Marzotto-­‐Ratti	                                Italian	  Entrepreneurship	                                              ...
Table	  of	  contents	  	  Brief	  preface	  ................................................................................
Brief	  preface	  	  The	  present	  work	  analyzes	  Marzotto-­‐Ratti’s	  company	  profile	  (secton	  1),	  its	  busi...
The	  company	  profile	  History	  Antonio	   Ratti	   founded	   Ratti	   in	   1945	   and	   in	   its	   first	   dec...
The	  Strategic	  Business	  Units	  The	  company	  is	  mainly	  operating	  in	  the	  design	  and	  production	  of	 ...
Despite	  a	  slightly	  decreasing	  level	  of	  revenues	  in	  Japan	  between	  2010	  and	  2011,	  US	  and	  EU	  ...
 	  	  	                                                        Revenues	  (SBU)	  	  	                                   ...
The	  competitive	  context	  Ratti	   competes	   in	   the	   national	   and	   international	   textile-­‐fashion	   i...
The	   imports	   rose	   at	   the	   same	   time,	   but	   less	   than	   proportionally,	   thus	   leading	   to	  ...
Opportunities	  and	  threats	  	  Ratti,	   through	   its	   high	   brand-­‐awareness,	   takes	   advantage	   of	   t...
Porter’s	  five	  forces	  analysis	  	  	  	  	  	                                                                     SU...
The	  main	  competitors	  among	  the	  Italian	  firms	  are:	     	     	                                              ...
KSF	  inside	  the	  industry	  	  Taking	   into	   account	   environmental	   developments,	   competitive	   forces	  ...
Service	  width	  	  It	  means	  first	  of	  all	  the	  degree	  of	  control	  of	  the	  different	  phases	  of	  te...
 	  	  	  	  	  	  	  	  	  	  	  	  Brand	  awareness	  	  Ratti	   remains	   the	   most	   known	   brand,	   as	   ex...
Ratti’s	  positioning	  	  Ratti	   is	   operates	   through	   the	   full-­‐service	   model.	   Thus,	   it	   constan...
Financial	  analysis	                     Considering	  the	  consolidated	  results	  of	  Ratti	  group,	  we	  need	  t...
These	  alarming	  profitability	  results	  led	  the	  Debt	  to	  Equity	  ratio	  to	  skyrocket	  in	  2009	  till	  ...
THE	  BUSINESS	  MODEL:	  value	  creation	  through	  customer	  orientation	  	                                         ...
competitors.	   Ratti	   gratifies	   its	   customers	   by	   letting	   them	   research	   the	   feeling	   in	   its...
 	  	                                                                        • Briefing	  with	  customer,understanding	  o...
Cost	  structure	  (CS):	  Ratti’s	  premium	  value	  proposition	  and	  its	  extreme	  customization	  lead	  to	  a	 ...
Business	  model	  configuration	  The	  business	  model	  described	  above	  entails	  both	  a	  dimension	  typical	 ...
The	  model	  configuration	  can	  be	  represented	  as	  follows.	                                                     ...
 	  	  	  Business	  Model	  to	  be	  Ratti	   needs	   to	   evaluate	   all	   consequences	   of	   current	   industr...
The	   internal	   growth	   project	   also	   involves	   a	   triplication	   of	   ink-­‐jet	   printing	   capacity	 ...
Two	  firm	  choices:	  Acquisition	  and	  HRM	  Marzottos	  acquisition:	  	  the	  impact	  of	  fast	  fashion	  on	  ...
Marzotto - Ratti
Marzotto - Ratti
Marzotto - Ratti
Marzotto - Ratti
Marzotto - Ratti
Marzotto - Ratti
Marzotto - Ratti
Marzotto - Ratti
Upcoming SlideShare
Loading in...5
×

Marzotto - Ratti

1,174

Published on

Description of Marzotto-Ratti Company Profile, Key financial figures, Business Model Design and key firm choices; Italian Entrepreneurship Course

Published in: Business
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,174
On Slideshare
0
From Embeds
0
Number of Embeds
4
Actions
Shares
0
Downloads
0
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Transcript of "Marzotto - Ratti"

  1. 1. Marzotto-­‐Ratti   Italian  Entrepreneurship     Matteo  Bano,  Nicola  Cenedese,  Clementine  Marchaisse,  Laura  Serra  ,  Martin  Stepanek   6/12/2012               1    
  2. 2. Table  of  contents    Brief  preface  ............................................................................................................................................  3  The  company  profile  ...............................................................................................................................  4   History  .................................................................................................................................................  4   The  Strategic  Business  Units  ...............................................................................................................  5   The  competitive  context  .....................................................................................................................  8   External  environment  and  trends  ....................................................................................................  8   Opportunities  and  threats  .............................................................................................................  10   Porter’s  five  forces  analysis  ...........................................................................................................  11   KSF  inside  the  industry  ...................................................................................................................  13   Positioning  .........................................................................................................................................  13   Service  width  .................................................................................................................................  14   Brand  awareness  ...........................................................................................................................  15   Ratti’s  positioning   ..........................................................................................................................  16   Financial  analysis  ...............................................................................................................................  17  THE  BUSINESS  MODEL:  value  creation  through  customer  orientation  .................................................  19   Business  Model  AS-­‐IS  ........................................................................................................................  19   The  analysis  through  BM  canvas  ...................................................................................................  