Assignment Sample on Fundamentals Of Business Management Practice
1. Introduction
This study aims to provide a detailed business situation analysis, which showcases the critical understanding of business and management at the core of an organisation. The chosen organisation for the study is Gucci, which operates in the luxury fashion industry and is headquartered in Italy. In order to provide a detailed analysis the secondary method of data collection is being used in this case study. The limitation of using secondary data is that the learner does not have any access to cross-check the truthfulness of the data. Besides that, due to the secondary mode of data collection, all collected data will be secondary and no first-hand real-time data can be extracted. However, authentic websites like company websites, government websites, Google Scholar, PubMed and other authentic websites are being used for maintaining the research quality. The following section of the case study will include company history, operating structure, SWOT, external analysis, Porter 5 force analysis and others to draw complete business situations and lastly conclude and recommend for future growth of the brand.
2. Business Situation Analysis
2.1 Company background, growth, market structure and organisation leadership
Gucci is a century-old luxury brand that has been a renowned brand in the fashion industry. Although the sector has considerable hurdles in maintaining quickly changing consumer tastes while preserving its brand reputation and levels of client happiness, Gucci is well-recognised for its premium items and great customer service (Furui, 2019).
Figure 1: Global brand value of Gucci
(Source: Statista.com, 2022)
Gucci’s growth structure shows gradual growth in recent years; though the pandemic caused by COVID-19 has impacted the business growth in 2021 and the brand value dropped by 20%. However, the brand value of the company in 2022 was $18.1 billion which is the highest of all time to date (Statista.com, 2022).
Figure 2: Market of luxury fashion
(Source: Statista.com, 2022)
The statistics above depict that the market size of the luxury fashion market is growing and can reach $278 billion in 2031 (Statista.com, 2022). Therefore, Gucci has the potential to grow and ensure more market share in the upcoming years.
Gucci has the mission to become a globally recognised luxury fashion brand and become the market leader. However, Gucci’s brand reputation is built on two pillars of luxury brand management heritage and craftsmanship that distinguishes the brand from its market rival. Although Gucci followed a classical leadership style since its formation, visionary leaders have always been crucial for brand success. Nowadays, the brand follows transformational leadership to cope with market change and changing market demand (Gucci.com, 2023).
2.3 Current operating structure and business model
Organisational structure
The functional branches of the brand include digital business and innovation, customer engagement, indirect channels and outlets, global market and merchandising. The current CEO of the company is Marco Bizzarri and the company employs more than 18,500 employees throughout the world (Gucci.com, 2023). The current organisational structure shown in Figure 3 is in line with the revamped organisational structure of 2018. The brand, with the above organisational structure, focuses on strengthening the brand relationship with the client establishing a personalised conversation while leveraging emerging technologies.
Business model
Targeting a younger, more diversified audience through marketing initiatives and partnerships, the business has also made investments in forging a strong online social media presence (Gucci.com, 2023). Gucci has also concentrated on developing a more ethical and ecological brand image, which is becoming more and more crucial to premium shoppers. For continued success as a top luxury brand, the corporation makes significant investments in product design, advertising strategies, and client relations. It further enhances the uniqueness and scarcity of its offerings by using alliances and special edition collections (Furui, 2019).
Gucci offers its products in many different market segments to appeal to different customer bases. The product offerings include accessories, dresses, shows, and others. Gucci’s marketing strategy is to find the right balance between classic and fashion-oriented products in staple pieces compared to the market rivals like Prada, Dior, Saint Laurent and others. This way the brand stays true to Italian culture while keeping the brand heritage while producing some timeless and in-style products to cope with the latest trends (Furui, 2019).
2.4 SWOT analysis
| Strengths | Weaknesses |
| ● Global presence and brand equity
● Quality and line of products ● Continuous diversification |
● Inefficient promotion
● Research investment ● Copying and trademark violation |
| Opportunities | Threats |
| ● Online market and e-commerce
● Emerging market ● Brand conscious youth |
● Imitation in the market
● Increasing competition ● Rules and regulations |
Table 1: SWOT analysis
(Source: Self-created)
As of 2022, Gucci had nearly 500 stores around the world which shows the strong brand presence of the company. Besides that, it has a presence in the growing markets of the UK, the US, China, Japan, and others. The company has a brand equity of $15.48 billion as of 2022 (Gucci.com, 2023). As per Forbes report, Gucci ranked 31st in the world in terms of world luxury products (Forbes.com, 2020). In order to compete in the global market the company has used its experience while continuously diversifying the products to make the shopping layouts remain trendy and fresh for the customers. The product portfolio of the company includes outfits for women and men, other personal items and jewellery to provide the privilege to use ultra-luxury and full-fledged lifestyle.
