Analysis on Louis Vuitton Case Study
1.What has made Louis Vuitton’s enterprise model profitable within the Japanese luxurious market?
As the business model addresses “how the company makes money on this business”, Louis Vuitton’s business model in Japan can be merely explained as promoting merchandise through directly owned and managed stores. A good business mannequin can guarantee the success of business. LV’s enterprise model in Japan efficiently drove it to the world’s largest market by strictly following the principles and benefiting from the exterior surroundings.
First of all, the specifics and advantages of Japanese market performed a major position in facilitating LV’s success. (These benefits of Japanese market might be discussed additional in Question 3.) With these specifics and benefits facilitating its operation and manufacturing ideas, Louis Vuitton (LV) was able to adapt to the Japanese market and shortly occupy the Japanese luxury market.
The success of LV’s business mannequin additionally benefited from the first mover advantage in Japanese luxury market. LV entered the Japanese market in 1977, and it met the Japanese financial system increase within the following years.
The pioneer advantage arose as the company established its own subsidiary in Japan while different overseas corporations only manufactured and distributed their merchandise by licensing. The advantage enabled LV to construct stable model image and to extend the market share. Meanwhile, the corporate accumulated experience in Japanese market, which would have optimistic affect on the further growth in Japanese market and the later enlargement to new Asian markets.
Most importantly, LV values the customers’ benefit and attaches great importance to customers’ psychology.
LV has been committed to the quality control. As Japanese market emphasized tremendously on the product high quality, good quality made LV acceptable and popular in Japan. Through attaining high quality, LV nurtured an habit of the Japanese to luxury and built the loyalty to the model to be able to sustain its profitability. This made Japan the biggest market of LV for an extended period. According to the smile curve of value creation, LV insisted including worth to its model and products to sustain its profitability. To maintain the brand new and engaging to Japanese prospects, Louis Vuitton strove to add modern parts into its merchandise and keep the custom and heritage of the brand. With such innovation, Louis Vuitton started to reach extra local customers and constantly inspire purchases since most Japanese ladies are beauty-conscious. Also, as believing that productiveness would not maintain progress, the company constructed the brand image via great expense in promoting.
In addition, the efficient structuring of the company led to the management effectivity, which assured the conventional operation of LV and supplied the strong foundation to its success in Japan. Besides, manufacturing efficiency is one other key issue of LV’s successful business mannequin. The manufacturing was accomplished by way of teamwork, and the staff were educated to be autonomous and multi-skilled so that the issues of the product could probably be found by the front-line workers and solved timely with their data and expertise. The teamwork effectivity, to a considerable extent, ensured Louis Vuitton’s merchandise with high quality.
2.What are the alternatives and challenges for Louis Vuitton in Japan? The inherent advantages of Japanese market introduced Louis Vuitton nice success. While the market is growing quickly and gradually come to be mature, challenges, which additionally imply opportunities, seem to LV in Japan.
For the weak economic system, the consumer preferences began to shift, and the Japanese consumers grew to become not to endure high costs. The young era began to lose its appetite on LV; however, a possibility could be seen that the wealthy old era gained increasing buying power as Japanese inhabitants aging. Meanwhile, because the competitors from international manufacturers rose, the shoppers tended to show to the manufacturers like H&M and Zara for its good quality with reasonably priced costs. Meanwhile, some shoppers have been also attracted by the counterfeit merchandise, which have the identical design and considerable quality. The situation of LV in Japan seems to be fierce, nevertheless, with effective solutions, LV can also seize the chance to sustain profitability in Japanese market quite than simply survive.
As it is stated within the case that Japanese customers had been holding the need for inexpensive luxury products from Louis Vuitton. Therefore, to resolve this problem and appeal to more clients, LV ought to attempt to make “inexpensive” merchandise by growing the worth of products, lowering the prices and prices, and eventually creating high worth for the customers. As the scandal of counterfeit offered on the websites in 2008 led to a decline in the gross sales of Louis Vuitton merchandise, it can be considered as a valued alternative for Louis Vuitton to ascertain its own business online since it could both add selling channels and empower the company to battle with counterfeiting.
Another problem for Louis Vuitton is the market and brand dilution because it has already entered and successfully fit in the Japanese market. The merchandise have already maintained the “acceptable” group, and the corporate has become to really feel tough to increase the income. The figure supplied in the case showed that nearly half of the Japanese have Louis Vuitton-monogrammed items by the point of 2007. This seemed to make LV prevalent however not luxury any more. To maintain its model image, it’s also a possibility for LV to reposition itself as a style luxury brand by offering fashionable and up-to-date design with out abandoning its heritage. Since most Japanese females are beauty-conscious, the fashionable design might help Louis Vuitton regain the earnings and the market shares. Besides, in this case, providing limited editions is one other good approach to stimulate consumption.
However, limited editions also face losing attraction to the shoppers because of overdoing “limited edition” as a advertising technique. This forces Louis Vuitton to seek new methods to draw clients. Additional alternatives for LV rise as options to this downside. LV can either increase the market by opening stores in middle-size cities or develop customer base by creating new merchandise such as merchandise for kids so as to improve the income.
In conclusion, challenges won’t ever be the top of LV’s improvement in Japan as long as the model new opportunities may be discovered past the menace.
3.What are the specifics of the Japanese trend luxurious market?
The distinctiveness of Japanese fashion luxurious market contributes so much to the success of LV. The benefits of Japanese market provide not solely LV but also other luxury manufacturers alternatives to develop in such surroundings while another specifics of the market also deliver issues to these luxury manufacturers.
