The Gucci Firm’s Sustainable Business Strategy

Topic: Business Strategy Words: 5136 Pages: 15

The luxury handbag industry is a multi-billion field dedicated to producing expensive leather goods of exquisite designs. This sphere has become a significant driver of the global GDP. However, it is a highly competitive sector, with only several brands accounting for the majority of the sales. Moreover, the most recent disruptions in the global market that affected almost every industry, mainly the COVID-19 pandemic, had little effect on this industry as the sales of luxury handbags continuously increased (Robins, 2022; Kumar et al., 2019). One of the well-known brands that operate in this industry is Gucci, and this report will focus on how this company can achieve sustainability and increase its profits.

An iconic name in high-end Italian fashion and luxury handbags is Gucci. The Gucci company was started by Guccio Gucci in 1906 when he launched the first Gucci store (‘About Gucci,’ no date). Nevertheless, he legally founded the business in Florence, Italy, in 1921. In 1999, Pinault Printemps Redoute, a French corporation, acquired the brand. Today, Kering, a French luxury fashion company, owns a division called Gucci. Gucci earned 9.63 billion Euros in annual income in 2019, according to statista.com research (Sabanoglu, 2022). After subtracting all costs, the company’s net income came to 1.56 billion euros. According to an analysis by spglobal.com, the company’s net income fell to 569.3 million Euros (Naik, 2022). The COVID-19 epidemic has decreased Gucci’s net earnings.

There are many different sizes and types of Gucci purses. Made of leather, canvas, and suede, they are tiny to medium in size and include zippered compartments with metal locks or magnetic snap closures (Cengage, no date). Some feature leather straps that can be adjusted. Gucci handbags come in a variety of colors, including black with tan leather trim, blue and white with a leaf and flower pattern, and tan and brown with light caramel-colored trim. A metal Gucci logo and a red and green stripe run along the middle of many Gucci purses. Some are so tiny that they resemble purses, little bags, or pouches that are mostly used to carry cash. Like all Gucci goods, customers, as status symbols, cherish handbags. Due to this, fake Gucci goods are frequently oversaturated on the commercial market (Shao et al., 2019). The cost of original Gucci bags is high since they can sell for hundreds or even thousands of dollars and have serial numbers that prove their authenticity.

