Joint ventures occur when a business joins a foreign company to undertake particular operation. There are three types of joint ventures: licensing, contract manufacturing and joint ownership.
-
Licensing is when a company enables a foreign company to use such things as the company’s manufacturing processes or brand name. This allows the foreign company to enter the market easily and with little risks. However, if one of the companies is more successful than the other, this can cause competition.
-
Contract manufacturing is when a company enters a foreign market by making a contract with the local manufacturers to produce its products. This often happen in the fashion industry where, for example, jeans are “produced by Filipino and Chinese textile mills for overseas manufacturers” (Johansson, 2003: 147).
-
Joint ownership occurs when a company creates a local business in a foreign market and sharing the ownership with the foreign investors.
Direct investment consists in investing in the country to enter, for example by building assembly or manufacturing facilities. This can offer lower costs due to cheaper labour and raw materials. However, despite the advantages a company may be faced with unstable governments, weak markets or fluctuating currencies.
- Standardised versus Adapted marketing mix.
The standardised marketing mix is when a company uses the same elements of the marketing mix throughout all its markets. Many fashion companies tend to have the same product lines and use the same advertising strategies throughout different markets. This “implies a common message, creative idea, media and strategy” (Chee and Harrison, 1993: 348).
The adapted marketing mix is when elements of the marketing mix are changed or modified according to the specific market they are aimed to. This type of marketing mix is more costly than the standardised marketing mix, however, it also allows a company to achieve higher returns more easily.
- Global marketing and the 4 P’s
When selling a product across different markets a company has the choice of keeping the product as it is (straight line expansion), making specific changes to it (product adaptation) or inventing a new product in order for it to be more successful in each individual market. However, no matter what strategy a company decides to use, it should primarily aim to satisfy customer’s needs.
Another factor that needs to be taken into consideration is the price at which products are sold internationally. The price of the same product can change across countries. This is due to factors such as transport costs or tariffs which can affect the price of the product when selling it in a foreign country.
The distribution channels adopted by a company are also important when marketing on a global level. These are very different across nations with variations in the number and type of intermediaries and retail units within each country. Moreover, distribution channels are an important factor because they are the most long term and the most difficult to change in a short period of time (Czinkota and Ronkainen, 1993).
When promoting a product globally companies have the choice of using the same strategy or changing it according to specific markets. Some companies make small changes to their advertising campaigns such as, colour or language changes, however, others fully adapt their advertising strategy according to the market they want to enter. This is done to enable the company to communicate its message to their target market in the most effective way (Chee and Harrison, 1993).
- TARGET MARKETS
People are individuals however they tend to have common characteristics. In the fashion industry consumers are increasingly aware of the variety of products and their characteristics and search for items that make a “positive statement” (Silverstein and Fiske, 2003: 54).
In order to better serve its customers a company needs to segment its market into a number of groups according to customer needs, wants or specific characteristics. Once the market has been segmented the company will need to evaluate each segment in order to see which ones are the most attractive ones to enter. This is called market targeting.
- Assessing and Selecting Attractive Segments
There are a number of different ways to assess the attractiveness of market segments, one of which is Porte’s five force model. This model states that the competitors in the segment, the potential entrants to the market, the substitute products, and the power of buyers and suppliers are all important factors that need to be considered when assessing market segments (Baker, 2003). Moreover, companies will also target segments according to the segment’s size and growth, the profit margins or the sales that can be achieved within the segment. However, each company will have to carefully evaluate each segment according to its long term aims and objectives. Furthermore, the company should assess what it was to offer the new market segment. Once the company has selected the market segments to enter it needs to make sure that it has more than just the strength required to compete in the segment, but that it has the strengths to successfully gain a compete advantage of the other businesses in the market segment.
- COMPETITORS
In order for a company to successfully compete in a market segment it needs to know about its competitors and their aims, objectives and strategies. By having all the relevant information and constantly comparing it self to its competitors a company can find areas in which it can achieve a competitive advantage.
- Three things companies should know about competitors
-
Learn and understand what competitors are trying to achieve in terms of profitability, sales, market share and any other goals that could be relevant. This enables a firm to see how its competitors feel about their current market position.
-
Learn about competitor’s strengths and weaknesses. The most common ways to do this is through secondary research or personal experience however, primary research can also be conducted with suppliers and customers in order to gather valuable information. A company’s competitiveness can also be increased by comparing its products with those of its competitors generating ideas to improve some of its aspects (Kotler et al, 2005). This is usually referred to as benchmarking.
-
Learn about how competitors would react to competitive actions. This will enable a firm to deal with competitive actions successfully. Although the process of gathering all the required information about competitors is both costly and time consuming the price the company would have to pay if it didn’t undertake this research would be higher.
- PRODUCT LINES
Kotler (2005: 552) defines a product line as:
“a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through the same types of outlets, or fall within given price ranges.”
- Product line length
The length of the product line tends to change according to the company’s objectives. If the firm is interested in short-term profits then it will focus on a short product line, however if they want to achieve long term objectives such as market growth they will focus on longer product lines (Kotler et al, 2005).
The two main ways in which the length of the product line can be increased is through stretching or filling the line.
