Case Essay

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Case 16: LVMH The story of LVMH is significantly a story of the overarching ambition of one highly cultivated individual: Bernard Arnault, founder and CEO of LVMH, who strikingly combines artistic sensibility and business acumen. This is a case study illustrating how industries may be mature only by definition, and that the definition need persist only until such time as one creative individual bends his mind to the question “how can we create new value?” The case describes the revitalization of established but somewhat tired brands, with issues such as strategic leadership, image-driven innovation, market positioning, and related diversification all being to the fore. LVMH is an example of a company that successfully combines size (46,000 employees; 15% of a global market worth $68bn) with coherence and autonomy of operation, mass production with luxury, diversification with market focus, continuity with change, conservatism with risk-taking, and financial success (value has grown 15-fold and profit 5-fold in 11 years) with free-ranging creativity. The analysis could begin by challenging students to explain how these contradictions are so successfully reconciled at LVMH. An “Entrepreneurial Organization” The characterization of LVMH as an “entrepreneurial organization” is the beginning of an answer. Such an organizational form succeeds in an environment that is simple and dynamic. The simplicity is evident along a number of dimensions. The products—whether handbags or perfume, champagne or a watch—may be described simply as “superbly designed symbols of social prestige.” These brands are clustered into 5 “branches:” wines and spirits, fashion and leather goods, perfumes and cosmetics, watches and jewelry, and selective distribution. The simplicity of strategy formation is maintained by the manner of diversification (strongly marketing related,

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