Business Homework

Louis VuiUon I

SYNOPSIS

1 Moet Hennessy Louis Vuitton (LVMH) enjoyed double-digit growth and healthy plolIIlI1 ity in 2010 and 2011. A large part of this growth had been driven by its tla lship nlllp I Vuitton (LV). In 2011, LVMH announced that long-time LV CEO Yves arc -Ik- w01I11 replaced at the end of20l2 by Jordi Constans, an executive from the French food pili 1 multinational Danone SA. However, after serving less than a month, Con tans wus r~'1III in December 2012 by Michael Burke, an LVMH insider who had been with the ~'1I1111 for nearly 30 years. While LV had enjoyed rapid growth over the la t two years, Ih - 'III tion was whether such a growth rate was sustainable, What were the challenges lucln and how should these challenges be addressed?

HISTORY

2 Louis Vuitton Malletier was born in 1821 in Anchay, France. At age 16 he moved 10 1'11I and took up a job as an apprentice trunk maker, over time becoming a respect d 111111 maker in his own right. In 1854, he opened his own company and over the next 1'0111' III went about redesigning the trunk. In those early days, trunks were oval shaped and Ih I fore not stackable; as such, they were not conducive to the emerging and rapidly '1'0 III forms of travel on steamers and trains. Vuitton came up with a flat-top trunk with flal hill that was stackable and suitable for long journeys. A few years later, and in respom • I competitors copying his original design, Vuitton invented his famous trunk made or I III and red striped canvas.' The canvas protected the contents of the trunk from rain and du I, and customers loved the unique design. This innovation in material and design also mud II difficult for competitors to copy. Vuitton's business thrived. He was able to cemenl his Jlo I tion among aristocracy in Europe and beyond, in places such as Egypt and India, when II was appointed the official packer and trunk maker for Eugenie de Montijo, Napol Oil III' wife and a Spanish countess. As a result, the business strengthened further. Vuiuon's , II cess is said to have been built on three rules: to master his savoir jaire, to provide x 'l'lIl'llI Source: Manu Mahbubani wrote this case under the supervision of Professor Mary Crossan solely to provkh: material for class discussion. The authors do not intend to illustrate either effective or ineffective handling 11111 managerial situation. The authors may have disguised certain names and other identifying information 10 pi 1110'1 I confidentiality.

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IVEY Copyright © 2013, Richard Ivey School of Business Foundation

Richard Ivey School of Business The Universi\yofWtsu:rn Ontario

Version: 2013-04-04

'This case has been written on the basis of published sources only. ons qu smly, the interpretatiou urul perspectives presented in this case are not necessarily those of Louis Vuiuon 111'/111 or its employe's, 'Dana Thomas, Delu-xe, How Luxury Lost its Lustre, P nguin, 1.011011111, 111111

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3 icorgcs Vuiuon, Loui Vuitton ' son, inherited the company after his father's death in 1892. George continued the company's focus on innovation. He invented the five-number combi- nation lock found on the trunks even today. He also designed the famous monogram pattern and the more complex pattern used on the canvas of LV products. Part of the motivation for these latter innovations was to counter the increased counterfeiting facing the company at that time.' Georges is also credited with designing hundreds of purses and moving the company into the handbag business. It was also during his tenure that LV started its global expansion. In 1893, LV displayed its products at the Chicago World Fair. In the years follow- ing, stores were opened internationally in New York, London, Alexandria, and Buenos Aires.

4 The Second World War brought an end to this expansion. The period was marked by efforts of the Nazi occupiers to move the couture houses and luxury businesses from Paris to Berlin. Factories were closed and LV's international distribution contracts were termi- nated. After the war, the luxury business revived, but LV was not able to recapture its former position. By 1977, its revenues were only US$20 million and profitability low. It was under these circumstances that Renee Vuitton, the family's matriarch, brought in her son-in-law Henri Racamier to lead the business. Racamier had no background in luxury but was an astute businessman.

5 Racamier discovered that the majority of profits in the value chain were being re- tained by merchants. To bring these profits in-house, he started bypassing the merchants and opening company-owned stores. He also pushed for rapid global expansion, opening 9S stores by the mid-1980s. TheLV brand was pushed aggressively, products were diver- sified, manufacturing expanded, and new technologies introduced. Racarnier also started acquiring companies that produced high-quality products, such as Givenchy and the cham- pagne house Veuve Clicquot. Revenues grew to nearly US$l billion by 1987.6 Racamier also took LV public and listed it on the French Bourse and the New York Stock Exchange. Going public allowed him access to capital, which was required to fund ongoing growth.

6 In 1987, as part of this strategy, Racamier agreed to a merger with Moet Hennessy, a company that was much larger than LV, to form the Moet Hennessy Louis Vuitton (LVMH) group. The companies had an agreement that each division would be run independently with its own management and philosophy, with Racamier maintaining his leadership po- sition at LV, However, relationships between the two divisions deteriorated rapidly with disputes and legal battles over how to run the company. Finally, in 1987, Racamier brought in a property developer, Bernard Arnault, to bolster his position against Moet Hennessy and try to reverse the merger. It was a move that Racarnier would come to regret. Arnault had different plans, and those plans did not include Racamier.

3Ibid. 'Pamela Golbin, Louis Vuittonl Marc Jacobs, Rizzoli; Enfield: Publishers Group UK (distributor), New York, 20J 2, p. 27. 'hllp://voices.yahoo.comllouis-vuitton-history-behind-purse-53285.html, accessed September 11,2011 . ••111111:llwww.l.llndingllnivcrse.com/company-h istorie IIvmh-mo%C3%A Bt-hennessy-lou is-vu i Iton-sa-h istory/, III I "M~I'd S"pl nnh r I 1,20 I I.

11\'111lid 1\IIIIIili W II i'lIld\lld I 1111'1011111111'11\11111111111111,wlllid h Ji'o!lI\'H111I'Oil l'llh 11111'h 01' his W '[lllh helll ' built 011I,VMll.l\l'lIl1Uit WliS 01'1 iuull II jlI'Op '1'1 d 'v 'IOPI'I wlth no bacl ground in the tradition and It .rituu or the luxury industry. II' »u 'I"d 11ll'hulu 11\ with the purchase of the then-bankrupt rcnch t xtil conglorn rat; 130ll~SIl' Suillt I'll II for US$80 million; its holdings included the couture house Dior," It was this latter hulllill 1 which provided him with a base to establish a luxury good powerhous ,that 1\1'111111111111 interested in. He brought his reputation for laser-like focus on profitability and 'l'Irdl'lIl \ to the acquisition. The French press dubbed him "the terminator." Fir d ex cutiv 's wlIlild complain about learning of their dismissal from the press. Over the next f w y 'aI's. 1\IIIIIIili laid off over 8,000 employees and sold off large parts of the conglomerate for U $,0011111 lion." He grew Dior into a profitable business using methods of vertical integral ion Sllllllill to those employed by Racamier.

