The Marketing Strategies of Gucci

The House of Gucci or simply Gucci is an Italian fashion icon company. Founded by Guccio Gucci inFlorence, 1906, it is now the most famous luxury brand in the world.

Gucci earned US $ 7 billion in revenues in 2006. It ranks 46th in Business Week's Top 100 Brands. Itnow has 425 stores worldwide and a number of franchisees and high-end department stores thatcarry its brands.

Gucci, being one of the premium brands, has to contend with a number of factors both internal andexternal in order to maintain its current status. The following is the analysis on Gucci's strengths,weaknesses, opportunities and threats.

SWOT Analysis of GucciStrengths

The strength of Gucci is in its established, very strong brand image and international presence.Gucci has also the ability to control its distribution channels. This is part of Gucci's defensivestrategy in the chain value to capture the value added instead of giving it to the middlemen such assuppliers and retailers.

The company has also increased the number of their Directly Operated Stores (DOS) as part of thedefensive strategy of taking more control of the distribution process. The 2003 figure showed thatDOS accounted for 61.3% of revenues compared to a much lower 32.5% in 1999.

Its aggressive strategy accomplished through diversification and communication is also another ofGucci's strengths. Gucci changed its strategy of carrying a single brand to branching out to a multibrand group. This strategy is also adopted by other conglomerates such as Louis Vuitton and Prada.

Some luxury companies use the strategy of focusing only on one brand and add other businesssegments such as what Armani, Polo Ralph Lauren, and Versace did.

This strategy is done in order to allow the positioning of the brand in the industry to differdepending on the number of brands and the number of business segments the company wants tocompete in. This is the idea behind focus (mono brand) versus diversification (multi-brand). GucciGroup has more than 10 brands, including Gucci, Yves Saint Laurent, YSL Beauté and Sergio Rossi.

Weaknesses

The weaknesses of Gucci include instability in management and financial base. The instability of itsmanagement can affect the group's corporate strategy and vision.

The financial base is weak and alarming, with a long term debt increase from $17 million in 1998 to$143 million in 1999 and to $1.3 billion in 2003. Some brands in the Gucci group's portfolio are stillnot profitable, and there is a need to promote and market them aggressively.

Opportunities

Opportunities for Gucci abound especially in the emerging luxury markets in growing economiesfrom Asia such as India and China. People who come from these places who recently amassed huge

wealth due to the excellent performance of the economy would definitely want to try luxuriousbrands such as Gucci.

There is opportunity in the consolidation of other brands too. The opportunity exists in creatingcompetitive advantage in different business segments. There fashion jewellery stores india arevarious business segments Gucci can venture into should the need to expand and create moreluxurious products arise.

Threats

The luxury goods carry premium products designed for very wealthy individuals. This demandingmarket spares on expense to get the best product in terms of quality, style and design. Price,therefore, is not a basis of competition in this kind of industry.

Competition largely exists on how potent and valuable the brand image has become. Try articlewriter stacee sanchez's website Indian Ethnic Jewellery.This is the focus of Gucci's thrusts. Itscompetitor Louis Vuitton may have made its mark in size with more than 50 luxury brands in its beltand sales of 12.6 billion euros in 2004 alone but it is not exactly the single dominant player in themarket.

This is because in the luxury products market, companies can carry several brands and businesssegments which could change their positions depending on the segments such as leather shoes,cosmetics, jewelry watches, wine and spirits and others.

Competition is also effectively minimized by the Fashion buzzer intense rivalry of established luxurygoods. New firms would definitely find it next. those who are excited about SITE TOPIC GOES HEREview or perhaps .

to impossible to penetrate such an exclusive market. The cost of maintaining and promoting thisimage are also prohibitive.

Companies are forced to invest huge money in brand promotions in order to maintain their image.Expenses such as advertising and marketing expenses, acquisition of competitors, control of thedistribution channel and other strategies take the bulk of company's operating budget.

The barriers to exit in this industry are low which means that survival is for the fittest. If thecompany cannot compete with other players in the industry then it has to fold or sell to other bigger

firms which make exit quite easy and quick.

In this industry, the barriers to entry are really high and the barriers to exit are low, therefore onlythe select few can maintain their position in the market, while others could give up altogether or arebought by bigger firms.

Also, luxury goods do not have direct substitutes like other ordinary goods but the threat could comefrom imitation. Counterfeits often penetrate the market. This could take away a portion of the salesthat should go to luxury goods companies.

There is also the threat of substitutes to contend with. These are products that are consideredordinary or the medium brands but can eventually expand their product lines to premium brands inthe future such as Zara and Gap.

Internal threat could also come from French holding company Pinault-Printemps-Redoute (PPR) whocurrently owns 68% of Gucci's stocks.