strategic marketing - a case study of gucci group marketing strategies

STRATEGIC MARKETING

PRESENTED

BY

ADAMS ERHUVWU

Adams Erhuvwu

TABLE OF CONTENTS PAGES

INTRODUCTION 4

THE ENVIRONMENTAL TRENDS OF GUCCI GROUP 5

THE INTERNAL BUSINESS ENVIRONMENT OF GUCCI GROUP 5

McKINSEY 7 – S FRAMEWORK 5

SWOT ANALYSIS 9

EXTERNAL BUSINESS ENVIRONMENT OF GUCCI GROUP 11

ANSOFF MATRIX 11

GUCCI GROUP’S MARKETING STRATEGY MIX GLOBALLY 12

FIVE POSSIBLE STRATEGIES FOR GUCCI GROUP IN BOTH THE SHORT

TERM AND LONG TERM 14

APPROPRIATE MARKETING STRATEGY FOR GUCCI GROUP IN UNITED

STATES 16

CONCLUSION 19

REFERENCES 20

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OVERVIEW OF GUCCI GROUP

Gucci is an Italian fashion company founded in 192 by Guccio Gucci; the business

specializes in handbags, shoes, dresses, perfumes, fragrances, trousers, leather and shirts. In

the 1980’s , however the business suffered due to the company aggressive branding and

licensing strategy and a series of family quarrels among Guccio Gucci progeny. In 1995 De

Sole became the Chief Executive Officer of the company working closing with Ford the

creative manager to restructure the Gucci Group; and later in 2004 Polet took over as the new

Chief Executive Officer of the organisation.

Gucci products are diversified into so many brands such as Jeweler Boucheron, Shoemaker

Sergio Rossi, the watch producer Bedat & Co, the more discreet and classic leather goods

Bottega Veneta, the iconic Gucci with its visible GG logo, the high-end fashion YSL, the

urban Balenciaga, the modern and extravagant Alexander McQueen and the green Stella

McCartney. Each brand within the organisation has its management structure and designer

except for YSL and for Gucci. The company employs over 14,000 staffs and in recent years

has made over 4 billion Euros in its revenues.

Source: (Adapted from the Case study of Gucci Group)

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INTRODUCTION

The report is set to investigate the environmental factors that helped led to the growth and

development of Gucci Group together with the strengths and weaknesses of the company. As

a result of this the report will be examining and analyzing the internal environment of Gucci

Group with the use of McKinsey 7 – S model and the SWOT Analysis model. Whereas the

external business environment will be analyzed with the use of the Ansoff matrix in order to

identify the factors that affect the business externally. The marketing mix of the organisation

will also be examined with the use of 4 P’s of marketing in order to be able to understand the

factors behind the success of the company. The report will go ahead to suggest five possible

strategies that can help the organisation to achieve its short term and long term objectives

within the organisation. Finally the report will address the issue of its United States branch on

the things that needs to be done in order for the organisation to increase the profits of the

company.

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THE ENVIRONMENTAL TRENDS OF GUCCI GROUP

The environmental trends of Gucci Group are made up of internal and external business

environment and they include

THE INTERNAL BUSINESS ENVIRONMENT OF GUCCI GROUP

According Blackhurst (2007) the internal business environment can also be called micro

environment because of the fact that it addresses the smaller issues of the business

environment. It includes those issues that affect the internal business environment of an

organisation; In terms of Gucci Group its internal business environment will be analyzed with

the use of McKinsey 7-S framework and the SWOT Analysis framework and it include:

McKINSEY 7 – S FRAMEWORK

The 7S model is used in an organisation to emphasize the importance of considering the

impact of different numbers in the business together with their interaction when determining

and implementing a strategy. It includes strategy, structure, systems, skills, style, staff and

Superordinate goals.

