Luxottica project

1. Professor: Emanuele Lettieri
Tutor: Antonio Conte

2. • COMPANY PROFILE
• GLOBAL COMPETITIVENESS AND EXTERNAL ANALYSIS
• MISSION AND STRATEGY
• CRITICAL SUCCESS FACTORS
• STRATEGY MAP
• FINANCIAL PERSPECTIVE
• CUSTOMER PERSPECTIVE
• INTERNAL PROCESSES PERSPECTIVE
• LEARNING AND GROWTH PERSPECTIVE
• METHODOLOGY
• CRITICAL ANALYSIS
• CONCLUSION
• REFERENCES

3. Market leader in eyewear market (sun and prescription eyewear)
Excellent design, high quality and well known brands are its characteristics.
73,400 employees
Production facilities in Italy, China, USA, and Brazil
Wholesale distribution network in 130 countries across five continents
Retail Store Chains:
North America:
LensCrafters and Pearle Vision
Sears Optical and Target Optical
Asia-Pacific:
OPSM and Laubman & Pank
South America:
GMO
China:
LensCrafters
Global:
Sunglass Hut, ILORI, and The Optical Shop of Aspen
In total more 7000 stores

4. Some authors argue that Luxottica is an undercover monopolist since it controls over 80% of the market.
However the company has though competitors in North America like Walmart and Costco
In luxury eyewear market, there are strong players such as Safilo, De Rigo, Marcolin, Silhouette.
It is critical to keep and obtain the brand licenses of high-end fashion brands, which contributes to the rivalry.
Opportunities of Luxottica: acquisition of new brands and competitors, entering emerging markets, operating
synergies, new technologies
Increasing fashion content of frames and general eyesight worsening of the population are advantages for Luxottica.
The company takes the advantage of scale economies that creates high entry barriers for the incumbents.
Threats of Luxottica: substitute product like contact lenses and corrective surgery.

5. Expansion
and
Growth
Acquisitions Organically
Customer
Satisfaction
Creating
Value for its
Employees
Vertically
Integrated
Business
Model
Partnerships with
Fashion Brands
Distribution
Structure
Product
Differentiation
Technological
Innovation
Wholesale
Network
Cost
Advantage
Value
Advantage
Retail Stores

6. Vertically Integrated Business Model:
• Provides both cost and value advantages
• More efficient, flexible and faster in product design, manufacturing and logistics
• High quality
Distribution Structure:
• Serving both wholesale distribution networks and its own retails stores
• One of the most extensive and effective in the optical sector
Pre- and Post-Sales Services:
• Highly automated order management system that reduces delivery times and minimizes inventory
Hiring and Training Process:
• Critical to employ and retain the most outstanding professionals for its strategic objectives
Welfare System:
• Health care for specialist visits
• Listening service for both employees and their families to improve the quality of labor and social
relations
• The possibility of access to a micro-credit system of solidarity to financially support employees in
need
• Free transport system

7. FinancialCustomerInternal
Learning
and
Growth
Growth
Net Sales Growth Rate (+)
Profitability
ROI (+)
Effectiveness of Customer
Service
Net Promoter Score (+)
Efficiency of Manufacturing
Defect Rate (-)
Efficiency of Wholesale and
Retail Distribution Networks
Number of Back Orders (-)
Design and Technological
Innovation
Number of Patents and
Trademarks (+)
Time To Market for New
Products (-)
Strategic Objective
Performance Measures
Effectiveness of the Brand
Portfolio Management
Brand Equity Index (+)
Customer Satisfaction
Surveys (+)
Competences and
Commitment
Average Hours of Training (+)
Reinvestment level (>0)
Product Return Rate (-)
Expansion into Emerging
Markets
Number of Retail Stores in
Emerging Markets (+)
Inventory Turnover (+)
Lead Time (-)
Average Cost of Production (-)
Engagement Index (+)