Gucci encompasses harming the audience sentiment by objective women for marketing and this way it ensures ineffective advertising. Apart from that, the investment of the company in the research and development aspect lags behind its competitors like Prada and Saint Louis. This is considered to be the worst flaw of the company because this way the competitors gain a competitive edge and greater market share (Liu, 2022). Being a global brand the company has been pirated in various countries and the inability to ensure the trademark disputes are another witness of the company. This is a difficult issue that any company can encounter regularly even if it is a very serious violation of trademark and copy.
The emerging economies request luxury goods tremendously and their food Gucci should grow its product line-ups and related cells while focusing on India and China for increased profit as well as market dominance in today’s takes every world, especially after the digital disruption, the consumer market has shifted to the online possibilities considering e-commerce the modern way of shopping, especially in younger customers are preferred by online shopping as they can compare the quality, price, fabric, and other features of any clothing before buying it (Liu, 2022). Being a luxury company, Gucci has never compromised on quality and has a huge chance to improve its presence online and increase sales by this. The earning power increment of youth has also shown the opportunity to target the youth customers more because they are found to be 60% more reliant on premium products (Sepe and Anzivino, 2020).
Counterfeit of products and the imitability of Gucci is a major threat to the company in upcoming years which is harming the production and development of the company. Dior, Prada and others are major rivals and the number of rivals is increasing each day. The worldwide presence of the company has enacted Gucci in front of different nations’ rules and regulations which can be a major headache for a business. Besides that, there are environmental requirements, which can increase the complexity of manufacturing some leather products due to carbon footprints and the company should invest in environmentally friendly items as well for gaining the client and investors’ confidence (Armitage and Roberts, 2021).
2.5 Performance analysis – Boston Matrix – product portfolio
The company offers various luxury fashion products from which nearly 52% of revenue comes from leather products whereas 21% of revenue comes from shoes. However, another 15% of the revenue share comes from the ready-to-wear apparel section and 5% comes from the jewellery section of the company (Statista.com, 2023)
2.6 Market analysis – the external environment
| Factors | Description | Impact |
| Political | ● Italy’s “Political Stability Index” is 0.58 (Theglobaleconomy.com, 2021)
● The government has projected to grow spending in luxury fashion by 2.61% by 2023. |
Positive |
| Economic | ● “Consumer Price Index (CPI)” increased by 7.4% (Worldbank.org, 2022)
● Pandemic caused by COVID-19 leads to the decline of purchasing power. |
Negative |
| Social | ● Change in the purchasing behaviour of people
● Young people in Gen Z are more adaptable to globalisation and global culture (Liang, 2022) |
Moderate |
| Technological | ● Emerging technologies to enhance online market capture
● Use of block chain and big data for informed decision-making (Le Xuan, 2019) |
Positive |
| Legal | ● Trademark act 1970
● Intellectual Property Rights Act (Ricolfi, 2021) |
Moderate |
| Environmental | ● Moderate Carbon emissions, pollution
● Government’s action and increasing environmental awareness |
Negative |
Table 2: PESTLE analysis
(Source: Self-developed)
The political stability index or Italy is 0.58 which has a strong emphasis on the luxury products market in the country besides that the government has projected to grow the spending by 2.6% in the current year, showing a positive impact from the political aspects of the nation. The economic aspects of the country are negative for the luxury fashion industry because the pandemic has declined the purchasing power of people in the country. Besides that, the consumer price index of a country shows inflation by 7.4% (Worldbank.org, 2022).
There has been a change in the purchase behaviour of people and people are more about buying the necessary goods first and then buying the luxury products concerning the current situation. Young people belonging to generation z have accepted the global culture more along with globalisation and therefore there is a moderate impact from the social factors. Technological factors have a positive impact because the technology in this digital disruption, this emerging technology with the help of social media and digital marketing can enhance the company’s online marketing capture (Le Xuan, 2019). Besides that, the company can use big data and blocks and techniques for making depending on the market data. Legal compliance is necessary for every company, and the legal can help the company to enhance operation benefits. There are 10% of emissions come from the fashion industry (Niinimäki et al. 2020). Thus, the company should be aware of environmental awareness and take action to reduce its carbon footprint.
2.7 Porter 5 force analysis
| Porter’s forces | Strength | Description |
| Competitive rivalry intensity | High | ● 40% market share is captured by major company rivals like Prada, Versace, Chanel, and Louis Vuitton, while the smaller brands are providing strong competition for more than 50% of the market (Armitage and Roberts, 2021).
● Besides that, the industry is growing every year with potential online brands with no physical existence also reflecting strong competition. |
| Threats from new entry | Moderate | ● The luxury fashion industry is diversified and highly competitive indicating moderate threat from new entries.
