Miuccia Prada once said that “What you wear is how you present yourself to the world, especially today, when human contacts are so quick. Fashion is instant language”. Miuccia Prada and the Prada brand have grown from humble beginnings making quality leather goods to a public traded company with a current market capitalization of over $26 billion (USD) . With the development of Prada as one of the world’s premier luxury brands it provides an excellent case study to examine how strategy paved the way for the success of the Prada brand. First, an examination of Prada’s strategic positioning against luxury brand rivals Louis Vuitton Hennessey Moet (LVHM) and Kering (Gucci). The acquisition history of Prada will be reviewed, where some preliminary conclusions can be made about what has been contributing factors to both the successes and failures. Then finally, an evaluation of what the future holds for Prada and the sustainability of its competitive advantage.
Section 1: Prada’s Strategic Positioning compared to LVHM and Kering
The high pressure luxury brand industry has evolved over the last few decades from a small and selective to a multibillion dollar arena offering significant potential and growth opportunity for the luxury brands that compete within its realm. With many luxury brands competing for over $225 billion (The Economist, 2009) in revenue each year it is easy to see how strategy plays an important role.
In order to understand the context of what type of positioning a company can take as part of its competitive strategies this paper below will examine how Prada fits in to Porters’ concepts of generic strategies and competitive position as well as Treacy and Wiersema’ s value disciplines. These two leading schools of thought on strategy are largely centered on the assertion that an organizations competing in any industry must establish a strategic operating model that focuses on a distinct principle in order to achieve success. “According to Porter, a business can maximize profits either by striving to the low cost producer in an industry of by differentiating its line of products or services from those of other business either of these two approaches can be accompanied by a focus of organizational efforts on a given segment of the market p.1141” (Parnell, 2006). Porter expanded the generic strategies of cost leadership, differentiation, and focus to expand these principles more specifically to competitive positioning, where an organization chooses a “value position against a relevant set of industry rivals by finding “a unique position, the place you want to be in the industry.” (Margretta, 2011). Whereas, Porter focuses on “how” a company positions itself against external stakeholders, Treacy and Wiersema offer a more internal approach to strategy by championing the concepts of the three value disciplines; operational excellence, production innovation, and customer intimacy....