Post on 28-Mar-2015
Embed Size (px)
A Case Analysis:
EXECUTIVE SUMMARYThe year is 2000, Gucci Group is at a cross road and its strategic decision at this juncture will define the future of the worlds fourth largest US$1.2 billion luxury group. Gucci is a 77 years old group, established in 1923 in Florence selling luggage imported from Germany. It has transformed itself over the last 77 years and moved from a family owned entity to a public listed company. After 77 years of its existence, it now sells a wide range of luxury goods starting from leather goods, fragrance, cosmetics, shoes, watches, apparel, jewelry, silk ties & scarves etc. More importantly, what started as a single product, single brand company that was focused on small leather goods has now transformed itself into a multi-brand, multi-product group with worldwide presence. The case Fashion Faux Pas: Gucci & LVMH deals about the hostile takeover and the legal battle between the aforementioned companies in the controlling ownership of Gucci shortly after its initial public offering. Thus, J4 examined the actions pursued by Gucci as it has practiced the poison pill mechanism. With such a study, the proponent aims to recommend actions that will enhance the competitiveness of the company. Further, the group identified area of opportunity in which the internal organization of Gucci can focus on to deliberately align its strategies with its mission and vision. To achieve these goals, the proponent used several tools in congruence with the identified problems hindering the companys endeavor to achieve its goals. The proponent initially looked into the internal structure of Gucci through its company profile. Acknowledging the significant impact of external environment and the fashion industry in the performance of the company, the proponent used the PESTL Analysis and Porters Five Forces of Competition Analysis. With the PESTL, it was found out that the economic and social aspects of environment have the utmost impact to the company. Porters result on the other hand posted a moderate to high level of competitiveness within the fashion industry. Furthermore, the proponents included other analysis of general environment to completely realize what action(s) to undertake to satisfy the goals of Gucci.
TOWS Matrix evaluates the companys historical transactions and strategies to gain a better picture of the companys current status and lead the proponent to a realistic action plan for the future. This tool is an aid to identify strengths and opportunities that can serve as armours in battling the weaknesses and threats in the organization. With the integration and matching of the results of the tools used, the strategic action chosen as the grand strategy was determined to be the pursuance of market expansion. This can help the company proceed to development and growth. This action is appropriate since the companys status in the industry has been at par with the superior brands like LVMH, Prada, Hermes, and the like.
A Case Analysis:
Objectives:The proponents aim to examine the actions pursued by Gucci in the case when LVMH attempted a hostile takeover. Other intents of the groups are the following:
(1) To identify strategies that will help maintain and strengthen the companys competitiveness in the luxury goods industry. (2) To identify opportunities that will satisfy the companys mission of rapid growth development in the next five years. (3) To propose tactics and/or courses of actions that Gucci can undertake to increase its market share by 10% next year.
Problem Statement:The battle between LVMH & GUCCI brought the latter to spill a poison pill (ESOP) into competition with the formers attempt of hostile takeover. Gucci then faced a dilemma on how it will reposition itself in the fashion industry and how it will find opportunities to enjoy organic growth to proactively prevent takeover of a competitor like LVMH.
A Case Analysis:
COMPANY PROFILEThe House of Gucci or famously known as Gucci, was founded by Guccio Gucci in 1921. As one of the worlds leading luxury fashion brands, Gucci is known for its renowned reputation for quality and Italian craftsmanship, designs, manufactures and distributes highly desirable products such as leather goods, shoes, ready-to-wear, silks, timepieces and fine jewelry. After Guccios death in 1953, his son Aldo helped the company lead the company to a position of International prominence, opening the companys first boutique in New York. Gucci targeted the Far East for further expansion in the late 1960s wherein they opened stores in Hong Kong and Tokyo. They also developed on that time their famous logo, GG, the Flora silk scarf and the Jackie O shoulder bag which was created by U.S. President John F. Kennedys wife, Jackie Kennedy. During the late 1970s, the establishment remained one of the premier luxury goods establishments. Family quarrels and disastrous business decisions had brought to the downfall of Gucci. His two sons, Rodolfo and Aldo acquired equal 50% shares of the company. Rodolfos contribution was much less than what Aldo and his sons did. Aldo created the Gucci Accessories Collection (GAC) wherein the main intention was to boost the Gucci Parfumes Branch and it was operated by his sons. GAC consisted of small accessories, such as cosmetic bags, lighters, and pens, which were priced at considerably lower points than the other items in the companys accessories catalog. GAC proved to be profitable but it had resulted to the lost of Guccis reputation as the one of the worlds most stylish brands. Soon, cheap counterfeit Gucci products began appearing, with the knockoffs looking exactly the same as the originals. This became a big stain to the companys name. Rodolfos death paved way for the eventual control of his son Maurizio of the Gucci Company and further mismanagement caused him to introduce dclass products which further cheapened the then-weakening Gucci brand name. The company suffered heavy losses in October 1993. The business was set up for liquidation and Maurizio was forced to sell his shares in the company to Investcorp in August 1993. This was the start of Guccis turnaround and redemption with Investcorps bold move of hiring Domenico de Sole as Guccis CEO and Tom Ford as Creative Director.
