Case Study: Armani, the Ultimate Fashion Brand

CASE STUDY: ARMANI THE ULTIMATE FASHION BAND

Timeline

Giorgio Armani, 74, is Chief Executive Officer of the Armani Group and sole shareholder of Giorgio Armani S.p.A. (Armani), one of the world's leading fashion and lifestyle design houses, with 5,000 direct employees, 13 factories, and a direct network of 500 exclusive retail stores in 46 countries worldwide. Under Mr. Armani's direction, Giorgio Armani S.p.A. is one of the few remaining independent, privately-owned companies in its sector, with a proven business strategy that has capitalised on the worldwide power and potential of the Armani brand name.

A child in Mussolini's Italy, Giorgio Armani grew up to be a fashion revolutionary. He liberated men and women from the straitjacket of traditional tailoring and introduced them to the pleasures of casual chic. Yet he is himself a perfectionist who wields complete control over what has become a worldwide brand.

Giorgio Armani S.p.A. was founded in Milan on July 24th, 1975 and later that year, the first Giorgio Armani Borgonuovo 21 ready-to-wear collection was presented. After a successful first year the Company began to broaden its portfolio of clients and expanded its European presence. 1978 marked an important turning point in the company's history when it established a licensing agreement with GFT (Gruppo Finanziario Tessile - Textile Finance Group). GFT was the world's largest manufacturer of designer clothing, competing at the highest end of the fashion business; its success is rooted in its history, cutting edge technologies, well-organised labour, GFT single-handedly revolutionized the way artistic clothing was conceived, manufactured, marketed, and distributed. Its heart was on the pulse of social trends and needs, keeping it way ahead of its competitors. This licensing agreement resulted in Giorgio Armani S.p.A. obtaining the opportunity to invest in a new headquarters that included showrooms and press offices.

In 1979 overseas expansion began by establishing the Giorgio Armani Corporation in the United States. By the end of the 70s Giorgio Armani S.p.A. had emerged as one of the leading international fashion houses. In the early 80s Giorgio Armani S.p.A. established an important licence agreement with L'Oreal (formerly H.Rubinstein) for fragrances and launched the Emporio Armani and Armani Jeans collections. The company also began to strengthen its commercial and marketing divisions, while building the values of its brands and the philosophy of management, which continue to be fundamental to the success of the business today.

In the second half of the 80s, Giorgio Armani S.p.A. continued its overseas expansion by opening Giorgio Armani Japan in 1987 through a joint venture with Japanese Itochu Corporation and the Seibu Department Store, followed by the signing of a licensing agreement for eyewear with Luxottica Group Spa in 1988.

As part of its strategy to maintain control over product quality and distribution, Giorgio Armani S.p.A. initiated a series of share investments, which today include Intai Spa (100%), Antinea Srl (100%) and the manufacturing company Simint Spa (100%), the complete acquisition of which was finalised in 2001.

In 1999, a new Accessories Division was created including a first e-commerce presence with www.armaniexchange.com in the United States.

In the five years from 1998 to 2003 the Armani Group spent of Euro 600 million of internally generated funds on strategically important activities, including the evolution of its manufacturing base, the expansion and renovation of its retail network, the diversification of its product lines and the enhancement of its headquarters facilities in Milan.

In 2000, Giorgio Armani's, 25th anniversary year, the company launched its global website. In 2001, continuing with the Group's strategy to take greater control over all aspects of its manufacturing, distribution and retail activities and to further focus on the 'Made in Italy' content of its brands, a joint venture company with Vestimenta SpA (manufacturers and distributors of Italian tailored men’s and women’s apparel and one of the Armani Group's licensees since 1979) was formed for the production and distribution of the men's and women's Giorgio Armani top line. In 2002, the Group's retail investment programme continued at a fast pace with 16 store renovations and 30 new store openings in strategically important cities worldwide, including the second Armani multi-brand store covering 3,000 square metres in Hong Kong, which also signalled the launch of a strategic retail expansion programme for China. On the manufacturing front, two important acquisitions were completed: Deanna S.p.A. for the production of high quality knitwear and Guardi, which controlled four specialist shoe makers, to support the further growth of the Group's shoe business. Product line expansion continued with the launch of Emporio Armani Jewellery; the expansion of the Armani Jeans line in Japan and the United States; and, the further growth of the Armani Casa brand around the world through the opening of seven new stand-alone stores in Milan, Istanbul, Zurich, Hong Kong, Moscow, Marbella and Riyadh. Safilo S.p.A is awarded with a new licence for the production and distribution of Giorgio Armani and Emporio Armani Eyewear