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McKINSEY 7 – S FRAMEWORK

Source: (Adapted from Porter’s, 1985)

The term strategy simply means an action plan or game plan used by the organisation to

achieve its objectives. For Gucci Group its strategy is to diversify their products into different

brands such as Boucheron, Sergio Rossi, Bedat 7 Co, Bottega Veneta, Gucci, YSL,

Balenciaga, Alexander McQueen and the green Stella McCartney in order for them to achieve

their objectives. The strategy of diversifying into different brands will help the organisation

to increase its revenue and at the same time allowed them to be able to manage their risks

within the organisation (Pavitt, 2009)

Structure

Strategy Systems

Superordinate

Goals

Skills Style

Staff

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REVENUE OF GUCCI GROUP

Source: (Adapted from PPR Annual Report 2007)

Looking at the revenue of Gucci Group it can be said that the organisation continues to make

profit and the moment is worth over 4 billion Euros in tersm of its revenue. In terms of its

goals the organisation hopes to be the best within th fashion industry in the way and manner

in which it cinducts its business activities.

On the other hand in terms of its structure, the organisation goes a long way to determine the

strategy development of the business. The organisation structure of Gucci Group consists of

functional structure where jobs are grouped according to their specialism such as finance,

production and marketing etc. The structure may inhibit development of different activities as

strategic business units and restructuring may be necessary before a new strategy approach

can be adopted. Its systems are made up of procedures within an organisation either formal or

informal such as budgetary systems, financial control procedures, reward systems,

management information systems, operating procedures etc. These have significant impact on

strategy development and implementation. In terms of its style, the organisation tries to instill

its culture such as its values, beliefs and norms shared into its members.

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The staffs of Gucci Group are individuals or employees that carry out the day-to-day

activities within the organisation. It is important to note that over the years the management

of Gucci Group has developed from the traditional approach of regarding labour as simply

one of the factors of production and managing staff through the operation of formal

procedures such as reward systems, appraisal schemes; to recognizing the important

contribution which people can make to organisational success. As a result of this it can be

said that human resource strategy must aligned with the development of the corporate

strategy.

STAFF IN GUCCI GROUP BRANDS

Source: (Adapted from PPR Annual Report 2007)

It is important to note that the organisation employs over 14,000 staffs within the

organisation and they help the organisation to achieve the competitive advantage when

compared to other organisations. There are also strong links between staff and style as key

staff management processes such as recruitment and rewards have an obvious impact on

values, attitudes and behaviours. On the other hand it can also be said that skills refer to the

distinctive competences and capabilities which an organisation possesses such as a strong

focus on product development, skills in project management or excellent after- sales service.

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There is also an obvious link between skills and staff as the skills of an organisation is

embodied in its employees. Specific skills may be acquired by recruitment but also by

equipping existing staff with the new skills required. As a result of this human resource

management links the acquisition of skills directly with the achievement of goals

SWOT ANALYSIS

The term SWOT analysis simply means a simple technique which looks at an organisations

strength and weaknesses; and the opportunities and threats which face it. It stands for

Strengths, Weaknesses, Opportunities and Threats

SWOT ANALYSIS FRAMEWORK

Source: (Adapted from Porter, 1985)

STRENGTHS AND WEAKNESSES OF GUCCI GROUP

According Ritson (2009) the strengths and weaknesses are part of the appraisal which is

derived essentially from the internal and specific external environments of the organisation. It

attempts to identify those areas of the organisation having strengths that could be exploited

under particular circumstances by suitable strategies, and which areas have weaknesses which

should be minimized. It therefore looks at the findings of the position audit and considers

information on such factors which include products, marketing, distribution, raw materials,

STRENGTHS WEAKNESSES

THREATS OPPORTUNITIES

The

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finance, employees, employee relations, management, suppliers, customer loyalty together

with plant and equipment. As a result of these organisations strengths or weaknesses may

include the skills and expertise of its management and staff together with some organisational

factors such as responsiveness to change, access to resources and market position of the

organisation.

For organisations such as Gucci Group its strengths include the brand name which includes

Boucheron, Sergio Rossi, Bedat 7 Co, Bottega Veneta, Gucci, YSL, Balenciaga, Alexander

McQueen and the green Stella McCartney. These brand names over the years have helped the

organisation to achieve its competitive advantage over its competitors and at the same time

have helped in terms of increasing the revenues of the company; on the other hand its

strengths also includes quality, durability of the product and the demand for the product.