8 When Arnault was approached by Racamier to help the latter bolster his posit ion ill'lIll1 I the Moet and Hennessy families, rather than backing him Arnault quickly acquluxl II 45 percent controlling stake in LVMH and garnered support from the Moet and II'IIIH' \ families. An 18-month legal battle for control of LVMH commenced between Arnuult IIItI Racamier, resulting in a victory for Arnault and the resignation of Racamier. Arnuull hi came the CEO of the company, and control of LV slipped away from the Vuitton I'ulltlh Tile stealth by which Arnault was able to acquire a controlling stake in LVMH and thl' h'\'1 I of bitterness and Machiayellian behavior for control ultimately contributed to the I' 'wl'il IIiH of French laws around takeovers. 10

THE PERSONAL lUXURY GOODS INDUSTRY

9 LVMH competed in the global personal luxury goods industry. This industry was proj 'l'll'd to have revenues of €212 billion in 201211 and included products such as apparel, p 1'1'111111', cosmetics, shoes, leather goods, and hard luxury goods. Leather goods included produ, I such as handbags and accessories, while hard luxury goods included watches and j 'wl'll \ The global personal luxury goods industry was a subset of the larger €1.1 trillion ilohul luxury industry that included a wide range of products and services from shoes and 'Iolh\, to yachts and travel experiences. 12

10 The growth rate for the personal luxury good industry for 2012 was projected to III 10 percent in euro terms. However, since most of the major players in the industry Wl'lI' based in Europe, the euro exchange rate had a significant impact on nominal growth 1'1I11' For example, in 2012, the growth rate in constant exchange rate terms was expected to lit' 5 percent. In 2011, the market had grown by 11 percent in euro terms and 13 per' 'Ill II constant exchange rates, while in 2010, it had grown by 13 percent in euro terms and H IH'I cent at constant exchange rates. By 2015, the luxury goods market was expected to '1'01 ,

7http://www.forbes.com/profile/bernard-arnault/.accessed September II,20II. 8http://www.britannica.comIEBchecked/topic/35681/Bernard-Arnault,accessed September 11,20 II. "Thomas, Deluxe. IOIbid. II http://www.bain.com/about/press/press-releases/bain-projects-global-Iuxury-goods-mu rkct - W iII-grow-l.n percent-in-2012.aspx,accessed February 3, 2013. 12http://www.ft.com/intllcms/s/0/2cd3653e-acOe-llel-a8aO-00144I"alll!·O.hllllllll1.\II·.IWIMx.lI..1I.. 'ss~'d September 17,2012.

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5%1\ itl·P sci fie Rest of the World ~II

Source: ClaucliaD' Arpizi/2 [,//,\:i1l'j Milan, October 2012.

fO II at constant exchanges. to €'P ,11. I of between 4 percenH perc OJ I were growing the fas and by tm grown by an averagel- perce f C~I to continue into 20l:rowth, ~fOlt{ UOIfor leather goods ancpercen ~

I r wiThe largest marke" uxu '1' . . Chi Pep!highest growth rate -m 111/.

hibit 1 breaks down riluesbylth projected for each re! Each tg11

A fast-growing anlportant p~ land China, Hong K0Ind Mao/ which was in mainlj:hina. J ge 1 cent, in euro and conf excha%~ ~ to around 20 percenteuro tel' f.. I.ln numbers underestim' the SIZl luxury goods custon were C ;ro11, travel widely. They tefore no Ing their travels. Such test shopp' get of luxury goods and: risk of fhe . t'lneIIIEurope were overpercen I,~' ceived as less likely Jecounttl sales in Europe wer~de to Ct/~ t to tourists. IS LV did1ke effo~rol 2012 the company jeased E ,fac

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ing weakening in dend as a ~rll. ) place by govemmen'' southIS I' in consumption of pry goo

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(Constant K) Alne mil I IIIOP(I JlPdr1 Asia-Pacific Rest of the World

5% 8%

18%

8%

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10%

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Source: Claudia D' Arpizio, 2012 Luxury Goods Worldwide Market Study, 11th Edition, Bain and Company, Milan, October 2012.

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at constant exchange rates, to €250 billion with a compound annual growth rate (CAGR) of between 4 percent and 6 percent. Of the various product lines, leather goods and shoes were growing the fastest, and by 2011 these formed the largest product segments. They had grown by an average of 15 percent over the previous decade, and this growth was expected to continue into 2012. Growth, at constant exchange rates, was expected to be 16 percent for leather goods and 13 percent for shoes. 13

11 The largest markets for luxury goods were in Europe and the United States, though the highest growth rate was in China, which had recently overtaken Japan in market size. Ex- hibit 1 breaks down revenues by region and shows the 2012 and 2013 growth rates that were projected for each region. Each of the regions, however, had different growth dynamics.

A fast-growing and important region was the Greater China market, which included main- land China, Hong Kong and Macau, and had a total market size of €23 billion, 65 percent of which was in mainland China. In 2011, the sales in mainland China had grown by 30 per- cent, in euro and constant exchange rate terms. For 2012, growth was expected to decelerate to around 20 percent in euro terms and 8 percent in local currency terms. '4 However, these numbers underestimated the size of the Chinese market. By 2011, one in four worldwide luxury goods customers were Chinese. Wealthy customers from mainland China tended to travel widely. They therefore not only bought luxury goods at home but also did so during their travels. Such tourist shopping was fueled by the differences across regions in prices of luxury goods and the risk of getting counterfeit products. For example, in 2011, prices in Europe were over 40 percent cheaper than in mainland China, and these goods were per- ceived as less likely to be counterfeit when purchased in Europe. Indeed, over one-third of sales in Europe were made to Chinese tourists. In 2011, 60 percent of sales in France were to tourists." LV did make efforts to reduce such price disparity. For instance, in October 2012, the company increased European prices by 8 percent.

Growth in Europe on the surface had been steady in 2011. But this masked an underly- ing weakening in demand as a result of the financial turmoil and austerity measures put in place by governments in southern Europe. There had, for example, been a significant drop in consumption of luxury goods in Italy. However, much of this decline had been offset

12

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I3Claudia D' Arpizio, 2012 Luxury Goods Worldwide Market Study, 11th Edition, Bain and Company, Milan, ctober 2012.