-
Stretching the product line into higher or lower ends of the market can be done in order to increase the company’s growth rate. However, this can be risky as the firm may not have the capabilities to successfully compete in different ends of the segment. Some fashion companies such as Zara have successfully used this strategy by introducing their Zara Woman collection which offers higher quality products at a higher price.
-
Product-line filling, on the other hand, is when a company adds more products to its product line. This could be done to achieve higher profits, provide customers with a full range of products or successfully compete against competitors. This is often done by fashion companies who expand from clothes and shoes into accessories and perfumes.
- DISTRIBUTION CHANNELS
- Intermediaries
Manufacturers often use intermediaries to sell products to customers as they tend to have a closer relationship with the customers. The intermediaries through which products need to pass in order to go form the manufacturers to the customers are also referred to as the distribution channels.
- Choice of channels
Such things as the product, price or advertising decisions are affected by the choice of distribution channels. Therefore, distribution channels can be a determinant factor of the firm’s profitability and even be a source of competitive advantage and need to be carefully selected.
Furthermore, the choice of channels will be affected by the company’s objectives, resources and positioning strategy and companies will have the choice of focusing on, intensive, exclusive or selective distribution.
Intensive distribution is usually used with low-priced, convenience products as these need to be present in a large number of places in order to have a better chance to be sold.
Exclusive distribution is used for luxury products. In this case manufacturers only allow a small number of intermediaries to distribute their products. This enables the company to have better control over the pricing and selling of products.
Selective distribution is when a company restricts its choice of intermediaries in order to select the best available dealers.
- Three generic distribution channels
A company that wants to operate internationally needs to evaluate the best way of entering the foreign market. This can be done by integrated distribution, direct or indirect exporting (Business America, march 25, 1991).
Direct and indirect exporting have been discussed in previous chapters.
Integrated distribution, on the other hand, is when a company invest money in establishing such things as sales offices and manufacturing facilities in the country of interest. Although this can be very profitable it is riskier than the first two methods, as large investments are required.
- ADVERTISING
The main aim of advertising is to inform people about a particular product and persuade them to buy it. There are two opposing theories on the usefulness of advertising: the strong and the weak theory of advertising (Jobber, 2004).
The strong theory of advertising states that advertising is powerful enough to inform and change people’s aptitudes about a specific product and, therefore, persuade them to buy the product. This theory has, however, been criticised because it is limited to converting a non-buyer to a buyer without considering what happens after the first purchase.
The weak theory of advertising suggests that advertising firstly stimulates potential consumers’ interest, then pushes them to an initial trial of the product and finally provides after purchase reassurance. In this case the main aim of advertising is to retain buyers, rather than focusing on new potential consumers.
- Target Audience
In order to produce successful advertising campaigns advertisers need to be aware of the characteristics, needs and wants of the customer they plan to target with their campaigns. The advertising strategies will need to be different depending on the type of product and the customers they are aimed for. The luxury fashion industry is of such a global nature that companies can often use the same advertising strategies and campaigns across different nations. This is also due to the increasing similarities between customers of different nationalities.
- Advertising Objectives
The company needs to establish whether its advertising objectives are “to inform, persuade or remind” (Kotler et al,2005: 763) its customers about a product. The advertising strategy will vary according to which objective the company decides to pursue. Through advertising customers can be informed of the characteristics of a product and can be persuaded to buy it by using persuasive language or images. Furthermore, advertising is the tool companies use to position a particular product in customers minds.
- Advertising Budget
In order to achieve the advertising objectives the company needs to assess how much it needs to invest in advertising. The advertising budget will change according to such things as the type of product, the stage of the product life cycle the product is in or the amount of competitors it competes against (Kotler et al, 2005). Furthermore, the budget can be set by looking at more financial aspects, such as how much companies can afford to spend on advertising or by setting the budget on a percentage of the expected sales. Moreover, the budget could be set by matching what competitors spend on advertising. Each aspect should be carefully evaluated to determine what suits the company best.
- The message
One of the most important aspects of advertising campaigns is the message that it communicates as this is what potential customers respond to. Advertisers need to bring the message to life through meaningful, believable and distinctive advertising campaigns (Kotler et al,2005). The main aim of advertising is that it needs to attract attention because with the thousands of products and adverts customers are targeted with, only what is distinctive will be noticed. Furthermore, the ways of presenting the message; such things as the style the tone or the words used in advertising campaigns will change according to the product or the characteristics of the target market.
- Selecting the media
The most appropriate advertising media needs to be selected to deliver the message in a distinctive way. Different types of media have different costs and benefits, all of which need to be evaluated to assure that the most effective advertising method is chosen. Moreover, companies will need to know about the type of media that will have a greater impact and reach on its target customers.
Before selecting the advertising media advertisers should consider all aspects of the marketing mix. The different product characteristics will call for different advertising media. Many fashion companies, for example, use magazines to advertise their products as these are effective means of evoking and engaging consumer’s emotions.
Once the media has been selected the advertisers will need to decide on the timing of the advertising (Kotler et al, 2005).
-
Continuous advertising is when advertising is spread evenly over a period of time.
-
Seasonal advertising is when advertising can be concentrated in a set period of time.
-
Flighting is when a company alternates the moments in which it advertises a particular product with times where it doesn’t advertise at all.
-
Pulsing is when a company alternates times where it spends very little on advertising with times where the amount spent on advertising is very high.
