|The Structural Frame:
A frame is a systematic collection of concepts that enables a greater understanding of what goes on in a business’ day-to-day operations. A structural frame is similar as it organizes where elements need to exist in order for a corporation to be efficient and effective in its operations (Bolman and Deal, 2008). Within this structural frame lie the organizations goals as well as the specialized responsibilities of employees and their relationships. This is vital in order to allow adequate coordination for a well-organized platform of success (Bolman and Deal, 2008). Using this structural frame, Armani’s organizational design will be analyzed in order to determine whether or not they can adapt or react to change and how effective the company will be in such situations. In order to understand exactly what happened in the “situation”. To best understand the overall organization and the environment in which Armani Exchange competes, the whole Armani franchise must be analyzed
The Organization Structure of Armani: The Pyramid
There are two models as to how an organization desires to structure itself. An organization can choose a business model in order to make money in the short run and in the long run as well: Either a Pyramid or a Galaxy scheme (Kapferer and Bastien, 140). ‘Armani’ is a company that positions itself on the ‘pyramid’ business model, occupying multiple levels declaring their structure (See Figure1). Armani’s strategy is creating sub-brands by diversifying their product categories with the signature Giorgio Armani brand at the top of the pyramid in order to set the standard (Kapferer and Bastien, 141). Beneath the signature Armani is an entity that provides slightly closer to the reach of the customers, “Armani Collezioni”. Following this are Emporio Armani, Armani Jeans, Armani Exchange, Armani junior, Armani casa, Armani Prive’, Armani Dolci and the recently opened Armani brand hotels in the major cities of the world (Armani Press, 2005).
Armani’s Company Pyramid:
Armani’s company has Giorgio Armani at the top of the pyramid (See Figure 2), since it is the first line established by Armani himself in the 1970’s. (Funding universe, 2002) Thus, Armani will always take pride in his first creation (CNN, 2006). It carries the designer’s name as well as overseeing the rest of the line of the brand, therefor whenever Armani decides to open in a new market it is evident that a Giorgio Armani boutique will open first to set the standard for the rest of the brand. This parent company is privately owned and run by Giorgio Armani himself, the founder and designer of the brand (Roll, 2012).
The Giorgio Armani is indeed a corporate brand with a sole shareholder and it is the line featuring the main collection of couture suits and gowns targeting the elite of the society of ages 35-50 (Roll, 2012). The Style and the design of Giorgio Armani’s line is simply a combination between couture and classic bringing the best of men's’ suits and gowns to life. However, the price is very high on this end of the grid (Figure 3).
Armani Collizioni (previously Giorgio Armani Le- Collizioni) is the entity that caters to the segment of customers that love Armani’s designs and would like to wear Armani but cannot afford to do so. The style and designs are simpler than the couture line there for cheaper by around 20% than what the Haute couture sell for. There are eleven stand-alone boutiques of the Colliziono, generally it is sold in high-end department stores or recently combined with an Emporio Armani store.(Roll, 2012)
Emporio Armani is a diffusion line that sells high-end clothing targeting young professionals between the age of 25 and 35. The pricing leans more towards the higher end and the style is very consistent with the tastes of those interested. This line is sold strictly in its own freestanding boutiques, there are 122 Emporio Armani boutiques or in mini boutiques in exclusive high-end department stores. EA7 is a sub-label branched out of the Emporio Armani line. It is a high-end sports line that is sold in the store (Roll, 2012).
It is the line that is created especially for kids. There are fifteen boutiques around the world but products also found in selected high-end department stores (Roll, 2012).
There are 15 Standalone Armani Jeans stores. These stores sell Jeans and a few of Emporio Armani’s collection but generally Armani’s Jeans are sold in department stores. The design of the line is completely different than this of Giorgio Armani, The colors diversity and the complexity of the design caters to a very different segment. It is a trendy line so it caters to customers that are 18- 30 years old (Roll, 2012).
Armani Exchange is the most accessible line of the Armani brand delivering to a wide range of the market unlike the couture lines. The prices are more realistic for the mass public in return for the feel of the luxurious brand name designs of Giorgio Armani. With over 235 stores around the world, Armani Exchange has the highest number of stores since it caters to the biggest segment of prospective customers (Roll, 2012).
Armani Casa is an exclusive Armani Italian designer furniture line. This store caters to high-end home décor and furniture featuring, lamps, linens, and dining essentials. There are only 40 exclusive boutiques worldwide. (Funding universe, 2002)
Armani Hotels are a series of hotels opening in the major cities of the world like Dubai, Milan and London. Giorgio Armani oversees all the designs of the hotels from the biggest details to the finest. The series of Hotels and residences are furnished completely by Giorgio Armani from his line Armani Casa, making it that much more exclusive (Armani Hotels and Resorts, 2012).
