Value Chain at Louis Vuitton
( 2 ) This instance explores the competitory advantage in the universe of high manner luxury goods. Does the advantage come merely from the trade name name or there are other advantages? Louis Vuitton and Gucci are trade name names which are ever associated with high manner and are among the most successful international manner houses.
( 3 ) THE FIRST PART OF THE PRESENTATION examines the value concatenation and the value system of the celebrated Gallic manner house LV. This will assist to place those parts of the concern that are peculiarly profitable and hence likely to be linked with possible advantage. THE Second PART OF THE PRESENTATION so uses the value concatenation to place those resources that are exceeding and have sustainable competitory advantage.
( 4 ) THE WORLD OF LUXURY
Luxury merchandises have more than necessary and ordinary features compared to other merchandises of their class. which include their comparatively high degree of monetary value. quality. aesthetics. rareness. extraordinariness. and symbolic significance.
With one-year gross revenues of over US $ 165 billion and gross net income borders of over 50 per centum the major luxury goods companies rely on celebrated trade names like Louis Vuitton and Gucci to present a competitory advantage. Does the advantage come merely from the trade name name or there are other advantages?
( 5 ) Louis Vuitton
( 6 ) Gucci
( 7 ) The VALUE CHAIN AND THE VALUE SYSTEM were developed by Professor Michael Porter. The construct of value added can be used to develop company’s sustainable competitory advantage. Like most of the organisations LV consists of activities that link together to develop the value of the concern. The VALUE CHAIN is used for developing competitory advantage due to fact that they are alone to an organisation.
In add-on. the manner house is portion of a wider group of value coevals – THE VALUE SYSTEM- which includes providers. distributors. purchasers and rivals.
The VALUE CHAIN ANALYSIS emphasises on the linkage between two countries:
First. the value concatenation links the value of the organisation’s activities with its chief functional parts. Then the analysis examines how each portion might be considered to lend towards the coevals of value in the company and how this differs from the rivals. ( Lynch. 2009 )
( 8 ) The value concatenation model is a ready to hand tool for analyzing the activities in which the house can prosecute its typical nucleus competences. in the signifier of a low cost scheme or a distinction scheme. In add-on. Porter splits the company into two chief parts:
PRIMARY ACTIVITIES OR THE PRODUCTION PROCESS ITSELF which includes: inbound logistics. operations. outbound logistics. selling and gross revenues and services.
SUPPORT ACTIVITIES such as the human resources direction and the firm’s substructure.
The word ‘margin’ in the diagram is used by Porter to bespeak what is defined as added value. The border is the difference between the entire value and the corporate cost of executing the value activities. ( Lynch. 2009 )
( 9 ) ! ! LET LOOK AT LV’S VALUE CHAIN! !
As portion of designer’s following women’s spring aggregation. the creative activity of manner haute couture silk frock will bring forth net incomes through the value concatenation of concern activities. Normally the value concatenation in the luxury goods sector is complex with many parts where value is added. We have started with the direction of the supply concatenation in order to see how the production lines are working within the mills of Louis Vuitton get downing from the SUPPLIERS.
( 10 ) In order to do the frock. silk is supplied as thread chiefly from China to a co-ordinate company which uses its web of associated companies to decease. spin and weave the silk. Essential portion of the procedure is that the co-ordinating company will work really closely with the lead interior decorator on colorss. forms and textures relevant to the appropriate design aggregation. In this instance THE REAL DRIVING FORCE in footings of design. monetary value and gross revenues for both Chinese and Italian companies is the manner house. This is the ground why THE MAIN VALUE IS GENERATED AT THE FASHION HOUSE. non at the earlier parts of the value concatenation.
( 11 ) The 2nd portion is the INBOUND LOGISTICS and at that phase the sum of value added is LOW because of the assortment of importers and methods which are non sole for the company.
( 12 ) A important component in the procedure of developing the new silk frock is the interior decorator. The interior decorator is involved in the OPERATIONAL PART of the procedure where a SIGNIFICANT VALUE is added due to celebrated interior decorators such as John Galliano and Stella McCartney.
The concluding phases involve unseeable sewing utilizing HIGHLY SKILLED SEAMSTRESSES who are an highly of import portion of the top manner house AND ADD ESSENTIAL VALUE to the concluding merchandise.
( 13 ) In order to make the semblance of exclusivity. LV’s DISTRIBUTION STRATEGY is focused merely on specially selected locations which are limited. The stores are located on high streets and luxury shopping promenades with other interior decorator trade names. These sole channels of distribution guarantee greater control and flexibleness on their merchandise ranges. As a consequence. OUTBOUND LOGISTICS have besides a high part to the value of the merchandise and the competitory advantage of the trade name.
( 14 ) The Selling AND SALES DEPARTMENT besides has a great impact on the value added to the concluding merchandise due to the manner shows and in the world’s manner capitals New York. Milan and Paris. The media coverage of the show is highly valuable and consequences in 1000000s of dollars. The pre-collection briefings are utile for trade name publicity. but the existent value added at the manner house comes at the off-the-rack merchandises and accoutrements such as places and bags every bit good as other related accredited points such as aromas.
( 15 ) THE SERVICE DEPARTMENT ADDS A SIGNIFICANT VALUE TO THE BRAND ALTHOUGH THE NUMBER OF HAUTE COUTURE CUSTOMERS IS LOW. THE FASHION HOUSE PROVIDES EXCLUSIVE AND DISCREET LEVELS OF SERVICE TO THEIR WEALTHY CLIENTS WHICH ADD VALUE TO THEIR PRODUCTS. LV ALSO OFFERS ADDITIONAL SERVICE TO THE GREAT NUMBER OF CLIENT FOR PRET-A-PORTER.
Apart from the design and industry of a individual silk frock. value coevals is captured in two extra facets:
The market leader in luxury goods LVMH has developed its ain 1. 600 retail mercantile establishments around which derive around 80 % of company’s gross revenues.
LVMH besides operates a scope of at least 50 trade names non merely in manner vesture. The intent of this scheme is to distribute hazard and bring forth net incomes even if one trade name suffers a impermanent downswing.
Shin’ya Nagasawa. ( 2008 ) . Marketing Principles of Louis Vuitton. _The strongest Brand Strategy_ . 44 ( 5 ) . 44-45
Richard Lynch ( 2009 ) . _Strategic Management_ . 5th erectile dysfunction. England: Prentice Hall. 122-140.
Porter. M. E. ( 1990 ) . The competitory advantage of states. New York: Free Imperativeness
Macmillan. H. & A ; Tampoe. M. ( 2000 ) . Strategic Management. Oxford University Press.