Whereas its weaknesses include its expansive nature, its inability to expand its business units

to other areas of the world such as Africa and some Asia countries

On the other hand the opportunities and threats are part of the appraisal and more outward-

looking which seek to identify the implications of change in the organisations general and

specific external environments. Opportunities can be identified and exploited by the

organisations strengths. In order to review opportunities the organisation must identify what

opportunities arise from environmental change, their potential and the ability of the

organisation to maximize them to towards the growth and development of the business. On

the other hand the threats from the environment comes in the form of economic conditions,

government action, technological advances and competitor activity are also anticipated; at the

same time the necessary strategies are develop to minimize the threat. For organisations such

as Gucci Group its opportunities includes the expansion possibilities to other regions in

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Africa and Asia whereas on the other hand its threats are the economic downturn, war and

political instability in the regions where its businesses are established (Forden, 2001)

EXTERNAL BUSINESS ENVIRONMENT OF GUCCI GROUP

The external business environment can also be called the macro environment because it

addresses the bigger environment issues; at the same time it involves those factors that affect

the organisation externally. In this report the use of Ansoff Matrix will be used to analyse the

external business environment of Gucci Group in order to be able to understand its strengths

and weaknesses and the reasons behind the success of Gucci Group.

ANSOFF MATRIX

According to Johnson and Scholes (2008) the term Ansoff Matrix simply means a model that

helps the organisation to identify the appropriate strategy at any given time and in various

sets of circumstances in order to develop a company such as Gucci Group. It involves market

penetration, product development, market development and diversification.

ANSOFF MATRIX MODEL

Existing Product New Product

Existing

Market

New

Market

Source: (Adapted from Porter’s, 1985)

MARKET PENETRATION PRODUCT DEVELOPMENT

MARKET DEVELOPMENT DIVERSIFICATION

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It is important to note that within Gucci Group the organisation have diversified into so many

brands such as Boucheron, Sergio Rossi, Bedat 7 Co, Bottega Veneta, Gucci, YSL,

Balenciaga, Alexander McQueen and the green Stella McCartney. This diversification of

different brands by the organisation has brought about increase in revenue for the

organisation; and at the same time has allowed them to be able to manage their risks within

the organisation. Diversification of different brands by Gucci Group has also brought about a

growth and expansion of power and at the same time can act as insurance against potential

disaster. At the same time it can be argued that diversification of brands within an

organisation such as Gucci Group brings about confusion and lack of concentration on the

organisation (Saltmarsh, 2009)

It is can also be said that over the years Gucci Group have also developed new brands to sell

in existing market in its region such as Europe, Japan, Asia Pacific, North America. This new

product may be packaged with new design in such a way that it will suit the existing market.

At the same time it is also important to note that Gucci Group in its market penetration

strategy tries to sell an existing product in an existing market. This is suitable in a growing

market which is yet not saturated such as its Japan, Asia Pacific and other countries where the

organisation has its business units (Saltmarsh, 2009)

GUCCI GROUP’S MARKETING STRATEGY MIX GLOBALLY

According to Johnson (2008) the term marketing mix simply means a strategy or a concept

used by organisations such as Gucci Group in terms of creating awareness to its customers on

the products and services that is been offered by the organisation and they include Product,

Price, Promotion and Place. It is important to note that the marketing mix will be used in this

report in order to be able to understand the strengths and weaknesses of Gucci Group together

with the reasons behind its success.

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On the other hand the term product entails the tangible goods that are offered to the

customers. In terms of Gucci Group its products entails, handbags, shoes, dresses, fragrances

and trousers. The products are made of quality materials and they have helped in

distinguishing the organisation from any other fashion shop in the world. At the same time it

can also be said that the products of Gucci have helped the organisation to achieve its

competitive advantage over its competitors such as Hermes, Armani and LVMH. The term

place talks about the distributive channels that allow the easy delivery of the goods to the

final consumers which is the customers. The organisation tries to market its products online

and through its directly operated stores (DOS) which accounts for over 70% of the

company’s revenue in a year

At the same time it can also be said that the organisation have over the years invested a lot of

resources into the promotion of its business; as a way of creating awareness of its products to

its customers. This they have achieved through advertisement, sales promotion and public

relations. The promotion of the business has helped the organisation to gain popularity among

its customers over the years. The price of Gucci Products is very expensive when compared

to the products offered by its competitors; and this has helped the organisation a lot in terms

of differentiating itself from other fashion shops (Woyke and Gordon, 2009)

