Business management strategies of multinational corporations operating in different markets

According to Oshri et al. (2009), there are four models of global sourcing, which are: domestic outsourcing, offshore outsourcing, domestic insourcing and captive models. The difference between these models of sourcing lies in the geographic location and the executor of the task. Depending on the model, it could be either subsidiary or external executor, which operate either at a domestic location or abroad. Moreover, the volume of outsourced production can vary from total outsourcing to partial or selective outsourcing.

Sturgeon (2013) distinguishes between internal-within an enterprise and external- from the outside sourcing in terms of organization and four options in terms of location: domestic and international. On the domestic level, the work could be sourced either with the usage of resources and capabilities of an enterprise or with the resources of independent suppliers. On the international level, the subdivision is the same- either an enterprise source the work to their ventures outside the home-country or an enterprise let independent suppliers from abroad to perform the tasks. In the report for Eurostat, Sturgeon (2013) labels all these sourcing options in the following way:

1)Domestic intra-group sources

2)Domestic external suppliers

3)International intra-group affiliates

4)International external suppliers

At each stage of the production, an enterprise can decide between these four sourcing options. The VRIO framework is used to assess the effectiveness of the resources possessed by an enterprise. Based on four pillars-value creation, rarity, imitability and organization, it allows making a critical analysis of resources and capabilities.

Value refers to the most crucial feature of the process- the addition of value. If a resource creates value, it can increase the final price for the product and thus create a competitive advantage for the company. On the contrary, the resources which do not create any value can create a company's weakness and lead to competitive disadvantage. Therefore, it is crucial to examine whether a resource adds value or not.

Possessing resources which create and add value to the product might be not enough in the context of high competition between companies. Thus, another pillar must be considered. That is a rarity. Only those resources, which are valuable and in scarcity, can lead to a competitive advantage. The question of rarity often causes a dilemma for outsourcing, since the licensing partners could use original technologies of a company to their advantage. Thus, the topic of intellectual property rights is significant.

Another pillar of the VRIO framework is imitability, and it is also core since valuable and rare resources can lose their price if the competitors can easily duplicate them. Here the intangible resources some to the scene, as it is usually hard to imitate the skills and unique capabilities of employees. However, the system of production is so complex and interconnected so that competitors can not accurately estimate the particular resources or capabilities that created an outstanding success. Nevertheless, companies should maintain quality and always develop new technologies in order to make their product hard to imitate.

Furthermore, the last, but not the least pillar of the analysis is organization. Here the social capital is the most critical part, as it includes inter-personal relations, cultural specifics and non-visible assets, which add value to the final product. Managing different people across various countries is a robust process, which involves complex measures. Exactly the human capital cannot be imitated by competitors and thus adds a significant part to competitive advantage.

Overall, all of these four pillars are important factors for success. Starting with resources, creating value and ending by non-substitutable human resources, they allow companies to outperform the rivals and achieve sustainable competitive advantage. Thus, the inner resources and capabilities of a company create the fundament of prosperous development. When deciding to move abroad, a company should consider various factors both in the field of their inner structure and also in the field of the local environment.

The next chapter will be devoted to the analysis of the business strategies of the Louis Vuitton Moлt Hennessy conglomerate, which originates in France and now has the largest capitalization and France and the biggest luxury conglomerate in the world.

Analisys of business management strategies: case of lvmh. LVMH Business Management Strategies

According to the theories of the development of business management strategies, described in the 1st chapter, the core element in choosing a particular strategy is the organizational structure of the multinational corporation. Thus, the first element of analysis would be the structure of LVMH which in turn will enable to analyze the strategy of the conglomerate.

As for 2020, LVMH consists of 75 Maisons across 70 countries in 5 spheres: Wine&Spirits, Fashion&Leather Goods, Perfumes&Cosmetics, Watches&Jewelry and Selective Retailing. It operates simultaneously in all of these five spheres, which makes it the only Group present in all luxury sectors.

The greatest number of stores is located in Asian region-1453 stores with 38,109 employees. The second-largest region of the Group's presence is Europe-1177 stores with more than 40,000 employees. Moreover, the third-largest market is in the USA with 829 stores across the country and more than 30,000 employees involved.

The most profitable business group of the conglomerate is Fashion&Leather Goods, followed by Selective Retailing, Perfumes&Cosmetics, Wine&Spirits and Watches& Jewelry. The profitability of each LVMH sector reflects the efficiency of implemented business strategies in each sector and generally.

