Louis Vuitton (0HAU) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Louis Vuitton (United Kingdom)

Based on various researches at Oak Spring University , Louis Vuitton is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Louis Vuitton

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.

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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 United Kingdom
4. Making a Apparel/Accessories sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Louis Vuitton

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Strengths of Louis Vuitton | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Louis Vuitton are -

Successful track record of launching new products

– Louis Vuitton has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Louis Vuitton has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

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.

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 United Kingdom 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.

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.

Diverse revenue streams

– Louis Vuitton is present in almost all the verticals within the Apparel/Accessories industry. This has provided Louis Vuitton a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.

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.

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.

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.

Ability to lead change in Apparel/Accessories

– Louis Vuitton is one of the leading players in the Apparel/Accessories industry in United Kingdom. Over the years it has not only transformed the business landscape in the Apparel/Accessories industry in United Kingdom 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.

Ability to recruit top talent

– Louis Vuitton is one of the leading players in the Apparel/Accessories industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

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.

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.

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Weaknesses of Louis Vuitton | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Louis Vuitton are -

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.

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.

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.

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.

Increasing silos among functional specialists

– The organizational structure of Louis Vuitton is dominated by functional specialists. It is not different from other players in the Apparel/Accessories industry, but Louis Vuitton needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Louis Vuitton to focus more on services in the Apparel/Accessories industry rather than just following the product oriented approach.

Low market penetration in new markets

– Outside its home market of United Kingdom, Louis Vuitton needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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.

Slow to strategic competitive environment developments

– As Louis Vuitton is one of the leading players in the Apparel/Accessories industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Apparel/Accessories industry in last five years.

Need for greater diversity

– Louis Vuitton has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

High dependence on Louis Vuitton ‘s star products

– The top 2 products and services of Louis Vuitton still accounts for major business revenue. This dependence on star products in Apparel/Accessories industry has resulted into insufficient focus on developing new products, even though Louis Vuitton has relatively successful track record of launching new products.

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.

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Louis Vuitton Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Louis Vuitton are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Louis Vuitton can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Louis Vuitton to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Learning at scale

– Online learning technologies has now opened space for Louis Vuitton to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

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.

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.

Buying journey improvements

– Louis Vuitton can improve the customer journey of consumers in the Apparel/Accessories industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.

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.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Louis Vuitton in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Apparel/Accessories industry, and it will provide faster access to the consumers.

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.

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.

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Threats Louis Vuitton External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Louis Vuitton are -

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.

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.

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.

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.

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.

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.

Consumer confidence and its impact on Louis Vuitton demand

– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Apparel/Accessories industry and other sectors.

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.

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.

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.

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.

Technology acceleration in Forth Industrial Revolution

– Louis Vuitton has witnessed rapid integration of technology during Covid-19 in the Apparel/Accessories industry. As one of the leading players in the industry, Louis Vuitton needs to keep up with the evolution of technology in the Apparel/Accessories sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.

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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.

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