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-------'-..---111 n rn n ils xluw hul '1lIdlllllll'l'OVl'l 1111111IIIl' .100H 1(' '\', , luu. ("owlll "Ill' Wl'll' 1"111'('11·\11111 10 IJ pel" 'Ill ill 201_ 'Oll'P"1'xl 10 I() P 'I' "Ill ili 20 I 1,1/ III .I IIpuII, while i'l'oWlh ill I terms wa expected to be 8 I crccnt due to the rising yen, in constant 'x 'hall ' ' 1'1111'I 'II the market was expected to be stagnant with eith r very low or no irowth.

Customer Segments 15 The industry was split between three customer segments: absolute, aSI irat ional, and

sible." At the top of the pyramid was the absolute segment that consi 'led or individuul high and ultra-high net worth. These customers looked for true luxury, which was, in words of Francoise Montenay, the president of Chanel Europe:

At a minimum, it must be impeccable. Maximum, unique. It's the way you are spoken to, th way the product is presented, the way you are treated. Like the tea ceremony in Japan: the ritual, the respect, the transmission from generation to generation. 19

16 These customers desired exclusive products backed by brands that were based Oil I tage and tradition. They generally bought the highest end of the product line in I' 'ad I wear products or bought made-to-measure products. These customers looked for cxc II craftsmanship, the use of high-end materials and an excellent buying experience. "h valued their privacy. Vendors set up private fitting areas, which could be salons or prl III apartments, for these customers to select their designs and to get measured and fill xl, II some cases, vendors would fly a salesperson along with a collection to a buyer who 1111hi for example, reside in China. The low-key nature of these purchases extended to the d' II for the products not to carry logos that communicated ostentatious consumption. Price II an important factor, with true luxury expected to be priced at levels that most could 11111III ford. In the words of a customer at Daslu, a high-end fashion store in Sau Paulo, BI'lII.i1

Luxury is not how much you can buy. Luxury is the knowledge about how to do it right, IIIIW to take the time to understand and choose well. Luxury is buying the right thing." (ernphusl in the original)

17 The second segment was the aspirational customer. These included the top 10 pCI''(.'111III income earners such as celebrities, professionals, and business men and women with hi II disposable incomes. High quality, an exclusive buying experience, and brands based (HI1111 dition, heritage and that communicated the high quality of their purchases were impOlllIlI1 attributes for this group.

18 The final segment was the accessible customer who through the purchase of a luxtu product experienced the feeling of having membership in an elite group. They gOI II III I of the world of the rich and famous. While these customers were more price consciou: • Ih product they bought needed to convey a high level of quality and be backed by a brund Ihlll conveyed exclusivity.

19 In all three segments, customers valued products that were made in France 01' iII ill hi I parts of Europe, more than those made in Asia or even the United States. The hi/lit I growth between 2012 and 2014 was expected to come from the top two segments 01 1111

"Ibid. "Ibid. 18hltp:llaffaritaliani.libero.it/static/uploadlbain/bain.pdf, accessed December 7. ,0 I~. "Thomas, Deluxe, p. 324. 2°Ibid., p. 345.

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\ II I I'll II II IIII'IIIW lu-luw Ihi' 111111'"'11'111 ','I 1111'111'11I 111IIII' .uxtum 'I' S' 'Ill 'Ills differed across murk 'Is. For example, in hina as

1111'11111Ilid IWi'lilll' mor common, the absolute egrnent moved away from these brands ,111\'\'Iill' W 'I" viewed as becoming less exclusive. Focus of this segment moved toward Ihsollll' luxury, which included high-end experience and service, and away from logo products. On the other hand, this issue was less prevalent in Japan where high-luxury brands were heavily indulged in by all customer segments without undermining the attrac- tiveness of the brand in anyone segment.

21 Changing demographics and global economic challenges had led to some changes in consumer buying behavior. For example, customers, especially at the higher end of the market, had moved toward placing more value on luxury experiences, such as luxury travel and spas, than luxury purchases."

Pricing and Distribution 22 The major companies in the industry tended to cater to all three segments. For example,

PPR offered products through its Puma brand to the accessible customer segment, through the Gucci brand to the accessible and aspirational customer segments, and through brands such as Bottega Veneta to the aspirational and absolute customer segments. Smaller com- petitors tended to focus on specific customer segments. For example, Hermes focused more on the higher end of the market by offering bespoke, higher quality, and more expensive products. Prices charged by the companies varied according to the segment at which the product was targeted. Generally, lower prices for products targeted the accessible customer segment. Prices for a handbag would start at around US$3,000 for the absolute customer segment and could exceed US$100,000. They would start at around US$l,OOO for the aspi- rational segment and around $300 for the accessible segment. 23

23 The highest prices were reserved for limited edition products or bespoke, made-to- measure offerings. However, especially at the high end of the market, players tended to compete more through product design, the buying experience, and brand image rather than through price. In general, companies had been able to command a high price for their prod- ucts. In keeping with these dynamics, companies had tended to invest heavily in advertising to build their brands and in product design and development to deliver unique products. Distribution models also varied considerably with some players selling through resellers while others, such as LV and Hermes, relying on company-owned stores. Many of the more successful companies controlled most aspects of their production and distribution in order to ensure a level product quality and experience that justified high prices for their goods. In many cases, companies used multiple channels, including directly owned stores (DOS), department stores (termed wholesale), and licensing of their brands to third parties. Growth rates varied between the various channels. For example, in 2011, DOS sales had increased by 15 percent in euro terms, and 9 percent at constant exchange rates versus 10 percent in euro terms for the wholesale channel. This trend was expected to continue in 2012.

21http://www.altagamma.itJimg/sezione3/files/397 _975_file.pdf, accessed December 7, 2012. "l! IIflS:llll'wlv. b 'gpe rspect ives. com/content/a 1'1icle.l'IcOilsumer-producls-"Ulol11olive_luxe_red,lxl? chapt 1'=3, 1I1'1'I'~NI'd1'1\'111'11111'1'24,2012. IIIIIJI //WI \V,PWl'.I·OIIl/il/il/puhli 'uliolls/uss 'Is/do 's/1lIul'k 'Ivision ILIXlIl'y 20 12.pdl', ae 'ss xl l c . '111h'1'7, ~()12.

