Giorgio Armani Case Study: Using the Business Model Portfolio to Dominate International Markets

Giorgio Armani Case Study: Using the Business Model Portfolio to Dominate International Markets

What makes Giorgio Armani stand out as a great business case study in the context of international expansion and growth is the brand’s ability to differentiate its marketing strategy based on the value that each individual collection is able to bring to market, and tailor a bespoke business model for each of the brand’s product lines. 

This has enabled the company to be much more efficient and costumer-centric in the development of its collections. 

In this post, we’re going to break down Giorgio Armani’s strategy using a little bit of marketing theory and see how this approach could also be applied to the growth of your fashion brand. 

Let’s get into it!

Identifying the Value Fashion Brands Bring to Market

The first thing we need to do in order to understand Giorgio Armani’s expansion strategy is to identify the unique value proposition the brand brings to the market. 

And here comes the first strategic decision.

Fashion brands know how a garment can mean different things to different people. In fashion marketing, we usually break down the value that products and services bring to market on the grounds of their ability to help customers overcome:

  • Functional needs. These needs are simply connected to the practical use customer make of our products and services. In the context of fashion, these products are usually mass-market products that are usually quite inexpensive and provide us with the most basic functional benefit of clothing, which is sheltering us from the weather and cold. As these needs are commodified, many brands try to increase their profit margins by providing something more enticing such as social benefits.
  • Social needs. In this context, fashion brands fulfill a very important role, as fashion products gain value in the customer’s eyes. Customers often – if not always – use fashion products as social currency, usually for one of two reasons. To either fit in, or show belonging to a particular group, or to stand out or make ourselves get noticed. Social needs are associated with middle-tier brands such as bridge brands, and diffusion lines, which benefit either from the trickle-down value or from strong trendy communications. But what about the top of the fashion pyramid? What kind of value do luxury products bring to the market? Let’s see in the next paragraph.
  • Emotional needs. These needs are satisfied by products that have such a strong reputation and heritage, that the simple fact of owning them, makes us feel proud and part of the brand’s legend. These needs are usually satisfied by luxury brands that are exclusive and aspirational, as the fact of owning these products is a strong social signal. Because of this emotional drive, these products need to be aspirational and exclusive, if they become too accessible they may completely lose their aura of prestige. This is why brand managers in luxury should always avoid brand dilution. But more on this later.

From our analysis, we can already see that it would be really difficult to build a brand only appealing to one of these needs, as for each category, the product’s price would be very different, and as a result, the brand would risk cornering itself losing touch with other customer audiences. 

This is why Giorgio Armani was able to devise an innovative approach, capable of segmenting its markets not only looking into the price but into each and every element of the marketing strategy adopted by the brand. 

Let’s look into this in more detail in the next section of the post.

How Giorgio Armani Uses This Model For International Growth

So how does Giorgio Armani use the Business Model Portfolio to enter and compete profitably in internal markets? 

Well, as you can see from the breakdown below, the strategy adopted connects different collections to different business models, whereby every product line is highly differentiated in terms of cost, distribution strategy, stylistic identity, social currency, and quality of manufacturing.

Here’s a breakdown:

  • Giorgio Armani Privè. This is the haute couture collection (shown in Paris) which has only one womenswear collection per season. According to our analysis, these products serve an emotional need, as this is the most expensive and exclusive collection.
  • Giorgio Armani. This is the top line, also known as the black label. This is sold only in mono-brand stores and each season there is a man and woman collection. This is in between the luxury line and the diffusion line, it has been developed mainly to target high-end male customers, as the privè line is only for women.
  • Armani Collezioni. This is the so-called white label. This collection has a lower cost of the top line, but it still features the brand’s stylistic identity by being elegant and classic. This collection is provided by department stores and each season a new man and woman collection is created. The white-label, or diffusion line, serves instead of a social need, which is linked to using Armani heritage as a social currency while purchasing relatively more affordable clothing.
  • Emporio Armani. This is the young and trendy line, it’s sold in mono-brand stores and multibrand stores, this collection is also designed in one man and one woman collection for each season. This is a bridge section brand, designed to target younger customers and meeting them at a price point that can be achievable for someone who is starting to dress elegantly and smart more and more often.
  • Armani Jeans. This is the denim collection, it is sold mainly in department stores.  this collection is also designed in one man and one woman collection for each season. As jeans and denim are also in part functional clothing, Armani created a specific collection to make sure the brand would not be associated with work clothing.
  • Armani Exchange. This is the most affordable line, with collections continually renewed based on the fast-fashion formula, this collection is also sold through the website. This is instead the mass-market commodity line. In this case, the brand has no element of differentiation, but still, the association with the higher-end collection allows the brand to still cost much more than any other unbranded competitor.

As we’ve seen, this approach is based on the business model canvas, but at the same time, it builds upon it, as each collection is brought to market with an enhanced strategy in support of the value that the brand is offering its customers.

There are many advantages to this approach, and we’re going to discuss them in the next section of the post. 

What Are The Advantages of this Approach

The advantages of this approach a numerous, but to focus on the most relevant ones, take a look at our list below:

  • Differentiation in terms of value to the customer.  As opposed to marketing the brand in an undifferentiated manner, Armani is able to focus on emotional, social, and functional values depending on specific customer types. This is enabling the brand to build tailored and specific communication strategies that go to the core of what the customer is looking for.
  • More efficient distribution strategy. Because of the highly differentiated collection portfolio, each collection is sold through a specific distribution strategy. Because of this, the brand is able to invest more efficiently in the retail typology that better fits the collection to maximize returns on the development of new brand touchpoints.
  • Opportunity to navigate multiple markets. As a result of a differentiated value proposition and distribution strategy, the brand gets to compete profitably in multiple markets, as each customer is set on a unique customer journey, based on the specific collection he\she is willing to purchase. 
  • Limited Brand Dilution. The biggest achievement is actually connected to the fact that the brand as a result of this approach is resenting from very little brand dilution. Customers still perceive Giorgio Armani as a brand with high emotional and social status, but at the same time, they see the convenience of purchasing Armani products sold at lower-tier prices.

There you have it. Now that we’ve touched upon all relevant bases, let’s move to our conclusive remarks.

Conclusions

As we’ve seen in this post, by creating a business model portfolio the Armani brand was able to tackle multiple fashion markets and multiple customers’ needs. At the same time, by differentiating the brand’s distribution strategies, customers’ perceptions are not as influenced by the higher supply of Armani products as no overlap exists between the different collections and stores. 

We can see therefore that the distribution strategy a brand chooses for its expansion abroad plays a pivotal role in determining the sense of accessibility and desirability tof your collection. If you’d like to learn more about distribution strategies in fashion, here’s an article that can help: Retail distribution in the fashion industry. 


But what if you are targeting HNWI (High Net Worth Individuals)? In this case, it can be really challenging to find a way to connect to them, especially due to their “jet-set” lifestyle. If you’re looking to update or upgrade your distribution approach to meet these customer profiles, in this post we’re looking at this exact challenge: 3 Ways You Can Update Your Distribution Strategy to Target a Moving Customer. Enjoy!

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Giorgio Armani Case Study: Using the Business Model Portfolio to Dominate International Markets In this case study we're looking at how Giorgio Armani was able to develop a business model portfolio to expand in international markets without diluting the brand's equity.
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