19   Business  model  configuration   ........................................................................................................  23   Internal  and  external  consistency  of  BM  .......................................................................................  24   Winning  aspects:  robustness  and  self-­‐reinforcement  ...................................................................  24   Business  Model  to  be  ........................................................................................................................  25  Two  firm  choices:  Acquisition  and  HRM   ................................................................................................  27   Marzottos  acquisition:     the  impact  of  fast  fashion  on  value  creation  and  organization  ...............  27   HR  strategic  decisions  and  initiatives  to  sustain  value  creation   ........................................................  29   HR  practices  for  designers  .............................................................................................................  29   How  to  motivate  senior  and  product  managers  and  junior  PM  ....................................................  31  References   .............................................................................................................................................  33         2    
  3. 3. Brief  preface    The  present  work  analyzes  Marzotto-­‐Ratti’s  company  profile  (secton  1),  its  business  model  (section  2)  and  considers  two  main  choices  (section  3)  undertaken  by  the  management.  The  followed  method  includes  the  use  of  red  boxes  to  provide  deeper  analysis  and  apply  theory  to  the   present   case   study.   Indeed,   they   have   to   be   taken   into   account   as   a   fundamental   part   of   each  section.  We  would  like  to  thank  Marzotto  Ratti’s  management  for  the  kid  demonstrated  availability.         3    
  4. 4. The  company  profile  History  Antonio   Ratti   founded   Ratti   in   1945   and   in   its   first   decade   he   started   to  industrialize  the  company,  reaching  the  integrated  cycle  of  silk  production  in  1958   when   Guanzate   plant   is   built.   In   1976,   Ratti   consolidates   its   industrial  structure   and   undertakes   its   internationalisation   strategy   whereas   in   the  eighties  it  followed  a  diversification  strategy  through  an  external  line  growth  process   by   entering   the   cotton   and   wool   market,   integrating   the   existing  textile  activities.    The  Fondazione  Antonio  Ratti  (FAR)  was  created  in  1985  and  today  it  is  still  a  key   partner   in   value   creation   and   its   ancient   archive   is   one   of   the   external  expressions  of  the  organizational  culture.  In   the   nineties,   in   order   to   empower   its   internal   competencies   in   sales  management,  the  company  acquired  the  specialized  cut  textiles’  distributor  Collezioni  Grandi  Firme  Spa  and  continued  its  external  line  growth,  thereby  reaching  an  enriched  value  proposition.  The  late  nineties  were  characterized  by  strong  price  competition  by  the  Chinese  producers  which  was  especially  affecting  US  markets  where  higher  price  sensitivity  is  present.    Due   to   lower   production   volumes,   Ratti   started   a   structural   rationalization   process   by   merging   all  subsidiaries  of  the  group  into  the  single  Ratti  Spa.    In  2003,  to  react  to  the  world  trends  of  lowering  marginal  costs  and  to  gain  in  operating  efficiency,  Ratti   started   to   delocalize   production   with   a   Greenfield   entering   strategy,   in   Romania.   The   process  stopped  during  2008  financial  crisis  when  the  company  decided  to  minimize  investments  and  tried  to  contain  structural  costs  through  a  deeper  integration  and  centralization  process.  This  strategic  choice  was  part  of  a  wider  project  of  corporate  turnaround,  boosted  by  Marzotto’s  acquisition  in  2009.  This   led   to   nowadays’   re-­‐birth   of   the   company   (see   financial   analysis)   and   to   the   re-­‐opening   of  Romanian  plants.    Further  detailed  information  is  provided  in  the  timeline  below  (figure  1.1).                     4     Figure  1.1  
  5. 5. The  Strategic  Business  Units  The  company  is  mainly  operating  in  the  design  and  production  of  printed,  solid  and  yarn  dyed  fabrics  for   clothing,   accessories   and   home   furnishings   in   which   it   sells   its   products   in   Italy,   Europe,   the  United  States  and  Japan.      Ratti   S.p.A.   presents   a   divisional   structure   organized   on   products,   with   horizontal   elements   (product  managers)  typical  of  the  matrix  organizational  form.  These  ones  are  mainly  grouped  in  four  operating  segments,  which  are  described  below:  the  strategic  business  units.  They  are  managed  separately  by  SBU  directors,  figures  re-­‐introduced  after  Marzotto’s  acquisition  to  provide  strong  leadership,  due  to  different  internal  structures.  Being  a  B2B  company  and  not  owning  any  kind  of  distribution  network,  key   activities   are   product   ideation   (in   co-­‐development   with   the   customer),   design   and   production.  However,   the   marginal   distribution   activity   concerns   silk   textiles   delivery   to   small   confectioners,  tailors  and  retailers  through  Carnet  C.G.F.  and  products  distributed  under  licensing  agreements  that  are  delivered  directly  to  retailers.  All  SBUs  contribute  to  the  integrated  value  proposition  the  group  can  offer  to  its  B2B  clients.  To  do  that,   creativity,   style,   customization   and   co-­‐development   of   the   upstream   design   phase   and   in  production  are  exploited  in  each  new  project.             Raa  Finished   Raa  Home     Raa  Women   Raa  Men   Product   Furnishings     -­‐  Raa  donna  fashion     -­‐  Raa  Setamarina   -­‐  Raa  Uomo   -­‐  Raa  Collezioni   -­‐  Raa  Tinto  in  Filo   -­‐  Raa  Uomo  Tinto   -­‐  Raa  D   Company/product  line   -­‐  R  Industries   Filo     -­‐  Raa  Studio     -­‐  Carnet  C.G.F.     Product  ideabon   Product  ideabon   Product  ideabon   Product  ideabon   Product  design   Product  design   Product  design   Product  design   Activities  covered     Producbon     Producbon     Producbon     Producbon     Distribubon*    Distribubon**     Printed  and  yarn  dyed   texbles  for  bes  and   Fabrics  for   fabrics  for  women’s   Printed  and  yarn  dyed   scarves;  licensing   upholstery,     apparel,  beachwear,   fabrics  for  neckwear   finished  products;   curtains,  pillows,   Products   footwear  and  bags,  fast   and  men’s  shirts.     finished  bes,  scarves,   home  accessories;     fashion  texbles   foulards   texbles  for  hotels     Figure  1.2         5    