Fashion&Leather goods group includes 13 brands from France, Italy, Spain, the United Kingdom, the USA and Germany. The business management strategies differs from one brand to another. For example, at the production management strategies Louis Vuitton uses external manufacturers only to supplement its manufacturing and achieve production flexibility in terms of volumes while Christian Dior uses outsourcing in production process very widely depending on the product. Almost all brands use the similar supply management strategy - they purchase its materials from suppliers located around the world, with whom they have established partnership relationships. The supplier strategy implemented over the last few years has enabled volume, quality and innovation requirements to be met thanks to a policy of concentration and supporting the best suppliers while limiting dependence on them. Special role in the whole business management strategy of this sector is given to distribution. Controlling the distribution is a core strategic priority for LVMH in luxury Fashion and Leather Goods. In order to meet these objectives, LVMH has the premier international network of exclusive boutiques under the banner of its Fashion and Leather Goods brands. According to Management Report of the Board of Directors (2020) this network included more than 2,000 stores as of December 31, 2019.

The Perfumes&Cosmetics LVMH group includes 12 brands on its behalf, dealing with beauty and cosmetics. The most important business management strategies of this sector focused on R&D level - the Group's brands have pooled their resources in research and development since 1997, with a joint center in France, Japan and China. This is the most valuable part of value-added chain of LVMH Perfumes&Cosmetics. The five French production centers of Guerlain, Parfums Christian Dior and LVMH Fragrance Brands meet almost all the manufacturing needs of the major brands. The distribution network is joint for all 12 brands and the presence of a broad spectrum of brands within the business group generates synergies and represents a market force. Joint distribution strategy means that advertising space can be purchased at competitive rates, and better locations can be negotiated in department stores. The use of shared services by subsidiaries increases the effectiveness of support functions for worldwide distribution and facilitates the expansion of the newest brands.

The Wine&Spirits Group includes 6 brands. There are two main pillars for business management strategies in this sector - R&D level and distribution network. This business group is focusing on the quality and productivity of its retail networks and is also developing its online sales. In terms of business strategy this business group has reaped the benefits of its excellent coordination and pooling of administrative, sales and marketing teams. A worldwide network of after - sale multi - brand services has been gradually put in place to improve customer satisfaction. LVMH Watches and Jewelry has a territorial organization that covers all European markets, the American continent, northern Asia, Japan, and the Asia-Pacific region. It selects multi - brand retailers very carefully and builds partnerships so that retailers become genuine brand ambassadors when interacting with end - customers.

Despite having such an extensive portfolio of brands and different business groups, LVMH has three core values presented across the whole conglomerate: «being creative and innovative», «delivering excellence», «cultivating an entrepreneurial spirit». By «being creative and innovative» the Group understands respecting the heritage of each Maison, while continually developing produced goods and looking into the future. These core values represent the difference of LVMH from the competitors on various markets and in different spheres. Quality of goods is a fundamental element of groups values as it strives to be the world-leading conglomerate in the sphere of luxury goods. That is why LVMH pays attention to details and excellence of products. According to Arnault (2018), LVMH is an ambassador of excellence. Furthermore, the Group encourages its Maisons to work independently, to take responsibility and to make decisions.

The Annex 3. Organizational structure of LVMH shows the organizational structure of the Group. It represents the brands with their shares and allows them to examine direct and indirect control structure. Within the conglomerate there are several holding companies, namely LVMH itself, Moлt&Hennessy, Sofidiv, which later subdivides into LVMH BV and LVMH Inc. and other holding companies.

The sphere of alcoholic beverages production is peculiar since many regulations vary from country to country. Moreover, compared to the competitors, the LVMH holds a unique sphere of production- beverages, which also contributes to the success of the company in the international arena. Because this sphere is distinctive and that there might be a more comprehensive range of restrictions in the area of beverages production, the main focus of this paper will be on this business group.

The Moлt&Hennessy is a holding company for all other ventures in the sphere of wine and spirits that LVMH has across the globe. To the LVMH belongs 66% of Moлt&Hennessy share, while 34% belongs to Diageo, which is one of the largest alcoholic beverage company with the Headquarters in London, Great Britain. The Figure 4. Organizational structure of the Wine&Spirits business group represents the holding companies and their share.

The creativity lies in the heart of the company. Bernard Arnault (2018) expressed the philosophy of the Group as «passionate for creativity».

Pierre-Yves Roussel, in his interview to McKinsey, emphasizes that the unique identity of each brand consists of its unique location, meaning that LVMH does not relocate all brands under one roof. Moreover, products and brands are continually developing and changing, even though some iconic products remain in the stock.

According to the Management Report of the Board of Directors (2020), LVMH has an exclusive operating model, which is based on six essential pillars. In the language of strategy, these pillars can be seen as capabilities of the company, which allows LVMH to outperform the competitors. Due to the fact, the conglomerate has a decentralized structure; each brand has its business model. However, these six dimensions are considered across the whole Group. The operation, according to these six pillars, creates a significance for the LVMH and distinguishes the capabilities of the corporation from other luxury conglomerates. Moreover, in the light of VRIO analysis, these pillars will create a sustainable strategic advantage over competitors.

Firstly, the company has a decentralized organization: all of the 75 houses operate autonomously and responsive. Such type of organization allows them to engage in direct communication with clientele and adopt the strategy to the rapid-changing environment.

