Research Paper on Founding of Prada: A Legacy of Luxury & Royalty

Introduction

Prada was founded in 1913 in Milan, Italy by Mario Prada and his brother. Originally Prada only sold leather goods. The first store was in Galeria Vittorio Emmanuelle II. Since the founding of the company, it is established as a luxury brand and grand the appreciation of the aristocratic and the most respected and stylish people in Europe. In 1919 it became the supplier to the Italian royal family.

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The company`s initial founder, Mario Prada, has had a negative opinion towards women working in business and has as declined that any of the women's in his family would not have a roll in the business. Ironically, the turning point in Prada`s history was in 1970 when Miuccia Prada took owner the company from her mother Luisa Prada. She brings a fresh creative and young approach to the business model and the products initially started by her grandfather.

Her first innovation was the Prada Nylon backpack, which even today is the shining star of Prada`s collection. In 1977 she has partnered up with Patrizio Bertelli to enhance her vision and to take the companies ideas to the next level. Patrizio Bertelli has found in 1977, where he began producing a major part of his leather goods. Even eventually the company has obtained the license to produce the leather goods for Prada leading to a merge several years after that became the Prada group.

In 1983 Prada open another Boutique (second Store) in Via Della Spiga. In 1988 the company has begun a full expansion in Europe, the USA with stores in New York, Madrid, London, Paris, and Tokyo. In the same year, Prada has launched the first women`s wear collection.

In the '90s the company has seen a new transformation with the debut of the first men`s wear collection. The founding of Miu Miu which took place in 1993 was the new brand under the arm of the Prada brand which targeting sophisticated and stylish women. The Brand continues to be even today the choice of young ladies who seek sophisticated pieces with a twist. In the same year, Miuccia Prada together with Patrizio Bertelli founded Fondazione Prada that put together their passion for art but also show how fashion and art can go together.

In 1999 the company acquired Church's an English company founded in 1873 it was specialized in high-quality footwear.The epicenter the Project was conceived redesign shopping experience and to combine art with passion. The first store Opened in 2001 on Broadway in New York City designed by a Rem Koolhas. The following stores were in Tokyo and Beverly Hill.

In 2003, they made a license agreement with Luxoticca the manufactured for eyewear. In the same year, they also launched their first fragrance with the manufacture Puig. In 2011 Prada cope was listed on the Hong Kong stock exchange. Which led all the entry into the food sector by acquiring Marchesi and to many more investments.

Current World Economy and World Fashion Industry Status

The current state of the global economy is in a rather stagnant situation, economic growth has seen a rise of 2.5% since the economic crisis. We had expected financial growth but sadly in 2019, there were signs of Europe, Latin America, Middle East, US and China of degradation.

Industry leaders see the situation getting worse in the future. As the macroeconomic environment changes everyone will try and lock in getting more productivity. Even fashion has felt the problems of financial degradation, even though big companies keep investing and flourishing.

India is getting stronger and powerful than ever, their financial power and economic expansion has put and imprinted on industries like tech or fashion. According to Mckinsey & BOF India is seen to have an 8 percent growth by 2022.

More and more brands are seeking to open stores in India, seeing that the middle class is getting more and more financially powerful. Even with this India remains a very diverse and complicated market, being spread so widely and with so many cultures - companies will need to be careful while entering the market.

With the problems between China and the US, we could see a change in trade relationships. The Brexit has also left a big question mark around all industries and we are seeing more and bigger players moving their headquarters from London to other countries.

China is also seeing a huge rise, the market has been growing for the past 20 years or so and now we can see a trend like '' Made in China'' becoming a more acceptable tag. Coming back to fashion the industry is changing fast especially with Gen Z, getting more financial power; companies need to reevaluate their business plan. Sustainability is also becoming a demand and fashion seems to have caught on it as a trend (the fashion industry is the second-largest polluter in the world).

Revenue Used By Company

The Prada Group's sales performance in 2018, changed across the globe. The revenue increased than it has been witnessed over the years. The outcome of the 2018 report suggested that the plan was steered towards increasing the profitability and volumes in the medium report. Based on the investment and the omnichannel used over the last decades reassure the management in meeting its set objectives. The revenue of the Prada groups has been boosted by the organizational structures. For instance, the change of the organizational structure at the operational level was a vital step taken by the company in digital processes. Through the digitalization process, the Prada Group became more dynamic by interpreting its information at a great speed.

As the digitalization process advanced, the design team of the Prada Group was committed to nurturing top and creative talents in developing its products. For that reason, the team generated new products such as special edition processes, backpacks, and sneakers. By producing several products, the company has benefited from an improved product assortment having a better taste within the market segment. The Prada Groups has achieved product assortment while maintaining vital brand codes and brand identities. As captured in the 2018 report, the nylon was the main component of the Fall/Winter Linear Rossa and the Spring/Summer 2018 collections. Also, Nylon was the center of the essential communication campaign.

