Luxury Good and Gucci Essay

Guccis overall strategy was to vertically unify to strengthen its overall mark off image. After vertically integrating they acquired opposite highlife retailers to continue to grow horizontally and to increase economies of scope. The economics of the luxury goods industry changed forcing Gucci to modify its strategy. Consumers regard shifted from classic style buyers to style assured buyers. Gucci not only had to change due to the economics of the industry further they also had several problems with their existing structure.Hence Gucci made the fol minoring moves to stir it to compete in the in the altogether economics of the luxury goods industry. Gucci The better halfship betwixt DeSole and pass over addresses the companys inability to own streamlined finale making and consistent branding by means of with(predicate)out the company. By partnering harvest-tide creation and strategy, Gucci can now make product and business decisions that deliver a consistent message externally. All products and communications will support the brand image of a luxury goods retailer that Gucci wants to deliver to the marketplace.The cost in the raw and targeted layoffs address Guccis poor cost structure. While profit margins were healthy, the overweening sp residualing by the former CEO was reducing lucrativeness. The company had overabundance headcount in some beas and less in others. The layoffs improved Guccis cost structure and streamline the organization. Secondly, Gucci lacked the management talent to run a high end luxury company. By laying off underperforming managers and hiring go through business executives, Gucci significantly improved the smell of its management team.The cash coronation by PPR protects Gucci from hostile takeovers by competitors. The improvement in Guccis detonator structure enables Gucci to move from an acquisition target to a potential acquirer of substitutes and new entrants. This is critical because in the form industry , new brands are of all time emerging in the market. The $3 billion dollar cash investing enables Gucci to protect its core market better. Additionally, the acquisition of YSL through the merger diversifies Guccis product portfolio and creates high barriers to entry.Buyers Due to changing consumer implores, Gucci started to focus on fashion in extra the glamorous edge. Since switching cost for consumers are low and consumers are now demanding new fashions every season focusing on seasonal trends competitively positioned Gucci against its rivals and impeded consumers from finding substitutes. Gucci changed its target consumer from an older more(prenominal) conservative buyer to a modern, youthful, fashion conscious one.Since all of Guccis competitors had the same target (30-50 year affluent women) going after a modern, youthful spirited consumer allows Gucci to focus on a different piece of the luxury market, capturing a different slice of the pie. To create true-bluety, give consumers options, and to oppose consumers from switching and buying a substitute product Gucci decided to invigorate their product assortments to correspond with the seasonal trends. In admission they increased the quality of their products comparable to Hermes and offered these products at a value to meet the consumers needs.Furthermore, Gucci trig their product assortment in each DOS to local customers to string more consumers in the local markets. To better forecast product demand for seasonal goods and to keep inventory costs down Gucci added customer news to the decision making process to better understanding consumers buying behavior. In order to obtain higher profit margins and offer a world-wide line of products it was necessary for Gucci to diversify its portfolio. Hence Gucci introduced items from scarves to fur coats.To remain focused and maintain its luxury status, Gucci did not introduce diffusion product lines. Gucci had initially set its prices too high hence reducing their retail prices by 30% was necessary to attract and maintain customer loyalty. In order to generate demand for the product Gucci doubled their advertising and dark Tom Ford into a celebrity hoping to attract media and attention from almost the world. To restore Guccis image as a high end luxury goods retailer they renovated all of their stores to support this new image.In addition all internal and external communications had the same look and intuitive feeling to convey a consistent brand identity. Furthermore, they reduced scattering through retail stores that didnt support the new brand image disregardless of sales. Gucci launched an official web site to create awareness and exhibit new product lines and to position themselves against their competitors. Suppliers Suppliers are a key driver of profitabilitya key competitive force.Suppliers are responsible for delivering a bounteousness product that satisfies the companys standards in quality and that reflects Tom Fords creative vision. Without fast turnover to meet fashion onwards trend demands and a quality product, the repositioning of the Gucci brand could not have taken place. To fulfill this vision Gucci created an incentive program to keep suppliers loyal to ensure a quality product was manufactured, on time delivery, and it would keep on the suppliers from forging relationships with Guccis competitors.In addition, Gucci made suppliers more efficient through technology and logistics investments, provided training for suppliers and built an EDI network allowing Gucci to efficiently communicate with partner suppliers through the production process. As more fashion products will be produced every season along with the classic products, delivery and meeting demand could become an issue if production processes are not efficient. Investing in suppliers ensures that supplier curse, which is high, is controlled and suppliers have incentives to stay with Gucci.Supplier threat is high becaus e of on that point is an absence of substitutes suppliers. Switching costs are high for Gucci other suppliers may be producing for their rivals. Other suppliers may not deliver the quality and cunning Gucci is expecting. In addition, other suppliers do not have experience in producing Gucci products (current suppliers have been with Gucci for long time). Hence they will have a interminable learning curve slowing down the production process.There are few suppliers in specific regions Gucci suppliers had production capacity to meet Guccis growth (20-30% a year). However, finding new suppliers would be going into Pradas territory. With more growth, suppliers gained bargaining power with sub-suppliers and with Gucci. Initially, Gucci had power because suppliers worried that Gucci would go foreign for suppliers. Complementors Complementors are a not a high threat to Gucci because there only a few of them, media and advertising. Competition There are numerous firms in this industr y because profit margins are high.However with the number and plenty of M&A activity on the rise, consolidation is imminent with a few big players left in the market. Consolidation among competition has attached competitors lower cost structure resulting in a competitive favour such as ad purchasing discounts and supplier negotiating power. The competitors have a diversified product portfolio to target multiple segments of the market. They dominate in particular segments, for example Hermes and leather bags. Since there is slow industry growth effect fights for market share is certain to occur.This may result in a high threat from competitors such as LVMH and Prada. Threat of Entry The threat of entry is low because brand identity and product differentiation has been healthy established in this industry. In addition, access to distribution channels is moderate and the new entrant would be competing with already established channels of distribution for Gucci and others firms. G ucci and other competitors have substantial resources to fight back because they of their monetary resources and could check the new entrant or buy them out.