Gucci Case free essay sample

Is Gucci good at strategy? ! ? When Tom Ford was in charge, the business was more design-focused control was centralised there were disputes between Tom De Sol regarding managerial control ? With the appointment of Robert Polet, control became decentralised and each brand was given direct control over its label appointed relatively unknown designers # very controversial move ? PPR bought back the 20% stake that LVMH owned, acquired more brands and entered into franchising ?Although some brands in the Gucci Group portfolio are not very profitable, they still have a high brand equity, which contributes positively towards the strategic advantage #? Although Gucci’s strategy was controversial and risky at the time of its conception, it has influenced current businesses and helped the company become more profitable #? Gucci is good at strategy The Luxury Goods Sector Products Apparel, leather goods, shoes, fragrance, cosmetics, jewellery, watches # Accessory spending to experie nce most growth, whilst watch cosmetics consumption has slowed (Bain Company, 2013) Geographic scopeUSA, Europe, Central South America, Asia, Middle East Buyers High-class middle. class. Intelligent, individualistic individuals with strong values principles. Are demanding, have high expectations a disposable attitude. (Okonkwo, 2007) Competitors Kering, LVMH, Richemont Group, smaller niche brands (eg Goyard) Suppliers Specialised, often family-run production sites – but also factories in Asia Middle-East Substitutes Wines Spriits Potential entrants High-tech luxury goods Level of profitability Revenues expected to grow 50% faster than global GDP 4-5% growth expectancy for 20135-6% annual average growth expectancy through 2015 (Bain Company, 2013) Long-term profitability Predicted to be 5x larger in 2025 than it was in 1995 Recent likely future changes China to become highest consumer of luxury goods Middle east south-east Asia sales growing Importance of menswear to increase E-Tailers that sell luxury goods to create own-brand luxury good offerings? Aspects that may be affected by competitors, new entrants or potential entrants Importance o f customer experience Retail management Talent within the company ! The Luxury Goods Sector Threat of new entrants Low Bargaining power of suppliersMedium high High switching costs for industry players Medium to low degree of product differentiation Low supplier substitute availability Low threat of forward integration into the industry High capital requirements High demand-side benefits of scale economies of scale Rivalry among existing competitors Medium High amount of competitors Medium High exit barriers High rival familiarity Medium price competition Threat of substitutes High High offer of attractive priceperformance tradeoff Low switching costs Bargaining power of buyers Medium Medium brand loyalty (more brand loyalty is at the veryhigh end of the luxury sector) High fixed costs Low switching costs Medium to high product standardisation High importance of product performance Medium to low price sensitivity The Luxury Goods Sector ! ? Stable There is re latively little threat of new entrants ? Longitudinal – the industry is not as gravely affected by economic downturn ? Difficult supply-chain management because there is a trade-off to having sustainable, specialised suppliers # they have higher negotiating power ? High threat of substitutes ? Customers are loyal and do not have as much bargaining powers as they do in the high-street sector ?Rivalry between competitors is not as high as it is in the high-street sector What does this imply about the strategy Gucci should adopt? ? Strengthen the brand image to combat the threat of substitutes ? Strengthen the relationship with their suppliers Gucci SWOT Analysis Strengths †¢? †¢? †¢? †¢? †¢? †¢? World’s third largest luxury retailer Strong managerial presence since the arrival of Polet Brand portfolio is easy to handle Perceived quality value of the leather goods Strengths of brands such as Bottega Venetta, Alexander McQueen etc that have r ecently established themselves Shift to decentralised control (with 3-yearbusiness plans) Opportunities †¢? †¢? †¢? †¢? Expansion into the growing luxury markets Enter the technological sector Update store concept retail experience – more technology Collaborations with other brands celebs Weaknesses †¢? †¢? †¢? †¢? †¢? †¢? †¢? Less diversified brand portfolio than other competitives in the sector Residue of cheapened brand image YSL being unprofitable Timing of new strategy implementation Appointment of relatively unknown designers Disruption when three dozen managers left upon Tom Ford’s leave Robert Polet’s lack of experience in the fashion sector or luxury markets Threats †¢? †¢? †¢? †¢?†¢? Economic downturn/instability Imitability – fast fashion Less licensing Prada entering into the technology sector LVMH, especially Louis Vuitton Strategic group analysis Hermes Luxury Chanel Bottiga Venetta Burberry Celine Givenchy GUCCI LV Kenzo Loewe Traditional Innovative Marc Jacobs Ralph Lauren Longchamp Affordability Michael by Michael Kors How should Gucci adapt its strategy to maintain its position? ! It might be the time to change the strategy again! ? Should position themselves to become more innovative make their product offering more varied (include more very high priced, limited items)? Refresh their image – become more edgy and contemporary !? Eg create cooperations between different brands within the portfolio !? Strengthen the Gucci brand further before adding even more brands to the portfolio !? Celebrity endorsements Prediction for the future of Gucci ! ? They will ‘stay in the game’ ? The brand needs some help to reinvent itself its image through contemporary advertising campaigns, better visual store concepts, social media techniques etc otherwise it may run the risk of losing its brand voice ? Create a new values Thank yo u! If you have any questions please feel free to ask