8. GROWTH: Main driver of the financial performance
Net Sales Growth rate Reinvestment Level
Organizational
Unit in charge
• Administration, Finance, Control and Legal
• Internal Auditing
• Administration, Finance, Control and Legal
• Internal Auditing
Formula
Difficulties in
measuring,
monitoring and
controlling
• Effects of currency fluctuation
• Constant exchange rate should be used for
comparison purposes
• Goodwill should be considered because purchased
businesses contributes to the growth
Target setting • Explicit target setting system
• Market and local condition should be considered
• Implicit target setting system because it is not affected by
the market conditions and can be determined by the
company
2013 situation • 7313 million Euro • 8.16 %
Initiatives • Expansion in emerging market
• Investing in new technologies
• Levering new sale channels like e-commerce and
travel retail
• The same with one of net sales growth rate

9. PROFITABILITY: Critical to have profitable growth
Return on Investment
Organizational
Unit in charge
• Administration, Finance, Control and Legal
• Internal Auditing
Formula
Difficulties in
measuring,
monitoring and
controlling
• Effects of currency fluctuation
• Constant exchange rate should be used for
comparison purposes
Target setting • Explicit target setting system
• The company is setting a value considering target
net sales growth rate
2013 situation • 18.81 %
Initiatives • For the top-line growth, the initiatives are
explained in the previous slide
• For the internal efficiency, implementing
enterprise resource planning software and
fulfilling the vertically integrated business model

10. EFFECTIVENESS OF CUSTOMER SERVICE
Net Promoter Score
Organizational Unit in charge • Quality
• Marketing, Style and Product
Formula
Difficulties in measuring,
monitoring and controlling
• Conduct a survey
• Online survey can be an option
Target setting • Implicit target setting system
2013 situation • No available data
Initiatives • Decrease the price
• Increase the quality of customer relationship management
• Increase brand awareness, especially among ‘passive’ customers

11. EFFECTIVENESS OF THE BRAND PORTFOLIO MANAGEMENT
Brand Equity Index
Organizational Unit in charge • Quality
• Marketing, Style and Product
Formula The Moran Brand Equity Methodology:
• Effective Market Share (EMS), which is the summation on the total number of segments in which
the brand operates (national markets, for instance) of the products between the brand’s market
share in that segment (the ratio of the brand’s sales to the total sales in that segment) and the
proportion of the brand’s sales in that segment (the ratio of the brand’s sales in that segment to
the brand’s total sales);
• Relative price (RP), which is the ratio between the price of the brand’s product/service over the
average price of a competing product/service;
• Durability (D), which is the measure of customer retention or loyalty, expressed by the forecast of
the percentage of a brand’s customers who will continue to buy the brand’s goods in the following
years.
Moran Brand Equity Index=EMS*RP*D
Difficulties in measuring,
monitoring and controlling
• In the eyewear industry, segmentation is straightforward
• Sales data is easily available
• Durability requires a detailed market research
• This analysis can be applied to ‘Luxottica’ brand or each of its brands or other brands to consider
purchasing
Target setting • Explicit target setting system
2013 situation • No available data
Initiatives • Focusing on leading brands
• Balancing proprietary and licensed brands
• Avoiding brand dilution
• Lengthening the average term of licensing agreements with profitable partners.

12. CUSTOMER SATISFACTION
Surveys Product Return Rate
Organizational
Unit in charge
• Quality
• Marketing, Style and Product
• Quality
• Marketing, Style and Product
Formula There is no formula. The company simply has to collect
data through the administration of paper or electronic
surveys regarding customer satisfaction.
Difficulties in
measuring,
monitoring and
controlling
Companies very often submit online surveys in order to
understand the customers’ needs and their feelings
about products’ features. Online surveys are particularly
easy to administer and the results can be monitored on a
daily basis.
The company calculate this indicator from sales records.
The company is also able to know the reasons behind the
returns and thus to adopt measures that prevent the
phenomenon from happening in the future.
Target setting There is no target to set for a survey, only the necessity
to collect positive data on customer satisfaction.
Explicit target setting system
2013 situation No available data No available data
Initiatives • Improving its quality control program.
To assure its quality standards worldwide and the right
support for quality improvement, Luxottica has four main
labs, one in Italy, one in China, one in the United States
and one in Brazil. Each lab is responsible for establishing
and maintaining the quality standards in the region
where it is located and supports activities in engineering,
production and market feedback management. All of
these labs conduct the same tests using the same
equipment and procedures, which are developed and
approved in the central Italian lab. Every year Luxottica
enhances the performance criteria used in its standard
tests and introduces new requirements
• Improving its quality control program.

