Assignment Sample on Fundamentals of Business Management Practice
1. Introduction
The competitive advantage gained by most MNCs in the Global industry is due to their significant market structure aligned with their internal capabilities that could mitigate external factors and achieve more reputation and recognition in the target markets. Therefore, the purpose of the present study is to acknowledge the fundamental aspects of business management in terms of a case study that could provide an understanding of how certain companies perform. In this research, the secondary methodology has been used to access the company’s overview and to understand the position and way of management of the company, extracted data with proper research has been used. Gucci was founded by Guccio Gucci in 1921 and emerged as a powerful Italian fashion brand soon after the 1950s. In 2021, Gucci was announced as the 4th largest and most valued luxury brand in the whole world. The current brand value of Gucci at present time is approximately US$33.8 billion and the parent company of Gucci is Kering Group (statista.com, 2023).
2. Business Situation Analysis
2.1 Company/Brand History, Growth, market structure, and Overview of organization leadership
Company/Brand History
Gucci originated as an Italian luxury luggage brand in 1921 under the operation of its founder Guccio Gucci. The brand gained significant popularity during the 1950s when wealthy Italian middle-class families started demanding travel luggage from Gucci. During this time, Gucci thought of marking its production through a brand recognition mark which is their strip of two green and one red line and the Double-G logo in their products. The 1950s was the period when Gucci got immense popularity around the world. The brand and its label got recognized by Hollywood stars and wealthy travellers. But soon after that, the founder, Guccio Gucci passed away but the perpetual succession continued with various new and innovative leaders of the group like Vasco, Aldo, and Rodolfo in the era of the mid-60s and Maurizio Gucci in 1983.
Growth
The present CEO of Gucci is Marco Bizzarri and it headquarter is situated in Florence, Italy. The current revenue of the brand is 10,487 million euros (statista.com, 2023). However, innovative and unique styles have started attracting new and potential customers (Chan Kim and Renée, 2017). In 2017, it was reported that Gucci has achieved an 11% boost in its profit and achieved a good sales record under the operation of Alessandro Michael. Gucci is currently owned by Kering group, A French luxury group (businessconnectindia.in, 2023).
Market structure
Gucci holds an oligopoly market structure as there are only a few big brands in the market and the consumer is ready to pay big money. In today’s market, Kering Group is the top fashion brand and its revenue in 2019 was approximately around € 9.6 billion. The brand didn’t take much time in bouncing back to its position after the pandemic and was legit valued at US$33.8 billion in 2021 and was positioned fourth among the world’s most luxurious brands behind Louis Vuitton, Chanel and Hermès (statista.com, 2023).
Overview of organization leadership
The company has been under CEO Marco Bizzarri since 2015 and the employees have rated their management team as Top 20 in comparison to similar companies (comparably.com, 2023). Marco Bizzarri follows transformational leadership as he promotes creativity and innovation most and being a luxury brand the leader must understand consumer demand and Gucci tries to deliver overall consumer satisfaction (Amit and Christoph 2020). He tries to communicate with the executive to understand their viewpoint and makes sure that all the changes are properly understood by the executives. Fluidity and Agility is the concept on which the company operates and due to this principle, Gucci tries to make decisions and implementations as fast as possible. Gucci is also a learning organization where employees are given proper training and learning regarding the new trends and technology to mold their employees according to the changing environment.
2.2 Current Business operating structure, business model
Figure 1: Business model of Gucci
(Source: Developed by the learner)
High-end luxurious fashion brands can predict their customer demands and fashion trends that are going to prevail in the market shortly. Luxury fashion firms like LV, Prada, and Gucci have been depending on their traditional stores for ages because luxury fashion houses believe that e-commerce is more suitable for mid-range or lower-range products. But after a McKinsey report published stating that luxury sales are more influenced digitally, the fashion brands started digitalizing and Gucci also knew that it is time for the company to step ahead and go digital. But the typical business model of Gucci before 2015 was constituted with few elements like the parent company of Gucci under which it was operating was Kering and the key activities of the company were designing and producing accordingly and promoting and selling it in the store. The main resources of Gucci were its supply chain and brand customer base. The key proposition of the company was its Italian craftsmanship and highly electric and romantic fashion. The channel of injection of their products in the market was their store and magazine advertisement and their target customers were fashionistas and celebrities but after the McKinsey report, the company started targeting young adolescents and started doing digital promotions as well.