R v nu 5 Gross Profit

Operating Profit ,0 Net Pmfit 1,

Shares Outstanding (mm) 478 492 126 126 566

Current Assets 11,199 13,267 6,940 5,277 7,024

Non Current Assets 25,9'65 33,802 17,754 17,508 2,659

Current Liabilities 7,060 9,594 6,495 5,472 2,213

Non Current Liabilities 11,900 13,963. 6,549 6,a33 488

Total Debt 5,266 7,266 5,219 4,678 222

Shareholder Equity 18,204 23,512 10,599 10,925 6,992

Source: LVMH Annual Reports, 2006 to 2011.

Similarly, sales in outlet stores that sold discounted merchandise had risen by 19 P 'rl' 'III II constant exchange rates in 2011 and were expected to rise by 20 percent in 2012.l"

Suppliers 24 Many of the companies, especially at the higher end of the market, designed and 111:11111111

tured their products in-house. As such, they generally sourced only component paris, ~11 II as leather, zippers, and clasps, from external suppliers. Companies were selective ill 111'11 purchasing and had dedicated functions to ensure the supplies being purchased 11Il'! III required quality standards. While the industry was dominated by a few large buyers, 111('1 was no such concentration on the side of the suppliers.

liHE LVMH GROUP

25 LVMH, Moet Hennessy Louis Vuitton, operated five businesses: wines and pmrs, P('I fumes and cosmetics, 'fashion and leather goods, watches and jewelry, and select ive 1(' tailing. The group owned over 60 luxury brands." In 2011, sales were €23.6 billion 111111 profits were €3 billion. Exhibit 2 gives the financial details of LVMH group and 1111"I'(' III its competitors for 2009 to 2011. The group had enjoyed substantial growth in revenue 111111 profitability over this time period.

.Acqulsttlons . -,26 » '-. While it had grown over the last two decades both through acquisitions and organicall ,III'

quisitions had played a major role. The majority of acquisitions had been in companies Ihlll produced high-qualityluxury products. Some of the major acquisitions included iWlll'ilV

24Claudia D' Arpizio, 2012 Luxury Goods Worldwide Market Snu!v, 11111I (dilioli. Bllin und orupuny, MIIIIII, October 2012. 25http://www.lvrnh.com/lhe-gl.Oup/lvl1lh-flIYIIIP.(II.(.(.o..l.I.II •••·/•••/II/\ •••• 1i11

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IlIlIqlllli 111111111I II III 1111\'111Illuli " ( I()()()). II III U h Id 111,\, III ruull pll' I\lX\l1 1111111'111111III'IIIdili Ii'lldi, IHIIiI'1'011I-.will' 1\1;11'I'S 1I1lt!hnlllds Sit '11liS I' II ,lIt'iks '11 111111NIIIII III' Itlds, 't. III .0 I I, LV M II .Ios ,t! u deal 10" .quirc the jewelry and watch maker IIlill'lIll. Illd'lIri was a large player in the industry with 2010 revenues of €I billion, and lis 11111I'IIIiol1into LVMH was expected to require substantial attention from the LVMH ~'X' .utivc team. Other than Bulgari, LVMH made one other acquisition and invested in two companies in 2011. In general, the rate of acquisitions made by LVMH had fallen over the last few years with greater emphasis placed on buying partial stakes in companies.

27 In 2010, LVMH quietly acquired 17 percent of the outstanding shares of its competitor Hermes. Arnault purchased the shares through derivatives to circumvent the French law that requires a company to report more than a 5 percent ownership interest. This ensured that he did not have to make his position public until a larger share had been acquired. Hermes was surprised by the move and did not accept Arnault's assurance that LVMH had no intention to acquire Hermes or seek a board seat. By 2011, LVMH's stake in Hermes had increased to over 22 percent. To prevent a possible takeover, members of the Hermes family formed a holding company that controlled over 50 percent of the company's shares. In 2012, Hermes filed a lawsuit against LVMH, claiming irregularities in the way LVMH had acquired its stake.

FASHION AND LEATHER GOODS GROUP

28 The Fashion and Leather Group had a number of brands under its umbrella that sold hand- bags and leather goods. These brands included Louis Vuitton, Loewe, Fendi, Marc Jacobs, and Donna Karan New York. These brands had operated in different customer segments. Louis Vuitton had positioned its products in the absolute and aspirational customer seg- ments. Loewe had been situated at the absolute customer segments and at the higher end of the aspirational customer segments. Prices for its handbags had started at $1,500, though most had been priced at between $2,000 and $4,000. Loewe's high-end handbags had been priced over $5,000 and they had emphasized their made-to-order offering, which had tended to be more expensive, Fendi and Marc Jacobs had offered products primarily to the aspirational customer segments. Handbags prices at Fendi had started at $600 though most handbags had been priced between $800 and $2,500. The high-end handbags had been priced around $4,000. At Marc Jacobs prices had started at $800, most of the hand- bags had been priced between $1,000 and $2,500, and high-end handbags had been priced between $10,000 and $25,000, though the selection at this range had been limited. Donna Karan New York in contrast had served the accessible customer segment and had priced its handbags between $150 and $500. Details about Louis Vuitton's products and prices are provided in the next section.

29 The Fashion and Leather group's financials are given in Exhibit 3. Revenues for 2011 had grown in euro terms by 15 percent and organic growth, in constant exchange rate, was 16 percent. Revenues in 2010 had grown by 20 percent in euro terms and 13 percent in organic terms." Revenues by region are provided in Exhibit 4.

2(.llItp:llwww.I700vers.COlnicompanyILVMH_Mo%EBIJJennessy_Louis_Vu.ittoll_SAicr:qci-I-II.!ihxk.htm.l. 1/1'1'1'.1',\'('(/ September 12, 2012. l'I,YMIIi\nllllillR pOl'I,2011.

----------------~----------~----------------------~ __ ~L-~~~~~~~~ __ ~~ _

200 2010 011-Wines and Spirits 2,lIJ.O ,? 1 l,')/1I Fashion and Leather Goods 6,302 7,581 BJ1') Perfumes and Cosmetics 2,741 3,076 3,1()')

!Watches and Jewelry 764 985 1, 4() Selective Retailing 4,533 5,378 6,43(1

Other activities/eliminations -27 39 21 17,053 20,320 23,7 1

Profit from Recurring Operations by Business Group

2009 2010 2011 Wines and Spirits 760 930 1,101

Fashion and Leather Goods 1,986 2,555 3,075

Perfumes and Cosmetics 291 332 348

Watches and Jewelry 63 128 265

Selective Retailing 388 536 716

Other activities/eliminations -136 -160 -242

3,352 4,321 5,263

Source: LVMH Annual Reports, 2009 to 2011.

