In addition to these distribution assets LVMH had recently acquired La

In addition to these distribution assets lvmh had

This preview shows page 8 - 10 out of 15 pages.

underrepresented. In addition to these distribution assets, LVMH had recently acquired La Samaritane, the presti- gious Paris department store. The company had also entered the retailing end of the made-to-order tailoring business with the acquisition of Thomas Pink, the legendary Mayfair tailoring house that had a worldwide reputation for excellence in shirts. Thomas Pink had retail outlets in the United States as well. LVMH had also taken a minority position in the 200-year-old U.K. fashion retailer, Asprey & Garrard, that had global aspirations of its own. 2 Hurley, J., & Telsey, D.L. (2001) Luxury Goods: Value in the Magnetism of Brands . Bear Stearns.
Image of page 8
A09-03-0011 9 Auction Houses Auction houses specializing in art and antiquities were another new line of business for LVMH. In 1999, LVMH spent between $60 and $100 million to acquire Philips, “one of the perennial also-rans of the auction world.” 3 It subsequently acquired Geneva-based Gallery de Pury & Luxembourg and the Parisian auction house L’Etude Tajan. It had also recently engineered a merger with Bonham & Brooks, the top automotive auctioneer. The auction business at the upper levels had very poor margins given the competition between the heavyweights, Christie’s and Sotheby’s. The LVMH acquisitions were prima- rily in mid-market auctions and hence considered more economically viable. It was also rumored that Mr. Arnault was taking a closer look at Sotheby’s, and if he succeeded in buying the Sotheby name, he would then be able to package the auction line along with some of the other high-fashion brands to bring in new customers. Forbes noted that, “He could use the champagnes, rare wines, jewelry, and fashion, as well as the cachet of its parties and product launches, to lure new customers. In terms of synergy, it would all fit together nicely.” 4 The LVMH Approach to Competitive Strategy Innovation, differentiation, and positioning were the fundamental pillars of the competitive strategy that LVMH followed. It had mastered the art of differentiating itself in every market segment in which it operated. The company valued long-term performance and was willing to plough investments into new product brands and provide brand support for extended periods of time before expecting tangible profits. Unfortunately, although this long-term orientation and reinvestment of profits improved its market share over the long haul, it did not match the aspirations of the investing public, especially in major capital markets such as the United States. Success sometimes did take a long time to percolate to the bottom line. Managing the Business Model Creativity and innovation were synonymous with success in the fashion business. As two analysts re- cently observed, “Luxury brands must foster an appreciation (and tolerance) for creativity that is un- constrained by commercial or production constraints.” 5 At LVMH, creative autonomy was a principle that was guarded zealously. In almost all its acquisitions, LVMH had maintained the creative talent as an independent pool without attempting to generate synergies across product lines or brands. When
Image of page 9
Image of page 10

You've reached the end of your free preview.

Want to read all 15 pages?

  • Spring '10
  • PETRACHRISTMANN
  • Louis Vuitton, LVMH, Louis Vuitton Moet Hennessy, Mr. Arnault

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture