Gucci’s prosperity

Gucci’s prosperity

Introduction

Toward the beginning of the Marco Bizzarri and Alessandro Michele time at Gucci in 2015, industry examiners thought about whether the brand would part from the tasteful of the ultra-hot Tom Ford Gucci period, which had been proceeded by Ford’s successors long after he had left the business in 2004. In any case, the fresh out of the plastic new’s pioneers perceived that culture had changed fundamentally in the interceding decades: sexuality and sex were progressively liquid, and the web had transformed speciality premiums into mass-market patterns with a lot shorter life expectancies. (CRUMP, 2019)

Michele’s fantastical plan vocabulary came at precisely the perfect time, giving a rich universe of idealism for the extravagance customer that was a close moment hit and has figured out how to keep on enthralling customers.

Key to Gucci’s prosperity is a synchronous innovative and promoting methodology that has keenly carried equivalent thoughtfulness regarding transient prevailing fashions and staple items which, under Michele and Chief Merchandising Officer Jacopo Venturini’s control, feel an integral part of a similar universe. (Haseeb, 2016)

While the methodology prompted significantly quick development in the central years, deals have begun to back off in 2019, diminishing 2 per cent year-over-year in North America in the second quarter of 2019. During a similar period, the business development rate in the Asia Pacific locale likewise eased back to 23 per cent versus 47 per cent the earlier year.

METHODOLOGY

The report has been set to do investigations on the environmental factors that did help lead to the fast growth and the development of the Gucci Group together also with the weaknesses and strengths of the company. And as a result of this, the report will be analyzing and examining the internal environment of the Gucci group using the McKinsey 7-S model and swot analysis model. The external environment of the business will be explained by the help of Ansoff matrix so that we can be able to identify the factors that externally after the running of the company. The marketing mix will be examined too of the organization with the assistance of 4 Ps of marketing so that it can be possible for us to understand the real factors behind the company’s success. Also, the report will suggest five strategies likely to help the organization achieving its long term and short term objectives which are within the organization.

Mc-KINSEY 7-S FRAMEWORK

This model is usually used in an organization to help in emphasizing on the importance of consideration of impacts of different numbers together in the business as well as interaction when determining or implementing a particular strategy. It includes structure, strategy, systems, style, skills, superordinate goals and staff. The naming strategy means any action plan or any game plan that’s used by the organization to achieve its objectives. For the Gucci Group, they use the strategy of diversifying their products into many different groups like Sergio Rossi, Boucheron, Bottega Veneta, Balenciaga, Alexander McQueen, Gucci, Bedat 7 Co, Green Stella Mc Cartney which are done to achieve all of their objectives. This strategy of diversification into many different brands will help the organization to increase its revenue and also at the same time allow them too to be able to risk management within the organization (Pavitt, 2009)

SWOT ANALYSIS FRAMEWORK

The name SWOT analysis means techniques which are simple and which look at an organization’s weaknesses and strengths and also the threats and opportunities that face it. Its initials stand for  Strengths, Weaknesses, Opportunities and Threats. According to Ritson (2009), the weaknesses and strengths have been part of the appraisal, which have also been derived primarily from specific external and internal environments in the organization. It does attempt to identify areas, those that the organization have strengths and that could be exploited under certain particular circumstances by suitable strategizing .it also attempts in identifying those areas in the organization that have advantages which could be used particularly under the circumstances on appropriate strategies, and which are also areas that have weakness which should be entirely minimized. Hence it looks at those findings of the audit position and considers on such factors information which includes marketing, distribution, raw materials, finance, products, employees relation, employee, suppliers, management customer loyalty together with equipment and plant. As a result, these organizations weaknesses and strengths may include expertise and skills of its staff and management along with some factors in the organization like responses to change, market position, and access to resources in the organization.

