STRATEGIC IMPLEMENTATION PROCESSES 9
Corporate Social Responsibility Policies/Practices (CSR)
LVMH is a conglomerate that demonstrates commitment to commendablecorporate social responsibility based on the basic principle “ofrespect for people, and on making excellence a lever for social andprofessional inclusion, in solidarity with our host communities”(LVMH, 2015). The organization has four pillars that act as the basisfor social responsibility. These are quality working environment,talent development and savoir-faire, avoiding discrimination andsupporting local societies (LVMH, 2015). All Groups’ Houses sharethe CSR vision and adapt it in addressing their individual prioritiesand regional presence.
By respect for people, the organization ensures that its workenvironment allows all personnel to demonstrate fully theirproficiency under the most suitable workplace conditions. Thisguarantees the respect and enrichment for every individual’suniqueness (LVMH, 2015). The basis of the working environmentincludes the constant focus on working conditions, as well as theorganization’s policy against any manner of discrimination. Inspecific, is ensuring that its female workforce do not face any formof discrimination due to their gender. The policy on respect forpeople aligns with the preservation of the unique savoir-faire ofLVMH’s Houses and progressing to improve their noteworthy heritage.
The organization has a firm belief that excellence is its successengine, which comprises of “a formidable drive towards socialinclusion and workplace integration” (LVMH, 2015). Part of LVMH’sCSR policy involves employing its excellence in serving marginalizedas well as susceptible populations, hence supporting the localitieswhere it operates. LVMH has also developed partnerships withnon-profit companies with the objective of supporting the socialintegration, as well as personnel inclusion of disadvantaged persons.For instance, Louis Vuitton has initiated the “excellenceinitiative” with the objective of providing education in salestasks within the luxury sector for persons rejoining employment aftera disability. This initiative represents LVMH’s aspiration toenhance the positive social impact of the business. In addition, itacts as proof of a philanthropic and comprehensive view ofexcellence.
LVMH is involved in various initiatives, which demonstrate itscorporate social responsibility. In 2013, the company together with32 of the Houses became signatories to the United Nations’international consensus on “Women’s Empowerment Principles”(LVMH, 2015). As a result, LVMH is committed to ensuring both malesand females have equal opportunities at work. The organizationcreates the “Institut des Metiers d’Excellence” for preservingand transferring its long-established savoir-faire (LVMH, 2014). TheInstitute also advances the attractiveness of professions inconventional artisanship in addition to creative métiers amid youngindividuals. LVMH has a “Moet Hennessy Enterprise Adaptee”, whichacts as a structure for accommodating personnel with disabilities(LVMH, 2014). The enterprise provides innovative as well as realisticsolutions for the re-employment of personnel that face professionalhardships after a disability. The enterprise, which was formed in2011, makes it possible for personnel that have special needs to workin environments that are perfectly adapted to their disability.
The company is engaged in the support of social entrepreneurs thatcreate economically feasible businesses, which tackle social as wellas environmental needs. LVMH provides its prospect leaders theopportunity to work together with established social entrepreneurs inspeeding the advancement of their business (LVMH, 2014). Theinitiative has made it possible to advance practices that areimportant to LVMH, like emancipating women and enhancing access toeducation. LVMH has initiated tests that make it possible to avoiddiscrimination that may happen during hiring. The tests also make itpossible to supervise progressively if loyalty to job applications isrespected. The organization is dedicated to responsible consumption.Moet Hennessy is a strong believer that education and knowhowconcerning products results in responsible consumption. As a result,the company enhances knowledge about its wines and spirits to ensureclients enjoy the drinks moderately.