For the models launched in the recent collection, the handbags continued to be the most iconic model. Handbags lead to positive annual sales growth. The Prada Group applied the revising of the promotional sales to realize the most effective policy toward product positioning.

In 2018, full-price sales concerning the volume increased and discounted sales decreased. In the gross margin, the significant contribution of the strategy is not evident. Such that, the volume was eliminated by the effect of unpleasant exchange rates as compare in the previous period.

On the international scene, the Prada brand has been promoted by the sponsorships between the Luna Rossa and the Fondazione Prada. The association with the oldest surviving sports competition and the prestigious cultural center has helped the Prada Group to improve the value of its products. The Prada Group also sponsors the America Cup competition while also acting as the team sponsor. By having that agreement in place, the brand benefited from increased visibility. The growth of visibility was boasted by presenting the 36th edition such as the unveiling of the new trophy and presenting the hologram of the new AC75 flying monohull.

The Prada Group identity was strengthened by various resources. Some of the resources include Miu Miu Croisiere at Hotel Regina in Paris, new fashion shows, broadcast live in Timesquare, and Prada Resort in Manhattan. The Group used pop-up shops and operated stores at the precious department for special displays. The Prada Group used these places to celebrate re-releases and market new collection of the iconic products in conceptualized settings and new collections. By conducting continuous research, the stores' concepts contributed to extra restyling projects. The customer access has been enriched through investment done on social media platforms and the website. Through these processes, the Prada Group has forged forward in integrating communication, digital retails, and physical retails.

Analysis of the Pro-Forma Net Revenues

In 2018, the net sales were 3,098,068 which was about 98.6% of the net revenue. The net sales increased by 3.0% of the previous year in 2017. Royalties were about 44,080 that approximated to 1.4% of the total net revenues. The number saw the number of royalties reduced by -8.5% of the previous year in 2017.

The annual net retail sales were closed on December 31, 2018. In the end, it was reported that the current rates were 3.6% and an increased 6.8% at constant rates. The Prada Group showed a positive annual performance. In the latter months, there was a slow performance that was affected by strategic decisions and the market to decrease discounted sales. The Prada Group noticed that the number of directly operated stores consisted of 20 closures and 29 openings that increased from 625 on December 31, 2017, to the end in 2018.

From these sales, the report suggests that the sales made from the wholesale channels consisted of the previous period. Such that, the wholesale sales increased to 1.3% at unchanged exchange rates. The current exchange rates of wholesale sales rose by 0.3%. By having an effective Group's digital strategy, the wholesale orders to e-retailers increased.

Market

In the Asia-Pacific market, the Prada group's net sales increased by 9.7% at unchanged rates. In China, the company produced 675 million Euro net sales with the current exchange rates by 4.5% and 8.2% at constant exchange rates. In Europe, the Prada group registered a 2.8% rise in sales at unchanged rates. Also, in Europe, the Group recorded a positive increase of 1.6% at current rates. In the European market, the increase was concentrated in the number of items bought by the customers. In the American markets, net sales increased by 3.9% at unchanged rates. In America, the current rates were estimated to be negative (-1.3%). The growth of the net sales split evenly between the travelers and local customers.

In Japan, the net sales were recorded to be the highest with the current exchange rate of (+45) and constant exchange rates (+7.4%) based on the recovery in domestic consumer spending. In the Middle East, net sales increased from +0.8% at current rates and constant rates of +5.2%. By the opening of the Miu Miu and Prada within the prestigious Dubai Mall led to the growth of the period.

Products

At a constant exchange rate, the clothing sales of the Prada group increased by 9.6% with 6.8% as the current rates. Miu Miu and Prada grew at constant exchange rates in every region. At the current exchange rates of 3.1% and 5% at the constant exchange rates, the sales of leather goods increased by 5.9%.

The report has it that the footwear sales felled by 1.3% at current exchange rates and increased by 1.5% at constant exchange rates with various trends for different markets. In the Asia Pacific and Japan, there was an increase in the double-digit of Footwear sales. However, in America, there was a decline in Footwear sales, especially at concentrated wholesale channels.

Brands

The net sales of the Prada Group rose at a constant exchange rate of 6.7%. The net sales had a current exchange rate of +3.9%. In 2017, it was reported that every product category registered a higher sale at constant exchange rates. In 2018, the Miu Miu net sales increased at unchanged exchange rates by 1.7%. The report displayed a positive increase in clothing and a steady outcome for leather and footwear products than in the prior period.

The Church brand reported a negative (-2.7%) at current ex...