LV External Environment
5. Analysis of Different Alternatives 5.1 External Environment The external environment can be divided into three interrelated subcategories: Remote environment factors, industry environment factors and operating environment factors. 5.1.1 Remote environment Economic The personal luxury good industry’s growth rate was projected to be 10 percent in euro terms for 2012. The euro exchange rate had a quite important impact on nominal growth rates. As the constant exchange rate and the favorable exchange rate environment, the growth rate will increase more. Though there growth on the surface had been steady in 2011 in Europe, under the financial turmoil in the southern Europe, cause a significant drop in consumption of luxury goods. After the …show more content…
The luxury industry was a concentrated industry, and LV was one of the dominated brands in this field, which allowed it to have great power as suppliers. The positioning of LV was different from other luxury brands, which allowed it to avoid losing supplier’s power due to homogeneity competition. Powerful buyer As a big company, LV had great bargaining power when purchasing raw materials. With large demand on components such as leather and zippers, LV could bargain around different suppliers and pull down the price of the material. Substitutes Because of the special meanings and designs attached to luxury goods from their brand, it was hard to find any substitutes of luxury goods. When a customer wanted to buy a LV handbag, the demand of a LV handbag usually cannot be substituted by a handbag with similar quality from an obscure brand. This brought great advantages to LV because it did not have to worry about the market being taken by substitutes. 5.1.3 Operating Environment Customers Developing a firm’s present and prospective customers enhance the ability of its managers to plan strategic operations, to anticipate changes of markets, and to reallocate resources in order to support forecast shifts in demand
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