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 (Germany)
Based on various researches at Oak Spring University , Louis Vuitton is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, technology disruption, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies,
central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , 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 Germany
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Weaknesses of Louis Vuitton | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Louis Vuitton are -
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 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.
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.
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.
Products dominated business model
– Even though Louis Vuitton has some of the most successful models in the Apparel/Accessories industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Louis Vuitton should strive to include more intangible value offerings along with its core products and services.
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.
High bargaining power of channel partners in Apparel/Accessories industry
– because of the regulatory requirements in Germany, 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 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.
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.
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.
Louis Vuitton Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Louis Vuitton are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Increasing wage structure of Louis Vuitton
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Louis Vuitton.
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.
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.
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 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.
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.
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.
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.
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.