2.3 SWOT analysis
| Strength | Weaknesses |
| ● Wide global presence with around 500 stores in different nations and strong grip over developed economies like the UK, US, and Japan along with several developing countries.
● Excellent market research experience in luxury fashion trends. ● Strong market position in the fashion industry. |
● The research sector of Gucci has been lagging behind its competitors in the market despite huge investment in the research department by the brand.
● Regular Trademark and copyright violation disputes regarding the GG logo of Gucci. |
| Opportunities | Threats |
| ● Focusing on markets where luxury brands are trending and more preferred like China and India.
● As opined by Lynch, (2021), The increasing income and purchasing power of today’s youth are rapidly inclining toward premium products. |
● Increase in forgery, counterfeit and duplicate designs as the Gucci designs are easy to copy.
● Increasing competition due to well-known brands like LV, Prada, Channel, Versace, and similar others. ● |
2.4 Performance analysis – Boston Matrix – product portfolio
Figure: Boston Matrix of Gucci
(Source: Developed by the learner)
As per Chiu and Lin (2020, p.18), Boston Matrix is used in business to analyse their business portfolio. Boston Matrix has been a popular tool for business analysis and making marketing strategies. This Matrix analyses any product based on market share and growth. This Matrix uses several assumptions like market share gain can and will always produce cash surplus, cash surplus is only produced when the product reaches the maturity of its lifecycle, and similar others.
The Four stages in Boston Matrix are:
- Star
The star products by the Gucci company were their Iconic Gucci Belt, The OG Gucci Scarf, and the most popular Gucci printed t-shirts. Gucci started offering belts in 1921 and soon after the release of their belts, consumers were crazy about their belts due to their quality and the big GG logo on the belt which demonstrated the brand in the public. The Original Gucci Silk scarf was another popular and demanded product of the brand, the scarf was first launched in the market in 1966, and soon after that Hollywood stars started promoting it by wearing it. It was a floral 34″X34″ scarf that was made in Italy and as said by the brand, is a demonstration of the rich heritage of the brand. Similarly, the shirt is still famous among the youth.
- Cash Cow
The cash cow of Gucci is their eyewear, jewellery and watches. The eyewear was launched about 30 years ago and the company offers a high-quality and vast variety of eyewear in the market. Gucci eyewear is the favourite choice among wealthy people around the world. The consumer of the brand like to wear them but eyeglasses are a slow fashion segment and not a lot of sales are generated from this industry on a regular basis but the premium quality of Gucci offers their eyewear at a premium price which Increases their cash inflow.
The jewellery and watches are also quite popular but are not high-growth products for the company. Instead, these products help in the development of star products by contributing through cash inflow (Mckeown, 2020).
- Question mark
Gucci shoes are a similar product line of the brand which holds a huge potential in the market but needs some significant improvement and investments in them. The shoe and sneaker markets are increasing rapidly and for Gucci, it can be an opportunity to participate in this growing market but for that, Gucci has to bring some significant changes in its existing shoe production. Gucci should conduct a market survey and analysis to understand and work on its loopholes. Well-established global shoe brands like Nike, Puma, and Adidas can be a good inspiration for the company.
- Dog
The Retro Flower and Pony print bow produced by the company was a dog product for the company as this product could not perform well in the market. Lamme GG shocks and cosmetics line of the company is similarly the low-performing products that could not get enough popularity in the market and also don’t have a considerable amount of sales record with them.
