Gucci's marketing project by SHAZI

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Hailey College Of Banking & Finance Punjab University

GUCCI

Type

MARKETING RESEARCH

Subsidiary of PPR (Euronext: PP)

Industry

Consumer Goods

Founded

1921

Headquarters Key People

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Florence, Italy Guccio Gucci, Founder Patrizio di Marco, President & CEO, Frida Giannini, Creative director

Products

Clothing, watches, jewelry, shoes and leather goods

Revenue Parent Website

▲2.2 billion euro, at 31 December 2009 PPR www.gucci.com


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Submitted To:

Mr. Zargham Ullah Khan Submitted By:

 M. Shazib Nawaz (mi07bba051)  Rameez Hussain (mi07bba055)  Faisal Naseem Syed (mi07bba013)  Abdul Rehman (mi07bba062)


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Letter Of Transmissal


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Letter of Authorization


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Table of Contents

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Discription

Page #

1.

Features of Clothing

11

2.

Fashion

13

8


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Brand

16

4.

Luxury Goods Industry

22

5.

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6.

Introduction

27

7.

History

29

8.

Company Profile

33

9.

GUCCI Group

35

10.

BCG Matrix

37

11.

Vission

40

12.

Mission

42

13.

Board of Directors

44

14.

Miscellaneous Facts

47

15.

Marketing Strategies

49

16.

Strategic Management Process

52

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Objectives

55

18.

GUCCI’s New Era

58

19.

GUCCI’s Value Chain

60

20.

Marketing Mix

62

21.

Marketing Research

75

22.

SWOT Analysis

77

23.

Research Approach

82

24.

Limitations

84

25.

Recommendations

86

26.

Conclusion

89

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CLOTHING (Feature of all Human Societies)


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CLOTHING (Feature of all Human Societies)

A feature of all modern human societies is the wearing of clothing, a category encompassing a wide variety of materials that cover the body. The primary purpose of clothing is functional, as a protection from the elements. Clothes also enhance safety during hazardous activities such as hiking and cooking, by providing a barrier between the skin and the environment. Further, clothes provide a hygienic barrier, keeping toxins away from the body and limiting the transmission of germs. Clothing performs a range of social and cultural functions, such as individual, occupational and sexual differentiation, and social status. A uniform, for example, may identify civil authority figures, such as police and military personnel, or it may identify team, group or political affiliations. In many societies, norms about clothing reflect standards of modesty, religion, gender, and social status. Clothing may also function as a form of adornment and an expression of personal taste or style. Throughout history, many materials have been used for clothes. Materials have ranged from leather and furs, to weave and woven materials, to elaborate and exotic natural and synthetic fabrics. Recent scientific research estimates that humans have been wearing clothing for as long as 650,000 years. Others claim that clothing probably did not originate until the Neolithic Age (the "New Stone Age"). Articles carried rather than worn (such as purses), worn on a single part of the body and easily removed (scarves), worn purely for adornment (jewellery), or those that serve a function other than protection (eyeglasses), are normally considered accessories rather than clothing.


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FASHION

FASHION Hailey College Of Banking & Finance Punjab University

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Fashion, a general term for the style and custom prevalent at a given time, in its most common usage refers to costume or clothing style. The more technical term, costume, has become so linked in the public eye with the term "fashion" that the more general term "costume" has in popular use mostly been relegated to special senses like fancy dress or masquerade wear, while the term "fashion" means clothing generally, and the study of it. This linguistic switch is due to the fashion plates which were produced during the Industrial Revolution, showing the latest designs. For a broad cross-cultural look at clothing and its place in society, refer to the entries for clothing, costume and fabrics. An important part of fashion is fashion journalism. Editorial critique and commentary can be found in magazines, newspapers, on television, fashion websites, social networks and in fashion blogs. At the beginning of the 20th century, fashion magazines began to include photographs of various fashion designs and became even more influential on people than in the past. In cities throughout the world these magazines were greatly sought-after and had a profound effect on public clothing taste. Talented illustrators drew exquisite fashion plates for the publications which covered the most recent developments in fashion and beauty. Perhaps the most famous of these magazines was La Gazette du Bon Ton which was founded in 1912 by Lucien Vogel and regularly published until 1925 (with the exception of the war years).

Vogue, founded in the US in 1892, has been the longest-lasting and most successful of the hundreds of fashion magazines that have come and gone. Increasing affluence after World War II and, most importantly, the advent of cheap color


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printing in the 1960s led to a huge boost in its sales, and heavy coverage of fashion in mainstream women's magazines - followed by men's magazines from the 1990s. Haute couture designers followed the trend by starting the ready-to-wear and perfume lines, heavily advertised in the magazines, that now dwarf their original couture businesses. Television coverage began in the 1950s with small fashion features. In the 1960s and 1970s, fashion segments on various entertainment shows became more frequent, and by the 1980s, dedicated fashion shows like Fashion-television started to appear. Despite television and increasing internet coverage, including fashion blogs, press coverage remains the most important form of publicity in the eyes of the fashion industry. However, over the past several years, fashion websites have developed that merge traditional editorial writing with user-generated content. New magazines like iFashion Network, and Runway Magazine, led by Nole Marin from America's Next Top Model, have begun to dominate the digital market with digital copies for computers, iPhones and iPads. Sporting a different view, a few days after the 2010 Fall Fashion Week in New York City came to a close, Fashion Editor Genevieve Tax said, "Because designers release their fall collections in the spring and their spring collections in the fall, fashion magazines such as Vogue always and only look forward to the upcoming season, promoting parkas come September while issuing reviews on shorts in January." "Savvy shoppers, consequently, have been conditioned to be extremely, perhaps impractically, farsighted with their buying.