A Case Analysis:
In 1999, Pinault-Printempts-Redoute (PPR) made a strategic investment worth $2.9 billion and eventually became the current owner of the Gucci Group. At present, Gucci is one of the leading luxury brands in the world with several luxury brands under its portfolio like Balenciaga, Yves Saint Laurent and Alexander McQueen to name a few.
Mission:To become a group leader in the luxury market at world-wide level through: putting into effect and maintaining. The companys objective was to enhance its rapid development and growth plans, as well as to bring about great flexibility to its production and business processes.
Vision:To become the global multi-brand, well-diversified luxury goods company leader.
MAJOR PRODUCTS and SERVICESGucci Group produces a range of fashion products and related items. The company offers the following products and brands:
Luxury goods Womens ready to wear Luggage Handbags Leather goods
Time pieces Shoes Jewellery Ties Scarves
Eyewear Perfumes Cosmetics Skincare products
A Case Analysis:
Alexander McQueen Balenciaga BEDAT & Co Bottega Veneta
Boucheron Gucci Sergio Rossi Stella McCartney
Yves Saint Laurent YSL Beaute
Segment information The Group has five operating segments: Gucci Division (excluding Gucci Timepieces) Gucci Division (excluding Gucci Timepieces) includes all revenues from the sale and licensing of Gucci branded products other than those from the wholesale distribution activities of the Gucci brand watches. Gucci Group Watches Gucci Group Watches includes the production and distribution of Gucci and other Gucci Group brand watches. Yves Saint Laurent Yves Saint Laurent includes all revenues from the sale and licensing of Yves Saint Laurent branded products other than those from the wholesale distribution of Yves Saint Laurent perfumes, cosmetics and watches. YSL Beaut: YSL Beaut includes revenues from the sale of perfume, make-up and skincare products other than Gucci and Boucheron brand perfume.
A Case Analysis:
Gucci vs. LVMH: The Battle for ControlThe battle for the takeover of Gucci by LVMH, and efforts by Gucci management to defend against the intended takeover at all costs, is a classic example in the fashion goods industry. The case can be seen as mainly a battle between the two majority stakeholders in Gucci, namely the management of Gucci itself versus the other majority stakeholder LVMH. It can also be seen as the battle between two personalities, De Sole of Gucci and Bernard Arnault of LVMH, each determined to get their own way, regardless of the other minority shareholders. The following are claims of LVMH against Guccis poison bill creation:
Nature of ESOP
An ESOP is a type of employee benefit plan designed to invest primarily in employer stock. To establish an ESOP, a firm sets up a trust and makes tax-deductible contributions to it. In the case of Gucci, it has created ESOP as a strategy to protect the ownership of the management and its long-time employees. With the growing percentage of shares of LVMH, extending up to 34.4%, Gucci has been alarmed of the possible hostile takeover. De Sole, CEO of Gucci, instituted ESOP in the form of Trust. This is viewed as a company-centred move because as was mentioned, ESOP was merely a Trust, meaning, employees can not expect for premium and dividends. The company also, did not actually issued stocks to accumulate additional capital, rather only shares that converted into its power to retain its majority voting rights.