frfashion1-7, Exercise 2: LVMH and Hermès

Model answer (check the details):

LVMH: a conglomerate that owns many brands in fashion, leather goods, perfume, wine and spirits, jewellery and retail. Strategy: buy and grow brands, share costs and expertise across them, use scale to open shops and negotiate with suppliers. Protects: financial strength, spread of risk across brands and markets, the ability to buy talent. Risks: dilution of each brand's identity, dependence on a few large markets, and the criticism that houses become commercial products.

Hermès: a family-controlled single group. Strategy: keep production in its own workshops, limit supply of the most desired bags, avoid discounting, and grow slowly. Protects: scarcity, craft credibility and independence (the family defended its control against LVMH in 2010). Risks: dependence on a few products such as the Birkin, limits on growth because of the supply of craftspeople, and exposure if the family's control weakens.

Contrast: scale and portfolio against scarcity and control.

Care: both groups are very profitable, so neither can be called the "better" model without a measure and a time period. Check current accounts.