A comparative study of the marketing activities of the international fashion company Salvatore Ferragamo in Italy, the home market, and the United States, the most important foreign market.

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ABSTRACT        

1.1        WHAT IS THE PROJECT ABOUT        

1.2        COMPANY BACKGROUND        

1.3        WHY IS THE TOPIC IMPORTANT        

1.4        AIMS AND OBJECTIVES        

2.1        LUXURY GOODS        

2.2.1        Home market versus Global market        

2.2.2        Market Entry Strategy        

2.1.3        Standardised versus Adapted marketing mix.        

2.1.4        Global marketing and the 4 P’s        

2.3        TARGET MARKETS        

2.3.1        Assessing and Selecting Attractive Segments        

2.4        COMPETITORS        

2.4.1        Three things companies should know about competitors        

2.5        PRODUCT LINES        

2.5.1        Product line length        

2.6        DISTRIBUTION CHANNELS        

2.6.1        Intermediaries        

2.6.2        Choice of channels        

2.6.3        Three generic distribution channels        

2.7        ADVERTISING        

2.7.2        Advertising Objectives        

2.7.3        Advertising Budget        

2.7.4        The message        

2.7.5        Selecting the media        

2.7.6        Evaluating the effectiveness of advertising        

CHAPTER 4: DATA PRESENTATION AND ANALYSIS        

4.1        MARKETING ACTIVITIES        

4.1.1        Main Target Market        

4.1.2        Customers        

4.2        ADVERTISING MEDIA        

4.2.1        United States        

4.2.2        Italy        

4.3        ADVERTISING STRATEGIES        

4.4        THE ADVERTISING CAMPAIGN        

4.5        CULTURE AND ADVERTISING        

4.6        SELLING POINTS        

4.6.1        United States        

4.6.2        Italy        

4.8        PRODUCTION        

4.9        COMPETITORS        

4.9.1        United States        

4.9.2        Italy        

4.10        THE IMPORTANCE OF THE HOME MARKET        

 


ABSTRACT

This project sets out to provide a comparative study of the marketing activities of the international fashion company Salvatore Ferragamo in Italy, the home market, and the United States, the most important foreign market.

As distances and differences between countries are diminishing due to the improvements in communication, transport and technology, this dissertation aims to assess the degree to which marketing activities vary across different countries.

The paper will examine global marketing issues comparing target markets, advertising strategies, product lines, distribution channels and competitors faced by the company across different countries. In order to answer the research question, primary data in the form of interviews and questionnaires was collected. One marketing manager of the company from Italy and one from the US were interviewed. The questionnaires, on the other hand, were sent to three company employees in Italy and three in the US. The relevant primary data is represented and analysed throughout the project, supporting the line of discussion. Moreover, throughout the dissertation arguments and ideas will be backed up by secondary research collected and the work of renowned theorists such as Kotler.

From the results of the research conducted it was possible to find out that the overall marketing activities pursued by the company are very similar in both Italy and the United States. The company targets the same markets in both countries and uses a standardised international advertising campaign to do so. The product lines, distribution channels and competitors are also very similar across countries with minor regional differences. Moreover, through the research it was possible to establish that, although Italy is the “home market” and the company’s production is based here, it is a much smaller market than the United States. However the country of origin still plays an important role in the success of national products in foreign countries, especially in the fashion industry.


CHAPTER 1: INTRODUCTION

  1. WHAT IS THE PROJECT ABOUT

This project will analyse some of the marketing activities of the Italian international fashion company Salvatore Ferragamo. The main aim of the project will be to compare the marketing activities undertaken by the company in Italy with those in the United States recording and analysing the main differences and similarities. The main marketing aspects that will be compared are the target markets, the advertising strategies used, the product lines, the distribution channels and the competitors the company faces. Furthermore, the project will try and determine the importance of being successful in Italy, the home country, in order to appeal to customers in the United States.

The project will start with a review of the relevant literatures and theories that will provide the basis of the review. Secondly, the sources and methods of collecting the research will be stated, such as, how the data was collected and who was addressed. The dissertation will continue with the presentation and analysis of all the relevant results and then a conclusion will be drawn.

The reason why Italy and the United States have been chosen as the two countries to be compared is because Italy is the “home country”, whereas, the Unites States are the largest market Salvatore Ferragamo operates in. The comparison between these countries will enable to get a better insight into the company’s activities.

