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Factors Affecting the Gucci business in UK

Factors Affecting the Gucci business in UK

Every organisation wants to increase their sales and enhance its customer satisfaction.  To increase organisational sales and attract a large number of customers towards the organisation there is no alternative of marketing. Marketing helps the organisation to identify the customer needs and wants and try to offer the best products to satisfy their customer need (Kotler, P. and Armstrong, G. 2018).

The main job of marketing department of the organisation is to analyse the internal and external environment, product design, and promotional strategy as well as provide better customer services (Kotler, P. Et al., 2012).  In this assignment, the researcher is appointed as a marketing officer and need to do some marketing environmental scan for the clothing industry. The researcher chooses Gucci as an organisation and they want to start their business in UK. In the following part, researcher discusses the Gucci overview, PESTEL, SWOT, marketing mix and market segmentation of Gucci. After this analysis researcher also give some recommendation that Gucci can follow to achieve market leadership in UK clothing industry.

Organisational overview Gucci

Gucci is a very popular and prestigious brand in the luxury clothing industry. Gucci is established their business in 1921 and the founder of their company was Guccio Gucci. From 1921 Gucci is well known for its superior quality products among the elite group. Gucci is selling all kinds of clothing for male, female, older people, children etc. Gucci is also selling designer shoes, accessories, and handbags which is very expensive and elegant (Gucci.com, 2019). In terms of marketing strategy, Gucci is following the differentiation strategy most of their products are unique in design and quality. The main competitors of Gucci are Louis Vuitton, Chanel, Tommy Hilfiger and Prada.

Macro environmental factors that affect the Gucci business in UK market

Gucci is a popular brand in the clothing industry for their luxury items. Gucci has a very good brand image in the market place. They started their business in 1921 and from that time they were successfully managing their business (Baker, 2014). Recently, a researcher is appointed as a marketing assistant and prepares this report for Gucci because they want to expand their business in UK. In this below researcher is going to do the PESTEL analysis of UK for Gucci so they can make the effective decisions-

PESTEL analysis

Organisations are using PEST analysis tool because it gives valuable information about the external environment. PEST analysis helps companies to know what kind of challenges they might face operating their business in a particular are. Gucci is a very famous brand and currently, they want to expand their business in UK because of this they want to aware of the macro-environmental factors of UK (Graham, 2018).

Political environment

The political environment of a country influence the Gucci profitability level because of this Gucci needs to know the political environment of UK before making any decision. Elements of the political environment are- taxation of a country, political instability, governmental legislation, corruption etc (Kotler, P. and Armstrong, G. 2018)

The political environment of Gucci is stable and the rate of corruption is also very low in UK. The most important thing in UK is their rule of law and democratic system. Gucci can enjoy a very good political environment in UK because UK government always helps the business organisations.

But if we see the recent political environment UK political environment is quite unstable because of BREXIT issue but still, UK is a good place for a business especially the luxury brand like Gucci. In terms of Tax this is quite high is UK so Gucci needs to compromise this thing with their profitability.

Economical environment

Gucci should consider the economical environment of UK and these are- market structures, interest rates, inflation rates, foreign exchange rates, GDP and employment rate etc.  UK economy is open so any company can come and start their business (Kotler, P. and Armstrong, G. 2018). Gucci is selling clothing, luxury products and accessories etc. UK economy is growing and the rate of inflation is also very low in UK which means UK is a good place for business a company like Gucci.

The bank interest rate in UK is quite low because the Government help the business organisation always in UK. The low-interest-rate indicates Gucci can easily borrow money when they required and they have to pay very low interest.

Most of the UK people are working in different sectors that mean employment rate is quite high which indicates a good market for Gucci.

Social environment

Some of the social environmental factors such as- culture, religion, social class, people’s attitudes, social values that influence Gucci’s business. Most of the population in UK is very serious about their social class, social status. Gucci will enjoy a good market in UK because most of the British people use luxury products. Most of the UK customers are educated and working in a corporate world which also indicates a good sign for Gucci’s business (Kotler, P. Et al., 2012).

Technological environment

Technology brings a revolutionary change in the business world without technology not a single organisation can do their activities effectively (Kotler, P. Et al., 2012). Gucci selling luxury products in the stores and in online. Gucci also needs to use technology to sell their products online, do advertise, product innovation etc. In UK they can enjoy almost all kinds of modern technological facilities.

Environmental

Gucci must obey all the environmental laws introduced by the UK government if they want to do their business. Most of the UK consumers are also very conscious they avoid those firms that are involved in environmental pollution or doing harmful things for the environment.

Legal environment

UK is very strict about their laws and regulation if Gucci wants to do their operation in UK they must follow all the laws and regulation of UK government.

