Please answer the questions quickly

Mot Hennessy Louis Vuitton SE (LVMH) is a French luxury conglomerate formed in 1987 following the merger of the French fashion and leather goods company Louis Vuitton and the French wines and spirits producer Mot Hennessy. LVMH stocks are listed on the Euronext Paris (Ticker: MC.PA). U.S. investors could purchase the stocks via unsponsored, Level I ADRs (Ticker: LVMUY), where five ADRs represent one underlying share.

LVMH has grown to be the worlds largest luxury group with a strategy of acquiring established luxury brands, enabling it to operate in all six segments in the luxury market: wines and spirits (e.g., Glenmorangie, a British whisky brand acquired in 2004), fashion and leather goods (e.g., RIMOVA, a German luggage manufacturer acquired in 2016), perfumes and cosmetics (e.g., Acqua di Parma, an Italian fragrance maker acquired by 2003), watches and jewelry (e.g., TAG Heuer, a Swiss watchmaker acquired in 1999), selective retailing (e.g., DFS, the airport duty-free retailer founded in Hong Kong acquired in 1997), and other activities (e.g., Belmond, a luxury travel and hotel chain based in Bermuda acquired in 2019).

Tiffany & Co. (Tiffany), an American luxury jewellery and specialty retailer, was founded in 1837. It is known for its innovative designs and expert craftsmanship. In January 2021, it became LVMHs most recent acquisition through a deal of US$15.8 billion. The Tiffany acquisition will roughly double the size of LVMHs jewellery and watch business, and the number of LVMH-owned brands grows to 75. The deal is expected to allow LVMH expand deeper into jewellery and strengthen its presence in the U.S. For Tiffany, the deal is expected to strengthen Tiffanys presence in Europe and China (Investopedia, 2021).

To finance the Tiffany purchase, in February 2020, LVMH sold 7.5 billion euro-denominated bonds and 1.55 billion pound-denominated bonds of varying maturities from 2 to 11 years that carried very low yields. Two of the euro tranches were placed at negative yields, meaning investors are paying LVMH to borrow money; and the longest 11-year euro tranche has a coupon of just 0.45% p.a. LVMHs access to dirt cheap funding in its home currency to buy an American company was thanks to ECBs unprecedented stimulus policies, which was intended to lower European companies funding costs to invest at home (Bloomberg, 2020).

LVMH released its semi-annual earnings report on July 26, 2021. Asia, especially China, continued to drive LVMHs revenue growth, accounting for nearly 40% of the groups revenue; the U.S. market ranked second and also saw sustained growth, while sales in Europe slowly recovered from COVID disruptions. LVMH stocks reached historic high in early August.

On August 17, 2021, the Chinese President Xi Jinping gave remarks at the 10th Meeting of the Central Committee for Financial and Economic Affairs that emphasised on Chinas commitment on promotion of common prosperity and to narrow Chinas growing wealth gap. A selloff of stocks in the luxury industry followed, wiping out 60 billion euros from the value of Europes top luxury stocks, including LVMH (WSJ, 2021). However, in an October earnings call following the release of Q3 results, LVMHs CFO has stated that the company is not worried because the bulk of its customer base in China is the upper-middle class. Asia (excl. Japan) again contributed the most to LVMHs business for Q3 (Bloomberg, 2021). MC.PA is currently at 683.40 and LVMUY is trading at $159.10. The spot rate is $1.16/.

Based SOLELY on the case information above and what we have learnt in this course, answer the following questions.

a. LVMH started out as a successful French enterprise. Name all the locations it now operates in. What factors do you think have been driving its global expansion history and choices? Discuss and clearly relate each factors to LVMHs core business.

b. Much of LVMHs global expansions involved cross-border acquisitions of foreign businesses and established brands. Compare this strategy against each of the different international entry strategies we have discussed in class; make sure to identify and explain why you think LVMH focused on acquisition rather than other entry strategies or models. (8 marks)

c. Explain all relevant types of risks that LVMH may be facing in its international operations. Ensure to name the currencies that it is exposed to. Also, suggest TWO reasonable management strategies for EACH risk type that you have identified.

d. LVMH attempted to acquire Herms, a 184-year-old iconic French luxury brand and LVMHs long-time competitor. However, Herms fought off the acquisition attempt. In addition to the explicit reason already provided in the case, suggest and discuss TWO other plausible reasons you have learned in the course to explain why Tiffany, itself with 184 years history, would be willing to be acquired by LVMH.