Throughout this project, topics such as, global marketing and fashion marketing, will be explored looking at marketing activities of Salvatore Ferragamo both at a national and international level. The project, overall, will offer an insight of how the company deals with certain marketing activities and what are the differences and similarities between Italy and the United States.

  1. COMPANY BACKGROUND

The founder of the company, Salvatore Ferragamo, was born in Bonito a little village, in the south of Italy, close to Naples in 1898. He started working as an apprentice to a shoe maker in Naples at the age of 11 and at 13 he opened his own shop in Bonito. At 14 he moved to Boston with one of his brothers and worked with him in a large footwear company. The machinery and working procedures fascinated him, however he soon realised their quality limitations.

Salvatore then moved to California with another brother and opened a shoe repair shop. At the same time he started designing and producing shoes for film sets of famous directors and producers. His shoes, thanks to the quality and comfort, soon became very popular with actors and actresses who started ordering footwear for both on and off the set. When the movie industry moved to Hollywood he followed and in 1923 he opened his first shoe shop. Some of his most devoted customers were famous personalities such as Mary Pickford and Rudolf Valentino and this helped his popularity to boom.

In 1927 Salvatore Ferragamo decided to return to Italy. This was because he could no longer cope with the constantly increasing demand and decided to move to Florence, where he opened a workshop of skilled craftsmen, from which a constant stream of exports to the states was launched.

The great crisis of 1929 interrupted contacts with America and Salvatore Ferragamo had to turn his efforts into the national market. By 1936 his business was, once again, successful and these were the years of some of his greatest creations accomplished by using innovative materials such as cork, wood, metal wire and raffia which creatively replaced the leather and steel which trade restrictions prevented Salvatore from using.

In 1950 the company was producing 350 pairs of shoes daily by hand. The success of the company was once again international after some of Ferragamo’s great inventions such as the metal reinforced stiletto heels made famous by Marilyn Monroe and the “invisible” sandals which in 1947 won Ferragamo the prestigious “Neiman Marcus Award”, the Oscar of the fashion world, awarded for the first time to a footwear designer.

The Ferragamo shop in Florence became an essential stop-off for personalities such as Greta Garbo, Sofia Loren, the Duke and Duchess of Windsor and Audrey Hepburn, who all had their shoes made to measure there. These were also the years that saw the first, relative mechanisation of production; relative because Ferragamo saw machinery as indispensable for the less elaborate work, but believed that the rest should be done by hand and under strict human supervision.

When Salvatore Ferragamo died in 1960, his family was left in charge of carrying on and fulfilling the plan that Salvatore had nurtured in his final years: transforming Ferragamo into a great fashion house. Today, nearly 10000 pairs of shoes are produced daily, thanks to the development of numerous sizes and types of fit. Despite this industrialization, necessary to meet demand, the company has kept quality and excellent fit as the product’s fundamentals. Salvatore Ferragamo’s wife, Wanda, took over the company after her husband’s death and it was under her direction that the company took the “great step” of expanding form footwear only into other sectors including men’s and women’s ready-to-wear and accessories.

  1. WHY IS THE TOPIC IMPORTANT

This is an interesting project because through the research collected it will be possible to have a critical insight of some of the main marketing activities undertaken by an international fashion company at both a national and international level. Furthermore, companies are becoming more global day by day and to be able to have a critical insight of the marketing activities of a successful international company can be an important reference when conducting other marketing activities.

  1. AIMS AND OBJECTIVES

  1. Aims

The aim of this dissertation is to offer a comparative analysis of the marketing activities of the Italian international fashion company Salvatore Ferragamo in Italy, the home market, and the USA, the most important foreign country.

  1. Objectives

The key objectives are to identify the main target markets in the two countries, the advertising strategies used, the product lines and the distribution channels. The company’s major competitors in Italy and the USA will be identified. An analysis of the differences and/or similarities within each of the countries will be conducted. The researcher will also investigate how the company needs to be successful in Italy in order to then appeal to customers in the USA.


CHAPTER 2: LITTERATURE REVIEW

  1. LUXURY GOODS

Luxury goods “evoke and engage consumers emotions while feeding their aspirations for a better life” (Silverstein and Fiske, 2003: 48).

