Gucci Case Study

Introduction

When most people hear or see Gucci, the names Domenico de Sole or Tom Ford aren’t usually the first things the consumers think of. They usually think of affordable high class luxurious products, which de Sole and Ford helped make possible. These two men were responsible for bringing this declining label into the success that it is today. From 1991 to 1993, Gucci’s losses amounted to over 100 million, which meant management was not able to fund projects and advertising as well as pay employees. This all turned around in 1994, when de Sole and Ford forged a close relationship, as COO and creative designer respectively, which they both asserted as the driving force to Gucci’s success. Their unwillingness to give up and continuing working through long nights coupled with a strategy and bold moves to buy Yves Saint Laurent (YSL) and Sergio Rossi all attributed to Gucci’s up rise from 1990 to 2000.

Reorganization

In order for Gucci to be able to compete in the luxury goods industry again, there had to be a makeover with the corporate level strategy. De Sole believed in order to become successful again, he had to trim the fat off and get Gucci back into top shape. He made cost cutting a priority as 50 people were fired from corporate and 100 people were fired from manufacturing. Cost cutting also led to the appointment of Tom Ford as the new creative designer, which began their eminent partnership. These were able to lead Gucci because they both believed in “making quick decisions and doing everything three days ago.” (de Sole 1994) The first challenge these leaders faced were creating synergies among the businesses they were in. They always felt that they were never united and each group was always doing their own thing. Communication was inadequate as no one knew what was going on in different locations. In order to create synergies, the seven Gucci groups were brought together with the help of Investcorp in 1995, anointing de Sole as CEO as well. De Sole further helped the cause by offering stock options to employees. Synergy with Gucci would be improved upon later on with acquisitions of other brands.

Strategy

Fashion: From the corporate level, de Sole changed everything from fashion to manufacturing to distribution. Through a corporate portfolio analysis, de Sole realized that the old way had to go and he pretty much reinvented Gucci, transitioning the label from question mark to star during the 1990s. By implementing diversification, Ford was able to alternate the old classic image to a more fashion based product trend. With concentric diversification, Ford was able to modifying the existing product to attract the modern customers, who favor fashion look over the classic image. From 1990 to 2000, their customer base changed from older and conservative to urban and youthful, generating sales of more