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BRAND

BRAND A trademark or distinctive name identifying a product or a manufacturer. OR


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A brand is a name for or a trademark claimed for a certain product or service by either an individual or a company. A brand helps others know and identify the product or service. OR

A brand is a name or symbol used to identify the source of a product. When developing a new product, branding is an important decision. The brand can add significant value when it is well recognized and has positive associations in the mind of the consumer. This concept is referred to as brand equity.

Brand Equity: Brand equity is an intangible asset that depends on associations made by the consumer. There are at least three perspectives from which to view brand equity: 

Financial - One way to measure brand equity is to determine the price premium that a

brand commands over a generic product. For example, if consumers are willing to pay $100 more for a branded television over the same unbranded television, this premium provides important information about the value of the brand. However, expenses such as promotional costs must be taken into account when using this method to measure brand equity.  Brand extensions - A successful brand can be used as a platform to launch related products. The benefits of brand extensions are the leveraging of existing brand awareness thus reducing advertising expenditures, and a lower risk from the perspective of the consumer. Furthermore, appropriate brand extensions can enhance the core brand. However, the value of brand extensions is more difficult to quantify than are direct financial measures of brand equity. 

Consumer-based - A strong brand increases the consumer's attitude strength toward

the product associated with the brand. Attitude strength is built by experience with a product. This importance of actual experience by the customer implies that trial samples are more effective than advertising in the early stages of building a strong brand. The consumer's awareness and associations lead to perceived quality, inferred attributes, and eventually, brand loyalty. Strong brand equity provides the following benefits:



 Facilitates a more predictable income stream. Increases cash flow by increasing market share, reducing promotional costs, and allowing premium pricing.  Brand equity is an asset that can be sold or leased.


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However, brand equity is not always positive in value. Some brands acquire a bad reputation that results in negative brand equity. Negative brand equity can be measured by surveys in which consumers indicate that a discount is needed to purchase the brand over a generic product.

Building and Managing Brand Equity In his 1989 paper, Managing Brand Equity, Peter H. Farquhar outlined the following three stages that are required in order to build a strong brand:

1. Introduction - introduce a quality product with the strategy of using the brand as a

platform from which to launch future products. A positive evaluation by the consumer is important.

2. Elaboration - make the brand easy to remember and develop repeat usage. There should be accessible brand attitude, that is, the consumer should easily remember his or her positive evaluation of the brand.

3. Fortification - the brand should carry a consistent image over time to reinforce its place

in the consumer's mind and develop a special relationship with the consumer. Brand extensions can further fortify the brand, but only with related products having a perceived fit in the mind of the consumer.

Alternative Means to Brand Equity Building brand equity requires a significant effort, and some companies use alternative means of achieving the benefits of a strong brand. For example, brand equity can be borrowed by extending the brand name to a line of products in the same product category or even to other categories. In some cases, especially when there is a perceptual connection between the products, such extensions are successful. In other cases, the extensions are unsuccessful and can dilute the original brand equity. Brand equity also can be "bought" by licensing the use of a strong brand for a new product. As in line extensions by the same company, the success of brand licensing is not guaranteed and must be analyzed carefully for appropriateness.

Managing Multiple Brands


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Different companies have opted for different brand strategies for multiple products. These strategies are: 

Single brand identity - a separate brand for each product. For example, in laundry

detergents Procter & Gamble offers uniquely positioned brands such as Tide, Cheer, Bold, etc.



Umbrella - all products under the same brand. For example, Sony offers many different product categories under its brand.



Multi-brand categories - Different brands for different product categories. Campbell Soup Company uses Campbell's for soups, Pepperidge Farm for baked goods, and V8 for juices.



Family of names - Different brands having a common name stem. Nestle uses Nescafe, Nesquik, and Nestea for beverages.

Brand equity is an important factor in multi-product branding strategies.

Protecting Brand Equity The marketing mix should focus on building and protecting brand equity. For example, if the brand is positioned as a premium product, the product quality should be consistent with what consumers expect of the brand, low sale prices should not be used compete, the distribution channels should be consistent with what is expected of a premium brand, and the promotional campaign should build consistent associations.

Brand Image Images evoked by exposure to a named brand Like brand personality, brand image is not something you have or you don't! A brand is unlikely to have one brand image, but several, though one or two may predominate. The key in brand image research is to identify or develop the most powerful images and reinforce them through subsequent brand communications. The term "brand image" gained popularity as evidence began to grow that the feelings and images associated with a brand were powerful purchase influencers, though brand recognition, recall and brand identity. It is based on the proposition that consumers buy not only a


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product (commodity), but also the image associations of the product, such as power, wealth, sophistication, and most importantly identification and association with other users of the brand. In a consumer led world, people tend to define themselves and their Jungian "persona" by their possessions. According to Sigmund Freud, the ego and superego control to a large extent the image and personality that people would like others to have of them. Good brand images are instantly evoked, are positive, and are almost always unique among competitive brands. Brand image can be reinforced by brand communications such as packaging, advertising, promotion, customer service, word-of-mouth and other aspects of the brand experience. Brand images are usually evoked by asking consumers the first words/images that come to their mind when a certain brand is mentioned (sometimes called "top of mind"). When responses are highly variable, non-forthcoming, or refer to non-image attributes such as cost, it is an indicator of a weak brand image.


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The Luxury Goods Industry


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The Luxury Goods Industry


GUCCI Definition

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The Luxury Goods industry is defined by the personal consumer goods positioned in the high end of the market. Luxury products transcend product functionality. Traditionally, the Luxury Goods industry has been associated with French families and designers, still represented by the Comité Colbert1, but it is becoming a global industry. The main characteristics of luxury goods are:  A strong branding that relates to an exclusive and wealthy lifestyle.  High quality, especially in terms of design.  Premium pricing. The luxury brand is perceived as being exclusive (82% of consumers), high quality (80%), stylish (75%) and extravagant (65%). Only 55% perceive it as lasting and only 51% perceive it as expensive.