In the article “Luxury for the Masses” Silverstein and Fiske state that there have been some recent changes in consumption trends which have lead to an increase in demand for luxury goods and services. The Figure 1 _                                      rises in real income, and home equity mean    that, in general, people have more money to spend on luxury products. The higher levels of education have also lead to a higher spending on luxuries. People want products which have a better quality and that will “help them manage the stress in their lives, better leverage their time, and achieve their aspirations” (Silverstein and Fiske, 2003: 53). Figure one and two, respectively show the share prices and net profits of the three large luxury-goods companies Louis Vuitton Moët Hennessy (LVMH), Richemont and        

Gucci. They both show the decline in share price and net profits of the companies due to a weakening economy and the                          Figure 2 

September 11 terrorist attacks. However, this has not affected the super-rich who are still spending on such things as Hermès Birkin handbags, which cost $13,000 each. Michael Silverstein states that there is a new type of luxury consumer who has higher levels of taste, quality and aspiration and is “simultaneously trading up and trading down” (The Economist, 2002), where $10 tops from H&M are worn with $500 bags from Gucci. This shows that demand for luxury products is more elastic than conventional goods and that customers will gladly spend more for such products as they satisfy customer’s needs not only on a physical level, but on an emotional level too.

A recent article by Robert Galbrainth (2006) states that there is “something intangible about the qualities that make up luxury Italian brands”. Moreover, the article talks about the importance of the family in the Italian business model and how it gives “authenticity to the brand in the eyes of the consumers” (Savio cited Galbraith, 2006).

  1. GLOBAL MARKETING

With the constantly increasing speeds of such things as transport and communication, the distances between countries have been diminishing. The differences between cultures across different nations are also fading, encouraging firms to use global marketing strategies (Baker, 2003). Theodore Levitt (1986) was one of the first theorists to talk about global marketing, stating that “even the biggest companies in the biggest home markets can not survive on their domestic markets if they are in global industries” (Czinkota and Ronkainen, 1990: 493) such as fashion. The fashion industry, in particular, has become extremely global due to the need of consumers to express them selves through what they wear. Furthermore, consumers are increasingly aware of the qualities and characteristics of the products they buy which push them to purchase the best available items on the market no matter where it comes from. The recent evolution of the global market has, therefore, encouraged a number of companies to operate internationally in order to achieve further growth (Chee and Harris, 1993).

  1. Home market versus Global market

Although competing in the home market tends to be a safer option the business environment is rapidly changing due to the improvements in technology, communication and transport and companies can no longer focus exclusively on their national markets. Foreign businesses are constantly expanding into new international markets and with the increasing global competition, the home markets are no longer able to provide the security and opportunities previously offered (Kotler, 2005). This can cause companies, that remain national, to miss the opportunity of entering new markets and to risk loosing their home market due to the increase in competition. For this reason, it is important that companies “constantly improve their products at home and expand into foreign markets” (Kotler et al, 2005: 211) which enable them to compete strategically.

        

Global marketing, deals with the integration or standardisation of a number of “marketing actions across different geographic markets” (Kotler et al, 2005: 212). This suggests that companies should take advantage of similarities between markets to do business internationally and increase their competitive advantage. The fashion market is a vastly international market and the Italian labels have been successful for decades all over the world through the outstanding quality of their products. Becoming international can enable companies to take advantage of a number of opportunities which can only be exploited by operating in a global environment. However, before moving to foreign markets companies need to fully evaluate the opportunities and risks.

  1. Market Entry Strategy

There are three ways a company can enter a specific market, by exporting, joint venturing and direct investment. A company needs to carefully select the entry strategy as this will influence the overall marketing plan.

Exporting is the easiest way in which a company can enter a foreign market. This is because it enables the company to enter different markets with very little change in its operations. There are two ways in which a company can export its goods and services, by direct or indirect exporting (Kotler et al, 2005).

     

         Figure 3

                

  1. Indirect exporting involves working with independent national marketing intermediaries such as an Export Management Company, as shown in Figure 3. This type of exporting is cheaper and less risky than direct exporting because the company is not directly involved with the operation. However, the firm has limited control over operations (Terpstra and Sarathy, 1994).
  2. Direct exporting consists of companies setting up their own sales branches abroad. This can be more expensive and risky than indirect exporting, however, the company higher control over operations and returns can be higher.
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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.

  1. 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.
  2. Contract manufacturing is when a company enters a foreign market by making a contract with the local manufacturers ...

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