EXHIBIT 4 Fashion and Leather Goods Revenue by Region

EUR Million 2006 2007 2008 2009 2010 2011 Revenue 5,222 5,628 6,010 6,302 7,581 8,712

Asia 20% 23% 25% 28% 30% 32%

France 9% 9% 8% 8% 8% 8%

Europe 19% 20% 21% 21% 21% 20%

U.S. 21% 20% 19% 18% 18% 18%

Japan 26% 22% 20% 18% 16% 14%

Rest of the World (ROW) 5% 6% 7% 7% 7% 8%

Source: LVMH Annual Reports, 2006 to 2011.

30 Even though the group had multiple brands, the largest brand, the one that drove th linlill cial performance of the group, had been Louis Vuitton. As such th financial perfonnunco of the Fashion and Leather group had been expected to lar 'Iy mirror Ih p rforman , , 01 Louis Vuitton. In addition, decisions mad by Louis Vuiltun hlld II dire 'I and subsnuui Ii influence on th p rforman of th 'roup.

28Thomas, Deluxe, p. 52. 29Claudia D' Arpizio, 2012 Luxury Goods Worldwide Market Study, II th Edition, Bain and Company, Milan, October 2012. "Trunscri pi lrom investor con lcrencc call n October18,20 I I. "'f'. IlIlNnipl!"mll. inv .sror (.)0111"'1' '11 " '!IIIOil July 26,2012,

1111 III IIII' IIIIIIIIIIIIII.VMII, Allilidl WIII'IfI'If olllllll>"IIf I' I>I'IIIIVI'H1111111 IN 1111 II ) Itl 11111' III III I ('III'l'lk liS ('J(), lJlldl'l Ih' II 'W Il'lIdl'lShip IIlId IlIlHUlll'l'Mltlp wltf Mnrc 111111111 III IlI'lid !II' 11'11 'I" LV llourish xl. Arnuult und 'III" -II - brou .ht till '1I1ioil to b .ar on IIII' plllill 1111111 11I1t!·1'fi.i 'n .y of the business. They continu d the practice of selling only JIllI1111'11 'OIllplilly-owned 'lore, but they also made other changes. Unlike Racarnier, under whll,' , leadership 70 percent of production was outsourced, the two brought production in-house, soon expanding the number of factories in France from five to 10. In 2004, they bought out distributors and took direct control of the distribution channel. According to Arnault, "If you control your factories, you control your quality" and "If you control your distribution, you control your image.''" In addition, in partnership with Marc Jacobs, an increased focus was put on new product designs and innovations that resulted in a slew of creative and successful products.

32 LV products included a wide range of luxury fashion goods for women and men includ- ing handbags, wallets, luggage, accessories, ready-to-wear clothes, shoes, watches, and jewelry, though the company's mainstay, and what it was known for, was its collection of leather products. One area in which LV did not, in 2011, offer products was perfumes. This was an area into which the company was considering expanding. The perfume market stood at €19 billion in 201129 and was expected to grow by 5 percent in 2012. The absolute and aspirational segment made up about 25 percent of the market. Of note was that the parent organization, LVMH, had significant experience in the perfume products in its perfumes and cosmetics division. This division had industry-leading brands such as Christian Dior, Guerlain, and Givenchy under its umbrella.

Pricing and Customer Segments 33 LV's product portfolio included offerings for all three segments but had primarily focused

on the Absolute and Aspirational customer segments. Prices for handbags had varied from a low of US$300 for clutches to a range of mid-priced products priced between US$750 and US$3,500. At the high end, handbags had been priced anywhere from US$3,500 to US$35,000 with some handbags selling for US$100,000 or more. The higher end handbags had included custom designed bags that took five months to deliver. In many of its stores, an area used to be reserved for the best customer to shop in privacy. In some cities, LV had owned private apartments and yachts, which included amenities such as butler service, where customers would be given design consultations and could be fitted.

34 Prices had been tightly controlled. Products were never discounted or sold in value packs. LV, like many others in the industry, had considerable power to increase prices. While price increases had slowed after the 2008 recession, they started picking up in the second half of 2010. In 2010, prices in the euro zone were increased between 2 and 3 percent. In 2011, prices were increased by 16 percent in the United States, 5 percent in Europe and 11 percent in China." Some of these price increases were made in response to currency fluctuations. Between the second quarters of 2011 and 2012, overall prices were increased by 7 percent." These price increases made up for the smaller price increases that

'1'11('1\'1111'tutu III1111('kllll'lIl 111111111111III' IIlIlIh'l Pllitilll'I, dl"lllllIllIllIl. 1'111111111111111111 IIllti price. Olll'joh Is 10do sucl: II 1111111I~11v.111111111llil' IlINt1111'T 11\111Ill'oph' 101 1'1111111111111 the fourth. 12

35 However, while prices had increased in 20 I I, customers, csp .ciully tilosl' III 1111'II" and aspirational segments, were becoming value con. ci us. It was th 'rL'i'on',' pi t future price rises would be more moderate.

Distribution 36 As previously mentioned, LV sold most of its merchandise throuuh its OWII 1111

number of stores had increased from 368 at the end of 2006 to 425 at th ' l'lId III III the first quarter of 2010, the store network had increased to 451,33 Fewer thuu I() 1111 been inaugurated in 2010, with the retail network totaling 45834 stores by th '('lid 111111 quarter of 2011. These stores were located at prime venues in major citi s. StiliI' III I of the cities were anchored by flagship stores; all stores were designed' '11111111nt main operations in France to communicate the company's French tradition IIl1d1II'Ilin well as to provide a unique experience of opulence and luxury. Centralized ('0111111111 store designs allowed for a common brand image across them. Some had urcn tl1ll1 available to members only. Membership required recommendation by a urrcnt III 1111 one-time initiation fee, and an annual membership fee. Per store, revenues w '1\' I I I II lion, more than double the per store revenue figures for Gucci and Prada."

37 During the opening of the Bond Street store in London, Jacobs comment ,d: "I Ihlll [Louis Vuitton] is one of the few companies ... who have made that leap to cr '''I~' 1111111II tive universe ... another universe that co-exists with the classic universe thai il is 11111111111

38 Products were only sold through LV stores. Brands were not licensed to 1,,11i11'11111 Excess stock was destroyed rather than discounted. Products were not sold 1"1'0111'''11111I stores or in value packs.

