INTERNATIONALISATION AND HIGH FASHION –
THE INFLUENCE OF EMERGING COUNTRIES ON THE FASHION INDUSTRY
Countries of Interest: Brazil, India, China, Russia
GIE 6530 MBA Final Essay Presented to: Mr. André Gascon
Presented by: Angelic Vendette (908 144 107)
Faculté des sciences de l’administration
Université Laval
May 1st, 2013
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Executive Summary
The political context in all BRIC countries has shifted towards an open market regarding the fashion industry and luxury brands, making it easier for brands to access the markets. Specific tax laws applicable to Brazil could improve in order to facilitate designer brands’ integration as well as preferential trade tariffs for fashion goods. Russia’s political stability in the last years has also given hope that the economic context will remain as it is. The government of India has also recently invested a lot of money into the Indian retail industry. Developing FDI as well as local production facilities will further encourage luxury brands to migrate on the market as well. Although China’s government is investing in domestic brands, there is still a lot of room for international luxury brands within the market, as it is expanding rapidly. The economic context within the BRIC countries demonstrates how these 4 countries have evolved into promising markets with ever growing GDP’s and PPP’s. Brazil’s economy is now ready for the fashion industry to boom. The demand is there and it promises substantial growth. Russia has shifted from the Soviet Union to open market regarding the luxury business. Middle classes have also emerged and they have new disposable income for the industry. India has taken away its ban on FDI since 1991 and since then the fashion business has grown tremendously. There is also demand in terms of luxury and not many competitors. China’s GDP is expected to become 1st worldwide in the upcoming years. This is a market that luxury brands cannot neglect. The socio-demographic context within BRIC shows how diverse yet similar demands are for luxury designer goods. Although Brazil’s population is diverse, the common sense of style and fashion that is part of everyday life explains the demand and is demonstrated by the fact that Brazil has its own fashion week. Russia has seen great migration of its people to two major cities, mostly that of Moscow and St-Petersburg, which are European influenced. As the population is more educated so grows the fashion education as well. India’s population is comprised by 65 percent of 35 year olds and younger. This represents huge opportunities for the retail market, now, and in the upcoming years. China regards luxury goods as a status symbol and put much importance in the price of things as well as the exclusivity and the power of the brand. This describes the fashion industry perfectly in terms of supply. The technological context within BRIC shows there is a lack in technologies as compared to other countries however significant investment on behalf of governments are being introduced into the fashion industry in terms of innovation. The Brazilian government has decided to invest in new technologies in order to remain competitive with the international fashion scene. The government is in fact looking to invest on many different levels in order to reduce production gaps with other producing countries. Russia has several interesting innovations linked with the retail experience and well as for the industry as a whole. This definitely attracts consumers as much as merchants. Although India does not have any specific technologies linked to the fashion industry, specialization, education and method have made India into one of the most
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
technologically savvy countries. All new technologies can be beneficial to the industry. China is known for counterfeit goods and although they produce millions per year, technology has not yet been able to reproduce hand-made quality. The environmental context within BRIC shows of bio-diverse lands and environments that have, for the most part, been destroyed and polluted due to industrialization. Brazil for the first part is self-reliant in terms of natural resources. The fashion industry as well doesn't destroy per-se the environment, and its resource self-reliance is an incredible asset to production. Russia is a great polluter and natural disasters have come out of it. This has not yet affected the fashion industry, but other industries rather. Also, it is not recommended to move production to Russia for reputation concerns. The major environmental concern in India is not the pollution that the fashion industry causes but rather the lack of sanitary infrastructures. Store location is thus crucial. Sixteen out of the twenty most polluted cities can be found in China alone. Air pollution is horrid and designers need to help the country move in the right direction by diminishing their carbon footprint.
The legal context within BRIC shows that laws have been changed from more restrictive economies into open markets. Within Brazil, there are law-setting tariffs that can be changed all the time depending on certain situations. Russian law imposes certain limitations on the protection of trademarks, company names and brand names as well. India waved the FDI limitations it had in the retail industry and has since then seen its market flourish. China’s laws regarding counterfeit goods are not applied and cause a copyright and trademark concern.
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Table of Contents
Introduction: ................................................................................................................ 5 Terminology ................................................................................................................................................................. 6 Fashion Industry: ........................................................................................................................................................ 6 BRIC: ................................................................................................................................................................................. 7
Documentation by Country and Recommendations ..................................................... 8 1. Federative Republic of Brazil ........................................................................................................................... 8 Political Context .......................................................................................................................................................... 8 Economic Context .................................................................................................................................................... 10 Socio-‐demographic Context ................................................................................................................................ 12 Technological Context ........................................................................................................................................... 15 Environmental Context ......................................................................................................................................... 16 Legal Context ............................................................................................................................................................. 18
2. Russian Federation ............................................................................................................................................ 19 Political Context ....................................................................................................................................................... 19 Economic Context .................................................................................................................................................... 20 Socio-‐demographic Context ................................................................................................................................ 21 Technological Context ........................................................................................................................................... 23 Environmental Context ......................................................................................................................................... 24 Legal Context ............................................................................................................................................................. 25
3. Republic of India ................................................................................................................................................. 26 Political Context ....................................................................................................................................................... 26 Economic Context .................................................................................................................................................... 28 Socio-‐demographic Context ................................................................................................................................ 29 Technological Context ........................................................................................................................................... 30 Environmental Context ......................................................................................................................................... 31 Legal Context ............................................................................................................................................................. 32
4. People's Republic of China ............................................................................................................................. 34 Political Context ....................................................................................................................................................... 34 Economic Context .................................................................................................................................................... 36 Socio-‐demographic Context ................................................................................................................................ 37 Technological Context ........................................................................................................................................... 38 Environmental Context ......................................................................................................................................... 39 Legal Context ............................................................................................................................................................. 41
Conclusions ................................................................................................................ 43 Political Recommendations ................................................................................................................................ 43 Economical Recommendations ......................................................................................................................... 44 Socio-‐demographic Recommendations ........................................................................................................ 44 Technological recommendations ..................................................................................................................... 45 Environmental Recommendations ................................................................................................................. 46 Legal Recommendations ...................................................................................................................................... 47 Bibliography .............................................................................................................. 48
Annexe ...................................................................................................................... 53
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Introduction:
Over the past few years, the globalization of markets has led to the internationalization of
companies as well as to similar consumer demands throughout the world. It is safe to say
that a product currently trending in Tokyo is also likely to be so in Paris, London, Milan
and New York.
Aside from new technological gadgets (ie: Apple products), the fashion industry has long
been a pioneer in agglomerating and creating same consumer needs worldwide.
Traditions and culture certainly also have their say on the multi-billion dollar industry,
however trends and styles coming from high end fashion and world-renowned designers
are unchanged and unaffected on when it comes to what is NEW, what is IN, and what is
really Fashionable.
Simultaneously, due to globalization, there has also been a shift in economic powers,
mostly within emerging countries due to various factors such as population growth,
technological developments, as well as increased purchasing power on behalf of its
consumers.
Countries making up the popular acronym known as BRIC (Brazil, Russia, India, China)
are gaining influence on the rest of the world as well as the traditionally economically
powerful countries.
This essay combines both of the two recent changes and targets new business
opportunities that can arise for BRIC countries and for the fashion industry leaders alike.
The following: Internationalisation and High Fashion – The Influence of Emerging
Countries on the Fashion Industry aims at exploring how key players of BRIC influence
the fashion industry and in what way the fashion industry can adapt in order to give these
new countries place within this business and how this can be done through various
recommendations
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
To do so, each of the BRIC countries will be analysed keeping in mind the fashion
industry, using the framework of PESTEL to determine business opportunities within
each; the risks of going; their business environment analysis, as well as segmented and
specific recommendations; This will give an overview of how these countries differ, but
rather how together bring amazing new markets to luxury goods and couture houses
worldwide.
Terminology
In order to begin however, two key reoccurring terms must be specified in order for the
reader to fully grasp what is being analysed throughout this essay. The meanings for
Fashion Industry, as well as that of BRIC are defined below, as this can lead to different
interpretations, and will be used in the specified manner for the remainder of this
document.
Fashion Industry:
The fashion industry can be divided into different categories varying from low-end all the
way to very high-end. For the purpose of comprehension, here they are in increasing
order of quality and price: (Fashion Industry)
1) Discount brands, which deserve lower-income consumers (ex: Clothing found at
Wal-Mart, Request found at Zellers, etc.)
