. 2. Adverse consequences of the global recession, due to global financial crisis in 2008-2009. 3. Eleven out of 13 factories that made Louis Vuitton bags were in France, though French labour market is one of the most expensive labour markets in the world. 4. Young Japanese women became more aware of the value of money, sales of classic bags among them are constantly decreasing nowadays. 5. Strong dependence on the Japanese market. 6. “Limited Editions” strategy confuse consumers as it is a marketing ploy.

Problem: Counterfeiting. Possible solutions: Requirements of making edits in intellectual property international law; increased penalties for the production and distribution of counterfeit goods. How to implement: all big “luxury-segment” companies” should collaborate to offer the World Trade Organization to initiate the process of amending the existing legislation. The Company may require retailers to check the products prior to acceptance from abroad. How to implement: retailers should buy equipment to carry out the procedures for testing the strength of the skin and zippers durability.

Problem: Adverse consequences of the global recession. Possible solutions: A right step is already done – the rental of bags. Focus on advertising cheaper goods in Japan (Key market). Possible price reduction as operating margin (45%) is still bigger than the standard average margin in the luxury accessories business (25%) to revive sales.

Problem: expensive labour Possible solutions: Transfer of production capacity to a country with lower labour costs (For example, South Korea). This solution will solve two problems at once. Firstly, labour costs will be reduced several times (in case of South Korea, approximately twice). Secondly, the company will save on logistics, because Key market is Japan, and South Korea is much closer to Japan than France.

Problem: changing preferences of Japanese women. Possible solutions: Focus on advertising cheaper goods in Japan (Key market).

Problem: Strong dependence on the Japanese market. Possible solutions: Tapping new emerging markets, mainly China and India. By 2030, the Chinese income will be comparable with the income of EU citizens. So, China is a very attractive market.

Problem: “Limited Editions” strategy confuse consumers as it is a marketing ploy. Possible solutions: Remove the strategy, as the company may lose customers as a result of its further use

SWOT analysis Strengths Weaknesses Opportunities Threats Rating Parameter 1 Rich history, recognizable brand High costs of labor of the workers and logistics 2 Strong presence in leading commercial hubs High prices 3 Decentralised management   4 Exclusivity by multiple brands 5 Multilevel product testing system 6 Lifetime repair guarantees Opportunities Threats Tapping new emerging markets, mainly China and India Counterfeiting Possible edits in intellectual property international law Dependence on Japonese market Transfer of production capacity to a country with lower labour costs (For example, South Korea) Currency fluctuations Influence of western stars on growing sales Drop in brand reputation among consumers because of the marketing ploys The ability to develop new market niches Rising advocasy against the use of animal skins

SWOT analysis 1. How to use the strengths of the product in the development of opportunities? a) Rich history and recognizable brand will help to tap new emerging markets easily. b) Decentralised management would be the most welcome in case of transfer of production capasity to a country with lower labor costs, because the company will need some person to manage the process of making products in a new place. c) Testing of product will be much more cheaper in a new place.   2. Which weaknesses can prevent it? a) In case of company's decision not to transfer production capacity to a country with a lower labor costs, it may be rather difficult to tap new markets because of high prices. 3. What strengths can neutralize the threats of the market? a) The model of decentalised management let to make decisions in every place independently - managers in every country may approve a marketing campaingn that will attract new clients. b) Exclusivity by multiple brands limits counterfeiting. c) Multilevel product testing system can attact new clients as LVMH provides the market with high-quality production. 4. How the market can be subject to threats to the company because of its weaknesses? High prices can exacebrate currency fluctuations