LensCrafters 2011 Annual Report Download - page 20

18 ANNUAL REVIEW 2011
One of the competitive advantages underpinning the Group’s past and future successes is
the vertically integrated structure that Luxottica has built over the decades.
The Group’s present structure, covering the entire chain of value, is the result of a far-sight-
ed choice made by the Company’s founder and current Chairman, Leonardo Del Vecchio,
who understood the potential of the “vertical” strategy ever since deciding to make entire
frames rather than just components. Vertical integration of manufacturing was gradually
accompanied by the expansion of distribution, first wholesale and, from 1995, retail and by
a key presence in the high value-added business of lens finishing.
In manufacturing, the Company has, over decades,
to attain a level of efficiency in line with the quality of products and services it offers.
Direct control of the entire production platform makes it possible to verify the quality of
the products and processes, introduce innovations, discover synergies and new operating
methods, and optimize time and costs.
Direct distribution enables Luxottica to stay in touch with end users and understand their
tastes and tendencies and is viewed as a strength by stylists and fashion houses who come
to Luxottica to produce their eyewear collections and access Luxottica’s global and wide-
spread distribution network.
DEVELOPMENT OF A VERTICALLY INTEGRATED BUSINESS MODEL
> INCORPORATION: the Company started out as a small workshop and operated until
the end of the 1960s as a contract producer of dyes, metal components and semi-finished
goods for the optical industry. It gradually widened the range of processes offered until it
had an integrated manufacturing structure capable of producing a finished pair of glasses.
In 1971, Luxottica’s first collection of prescription eyewear was presented at Milan’s MIDO
(an international optics trade fair), marking Luxottica’s definitive transition from contract
manufacturer to independent producer.
> EXPANSION IN WHOLESALE DISTRIBUTION: in the early 1970s, the Company sold its
frames exclusively through wholesalers. In 1974, after five years of sustained development
of its manufacturing capacity, it started to pursue a strategy of vertical integration, with the
goal of distributing frames directly to the market. The first step was the acquisition of Scar-
rone S.p.A., which marketed the Company’s products since 1971 and which brought with it
vital knowledge of the Italian market.
International expansion began in the 1980s with the acquisition of independent distribu-
tors, the opening of branches and the forming of joint-ventures in key international markets.
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