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 – increasing energy prices, central banks are concerned over increasing inflation, wage bills are increasing, cloud computing is disrupting traditional business models, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption,
competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, 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 -
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.
Digital Transformation in Apparel/Accessories industry
- digital transformation varies from industry to industry. For Louis Vuitton digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Louis Vuitton has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
Organizational Resilience of Louis Vuitton
– The covid-19 pandemic has put organizational resilience at the centre of everthing Louis Vuitton does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Louis Vuitton is one of the most innovative firm in Apparel/Accessories sector.
Effective Research and Development (R&D)
– Louis Vuitton has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Louis Vuitton staying ahead in the Apparel/Accessories industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
Learning organization
- Louis Vuitton is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Louis Vuitton is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Louis Vuitton emphasize – knowledge, initiative, and innovation.
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.
Analytics focus
– Louis Vuitton is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Apparel/Accessories industry. The technology infrastructure of Italy is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
Weaknesses of Louis Vuitton | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Louis Vuitton are -
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Louis Vuitton, in the dynamic environment of Apparel/Accessories industry it has struggled to respond to the nimble upstart competition. Louis Vuitton has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that Louis Vuitton needs to have more collaboration between its sales team and marketing team. Sales professionals in the Apparel/Accessories industry have deep experience in developing customer relationships. Marketing department at Louis Vuitton can leverage the sales team experience to cultivate customer relationships as Louis Vuitton is planning to shift buying processes online.
High operating costs
– Compare to the competitors, Louis Vuitton has high operating costs in the Apparel/Accessories industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Louis Vuitton lucrative customers.
Skills based hiring in Apparel/Accessories industry
– The stress on hiring functional specialists at Louis Vuitton has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Louis Vuitton has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Apparel/Accessories industry using digital technology.
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 -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Louis Vuitton can use these opportunities to build new business models that can help the communities that Louis Vuitton operates in. Secondly it can use opportunities from government spending in Apparel/Accessories sector.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Louis Vuitton can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
Using analytics as competitive advantage
– Louis Vuitton has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Apparel/Accessories sector. This continuous investment in analytics has enabled Louis Vuitton to build a competitive advantage using analytics. The analytics driven competitive advantage can help Louis Vuitton to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Louis Vuitton can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Louis Vuitton can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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.
Threats Louis Vuitton External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Louis Vuitton are -
High dependence on third party suppliers
– Louis Vuitton high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Louis Vuitton can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Louis Vuitton prominent markets.
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.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Louis Vuitton in Apparel/Accessories industry. The Apparel/Accessories industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Louis Vuitton may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Apparel/Accessories sector.
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.
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.
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.
