Luxury Good and Gucci

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Strategic Management – GUCCI CASE ANALYSIS

by
RKC MBA Student

Presented to Prof. David Duffill

Strategic Management
Robert Kennedy College, University of Wales

October 24, 2010

Word count: 4221
Table of content

1. Executive Summary3

2. Luxury Goods Market Overview & Competitive Positioning4

2.1 Luxury Goods Market – Key success Factors4
2.2 Luxury Goods Market – Competitive Position Mapping5 2.3 Luxury Goods Market – Best Positioned Players in 20007

3. Gucci’s position in Luxury Business – 1990 to 20009

3.1 Gucci in 19909
3.2 Gucci in 199410
3.3 Gucci in 200010
3.4 Critical Moves that repositioned Gucci11

4. Gucci’s Latest Strategic Moves13

4.1 Analyzing Gucci’s move using Ohmae’s Strategic Triangle13 4.2 Analyzing Gucci’s move using Porter’s Generic Strategies13 4.3 Analyzing Gucci’s move using Ansoff’s Corporate Strategy14

5. Recommended Move Forward Strategy15

5.1 Strategic Intent15
5.2 Strategic Assessment15
5.3 Proposed Gucci’s Strategy going forward16
5.3.1 Recommendations for Strategic Intent16
5.3.2 Recommended Strategic Actions16

6. Conclusion18

7. Bibliography19

Exhibits

Figure 1: Sales & Operating Margin in 1999 – Source: HBS Case 9-701-0374 Figure 2: Spread of Luxury Products – Source: HBS Case 9-701-0375 Figure 3: Luxury Company Positioning Matrix6
Figure 4: Luxury Company Competitive Assessment7
Figure 5: GUCCI in 1990 – Strength, Weakness, Opportunity & Threat (SWOT) Analysis9 Figure 6: GUCCI in 1994 - SWOT Analysis10
Figure 7: GUCCI in 2000 - SWOT Analysis11
Figure 8: Ohmae's 3C Model13
Figure 9: Porter's Competitive Advantage (source: Strategic Management, 2000. pg143)14 Figure 10: Ansoff's Corporate Strategy (Source: Strategic Management, 2000. pg 137)14 Figure 11: Strategic Assessment Framework. Source: Strategic Management, 2000. Pg 8315 Figure 12: Product Vs Brand Matrix16

Figure 13; Porter's Five Forces18

Executive Summary

The year is 2000, Gucci Group is at a cross road and its strategic decision at this juncture will define the future of the world’s fourth largest US$1.2 billion luxury group[1]. Gucci is a 77 years old group, established in 1923 in Florence selling luggage imported from Germany. It has transformed itself over the last 77 years and moved from a family owned entity to a public listed company. After 77 years of its existence, it now sells a wide range of luxury goods starting from leather goods, fragrance, cosmetics, shoes, watches, apparel, jewelry, silk ties & scarves etc. More importantly, what started as a single product, single brand company that was focused on small leather goods has now transformed itself into a multi-brand, multi-product group with worldwide presence through its recent acquisitions of Sergio Rossi and Sanofi Beauté.

Between 1991 through 1993, Gucci lost US$102 million[2], was strapped by cash constraints, and was unable to finance its own operations. 1993 also saw the end of the last Gucci family member’s control over the company and the brand and the company moved to Investcorp’s control. At that time, few would have thought that the total revamp of Gucci as a brand and its current industry leading position was possible. Gucci’s current management team has achieved exactly that in less than seven years. This significant turn around was a result of the recovery strategies adopted by De Sole and team, who revamped almost everything from products, pricing, marketing, distribution and logistics to the management committee. The leadership team believed that they needed to expand beyond the Gucci brand of products to grow the group’s top line further and this resulted in Gucci acquiring multiple brands. However, this multi-brand portfolio has posed a challenge to the current management structure in terms of managing it as independent brands. Establishing this structure and managing...
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