How is LVMH attempting to unlock value at Tiffany?

-by leveraging and transferring Tiffany's competencies into its organization

-by opening super high-end Tiffany stores in USA and Canada

-by increasing Tiffany's market share with Gen X and Baby boomers

-developing synergy by adding LMVH leather and watch products into the Tiffany line of jewelry

EXHiarr MC9.1 LVMH Group Total Revenues, 2008-2021 (billion euros) 40 30 20 17.26 10 42.66 46.86 53.76 64.2 With almost all of its sales concentrated in retail stores and focused on the U.S. market, Tiffany had huge exposure to extemal events So, in due course, the Covid-19 pandernic hit Tiffany much harder than other competifors in the luxury businesx. Tiffany's sales plunged as its stores closed for extended periods and international travel was suspended. The Wolf in Cashmere to the Rescue The "wolf in castmere" refers to Bernard Arnaul, chairman and CEO of LVMH, the largest luncury conglomerate globally Arnault is the wealthiest person in Europe, with a net worth or $150 billion. He eamed the moniker "wolf in cashmere" Wher he turned a family construction company from the gritty town of Roubao in northern France into a luxury behemoth His first step was to acquire Dior, the French lisxury fashion house, before gaining control of LVMH in the 1980 : Louls Vutzon is the flagship brand of France v Moe t Hennessy Louis Vultion S. A. better known as LVMH. Its most populat products are Louis Vutton handbags with the iconic LV monogram. The largest purveyor of luxury brands globally. LVMH owns some 75 fuxury lines in fashion (Dior ond Fendi), jewelry and watches (Bulgari and TAG Heuen, wine and spirits Moet Hennessy and Armand de Erignac by Jay-Z1. perfumes and cosmetics (Sephora, and Fenty Beauty by Rahanno), and Hisury yachts. Exhibit Mesis shows the reventes of the LVMH Group, which reached 642 biltion euros (equivalent to $76 bilionin 2021 EXHIBIT MC9.1 LVMHGroup Total Revenues, 2008-2021 (bilion euron) 70 60 Exhibit MC9 2 breaks down IVMH Group's revenues by segment. In 2021 , about 48% of the 64.2 billion euros came from tashion and leather goods, 18% from selective retailing fwhich makes certain products avaltable only in specific stores and locations such as Sephora and Le Bon March), 10% from perfumes and cosmetics, 9% from wines and spirits, and 14% from watches and jewelry. EXHIBIT MC9.2 LVMH Group Revenues by Seament, 2008-2021 (billion euros) Fashion and Salantiu seament, 2008-2021 (billion euros) LVMH has grown by acquisition. By acquiring Tiffany, LVMH has engaged in horizontal integration, which is the process of merging with a competitor at the same stage of the industry value chain. Horizontal integration is a corporate strategy that can improve a firm's strategic position in a single industry. As a rule, firms should go ahead with horizontal integration (0.e. acquiring a competitor) if the target firm is more valuable inside the acquiring firm than as a continued standalone. company. LVMH believes it can unlock more value from riffany within the conglomerate. For one. Tiffany helps strengthen its position in jewelry and watches. Since the Tiffany acquisition, LVMH's sales of jewelry and watches increased from 3.4 bilition curos (or 7% of total) in 2020 to 9 bilion euros (or 14% of total) in 2021 As a standalone category. sales of jeweliry and watches increased by 265% (see Exhibit MC9.2), thus aiding in diversifying the conglomerate's product mix. Second, by owning THforny. LVMH can strengthen its presence in the US. market and enthance its geographic diversification, In contrast to Tiffany, LVMH earns over 90% of its revenues outside its home country of France, with about 65% of its sales in Asia. 25% in Europe, and only 10% in the United States. Third, by acquiring Tiffany, tVMH preempted rivals from doing so. The gobal fuxury industry is dominated by three conglometates LVMH, Kering (Gucci and Yves Saint Laurent), and Richemont (Cartier and Montbianc). LVMH is more than twice the size of Kering and Richemont combined. Tiffony Moves into the 21st Century IVMH immediately set to work in attempung to unlock value at Tirany by moving the company into the 2 stst century it brought in a new top manegemerot team from france. including a new CEO for Tiflany, Anthony Lecu and Alexandre Ampult, the 29 year-old son of Bemout Axpoult. The younger Amsults official tite is execulve vice president of proctuct