Alignment with Good CSR
CSR regards to a management idea where organizations put togethersocial and environmental issues in their endeavors and dealings withstakeholders. Corporate social responsibility in general is themanner via which an organization attains a balance of social,economic and environmental imperatives, whereas tackling stakeholderand shareholder expectations. The objective of CSR is ensuringcompanies carry out their operations in manners that are ethical.Traditionally, CSR was considered as a company’s involvement inphilanthropic activities. The view has shifted towards a widercommitment to the safeguard and improvement of employees’ lives andsocieties where the company operates. Good CSR practices comprises ofan organization that demonstrates commitment towards specificactivities. These activities are working together with localsocieties, investing in manners that demonstrate socialresponsibility, the development of rapport with workers and clientsand engaging in activities that result in the protection of theenvironment as well as sustainability.
LVMH is in alignment with good CSR practices. The organization hasan everyday commitment for respecting people. People in this caserefer to its employees and customers. LVMH realizes that everyemployee and customer is important to the organization. This isevident through the creation of a working environment that makes itpossible for workers to express their prowess maximally. The workingenvironment is also conducive to allow customers shop for productseasily. LVMH is also engaged in the education of its customers on theproducts it sells. This mainly applies to the wines and spirits,where education is a CSR practice aimed at ensuring responsibleconsumption. Clients are able to enjoy the unique and classy drinksby LVMH, while at the same time demonstrate responsible alcoholicconsumption. Education focuses on informing on the perfect manner forconsuming LVMH products, and the perils that arise from improperalcohol consumption.
The organization aligns to proper CSR through the engagement inactivities that promote partnership with local communities. LVMHensures that it hires employees from local communities where itoperates, by using a hiring procedure that does not discriminate.Both males and females have an equal employment opportunity. Thecompany constantly monitors its recruitment process to ensure thatthere is no discrimination. In addition, the company supports socialentrepreneurs from local communities where LVMH operates, by ensuringtheir ideas are nurtured into becoming profitable businesses. Thecompany is actively involved in activities that improve the health oflocal communities. An illustration is LVMH’s active engagement infighting sickle cell anemia. As a response to assist childrensuffering from the illness in northeastern Paris, the organizationcollaborated with the “Robert Debre” pediatric hospital. Thepartnership led to the formation of an internationally recognizedcenter for sickle cell disease study.
CSR and Competitive Advantage
The fashion industry is not immune to the ethical repercussions thepresent world enforces (Fashion, 2013). This means thatorganizations operating in the industry must be socially responsiblein order to compete profitably. CSR has added value to LVMH. It actsas the opportunity for the organization to reinforce its bottom line(O’Keefe, 2014). Through involvement in activities that help localcommunities, locals do not just view the organization as after makingmoney. Instead, they feel that the company is considerate towardstheir needs, and are more likely to support the actions of LVMH. Bysupporting the company’s actions, it acts as an indirect way ofpromoting its products within the areas LVMH operates.
Some of the CSR practices undertaken by LVMH result in the retainingof top talent (O’Keefe, 2014). One such practice is the developmentof talent and expertise. Through identifying and recruiting talent,in line with preserving strategic skills LVMH is able to achieveshort and lasting success. The company operates in a competitiveindustry, where talent and skill are superlative. This makes itcrucial to employ highly effective and fitting talents that result ina promising future for LVMH. Talent development happens through acommitment to training. Training makes it possible to preservecorporate cultural assets in artistry and designing via skilltransfer. It is partly achieved through the “Institut des Metiersd’Excellence” created for transmitting LVMH’s traditionalsavoir-faire to young employee generations. Another policy thatresults in retaining talent is LVMH’s yearly talent appraisal. TheHR together with operations managers coordinates the appraisals,which creates an opportunity for preparing different training coursesfor personnel. The training course enhances the performance ofpersonnel as they gain more expertise.
Good CSR makes it possible for LVMH to attract customers and retainemployees. When an organization invests in society, it empowerspersonnel to act in the similar manner. Workers desire to work fororganizations, which demonstrate commitment in improving the world.Hence, they are more likely to work for an organization that makes itpossible for them to make meaningful contributions towards improvingtheir local communities. On the other hand, customers desire to buyproducts from companies they feel are not only after moneymaking, butalso demonstrate a commitment to improving society as well.Attracting more customers and retaining employees is an addedadvantage for LVMH. The more the customers, the more sales and inturn profit for the company. Retaining employees means the companysaves on money spend in training new workers, and talent remainswithin LVMH.