- Evaluating the effectiveness of advertising
Once the advertising campaign has been planned and put into action it will have to be re-evaluated on a regular basis. This is essential, because we live in a constantly changing environment and as time passes the effectiveness of the initial advertising campaigns can decrease and, therefore, adjustments may be required.
CHAPTER 3: SOURCES AND METHODS
- INTRODUCTION
In order to answer the key research questions, secondary and primary research, will be collected. Both types of research are essential in this dissertation as they offer crucial insights into the company’s activities. Furthermore, qualitative data has been collected instead of quantitative data, this is because the available time was not enough to collect and analyse a wide range of data.
- SECONDARY RESEARCH
The secondary research consists of “reanalysing data that have already been collected for some other purpose” (Saunders, Lewis and Thornhill, 2003: 188). In this case, the researcher will be interested in information about international companies overall, the importance of being successful in the national market before entering foreign markets, and global marketing issues. One of the main books used for this is Principles of Marketing (Kotler et al, 2005). Other important books for the secondary research are Il marketing della moda: politiche e strategie di fashion marketing (Foglio, 2001), and Global marketing: foreign entry, local marketing and global management (Johansson, 2003). These create part of the theoretical framework.
The information needed to conduct the project will be collected through the use of external sources of secondary data such as published books and articles. However, the main part of the research focuses on the company Salvatore Ferragamo. In order to collect all the necessary information the researcher will gather internal sources of secondary research. This information includes corporate documentation such as company reports and marketing plans which are available due to prior employment, of the researcher, in the company. Some of the most relevant information collected will be presented in Appendix B. The internal sources of secondary research will be backed-up by other external sources such as published general statistics and industry statistics, which have been collected through the use of the internet.
Although secondary research has a number of advantages such as the fact that it is readily available, it saves money and it is not time consuming it also has some disadvantages. In order to use secondary data effectively it is important to make sure that the data is relevant to the specific problem addressed and that it has been classified in a way that is consistent with the study at hand. This consists in making sure that such things as variables and measurements are “in line” with those used in the investigation. It is also important to make sure the data is accurate and that it comes from the original source and not an intermediate or third-hand report (Ghauri and Gronhaug, 2002).
- PRIMARY RESEARCH
The secondary research conducted, will be further backed up, by some primary research. This is “data gathered and assembled specifically for the project at hand” (Zikmund, 1994: 40). The researcher will create and conduct a number of interviews and questionnaires that will be sent to people in the company in both Italy and the USA.
Table 1: Interviewees Source: Author (2006)
Table 2: People to whom the questionnaires will be sent
Source: Author (2006)
When deciding who to send the questionnaires to, people with similar job titles were selected as this would be a better means of comparison and would enable results to be as fair as possible. The questions will focus on the types of advertising strategies used, such as what are the advertising media used and the advertising campaign, how customers are segmented in both countries and who are the companies they compete against. Moreover, the primary research will include questions about the product lines and distribution channels used.
- Primary Research: Interview
The interviews will consist of semi-structured in depth interviews with thirteen open ended questions. The interviews will be constructed in this particular way because they enable the interviewees to answer questions freely and in as much depth they want. The interviews will include the same questions for everyone, making it easier to compare answers between employees in Italy and the United States. Moreover, the questions that will be asked in the interview will be similar to those in the questionnaire. However, the answers given in the interviews will be more in depth. Moreover, the interviews will include questions about the importance of taking into consideration cultural differences when advertising internationally. The interview will include questions such as: “Why has this target market/s been chosen?” and “Who are the key target markets?” encouraging interviewees to expand on their answers. On the other hand, when talking about target markets, the questionnaires will have more specific questions about the gender and age of customers targeted.
- Primary Research: Questionnaire
Both, interviews and the questionnaires, will be conducted through the use of the internet, as this is a cheaper and less time consuming communication media. Furthermore, the people whom the questionnaires will be sent to, will be able to fill them out and send them back, in their own time. This can be seen as an advantage as they will not be faced with time pressure enabling them to feel comfortable writing answers to questions rather than being face to face with the interviewer. This will enable the researcher to collect honest and reliable answers to a number of both open ended and closed ended questions. The reason why the questionnaire included both types of questions is because the open ended questions enabled the employees to express their thoughts whereas the closed-ended questions allowed the researcher to collect “direct” information. The following questions are examples of the types of questions that will be included in the questionnaire.
What are the main advertising strategies used by the company? Tick up to 3.
Newspapers
Magazines
Bill Boards
Radio
Television
Leaflets
If other, specify
……………………………………………………………………………………
Which one do you think is the most effective and why?
………………………………………………………………………………………………………………………………………………………………………………………………
Questions, where the answers are multiple choice, will also be included, as these are less time consuming for the interviewees who are likely to be very busy and with little time to spare. However, one main disadvantage with conducting the interviews and questionnaires over the internet is that the researcher will not be able to see the body language of the respondents, which can often be helpful when analysing results.
- TIME SCALE
Interviews and questionnaires will be constructed during the week of December 26th and will be sent on January 2nd. Respondents will be encouraged to return the data by the January 23rd. This gives respondents enough time to reply and allows the researcher enough time to trace people who haven’t responded or to overcome any other problems that may occur. The deadline for collecting secondary data is January 29th. This is a good date to have all the research by as it will give the researcher time up to February 12th to analyse the data. However, if the researcher is faced with unexpected problems there will be time up to January 29th to collect all the data.