On the other side, threats and opportunities are appraisal parts and also out warding more which seek identification of the implications in the change in organizations specific and general external environments. The possibilities can be exploited and identified by the strengths of the organization. To review the opportunities, the organization must identify opportunities which arise from the environmental change.

ANSOFF MATRIX FRAMEWORK

According to Scholes and Johnson (2008), the term Ansoff Matrix refers to a model which assists the organizations in identifying the strategy appropriate at any time given and also in various circumstances that are set so that they can develop companies like that of Gucci Group.it involves product development, diversification, and market penetration. It is also something important to note that the organization Gucci Group within it have done diversification into a lot of brands like Sergio Rossi, Bottega Vendetta, YSL, Balenciaga, Boucheron, Bedat 7 co, Stella Mc Cartney and Alexander McQueen. The diversification of different branding I this organization has let about an increase in the revenue for the organization and also at the same time has acted as an insurance against any potential disaster. At the same time also it can suggested that brands diversification within any organization like Gucci Group has brought about a lot of confusion and even lack of concentration in the organization (Saltmarsh, 2009) It can also be said in the years over, Gucci group have brought into existence brands which are new so that they can sell in the regions like Japan, North America, Asia Pacific and Europe. This new product could be packaged with designs which are unique and which suit the market was existing.

At the same time, something else fundamental to note is that Gucci group in its strategies to penetrate the market also tries to sell in an existing market an existing product. This is very suitable in a growing market which has not yet gotten saturated like Japan, Asia pacific and also other countries where the organization has its business units (Saltmarsh, 2009)

PORTER’S FIVE FORCES MODEL ANALYSIS

Industry rivalry where the competitiveness in the industry can be qualified as relatively high, but given the high margins and the customers’ perception about the price, the competition is not on price, but rather on quality and image perception, as well as on the ability to attract the right designers. Competitors, where the barriers to entry are very high. They are the intangible image and the perception built around the brand. The obstacles to stay are also very high: there is a continuous need to “feed” the image, to maintain the perception but still to respond to customers’ needs and changing expectations. The trade-off between exclusivity, stylishness, extravagance and lasting image makes it difficult to be for a long time in the business. There are hardly any barriers to exit given the high walls to entry and to stay and the low barriers to exit, the dynamics of the industry are: few big players and only the best, as the others either cannot get in or are easily out. Suppliers where the bargaining power of the suppliers depends on the segment. As some tended to have increased bargaining power, this leads to the concentration and vertical integration trend in the industry, one of the reasons for which is to lessen the bargaining power of the suppliers. Until now, there is not observed concentration among the suppliers of the luxury goods industry among themselves. There is, however, a trend for more substantial houses to buy smaller suppliers and to deprive the market form access to those suppliers. Customers whereby there are two types of customers. The super-rich and the middle-market customers, who selectively trade-up to higher levels of quality, taste and aspiration.

The super-rich customers (or High Net Worth Individuals) seem not subject to the world economic cycles. Besides, they are a growing number. Estimates predict that their number will increase from ~ 26 million in 2000 to ~ 40 million in 2005 (an increase of ~ 9% p.a.)

The middle-market customers are those that are willing to buy luxury goods, but “they want the hottest, trendiest design, which increasingly has to be marketed in creative and expensive ways”. They can potentially expand the market quite dramatically, as they are part of the upper-middle class. They are considered to be both a great opportunity (show no price sensitivity when buying the “hottest” product), but they are also a threat. “They are more demanding, more selective and show less brand loyalty than the super-rich class”.This implies for the luxury goods industry a problematic equilibrium between the two kinds of customers because both are not necessarily compatible. This can lead to a problematic trade-off between satisfying a smaller number of loyal customers and a more significant number of more volatile customers.

