Lvmh

Bernard Arnault loves star brands. Dubbed "the Machiavelli of finance" by French newspaper Libération for clever financial transactions that made him chairman, CEO, and major shareholder of French luxury-goods conglomerate LVMH Moët Hennessy Louis Vuitton SA in 1990, it's his talent building star brands that has made him ascend to seventh place on the Forbes "World's Richest People" list, with a net worth of US$ 21.5 billion.

The star brand formula, according to Arnault himself, goes something like this: Sharply define the brand identity (or "DNA," as he calls it) by mining the brand's history and find the right designer to express it, create masterful marketing buzz, and tightly control quality and distribution.

The best example of this method is the brand responsible for at least 70 percent of the group's $16.47 billion in 2005 sales: Louis Vuitton. LVMH also makes wines and spirits (Dom Pérignon, Moët & Chandon, Veuve Clicquot, and Hennessy), perfumes (Christian Dior, Guerlain, and Givenchy), cosmetics (Bliss, Fresh, and BeneFit), fashion and leather goods (Donna Karan, Givenchy, Kenzo, and Louis Vuitton), and watches and jewelry (TAG Heuer, Ebel, Chaumet, and Fred). LVMH's retail division includes Sephora cosmetics stores, Le Bon Marché Paris department stores, and 61% of DFS Group (duty-free shops). Chairman Bernard Arnault and his family own 48% of LVMH. (The company also owns Fendi, Moët et Chandon, and Christian Dior, among many other brands.)

Louis Vuitton began in 1854 as a manufacturer of steamer trunks and flourished with the growth of travel by rail and ship at the beginning of the last century. By the 1980's, though, Louis Vuitton had become the brand your mother bought: expensive and well made, but boring and out of date. This changed in 1997, when Arnault hired Marc Jacobs, a young, hip designer from New York, as creative director. Jacobs studied Vuitton's history and developed several lines of bags, each with a modern twist.

As the bags got...