Gucci Case

De Sole and the management’s strategy to grow Gucci Group’s revenue beyond the stagnant point is using acquisition as the approach. The acquisition of Yves Saint Laurent and Sergio Rossi turned Gucci into a multi-brand group from a single brand operation. Given Gucci’s current success in the focused, single brand approach, is the acquisition a wise move? I believe the acquisitions are risky but worth to take.

First of all, a business grows either by expanding market or product. The acquisition enables Gucci to expand in existing market through new acquired products. Gucci is clearly defined as exclusive clientele for luxury products, cost does not make much difference to attract or grow its clientele. Therefore, Gucci’s competitive strategy should focus more on product differentiation in order to have more unique products valued by consumers. The acquisition exactly provides that advantage to Gucci.

In the second place, the acquisition will certainly result in synergies and economies of scale. Moreover, Gucci was very successful in revamping the product line, reducing the price, restructuring the distribution channels and improving the manufacturing method to maintain the quality and reducing the average time required to manufacture an item. It is reasonable to believe that Gucci can successfully apply these know-how to Yves Saint Laurent and Sergio Rossi as well.

Last but not least, Gucci could treat these two acquisitions as experiments before making other acquisitions. The group could test whether it is able to establish substantial synergies and apply its advantage to other brands. If acquired business is proven to be fruitful, the group could be confident to develop its business following the multi-brand approach, like the LVMH group. Otherwise, it can still get out and go back to its old single brand operation.