2.5 Market analysis – the external environment
PESTEL Analysis
| Factors | Analysis | Impact |
| Political factors | ● Brexit
● Dual government structure |
Positive: Brexit can be an opportunity for the country to generate employment and attract more MNCs in the country. Gucci being a well-established high-end fashion brand already has a strong grip over the UK as the consumers of the country have a high level of brand loyalty towards Gucci. Being such a big brand, Gucci also has control over the political affairs of the country. |
| Economic factors | ● High inflation rate
● High unemployment in the UK economy |
Negative: The inflation rate of the UK was 11.1% in October 2022 making the cost of living increase in the UK adversely (commonslibrary.parliament.uk). The unemployment rate of the country is 3.8% from Dec 2022 to Feb 2023 with an increase of 0.1 percentage during the quarter (ons.gov.uk, 2023). This situation is only suitable for Gucci to operate in this country if Gucci can create employment in the economy and due to this collapsing economic situation, the luxury goods demand will shift to necessary goods. |
| Social-cultural factors | ● Population
● Increase in the healthcare industry |
Positive: The increase in population in the UK by 2039 was estimated to attain 74 million in numbers. The current birth rate is higher than the mortality rate in the country and the healthcare facilities are also improving in this country due to the highest population situation. The opportunity for Gucci to operate in the UK at this population rate is immense as the rise in population will also result in a rise in demand (Sedgley, 2020). |
| Technological factors | ● Artificial intelligence
● Machine learning |
Positive: The UK is the leading provider of education around the world which confirms its successful step toward the digital progress of the country. Reportedly, UK’s public sector technology spending has increased by 1.8% resulting in total spending of £20.1 billion during 2021-22 (globaldata.com, 2023). |
| Environmental factors | ● Carbon emissions
● Sustainable development growth |
Positive: The UK government started to understand their main environmental mental issues and to eliminate those a website is made and a movement is facilitated by the UK government namely, Carbon Neutral Britain. This website and the movement will ensure the lowest carbon footprints by the companies and an increase in carbon emission initiatives (carbonneutralbritain.org, 2023). |
| Legal factors | ● Custom Duty
● Employment Act 1996 and Equity Act 2010 |
Negative: Every company in the UK be it big or small is being regulated and ruled under two major acts followed by various others. As expressed by Palombo, 2019, The Employment Act 1996 is the key act that thoroughly looks after the minimum wage, maternity and paternity leaves, sick pay, and similar others along with the equity act ensuring equality in every aspect. |
2.6 Porter’s 5 Forces of the Business/brand
| Five Forces | Degree | Justification |
| Bargaining power of suppliers | High | The premium quality manufacturing process of Gucci ensures the premium quality of raw materials and the supplier has limited stock of raw materials lying with them due to the shutting down of production during the pandemic. This limited raw material holds high potential demand in the luxury market as all the luxury brands are searching for raw materials to bounce back in the market. This demand directly affects the bargaining power of the suppliers (Mckeown, 2020). |
| Bargaining power of customers | Low | Like big fashion houses like Gucci, and Prada, LV is a global luxury brand that deals with upper-class income group people who are willing to spend on luxury. Gucci does favour to lavish class ignores the poor class for its target. |
| The threat of new entrants | Low | The high-end fashion brand which is now operating for about 100 years have got a significant grip on its market and is very difficult for any new entrants to reach the level at which Gucci is operating customer loyalty is a big advantage to the brand and also ensures that no new brand can compete it instantly after entering this industry. |
| Threat of substitute | Moderate | There is a moderate threat to the brand as there are potential competitors who are operating in the same market as Gucci and they are also offering similar products and quality to the consumer. |
| Competitive rivalry | High | Gucci dealing luxury handbags, luggage, accessories and garments have a huge no of highly competitive rivals who have similar market position and popularity around the world and the competition among these rivals are very high. Some of its potential competitors of Gucci are Versace, Prada, LV, Chanel, and similar others. |
3. Conclusions
This is to be concluded that Gucci, 100 years old well-established high-end luxury fashion brand that originated in Italy by Guccio Gucci, is now a Worldwide high heritage brand. More than a brand, Gucci is seen as a self-worth increment and status symbol in today’s world. Like other brands, Gucci also has various weaknesses and threats but there are several opportunities present for Gucci to overcome them. The brand has great potential if operated on its strength. The leadership style and organizational structure are highly in accordance with the required standards of present times.
