lvmh reflection,
Use this questions to write your Individual (Reflection)
Please answer the five questions each Q answer in about 120 words. The total about 600 words.
I will load group work and must notes that my part last part (perfume and cosmetics)
1. How work has been organised within the group?
2. What your very contribution to the collective report is?
3. What you have experienced in doing this collective exercise (likes, dislikes, frustration, etc.)?
4. What you have learnt from working on the LVMH case like this?
5. What could you as a management accountant do to improve the information you provide using forecasting? Please draw on the readings and additional resources on blackboard and any other research you undertake that helps you answer this question. Please provide a bibliography of references you use.
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Perfume & Cosmetics
According to statistical data collected, the perfume and cosmetics industry had a revenue totaling to 3,717 million euros in the year 2013 alone (Nichol, 2011). This revenue was representative of 13% of LMHV’s. From these figures, it is evident that there is huge potential in the perfumes and cosmetics industry.
However, for a proper profit assessment, one needs to look at the sales. There is need to answer questions related to how both internal and external environments are likely to affect the sales and profit margin. Internal factors include bigger sales force, increased target for sales or even increase in the product pricing that can positively impact the sales. Case study on LMHV indicates that the profit margin grew drastically from 348 to 408 million Euros between 2011 and 2013. From the construction of the Helios research center; the company was able to dig deep into new ideas for steady profit realization in the perfumes and cosmetics industry (Wendlandt, 2013). In this regard, profit margin growth can be attributed to investment in research.
Research to know what the market wants is very important for the prosperity of any business. For a successful profit projection, the company needs to understand fully what drives products in the market (Berger, 2007). With this knowledge in hand the more accurate the projections become, the more the profit margins can be increased to meet the targeted figure of 480 million euros by the year 2014. The company should also be more concerned with some of the factors affecting the sales.
When doing projections, Gross Profit Margin (GPM) is another consideration to be noted keenly. Price changes have an impact on the GPM since it is also directly affected by the stock prices. One of the most important questions to ask is whether requesting for supplier discounts is likely to make an impact on sales (Heiler, 2010). Such a question is important when trying to determine a projection that will affect a particular GPM. There is an expected projection that through supplier discounts, the company is well positioned to increase its sales (Wendlandt, 2013).
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This can be attributed to the fact that the company has decided to focus on expanding the 77 billion euro a year market, and this has been made possible via products produced from the latest research activities. This projection has been made more accurate by the number of shares enjoyed by the company in the intercontinental market. For instance, 42% shares in the Asian market as compared to 59.2% in the Japanese market. With intentions to open markets to the Asian markets for a brand from the USA, it is projected that the company is likely to widen and cement its shares within the Asian market which is a good prospect for sales (Wendlandt, 2013).
The company will need to be more aggressive when trying to penetrate the Asian market so as to realize the much-needed profit margin of the half a billion mark. This will be necessitated by the need to be able to reach the local population (Nichol, 2011). What does this mean for the business? There is an anticipated increase in the profit margins for the company as penetration of the new brand with a lot of aggressions is likely to open a new market base for the company products (Wendlandt, 2013).
Another factor that is likely to increase sales is the company’s research of the Asian skin types. This included the use of sophisticated equipment for the analysis of the skin types especially in China and what effects the company’s products could have on such skin types. Products such as Guerlain Abeille Royale skincare were developed as a result of this study alone (Nichol, 2011). There have been collaborations between different agencies to better on the kind of products that are released into the market. A good example is a collaboration between skincare experts and makeup specialists that has resulted in the rise of quality products such as BB Cream Nude (Nichol, 2011). Hence growth projection.
Cosmetics regulating bodies also come in key. Sole purpose of these regulating bodies is to ensure the safety of the consumers of these very products. A good initiative. LVMH research teams have made a good breakthrough through the safety bodies by making necessary adjustments and changes in how they assess the various product. Apart from this, there has been the development of up to date
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simulation software that help to identify toxic substances within the products. The company has made positive trust between them and the customers. Such good relationship is a sure way that the profit margins are likely to grow as many people within the Asian market are going to be attracted to these products (Nichol, 2011).
According to The Metropolitan Museum of Art Sciences of Time-Perfume from ancient Egypt to the 21st century, patenting of products is another sure way of controlling and keeping the company’s innovation from individuals or organizations that are eager to take advantage of other people’s work. This can foster growth as the company will have little worries of persons trying to use their products elsewhere. According to Mintel GNDP (2010), through these positive advancements, it is predicted that the company is poised to reap from increased profit margin. It is also important to note that as much as LVMH is expanding its activities through research and partnerships, the cost of production will tend to rise though this is expected to stabilize over the years. As much as profit margins are expected to rise; the curve is expected to rise slowly but
Steadily. The company is also expected to have increased lending requirements due to the projected growth so this growth strategy is definitely expected to pay off (Nichol, 2011).
According to the international market demands, the company should reconsider opening more branches especially in the African market to foster sales (Baines, David, and Seal, 2008). This has always been considered a potential market especially in the fashion industry and through this, the company can be able to increase its production. Another important aspect is the investment in educating the local market about the products (Nichol, 2011).
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References
Euromonitor. (2014 and 2015). Jewellery market research. Retrieved from Euromonitor: http://www.euromonitor.com/jewellery
Parashar, S., & Sakshi, N. (2007). Perception Towards Branded Jewellery: A Study of Working and Non-working Women . In R. K. Prashant Gupta, Enhancing enterprise competitiveness (pp. 13-15). Ahmedabad: Allied Publishers Pvt. Ltd.
CCP-Luxury, 2013. ‘Loro Piana reports 13% percent turnover growth in 2012, to 630 million euros’,
D’Arpizio, C., 2014. ‘Luxury Goods Worldwide Market Study: The rise of the borderless consumer’,
PRNewswire, 2014. ‘Global Luxury Goods Market – Industry Analysis, Growth, Trends’.
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