2) Mainstream brands, which are conceived for the masses and offer almost no
exclusivity (ex: Zara, H&M, etc.)
3) Affordable luxury brands, which offer lower-priced alternatives to luxury brands
(ex: Michael by Micheal Kors, Marc by Marc Jacobs, D&G, all diminutives of the
following luxury brands: Micheal Kors, Marc Jacobs, Dolce and Gabbana, etc)
4) Luxury brands, which often deserve a high-income clientele (Prada, Burberry
Prorsum, Balmain, etc.)
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
5) Haute couture, which deserves the world’s wealthiest customers and is the most
expensive and exclusive category seeing as all is tailored and hand-made. (Ex:
Chanel, Giorgio Armani Privé, Givenchy, Christian Dior, etc.)
Throughout this essay, when using the term Fashion Industry, we are referring to mostly
level 4 and 5, known as Luxury Brands as well as Haute Couture. This is for the simple
reason that all Couture Houses (designers of Haute Couture) produce ready-to-wear as
well as couture pieces but because of its extremely high prices (items can be sold for up
to 1 million dollars a dress), the mass-produced luxury ready-to-wear collections are
much more profitable than Haute Couture. At these high levels, the fashion industry is
also unaffected by economic changes. The Luxury and Haute Couture markets are in fact
seeing increases in sales as compared to mainstream, affordable luxury, as well as
discount brands that have lived a decrease in sales because of the latest economic
downfall. (Fashion Industry) This category is also the one directly linked to well-known
fashion designers and its clothing is what is found on runways as well as in magazines
preceding each fashion season.
BRIC:
As mentioned above, BRIC is an acronym referring to the countries of Brazil, Russia,
India, and China and demonstrates the drift in economic powers throughout the world,
leaning away from the traditional G7 towards the developing economies. (Ask the expert:
BRICs and investor strategy, 2008) This term was created in a paper conceived by
Goldman Sachs and also argues that the economies of the four BRIC countries will
eventually become the dominant economies by 2050. (Goldman Sachs Reports)
The Economic potential of BRIC is demonstrated by the fact that these countries account
for a combined GDP of 18.486 trillion dollars, hold a little more than 40% of the planet’s
population and furthermore are comprised of 25% of the world’s land coverage.
(Emerging Markets: Brics sceptics have their backs to the wall)
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Not only do these countries represent a foreseeable increase in demand on behalf of basic
goods but they will also impact higher-priced goods as well, and for this reason the
countries of BRIC will be the subjects of the emerging countries linked to the fashion
industry in this essay, as their high business potential will be proven throughout.
Documentation by Country and Recommendations
1. Federative Republic of Brazil
Political Context
The Federative Republic of Brazil (Brazil) is known as one of the largest democratic
countries of South America and is governed by a woman President, Dilma Rousseff,
which is both head of government as well as head of state. (Brazil Politics and
Government)
There are 26 semi-autonomous states within the country that are organized with their own
traditions and sets of symbols, their own financial independence as well as complete
administrative branches. Each state also exercises an important amount of power in terms
of determining taxes and the allocation of these funds. (Politics: Brazil) The most
important Brazilian states in terms of economic power and in terms of population are Sao
Paulo, Rio de Janeiro, Minas Gerais and Rio Grande do Sul. (Politics: Brazil)
Considering that politics are quite stable in this country and that each state is independent
for its own rules, the fashion industry still has not faced the easiest policies in regards to
international luxury brand products entering the country. In fact, Brazil is currently faced
with overpriced import duties and taxes that keep most luxury brands out of reach for the
country’s wealthiest consumers. (Inside Brazil’s Booming Fashion Industry)
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
The government’s import tax protects “industries and produce from foreign competition.
These tariff rates range from 0 to 35 percent according to the product…The import tariff
rate is applied to the customs values of the goods: the sum of the cost price, insurance
covering the goods during shipment or freight.” (Understanding Brazil Taxes on Imports)
As we can imagine, the import tax is thus quite elevated for all luxury goods and thus
halts most designer houses from entering the country.
Recommendations:
In order for the fashion industry to boom or take its place within Brazil, the government
would have to firstly review its out-dated tax structure in order for this industry to grow.
In fact, according to Paulo Borges, President of the company that produces Sao Paulo
Fashion Week, the laws governing labour also need to be modernized: “Brazil is at a very
good place politically and economically, but these changes are necessary to enable the
further development of the creative and design industries” (Inside Brazil’s Booming
Fashion Industry)
Furthermore, on the political scale, seeing as each state can supervise their own tax laws
and conditions, it would be interesting for the fashion industry if Brazil allowed few
states such as Sao Paulo and Rio de Janeiro to experiment with lesser import taxes on
luxury goods, as these states can set their own tariffs anyways. Not only would this create
new jobs and services linked to the industry, but it would also bring in new developments
and maybe even increase areas of tourism for a clientele looking for high-end fashion
brands while in Brazil. This seems to be a very good idea for Brazil, as not only could
local designers gain visibility, seeing as the fashion scene would be enlarged, but this
could also bring a very profitable industry to the developing country. Actually, since
2010, brands like Diane von Furstenberg, Louis Vuitton, Gucci, Chanel and Burberry
have made (or are presently making) large investments in order to import their products
within Brazil and even opening stores in major city centers. As a matter of fact, one of
Gucci’s spokespersons confirmed that one of their top selling stores worldwide was the
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
one situated in Sao Paulo. (Inside Brazil’s Booming Fashion Industry) Thus confirming
business potential.
On another note, the Brazilian fashion industry could also take advantage of having a
woman as their President. Dilma Rousseff, first woman to be elected as Brazil's president
(Country Profile), is taking more place on the international scale and this visibility could
also be interesting for any designer dressing her: whether at formal events or even
business meetings and country visits. If we only take for example what has happened to
designers dressing other political women like Michelle Obama being dressed by designer
Jason Wu, or even Kate Middleton and the exposure that she gave to Sarah Burton as
designer of the British label Alexander McQueen.
Economic Context
Over the last few years, Brazil has enormously improved its economic stability and has
slowly grown into Latin America’s largest economy. It is also one of the fastest growing
economies in the world, with an average annual GDP growth rate of a little over 5
percent. (Is Brazil's Economy Getting Too Hot?) In fact, in 2010, consumer and investor
confidence was so high that GDP growth reached 7.5%, the highest growth rate in the
past 25 years for Brazil. (Brasil)
Furthermore, taking into consideration the latest economic downturns worldwide, Brazil
managed to replace the United Kingdom as the 7th largest economy in terms of GDP last
year, and by the end of 2012, is forecasted to surpass France and become 5th worldwide.
(Brasil) This is a lot faster than had predicted the original BRIC document written by
Goldman Sachs, as seen in Table 1 of the Annexe, Brazil’s economy was foreseen to
surpass both France and the U.K only between years 2025-2030. (Stupnytska, 2007)
The economy is thus undeniably one of the main aspects driving the present demand
within the Brazilian fashion market, eased by changing social climate and of course the
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
globalization of needs worldwide. Not only has this helped the growth of the industry, but
it has also helped the market’s self-confidence from within.
As one of Brazil’s most famous fashion-journalists pointed out (Erika Palomino),
“Brazil’s new-found self-esteem is as important to the fashion industry as are its
economy’s positive numbers.” (Inside Brazil’s Booming Fashion Industry) Considering
this, it is clear to say that not only will Brazil’s latest bidding wins for the 2014 World
Cup as well as 2016 Olympics impact furthermore Brazil’s economy, but this will also
bring a new demand within the fashion industry as the country grows. In fact, according
to industry statistics and market research done by Plunkett Research Ltd, the firm
concluded that: “The apparel and accessory stores have been enjoying a rebound in sales
around the world. Meanwhile, the luxury apparel, shoes and accessories market is
booming in rapidly growing economies such as Brazil and China. Leading brands are
opening large numbers of new stores in these markets.” (Apparel, Textiles & Fashions
Industry Market Research)
Another interesting aspect linking both Brazil’s fashion industry and economy is the fact
that within its domestic market, there are only two types of clothing brands: low quality
and price brands found at grocery stores and local markets (ie: the local C&A brand), or
independent labels that offer designer quality brands at high price points.