39 Tight control of distribution also ensured that LV products did not get "lost" dlllllljl dt tribution to show up in the gray market. Another strategy used to counteract 'I'll 111111I was to ensure that price differentials between markets were not high enough 10 ('11"1111111 the creation of gray markets. For example, LV entered Japan when it discov red tluu Ihtl parties were bringing products that had been purchased in stores in Europe into lill' \'11111111 and selling them at very high prices. The company set a formula whereby Japune: I' I'll were set at 1.4 times the prices in France, a price point that was significantly 1m "I 111111 what third parties were selling at. More recently, despite difficult local econon Ii ' I ,111111 tions, the company increased prices in Europe because Chinese shoppers were 1111IIIV III Europe rather than in China to take advantage of the high price differential P:II'II ('1111 d by high import duties in China.

40 LV had also sold its products online. While it had been difficult to sustain 1111111111III exclusivity in the ortline marketplace, this channel had provided access to alar) 'I' 'II II11111I base. Online products had been offered in markets such as the United States, 'UI'OIH\ Jllid

"The Economist, "The Substance of Style." September 17, 2009. 33Transcriptfrom investor conference call on July 27, 2010. "Transcripr from investor conference call on July 26, 2011. 35http://www.businessweek.com/news/2011-11-16/Vllitloll-s's-f\I'owlhIII'1iIII luvluulon-onty-Iuxu: 111011 retail.html, accessed September 24, 2012. 36htlp://WWW.yolllUbe.col11/wAtch.?v=jyp9QVQvPIA.II.·I·\.NI.Ii..• Jllllldl.IIII.11111

II 111111 11111111)1111111 111111111 1111111111'1,

Mil' III 11 I 111/1/111I1I1'1i/I'l'(/ nil il~ produ 'ls und did nOI buy produ 'IS rl'()l11lhird parties lor resale. So, wll\l/I I I' Plillti'l its pro III 't portfolio to includ shoes, it set up a sho production facility /I II rly, II 01' rate I l7 factories, of which 12 were located in France, three in Spain, and Iwo iII the United States. Most of its production was done in-house, with only parts, such as zipp rs, being sourced externally. In 2011, it opened its newest factory in Marsaz, France. The factory expanded production by 70 people." The new factory, which took over three years to bring into production, helped ease some of the product shortages that in 2010 had forced the company to reduce store hours in France. New employees at the factory were trained by experienced workers. Given the size of the company, the new factory could be considered a small increase in capacity. LV tried its hand at expanding manufacturing in- ternationally. In 2007 , it announced the setting up of a shoe factory in Pondicherry, India. However, in 2011, the plant closed due to labor trouble.

I/dl I flilil

Improving Efficiency LV had also focused on improving the efficiency of its production system through the in- troduction of manufacturing practices inspired by the lean production techniques used by Toyota Motors. The program, implementation of which was started in 2005, reduced the level of specialization of an employee and trained employees in multiple activities, thereby improving productivity. The manufacturing line was reorganized. Originally goods in pro- duction would be put on carts and wheeled to workers, resulting in goods staying a long time on carts. The new system organized workers in groups of six to 12, with the complete manufacturing of a product staying within the group. These changes not only increased production efficiency but also, since the workers were less specialized now, allowed the company to shift groups to manufacture different products in response to changes in de- mand. Increased automation, such as the use of robots, also helped improve efficiency. At its peak, efficiency was increased by 5 percent per year, though a more sustainable rate was expected to be 3 percent per year.

43 However, improved efficiency in manufacturing had some consequences. The LV brand projected its products as being handmade by artisans. Customers, especially those in the top two segments, expected their products to be unique and designed and crafted by arti- sans. Too much reliance on automated manufacturing processes could undermine the ap- peal of the brand to these customer segments. For example, in 2010, two of LV's ads were banned in the United Kingdom for implying that its bags were handcrafted while in reality they were machine stitched. As Yves Carcelle said in an interview with the Wall Street Journal: "Our paradox is how to grow without diluting our image.''"

44 The focus on improving efficiency was also true for all other departments. For example, rather than a sales person going to the back room to pick up products and leaving the cus- tomer alone, an assistant would bring the products to the sales person. At checkout time, products would be packaged in the back room and brought to the customer. Experienced sales persons therefore could concentrate on selling without interruption.

42 '/,11 Iill

I, II 11/1

111/1, IIN.

1/1'1

J1http://online.wsj.com/article/SB/00014240S2702303627104S764098138428S8304.htmi, accessed S pi ember 20, 2012. IKlllill.

There is a connection between sophistication and expertise .... For example, with Ill' hllsl I bag this season, it looks very simple, but actually it wasn't simple because it was IwO Illy 'rs bonded together-a technique that was embossed and cut out and perforate I at the same time. Before that we'd only done perforations, so we were challenging the produ 'Iion tcum to do [multiple techniques] at the same time. So there's always some way in which we 011" pushing new and innovative ways of working."

The words they use at the factory are "We'll try!" ... It's very rare. I don't think there was anything for the show they couldn't do .... We sit down and we work out how we can achieve what we need. I think that's the magic of being here."?

46 And specifically on leather goods:

It's the heart of the business, it's the image of the business-leather goods are the core of th company. Working on the fashion leather goods was amazing training and experience .... How do you convey the message of Marc throughout the store network-how is that creativity communicated? I'm not just talking about an advert at the end of the line. It's about how to release things, how things are evolving creatively and implementing that within the business. If the bags are getting more sophisticated how do you speak about that? How do you treat the bags? So there's lots going on there."

Quality 47 Part of making top-quality products involved sourcing high-quality materials. For example,

for top-end products, leather was sourced from northern Europe since leather from call h' there had fewer blemishes from insect bites. Products were also put through rigorou. t 'st ing to ensure quality. Some of the techniques used included a robot that repeatedly dr Plwd a bag containing a three-and-a-half kilogram weight, a machine that opened and clos 'd 1\ zipper 5,000 times, and another that shot ultraviolet rays at the bag to test for fading.'12AII products had a lifetime repair guarantee.

