Salvatore Ferragamo Case:
Project description:
Read the Salvatore Ferragamo Case:
1) Identify key issues that will impact the business (Marketing, Research and Development, etc)
2) Analyze the business issues and suggest 4 recommended solutions based upon understanding of the business, next phase issues and the potential impacts of any on the family.
The 4 Alternatives:
1) Do Nothing
2) Fix the Issue
3) Best Practices
4) Reinvention
Explain and give details on each alternatives
*Note that your responses to this case should address the following issues from a SYSTEMS perspective:
-What is the key challenge facing the business and the firm management in this case?
-What strengths and weaknesses does the business possess?
-What are the strengths and weaknesses of the firm’s management?
-What opportunities and threats does the business in this case face?
-What opportunities and threats does the firm’s management in this case face?
Salvatore Ferragamo, SpA:
Wanda Ferragamo looked around the room. A lively discussion was taking place among the members of Ferragamo’s board of directors, composed mainly of her six children, a son-in-law, and Wanda herself. All had been active in helping her, as president, build on the legacy of her husband, Salvatore. Since his death in 1960, Wanda had expanded the company from a small base to a significant international presence, that in 1990 included luxury shoes, clothing, and accessories for women and men.
Earlier that morning, while walking down the streets of Florence on her way to the meeting, Wanda had noticed many of her competitors’ shops. Their offerings were more varied and modern, designed to appeal to a younger, more fashion-driven market; their product lines had expanded to include watches, perfumes, and a variety of sportswear. These competitors were, she knew, opening new stores throughout the world. Yet, Wanda felt that with rapid expansion many had reduced the quality of both their designs and their workmanship.
Wanda was dedicated to maintaining Salvatore’s life-long commitment to quality, value, and fairness with employees, Suppliers, and customers. But now, in late 1990, the board had gathered to hear a presentation from Geraldo Mazzalovo, an halo-French MBA from Columbia University who had recently been brought into the company by her son Ferruccio, Ferragamo’s chief administrative officer.
As a backdrop for Mazzalovo’s presentation, Wanda stressed that he had been asked-by Ferruccio and herself-to recommend the steps needed to double Ferragamo’s sales over the next five years (from $200 million to roughly $400 million). “The market is growing and changing,” she said, “we must grow with it. I’m convinced this kind of growth is possible, but Mr. Mazzalovo is here to tell us what changes he thinks we need to make in order to reach such an ambitious growth target.”
Despite her 68 years, Wanda believed she could still make major contributions to the business; she had no desire to retire. Change itself was not frightening, and she wanted to continue pursuing her husband’s dream of a House of Ferragamo. At the same time, she did not want to erode the family spirit that had been so important in her company’s success thus far.
WM: This case was prepared by Research Associate Johanna M. Hurstak and Jennifer Raiser MBA ’90 under the supervision of Professor Andra]! Pearson as the basis for class discussion rather than to illustrate either effective or inefl’ective handling of an administrative situation.
Copyright 0 1991 by the President and Fellows of Harvard College. To order copies, call (617) 495-6117 or write the Publishing Division, Harvard Business School, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means-electronic, mechanical, photocopying, recording, or otherwise-without the permission of Harvard Business School.
Salvatore Ferragamo, SpA, was a Florence-based maker of high-quality Italian clothing and leather goods, which began as the small, handmade shoe business of Salvatore Ferragamo (see Appendix A). Since his death thirty years earlier, Wanda, had presided over the company’s growth, managing the business with her six children. Unlike the Gucci or Benetton families, the Ferragamos placed a premium on consensus decision-making and had developed the company gradually in order to preserve product quality.
Salvatore’s distinctive italic signature adorned a complete line of luxury products, all manufactured in Italy according to strict specifications. The Ferragamo business grew steadily from $20 million to $200 million in 1990, with profits hovering around 5% of sales. (See Exhibit LA and LB for financial information and Exhibit 2 for Ferragamo’s sales and production by division for 1990.) Much of that growth was internally instigated rather than market-driven: a family member would recommend a new product line or a new store location and, upon agreement from the other Ferragamos, investment in the opportunity would follow. While the .{5 company continued to introduce new products, such as men’s ties in 1988, its major product lines had existed for 15 years. Women’s shoes continued to account for over half of the company’s business, although Ferragamo also sold a range of other items. (See Exhibits 3-A and 3-B for information on product volumes and trends.) Thirty-three Ferragamo boutiques sold the full product line throughout North America, Asia, and Europe, with dozens of other independent I retail outlets carrying selected merchandise in Ferragamo “corners.” if: The company was roughly divided into six organizational units, each run by one of the Ferragamo children. As president, Wanda was actively involved in both design and administration for the entire business. The three daughters managed design and merchandising for their respective product lines. Fiamma, the eldest, was in charge of women’s shoes and handbags; Giovanna, women’s ready-to-wear (RTW) clothing; Fulvia, the youngest, scarves and other accessories. The three brothers focused more on management and administration. Eldest son fif- Ferruccio, served as managing director and chief administrator of the company. Middle son Leonardo, was responsible for expanding the Ferragamo brand across Europe and Asia, while youngest son, Massimo, led the United States operations as general manager of the Moda Imports subsidiary.
Located some 300 kilometers from the Italian fashion capital of Milan, company j headquarters was the Florentine palazzo where Salvatore had set up his first assembly line. Elaborately frescoed rooms served as impressive product showrooms, with the company’s flagship boutique on the ground floor. Administrative offices and product inventory were based in Osmannoro, a suburb 30 kilometers from Florence. The company directly employed 457 people worldwide, and supported thousands more through controlled contract manufacturing. Ferragamo also retained showrooms and offices in Milan, New York, and Hong Kong, the New York and Hong Kong offices managed as distribution subsidiaries.