- Subject: Strategic Management. - Mandatory book for this week's assignment (file attached - please include in citations): Rothaermel, F. T. (2013). Strategic management: Concepts. New York: McGraw-

E ssay # 1: C onduct a v a lu e c h ain a naly sis fo r M cD onald ’s . W hat a re it s p rim ary

a ctiv it ie s? Wh at a re it s s u pport a ctiv it ie s? Id entif y th e a ctiv it ie s th at a dd th e m ost v a lu e

fo r th e c u sto m er. Wh y? Wh ic h a ctiv it ie s h elp M cD onald ’s to c o n ta in c o st? W hy? In th e

la st fe w y e ars , M cD onald ’s h as m ad e a lo t o f c h a nges to it s m en u, a ddin g m ore h ealt h y

ch oic e s a nd m ore h ig her p ric e d it e m s, s u ch a s th ose o ff e re d in M cC afé ( e . g ., p re m iu m

ro ast c o ff e e, fr a ppe’, a nd fr u it s m oo th ie s), a nd h as a ls o e nhance d it s in r e sta ura nt

se rv ic e s ( e .g ., fr e e, u nlim it e d Wi F i, n ew er in te rio rs ). D id M cD onald ’s n ew p rio rit ie s – in

t e rm s o f a b ro ader, h ealt h ie r m en u a nd a n im pro ve d in r e sta ura nt e xp erie nce – r e quir e

c h anges to it s tr a dit io nal v a lu e c h a in a ctiv it ie s? If s o , h ow ? T ry to b e a s s p ecif ic a s

possib le in c o m parin g th e M cD onald ’s fr o m th e r e ce n t p ast ( fo cu sin g o n lo w -c o st

b urg ers ) to th e M cD onald ’s to day.

E ssay # 2: T he w orld ’s m ost s u cce ssfu l g lo ba l r e ta ile r, in te rm s o f p ro fit a bilit y , is n ot

W alm art o r th e F re nch g ro ce ry c h a in C arre fo ur, b ut IK EA – a p riv a te ly o w ned h om e

fu rn is h in gs c o m pany w it h o rig in s in S w eden. In 2 012, IK EA h ad m ore th an 3 30 s to re s

w orld w id e in 3 8 c o untr ie s, e m plo ye d s o m e 1 40,0 00 p eople , a nd e arn ed r e ve nues o f 3 3

billio n E uro s. IK EA’s r e ve nues b y g eogra phic r e gio n a re 7 0 p erc e nt fr o m E uro pe, w it h

t h e r e st fr o m N orth A m eric a ( 1 6 p erc e n t) , A sia a nd A ustr a lia ( 8 p erc e nt) , a nd R ussia ( 6

p erc e nt) ( F ig -3 ). A lt h ough IK EA’s la rg est m ark e t is in G erm an y ( 1 4 p erc e nt o f to ta l

sa le s), it s fa ste st- g ro w in g m ark e ts a re th e U nit e d S ta te s, C hin a, a nd R ussia .

F ig ure 3

E xh ib it F ig -4 s h ow s IK EA’s g ro w th in th e n um be r o f s to re s a nd r e ve nues w orld w id e

sin ce 1 974. K now n to day fo r it s ic o n ic b lu e a nd y e llo w b ig b ox r e ta il s to re s, fo cu sin g o n

fla t p ack fu rn it u re b oxe s c o m bin e d w it h a la rg e D IY c o m po nent, IK EA s ta rte d a s a s m all re ta il o utle t in 1 943 b y th en 1 7-y e ar o ld In gva r K am pra d. T hough IK EA h as b eco m e a

g lo bal p henom enon, it w as in it ia lly s lo w to in te rn atio naliz e . It to ok 2 0 y e ars b efo re th e

co m pany e xp anded b eyo nd S w ed en to it s n eig hborin g c o u ntr y o f N orw ay. A fte r h onin g

and r e fin in g it s c o re c o m pete ncie s o f d esig nin g m od ern fu nctio nal h om e fu rn is h in gs a t

lo w p ric e s a nd o ff e rin g a u niq ue r e ta il e xp e rie nce in it s h om e m ark e t, IK EA fo llo w ed a n

in te rn atio nal s tr a te gy, e xp andin g fir s t to E uro pe, a nd th en b eyo n d. U sin g a n

in te rn atio nal s tr a te gy a llo w ed IK E A to s e ll th e s a m e ty p e s o f h om e fu rn is h in gs a cro ss

th e g lo be w it h lit tle a dapta tio n ( a lt h ough it d oes m ake s o m e a llo w ance s fo r c o untr y

p re fe re nce s). B eca use IK EA fo cu se s o n lo w c o st, it s h if te d m ore r e ce ntly fr o m a n

in te rn atio nal s tr a te gy to a g lo ba l s ta ndard iz a tio n s tr a te gy, in w hic h it a tte m pts to

a ch ie ve e co nom ie s o f s ca le th ro ugh e ff e ctiv e ly m an agin g a g lo bal s u pply c h ain .