The second pillar is internal growth, which emphasizes the priority of internal development of Maisons, achieved through the support of the development of employees. Another pillar is vertical integration, which allows controlling of each stage of production and brand image of houses.

Creating synergies is also stated as an important pillar in the operating model as it allows them to share resources among all group participants while preserving the autonomy of the Maisons. This system allows all the houses to develop its unique vision while strengthening the capabilities of the whole Group.

Being presented across different continents and countries and covering several spheres of luxury production and retail, LVMH strengthens its position and secure itself from fluctuations.

Lastly, the Group builds a solid foundation for future generations to expand their creativity and craftsmanship. Thus, the Group has a long-term vision of its performance. As Arnault (2018) says, “Our business model is anchored in a long-term vision that builds on the heritage of our Houses and stimulates creativity and excellence. This model drives the success of our Group and ensures its promising future.”

The Wine&Spirits Group consist of 26 houses, which are spread across different continents, with leading types of beverages- champagne and cognac. The detailed table of the brands is provided in the annexes. (See Annex 4. Maisons of LVMH, Wine&Spirits business group).

The Wine&Spirits business group accounts for 5,576 million Euro revenue, which is 10,4% of the total revenue in 2019, according to Financial Documents of the LVMH (2019). Moreover, the most revenues are gained from the United States, according to the financial report 2019. The Annex 5. Revenue breakdown in Wine&Spirits business group shows revenue, distribution markets and volume of sales.

The main aim of the research is to examine business strategy models used in LVMH (in the sphere of Wine&Spirits) to understand how the company manages to operate in various legal, economic and political environments. Since each country has different political structure, economic system and legal norms our assumption is the following: The Group LVMH adopts its strategy in each country to its specific features, while maintaining their six pillars across all of the Maisons.

It is essential to examine the value-added chain of the company to analyze and assess the strategy of the corporation. Thus, this analysis will be made further with the detailed evaluation of country profiles in the spheres of operation of the company.

LVMH Value Added Chain Analysis in Alcoholic Beverage Industry

This paragraph will be devoted to the analysis of the value-added chain within the alcoholic beverages business group. Such examination will help to evaluate the strategies which LVMH uses to manage business processes in this group.

The LVMH has its Maisons in the Wine&Spirits business group in 12 countries on different continents. Some of them have a long history of alcoholic beverages production, and the LVMH created some of them. The Table 9. Maisons of the LVMH, Wine&Spirits business group (see Annexes) summarizes the brands from the LVMH portfolio, their geographic location and year of establishment. Multiple brands, which include «Chandon» in their title, were established by Moлt& Hennessy to enrich and enlarge the quantity and quality of produced beverages. This Table 1.Area of vineyards summarizes the total area of vineyards, owned by the LVMH. The most area is located in France, which is evident since the enterprise has the most significant number of brands in France. The other vast territory is held in Argentina -1660 hectares and followed by Australia and New Zealand combined. Areas, which are indicated as «under protection» are not involved in the wine-growing process yet but planned to be. Moreover, the LVMH holds various offices, cellars and warehouses, which account for 848.000 square meters in France and 314.000 square meters abroad.

Table 1. Area of vineyards

The raw materials chain has the following structure: mainly, all of the grapes for wine and champagnes production are grown by Maisons of LVMH. However, less than 10% of the total amount of grapes are purchased from winegrowers, with which the Group has multi-year agreements. It happens since the French government regulates the amounts of grapes which could be grown for wine-making processes. Also, some vineyards are not in use yet but only are prepared for the following grapes growing. Thus, to produce a sufficient number of alcoholic beverages for distribution and also for saving some number of bottles for the future, the company has to sign agreements with external suppliers of grapes.

To enlarge the portfolio of the group, the corporation uses different strategies of the establishment of new ventures. In some regions as the European region, the LVMH acquires already existent vineyards. In others, such as the Asian region, the new ventures are fully established by the group. Each region holds unique resources due to specifics of climate and what is more, gives access to new distribution markets; thus, the capabilities of the company enlarge.

All products related to packaging and bottling are outsourced and purchased from suppliers outside of the group, states the Management Report of the Board of Directors (2020). Here the enterprise uses the international external suppliers' type of sourcing since the production of packaging is not the primary capability of the Group and this type of activity is not crucial for the value chain, thus, could be easily outsourced. The other situation is with the cognac-another original product of the enterprise. The LVMH group has 1600 independent suppliers for the production cognac «Eaux-de-vie». Moreover, bottles and barrels are outsourced from independent producers. Hennessy itself operates within only 180 hectares, which accounts for less than 1% of the total amount needed.

The distribution activities are generally done through exclusive stores ruined by the enterprise. Part of the distribution network belongs to the Diageo, which holds 34% of shares of Moлt&Hennessy business group. Annex 6. Sales of alcoholic beverages summarizes the regions and countries for sales of wine and champagnes and cognac in percent's for years 2017-19.

