Environmental Analysis of Louis Vuitton - Assignment Example

Environment Analysis Executive Summary: Environmental analysis of an organization seems to be an essential part of any business since it allows an understanding of the internal and external factors that might affect the normal operations of a company. Having clear ideas on these factors would allow an organization to consider preventive measures accordingly such that the goals and objectives of the company are not affected. This study has been focused on an environmental analysis of Louis Vuitton that is Fashion House headquartered at Paris in France. An environmental analysis of the company enabled learning of the political, social, economic, technological, environmental and legal factors that may have impacts on the functions and planning of the company. Also, the strengths, weaknesses, opportunities and threats of the company could be significantly learnt from the study. Introduction: Environmental analysis of an organization is necessary to realize the impacts that several factors might have on an organization. Such analysis enables business organizations to identify the threats and opportunities and thus a company is capable of considering the effective measures accordingly (Jain, Trehan & Trehan, n.d., p.21). Macro environment of an organization refers to the environment external to an organization and includes factors like the political-legal environment, the technological state, and the socio-cultural environment. Micro environment on the other hand refers to the internal environment that includes factors like the organizational employees, the board, the consumers, the contractors, the competitions, the financial organizations associated with a business as well as the governmental impacts (Management: The Business Environment of Organizations, 2012). The present study has considered Louis Vuitton as the business to make a detailed learning on the organization’s macro and micro environment thereby trying to reflect on its strengths, weaknesses, opportunities and threats. Louis Vuitton: An Overview: The Louis Vuitton fashion house has its name from the founder of the company, Louis Vuitton who was a fashion designer by profession. Initially he had been involved in manufacture of trunks in Paris and his company became famous for luxury goods. The luggage company along with its designer logo has made its presence successful and leading through its availability of luxury goods for its consumers, and products like books, perfumes, distilled spirits as well as designer clothing (Louis Vuitton, 2012). Purses, wallets and women bags as offered by the company are highly popular. Louis Vuitton Company merged with Moet et Chandon and Hennessy in the year 1987 that led to the creation of luxury powerhouse anagram LVMH. Ten years after this merger, the business started offering ready to wear products and other clothing (Label Overview, 2012). In the present times, the company is known to have its presence in several countries across the world that includes Japan, China and Asia among others. There are around 130 retail stores of the company in total across the world. With the passing years, newer ranges of handbags and accessories are being designed and presented by Louis Vuitton. The company focuses on creation of new, graceful, and sensible up to date luxuries with value. These primarily cater to those consumers who believe in style, and are aware of the latest designs being offered, thus following the up to date trends of fashion (Louis Vuitton (1821-1892), 2012, pp.16-28). Macro Environment Analysis of the Company: The macro environment analysis of Louis Vuitton would involve the relevant environmental trends in the external factors that might affect the company and its operations to achieve its desired goals and objectives. Economic Factors: The economic factors that may affect Louis Vuitton include the rates of interest, the changes in the systems of taxation, the rates of economic growths, the inflation rates and rates of exchange that are generally varied depending on different countries having different policies and economic environment where the company conducts its business (Cateora & Hess, 2008, pp.34-255; Pearce, 2006, pp.39-70). Natural Factors: These comprise the natural factors like changes in the weather and climate. Natural calamities like floods, droughts and earthquakes may have destructive impacts on any country and hence the businesses in that country as well. The temperatures and the environmental policies in any country may affect the demands of some products, particularly products associated with fashion. Louis Vuitton thus needs to comprehend all the environmental factors in any market and their likely effects on the new venture of the company (Cateora & Hess, 2008, pp.34-255; Pearce, 2006, pp.39-70). Technological Factors: The present times having significant advancements in the field of technology, countries that are technologically advanced would have lower costs of conducting business, superior quality of products and a self-effacing surrounding of more improvements thus benefiting both the company and the consumers. Thus Louis Vuitton would require understanding the market well before initiating its business in order to utilize the technological advancement successfully (Cateora & Hess, 2008, pp.34-255; Pearce, 2006, pp.39-70). Political Factors: The political factors for Louis