A lt h ough A sia a cco unts c u rre ntly fo r o nly 8 p erc e n t o f it s s a le s, IK EA s o urc e s 3 2

perc e nt o f it s in puts ( m ostly tim be r) fr o m th is r e gio n. T o d riv e c o sts d ow n fu rth er, IK EA

has b egun to im ple m ent p ro ductio n te ch n iq ues fr o m a uto a nd e le ctr o nic s in dustr ie s, in

w hic h c u ttin g-e dge te ch nolo gie s a re e m plo ye d to a ddre ss c o m ple xit y w hile a ch ie vin g

fle xib ilit y a nd lo w c o st. D esp it e it s s u cce ss, IK EA fa ce s s ig nif ic a nt c h alle nges g oin g

fo rw ard . O penin g n ew s to re s is c rit ic a l to d riv e fu tu re g ro w th ( s e e F ig -4 ). F in din g n ew

so urc e s o f s u pply to s u pport m ore s to re o penin gs, h ow eve r, is a c h alle nge. A lt h ough

dem and fo r IK EA’s lo w c o st h om e fu rn is h in gs in cre ase d d urin g th e g lo bal fin ancia l

cris is a s m ore c u sto m ers b eca m e p ric e c o n scio us, IK EA’s a nnual s to re g ro w th h as

slo w ed to le ss th an fiv e n ew s to re s a y e a r. T his is b eca u se it s s u pply c h ain h as b eco m e

a b ottle neck. IK EA h as d if f ic u lt y fin din g s u p plie rs th at a re a s tr a te gic fit w it h it s h ig hly

e ff ic ie nt o pera tio ns.

F ig ure 4

R ela te d to th is is su e is th e fa ct th at w ood r e m ain s o ne o f IK EA’s m ain in put fa cto rs , a nd

th e w orld ’s c o nsu m ers a re b eco m in g m ore s e n sit iv e to th e is su e o f d efo re sta tio n a nd it s possib le lin k to g lo bal w arm in g. In th e n ear fu tu re , IK EA m ust fin d lo w -c o st r e pla ce m ent

m ate ria ls fo r w ood. In a ddit io n, p ow erfu l c o m pe tit o rs h ave ta ke n n otic e o f IK EA’s

s u cce ss. A lt h ough IK EA is g ro w in g in N orth A m eric a , it h old s le ss th an 5 p erc e nt o f th e

hom e fu rn is h in gs m ark e t. In s o m e E uro pean m ark e ts , IK EA h old s 3 0 p erc e nt m ark e t

sh are . T o k e ep IK EA a t b ay in t h e U S, T a rg et h as r e ce n tly r e cru it e d to p d esig ners a nd

la unch ed a w id e r a nge o f lo w -p ric e d fu rn is h in gs. K m art, lik e w is e , h as e nro lle d M arth a

S te w art to h elp w it h th e d esig n o f it s o ff e rin gs o f h om e fu rn is h in gs.

B esid es th ese e xte rn al c h alle nge s, IK EA a ls o fa ce s s ig nif ic a n t in te rn al o nes. S in ce th e

co m pany’s fo undin g in 1 943, n o s tr a te gic d ecis io ns h ave b een m ade w it h out M r.

K am pra d’s in vo lv e m ent a nd e xp lic it a ppro va l. In 2 013, M r. K am pra d ( n ow in h is la te

8 0s) a nnounce d h e is s te ppin g d o w n fr o m c h a ir in g In te r IK EA, th e fo undatio n th at o w ns

th e c o m pany. M any o bse rv e rs c o m pa re M r. K am pra d’s in flu ence o n IK EA’s c u lt u re a nd

org aniz a tio n to th at o f th e le genda ry S am W alt o n a t W alm art. M r. K am pra d’s th re e s o ns

w ill ta ke o n s tr o nger le aders h ip r o le s a t IK EA, w it h o ne o f th em n ow c h air in g In te r IK EA.