In 2020, LVMH acquired Tiffany for $16 billion, the largest takeover in the industry. With little or no growth for a decade. Tiffary had fallen on hard times. Why did the American jeweler struggle? Why did LVMH acquire Tiffany? And how wilt the merger impact a company that is an American cultural icon? Tiffony Feeling Blue Tiffany &.00. is the quintessential American jewelec, best known for its iconic blue box and romantic engagement rings. it has been a imainstiry in American culture for almost 200 years. Before the LVMH acquisition, Tiffany focused on providing affordabie luxury for many Americans, including gifts for baby births, weddings, and graduations. Engagement rings, wedding bands, and other jewelry are among its most popular items. For instance, entryilevel sterling silver pieces, such as the Elsa Peretti heart necklaces that are priced less than \$9oo, are beloved by generations of teenagers. Tiffary's reputation is one of understated, cassic elegance Since key scenes of the 1961 movie Breakdast at Titfany's were shot at Tiffany's Fifh Avenue flagship store in New York. City, it has become a magnet for window shoppers and tourists, who often wait in long lines to enter the store. Tiffany certainly provided an unparalleled in-store shopping experience for customers looking to be part of an aspirationat brand. indoed, nffanys 330 retai outlets are the pirnary source of its revenues, generating almos: 95% of its sales Compared to otherjewelers. Tiffany's online presence is underdeveloped. Moreover, Tifrany's business is heavly concentrated in iss home market, where it earns roughly 45% of its reveaues, compared with 15% in Japan, 30% in the rest of Asia, and 10%5 in Europe Tiffanys sales were $4 bilion in 2019 , its last year as an independent company. Reisting onpustiaurels, Tifiany stopped innovating and changing with the times. Its iconic brand had become stale and associated with an older generation Professiona Millennials and Gen Zers do not consider Tiffany o place where they suich as is Supreme hoodie are much more desirable than a diamond ring. Others prefer a Tesla vehicie over bling? 'fabulous' and excessively positive comments are not the norm 3 The new CEO firmly pushed back and indicated that the memo was not representative of the values held by LVMH. Alexandre Amault designed new marketing campaigns to communicate Tiffany's fresh approach. A Millennial himself, the younger Amault wants to make Tiffany attractive to a younger audience. To support this positioning. Tiffany released the ad campaign "Not Your Mother's Tiffany." The initiative received an immediate backlash, with many young women expressing outrage on social media. Indicating that they look to their mothers for inspiration and view the new branding as degrading their mothers' style. While negatively recelved, the campaign did intend to reach a broader audience by showing that there are other options besides the classic Tiffany style. Next, Tiffany launched the 'About Love' campaign featuring Beyonce and Jay-z. In addition to targeting a new audience for Tiffany products, LVMH is also attempting to position Tiffany upmarket. Rather than selling entry-level items for a few hundred dollars, LVMH wants Tiffany to focus on the luxury segment. As a prime example of the new Tiffany, it introduced a 180 -carat diamond necklace as part of its fine-jeweiry collection, at an estimated price of $20 - $30 million. LVMH is attempting to move Tiffany upmarket while remaining attractive to the US consumet. Highend jewelry sales above $100,000 are up 50% at Tiffany sompared to 2019 . The more robust demand for high-end jewelry translated into a 35% increase in spending by the average consumer, particularly those under 40 . At the same time; LVMH wants Tiffany to increase its sales overseas, especially in Asia, which is home to o large and wealthy middle class in China and other countries. The new CEO plans to open super-high-end Tiffany stores in Europe and Asia to provide a best-in.class customer experience. Making Tiffany more attractive internationally is a top priorify because most or its sales have been in the United States. The new marching orders are: Go upmarket and go global while remaining strong in the home market. Endnotes LVMH immediately set to work in attempting to unlock value at Tiffany by moving the comparny into the 2ist century it brought in a new top management team from