Action Plan
| Objectives | Specific | Measurable | Attainable | Realistic | Time-bound |
| To engage innovative technologies at the Gucci production center to develop quality dog-rated products | Huge Capital availability in the company for facilitating innovation and development. | Good feedback from consumers and inclusive satisfaction to the consumer. | Use of the Circular design principle to have less waste material and capital. | Circular design approach usage by successful companies like H&M, IKEA, Starbucks, Adidas, and similar others. | 6 months |
| To recover from pandemic losses | Investing in a cheaper version of products and offering them to lower and middle-income groups of the global economy. | When Gucci products can be seen to be used by every income group of consumers. | By increasing the number of industrial partners and the emergency of new sustainable production methods. | Big competitive brands like Panasonic, Unilever, Adobe, IBM and similar others are using sustainability in their production. | 1 year 6 months |
| To acquire a market of a mixed range of customers globally | Using a strong grip on the market and producing products for middle-level income groups of people to acquire a larger market. | Availability of Gucci products in various shopping malls around the world apart from high-end shopping malls and exclusive Gucci stores. | Increasing the number of suppliers and making a vast chain of supply to minimize the intermediate cost. | A large number of companies use supply chain management and encourage the vast involvement of suppliers like Adidas who have more than 400 independent production factories. | 1 year |
4. References
Journals
Amit, R. and Christoph Zott., 2020. Business model innovation strategy: transformational concepts and tools for entrepreneurial leaders. Hoboken, New Jersey: Wiley. https://books.google.com/books?hl=en&lr=&id=utP5DwAAQBAJ&oi=fnd&pg=PR15&dq=Amit,+R.+and+Christoph+Zott+(2020).+Business+model+innovation+strategy:+transformational+concepts+and+tools+for+entrepreneurial+leaders.+Hoboken,+New+Jersey:+Wiley.&ots=p72NJUCaZd&sig=cpuo9RiXKWquQjm0mnO8BrBAqR0
Chiu, C.C. and Lin, K.S., 2020. Rule-based BCG matrix for product portfolio analysis. Software Engineering, Artificial Intelligence, Networking and Parallel/Distributed Computing, pp.17-32. https://link.springer.com/chapter/10.1007/978-3-030-26428-4_2
Lynch, R. 2021. Strategic Management. S.L.: Sage Publications
Mckeown, M. 2020. The strategy book: how to think and act strategically to deliver outstanding results. Harlow, England: Pearson
Palombo, D., 2019. The duty of care of the parent company: A comparison between French law, UK precedents and the Swiss proposals. Business and Human Rights Journal, 4(2), pp.265-286. https://www.cambridge.org/core/journals/business-and-human-rights-journal/article/duty-of-care-of-the-parent-company-a-comparison-between-french-law-uk-precedents-and-the-swiss-proposals/A0F7FE03FF6866A331E227FC023F1060
Sedgley, M. 2020. Skills for business and management. London: Red Globe Press. https://books.google.com/books?hl=en&lr=&id=iRxHEAAAQBAJ&oi=fnd&pg=PP1&dq=Sedgley,+M.+(2020).+Skills+for+business+and+management.+London:+Red+Globe+Press.&ots=8DCgKZ9zfO&sig=VcDdPVzP6g08bUogbhOvMUgs5a8
W Chan Kim and Renée Mauborgne, 2017. Blue ocean shift beyond competing: Proven steps to inspire confidence and seize new growth. San Francisco. https://www.aboutthestories.com/s/Blue-Ocean-Shift.pdf
Websites
businessconnectindia.in, 2023, Available at https://businessconnectindia.in/gucci/ (Accessed on April 18th, 2023)
carbonneutralbritain.org, 2023, Available at https://carbonneutralbritain.org/?gclid=CjwKCAjw__ihBhADEiwAXEazJijBjzdAFmkQFrjRzMWbimWrFtElqaYA34dZr7WwCYZNjTZ94hvrHRoCv0UQAvD_BwE (Accessed on April 18th, 2023)
commonslibrary.parliament.uk, 2023, Available at https://commonslibrary.parliament.uk/research-briefings/cbp-9428/#:~:text=The%20cost%20of%20living%20increased,2023%20to%2010.4%25%20in%20February (Accessed on April 18th, 2023)
comparably.com, 2023, Available at https://www.comparably.com/companies/gucci/executive-team (Accessed on April 18th, 2023)
globaldata.com, 2023, Available at https://www.globaldata.com/media/technology/uk-public-sector-technology-spending-grew-just-1-8-20-1-billion-fy-2021-22-says-globaldata/#:~:text=%E6%97%A5%E6%9C%AC%E8%AA%9E-,UK%20public%20sector%20technology%20spending%20grew%20by%20just%201.8%25%20to,FY%202021%2D22%2C%20says%20GlobalData (Accessed on April 18th, 2023)
ons.gov.uk, 2023, Available at https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment (Accessed on April 18th, 2023)
statista.com, 2023, Available at https://www.statista.com/statistics/267476/global-revenue-of-the-kering-group-by-brand/ (Accessed on April 18th, 2023)
statista.com, 2023, Available at https://www.statista.com/topics/5132/gucci/#topicOverview (Accessed on April 18th, 2023)
statista.com, 2023,Available at https://www.statista.com/topics/5132/gucci/#:~:text=As%20of%202021%2C%20Gucci%20was,parent%20company%2C%20the%20Kering%20Group (Accessed on April 18th , 2023)
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