Professional Documents
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MARKENMANAGEMENT
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Resources
Manufacturing
Sourcing
Purchasing
Loan
conditions
Productive functions
Currency
hedging
Financing
Emplacements
Financial
synergies
Bargaining
Power
Legal
structures
Market Power
synergies
Wholesalers
Space Purchase
Lobbying
R&D
Retailing
Pooling of
resources
(Economies
of scope)
Logistics
Warehousing
Luxury expertise
After-Sales service
Support functions
(Central & Regional)
Management
of Talents
Legal (IP..)
Efficiency
synergies
(Hard
synergies)
Marketing
Media Buying
Luxury branding
Brand Tumover
Corporate
Capabilities
Corporate
effect
Human Resources
IT and ERP
Fashion magazines
Financial
Corporate
Assistance
Services
Real Estate
Tax
Insurance
Back office
Utilization of best
practices to improve
cost efficiency
Operational
synergies
Transfer of
know-how
Raw material
Technology, component or product
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Access to
scarce
resources
Organizational Design
Best Practice Sharing
Staffing of key people
Transfer of
know-how
Communication/Media
Corporate
initiatives
Brand Streching
International expansion
Corporate
synergies
Growth
synergies
(Soft
synergies)
Corporate
Control &
Planning
Corporate
development
Formulation of Strategy
Control of Performance
M&A
JV
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MARKENMANAGEMENT
the businesses and the horizontal relationships between the businesses (Knoll 2008).
Search for synergies is another goal of groups. Synergy means
that the combined return of two or more units together is greater
than the sum of the returns of each unit individually. Usually the
study of synergies has been limited to efficiency-focused synergies or hard synergies (economies of scope). Following Knoll, we
integrate it into a more global theoretical framework defining
operative synergies, market power synergies, financial synergies
and corporate management synergies, which are derived from
leveraging operative, market power, financial, and corporate
management resources, respectively, across the businesses (see
figure 1).
Leather
Goods
Timepieces
Jewelry
Fragrances Spirits
& Cosmetics
Overall
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MARKENMANAGEMENT
Financial Synergies
This point is often ignored yet matters substantially. Our study
shows that all luxury conglomerates have implemented a pooling
of financing resources. This means that the brands no longer have
to negotiate their credit lines on their own, but rather receive funds
according to a budget approved by both the brand and the corporate level. This gives the brand easier access to credit, which can be
very important considering that brands in ramp-up often find it
difficult to acquire the financial resources that they need to expand
and reach their very high break-even point. Moreover, brands in
conglomerates are granted much better conditions for loans, as the
parent often has a better risk profile, since it is more diversified and
larger. Finally, some conglomerates are cash rich and often only
need to use debt to raise their leverage and the return to their shareholders.
We also identified the possibility for brands in conglomerates to
protect themselves from currency fluctuations by pooling currency
hedging at the corporate level. Doing so allows the brands to fully
concentrate on their operational management and remain confident that their performance will not be greatly endangered by currency fluctuations.
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Foto: Nikada/istock.com
Regarding the governance debate between autonomy and centralization, we believe that with respect to the identity, culture and
strategy of each brand, an organization by business branches can
provide a powerful infrastructure and deliver shared resources to
the brands of the division, especially the weakest or smallest. Each
entity (also called Maison) acts as a virtual company with its own
CEO and its own head creative designer, both having a real brand
custodianship. The difficulty comes in finding the right balance
between the search for synergies and the autonomy of the brands.
We would like to warn corporate managers that cross-business synergies should be implemented carefully and that the more synergies the better is a very dangerous point of view. Luxury brands
symbolic capital is fragile. It is essential for them to maintain their
roots and their freedom within a framework.
If too many synergies are realized, brands tend to underperform,
as sharing resources can reduce their sense of accountability. However, entrusting full profit and loss responsibility to brands driven
by corporate objectives jeopardizes coordination and collaboration
mechanisms.
Finally, we would like to draw corporate managers attention to
human capital and knowledge management (including the sharing of best practices), two undisputable strengths that groups
should cultivate so as to outperform their peers on a long-term
basis.
Galbraith, R. (2001): Multibrands: A Lucrative Strategy for the Luxury Italian Fashion, http://www.nytimes.com/2001/03/02/news/02iht-rbrand.t.
html?pagewanted=all (Accessed: 27.10.2011).
Goold, M./Campbell, A./Alexander, M. (1994): The New Strategic Brand Management, New York.
Kapferer, J.-N. (2012): The New Strategic Brand Management, 5th edition, London.
Kapferer, J.-N./Bastien, V. (2009): The Luxury Strategy: Break the Rules of Marketing to Build Luxury Brands, London.
Knoll, S. (2008): Cross-Business Synergies: A Typology of Cross-business Synergies and a Midrange Theory of Continuous Growth Synergy Realization,
Wiesbaden.
Moore, C.M./Birtwistle, G. (2005): The Nature of Parenting Advantage in Luxury Fashion Retailing the Case of Gucci Group NV, in: International Journal of Retail and Distribution Management, 33, 4, pp. 256-270.
Rigby, D./DArpizio, C./Kamel, M.-A. (2006): How More Can Be Better, http://
www.ft.com/intl/cms/s/0/4f86d8ec-f42f-11da-9dab-0000779e2340.
html#axzz1c0U1IMgK (Accessed: 27.10.2011).
Rumelt, R. (1991): How Much Does Industry Matter?, in: Strategic Management Journal, 12, 3, pp. 167-185.
The Authors
Vincent Ijaouane
Investment Manager at Agora Fund LP in Geneva,
Switzerland
E-Mail: vincent.ijaouane@gmail.com
Brush,T./Bromiley, P./Hendrickx, M. (1999): The Relative Influence of Industry and Corporation on Business Segment Performance, in: Strategic Management Journal, 20, 6, pp. 519-548.
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