Assessment of Tod’s strategy
Tod’s management and, first of all, its forward-looking chairman and CEO Diego Della Valle have been able to build up a multi-brand luxury company which has rapidly grown up becoming in less than twenty years one of the major players within the global luxury-goods arena. Nevertheless, the bet underlying Tod’s success had been won even before the game had started. This paper will be an attempt to demonstrate in a rigorous way and through the utilisation of the frameworks introduced during the course that Tod’s’ growth and the establishment of its competitive advantage have relied, on one hand, on the superior understanding of the industry environment and its key success factors and, on the other hand, on a solid basis of resources and organisational capabilities. In this context, particular emphasis will be given to Tod’s geographical localisation, viewed as a critical source of competitive advantage. In the second part of the paper we will be trying to indicate the potential drivers to sustain Tod’s’ future growth and the potential risks intrinsic in the company’s current and future strategies. ………………………………………………………………………………………………………… Even though financial results for 2002 have shown a slowdown in Tod’s’ sales growth ratio, analysts still forecast an increase in profitability figures (ROE and ROCE) for 2003 and 2004. What are the sources of the firm’s superior financial performance in the last decade –which seems to have been only slightly touched by the deterioration in macroeconomic context following September 11? And can such a positive performance be sustained over the time? Referring to Grant’s analytical framework, Tod’s competitive advantage is founded on its capacity of exploiting the unique features of its resources and capabilities coherently with the key success factors characteristic of the luxurygoods industry. Lets consider in detail the group’s strategy. Since its foundation at the beginning of the Eighties Tod’s Group has constantly pursued a differentiation-based competitive advantage concerned with providing uniqueness to its customers: as emerges clearly from Della Valle’s words, in fact, differentiation can be clearly identified as a much more stable basis for establishing competitive advantage in an industry such as the luxury-footwear one, where customers are more sensitive to quality than to price and are even willing to pay a price premium for higher quality. The challenge facing Tod’s management was to find how to provide uniqueness and to generate a superior value for customers. As we will see, throughout an extensive and deep analysis of the demand for high-class shoes and of the competitive context – see TABLE 4 - Tod’s management has identified its client base in middle-aged, well-being, very refined and low-fashion oriented people coherently building its unique strategic positioning. Diego Della Valle’s initial great intuition was that elegance and comfort are not incompatible attributes. Since its introduction Tod’s brand focused on functionality as a crucial attribute for its products. The high degree of technical functionality is supported by great efforts towards continuous innovation as demonstrated by the numerous patents registered by the group since its birth (more than 150). Moreover, while the main actors competing in the luxury-shoes arena adopted either a classic \ traditional or a fashionoriented concept, Tod’s Group chose for its three brands a unique positioning through a “contemporary-luxury concept”: an harmonic and equilibrated synthesis between the exclusivity of classic luxury goods and the functionality requirements of contemporary life-style. It has also to be underlined – as pointed out by analysts – that the choice of a classic, low-fashion and functionality-oriented concept, exposing the firm to a lower cyclical risk than other competitors, has proved to be winning in the current weak macroeconomic context. Besides, Tod’s’...
Please join StudyMode to read the full document