To understand the peculiarities of different regions in Europe and abroad the detailed analysis of the country's profiles where LVMH operates will be carried out in the following chapters.

Value added Chain analysis in alcoholic Beverage Industry in the European region

The first and the most sizeable geographic location of the group is in France - the country where the LVMH originates. France is still considered the leading country in the wine-production. Holding this status, France sets the rules for this industry to the whole world. The production of wine in France began with the ancient Romans back to 125 BC. Many regions of the country produce its wines, which are imported to various countries. Also, the drinking culture is highly developed and has historical routes. According to the World Health Organization (2016), the total per capita liters of pure alcohol consumed by French was 12,6 liters. Wine accounted for 59%, being the most popular beverage, followed by spirits (20%) and beer (19%). Male population consumed 23,6 liters of pure alcohol in 2016, while females consumed 8.3 liters. This data proves that France is a profitable consumer market for the LVMH.

The amount of production nowadays is counted in billions of bottles each year. The AOC system is invented in France. The AOC system (Appellation d'Origine Controlйe) regulates the certifying geographical origin of the product. It is based on the land where the wine was produced. Moreover, it shows the specific qualities of the product based on the terroir of origin. For the LVMH such classification allows maintaining high standards of production, and if the quality of produced beverages corresponds to the highest category, the price of vines will also be higher which in turn could create more substantial revenues.

According to this system, there are four categories of wine (listed from the lowest quality to the highest):

? Vin da Table (every-day wine with no origin and grapes used listed)

? Vin de Pays (region and grapes are indicated)

? Vin Dйlimite de Qualitй Supйrieure (middle-step wines from Vin de Pays to AOC)

? Appellation d'Origine Contrфlйe (wines of high standards and many restrictions on production)

Thanks to this strict system, the original methods of wine production are still used in modern France.

In France, the LVMH possess 10 Maisons, which is the most considerable amount in one country for the group. Moлt&Chandon is the leading brand across the Champagne region, which produces, and harvests renewed champagnes. Dom Pйrignon, Veuve Clicquot, Ruinart, Krug all have a long history of champagne production. Their legacy and traditions give them a unique competitive advantage over other producers as they have established and possessed excellent quality over the centuries. Having such brands in the portfolio, LVMH can produce and sell various kinds of champagne and acquire a larger share of the market.

Moreover, in order to protect the production of high-quality Champagnes despite the weather conditions, LVMH has established storage tanks and invested into the development of facilities with fermentation rooms, cellars and bottling lines in the main cities of production.

All these features create unique capabilities of the company since no other company in the world possesses such a wide range of historic producers of wine, and thus LVMH products are unique and rare.

Apart from the long history and cultural basis for the production of wine and cognac, France has a pleasant business climate, which proves by several rankings and the economic conditions of the country. The particular details are provided below, to examine the institutional conditions for running an enterprise in France.

The economic framework of the country is a competitive one, as it is free-market-oriented and considered as the most developed in the world, holding the 7th place among the largest economies in 2019. According to World Bank (2018), the GDP (in US dollars) is 2.778 trillion with the annual growth of 1.7%. For 2020 and 2021, the IMF predicts a 1,3% GDP growth.

Moreover, in the Global Competitiveness Report (2019), France is ranked 15th. The country has better performance than average OECD country in 10 dimensions out of 12. Among the strengths are macro-economic stability (score 99.8); infrastructure (89.7 points), innovation capability (77.2) and financial system development (85.9 points). However, some dimensions should be improved. For example, ICT technology adoption, although having quite high score-73.7, still is behind the scores of China, Korea and Russia. Also, such measures as entrepreneurial risks and management culture have relatively low indicators- 52.9 and 61.4 points, respectively. Another ranking-Doing Business, which assesses the conditions to open a new venture in a country, puts France on the 32nd place with the score 76.8, which indicates that it is relatively easy to open a new enterprise there. The corruption index made by the Transparency International in 2019 has shown that France has a score 69/100 and holds the 23rd place. According to the scale, such result places France among «almost clean from corruption» states.

The tax rate for corporations is not that low, compared to other countries and any company which is incorporated in France is considered as a tax resident and supposed to pay standard corporate income tax with the rate of 31%. Recently, the reduction of the corporate tax for large companies was made (from 33% to 25% over five years); however, the tax for companies with revenues over 250 million will remain at 33%. Moreover, 3,3% of the social surcharge is added if the standard corporate tax exceeds EUR 763.000.

In 1997 LVMH added another type of beverage into their portfolio- whiskey. The main intention for such acquisition was the enlargement of the variety of products and thus creation the new source of revenues. The ideal location to produce such beverage was Scotland since it is renowned for the creation of different types of whiskey. In two Maisons - Glenmorangie and Ardbeg, which LVMH has in Scotland, whiskey is produced with specific regulations. Everything from ingredients to the maturity of the beverage is under strict control. Glenmorangie was established in 1843 and is a first mover in this field. They use tallest stills in Scotland to create exceptional taste. Ardbeg was established even earlier - in 1815. It has the unique terroir surrounded by sea. In 1997 it was acquired by Glenmorangie, and now these two brands add flavors to the portfolio of the LVMH.