M ore ove r, IK EA is p riv a te ly h eld ( th ro ugh a c o m plic a te d n etw ork o f fo undatio ns a nd

hold in g c o m panie s in th e N eth erla nds, L ic h te nste in , a nd L uxe m bourg ). T his

a rra ngem ent p ro vid es b enefit s in te rm s o f r e ducin g ta x e xp o su re , b ut a ls o c re ate s

co nstr a in ts in a cce ssin g la rg e s u m s o f c a p it a l n eeded fo r r a pid g lo bal e xp ansio n. IK EA

w ill n eed to a ddre ss th ese c h alle nges in o rd er to liv e u p to it s s tr a te gic in te nt o f

doublin g it s n um ber o f y e arly o pen in gs in a n a tte m pt to c a p tu re a la rg er s lic e o f fa st-

g ro w in g m ark e ts s u ch a s th e U S, C hin a, a nd R ussia .

Q uestio ns

1. Lis t IK EA’s e xte rn al a nd in te rn al c h a lle nges. L ookin g a t IK EA’s c h alle nges, w hic h

o nes d o y o u th in k p ose th e g re a te st th re at? W hy? H ow w ould y o u a ddre ss th e

ch alle nges?

2. W alm art e nte re d a p erio d o f d if f ic u lt ie s a fte r S am W alt o n s te pped d ow n. D o y o u

antic ip ate IK EA h avin g th e s a m e le aders h ip tr a nsit io n c h a lle nges? W hy o r w hy

not?

3. D id it s u rp ris e y o u to le arn th at b o th a d eve lo ped c o u ntr y ( th e U nit e d S ta te s) a nd

als o e m erg in g e co nom ie s ( i. e ., C hin a a nd R ussia ) a re th e fa ste st g ro w in g

in te rn atio nal m ark e ts fo r IK EA? D oes th is fa ct p ose a ny c h a lle nges in th e w ay

IK EA o ught to c o m pete a cro ss t h e g lo be? W hy o r w hy n ot?

4. Wh at c a n IK EA d o to c o ntin ue to d riv e g ro w th g lo bally , e sp e cia lly g iv e n it s

s tr a te gic in te nt to d ouble a nnual s to re o penin gs?

5. A ssu m e y o u a re h ir e d to c o nsu lt IK EA o n th e to pic o f c o rp ora te s o cia l

re sp onsib ilit y . Wh ic h a re as w ould y o u r e co m mend th e c o m pa ny b e m ost s e nsit iv e

to , a nd h ow s h ould th ese b e a dd re sse d?

E ssay # 3: In sp ir e d b y Ita lia n c o ff e e b ars , S ta rb ucks’ C EO H ow ard S ch u lt z s e t o ut to

p ro vid e a c o m ple te ly n ew c o nsu m er e xp e rie nce . T he tr a dem ark o f a ny S ta rb ucks

c o ff e ehouse is it s a m bie nce — w here m usic a nd c o m fo rta ble c h air s a nd s o fa s

enco ura ge c u sto m ers to s it a nd e njo y th eir b eve ra ges. W hile h angin g o ut a t S ta rb ucks

(T ic ke r: S BU X), th ey c a n u se th e c o m plim en ta ry w ir e le ss h ots p o t o r ju st v is it w it h fr ie nds. T he b aris ta s e em s to s p ea k a fo re ig n la nguage a s s h e r a ttle s o ff th e o ff e rin gs:

C aff é M is to , C ara m el M acch ia to , C in nam on D olc e L atte , E sp re sso C on P anna, a nd

S ta rb ucks’ M in t M och a C hip F ra ppuccin o a re a m on g s o m e 3 0 d if f e re nt c o ff e e b le nds.

D azzle d a nd e nch ante d, c u sto m ers p ay $ 4 o r m ore fo r a V en ti s iz e d d rin k. S ta rb ucks

h as b een s o s u cce ssfu l in c re atin g it s a m bie nce th at c u sto m ers k e ep c o m in g b ack fo r

m ore .

S ta rb ucks’ c o re c o m pete ncy is to c re ate a u niq ue c o n su m er e xp erie nce th e w orld o ve r.

