Analysis of Gucci’s International Growth using Treadgold’s Experience Curve.
Treadgold’s experience curve is a valuable way to analyse the growth of a company. It examines the various stages of reluctance, caution and ambition as the company internationalises. By mapping Gucci’s moves throughout its history onto this model it allows us to explore the motivations and expansion of Gucci from local artisanal manufacturer into the global leader we know today.
Here we see an example of the Treadgold Experience Curve (Treadgold 1990) mapped to Gucci’s international expansion. Three key events in Gucci’s history are present representing the reluctant, cautious and ambitious stages of the model. These are Gucci’s initial international expansion into the US in 1953, Gucci’s expansion into Asia in 1973 (Gucci 2016) and the opening of Gucci’s Asian flagship in Hong Kong in 2006 (Vogue 2006).
First Move
The first stage in this model is reluctance. This represents the earliest stages of internationalisation for a company when they expand almost begrudgingly due to external factors. For Gucci this would be the opening of their first international store in New York in 1953 (Figure 1). This store was located on 5th Avenue, New York’s iconic shopping district and represented Gucci’s first move out of Italy. Gucci is perhaps unorthodox among companies as at the time of their initial expansion there was little risk involved. Gucci was already world renowned and a beloved brand to celebrities, businessmen and even politicians so this move meant they were merely moving closer to an eager customer base. Similarly, when looking through the Hofstede Country Comparator (Hofstede 2020) it seems this internationalisation also had minimal risk.
United States – Purple
Figure 2
It is shown clearly here the many similarities between the culture in Italy and the United States (Figure 2). According to the comparison both countries are largely individualist meaning that both countries favour an independent self-image with a focus on self-actualisation. Similarly, both countries are considered masculine and driven by competition, achievement and success.
Culturally, Italians like to show success through status symbols. The United States operates in a similar way, striving for success, openly discussing their personal achievements and also seeking status symbols. Whilst there are undoubted similarities, it is the way the countries differ on the comparator that ensures Gucci’s success in the United States. For example, a clear difference is that the USA are a more indulgent country than Italy. Culturally the Italians are restrained, this means they are more likely to be cynical and pessimistic with a controlled gratification of desires. Similarly, cultures like Italian feel restrained by social norms and often feel that self-indulgence is wrong.
This is a contrast to the United States which is an indulgent country. They operate on a series of contradictions such as a work hard, play hard philosophy and outward prudishness despite clear underlying immorality. This is a key cultural difference and increases the likelihood of Gucci’s success in the country. The USA’s cultural indulgence combined with the masculine society means that they gravitate towards status symbols even more than the Italians. This meant that this internationalisation was relatively low risk for the company.
Nonetheless, this still fits into the reluctant stage of the model and was a reactive decision rather than a proactive one. This would also be considered a push factor towards internationalisation (Swoboda, Zentes and Elsner 2009). This is because Gucci needed to move out of a limited market in Italy due to the competition from other fashion houses such as Prada. Luckily for Gucci, at this time luxury brands were primarily European-centric so an expansion into the USA proved successful. Their high-quality leather goods and accessories were already lauded by American celebrities such as Elizabeth Taylor (Curcio 2019), so the expansion required no adjustment to their product portfolio. Overall, although a choice pushed upon them this was a key moment in Gucci’s history that was vital to their long-term success and allowed them to expand into a market in a relatively low risk way.
Second Move
A second key moment in the history of Gucci’s internationalisation was their expansion into Asia. Asia presented altogether different challenges for what was, in 1973, already a highly successful brand. Gucci opened their first Asian store in Tokyo Japan in 1973 (Figure 1). This represented Gucci’s first forays into the Far East and presented a drastic cultural shift. The Japanese market posed a more radical challenge than America did. This stage is represented by the cautious stage of the Experience Curve and presented Gucci nervously expanding to a more culturally diverse continent.
This new store opening presented more of a risk for Gucci as well as more of a challenge. Although they had Asian customers, they were not as beloved in Asia as they were in America. Similarly, the Asian markets didn’t possess the historical love affair with European goods in the same way as American consumers. An additional challenge faced by Gucci was that they were entering an alien market filled with entirely new competitors. However, they also had many factors in their favour in regard to this move. For example, at this time due to an economic boom Japan was one of the world’s most prosperous countries (Oka, 1970). This left consumers with disposable income for luxury fashion (Monroe 1972). Similarly, the Japanese fashion scene was not entirely unknown to Gucci. The rise of designers such as Kenzo Takada, who founded his brand Kenzo, which fused Asian, specifically Japanese, style with European construction, in Paris showed Gucci what to expect from some of their new rivals (Dorsey 1976).
