Porters Diamond Model Analysis: Louis Vuitton

There are multiple theoretical frameworks available for businesses to optimize their expansion strategies. The Porter Model is shaped like a diamond and comprises four interrelated and interactive factors that determine the likelihood of success for a company based in a particular country when competing in international markets (Kennedy, 2020). These factors include domestic demand and factor conditions; related and supporting industries; and rivalry among competitors (Kennedy, 2020). In this essay, I will apply the Diamond Model to the French luxury goods company Louis Vuitton (LV) and select the best market entry option for further expansion.

Demand conditions refer to the consumer preferences of the domestic market. Meeting high standards in their home country enables a company to offer high-quality products on the international market and become an industry leader (Kennedy, 2020). French consumers have particularly high expectations of style and quality fashion, and thus French clothing brands are pushed to innovate to satisfy domestic consumers. As a result, France is the global capital of first-rate fashion, haute couture, and luxury goods. LV came to dominate international fashion because initially, it had to meet the high standards of French customers.

Factor conditions refer to structural elements that provide a certain industry with a competitive advantage. The French fashion industry is characterized by a powerful ecosystem that combines design, technical knowledge, and favorable infrastructure. It is a major part of the French economy, generating 2.7 percent of its GDP and creating over a million jobs (Uta, 2021). Numerous institutions have historically advocated for couturiers whose designs are protected under copyright laws (Crane, 2019). LV has benefitted from favorable material conditions France has developed to support the fashion industry over the last centuries.

Related and supporting industries refer to domestic suppliers and complementary industries that enable a brand to succeed. Without the powerful textile industry established by Louis XIV, LV would need to rely on imported materials and thus lose flexibility and speed. Today, the industry is considered highly developed and mature, with over 500 companies and approximately 60,000 employees (France Textiles, 2018). The market is dominated by niche family-owned companies that offer highly technical goods and highly skilled seamstresses. The development of LV is directly linked to the sub-sectors of the French textile industry and skilled labor force.

Strategy, structure, and rivalry refer to the domestic competition that prepares a company for the international arena. The more challenging the domestic rivalry, the more likely it is that a company has developed effective strategies to facilitate success (Kennedy, 2020). LV has been pushed to reach its full potential in creativity and innovation due to intense competition with other French luxury brands such as Chanel, Dior, and Hermes (Leading fashion brands in France, 2021). After surviving a highly competitive domestic environment, LV could successfully contend with other companies such as the Italian brand Gucci on a wider international scale.

Based on my analysis of LVs Diamond Model, the most optimal international business strategy is creating a wholly-owned subsidiary through a greenfield venture in Asia. The Chinese market already consumes almost as many luxury goods as the entire continent of Europe (Share of the personal luxury goods market, 2020). There is no point in franchising or joint ventures if LV is an internationally recognized brand that benefits from the industrial infrastructure in France. Opening independent retail locations in Asia would allow LV to take advantage of Frances superior factor conditions and supporting industries while capitalizing on Asian demand for European luxury.

In conclusion, the dominance of LV in the luxury goods sector is thoroughly expectable through the lens of the Porter Diamond Model. The brand was able to take advantage of the favorable factor conditions and the established textile industry in France to make high-quality luxury goods that would be in international demand. Furthermore, it was pushed to innovate and optimize its business strategies to satisfy the high standards of domestic consumers and compete with other French fashion brands. The next step for LVs expansion is opening wholly-owned retail locations in the profitable Asian market.