Recommendations:
On an economical standpoint, we can determine that the fashion industry market within
Brazil is far from being saturated. It is still in a start-up phase seeing as international
designers entering the country are testing out the market in order to be first ones there, as
well as trying out luxury labels where there haven’t been any before. It is hence objective
to say that the market and the economy are presently at the right place for high-end
designer fashion to be introduced onto the market, and that large international companies
should be aware of this potential. According to Ross’s Market Phase Model, the fashion
industry is past the Investigation phase, as all economical factors point out, and
companies should move into the Exploitation phase of the market, as demonstrated in
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Table 2 of the Annexe, and should render profitable their entrance to this new
geographical location.
Since some companies have already started doing this, according to Ross, it would be all
in high fashion labels’ strategically advantages to implement themselves in Brazil as well
and they will “come out of it with product/market fit, a critical mass of customers, real
revenue, increasing momentum, strong positioning, a solid foundation of knowledge of
how to reach their target market, and a team that’s up to speed, succeeding, and building
momentum towards success.” (Go-To Market Strategy for Start-Ups). I would also
further recommend any designer firm to implement themselves on the market as quickly
as possible. Being first often leads to very strong positioning within a new market, as it
has been demonstrated with various examples worldwide, or even most basically and
notably the infamous case of KFC being first on the market in China, even before
McDonald’s, and being fast-food winner over there.
Another recommendation linked to the fashion industry and Brazil is the fact that since
the World Cup and the Olympic games will boost furthermore the Latin American
country’s economy, this is the right moment to go on the market. Within 2 years, Brazil
will have increased global exposure and thus more tourism as well. Since there are no
mid-level brands in Brazil, as discussed above, stores like Zara or Mango are inexistent
and this leaves little to no choice to middle and upper class Brazilians to buy designer
brands. It is the lack of luxury brands however within the country that are presently
stimulating the interior fashion industry because it forces consumers to spend on designer
domestic labels. (Fashion Industry)The market is there, now all that is left to do if for
international designer to enter and enjoy.
Socio-demographic Context
Brazil’s population is characterized by a very diversified basin of people. It is rich in
culture and is becoming one of the most important populations in terms of people on the
planet. As a matter of fact, Brazil accounts for being the sixth most populous country in
the world after China, India, the United States, Indonesia and Russia, with a population of
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a little over 190 million. The country’s population growth has grown significantly over
the last decades and is demonstrated in Table 3 of the Annexe. (Brazil population)
Brazil’s population is also described as being predominantly young, with 62% of its
population being under 29 years of age. (Brazil in brief)
The population in this South American country is also composed of richly racially mixed
backgrounds. The majority of Brazilians have ancestors from one of the three following
groups: European (mostly Portuguese), African, and the original indigenous population
from the continent. (Brazil in brief)
Similarly to Canada, Brazil’s average density is also low, as most people live in
proximity to the Atlantic coast from South the North. (Brazil in brief) Furthermore, there
have also been demographic shifts in terms of distribution of wealth. In the past, the gap
was rather between high upper class and low lower class, whereas now the disparity is
lessened. In fact, a great percentage of the population has now joined the middle and
middle-to-upper classes, explained by migration of the population to urban areas. (Inside
Brazil’s Booming Fashion Industry)
Although demand worldwide and growth in the industry has been forecasted to slow
down in the upcoming years, sales and revenue driven by high-end fashion in Brazil is
expected to grow sufficiently to increase domestic demand as well as attract new
international brands. (Women's Wear Daily, 2010) This is mostly due to the fact that
fashion has always had a great place in Brazilian culture. The Brazilian population is
known for valuing aesthetics and quality as well as involves trends in everyday
conversations and investing time in one’s looks is also part of the average Brazilian’s
pastimes. (Inside Brazil’s Booming Fashion Industry)
Recommendations:
From a socio-demographic standpoint, although Brazil’s population comes in after the
other BRIC countries, it is an amazing basin of opportunity because Brazil is the only
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
BRIC country with a major fashion industry of its own. Not only does this make room for
international couturiers to come in, but it also allows for domestic designer to flourish as
well. In fact, there are numerous Brazilian ready-to-wear and accessory brands that have
been successful in the past. The best example of this are the Brazilian accessories brand
Havaianas.
Since fashion and aesthetics are also an important part of the Brazilian lifestyle, this will
allow greater and easier brand implementation on this new market. It is thus
recommended that high-end designers and brands introduce themselves to the Brazilian
market through its São Paulo Fashion Week -facilitated through the importance that
fashion plays in Brazilian culture.
Also regarding the country’s socio-demographic standpoint, brands are further
encouraged to go to the Brazilian market because of the advantage that the culture brings
to the industry as a whole. For example, Hermès’ General Director Richard Barczinski
stated that although his work frequently takes him to other BRIC countries like Russia
and China, the way Brazil compared demonstrated greatly of the opportunity designers
had in bringing their goods to this market. “ “In terms of potential, China maybe the
champion because it is experiencing such tremendous growth and has such a huge
population, but culturally Brazil may have an advantage because the consumer here is
highly sophisticated and informed. People here appreciate not just the value of something
expensive, but the value and pleasure of good design and materials.” (Inside Brazil’s
Booming Fashion Industry)
Designer brands also have a lot to gain by entering the Brazilian market because of the
higher return on investment. In fact, couture houses don't need to invest as much in
marketing and branding as the Brazilians are trend savvy and have a flair for what is in
fashion. As stated by Eliana Tranchesi, CEO of Daslu, a high-end department store in
Brazil, “brands can spare the effort of building knowledge regarding new collections,
style and product launches. As collections arrive to national stores, they already have an
enthusiastic client base… Today, the Brazilian customer knows exactly how much they
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
are willing to pay for an item and how much it is really worth.” (Inside Brazil’s Booming
Fashion Industry)
Technological Context
On the technological forefront, The Brazilian textile production dropped by 4.3 percent
and the production of apparel also dropped by 10.5 percent in 2012. (Roncato, 2013) This
shows a significant decline in local production, and because of upcoming event like the
2014 World Cup and the 2016 Olympics, the Brazilian government has decided to invest
in new technologies in order to remain competitive with the international fashion scene.
The government is in fact looking to invest on many different levels in order to reduce
production gaps with other producing countries. This will be done through investment in
designers, brands, sustainability, but mostly through innovation.
Moreover, since international brands are beginning to open more and more stores in
Brazil, the Textile and Clothing industries of Brazil are also investing in adding value to
their goods through differentiation in order for local producers and brands to face the
newly arriving international competition. This is being done through working with
attributes in the products that convey values of Brazilian culture, like lifestyle, diversity
and creativity. In terms of innovation, sustainability is being incorporated into production
in order for the Brazilian industry to standout from other products produced in countries
with a less sustainable image, like China for example. (Roncato, 2013)
Various investors from all around the world are attracted to Brazil due to the new
potential for consumption of luxury goods. Brazil on the other hand also sees this interest
as a way of developing new technologies within the country, either through bringing in
innovative ideas from elsewhere or even through the development of technology transfer
agreements. (Roncato, 2013)
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Recommendations:
As a recommendation to designers looking to penetrate the Brazilian market, although the
market is promising right now in terms of sales and exposure, and although the
government is heavily investing in technologies and innovation for the fashion industry,
it is not recommended that designers also shift their production to Brazil. For the time
being, there are still cheaper and more efficient ways of production outside of Brazil,
until more interesting technological innovations come up on this forefront. In 2011, the
industry itself invested about $2.4 billion (Roncato, 2013), and although this will
certainly lead to great production facilities and efficient innovation for the industry,
designers are not yet advised to shift all to Brazil till this is done.
Furthermore, if luxury brands are willing to go to Brazil in order to exploit the amazing
opportunity that the market has to offer, internationally renowned designers also should
take into consideration the local competition in order to penetrate the market
successfully. This means adapting their goods to market as well. This can be done
through a variety of technologies within Brazil already, like using materials that are
adapted to Brazilian climate or even using Brazilian patterns and incorporating geo-
cultural materials into their product line.
Environmental Context
Brazil’s environmental context is also quite unique and important. This obviously plays a
role in various industries within Brazil. In fact, Brazil has a variety of natural resources
that are interesting for national and international companies alike.