Market segmentation

Total sales in 1999/2000 amounted to USD 60 to 80 billion. The market growth has been 6.3% between 1996 and 1999, and is supposed to be 7-10% between 1999 and 2003. The market can be divided into different business segments and geographical areas. Hailey College Of Banking & Finance

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Business segments

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The market is divided among:  Fragrance and cosmetics (24 to 37% of the luxury goods, depending on estimates)  Ready-to-wear and fashion (14-30%)  Leather and shoes (13-16%)  Watches and jewellery (8-32%)  Wines and spirits (15-22%)  Tables wear (4-5%)  Accessories (5-9%)

Geographical segments

The market is divided into 3 geographical areas: in 1999, USA accounted for 30%, Europe for 34%, and Asia for 36% (increasing to 60% if we include purchases abroad by Asian tourists).

Growth drivers of the global luxury goods industry  The socio-demographic changes (growth of the professional women segment and trend towards single households)  The world economy and the global wealth (economic slowdown and crisis like September 11 affect the industry as consumer confidence vanishes and travelling activities decrease)  Exchange rates and fluctuations (high dependency on sales to Asian tourists make industry vulnerable to exchange rate Hailey College Of Banking & Finance Punjab University

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Asian tourists especially Japanese, take advantage of luxury goods prices which are significantly lower than in their home countries. Louis Vuitton, for example, sells 40% of its output to Asian tourists. Economic slowdown has a major impact on the luxury goods industry, since consumption of luxury goods are highly independent on consumer confidence. However, high-end classic brands are usually less affected than inspirational or fashion brands due to their wealthier client base; for which luxury goods remain affordable. The travel retail represents around 40% of the Luxury Goods sales. Therefore, a decrease in the travel industry has a direct negative impact on the sales. So the Gulf crisis, the Asian crisis, and ultimately Sept. 11 have badly hit the market. As global wealth is increasingly linked to stock market strength, a crisis in the financial markets affects the luxury goods industry.


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INTRODUCTION

INTRODUCTION Hailey College Of Banking & Finance Punjab University

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The House of Gucci, better known simply as Gucci, is an Italian fashion and leather goods label, part of the Gucci Group, which is owned by French company Pinault-Printemps-Redoute (PPR). Gucci was founded by Guccio Gucci in Florence in 1921.

Gucci generated circa €2.2 billion worldwide of revenue in 2008 according to BusinessWeek magazine and climbed to 41st position in the magazine's annual 2009 "Top Global 100 Brands" chart created by Interbrand. Gucci is also the biggest-selling Italian brand in the world. Gucci operates about 278 directly operated stores worldwide (at September 2009) and it wholesales its products through franchisees and upscale department stores.

HISTORY


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HISTORY


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Like many other high-fashion companies, Gucci began as a small, family-owned saddlery and leather goods store. Guccio Gucci was the son of an Italian merchant from the country’s northern manufacturing region. As a young man, he travelled to Paris and London, where he gained an appreciation of cosmopolitan culture, sophistication, and aesthetics. Gucci opened his first boutique in the family’s native Florence in 1921 and quickly built a reputation for quality, hiring the best craftsmen he could find to work in his atelier. In 1938, Gucci expanded and a boutique was opened in Rome. Guccio was responsible for designing many of the company's most notable products. In 1947, Gucci introduced the bamboo handle handbag, which is still a company mainstay. During the 1950s, Gucci also developed the trademark striped webbing, which was derived from the saddle girth, and the suede moccasin with a metal bit. Guccio and his wife Aida Calvelli had a large family, six children in all, though only his sons —Vasco, Aldo, Ugo, and Rodolfo—would play a role in leading the company. After Guccio's death in 1953, Aldo helped lead the company to a position of international prominence, opening the company’s first boutiques in London, Paris and New York. Even in Gucci’s fledgling years, the family was notorious for its ferocious infighting. Disputes regarding inheritances, stock holdings, and day-to-day operations of the stores often divided the family and led to alliances. As the Gucci expanded overseas, board meetings about the company’s future often ended with tempers flaring and luggage and purses flying. Gucci targeted the Far East for further expansion in the late 1960s, opening stores in Hong Kong and Tokyo. At that time, the company also developed its famous GG logo (Guccio Gucci's initials), the Flora silk scarf (worn prominently by Hollywood actress Grace Kelly), and the Jackie O shoulder bag, made famous by Jackie Kennedy, the wife of U.S. President John F. Kennedy.

Gucci remained one of the premier luxury goods establishments in the world until the late 1970s, when a series of disastrous business decisions and family quarrels brought the company to the verge of bankruptcy. At the time, brothers Aldo and Rodolfo controlled equal 50% shares of the company, though Aldo felt that his brother contributed less to the company than he and his sons did. In 1979, Aldo developed the Gucci Accessories Collection, or GAC, intended to bolster the sales for the Gucci Parfums sector, which his sons controlled. GAC consisted of small accessories, such as cosmetic bags, lighters, and pens, which were priced at considerably lower points than the other items in the company’s accessories catalogue. Aldo relegated control of Parfums to his son Roberto in an effort to weaken Rodolfo’s control of the overall operations of the company. Though the Gucci Accessories Collection was well received, it proved to be the destabilizing force that brought the Gucci dynasty crashing down. Within a few years, the


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Parfums division began outselling the Accessories division. The newly-founded wholesaling business had brought the once-exclusive brand to over a thousand stores in the United States alone with the GAC line, deteriorating the brand’s standing with fashionable customers. "In the 1960s and 1970s," writes Vanity Fair editor Graydon Carter, "Gucci had been at the pinnacle of chic, thanks to icons such as Audrey Hepburn, Grace Kelly, and Jacqueline Onassis. But by the 1980s, Gucci had lost its appeal, becoming a tacky airport brand."

