Threat of substitutes
The threat from substitute products is low. The fact that the products from the company are purchased by individuals in the middle-to-high income group makes it impossible to have high competition. The introduction of counterfeit products is imposing danger to the products (high quality) sold by the company. Emerging markets such as China are a threat to the company’s brand. The prices of the substitute tend to be low, a case that would divert buyers from Louis Vuitton.
Threat of entrants
A significant amount of capital is needed for expenditure for a firm aiming to join the market. The threat of entrance is however low. Brand recognition, as well as customer loyalty, remain the basis for determining the drive from middle-to-high income generating from a like of the Louis Vuitton. It would be hard for new firms to achieve an equitable share of the market without having to make a significant investment.
Bargaining power of supplier
The firm does not make its original products. The manufacturers are the main source of material for the firm and include China, India, Thailand among others. The Louis Vuitton company reports taking over Les Tanneries Roux, which is a Roman, based Supplier Company. With acquiring key suppliers, the company might end up depleting the bargaining power of suppliers concerning the leather products.
Bargaining power of buyers
The company deals with retail and wholesale customers. Direct sales report to account for 89% of total sales in the fiscal year 2012. The bargaining power of wholesales is limited since they account 10% of the sales, while that of end-customers of moderate.
The competitiveness is high; however, the competition is based on the quality and image perceptions rather than price (expensive). Some rival to the company includes the Hermes, Chanel, Versace, Gucci, Versace, Prada, and Burberry.
Louis Vuitton Case Study: SWOT Analysis
One of the advantages is the company’s strong brand. The firm has an excellent positioning based on the well-laid brand management. The Louis Company offers a wide range of luxury commodities. The firm realizes cost saving since it shares resources among the different brands. The other strength is that the firm has recommendable management practised through price deficit (11).
The principal weakness of the firm is the inability to move its central manufacturing industry that is now located in California, Spain, and France. Furthermore, the profit margin relative to the jewellery and watch section of low. In addition, in cases of crisis, the organization might find it hard to cut its marketing expenses, which include the money spent on advertising, and sponsoring various events.
The increasingly growing Asian market is a potential ground for the firm. Moreover, the decline of trade barriers all over the world would make it possible for Louis Company to market its products without incurring the customs taxes. The advancement in information technology and communication will necessitate the Vuitton firm reach more people by making use of social media sites.
The sprout is counterfeit product might affect the popularity of the brand since people tend to buy cheap but identical products. There are strong competitors in the market. The existence of cultural differences makes it challenges to make products appealing to all communities. Lastly, the political differences between the established markets states hinder trade.