Brazil is the world's fifth largest country, with land covering close to 50 percent of South
America and can also be divided into four distinct geographic regions: the coastal area,
the large highlands, the open forest, as well as the Amazon. The latter also accounts for
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
one of the world's largest rivers, as well as 30 percent of the world's forest. (Globe
Aware)
This obviously has an impact on the fashion industry in Brazil because the nation, along
with other natural resources, has also become self-sufficient in oil, “ending decades of
dependence on foreign producers.”(BBC , 2012) Which permits for more production
within the country instead of importing already-made goods.
On the other hand however, Brazil is also known for the destruction of its environment
since most of all of the country’s ecosystems are threatened. (Globe Aware) This can also
negatively affect the fashion industry in terms of production. A bad reputation linked to a
garment line can go a long way in terms of public relations, as we’ve seen in the past
with Nike Air.
Recommendations:
In terms of recommendations concerning Brazil’s Environmental context, it would be to
any designers’ great advantage to use Brazilian natural resources as part of their
production. As mentioned earlier, although innovation still has a long way to go, certain
phases of a luxury good can be sourced in Brazil –a lot of natural materials for example,
or even the use rare stones and woods can at the time embellish a product and make it
more desirable to the Brazilian consumers. In fact, “Brazil’s growing national pride,
combined with the country’s relative geographic isolation, has had a positive effect on the
country’s domestic fashion market. Sara Andrade, the influential fashion editor of Vogue
Portugal, thinks Brazil’s self-reliance is one of the country’s greatest assets. “One of the
things Brazil has working for it is that it’s a country that really supports their own —
their own production, their own artists, and even their own trade. That makes it less
dependent on other countries.” (BBC , 2012)
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Legal Context
The legal context in Brazil is multi-faceted and is important to the success of any
business as well as those in the fashion industry.
First of all, importing into Brazil is quite regulated. The laws and regulations applicable
to import luxury goods are generally elaborate, and the government can change
regulations even while good are in the process of being shipped into Brazil.
There are also laws and regulations concerning labour that are important to note whilst
going to Brazil. In fact, Brazil’s trade policies place a heavy emphasis on protecting the
population from increased domestic prices due to foreign trade. This is also very true
concerning designer brands. Although Brazil has also been known to lack skilled labour,
the workforce is plentiful in sectors that support the fashion as well as retail industries.
(Diaz Reus)
Recommendations:
The legal context in Brazil is also particular and designers or couture houses looking to
penetrate the market should take into consideration different laws and regulations there
are regarding their industry as well as business in general in order to make sure they do
not have problems.
It is recommended that most luxury brands shipping products into Brazil are
knowledgeable of the tariffs and regulations there are for their products. As tariffs can
vary, getting insurance for this can kind of fluctuation can help couture houses budget
adequately when sending products for sale into the country.
Since the labour in the fashion and retail industries are plentiful, luxury brands should
also therefore pay close attention to legal limits in place regarding employee workdays as
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well as workweeks and holidays. Regulators in Brazil are said to have paid close
attention to foreign luxury brands in the past. (Diaz Reus)
2. Russian Federation
Political Context
The Russian Federation, also known as Russia, is a referred to as a federal “semi-
presidential” republic because Russia is lead by both the President, Vladimir Putin and
the Prime Minister, Dmitry Medvedev. In fact, according to the Russian Constitution, the
head of state is the President, and he appoints several different party executives to
exercise power within the government. The latter are thus further lead by the Prime
Minister. ( Legislative process in Russia)
This type of two-tiered government is in place since 1993, in order to forge a stronger
political system as a much-needed consequence to the 75 years of Soviet directive, which
collapsed in 1991. (Country Report: Russia, 2013) This has a direct impact on the fashion
industry as well as many others in Russia because with a new constitution and a new
parliament representing diverse parties, Russia’s political power has shown great sign of
stabilization, and with that a new interesting open-economy market for luxury fashion
brands. (Country Report: Russia, 2013)
Recommendations:
In order for the fashion industry to thrive in Russia, luxury brand designers must be
aware of the special role Russia’s politics plays in the Russian economy. Although the
present government has an open-economy towards the luxury fashion, fashion houses are
encouraged to keep a close eye to the country’s political situation and stability as
Vladimir Putin mentioned: “Political stability is very important for Russia’s economic
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recovery and further growth. When a country is in a difficult, complicated situation, just
emerging from a crisis and finding its feet, elements of stability in the political sphere are
of vital importance.” (Country Report: Russia, 2013)
This being said, luxury brand should keep in mind that although Russia is a very
attractive market, there are risks related to the market because of its politics. In order for
the fashion industry to grow sufficiently in Russia, a period of stable growth is needed.
Moreover, there can be some controversy regarding Russia’s political stance, and couture
houses must pay attention to current events in order for them not to receive negative
publicity, especially if they are considering moving some of their production their as
well.
Economic Context
Subsequently to the fall of the Soviet Union, Russia has experienced significant changes
moving from an auto-sufficient economy to an open market. This is in large part due to
the reforms that took place during the 1990’s. (Russian Economy) Nowadays, Russia is
also a globally competitive producer - being the world's largest exporter of natural gas,
the second largest exporter of oil, and the third largest exporter of steel and primary
aluminum. The government has also taken on a very determined program aiming at
reducing the country’s dependency to its natural resources, and rather investing in
technology, services, and more artistic industries like that of retail and fashion.
( Legislative process in Russia)
This is interesting to note for fashion designers on an economic standpoint because as of
1998, the economy has had an average growth of 7,5%, which is demonstrated in Table 4
of the Annexe. This also doubled the real disposable income of Russians as well as
created a middle class, as can be perceived in Table 5 of the Annexe through its
diminishing unemployment rate. (Russian Economy)
Another important year for Russia, besides 1998, was a decade later in 2008. Although
many countries were affected due to the economic downturn, Russia was especially hit
hard because of the decrease in oil prices. This is another indicator that Russia needs to
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invest in other industries, like that of fashion, in order to avoid these types of crises in the
future. (Russian Economy)
Recommendations:
Considering the recent growth in disposable income in Russia as well as the new creation
of its middle class, Russia is seen as an interesting market for the designer fashion
industry. Since the fashion industry in Russia is currently mostly based on importing
designer goods, designers have nothing to loose in going on these markets from an
economic standpoint. In fact, it would be recommended to do so as Russia accounts for
the largest retail market in all of Eastern Europe. (Fashion in Russia)
Aside from the economic downturn, the local fashion industry in Russia has been
growing. In fact, Russian designers are opening more and more of their own fashion
houses and labels in Russia. The economy is only positive and growing, and should
therefore be an incentive for luxury brands to pierce the market.
Socio-demographic Context
In terms of the socio-demographic situation, Russia has a very interesting history
regarding its population growth. In October 2012, the population of Russia was estimated
to be 143 million. (Mood in Russia) It has in fact been diminishing since its peak in 1991
with a population of 148 million, when the Soviet Union broke up. This is due to
declining births, rising death rates, as well as emigration. (Mood in Russia)
This is interesting for the fashion community because although the population is
decreasing, the GDP is rising significantly. This means there is more disposable income
per capita than there would be in other developing countries, because Russia’s population
is not growing proportionally.
Another very interesting factor of the Russian population is that 75 percent of the
population lives in urban areas near Europe, mostly around Moscow and St-Petersburg.
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Furthermore, the number of Russians living in poverty has also decreased about 50
percent that it was following the disintegration of the Soviet Union in 1991. (Mood in
Russia)
Recommendations:
In terms of recommendations for designer brand looking to go to Russia, since 75 percent
of the population lives near either Moscow or St-Petersburg, this creates a very dense
basin of new market potential. This is due to Russia's consumer boom that has brought
new shopping opportunities for both Russian cities, so that nowadays there are malls and
shopping centers carrying more and more brands, centers which would be ideal location
for new designer labels to begin sales in Russia. (Fashion in Russia)
Moreover, considering the population’s proximity to Europe, similar values to the
European population are shared with the Russians in terms of style and links to fashion in
everyday life. Russians who also have gained new disposable income also value
expensive brand names because they are so rare in Russia, and new to the market since
the collapse of the Soviet Union, that brands also act as status symbols. (Fashion in
Russia) If marketed in the right way, a luxury brand could go a long way by creating
demand by the Russian elite.