Japan – Purple
Figure 3
As with the United States, there are both similarities and differences between the culture of Italy and that of Japan (Figure 3). One of the key cultural similarities is that both Italy and Japan are masculine countries. Japan is among the most masculine societies in the world and this has led to the reputation of workaholism of the Japanese (Figure 3). One of the other large similarities is the long-term orientation of each country, although Japan takes this to a much greater extreme viewing their individual lives as merely a short window in history. This is also reflected in the long-term approach of Japanese businesses. Whilst the countries also share similar traits in terms of uncertainty avoidance, indulgence and power distance they have a large cultural difference in terms of individualism. Japan is a collectivist society which puts the harmony of the group above the individual (Figure 3). However, whilst collectivist by western standards, Japan is considered fairly individual by standards of other Asian countries such as China. This meant that Japan was a clever point of entry for the Asian market for Gucci, providing a halfway house between the West and the East and preventing the culture shock from being too drastic.
This movement to internationalise eastwards was a proactive decision by Gucci as well as a pull factor (Alexander 1990). The decision to move east was to expand on Gucci’s successes in Europe and America and continue their evolution into one of the most successful fashion brands in the world. Similarly, the economic boom in Japan and resultant increase in disposable income made the move an appealing proposition, as would the work loving nature of the Japanese employees which must be a benefit to brands establishing themselves in the country (Alexander 1990). These would both count as pull motivators as the conditions would be tempting for Gucci as they would have enabled faster growth in this new market (Alexander 1995). Nevertheless, this would still be considered the cautious stage of the curve. Gucci opted to enter the least culturally different of all of the major Asian countries and did so with a store in the largest city, the capital Tokyo. Similarly, this cautious approach is shown by the fact that Gucci’s branding and goods remained unchanged with the only a variation being in the prices of the goods. This is still the case today with a pair of Gucci Jordaan Loafers, costing 110,000 ¥ in Japan (Gucci 2021) and €650 in Italy (Gucci 2021), a price difference of around €200.
Recent Move
The third and most recent key move made by Gucci was the opening of an Asian flagship store in Hong Kong. This shows just how important the Asian market has become to Gucci in the years since their entry in 1973. It joined flagship stores such as those in Florence, Milan, London, New York, and Los Angeles.
This Hong Kong store was the most recent major instance of internationalisation for Gucci when it opened in 2006 (Figure 1). It also represented the ambitious stage of internationalisation for Gucci. Gucci had, by 2006, become a global power in the fashion world. They had been purchased by Kering in 1999 giving them increased financial firepower (Kering 2021). Between their expansion into Asia in 1973 and this flagship opening in 2006 Gucci had great commercial success (Anderson 1992). Despite this Gucci had received mixed reviews critically. Their products had gone in and out of fashion and the brand itself had experienced various family feuds culminating in the Gucci family being forced out of the business and the infamous murder of Maurizio Gucci (Tagliabue 1995).
The years between 1973 and 2006 also saw a great Gucci revival under the creative direction of Tom Ford. This revival saw a reduction in the number of global stores, critical as well as commercial success and an increase in Gucci’s marketing budget (Anderson 1992). This increased the exclusivity of the brand which had taken a hit since their jetset boom in the 1960’s and 1970s. It was clear that Gucci was riding a new high and was beginning to re-expand its business after a period of consolidation.
This new period of growth was achieved with the financial backing of Kering and was clearly ambitious on Gucci’s part. As well as being the result of a proactive decision from Gucci to expand, it is also an example of a pull factor of Gucci being drawn to new lucrative markets (Alexander 1990). Gucci were going for more ambitious stores of greater scale and grandeur, showing ambition and foresight on Gucci’s part as they predicted how lucrative the Asian market could become. Today the Asian market remains vital to the success of Gucci with the Asia-Pacific region making up 44% of Gucci’s revenue in 2020 (Sabanoglu, 2021).
Although Gucci has kept its overall global offering and branding very similar its expansion into the Asian market did result in some changes. This was due to the propensity of the Asian markets to favour heavily branded goods. Gucci began to adapt their designs to incorporate more logos and a greater emphasis on branding. However, rather than using this tactic exclusively in Asia, Gucci retroactively applied it to the whole of their business in an exchange of ideas caused by their internationalisation (Burt and Sparks 2002). This change has led to great success for Gucci, particularly in recent years (Perino, 2019), but it probably would not have occurred without the committed expansion into Asia.
Hong Kong – Blue
Figure 4
Although highly successful this move was not without difficulties due to cultural differences. Hong Kong presented the greatest cultural shift yet for Gucci. The most drastic differences came in the cultural view on individualism (Figure 4). Whilst Japan was more individualist than other Asian countries Hong Kong has a truly collectivist culture. They put the needs of the group ahead of individuals and avoid open conflicts. This is a contrast to the individual nature of Italian culture, which is a society generally defined in terms of I, not we. Another drastic difference is the cultures view on power distance (Figure 4). Whilst Italy believes in true equality, Hong Kong as a society accepts inequalities and there is little defence against power abuse. A third drastic difference is the views on uncertainty avoidance, whilst Italian culture is deeply uncomfortable with ambiguity, the culture in Hong Kong is more pragmatic on the subject. The people of Hong Kong are largely comfortable with ambiguity. This shows that adapting to the new culture would have presented a great challenge for Gucci. However, their success in this shows that Gucci were up to the challenge and have thrived.
That Stylish Guy 