In 2002 Armani purchased IT based store systems for 28 of its US retail stores. These were used for store operations management, supporting critical store level activities including receiving, stock adjustments and transfers. The systems were deployed throughout the stores in a wireless environment, and deployed using handheld devices within the store.
"Providing our customers with high levels of service is very important," said Stephen Culver, Chief Information Officer with Giorgio Armani, US. “The system has provided Armani with a strong store operations solution that enables real-time information to flow between the store and headquarters. With this information, we have been able to reduce inventory, improve labor management, and most importantly, improve customer service”.

In 2005, Armani announced new important strategic initiatives underlining the company's continued approach to expansion: the launch of Armani Privé couture collection reflecting the increasing desire for customisation and personalisation at the top end of the market; and the exclusivity of Armani/Privé expanded its frontiers with the launch of Borgo 21 timepieces. A contractual agreement was signed between Giorgio Armani S.p.A. and EMAAR Hotels & Resorts LLC for the development of an exclusive collection of 'Armani Hotels and Resorts'. On the operational side –A|X Armani Exchange purchased a web-based Product Lifecycle Management and Production Tracking system, e-SPS, to streamline and integrate product development and global sourcing. This provided real-time visibility into merchandising, design and production activities from product concept to delivery, streamlining its entire supply-chain process.

In 2006, the Armani Group announces his support of the (Product) RED, the pioneering global business initiative launched by Bono and Bobby Shriver for The Global Fund in the fight against AIDS in Africa. In support of RED, Armani is designing an Emporio Armani (Product) RED capsule collection, including clothing, accessories, eyewear, watches, jewellery and fragrances.

The world's first Armani Residences opened in the Burj Dubai in 2007 and the first group of apartments sold out in a few hours., Armani's fourth concept store after Milan, Hong Kong and Munich, was opened in Tokyo's Armani/Ginza Tower; the store covers 6,000 square metres including the first Armani/Spa.

At the end of October 2008, the Armani Group announced its plans for a 'fast-track' expansion in the Duty Free and Travel Retail marketplace, declaring its future planned openings at London Heathrow airport, in Guam's prestigious redevelopment of the DFS Galleria and at Japan's Narita airport. Meanwhile, another agreement was also established between Giorgio Armani S.p.A and Como Holdings, Inc. to create a new joint venture company, called Presidio Holdings Ltd., for the management and expansion of the A/X Armani Exchange brand throughout the world. Finally, a global beauty website www.giorgioarmanibeauty.com was launched, demonstrating the company's commitment to embrace fashion and beauty within the online sphere.

During the same year, a strategic marketing agreement was signed between Giorgio Armani and Samsung to develop high-end electronic and consumer products, including the launch of a Giorgio Armani mobile phone, the Armani/Samsung Television and the Emporio Armani Samsung mobile, "Night Effect ".

The hotels opened in early 2010 and Armani remarked ‘“I’ve been working on this for five years. I’m finally going to see what I designed, and it’s a bit nerve-racking to think that what I liked five years ago might look old now. ”In ever-changing, constantly evolving Dubai, five years is a long time – some of Dubai’s most iconic buildings, such as the Burj Al Arab and Emirates Towers are only 10 years old.

Out of all these celebrity-endorsed projects, Giorgio Armani is probably the first to make it past the post. ‘As a man used to launching new fashion collections every season, he may indeed worry that his work now looks a little dated, but his neutral tones and simple minimalist style – alien to the region’s more, how to say it, “colourful” tastes – will offer a pleasant alternative to travellers’ (www.telegraph.co.uk April 2010)

From initial sales of $14,000 in its first year, 1975, the company grew to sales of $100m only a decade later. Today it has an annual turnover of close to $2bn.