Another very important recommendation in order for designers to implement themselves
properly on the Russian market is of course by their presence and support at annual
fashion events held in Russia. These have gained importance tremendously amongst the
higher class and elite of Russia. Russian Fashion Week is indeed the largest fashion week
in Eastern Europe and can be attended by invite only. Moscow has also partnered with
the greatest fashion cities of the world, like London, Paris, Milan, in order to become a
fashion destination of its own. (Fashion in Russia)
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Technological Context
In terms of technology, as stated above, the Russian government has invested a lot of
money into technology in order to reduce the country’s dependency to its natural
resources. One of the major industries that has benefited of these massive investments are
that of retail and fashion.
The St. Petersburg International Economic Forum has recently hosted the signing of an
agreement to launch-the Store of the Future through project RusNano. The investment
into this project has totaled approximately $11,5 million (CAD) in order to create Nano-
enabled solutions within Russia’s retail industry. The project will establish a company-
integrator to introduce RFID technology to domestic retail trade as well. This could be
interesting to designer brands opening various locations within Russia, or even in order to
track their merchandise. (New RFID project to foster demand for nano-enabled products)
Another interesting innovation is Russian based company Gloria Jeans Corporation’s
FastFit360. This is a cloud communication platform in order to sync communication
across global operations. “Designed specifically for the apparel industry, the FastFit360
platform enables truly social business communication – a single location where supply
chain partners, designers and executives alike can track everything from inspiration to
product milestones and pre-production samples without the expense typically associated
with shipping and travel.” (Gloria Jeans adopts FastFit360 cloud communication tool )
These types of innovative ideas coming from Russia will make more efficient a lot of
retail production as well as communication. Brands going to Russia can acquire this here
and use it throughout their processes globally.
Lastly, another innovative technology that will change the way the Russian consumer
buys clothing is through VIPodium. This is “a sophisticated apparel visualization, social
media engagement and educational platform that allows fashionistas to virtually try on
clothes either at home or in store.” (Fitting Reality unveils VIPodium) In fact, the
platforms are designed to help shoppers visualize how different sizes and models of
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garments fit as they would in a fitting room, but without the need to physically try on the
clothes.
Recommendations:
It is thus recommended that designer looking into going to Russia make most use of these
new technologies. Although most mentioned above are in the Russian market, this can
help the designer gain visibility by being early adopters of these new technologies in their
processes or production, through the support of techno-fans as well as the Russian
government itself as well as through brand marketing within the fashion community
through media.
Environmental Context
Russia’s environmental context is quite unique. Although Russia comprises the world’s
most extensive forest, more than 8 million km of woodlands, desert, tundra, mountains as
well as grasslands and the Himalayas (Russian Wildlife, 2012), it is one of the most
polluted countries as well. Indeed, nearly 40 percent of Russia’s territory has shown signs
of ecological and environmental damage. (Russia's Environmental Problems) This is in
large part due to the Soviet Union that felt that pollution control was unnecessary and
came in the way of industrialization.
The biggest polluters are the various industries, including that of manufacturing for retail
purposes. They neglect the legislative requests and damage both the environment and the
people in the touched areas. Last year, the NGO Green Patrol found out that the
aluminum plant of the company RusAl is blowing cancer-causing substances in the air in
Krasnoyarsk that is quite toxic. Chemical waste is also directed into the Yenissei, one of
the lengthiest water streams in Russia. (Russia's Environmental Problems)
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Recommendations:
Since Russia is known as a great polluter, it would be recommended that designers do not
change their production locally if they are to implement themselves within the Russian
market. In fact, this could bring negative press and because a lot of the pollution has in
the past been due to industrialization and manufacturing, designers do not want to embark
on justifying why they are manufacturing in a country with no environmental
consideration.
Couture houses also looking to implement themselves in Russia should also take into
consideration the damage that global warming is doing to the environment. In fact some
repercussions are noticeable today. We can only think of the recent forest fires as well as
the defrosting permafrost that has negative effects on building in all of Russia as well as
other infrastructures. (Russian Wildlife, 2012)
Finally, luxury brands going to Russia can help by investing in new and modern
production complexes as well as energy efficient stores. Saving energy and more efficient
industrial complexes would help produce less waste and contribute in bringing a “green-
buildings” trend. (Russia's Environmental Problems)
Legal Context
The Russian government is presently involved in local projects and legislative changes
that are working towards helping Russia’s international image. They not only concerned
with increasing social quality of life, but also by letting in more and more international
investments into Russia. (Legal protection and intellectual property, 2012)
In terms of why designers should be concerned is mostly relevant to know what types of
laws exist for intellectual property of not only their designs, but also their brand names
and logos. In Russia, international fashion brands are offered general protection. This
protection is usually available in the form of a trademark or through incorporation.
In regards to the designs itself, creative work is offered general copyright protection in
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Russia although the availability and extent of the protection varies. The most important
aspects affecting the protection are the author's nationality and the place of first
publication as well the relationship between the author and the company. (Legal
protection and intellectual property, 2012) (For example a company named Michael Kors
in Russia, copied from the popular American designer brand, would in fact loose its name
once the brand came into Russia because the American designer’s collection is named
after the owner and creator Mr. Michael Kors himself.)
Recommendations:
Although, as mentioned above, designers are protected through general law for their
brand names, Russian law imposes certain limitations on the protection of trademarks,
company names and brand names as well. It would thus be important to see if the
company’s brand name already exists in Russia, and how they could be sure not to lose
their notoriety through logos and slogans because of that.
3. Republic of India
Political Context
The political context in India has a role to say in how the fashion industry will evolve, as
they will be aiding to finance certain projects, pass various laws, as well as allow more
foreign investment in this area. The Union Government, the name used to call the Indian
Government, is the prevailing authority of the union of 7 territories as well as 28 states.
(Council of States (Rajya Sabha), 2013)
In many aspects, where India is similar to the United Kingdom and Canada, because of
India’s historic colonised state, the legislature is also know as the Parliament. All the
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Ministers as well as the President need to be elected. (Council of States (Rajya Sabha),
2013) This has a positive effect on many international industries, including the fashion
industry because as the population gains more and more information about the industry as
well as what is going on globally, they also elect members of Parliament with their
similar values and interests.
The current President Pranab Mukherjee has in fact acknowledged earlier this year that
India is trying to turn more towards a knowledge-based society by investing and creating
programs directed at youth. Amongst the investments, there is a mega textile cluster to be
created in the area of Jharkhand, as well as numerous government funded and
acknowledged model colleges as well as technical degrees relating to fashion. (India to
create knowledge based society: President Pranab Mukherjee, 2013)
Recommendations:
As the government is currently investing a lot of effort and budget into the fashion
industry in India, it is a good way to perhaps gain visibility for luxury brands by also
helping to fund certain projects. For example, a firm who is already producing or getting
textile from India would perhaps want to give back to society or even fund a college
named after them in Jharkhand, where the fashion cluster is to be located. Furthermore,
as the President mentioned, these zones will be created in order to bring in more
production into India as well as develop other skills that are knowledge base, probably to
eventually have their own full cycle of production including designers, marketers,
clothing, textile, sales, etc. This helps the international fashion scene, because as India’s
own industry flourishes, this will bring in more international names as well because
people will be more “fashion-aware”.
On the other hand however, if designer labels are to be associated with any projects in
India, they will have to supervise some of the activity to make sure no bad press can
come of it through labour laws or even as the current affairs story of Bangladesh, where
many people where hurt in the recent building collapse. (The Weston group owning
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Loblaws, who manufactures Joe Fresh clothing, was manufacturing their clothes here and
so far they have had to pay a lot in damages as well as handle media)
Economic Context
India’s economic context has seen amazing shifts in the last two decades. India’s
economy is presently the 10th largest in the world taking into account nominal GDP as
well as being 3rd in terms of Purchasing Power Parity. (Explore Economies: India) This
is clearly demonstrated and mapped in Table 6 of the Annexe, where since the early
1990’s, India GDP is showed to keep growing very steeply. (Economy of India) India’s
growth is mainly due to its adoption of a free and liberal market in 1991.
