Gucci Group: Case Analysis
... Initially attempting to takeover Gucci in1994, Bernard Arnault of LVMH continuously offered unsolicited bids. With PPR’s intervention and consequently buying 67% Gucci stake and possible another 32% in 2004, the risks of competing with LVMH were alleviated. D. Synergies from major acquisition Will the big names in fashion that have been acquired by Gucci justify the expensive prices paid for? Since 1999’s acquisition of YSL Couture, YSL Beauté and other brands, Gucci are challenged to transform itself from a single brand company into a multi-brand luxury group. III. Recommendations A. Sustain efficient senior management team Inject a powerful and systematic senior management mechanism that will replace Tom and Dom and resume successful business operation in the shortest time frame. Gucci should find a new team that characterize a balanced allocation between business expertise and creative talents. B. Enhance the brand by building a multi-brand company Develop multi-brand strategy while exerting strict control over manufacturing, either by handling it directly or by outsourcing it to sub-contractors who are subject to strict, constant quality control. Besides, Gucci should continue to make sound acquisition and revamp some brands’ images. C. Avoid takeover risks by strong acquisition to rival competitors Improve competitive advantages by production differentiation, Internal Production and Global Presence. The former allows Gucci to manufacture its own goods while the latter will permit distributing its products through directly operated stores (DOS) from all over the world. They should also be proactive to takeover. D. Recommendation to Dom & Tom Tom: Several possibilities for this talented designer Go to another fashion brand and revamp it Start his own brand and co direct with Dom Going to entertainment industry: Hollywood director or actor Dom: Co-operate with Ford to run a new label or being a business consultant IV. Analysis A. Establishing an efficient senior management system Although it is doubtful that a new management team of Gucci could create new buzz for the group, the urgency is to minimize the destruction brought upon by the departure of De Sole and Ford. A new era of Gucci should start with a new management equipped with talented designers and experienced managers. The right synergy among those people is critical to Gucci’s future success. More important is to retain loyal customers and regain credibility through continuous efforts on Public Relation and communication in any forms. True, the bid-off of the dream team greatly destabilized the group’s performances, yet the future still lies in the Gucci brand name and image. The new team should take advantage of the competitive advantage and built up trust in the shortest time possible. B. Building a multi-brand luxury group When Do Sole and For took over senior management in 1994, they took a series measures to reorganize and reposition the company. The group's strategy to turn around the brand was to establish a successful leather goods and accessories business and to build a strong network of directly operated stores outside Europe. Measures taken that ensured a successful turn around included the following: Leadership: synergy between two legendary men Never has been a more perfect combination between a creative talent and a businessman with vision. Especially when the two showed great trust and mutual respect to each other. Ford and De Sole's symbiotic relationship, built not on romance but, as De Sole himself puts it, "on friendship respect and trust," created a fashion powerhouse. Combined company’s separated business operation together In 1995, the whole group was under the management of De Sole and a completed reporting system was established which greatly facilitated internal control and communication. Remaking the Gucci Brand Tom Ford successfully transferred Gucci from a dated classic image into a young, new, sexy fashion-oriented brand while maintaining its exclusive quality. Thus, Gucci became a urban status symbol. Pricing strategy was adjusted to offer more value to customers. At the same time, the management team was able to preserve Gucci’s luxury status by limiting brand extension. High investment in advertising was ensured by effective handling PR. On the part of design, Tom Ford was appointed the top creative designer who was responsible for collection and any other visual and external communication. He was reported to be made a Star. Efficient manufacturing and logistics Driven by focused customer data analysis and market forecast, Gucci also introduced highly flexible system that based upon skilled craftsmen, advanced technology and efficient logistics. Focus on Leather goods and strengthen relationships with suppliers Strengthened the network of DOS Conclusion: Luxury product companies are to a large extent depending on their brand. That’s why luxury products are competing on acquiring high-profile brands. However, Gucci depended on single brand for long time, which is risky if the brand has trouble. Further more, the consistent image of a brand constraints its expansion to other market segment and product categories. The more brands a company owned, the less the company worries about consumers’ loyalty to a single brand. No matter what a certain consumer prefer, Gucci or YSL, the consumer chooses Gucci groups. Through acquisition of YSL, Gucci learns to enter other luxury goods sectors like cosmetics, promote the sharing of expertise among brands and balance different brands. Since 1999, with the support of its main shareholder PPR Gucci Group has been pursuing a strategy aimed at building up a multi-brand luxury group from the Gucci single-brand business. In this context, between March 1999 and the middle of 2001, Gucci acquired eight prestigious brands , each of which has its own market share and specific features. C. Synergize YSL and YSL Beaute Domenico De Sole once said:” We believe Yves Saint Laurent is one of the really great trademarks, and our goal is to achieve the same financial success with YSL that we have achieved with Gucci." The acquisition from YSL brought opportunities as to greatly extend the company’s luxury goods diversity and business. It has the following advantages: Strong potential revenue Existing customer base and suppliers Bring diversity and brand extension to the group However, YSL remains a big challenge for Gucci. In order to benefit from this expensive acquisition, Gucci should take measures to synergize YSL and YSL Beaute. 1. Revamp the image: When Gucci acquired YSL, YSL was criticized as “recycled pastiche of old fashion”. Gucci has experience on how to revive an out-of-date brand. Facing a more trendy-oriented industry and younger consumers, YSL should be more modern and trendy on base...