France, including a new CEO for Tiffany. Anthony Ledru, and Alexandre Arnault, the 29-year-old son of Bernault Amault. The younger Amault's official title is executive vice president of product. and communications. Although Alexandre Amault is supposed to report to the CEO per the new org chart, in meetings he often leverages tis father's authority by stating. "I spoke with BA [Bernard Amault] and this is what we agreed on 1 American employees bristled at the blatant nepotism. When asked during a town hall meeting shortly after the acquisition what LVMH would do to promote more women to leadership positions at Tiffany, the new CEO responded, "Leave some jobs for us men, because we need to work, too," which he meant as a joke. Still, it was not well received in a post-\#Meloo world 2 The tight knit French executives set to work immeciately to change Tiffany's strategy, structure, and culture. First; meetings were streamlined, with no more than 10 executives, rather than the more than 40 people common during Tiffany's days as an independent jeweler, Second, they implemented a clear hierarchical structure at Tiffany, which hac been known more as an egalitarlan and consensus-oriented workplace. Third, the French leadership team required people to work in the offices during the pandenic and controlled attendance by checking the electronic swipe in/out records of employee batches. They argued that jeweliry could not be appralsed or designed via Zoom calls Ater being replaced by french executives, iong-time American lesders quit. Rank-and-file employee furnover was aiso high during the pandemic as people sought out employers that allowed them to work from home. The remaining Tiffany employees joked that the ability to speak Fiench was a prerequisite for job security. Shortly after the acquisition, an unsanctioned memo titied "Franco. American Cultural Nuances and Etiquettel made its way around Tiffany, including tips on culturai differences between Fiench and American wonpisce culture it counseled against discussing weekend plans as small taik Employees should expect a much iess welcoming workplace, short on positive feedback but long on critisisn: "French people share more negative feedback" and workers should "expect less warm and fuzzy 'amazing tabulous and excessively positive comments are not the norm. 3 The new CFO firmly pushed back and indicared that the EXHiarr MC9.1 LVMH Group Total Revenues, 2008-2021 (billion euros) 40 30 20 17.26 10 42.66 46.86 53.76 64.2 With almost all of its sales concentrated in retail stores and focused on the U.S. market, Tiffany had huge exposure to extemal events So, in due course, the Covid-19 pandernic hit Tiffany much harder than other competifors in the luxury businesx. Tiffany's sales plunged as its stores closed for extended periods and international travel was suspended. The Wolf in Cashmere to the Rescue The "wolf in castmere" refers to Bernard Arnaul, chairman and CEO of LVMH, the largest luncury conglomerate globally Arnault is the wealthiest person in Europe, with a net worth or $150 billion. He eamed the moniker "wolf in cashmere" Wher he turned a family construction company from the gritty town of Roubao in northern France into a luxury behemoth His first step was to acquire Dior, the French lisxury fashion house, before gaining control of LVMH in the 1980 : Louls Vutzon is the flagship brand of France v Moe t Hennessy Louis Vultion S. A. better known as LVMH. Its most populat products are Louis Vutton handbags with the iconic LV monogram. The largest purveyor of luxury brands globally. LVMH owns some 75 fuxury lines in fashion (Dior ond Fendi), jewelry and watches (Bulgari and TAG Heuen, wine and spirits Moet Hennessy and Armand de Erignac by Jay-Z1. perfumes and cosmetics (Sephora, and Fenty Beauty by Rahanno), and Hisury yachts. Exhibit Mesis shows the reventes of the LVMH Group, which reached 642 biltion euros (equivalent to $76 bilionin 2021 EXHIBIT MC9.1 LVMHGroup Total Revenues, 2008-2021 (bilion euron) 70 60 Exhibit MC9 2 breaks down IVMH Group's revenues by segment. In 2021 , about 48% of the 64.2 billion euros came from tashion and leather goods, 18% from selective retailing fwhich makes certain products avaltable only in specific stores and locations such as Sephora and Le Bon March), 10% from perfumes and cosmetics, 9% from wines and spirits, and 14% from watches and jewelry. EXHIBIT MC9.2 LVMH Group