The Gucci - LVMH Battle

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Case Details:

Case Code : FINC013
Case Length : 7 Pages
Period : 1999-2001
Pub. Date : 2002
Teaching Note : Available
Organization : Gucci, LVMH, PPR
Industry : Consumer Goods & Services
Countries : India

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

Gucci's history goes back to 1923, when Gucci Guccio started selling expensive leather goods in Florence, Italy. By 2001, the Gucci Group had emerged as one of the world's leading multi-brand luxury goods companies.

The company designed, produced and distributed high-quality personal luxury goods, including ready to wear garments, handbags, luggage, small leather goods, shoes, timepieces, jewellery, ties and scarves, perfume, cosmetics and skincare products. Some of its important brands were Gucci, Yves Saint Laurent, Sergio Rossi and Boucheron The group directly operated stores in major markets throughout the world and also sold their products through franchise stores, duty-free boutiques and leading department and specialty stores. De Sole had joined Gucci in 1982 and quickly moved up the ranks, becoming the President of Gucci US. In the early 1980s, around 50% of the company's stock was owned by an Arab company, Investcorp.

During the 1970s and 1980s, the Gucci label was seen on almost every imaginable product: scotch, leatherwear, key chains, watches, T-shirts, etc. Also, the company was spending more than $ 4 million a year to combat a flood of fake Gucci merchandise.

In 1990, Gucci hired Tom Ford (Ford), an actor-model with a degree in interior architecture and some experience in fashion design for its designing needs. By 1993, Gucci was on the verge of bankruptcy. In 1994, it was reported that the company was offered to Arnault for $ 400 million, but he backed off at the last minute. Investcorp then bought the remaining 50% stake in a desperate effort to recoup its investment. De Sole and Ford then began working towards canceling Gucci's numerous licensing agreements and went on to build its image as a premier luxury brand. Though initially De Sole had reservations regarding Ford's competence, over the years, Ford emerged as the single most important factor behind Gucci's success...

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