Growth Opportunities and Current Emerging Threats: PESTLE

Table 1: PESTLE for the luxury handbag business and Gucci

Factors	Opportunities/Threats	Implications
Political	Local governments have a significant impact on how policies are developed and executed because they are typically in charge of carrying out local laws in their jurisdictions, receiving most of the enforcement agencies’ reports on various laws. The country’s “ease of doing business” ranking has improved as a result of the regulatory practices being simplified with international standards. The country’s judiciary is largely independent when it comes to economic and business matters. Businesses do encounter difficulties when proprietary technology and public interest conflict, as they did in South Africa, where the government and judiciary were involved in authorized generic AIDS drugs despite the patents of multinational corporations.	The high differentiation in the local policies means that Gucci has to carefully plan its operations in foreign markets.	Threat
Economic	A high employment rate will have an impact on Gucci’s strategy in two ways: first, it will increase the cost of hiring talented and skilled personnel, and second, it will supply enough consumers for Gucci products. Rate of Savings and Household Income Credit binge consumption was a result of rising consumption and stagnant household income in the United States. As a result of this, people no longer have enough money to save. It is important for Gucci to use caution while developing a marketing plan that relies on “Purchase on Credit” consumer behavior. Demand Shifts from the Products Economy to the Service Economy – The proportion of services in the economy is steadily rising in comparison to the proportion of the manufacturing, goods, and agricultural sectors.	Gucci’s costs may increase as the competition in the labor market is now lower; “Purchase on Credit” provides new earning opportunities.	Opportunity
Socio-Cultural	Increasing consumer activism and pressure from non-governmental organizations and pressure groups are frequently a result of higher levels of social issues in society. The level of product quality and the cost structures of manufacturing processes are frequently indicators of how people feel about health and safety. Gucci may have to compete in emerging markets with players who don’t have Gucci’s high-cost structures due to its strict health and safety standards. The types and degree of consumption in a society are also influenced by the hierarchy and standards that are acceptable in that community. The top of a highly hierarchical society frequently has the authority of decision-making.	The market’s attention to ethical practices and environmental responsibility will pressure brands. Gucci already uses proper manufacturing practices, which can be used to appeal to this market.	Opportunity
Technology	Integration of Technology into Society and Business Processes is a necessity. For instance, Uber’s attempt to enter China before smartphones were widely used there resulted in failure. Similarly, luxury brands need to develop a plan that can take into account infrastructure, societal values, and Gucci’s business model. Counties all over the world are attempting to get ready for the installation of 5G infrastructure. Gucci needs to determine how ready the local market is for the rollout of 5G connectivity. Mobile Payments are one of the areas where the US lags behind China. Gucci should determine which mobile payment options are most popular in the local market before deciding on a business model.	Technology can provide better access to online shopping for consumers Consumer readiness for technology adoption in a certain must be evaluated prior to leveraging the technology	Opportunity
Environmental	Environmental regulation has an impact on the industry’s dynamics of absolute cost advantage. Paris Climate Agreement and National Government Commitment under the Agreement: What are the nation’s commitments under the Paris Agreement, and how widely accepted is the Paris Climate Agreement throughout the nation? For instance, there was uncertainty due to Trump’s failure to uphold US agreements. What is the nation’s national carbon emission level, and what is the nation’s per capita carbon emission level? This will make it easier to forecast the nation’s environmental policy. What is the waste management policy in the target market, and how can Gucci comply with its waste management obligations there?	Each state is at a different stage of implementing the Paris Climate Agreement, meaning that in some cases, Gucci will need to adjust its production approach.	Threat
Legal	Even if a nation has the best laws, they will not mean anything if they can’t be applied promptly. Given the potential legal difficulties Gucci may encounter, Gucci should conduct an in-depth study to determine how long it typically takes to resolve a case in the nation. Luxury should not be concerned about the monopoly and restrictive trade practices statute because it applies only to established players. Consumer Protection Laws: Luxury brands are interested in learning about consumer protection laws, their enforcement frequency, the attitudes of the relevant authorities, and the contribution of activist groups to their implementation.	Consumer protection laws have not been changed in most developed states recently.	Opportunity
Environmental	Gucci is mandated to use and create environmentally friendly products under the sustainable strategic framework. Gucci’s large portion of products are luxury attire. The toxicity of the materials used additionally harms the environment, which not only generates bad press for Gucci but significantly hinders the future of growth. Thus, sustainability is a major opportunity, whereas fast fashion is a serious threat.	Gucci can become a substantial polluter of the environment, which can permanently damage the brand’s reputation and PR. Adopting sustainable strategies might reduce short-term profits but will result in bigger gains in the far future. Therefore, the current fast fashion-oriented business model is a threat.	Threat

The PESTLE analysis for the luxury handbag business and Gucci is shown in Table 1 above. The luxury handbags market is attractive due to its continuous s growth and high profit margins. The market for luxury handbags was worth $58.3 billion in 2018 and is projected to grow to $89.9 billion by 2026, with a CAGR of 5.6 percent between 2019 and 2026 (FMCG, 2022). Luxury handbag makers have started to pay attention to the emerging consumer class known as HENRYs (High-Earners-Not-Rich-Yet), which is on the rise right now and is expected to grow more and more significantly in the future (Danziger, 2020). The growth of the HENRY market segment is the main opportunity for the companies in this industry.

Additionally, businesses are committing to spending a lot of money to pique the interest of millennials and Gen Z, two groups of people who are considered to be the market’s future consumers. Consumer credit bureau Equifax claims that HENRYs make between $100,000 and $250,000 and are well-versed in technology, devoted internet shoppers, and heavy consumers of luxury goods (Equifax, no date). The rise in per capita income of the target market is one of the major factors driving the expansion of the world market for luxury handbags.

Premiumization has persisted as a trend across numerous industries, including those of food, clothing, cosmetics, and others. Manufacturers use this approach to highlight a product’s exceptional quality and exclusivity in order to increase its consumer attractiveness. Because the bulk of the target market’s per capita income has increased, they place more emphasis on the product’s quality than its price. In terms of value sales, this enduring trend has significantly aided the overall expansion of the worldwide handbag market.