Corporate strategy refers to the direction taken by a company withthe aim of attaining lasting business success. The focus makes itpossible for an organization to adapt as well as anticipate changeswithin its business environment. Coming up with a corporate strategyentails the establishment of the objective and scope of a company’sactions. It also entails paying consideration to the environmentwhere the company operates, position in the market and competition.LVMH’s corporate strategy involves holding a range of the mostvalued, desirable luxury brands. The corporate strategy is a lastingvision, whose foundation is the heritage of its Houses, stimulatingcreativeness and excellence. The organization identifies itself as aglobal leader in luxury products. It has a unique collection ofbrands that are popular among prestige circles. These includeluggage, champagne, watches, cognac, jewellery and perfumes amongother luxury goods. The organization’s brands are as well popular,which include “Moet and Chandon, Veuve Clicquot, Hennessy, Hine,Tag Heuer, Zenith, Christian Dior, Givenchy and Christian Lacroix aswell as Louis Vuitton leather products” (Thompson, 2001). LVMH onlysells products that have an international appeal and to a specifictarget market comprising of the affluent.
Generally, LVMH’s corporate strategy involves differentiation. Byfocusing on star brands, the organization determines products, whichappeal to its target within the fashion industry. LVMH sets itselfapart from other companies by ensuring that their products andservices are unique. Since the target market is wealthy customers,who are more concerned about quality than price, the products must beunmatched. Although there are competitors in the market that alsotarget wealthy customers, LVMH differentiates itself by settinghigher prices for its products. Setting higher prices communicatesthat the products are of more value, hence different from those soldby competitors. This is how customers are able to identify with thebrand. As a result, LVMH is identified as a leader in the making andsale of luxury products within the fashion industry.
How Corporate Strategy has Added Value
The use of differentiation as a corporate strategy sets LVMH apartfrom other companies in the fashion industry. Throughdifferentiation, the organization has a specific target market. Thecompany determines what brand will appeal to its customers, createsthe products and sells them. As a result, they have unmatcheduniqueness and quality of their products, which adds value to LVMH interms of customer loyalty. Customer loyalty is very beneficial forLVMH, considering that it operates in a highly competitive market.Customers identify with LVMH’s products, which makes it hard forthem to buy from competitors. Hence, the organization makes profitwhen customers become loyal to their brand, and at the same time,they do not face stiff competition in highly priced brands.
Through the corporate strategy, LVMH creates timeless products.Timeless products are developed when an organization emphasizes onmaking products that are of the best quality. This means that theproducts have not been made before or by competitors. As a result,they become star brands, which will last for years. Timeless productsare an added advantage for LVMH, because customers will continue tobuy the products for years. Products like watches, jewelry and wine,when timeless are not affected by changing consumer demands. Consumerdemands changes due to the emergence of new products that havedifferent or better features. However, since LVMH differentiatestheir products, they are not affected by such changes, which explainwhy their luxury goods last for years.
The corporate strategy also acts as a form of marketing for LVMH. Itis obvious that the products are of high quality and target high-endcustomers. The target market comprises of individuals that also livein affluent places and associate with affluent people. When onecustomer buys products from LVMH, other individuals that mingle withthe customer also develop interest and end up buying the sameproducts from LVMH. Hence, the uniqueness and quality of LVMH’sproducts results in product marketing through appealing to the tasteof customers.
How Corporate Strategy has negatively affected LVMH
The corporate strategy at LVMH involves targeting high-endcustomers. This means that the products made are only those that suitthe customer taste, fashion and demand of affluent individuals.Hence, LVMH can only sell its products to wealthy individual. Thestrategy has a negative effect on the organization because it reducesits customer base. Although individuals that have the taste forunique and quality products by LVMH may be willing to buy, theycannot. This is because the prices are set for high-end customers,who are more conscious of the taste and not price. Middle classearners on the other hand are conscious about the taste as well asprice. As a result, LVMH has a limited customer base for itsproducts.