T hat is w hat c u sto m ers a re p ayin g fo r, n ot th e c u p o f c o ff e e o r te a. T he c o nsu m er

exp erie nce S ta rb ucks c re ate d w as a v a lu able , r a re , a nd c o stly to im it a te in ta ngib le

r e so urc e . T his a llo w ed th e c o m pa ny to g ain a c o m pe tit iv e a dva n ta ge. W hile c o re

c o m pete ncie s a re o fte n b uilt th ro ugh le arn in g fr o m e xp e rie nce , th ese c o m pete ncie s c a n

atr o phy th ro ugh fo rg ettin g. T his is w hat h appened to S ta rb ucks. B etw een 2 004 a nd

2008, S ta rb ucks e xp anded o pera tio ns r a pid ly b y d oublin g th e n um ber o f s to re s fr o m

8,5 00 to a lm ost 1 7,0 00 s to re s ( s e e F ig -5 b elo w ). It a ls o b ra nch e d o ut in to ic e c re am ,

desse rts , s a ndw ic h es, b ooks, m usic , a nd o th er r e ta il m erc h a ndis e , s tr a yin g fr o m it s

c o re b usin ess. T ry in g to k e ep u p w it h it s e xp lo siv e g ro w th in b oth th e n um ber o f s to re s

and p ro duct o ff e rin gs, S ta rb uck s b egan to fo rg et w hat m ad e it u niq ue. It lo st th e a ppeal

th at m ade it s p ecia l, a nd it s u niq ue c u lt u re b eca m e d ilu te d. F or e xa m ple , b aris ta s u se d

to g rin d b eans th ro ughout th e d a y w heneve r a n ew p ot o f c o ff e e h ad to b e b re w ed

(w hic h w as a t le ast e ve ry e ig ht m in ute s). T he g rin din g s o u nds a nd fr e sh c o ff e e a ro m a

were tr a dem ark s o f S ta rb ucks s to re s. In ste ad, to a cco m modate it s fa st g ro w th , m any

baris ta s b egan to g rin d a ll o f th e d ay’s c o ff e e b eans in th e m orn in g a nd s to re th em fo r

th e r e st o f th e d ay. T o m ake m atte rs w ors e , in 2 008 th e g lo bal fin ancia l c ris is h it . T he

fir s t it e m s c o nsu m ers g o w it h out d urin g r e ce ssio n a re lu xu ry it e m s s u ch a s a $ 4 c o ff e e

at S ta rb ucks ( s e e r e ve nue d ro p in F ig -5 b elo w ). C om in g o ut o f a n e ig ht- y e ar r e tir e m ent,

H ow ard S ch ult z a gain to ok th e r e in s a s C EO a nd p re sid ent in J a nuary 2 008, a tte m ptin g

to r e c re ate w hat h ad m ade S ta rb ucks s p e cia l. In 2 009, S ta rb ucks in tr o duce d V ia , it s

n ew in sta nt c o ff e e, a m ove th at s o m e w orrie d m ig ht fu rth er d ilu te th e b ra nd. In th e fa ll

o f 2 010, S ch ult z r o lle d o ut a n ew g uid elin e: B aris ta s w ould n o lo nger m ult it a sk, m akin g

m ult ip le d rin ks a t th e s a m e tim e, b ut w ould in ste ad fo cu s o n n o m ore th an tw o d rin ks a t

a tim e, s ta rtin g a s e co nd o ne w hile fin is h in g th e fir s t. T he g oal w as to b rin g b ack th e

cu sto m er e xp erie nce th at b uilt t h e S ta rb ucks b ra nd. B y th e s u m mer o f 2 013, S ta rb ucks

o pera te d s o m e 2 1,0 00 s to re s in o ve r 6 0 c o u ntr ie s, b rin gin g in $ 14 b illio n in a nnual

re ve nues.

To ta l N um ber o f S ta rb ucks S to re s, 1 971– 2 013 S O URCES: A uth or’s d epic tio n o f d ata

d ra w n fr o m v a rio us S ta rb ucks A nnual R eports a nd “ F orty y e a rs y o ung: A h is to ry o f

S ta rb ucks,” T he T e le gra ph, M ay 1 1 , 2 011 . Fig ure 5

Q uestio ns

1. Wh at r e so urc e s a nd c a pabilit ie s fo rm ed th e b asis o f th e u niq ueness o f S ta rb ucks

in th e fir s t p la ce ? Wh y w as it s o s u cce ssfu l?

