Create a scenario of a hypothetical company whose situation was similar to that of The Gucci Group.

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Question:

Create a scenario of a hypothetical company whose situation was similar to that of The Gucci Group. Include the company's name, its industry type, and management structure.

Then explain what could happen if the CEO, the mastermind behind the success of the company decides to leave the organization.

Remember to include the following points:

Its implication on the company's product.

Fluctuation in the company's stock price.

The expected outcome in terms of profit and loss.

When Your Competitive Advantage Walks Out the Door: Gucci

On September 10, 2001, French retailer Pinault Printemps Redoute (PPR) agreed to acquire Gucci Group— the Italian-based fashion house and luxury goods maker. On November 4, 2003, the managers and shareholders of the two companies were stunned to learn that Chairman Domenico De Sole and Vice Chairman Tom Ford would be leaving Gucci in April, 2004.

The duo has masterminded Gucci’s transformation from a near-bankrupt family firm with an over-extended brand into one of the world’s hottest fashion houses. As creative director, Tom Ford had established Gucci as a style leader and hired young designers such as Stella McCartney and Alexander McQueen. De Sole’s astute leadership had instituted careful planning and financial discipline and built Gucci’s global presence— especially in Asia.

How great a blow was De Sole and Ford’s departure to the parent PPR? In principle, a new CEO and new head of design could be hired. In practice, talent of the ilk of De Sole and Ford was rare—especially a combination of designer and CEO who could collaborate around a shared vision.

The stock market’s reaction was ominous. On November 3, 2003, Gucci’s share price was $86.10; on November 6 it had fallen to $84.60. However, in the absence of PPR’s guarantee to acquire Gucci’s shares at $85.52, analysts estimated that Gucci would be trading at around $74. The implication was that Gucci was worth $1.2 billion less without De Sole and Ford than with them.