  6. 6. Despite  a  slightly  decreasing  level  of  revenues  in  Japan  between  2010  and  2011,  US  and  EU  revenues  grew  by  42%  and  47%  respectively,  over-­‐performing  the  already  surprising  domestic  market  revenue  growth  of  26%  (fig.1.3  and  Excel  file).     Revenues  (geogr.)     35   14%   Italy     30   25   3%   EU   38%   mln  €     20   12%   15   USA   10     5   Japan   0   Italy   EU   USA   Japan   Othe 32%     Other   r   2010   27,611   19,585   7,829   3,295   12,01     2011   34,769   28,807   11,15   3,066   12,957     Figure  1.3   Figure  1.4    In   this   geographical   scenario,   Ratti   gathers   80%   of   revenues   from   its   woman   and   finished   product  SBUs   (51%   and   29%   respectively   –   fig.1.4).   This   last   division   includes   creations   produced   upon  request  or  products  distributed  under  license  (fig.1.5).           Foulard     Valenbno       Cravahe     Current  Licensing     agreements   Foulards       Leonard   Lingerie         Soleil       Figure  1.5    Even  though  weighing  only  for  16%,  the  man  segment  presented  the  second  top  growth  rate  (after  the  finished  product  with  43%)  in  2011:  37%  (fig.  1.6  and  1.7).               6    
  7. 7.         Revenues  (SBU)       50     40   mln  €     30     20     10     0   Woman   Finished   Man   Furnitur Other     prod.   e   revenues     2010   36,65   18,364   10,613   3,393   1,31     2011   45,998   26,26   14,558   2,912   1,021       Figure  1.6             3%   1%     16%     Woman     Finished  prod.     51%   Man       Furniture   29%     Other  revenues           Figure  1.7        To   support   its   global   strategy   and   its   performance,   Ratti’s   structure   involves   both   production   and  commercial  (to  sustain  relationships  with  B2B  clients)  operational  locations  worldwide:           Figure  1.8   7    
  8. 8. The  competitive  context  Ratti   competes   in   the   national   and   international   textile-­‐fashion   industry,   thanks   to   its   well-­‐known  brand  and  its  relationships  with  worldwide  famous  griffes  and  clients.    Silk  market  accounts  for  only  about  0.2%  of  global  fiber  market,  yet  it  is  a  multibillional  trade  as  the  unit   of   raw   silk   is   twenty   times   more   expensive   than   a   unit   of   raw   cotton.   The   price   of   silk   has  decreased  significantly  over  the  last  year.  Despite   unsatisfactory   performance   during   the   recent   crisis   years,   2011   marked   an   initial   recovery  due  to  general  environmental  factors,  internal  higher  efficiency  and  external  renewed  effectiveness.  However,  some  important  competitive  challenges  are  present.  In  this  section,  we  underline  the  dynamics  of  the  textile  and  fashion  industry,  and  of  Ratti’s  specific  competitive  area.    External  environment  and  trends  2011   was   a   dual-­‐speed   recovery   year   for   the   industry.   After   the   sustained   pace   of   the   first   semester,  the  growth  was  slowed  in  the  second  one  down  to  an  aggregated  +4.8  %  of  revenues,  which  reached  €52,4   billion.   While   the   exports   increased   with   a   double-­‐digit   rate,   Italian   consumption   remained  stagnant:  general  demand  grew  by  4.1%.  As  far  as  Ratti  is  concerned,  this  brought  an  increase  in  B2B  portfolio  orders  by  the  end  of  2011  and  the  beginning  of  2012.    Hence,   internationalization   remains   the   main   driver   of   growth:   the   EU   destinations   experienced  +10.7%   growth   (with   France   and   Germany   remaining   the   top   commercial   partners)   and   extra-­‐EU  +14.6%  growth.  The  shares  of  both  markets  on  total  exports  are  57%  and  43%,  respectively.  In  this  scenario,  the  top-­‐growth  destinations  are:                                 Table  1.1   8    
  9. 9. The   imports   rose   at   the   same   time,   but   less   than   proportionally,   thus   leading   to   a   positive  commercial  surplus  both  on  textile  (upper-­‐stages  of  the  chain)  and  fashion  (lower  stages)  sectors  of  the  industry.  Importantly,  raw  materials  for  whole  industry,  and  for  Ratti  itself,  come  primarily  from  China  (producing  up  to  90%  of  global  silk  production),  which  maintains  a  total  share  of  25.6%  of  total  imports  with  an  annual  growth  of  12.6%,  whereas  all  other  source-­‐countries  are  below  7%,  with  an  average  share  of  4.7%  (table  2).                                 Table  1.2    As  shown  by  the  Figure  1.9,  although  exports  are  in  recovery  phase,  they  remain  below  their  pre-­‐crisis  level.                       Figure  1.9   9    
  10. 10. Opportunities  and  threats    Ratti,   through   its   high   brand-­‐awareness,   takes   advantage   of   the   international   development   of  markets   through   an   internationalized   business   model   (BM),   and   it   allows   diversification   of   the  portfolio   risk.   Yet   it   remains   important   to   carefully   monitor   the   strategic   choices   of   Chinese  competitors  (sometimes  strongly  integrated,  as  Dr.  Luca  Vignaga  notices)  on  the  U.S.  market,  where  price   competition   is   stronger   and   the   differentiation   policies   are   centered   on   the   intrinsic   value   of  the  product  and  its  quality,  and  integrated  service  to  the  customer  seem  less  effective.  On  the  other  hand,  the  Italian  market  appears  to  be  not  so  concentrated  (CR  4  index  is  at  13.5%).  This  triggers  two  important  aspects:           Compebbon  can  always   become  more  price-­‐ The  recent  crisis  could  boost   oriented,  even  in  the  light  of   aggregabon  dynamics     the  figures  presented  above,   between  different  players,  as   in  which  the  imports  from   was  the  case  of  Raa  itself  in     low  labor-­‐cost  countries   2009  with  Marzoho  group.   have  risen     Figure  1.10      Given  this  actual  or  possible  pressure  on  price  competition,  the  company  has  reacted  (and  wants  to  do  it  in  the  near  future  as  well)  with  an  active  approach  by:     Empower                     • Empowering  the  up-­‐market  service,  where  Chinese  compebbon  is   less  present.   