Vuitton include the interventions of the government and the different policies including nationalization and privatization that can affect the operations of the company. Moreover the ownership of business enterprises by the government, the goods and services that the government can provide, the degrees to which any government can recommend subsidies to the company and its precedence in regard to supporting the business along with the effects of the policies and decisions on other areas governed by the government can affect the operations of the company (Cateora & Hess, 2008, pp.34-255; Pearce, 2006, pp.39-70). Cultural Factors: The cultural factors prove to be of tremendous importance since they might determine the success or failure of the company while it tries to conduct its business in different countries having different cultural values and beliefs. The culture of any particular country may influence Louis Vuitton to act in the foreign market accordingly and dependently. The company would require to get acquainted with that country’s culture where the business is supposed to be executed. These would include effects on communication, eating, and any other habit associated with culture (Cateora & Hess, 2008, pp.34-255; Pearce, 2006, pp.39-70). Competitive Analysis: Direct and Indirect Competition for Louis Vuitton: The direct competitors of the company include Dolce & Garbana, Gucci, Hermes, Prada, and Chanel. These companies are also manufacturers of handbags, clothing, watches, footwear, sunglasses, accessories, perfumes and luxury goods. Dolce & Garbana, Gucci, and Prada are originally located in Italy, with Dolce & Garbana having 215 retail stores across the world. Gucci has more than 425 retail stores in the world, and Prada has around 122 stores across the world. Hermes is originally located in France and has 216 stores in the world. Chanel is located in Paris and has 200 stores across the world. These companies are doing extremely well having significant profits thus raising the threats for Louis Vuitton as far as competition in the industry is concerned (Louis Vuitton (1821-1892), 2012, pp.42-47). The company also faces indirect competition from companies that are involved in similar products and pose challenges for Louis Vuitton to remain at the leading position in the market. Trying to enter a market like India that has several low income groups, with a high end brand, creates indirect competition for the company where other companies may cater to the needs of the consumers and make cheaper products available (Project Proposal, 2012, p.2). Industry Analysis and Competitiveness: Considering recent studies on the company, it has been observed that around 94 percent of women in Tokyo, particularly the women in their teens, have at least one dress from Louis Vuitton in possession. The products of the company are available in selected boutique stores that are spread across different countries and localities for consumers to get access to them. The Private Equity funds for the company’s presence in countries like India have been known to be on an upswing stage. Acquisitions or investments are being considered by global brands of luxury products in India and manufacturing companies of the country. Thus companies like Louis Vuitton are planning for significant amounts of investment in India. Considering the current situation across the world, the company is putting into practice its struggle against counterfeiting. The company still remains outstanding from others owing to its strategy of brand development (Louis Vuitton (1821-1892), 2012, pp.42-47). The Porter’s Five Forces are the five factors (Rivalry, Supplier Power, Buyer Power, New Entrants, Substitutes) that mostly relate to the functioning of an organization and enable an understanding of the level of competition prevailing in the market for the company. Rivalry: The degree of rivalry enables an understanding of the intense competition in the market (What is Porter’s Five Forces Analysis?, 2012). As far as the competitors of Louis Vuitton is concerned, it can be realized that the rivalry among the companies is significantly firm and hence may cause threats to the success of the company. This is primarily so because there are direct and indirect competition from other companies offering similar products. Power of Suppliers: The quality of the products is an essential element of the company’s success on which the company is significantly dependent. Thus the suppliers need to provide the company with quality products, whereas the production mostly depends on the working of the selected employees, thus lowering the power of the suppliers for Louis Vuitton Company (Passariello, 2012). This can be considered to be a significant strength for the company. Power of Buyers: With the recent advancements in the technological use, the consumers have become aware of different companies and brands and their products and prices. Thus, with the availability of other companies providing similar products, the bargaining power of the buyers can be understood to be significantly higher for Louis Vuitton. In other words, there are other options for the buyers thus causing threats for the company. Threat of New Entrants: Like there are effective competitors of the company, it can be expected that newer entrants may also enter the markets depending on the changing economic environment of different countries that may cause