Moreover, the new tech-savvy generation seeks a personalized, seamless brand relationship. Luxury handbag companies are investing globally in digital marketing and using social media to connect with customers more (Bazi et al., 2020). Companies are also reevaluating the importance of brand history and heritage to their customers (Gerretsen, 2022). Additionally, luxury businesses have begun to communicate with customers by leveraging social media platforms as a result of the increase in internet usage and the importance of social media (Blasi et al., 2020). Social media use the attraction of tech-savvy consumers is another opportunity for luxury brands (Ngo et al., 2020; Perez et al., 2020). The type, channel of distribution, and region-based segments are used to divide the global market for luxury handbags. It is divided into different types, including wallets, handbags, and backpacks. It is divided into duty-free shops, online shops, discount shops, hypermarkets, and specialty shops according to the distribution route. North America, Europe, Asia-Pacific, and LAMEA are all considered in the regional analysis of the market.

The most popular competitors in this segment are Chanel, Dior, Louis Vuitton, and Coach. Despite the profit projections for the industry, there are some threats to the luxury handbag market. Housing expenses are rising, inflation may be rising, and despite widespread vaccinations and the lifting of restrictions, the COVID-19 epidemic is still widespread. Despite this, forecasts for the luxury handbag market globally indicate that it will be worth more than 35.4 billion dollars by 2031 (Robins, 2022). Luxury handbag producers who provide bags that combine fashion and technology are drawing in customers. Due to the region’s residents’ increasing disposable income, businesses are predicted to experience significant growth in the Asia Pacific region.

Companies involved in the luxury handbag industry are putting their efforts into creating products that are both inventive and economical. Additionally, a number of firms are working to create a product line that meets the demands of their target market. A lot of market participants in the luxury handbag industry use various social media channels to promote their goods. Businesses are utilizing tactics like mergers and acquisitions to increase their geographical presence. Such initiatives are anticipated to contribute to the creation of lucrative chances in the luxury handbag market in the near future.

In order to meet the growing demand for such products, players in the global luxury handbag market are producing more compact and inventive bags. Additionally, businesses are putting a lot of effort into creating elegant, stylish, and portable bags. Additionally, they produce goods that include technical breakthroughs. For instance, businesses like Mezzi are selling handbags that combine fashion and technology. Such items are becoming more popular since they include features like laptop covers, phone charging batteries, and tracking systems to locate the bag if it is lost or stolen. In the future years, these advancements are anticipated to boost growth prospects in the market for luxury handbags on a global scale.

Industry Attractiveness: Porter’s Five Forces

It is important to note that in order to apply a more sustainable strategic framework to Gucci’s business model, one should critically analyze the company’s position in its industry. Among the most relevant factors from the latter is industry attractiveness, which encompasses core aspects of the market of interest. The core elements of the selected framework include the threat of new entrants, the threat of substitution, buyer power, supplier power, and competitive rivalry (Mind Tools, 2022). The given section will primarily rely on the application of Porter’s Five Forces as a core strategic instrument, as shown in Table 2 below. The industry analysis shows that it is fairly unattractive, which is discussed in the following subsections.

Table 2: Porter’s Five Forces and Attractiveness for Gucci

Forces	Industry attractiveness level	Reasoning
Competition in the industry	High	The market is fairly small, meaning that the competition is high. Although not every company can achieve the status of being perceived as a luxurious manufacturer, the case of Gucci is unique due to the presence of several strong competitors in the market. The most prominent industry rivals are Prada, Dolce & Gabbana, Guess, Armani, ‎Louis Vuitton, and many others. In other words, for such a small consumer sector, there are a multitude of powerful and equally luxurious competitors, which implies high competition.
Potential of new entrants into the industry	Low	A new entrant does not have the reputation or brand image to make it appealing as a luxurious product designer or producer, making the industry almost impossible to penetrate, let alone compete with existing rivals.
Power of suppliers	Moderate	Firstly, the supplier power is granted by the mere fact that high-quality raw materials used for luxury products are less abundant than medium or low-quality alternatives. However, secondly, the supplier creating high-quality materials can only sell them to luxury manufacturers since they would not make financial sense for low-quality mass producers who use a price advantage strategy.
Power of customers	High	The overall power of customers in the industry is extremely high because luxury products, by definition, are non-essential. In other words, the customers are not forced nor need to buy them because they can always opt-out for cheaper medium-quality alternatives.
The threat of substitute products	Moderate	Firstly, luxury products are expensive, partly due to their quality. Any innovative product made with the same or even superior quality but less cost or markup can hurt Gucci’s sales. Secondly, however, the luxuriousness status cannot be replicated by other products, which means that a complete substitution is impossible.