up-­‐market   •   Where  quality  levels,  design  capabilibes  and  service  levels  offered   by  Raa  represent  a  differenbabng  tool.   • Enhancing  internal  efficiency  with  a  turnaround  process  that  has   begun  in  2008-­‐2009,  when  the  revenues  went  down  by  almost   30%.  The  changes  involve:   Internal   • Workforce  reducbon  of  350  units.   efficiency   • Divestment  of  Textrom  s.r.l.  in  Romania).   • Investments  in  technology  to  empower  ink-­‐jet  prinbng  technique   and  reduce  wastes  in  producbon  processes  (planned  investment:   €6  million  between  2010  and  2013).   • Trying  to  reach  a  cribcal  mass  with  the  integrabon  of  all  design,   service  and  producbon  acbvibes  into  the  headquarters  in   Guanzate.   Cribcal  mass   • Higher  producbon  volumes  over  which  fixed  costs  are  spread.   •   As  a  consequence,  reducbon  of  overheads,  economies  of  scale  in   purchases  of  raw  materials,  lower  coordinabon  costs.     Figure  1.11       10    
  11. 11. Porter’s  five  forces  analysis             SUPPLIERS   chinese  firms  (raw     silk);  brazilian     suppliers         POTENTIAL     ENTRANTS   RATTI;  Canepa;     industrial  players/ Mantero;  Isa;   SUBSTITUTES     converters  currently   Olmeho;  Lisa;   low-­‐cost  asian   handling  other   Taborelli   factories     fibres         CUSTOMERS     Griffes,  licensor     firms,  fast  fashion   firms,  tailors         Figure  1.12          The  scheme  above  presents  the  structure  of  the  competitive  context  through  the  usual  Porter’s  five  forces  approach.    Currently,  Ratti’s  direct  competitors  are  all  Italian  firms,  whereas  the  others  (Asian,  mainly  Chinese)  players   are   included   in   substitutes   since   they   currently   offer   different   products   of   lower   quality,  design   and   creativity,   and   also   less   customer   service   than   the   Italian   ones,   therefore   their   main  strategic  goal  is  to  reach  a  competitive  advantage  through  a  pure  cost-­‐strategy.           11    
  12. 12. The  main  competitors  among  the  Italian  firms  are:       • A  family  run  company  producing  fabrics  and  accessories  for   men  and  womenswear,  both  luxury  and  fast  fashion  products.         Mantero   • Covers  Italia,  Europe,  North  America  and  Asia  (30%,  47%,  17%   and  6%  respecbvely).           • A  rather  new  (established  in  1970)  company,  mainly  focused  on   womenswear,  however  also  producing  in  other  areas.         Lisa   • Lisa  owns  another  company,  Stamperia  Marbnengo,  through   which  it  offers  service  in  all  possible  kinds  of  fabrics,  from  raw     materials  to  prinbng.       • Formerly  producing  umbrella  fabrics  and  lining,  with  a  recent   shir  towards  womenswear  and  bes.      Tessitura  Taborelli     • Taborelli  offers  all  different  kinds  of  materials  (acetate,  cohon,   silk,  etc.)  and  sells  mainly  to  a  network  of  texble  converters,     both  in  Italy  and  abroad.       • Established  in  1956,  produces  underwear,  swimwear,  bes  and   scarfs,  and  further  offers  fabrics  for  furnishing.       Isa   • Emphasizes  its  concern  regarding  ecology  for  the  last  35  years.     • Isa  bought  two  addibonal  companies:  Prochownik  (men’s     accessories)  and  ZeroRh+  (glasses  and  luxury  sportswear).         • Produces  both  men  and  womenswear  made  of  silk.     Olmeho   • Olmeho  group  consists  of  5  companies:  Olmeho,  Tessitura   Elmtex,  Lucky  Prinbng  Mill-­‐lpm,  Confezione  Ties,  and  Pal&Stra.         • Has  a  business  model  similar  to  Raa’s.       Canepa   • Offering  both  an  integrated  service  to  the  customer  and   managing  licensing  agreements.  It  also  offers  a  discrete  variety     of  finished  accessories  through  Intermoda  and  Fiorio.       Figure  1.13     The  power  of  suppliers  and  customers  is  quite  high  due  to  the  prevailing  role  of  Chinese  firms  in  the   first  case  and  to  the  increased  service  level  demanded  in  the  second  one.   Barriers  to  entry  are  sufficiently  high  for  players  currently  competing  in  other  fibers’  markets  to  enter   through  an  internal  growth  strategy  (different  technology,  need  for  highly-­‐skilled  staff,  considerable   equipment  investments,  knowledge,  and  design  capabilities).       12    
  13. 13. KSF  inside  the  industry    Taking   into   account   environmental   developments,   competitive   forces   and   current   trends   in   the  industry,  Ratti’s  business  model  should  be  both  externally  coherent  with  the  competitive  context,  its  main  mechanics  and  developments  underlined  above  and   internally  with   the   other   company   choices  and  strategies.  KSF  need  to  be  covered  on  both  these  sides.       Design,  creabvity  and   innovabon   Key  succes  factors   Customizabon,  integrated   Effecbveness   service,  co-­‐development  of   texbles   Quality   Reduced  bme  to  market   and  rapid  deliveries   Efficiency     Internal  flexibility  to   manage  different   producbon  technologies     Figure  1.14    Positioning  Before   describing   Ratti’s   positioning   within   the   textile   industry   and   with   respect   to   its   main  competitors,  it  is  important  to  point  out  that  in  this  industry,  4  main  macro-­‐areas  of  the  supply  chain  exist  (Dr.  Luca  Vignaga,  chief  HR  officer):     1   • The  creabon  of  the  fiber  from  raw  materials   • The  creabon  of  the  texble  (printed,  yarn  dyed  or  solid)   2   through  various  techniques   3   • The  finished  product  and  its  packaging   4   • The  distribubon  and  sales  to  the  end  consumer     Figure  1.15    Ratti  and  its  competitors  are  all  located  in  step  2,  thus  being  typical  B2B  companies.  Despite  sharing  the   majority   of   the   activities   performed,   their   strategic   positioning   in   the   market   can   be  differentiated   according   to   the   following   two   chosen   variables   below,   further   included   in   the  positioning  map  (fig  1.19  –  end  of  paragraph).     13    