13. EXPANSION INTO EMERGING MARKETS
Number of Retail Stores in Emerging Markets
Organizational Unit in charge • Quality
• Marketing, Style and Product
Formula Simply the numbers of stores
Difficulties in measuring,
monitoring and controlling
No difficulties
Target setting An explicit target setting system is suggested: Luxottica is able to make precise evaluations about the
geographic coverage of its distribution network and come up with a detailed plan for the opening of
new stores in emerging markets.
2013 situation
Initiatives • Opening new stores

14. EFFICIENCY OF MANUFACTURING
Average Cost of Production Defect Rate
Organizational
Unit in charge
• Operation
• Administration, Finance, Control and Legal
• Operation
Formula
Difficulties in
measuring,
monitoring and
controlling
• Production process and raw material used are different for
different types of product, therefore production mix of a
certain time period has an effect on average cost of
production.
• Raw material and energy costs can also change during the
year.
• The company should consider these external and internal
factors that can mislead the indicator.
By recording each defected product
manufactured, Luxottica can easily measure this
indicator.
Target setting • Explicit target setting system • Explicit target setting system
2013 situation No available data No available data
Initiatives • Invest in production process technologies
• Luxottica has specialized production facilities, which makes
each facility excellent on certain types of production
processes, thus decrease the average cost.
• Luxottica is also investing in China for production to take the
advantage of low labor cost.
Luxottica in particular uses a “six-sigma” approach
to improve this indicator: the methodology
consists in designing production systems in a way
that only one out of a million parts can turn out to
be defective.

15. EFFICIENCY OF WHOLESALE AND RETAIL DISTRIBUTION NETWORKS
Lead Time Number of Back Orders Inventory Turnover
Organizational
Unit in charge
• Operation • Operation • Operation
Formula the period of time between the
placement of an order and the
delivery of the product. In this
definition, the order placement is
done by storeowners or managers
of the stores. Therefore this
indicator is not related to final
consumers.
the number of customer orders that
cannot be met when presented, and
for which the customer is prepared to
wait for some time
Difficulties in
measuring,
monitoring
and controlling
Easily measured with Luxottica’s
advanced order placement system
Easily measured with Luxottica’s
advanced order placement system
can be found in the consolidated
statements of income and financial
position
Target setting • Explicit target setting system • Explicit target setting system • Implicit target setting system
2013 situation No available data No available data
Initiatives • Investing in information
technologies (IT) to support its
logistic system
• Automating the operations in
its logistic hubs
• Investing in information
technologies (IT) to support its
logistic system
• Automating the operations in its
logistic hubs
• Investing in information technologies
(IT) to support its logistic system
• Automating the operations in its
logistic hubs

16. DESIGN AND TECHNOLOGICAL INNOVATION
Number of Patents and Trademarks Time To Market for New Products
Organizational
Unit in charge
• Administration, Finance, Control and Legal
• Business Development
• Marketing, Style & Product
• Quality
• Operation
• Operation
• Marketing, Style & Product
• Wholesale
• Retail
Formula the amount of patents and trademarks held by the company the period of time from when the idea for a new
product obtains general agreement and resources
are committed to the project, to when the final
product is available for sale.
Difficulties in
measuring,
monitoring and
controlling
No difficulties By carefully managing all the phases involved in
the launch of a new product, the company is able
to easily handle this indicator.
Target setting • Implicit target setting system • Explicit target setting system
2013 situation Currently Luxottica holds more than 600 patents worldwide. In
the course of 2013, the Group added approximately 1,900 new
styles to its eyewear collections
No available data
Initiatives • Investing in research and development activities
• Partnership with Google for Google Glass
• Optimize all phases from design to
manufacturing of products
• Decrease design mistakes
• Reduce the time required by prototyping and
assembly

