The Dominance of Conglomerates in the New Oligarchy of the Luxury Market
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Department of Business and Management Chair of Luxury Management Key players in luxury: The dominance of conglomerates in the new oligarchy of the luxury market Supervisor Co-Supervisor Prof. Alberto Festa Prof. Carlo Fei Candidate Raimondi Marcello 698421 Academic year 2018/2019 I Table of Contents Introduction ................................................................................................................... 1 CHAPTER 1: Luxury, an oligopolistic market ............................................................... 3 1.1: The concept of luxury ..................................................................................................... 3 1.2: The luxury market: Features and peculiarities .............................................................. 3 1.3: Luxury market analysis ................................................................................................ 11 1.4: What are luxury conglomerates? .................................................................................. 16 CHAPTER 2: Key players ............................................................................................. 20 2.1: Birth and development of the most important players ................................................. 20 2.1.1: LVMH .......................................................................................................................................... 21 2.1.2: Kering ........................................................................................................................................... 23 2.1.3: Richemont Group ......................................................................................................................... 25 2.1.4: Luxottica ....................................................................................................................................... 27 2.1.5: Estée Lauder ................................................................................................................................. 28 2.1.6: Swatch Group ............................................................................................................................... 30 2.2: Characteristics and business diversification of the main players ................................. 31 2.2.1: LVMH .......................................................................................................................................... 31 2.2.2: Kering ............................................................................................................................................ 32 2.2.3: Richemont Group ......................................................................................................................... 34 2.2.4: Luxottica ....................................................................................................................................... 36 2.2.5: Estée Lauder ................................................................................................................................. 36 2.2.6: Swatch Group ............................................................................................................................... 37 2.3: Business model of the main groups and impact on brands ........................................... 37 CHAPTER 3: A Common Growth Strategy: Mergers and Acquisitions ......................... 45 3.1: External growth strategy models .................................................................................. 45 3.2: Advantages and disadvantages of acquisitions and mergers for the acquiring companies ............................................................................................................................ 49 3.3: Reasons for the use of mergers and acquisitions in the luxury sector ........................... 50 3.4: Strategies of the dominant groups and the success of acquisitions ............................... 52 3.4.1: LVMH .......................................................................................................................................... 53 3.4.2: Kering ............................................................................................................................................ 60 3.4.3: Richemont .................................................................................................................................... 64 3.4.4: Luxottica (From 2018 EssilorLuxottica) ...................................................................................... 69 3.4.5: The Estée Lauder Group ............................................................................................................... 75 3.4.6: Swatch Group ............................................................................................................................... 77 Chapter 4: Emerging Players ........................................................................................ 79 4.1: The geography of luxury groups and the French domain ............................................. 79 4.2: Capri Holdings Limited ................................................................................................ 80 4.2.1: Group trademarks ......................................................................................................................... 80 4.2.2: Acquisitions .................................................................................................................................. 82 II 4.2.3: Business strategy .......................................................................................................................... 83 4.2.5: Results and growth ....................................................................................................................... 85 4.3: Mayhoola for Investments ............................................................................................ 86 4.3.1: Results and Growth ...................................................................................................................... 88 4.4: Tapestry Inc .................................................................................................................. 88 4.4.1 Results and growth ........................................................................................................................ 89 4.5 Other actors ................................................................................................................... 91 Chapter 5: Future prospects .......................................................................................... 94 5.1: Future prospects ........................................................................................................... 94 5.2: Greater prospects for diversification ............................................................................ 95 5.3: Luxury Groups and Technology: a possible choice? .................................................... 99 Conclusions ................................................................................................................ 105 Summary .................................................................................................................... 108 Bibliography ............................................................................................................... 123 Sitography .................................................................................................................. 130 III Introduction The luxury market has evolved radically throughout its history and has undergone many changes. In fact, it has always identified itself as a very special market because it is not linked to people's primary needs but to their emotions, their dreams, their desire for personal and social affirmation and the satisfaction of their highest needs. For this reason, it is a market that has often been subject to changes, even radical ones, from the point of view of strategies, organization and management, communication of brand values, relationship with customers as well as the simple change of products and services offered. The luxury market, however, has undergone a radical structural change, above all with the development and affirmation of the so-called conglomerates that have transformed it from a market made up of numerous family-run companies that, except in rare cases, were no larger than medium size, into a market increasingly oligopolistic in nature dominated by large multinationals called "luxury groups" that bring together under their own power dozens of different brands belonging to different sectors of the luxury world. During the course of the last 10 years, these large companies have each taken more and more power in different ways, becoming bigger and bigger and representing the most important players in the luxury world. All the most important players, however, share the same basic strategy: to pursue external growth strategies through continuous acquisitions, expanding and, at the same time, diversifying and ensuring a continuous increase in the value of the brands owned. The aim of this work is to analyze the importance and key role that these groups have played in the development, evolution and growth of the luxury market with the aim of demonstrating how this structure has been ideal both for the stability and growth of the controlled brands and for the development of the entire market. The development and strategies of the main dominant and most promising emerging groups will be analyzed, focusing on the growth strategies