Building and sustaining hidden monopoly through organizational design: Luxottica Oakley Merger,a case study

R I S E A N D F A L L

A AY U S H I G U P TA K R I T I D O N E R I A N E H A S I N G H

R E H A N AT I Q U L L A S U P R E E T AG RAWA L

Evolution of Oakley

1975

1984

1986

1995

1998

2001

2007

Handgrips Sunglasses Tour de France

Enlisted asPublic

company

Athletic Shoe Retail stores Merger

Oakley’s Strategy

Niche market

Quality products

PatentsSelective distributi

on

Endorsements

320 patents 249 trademarks

Andre AgassiMichael JordanGreg Le Mond

Fox RacingOliver PeoplesPaul Smith Spectacles

O –frameFrogskinPRIZM

Chairman,

President

CEO

SVP, Mfg. & Sourcin

g

VP, Finance

VP, US Sales

VP, International

SalesVP, R&D Senior

Advisor

Oakley’s Structure

James Jannard

$4.1 billion net worth

#142 on Forbes 400

Aggressive, headstrong, “mad scientist”

September, 1997

• Link Newcomb

April, 1999

• William D. Schmidt

October, 1999 • Jim Jannard

September. 2005

• Scott Olivet

August, 2009

• Colin Baden

Changes in Strategy

LUXOTTICA

Product and operations

CEO

CIPOFoothill ranch

R&D, Manufacturing

VP, R&DSVP,

Manufacturing

Marketing CEO

Marketing,Milan

Retail,Ohio

Oakley’s “O”

stores 

Wholesale,

New York

Oakley under Luxottica

Luxottica is a global leader in the design, manufacture and distribution of fashion,

luxury and sports eyewear with high technical and stylistic quality.

1961 - Agordo, ItalyLeonardo del Vecchio

150 countries

7,400 stores79,000 employees

€8.837 billion (2015)

€1.861 billion (2015)

THE ILLUSION OF CHOICE

Leonardo del VecchioUS$17.3 billion

Source: http://www.forbes.com/global/2002/0204/028.html

Product Development• 2000 designs each year

Manufacturing• Italy, China, India, Brazil

Logistics• 18 DCs worldwide

Distribution• 6,589 stores

Customer

Vertically

Integrated

BusinessModel

2003Versace

OPSM Australia

Prada

2005DKNY

Xueliang Optical

Burberry

Ming Long Optical

D&G

2006Polo Ralph

LaurenShopper’s

OpticalModern Sight

Optics

D.O.C. Optics

Tiffany

2007Oakley

2008Stella

McCartneyDiethelm Keller

Ltd.Sunglass Hut launched in

India

2009Tory Burch

Multiopticas Internacional

Myer

Meera Enterprises

Macy’s

2010Essilor

Coach

2011Grupo Tecnol

2012Grupo Tecnol

Sun Planet stores

Alain Mikli

2013 2014Glasses.com

Google

Michael Kors

2015Miu Miu

Licenses, Mergers and Acquisitions

Source: Financial reports, ‘03 to ‘15

Country Manager

Sales Head

Channels of Trade

Marketing Head

Brands

FinanceHR Legal Logistics Production

Luxottica in India

THE MERGER

Price Cut

• 10 agreed

Oakley

• 25% sales

Cut by 2/3

• Goodbye

2001

25 % MARKET SHARE

EBITDA- Oakley

2000 2001 2002 2003 2004 2005 20060

20

40

60

80

100

120

140

TOTAL REVENUE

2000 2001 2002 2003 2004 2005 20060

100200300400500600700800

Source: http://www.luxottica.com/en/information-related-departure-adil-mehboob-khan

Source: https://www.ft.com/content/ee1cc24e-cf1e-11e5-92a1-c5e23ef99c77