CHAPTER 4: DATA PRESENTATION AND ANALYSIS
The initial aim was to send the questionnaires to five people in the marketing department in Italy and five in the USA, however, this was not possible as the marketing department of the company only consisted of a couple of people. The questionnaire was, therefore, sent to three company employees in each country, such as, marketing and public relation managers and directors. Although the number of people interviewed and surveyed is not very large, it should still be enough to have an insight of the company’s marketing activities. Moreover, the primary research collected will still enable a comparative analysis of the activities in the two countries, as the same number of people were interviewed and surveyed in both Italy and the US.
- MARKETING ACTIVITIES
Table 1
There were a number of the things that were discovered from the questionnaires that were sent out to employees of Salvatore Ferragamo in both Italy and the US. In this case, the above table shows the information collected about the main target market, the customers and the age group they belong to.
- Main Target Market
In order to better serve its customers through desirable products and effective advertising strategies any fashion company needs to identify its target market.
Through the use of the questionnaires it was possible to find out that in both Italy and the US the main target market is shoes for both men and women. The reason for this is probably because this is how the business started and it remains the central focus of the company. From the primary research it was, also, possible to find out that the other major market Salvatore Ferragamo targets is the leather goods market. In this market the business is particularly successful in manufacturing luxury handbags and smaller leather goods such as belts and wallets. Some of the other accessories that the company produces are silk items such as scarves and ties. Salvatore Ferragamo has also started targeting, in recent years, the clothes market with a small percentage of ready to wear items. Overall, it is possible to see, that all the all the items produced by the company are high quality luxury goods which are, primarily, aimed at high end customers.
- Customers
Although Salvatore Ferragamo has a wide range of products for men, in both the US and Italy, the results of the primary research, as presented in Table 1, show that the main customers targeted are women of the ages between 30 and 50. The reason why the company targets women is probably because they are more susceptible to the company’s advertising strategies and are more likely than men to indulge in the act of shopping. Furthermore, often women tend to do the shopping for their male partners, friends or family members making them a more valuable target for the company. Moreover, the company targets women between 30 and 50. One of the reasons for this is that this is the age women are more likely to care about and afford luxury brands. The company therefore produces elegant items that would attract wealthy and stylish women in this age group. Furthermore, the main way in which the company attracts its customers is by creating items that promote a “positive statement” (Silvertein and Fiske, 2003: 54) and, through this, enhancing the feeling of elegance and femininity to women.
- ADVERTISING MEDIA
Table 2
In order to deliver the message in a distinctive way the most appropriate advertising media needs to be selected.
Through the use of the questionnaire it was possible to find out the main advertising media used by the company in both countries. The information that was found is represented in Table 2. From the table it is possible to see that there are some distinct differences in the choice of media between the US and Italy. However, it is possible to see that neither country uses bill boards, radio or television as advertising media. The main reason why the company does not use bill boards as an advertising media is because it is difficult to target specific markets. The company wants to target wealthy women between the ages of 30 to 50; this is not an easy task when using outdoor advertising media. Through the use of the radio, on the other hand, it is easier to target specific markets or age groups by selecting particular stations, programs or times of the day. However, the radio is not advantageous media for the fashion industry because there is no visual exposure which is essential when trying to engage customers’ emotions through the use of images. Lastly, the reason why television is not used is because it is very costly and advertising on television is brief, not enabling customers to focus closely on the details of the images portrayed.
Another way of promoting products is through the use of public relations. Salvatore Ferragamo uses public relations strategies worldwide to advertise specific products. This consists of sending the selected items to celebrities and making sure they are photographed wearing the company’s product. This is particularly effective because people often feel the need to associate with celebrities as this makes them feel better about themselves and their image. Moreover, if products are worn by the right celebrity they immediately become fashionable and desirable to customers.
- United States
In the US the company mainly advertises through magazines but also through newspapers, telephone kiosks and the store window. Magazines and newspaper advertising are best for building brand awareness and communicating the brand image for the season, to existing and possible future customers. This is because, as previously stated, the images portrayed in magazines have the ability of evoking and engaging people’s emotions more than it would be possible through other media. Although Salvatore Ferragamo has an international adverting campaign, the magazines in which the adverts are placed are country specific. The marketing department in each country selects the magazines in which to place the adverts. This is done by choosing the magazines through which the company can achieve the widest reach in the target market selected. The company will, therefore, choose fashionable and prestigious magazines where luxury products are best advertised. Direct mail, on the other hand, is best for creating relationships with actual and potential customers and is an effective way of communicating product information directly to the customers. Direct mail is also an efficient predictor of sales as it is easier to calculate sales generated by direct mail than those generated by advertising campaigns. However, in order for the advertising strategies to be most effective it is better if they are used in a strategic combination with one another. This will enable the company to reinforce the message it is sending customers on a number of different levels. Moreover, as Tara Hannert stated in the survey conducted, the store window can be used as an effective advertising tool. By exposing fashionable items in specific combinations of styles and colours can send a positive image of the company to current and potential customers. If the window sill is attractive to customers there is a greater chance that they will enter the store and possibly purchase something. In order to highlight the importance of the use of window sills as an effective advertising tool Appendix B includes a “window sill analysis” conducted by the company in Italy, where the displays of the window sills of different fashion houses are compared.