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FIVE POSSIBLE STRATEGIES FOR GUCCI GROUP IN BOTH THE

SHORT TERM AND LONG TERM

Having examined the Gucci Group and for the organisation to be able to achieve its

objectives in the short term and long term; they need to utilize the five possible strategies

stated below which include:

DELAYERING OF THE ORGANIZATIONAL STRUCTURE

It can be said that the company is presently operating a complex organizational structure

which makes it difficult for the organisation to achieve its objectives. As a result of this for

the company to be able to achieve its short term and long term objectives, they need to

delayer their organisational structure in such a way that decision making can be easy within

the organisation. The structure of Gucci group need to be simplified into a more functional

structure where everyone has their defined roles within its department and everyone knows

whom they are answerable to

RESEARCH AND DEVELOPMENT

In order for Gucci Group to be able to achieve their ambition of becoming the leader in the

global fashion industry the company needs to invest its resources in research and

development; as a way of discovering the best ways of doing things within the organisation.

This can be achieved through a planned and comprehensive market research conducted by the

organisation with the aim of discovering what their customers think about their products. At

the same time it can also be said that research and development programme allows the

organisation to know the best ways to do things within the organisation; which is believed

will help the organisation to achieve its objectives over a period of time.

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DECENTRALISATION

At the same time the powers within the organisation needs to be distributed or decentralized

in such a way that everyone within the organisation are been empowered to carry out a

particular task within the organisation. Decentralization of the powers will create a sense of

responsibility among the employees; and at the same time will help to challenge them on the

need of doing new things within the organisation. In terms of decision making, the time and

processes it takes to make a decision within the organisation will be drastically improved. At

the same it can also be said that decentralization allows the different regions at Gucci Group

to be able to make some decisions that will favour their business within its area without

taking decisions from the centre.

PROMOTION OF ITS BUSINESS ACTIVITIES

Gucci Group also needs to continue in its promotion activities especially in those regions

where its business is still growing such as Japan, Asia Pacific and others. Promotion of its

business activities will help the organisation to create awareness on its products and services

to the members of the society and its customers. In order for Gucci Group to achieve its short

term and long term objectives they need to be able to create awareness of its products to more

potential customers. This is believed will help the organisation to increase their revenues and

at the same achieve its objectives.

MANAGEMENT STYLE

For Gucci Group to be able to achieve its short and long term objective they need improve on

its management style to a more democratic style whereby the members of the organisation

can be able to participate actively in the decision making process. The current system allows

for a situation whereby power emanates from the centre and being passed down to the

employees or members of the organisation to be able to implement the decisions made by the

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senior management. In such as situation the opinions of the people are not been put into

consideration. As a result of this it is can be said that the opinions of the members of the

organisation ranging from the employees up to the senior management must be able to count

in the decision making process. Before any decision are made the employees and the

customers need to be interviewed on what they think about the decision and the implications

to the organisation will be examined as well. This is believed will help the Gucci Group to be

able to achieve its short term and long term objectives within the organisation.

APPROPRIATE MARKETING STRATEGY FOR GUCCI GROUP IN

UNITED STATES

Stated below are the things Gucci Group in the United States need to do in order to be able to

increase its profit in the short term and long term and they include:

BOTTOM-UP DECISION MAKING PROCESS

For Gucci Group in the United States to achieve profit; they need to carry everyone within

the organisation in their decision making process through a bottom-up decision making

process. This is because of the fact that the bottom-up decision making process encourages

the full participation of the employees. The employees can feel that their opinions count

towards the growth and development of the organisation and in such as situation they will

feel motivated and sense of belonging to work for the organisation. The bottom-up decision

making process involves a situation whereby the decision making process starts from the

people at the shop floor such as the employees before going to the senior management. This

is done in order to determine what they think about a given issue within the organisation. It is

important to note that in a situation whereby the decisions and opinions of the people are

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sought before making any decision; the organisation ends up with a good decision that will

favour every stakeholder within the business

CUSTOMER RELATIONSHIP MANAGEMENT

At the same time in order for Gucci to achieve its short term and long term goals they need to

improve on their customer relationship management of the company. This because of the fact

that the customer relationship management in its United States branch is inadequate of the

company is inadequate. For Gucci Group in the United States to be able to increase in its

profit its customer relationship management systems need a tremendous improvement; this is

because it allows for direct the marketing activities and at the same time helps time helps the

company to improve the stores ability to contact clients. It will also allow the organisation

and the customers to establish a good relationship which will carry on for a long time. This

can be achieved by introducing loyalty card; and at the same time the organisation on a

regular basis will be sending information to the customers email and mobile phones on the

new changes in terms of products and the necessary information available. This is aimed at

updating the customers on what is going on within the organisation.

