Become one of the leading luxury groups providing excitement and glamour to a global heterogeneous customer base. Young, creative and hedgy designers allows Gucci to deliver such vision.
The luxury sector, where the Gucci group is operating, is a market where brand, product and the intangible benefit associated to the brand are key success factors (KSF). The economic slowdown represents a potential threat to the group, which has poorly performed in some of its brands, and has maintained profitability by focusing on emerging markets (BRIC), which are the most likely to be affected by the economic cycle. Given the scenario ahead the management is in the process of deciding its marketing strategy. The options in the table are essentially two. Adopting a more diversified approach (LVMH multi-brand strategy), or continuing developing strong individual brands serving different niche / customer base under the same umbrella company. Vital to the success of the group is the rapid adoption of a clear marketing and investment strategy around its flagship brands. The luxury sector is highly sensitive to the economic cycle and the potential losses in an economic downturn can be considerable given the high level of promotion required to maintain brand equity.
The Group is facing an uncertain economic scenario which is challenging the profitability of its flag ship brands, in the middle of a restructuring process started in 2004, when the icon designer of Gucci (the brand) and is CEO have both left the company for incompatibility with the new management.
Corporate objectives (5 years)
Reestablish brand equity and image is vital for the group representing top-notch brands with a long life history of success, innovation and creativity within their distinct brand character.
Business / Functional Objectives (Specific, Measurable, Achievable, Relevant, Time bound) •
Reduce business concentration risk in terms of sales and EBITDA to a 25-30% cap on each product (leather goods is in 2007 around 55% and it has been growing from 2003) within 5 years. •
Maintain a widespread geographic allocation of sales to reduce the impact of any region specific risk, including geo-political and economic risks (particularly currency risk for Luxury). •
Restructure the loss generating brand, bringing the operating margin to positive within 2 years (ambitious but necessary given the fast paced challenging market)
Some back-ground consideration relevant for deciding the marketing strategy
The first decade of the 21st century has seen the creation of large group operating in the fashion industry, with some players adopting a multi-brand diversified portfolio strategy (LMVH is a luxury conglomerate), while others have decided to maintain a focus strategy around its brand identity, building and expanding the brand into different segments to drive growth (Dolce & Gabbana, Prada and many others have expanded their presence in perfumes, accessories, etc).
Star brands such as Gucci have built their brand image around its creative director reputation. The strong association between the brands and the designer can make the brand vulnerable to its flagship designer future. As an example, few years before, the murder of Gianni Versace has drowned the Versace group into problem, to which the management has never been able to react successfully.
The luxury and the fashion industry are changing rapidly and completely. For example in the 50-60’s l’haute couture was a product for an elite. The accessible fashion world was clearly separated from top-designer. Both product and customer were completely different with no overlapping. In the last decade, the separation between these extremes world seems to have fallen apart. For example top fashion house designer Karl Lagerfeld (Chanel) had designed a line for H&M few years ago, against traditional...
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