- Italy
Similarly to the US, Italy also uses magazines and newspapers as its primary advertising media. However, it is possible that the particular magazines and newspapers in which the company decides to advertise will be different ones to those in the US. The director of Public Relations, Tara Hannert, stated during the recent questionnaire conducted that “each country chooses different publications in which to advertise, based on its own individual market”. This is mainly due to cultural and lifestyle differences across countries which tend to have an impact on consumption patterns and the purchasing behaviour of customers. Salvatore Ferragamo also uses leaflets as an adverting media nationwide. This is also a very effective way of building customer loyalty and strengthening the relationship the company has with customers. Another way in which the company has been promoting it self is through hosting events. This strategy has helped the business in creating a positive company and brand image while simultaneously improving the relationship with customers.
- ADVERTISING STRATEGIES
In both the US and Italy the advertising strategies are changed every 1 to 6 months. Mainly the advertising strategies are changed two times a year in the spring/summer and autumn/winter. The company has an international advertising campaign with images that, as stated by the Marketing Manager of Salvatore Ferragamo US, Kristina Buckley, are “global and not customised by region”. This standardised advertising strategy enables the company to have a consistent and cohesive brand image across the world at a relatively low advertising cost. However, the location of where the brand is advertised will change according to country specific characteristics, such as what people in the country consider fashionable or not. Also, through the interview with Kristina Buckley it was possible to find out that “the product featured in the advertisements may vary slightly from country to country, depending on their retail buy”. Moreover, the mix of the marketing tools used by the company is likely to vary across countries this is because, for example, as stated by Silvia Agostini, the Marketing Manager of Salvatore Ferragamo in Italy, “direct marketing might be more effective in certain markets and not in others”.
- THE ADVERTISING CAMPAIGN
Most of the advertising campaigns used by Salvatore Ferragamo feature the product with a model. Through the use of the questionnaires it was possible to find out that, this particular advertising strategy is used because, as stated by Paolo Riva, having a model wearing the advertised product brings the item to life and “makes the product and ‘mood’ more desirable”. Furthermore, portraying a model allows the company to express the type of person who would be interested in the brand and his/her style, helping clients to relate with the brand. The company has a product-driven advertising strategy. The current advertising has been created by the advertising agency Armando Testa and portrays a black and white picture of a model wearing an item from the Salvatore Ferragamo current collection. However, the product is emphasised by being the only thing in the advertising which has colour. This is an effective way of advertising as the product is successfully highlited and stands out from the image as a whole. Furthermore, the company has introduced a new slogan: “I Love Salvatore”. Tara Hannet stated that this new slogan has the objective of creating a positive response towards the brand by evoking happy emotional feelings. Moreover, through this memorable and original advertising campaign the company has managed to bring the message to life, attracting customers worldwide. Also, by looking at the images of the advertising campaign it is possible to see that the models have a “romantic” facial expression and body language. This helps emphasise the message “I love Salvaore”. Additionally, the use of younger models in the new advertising campaign has made it appealing to a wider demographic, including a younger audience. This has lead to an increase in the overall company sales. Furthermore, Paolo Riva believes that the new adverting campaign has also helped Salvatore Ferragamo renew its image by revitalising the mood, the design and the direction of the company.
- CULTURE AND ADVERTISING
The company undertakes an international advertising strategy, meaning that cultural differences are not necessarily taken into consideration. Silvia Agostini, believes that “a successful luxury fashion brand needs to be bold and confident in the message it communicates”, and that customized adverts to suit different cultures dilute the images of success and luxury. The international advertising campaign of Salvatore Ferragamo portrays images and slogans that can be easily understood worldwide enabling a wide range of people to associate with them. Furthermore, Kristina Buckley claims that the Salvatore Ferragamo’s objective is to send a clear, unique and consistent message globally. Through the use of the primary research it was possible to find out that, although, the company has international advertising campaigns it also undertakes local marketing activities where culture is taken into consideration. For example, according to Kristina Buckley, the company works with local celebrities or organises events which will appeal to people of a particular cultural background.
- SELLING POINTS
Table 3
From the questionnaires conducted, it has been possible to identify the main selling points. These are classified in the above table which shows where the brand Salvatore Ferragamo is sold and the number of shops in the country. From the table it is possible to see that in both Italy and the US the brand is carried in both the company’s own shops and Graph 3 other shops. However, one of the difference between the two countries is that the US has a higher number of “own shops” and sells items in shopping centres, but not outlets. Graph 3 is a more visual representation of the number of shops in each country.
- United States
Through the use of the primary research conducted it was possible to find out that in the Unite States, Salvatore Ferragamo has 25 own shops. The brand is also sold in Luxury Department stores and very upscale shopping centres where the company has its own boutiques. In some regions the boutiques are “core stores”. In this case they are stocked with a moderate assortment of key shoes, handbags and accessories, but not ready-to-wear. However, in the larger, more important markets, such as New York, Hawaii or Los Angeles, the stores carry a full range of products (Hannert Tara, interview). This enables the company to focus on its major markets while slowly expanding and introducing the brand in new or smaller alternative markets.