threat to the Louis Vuitton’s success. Substitutes: The threats of substitutes remain since the competitor companies of Louis Vuitton provide their consumers with similar products as that of Louis Vuitton and their availability of the products is also wide-spread. Competitive Strategies: Louis Vuitton believes in following the strategy where the company makes its products available only through markets where it has its own retail stores or boutiques. Thus it is capable of controlling the quality and pricing of its products and prevents fake products to enter its channel of distribution. Also the company has now considered its focus on online selling that allows it to sell some of its products (Project Proposal, 2012). It is not possible for Louis Vuitton to sell its products to the mass as well as to the rich. “Louis Vuitton is a company using differentiation focus. Louis Vuitton aims to sell products only to those who can afford it. The prices of the handbags are ridiculously high compared to the prices of handbags in general” (Project Proposal, 2012). Company Analysis: The company’s mission statement is to “represent the most refined qualities of Western ‘Art de Vivre’ around the world” (Louis Vuitton’s Efforts to Maintain Reputation of Leading Luxury Brand, n.d.). The fundamental values that the company believes in include being creative and innovative, aiming for excellence in its products, strengthen the likeness of their brands with ardent purpose, act as entrepreneurs, and strive to be the best in the world (Louis Vuitton’s Efforts to Maintain Reputation of Leading Luxury Brand, n.d.). As far as the human resources of the company is concerned, men and women are known to work in the company with equal excellence, power, and spirit towards achieving the goals of the organization, thereby exploring, developing, innovating, and creating newer fashion designs (Louis Vuitton Macau Company Limited, 2012). Summary: SWOT of Louis Vuitton: The strengths of the company are that the company has a strong brand positioning among its consumers with its products being easily available to its desired consumers. The product portfolio of the company is also large. However the weakness of the company arises out of the declining margins although the company has been considering several cost cutting measures. As far as the opportunities are concerned, large markets are available for the company where it can conduct its business of luxury goods. Also, growth through inorganic means proves to be an opportunity for the company. However, the slowdown of wines and spirits and making of watches causes threats for the company. Even the entry of counterfeit products can prove to be threatening for the company, accompanied by the increasing competition (LVMH Moet Hennessy Louis Vuitton (SWOT Analysis), n.d.). To summarize the study, it can be said that the most important factors that have been obtained from the study are that Louis Vuitton has been successful in becoming the leader in the fashion industry as far as the fashion and luxury goods are concerned. However, with the increasing competition and different companies being available in the market offering similar products, there are significant threats for the company. Particularly, since it operates in different countries, the issues of differences in cultures, incomes and other related factors are needed to be considered effectively by the company before conducting its business. Conclusion: The above study considered Louis Vuitton as the chosen company on which an environmental analysis has been conducted. From the study it can be concluded that although the company has been performing successfully over the years and has been the leading company in the fashion designing retailing in the world, yet the macro environment or the external factors are capable enough to affect the business. However the focus of the company can be found to have been determined and the human resources are a big strength for the company that can be used advantageously towards achieving their goals and objectives successfully over the years and in the near future, gaining competitive advantages over its competitors. References 1) Cateora, P.R. & J.M. Hess 2008, International Marketing, Tata McGraw-Hill Education, India, viewed 18 August 2012, 2) Jain, T.R., Trehan, M. & R. Trehan n.d., Business Environment (for BBA – 1), FK Publications, India, viewed 15 August 2012, 3) Label Overview 2012, nymag, viewed 15 August 2012, 4) Louis Vuitton (1821-1892) 2012, slideshare, viewed 16 August 2012, 5) Louis Vuitton 2012, infoplease, viewed 15 August 2012, 6) Louis Vuitton’s Efforts to Maintain Reputation of Leading Luxury Brand n.d., wordpress, viewed 17 August 2012, 7) Louis Vuitton Macau Company Limited 2012, macauhr, viewed 17 August 2012, 8) LVMH Moet Hennessy Louis Vuitton (SWOT Analysis) n.d., yousigma, viewed 17 August 2012, 9) Management: The Business Environment of Organizations 2012, moneyinstructor, viewed 10 August 2012, 10) Passariello, C. 2012, Louis Vuitton tries modern methods on factory lines, post-gazette, viewed 17 August, 11) Pearce, R. 2006, ‘Globalization and development: an international business strategy approach’, Transnational Corporations, Vol.15, No.1, pp.39-74, viewed 18 August 2012, 12) Project Proposal 2012, slideshare, viewed 17 August 2012, 13) What is Porter’s Five Forces Analysis? 2012, coursework4you, viewed 17 August 2012, Read More