Competition 48 LVMH, the parent company of LV, was the largest player in the industry with 2011 slIll'

of over €23 billion. Other large players included the conglomerates PPR and Rich m01l1 PPR, headquartered in France, marketed a wide range of products from fashions and b nut Y care to home appliances. It owned brands such as Gucci and Puma. Sales in 2011 wen- over €12 billion with Gucci accounting for €3 billion of those sales. PPR also sold I "IIIlII handbags and luggage. Its total sales of luxury goods in 2011 were nearly €5 billion. '1'111' other large player, Richemont, was based in Switzerland and also operated a wide 1'<111/'I of businesses including jewelry, luxury watches, leather goods, and apparel. Some or it-

39Golbin, Louis Vuinon/Marc Jacobs, p. 143. 4°Ibid. 4'Ibid., p. 139. 42http://www.businesswcck.colll/sl.oricsl2004-03-21/lh i-vuiuun 1IIIIIIt,\, Itilit hhu, IIt'I'I' I'tI S \pt~lIthct' O. 101 )

1IIIiI llilll Iii

11 Milil III IIII IIIIIIPIIIII,' , I' IH'vi illy ill 11111111""\ I'll' 'IIIIIIIIIh'd hy 1IIIIIIdlili 111111Ih, It"" III" I 111'1'1I IIlljolil ()I''', iltlilk IlliliOtil po, 111,111ill the il1'1II. 'I'liis wux 11'11'01'

IlIli" I pllI\11 twll liS PPR, where the fouudiuu lumily .ontrollcd OV',. 0 percent of' the 11111111111111lilli' 'S, und or smaller companies such as Herrn s, wher the founding family 1',,"ll'ollwl (IV',. 50 I crccnt of the outstanding shares. The companies were fiercely protec- rlve or Ih 'ir bran Is that in many cases were over 100 years old.

o Brand' that LV competed against were either owned by conglomerates, such as PPR, or by smaller companies such as Hermes or Prada. Exhibits 5 and 6 provide an overview of the main competitors and their sales distribution by region.

51 Details on each of the competitors are provided below.

Hermes 52 Competition from Hermes came in the absolute and aspirational segments. Hennes prided

itself on producing exclusive highquality goods that were produced by experienced craftsmen using the best material available. The company promoted itself as innovative and creative with the capability to design and produce unique products. Some of these products, such as Birkin handbags, had a waiting list that was months long. Prices for the Birkin bag started around US$5,000 and went up to five and six digits. Most of the handbags were priced be- tween US$2,000 and US$lO,OOO,though many were priced higher." The company produced some of the most expensive handbags in the world. In 2012, for example, Hermes released a handbag priced at US$2 million. In addition to this ready-made line of handbags, Hermes was also known for designing and manufacturing high-end handbags to customer specifications.

53 Hermes's range of products included leather goods, apparel, saddlery, silk products, shoes, accessories, and fragrances, though 47 percent of its sales came from leather goods." Its products were sold worldwide through company-owned stores and through select retail- ers. In all cases, Hermes kept tight control of distribution and prices. Revenue breakdown by region, including growth rates, are given in Exhibit 6. Given its rapid growth, Hermes was expected to focus in 2012 on continuing to improve manufacturing capacity. Most of this manufacturing was located in France and emphasized traditional manufacturing prac- tices rather than assembly-line or mechanistic manufacturing processes.

Gucci 54 Gucci was part of the PPR group. It designed, manufactured, distributed, and sold leather

goods, ready-to-wear apparel, silks, timepieces, jewelry, and fragrances. Its mission was to provide excellent products and experience for its customers based on heritage, craftsman- ship, high quality, and innovation backed by a "Made in Italy" label. In 2012, its handbag prices started in the US$850 range with most priced between US$l,OOO and US$3,000. Some bags were priced as high as US$4,700.45 Most of its products were manufactured in Italy and were largely sold through 376 DOS and some through department stores. The brand was making significant efforts to reduce distribution through resellers and also mak- ing efforts to limit merchandise offered at discount prices.

55 In 2011, Gucci achieved revenues of €3.14 billion and a recurring operating profit of €946 million. Revenues had grown by 18 percent in euro terms and 19 percent in constant exchange rate terms from the previous year."

••http://www.hermes.com/index-ca-en.html. accessed December 3, 2012. ""11rilles Annual Report, 2011 . ••lillp:llwww.gucci.col11/ca-cn/home. accessed February 3, 2013. li'l'l'l~Anuuul R ·POI'I.2011.

evenues 2666 3148 511 683 2047 2556 2401 2841 NA 3000 3127 3581 7581

ecurrinq 757 946 130 205 4J8 629 668 885 NA NA 981 1137 2555 Goerating "1COffie

:::--"5 317 31'6 148 170 309 388 317 328 NA NA 451 ~ revenues excludes royalties of 32m

_-".=_-Ol_-'.\-ailable financials converted from US$ to euro at €1 = US$1.33

Source: PPR, Prada, Hermes, Coach Annual Reports. 2010 to 2011.

EXHIBIT 5 Louis Vuitton Competitor Overview

2010 20-11 2010 2011 2010 2011 2010 201'V 20tO 2011 2010 2.011

Chanel S.A.1 ~

Coacb~_ LVGucci Bottega Veneta Prada, Hermes

Customer Segment Served

Distribution Direct owned stores Direct Owned Channels "y Online Stores F'ranchises

Select Retail Stores Online

Aspirational Accessible

Absolute Aspirational

Aspirational Accessible

Absolute Aspirational

Absolute Aspirational

LVMH: Publio Traded with 40% owned

"Arnault ram"

Absolute Aspirationa Accessible

Direct ownec stores Online

Ownership Part of PPRPPR: Part of PPRPPR: Publicly Traded Publicly traded. Privately HeJd Publicly Traded

status Publicly Traded with Publicly Traded with 80% controlled by 40% controlled by 40% controlled by insiders insiders insiders

Hermes family controlled 50.2%

Direct Owned Stores Franchises (33 in 2010, 26 in 2011) Select Retail Stores Online

Direct Owned Stores (193 in 2010, 205 in 2011) Select Retailers (124 in 2010,123 in 2011)Online

Direct Owned Stores SeleCt Retailers

Direct Owned Stoles Fran~hises Outlet Stores Select RetaTI Stores Licensing Online

EUR Millions

H h rwthRv nu r wth rowth 17% 1055 1'/% 42% SOlS 17% 508 34%

R l,lIIOI) \ HlI I i\ 'icJ-i I'll, III,', (indl Chin ) China Japan Americas

wth R 112% 46%

86 873

1 t I~II 1111 I. !)

ROW Prada revenues excludes royalties of 32m Coach financials converted from US$ to euro at €l = US$I.33 NA = Not Available

Source: PPR, Prada, Hermes, Coach Annual Reports, 2011.