SWOT analysis of Gucci

SWOT analysis is an important tool that organisation use to analyse their competitive position in the market place. Gucci wants to start their operation in the United Kingdom but before do that they need to do their SWOT analysis to identify their strengths, weakness, opportunity and threats(Dyson, R. G. 2004). This SWOT analysis can help Gucci to make their business decisions. In the following table researcher done the SWOT analysis of Gucci –

Strengths Weakness
A number of distribution outlets with strong distribution networks;

High brand image in the luxury market segment;

Gucci low-cost structure helps them to manufacture their products in low price;

Gucci is very good in new product innovation(Forden ,2000);

Most of the employees working in Gucci are very efficient;

Financial performance of Gucci is very strong;

Product automation system allows Gucci to manufacture their product effectively(Gucci overview);

Different range of product in their product lines;

Gucci has a strong presence in social media they have a large number of followers on their social page (Forden, 2000)

Most of the property used by the Gucci is rented and they have to pay the rent regularly(Gucci overview);

Research and development team of Gucci is comparatively weak;

Employees turnover in Gucci is very high;

The liquidity position of Gucci is a bit weaker.

 

 

Opportunity Threats
Because of information technology Gucci can increase their online sales volume;

Gucci can expand its business in different foreign market;

Most of the people are more conscious about the luxury brand.

There are many players who are selling luxury products;

There are many substitutes products available in the market place;

Competition is increasing.

Market segmentation

Dividing the market into different parts is called the segmentation. According to Procter, T . (2012), segmentation means splitting the markets into smaller segments on the basis of demographic, psychographic, behavioural and geographic area.

Four types of market segmentation are-

  • Geographic segmentation
  • Demographic segmentation
  • Psychographic segmentation
  • Behavioural segmentation (Kotler, P. Et al., 2012)

In below researcher discuss how Gucci can segment their market in UK market-

Demographic segmentation

Segment the market on the basis of sex, age group, education, religion, income. In UK they can follow the demographic segmentation to attract more customers in Gucci product such as- –

Gender:  Gucci can segment their product lines on the basis of people gender. They manufacture luxury clothing and accessories for both men and women.

Age: Gucci can manufacture clothing products for all age group from a newborn baby to old people. But their main customer group in UK should be age between 25 to 50 years, professional people. Because that age group people love to spends their money on clothing.

Income: Gucci’s target customers are those people who are earning a lot of money because those people spend money on luxury products.

In another way, Gucci offer products for both male and female members who want to spend money to impress other people and high-class rich people. Gucci only produces their items for high-class people they never manufacture products for the economy or middle-class people (Gucci.com, 2019).

Psychographic segmentation

Gucci can segment their market people’s social class, the lifestyle which is discussed in below-

Social class

Gucci is well known for its luxury products and excellent quality. Most of the people buy Gucci items just to maintain their social class. In UK upper-class people spends a big amount of money on their clothing and luxury product so Gucci can select that segment in UK market.

Lifestyle

Gucci designed their products for those people who love fashionable and luxury products. In UK there are many customers who spend huge money on a luxury lifestyle. The main target group of customers of Gucci are football players, film stars, musicians and big businessman (Gucci.com, 2019).

Geographic segmentation

Segmenting the market depending on the geographic region such as- city, state, country etc.

Gucci has their physical stores only in a couple of places in USA and European countries where consumer buying behaviour is high and people are looking for high quality and luxury product (Gucci.com, 2019).

Behavioural segmentation

Brand image, customer loyalty towards the brand, user rate and market responsiveness towards the power is the element of behavioural segmentation (Kotler, P. et al., 2014). Gucci has already created a unique position in the market place for its unique quality and high brand image. Most of their customers are highly loyal because their buying experience is very good.

Targeting

Most of the organisations are using three approaches to set their target market which are-

  • Undifferentiated approach
  • Concentrated approach
  • Multi-segment (Boshoff et al., 2002)

The target group of customers of Gucci are both male and female because they are selling products for all in their stores. They sell almost all age group clothing but after done research it is identified that their target group for UK market should be 25 to 50 years professional people because those people spends money for their lifestyle. Usually Gucci item is expensive so their target group is basically the upper-class rich people like- sportsperson, celebrity and businessman.

Positioning

Positioning means creating a unique position in the mind of their target customers (Kotler, P. 2012) Gucci already has a unique and high brand image in the luxury market segment.  They are well known for their finest quality, retail environment, luxury pricing and their effective distribution channels. Most of the Gucci stores are well decorated.

Gucci offers the best quality products for their customers with their outstanding features and excellent customer service. All through their price is expensive but still, most of the upper-class people love to do their shopping from Gucci. Gucci is a big brand among celebrities and high business class people.

Marketing Mix

Product

Gucci is providing the best quality products for its customers from their beginning and their top management always try their best to develop their quality and offer the best products for their customers. Gucci is popular for their luxury leather items, designed clothes and accessories and this product are extremely popular in the market place.  All the products offered by Gucci is unique in terms of design and quality and this is the reason for their high sales and high brand image.  Gucci uses the advance technology in their products which makes their product more attractive and sophisticated (Forden, S. G. 2000).