It didn’t take long before counterfeiters ravaged the company’s pomp by flooding the market with cheap knockoffs, further tarnishing the Gucci name. Meanwhile, infighting was taking its toll on the operations of the company back in Italy: Rodolfo and Aldo squabbled over the Parfums division, of which Rodolfo controlled a meager 20% stake. By the mid1980s, when Aldo was convicted of tax evasion in the United States by the testimony of his own son, the outrageous headlines of gossip magazines generated as much publicity for Gucci as its designs. Rodolfo’s death in 1983 caused a major shakeup in the company when he left his 50% stake in Gucci to his son, Maurizio Gucci. Maurizio allied with Aldo’s son Paolo to gain control of the Board of Directors and established the Gucci Licensing division in the Netherlands for tax purposes. (This action would later have a drastic impact on the outcome of the company’s dispute with the world’s largest luxury goods company, LVMH Moët Hennessy Louis Vuitton.) Following the decision, the rest of the family left the company and, for the first time in years, one man was at the helm of Gucci. Maurizio sought to bury the fighting that had torn the company and his family apart and turned to talent outside of the company for Gucci’s future.


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Company Profile


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Company Profile

Gucci Group is one of the world’s leading multi-brand luxury goods companies. Thanks to a clear strategies and a set of unique competitive advantages, the group has developed and strengthened a prestigious brand portfolio, broad product range and extensive geographical presence worldwide. The Group’s well balanced brand portfolio includes prestigious and clearly identified luxury brands with a distinctive, specific role. Gucci Bottega Veneta and Yves Saint Laurent are the engines of organic growth. Boucheron offers complementary expertise in segments like jewellery and watches. Balenciaga, Stella McCartney, Alexander McQueen and Sergio Rossi are cutting-edge brands with high potential for long-term growth. Gucci Group has successfully attracted the best creative talents, who are now recognized as rising stars. Frida Giannini at Gucci, Tomas Maier at Bottega Veneta, Stefano Pilati at Yves Saint Laurent and Nicolas Ghesquiere at Balenciaga have perfectly interpreted the essence of their brands, keeping their heritage alive with a contemporary mood. Designers like Alexander McQueen, Stella McCartney and Francesco Russo at Sergio Rossi have set the trends with the cutting-edge styles. The Group creates and distributes high quality luxury goods including ready-to-wear, handbags, luggage, small leather goods, shoes, timepieces, jewellery, ties and scarves. Also, under license from global industry leader, eyewear and fragrances, cosmetics and skin care products. This vast product range and the sharing of specific expertise among the various brands are one of the Group’s greatest assets and a source of organic growth. The carefully controlled development of an integrated distribution network with a sound geographical basis has been a key strategic focus of Gucci Group. As of the end of 2009, the group directly operates 609 stores in major markets throughout the world and wholesale products through franchise stores, duty free boutiques and leading department and specialty stores. Gucci Group is owned by PPR , a global player in retail and luxury goods.


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Gucci Group

Gucci Hailey College Of Banking & Finance Group Punjab University

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Brands under Gucci Group  Gucci  Bottega Veneta  Yves Saint Laurent  Boucheron  Bedat & Co  YSL Beaute  Balenciaga  Stella McCartney  Alexander McQueen  Sergio Rossi


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BCG Matrix Of Gucci Group

BCG Matrix Of Gucci Group Hailey College Of Banking & Finance Punjab University

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As the Creative Director for both brands at Gucci and YSL, Tom Ford has the challenge to create a distinctive image for both brands. The first fashion shows for YSL by Tom Ford were reported to be a cheaper version of Gucci. This creates a huge problem, as the fashion shows contribute largely to create the image required to generate big sales in the high-margin accessories associated with that image, such as handbags, eyeware, watches, perfumes and cosmetics. Hence, a key challenge will be to keep the new YSL look distinct within the growing Gucci empire. Ford is trying to address this, and has presented the following image differentiation to the press which was perceived with confidence by Business Week: “the YSL brand is starting to recapture its star allure”. We believe however that the problem shall not be resolved entirely as Gucci Group integrates more and more brands. Brand positioning shall be key, and keeping Chinese walls between them will reveal a challenge to the new conglomerate. Additionally, front-office synergies here are almost impossible as a blurring perception might result for clients.


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VISION

VISION


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Gucci Group strives to

attract, hire, motivate, and retain the best talent in order to achieve excellence in all aspect of businesses.


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MISSION

MISSION Hailey College Of Banking & Finance Punjab University

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 “The price is forgotten long after the quality remains.”

&



“To achieve profitable growth, while pursuing international expansion in a spirit of achievement and creativity.”

BOARD OF DIRECTORS


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BOARD OF DIRECTORS

Frida Giannini: Creative Director Frida Giannini’s unique talent and modern vision have fueled her rise as the leading creative force behind one of the world’s most celebrated fashion houses.


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Born in Rome in 1972 to an architect father and art history professor mother, Giannini

studied fashion design at Rome’s Fashion Academy before apprenticing in a small ready-towear house. In 1997, she went to Fendi where she worked as a ready-to-wear designer for three seasons before being named designer for Fendi leathergoods. In September 2002 she joined Gucci as Handbag Design Director. Two years later she was appointed to a newly created post, Creative Director of Accessories, where she assumed unprecedented control of bags, shoes, luggage, small leathergoods, silks, fine jewelry, gifts, watches as well as eyewear. Giannini flourished in this expanded role, and brought a powerful new perspective to Gucci’s accessories collections. Using the Gucci archives as a starting point, she transformed house classics such as the Flora scarf pattern and equestrian iconography into novel and hugely successful designs. In 2005, she was named Creative Director of Gucci Women’s ready-to-wear, in addition to her responsibility for all accessories. In 2006, she took over menswear, thus rising to sole Creative Director of the label.

