Possible factors for success
The phenomena of internationalisation
Internationalisation occurs when the firm expands one or several business activities into in-ternational markets (Hollensen, 2004). The process of internationalisation has been the tar-get of many books, articles and reports. Despite the large quantity of written material about internationalisation, the field of Swedish fashion companies’ internationalisation process has not been investigated in extent and there are still unanswered questions to be ad-dressed. Randall, (2000) states that it is well known to everyone that the world is becoming more international.
The importance of globalisation can not bee overlooked, according to Czinkota & Ron-kainen, (1995) the countries that was quickest to globalize gained the benefits in the shape of 30 to 50% higher growth rates over the past 20 years. At a company level there are also benefits to be gained. The world is shrinking and as the costs of computing power and telecommunications becomes less and less, the globalisation of the economy is increasing. Kotler, Armstrong, Saunders, & Wong, (2001) states that the international trade is boom-ing. This view is supported by Czinkota & Ronkainen (1995) who further talks about glob-alization as being one of the most significant developments in the last 20 years for the in-dustrialized world.
According to Kotler et al, (2001) the need to go abroad, as well as the risk for doing so, has increased. The Internationalisation process is not always as easy and transparent as can be the picture given by some researchers, since different types of barriers exists which makes it difficult for the company. These barriers can be divided into three groups, which are general market risks, commercial risks and political risks (Hollensen, 2004).
The development in emerging countries such as China, South Korea and Poland shows a dramatically increase, a progress that in time can diminish the already industrialized coun-tries domination on the global market (Czinkota & Ronkainen, 1995). This somewhat an-ticipated competition as well as already increasing existent competition has inspired, moti-vated and pushed companies to go international (Czinkota & Ronkainen, 1995). As argued by Melin (1992), it is not easy to suggest one single model that explains the internationalisa-tion process. The complexity calls for a variety of inputs and variables combined in order to get a coherent picture. This view is supported by Hollensen (2004), when he describes the global marketing process as a complex task.
The decision to internationalise
Although much of the internationalisation literature are concerned with the processes and extensive calculations and plans that is foregoing the internationalisation process, it is ar-gued by Agndal & Axelsson (2002) that it is often the case that the firm or more specifi-cally managers in the firms who makes the judgments based on no real rational decisions making process.
What on the surface seems to be a well planned decision is according to Agndal & Axels-son (2002) often affected by factors like corporate relationships, earlier market experience chance and luck. The sound business plan often give way for a cocktail of orientation posi-tioning and timing (Axelsson & Johanson, 1992) through Agndal & Axelsson (2002). The importance of networking as a way of choosing if and where to internationalise are sup-ported by the findings of the investigation made by Axelsson, Johansson and Sundberg (1992) through Agndal & Axelsson (2002) where international business travellers claims that the main objective for many of their trips where mainly to keep relationships active. This investigation is further supported by other investigations that prove the importance of previous international experience on the decision to start an internationalisation process (Ali & Swiercs, 1991; Almeida & Bloodgood, 1996; Morgan, 1997; Reuber & Fisher, 1997 Westhead et al., 1998) through Agndal & Axelsson (2002). Research points to the impor-tance of single individuals, one person that has the power and influence to get the company to go through with the internationalisation.
Baird, Lyles, & Orris (1994) describe several strategic options that face a small company set out to choose an international strategy. Due to the restraints, such as, financial and mana-gerial that often characterizes a small firm, it might act differently compared to a large company. Often is the one person decision an affect of these restraints, it could turn out to be an obstacle for a successful foreign expansion.
Despite the importance put into the one-person decision by many scholars Johanson & Vahlne (1977) do not agree with the fact that the one person decision plays such a large role as other seems to think. Their view is that the internationalisation is a product of series of incremental decisions.
As a concluding remark on the topic of the importance of individual networks influence on the process on internationalisation it may be concluded according to Agndal & Axelsson (2002) that it is often the case that the firm, or more specific managers in the firms that make the decisions does so on an outcome of a process that is not a rational one.
Theoretical models of internationalisation
There are many models that concern themselves with the process of internationalisation. Three famous, widely used and tested models are here given a short description. This in order for the reader to follow our reasoning and comparison concerning the chosen com-panies’ internationalisation process.
The Uppsala model
A very famous model that has been in focus since 1975 is the Uppsala model of interna-tionalisation, or U-model, a model that describes the internationalisation process in stages that suggests a sequential pattern of entry into successive foreign markets with an progres-sive deepening of commitment to each market (Hollensen, 2004). The authors Johanson & Wiedersheim-Paul´s model suggested that companies tend to begin their internationalisa-tion in physically fairly nearby markets and only gradually penetrate the more far away mar-kets. It was rare that a company entered a market through their own manufacturing sub-sidiaries or sales team; they instead entered the market thorough export (Hollensen, 2004).
