Devoir sur LVMH en comparant avec la porter's diamond theory

« Choose a MNE and a country. Discuss how the features of your chosen country can help and/or hinder your MNE’s activities using Porter’s Diamond Theory of National Advantage. »

“Our model, which is based on a long-term vision, values the heritage of our Houses and stimulates creativity and excellence. It is the driving force for the Group’s success and the guarantee of its future.” (Bernard Arnault, CEO) The group LVMH is the leader in the luxury sector since the beginning and this, thanks to some marketing strategies. In a first part we are going to talk and present the group LVMH and the Porter’s diamond theory; and in a second part we are going to see the link between both of them and how the group can still be a leader for more than 30 years.

LVMH (Moët Hennessy-Louis Vuitton) is a group made up of a set of brands with a high capacity of evocation and really important symbolic names in the history of the luxury industry. They are the world leader of the manufacturing and also the distribution of luxury items. The group as enjoyed uninterrupted growth since it was set up in 1987. To have an idea of the importance of the group, let’s talk about the figures related: LVMH has around 70 brands and houses in its portfolio and has more than 56.000 collaborators (63% out of France). The income of the group in 2017 is 42,6€ billion, thanks to the 145 000 employees (just for LVMH company).

Porter’s diamond theory is theory written by Michael Porter, born in 1947, who is a professor of business strategies at Harvard Business School University. He is graduated in aeronautic and mechanical engineering. He is one of the famous names in the comtemporary industrial economy, autor of 17 works and more than 125 articles. He really get famous with theory about

« the competitive advantage of nations », and has influence a lot the strategic thinking of the 80’s. Unlike all the other visions elaborate earlier by his counterpart economist and professor of management, Porter does really insist on the impact of the external environment on businesses. According to his

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theories, the company is not close in on itself anymore (rationality of organisations), it has to face and/or go hand in hand with its environment. The diamond theory as been introduce in his book « the competitive advantage of nations » after having made some research in 10 commercials nations. The geographic origin of a firm influences its capacity to develop a competitive advantage. There are 4 essentials factors within a geographic zone that can alter the competitivity of a business which originate. Those facors are presented by Porter in his diamond model:

Porter’s diamond model

Structure of firms and rivalry:

It is the context in which the companies are created, organised and directed. The competition within the sector push the business to increase the productivity and the innovation. The companies of a same industry stimulate and help each other.

Demand conditions:

Expose the characteristics, the composition of the request, its volume and his type of growth. "The request modulates the rhythm and the quality of the progress and the innovations carried out by the company of a country" (Porter,1990). The request puts pressure on the company to force him to

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innovate ceaselessly, getting him a world of competitive advantage. For example: if the customers are demanding in quality terms, then the pressure exercised on the company is stronger as it ceaselessly has to improve its competitiveness by innovating and by increasing the quality.

Related and supporting industries:

It is about the capacity of companies of leaning on upstream industries and downstream themselves successful. " The essential advantage of suppliers' local presence is rather situated in the plan of the processes of innovation and modernization " (Porter 1990). The interaction between companies arisen from the geographical closeness allows a fast access to the information, to the new ideas and to the innovation. Because of the interdependences, the success of some brings to the success of the others, the investments of some are useful for the others.

Factors conditions:

They are the resources of a nation, the factors of production: man power, farmland, natural resources, capital, infrastructures, skills, knowledge. Government:

The government influences four determiners of the competitive advantage of a nation. This influence is positive or negative through regulations, fiscal policy, legislation...

The use of the model of the diamond:

- optimize the choices of the establishment of international companies.

- Explain the disparities between the various regions of the same country.

This model is also run by the State to define the policies, and action to strengthen the competitiveness of the local leaders.

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We are going to see why LVMH can resist to all the crisis.

1st point: the intrinsic quality of the product. Technically, aesthetically, artistically the product has to have zero defect. The most important rule is the choice of raw materials for the conception, the process of manufacturing and for the organisation of the distribution.

2nd point: the history we tell about the product. The product is not only bought for what it is, but for what he tells.

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