Gucci Case

Topics: Gucci, LVMH, Luxury good Pages: 9 (904 words) Published: December 4, 2013
Group A
Anna Abrell, Lottie Batchelor, Ankita Choudhary, Yuou Du, Marianne Halmela, Martin Zirfas

Table of Contents
!
" Gucci’s strategy!
" The luxury goods sector!
" Gucci SWOT analysis!
" Strategic group analysis!
" Future predictions

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 experience most growth, whilst watch & cosmetics consumption has slowed (Bain & Company, 2013)

Geographic scope

USA, 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 2013
5-6% 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 of customer experience
- Retail management
- Talent within the company

!

The Luxury Goods Sector
Threat of new entrants
Low
Bargaining power of
suppliers
Medium - 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 very
high 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 relatively 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...
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