To consider the general Japanese market, the consumers have giant demand for prime trend products due to the social tradition, social structure and shared worth in Japanese society. First, Japanese girls were conscious to magnificence and willing to purchase things that might be thought-about lovely. The trend luxurious products fit their want nicely in this case. Second, Japanese worth social standing a lot and thus, want luxurious items to precise their social place. Third, as to the social culture, Japanese seem to be influence by the norms. In this case, Japanese purchasing behavior is constantly beneath the impact of the big middle class who has the choice on luxury products. All these elements lead to the Japanese great curiosity in style luxurious products.
Meanwhile, the prosperity of Japanese financial system endows the shoppers with excessive purchasing energy. The large proportion of Japanese social structure is consisted of middle class. This made LV’s products inexpensive to a large proportion of Japanese people.
Another specific of Japanese market is that although shoppers have great demand of luxury product they’re still rational since Japanese people emphasis much on product quality and affordability. On one facet, this offers some luxurious manufacturers, which stress on the standard, similar to LV, great alternative to seize the market; however, on the opposite side, it forces the posh brands to focus not only on the design but also on the standard control, and accordingly, raise the price of manufacturing.
Besides, as the population growing older and economic environment changing, the Japanese folks, particularly the young era, started to vary their mindset to high-quality merchandise with inexpensive costs. This requires the posh brands to add extra worth to the products as nicely as to lower the costs and expenses. Thus, a query is raised to the luxurious manufacturers since it’s contradictory to each enhance the quality and cut back the costs.
As Japanese market offering many potentialities to the growth of luxurious brands, the competition in the Japanese style luxury market is fierce as well. According to Exhibit 7, in 2005, probably the most revenue of world high luxurious trend manufacturers got here from Japanese market. The advantages of Japanese market constantly attracted foreign brands to enter whereas all the manufacturers wanted to face the competitors as a severe problem. For instance, because the market was inundated with trendy elements of design, the consumer choice could be changeable so that the companies needed to maintain up with development timely.
The specifics of Japanese market each contributed to the growth of overseas luxurious brands and arrange some barriers to them. To bring LV for instance, because of the specifics of Japanese market such because the excessive client buying energy, it successfully constructed impressive model picture and earned great earnings from Japanese markets.
4.How did Louis Vuitton enter into the Japanese market originally? What had been the other entry methods it adopted later to strengthen its presence?
LV firstly entered the Japanese market in 1977 by opening two personal shop-in-shops. Unlike different foreign firms who distributed the merchandise by licensing beneath the help of Japanese distributors, LV created an efficient business model by establishing its own subsidiary in Japan and promoting the merchandise immediately beneath its personal control. LV initially followed the international technique via exporting products from France to Japan. Also, the subsidiary in Japan had great autonomy, which contributed to the environment friendly market-driven decisions and helped reduce some obstacle within the preliminary stage.
The success of LV’s first transfer was adopted by another strategies for maintaining its benefits as the pioneer in the market. To expand the market in Japan, the company later opened its first retail store and some franchisees, which can decrease the danger of the corporate to some prolong. To adapt to Japanese market properly, LV steadily turned its technique from worldwide to localization. The head manager of Japanese subsidiary was a Japanese one who knew extra concerning the native market and customers. As Japanese people cared much about magnificence and quality, LV began to company with Japanese designers and mix fashionable parts with its tradition and heritage to achieve more clients.
With the first mover advantage and the nice adaption to the Japanese market, LV efficiently entered the Japan market and became the industry magnate within the Japanese luxury market.
5.Will Louis Vuitton have any new challenges arise as a outcome of global monetary crisis? If so, how can it overcome the model new challenges?
Within the altering world surroundings and underneath the increasing competition in the international market, LV certainly will meet new challenges when facing the worldwide monetary crisis.
Due to the decline of purchasing power and demand in the course of the financial crisis and rising competitors, LV may face critical decrease of income. Within the entire melancholy environment, individuals will tend to scale back their expenses on luxury items. Besides, adjustments in mindset will occur to some folks. They might shift to buy basic items that are cheaper in price and with comparable quality. In such situation, opponents, like Zara and H&M, can energy their advantages in global market. Some different customers, particularly the Asian, might turn to anther choice to buy counterfeit products. In this angle, the financial disaster appears to provide an opportunity to the growth of counterfeiting trade.
To solve the issues attributable to client loss and gross sales decline, there are several attainable methods that might be taken into consideration. The most direct means is to decrease the prices. However, this resolution is controversial since LV, as a luxury model, is doubted whether it ought to go counter to its luxury idea to stimulate the purchases. Although LV can maintain its earnings by reducing the costs on the identical time, it still seems not to be a wise decision to take action since folks won’t purchase the luxury merchandise only for the decreasing prices when they don’t have sufficient purchasing power. Therefore, the fee reduction can’t be thoughtful as an effective solution. However, LV nonetheless has the prospect to survive in the monetary crisis by growing new market within the 2nd or 3rd tier cities. The cause is that these cities could have little affect from the financial crisis and thus individuals could keep the curiosity of LV.
The overdependence on Japanese market is risky and has potential crisis to LV. As Japan will also suffer damage from global monetary crisis, the market shall be collapsed thus having disastrous effect to the LV not only in Japan but additionally on the earth vary. In case to avoid such tragedy, LV should started to show to new market, for example, the Chinese market. With its amassed experience in Japan, LV can simply succeed in any other markets which may be similar to the Japanese market. By opening more new markets, LV can reduce its rick to a sure extent when dealing with the financial crisis.