Building and sustaining hidden monopoly through organizational design: Luxottica Oakley Merger,a case study
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Did you know why your Prada glasses are so expensive? Did you know that almost every eyewear you use in a lifetime is manufactured by a single company? Read on to know more.. Prepared for coursework Organizational structure and design,supervised by DR. Amit Shukla,IME IITK. Special thanks to Mr Akash Goyle,Managing Director at Luxottica India for valuable inputs.
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Building and sustaining hidden monopoly through organizational design: Luxottica Oakley Merger,a case study
- 1. R I S E A N D F A L L A AY U S H I G U P TA K R I T I D O N E R I A N E H A S I N G H R E H A N AT I Q U L L A S U P R E E T A G R AWA L
- 2. Evolution of Oakley 1975 1984 1986 1995 1998 2001 2007 Handgrips Sunglasses Tour de France Enlisted as Public company Athletic Shoe Retail stores Merger
- 3. Oakley’s Strategy Niche market Quality products Patents Selective distribution Endorsements 320 patents 249 trademarks Andre Agassi Michael Jordan Greg Le Mond Fox Racing Oliver Peoples Paul Smith Spectacles O –frame Frogskin PRIZM
- 4. Chairman, President CEO SVP, Mfg. & Sourcing VP, Finance VP, US Sales VP, International Sales VP, R&D Senior Advisor Oakley’s Structure
- 5. $4.1 billion net worth #142 on Forbes 400 Aggressive, headstrong, “mad scientist”
- 6. September, 1997 • Link Newcomb April, 1999 • William D. Schmidt October, 1999 • Jim Jannard September. 2005 • Scott Olivet August, 2009 • Colin Baden Changes in Strategy
- 7. LUXOTTICA Product and operations CEO CIPO Foothill ranch R&D, Manufacturing VP, R&D SVP, Manufacturing Marketing CEO Marketing, Milan Retail, Ohio Oakley’s “O” stores Wholesale, NewYork Oakley under Luxottica
- 9. Luxottica is a global leader in the design, manufacture and distribution of fashion, luxury and sports eyewear with high technical and stylistic quality.
- 10. 1961 - Agordo, Italy Leonardo delVecchio 150 countries 7,400 stores 79,000 employees €8.837 billion (2015) €1.861 billion (2015)
- 11. THE ILLUSION OF CHOICE
- 15. Product Development • 2000 designs each year Manufacturing • Italy, China, India, Brazil Logistics • 18 DCs worldwide Distribution • 6,589 stores Customer Vertically Integrated Business Model
- 16. 2003 Versace OPSM Australia Prada 2005 DKNY Xueliang Optical Burberry Ming Long Optical D&G 2006 Polo Ralph Lauren Shopper’s Optical Modern Sight Optics D.O.C. Optics Tiffany 2007 Oakley 2008 Stella McCartney Diethelm Keller Ltd. Sunglass Hut launched in India 2009 Tory Burch Multiopticas Internacional Myer Meera Enterprises Macy’s 2010 Essilor Coach 2011 GrupoTecnol 2012 GrupoTecnol Sun Planet stores Alain Mikli 2013 2014 Glasses.com Google Michael Kors 2015 Miu Miu Source: Financial reports, ‘03 to ‘15
- 17. Country Manager Sales Head Channels ofTrade Marketing Head Brands FinanceHR Legal Logistics Production Luxottica in India
- 18. THE MERGER
- 19. Price Cut • 10 agreed Oakley • 25% sales Cut by 2/3 • Goodbye 2001 25 % MARKET SHARE
- 20. 0 20 40 60 80 100 120 140 2000 2001 2002 2003 2004 2005 2006
- 21. 0 100 200 300 400 500 600 700 800 2000 2001 2002 2003 2004 2005 2006
Editor's Notes
- By 1995 : 320 patents issued or pending worldwide 249 registered trademarks Oakley won two patent infringement suits against Bausch & Lomb Inc. and Lombardie Booster. Oakley goes public through an initial public offering (IPO) that raises $230 million. Despite making only 22 products in the company's first 20 years, by the mid-1990s Oakley's yearly sales were rising toward $200 million. Jannard had a passion for quality -- that was his mission, and that's what was customers were buying. Long before Jannard began making his first prototype he knew exactly who his market was. Dedicated athletes not only demand quality, but they're willing to pay a premium for it. At the time, however, high quality extreme sports accessories wasn't deemed a big enough market for larger companies like Nike to pay attention -- this created the perfect opening for Oakley. Exclusivity Early on Jannard made sure to do two very smart things: patent his designs and technology, and restrict distribution. Ultimately, the combination of a mission-driven approach, understanding the company's key market, and developing unique and quality products is what helped turned Jannard's initial $300 dollar investment in to one of the most popular sunglasses brands in the world. Second, as a niche retailer to some of the greatest athletes on Earth, Oakley is cool. In late 1980's, Oakley attempted to maintain that image by restricting who could and could not sell their products. The company's mission was one of quality, therefore, having their sunglasses in a retailer that did not meet that standard devalued the brand.
- Owns red films currently; red camera Laid back culture, hippie turned corporate exec; employees in shorts, fun place to work
- Operations, no brand building BRAND VISIBILITY BRAND + INNOVATION + Vertical Integration Vertical integration + luxury eyeware Merger & guided by strategy of Luxottica
- 8.8bil is operating revenue 1.8bil is EBITDA
- IILUSION OF CHOICE OWN RAY BAN, OAKLEY, PAUL SMITH VERSACE, ARMANI AND PRADA
- post WWII Milan, ITA Grew up working in factories, studying in design school Started his own tooling factory, then sunglass frames “Work always comes before everything” Started getting licenses, beginning with Armani Picked up Bosch & Lomb sunglasses group, including Ray Ban Turned around Ray Bans from cheap and ubiquitous to exclusive and high class Bought retail chains and used their distribution network to flourish
- Acquired in 2001, $653 million, Foot Locker, Champs and The finish line
- REPURCUSSIONS 2014 - Chief Executive Andrea Guerra left due to rifts, Dual CEO – Adil M Khan – distribution; Massimo Vian – operations and products UCLA faculty advisor: danger with splitting the top job - can send the wrong signal to the market about company strategy; leads to less accountability at the top. Reason - according to current and former Luxottica managers - is that the 79-year-old patriarch loathes to concentrate power in one independent executive again after his falling out with Guerra Despite this, he has been very pro as he passed son …
- Reason for these exits is same: dV is a control freak, gives little autonomy Despite posting sales of $9.6 billion, 4.3% rise Handsomely reimbursed, payment is the gross total amount of 7mil Euro Telephonic interview with Reuters; 2 were problem, dV wanted back in, disaster, let’s GTFO: AMK