Gucci case history

Master Student um Copenhagen Business School
26. Nov 2014

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Gucci case history

  1. G U C C I Historically, fashion was viewed like movies. We made it a business. Domenico De sole – CEO of Gucci Group
  2. HISTORY 1923: Florence, leather goods 1930s: Mussolini, new material, canvas, producing small leather goods, wallets and belts 1953-1973: more shops in USA ,Europe, Japan
  3. HISTORY 1970s: an internal crisis wracked the firm 1980s: block venture and lawsuits flew back and forth
  4. WHAT DID DE SOLE DO? BEFORE DE SOLE AFTER DE SOLE Fake Gucci bags 900 employees 600 points of sale Too high prices Disorganized production and nightmare delivery No clarity to the direction of the company No cost controls No liquidity Conservative women About 15,000 products He fired 150 employees and hired new manager 194 points of sale Lowering prices on average by 30% Reorganization of production and distribution Quick decisions with discipline and focus Cost control High liquidity Modern, urban woman
  6. Substitutes Competition: (high) Luxury but not necessary Industry Rivalry: (high) Chanel, Hermés,Louis Vitton,Prada Suppliers (low) They rely on different suppliers Threat of Entry: (high) Various of brand , different trend every season PORTER’S FORCES Buyers : (high) Customers are easily switch their choices It depends on the relevance of distributors Complementarities : (low) Entertainment
  7. 2. WHICH CRITICAL MOVES ALLOWED DE SOLE TO REPOSITION GUCCI? OLD TARGET NEW TARGET Highly classic conception of women’s role in the society 40-50 y.o Upper class Family lady Multi-brands loyal Not price conscious Upper class 30-50 y.o Singles working women Readers of fashion magazine Change every season IMAGE MAKEOVER DE SOLE - FORD PARTNERSHIP The two men ran Gucci together, De Sole in managerial terms and Ford in creative ones. Trust and mutual respect were key factors in the Gucci turnaround.
  8. 2. WHICH CRITICAL MOVES ALLOWED DE SOLE TO REPOSITION GUCCI? Distribution DOS (from 65 to 126) DOS renovations,“clean, modern look” Closure of Duty free store As opposed to previous franchising and license agreement strategy PRICING Lowered priced by 30% to be on the same level as Prada and Vuitton, to target fashionable young women
  9. MANUFACTURING • Keep only best manufacturers and cut off the rest • Provide selected suppliers with technical and financial support • Outsource 95% of leather goods, keep • only exotic skins in-house • System based on 3 pillars: Skilled artisans, advanced technology and efficient logistics ADVERTISING • Doubled from 1993 to 1994 • expected to spend 250 million in 2000 • “Create an arresting image of the world you want to be a part of” • Tom Ford’s star status IMPROVED COMMUNICATION WITHIN THE COMPANY Manage Gucci as a coherent whole. The company used to operate on its own and no information was shared.
  10. 3. WHAT DO YOU THINK ABOUT THE ACQUISITION OF YSL AND SERGIO ROSSI? “If you really are an exclusive brand, you can’t grow beyond a certain point. Nobody knows where that point is, but there is a limit to the number of handbags you can sell for $1000. That’s the bottom line.” (De Sole) OPERATING MARGIN 1999 2000 2001 2002 21% 22.5% 22.5% 24.3%
  11. 4. HOW IS THE CURRENT COMPETITIVE POSITION OF GUCCI GROUP? 2008 2009 2013 4,2 billion (Business week) 41° “The Global 100 Brands” (interbrand) 278 directly operated stores $ 12,1 billion USD with a sales of $ 4,7 billion USD 38° most valuable brand ( Forbes) The Biggest-Selling Italian Brand ! 1999 2003 2008 2012 1.2 billion revenues 3.1 billion revenues 4.2 billion revenues 4.7 billion revenues
  12. INCREASE OF REVENUES 5000000 4500000 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 Revenues 1998 2003 2008 2012
  14. Thank you for your attention! Xueyang Chen Giuseppe Origo Stefania Stefanizzi Marika Torcitto Maria Paula Varela