Louis Vuitton (LVMH) SWOT Analysis / TOWS Matrix / MBA Resources
Apparel/Accessories
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Louis Vuitton (Italy)
Based on various researches at Oak Spring University , Louis Vuitton is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Louis Vuitton can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Louis Vuitton, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Louis Vuitton operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Louis Vuitton can be done for the following purposes –
1. Strategic planning of Louis Vuitton
2. Improving business portfolio management of Louis Vuitton
3. Assessing feasibility of the new initiative in Italy
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Louis Vuitton
Strengths of Louis Vuitton | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Louis Vuitton are -
Cross disciplinary teams
– Horizontal connected teams at the Louis Vuitton are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Strong track record of project management in the Apparel/Accessories industry
– Louis Vuitton is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Louis Vuitton is one of the most innovative firm in Apparel/Accessories sector.
Superior customer experience
– The customer experience strategy of Louis Vuitton in Apparel/Accessories industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Louis Vuitton has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Louis Vuitton to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Louis Vuitton has one of the best training and development program in Consumer Cyclical industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy of Louis Vuitton comprises – understanding the underlying the factors in the Apparel/Accessories industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Sustainable margins compare to other players in Apparel/Accessories industry
– Louis Vuitton has clearly differentiated products in the market place. This has enabled Louis Vuitton to fetch slight price premium compare to the competitors in the Apparel/Accessories industry. The sustainable margins have also helped Louis Vuitton to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Louis Vuitton in the Consumer Cyclical sector have low bargaining power. Louis Vuitton has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Louis Vuitton to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Louis Vuitton has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Apparel/Accessories industry. Secondly the value chain collaborators of Louis Vuitton have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Louis Vuitton has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to lead change in Apparel/Accessories
– Louis Vuitton is one of the leading players in the Apparel/Accessories industry in Italy. Over the years it has not only transformed the business landscape in the Apparel/Accessories industry in Italy but also across the existing markets. The ability to lead change has enabled Louis Vuitton in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Louis Vuitton | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Louis Vuitton are -
Interest costs
– Compare to the competition, Louis Vuitton has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, Louis Vuitton has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Apparel/Accessories industry over the last five years. Louis Vuitton even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of Italy, Louis Vuitton needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the Apparel/Accessories industry, Louis Vuitton needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Louis Vuitton is slow explore the new channels of communication. These new channels of communication can help Louis Vuitton to provide better information regarding Apparel/Accessories products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Apparel/Accessories industry
– because of the regulatory requirements in Italy, Louis Vuitton is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Apparel/Accessories industry.
High cash cycle compare to competitors
Louis Vuitton has a high cash cycle compare to other players in the Apparel/Accessories industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee of Louis Vuitton is just above the Apparel/Accessories industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– From the 10K / annual statement of Louis Vuitton, it seems that company is thinking out the frontier risks that can impact Apparel/Accessories industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Louis Vuitton supply chain. Even after few cautionary changes, Louis Vuitton is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Louis Vuitton vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Louis Vuitton strategy
– From the outside it seems that the employees of Louis Vuitton don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Louis Vuitton Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Louis Vuitton are -
Building a culture of innovation
– managers at Louis Vuitton can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Apparel/Accessories industry.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Louis Vuitton to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Better consumer reach
– The expansion of the 5G network will help Louis Vuitton to increase its market reach. Louis Vuitton will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Manufacturing automation
– Louis Vuitton can use the latest technology developments to improve its manufacturing and designing process in Apparel/Accessories sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Loyalty marketing
– Louis Vuitton has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Developing new processes and practices
– Louis Vuitton can develop new processes and procedures in Apparel/Accessories industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Louis Vuitton is facing challenges because of the dominance of functional experts in the organization. Louis Vuitton can utilize new technology in the field of Apparel/Accessories industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Louis Vuitton can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Apparel/Accessories industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Louis Vuitton can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Louis Vuitton can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Louis Vuitton to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Louis Vuitton to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Louis Vuitton has opened avenues for new revenue streams for the organization in Apparel/Accessories industry. This can help Louis Vuitton to build a more holistic ecosystem for Louis Vuitton products in the Apparel/Accessories industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Apparel/Accessories industry, but it has also influenced the consumer preferences. Louis Vuitton can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Apparel/Accessories industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Louis Vuitton in the Apparel/Accessories industry. Now Louis Vuitton can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Louis Vuitton External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Louis Vuitton are -
Shortening product life cycle
– it is one of the major threat that Louis Vuitton is facing in Apparel/Accessories sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Apparel/Accessories industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Louis Vuitton can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Louis Vuitton needs to understand the core reasons impacting the Apparel/Accessories industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Louis Vuitton can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Apparel/Accessories industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Louis Vuitton business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Louis Vuitton will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Regulatory challenges
– Louis Vuitton needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Apparel/Accessories industry regulations.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Louis Vuitton.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Louis Vuitton in the Apparel/Accessories sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Apparel/Accessories industry are lowering. It can presents Louis Vuitton with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Apparel/Accessories sector.
Environmental challenges
– Louis Vuitton needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Louis Vuitton can take advantage of this fund but it will also bring new competitors in the Apparel/Accessories industry.
Weighted SWOT Analysis of Louis Vuitton Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Louis Vuitton needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Louis Vuitton is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Louis Vuitton is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Louis Vuitton to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Louis Vuitton needs to make to build a sustainable competitive advantage.