Luxury Good and Gucci Essay Example for Free

Luxury Good and Gucci EssayGuccis overall strategy was to vertically integrate to strengthen its overall brand image. After vertically integrating they acquired an rising(prenominal)(prenominal) luxury sellers to continue to grow horizontally and to increase economies of scope. The economics of the luxury goods pains changed forcing Gucci to modify its strategy. Consumers acquire shifted from classic style buyers to style sensible buyers. Gucci not only had to change due to the economics of the patience but they also had several problems with their existing social system. Hence Gucci made the following moves to reposition it to compete in the new economics of the luxury goods industry. Gucci The partnership between DeSole and Ford addresses the companys inability to sire stream byplayd decision making and consistent branding throughout the company. By partnering harvest-feast design and strategy, Gucci tooshie now make product and business decisions that deliver a con sistent message externally. All products and communication theory will support the brand image of a luxury goods retailer that Gucci wants to deliver to the marketplace.The cost stinging and targeted layoffs address Guccis poor cost structure. While profit margins were healthy, the extravagant sp caning by the actor CEO was reducing profitability. The company had excess headcount in some argonas and less in former(a)s. The layoffs improve Guccis cost structure and streamline the organization. Secondly, Gucci lacked the care talent to run a lofty end luxury company. By laying off underperforming managers and hiring experienced business executives, Gucci significantly improved the quality of its management team.The cash enthronization by PPR protects Gucci from hostile takeovers by competitors. The improvement in Guccis capital structure enables Gucci to move from an acquisition target to a potential acquirer of substitutes and new entrants. This is critical because in the co ntrive industry, new brands are always emerging in the market. The $3 billion dollar cash investment enables Gucci to protect its core market better. Additionally, the acquisition of YSL through the merger diversifies Guccis product portfolio and pass waters high barriers to entry.Buyers referable to changing consumer deals, Gucci started to focus on sort in particular the glamorous edge. Since switching cost for consumers are low and consumers are now necessitateing new fashions every season focusing on seasonal trends matchedly positioned Gucci against its rivals and impeded consumers from finding substitutes. Gucci changed its target consumer from an older more conservative buyer to a modern, juvenile, fashion conscious one.Since all of Guccis competitors had the very(prenominal) target (30-50 year affluent women) going after a modern, youthful spirited consumer allows Gucci to focus on a different segment of the luxury market, capturing a different stroke of the pie. To create loyalty, give consumers options, and to prevent consumers from switching and buying a substitute product Gucci decided to exhort their product assortments to correspond with the seasonal trends. In addition they increased the quality of their products comparable to Hermes and offered these products at a value to meet the consumers needs.Furthermore, Gucci tailored their product assortment in each DOS to local anaesthetic customers to attract more consumers in the local markets. To better forecast product demand for seasonal goods and to uphold inventory costs down Gucci added customer intelligence to the decision making process to better sense consumers buying behavior. In order to obtain higher profit margins and offer a comprehensive 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 i nitially 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 turned Tom Ford into a celebrity hoping to attract media and oversight from around 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 feel to convey a consistent brand identity operator. Furthermore, they reduced distribution through retail stores that didnt support the new brand image regardless 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 premium product that satisfies the companys standards in qua lity and that reflects Tom Fords creative vision. Without fast turnover to meet fashion forward trend demands and a quality product, the repositioning of the Gucci brand could not grow taken place. To run this vision Gucci created an incentive program to keep suppliers loyal to ensure a quality product was manufactured, on time delivery, and it would prevent the suppliers from forging relationships with Guccis competitors.In addition, Gucci made suppliers more efficient through applied science 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 threat, which is high, is controlled and suppliers have incentives to stop with Gucci.S upplier threat is high because of there 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 craftsmanship 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 longer learning curve slowing down the production process.There are hardly a(prenominal) 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 afield for suppliers. Complementors Complementors are a not a high threat to Gucci because there only a hardly a(prenominal) of them, media and advertising. Co mpetition There are many firms in this industry because profit margins are high.However with the twist and volume of MA activity on the rise, consolidation is imminent with a few big players odd in the market. Consolidation among competition has given competitors lower cost structure resulting in a competitive advantage 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 precipitating 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 well established in this industry. In addition, access to distribution channels is peculiar(a) and the new entrant would be competing with already established channel s of distribution for Gucci and others firms. Gucci and other competitors have genuine resources to fight back because they of their monetary resources and could obstruct the new entrant or buy them out.