  14. 14. Service  width    It  means  first  of  all  the  degree  of  control  of  the  different  phases  of  textile  creation  (product  ideation,  collection   development,   design,   production   and   if   necessary   distribution   to   retailers).   Three   basic  models  are  therefore  usually  identified,  with  obvious  overlaps  when  considering  specific  firms:           Full  service  model   • All  phases  are  available  to  offer  to  the  customer.       • Producbon  is  done  in-­‐house.     • The  customer  has  to  provide  operabons  with  drars,     Producer  model   drawings  and  more  generally  has  to  bear  the  creabve   part.       • Producbon  is  outsourced.     Creator  model   • Only  the  creabve  part  of  design  and  product  ideabon  is   offered  .     Figure  1.16    This  variable  has  to  be  naturally  coupled  also  with  target  markets  that  the  incumbent  can  serve,  as  the  coverage  of  multiple  target  markets  implies  greater  service  width:   Luxury  customers     (ex:  Hermès,  Louis  Vuihon)   Middle-­‐market     (ex:  MaxMara)   Fast  fashion     (ex:  Zara,  H&M,  Banana  Republic)   Mass  market     (ex:  Oviesse,  CNA)   Figure  1.17      The   competitors   we   have   considered   represent   quite   different   levels   reached   in   each   of   the   two  variables  and  are  currently  the  main  incumbents  in  the  industry  in  which  Ratti  operates.           14    
  15. 15.                          Brand  awareness    Ratti   remains   the   most   known   brand,   as   explained   below.   However,   Mantero   seta   is   also   famous   for  its   100   years   international   experience   and   constant   communication   efforts   such   as   the   talent  scouting   contest   recently   developed   with   Ratti.   Canepa’s   brand,   although   well-­‐known,   is   less  widespread   due   to   tighter   international   expansion.   These   three   top-­‐players   are   followed   by  ISA   seta,  which   has   decided   to   sell   directly   to   customers   but   with   a   multi-­‐branding   strategy   (Zero   Rh+   and  Prochownik)  that  makes  product/brand  association  less  clear.  However,  thanks  to  its  50-­‐year-­‐history,  it  exploits  medium  brand  awareness  in  the  B2B  market.   Olmetto  focuses  on  B2B  production  phase  which  makes  it  a  follower  of  ISA.  Lisa  Seta  is  a  recent  firm  (1970),  focused  only  on  fast  fashion.  Despite  its  productive  capacity,  it  has  a  far   lower   brand-­‐awareness.   The   same   is   valid   for   Taborelli,   which   also   has   limited   variety   as   seen  above  due  to  its  high  specialization  in  production.  To  define  the  map,  we  have  considered:     o Year  of  foundation   o National  and  international  acknowledgement  of  the  brand  considered   o Strategic   alliances   to   increase   brand   awareness   (example:   deal   in   B2B   with   prestigious  griffes)   o Degree  of  internationalization   o Valuable   collaborations   (ex:   2011   contest   to   select   new   talents   promoted   by   Ratti   together  with  Mantero  seta)               15    
  16. 16. Ratti’s  positioning    Ratti   is   operates   through   the   full-­‐service   model.   Thus,   it   constantly   collaborates   with   customers   to  the  creative  and  design  phase  and  produces  textiles  through  5  different  techniques.                 Figure  1.18      In  addition,  when  needed,  it  can  distribute  products  to  retailers  as  it  does  with  licensing  ones  (even  if  distribution   is   marginal   in   Ratti).It   targets   the   luxury   high   end   market   as   well   as   the   middle   and  recently  (with  R  industries)  also  fast  fashion  ones.    In   these   fields,   both   in   Italy   and   abroad,   thanks   to   its   history   of   excellence   and   to   its   growing  international   expansion   (in   2011   Ratti   did   more   than   60%   of   its   revenues   outside   Italy   and   50%   of  them  in  Europe,    with  an  annual  growth  on  2010  of  47%),  it  exploits  an  exceptional  brand  awareness.           Figure  1.19       16    
  17. 17. Financial  analysis   Considering  the  consolidated  results  of  Ratti  group,  we  need  to  analyze  them  from  2006  to  2010  in   order   to   appreciate   the   complete   evolution   of   the   company’s   profitability,   composition   of   balance   sheet,  financial  stability  and  sources  of  capital.  It  is  anyway  recommended,  for  a  better  insight,  to  see   details  in  the  Excel  file.   Above   all,   it   is   straightforward   to   see   how   the   firm   suffered   the   crisis   and   how   it   recovered   thanks   to   the  acquisition  by  Marzotto.   At   a   first   glance,   one   first   notices   that   Ratti   closed   5   years   of   negative   year-­‐end-­‐result:   the   total   amount  of  these  losses  is  30,3Mil/€  (fig  1.20).             Figure  1.20     These   bad   results   have   been   driven   by   a   period   in   which   a   sharp   reduction   in   revenues   occurred   and   the  company  could  not  resolve  the  chronic  inability  to  be  profitable.  Indeed,  the  cumulative  revenue   decrease   between   2008   and   2009   is   -­‐42.33%   with   the   operating   costs   quite   stable   relative   to   revenues,  hence  highlighting  no  internal  efficiency  gain.             Table  1.3   The  bad  situation  in  2006  could  only  worsen  in  the  years  to  come.  The  global  financial  crisis  of  2008   deeply  hit  revenues  that  dropped  by  more  than  12%  in  2008  and  by  almost  40%  in  2009,  both  with   respect  to  the  top  level  of  112Mil/€  in  2007  and  ROE,  ROS  and  ROI  were  all  strongly  negative  in  2008.   Numbers  and  details  are  shown  in  tab.  1.4.    Table  1.4   17    
  18. 18. These  alarming  profitability  results  led  the  Debt  to  Equity  ratio  to  skyrocket  in  2009  till  6,15%  from  a  safer   1,06%   of   2006   balance   sheet,   primarily   due   to   net   equity   fall   (that   overweighs   net   financial  position   decrease)   in   order   to   cover   huge   losses.   Indeed,   to   reach   this   aim,   net   equity   had   to   be  slashed  at  2,9Mil/€  in  2009  from  2006  starting  point  of  28,8Mil/€.    Together   with   that   composition   of   financial   sources,   we   need   to   consider   also   the   short-­‐term  financial  stability:  liquidity  margin  dropped  from  a  positive  36Mil/€  of  2006  till  a  worrying  negative  7Mil/€   in   2009.   These   profound   cash   imbalances   could   easily   lead   Ratti   to   a   probable   default.  Despite   the   sharp   reduction   in   the   operating   working   capital,   Ratti   at   the   end   of   2009   needed  9,8Mil/€  to  continue  to  survive.  Luckily   in   2009   the   Marzotto   acquisition   occurred.   