Another disadvantage is that differentiation results in an increasein counterfeit products. The more the company creates products thatare unique, the more individuals are interested in associating withthe brand. As a result, there is a ready market for counterfeitproducts. People that cannot afford the highly priced originalproducts buy counterfeits. The proliferation of counterfeit productsin the market has a negative effect on LVMH. At times, it may bedifficult for buyers to differentiate between original andcounterfeit products. However, since the price for counterfeits islower, it means that more individuals are able to buy products thathave a striking resemblance to the original. This in turn reduces thequality and uniqueness of the original products.
The corporate strategy enhances competition in the fashion industry.By LVMH failing to tap into the existing market like middle incomeearners, other companies making the same products become morecompetitive because they target all customers. For instance, assumingthat a competing company makes products for both the wealthy andmiddle-income earners, it implies that the company caters for allmarket demands. This is unlike LVMH, which merely focuses on aspecific target market. In the end, the company that target morecustomers is more competitive than LVMH.
LVMH merges exceptional Houses, which create goods that representdistinctive savoir-faire, an articulately preserved heritage as wellas dynamic involvement with modernity (LVMH, 2015). The creationsmake LVMH’s Houses ambassadors of a uniquely refined art de vivre.The organization has been triumphant in the creation of a familyspirit, which places precedence on its lasting vision. The Group hasa vocation of ensuring the advancement of all its Houses whereaspaying respect to their identities, as well as their sovereignty,availing the resources required in creating and marketing LVMH’sgoods via articulately selected channels. All individuals in LVMHshare the three basic values expressed by Bernard Arnault during theformation of the Group. The values encourage excellence and compriseof the pillars of the company’s performance.
The values are creativity and innovation – the organizationdepends on creativity and innovativeness in ensuring its success andthe establishment of their legitimacy (LVMH, 2015). The combinationacts as the Houses’ foundation. It is the balance needed to renewthe products created while at the same time ensures a uniqueheritage. Delivering excellence – LVMH does not compromise onquality. This is because the company symbolizes the “world ofcraftsmanship in its most noble and accomplished form” (LVMH,2015). Excellence is achieved through paying consideration to detailas well as perfection by cultivating a quest for excellence.Cultivate an entrepreneurial spirit – LVMH is made up of adecentralized organization, which promotes competence andresponsiveness (LVMH, 2015). It encourages personal initiativethrough entrusting every individual with imperative responsibilities.The entrepreneurial spirit motivates risk taking as well asdetermination. It mandates pragmatic thinking and capability toinspire teams, directing them to attain ambitious goals.
Respect for the values is among the performance drivers at LVMHHouses, which engages them with modernity and society. The Groups hasensured that sustainable development is a major priority from theformation of the organization. Currently, the commitment creates aclear position concerning ethical responsibility of the organization,in addition to the unique function played in society by companieslike LVMH all over the globe.
How Organization Culture has Added Value
The organization culture at LVMH adds value to the organization innumerous manners. It unites employees from the different countriesand departments. LVMH is an international organization that hasdifferent product lines. This means that the workers are from varieddepartments and work for the same company from different regions.Each employee has their unique culture, and in order to work togetheras a team, employees rely on the organizational culture. Having acommon culture at the place of work gives workers a sense oftogetherness and comprehension towards each other. It as wellpromotes better communication and reduces disagreement. Additionally,the organizational culture promotes unity by making certain that noneof the workers is neglected at the workplace, and all personnel aretreated partially.
The culture results in employee loyalty. An organizational cultureassists in keeping workers motivated as well as loyal to LVMH’smanagement. This is because the culture makes it possible forpersonnel to see themselves as part of the company. As a result, theydemonstrate more eagerness in wanting to contribute towards LVMH’ssuccess. They experience greater accomplishments by being part of acompany they are concerned. For instance, through the decentralizedorganization, the Houses become sovereign and responsive.Decentralization makes it possible to guarantee fast, efficient andsuitable decision making. The approach additionally maintains themotivations of personnel by encouraging them to demonstrate theirreal entrepreneurial spirit.
