Luxurious Goods Louis Vuitton Moet Hennessey Essay

(Part 2)

 

Louis Vuitton Moet Hennessy has done a spectacular job of flourishing in every industry that it sets its sights on. As a result, the assets and revenues have been looking better every single year. In 2006 the company had more than $15.3 billion in sales, netting in $2.16 billion that year (‘A Solid Performance’). In 2006, there were 11,594 shareholders who had stake in the company, making both the revenue and assets prominently high for a multinational corporation. In the years 2007 and 2008, LVMH would increase its annual sales by roughly $1 billion, and would have a net profit of $2.3 billion both years (‘A Solid Performance’). Their equity in the company would rise by roughly 1,000 stakeholders each year, but the company was actually beginning to decline instead of grow. The net profit was $2,331 billion in 2007 whereas it was only $2.318 billion in 2008 (‘A Solid Performance’). The obvious cause of the decline was the recession which took place from 2007 to 2009, and it became eminent that consumers were purchasing the goods that they needed as opposed to luxurious items that were appealing to them. 2009 would be the worst year that LVMH would have, as the company’s sales would decrease from $17.193 billion to $17.053 billion, reducing the net profit from $2.318 billion to $1.973 billion. This was a significant decrease that caused the company to really regroup in order to focus on expansion instead of depreciation. As a result, LVMH would increase its sales by $3 billion every year in 2010 and 2011, with a $5 billion increase in 2012 (‘A Solid Performance’). The net profit for the company in those years were $3.032 billion, $3.065 billion, and $3.909 billion respectively. Additionally, the stakes in the company continued to increase significantly as the number of shareholders would rise significantly every year: 14,785 in 2009, 18,204 in 2010, 23,512 in 2011, and 25,666 in 2012 (‘A Solid Performance’). The company had a solid performance from 2006 to 2012, as its sales would rise from $15.306 billion to $28.103 billion, net profit would increase from $2.160 billion to $3.909 billion, and total equity would accumulate from 11,594 to 25,666 stakeholders.

Louis Vuitton Moet Hennessy is such a successful company because of the strategies that it uses in order to enhance its branding. Firstly, the company strives to create the most luxurious products on the market (Kross). These products are designed so eloquently that they deserve to be marketed at a much higher price. The quality of their goods is most appealing to the wealthy individuals that want to have luxury. This is a great marketing tool because all individuals strive to be rich, and the luxurious goods are envious in their own rights (Kross). Therefore, even though the price point of the goods are significantly high, consumers are willing to pay the additional cost in order to have a great item that is linked to luxury. Another reason why the company is such a success is because it has created brands that enhance the look of the consumer. A Hublot watch or a Louis Vuitton wallet will make any individual look richer because the brands are associated with luxury. Therefore, a world filled with materialism has caused individuals to purchase these hot commodities in order to show off their wealth (Kross). In an interview with Los Angeles’ Power 106 radio station, hip hop artist Kanye West publicly spoke out against Louis Vuitton, stating that the prices are too high that it can’t be afforded by the average consumer (Brannigan). The primary reason why the pricing of LVMH products are so high is because ‘its strategy includes adjusting the brand’s image to target the super-rich class. As part of this strategy, it is pushing high-priced leather handbags into the market and aborting expansion plans to finance the strategy’ (Kross). Luxurious, high-end products are something that all individuals strive to have, and for this reason Louis Vuitton Moet Hennessy has been able to flourish throughout the years to become a billion dollar international company.

LVMH stands on the market at the top of the category, being one of the most expensive of every industry that it is in. For example, the average cost of a wine bottle is roughly $15, whereas a Dom Perignon bottle would be retailed at $159.99 (Guenther). The products tend to be the most expensive, and most luxurious of its kind in every industry that it is found in. Hublot watches can cost more than $35,000, whereas the standard watch may be priced in the $100 to $200 dollar range (‘Prices for Hublot’). The high price margin causes the product to be associated prominently with the super-rich who are the only ones that can seemingly afford them. Therefore, LVMH has intentionally marketed itself as a company that tends to the wealthy. A part of their business strategy has been to target the categories that can be associated with luxury: winery, jewelry, perfumes, cosmetics, and watches. The reason for this is because these industries are likely to generate billions in annual revenue, which LVMH has managed to do throughout its years in operation (‘A Solid Performance’). Another part of its business strategy was to create products that are luxurious, and far better than any other that is on the market (Kross). The purpose of this strategy is to have hot items that the consumers would want, and as long as they aspire to have it the price point can be set accordingly to meet the demand. Therefore, they are able to set the price however high they want because their products are so much better than their competitors. Another aspect of their strategy is to target the super-rich, who are willing to spend heavily in order to purchase these hot commodities. This is a great marketing strategy because their consumers are of the mindset of wanting to spend their money in order to purchase the finest goods that life has to offer (Kross). For this reason, LVMH has focused on parts of the globe that tends to be associated with wealth, as they only intend to sell their products to the individuals that are rich enough to afford it. This marketing strategy tends to increase the brand’s name as well, since it will be associated with richness and prominence. Therefore, LVMH has successfully been able to sell their products at a much higher price point in order to generate accumulate billions of dollars from wealthy consumers throughout the globe. Their primary concern for expansion has been to continue to reach out to more wealthy individuals, and to increase the prominence of their brand.
Louis Vuitton Moet Hennessy (LVMH) has a history of merging companies, as it has been formed through the merging of multiple companies in order to become the product of what it is today. In 1971, Moet & Chandon merged with Hennessy in order to form a company called Moet Hennessy (‘LVMH Moet Hennessy’). Moet Hennessy would specialize primarily in cognac, and it would merge with the fashion brand Louis Vuitton in 1987 (‘LVMH Moet Hennessy’). This mergence would form Louis Vuitton Moet Hennessy, which as the name implies, has been the result of the merging of multiple companies. This super-company would retain its name as it would continue to expand globally, creating subsidiaries that are each managed independently. They frequently create these subsidiaries by recognizing emerging brands, and buying them out. This has been their expansion strategy throughout the years, as they have grown into multiple industries to increase their revenue stream. Today, ‘Christian Dior, the luxury goods group is the main holding company of LVMH, owning 40.9% of its shares, and 59.01% of its voting rights’ (‘LVMH’). The company had an estimated 25,666 stakeholders in 2012, and it has continued to expand significantly throughout the years (‘A Solid Performance’). Today, the company stands stronger than ever before as it has secured a place in multiple industries as the most effective player in the competitive league. They are continuing to buy out smaller players, and their integration is only expanding their company even more. It does not seem likely that this company will decline any time soon, and it is very likely that they will spread into more industries in the near future.

 

 

Louis Vuitton