Fashion related, India is also one of the 20 most exporting countries and one of the 10
most importing countries as well. (Emerging Markets: Brics sceptics have their backs to
the wall) What differentiates India from the other 3 BRIC countries is that India is
considered as one of the fastest growing economies primarily because of the fashion
industry on its own. In fact, its retail industry is also quickly becoming a retail destination
and emerging as a leader in terms of retail opportunity. In 2010, India’s retail market
grew to $427 billion (CAD) and became amongst the top 35 most preferred retail markets
in the world. (Retail Industry)
Recommendations:
The Indian fashion market represents enormous opportunity for fashion designers from
around the globe. India is currently experiencing a retail boom due to retail space, malls,
markets as well as the slowly growing presence of renowned international brands like
Chanel and Louis Vuitton in New Delhi. The India market is gaining more visibility to
brands and they even have their own Vogue since 2007. This can represent amazing
visibility for luxury brands that are slowly getting on the market in order for them to start
off their marketing campaigns.
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Another interesting aspect, as will be discussed below in the legal context, is the fact that
the government of India has opened its doors to foreign direct investment. Since then, a
number of foreign retailers have come in, and designer stores should be looking to do the
same. The market is not presently saturated and there is enormous room to grow and
prosper on this market. It would be advised for designer brands to invest in multiple
ways. Not only by opening up shop, but also by investing in huge production houses, by
teaming up with local designers to suit India’s needs (as they are different, demonstrated
by Vogue’s Vogue India success) and by investing in brands that are local, as there are
more and more. (Retail Industry)
Socio-demographic Context
The socio-demographic context of India is unique on its own. It is the second most
populous country in the world behind China and accounts for about 17 percent of the
total world’s population. (India population) One of the most interesting aspects of it for
the Fashion industry is that nearly 50 percent of the population is also below the age of
25 years old and more than 65 percent of it is below the of 35 years old. (India
population) This represents huge basin of people for the growing retail market, now, and
in the upcoming years.
Although India also has more than 2,000 ethnic groups, Indian culture is very important
for its population and designers need to be aware of this when presenting their product
selection in order for them to succeed. Its culture not only has a role on the way people
dress, as the traditionally sari wear is still very important, but it also plays on what types
of consumers will be purchasing luxury goods. The caste system is still very dominant in
Indian culture as well as great gaps between income and education levels. (India
population)
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Recommendations:
Indian culture is very important in the socio-demographic context and designers need to
be aware of this when presenting their product selection in order for them to succeed on
the Indian market.
As discussed previously, India has a textile industry that is unique. For designers to make
most of this as well as please the Indian market, they could also look into incorporating
unique designs that incorporate both Western and Indian styles. This can be done through
using Indian traditional textiles that appeal to the Asian and the western market making
the brand a unique and give differentiation to a designer. Designers going to India must
also take into consideration that what is fashionable in India is different. India is the only
BRIC country with as many important differentiation needs in order to incorporate Indian
culture into fashion. Fashion in India also incorporates body jewellery, henna makeup, as
well as the traditional sari. (Retail Industry) Luxury brand going into India must also
target their ads and products towards a younger demographic than in the other BRIC
countries.
Technological Context
India’s technology sector is growing very rapidly in within the country and is attributed
to increase in specialisation, highly educated work force, as well as an increase in
demand internationally. (Economy of India)
Unfortunately however, technology in the fashion and textile sectors is however lagging
behind, according to the strategy director of Global Fashion Industry in India. “Without
the right source of information, without the business intelligence and without the right
data available, it will be difficult for any organization to take up the right decision. The
manufacturers need to be more open in embracing new technology, as there cannot be a
cheaper and easier way for doing everything. In today’s new environment, companies
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with the right kind of software can excel. This will help the manufacturers to have the
right data to reduce the number of things to guess and increase the things that supports
decision-making.” (Indian textile industry needs to adopt modern technology)
Recommendations:
Although India’s technology and innovation context is quite advanced as compared to the
other BRIC countries, this is not the case for the fashion industry. It is thus recommended
that luxury brands looking into going into the market either invest in their own R&D in
terms of innovation on various fabrics or ways of production, or invest within India as
well in order to be able to move their production here too. However, designers should not
rely on technology here in terms of accessory or garment production.
They can however rely on technology and innovation in terms of retail for stores,
headquarters or even ERM programs linking activities in India to those throughout the
world. This could be a good idea to render more efficient the centralization of operations
and end results.
Environmental Context
Similar to the enviromental context in Russia, India has had many enviromental issues as
well. These include air and water pollution, as well as issues with garbage disposal.
Although the situation was worse between 1955 and 1995, India made great progress
regarding this issue between 1995 and 2010. In fact, India is known for having made the
quickest progress regarding addressing its environmental issue as well as improving its
environmental quality. (Data: India) This being said however, India still has a long way
to go in order to assure its environmental state will one day be healthy.
The major causes of pollution in India include its primary source of energy – that of
burning fuel wood as well as biomass made livestock waste. Furthermore, garbage
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removal is not accurately organized, sewage is not readily available throughout the
country, and extremely polluting high emissions plant that were built between 1950 and
1975, and are government owned, therefore not controlled. (Data: India)
Recommendations:
Considering India’s environmental context, it is advised that designers wisely choose
where they want to implement themselves store-wise because although this won’t have an
effect on the environment as much as an industry would, it would mostly be a burden to
the stores because of lack of garbage disposal and improper sewage and water.
Luxury brands should also be aware of the environmental issues within the country and
make their own efforts as well once there to help achieve better environmental goals. For
example, through recycling, through informatization instead of paper-use as well as
planning efficiently in order to reduce gasoline emissions or transportation to the country.
Legal Context
The Indian retail industry is what it is today because of the legal context encompassing
laws and regulations within the industry. In fact, the retail industry is one of the major
leaders and totals 15 percent of the country’s GDP. The Indian retail market is assessed at
$450 billion (CAD) and amongst the top retail markets in the world. The former Minister
of Textiles indicated that the change within the fashion industry to one of the major retail
industries in the world is a great success of the Government. The Government removed a
number of financial restrictions and allowed immense investment from domestic and
foreign investors. (The Economist, 2012)
The government also passed a law recently last year, in 2012, the government passed the
law allowing 51 percent of foreign direct investment in large retail stores with multiple
brands, as well as 100 percent foreign direct investment for single brand retail stores, or
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in other words, flagship designer stores like Chanel and Louis Vuitton. (The Economist,
2012)
There are about 30 other laws and regulations regarding retail however. These include
publicity, billboards, signboard licences, as well as measures to prevent stalking and
storing many sizes of the same designer models in order for style to stay in season. There
are also taxes for moving goods and products within India between various cities and
states. (The Economist, 2012)
Recommendations:
Since the law has changed in 2012, designer and couture houses are highly encouraged to
invest in stores in major cities like New Delhi and Mumbai. Not only should designers
look to bring their products to department stores that are now 51 percent owned by large
worldwide department stores, they could even look into buying and opening their own
flagship stores as a long term investment since this is allowed as of last year alone.
Furthermore, because India is now more and more open to foreign direct investment,
luxury brands are still taxed on shipping goods between states. It is this recommended
that brands ship directly to stores from their production location and not a centralized
area where the goods are further shipped within the country afterwards.
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4. People's Republic of China
Political Context
The People’s Republic of China’s political context has always been of great interest
because of its very strict influence on markets as well as industries a like. China remains
a socialist state, and although the Communist Party was the government of the past,
communism still has many influences on the way China is lead today – as there are
severe restrictions on: freedom of religion, as seen in Tibet; reproductive rights, as seen
in the one-child policy; restrictions on the internet as well as the press, as demonstrated
by Google, Facebook, and many other sites and publications not allowed in the country.
(China, 2012)
As China’s government has moved away from Communism, they indeed moved more
towards a political liberalization, where elections are even held in villages and towns
now. The CPC however, is still the party in control of the overall government and is
supported by the Chinese citizens by 86 percent according to the Pew Research Center.
(China, 2012) Amongst its concerns, the government is looking to fight corruption, lessen
the gap between social classes, as well as encourage local products. This is of interest,
especially as luxury brands are being more and more valued in China, the government is
trying to encourage its own locals brands in order to also make them luxury goods there
and abroad as well. (China, 2012) For example, the First Lady of China is now seen more
than ever in all public appearances wearing solely local Chinese luxury brands.
