1. Louis Vuitton Mot Hennessy (LVMH) produces high-quality luxury and ultra-luxury items. Customers pay a premium for...

1. Louis Vuitton Moët Hennessy (LVMH) produces high-quality luxury and ultra-luxury items. Customers pay a premium for goods that are hand-made and exclusive—customers want a bag that took 30 craftsmen 8 days to produce. Is there any point in talking about productivity for this organization?

2. Describe Louis Vuitton’s flexibility of manufacturing operations.

3. Describe how Louis Vuitton might attempt to manage inventory in production and at the store level.

Louis Vuitton Moët Hennessy (LVMH) is the world’s leading luxury goods company. Louis Vuitton, who was employed by wealthy women to pack their clothes, started his company in 1854 and revolutionized travel by offering flat-topped, waterproof trunks that replaced curved, domed-top trunks. Made by hand and with a lifetime guarantee (still so today), Vuitton’s expensive trunks were purchased by royalty and well-to-do travellers. 

LVMH is much more than Louis Vuitton: Among its best known brands, Kenzo, Givenchy, and Celine make up its fashion and leather goods division; Christian Dior, Givenchy, and Guerlain in perfumes and cosmetics; Dom Pérignon, Hennessy, Krug, and Moët & Chandon in wine and spirits; TAG Heuer, Chaumet, and Hublot in watches and jewellery; along with Sephora (perfume and cosmetics) and DFS group (duty-free stores).

The worldwide luxury market including cars and fine art is worth more than $US240 billion annually, with much of the demand coming from China. Louis Vuitton’s CEO, Yves Carcelle, said about China: “There are 1.4 billion people there who suddenly want to treat themselves, and it will continue.” That growth has attracted fierce competition, and disagreements about what constitutes luxury. Coach, for example, with its $300 handcrafted bags, considers itself in the “accessible luxury” business. Peter Marino, who designs Louis Vuitton retail stores counters that, “Coach has nothing to do with luxury. It could be selling iron ore, but it just happens to sell handbags. This is not about girls in China with a sewing machine, but about workmanship, exclusivity, and the sheer gloriousness of the materials.” Coach CEO Lew Frankfort responds, “When did they last speak to a consumer? Luxury has been democratized.” He insists that Coach bags, “are as well made as products anywhere. We even source from some of the same tanneries as European houses. But because we manufacture in low-cost countries, we can pass the savings on to consumers.”