Johanson & Wiedersheim-Paul (1975) hypothesised that firms would enter new markets with successively greater psychic distance. The findings of Johanson & Wiedersheim-Paul in 1975´s paper investigating the internationalisation of four Swedish companies became the basis for what is known as Uppsala model or the U-model.
The assumption was that the firm’s internationalisation was incremental and that it was the uncertainty avoidance that made the companies to start their export first to the neighbour-ing countries (Johanson & Wiedersheim-Paul, 1975). The model describes in four stages the internationalisation process;
• The first stage is no regular export activities
• The second is export via independent representatives (agents)
• The third is sales subsidiary
• The fourth is production / manufacturing.
The four stages referred to by Johanson & Wiedersheim-Paul as the establishment chain, mean an increasingly larger involvement and resource commitment by each step.
The Uppsala model has gotten a fair share of criticism for being too deterministic (Reid, 1983; Turnbull, 1987) through (Hollensen, 2004) as well as that it does not take into con-sideration interdependencies between different countries. Further has the model very lim-ited usage on service industries.
Andersen (1993) interpret the U-model as less bounded in both in space and time, and therefore can be expected to have a relatively high degree of generalisation. This generalisa-tion in turn requires a higher level of abstraction this comes at the price of lower level of precision. Other weaknesses of the U -model that Andersen (1993) point towards is the lack of explanatory power which implies vagueness in the purpose of the models. The corre-spondence between the theoretical and operational level has not been seen to a satisfactory degree. Further must the empirical design be adapted to the theoretical model. A cross sec-tional design can not document that firms proceed in stages, nor can it determine the fac-tors that influence a firms move from one stage to the next Andersen (1993).
The findings of Kremer (1996) supports the conclusion by Hollensen (2004) that the model has vital points that are still valid but that all the stages are not as mandatory or used in that particular order as argued. It describes an international process well but have be-come somewhat outdated in times of internationalisations processes arranged through leap-frogging, where companies enters markets that are distant in physic distance at an early stage. Johanson & Wiedersheim-Paul has to an extent agreed on some of the critic, and fur-ther more themselves published articles that concur with the critic. Especially that the stages are not as mandatory used in a particularly order as might have been suggested by their earlier publicised articles.
Johanson & Wiedersheim-Paul (1975) defines the psychic distance as “factors preventing or dis-turbing the flows of information between firm and the market”. The psychic distance is correlated with geographic distance, but not exclusively. Hollensen (2004) describes the psychic dis-tance as determined in terms of factors such as difference in language, culture, the level of education, the level of industrial development and political systems, which disturbs the flow of information between the firm and the market.
That’s why according to Hollensen (2004) that the companies that follows the Uppsala model chooses to start their internationalisation by going to those markets they can easiest understand, where they sees the opportunities and the market uncertainty is low. The coun-tries closest to Sweden are those that have the lowest psychic distance. Further are the Netherlands psychologically close to Sweden, ranked as the sixth country according to psy-chic distance from Sweden (Johanson & Wiedersheim-Paul, 1975).
Hallen & Wiedersheim-Paul (1979) does the connection between the stages model in the Uppsala model and the notion of psychic distance where to some degree attempts to meas-ure and to conceptualise the cultural distance between countries and markets are done. Jo-hanson & Wiedersheim-Paul (1975) drives the theory that Swedish firms that starts their operations in countries smaller than Sweden do so because those countries are more similar to the Swedish domestic market and therefore require smaller initial resource commitment or have less competitive domestic industries.
However has the importance of psychic distance as an hindering force when companies decides on which countries to target for their internationalisation that Johanson & Vahlne (1977) among others have found, not been supported by the findings of Ellis (2000). Ellis
(2000) found that the companies that he investigated did not put emphasises on the physic distance. This goes against the findings of among others Johanson and Vahlne (1977). It is however important to point out that it is notable, that this finding was based on the fact that 90% of the companies investigated was not the instigator of the internationalisation, but was rather pulled into the internationalisation by companies in countries psychologi-cally distant. Therefore must the findings of Johanson & Vahlne (1977) still be considered valid until new findings contradict the result.