- Italy
In Italy the company only owns 19 shops. One of the reason why there are less shops in Italy than the US is because, although Italy is the “home market”, in comparison to the US, Italy is a much smaller market. Another difference between the two countries is that in Italy, Salvatore Ferragamo does not sell its products in shopping centres. This could be because, in Italy, there are not many shopping malls and the ones in which the products could be sold are not prestigious enough. Also, in Italy unsold products or excess merchandise from stores and the factory are sold in outlets.
- DISTRIBUTION CHANNELS
From the beginning of the 1990’s, Salvatore Ferragamo has focused on building a directly controlled, solid distribution channel which is now present in over 55 countries. This has been achieved by working on the efficiency levels of the channel and continuously investing in its development, control and modernisation (Ferragamo, Company Profile: The Group). The surveys highlighted that Salvatore Ferragamo distributes its products through a number of privately owned retail stores and other luxury shops and shopping centres guaranteeing clients excellent service standards. This proves that the company uses an exclusive distribution channel enabling to better control quality standards. The distribution channel is an important tool for the growth and development of the company as it enables to link the objective of economic result with the choices of positioning, supporting the development of both the markets and the brand image through creative collections. In both Europe and the United States, the company has focused on strengthening and developing distribution channels which, overall, has led to a 12% increase in gross profit in 2005 over 2004. Therefore, the Salvatore Ferragamo Company, overall, has entered foreign markets by direct exporting and setting up its own shops in selected areas. This has enabled the company to have greater control over selected activities.
- PRODUCTION
Salvatore Ferragamo can be recognised through the quality of the materials, the manufacturing, the colours and the design which derives form a long cultural and artisan tradition. All of which are the characteristics that have led to the success of the “Made in Italy”. All the processes from design to production are undertaken in Italy. The company’s objective is to create products, in an original ways that evoke a concept of contemporary elegance, and express the personalities of individuals, through the unique and distinctive elements of the brand (Salvatore Ferragamo, Company Profile: The Group).
According to the answers Tara Hannet gave in the questionnaire, the fact that Salvatore Ferragamo goods are produced in Italy is a “key aspect of the company’s brand identity”. Salvatore Ferragamo originally set up his company headquarters in Florence in order to employ the highly skilled artisans of that region and this also where, up to this day, the elite craftsmanship required for product manufacture is based. Furthermore, the laboratories in Florence enable the company to better monitor the development phase and the production quality standards. Moreover, the ‘Made in Italy’ stamp on the products is an important part of the brand statement and heritage, discouraging the company to relocate production facilities to more favourable locations in terms of costs and expenses. Furthermore, according to the research of Clarke, Owens and Ford (2000) the country of origin can affect the perception customers have about the quality of the product or the image of the brand. Also, customers are increasingly willing to pay higher prices for those items produced in places considered to be more attractive.
Another factor that needs to be considered is that Italian customers are less likely to view Italian designers as prestigiously as customers from different nationalities might view them. A reason for this is that Italian customers tend to be more used to Italian designers than foreign customers. On the other hand, Americans might view Italian designers, such as Salvatore Ferragamo, as another European brand making no distinction between Italian, French or English luxury fashion houses. Although these assumptions can be made it is possible to say that the “made in Italy” is still an important aspect of the fashion industry. There are very few people who haven not heard about the elegant style or high quality of “made in Italy” items, such as shoes or shirts. Moreover, people tend to follow fashion trends, and if something is considered fashionable it does not matter where the product is manufactured. This proves that Italian customers will still buy Italian brands if these are considered to be fashionable.
- COMPETITORS
Table 4
The company needs to know who its competitors are and what their actions are in order to be able to gain a competitive advantage over them. Products and offers need to be created in order to satisfy actual and potential customers better than competitors would. From the surveys it was possible to deduct who are the main competitors of Salvatore Ferragamo, in the leather market, in both Italy and the United States. These are represented in Table 4. However, the competitors are likely to change in both countries according to the market segment the company is competing in. Furthermore, the competitors Salvatore Ferragamo faces are likely to change over time as companies change and evolve in terms of their objectives and strategies.
- United States
The three main competitors Salvatore Ferragamo faces in the US are Hermes, Channel and Fendi. These companies are especially profitable in the luxury bags and accessories markets. They are fashionable and successful luxury companies which can create a powerful competitive threat to the company. In order to overcome these threats Salvatore Ferragamo needs to have efficient marketing strategies.
Even without having an insight into the actual facts and figures of competitors, Salvatore Ferragamo can still try and understand what competitors are trying to achieve and what their strengths and weaknesses are. This can be achieved, for example, by looking at competitor’s window sill displays, advertising campaigns or product lines and pricing strategies. By observing competitors companies, including Salvatore Ferragamo, can learn to improve and avoid mistakes.
- Italy
In Italy the three main competitors of Salvatore Ferragamo are Hermes, Gucci and Luis Vuitton. These are, also, successful, luxury companies, however, their main focus, like Salvatore Ferragamo, is the leather goods market. From the research it is possible to say, that although the lifestyles and cultures of customers in the two countries can be very different their purchasing patters are similar and the company competes with similar brands across different countries.
