Download Strategy.GroupB01.Luis Vuitton

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
Global Annual Sales (Million $)
$11,962.00
$19,797.00
LVMH
PPR
Richemont
Prada
Others
$1,635.00
$3,914.00
$28,692.00
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
Revenue (Million $)
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
12000
10000
8000
33% of Revenue
66% of Profit!
Total Sales
Fashion &
Leather Goods
6000
Operating
Income
4000
2000
0
Revenues
Group B1 – Final Strategy Project
MBA FT2005, Semester II, 16.04.2004
The South Korean Opportunity
GDP:
GDP Growth:
$425bn
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
Stores in SK
FENDI
Pricing
24
+
18
===
14
Main Strength
Main Weakness
Cross-Selling
Allegra Beck Versace
=/-
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
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
Small Manufacturers
Reciprocal Benefits
Real Estate Owners
Noteworthy, but not fierce
Rivalry for design talent
No price competition
No discounts or sales
Waiting lists
Emotional switching
barriers
Rare brand-loyalty
Haute Couture
Designer flight
Cars, Watches…
Group B1 – Final Strategy Project
MBA FT2005, Semester II, 16.04.2004
Louis Vuitton SWOT Analysis
EXTERNAL
INTERNAL
• Strong financials
• 150 years of excellence
• Existing presence in SK
• Clothing not as wellknown as handbags
• Risk of brand dilution
• Marc Jacobs (designer)
• Cross-sell from accessories
SW
OT
• Most competitors don’t sell
• Currency fluctuations
in their own stores
• Political instability
• Strong SK economy
• Democratization of fashion
• LV brand already popular
• Counterfeiting & grey
• Young BoBos target
market
market
• Marc Jacobs could leave
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
1.
2.
3.
4.
Launch in Seoul flagship store
Market to BoBos
Cross-sell to existing customers
Use competitive intelligence from
DFS stores
5. Evaluate results & roll-out nationwide
6. Maintain brand exclusivity
7. Knowledge transfer within LVMH to
introduce conglomerate’s other brands
Group B1 – Final Strategy Project
MBA FT2005, Semester II, 16.04.2004
Any Questions