Robert Polet: President and CEO Robert Polet has been President and Chief Executive Officer and Chairman of the Management Board of Gucci Group, the world’s third largest luxury goods, since July 2004. Mr. Polet joined Gucci Group in 2004 after a 26 year career in Unilever, bringing considerable global management experience and an in-depth knowledge of the development of the consumer brands in a multicultural environment.

Karen Lombardo: Executive VP Global Human Resources Karen Lombardo has been Executive Vice President Global Human Resources since October 2004.


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Based in London, Ms Lombardo is responsible for Global HR strategy including Mobility, Leadership development and compensation philosophy and often travels through all the group locations according to divisions’ needs.

Karen Lombardo joined Gucci Group America in 1985 and since then has played an instrumental role in development of the Human Resource function. Ms Lombardo covered different roles becoming Vice President of Human Resources of Gucci Group America, where she was responsible for the integration of all levels of employees from acquired brands as the Gucci Group transformed itself into a multi-brand luxury goods company.

Alexis Babeau: Gucci Group Chief Operating Officer Gucci Group Chief Operating Officer since January 2009, Alexis Babeau joined Gucci Group in 2004 as Group Chief Financial Officer and was appointed Director of Strategy and Acquisitions in 2007.

Miscellaneous Facts


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Miscellaneous Facts

•

Majority of products are manufactured in the Florence region.

• Top international markets  Asia Hailey College Of Banking & Finance Punjab University

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 Europe •

Asian culture and lifestyle encourages luxury brand purchases.

Marketing Strategies Hailey College Of Banking & Finance Punjab University

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Marketing Strategies Marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. A marketing strategy should be centered around the key concept that customer satisfaction is the main goal. A marketing strategy can serve as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: "Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer's interaction with the low-cost product or service." A strategy consists of a well thought out series of tactics to make a marketing plan more effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives. Plans and objectives are generally tested for measurable results.


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A marketing strategy often integrates an organization's marketing goals, policies, and action sequences (tactics) into a cohesive whole. Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations can be orchestrated. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each one group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable. Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned. The industry is more a pull than a push industry, explaining the large amount of money invested in advertising (corporate or product specific level). On average, Gucci goods industry spends more than 7% of its sales in advertising. Gucci Group reiterated its strong belief in the control of the distribution channel and the development of DOS: “The idea here is to control [the brand] to within an inch of its life, from creation to production to distribution”. Gucci sends investigators into stores to keep legitimate other brands under Gucci group out of discounters.

As with the revival of Gucci, de Sole and Ford strongly believe in directly operated stores to revive the brand and with the “dismember in order to rebuild” approach. “De Sole plans to spend $20 million a year on marketing and real estate” with heavy investment planned in new boutiques: new flagships shops are planned for Beverly Hills, New York, London, Hong Kong and Milan. A detailed analysis of the actions that Domenico de Sole and Tom Ford undertook to turn around Gucci shows that they have created a strategy and a process to execute this strategy that not only enabled them to compete with the large luxury


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goods conglomerates such as LVMH, and Richemont, but actually to outperform them on several counts, including stock performance and compound growth.

In particular, we believe that they have achieved an extreme high-level of competence in several areas, which combined have created their unique competitive advantage.

STRATEGIC MANAGEMENT PROCESS Hailey College Of Banking & Finance Punjab University

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STRATEGIC MANAGEMENT PROCESS

The word Strategy means "to make plan for the right way, path or direction" while the word Management means "to organize the things in a required or desired way". So the word strategic management means "a process to organize the business on a right path to get profit and glory from the scared resources." The term strategic management refers to the managerial process of making the long term decisions, prediction about the business future position along with the sense of purposeful action plan.

In more simple words the strategic management is a managerial process of making strategies towards organizational objectives and evaluating the performance of employees and adjustments according to the requirements of the department to get best possible result from the formatting strategy.

Some of the purposes of strategic management are: 1. To provide the better and up-to-date information about the organization's current position and to predict where can be the organization stand in future. 2. To make managers and organizational members more alert about the opportunities and threatening development in their corresponding field. 3. To help the entrepreneur to unify its managerial and organizational efforts.


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5. To promote the development of a constantly evolving business model. 6. To provide the opportunities to managers for evaluating the company's budget according to the situation.

Gucci Group has built a very solid base over the years to tighten its relationship with its suppliers, particularly in the fashion and leather goods segments. They have incentivized them both with capital and production tools. This creates much higher barriers to entry for a competitor wishing to subcontract to them than the current exclusivity agreements. Although the Italian model is to outsource this activity, we feel it is very close to a virtual vertical integration backwards, while providing flexibility to Gucci (very low barriers to exit, as investment can be considered as sunk costs). Gucci Group is also developing economies of scale buy using the same suppliers to develop different lines of products for different brands. Gucci is also building manufacturing capability in-house for crafts it did not master (fragrances and watches). Its current agreement with Wella on Fragrances is an issue, as it does not provide the right flexibility and economies of scale opportunities. However by building the capability in house it is probably developing both a bargaining power, and a second sourcing capacity for its other brands.


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OBJECTIVES


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OBJECTIVES 1. Strategic Objectives:  To continue to strengthen its leadership as a global luxury brand by reinforcing its positioning in historical and new markets and focusing on its core businesses  Take advantage of emerging markets such as China, India, New Delhi and Bangalore and to continue to develop an integrated distribution network with a well-conceived geographical basis.  Ensure revenue growth and profitability for the Group, and to assign a specific role to each brand within the Group, so as to maintain the consistency of their positioning in terms of market segments and product categories.  Remain exclusive; Gucci products are sold exclusively through a network of directly operated stores, or under exclusive Gucci franchises and in carefully selected department stores and specialty stores around the world  Make all products in Italy (except for watches which are made in Switzerland)  Continue to provide outstanding product quality  Maintaining creativity by employing the most talented and world renowned creative directors


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2. Financial objectives:

 By 2012 Gucci wants to double revenue and rebuild its brand's gross margin to nearly 70%.  Gucci Group plans to multiply its presence in the emerging market of India by 2010. By the end of 2008 there will be four stores and in three years they plan to double that number.  For the next three years Gucci wants to have 10% compound revenue growth each year.


