Armani Group Economic Crisis (Essay Sample)

Armani Group Economic Crisis:
Name:
Institution:
Contents TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc388031923 \h 3Introduction PAGEREF _Toc388031924 \h 4Theories on luxury brand management PAGEREF _Toc388031925 \h 5Strengths of Armani’s business strategy PAGEREF _Toc388031926 \h 7Weakness of Giorgio Armani business strategy PAGEREF _Toc388031927 \h 8Recommendation for Armani group in managing and improving its brand PAGEREF _Toc388031928 \h 10Conclusion PAGEREF _Toc388031929 \h 12References PAGEREF _Toc388031930 \h 13
Abstract
The essay is based on thorough research about the Giorgio Armani group that is a luxury company majorly venturing in fashion design but also extended to other business territories. The research was done through research in books, academic articles and other literature on the internet and hardcopy. The methods used in the analysis of the company is comparison with other companies and through financial reports of the company posted on the internet and written in various articles, calculations of the financial reports were also done to come up with some of the sales and profits of the company.
Through the research, many findings about the company were discussed about the company’s business strategies, its operating techniques communication structure, and the its future business plans and branding plans that have made the company thrive in the fashion industry.
Introduction
Armani is a luxury company that was founded in 1975 by Giorgio Amani, one of the most influential fashion designer and entrepreneur (Scholz, L. (2014). It is based in Milan, Italy. In most cases large firms like this are owned by a group of people, friends or maybe family and relatives, but surprisingly, Armani owns 100 percent of the Giorgio Armani SpA. The firm engages in design, manufacture, and retail of fashion and lifestyle products at international levels. It deals with apparel accessories, jewelry, interiors, fragrances and cosmetics. The brand markets its products under many sub-labels, including Armani Collezioni, Giorgio Arman, AJ (Armani Jean), Empirio Armani and Armani Exchange. It operates various boutiques and stores. The company also operates a hotel in the Gulf emirate of Dubai. It has approximately 4,200 employees.
The Armani group uses various business strategies to gain its profits, some of which are normally used by most companies and some of which are majorly done by the company alone. Under a sole proprietor, the company has extended its business worldwide over the years with several sub-brand names under it to increase its profits and reach a large target group. The signature Giorgio Armani line is the main collection of apparel with brand names like Oscar gowns and Armani suits, it targets consumers between the age group of 35-50 years. (Chevalier, & Gutsatz, (2012). Emporio Armani, another signature that targets young professional segment in the age bracket of 25-35 year old. Armani Jeans is the lowest range apparel that caters for young adults between 18 to 30 years old. Gearing its strong equity in the apparel market, Armani has venture into other complementary products like jewelry, cosmetics and eyewear. Today Giorgio Armani has a retail network of 60 Giorgio Armani boutiques, 11 Collezioni, 122 Emporio Armani 94 Armani Exchange, 1 Giorgio Armani Accessori and 6 Armani casa spread over 37 different countries in the world. One of the strategies that has kept the company sucked and keep going is that it deals with all apparel accessories catering for all people-men, children and women. Besides that the company has venture in many business activities outside fashion, including furniture and having large hotels in many countries including Dubai and Italy.
The business strategy used by the group has really made it thrive in the business sector without shaking but progressive growth since its formation. . In 2008, the company had a 2.3 percent rise in its previous year sales The company had $800 million in cash in the year 2010, more than $8 billion worth of its products was sold all over the world in the same year. In the past 5 years, the company has made an investment of 653 million Euros which was entirely funded by internal company reserves, providing that in the year 2012, it invested 158 million Euros (an increase of over 80% over the previous year), the company maintained the solid cash of approximately 565 million euros that allowed it to independently fund its strong annual progress. In 2012, net profits for Giorgio Armani were at 194.2 million Euros (+7.9%) and the gross operating profit totaled 416.4 million euros(+19%), while dividends reached 80milion euros compared to 70 million in 2011, according to the Italian press.
Theories on luxury brand management
According to Domenico De Sole; "You can have the best strategy in the world, but the difference between the excellent and the incompetent is execution: execution, execution, execution" there are at least five key success factors that relate to implementation of strategy in luxury companies.
1 Being consistent in the brand appearance and strategy
2 Investing in retail and balancing supply networks
3 Being innovative and developing new products
4 Managing the gross margin
5 Investing in communication and media to develop brand awareness
One of the most remarkable insufficiencies in the international retail literature is lack of research into the specialized subject of fashion retail internationalization, all the same the agreement that fashion companies are dominant and successful international retailers. (Christopher, Anne, Doherty, & Stephen 2010). Given is dedicated demands and features, authors argue that conclusions derived from the general internationalization literature may be inapplicable to fashion retailing (Albrecht, Backhaus, Burzki & Woisetschlàger, 2013). Most important are the internal commercial characteristics of international fashion companies, the importance of brand presentation and product distinction ad variety of foreign market entry methods and control configurations. Describing the success of an international fashion design company is the ability of the owner to manage these factors, establishing effective associations within manufacturing, distribution and marketing systems to present an appealing and comprehensible brand image across geographically and in the diverse markets ( Fernie & Moore, 2009)Several authors have cited brand appeal as a significant determinant of international luxury company success (Albrecht, Backhaus, Burzki & Woisetschlàger, 2013) the argument is that the brand is the key point of distinguishing the firm from its opponent by producing a distinctive image, and satisfying the consumers’ purposeful and emotional values. Numerous case studies for instance, (Scholz, 2014) have placed the trademark as the vital to the company’s business structure. The brand generates appeal across many market section and product ranges. Martinez and de Chernatony (2004) suggest that companies trying to extend their brand into new products sectors and landscapes or unrelated markets must have a strong parent brand enjoying high consumer awareness, good extension suit and a positive consumer appearance.
Giorgio Armani’s company has adopted what may be described as a "countervailing manufacturing strategy" which has caused its great success in the fashion industry and other sectors that it has ventured into. From his perspective, their continued success is reliant on upon "an ongoing commitment to a scheme of vertical integration, whereby the Group increasingly takes direct control over all aspects of design, manufacturing, supply and retail.”(Giorgio Armani Group 2003).
Strengths of Armani’s business strategy
The Giorgio Armani Company has proven to have been one of the most successful companies in the fashion design industry. This is due to various reasons and stable business strategy taken by the company. For instance, the company’s exclusive and quality production in the fashion and clothing sector has earned it a good sum of earnings that have enabled it to venture into other business activities extended outside the fashion industry (Chevalier, & Gutsatz, (2012)... Their quality goes in hand with their pries which are quite high and meant for people with good wealth, this has also enabled them to gain good earnings by targeting rich people. The investment in other sectors is quite a tricky thing to do in the business industry but Armani have proven to do it successfully without downfall.
The advertising strategy of the company also has proven to be another reason for its great success. Armani deeply concentrated on the advertising media for his brand promotion and for real it has been a real success for the company. He used well known superstars like David& Victoria Beckham and Tom Cruise to promote his brands. Armani also used sales strategies like offers the likes of buy 1 get 1 free technique, and buying goods exceeding a certain amount you can meet your favorite celebrities or free tours to certain places which enticed more clients. Armani also promotes his products online and one could buy products through the internet (Chevalier, & Gutsatz, (2012).
Another strength in his business strategy was that he earned public attention through the public relations that he was involving himself in dressing the prominent football teams like England football teams, for instance he did two separate outfits foe the whole squad of the team which could cost 3500 for each player but he offered to do it free for the squad of 26 people and this got him good publicity. The new development into furniture and baked goods as well as florists, even hotels can be a source of durability for the corporation by allowing...