When extend the brand: De Sole decided to lower

When Gucci found it difficult to achieve the sufficient
amount of profit, they made some changes in their strategy to restructure the
business. One of the main priorities while restructuring the firm
was the cost cutting for the new hiring. Several people were fired at the
corporate level for that purpose and the employees were entirely astonished in
that situation.

Gucci restructured by naming William Flanz and Maurizio
Gucci as CEO and COO, naming Tom Ford as creative director, and meanwhile
cutting cost by firing a certain amount of employers.

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Gucci’s many operating companies started to weld into a
coherent whole. The seven Gucci operating companies – Guccio Gucci, Gucci
France, Gucci Ltd., Gucci S.A., Gucci America, Gucci Japan, and Gucci Co. Ltd –
were combined for the first time. Gucci also began to offer stock options to
employees, which was a practice that differentiated the company from its
competitors.

the key elements of De Sole’s
repositioning strategy

 

·        
Keep focusing on fashion: Gucci launched new collection and
redefined its target as a modern, urban, fashion-conscious consumer with a
youthful spirit.

 

·        
Lower prices and extend the brand: De Sole decided to lower prices on average
by 30% an positioned Gucci below Hermes and Chanel, and on a par with Prada and
Vuitton. In line with its goal of providing superior product representing good
value for consumers, De Sole also had production staff benchmark against its
competitors. De Sole extend the variety of products ranging from scarves to fur
coats.

 

·        
Increase advertising expenditure: Marketing was critical for Gucci and
Gucci’s new management doubled advertising expenditure from $5.9 million in
1993 to $11.6 million in 1994, and kept taking up larger proportion of revenue
in 1990 and 2000. By creating brand image through advertising, Gucci differentiated
itself and built the brand.

 

·        
Enhance supplier relationship: De Sole mitigate the relationship by
personal visits and started a new program to provide financial and technical
support to suppliers. His effort led to a result of a highly flexible
production system with three pillars: skilled artisans, advanced technology and
efficient logistics. Gucci maintained high product quality by providing
trainings for supplier’s workers and ensure the smooth information flow during
production process with suppliers through an EDI network. This strategy boosted
the production volume.

 

·        
Strengthen network and renovate directed
stores: Gucci grew its
store network by taking over franchises on depressed asset prices. Gucci
expanded largely its capital expenditure on renovating all of its directly
operated stores by the end of 2000 in compliance with fabulous fashion product
image.

 

·        
Maintain the exclusivity of the brand: The third party distribution was strict.
De sole decided whether a distributor would be allowed to carry Gucci’s ware on
the influence of the image of brand. The same rule applied to its
e-commerce(internet) channel. In De Sole’s point of view, targeting at sales
and revenue growth was not the most critical; instead, the brand should keep
its uniqueness and specialness.