According to the Ministry of Commerce, more and more policies and guidelines will be
stressed to be market-oriented concerning luxury retail goods. For the moment however,
international designer brands remain the key to educating its population on the
importance of such prestigious and elite brands, therefore they remain crucial for the
government for the time being. (Fashion of China's first lady: Part of the Government
Plan, 2013)
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Moreover, the Chinese Government has as a goal to move away from the common
expression of being the “world’s factory”, where exports dominate the country’s
economy, and move rather towards domestic consumption. Other goals the Chinese
government maintains regard eliminating lavish spending as well as corruption within the
government. (Fashion of China's first lady: Part of the Government Plan, 2013) This ties
hand in hand with its goal to consume domestically because for example, as Audi is no
longer the choice of vehicle for government officials, but rather a local prestigious brand,
less and less Audis will be on the market, and the demand will also go down, as will
government expenditures to acquire these products.
Recommendations:
As there is a certain way the country is governed, designer brands must also incorporate
this within their strategy when going to China. For example, it is important that a luxury
brand market itself within Chinese media as not rely on the traditional American modes
of social media and media. Furthermore, luxury brands need to be aware of what is
politically correct and what is not in order to brand themselves well with the population,
as well as with the government. There have been numerous examples of when people or
companies were banned from China because of behaviour or conduct or symbolism not
appreciated by the government.
Considering the fact that Chinese brands will slowly be more and more encouraged
within the fashion industry within China. Luxury brands worldwide need to play up their
image within China and establish themselves as worldwide brands of high prestige, as
this is what the Chinese are looking for. During my time in Shanghai, I was able to see
the prestige and honour women had in wearing these high designer brands, and this is
what couture houses need to play up. The fact that Chinese women can be like Parisian
women in Chanel or even Italian women in Versace as well as American women in Ralph
Lauren Black Label. This will be a key element in keeping the market leader positions
they already have.
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Economic Context
China’s economic context is just as impressive as important is its political context to the
development of the fashion and luxury brand industry within China. In fact, China is the
world’s second largest economy in terms of GDP as well as Purchasing Power Parity and
is the fastest growing economy in the world. It is also the single most exporter in the
world, thus known as the “manufacturer of the world” and is also the second largest
importer of goods in the world as well. (Explore Economies: China, 2013)
Due to China’s strong economic growth and position, China is even expected to surpass
the United States of America by becoming the world’s largest economy as early as 2020.
(Starr, 2001). It also helps that although the United States is first right now, China is the
United States’ largest creditor and owns about 22 percent of foreign-owed US Treasury
securities. (Starr, 2001) Furthermore, a large middle class is growing with China and as
of February this year, a nationwide minimum wage of 40 percent average urban salaries
to be slowly implemented by 2015. (Starr, 2001)
In terms of the fashion industry, China is also expected to become the largest fashion
market within the next five years. “China’s luxury market is forecast by McKinsey & Co.
to soar to $27 billion (CAD) by 2015, one fifth of the world’s total, up from $10 billion
(CAD) in 2009.” (The Fashion Industry and China, 2013) Moreover, France’s fashion
federation also maintained that China is a country that is passionate about fashion and
China is determined on creating brands and products and wants to become known as a
design and innovation center, and no longer the manufacturer of the world. (The Fashion
Industry and China, 2013)
Recommendations:
As China’s economic context is already a clear indicator that luxury brands and designer
goods must be on the Chinese market, it is also in couture houses to implement
themselves here because of the potential market it will become as well.
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Furthermore, although the country is trying to shift towards design and innovation in
terms of the fashion industry, they are not there yet and the demand for luxury goods is
there. Therefore, designers must not be afraid of copyright or trademark infringements,
because although this is popular and common in China, the market for the real goods is
just as high or even higher.
Socio-demographic Context
Although the socio-demographics of China are usually known for being a very large
population with a small portion of it being in the youth group due to the one-child policy,
other aspects of Chinese demographics are more linked to the fashion industry than not.
Indeed, China’s population accounts for more approximately 1.5 billion people and a
staggering 90% are of the same ethnicity while a little under only 10% are comprised of
minorities within China. (People of China)
Another key aspect to keep in mind is also the fact that China’s demographics accounts
for less and less supply of young labour but rather a quickly aging population. (China
Demographcis, 2012). Aside from this important aspect, we also know that more and
more Chinese are migrating to large cities within China, taking the urban population to
nearly 1 billion people in 2025. (People of China) This is also the major cause of the
increase in disposable revenue per capita, thus the creation of a large middle class that is
growing every day.(People of China)
These above mentioned factors have a huge role on the fashion industry within China.
For instance, women in China are proven to spend more on fashion and fashion literature
than in the Western world according to the New York Times. (The Fashion Industry and
China, 2013) As the CEO of Hearst Magazines International mentioned: We’re going
through this wonderful period where huge numbers of women are coming out of poverty
into the middle class and beyond. Many of these women are choosing to spend on luxury
goods.” (The Fashion Industry and China, 2013) This is in large part due to their
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
exposure and desire of the Western world, which makes Chinese consumers extremely
knowledgeable of global fashion trends. This is demonstrated by the fact that in 2010,
China ranked 6th in the world for spending on luxury goods ranked by country accounting
for a $18 billion (CAD) market where Louis Vuitton, Chanel and Gucci are the industry
leaders.
Recommendations:
Due to its gigantic presence in the luxury market, designers cannot neglect China as a
target market for growth especially since Chinese consumers have learned very quicly
about fashion and haute couture trends. A few years ago, logos and brand names were the
most important aspect to fashion, but now style and trends and uniqueness is also sought
after. Designers can play up these aspects by creating waiting lists for products, by
limiting the supply of them in China, as well as upping their prices within this market.
For Chinese consumers, luxury goods are a social status as well as a lifestyle. Even fast-
fashion companies such as H&M, Topshop and Zara have caught on to this trend and
stores are opening at fast rates. Designers, who aren’t already on the market, definitely
need to jump on the opportunity. It is no wonder that China is the fastest growing market
in terms of number of stores worldwide. (The Fashion Industry and China, 2013)
Technological Context
Chinese retailers and other local companies within the fashion industry have been
aggressive to contend against internationally renowned luxury brands with sought out
models and products of goods. Although China is a the lead manufacturer, they haven’t
been able to compete with couture houses especially in terms of product quality and
characteristics, marketing and media, the level of production technology, as well and
trendiness and customer service quality. Most of this has to do with the lack of practice
and capability and Chinese luxury brand companies’ operation have been relatively short-
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lived, therefore quality and prestige are not to par. The government is well aware of its
country’s shortcomings and therefore will continue to welcome foreign competitors to
grow alongside Chinese companies, especially in order to gain insight on their
technologies as well as innovation. (Fashion of China's first lady: Part of the Government
Plan, 2013)
Recommendations:
Due to the fact that China’s technology in terms of production is amazing, but lacks
technology and innovation to accurately pose a threat to established fashion houses with
world-wide recognition, it is recommended that designers, while going into China, make
sure that their know-how is not copied nor stolen as it has been in the past with various
subcontractors like Motorola for instance in other industries. Due to the fact that couture
houses are not mass-producing goods, what China is known for being good at, they need
to make sure that their own innovation and technology is not done within China but
rather in-house in order to keep that competitive edge. Chinese local brands are
aggressive and will continue to be so even more, however the key competencies of
couture houses are lacking in that regards.