The quality of work improves when a company has a clearorganizational culture. In LVMH, one of the values is excellence,which is clear to all workers. Hence, they must strive to depictexcellence in all they do. The desire to achieve excellence resultsin competition amid personnel. The workers will endeavor to be attheir best performance, with the objective of earning recognition aswell as appreciation from superiors. This enhances the work quality,which assists the company to stand out and prosper.
The organization culture makes clear the identity of LVMH. Anorganization’s approach in doing business is perceived by membersof the company and its target market, which is determined by theculture. The values of LVMH contribute towards brand image thatenhances the recognition and respect for LVMH. The value ofcreativity and innovativeness ensures that LVMH is recognized as aleader in the making of luxury products. By delivering excellence,the company communicates to customers that it is a world leader inthe fashion industry. Through fostering entrepreneurship, it becomespossible to create better, fashionable and unique products thatcontinue to communicate about LVMH quality products.
LVMH uses the organizational culture to create a sense of directionin the company. The culture defines what the company does and howthings should be done. These act as the guidelines for all members ofthe company. In turn, workers have a sense of direction as well asexpectations, which keep then at task. Every worker comprehends theirrole and duties, and how to achieve tasks before establisheddeadlines.
How Organization Culture has negatively Affected LVMH
The organization culture at LVMH is largely beneficial. However,there is the possibility that it may restrict employees. Due to theculture, personnel are expected to act in specific manners that alignto the working culture. This means that when making any decisions,the employees must consider if their ideas align with theorganization’s culture stipulations. Hence, employees arerestricted to working in manners that only align to LVMH’sorganization culture.
The organization culture creates a feeling of belonging, whichencourages workers to take part in the company. However, LVMHoperates in an industry where change is expected. Changes are athreat to the already established identity of workers. Although someworkers may view change as an opportunity, most are likely to ponderon what role will be assigned to them following change. Others may beapprehensive of losing already established status. Bearing in mindthat change results in uncertainty, workers might resent and resistany change to the already established organization culture.
Discussion and Recommendations
When compared to other organizations in the fashion industry, LVMHhas a competitive advantage. The organization is engaged in corporatesocial responsibility practices that market LVMH. By respectingpeople, emphasizing on the need for excellence and engaging ininitiatives that improve lives of local communities, LVMH attractsmore customers. Customers are interested in buying products from anorganization, which they are aware demonstrates interest in improvingthe society where they work. This explains why the organization hasbeen able to maintain its target customers despite the high pricescharged on products. LVMH’s corporate strategy is one that sets thecompany apart from other luxury goods manufacturers. By emphasizingon quality, uniqueness, modernity and fashion, LVMH is able to createstar brands. These brands are different from those made bycompetitors due to their unmatched quality and distinctiveness. Byusing the star brands, the organization is able to target wealthycustomers, who are keener on quality than price. This results incustomer loyalty, placing LVMH at a better competitive advantage.Customer loyalty means that the company does not have to worry ofcustomers opting to buy from competitors because they identify withLVMH’s luxury goods. The organization culture employed by LVMH hasbeen in practice for years and makes the company successful becauseemployees are aware of expectations. Hence, the organization cultureacts as a guide within LVMH.
To improve the company’s competitive position, LVMH needs tocreate products that do not just target the wealthy individuals.There is an existing market of middle class earners that also have ataste for fashion, which the organization has not ventured. Becausemiddle class earners cannot afford LVMH brands, but are interested inassociating with them they end up buying counterfeits thus, resultingin the growth of the counterfeit market. Another recommendation isthat LVMH should not just concentrate on star brands as a corporatestrategy. Differentiation ensures that some brands in theorganization continue to make profits at the expense of othernon-star brands. This means that while profiting from star brands,losses can be made through non-star brands, which negatively affectsthe competitive position of the company for non-star brands.
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