Competition in the Industry

Gucci mainly operates in a luxury products market, which tends to encompass only a small fraction of the larger consumer population. Luxury products are non-essential items or services that attract a customer base with means and finances, making these expensive products affordable for them. Therefore, the market is fairly small, meaning that the competition is high. Although not every company can achieve the status of being perceived as a luxurious manufacturer, the case of Gucci is unique due to the presence of several strong competitors in the market. The most prominent industry rivals are Prada, Dolce & Gabbana, Guess, Armani, ‎Louis Vuitton, and many others. In other words, for such a small consumer sector, there are a multitude of powerful and equally luxurious competitors, which implies high competition.

Potential of New Entrants into the Industry

The potential of new entrants into the industry is extremely low because the market for luxury products is strongly tied to brand image and the historic longitude of the prestige status. For example, a person buying a Gucci bag is not only paying the premium for the quality of the product but the status and statement behind the product about one’s socioeconomic level. Therefore, it is of paramount importance for a buyer to be fully convinced that other people are aware and know about the brand with its accompanying luxuriousness status. A new entrant does not have the reputation or brand image to make it appealing as a luxurious product designer or producer, making the industry almost impossible to penetrate, let alone compete with existing rivals.

Power of Suppliers

It is evident that a luxury product manufacturer needed to make such items from the highest quality of materials, which tend to be rare and expensive. The rating for the given metric is moderate because of two major conflicting reasons. Firstly, the supplier power is granted by the mere fact that high-quality raw materials used for luxury products are less abundant than medium or low-quality alternatives. The latter is simply due to more costs and efforts required to make it of high quality. However, secondly, the supplier creating high-quality materials can only sell them to luxury manufacturers since they would not make financial sense for low-quality mass producers who use a price advantage strategy. Therefore, these two forces of intertwined interdependence make the supplier power moderate.

Power of Customers

The overall power of customers in the industry is extremely high because luxury products, by definition, are non-essential. In other words, the customers are not forced nor need to buy them because they can always opt-out for cheaper medium-quality alternatives. Any major shift in the consumer base’s consciousness and perception of Gucci can make the company’s products obsolete. The entire business model is heavily dependent on the brand image and reputation of Gucci, which is tied to customers’ views of the company.

Threat of Substitute Products

When it comes to the threat of substitute products, it can be categorized as moderate due to two reasons. Firstly, luxury products are expensive, partly due to their quality. Any innovative product made with the same or even superior quality, but less costs or markup can hurt Gucci’s sales. Secondly, however, the luxuriousness status cannot be replicated by other products, which means that a complete substitution is impossible. Gucci’s brand and image are strong, well-established, and have historical longevity, which implies that these two forces cancel each other out.

Environmental Sustainability

Sustainability is the main ethical dilemma that society and governments are imposing on the strategy of the company. Firstly, one must define the term “sustainability” to be able to describe the current issues that Gucci and its competitors in the luxury handbag market are facing. According to McGill University (no date), sustainability refers to achieving a company’s goals without affecting the capacity of coming generations to achieve their goals. One requires social and economic resources in addition to natural resources. Environmentalism is only one aspect of sustainability, and most conceptions of sustainability also include considerations for economic growth and social equality. Although sustainability as a concept is a relatively new idea, the movement as a whole has origins in social justice, conservationism, internationalism, and other earlier movements with long histories.

The first social dilemma is that luxury handbags are typically produced from real leather, which creates a question of environmental sustainability and the impact of the luxury handbag industry on the exploitation of animals. According to Girod (2021), a sustainable brand should understand that the generation of long-term sustainable returns depends on stable, well-functioning, and well-governed systems. This is when sustainability is to be first defined by the UN as “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (Sustainability, no date, para. 1). Environmental, Social, and Governance (ESG) reporting is a significant component of this, and today any company interested in securing long-term commercial performance must do this duty.

Depending on the industry, sustainability can take many various forms: in the auto industry, regulators are applying pressure; in many other industries, activities are still conducted freely, but that is going to change. Luxury appears to be particularly well positioned to move freely within the sustainability domain since its goods are naturally lasting due to the use of the highest-quality materials, and the entire industry is infused with a culture of transmission across generations. Without even trying, luxury is preserving the environment.

For the government-related dilemma, since sustainability has been researched for a long time, there are agencies assigning sustainability ratings to companies and evaluating their CSR practices. Gucci is owned by Kering, and it has a “good” environmental rating (‘Gucci’, no date). It makes use of recycled materials, among other environmentally beneficial ones. It has set a goal to cut greenhouse gas emissions from its own operations and supply chain, and it is on course to achieve that goal, and the latter is founded on science. It has a CanopyStyle-approved policy to stop the destruction of old-growth and endangered forests in parts of its supply chains (Ngo et al., 2020). It lessens the amount of chromium and other dangerous chemicals used in the tanning of leather.