Gucci sales fashionable clothing for male and females which are elegant, classic and high fashion. Gucci is popular in the market place because of its different range and large collection. Gucci bags are very stylish and elegant and their clothing and shoes are very comfortable.

Price

Gucci follows the premium pricing policy almost all of their products price is very high due to their superior quality. Gucci is known as a prestigious brand in the market place and most of the Gucci customers are willingly pay to the high prices because of the product uniqueness. Gucci is popular in the elite group of society because of their high brand image. Most of their product is designed for wealthy people in society. Gucci never compromises their product quality or customer service quality because of this they cannot able to offer products in cheap price.

Place

Most of the Gucci stores are situated in big cities and expensive and high profile streets. All of their stores are well designed most of their stores interior design is exclusive. Most of the customers find a nice environment when they go to do their shopping in Gucci. Salesperson of Gucci has worn a black dress and provide excellent services to their customers. Gucci has its outlets in New York, Rome and Paris (Forden, S. G. 2000). Gucci also sells its products online and its sales are growing day by day. Most of the Gucci customers elite group of society.

Promotion

To create a unique position in the market place and to attract more elite customers towards Gucci they invest a huge amount of money in their advertising. Gucci advertises their products in almost all the expensive and leading fashion magazines (Forden, S. G. 2000). Gucci also advertises their products online and on the television. They use experimental marketing strategy to maintain a better relationship with their loyal customers.  Gucci always involves high profile celebrities in their advertisements.

Recommendation

Gucci is very famous for its high brand image and excellent product quality and their target group of customers are the high-income level people. Gucci is trying their best to maximize their profit level and achieve market leadership in the luxury clothing industry. Gucci wants to expand its business in the United Kingdom’s market because UK is a good place for the business. In the above part of this tasks, researcher discusses the micro, macro environment of Gucci. On the basis of this information, the researcher found some limitation of Gucci’s business. Researcher gives some suggestions for Gucci which can help them to gain popularity in UK market as well as market leadership in this luxury market industry –

  • Gucci used the rented property for their products because of this they have to pay the rent regularly which increases their operating expenses. Gucci should buy the property by taking a bank loan;
  • Employee turnover is quite high Gucci management should look at these factors and try to offer the best salary packages and work environment to their employees so they stay long term in Gucci;
  • Gucci needs to invest money in their research and development team because R&D team helps the organisation to innovate new product in the market place;
  • Gucci should more invest in their marketing department to advertise their product in online;
  • Gucci also need to open more physical stores in different parts of the world;
  • Gucci should start their business in an emerging country as well because those place most of the rich people spends huge money on their clothing and stylish accessories.

Conclusion

In terms of Brand image, Gucci has a very high brand in the market place. The main reason Gucci is popular in the luxury market because of their stylish product and excellent services. Gucci should more focus on its promotional strategy to attract more customers. Most of their products are very expensive if they want they can produce some less expensive product lines as well which helps them to increase their sales volume. Finally, the researcher wants to say to start a business in UK is always a good option for Gucci because there are many customers who spend huge money on their clothing.

References

Baker, M. J. (2014), ‘Marketing strategy and management’, 2nd edition, McMillan international publications

Bianchino, G et al., (1987), ‘The origins of high fashion and knitwear’, vol.1, Milan

Graham, H. (2018), ‘Marketing strategy and competitive positioning’, 3rd edition, Pearson education international

Dyson, R. G. (2004), ‘Strategic development and SWOT analysis at the University of Warwick’, European journal of operational research, vol. 152, no.3

Forden, S. G. (2000), ‘The house of Gucci: a sensational story of murder, madness, glamour, and greed’ 1st edition, New York

Kotler, P. and Armstrong, G. (2018), ‘Principles of marketing’ 12th edition, Pearson education international

Hague et al., (2013), ‘Market research in practise’, how to get greater insight from your market, Kogan page, London

Kotler, P. Et al., (2012), ‘Marketing management’ 14th edition, Pearson education international

Gucci.com (2019) : https://www.gucci.com/uk/en_gb/st/stories (Access on: 05/09/2019)

Gucci overview: https://www.gucci.com/uk/en_gb/?gclid=Cj0KCQjwwb3rBRDrARIsALR3XeaIXLRWJEBMyOT6JN8Lbz8rGeuJ0kzMkZ3sNe0hZFC1n-PMAChnIB8aAqSjEALw_wcB&gclsrc=aw.ds (Access on: 04/09/2019)

Marketing mix: https://www.marketing91.com/marketing-mix-of-gucci/ (Access: 05/09/2019)

Written by

Md. Shadequr Rahaman

Email: [email protected]

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