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    Versace Gce Business Studies Advance

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    Emmanuel George
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    Versace Gce Business Studies Advance

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    284 views4 pages
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    284 views4 pages

    Versace Gce Business Studies Advance

    Uploaded by

    Emmanuel George
    If you like to get these documents by email Please contact me

    Copyright:

    Attribution Non-Commercial (BY-NC)
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    of 4

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    Paper Reference(s)

    6121/01
    Advance Information
    Edexcel GCE
    Business Studies (8076/9076)
    Advanced Subsidiary
    Advance Notice of Case Study for
    Unit 1: Business Structures,
    Objectives and External Influences
    January 2006
    This paper may be opened on
    Monday 21 November 2005

    Information for Candidates


    In preparing for the Case Study paper, candidates are advised to undertake general revision as well as
    detailed investigation of issues related to the Case Study.
    This Advance Notice should not be taken into the examination. The Case Study is reproduced in the
    examination paper.

    Printer’s Log. No.

    P23420A Turn over


    *P23420A*
    W850/S6121/57570 5/4/5/2/1/

    This publication may be reproduced only in accordance with Edexcel Limited copyright policy. ©2005 Edexcel Limited.
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    CONTEXT

    Versace Group Aims To Add Substance To Style in 2004

    Gianni Versace was born in Italy in 1946. In the early days, his mother supported the family with
    her small tailor-shop. There, Gianni learned everything about making clothes and soon he
    designed clothes himself, which were sold in his mother’s shop. In 1978, Gianni opened his first
    boutique in Milan, selling other labels to complement his own collections. With the growing
    popularity of the Gianni Versace style, his boutiques started to spread across the globe. 5

    The Versace fashion house was a family-run business, with Gianni Versace as director, owning a
    50 per cent share. His sister Donatella in the role of vice-president, with responsibility for
    distribution, owned a 20 per cent share and his brother Santo held the remaining 30 per cent.

    In 1985, The Versace Group added the Instante label to its fashion range. Instante is similar in
    style to the Versace couture range, but is targeted at a less affluent and younger market segment. 10

    The introduction of the Versus collection to the New York designer shows in 1995 marked the
    beginning of an expansion of the North American business for the Versace Group. This move was
    accompanied by the opening of various new stores and shop-in-shops in the United States of
    America. By 1994 the Versace Group had 40 of its own shops around the world, with an additional
    number of exclusive Versace outlets run by a Japanese partner. The Versace Group’s own shops 15
    achieved a multi-million dollar turnover in 1995, 53 per cent of which was achieved outside Italy.

    In 1997, Gianni Versace was shot dead in Florida. Gianni’s brother Santo was appointed the new
    Chief Executive Officer of the Versace Group. His sister Donatella became the new Head of
    Design. Donatella was already working in a creative position, designing for the Versus label.
    After Gianni’s death the Versace family was quoted as saying, “business will continue as 20
    planned”. However, although the Versace Group had been spending approximately 25 per cent of
    its annual turnover to promote its label since 1994, the growth in profits was slowing down. Santo
    Versace announced in 1997 that this promotion budget would be significantly reduced in order to
    cut costs.

    Plans for the Versace Group to float on the stock market were interrupted by Gianni’s death. The 25
    company intended to go public in mid-1998. Gianni Versace had started to reconstruct the
    company’s organisation shortly before his death and had planned to offer up to 30 per cent of the
    shares in the company on the stock exchange. Despite his death, the management still held on to
    these plans. At the age of 11 years Donatella’s daughter Allegra inherited Gianni’s shareholding,
    with Donatella in effect controlling the majority of the company until Allegra became 18 years 30
    old in 2004.

    In 2002, the Versace Group was still very much a family business. It started talks with potential
    investors but when they were not willing to pay the price for the shares that the Versace Group
    was asking, negotiations were halted. The failure to find a partner or to raise capital on the stock
    market made the Versace Group more vulnerable to economic changes. In 2003 sales dropped by 35
    17.5 per cent.

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    Following the spring/summer Milan Fashion Show in 2004, the Versace Group announced its long
    awaited restructuring strategy. The plan aimed to improve the financial position through vigorous
    cost cutting in order to pave the way for future outside investment into the company. The first
    round of cost cutting began in the United States of America through reorganisation of the retail 40
    network, expansion of the franchising agreements, more efficient production and a widening of
    the product range. A decision the Versace Group faced was whether to retain ownership of all its
    stores or to franchise those in smaller cities. Evidence suggested that directly-owned stores were
    highly profitable during times of economic growth but were expensive to run in downturns
    because of the elevated costs. 45

    Management consultants believed that the Versace Group needed to become more efficient and
    create a more stable financial position. Once it achieved these objectives the company would find
    it easier to attract outside investment and create the cash flow needed to compete around the
    world.

    For the small family-run fashion houses who want to remain autonomous, generating enough 50
    earnings to keep their businesses competitive is the biggest challenge. Other Italian fashion
    houses, such as Gianfranco Ferrè, Fendi and shoe designer Sergio Rossi, have chosen to join
    larger groups rather than try to finance their businesses alone. Much of the profits growth of big
    groups, such as Gucci and the French LVMH (Louis Vuitton Moet Hennesy), had been achieved
    in this way. Newly acquired brands are restructured before being heavily promoted through the 55
    group’s extensive global network. The designer retains a certain amount of creative independence
    in exchange for financial security.

    Adapted from the following sources:

    ‘Versace aims to add substance to style before luring investors’,


    The Business, 28/29 September 2003

    ‘A niece little earner’, Sunday Times, 6 June 2004

    www.unibw-muenchen.de/campus/WOW/v1041/hyper/versace.html

    END

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