The   agreement   brought   into   the   company  36Mil/€:   25Mil/€   directly   in   risk   capital,   11.4Mil/€     in   newly   negotiated   net   debt   thanks   to   the  implied  covenant  coverage,  considering  also  cash  that  exited  to  repay  a  loan  with  BNL  and  Unicredit  (16Mil/€   -­‐   4.6Mil/€   repayment).   That   operation   led   also   to   an   important   governance   change,   with  Faber  Five  and  Marzotto  owning  66%  of  Ratti  and  exerting  unified  control.    After  that  moment,  partial  recovery  occurred.  Debt  to  Equity  ratio  normalized  and  improved  till  0,84.  In  2010  the  revenue  increase  of  7,89%  drove  the  ROS  to  a  0,34%  positive  result  that  never  occurred  before  in  the  years  under  analysis.    In  2011,  although  Europe  sovereign  debt  crisis,  Ratti  improved  its  sales  of  almost  30%.  ROI  reached  a  +10%   record   and   ROS   finally   rose   at   +6%.     Debt   to   Equity   ratio   almost   halved   at   0,46   as   liquidity  margin  got  positive  to  a  30Mil/€.    Globally,   we   see   how   financial   debt/Ebitda   ratio   has   drastically   reduced   from   41   in   2006   to   2   in   2011  after   being   dangerously   negative   for   three   years   in   between.     This   underlines   a   safer   solvency  situation  and  stronger  financial  structure,  both  sustained  by  renewed  profitability  and  ameliorated  monetary  cycle.  Indeed,  the  commercial  cycle  of  Ratti,  underlined  in  the  five  years  analysis,  shows  a  gradual  improvement,  as  can  be  seen  in  tab.  1.5.           Table  1.5    These  positive  results  are  also  driven  by  an  increase  in  operating  efficiency:  the  revenue  per  worker  reached  the  positive  amount  of  163.000  €.  This  productivity  index  had  a  43%  increase  from  the  worst  2009  result  (114.000€/worker).  This  shows  how  the  managerial  capabilities,  the  new  industrial  plan  and  the  synergies  from  the  collaboration  with  Marzotto  have  produced  tangible  quantifiable  results.    Despite  this  sharp  and  rapid  improvement  of  2011  financial  data,  we  still  notice  some  difficulties  in  a  complete   recovery.   We   underline   how   55%   of   the   year   net   income   comes   from   the   non-­‐core  activities  due  to  a  7Mil/€  surplus  in  taxation.  The  overall  core  activities  could  only  produce  a  5Mil/€  surplus.  This  demonstrates  that  several  steps  forward  have  still  to  be  done  to  reach  a  fully  satisfying  performance.         18    
  19. 19. THE  BUSINESS  MODEL:  value  creation  through  customer  orientation        The   following   paragraphs   deal   with   the   business   model   (BM)   as-­‐is,   testing   its   internal   and   external  consistency   and   also   considering   some   of   the   Marzotto   acquisition’s   impacts   on   it,   and   then   try   to  provide  some  hints  about  the  business  model  to  be.  Business  Model  AS-­‐IS  To   describe   the   current   BM,   it   has   been   chosen   to   use   the   business   model   canvas   as   defined   by  Alexander  Osterwalder  and  Yves  Pigneur  (2010).  The  analysis  through  BM  canvas    Value   proposition   (VP):   Ratti   delivers   an   integrated   VP   to   its   customers   by   offering   a   360°  customized   and   dependable   service   of   product   design   and   a   deep   understanding   of   their   needs   in  terms   of   the   mood   that   has   to   be   transferred   to   each   project   (order-­‐winning   factors).   It   produces  textile  patterns  of  exceptional  quality  and  creativity  in  the  right  lead  time  (much  faster  than  in  the  past,   although   being   a   qualifying   factor)   and   at   the   agreed   price.   Ratti   is   therefore   in   between   a   pure  product  and  a  pure  service  output  firm  (Slack  2007).    Customers  (CS):  Ratti  adopts  a  segmented  approach,  serving  different  customers  with  slightly  varying  needs   through   flexing   the   same   transforming   resources   (machines,   staff).   As   a   consequence,   it  extends  its  offering  to  up-­‐market  (famous  griffes),  fast-­‐fashion,  swimwear  and  underwear  specialized  customers,  finished  accessories  segment  (also  through  licensing  agreements)  and  furnishing.    Customer   relationship/care   (CR):   Ratti   is   able   to   develop   a   deep   relationship   with   its   customers  assuring  to  be  in  tune  with  their  sensations  and  brand  codes  and  finally  transferring  them  in  the  final  textile.   It’s   a   sort   of   reciprocal   idiosyncratic   investment   that   the   company   and   the   stylists   cultivate   in  order  to  develop  better  products  in  a  faster  time.  Product  managers  (PM)  are  constantly  in  contact  with   different   stylists   in   order   to   catch   the   mood   and   be   the   best   choice   for   them   among   19    
  20. 20. competitors.   Ratti   gratifies   its   customers   by   letting   them   research   the   feeling   in   its   unique   archive,  with  dedicated  sections  both  to  up-­‐market  and  fast  fashion  customers.    Channels   (CH):   Thanks   to   its   history   of   excellence,   the   awareness   phase   has   been   already  experienced.  New  customers  are  reached  through  the   success  of  previous  collections,  thereby  with  a  sort   of   B2B   word-­‐of   mouth   contributing   to   the   evaluation   phase:   more   success   means   more  reputation  and  more  orders  thereby  triggering  a  virtuous  cycle.  “As  a  consequence  Ratti,  being  well-­‐known   in   the   fashion   industry,   is   always   included   in   each   year’s   auctions   promoted   by   potential  customers  that  need  to  develop  new  collections  (Dr.  Parenzan,  women’s  wear  chief  director)”.  The  real  challenge  is  to  communicate  its  enormous  experience:  one  of  the  tools  it  uses  especially  in  the  purchase   phase   is   the   archive   that   customers   can   view   and   use.   In   addition,   Ratti’s   PM   actively  participate   in   catwalks   around   the   globe.   This   allows   them   to   stay   in   contact   with   their   customers  and   to   think   about   new   proposals   for   the   seasons   to   come.   Value   proposition   is   delivered   day-­‐to-­‐day  through  PM  and  designers  (delivery  phase).    Revenue   stream   (RS):   Value   appropriation   on   the   revenue   side   showed   a   growth   in   every   market  segment,   with   woman’s   wear   and   finished   product   (includes   licensing)   accounting   for   80%   of   the  revenues  and  showing  both  a  growing  trend  (26%  and  43%  respectively).  