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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-ordertailoring business with the acquisition of Thomas Pink, the legendary Mayfair tailoring house that hada worldwide reputation for excellence in shirts. Thomas Pink had retail outlets in the United States aswell. 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.2Hurley, J., & Telsey, D.L. (2001) Luxury Goods: Value in the Magnetism of Brands. Bear Stearns.
A09-03-00119Auction HousesAuction houses specializing in art and antiquities were another new line of business for LVMH. In1999, LVMH spent between $60 and $100 million to acquire Philips, “one of the perennial also-rans ofthe auction world.”3It subsequently acquired Geneva-based Gallery de Pury & Luxembourg and theParisian 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 thecompetition 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 thatMr. Arnault was taking a closer look at Sotheby’s, and if he succeeded in buying the Sotheby name, hewould then be able to package the auction line along with some of the other high-fashion brands tobring in new customers. Forbesnoted that, “He could use the champagnes, rare wines, jewelry, andfashion, as well as the cachet of its parties and product launches, to lure new customers. In terms ofsynergy, it would all fit together nicely.”4The LVMH Approach to Competitive StrategyInnovation, differentiation, and positioning were the fundamental pillars of the competitive strategythat LVMH followed. It had mastered the art of differentiating itself in every market segment in whichit operated. The company valued long-term performance and was willing to plough investments intonew product brands and provide brand support for extended periods of time before expecting tangibleprofits. Unfortunately, although this long-term orientation and reinvestment of profits improved itsmarket share over the long haul, it did not match the aspirations of the investing public, especially inmajor capital markets such as the United States. Success sometimes did take a long time to percolate tothe bottom line.Managing the Business ModelCreativity 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.”5At LVMH, creative autonomy was a principlethat was guarded zealously. In almost all its acquisitions, LVMH had maintained the creative talent asan independent pool without attempting to generate synergies across product lines or brands. When
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Louis Vuitton, LVMH, Louis Vuitton Moet Hennessy, Mr. Arnault