Question: Using the text below, answer the following: Does the move…

dgarver21 Question: Using the text below, answer the following: Does the move…Question: Using the text below, answer the following: Does the move in the hotel market make sense for Armani? What are the reasons for and against such diversification? What would you advise Armani to do in order to minimize the risks of such a diversification strategy?  Useful text:Giorgio Armani is already one of the most diversified brands in fashion. As well a haute couture and everyday clothes, Mr. Armani and his eponymous firm create scent, cosmetics, spectacles, watches and accessories. Dedicated followers of Mr. Armani’s minimalist aesthetics can buy furniture at Casa Armani, chocolate, other sweets, and even jams at Armani dolce and flowers at Armani fiore. There are Armani cafes and restaurants in Paris New York, London and other cities. An Armani nightclub recently opening Milan. Now the great Giorgio is branching out further still. On 22 February, his firm announced a $1billion hotel venture with Dubai’s Emaar Properties, the Middle East’s largest property developer. Mr. Armani will be in charge of design for ten new luxury hotels and four resorts, to be built in the next six-to-eight years. Armani’s is the boldest move so far by a luxury goods company into the hotel business. But it is by no means the first. In September 2000, a hotel designed by Donatella Versace opened on Australia’s Gold Coast. In February 2001, Bulgari, an Italian jeweler, announced a joint-venture with Ritz-Carlton, the luxury hotel division of Marriot, to build six or seven hotels and one or two resorts. Bulgari and Marriot are each investing some $70m. The first Bulgari hotel, located immediately behind Milan’s La Scala opera house will open in May. Salvatore Ferragamo, an Italian shoemaker, has designed four hotels in Florence, his hometown. Does it make sense for designers of luxury goods to go into a tricky service business? Hotels are not a good hedge against the fickleness of the fashion world. In the first half of last year, both industries were in bad shape because of the war in Iraq, SARS and the rise of the euro (many luxury-goods firms are from euro-zone countries but their revenues are mostly in dollars or yen). In the second half of the year, the two industries started to recover, albeit timidly. Armani and Bulgari say that their hotels are managed by outside professional managers and that they are only in charge of making the hotels beautiful. Mr. Armani considers hotels are logical extension of his aim of promoting his brand in all walks of life. Because small is considered more exclusive, Armani and Bulagrai plan to launch mostly smallish five-star hotels. Armani’s’ Dubai hotel, due to open in 2007, will be an exception however with 250 rooms. Bulgari’s Milan hotel will have no more than 60 rooms. What of the risks? Over the years, Pierre Cardin, Yves St Laurent and Christian Dior have each lost their good names by doling out licenses all over the world to firms that did not deliver the appropriate quality. Calvin Klien’s current troubles are related to the company’s loss of control of distribution of its wares in many countries. Even if Bulgari’s hotels turn out not to make any money, the venture could be considered an expensive, yet effective, advertising campaign says Antoine Colonna of Merrill Lynch in Paris. Mr. Armani’s hotel plans are altogether more ambitious; Armani says that the management company for its hotel venture will be headquartered in Milan rather than Dubai and that Mr. Armani will be fully in charge of design. So far, Mr. Armani has managed to control his brand tightly despite dabbling in many different businesses. Hotels, however, are a bigger challenge than flowers and jam. BusinessBusiness – Other