In  addition,  menswear  grew  by   37%,   accounting   for   16%   of   total   revenue   stream.   Value   capturing   occurred   also   on   a   uniformly  geographical   base   with   US   and   European   market   growing   both   over   40%   and   the   domestic  marketplace  experiencing  a  26%  revenue  increase.      Key  resources  (KR):  To  sustain  its  key  activities,  a  set  of  interdependent,  non-­‐transferable  and  rare  resources  are  deployed  by  Ratti:  human  and  immaterial  resources  include  designers  with  specialized  capabilities,  production  skills  of  workers  using  machines,  chemical  knowledge  to  innovate  color  mix  and   printing   techniques   (R&D),   and   customer   relationship   management   competencies   among   the  others.    The  wide  historical  design  archive,  the  most  impressive  manifestation  of  the  effective  combination  of  these   resources   and   the   first   tool   a   product   manager   utilizes   after   the   briefing   with   the   customer,  together   with   innovative   production   technologies   such   as   ink-­‐jet   digital   silk   printing   and   fashion  books  also  plays  an  important  role  in  material  resources.      As   far   as   financial   resources   are   concerned,   surely   Marzotto   brought   in   liquidity   both   to   recover   and  to  undertake  new  investments.  It  also  provided  new  valuable  managerial  competencies.    Finally,  Ratti’s  strong  brand  awareness  surely  is  a  key  value-­‐adding  resource.    Key  activities  (KA):  It  recruits  and  motivates  the  designers  and,  apart  from  printing  supports  photogravure,  it  undergoes  all  the  activities  and  processes  of  the  silk  cycle.  It  can  create  a  finished  product  starting  from  an  idea  and  a  natural  silk  fiber  till  a  product  ready  to  be  sold  in  a  shop  (SBU  finished  product).  It  works  with  separated  business  units,  with  focalized  human  resources,  to  follow  different  markets,  products  and  customers.             20    
  21. 21.       • Briefing  with  customer,understanding  of  the   mood,       Product  ideabon   • First  drar,  prototypizabon,  collecbons       • Authorizabon  by  customer  and  final  deal         • Hand  designers,       Design   • Transformabon  of  the  drawing  in  CAD  file         • color  chemical  preparabon,       Producbon   • manomacchina,  stampa  rotabva,  stampa  ink-­‐jet,     stampa  a  quadro,  yarn  dyeing,       (make  to  order)   • maintenance  of  machineries,  quality  controls,     • finishing  and  packing       Figure  2.1                            Key   partnerships   (KP):     Ratti   buys   its   important   raw   materials   from   Chinese’s   suppliers   that   own   a  basic   step   of   silk’s   value   chain.   Silk   in   the   world   is   best   produced   in   the   Far   East   leading   country  where  lower  cost  of  labor  and  a  millenarian  tradition  allows  producers  to  have  a  strong  and  enduring  competitive  advantage.  Furthermore,  Ratti  buys  spools  and  rolls  of  different  quality  and  features  and  stocks  them  in  advance  to  cope  with  uncertain  suppliers’  lead  times.    Marzotto   is   not   only   the   33%   owner   of   Ratti;   It   is   also   a   key   partner   providing     financial   and  managerial  support  to  the  company  together  with  plants  and  equipment  to  produce  (  ex:  Lituanian  ones  for  fast  fashion)  and  maximize  synergies.  Ratti   also   stipulated   agreements   both   with   famous   Design   schools   and   with   Mantero   seta   for   its  yearly  recruitment.  This  is  a  typical  form  of  coopetition  in  the  field  of  design.  Foundation  Antonio  Ratti  (FAR)  is  a  valuable  internal  partner  that  provides  information  about  ancient  collections,  technical  information  and  design  inspiration  for  future  projects.    Nevertheless,   as   can   be   deducted   from   the   explanation   above,   Ratti   views   big   griffes   not   just   as  customers  but  as  partners.  Giving  a  service,  Ratti  exploits  their  capacity  to  grasp  customer  needs  and  trends  to  update  its  archive  and  textile  patterns.  They  are  customers  but  also  collaborators.   21    
  22. 22. Cost  structure  (CS):  Ratti’s  premium  value  proposition  and  its  extreme  customization  lead  to  a  value-­‐driven   business   model   rather   than   a   cost-­‐driven   one.   However,   through   R   industries   and   serving   fast  fashion   market,   economies   of   scale   could   be   reached   as   volumes   increased   and   utilization   of  machineries   too.   In   addition,   the   fast   fashion   introduction   led   to   higher   utilization   of   the   finishing  phase  of  production  that  is  now  applied  to  all  market  segments  served,  thus  reaching  economies  of  scope.    Ratti’s  BM  is  characterized  by  a  fixed  and  rigid  cost  structure,  as  its  main  resources  are  people  and  machineries.  However,  in  2011,  it  was  able  to  increase  EBITDA  margin  from  2.9%  in  2010  to  9%  by  rationalizing  operative  costs  and  thereby  also  ameliorating  its  EBIT  margin  from  0.35%  to  7%,  even  though  the  incidence  of  depreciation  did  not  change  so  much.  These  aspects  contributed  to  higher  value  appropriation.    An  immediate  and  visual  representation  of  the  hand-­‐made  canvas  is  presented  below  (figure  2.2).           Figure  2.2   Figure  2.2   22    
