Reference no: EM132239550
Management of the watch business of LVMH Moet Hennessy Louis Vuitton SE (“LVMH”) needs help to turn sales around. Their premium brands include Bulgari, Hublot, and TAG Heuer. According to The Wall Street Journal,
You’re 25 years old, basking in the glow of your first big job promotion and a hefty raise. Why not splurge on a big-ticket item?
Your father might have bought a fancy Swiss watch. But the thought doesn’t occur to you—for most of your life, you’ve used your cellphone to check the time. Instead, you book a getaway to Costa Rica, which you document extensively on Instagram.
Swiss watchmaking executive Jean-Claude Biver wants to change that thinking. From his perch at luxury conglomerate LVMH Moët Hennessy Louis Vuitton, the 68-year-old has seen younger generations drift away from his centuries-old industry. He is on a mission to get them interested in watches, before it’s too late.
“It’s the first time we have young people not buying watches,” says Mr. Biver, who leads LVMH’s watch division. “Time is everywhere. Why should these kids buy something for the wrists that tells them the same thing they get everywhere?”
Executives across Switzerland’s watch industry have been wrestling with the same question. How can they convince young consumers that mechanical timepieces are relevant—let alone worth the price of a car? At the same time, the tradition-bound manufacturers are fending off Apple Inc. and other tech companies that are disrupting the market with wrist gadgets that track your workouts and organize your social life.
The perils facing the Swiss industry have been laid bare by a sharp downturn starting in 2015. Chinese consumers, who drove a two-decade boom in the watch business, reined in their spending. That exposed watchmakers’ growing disconnect with clientele in the West. Swiss watch exports globally fell 13% between 2014 and 2016. Last year, exports rose 2.7%, but still lagged well behind the luxury sector as a whole.[1]
Based on this information and what else you may know about watches, help Jean-Claude Biver by completing a strategic plan to attract younger customers to buy premium LVMH watches.
Vision. We see a world full of proud millennials.
Mission statement. Using our core competencies in design and proprietary manufacturing capabilities, we will make the world’s handsomest premium wristwatches. We will act with compassion, honesty and high ethics in all situations, reflecting our fundamental values of caring, global teamwork and continuous improvement.
Opportunities. (1) Gain market share, using strengths of design, proprietary manufacturing capabilities and strong distribution, combined with a growing worldwide population of millennials and their increasing disposable incomes. (2) Make good profits, using the same strengths and external factors.
Threats. (1) Lose more of our customer base of millennials as because of our weakness of negative attitudes toward our brands and the increased desire for high-end automobiles by millennials. (2) Lose money as sales of watches drop further, because of the same weaknesses and external factor.
Long-term objectives. (1) Total wristwatch sales of at least $300 million by 2021. (2) Profit of at least $50 million in 2021. (3) Customer base of at least 15,000 in 2021.
Your task is to complete the strategic plan for the premium wristwatch business by answering the questions starting on the following page.
1. For each of the three matrices attached at the end, describe what it suggests about strategy for the LVMH premium wristwatch business, with explanations of why.
2. Which grand strategy/ies do you recommend for the LVMH premium wristwatch business?
3. Justify your answer to the previous question.
4. Recommend short-term objectives for the LVMH premium wristwatch business.
5. Justify short-term objectives.
6. Recommend tactics for the LVMH premium wristwatch business.
7. Justify tactics.