Value Chain At Louis Vuitton Essay

1097 words - 4 pages

Competitive advantage at Louis Vuitton and GucciIntroduction to The case: Names first(2) This case explores the competitive advantage in the world of high fashion luxury goods. Does the advantage come only from the brand name or there are other advantages? Louis Vuitton and Gucci are brand names which are always associated with high fashion and are among the most successful international fashion houses.(3) The first part of the presentation examines the value chain and the value system of the famous French fashion house LV. This will help to identify those parts of the business that are particularly profitable and therefore likely to be linked with potential advantage. The second part of the presentation then uses the value chain to identify those resources that are exceptional and have sustainable competitive advantage.(4) The World of LuxuryLuxury products have more than necessary and ordinary characteristics compared to other products of their category, which include their relatively high level of price, quality, aesthetics, rarity, extraordinariness, and symbolic meaning.With annual sales of over US$165 billion and gross profit margins of over 50 percent the major luxury goods companies rely on famous brands like Louis Vuitton and Gucci to deliver a competitive advantage. Does the advantage come only from the brand name or there are other advantages?(5) Louis Vuitton(6) Gucci(7) The value chain and the value system were developed by Professor Michael Porter. The concept of value added can be used to develop company's sustainable competitive advantage. Like most of the organizations LV consists of activities that link together to develop the value of the business. The value chain is used for developing competitive advantage due to fact that they are unique to an organization.In addition, the fashion house is part of a wider group of value generation - the value system- which includes suppliers, distributers, buyers and competitors.The value chain analysis emphasises on the linkage between two areas:First, the value chain links the value of the organisation's activities with its main functional parts. Then the analysis examines how each part might be considered to contribute towards the generation of value in the company and how this differs from the competitors. (Lynch, 2009)(8) The value chain framework is a handy tool for analysing the activities in which the firm can pursue its distinctive core competencies, in the form of a low cost strategy or a differentiation strategy. In addition, Porter splits the company into two main parts:Primary activities or the production process itself which includes: inbound logistics, operations, outbound logistics, marketing and sales and services.Support activities such as the human resources management and the firm's infrastructure.The word 'margin' in the diagram is used by Porter to indicate what is defined as added value. The margin is the difference between the total value and the collective cost of...

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