Louis Vuitton Market Entry Strategy RTW in South Korea Group B-1, RSM MBA FT2005 Mark Amritanand, Edo Avraham, Are Hofstad, Weiming Li, Kelly Pender, Stefan Salzer Strategy Management Rotterdam, 16.04.2004

Agenda Objective Global Luxury Goods Market Louis Vuitton Moët Hennessy (LVMH) The South Korean Opportunity Market Segmentation Competition South Korean Luxury Goods Market Louis Vuitton Analysis Conclusion Recommendations Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Objective Whether or not Louis Vuitton should launch its women’s ready-to-wear (RTW) clothing line in South Korea. Currently, Louis Vuitton has eighteen retail locations in South Korea, carrying only its luggage, handbags, accessories, and shoes. Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Global Luxury Goods Market Total market $66bn in 2000; expected $75 bn in 2004 Gross margins for clothing approx. 70% Dominated by large luxury goods conglomerates Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Luxury Goods Industry Trends Horizontal consolidation Reliance on one star brand Professional management Move away from licensing Investing in multi-million $ stores Recruiting international designers Democratization of fashion Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Louis Vuitton Moët Hennessy Fashion & Leather Goods (14) Louis Vuitton Fendi Kenzo Wines & Spirits (13) Moët & Chandon Dom Pérignon Hennessy Perfumes & Cosmetics (10) Guerlain Parfums Christian Dior Watches & Jewelry (5) Tag Heuer Chaumet Selective Retailing (6) DFS Duty-Free Stores Le Bon Marché eLUXURY.com Other (2) Media & publishing 33% of Revenue 66% of Profit! Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

The South Korean Opportunity GDP: $425bn GDP Growth: 2002: 6% 2003: 3% Population: approx. 50m GNI per Capita: $9,800 Retail Sector: 2001: $99bn Consumer Goods Imports 2002: $15.3bn Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

South Korean Developments Decreased tariff & import restrictions Reduced on luxury goods tax (11/01) Influx of upscale shops & restaurants Luxury goods lead consumer goods imports 5-day work week = more leisure time Core inflation stable Decreased regulation Foreigner can now own land (1998) Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Target Market Segment Women 25+ Early-adopter Urban Medium/High disposable income “LV sect” Grow along product lines In South Korea: Bohemian Bourgeois (BoBos) High-spending, brand conscious Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Competition FENDI Stores in SK Pricing Main Strength Main Weakness 24 + Cross-Selling Allegra Beck Versace 18 === 14 = / - Product Variety Giorgio Armani 12 + Privately Owned Couture Collection 11 + Jean Paul Gaultier Older Target Market 8 + PPR Ownership Tom Ford’s departure 8 + Holds 42% of LVMH Couture Collection FENDI 5 + LVMH Brand Higher Prices Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

South Korean Luxury Goods Market Players not yet in SK Market share of existing players No discounts or sales Waiting lists Emotional switching barriers Rare brand-loyalty Small Manufacturers Reciprocal Benefits Real Estate Owners Noteworthy, but not fierce Rivalry for design talent No price competition Haute Couture Designer flight Cars, Watches… Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Louis Vuitton SWOT Analysis Strong financials 150 years of excellence Existing presence in SK Marc Jacobs (designer) Cross-sell from accessories Clothing not as well- known as handbags Risk of brand dilution INTERNAL S W O T Most competitors don’t sell in their own stores Strong SK economy LV brand already popular Young BoBos target market Currency fluctuations Political instability Democratization of fashion Counterfeiting & grey market Marc Jacobs could leave EXTERNAL Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Conclusion Launch RTW Line in South Korea Expand into new market to fight mature markets in Eur. & N. Am. Complete distribution control in own stores Leverage existing store investments Grab mindshare before competitors Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

Recommendations Pilot Program Launch in Seoul flagship store Market to BoBos Cross-sell to existing customers Use competitive intelligence from DFS stores Evaluate results & roll-out nationwide Maintain brand exclusivity Knowledge transfer within LVMH to introduce conglomerate’s other brands Group B1 – Final Strategy Project MBA FT2005, Semester II, 16.04.2004

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