Revenues by Seament, 2008-2021 (billion euros) Fashion and Salantiu seament, 2008-2021 (billion euros) LVMH has grown by acquisition. By acquiring Tiffany, LVMH has engaged in horizontal integration, which is the process of merging with a competitor at the same stage of the industry value chain. Horizontal integration is a corporate strategy that can improve a firm's strategic position in a single industry. As a rule, firms should go ahead with horizontal integration (0.e. acquiring a competitor) if the target firm is more valuable inside the acquiring firm than as a continued standalone. company. LVMH believes it can unlock more value from riffany within the conglomerate. For one. Tiffany helps strengthen its position in jewelry and watches. Since the Tiffany acquisition, LVMH's sales of jewelry and watches increased from 3.4 bilition curos (or 7% of total) in 2020 to 9 bilion euros (or 14% of total) in 2021 As a standalone category. sales of jeweliry and watches increased by 265% (see Exhibit MC9.2), thus aiding in diversifying the conglomerate's product mix. Second, by owning THforny. LVMH can strengthen its presence in the US. market and enthance its geographic diversification, In contrast to Tiffany, LVMH earns over 90% of its revenues outside its home country of France, with about 65% of its sales in Asia. 25% in Europe, and only 10% in the United States. Third, by acquiring Tiffany, tVMH preempted rivals from doing so. The gobal fuxury industry is dominated by three conglometates LVMH, Kering (Gucci and Yves Saint Laurent), and Richemont (Cartier and Montbianc). LVMH is more than twice the size of Kering and Richemont combined. Tiffony Moves into the 21st Century IVMH immediately set to work in attempung to unlock value at Tirany by moving the company into the 2 stst century it brought in a new top manegemerot team from france. including a new CEO for Tiflany, Anthony Lecu and Alexandre Ampult, the 29 year-old son of Bemout Axpoult. The younger Amsults official tite is execulve vice president of proctuct In 2020, LVMH acquired Tiffany for $16 billion, the largest takeover in the industry. With little or no growth for a decade. Tiffary had fallen on hard times. Why did the American jeweler struggle? Why did LVMH acquire Tiffany? And how wilt the merger impact a company that is an American cultural icon? Tiffony Feeling Blue Tiffany &.00. is the quintessential American jewelec, best known for its iconic blue box and romantic engagement rings. it has been a imainstiry in American culture for almost 200 years. Before the LVMH acquisition, Tiffany focused on providing affordabie luxury for many Americans, including gifts for baby births, weddings, and graduations. Engagement rings, wedding bands, and other jewelry are among its most popular items. For instance, entryilevel sterling silver pieces, such as the Elsa Peretti heart necklaces that are priced less than \$9oo, are beloved by generations of teenagers. Tiffary's reputation is one of understated, cassic elegance Since key scenes of the 1961 movie Breakdast at Titfany's were shot at Tiffany's Fifh Avenue flagship store in New York. City, it has become a magnet for window shoppers and tourists, who often wait in long lines to enter the store. Tiffany certainly provided an unparalleled in-store shopping experience for customers looking to be part of an aspirationat brand. indoed, nffanys 330 retai outlets are the pirnary source of its revenues, generating almos: 95% of its sales Compared to otherjewelers. Tiffany's online presence is underdeveloped. Moreover, Tifrany's business is heavly concentrated in iss home market, where it earns roughly 45% of its reveaues, compared with 15% in Japan, 30% in the rest of Asia, and 10%5 in Europe Tiffanys sales were $4 bilion in 2019 , its last year as an independent company. Reisting onpustiaurels, Tifiany stopped innovating and changing with the times. Its iconic brand had become stale and associated with an older generation Professiona Millennials and Gen Zers do not consider Tiffany o place where they suich as is Supreme hoodie are much more desirable than a diamond ring. Others prefer a Tesla vehicie over bling? 