Did he really want all this? He did not predict it, he says. "When we started it was just one line, men and women; it was slow, we had time. It was much less aggressive 20 years ago, more balanced." But the entire fashion business has changed. Fashion is no longer the exclusive resort of the rich and whereas once, aside from clothes, it extended only to ephemera - handbags, pens, anything with a relatively short life, it has grown to embrace every aspect of lifestyle. Everything is susceptible to fashion now.”

Awareness

Giorgio Armani was one of the first designers to exploit the marketing power of media stars. He began a long relationship with Hollywood when he designed Richard Gere's wardrobe for the 1980 film American Gigolo. A string of other movie credits would accumulate throughout the next two decades, including Batman (1989) and Pulp Fiction (Emporio Armani) and, appropriately, Ready to Wear (both 1994). Armani sponsored or provided wardrobes for the musical tours of several pop musicians, including Paul Simon, Billy Joel, David Bowie, and Eric Clapton.

Armani continues full advantage of the celebrity culture using Lady Gaga, Ronaldo and others to model his products as well as showing his collections on a variety of social media such as Facebook and Twitter Armani’s virtual store in Second Life has been open since 2007, “ Fashion designer Giorgio Armani has opened up shop in Second Life, with a store modeled on his flagship location in Milan, his company said on Wednesday. The silver-haired Armani will send his avatar to celebrate the opening of the virtual store, and he will be interviewed in the virtual world by fashion Web site Style.com’s fashion director Candy Pratts Price .....“Finally, I can really be in two places at once,” said the ever-busy designer said. Second Life residents will be able to buy virtual Armani items with Linden dollars or connect directly to his recently-launched online store for non-virtual vestments. (www.reuters.com)

Giorgio Armani Style and Life

Mr. Armani's philosophy of fashion and style, together with his entrepreneurial ability, has been central to the success of Giorgio Armani S.p.A. He oversees both the company's strategic direction and all aspects of design and creativity. After thirty years of running his own label, he now presides over a stable of collections, including his signature Giorgio Armani line, Giorgio Armani Privé, Armani Collezioni, Emporio Armani, AJ | Armani Jeans, A/X Armani Exchange, Armani Teen, Armani Junior, Armani Baby, and Armani Casa home interiors, offering a choice of lifestyles to the marketplace. Today, the company's product range includes women's and men's clothing, shoes and bags, watches, eyewear, jewellery, fragrances and cosmetics, and home furnishings.

People in the business are constantly predicting his demise, but it does not happen. He has the reputation of being something of a potentate. He is also said to be a hard taskmaster - someone who will not tolerate imperfections but is equally known to pay his staff extremely well. Like a lot of very successful people, he seems to combine the demagogic with the democratic - he has the common touch. A friend of his described him to me as "someone who is perfectly sure of who he is and what he does, and this certainty makes him completely free". Armani’s response was "that's not clever. You have to have doubts. I have collaborators I work with. I listen and then I decide. That's how it works."

Armani always travels with a large group. Everyone calls everyone by their first name except for Mr Armani, who is always referred to and addressed as Mr Armani. He does not speak English, he has always refused to learn although he is bilingual, in Italian and French

His style became a statement about personal elegance and, of course, he was lucky. The timing of the rising feminism of the 1970s helped. Clothes had traditionally been seen as a symbol of the oppression of women. His innovation was casual chic – it is often said he introduced gentleness to men, and strength to women. To which other designer would the new female executive, with her enhanced sense of her own seriousness, turn?

Giorgio is a shy person who does not enjoy the limelight, for example, ‘at a private lunch, full of wealthy young potential customers - exactly the clientele you would think he would want to woo - he retreated into a back room’. However before a fashion show he spends hours backstage orchestrating everything from the make-up to the lighting design – and goes round, with his nervous fastidiousness, reassuring the models, correcting their walk, touching them, patting their cheeks.