Mintzberg’s Divisional Forms:
Armani the organization follows Mintzberg’s Divisionalized form (See Figure 4). Each brand line is a division serving a distinct market and running its own functional units under the umbrella of one huge parent company the “Giorgio Armani”. Giorgio Armani said: “I have always paid great attention to having brands that don’t overlap. I choose a brand for a particular market and balance my collections in terms of look, price, distribution and location.” The divisions of the Armani brand lines are based on the pricing, management, distribution and marketing (Piergiorgio, 2010). Each line of the Armani brand has its own committed style, product and brand manager, sales and communications, and its own Public Relations staff. Nevertheless, all the brand lines are closely supervised by the brand creator himself Giorgio Armani (Piergiorgio, 2010). Having a Divisionalized structure is very beneficial for a large organization such as Armani. This structure offers benefits such as economies of scale, resource allocation, and responsiveness while still controlling economic risks (Bolman and Deal, 84). Some argue that having an individual overlook every divisional manager is tedious and may lead to the head of the organization losing touch with operations, however Armani prides himself in the interfering in every sector organization and adjusting it how he sees fit (Roll, 2012). The Armani brand is built on the foundation of its’ founder Giorgio Armani. His interconnectedness within the organization is the main competitive advantage for the company (Roll, 2012). Giorgio is the sole shareholder and the CEO of the complete brand where he supervises the designs of every aspect of the brand. There are no other designers or leaders that are trained to carry on operations without Giorgio Armani. (Davidson, 2009)
Analysis of the Structural frame
Armani greatly emphasizes their logo and their brand and this is evident through their corporate structure. From upper management to the fore front employees, the brand name is stressed. While this message is communicated, it is not effectively acted upon due to major flaws in the organizational structure. Armani employs two types of working units; those established around customers and those around a certain place or geography (Bolman and Deal, 2008). This is evident through the various brands Armani has to cater to different types of customers (i.e. Armani Exchange for ordinary consumers, Emporio Armani for more high end consumers, etc.) and the distribution of them across the retail landscape.
The Armani Exchange store, the brand under analysis, uses both lateral and vertical coordination to structure their operations. Vertical coordination uses methods such as authority, rules, and planning systems to communicate the Armani message to employees (Bolman and Deal, 2008). As discovered through an interview with a former Armani Exchange employee, managers are given a high degree of authority. They are assigned with ensuring store operations are aligned with company goals and frequently stress the Armani logo and brand on the employees. The managers also stress performance controls by emphasizing sales goals and rewarding the employees with the highest sales. They, however, do not explain how these goals are to be met. Armani Exchange also utilizes some lateral coordination such as meetings. These weekly meetings, however, only occur between the managers and exclude employees. The person interviewed was a Sales assistant and a cashier whom said that there were never meetings scheduled for them with the managers. However, there were five managers for one branch and they meet regularly every week where the rest of the staff were not allowed to participate and were not notified as to what went on during the meeting.
After analyzing the structure of the Armani Exchange store, it is evident that much structural inefficiency exists in the organization of the store. The main flaw is the lack of communication to the employees. While managers have frequent meetings to discuss sales goals and overall company objectives, these are not communicated to the front line sales associates. News such as what sales goals are, which employee met them, and other crucial information are all posted on a board through which the employees get their updates for the week. During the interview with the Armani Exchange employee, it was also discovered that managers gave high importance to sales goals and greatly rewarded the employees with the highest sales. While they communicated these goals, they did not instruct the employees on how to achieve them, leaving them to understand that on their own.
The high emphasis on sales goals left employees narrowed in on achieving good sales, which were thereby done through profiling their customers, whether intentionally or unintentionally. In a store where managers rewarded and respected high sales employees, the rest of the sales associate team could not afford to give time to customers they felt would not make purchases. If they did, they would fall behind in sales and lose opportunity to display good work performance to their managers. This, however, created a disconnection between the consumers and the Armani Exchange brand or company goals. Armani Exchange, in comparison to other Armani brands, is the affordable brand targeted towards more everyday consumers. Nevertheless, even in this situation, the behavior of the sales associates portrays the brand as one that only has time for high worth consumers, causing a rift between what Armani is actually trying to achieve with their Armani Exchange stores.
Pricing: Armani applies a pricing strategy where the couture line are highly priced and then sloping down to much lower prices for Armani Jeans and Armani Exchange. The different sectors of the brand are prices separately according to the category. ( Davidson , 2009)
Distribution: Armani Carefully chooses what is sold in boutiques and what is distributed through high-end department stores. A customer can never find couture gowns in a department store they are strictly sold in Armani’s high-end boutiques. In Addition, the merchandise sold on the website and in the U.S are selected items and not the whole complete collection as in Italy, Milan. ( Piergiorgio, 2010)
Marketing: Armani’s marketing strategies differ according to the different categories. The couture lines do not necessarily need much advertising since celebrities take pride in wearing Armani’s Couture on the red carpet and on important ceremonies. For the lower bridge Armani lines the chosen faces and bodies of Armani are Worldwide famous celebrities, currently Christiano Ronaldo and Megan Fox. The Marketing process emerges from a very centralized strategies that allow consistency between the brand’s image and the brand’s Identity. ( Piergiorgio, 2010)
Giorgio Armani is splendidly content to deliver the highest quality merchandise where the Armani brand combines Elegance and sophistication, comfort and glamour in a simply marvellous Italian Taste creating a complete lifestyle and an Aura for a way of living. ( Piergiorgio, 2010)
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