Published by MBA Skool Team, Last Updated: October 28, 2019
PESTLE Analysis of Gucci analyses the brand on its business tactics. Gucci PESTLE Analysis examines the various external factors like political, economic, social, technological (PEST) which impacts its business along with legal & environmental factors. The PESTLE Analysis highlights the different extrinsic scenarios which impact the business of the brand.
PESTLE analysis is a framework which is imperative for companies such as Gucci, as it helps to understand market dynamics & improve its business continuously. PESTLE analysis is also referred to as PESTEL analysis.
Let us start the Gucci PESTLE Analysis:
The political factors in the Gucci PESTLE Analysis can be explained as follows:
In case of multinationals such as Gucci, the political implications across not just the host country but across all the countries have to be taken into account. The political factors vary among changes in sudden regimes to political unrest or among major decisions taken by the government. Asian countries like India and China which have rampant red tapism can create unfavorable environment for smooth functioning of the such brands. A country which has no system of framework established for protection of intellectual property that would directly result in negative consequences for Gucci as the investors wouldn’t find it feasible to invest in Gucci. Higher levels of taxation would result in high prices for the products of Gucci which would affect its profitability. The brand has earlier faced negative implications due to change in laws regarding import, export and increasing cost of operations. Availability of cheap labor would result in generation of higher profits for the brand.
Below are the economic factors in the PESTLE Analysis of Gucci:
The economic factor in case of Gucci would focus more upon the purchasing power of the consumers.
Gucci faced a couple of challenges in the market one of the main being skimmed prices and high insurance purchase sought after by the customers. Gucci’s positive contribution to the economy has resulted in increase in Gross Domestic Product and living standards of the economy. The efficiency of operation of the financial market can impact Gucci’s ability to raise capital at a fair price. Since Gucci is a luxury brand, despite the adverse economic trends the luxury goods industry has experienced a positive effect on economic growth. The ASEAN countries posted a better growth rate than the previous years. While the exchange rate of the country in which Gucci operates would impact the profitability of Gucci, especially if Gucci engages in international trade, the stability of the currency is also an important factor as an unstable currency discourages international investors.
Following are the social factors impacting Gucci PESTLE Analysis:
Gucci is a luxury brand and serves its products to high end customers who have specific demand for a particular product. It has always delivered the best luxury products that customer demands, including fur coat and leather bags etc. While this has successfully established a loyal customer base for the brand, the strategy has also resulted in social activist condemning the company’s policy to use the raw material for these products. The target market has to be aligned along with the products and price range of the company. It would be ineffective for a brand like Gucci to promote its products to the general public if the majority of the population belonged to a lower class, the company would have to rely on very niche marketing. Besides these factors the irreversible rise of civil society in the ASEAN countries has changed the way brands perceive and target its customers. The company recognizes the value of its employees and is committed to enhancing the lives of the people who make their products as well as supporting communities. For e.g. it involves responsible and innovative management of the supply chain, gender equality, diversity and inclusion. Each year the company contributes to a variety of projects aimed at safeguarding the rights of women, supporting the arts and protecting and promoting health of children.
The technological factors in the PESTLE Analysis of Gucci are mentioned below:
Various advancements in technology affects the market coverage and the ability of the brands to target niche customers. The brand is focused upon developing new solutions by applying various technical innovations in order to improve efficiency in its production and logistics in the daily operations of the company. For example, setting up an incubator and start up environment to foster the environment of innovation within the company. The brand has also expanded its reach by creating awareness and marketing its products on various online portals such as Youtube, Facebook, Twitter, Snapchat, Pinterest and Instagram. A variety of improvements in new technology would result in a reduction in cost of production, for the products of Gucci which helps the company to further increase its revenues.
The company has also launched a Florence based call center which would help deliver personalized experience to the customers through their smartphones.
Following are the legal factors in the Gucci PESTLE Analysis:
Gucci is a brand that strictly abides by the laws and regulations providing customers with their unique products in the market. Fair treatment should be provided to the employees in terms of working hours and treatment of employees. The company also has to protect its products from infringement. In the past, the Italian brand had filed a lawsuit against the Forever 21. The company had allegedly challenged Gucci’s trademarks of blue-red-blue and green-red-green stripe webbing. Forever 21 tried to defend its claim by stating that any use of stripes or color brands on clothing sold by them is ornamental, decorative and aesthetically functional for them. Gucci was involved in another battle with the Guess. The companies had landed in an ugly legal battle related to intellectual property right litigations which finally settled after ten years.
In the Gucci PESTLE Analysis, the environmental elements affecting its business are as below:
Gucci has a strong belief that the commitment to fight against the environment is essential for not only safeguarding the planet, but is also mandatory to ensure competitiveness. The company is setting ambitious targets to establish a new standard in luxury retail industry. One of the main goals of the company is to continually trace the procurement of 95% of its raw material.
The brand acknowledges the fact that there is a growing segment of new, ethically-minded consumers who focus upon innovation and social responsibility and want nothing to do with inherently cruel products. Therefore, in an industry that raises and kills more than 75 billion wild animals every year, the company has taken responsibility to become role models for other companies to follow a cruelty free model. The idea is to make use of the brand name that is already very influential in the market and the goal is to achieve a supply chain that doesn’t involve the exploitation of animals.
To conclude, the above Gucci PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.
This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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