Bottega Veneta 56 Bottega Veneta was also part of the PPR group. Its revenues in 2011 were €683 million and

recurring operating income was €205 million, up 33 percent from the previous year in both euro and constant exchange rate terms. The majority of its products were leather goods, though it also sold shoes, ready-to-wear apparel, and fragrances. Its brand was based on exclusivity, craftsmanship, the highest quality, and innovation, also backed by a "Made in Italy" label. Products were sold through 170 DOS and through other retail channels such as select department stores and franchises. For 2011, sales from DOS had increased by 32 percent and through the wholesale channel by 41 percent."

57 Prices for handbags started at US$l ,400, with the upper end of the ready-to-wear collec- tion priced at over US$28,boo.48

Prada 58 The Prada Group was headquartered in Italy though its shares were listed on the Hong

Kong Stock Exchange. In all, 19 percent of Prada Group shares were publicly traded. The group owned a number of well-known brands anchored by its famous Prada and Miu Miu brands that covered mainly leather goods and shoes but also included accessories, jewelry, and fragrances. The company's brands were based on heritage and craftsmanship, high quality, and innovation. DOS accounted for 78 percent of its sales while the rest came from wholesale channels that sold to select department stores across the world. Its goods were manufactured in-house with factories located in Italy and the United Kingdom.

59 Revenues in 2011 were €2.6 billion and net income was €436 million. Revenues had grown by 25 percent over the previous year in euro terms and by 26 percent in terms of constant exchange rates. Sales in the retail channel had increased by 37 percent in 2011, while sales through the wholesale channel had declined approximately 5 percent."

60 Prada priced its bags starting at US$l,OOO, with most bags priced between US$1,500 and US$4,000. Bags at the high <endwent for between US$6,000 and US$lO,OOO.

'''PI R Annual Report, 2011 . .••hllp:llwww.bo1.1.egaveneta.col11/.accessed February 3, 2013. Itll'l'{I(11i I\III1UIII R 'porI., 201 I.

h'II'd 11111111Ii'1',Till' I'IIIIIPIII ' plllllil'l IVI'II'wldl' 1/111III) 11I1'I1Idllll'IIIIII,IINNI'..PI'illllIlI , sl in 'III" I11'0dll'Is, I' 'lid 10 W(' II l'oll ' 'ilOIlS, IIlIlIdhll 1'1, slw"s, 111\(1II 'l'l'SNOIi(% II old II products throu ih iorupany-own d store» Hilt!N'I 'I d'PIII'IIll'II( SIOI"S,111 01 ••, Ii, IH'I'I S rics, including handbags and oth r leather products and api ar I, W 'I" nOIsold 01111111',

62 Since it wa a privately held company, financial in!' rrnation was nOI puhli ily IIvllilnlilt· However, industry sources pegged Chanel's 201.2 revenues at around bi llion." 01 lu-r II dicators provided a clue to Chanel's position in the marketplace vis-a-vis Y.1\11unul sl III Web searches indicated that the four most searched handbag brands online were LV, ('1111 nel, Gucci, and Hermes accounting for 30 percent, 23 percent, 13 percent, and 10 1)I.'I'vI'III respectively." Chanel was also ranked higher than its competitors in terms of brand quul IV, customer experiences, and social status by high-income earners."

63 Chanel priced its handbags starting at US$I,650, with most handbag, pric .d hi' tween US$2,500 and US$5,000. High-end handbags were priced between US$6,OOOIIlId US$lO,OOO.

Coach 53 64 Coach was firmly entrenched in the accessible customer segment. Most of its handbuu

were priced between US$200 and US$600, with the most expensive ones priced around US$I,OOO. While Coach was not a direct competitor, it was an example of a c mpan whose product price range overlapped with that of LV. It was the type of company with which LV would have to compete if it decided to enter the accessible customer segment.

65 Coach's products were sold directly through company-owned stores, which includ 'd factory outlets, and indirectly through the wholesale channel via department stores, 111 North America, for example, Coach's products were sold through 354 company-own 'd retail stores, 180 factory stores, and 990 third-party department stores. However, 8] pere nl of its revenue came from the direct channel.

66 Coach outsourced its manufacturing with sourcing and product development effie s located in Hong Kong, China, Vietnam, South Korea, and India. Its manufacturing was sourced out of China, Philippines, Taiwan, Vietnam, Thailand, India, Peru, Italy, and the United States. There was significant emphasis on product development with 71 percent or 2011 revenue generated from products that did not exist a year earlier.

67 For the 12 months ending June 30, 2012, Coach had annual net sales of US$4.8 billi n, with net income of US$1.04 billion. Revenues over the last 12 months had increa ed by 14 percent and net income by 18 percent.

THE DILEMMA

68 Reviewing the history of LV and its current performance, a number of concerns came to mind. While it was obvious that the company's performance in 2010 and 2011 had b 11 good, were there early signs of trouble? Could the recent performance be sustained? What were the options available to Michael Burke?

50http://www.businessoffashion.com/2012/10/ceo-talk-bmno-pavlovsky-president-of-fashion-chanel.html. accessed January 14,2013. 5lhttp://blogs.ft.com/material-world/2012111/20/hancibags-at-the-reaclyl?,lI''I','NI''',IIIIIIIIII' l;t, 2013. 52111'I.p://luxuryinstil.ut:e.col1l/blog/?lag=chanel, accessed .I111UHry 14,20 I J. \, 'ouch Annunl R porl,2011.

11111I1111111IIIi III" II/III jllIlll,,"I\1 111111111.\\III I hl\'\llIilH'1 'Oil h(1Ii III h(\(11I1I'IH,lill(l(/ II till t '11111111111/1111,II 1111'1''illid 11I11HII'IIIIIIICqIlIHilloll 11111(/'Il LVMII. A '/11'1111r, liS III IIlIti 1111111i(\Jlllilil of' LOllis VllilIOII, some ofthe i~~lI 'i< I'll 'in \ him w 'I" how should he 11111111111Iii \ V ill!'s lIllli Ill' h .ritag or ouis Vuiuon, the seeds of which had been laid over I 10 1'11', I () hy ils rounder, with the pressures to grow the business. How far could he l"lsll III' ouis Vuitton machine without undermining those values?

''http://blogs. ft.com/material-worldI20 J 2/121 181m ichael-burke-at -vu itton-old-hand-new-house-big-surprise/, accessed February 3, 2013 .

••hllp:llwww.f.I.comlinll/Cl11s/. 10/6991 06eO-24cb-1 1e l-blb3-00 144f'cabdcO.hll11J.i!uxzz2.1nN4m50M, lie .css d jll1hllllll'y:1, 201 •.