Transaction cost approach
This model is concerned with the minimisation of the Transactional costs of the firm that can lie as a base for a decision of how to internationalize. The founder of the model Coase (1937) argues through Hollensen (2004) that a firm will go international through internal growth rather than through an extern intermediary, when the cost for doing so is lower than that of an extern intermediary. The simple way of trying to explain this model is given by Hollensen (2004 p.59) “If the friction between the buyer and the seller is too high then the firm should rather internalise in the form of its own subsidiaries”. This model has been criticised for be-ing too narrow in its assumptions of the human nature (Moran, 1996) through (Hollensen, 2004). Further are many critics concerned with the lack of many factors such as “internal” transactions costs and the importance of the “production costs”.
Reactive and proactive motives
The motives of internationalisation are according to Hollensen (1999) through Agndal & Axelsson (2002) divided in reactive and proactive motives. The proactive motives include among others the exploitation of economies of scale in research and development, produc-tion, managements or image and the reactive motives are exemplified by market pressure that forces a firm to go international in order to maintain competitiveness (Agndal & Axelsson, 2002).
As Engwall & Johansson 1990 through Agndal & Axelsson (2002) describes are there also other reasons for internationalisations, such as an urge for exploiting critical resources, de-veloping critical knowledge or identifying gaps in the market to fill.
What is fashion?
Fashion is highly linked with social trends, which does not only mean clothing but also ac-cessories, cosmetics, footwear, even furnishings and architecture. One definition by Sproles, quoted in Curran, 1991 is:
“A way of behaving that is temporarily adopted by a discernable proportion of members of a social group because that chosen behaviour is perceived to be socially appropriate for the time and the situation.” (Boh-danowicz & Clamp, 1994, p. 4)
This definition highlights two of the most important features of fashion, which are its so-cial role and its transience. These factors are also the foundation for the marketing of fash-ion. Another more concrete definition, and one that more reflects the purpose of this the-sis, is the one given by Gold (1976), which is that;
“Fashion is the dress that is currently adopted.” (Bohdanowicz & Clamp, 1994 p.5)
The marketing of fashion
According to Frings (1999), fashion marketing is the entire process of research, planning, promoting, and distributing the raw materials, apparel, and accessories that consumers want to buy. It involves everyone in the fashion industry and occurs throughout the entire cannel of distribution. Fashion marketing begins and ends with the consumer, and is the power behind the product development, production, distribution, retailing and promotion of the end product (Frings, 1999).
Fashion marketing differs from the marketing of other types of goods and services because of the strong influence of environmental pressures, the time constraints and the role of the buyers. Because of the strong social role of fashion, the marketers have to operate in a very difficult environment, due to the international nature of the business environment and the complexity of the industry’s structure (Frings, 1999).
The transient nature of fashion means that marketers constantly have to operate within time constraints. The reason for this is that the fashion industry moves with the seasons and that there are two main collections each year, which are autumn/winter and spring/summer. This seasonal structure gives the marketers only a very limited time to reach their customers and convince them to buy the products before the next collection is launched (Frings, 1999).
The role of the buyer, meaning the person responsible for purchases at retail stores, is also significant in the industry. The buyer decides, by going to all the important fashion shows, what they should offer their consumers during the season. This gives the buyer a lot of power, and the close relationship with buyers is essential for the survival of a designer. The buyer, in return, has its responsibility towards its employer to select the clothes that will be demanded by the consumers. This in the end makes the consumer the most important part of the fashion marketing and distribution chain (Bohdanowicz & Clamp, 1994).
The fashion industry consists of a variety of different industries which all are linked with one another. The fashion marketers at all stages of the fashion industry chain need to be aware not only of the other industries they are involved with, but also of the ultimate desti-nation of their products, the consumers. The fashion industry chain is illustrated below (Bohdanowicz & Clamp, 1994).
The international dimension of fashion marketing
The understanding of the underlying framework of international marketing operations in the fashion industry and the effect of the international business environment of fashion marketing is of key importance to everyone in the fashion industry. It enables fashion mar-keters to evaluate the competition for their products and to assess new markets. Without an analytical approach, fashion marketers may find themselves losing ground to the compe-tition (Bohdanowicz & Clamp, 1994).
Fashion companies can have varying levels of commitment to international marketing, from causal exporting to active exporting. Causal exporting is when fashion companies do not actively seek export markets as part of their marketing strategy; it rather tends to hap-pen accidentally. The opposite is active exporting, where the fashion company makes active efforts to market their goods on an international market. The exportation and distribution of fashion can be made in different ways. The most popular method today is franchising, because of the small capital investment. Other methods are licensing, joint ventures and di-rect investment in an existing company on a foreign market (Bohdanowicz & Clamp, 1994).