2. T o b e a s o urc e o f c o m petit iv e a d va n ta ge o ve r tim e, c o re c o m pe te ncie s n eed to b e

honed a nd u pgra ded c o ntin uously

1. Wh y a nd h ow d id S ta rb ucks lo se it s u niq ueness?

2. H ow is S ta rb ucks r e cre atin g it s u niq ueness? D o y o u th in k it w ill b e s u cce ssfu l

ove r tim e? Wh y o r w hy n ot?

3. Wh at r e co m mendatio ns w ould y o u g iv e H ow ard S ch u lt z to s u sta in a c o m petit iv e

a dva nta ge o ve r tim e? S upport y o ur a rg um en ts .

E ssay # 4: LV M H in C hin a: B uild in g Its E m pir e o f D esir e

In J u ly 2 012, L ouis V uit to n, th e f la gsh ip b ra nd o f F ra nce ’s M oë t H ennessy L ouis V uit to n

S . A ., b ette r k n ow n a s L V M H, o p ened it s 1 6 th g lo bal “ M ais o n” a t S hanghai’s P la za 6 6, a

m ega lu xu ry m all. T he S hangha i M ais o n h ouse s th e e ntir e r a nge o f L ouis V uit to n

co lle ctio ns, fr o m h ig h-fa sh io n c lo th in g a nd le ath er g oods, to je w elr y , w atc h es,

c o sm etic s, a nd w in es a nd s p ir it s . T he g ra nd o penin g o f th e S hanghai M ais o n a ls o

c o in cid ed w it h th e 2 0 th a nniv e rs a ry o f th e b ra nd’s p re se nce in C hin a; L ouis V uit to n h ad

opened it s fir s t s to re in th e c o untr y in 1 992, in B eijin g’s P enin su la H ote l. LV M H’s s a le s in A sia a cco unte d fo r o ne th ir d o f it s to ta l r e ve n ue b y th e e nd o f th e fir s t

q uarte r o f 2 013[1 ]. T hose r e su lt s m ad e A sia th e la rg est r e gio n fo r L V M H in te rm s o f

re ve nues ( F ig -6 ). F ocu sin g o n c o u ntr ie s r a th er th an r e gio ns, C hin a is th e w orld ’s

b ig gest lu xu ry m ark e t ( F ig -7 ), h a vin g a ch ie ve d a n a ve ra ge a nnual g ro w th r a te o f 2 7

perc e nt fr o m 2 008 to 2 012.

F ig ure 6

F ig ure 7

L ouis V uit to n lo ve s C hin a, a nd th e C hin ese lo ve L ouis V uit to n. In a r e ce nt C hin ese

lu xu ry c o nsu m er s u rv e y p ublis h e d b y th e H uru n R ese a rc h In stit u te , L ouis V uit to n

to pped th e lis t a s th e n um ber o ne a nd n um be r tw o p re fe rre d lu xu ry b ra nd b y C hin ese

m en a nd w om en, r e sp ectiv e ly . A lt h ough th e b ra nd’s h erit a ge a nd c ra fts m ansh ip a re attr a ctiv e c h ara cte ris tic s to C hin ese c o n su m ers , th ey a re n ot s o le ly r e sp onsib le fo r

openin g th e w alle ts o f a ff lu ent C hin ese . L ouis V uit to n’s s te ep p ric e s a nd g la m oro us

pre stig e a re r e fle cte d o nto it s c u sto m ers , a nd C hin ese lu xu ry c u sto m ers ’ v a lu e b ein g

re co gniz e d a s w ealt h y e lit e s w it h h ig h s o cia l s ta tu s. T o s ta y a part fr o m ( o r a to p) th e

cro w d is w hat C hin ese c u sto m ers c ra ve in a d ense ly p opula te d a nd fo rm erly e galit a ria n

(c o m munis t) s o cie ty . T he b ra nd’s im ag e r e in fo rc e m en t is s o p ow erfu l th at e ve n m any in

C hin a’s m id dle c la ss a sp ir e to b e co m e o w ners o f L ouis V uit to n g oods. O n a ve ra ge,

C hin ese L ouis V uit to n c u sto m ers a re y o u nger th an th eir W este rn c o unte rp arts .

M ore ove r, th ey s p end a s ig nif ic a ntly h ig her a m ou nt o f th eir d is p osa ble in co m e o n

LV M H’s lu xu ry s ta tu s s ym bols .