According to Britannica (2019), Scotland is considered small, but the open economy, which holds 5% of the United Kingdom's export revenue. The GDP of Scotland is higher than in other regions of the UK (except London and eastern regions of England). Macroeconomic policies are regulated by the UK government, in particular: interest rates, central government spending and monetary policies. However, the Scottish Parliament controls the local economic development.

Agriculture plays an essential role in the economy of this country. The most exciting sector for this research is field crops, mainly barley since it is the main ingredient in the production of Scottish whiskey, which in turn is the most renown export product.

The overall economic situation in the UK and Scotland is favorable. The UK is considered to be a high-income group country. The UK holds the 8th place in the Doing Business Report (2020) and scores 83.5, which means that it is easy to start a new business there and all governmental procedures and regulations are straightforward.

The Global Competitiveness Report (2019) ranks the UK as 9th among 141, which means that the UK is a competitive country, based on the assessment of 12 pillars. Macro-economic stability (100), well-established institutions (74), highly-developed infrastructure (89), advance skills of a labor force (82), almost perfect financial system (88), excellent market size (82), business dynamism (77) and capability for innovation (78) are all above the groups average, which in turn makes the UK one of the most desired countries for the establishment of ventures.

What is more, the Transparency International calculated the score in 2019 for the whole United Kingdom. Thus, there is no Scotland independently. The UK has a score 77/100 with the 12th place, which shows that this country is almost clean from corruption.

The tax rate is lower than in LVMH home country. Companies have to pay corporate tax with a rate of 19%. Any foreign firm which has an office is also subject to this tax.

Summing up all the factors and taking in consideration the fact, that for the production of alcoholic beverages on the territory of the UK(Scotland falls under these regulations), the producer must obtain a distiller's license; approval for plant and process and account to pay Spirits Duty claims gov.uk. The Spirits Duty rate differentiate based on the type of alcohol. That is, for spirits the rate per liter of pure alcohol in 28.74 pounds; the rate for wine varies by the per cent of alcohol in the beverage from 91.68 pounds up to 396.72 pounds per hectoliter of product. The spirits duty is applicable to any beverage which contains more than 1.2% of alcohol by volume. Alcohol etc. (Scotland) Act 2010 represent the regulations on pricing, promotions, age verification, sale of alcohol production to people under 21, license conditions, social responsibility levy. Thus, the quality of beverages is distinctive and strictly controlled, and hence this location adds up valuable contribution to the brands' portfolio of LVMH.

The latest acquisition in the 1990s was in Spain in 1998. There, LVMH has a small-scale venture. Bodega Numanthia has extreme weather conditions, which gives unique opportunities for wine-creation. It is a small Maison, which covers only 83 hectares and thus the number of bottles produced also reduces. Despite that, the Maison possess vintage bottles, since the plantation of grapes dates back to 1880. All of the wines produced from local grapes, thus being in scarcity and having a great value. Operation in such a narrow niche adds to the capabilities of the corporation; thus, the LVMH has such acquisitions as part of its strategy.

Since Spain is included in the European Union, some of the legal issues are the same as in France, and it is relatively easy to establish a new venture here. The economic conditions are favorable, which is proved by the GDP of the country, which is according to the World Bank report (2019), was 1.474 trillion US dollars. The IMF estimates the GDP growth rate in 2019 at a rate of 2%. Spain is the 13th largest economy in the world by nominal GDP. OECD marks Spain as a high-income country

Furthermore, the Doing Business Report (2020) ranks Spain 30th among 190 countries and scores it with 77.9 points, which means that Spain has an advanced economy. Also, the regulatory system is well-established in terms of registration a new venture, transportation system, trading system across the borders and other issues associated with starting a new business there. Moreover, Spain had a score 62/100 in the corruption index in 2019 and held the 30th place, tend to be not corrupted country, rather than the opposite. That signs that all the operations in Spain could be regulated through courts and legal authorities.

The corporate tax rate is lower than in France, -25%. If the enterprise is based in Spain, then the company tax must be paid on all income from Spain and abroad, says "Your Europe"(2019). If the company has a permanent establishment in Spain, then it is not subject to corporate tax but subject to income tax of non-residents.

What is more, the Spanish government also has adopted classification system for the vines; thus, the alcoholic beverages from there would be of the best quality and this fact matters for the LVMH, as the conglomerate distributes only the goods of excellent quality. In 1932 the system called «Denominaciуn de Origen» was developed to control the quality of produced wine. Under this system, the type of grapes, the size of yields harvested, the age of the wine and the labelling of bottles are regulated. The body- Consejo Regulador is responsible for imposing these rules and controlling their implication among wine-producing regions. After examination of produced wine, it could be granted the status of DO/DOCa and use the corresponding label on the bottles.