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Gucci’s New Era

Gucci’s New Era Hailey College Of Banking & Finance Punjab University

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 New leadership  Revamping image (conservative vs. modern)  Price adjustments (Porter’s Demand Conditions)  Aggressive marketing campaign  Emergence of tourism as a major revenue stream (Porter’s Demand Conditions)  Revamping store layout to increase store sales (Porter’s Firm Strategy, Structure, and Rivalry)  Gucci provided training for its suppliers to ensure quality (Porter’s Factor Conditions)  Strong business relationship with shoes suppliers  Increased demand for luxury leather products which resulted in increased dependence on Italy’s leather market (Porter’s Related and Supporting Industries)

Value Chain Hailey College Of Banking & Finance Punjab University

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Value Chain


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Sourcing

Design

Manufacturing

Marketing

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Distribution


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Marketing

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Mix

Mix

In the latest Global Luxury Brands Survey, one in five global consumers said they would choose to buy Gucci (over any other luxury brand) if money was no option, making the Italian fashion brand that was revived by Tom Ford in the 1990’s the most coveted and


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inspirational luxury brand in the world today. 18% of South African Respondents said that they purchased Gucci, but in South Africa the most popular luxury brands are Diesel and DKNY. It must be noted that this survey is a reflection of internet users’ attitudes and therefore represents online consumers’ behaviour and attitudes only.

Globally, Chanel and Calvin Klein tied for second place in Nielsen’s 48-country online survey that was conducted in November 2007. In third place came Louis Vuitton, followed by Giorgio Armani, Christian Dior and Versace who all ranked forth. 28% of South Africans buy Calvin Klein, but the rest of these brands are less popular in our country, with only 8% of respondents saying that they buy Chanel and 4% buying Louis Vuitton. Two years ago in the same survey, Gucci shared top honors in the survey with Giorgio Armani – which has since slipped to fourth place in current global rankings. “It’s an incredible achievement for Gucci to remain at the top of the most coveted league table for luxury brands,” said Lennart Bengtsson, President Eastern Europe, Middle East & Africa (EEMEA), The Nielsen Company. “In the past two years, Gucci has managed to maintain and even increase its brand equity in a very competitive and fickle industry. They have achieved this by consistently embedding their core brand values in all their branded products, which range from perfume and sunglasses to accessories, jewellery, handbags and ready-to-wear fashion,” noted Bengtsson. According to the survey, if money was no object, 39% of South African consumers said they would choose Gucci.

The term "marketing mix" was first used in 1953 when Neil Borden, in his American Marketing Association presidential address, took the recipe idea one step further and coined the term "marketing-mix". A Hailey College Of Banking & Finance Punjab University

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prominent marketer, E. Jerome McCarthy, proposed a 4 P classification in 1960, which has seen wide use. The four Ps concept is explained in most marketing textbooks and classes. The duo designed the whole marketing mix, successfully changing the product mix, the pricing strategy, the promotion strategy and the distribution concept, introducing a unique Gucci approach to brand management.


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1. Product: A tangible object or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units. Intangible products are service based like the tourism industry & the hotel industry or codes-based products like cellphone load and credits. Typical examples of a Hailey College Of Banking & Finance Punjab University

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mass produced tangible object are the motor car and the disposable razor. A less obvious but ubiquitous mass produced service is a computer operating system. Packaging also needs to be taken into consideration. However, product has its life-cycle which result the growth will be stopped and started declined when market saturated. To retain its competitive in the market, product differentiation is required and is one of the strategy to differentiate from its competitors. The main idea for both managers was that the brand should be consistent all over the world, and convey the right image: “I wanted unity of style so that the customer who flies from Tokyo to Milan to New York will find the same image” – de Sole. One of the first measures was to slash unsuccessful product lines (a massive reduction in the range of leather products) and focus on quality. All manufacturing licenses were terminated and production was brought back to the Tuscany region, except for watches remaining in Switzerland. Franchises were granted exclusively to sectors where craftsmanship is required, such as perfumes (Wella has a 25 year contract). Finally the low-end products were slashed (although providing a very high margin) because of brand dilution: “don’t run after the last dollar”.

Additionally both de Sole and Ford understood that they could not rely on designer extravaganza, and very early on, introduced commercial considerations into their work: “in their world, value comes from a brand image more than form a designer’s artistry”. Ford was then instrumental in developing the Gucci new look. He dropped the old look of red and green stripes that had adorned every Gucci product since its creation, and shifted towards an ultra-chic black minimalist look, that Hailey College Of Banking & Finance Punjab University

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appealed to the fashion conscious clientele. He also understood that readyto-wear (originally 10% of sales) should be used as an entry product and image ambassador for the other much higher-margin products such as accessories (bags, ties, shoes, tableware and belts). Indeed, Ford created a mechanism to design a pipeline of new products, heavily using technology. Working from Los Angeles or London, he sent drawings electronically to Florence, were they were shaped in 3-D, then modified using cupboard models, and finally made into prototypes, again slashing both costs and new product development time.

Additionally, there is some evidence that he started to delegate part of the actual sketching to some 20 designers at Gucci and later to some additional 10 designers at YSL.