New entrants where the new entrants are mainly new designers who start their brand on their own. Usually, these new entrants, if successful, are quickly acquired by the big names of the industry, by providing them with the needed infrastructure for growth. However, new entrants, if remaining independent, can represent a threat by capturing the volatile middle-market customers. These customers go after the established name, and the perception builds around it, after the quality and design. All these elements take time to be built, which makes the threat of new entrants less significant Luxury Goods Market – Competitive Position Mapping. From a position mapping point of view, Hermes and Vendome form the high priced luxury goods range. Gucci, LVMH and Prada take the mid-tier followed by Ferragamo, Emporio Armani in the low-end tier. As for products, many of these are moving from traditional classic prints to the new fashion. Several of these have global reach with some brands limiting their presence and others expanding aggressively. For example, LVMH has 1005 direct stores whereas Gucci has only 126 stores but uses different sources like 6700 point of sales for watches, 301 departmental stores and 54 duty-free shops for a variety of its products.

Findings and Recommended Actions

Notably, the sustainability of the current business model is high because of the following reasons. Cost and cost reduction. Sales and profit margins. Risk and risk reduction. Reputation and brand value. Attractiveness as an employer. Innovative capabilities the business model can be changed to make it more sustainable by doing the following steps. Business building on belief. Changing everything other than your core beliefs about the business. Embracing change and standing still. Focusing on Proposition value-creating. Comfort and growth don’t co-exist. Concentrating on excelling in some areas. Focusing on constant reinvention.

Since the question is, how can it contribute to enhance its competitiveness? There is a very high competition in the industry because of few but competitive players and of the high capital investment required in entering the industry. The company has to penetrate new markets and achieve dominant leadership in the industry.

However, this helps the company achieve reliable staying power in the industry by having majority influence in the fashion industry trending backed up by partnerships aiding the company in lowering its cost and offsetting the threats of substitutes.

Conclusion

The staffs, systems and strategies goes along to build Gucci’s dominance in position in the international market. Also, at the very same time, can be used sad in that the brands go a long way in terms of revenues increase of the Gucci Company. Same time, it is entirely essential noting that the current diversification of the products into different brands has also helped in terms of enlarging the organization’s portfolio. Their products are made from the high-quality materials, distributed through channels which are different like through direct operating stores and its website.

However, it can also be said that this organization has throughout the years invested a lot of its resources into the promoting its business activities which to do create a lot of awareness of its products to their customers. In terms of achieving the objectives of a long time and short term, the organization needs to restructure its business activities, promote the business and also at the same time engage into the activities of development and research and this is done to find out all the new ways of doing things.

Its branch in the United States is needed to improve on its relationship with customer management and also at the same time restructure the supply chain, which in order will increase the profits. Gucci has a sharp brand image worldwide, but it has not expanded yet into other markets mainly because for a couple of years of operations, it has focused on major markets in Europe and North America. The step that the company can undertake is to capitalize on favourable opportunity- the Asian market. Asia, according to studies, is a fast-growing economy worldwide.

References

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Wang, L., & Snell, R. S. (2013). A case study of ethical issue at Gucci in Shenzhen, China. Asian Journal of Business Ethics, 2(2), 173-183.

Haseeb. (2016). Marketing Strategy of Gucci. Retrieved from http://marketingdawn.com/marketing-strategy-of-gucci

Jackson, T., & Haid, C. (2002). Gucci Group-the new family of luxury brands. International Journal of New Product Development and Innovation Management, 4(2), 161-172.

McCaffery, E. J., & Cohen, L. R. (2005). Shakedown at Gucci Gulch: The New Logic of Collective Action. NCL, Rev., 84, 1159.

CRUMP, C. F. (2019). Case Study: Decoding Gucci’s Merchandising Success. Retrieved from https://www.businessoffashion.com/articles/education/case-study-gucci-merchandising-strategy-trends

McCaffery, E. J., & Cohen, L. R. (2005). Shakedown at Gucci Gulch: The New Logic of Collective Action. NCL, Rev., 84, 1159.

Li, Z. Investigation of Luxury Fashion Brand Extension in Catering Services in China–A Case Study of Vivienne Westwood and Gucci in Shanghai.