It has a “start” labor rating, and a portion of its supply chain, including the entire final stage of production, has Social Accountability International’s SA8000 certification. It obtained a fashion transparency index score between 41 and 50 percent (Ngo et al., 2020). It adopts measures to promote inclusion and diversity in its direct operations but not in its supply chain. There is no proof that it ensures that a living wage is paid in the majority of its supply chain. It makes rules available to shield its supply chain’s vendors and employees from the effects of COVID-19.

Unique Resources

The unique intangible resources that Gucci possesses’ are the brand name and heritage, which has been the main determinant of success in the luxury handbag market. Additionally, for the physical aspects, the company possesses ties with suppliers of leather used for the crafting of luxury bags, and Gucci has the physical systems set in place to create such an item. The human resources that create the products possess the unique knowledge of how to create an item as a luxury. Gucci is owned by Kering, which had $5.676B and $3.768B earnings before tax and interest in 2021 and 2020, respectively. The total assets and current liabilities for 2021 and 2020 were $36.756B and $31.991B, as well as $10.322B and $7.693B, correspondingly (Macrotrends, 2021). The calculations are as follows:

2021) $5.676B / ($36.756B-$10.322B) = 0.214 = 21.4%
2020) $3.768B / ($31.991B-$7.693B) = 0.155 = 15.5%

The current ratios for 2021 and 2020 were equal to 1.31 and 1.34, respectively (Macrotrends, 2021). The gearing ratios for 2021 and 2020 were equal to 1.26 and 1.33, correspondingly (Macrotrends, 2021). The interest cover ratios for 2021 and 2020 were 1.55 and 1.74, respectively (Macrotrends, 2021). The latter means that the company is within the minimal means of the acceptable range, whereas the gearing ratios show that more than 50% of funding comes from debt rather than equity. The current and ROCE ratios reveal that they are in a good range, which means that the company is profitable above the interest rate and liquid.

Value Chain Analysis

The core distinctive competencies, as well as their corresponding activities, are shown in Figure 1 below. Firstly, the supplier of Gucci is unique in providing high-quality raw materials, such as leather. Secondly, the manufacturing process is distinct due to human talent as well as production knowledge, which makes a product of high quality. Thirdly, the marketing of the company is exceptional because Gucci was able to establish itself as a luxury brand without damaging its reputation or brand image. Fourthly, the process of sales and delivery of the product is an outstanding experience on its own, such as unique packaging and customer service. Customer satisfaction is the second part of continuous self-driven marketing done through word-of-mouth feedback from the consumers themselves.

VRIO

The VRIO analysis is shown in Table 3 below, which shows that the majority of Gucci’s competencies are valuable, rare, non-imitable, and organized. The selected two competencies for the following discussion are manufacturing and customer satisfaction. Firstly, manufacturing is the strongest competency of Gucci since it is the foundation behind the brand image and reputation. The human resources doing the work are experienced professionals exceptional at making Gucci products specifically. For the factual evidence, “Gucci is a small retail company with only 25 employees and an annual revenue of $7.1B” (Zippia, 2022, para. 3). In other words, it makes substantial revenues for a team of 25 workers, because all them are top craftsmen. Secondly, customer satisfaction is high to a degree where word-of-mouth marketing is even more superior than the company’s own marketing efforts. For instance, gifting only 1 Gucci bag to a beauty blogger, Jeffree Star, led to $1.6 million in earnings (CPP-Luxury, 2018). No other marketing strategy can be comparable to such strong and potent word-of-mouth marketing.

On the basis of the facts and reasoning provided above, it is clear that the dynamic capabilities of Gucci are high. The major reason is that the company has an exceptional capacity to purposefully create, extend, or modify its resource base. Gucci brings massive profits while maintaining a small manufacturing staff and infrastructure. It is agile, adaptable, and can easily configure its business if needed, but there was no need for drastic changes. In the future, a company could effortlessly decide to completely change its business, and its brand image would hold strong. The only issue would be to be able to live up to the expectations.

