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Essay Example on Gucci Group

4 pages
857 words
Harvey Mudd College
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The luxury goods industry goes back to over 150 years ago. The first player in the market was Thierry Hermes who started his legendary leather-goods house in 1837. Louis-Francois Cartier followed ten years later as a jeweler, followed by Louis Vuitton in 1854 who started his company with the aim of furnishing canvas-covered trunks to the elites of Second Empire. These people had started on a local scale but later expanded to international territories while diversifying their products to a wide range and targeting the upwardly mobile as well as the traditional elite. The luxury industry grew extensively with sales growing by 6% per year. The dominating product categories were leather goods, footwear, high-end apparel, jewelry, watches, and perfume and cosmetics. By the 1990s, the competing companies in this industry were Gucci, Prada, and LVMH (Louis Vuitton). LVMH was the best positioned in luxury goods marketing and retailing worldwide, followed by Prada. LVMH success was based on its several product groups and brands, as well as its ability to acquire stakes in other design firms including Gucci.

Prada was started in 1913 but came into competitiveness after the management of the company was taken over by the granddaughter of the founder together with her husband. She redefined Prada to a level where it could afford to acquire stakes in other firms such as Gucci and Helmut Lang. Prada and LVMH engaged in a joint venture that beat Gucci. The venture ensured that the two companies complemented their needs with Prada providing production while LVMH provided shops. Gucci experienced drawbacks in the 1990s but managed a comeback by the year 2000 through the efforts of De Sole.

Between the years 1990 and 1994, Gucci was experiencing one of its low points in terms of positioning in most of its markets. In 1993, the points of sale came to 194 from 600 in the late 1980s. The tally in the America stores fell from 42 to 26 between 1990 and 1994. In other cities where operations were still surviving, the company had to renegotiate rents, reduce square footage, and cut down the number of staff to lower the breakeven point of its stores. The overall losses amounted to $102 million from 1991 through 1993. Gucci was at this time strapped for cash and could not finance new collections and advertisements or even pay its suppliers and employees.

Critical moves had to be taken to reposition the company back into the business. De Sole, who had been named the COO in October 1994 was determined to turn Guccis situation around. The first thing De Sole did was to form a partnership with Tom Ford. Fords initial role was to sketch and design nearly all products, but it was expanded to setting the tone and direction for design in the firm. He took the roles of advertising, public relations, and store design while De Sole took operational management. The second move was to merge the seven Gucci companies that were in operation. This was done under Investcorps guidance. The merged companies were Guccio Gucci, Gucci France, Gucci (UK), Gucci (Switzerland), Gucci America, Gucci Japan, and Gucci (Hong Kong). De Sole took over the CEO position for the entire group in July 1995. Third, the company started to offer stock options to employees, something that was different from its competitors. Fourth, the company strategized the operations of the company to have a fashion sense. A ready-to-wear collection was introduced by Ford which included trousers and colored shirts. This catapulted Gucci to greater heights in the fashion sector. Fifth, pricing was restructured, and prices lowered by 30% on average. Other efforts were in marketing, manufacturing, and logistics, and in distribution. All these efforts were geared towards repositioning Gucci in the luxury goods industry.

One of the strategic moves that De Sole took was to buy Yves Saint Laurent (YSL) and Sergio Rossi in November 1999. This move was triggered by the desire to make Gucci a multi-brand group. YSL was later branched into Couture and Beaute. Sergio Rossi is an Italian shoemaker. These form part of the current Gucci group. As such, the strategic move by De Sole was a commendable one since it diversified the range of products that Gucci initially sold, giving the company a wider competitive space since competitors such as LVMH and Prada were threatening. With proper realignment that happened with the collaborated efforts of De Sole and Tom Ford, Gucci leaped back to position.

Robert Polet was the CEO for Gucci between July 2004 and 2011. Before joining Gucci, Polet was the president of the ice cream and frozen foods division at Unilever. He had worked in Unilever for many years moving from one position and department to another. Polet succeeded De Sole and Tom Ford who had helped reinstall Gucci in the 1990s when it had been threatened by losses. He helped in increasing sales and profits for Gucci in the immediate years after his hiring, but critics attributed this success to his predecessors De Sole and Ford. He left the group in 2011.

In summary, Gucci group and the luxury industry is a dynamic sector with multiple up and downs and high competition. Despite that, the founding companies including Louis Vuitton, Prada, and Gucci are still visible today across the world.

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