17. COMPETENCES AND COMMITMENT
Average Hours of Training Engagement Index
Organizational
Unit in charge
• Human Resources • Human Resources
Formula the average number of hours
spent in training (of all kinds) by
the company’s employees
an aggregated percentage of employees who are satisfied with their working
environment after the administration of an internal survey
Difficulties in
measuring,
monitoring and
controlling
No difficulties No difficulties
Target setting • Explicit target setting system • Explicit target setting system
2013 situation No available data
Initiatives • Investing in training and its
human resources
• Offering wide range of courses
(“Fabbrica delle Competenze”)
• Organizing out-of-hours events
• Cultural diversification in the company
• Prioritizing people’s health and safety
• Effective health care syste

18. In order to synthesize the strategy of Luxottica, its annual reports, official reviews, press
conferences, interviews are used as reference.
FINANCIAL PERSPECTIVE
Growth was tackled as a financial strategic objective, so we decided to measure it through
the company’s net sales and investment efforts.
Of course top-line growth is aimed at maximizing the company’s bottom-line margin, so
we connected the growth objective to another crucial financial goal, profitability, which is
measured through ROI.
CUSTOMER PERSPECTIVE
Luxottica is investing much effort in achieving growth by attempting to penetrate
emerging markets, levering customer satisfaction and finally improving the effectiveness
of its customer service and brand portfolio management.
INTERNAL PROCESSES PERSPECTIVE
To decrease costs, Luxottica increases the efficiency of its manufacturing and logistic
systems. To measure these two objectives, measures are selected by considering directly
relation and easiness-to-measure
LEARNING AND GROWTH PERSPECTIVE
Competences and commitments of employees are crucial to support all the strategic
objectives. Training hours and engagement index are selected to measure them. Design
and technological innovation is the other critical objective for Luxottica because of its
highly competitive market.

19. Difficulties related to each indicator are explained and should be taken into account by
Luxottica.
while selecting the strategic goals of the company, a balance between short and long term
objectives considered.
Considering eyewear market, there are numerous small player affecting the whole market
and its hard find data about them because their characteristic. It this report, main
competitors of Luxottica is focused in terms of analysis of competition.
When measuring the performance of brand portfolio management, the power, impact, and
market coverage of each brand are critical. It is estimated by using limited data in this
report so further study should be carried out.
Because of the vertically integrated business model, Luxottica has a wide range of internal
activity. Therefore it is hard to cover the performances of all internal activities. Two internal
processes objective that are strictly related to the strategic objectives are selected.

20. We believe the BSC we created for Luxottica can be deemed as both reliable, in terms of
alignment with the company’s actual strategic objectives, and beneficial to the organization’s
management, as it provides decision-makers with a detailed and coherent set of performance
measures.
The information we used for describing the company’s direction was gathered from the
documents Luxottica drafts for its external accountability (annual reports, annual reviews,
etc.) and also from interviews with the press and financial analysts. Several indicators we
included in the scorecard are actually being monitored by the organization, as we understood
by reading those documents.
The connections among the company’s strategic objectives as they appear in the strategy map
(the strong suit of a 2nd-generation BSC) have been thoroughly discussed by our group and
justified through coherent explanations, therefore we believe that the company’s
performance could benefit from the application of our tool: by following the stream of cause-
and-effect relationships we identified, the achievement of Luxottica’s general strategy
becomes both more explicit and feasible.

21. 1. Arnaboldi, A. Azzone, G. and Giorgino, M. (2014) “Performance Measurement and Management for
Engineers” Elsevier.
2. Luxottica Annual Financial Report as of December 31, 2013
3. Luxottica Group conference call transcript event: 3Q 2014 results date: October 29, 2014
4. Luxottica Annual Review 2013
5. http://www.luxottica.com/en/company/investors (on December 31, 2013)
6. Eyewear Market (Spectacles, Contact Lenses, Plano Sunglasses) - Global Industry Analysis, Size, Share,
Growth and Forecast, 2012 – 2018, Transparency Market Research
7. Safilo Group S.p.A. Annual Financial Report 2013
8. Marcolin S.p.A. Annual Financial Report 2013
9. De Rigo S.p.A. Annual Financial Report 2013
10. Eric Coppola,“The Eyewear Market Luxottica’s Leadership, Strategy and Acquisitions” Dipartimento di
Economia e Finanza Cattedra Markets and Strategies