IMPROVEMENT IN THE SUPPLY CHAIN

The organisation supply chain such as internet and direct operated stores needs a tremendous

improvement; as a result of this the Gucci Group in the United States needs to propose a

strategy whereby every three or four weeks 75% of Gucci’s merchandise will be changed in

the stores with new ones. This will allow the customers to visit at least a minimum of 17

times in a year. As opposed to the organisation current system whereby the Gucci replaces

the bulk of its collection only five times in a year making it only possible for customers to

visit only four to five times in a year.

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LEARNING FROM EACH OTHER AND MARKET RESEARCH

The organisation also needs to learn from other organisations such as Zara in its strategy and

the high-end brands within the organisation. In order to learn new ways of doing things

within the organisation and the changes they need to make that will help them to increase

their profit. At the same time Gucci Group in the United States needs to conduct a market

research in order to understand for the Americans want from the company. This will put them

in a better position to be able to offer what the people want from them

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CONCLUSION

In conclusion, the important points to draw from the issue of Gucci group include the

following:

The staff, systems, strategies and systems goes a long way in building Gucci’s

dominant position in the international market. At the same time it can also be sad that

the brands goes a long way in terms of increasing the revenues of the company

At the same time it is also important to note that the diversification of its products into

the different brands has also helped in terms of enlarging the portfolio of the

organisation

The products are made from high quality materials and they are distributed through

different channels such as through its direct operated stores and through its website.

At the same time it can also be said that the organisation has over the years invested a

lot of resources into promoting its business activities in order to create awareness of

its products to its customers

In terms of achieving its short term and long term objectives the organisation needs to

restructure its business activities, promote its business and at the same time engage its

activities into research and development in order to find out new ways of doing things

Its United States branch needs to improve on its customer relationship management

and at the same time restructure its supply chain in order to be able to increase its

profits

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REFERENCES

Blackhurst, C (2007), “Class Act Who Keeps Gucci’s Dream Alive”, The Evening Standard,

July 11, Via Factiva

Carreyrou, J and Ball, D (2008), “Unilever Executives Gets Top Gucci Post – Learning

Fashion Business is One of the Main Task Facing New CEO Polet”, The Wall Street Journal

Europe, April 22, Via Factiva

David, B., Yoffie and Kwak, M (2001), “Gucci Group N.V. (A)”, HBS No. 701-037, Boston:

Harvard Business School Publishing May 10

Forden, S.G (2001), “The House of Gucci: A Sensational Story of Murder, Madness,

Glamour, and Greed”, New York: Perennial, pp. 264-265

Forden, S.G (2001), “The House of Gucci: A Sensational Story of Murder, Madness,

Glamour, and Greed”, New York: Perennial, pp. 292 – 329

Johnson, G and Scholes, K (2008), “Exploring Corporate Strategy”, Prentice Hall

Johnson, J (2008), “Another Renaissance in Florence? Gucci is Trying to Reinvent Itself after

the Department of its Feted Former Leadership, Observers Believe It Faces an Uphill Battle”,

Financial Times, June 8, Via Factiva

Paul, M and Lyons, T (2008), “Does My Recession Look Big in This?” The Sunday Times,

July 11, Via Factiva

Pavitt, K (2009), “What We Know About the Strategic Management of Technology”,

California Management Review, Vol. 32

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Ritson, M (2009), “In With the Old Luxury, Out with the New”, Marketing, January 30, Via

Factiva

Saltmarsh, M (2009), “Luxury Loses its Allure for Investors despite Strong Results, Many

Fear that Tougher Times Wait”, International Herald Tribune, August 6, Via Factiva

Woyke and Gordon, J (2009), “Gucci’s High Style – and Growing Revenues; The Luxury

Label Has Overcome Sluggish Sales and Rebounded, Thanks to Savvy Branding Strategies”,

Business Week Online, February 5, Via Factiva

strategic marketing - a case study of gucci group marketing strategies

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