Strategy

Case Study

Competitive advantage at Louis Vuitton and Gucci

MEMO

The market of high fashion luxury goods presents US$165 billion of annual sales and gross profit margins of over 50 per cent. The leader company seems to be LVMH fashion house, with US$12billion of sales, followed by Richemont with US$3.6 billion and Gucci Group with US$2.4 billion. According to the text, the key activity of those companies is the preparation and display of new collection for their bi-annual fashion show. Analysing each activity which constitutes the value chain, I can say that:

* Suppliers – the co-ordinating company has a relatively important function, since it works closely with the designer in determinant aspects (such as colours, patterns among others) of the collection’s design. The Chinese and Italy co-ordinating associated company’s which supplies and dye, spin and weave the silk, respectively,are not so important, because is the designer’s work at fashion house that creates the main value – final collection design instead of components supplied. BALANCE=LOW/MEDIUM VALUE ADDED

* Inbound Logistics – there are many imports and the goods arrive at the fashion house not using an exclusive method. BALANCE=LOW VALUE ADDED

* Operations – is about working on final product, which is design and manufacture of each haute couture dress. Here, the name of the designer is a crucial element, since the fact she or he is famous add a large value, but specialized seamstresses who cuts and sews up finished dress are also an important element on value creation, although there are a limited volume of them. BALANCE=HIGH VALUE ADDED

* Outbound logistics – the product is distributed mainly through the fashion house’s exclusive shops but sometimes they licence their brand name to outside companies which distribute their products with the fashion house brand names. BALANCE=MEDIUM/HIGH VALUE ADDED

* Marketing and sales – the products are firstly presented to the public at Fashion...