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2.Price: The price is the amount a customer pays for the product. It is determined by a number of factors including market share, Hailey College Of Banking & Finance Punjab University

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competition, material costs, product identity and the

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customer's perceived value of the product. The business may increase or decrease the price of product if other stores have the same product. Another measure applied immediately by de Sole was to reprice every single item in the product line, mainly downwards, to create a consistent positioning of the brand, taking into account the competitor landscape. He stressed the importance of bringing value to customers. Indeed de Sole was quoted on several occasions that it was stupid to try to chase the last dollar in sales if that created blurred perceptions and inconsistency with the clientele.


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3.Place: Place represents the location where a product can be purchased. It is often referred to as the distribution channel. It can include any physical store as well as virtual stores on the Internet. Place is not exactly a physical store where it is available Place is nothing but how the product takes place or Hailey College Of Banking & Finance Punjab University

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create image in the mind of customers. It depends upon the perception of customers.

De Sole is bullish in his ambition to control the distribution channel, for he believes that in order to deliver the right image to his clients, Gucci needs to control the whole supply chain from manufacturing to distribution where the brand image is finally conveyed to its clients. In order to create the same look and feel all over the world, Gucci closed or bought back all franchises and licensees, including airport duty-free shops, and shops in shops in large department stores. “I am in the process of reducing the number of upscale retailers that carry Gucci” – de Sole. He indeed closed down Gucci’s presence at Harrod’s in 1996, opening a new store back a year later. He also heavily promoted directly operated stores (DOS) in exclusive locations (Gucci Group: 67 self-owned stores in 1996, 124 in 1999). In 1999, all stores around the world were redesigned simultaneously , in order to impact the clientele worldwide simultaneously. And again de Sole went on annual tours to check consistency of brand guidelines and closing down stores several times if necessary.


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4. Promotion: It represents all of the communications that a marketer may use in the marketplace. Promotion has four distinct elements: advertising, public relations, personal selling and sales promotion. A certain amount of crossover occurs when promotion uses the four


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principal elements together, which is common in film promotion. Advertising covers any communication that is paid for, from cinema commercials, radio and Internet adverts

through print media and billboards. Public relations are where the communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conferences, seminars or trade fairs and events. Word of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum. Sales staff often plays an important role in word of mouth and Public Relations. We understand that the Gucci brand was not heavily advertised in the pre-de Sole years. In order to relaunch the new image imagined by Tom Ford, Gucci relied on the usual techniques for fashion: public relations and press advertising. The difference with the previous era was the emphasis on this tool. Indeed in 1994, “there wasn’t much money for advertising, so we decided to sink what we had into fashion which is a highly publicized business” – de Sole. The two Milan readytowear show in 1995 by Tom Ford were massive successes, and relaunched the brand into the forefront of the luxury goods field. Gucci also used public personalities to showcase its products and create press coverage, such as with Hollywood stars: Madonna, Tina Turner, Nicole Kidman. A massive global advertising campaign was then launched using the best fashion magazines: increasing from $6 million in 1993, to $28m in 1995 to $70 million in 1997, to $80m in 1998 (representing between 6 to 12% of sales).

Marketing Research Hailey College Of Banking & Finance Punjab University

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Marketing Research

During the late 1990’s, Gucci portrayed the characteristics of a firm with a differentiated business-level strategy. Gucci provides value to their customers with high quality luxury goods which consist of unique product features in relation to their rival competitors. One example of Gucci’s distinct quality is the prestigious image of their brand name using the famous “GG” logo on their items.


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Gucci is a successful firm in the luxury goods industry with many resources and

capabilities that differentiate them from other companies within the industry. The first resource is the management team of Gucci following the millions in losses during the early 1990’s. Two managers in particular are Dominco De Sole, head of Milan office, and Tom Ford who replaced Dawn Mello as creative director in 1994. The duo of Ford and Sole turned the company around from near-bankruptcy to a close rival with LVMH, the luxury goods powerhouse. The two of them possess an intangible resource to Gucci that is

valuable, rare, inimitable, and non-

substitutable. Ford and Sole are considered to be valuable to the firm because of their leadership and vision to make Gucci a global presence and rare because their management skills are unlike any other

firm in the luxury goods industry. What

makes the management team a sustainable capability is the difficulty for other firms to match their business strategy from financial decisions to marketing abilities. Another resource that Gucci has used to gain a competitive advantage is its glamorous fashion

sense that captures consumers all over the world. This

resource only has the valuable characteristic however its quality is very significant to the Gucci brand. It is not a sustainable

advantage because competitors also

use a brand logo to maintain a loyal customer base.


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SWOT Analysis Hailey College Of Banking & Finance Punjab University

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Gucci, being one of the premium brands, has to contend with a number of factors both internal and external in order to maintain its current status. The following is the analysis on Gucci’s strengths, weaknesses, opportunities and threats.

Strengths: The strength of Gucci is in its established, very strong brand image and international presence. Gucci has also the ability to control its distribution channels. This is part of Gucci’s defensive strategy in the chain value to capture the value added instead of giving it to the middlemen such as suppliers and retailers. Hailey College Of Banking & Finance Punjab University

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The company has also increased the number of their Directly Operated Stores (DOS) as part of the defensive strategy of taking more control of the distribution process. The 2003 figure showed that DOS accounted for 61.3% of revenues compared to a much lower 32.5% in 1999.

Its aggressive strategy accomplished through diversification and communication is also another of Gucci’s strengths. Gucci changed its strategy of carrying a single brand to branching out to a multi brand group. This strategy is also adopted by other conglomerates such as Louis Vuitton and Prada. Some luxury companies use the strategy of focusing only on one brand and add other business segments such as what Armani, Polo Ralph Lauren, and Versace did. This strategy is done in order to allow the positioning of the brand in the industry to differ depending on the number of brands and the number of business segments the company wants to compete in. This is the idea behind focus (mono brand) versus diversification (multi-brand). Gucci Group has more than 10 brands, including Gucci, Yves Saint Laurent, YSL Beauté and Sergio Rossi.