Table 3: VRIO for Gucci

Competencies	Value	Rare	Imitation	Organization
Supplier	+	+	+	+
Manufacturing	+	+	+	+
Marketing	+	+	+	+
Sales and Logistics	+	+	–	–
Customer Satisfaction	+	+	+	+

Generic Strategy and Strategic Group

The generic strategy at Gucci is strongly differentiation, in accordance with Porter’s generic strategic framework, because it produces and sells a highly unique product, which is desirable and luxurious in the consumers’ perception. The bags or clothes are not niche markets because all people buy them, and there are many companies mass-producing cheap products. The prices of Gucci products are extremely high, making the company the anti-cost leader. However, no company can replicate Gucci bags or clothes.

TOWS

The general TOWS Matrix is shown in Table 4 below. Based on the analysis, it becomes evident that Gucci has a great opportunity to gain a good market share within the new HENRY consumer segment and invest in technology. This is especially true for the financial instruments that allow people to buy luxury products in several installments. Moreover, the fact that Gucci already has a good sustainability rating and adheres to many practices that are environmentally friendly, the company can appeal to conscious consumers as well. Considering the projections of the market expansion, Gucci will be able to expand its operations and increase its profits in the next several years.

Table 4: TOWS Matrix

Internal Factors (SW) External Factors (OT)	Strengths	Weaknesses
	S1: Gucci has a strong brand name S2: The Value Chain of Gucci provides an advantage over other brands S3: Financial ratios are high S4: The company has a strong environmental responsibility rating S5: Gucci can appeal to the new generation of HENRY and tech-savvy clients	W1: Weak research and development efforts W2: Liquidity issues due to its liabilities W3: Liabilities outnumber the assets W5: Some of the advertisement efforts of the brand were controversial, damaging the brand’s image W6: The high cost of manufacturing will not allow Gucci to increase its margins
Opportunities	SO	WO
O1: Luxury handbag market is expected to grow to $89.9 billion by 2026 O2: Financial instruments and technology will allow consumers to purchase goods in installments O3: COVID-19 pushed many brands to online sales, expanding the opportunity to access new markets O4: Influencer marketing on Instagram has become a great indicator of success for businesses O5: Raising attention to environmental issues requires brands to show their support of conscious practices	S2S5O1O3: Gucci can leverage its online presence and brand name to increase its sales as this is a well-recognized global brand S4S5O2O5: Gucci already uses environmentally conscious practices, which can be further emphasized in branding and marketing campaigns to increase the brand’s awareness S3S2O4: Investing in modern means of brand advertisement, considering Gucci’s good financial ratios, can become beneficial for this brand as it will allow it to reach the new HENRY consumer	W1O2O4: The pandemic has shifted much of the consumer’s attention to online shopping, which means that Gucci can reduce its research and development costs by focusing on online research W2W3O1: The projections for the luxury handbag market allow for the company to increase its profits and minimize liabilities W5O5O6: Leveraging influencer marketing and online brand advertisements to address the controversies that Gucci faced in the past can help enhance the brand’s image W6O5: Gucci can draw attention to its environmentally conscious practices as a way to justify the high cost of its items and increase the prices to address the low margins issue
Threats	ST	WT
T1: New entrants T2: Economic instability due to COVID-19 and the political situation	S1T1: Gucci will leverage its well-established brand name to combat the new entrants to this market S5T2: The new HENRY consumer segment will allow Gucci to make profits even during an instability	W1T1: Gucci should work on improving its reputation after the controversial advertisements, as this is damaging to the brand’s image W2W3T2: Gucci should decrease its liabilities to improve financial ratios because global economic instability will damage the brand’s profits

SAF

The recommended strategy for Gucci for the years 2021-2026 is to focus on the new consumer market, HENRY, which are potential customers who are wealthy enough to afford luxury goods but are not in the category of “rich” people yet, which is the S5T2 model. Currently, the ROCE of Gucci is 1.8, the current ratio is 1.31, and the gearing ratio is 1.2 (Macrotrends, 2021). Additionally, continuing to emphasize the environmental sustainability of this brand is beneficial for its image, as Gucci already has a good reputation as a sustainable and conscious brand. One of the new strategic options evaluated in this case is Suitability, Acceptability, and Feasibility (‘SAF (SFA) Strategy Model,’ 2021). For the S, the chosen strategy is Suitable because it allows leveraging the prospected market growth and increases Gucci’s earnings. Additionally, in the case of A, it is acceptable since it does not violate the current standards of production and sustainability. Lastly, for the F, this strategy is feasible since Gucci will have to focus on the emerging HENRY consumer segment to be ahead of its competition.

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