Lvmh and Luxury Goods Marketing Essay
1. Bernard Arnault has built LVMH into a luxury goods empire by making numerous acquisitions. Describe the strategy is being used here? Discuss why you agree or disagree with this type of strategy. If you disagree, what alternative tactics would you use?
Actually Mr. Bernard Arnault, one of the richest men in the world who took control of LVMH in 1990, has been snapping up luxury brands during past two decades one after another. He has build LVMH into a luxury good empire by conducting a selective acquisition strategy with which I agree. Now LVMH has more than 60 brands under control and is still pursuing some others including the old famous family business; Hermes.
LVMH structure is made up of …show more content…
Furthermore LVMH took advantage of crisis by renegotiating store leases in Asian cities. In some cases, the company extended lease terms longer than before and reduced the rate by as much as one-third which resulted saving for the company.
The overall result has been an increase in price and the rationale behind this decision is the fact that price perception is a critical component of luxury goods’ appeal. In fact, executives know that sales volume would decline sharply due to the effect of crisis and they have lost a big number of their customers. It is not a good time for expansion and opening new stores, so they decided to stay focused on the narrow market segment of their loyal customers. Those who still had notable disposable income shaped a niche market which was still large enough to be profitable. On the other hand, LVMH helped profitability by reducing the cost and cutting expenditures on advertisements. This was the adjustment executives made as opposed to the other alternative; reducing the price and presenting products to a bigger number of consumers.
3. Explain why some customer might think the high retail prices charged for luxury goods are worth paying?
As peoples income increases, they are more willing to buy luxury goods