Case, Gucci Group N.V. (A)
1. Map competitive positioning of different players in the luxury goods arena and state who is best positioned and why?
The luxury goods arena is a highly competitive industry in which companies must position themselves with both objective and subjective differentiating factors. Although humans are usually rational buyers when it comes to commodities and the necessities of life, much of this logic is thrown out when purchasing high-end luxury goods. While high quality is a necessary component of luxury goods, it is the brand’s image that a customer is really purchasing. Taking this into consideration, the true competition in this industry lies not in the technical differences in products offered, but in the perceived extent of luxury status the purchaser will receive upon buying said luxury item. There are several players in the luxury goods arena that have all become household names across the world through their strategic positioning. Currently, Hermes is considered as the “top of the line” luxury goods brand, with Chanel in a close second. Ferragamo is considered to be at the lower-end. For the sake of this case, we will focus on the middle tier, which consists of Prada, Louis Vuitton (LVMH), and Gucci.
Firstly, Prada is much smaller relative to many of the big players in this industry, but it has been actively acquiring and growing throughout the last two decades. What started as a high-end luggage company has expanded to a producer of all things luxury for both men and women, from luggage to apparel to accessories. As a result of this expansion, Prada’s sales grew by 25% a year from 1995-1999, with sales approaching $1 billion by 1999. Furthermore, Prada acquired a 9.5% stake in Gucci in the late in the summer of 1998, which they sold six months later to LVMH for a gain of $140 million. In addition to their product expansion and