TABLE OF CONTENTS INTRODUCTION THE ENVIRONMENTAL TRENDS OF GUCCI GROUP THE INTERNAL BUSINESS ENVIRONMENT OF GUCCI GROUP McKINSEY 7 – S FRAMEWORK SWOT ANALYSIS EXTERNAL BUSINESS ENVIRONMENT OF GUCCI GROUP ANSOFF MATRIX GUCCI GROUP’S MARKETING STRATEGY MIX GLOBALLY
PAGES 4 5 5 5 9 11 11 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 REFERENCES 19 20
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)
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.
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.
McKINSEY 7 – S FRAMEWORK Structure
Strategy Superordinate Goals Skills
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)
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.
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,
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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 outwardlooking 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
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 Existing Market MARKET PENETRATION PRODUCT DEVELOPMENT New Product
Source: (Adapted from Porter’s, 1985)
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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)
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.
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
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.
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
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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