Moreover, Spain exercises the laws of the European Union and has 6-Tier classification system according to which wine falls into a particular category among the following:

1)Denominaciуn de Origen (DO)

2)Denominaciуn de Origen Calificada (DOCa)

3)Vino de Mesa

4)Vinos de la Tierra

5)Vino de Calidad Producido en Regiуn Determinada

6)Vino de Pago

This classification allows to diversify wines by the quality and hence grant the winemakers the ability to label their products and sell it under the corresponding quality label.

The cultural dimension is also significant as it provides an opportunity to sell alcoholic beverages. Spain, like France, has a long history of vine production and consumption. The total alcohol consumption per capita in liters of pure alcohol in Spain, according to the World Health Organization (2016) was 10 liters. The most popular beverage of this king is beer (54%), followed by spirits (23%) and wine (18%). If only drinking population is considered, then males consumed 20.2 liters of pure alcohol and females consumed 7 liters.

Considering all these factors, added up by favorable climate conditions, Spain is a beneficial region to enlarge the groups' portfolio. However, to become the leading global player in the sphere of Wine&Spirits the LVMH and the Moлt&Hennessy business group, in particular, have to add up more brands, which the group continued to do in the 2000s.

In 2007 another territory for the production of alcoholic beverages was acquired. However, now, the new type was introduced for the LVMH portfolio - vodka. The location for this type of beverage was chosen in Eastern Europe- in Poland due to the several reasons, which can create capabilities for sustainable development of the company. Firstly, Poland has a long history of vodka production and created specific techniques. Secondly, the primary raw material - rye is grown there is a massive amount. Agriculture accounts for 60% of total land area; hence the farming sector is quite huge. Moreover, thirdly, the distribution markets of Eastern Europe, Russia and Scandinavian countries are close, so it is easier to spread the production across these markets. Poland itself also is a great market for the distribution of alcohol. The World Health Organization (2016) argues that Poland consumed 11.6 liters of pure alcohol per capita.

Founded in 1993 the Polish brand of vodka-Belvedere was acquired by LVMH in 2007. The unique feature of this beverage is composition-only pure water and rye. This specific location for acquiring a Maison is not accidental- Poland has a long tradition of distillation and thus became an expert in this field. Also, polish law prohibits adding extra ingredients to the beverage, and this gives an extraordinary taste and high quality to the vodka.

It was more comfortable for the group to acquire this location in the 2000s since Poland became a part of the European Union. Many legal frameworks corresponded to the European and French ones as well. What is more, since the end of communist rule, Poland became a country with a stable democracy. Now it is a semi-presidential parliamentary republic. This notion is important since, after the change in the political regime, the economic institutions changed from the planned economy to the market economy.

Moreover, the country has experienced rapid growth in terms of the economy. Now Poland has the open, free-market-oriented economy, which attracts a lot a foreign investment. It falls into the high-income group in the European region. According to World Bank (2019), Poland is considered to be "among the fastest-growing economies in the European Union». The current GDP in US dollars is 585.5 billion. According to IndexMundi (2019), Poland is named as the sixth-largest economy in the European Union, which makes it a desirable destination for foreign investment.

The assessment results done by international country rankings prove that Poland is a competitive country in many aspects. For example, The Doing Business Report (2020) shows that Poland holds the 40th place with the 76.4 scores being ahead of many European countries. Furthermore, Poland continues to improve its institutions and in 2019 Poland had 58/100 score in the corruption index, thus holding 41st place out of 180 countries. This score is in the middle of the scale, and the country has a moderate rate of corruption.

The Global Competitiveness Report (2019) places Poland on the 37th place out of 141 countries with a total score -68.9. The macro-economic stability has outstanding performance and thus gains a score of 100. The infrastructure is also above the average in the group, scoring 81 points. Moreover, the market size could be viewed as a strength of a country since this dimension scored 74 and is 14 points above the average score. Taking all this data into account, Poland could be considered as a competitive country and one of the best performers with the former Soviet bloc.

Another factor, which makes Poland attractive to establishing ventures there are the tax rates. The corporate tax rate is 19% for companies which revenues of more than EUR 1.2 million. From 2019 (according to PWC) companies with the same level of income in some cases will be subject to 9%. However, the title of «small taxpayer» from 2020 will increase from EUR 1.6 million to EUR 2 million.

As the LVMH preserves the highest quality for its products, the legal regulations for such production are crucial. In Poland, there are strict requirements on the ingredients from which vodka can be made-either cereal or potato, and this should be clearly specified on the label. Also, alcohol in such drinks must be only of agricultural origin. What is more, the label should contain information about the geographical origin of the product and all the compounds. The quality of products is checked by the Commission to ensure the high standards of alcohol beverages.

