Luxottica: How vertical integration has made it the world leader in eyewear
Luxottica with revenues of €8.8 billion clearly emerged as the market leader in Televisory’s previous blog on the eyewear industry. In addition, the blog emphasised on the operational and financial position of the selected key players.
In this blog, Televisory analysed Luxottica’s vertically integrated business model, that enabled it to acquire more than 50% of the market share. The company not only designs and manufactures frames, but can bolster sales through its strong distribution channels. Luxottica owns 50 wholesale subsidiaries and 7,265 retail stores across the world. It has further improved its reach through the use of e-commerce lately. Source: Luxottica …show more content…
Moreover, producing for third parties allowed Luxottica to capitalise through economies of scale with a significant and advanced manufacturing capabilities. It could (was in a position to ) earn more revenue at lower costs by paying only a royalty fee. Luxottica did not restrict its vertical integration model to only Europe, it extended it to North America, Latin America and Asia Pacific. In fact, North America was its major revenue contributor (close to 40% in 2015). The table below summarises the key benefits of major acquisitions for …show more content…
For instance, if we observe the net income profile of Luxottica since 1990, it suffered its 1st major decline in 2003 due to the acquisition costs of €254 million associated with OPSM. In another instance, there was peak in its revenues in 2007-08 as financial results of Oakley, which had revenues of over €500 million was included in this fiscal year. However, the net income dropped due to costs associated with the merger (Oakley was acquired for €1.6 billion). It faced a dip in its revenues again in 2009 due to structural and economic reformations across the world. Apart from acquisition and integration costs, Luxottica is (was) exposed to currency translation risks (market risks) as it covers a large geography, its revenues are (were) susceptible to currency risk. The depreciation of the US dollar was a primary contributor for the fall in revenue in
Luxottica with revenues of €8.8 billion clearly emerged as the market leader in Televisory’s previous blog on the eyewear industry. In addition, the blog emphasised on the operational and financial position of the selected key players.
In this blog, Televisory analysed Luxottica’s vertically integrated business model, that enabled it to acquire more than 50% of the market share. The company not only designs and manufactures frames, but can bolster sales through its strong distribution channels. Luxottica owns 50 wholesale subsidiaries and 7,265 retail stores across the world. It has further improved its reach through the use of e-commerce lately. Source: Luxottica …show more content…
Moreover, producing for third parties allowed Luxottica to capitalise through economies of scale with a significant and advanced manufacturing capabilities. It could (was in a position to ) earn more revenue at lower costs by paying only a royalty fee. Luxottica did not restrict its vertical integration model to only Europe, it extended it to North America, Latin America and Asia Pacific. In fact, North America was its major revenue contributor (close to 40% in 2015). The table below summarises the key benefits of major acquisitions for …show more content…
For instance, if we observe the net income profile of Luxottica since 1990, it suffered its 1st major decline in 2003 due to the acquisition costs of €254 million associated with OPSM. In another instance, there was peak in its revenues in 2007-08 as financial results of Oakley, which had revenues of over €500 million was included in this fiscal year. However, the net income dropped due to costs associated with the merger (Oakley was acquired for €1.6 billion). It faced a dip in its revenues again in 2009 due to structural and economic reformations across the world. Apart from acquisition and integration costs, Luxottica is (was) exposed to currency translation risks (market risks) as it covers a large geography, its revenues are (were) susceptible to currency risk. The depreciation of the US dollar was a primary contributor for the fall in revenue in