Wi th a n e ager c o nsu m er b ase a nd a la ck o f lo ca l c o m pe tit o rs , th ere is p ro bably n o

str o nger ta ilw in d a n in te rn atio na l b ra nd c o u ld h ope fo r in C hin a. L V M H’s y e ars o f h eavy

m ark e tin g to r a is e c o nsu m er b ra nd r e co g nit io n h ave p aid o ff : G oods fly o ff th e s h elv e s,

a nd e ve ry s in gle s to re L V M H h as o pened in C hin a is p ro fit a ble .

LV M H m anaged it s g ro w th w ell. S in ce it s fo rm atio n in 1 987, it h as b eco m e th e w orld ’s

l a rg est lu xu ry c o nglo m era te , o w nin g m ore th an 6 0 b ra nds a nd 3 ,2 00 s to re s w orld w id e.

[2 ] It h as a r e m ark a ble tr a ck r e co rd in A sia : 8 5 p erc e n t o f J a p anese w om en o w n a

L ouis V uit to n p ro duct, fo r e xa m ple . W it h a n e arly e ntr y in to C hin a, L V M H w as a ls o a ble

t o ta ke a dva nta ge o f th e c o untr y ’s in cre asin g g ro w th to b eco m e th e la rg est lu xu ry

m ark e t w orld w id e. N ot o nly d id L V M H c a p tu re th e lu xu ry lo ve rs in B eijin g a nd

S hanghai, b ut it a ls o o pened s to re s in s e co n d tie r p ro vin cia l c a pit a ls a nd w ealt h ie r th ir d

tie r c it ie s in th e w est, w here r a p id g ro w th w as e xp e cte d.

A fte r n early a d eca de o f s u cce ssfu l e xp a nsio n, L V M H r e ce n tly tu rn ed m ore c a utio us,

th ough. L V M H’s c o nce rn in C hin a is to “ a vo id b eco m in g to o c o m m onpla ce .” [3 ]

A lt h ough th e n ew ly r ic h in s e co nd a nd th ir d -tie r c it ie s s till c ra ve lu xu ry g oods, c o nsu m er

ta ste s in B eijin g a nd S hanghai m ay b e m atu rin g. C hin ese in th e m ajo r c it ie s h ave

b eco m e w ell- tr a ve le d g lo bal c o n su m ers a nd a re s h yin g a w ay fr o m “ lo go h eavy” m ega

bra nds. In cre asin gly , th ey a re m ore s o p his tic a te d c o n su m ers , e m bra cin g u niq ueness

a nd u nders ta te m ent in lu xu ry it e m s.

To r e sp ond to c h angin g c o nsu m er ta ste s, L V M H s to pped o penin g n ew s to re s in C hin a

and la unch ed th e S hanghai M ais o n w it h in vit a tio n o nly flo ors . It a ls o o ff e rs c u sto m

m ade to o rd er b ags u sin g e xo tic a nim al s kin s, to p ro je ct e xclu siv it y fo r th e v e ry to p-e nd

cu sto m ers . It b egan to fo cu s o n le ath er p ro ducts w it h h ig h v a lu e a dded r a th er th an th e

entr y -le ve l p ric e d c a nva s lo go s ty le . In a ddit io n, L V M H h as p ro m ote d a s e t o f “ lo go fr e e”

handbags ta rg ete d e xclu siv e ly a t h ig h e nd C hin ese c u sto m ers .

B ut L V M H’s d ecis io n to lim it s to re g ro w th m ay h ave a noth er r e aso n: T he C hin ese a re

m ore o fte n c h oosin g to b uy a bro ad. T he m ain r e aso n s C hin ese c o nsu m ers c it e fo r

sh oppin g o ve rs e as a re lo w er p ric e s ( d ue to C hin a’s h ig h lu xu ry ta xe s), b ette r s e le ctio n,

and g re ate r “ s h ow o ff ” v a lu e. It is q uit e c o m mon to fin d b uslo ads o f C hin ese to uris ts

lin in g u p o uts id e L ouis V uit to n’s b outiq ue o n A ve n ue d es C ham ps E ly sé es in P aris to

p urc h ase m erc h andis e . Alt h ough s u ch p urc h ase s in th e P aris s to re h ave c re ate d g ro w th fo r L V M H E uro pe, th ey

als o p ose c h alle nges s u ch a s m an agin g in ve n to ry a nd p ro vid in g a dequate s e rv ic e .