Value-added Chain run by the Global Distribution Network

Since there is a control of the number of harvested grapes in France, in order to expand their production, the group has to acquire new territories and establish new ventures there. The resources, namely the grapes, are the main factor for choosing the particular location. However, there are also other reasons for expanding to particular countries: for example, enriching the portfolio with new types of beverages or adding up the rare wines, which are produced only in that specific zones. Another reason is the entrance to the new markets of distribution. It is a strategy for choosing particular locations for production, and it is a part of the overall strategy of the company.

To operate in different markets, the group has to deal with various economic, political and legal conditions. On the examples of different Maisons which LVMH holds across the globe, these incentives will be illustrated as well as the country's frameworks.

The first venture overseas was established in Argentina. It was a newly created plant by Moлt&Chandon. On the territory of Argentina LVMH has 3 Maisons, all of them dealing with the production of wine. Chandon Argentina was the pioneering one overseas. It was established in 1959 when the potential to produce sparkling wines with the same quality as in France was realized. Again, the most attention was given to the climate and Mendoza region was chosen to produce products under the Group logo. Variation of altitudes provides a possibility to grow various sorts of grapes all year. According to the data provided on the official website of LVMH, this Chandon is qualified to be the 1st on the Argentinian market of sparkling wines.

To operate effectively on this market, LVMH has to evaluate the formal and informal institutions of the country in order to develop an efficient strategy of operation in Argentina. Thus, the country's profile would be analyzed below.

Argentina is considered to be among the biggest economies of Latin America. According to the World Bank (2019), the GDP of the country is $470 billion. It has enormous amounts of natural resources and hence is the leader in food production. Argentina is the 5th largest wine-producing country. It is the upper-middle-income country, which belongs to Latin America and the Caribbean region. Besides, ProsperAr (2009) argues, that wine sector in Argentina is advantageous for foreign investment since the country has a unique terroir, which provides a right combination of soil and climate; the production costs are relatively low, and the sector is developing very fast compared to previous years. All these provide unique opportunities to gain returns on investment quick. Also, Argentina is a member of MERCOSUR, a southern trade bloc, which enables LVMH to export its production within the members freely and thus have more capabilities.

Despite sufficient weather conditions and many hectares of land dedicated to grapes growing, the economic situation is not as stable as in other regions, where LVMH has branches of production. In 2019 Argentina was placed on the 83rd place among 141 countries in the Global Competitiveness Report (2019). The report argues that the economy of the country has been in recession since 2018, which in turn increased the unemployment rate to 9.9%. The macro-economic stability score is only 34 out of 100. Also, the stability of the government policies and the efficiency of the legal framework has negative scores, which reduces the rate of private investments into the economy.

Furthermore, the corruption index in Argentina in 2019 was 45/100, and the country held the 66th place. According to the scale of Transparency International, this score lies in the middle between «highly corrupt» and «very clean». In the Doing Business (2020) Argentina is ranked 126 with the score 59, which tends to be closer to the second part of the list, meaning that regulatory processes in the country are stringent. Furthermore, the inflation rate in 2019, argues Reuters, was the highest in nearly 30 years-53.8%, while the deficit is 6% of GDP, which is projected to fall in 2020, according to OECD report.

Nevertheless, this Chandon in Argentina shows that the company does not choose locations considering only economic factors and their performance on a global scale. Unique landscapes and new huge consumer markets can convince the group to locate the enterprise in this specific country.

Following the logic of expansion to new markets, the LVMH established its plants in the USA, in the most famous region for winemaking - California and later on, in 2010, acquired another brand dealing with whiskey. In the USA, three types of beverages are produced-wine, sparkling wine and whiskey. These are Chandon California, Newton Napa Valley and Woodinville. Chandon California is the first venture of Moлt&Chandon in the USA. Moлt&Chandon founded it in 1973. This Maison has unique features such as a variety of grapes used for sparkling wine and still wine production. The territory of the vineyards is quite large- 400 hectares, which gives the ability to grow different sorts of grapes and thus to produce a wide range of beverages which in turn provides a capability to capture larger distribution share.

Newton Napa Valley was created in 1977, and the technique of unfiltered winemaking was created there, for the first time in the USA. The location in the mountains also adds to the flavor of the beverages. Both of these two Maisons lie within California state.

Woodinville is a whiskey - producing venture. It was created relatively recently in 2010. They use grain grower in a family farm, and the entire production is handcrafted. By having the best distilling equipment and careful control of each step by two co-founders, this brand has distinctive features on the market.

Here, in the USA, the opportunities are enormous, both in terms of production and distribution. The economy of the USA is considered as the largest in the world, making from 17% to 22% of the world's GDP. The GDP for 2019 was $21.734 trillion with the growth rate at 2.1%, and around 20% of all goods in the world are produced in America.