● The economies of scale are relatively difficult to achieve but numerous independent brands have emerged. ● However, Gucci has the privilege of being the biggest house of the Kering group with a strong market presence (Gucci.com, 2023). |
| Bargaining power of suppliers | Low | ● There are several suppliers in the luxury fashion industry for providing standardised raw materials
● Therefore, the power of suppliers is relatively low as they have less control over product prices (Armitage and Roberts, 2021). ● This ensures that the suppliers do not contain any threat to Gucci’s business and the profits are closely tied to that of the suppliers. |
| Bargaining power of buyers | Moderate | ● Due to the presence of different brands operating in a competitive structure, the buyer’s bargaining power is high.
● The buyers are price sensitive as their income is low, which contains the pressure to buy products at a low price (Liang, 2022). ● The product differentiation in the industry is high and the buyers are unable to find alternative luxury brand products making the buyer’s power a weaker force. |
| Threat of substitutes | Low | ● Availability very few substitutes in the operating section, which means that there is no ceiling that can earn maximum profit as Gucci does (Furui, 2019).
● Fewer substitutes are available to ensure high quality as Gucci does making the threat of substitution a very weak force. |
Table 3: “Porter’s five force analysis”
(Source: Self-created)
3. Conclusions
Gucci’s goal is to dominate the premium fashion industry and establish itself as a household name. In 2022, the company’s brand was worth $18.1 billion. Digitalisation and innovation, customer interaction, indirect network and outlet, a worldwide market, and merchandising are some of the operational branches of the brand. With partnerships and marketing campaigns, the company targets a younger, more diverse audience. The company has also invested in building a strong social media presence online. The company has faced criticism and reaction due to its lack of proactive commercials and its unsuitability of it. Major competitors including Prada, Versace, and Louis Vuitton, who hold 40% of the market, pose fierce rivalry. Recommendations for the company are as follows:
Recommendation 1: The Company need to build agile capacity by investing in emerging technology.
Gucci can invest in business intelligence to learn, with the use of big data, what influences consumer preferences. The luxury fashion industry corporation can adjust to tactics like developing agile capabilities and implementing automation for improved client experience and ultimate growth (Le Xuan, 2019).
Recommendation 2: The Company need to focus on “Customer Relationship Management (CRM)” to keep track of changing market condition and customer preferences.
Customer satisfaction, the most crucial element of CRM, can be assessed using a range of measures, such as customer feedback and brand loyalty (Liang, 2022). Gucci must strive to provide excellent customer experience, tailored experiences, and high-quality items in order to satisfy its customers.
References
Forbes.com, 2020. “Gucci | Company Overview & News” Available at: https://www.forbes.com/companies/gucci/ [Accessed on 18/04/2023]
Furui, Y., 2021. Analysis on Marketing Strategy of Luxury Brand under the Context of New Media: Taking Gucci as An Example. J. Econ. Bus. Manag., 9.
Gucci.com, 2023. “GUCCI® US Official Site” Available at: https://www.gucci.com/us/en/ [Accessed on 18/04/2023]
Le Xuan, T., 2019. Digital marketing strategies of luxury fashion brands in China: The Gucci brand.
Liang, Z., 2022. Analyzing the Marketing Strategy of Luxury from the” Co branding” Activities of Gucci and Balenciaga. Frontiers in Economics and Management, 3(11), pp.73-79.
Liu, J., 2022, December. Metaverse and Brand: A Study of Luxury Brand Digital Marketing Strategy-Taking Gucci as An Example. In 2022 4th International Conference on Economic Management and Cultural Industry (ICEMCI 2022) (pp. 1907-1913). Atlantis Press.
Niinimäki, K., Peters, G., Dahlbo, H., Perry, P., Rissanen, T. and Gwilt, A., 2020. The environmental price of fast fashion. Nature Reviews Earth & Environment, 1(4), pp.189-200.
Ricolfi, M., 2021. Damages and Recovery of Profits in Intellectual Property Litigation before Italian Courts. GRUR International, 70(11), pp.1056-1073.
Sepe, G. and Anzivino, A., 2020. Guccification: redefining luxury through art—the Gucci revolution. The artification of luxury fashion brands: Synergies, contaminations, and hybridizations, pp.89-112.
Statista.com, 2022. “Global brand value of Gucci from 2016 to 2022” Available at: https://www.statista.com/statistics/980720/gucci-brand-value-worldwide/ [Accessed on 18/04/2023]
Statista.com, 2022. “Luxury apparel market value worldwide from 2020 to 2031” Available at: https://www.statista.com/statistics/941156/luxury-apparels-market-value-worldwide/ [Accessed on 18/04/2023]
Statista.com, 2023. “Revenue share of Gucci worldwide in 2022, by product category” Available at: https://www.statista.com/statistics/267731/global-revenue-share-of-gucci-by-product-category/ [Accessed on 18/04/2023]
Theglobaleconomy.com, 2021. “Italy Political stability” Available at: https://www.theglobaleconomy.com/rankings/wb_political_stability/ [Accessed on 18/04/2023]
Worldbank.org, 2022. “Inflation, consumer prices (annual %) – Italy” Available at: https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=IT [Accessed on 18/04/2023]
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