Luxottica Leonardo Del Vecchio, the 81 year old head of Luxottica, remembered the day when he heard the news about Bulgari having been bought. He had been shocked about what he had read about the company being bought by a French rival. Over the years, the luxury goods industry changed significantly and every company could be a target. At 81 – still at the helm of the company he founded and still not handing over to any of his children from various marriages - he knew that another French company is interested in an Italian company: his, Luxottica, a global player with sales of over €9bn and more than 79,000 employees. The French company in question, Essilor, is a lens producer. Luxottica was established three years after Leonardo Del Vecchio started to make tools for the production of eyewear in Milan in 1958. Nine years later, in 1967, the first Luxottica branded frames for glasses were produced. By 1971, they decided to stop contract manufacturing and focused on their own production and started vertical integration in this segment by buying up a distributor in 1974. In the 1980s, German sales subsidiaries were launched, followed by subsidiaries in the UK, France, Canada and the acquisition of a distributor in the US and the production of branded © Karin Sixl-Daniell 2017 1eyewear for high end brands through licensing agreements started with Armani. Other brands such as Chanel, Bulgari, Valentino, YvesSaintLaurent, Tiffany's, to name but a few, were added. In 1990, the company went public on the New York Stock Exchange, it is also listed on Milan's stock exchange. The company became a retail leader in the eyewear segment through acquisitions and also bought e.g. RayBan from Bausch&Lomb. After the acquisition of Sunglass Hut International, the company became the leading eyewear retailer in the world. The company also controls EyeMed Vision Care in the US. Over the past decades, the company had seen many other Italian high end manufacturers such as Bulgari and Fendi being sold to foreign houses. Luxury good producers in general such as LVMH (owning brands such as Louis Vuitton, Givenchy, Chaumet, TAG Heuer, Dom Perignon, Chateau d'Yquem, Moet&Chandon), Richemont (Cartier, IWC, Piaget, Jaeger LeCoultre, and Vacheron-Constantin among others) or Kering (formerly PPR, including Gucci, Yves Saint Laurent and others) felt the slowdown in the recent economic crisis. Del Vecchio wanted to ensure that his company is going the right way in the global market in the coming years and wondered what was lying ahead. After all, this was his family business, as he would still control more than two thirds of the shares through his foundation, Delfin. Given his © Karin Sixl-Daniell 2017 2personal past – he had spent his childhood in an orphanage – he wondered what would happen to his empire. He had removed the majority of the company's top management to ensure things are going his way. But he contemplated whether people would still be interested in buying high end eyewear in times of uncertainty, with so much perceived instability? With political uncertainty on the rise in many countries and the recent developments in the US, within the EU as well as the Brexit vote, he asked himself if, after the economic crisis at first, the political environment now would affect the business? Would people still want to buy such products? How would exchange rate issues as well as potential domestic economic issues in key markets affect the future of the company? Now that the decision for a merger of Luxottica with Essilor was made and became public in January 2017, he wondered if this was the right decision for the company. Pondering about the future of the company, he gazed out of the window. © Karin Sixl-Daniell 2017 3THE TASK Leonardo Del Vecchio has hired you as a consultant to help with setting out a strategic outline for Luxottica's global business in the current situation. He asked you to produce a report recommending how the company should go forward. Time is of the essence and he expects a well-structured report with recommendations within 24 hours as he has a press conference on Jan 30. GUIDE TO THE TASK You want to make sure that this report is of outstanding quality. Contemplating about the contents of the report, you start writing down the areas to be covered in the report and include, among others, the following areas: • Identify the latest developments in the eyewear industry. • Put them into context with the background of the company and its strengths and weaknesses. • Address any possible concerns about political stability in the countries the company and its main competitors currently operate and possible consequences for the company and its perspectives. • Identify possible partners for viable strategic alliances in various industry areas as well as geographical areas for the company and explain why you feel they would be suitable partners. © Karin Sixl-Daniell 2017 4IMPORTANT INFORMATION REGARDING THE PREPARATION OF YOUR WORK 1. In completing this task, be sure to also draw on the concepts you have learnt about during this module, making direct references to the subject materials. 2. Please note that you must upload a written response of 2000 words (+/- 10%, excluding references) within the 24 hours' timeframe. 3. Upload your work via Sakai in the assignments area. 4. Exam scripts submitted after the submission deadline will NOT be accepted. Students submitting after the deadline will be awarded a zero mark for the Final Exam. 5. Any sources need to be referenced. Students who fail to comply with this directive will not receive a passing grade. 6. This is a broad question that invites a variety of "equally correct" answers. 7. High marks will be awarded for good, critical analysis, rather than content cut and pasted from websites and other electronic sources. 8. The expectation is that you will not have the time to submit an answer of the quality of a term-time assignment. However, you should try, as much as possible, to submit an answer of similar quality. END OF PAPER © Karin Sixl-Daniell 2017 5