- THE IMPORTANCE OF THE HOME MARKET
Through the research and the answers to the questionnaires it is possible to deduct that if a brand is successful in its place of origin it is a beneficial quality for the company overall. This is because, as stated by Letizia Campana in her answers to the questionnaire, it is important for a company to be legitimate in its home market in order to be successful worldwide. Moreover, Silvia Agostini believes that the home country is the “most important window and is important for us to build a strong image and customer base in Europe and especially in Italy”. Furthermore, if Salvatore Ferragamo wants to be perceived as a leading Italian luxury house on an international level it should be thriving in Italy, the home market. However, this does not necessarily mean that it is not possible for the brand to be more successful elsewhere, as stated by Tara Hannert in the answers to the questionnaire. In the case of Salvatore Ferragamo, for example, the US and Asia are potentially much bigger markets than Europe. The key is, however, to be successful from an image perspective in every penetrated market. Moreover, while the country of origin is important as a creative source, it does not need to serve as a ‘gold pot’ for the company in order to be successful in other countries.
CHAPTER 5: CONCLUSION
- DISCUSSION
The aim of this project has been to analyse and compare a number of marketing activities undertaken by the Italian international fashion company Salvatore Ferragamo in Italy and the United States.
Two main objectives were to analyse and compare the key target markets and product lines in both countries. Through the primary research it was possible to find out that the company primarily focuses on targeting the shoe market and that the majority of customers are women between the ages of 30 and 50. In both Italy and the US the main customer fall under the same categories this is due to the fact that the product lines are the same worldwide with minor differences in the range of products carried by individual retail stores. Smaller shops, for example, will only carry a small assortment of key products.
One of the main differences between Italy and the United State that was discovered while analysing the primary data collected was that, although Italy is the home country and production is based here, there are fewer shops owned by the company. This is because in comparison to the US, Italy is a much smaller market. One of the reasons for this is that the “made in Italy” label is regarded more prestigious in countries outside Italy, such as the US.
Another difference between the two countries analysed is that in the US other than being sold in privately owned shops and other luxury shops the brand is also sold in prestigious shopping centres. This does not occur in Italy, mainly because shopping centres in Italy are rare and not very “up-scale”.
Another one of the objectives was to analyse and compare the advertising strategies in Italy and the US. Through the use of the primary data collected it was possible to find out that the company has an international advertising campaign with no differences across countries. However, the magazines in which the brand is advertised change according to country preferences and the company national advertising activities such as organising events or working with local celebrities.
The final objective was to find out if there were differences in the competitors faced by Salvatore Ferragamo in different countries. This was a hard task, because the competition varies according to the market segment targeted. Moreover, as stated by Paolo Riva “one can assess one’s competition in different ways: In terms of revenue, potential for growth, brand recognition, and media coverage”. However, by analysing the research it is possible to say that the company faces similar competitors in both the US and Italy, and that the competitors are luxury fashion houses which are especially profitable in the leather goods market.
- IMPROVEMENTS
Overall, the aim and objectives that were set were accomplished, making this a successful project. However, if there would have been more time a number of things could have been done to make the dissertation more detailed and focused. Firstly, a survey could be conducted amongst customers in the US and in Italy to see how they view the brand. Secondly competitors could be observed more closely. This could be done by looking at some of the marketing activities of Salvatore Ferragamo’s competitors and understanding if companies that operate in similar markets undertake similar marketing activities, such as, for example, international advertising campaigns. Moreover, the marketing activities of the company in other nations, such as China and Japan could be observed and analysed, as these are also major markets for Salvatore Ferragamo.
BIBLIOGRAPHY
Books
Baker, M.J., (2003). The marketing book. 5th ed. Oxford: Butterworth-Heinemann publications.
Chee, H., Harrison, R., (1993). Marketing a global perspective. London: Pitman Publishing.
Chisnall, P.M., (2002). Strategic Business Marketing. 3rd ed. Harlow: Prentice Hall.
Czinkota, M., Ronkainen, I., (1990). International Marketing. 4th ed. Orlando: Dryden Press.
Easterby-Smith, M., Thorpe, R., Lowe, A. (2002). Management Research, an introduction. 2nd ed. London: SAGE Publications.
Foglio, A., (2001). Il marketing della moda: politiche e strategie di fashion marketing. Milano: FrancoAngeli.
Ghauri, P., Gronhaug, K. (2002). Research Methods in Business Studies; A Practical Guide. 2nd ed. England: Pearson Education Limited.
Jobber, D., (2004). Principles and Practice of Marketing. 4th ed. London: McGraw-Hill Higher Education.
Johansson, J. K., (2003). Global Marketing: foreign entry, local marketing and global management. 3rd ed. Boston: McGraw-Hill
Kotler, P., Wong, V., Saunders, J., Armstrong, G., (2005). Principles of Marketing. 4th ed. Harlow: Prentice Hall.
Levitt, T., (1986). The marketing imagination. 2nd ed. New York: Free Press.
Saunders, M., Lewis, P., Thornhill, A., (2003). Research methods for business students. 3rd ed. Harlow,:Financial Times, Prentice Hall.
Terpstra, V., Sarathy, R. (1994). International Marketing. 6th ed. Orlando: Dryden Press.
White, N., (2000). Reconstructuring Italian fashion: America and the development of the Italian fashion industry. Oxford: Berg.