He has been pushed by the fashion conglomerates - in particular, he says, by Bernard Arnault, the chief executive of Louis Vuitton Moet Hennessy (LVMH) and Gucci. "The big internationals try to have everything. They buy everything. Before Mr Arnault it was quieter, certainly." But he likes the competition. "I have to be better than others. If people hear that my competitors are doing better they will be very disillusioned."

In 1999, under growing pressure, he completely restructured his management team, bringing in executives from other fashion houses – such as his commercial director, John Hooks. He has invested $700m in buying back factories from licensees in order to have total control over his own production. He may have missed some opportunities. "He probably should have gone into China sooner," Hooks says (although Armani was one of the first to have a presence there). "But he has not made many mistakes. He is a very good entrepreneur. He takes risks." But he has never changed his ethic. Armani is quoted as stating "I have never compromised. I learned to get where I am by work, I learned slowly. I was not certain of succeeding."

There is the issue of succession. Who will take over when Armani retires? To be a fashion designer at 85, he has said, would be absurd. "I say no to many propositions. Things that would have been convenient for me in one sense. I could have had a lot of money." But so far he has not wanted to relinquish control. "I have always wanted to be free. For it to be me who decides. Mine is the last generation who will keep this spirit. I know this. The conglomerates have much more importance now. It has nothing to do with the person. We speak of Dior but Dior lives no longer. Chanel still exists thanks to Mr Lagerfeld. I hope Armani can exist without me."

Armani is a rarity from a financial perspective too. Giorgio Armani has been the only shareholder of the company from its inception has not taken any bank loans... It has been one of those rare companies which has managed to have very healthy operating profits and ploughed back almost 700 million Euros into the business since 1999. Having this financial independence has helped Armani immensely as the company tested newer territories. With no pressures from shareholders and without having to bother about meeting quarterly targets, Armani has been able to operate quite successfully. Having this kind of financial independence to operate in has been one of the key success factors for Armani.

Armani, with its presence in diverse markets, a very wide brand portfolio, and interacting with diverse set of customers, faces a huge challenge of building a relevant and resonant personality; sustaining consistent brand personality. With the ever growing competition in the fashion industry and ever growing brand portfolio, building and nurturing this personality will prove to be a very big challenge for Giorgio Armani in the future.

Recognition

During his career Mr. Armani has received many local and international awards. These include the Commendatore dell'Ordine al Merito della Repubblica, and Grand'Ufficiale dell'Ordine al Merito della Repubblica (Italy's highest government awards), and the Award for Best International Designer, Lifetime Achievement Award for men's wear and for art and fashion from the Council of Fashion Designers of America. He has, in addition, been recognised with an Honorary Doctorate from London's Royal College of Art, and has an Honorary Degree from Milan's Accademia di Brera. In 2006 he was awarded an Honorary Degree from London's Central Saint Martin’s College of Art and Design, and in 2007 he received an Honorary Degree in Industrial Design from the Politecnico University of Milan.

Mr. Armani has served as Goodwill Ambassador for the United Nations High Commission for Refugees. In 2003 he was honoured with the inaugural Rodeo Drive "Walk of Style" Award for his pioneering role in bringing the worlds of fashion and cinema together. In 2006, Giorgio Armani was honoured with other important awards: from the Dino Ferrari award for being the most renowned fashion designer in the world, to the Elle Award given to Mr. Armani in Valencia, and the "Leonardo Award" presented to Mr Armani by the Italian Presidente della Repubblica, Giorgio Napolitano, in recognition of his status as a major representative of "Italian Quality" worldwide. In 2008, in Paris, the President of the French Republic, Nicholas Sarkozy, conferred the order of the Légion d'Honneur on the designer.

In 2000, New York's Solomon R. Guggenheim Museum celebrated the social and cultural influence of Mr. Armani's career, placing special emphasis on his pioneering design work for the cinema, by staging an exhibition that has since been seen at some of the world's most prestigious museums, including the Guggenheim Bilbao, London's Royal Academy of Arts, Berlin's Neue Nationalgalerie, Rome's Terme di Diocleziano, Tokyo's Mori Arts Museum and Shanghai's Shanghai Art Museum. On February 20th, 2007, the exhibition reached its eighth venue at the Triennale di Milano in an expanded and enriched version with a striking new display over two floors.