It is a high-income, which belongs to Europe and North America group. The US dollar is used worldwide as a trade currency and reserve currency. Also, the inflation rate is 1.6% for 2019, which is quite low and points out that the economy of the USA is stable. The stability of the economy further is proved by various rankings. For example, in the Global Competitiveness Report (2019), the USA is ranked 2nd out of 141 countries. The macro-economic stability score, as well as the score for the market size, is 100, which is higher than the average in this group. Moreover, the country is the best performer among all countries in business dynamism dimension, the innovation capability score (84.1) also adds to the strength of the country. A financial system (91) and workforce (82.5) are stable features of the USA. Overall, The USA remains one of the most influential countries in the group and the world as well, performing better than the average in 12 dimensions of the ranking.

More than that, the corruption index in 2019 was 69/100, the USA is in the 23rd place and tends to be not corrupted country. Moreover, in the Doing Business (2020) the USA holds the 6th place with 84 points, which means that the regulatory institutions are promoting a stable environment for launching a new enterprise.

Besides stable conditions in many spheres, the taxation system in California is advantageous: the corporate tax rate is 21% in the USA generally. However, each state has its state corporate taxes, which vary from state to state. For example, California has a 8.84% tax rate for corporations. Also, foreign companies are subject to franchise tax (minimum $800).

Taking these all into account, the location of production ventures in the USA was favorable in many aspects- starting with great opportunities in terms of raw materials and ending up with an enormous consumer market, as well as various trading agreements which the USA has with the majority of the countries worldwide.

Simultaneously with the expansion in the American market, the LVMH established a venture in Brazil. Chandon Brazil was founded in 1973 and combined in itself the expertise of the leading managers and winemakers of the Group and perfect climate of Brazil. Being driven to expand and acquire new markets and regions, LVMH has chosen this location to create sparkling wines following standards of the Champagne region in France. This Chandon was the pioneer on the Brazilian market to produce only sparkling wines, and now, according to the LVMH official website, it holds 52% of Brazilian market share in the segment of premium sparkling wines.

The GDP of Brazil in 2019 was $1.893, according to the IMF. With a predicted by OECD growth rate of 1.8% in 2020. The unemployment rate is 4.9%. Despite some fluctuations of the economy before 1994, it became more stable after reforms were made and since 2010 it is having a sustainable growth. As for now, Brazil has a free-market economy. In 2010 it was called the largest economy of Latin America by Stephen Schwarzman, CEO of Blackstone Group. The inflation in 2019 was at 3.6%. Being a member of Southern Trade bloc - MERCOSUR, Brazil gains an opportunity for trade with no barriers, which significantly facilitates export for the LVMH goods.

Despite the measurements implemented by the government, the overall score of Brazil in global rankings is not that high. For example, in the Global Competitiveness report (2019), Brazil holds the 71st place out of 141. It has scored 69 in the «macro-economic stability» dimension, 48 in the «institutions» and 60 in «business dynamism». The size of the market is 10th among other countries, which gives Brazil benefits and hence provides LVMH with a new capability of distribution. Also, the level of innovation capability is relatively high, boosting the Brazilian economy. What is more, the corruption index in 2019 was 35/100, and Brazil holds the 106th position out of 180, which makes it a corrupted country. Such a situation with corruption creates complicated circumstances for the operation of companies since the legal processes are not transparent and fair.

Furthermore, the tax rate is quite high compared to other countries. The corporate tax rate is 34%, which includes 15% statutory income tax, 10% surtax on income higher than BRL 240.000/year and 9% social contribution tax. Non-resident corporations are supposed to have a registered branch/subsidiary, and this branch is taxed based on income generated in Brazil.

Even with such unstable and sometimes unfavorable economic conditions, access to resources, and another market of distribution made Brazil one of the Maisons locations. The Brazilian wine industry is considered to be fast-growing, having more than 150 wineries across the country, argues Statista (2019). Moreover, in recent years, the country began to develop, urbanize, which leads to the growth of the commercial and industrial sectors.

Almost at the same time as establishing ventures in the USA, the LVMH has explored another region - Australia. Since it is located far from all other continents, building a venture there created access to the new market without complicated transportation issues. The first venture established there in 1970 was Cape Mentelle. From a tiny vineyard, it has expanded to mid-size one nowadays. The distinctive feature of this Maison is that all the grapes are harvested by hand, and thus the wine has unique features and excellent quality. Such method of vine production again adds to the capabilities of the company, since it lies within the category of exceptional and rare beverages.

Another Maison in Australia is Chandon Australia, which was established by Moлt&Chandon directly in 1986. Again, this location was chosen because of the desire of expanding overseas and due to the perfect climate conditions, which could be suitable for the champagne production. As in other locations, here the traditional French technique of champagne production is used.

Furthermore, the business conditions of Australia are advantageous, despite the physical distance apart from other continents. Australia is a highly developed country with a market economy. According to OECD data, throughout 26 years it experienced only growth and held the 13th place among developed economies of the world. The GDP is $1432.20 billion, which is more than 2% of the world's economy. The GDP growth in 2019 was 1.7%. For 2020 the IMF predicts GDP growth of 2.3%.