Weaknesses: The weaknesses of Gucci include instability in management and financial base. The instability of its management can affect the group’s corporate strategy and vision. The financial base is weak and alarming, with a long term debt increase from $17 million in 1998 to $143 million in 1999 and to $1.3 billion in 2003. Some brands in the Gucci group’s portfolio are still not profitable, and there is a need to promote and market them aggressively.


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Opportunities: Opportunities for Gucci abound especially in the emerging luxury markets in growing economies from Asia such as India and China. People who come from these places who recently amassed huge wealth due to the excellent performance of the economy would definitely want to try luxurious brands such as Gucci. There is opportunity in the consolidation of other brands too. The opportunity exists in creating competitive advantage in different business segments. There are various business segments Gucci can venture into should the need to expand and create more luxurious products arise.

Threats: The luxury goods carry premium products designed for very wealthy individuals. This demanding market spares on expense to get the best product in terms of quality, style and design. Price, therefore, is not a basis of competition in this kind of industry. Competition largely exists on how potent and valuable the brand image has become. This is the focus of Gucci’s thrusts. Its competitor Louis Vuitton may have made its mark in size with more than 50 luxury brands in its belt and sales of 12.6 billion euros in 2004 alone but it is not exactly the single dominant player in the market. This is because in the luxury products market, companies can carry several brands and business segments which could change their positions depending on the segments such as leather & shoes, cosmetics, jewelry & watches, wine and spirits and others. Competition is also effectively minimized by the intense rivalry of established luxury goods. New firms would definitely find it next to impossible to penetrate such an exclusive market. The cost of maintaining and promoting this image are also prohibitive. Companies are forced to invest huge money in brand promotions in order to maintain their image. Expenses such as advertising and marketing expenses, acquisition of competitors,


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control of the distribution channel and other strategies take the bulk of company’s operating budget.

The barriers to exit in this industry are low which means that survival is for the fittest. If the company cannot compete with other players in the industry then it has to fold or sell to other bigger firms which make exit quite easy and quick. In this industry, the barriers to entry are really high and the barriers to exit are low, therefore only the select few can maintain their position in the market, while others could give up altogether or are bought by bigger firms. Also, luxury goods do not have direct substitutes like other ordinary goods but the threat could come from imitation. Counterfeits often penetrate the market. This could take away a portion of the sales that should go to luxury goods companies. There is also the threat of substitutes to contend with. These are products that are considered ordinary or the medium brands but can eventually expand their product lines to premium brands in the future such as Zara and Gap. Internal threat could also come from French holding company Pinault-Printemps-Redoute (PPR) who currently owns 68% of Gucci’s stocks.

Research Approach Hailey College Of Banking & Finance Punjab University

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Research Approach

The undergone work has been done particularly under the guidance of our Teacher Zargham Ullah Khan saab and further approaches adopted for Hailey College Of Banking & Finance Punjab University

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GUCCI 2 it’s gathering, altering and completion according to certain methods like Online methodology i.e. net surfing, field work i.e. interviews from GUCCI customers and questionnaires from it’s administration and done under strict and careful guidelines.

Limitations Hailey College Of Banking & Finance Punjab University

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Limitations

 As there are no official outlets of GUCCI in Pakistan, that’s why we can’t have market research.  There were difficulties in finding the marketing strategies of GUCCI.  We were thinking to deliver presentation while operating the official website of GUCCI but we can’t do it, due to limitations @ Hailey College. Hailey College Of Banking & Finance Punjab University

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 Our required lighting setup is not available in classroom.  We have tried to become a permanent member (customer) of GUCCI Group (because they reveal certain hidden facts only to their permanent customers) but we can’t do that because the registration fees is 200$.

“Otherwise the overall the work criteria were interesting & there was a lot of learning margin……”

Recommendation s Hailey College Of Banking & Finance Punjab University

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Recommendations  We recommend that the company: 





Reactivate its image generator.

Emphasize the quality of raw material procurement.

Control quality by keeping an integrated manufacturing process, making it a core Hailey College Of Banking & Finance

Punjab University

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GUCCI 6 competence that will give it a competitive edge. It should of course not manufacture for competitors in case of excess capacity. Recreate a very strong interdependence between the marketing of the Perfume and the image creator’s business to avoid any divergence and create synergies between two activities. 





Revitalize the virtuous cycle by a push strategy.

Control distribution to have a scrupulous

respect and coherence of the brand image”.

 Increase sales by fully exploiting core segment and broadening its geographic reach.


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 Build a distinctive strong brand (differentiation).

Conclusion Hailey College Of Banking & Finance Punjab University

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Conclusion The formula used by Gucci in the marketing of its luxury goods has remained unchanged for the better part of fifty years. The focus still remains on the customer and the loyalty he has towards the Gucci product. Because the luxury goods market falls well outside the normal boundaries of hierarchical needs, the product range find itself in the sector of noneconomic influences. Gucci has come to terms with this in the very early stages of development, and has marketed the prestige and expensive way of life that Gucci has to offer. Hailey College Of Banking & Finance Punjab University

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The product design, quality and brand name has become synonymous with the elite, and will continue to do so because of the well maintained distribution of its products throughout the world.

The Gucci Company should primarily look at the market development and concentrate on new development within existing markets or possibly new markets that carry the status and appeal suitable to the Gucci brand. The Asian luxury goods market is a definite new market to consider, and definite growth can come from the new stores recently opened in Japan.

We got calculated that although there are several designers providing product but GUCCI must take more innovative steps to be at the top rank.

“DESIGNERS WORK AS THE WAY THEY ARE……” Hailey College Of Banking & Finance Punjab University

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Gucci's marketing project by SHAZI

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