He is proud of his clients' devotion. "I have never had anything to do with the kind of fashion that is influenced by the press or identified with the spirit of the season. My clients come for me, they come back each season for my spirit. That's the reality." And so far the market trend appears to be proving him right. Because as consumerism grows, so does the power of the consumer. Every purchase involves a subjective choice, and people have continued to choose Armani

The Italian Fashion Industry

The Italian fashion industry is one of the largest in the world, with revenues of 48 billion euro, 70.000 companies and 700.000 people employed, makes Italy the most active in the world, in terms of

quantity, second only to China, and holds leadership in the prêt-à-porter, even though Italy is not favoured by significant resources of raw materials or the cost of labour force.

50 years ago, Italy had virtually no fashion industry; no Italian designer enjoyed an international reputation. The country’s weathly commissioned their exclusive hand-made clothes from tiny specialist tailors in Rome, but most Italians found their dressmaking requirements met by small, local, businesses. Gentlemen ordered suits from traditional bespoke tailors, while their wives and daughters patronised whichever local dressmaker exhibited the greatest skill in replicating the latest fashions from Paris. Italian women with less income had to search the markets for fabric and sew their own clothes at home.

The war years changed everything and provided opportunities. There were three significant developments at this time. After the second world war, an investment plan, the Marshall Plan, was implemented to rebuild Europe and to create a stronger economic foundation, new factories were built in Italy which employed skilled craftspeople who came from the small hill towns of the north and the vanishing villages of the south and who needed to find work.. The combination of the very latest machinery with an exceptionally skilled workforce created an unparalleled garment manufacturing capability.

The designers no longer followed the French lead by copying their style but created a fashion identity that seemed distinctively Italian. This benefited greatly from the huge trend to acquire everything Italian, from espresso coffee to leather-goods, which was particularly noticeable in America throughout the post-war years. Unlike the French sophistication, the Italian clothes emphasised wearable elegance which was particularly appreciated by the Americans. Actresses such as Audrey Hepburn favoured the glamorous evening dresses and the stylish but simple daywear

At the same time the emerging Italian fashion industry quickly developed an natural marketing flair together with something what would currently be called brand focus. Talented new designers certainly showed impressive commercial expertise in addressing an important emerging fashion consumer who was, as yet, poorly served by more established fashion centres: the post-war working woman.

They also developed an unrivalled ability to produce high quality apparel in luxurious fabrics and Italy is the which British, French and American designers all entrust the production to of their garments even though nowadays there are very much cheaper labour markets.

700.000 Italian professionals represent the basic pieces for a process which still needs quality, specialisation and ability to deliver.

Italians have a reputation for many other fashion items, one of these is leather goods including shoes.

‘A recent study by the Italian bank Banca Nazionale di Lavoro (BNL) said that the Italian shoe industry, which is worth 100 trillion lire ($44 billion), is the largest in the world and accounts for 14.5 percent of footwear production globally’

Despite the number of large global companies that that can produce shoes cheaply, the Italian companies are surviving even after a decline in the 1990s; for three years, production fell significantly, dropping by more than 10 percent in 1999. Since 2001 the country's footwear industry has been on a rebound.

The downturn, however, caused some smaller businesses to close while others were forced to join bigger groups to survive. However it also stimulated the Italian industry to reflect on how new technology and design techniques could improve their business performance.

"A significant part of the recovery in the Italian industry can be seen in the move to increase the quality of the shoes. The companies reacted to the downturn by investing in research and design so that innovation in models and colors was a feature of last year's production," said Pulisia Di Falco, one of the two authors of the BNL study.

Italian shoemakers believe that the Italian artisanal approach can be adapted to more modern production techniques without losing any of its tradition or style. (adapted from www.nytimes.com)

Other sources used include:

www.armani.com,

www.facebook.com,

www.secondlife.com

www.wayitalia.net

www.italianweb.org

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