LVMH in 2004: The Challenges of Strategic Integration. 2004. Stanford SM-123

1. What’s the rationale of LVMH’s creation through merger in 1987?
a. The rational of LVMH’s creation through merger is to build the luxury empire and create the largest conglomerate of luxury brands in the world.
b. To redefine a bunch of small and fragmented industries into coherent and growing sector, which put into a good position to dominate the markets.
c. Arnault believed that the action should be taken quickly when the few “star brands” are still available before others realize it.

2. How do you evaluate LVMH’s corporate strategy and the brand-centric business strategies for the individual businesses?
a. Tradition and vision lie with the brand, that the brand generates the energy and motivation. Thus, the independence of individual brands has be guaranteed during the pursuit of cross-brand synergy within LVMH Group.
b. LVMH reflected the brand-centric culture. The headquarters flexibly review each brand’s business plan on a case by case basis and are very involved in deciding and assigning financial resources towards the implementation of the strategic plans.
c. Strategic integration was established by formal dynamic and was gradually institutionalized. It started with the integration of the Perfume and Cosmetics branch, then created the Fashion group and the Watches and Jewelry branch. All the Wine and Spirites branch were integrated. The Seletive retails arm maintiend decentralized.
d. By integration, LVMH aims to profit more from the synergies and growth opportunities, and also take full advantage of the leadership position. The centralized R&D team, purchases of supplies and the merged critical services such as legal support improved the efficiency.
e. The new brand and the start-ups must gain the legitimacy to gain access to distributers according to the strategy.