♤ Potential Entrantsmainly new designers who start their own brand on their ownless significant

☢Industry RivalryHigh but not on price + quality and image perception +ability to attract talent

♢ Substitutesno real substitutes for the luxury goods, as it is not a necessary need.

♡Buyers- The super-rich - The middle-market customers, who selectively trade-up to higher levels of quality, taste and aspiration

♧SuppliersThe bargaining power of the suppliers depends on the segment

And the best

positioned

player is…

Gucci Case

✈ 1990:-the poorest time in the company's history, came close to bankruptcy

-Maurizio Gucci was chairman

-the Gucci name had lost much of its mystique

- many Gucci products had flooded department stores and boutiques

1994

- Gucci's image revision

- Domenico de Sole became COO. Tom Ford was creative director.

-Tom Ford received two prestigious awards for designing Gucci's ready-to-wear fashions and footwear.

-Sales growth has been strongest in the United States and Asia, where consumers followed American trends.

-The company soon recovered profitability and turned a $17million profit.

☺2000 - No. 3 global luxury goods group

- Acquired YSL & Sergio Rossi

- group operating income rose 92 percent, to $133 million, on a 101 percent increase in revenue, to $615 million

- LVMH lost a battle for control of Gucci, after Gucci thwarted overtures by the LVMH owner Bernard Arnault and sold a controlling stake to the big French retail group controlled by the French investor Francois Pinault, a rival of Mr. Arnault

Gucci unique competitive advantage

“the most dangerous thing in business is not making decisions. I learned from Maurizio Gucci- he couldn’t decide anything” - Domenico de Sole

$ Management- Flat structure- Impeccable execution of the strategy - Typical US incentives for employees

$ Manufacturing- Regain the confidence and assessing their quality- Incentive: offer to pay upfront future wages- Productivity- Former employees- Technology

$ Marketing- Product mix + brand should be consistent + convey the right image + focus on quality + commercial considerations + new look + pipeline of new product

- Pricing reprice every single item (mainly downwards)

-Promotion + two Milan ready-to-wear show in 1995 + public personalities: Madonna, Tina Tuner, Nicole Kidman + massive global advertising campaign

- Distribution + control the distribution channel + Gucci closed or bought back all franchises and licensees + promoted directly operated stores (DOS) + redesigned simultaneously

Sergio Rossi

&

Yves Saint Laurent

This marked the turning point for Gucci

- from a single brand company towards a luxury goods conglomerate

- both on the multi product axis (leather, fashion, cosmetics, fragrances, watches and jewelery) and the multi brand axis (Gucci, Sergio Rossi, Bottega Veneta, YSL, Boucheron, Bedat, etc.)

Presented by

F2 Group