B efo re a r e ce nt h olid ay s e aso n, fo r e xa m ple , L ouis V uit to n h ad to p ut in d ra stic

m easu re s to s lo w s a le s. In it s fla gsh ip P aris s to re , L V M H lim it e d th e to ta l n um ber o f

le ath er p ro ducts a va ila ble fo r p urc h a se fo r e ach c u sto m er a nd r e duce d s to re h ours . In

a ddit io n, L ouis V uit to n’s E uro pean s to re s h ave h ir e d M an darin s p eakin g s ta ff w ho a re

tr a in ed to b ette r m eet C hin ese n eeds a nd b ette r h andle th e s p ik e s o f to ur b us tr a ff ic .

M eanw hile , L V M H a im s to s tr e n gth en it s r e la tio nsh ip w it h C hin ese c u sto m ers a t h om e

by p ro vid in g p re m iu m s e rv ic e s a n d e nhancin g th eir s h o ppin g e xp erie nce . A s lo ng a s

th e p ric e d if f e re nce e xis ts , h ow eve r, s to re s a bro ad w ill c o n tin ue to b e C hin ese

cu sto m ers ’ p re fe rre d s h oppin g d estin atio ns.

L ik e a ll o th er lu xu ry b ra nds, L V M H h as to c o n sta ntly fig ht a gain st th e c o unte rfe it in g o f

it s p ro ducts , e sp ecia lly th e L ouis V uit to n b ra nd. C hin a’s d om in ance in m anufa ctu rin g

and it s g enera l la ck o f e nfo rc e m ent o f in te lle ctu al p ro perty la w s h ave m ade it th e

lo ca tio n fo r th e m anufa ctu re o f m ore th an 8 0 p erc e n t o f th e e stim ate d $ 300 b illio n

co unte rfe it in dustr y . T o k e ep s o m e c o n tr o l o ve r it s p ro ducts , L V M H m anufa ctu re s it s

le ath er g oods in c o m pany o w ned fa cto rie s in F ra nce , S w it z e rla nd, G erm any, Ita ly ,

S pain , a nd th e U nit e d S ta te s. S in ce th e e arly 2 000s, L V M H’s C hin ese a nti-

c o unte rfe it in g te am , to geth er w it h it s g lo bal s p e cia lis ts a nd in ve stig ato rs , h as r a is e d

public a w are ness o f c o unte rfe it s a nd s te m med th e flo w o f th e c o unte rfe it s fr o m C hin a

to th e d eve lo ped w orld . It a ls o b ro ught le gal a ctio ns a gain st p ir a te s w ho m ade fa ke

g oods, a s w ell a s la ndlo rd s w ho p ro vid ed o pera tio n lo ca tio ns fo r th e p ir a te s. L V M H h as

ach ie ve d m uch a nti- c o unte rfe it in g s u cce ss in C hin a, in clu din g w in nin g s e ve ra l r e ce nt

ca se s in C hin ese c o urts . B ut a s lo ng a s th e p opula rit y o f it s L ouis V uit to n b ag la sts , th e

anti c o unte rfe it in g b attle g oes o n , fu rth er c o n tr ib utin g to a p ote ntia l lo ss o f e xclu siv it y .

Q uestio ns

1. Wh y is L V M H s o s u cce ssfu l in C hin a?

2. Louis V uit to n is L V M H’s fla gsh ip b ra nd. M uch o f L ouis V uit to n’s a ppeal is th at it

b esto w s e xclu siv it y o n it s o w ners . In th e la st fe w y e a rs , h ow eve r, th e L ouis V uit to n

lo go h as b een a pplie d to h andb ags a nd a cce sso rie s a t a n u npre ce dente d r a te .

D is cu ss th e c h alle nges to th e v a lu e o f th e b ra nd a s L V M H r e sp o nds b y in tr o ducin g

m ore lu xu ry h andbags a nd a cce sso rie s w it h out d is p la yin g th e lo go.

3. LV M H is a ls o c o nfr o ntin g th e p ro ble m o f p ro lif e ra tio n o f th e L V lo go th ro ugh

exce ssiv e c o unte rfe it in g a ctiv it y . H ow c a n L V M H u se it s s tr e ngth s to o ve rc o m e

th re ats fr o m c o unte rfe it e rs ?

