When Gucci found it difficult to achieve the sufficientamount of profit, they made some changes in their strategy to restructure thebusiness. One of the main priorities while restructuring the firmwas the cost cutting for the new hiring.
Several people were fired at thecorporate level for that purpose and the employees were entirely astonished inthat situation.Gucci restructured by naming William Flanz and MaurizioGucci as CEO and COO, naming Tom Ford as creative director, and meanwhilecutting cost by firing a certain amount of employers. Gucci’s many operating companies started to weld into acoherent whole. The seven Gucci operating companies – Guccio Gucci, GucciFrance, 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 toemployees, which was a practice that differentiated the company from itscompetitors.the key elements of De Sole’srepositioning strategy · Keep focusing on fashion: Gucci launched new collection andredefined its target as a modern, urban, fashion-conscious consumer with ayouthful spirit. · Lower prices and extend the brand: De Sole decided to lower prices on averageby 30% an positioned Gucci below Hermes and Chanel, and on a par with Prada andVuitton. In line with its goal of providing superior product representing goodvalue for consumers, De Sole also had production staff benchmark against itscompetitors. De Sole extend the variety of products ranging from scarves to furcoats. · Increase advertising expenditure: Marketing was critical for Gucci andGucci’s new management doubled advertising expenditure from $5.9 million in1993 to $11.6 million in 1994, and kept taking up larger proportion of revenuein 1990 and 2000.
By creating brand image through advertising, Gucci differentiateditself and built the brand. · Enhance supplier relationship: De Sole mitigate the relationship bypersonal visits and started a new program to provide financial and technicalsupport to suppliers. His effort led to a result of a highly flexibleproduction system with three pillars: skilled artisans, advanced technology andefficient logistics. Gucci maintained high product quality by providingtrainings for supplier’s workers and ensure the smooth information flow duringproduction process with suppliers through an EDI network. This strategy boostedthe production volume. · Strengthen network and renovate directedstores: Gucci grew itsstore network by taking over franchises on depressed asset prices. Gucciexpanded largely its capital expenditure on renovating all of its directlyoperated stores by the end of 2000 in compliance with fabulous fashion productimage.
· 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 onthe influence of the image of brand. The same rule applied to itse-commerce(internet) channel. In De Sole’s point of view, targeting at salesand revenue growth was not the most critical; instead, the brand should keepits uniqueness and specialness.