Zikmund, W.G. (1994). Business Research methods. International Edition, 4th ed. London: The Dryden Press, Harcourt Brace College Publishers.
Articles
Anonymous, (1991). “Market Entry Strategy”. Business America, March 25, 1991: 12-17.
Benady, D., (2003). “Home truths about global marketing”. Marketing Week, 26 (6): 20.
Clarke, I., Owens, M., Ford, J.B., (2000). “ Integrating country of origin into global marketing strategy: a review of US marketing statutes”. International Marketing
Review, 17 (2): 114-123.
Dougls, S.P., Craig, C.S., (1989). “Evolution of Global Marketing Strategy: Scale, Scope and Synergy”. Columbia Journal of World Business, 24 (3): 47-59.
Galbraith, R., (2006). “Italian firms put independence and family before economic logic”. Wall Street Journal, February 24, 2006.
Nunes, P., Johnson, B.A., Breene, R.T.S. (2004). “Selling to the moneyed masses”. Harvard Business Review, 82 (10): 94-104
Ronkainen, I.A., (1996). “Implementing global marketing strategy: an interview with Whirlpool Corporation”. International Marketing Review, 13 (3): 56-63.
Silverstein, M.J., Fiske, N., (2003). “Luxury for the masses”. Harvard Business Review, 81 (4): 48-57.
Taylor, R. K., (2000). “Marketing Strategies: gaining a competitive advantage through the use of emotion”. Competitiveness Review, 10 (2): 146-152.
Zargani, L., (2005). “Ferragamo Evolves Message”. Women’s Wear Daily, 190 (18): 12.
Web Sites
Market Entry Strategies. Available at: (Accessed: 2006, February 26).
Salvatore Feragamo. Available: (Accessed: 2005, November 26).
The Economist (2002, March 21) Every cloud has a satin lining. Available: (Accessed: 2006, February 16).
Interviewees
Agostini Silvia. Marketing Manager at Salvatore Ferragamo Italy. Email interview: February 28, 2006.
Buckley Kristina. Marketing Manager at Salvatore Ferragamo US. Email Interview: February 27,2006
Campana Letizia. Communication Account USA and Latam at Salvatore Ferragamo Italy. Email Interview: February 24, 2006.
Hannert Tara. Director of Public Relations at Salvatore Ferragamo US. Email Interview: February 20, 2006.
Riva Paolo. Strategic Marketing advisor to the CEO at Salvatore Ferragamo Italy. Email Interview: February 24, 2006.
Robb Amy, Public Relations & Special Events Manager at Salvatore Ferragamo US.
APPENDIX A: PRIMARY RESEARCH
QUESTIONNAIRE
What is your job position?
……………………………………………………………………………………
How long have you worked for Salvatore Ferragamo?
Under 1 year
Between 1-3 years
Between 3-5 years
Over 5 years
What country are you based in?
Italy
US
What is the main target market? Mark from 1 to 4. Where 1 is the most important.
Clothes
Shoes
Bags
Accessories
The majority of customers are:
Male
Female
What age group are the majority of customers?
20-30
30-50
50 and over
What are the main advertising strategies used by the company? Tick up to 3.
Newspapers
Magazines
Bill Boards
Radio
Television
Leaflets
If other, specify
……………………………………………………………………………………
Which one do you think is the most effective and why?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
How often are the advertising strategies used, changed?
1-6 months
Up to 12 months
1-2 years
2-5 years
If other, specify
………………………………………………………………………………………………
What is featured in the advertising campaigns used?
Just the product
The product and a model
The product and a famous personality
Just the brand name
If other, specify
………………………………………………………………………………………………………………………………………………………………………………………………
Why have these advertising strategies been chosen?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Do you think the advertising strategies have been successful? Explain why.
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Where in the country, is the brand sold?
Own shop
Other shop
Outlets
Malls
Shopping Centres
If other specify
………………………………………………………………………………………………
How many Salvatore Ferragamo shops are there in the country?
0-5
5-10
10-20
20-40
40-60
Over 60
Do all shops contain the same products? Why or why not?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Where are products produced?
Italy
US
Both
If other specify
………………………………………………………………………………………………
Why is production based in the country mentioned above?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Who are Salvatore Ferragamo’s three main competitors, in the country?
………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
Do you believe it is important for the company to be successful in Italy in order to appeal to customers in the US or other countries? Explain why or why not.
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
INTERVIEW
What is your job position?
How long have you been working for the company?
What are the current advertising strategies used?
Do the advertising strategies used change according to the country they are made for? Explain why they do or do not.
Why have these strategies been chosen?
Do you feel the current advertising has been successful? Why?
Are the adverts designed by the company? If not what company designs the adverts for Salvatore Ferragamo?
Who are the adverts aimed to?
Who are the key target markets?
Why has this target market/s been chosen?
Do you believe it is important to take into account cultural differences when advertising internationally?
What are the main product lines?
What are the main distribution channels used?
Who are the main competitors in the country?
Do you believe it is important for the company to be successful in Italy (home country) in order to appeal to customers in the US? Explain why or why not.
APPENDIX B: SECONDARY RESEARCH
There is no need to learn foreign languages, deal with foreign currencies, governments, cultures or political instabilities.