Gucci Group, N.V. Case Essay

1748 words - 7 pages

Case, Gucci Group N.V. (A)
1. Map competitive positioning of different players in the luxury goods arena and state who is best positioned and why?
The luxury goods arena is a highly competitive industry in which companies must position themselves with both objective and subjective differentiating factors. Although humans are usually rational buyers when it comes to commodities and the necessities of life, much of this logic is thrown out when purchasing high-end luxury goods. While high quality is a necessary component of luxury goods, it is the brand’s image that a customer is really purchasing. Taking this into consideration, the true competition in this industry lies not in the ...view middle of the document...

All of these moves have been the result of successful strategic positioning by Prada management, which has resulted in the continual growth and expansion of the company.
While Prada has historically been small, yet growing quickly, LVMH has been much larger and more stable over its life. Out of the three middle tier brands, LVMH is most likely best positioned for success because two factors: the large number of established luxury brands they own, and the diversity of their portfolio, which is well balances across leather goods/fashion apparel, champagnes/wines/spirits, selective retailing, and fragrances/cosmetics. This diversification was a result of the synergistic efforts implemented in the late 1990s by Bernard Arnault. He thought the company could better position itself by taking advantage of their size to reduce costs and improve profitability. Furthermore, he placed a huge emphasis on controlling product quality, which has led to a continual positive brand-name association. Lastly, LVMH has used the popularity of their Louis Vuitton brand, which has historically accounted for around 50% of their products, to convince department stores to allow distribution of some of their lesser-known brands. This has resulted in an increase in sales for both the Louis Vuitton brand and for the lesser-known brands, which may have not been purchased if they had not been placed in stores near Louis Vuitton products. Overall, LVMH has successfully positioned itself by establishing an extremely positive brand image and by diversifying across several sectors of the industry.
Because this case focuses on Gucci, we will conduct a more in-depth analysis of Gucci’s competitive advantage and strategic positioning using SWOT analysis, which identifies a company’s strengths, weaknesses, opportunities, and threats. Throughout its life Gucci has developed many sustainable strengths, such as strong worldwide brand recognition, ownership of many different highly regarded luxury brands, and a strong value chain. While all of the heavy-hitters in the luxury goods arena focus on their value chain with regard to quality manufacturing and a large investment, Gucci has sustained much competitive advantage through control of their distribution channels. While many brands sell their products through a wide variety of locations, Gucci primarily sells its products through directly operated stores, which allows them to control their brand image, pricing, and the overall shopping experience of Gucci products. Moreover, while most luxury brands are sold solely through physical retail stores, Gucci has positioned itself well for the young and “hip” demographic by selling their products through their own website. On the contrary, two of Gucci’s weaknesses concerns instability resulting from owning multiple different brands, not all of which will always be profitable, and the large investment they must make in marketing and advertising in order to sustain its brand image....

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