Environmental Context
The environment of China contains various climates and environments however hurried
industrialization, large population development, and negligent environmental regulations
have caused many environmental problems as well as immense pollution. (As Pollution
Worsens in China, Solutions Succumb to Infighting, 2013)
In fact, as China is the worlds lead producer and exporter, and considering the fact that
resources such as coal are widely used due to its low cost, “China’s air pollution will
become a lot worse from the already unbearable level, calling for drastic policy changes
and a strong government will to overcome the opposition from interest groups.” (As
Pollution Worsens in China, Solutions Succumb to Infighting, 2013)
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
China’s pollution and environmental context does not just effect the land and the
environment but rather also the health of the population as a whole. In current news, the
recent incident where more than 16,000 dead pigs were found floating in a river that
allows drinking water to most of Shanghai citizens, and hardly any government officials
addressed the alarming dangerous hazard this would cause to human health. One of the
only topics they do address however is the toxicity of the air in urban areas where visible
smog can be seen on a daily basis. Li Keqiang, the prime minister, “said the air pollution
had made him quite upset and vowed to show even greater resolve and make more
vigorous efforts to clean it up.” (As Pollution Worsens in China, Solutions Succumb to
Infighting, 2013)
Indeed the quick industrialization of China has also contributed to the problem. This can
be seen through the fact that 16 of the 20 most polluted cities in the world can be found in
China. As of last year, there was increased citizen activism regarding government
decisions, which were perceived as being environmentally damaging. (As Pollution
Worsens in China, Solutions Succumb to Infighting, 2013)
Recommendations:
Although the environmental context in China is so heavy and negative regarding its
situation as a whole, and doesn't per se touch the fashion industry solely, it will also
affect the designer brands going into China. It is thus important for brands to be
knowledgeable of their carbon footprint in China, and assure they are not contributing
negatively. Although pollution because of industrialization is normal and had been seen
in all industrialization processes in the Western world as well, China has brought it to a
new level, and designers need to be conscious of this and take the environment to hear to
deepen the problems this brings to the entire planet. Although they are the world’s
manufacturers as of now, as they become more knowledge based and begin
manufacturing less and less, production of many goods will shift elsewhere. It will then
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be the responsibility of the designers and producers to keep encouraging countries like
Italy and France, where although the cost is more, the environmental repercussions are
also greatly lessened.
Legal Context
The major legal concern regarding luxury goods in China is definitely without doubt
counterfeit products, copied or reproduced to resemble the real couture house’s designs.
The United States even brought up an act called the Innovative Design Protection and
Piracy Prevention Act in front of the Chinese Supreme People’s Court in order to raise
the issue. (Hays, 2008) In fact, pirated and counterfeit items from China are sold
throughout the world, where 75 percent of counterfeit goods seized in Europe are from
China, and the industry is estimated at $25 billion (CAD) a year. Also, the loss of
potential sales by all designers and couture houses is also estimated at $17 billion (CAD)
worldwide. (Hays, 2008)
One of the major issues with counterfeit luxury goods, aside from being illegal is that the
quality of the goods are improving and sometimes these products have made their ways
into real distribution channels where the real goods are also sold –either through returns
or even exchanges of goods. (Hays, 2008)
Although laws have been put in place against these counterifeit goods, Chinese
government officials recently defended the role of these counterfeit goods by stating it
part of Chinese culture and innovation. Liu Binjie, head of the China National Copyright
Administration stated: The luxury brand counterfeit industry is a sign of cultural
creativity of the common people who supplies a market need in China.” (Hays, 2008)
Recommendations:
It is thus recommended that designer brands going into China do not bring their
productivity into China as well. Although it can be tempting because of efficient
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
productivity as well cheap cost of production, the integrity of the product and its
uniqueness will remain more intact should designers take these precautions. Although
there are laws defending copyrights and trademarks and logos and slogans, what was
demonstrated above represents how seriously these are applied by the government and
how they will take Chinese’s workers side in all situations. It is thus advised to go into
business with perhaps lawyers knowledgeable of doing business in China as this will help
solve many questions as well as protect as much as possible couture houses as well as
designers.
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Conclusions
Due to the shift in economic powers within the emerging countries known as BRIC
(Brazil, Russia, India, China) new business opportunities have arisen for fashion industry
leaders. Several recommendations have been determined through the analysis. Regardless
on risks and contingencies presented above, fashion companies must implement
themselves with all 4 stated-above countries in order to remain industry leaders. They can
only gain from this experience and grow as companies.
Political Recommendations
The political context in all BRIC countries has shifted towards an open market regarding
the fashion industry and luxury brands, making it easier for brands to access the markets.
In order for the fashion industry to thrive the various governments would have to review
their out-dated tax structure in order for the industry to grow.
Seeing as each country and various states within those countries state can supervise their
own tax laws and conditions, free trade zones could be tested in various markets.
Women in power or with influential capabilities should be taken advantage of in the
sense of sponsorship in order to gain visibility.
Political stability should be given close attention as tariffs and regulations change when
governments do as well.
Countries are investing within their own markets, in terms of production as well as new
regulations allowing foreign direct investment, which encourages the industry even more.
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Although investment in developing local markets to eventually compete with luxury
worldwide brands is in place, designer brands keep a vantage point as governments still
prone international presence.
Economical Recommendations
The economic context within the BRIC countries demonstrates how these 4 countries
have evolved into promising markets with ever growing GDP’s and PPP’s.
Countries are leaving the Investigation phases of the industry and entering the
Exploitation phases where the market is currently almost free. There are few key players
and few competitors as well. It is time to enter these markets.
New disposable income and middle classes have emerged within these countries and a
shift from closed market economies to open-market economies has been underway. There
is potential demand as PPP grows
Countries have taken away their restrictive policies that once hindered international
companies in penetrating the luxury market within their countries. They are also growing
in terms of industries and with its growth comes also international expansion and demand
for brands.
GDP is growing and will soon surpass many present-day leading countries. Designer
brands cannot afford to not penetrate these markets in terms of profit and opportunity.
Socio-‐demographic Recommendations
The socio-demographic context within BRIC shows how diverse yet similar demands are
for luxury designer goods.
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Although the populations are diverse, common trends in terms of interest for aesthetics
and fashion are similar throughout. This demonstrates the opportunity for high designer
clothing, as trends are worldwide in the fashion community.
Urban centers are developing more and more as migration and educations develops, and
thus create an excellent opportunity for visibility as well as shopping destinations for
people throughout the countries in one concentrated area.
The countries are comprised of very young demographics as compared to the Western
world. This represents huge opportunities for the retail market, now, and in the upcoming
years.
Wearing and owning luxury goods has become more than what it is on the current
markets. Luxury is a status symbol and is part of a lifestyle many people want to be
associated with.
Technological recommendations
The technological context within BRIC shows there is a lack in technologies as compared
to other countries however significant investment on behalf of governments are being
introduced into the fashion industry in terms of innovation.
Production gaps exist with other producing countries in terms of clothing, and
governments are investing more and more in innovation and technologies solely aimed at
the fashion industry. This demonstrates that investment is being made and new ideas and
more efficient ways of doing will soon profit designers coming into these countries as
well.
New and exciting innovations exist in order to give the consumer a great experience
when shopping for luxury goods. Designers can catch on to these early by using these
new technologies and thus captivating and attracting more consumers.
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Other technologies exist that can benefit a store through ERM, CRM as well as new ways
of centralizing information that the fashion industry and stores can also grow from.
In countries where counterfeit goods are valued, technology still hasn't been able to
reproduce quality exactly as if it were hand-made. Designers need to watch out, however
still keep their competitive edge.
Environmental Recommendations
The environmental context within BRIC shows of bio-diverse lands and environments
that have, for the most part, been destroyed and polluted due to industrialization.
Natural resources are a great asset to any developing country. Not only is the pollution a
lot lessened but also self-reliance is also ideal for fashion production, or for any industry
for that matter.
Countries who are great polluters play a large role in their environment. Fashion
companies need to be aware of the policies and how negatively portrayed bringing their
production there can be seen as.
Infrastructures are not always in place, and environmental concerns include bad garbage
disposal and lack of drinking water. Luxury brand stores must be cognisant of store
locations.
The carbon footprint of the luxury stores can play a big role in how their clients perceive
them. If designers can do anything to diminish pollution or environmental hazards within
a BRIC country that is already showing the locals what is indeed important and trendy.
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Internationalisation and High Fashion – The Influence of Emerging Countries on the Fashion Industry
Legal Recommendations
The legal context within BRIC shows that laws have been changed from more restrictive
economies into open markets.
Although certain law sets certain regulations for exporting countries to follow when
shipping goods, luxury houses must plan these accordingly into their budgets for
transportation as well.
Countries do have laws regarding trademarks, logos, brands, names, intellectual property
and design. It is advised that couture houses are very familiar with these laws before
going into a certain country.
Laws of foreign direct investment have widely allowed for the fashion industry to grow.
Designers are encouraged to make most use of this, as it is often preferential to them.
Laws are often in favour of the local country and not international designer brands. It is
advised to have legal advise when entering a new country.
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Annexe Table 1: BRIC Overtaking the G7 Economic Powers
Table 2: Market Phase Model
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Table 3: Brazilian population and population growth
Table 4: Russia GDP Growth since 1998
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Table 5: Russia Unemployment Rate Decline
Table 6: India Rising GDP
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Table 7: Chinese GDP Surpassing all Countries in Upcoming Years