The construction of a brand
“A brand is every sign that is capable of distinguishing the goods or services of a compa-ny.” (Riezebos, 2003)
Kapferer, (1992) through Blombäck (2002) describes branding as a “living memory” which would suggests that branding includes those things that are made in order to create a men-tal image of a certain brand. A brand is not solely one symbol or name but instead is it a function of everything that a customer interacts with and perceives of a certain product or company (Kapferer, 1992) through Blombäck (2002). The connection concerning the im-portance of brand management and the form of internationalisation in combination with success factors such as Country Of Origin (COO) in the case of Swedish fashion compa-nies has not been the subject of many reports. Just as branding has more and more grown into being a natural part of the companies strategies, so has also the importance of COO become a more used and acknowledged part of the branding process. Riezebos, (2003) supports the importance of geographic area of origin.
Fashion branding and distribution
Brand names have become very important in the fashion business. They identify products made by a particular manufacturer and they must fit the image that the manufacturer wants to project, reflect the style and mood of the clothes and appeal to the intended customer. The ultimate goal of the manufacturer is to establish the identity of a particular brand to the point where consumers prefer that brand above all others, a phenomenon referred to as consumer franchising. Once this is achieved a brand name recognition, and the resulting con-sumer demand, almost decides the choices of retail purchasers. Manufacturers always strive to strengthen their brands in order to build their business. If they succeed in doing this, they are able to develop a strong national or global brand, which opens the door to export-ing their products to retailers or even open their own retail stores (Frings, 1999).
The purpose of branding is to help achieve and maintain a loyal customer base in a cost-effective way in order to achieve the highest possible returns on an investment. A brand is often filled with an added value, which means that a branded product has additional attrib-utes which some may consider intangible but which are very real and important to the con-sumer. The added values in fashion are often simply emotional, which makes the brands into symbolic devices that help a consumer to express something about themselves to peo-ple alike themselves (Constantino, 1998).
Manufacturers of fashion also have to decide on a way of distributing their products in or-der to ensure that the branding strategy is fulfilled. In order to do this, the manufacturer must plan the distribution so that the appropriate stores buy the products, that the prod-ucts are represented in a desired way at selected geographical areas, and also make sure that not too many stores in the same area sells the products (Frings, 1999).
Icons in branding
*Iconic brands are according to the definition given by Holt, (2004); “an identity brand that ap-proaches the identity value of a cultural icon” Iconic brands are when properly managed much more durable than trend brands. Iconic fashion brands runs more than other brands the risk of being destroyed if caught up in a trend cycle Holt, (2004). A trend cycle is when the brand is forced by expectations to invent new and exiting trends or advertising campaigns that pushes the limits for the company. Brands like Gap’s felt the bursting of its bubble when they did not deliver another successful innovative campaign for their chino pants af-ter 2 years of a consistent admired ads campaign.
Gap’s brand got hurt by the urge for attracting younger customers, during that process they alienated their durable iconic customers which got the stock price to plummet and the company’s identity to be somewhat twisted, Holt (2004).
National ideology in a brand
National ideology is the ideas that forge the links between everyday life and those of the nation Holt, (2004). In order to be effective, the nation’s ideology can’t be learned or co-hered from textbooks, it has to be deeply felt and taken for granted as the natural truth ac-cording to Holt, (2004). The importance of the national ideology is something not to be taken in passing, even though it shares some of its importance with religion and ethnicity, it is usually the most powerful root of the consumer demand Holt, (2004).
Ideology is never according to Holt, (2004) conveyed directly but instead are expressed through myths. The most important myths are built into the branding through conveying the message of that the consumer is part of creating something bigger than themselves. Coca Cola is a company that drives heavily on the image of building the American dream Holt, (2004). Here the consumer helps the company and the country which it’s represent, by buying the product, to become prosperous and powerful and thereby on some level hoping that this will rub of onto the consumer itself.
Table of Contents
1.2 The history of Swedish fashion industry
1.3 Purpose definition
2.1 Choice of method
2.2 Research design
3 Possible factors for success
3.1 The phenomena of internationalisation
3.2 Theoretical models of internationalisation
3.3 What is fashion?
3.4 The construction of a brand
3.5 Key success factors
3.6 Limitations / Explanation
4 The studied companies
4.1 Filippa K
4.2 Acne Jeans
4.3 Nudie Jeans
4.5 Relations in the Swedish fashion Industry
5 Analysis of similarities and specifics
5.1 Similarities in the companies
5.2 Specifics in the companies
7 Suggestion for further studies
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