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Research on Luxottica Group in China

  • Introduction of Luxottica Group

Luxottica Group was founded in 1961, its commercial network covers more than 130 countries with approximately 7,100 optical and sun retail stores, and it directly controls 38 optical markets of importance throughout the whole world. It has more than 6,700 retail locations (currently, 270 in China), 36 brand series including its 12 house brands and 24 licensed brands. Luxottica’s two main product offerings are sunglasses and prescription frames. The company operates in two sectors: manufacturing & wholesale distribution, and retail distribution. With net sales reaching Euro 6.2 billion in 2011, over 65,000 employees (more than 6,000 in China) and a strong global presence, Luxottica is a leader in the design, manufacture, distribution and sales of premium, luxury and sports eyewear.

  • Luxottica’s Organizational Culture and Environment

Luxottica’s core values are Entrepreneurial, Imaginative, Passionate, Simple & Fast. Luxottica builds its cultures around meaningful purpose, under the value  of ”Entrepreneurial”, every employee has a strong sense of purpose, this culture has contributed to the efficient and productive Luxottica. “Imaginative” to some extent has led to its innovation in marketing, in the market, in design and in technologies.

In addition, Luxottica has matched facilities of life and entertainment: library, stadium, infirmary, workers’ quarters, ktv, cafes etc. China is the largest consumer market of glasses, and Chinese people’s spending capacity continues to increase in these years, but the lack of independent brands and the high-end products makes Luxottica enjoy great advantages in China.

  • Luxottica’s Strategic Management in China

l  Merging and Acquiring other important glasses company of China.

In July 2005, Luxottica Group has acquired all the shares of Beijing XueLiang Optical Co, Ltd. with 210 million Yuan, possessing 75 glasses chain under its banner. In October of the same year, it has acquired all the shares of Guangzhou MingLang Optical Company with 290 million Yuan, obtaining 133 glasses chain. In June 2006, with 140 million Yuan, Luxottica has finished again the acquisition of 28 upscale glasses chain of Shanghai Modern Optical Company. And then all these glasses chain have been changed to the brand LensCrafters. Continuous acquisitions of the Luxottica Group has made itself become China’s major high-end glasses operator. A retail network throughout Beijing, Shanghai, Guangzhou- three high-end glasses markets and the most important luxury market in Asia – Hong Kong market has been formed initially. Luxottica Group’s position in China’s glasses industry market has been fully consolidated.

l  Luxottica’s Vertical Integration on Design, Production, Distribution and Retail in China.

Luxottica has two factories of design and production and the second largest distribution network in China. This integration, firstly has contributed the growth of speed on the Chinese market; secondly, it has increased the flexibility of Luxottica; and thirdly it enables the company to search the opportunities to make up for the missing links in the entire value chain.

l  Luxottica’s concentration strategy in China.

Besides the strategy of M&A, in China, Luxottica endeavors in the primary line of business, conducts vigorous propaganda to the original brands, makes efforts to strengthen the brands in China, pays more attention to the pre-sales and after-sales service.

l  Luxottica takes in consideration the requests of Chinese consumers, introduces some best practices in China from other markets, creating brands of glasses with Chinese characteristics.

The successful promotion of LensCrafters in China owes to the following three points:

Production strategy—introduces high-quality products in China, develops customers awareness and conducts the customers to buy the glasses.

Service strategy—through the training for the workers,  raises the quality of service and enhance the level of eye care.

Convenience strategy—not only the layout of the store is convenient, but also the service, until the products are submitted to the hands of customers.

  • Motivation measures of Luxottica Group in China

Competitive salary and performance bonus. Free accommodation for employees, food subsidies. Holds birthday parties, welcome parties, garden parties and all kinds of sport competitions etc. Focuses on the individual development, provides training opportunities to Italy and United States, recognizes the worth and value of employees. Offers opportunities of promotion and salary twice a year for each employee.

  • SWOT analysis of Luxottica Group in China

Internal analysis– Strength

1.Vertical integration of design, production and distribution.

2.Its strong portfolio of brands.

3.Its distribution network that covers all the world.

4.Its high-quality products in continued improvement.

5.Pays much attention to the pre-sales and after-sales service.

6.Innovation of the products according to different traditions and interest of the customers.

Internal analysis Weakness

1.Its price is higher than some Chinese brands.

2.Its logistics information system is not perfect, lacking a unified method to calculate the logistics cost.

3.Glasses product update faster, need unique technology, so there exists a strong dependence on the technical and financial.

External analysisi Opportunity

1.The support of local government and the related departments.

2. The large market of China and the level of consumption in continued increase.

3.The globalization of economics which contributes to the accumulation of capital, skilled personnel, technologies and materials.

4.The lack of independent  brands and high-end glasses product in China.

5.The lower cost of labor, material and industry processing in China.

External analysisThreat

1.The competition of other famous glasses company.

2.With the development of Chinese economy and technology, China is trying to develop its own glasses brand.

All in all, Luxottica should take the following measure to have a considerable and healthy development in the Chinese market.

1.Making full use of and strengthen its own advantages,

2.Developing and utilizing advanced technologies to reduce costs in order to obtain a more competitive price,

3.Improving logistics information system,

4.Expanding the sources of funding

5.innovating to make up for the inadequacies and to meet the challenges.