4. H ow d oes L V M H e nco ura ge C hin ese c u sto m ers to p urc h a se L V M H p ro ducts in

C hin a r a th er th an a bro ad? D o y o u th in k th ese s tr a te gic in it ia tiv e s w ill b e

su cce ssfu l? Wh y o r w hy n ot? W hat o th er id eas d o y o u th in k L V M H s h ould p urs u e

to e nco ura ge C hin ese c u sto m ers to p urc h a se L V M H p ro ducts in C hin a?

5. G iv e n a b ackla sh in C hin a a gain st c o n sp ic u o us c o n su m ptio n ( th e s p endin g o f

m oney o n lu xu ry g oods to p ubli c ly d is p la y w ealt h a nd s ta tu s), w hat

re co m mendatio ns w ould y o u g iv e L V M H? 6. Oth er lu xu ry b ra nds s u ch a s C ha nel, B urb erry , a nd G ucci a re b uild in g a p re se nce

in th e la rg e lu xu ry g oods m ark e t in C hin a. W hat a ctio ns m ig ht L V M H ta ke to

s u sta in it s s tr o ng p osit io n in th e m ark e t?

E ssay # 5: W rit e d ow n y o ur o w n p ers o nal s tr e ngth s a nd w eakn e sse s. W hat s o rt o f

org aniz a tio n w ill p erm it y o u to r e ally le ve ra ge y o u r s tr e ngth s a nd k e ep y o u h ig hly

e ngaged in y o ur w ork ( p ers o n – o rg aniz a tio n fit ) ? D o s o m e o f y o ur w eakn esse s n eed to

b e m it ig ate d th ro ugh a ddit io nal tr a in in g o r m en to rin g fr o m a m ore s e aso ned

pro fe ssio nal?

P ers o nal c a pabilit ie s a ls o n eed to b e e va lu ate d o ve r tim e. A re y o ur s tr e ngth s a nd

w eakn esse s d if f e re nt to day fr o m w hat th ey w ere fiv e y e a rs a go? W hat a re y o u d oin g to

m ake s u re y o ur c a pabilit ie s a re d yn a m ic ? A re y o u u pgra din g s kills , m odif y in g

behavio rs , o r o th erw is e s e ekin g to c h a nge y o u r fu tu re s tr e ngth s a nd w eakn esse s?

A re s o m e o f y o ur s tr e ngth s v a lu able , r a re , a nd c o stly to im it a te ? H ow c a n y o u o rg aniz e

yo ur w ork to h elp c a ptu re th e v a lu e o f y o u r k e y s tr e ngth s ( o r m it ig ate y o ur

w eakn esse s)? A re y o ur s tr e ngth s s p e cif ic to o ne o r a fe w e m plo ye rs , o r a re th ey m ore

g enera lly v a lu able in th e m ark e tp la ce ? In g enera l, s h o uld y o u b e m akin g in ve stm ents in

y o ur h um an c a pit a l in te rm s o f c o m pa ny s p e cif ic o r m ark e t g enera l s kills ? W hy s h ould

t h at d is tin ctio n m atte r?

A s a n e m plo ye e, h ow c o uld y o u p ers u a de y o u r b oss th at y o u c o uld b e a v it a l s o urc e o f

su sta in able c o m petit iv e a dva nta ge? W hat e vid ence c o u ld y o u p ro vid e to m ake s u ch a n

arg um ent? If y o u a re c u rre ntly o r p re vio usly e m plo ye d , c o n sid er h ow y o ur p ro fe ssio nal

activ it ie s c a n h elp r e in fo rc e th e k e y v a lu e a dded a ctiv it ie s in y o u r d epartm ent o r

org aniz a tio n.

[1 ] E xclu din g J a pan; L V M H d oe s n ot b re ak d ow n s a le s fo r C hin a s e para te ly .

[2 ] L V M H’s fa m ous b ra nds in clu de L ouis V uit to n ( fa sh io n a nd le ath er g oods), B ulg ari

a nd T a g H euer ( w atc h es a nd je w elr y ), M oë t e t C handon a nd D om P érig non ( w in es a nd

sp ir it s ), a nd D io r ( fa sh io n, p erfu m es, a nd c o sm etic s).

[3 ] “ L ouis V uit to n s lo w s e xp ansio n to p ro te ct im ag e,” T he G lo be a nd M ail, J a nuary 3 1,

2013.