'fabulous' and excessively positive comments are not the norm 3 The new CEO firmly pushed back and indicated that the memo was not representative of the values held by LVMH. Alexandre Amault designed new marketing campaigns to communicate Tiffany's fresh approach. A Millennial himself, the younger Amault wants to make Tiffany attractive to a younger audience. To support this positioning. Tiffany released the ad campaign "Not Your Mother's Tiffany." The initiative received an immediate backlash, with many young women expressing outrage on social media. Indicating that they look to their mothers for inspiration and view the new branding as degrading their mothers' style. While negatively recelved, the campaign did intend to reach a broader audience by showing that there are other options besides the classic Tiffany style. Next, Tiffany launched the 'About Love' campaign featuring Beyonce and Jay-z. In addition to targeting a new audience for Tiffany products, LVMH is also attempting to position Tiffany upmarket. Rather than selling entry-level items for a few hundred dollars, LVMH wants Tiffany to focus on the luxury segment. As a prime example of the new Tiffany, it introduced a 180 -carat diamond necklace as part of its fine-jeweiry collection, at an estimated price of $20 - $30 million. LVMH is attempting to move Tiffany upmarket while remaining attractive to the US consumet. Highend jewelry sales above $100,000 are up 50% at Tiffany sompared to 2019 . The more robust demand for high-end jewelry translated into a 35% increase in spending by the average consumer, particularly those under 40 . At the same time; LVMH wants Tiffany to increase its sales overseas, especially in Asia, which is home to o large and wealthy middle class in China and other countries. The new CEO plans to open super-high-end Tiffany stores in Europe and Asia to provide a best-in.class customer experience. Making Tiffany more attractive internationally is a top priorify because most or its sales have been in the United States. The new marching orders are: Go upmarket and go global while remaining strong in the home market. Endnotes LVMH immediately set to work in attempting to unlock value at Tiffany by moving the comparny into the 2ist century it brought in a new top management team from France, including a new CEO for Tiffany. Anthony Ledru, and Alexandre Arnault, the 29-year-old son of Bernault Amault. The younger Amault's official title is executive vice president of product. and communications. Although Alexandre Amault is supposed to report to the CEO per the new org chart, in meetings he often leverages tis father's authority by stating. "I spoke with BA [Bernard Amault] and this is what we agreed on 1 American employees bristled at the blatant nepotism. When asked during a town hall meeting shortly after the acquisition what LVMH would do to promote more women to leadership positions at Tiffany, the new CEO responded, "Leave some jobs for us men, because we need to work, too," which he meant as a joke. Still, it was not well received in a post-\#Meloo world 2 The tight knit French executives set to work immeciately to change Tiffany's strategy, structure, and culture. First; meetings were streamlined, with no more than 10 executives, rather than the more than 40 people common during Tiffany's days as an independent jeweler, Second, they implemented a clear hierarchical structure at Tiffany, which hac been known more as an egalitarlan and consensus-oriented workplace. Third, the French leadership team required people to work in the offices during the pandenic and controlled attendance by checking the electronic swipe in/out records of employee batches. They argued that jeweliry could not be appralsed or designed via Zoom calls Ater being replaced by french executives, iong-time American lesders quit. Rank-and-file employee furnover was aiso high during the pandemic as people sought out employers that allowed them to work from home. The remaining Tiffany employees joked that the ability to speak Fiench was a prerequisite for job security. Shortly after the acquisition, an unsanctioned memo titied "Franco. American Cultural Nuances and Etiquettel made its way around Tiffany, including tips on culturai differences between Fiench and American wonpisce culture it counseled against discussing weekend plans as small taik Employees should expect a much iess welcoming workplace, short on positive feedback but long on critisisn: "French people share more negative feedback" and workers should "expect less warm and fuzzy 'amazing tabulous and excessively positive comments are not the norm. 3 The new CFO firmly pushed back and indicared that the