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LVMH in 2004-The Challenges of Strategic Integration Case Solution

Solution Id Length Case Author Case Publisher
825 704 Words (3 Pages) Robert A. Burgelman, Frederico Antoni, Philip Meza Stanford Graduate School of Business : SM123
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LVMH is in the business of luxury goods. The primary activities or revenue sources include champagne, cognac and luggage. The mentioned primary activities mainly belong to two broad groups: Wines and Spirits and Fashion and Leather Goods.

The houses in Wines & Spirits include Moet Chandon, Dom Perignon, Hennessy and Hine. Fashion & Leather Goods houses include Louis Vuitton, Loewe, Donna Karan and Fendi. LVMH also takes into notice the performance of different brands and plans accordingly to maintain or dispose-off non profitable brands. An example of this can be considered in the case of the American Start-ups LVMH invested in. It started off by investing in brands including Hard Candy, BeneFit, Urban Decay and Bliss.  

LVMH also has a considerable share in other categories that include perfumes, cosmetics; watches, jewellery and selective retailing. Besides these LVMH has also invested in other ventures including e-luxury, L Capital and DI Group.

Following questions are answered in this case study solution:

  1.  What business is LVMH in? What are their primary activities or revenue sources? How many categories are they in?

  2. How would you describe the LVMH business model? What are the key components?

  3.  In terms of revenue growth, where does the future belong?

  4. What strategic factors contribute to LVMH’s strength and successes?

LVMH in 2004 The Challenges of Strategic Integration Case Analysis

How would you describe the LVMH business model? What are the key components?

LVMH group’s business model revolves around four designing, producing and marketing of luxury items. Pricing has not been considered as a major aspect of LVMH’s business model as it tends to emphasize more on clever advertising that allows to sell high priced items which is also more suitable for the luxury industry.

LVMH, like its competitors, employ the use of aesthetic beauty, prestige and status symbol to lure in customers. Exclusivity is the charm of this industry, and LVMH makes use of it. However, an important aspect of LVMH’s business model is the use of entrepreneurship qualities and creativity of its managers to promote a brand quality. Despite being a conglomerate, independence of brands has been the focus of the business model.

In terms of revenue growth, where does the future belong?

LVMH group is mainly known for the Wines & Spirits and Fashion & Leather goods. However, the sector for Selective Retailing has shown some potential, considering the growth of 430% in financial results of 2003 as compared to those of 2002. Although this is mainly because LVMH just entered into the sphere of Selective Retailing, none the less it does point out some potential of growth.

Perfumes & Cosmetics has also shown promise depicting a growth of 11%. In this particular sector brand, value is of paramount importance and has been the main attraction element that has been used by existing competitors including Ralph Lauren and Armani. LVMH can also capitalize on this element along with cash on the advantage of being a huge company that can occupy massive market share to grow.

The sector for Watches & Jewellery has not proven to be quite profitable and does not encourage growth. This is mainly due to the economic crisis of 2001 and also the entry of brands offering fashion and leather goods.

What strategic factors contribute to LVMH’s strength and successes?

The strategic factors that contribute towards LVMH’s strength and success can be considered as such: efficiency at the brand level, elimination of non-strategic brands and suitable hedging policy.

Despite the integration, LVMH has encouraged a decentralized approach when it comes to brand identity and brand performance. It has allowed for brands owned by the same company in order to compete against each other. Brand independence allows for greater entrepreneurship qualities and creativity as LVMH promotes the emotional involvement of its brand managers in the operations. This approach, therefore, allows for integration with independence.

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