  23. 23. Business  model  configuration  The  business  model  described  above  entails  both  a  dimension  typical  of  the  layer-­‐player  model  and  of   the   integrated   model.   In   particular,   although   the   crucial   value   adding   stage   on   which   Ratti’s   BM   is  focused   is   the   creative   phase  (product   ideation   and   design).   We   can   say   more   properly   that   Ratti   has  configured  its  BM  as  an  effective  mixture  of  layer-­‐player  and  integrated  model,  thereby  leading  to  a  partially-­‐integrated   layer   player   model:   indeed   it   is   specialized   in   two   fundamental   steps   of   the  value  chain,  not  only  one,  which  are  design  and  production  (partial  integration  side)  that  it  expands  and   replicates   horizontally,   through   a   customized   approach,   on   different  projects/customers/markets  (layer  player  side),  thereby  exploiting  cognitive  economies  of  scale.  The  layer-­‐player  orientation  is  predominant,  as  an  integrated  configuration  would  entail  raw  materials  control  and  the  creation  of  a  widespread  distribution  network  together  with  after-­‐sales  activities.    However   it   is   interesting   to   notice   that,   within   different   SBUs,   the   BM   configuration   might   change  slightly  and  be  more  oriented  towards  one  or  the  other  side  underlined  above.  This  is  the  case  of  the  distribution   activity   that   assumes   a   marginal   (but   not   negligible)   role   in   Ratti’s   business   model   if  Carnet   –   C.G.F.   (in   women’s   wear   SBU)   and   licensing   products   (in   finished   products   SBU)   are  considered.  In  these  two  cases,  Ratti’s  BM  slightly  moves  towards  the  integrated  dimension  from  a  configuration   typically   more   oriented   to   the   layer-­‐player   one.   Again,   since   no   owned   distribution  network   is   available   to   Ratti,   key   activities   included   in   BM   overall   description   do   not   include  distribution   and   this   change   is   likely   to   be   more   similar   to   an   extension   of   the   service   width   (see  positioning)  rather  than  a  re-­‐configuration  of  Ratti’s  BM.                       23    
  24. 24. The  model  configuration  can  be  represented  as  follows.     Figure  2.3  Internal  and  external  consistency  of  BM      Ratti’s  business  model  is  externally  consistent  as  it  is  aligned  with  the  industry’s  key  success  factors  identified   in   the   competitive   context.   Indeed,   through   its   value   proposition   and   the   effective  management   of   customer   relationship,   Ratti   is   able   to   offer   an   integrated   and   customized   service  simultaneously   utilizing   its   core   resources   and   competencies   in   design,   reinforced   through  partnerships   with   major   design   schools   and   production   to   create   products   of   exceptional   quality.  From   the   efficiency   side,   only   recently   it   has   made   its   technology   and   equipment   more   flexible   in  order   to   cope   with   the   fast   fashion   growing   trend.   Furthermore   the   investment   in   new   ink-­‐jet  printing  machines,  due  to  their  inferior  production  lead  time  (CAD  file  is  immediately  printed  on  the  fiber  and  no  different  supports  need  to  be  changed  in  order  to  obtain  different  colors),  represents  a  higher  share  of  production  activities  devoted  to  time  to  market  reduction.  Internally   resources,   activities,   partnerships   and   the   care   applied   to   customer   relationship   are  aligned   with   company   objectives   expressed   with   its   value   proposition   and   with   target   customers  served   in   the   market.   This   internal   consistency   has   proved   to   be   effective   in   the   profit   and   loss  account  through  revenue  stream  and  cost  structure.        Winning  aspects:  robustness  and  self-­‐reinforcement    Ratti  created  a  strong  barrier  to  imitation  through  its  asset  synergies  with  Marzotto  in  fast  fashion.  To   assure   a   similar   availability   of   machineries   and   equipment,   a   competitor   would   require   large  capital   investments.   Nevertheless,   its   integration   with   Ratti’s   full   and   established   understanding   of  rotative  printing  technique,  builds  an  integrated  system  which  is  hard  to  replicate.  Another  barrier  is  due  to  causal  ambiguity  embedded  in  customer  care:  Ratti’s  exceptional  capacity  of  staying  in  tune  with  customer’s  mind  and  specific  needs  is  a  distinguishing  element  of  its  BM  that  is   hard   to   replicate   because   of   difficulty   in   understanding   its   roots.   In   other   words,   it   is   a   rigid  consequence  of  a  governance  choice  (product  manager  following  specific  brands’  product  lines),  an  asset   choice   (recruiting   only   motivated   talents)   and   a   policy   one   (building   customized   value  proposition  for  each  client).           24    
  25. 25.        Business  Model  to  be  Ratti   needs   to   evaluate   all   consequences   of   current   industry   challenges   (ex:   fast   fashion   trend   and  Chinese  price  competition)  on  its  BM  and  develop  strategic  agility  (Doz  and  Kosonen  2010)  in  order  to   turn   them   into   positive   opportunities   for   possible   BM   innovation.   A   concrete   application   of   this  useful  concept  is  provided  in  the  box  below.                          Re-­‐elaborating  some  information  provided  by  Dr.  Luca  Vignaga  (interview  12/06/2012),  we  have  tried  to  map  a  possible  future  evolution  of  Ratti’s  business  model.  The   final   goal   is   Ratti’s   configuration   as   a   360°   full-­‐service   provider   and   problem-­‐solver   for   the  customer,  independently  on  which  kind  of  fiber  it  has  to  work  on.  Indeed,  for  fibers  different  from  silk,   Marzotto’s   machineries   and   skills   can   be   used.   However,   the   dealer   with   the   customer   will  remain   Ratti,   due   to   its   key   capabilities   in   management   the   relationship   and   key   resources   described  above  (value  proposition  to  be).  To   accomplish   this   wide   range   of   needs,   Ratti   needs   to   empower   its   recruiting   practices   by  strengthening   alliances   with   designer   schools   and   further   promoting   initiatives   as   the   one   with  Mantero   seta   (key   partnerships   to   be).   “Marzotto-­‐Ratti   group   is   not   much   worried   about  competition,  it  is  worried  about  having  a  strong  silk-­‐district”  to  create  an  effective  network  of  firms  and  promote  coopetition.   25    
  26. 26. The   internal   growth   project   also   involves   a   triplication   of   ink-­‐jet   printing   capacity   (key   activities   to  be)   and   buying   fashion   archives   from   other   companies   (operations   that   on   average   worth   300-­‐400.000  €),  thereby  impacting  on  key  resources  to  be.  In  addition,  the  focus  on  the  empowerment  of  revenue  sources  represented  by  furniture  and  finished  products  will  make  more  solid  and  diversified  the  revenue  stream  to  be.             26    
  27. 27. Two  firm  choices:  Acquisition  and  HRM  Marzottos  acquisition:    the  impact  of  fast  fashion  on  value  creation  and  organization      Since  the  Due  Diligence  phase,  it  was €

×