Internationalization Process Of Chinese Luxury Fashion Industry Marketing Essay

Published Date: 23 Mar 2015

Since economic reformation period from planned economy to market economy thirty years ago, Chinas commodity economy has indicated a promising, wealth trend with national purchasing power growing incredibly. Under the high-speed development of China's open economy and the deep influence of globalization, China has become the world's second largest luxury product consumption country, surpassing the United States, only after Japan (Zheng, Z., 2011). As shown by "China Business Development Report", the consumption of luxury goods amounted to 9.4 billion dollars, making up of 27.5 % global share in 2009 (Lu & Fang, 2011).

Twenty years ago, the concept of luxury was still unaware and undeveloped for Chinese people and "luxury" was considered to be usually related to negative aspects, such as corrupt or wasting in traditional Chinese culture (Shen, 2011). Twenty years later, however, the Chinese luxury goods market has expanded, from small to big, from random to constant and China has become world famous luxury consumption country. Giving the nature of luxury fashion market place is highly competitive, domestic market for each brand is limited due to its special economic requirement for customers. This leads to the growing intension for those companies seeking for opportunities for global market enlargement. As the decline of sales in Europe and America during the depression period begun in 2008, China has surely become the most promising market for those companies' profit generation in the future not only because its increasing purchasing power, but also the large population base (Lu & Fang, 2011).

While numbers of global luxury fashion brands entering growing China market in various modes, the impact of China's fashion industry on the local market is limited. In fact, the world luxury fashion industry is still dominated by western luxury giants, such as LVMH, Gucci etc. The majority of luxury fashion brands obtain worldwide excellent sales volumes belong to these groups from France, Italy, and America (Kendall, 2009). Depending on that China owns vast textile manufacturing base and has become the largest garments exporter in the world, it is urgent for Chinese to dispose the impression of low-end. With precious traditional inherited stitch skills and splendid culture background Chinese enterprises keep making efforts on establishing Chinese luxury fashion groups occupied with global respective reputation.

1.2 Research Objective

Previous work has shown scholar's interest in China's luxury market, customer attitudes which provides guide to international luxury giants to develop strategy in China (Shen, 2007; Degen, 2009; Zheng, Huang & Chen, 2010; Lu & Fang, 2011; Penna, 2011). Also, some also paid attention to the development of Chinese local luxury brands and their branding strategy (Li, 2008; Tu & Yang, 2010; Sun, 2011; Tu & Yang, 2010). However, all these studies concentrate only on China market, lacking of a global prospection, and few have mentioned the overseas strategies undertaken by Chinese local brand. New sight should be taken for local luxury enterprise' international expansion strategies.

The objective of this thesis is to identify the current situation of world luxury fashion industry with a focus on Chinese enterprises' performance, to explore the competitive strategies Chinese companies utilize in building and developing luxury fashion brands and entering global market as well as to propose suggestions for these firms in future direction in reference with successful examples from leading companies within the industry.

1.3 Research method

To complete the objective of this research paper, case study strategy will be used as main research method and various qualitative methods will be undertaken to collect data. Documentary research on previous work will be summarized in advance. In-depth interviews with employees and management in China luxury fashion industry are conducted during the summer 2012 for detail information. Questions are developed based on literature review. Open-ended questions will be frequently used. Ethnographic observation is also a source of data gathering as the author employed in this industry. After data collection, content analysis technique will be adopted to evaluate data and draw findings.

1.4 Organization of the thesis

This paper is organized as following guide for the rest parts. First, a literature review on the development of world's luxury fashion industry will be presented, including industry characteristics, marketing and branding uniqueness and typical leading companies' introduction. Second, a broad overview of China and Chinese enterprises' global expansion strategies will be taken insight on. Third, a review of Chinese luxury fashion enterprises' efforts to compete in global marketplace will be examined. In addition to this, research methods including sampling method and way of data collection is followed. Afterwards, findings and managerial implementations will be discussed to present the result of this research. And finally, conclusion will be drawn with pointing out limitations of this paper and future research directions.

Chapter Two: Review of world's luxury fashion industry

2.1 Origins of luxury fashion industry

The word "luxury" originated from Latin words "luxus" and "luxuia", meaning extravagance and excess and rankness (Stegemann, 2006). The word luxury obtains a positive value of splendor while in a social context it is usually understood as negative meaning of decadence when relating to "private" and "excess". It is obvious that luxury is related to high price owing to its limited supply. It also concerns about way of life, which is full of pleasure, perfection, freedom and admirableness. Stegemann (2006) cited Dubois, Laurent and Czellar (2001)'s work, who had proposed a definition of the nature and features of luxury, categorized in six aspects as following,

"1) excellent quality, 2) very high price, 3) scarcity and uniqueness, 4) aesthetics and polysensuality, 5) ancestral heritage and personal history, and 6) super fluousness".

Luxury goods were defined as exclusive products which is not commonly possessed or used but conspicuous than essential necessities (Boume, 1957, cited by Stegemann in2006).The main motive for customers to purchase luxury goods in primary price is to satisfy their increasing psychological needs of esteem while its practical functions seem to only act as a secondary role in their decision-making process (Arghavan and Zaichkowsky 2000; Nueno and Quelch 1998). People in different social positions differs in interactions with other social entities, thus hold different view of luxury as they develop different perception of luxury brands according to combinations of needs based on values, among which, pursuit for sociability and self-expression are key point (Vigneron & Johnson, 1999).

Luxury demonstrates beauty, and it is more an art applied to practical items than ordinary commercial goods (Vigneron & Johnson, 2004). Similar to light, luxury is shining and enlightening. Along with offering functional usage, they also provide guide to favorable life style and reference of good taste. It explains the reason that luxury brands' management develop products not only rely on customer expectations. They are always stimulated internally by advanced global vision, the pursuit of specific preferred taste and guarantee of excellent quality standards. It is believed that the marketplace would be colorless without luxury brands (Okonkwo, 2007).

According to Tungate (2005), there was no fashion until the end of 19th century when the world's first designer label was created by an Englishman in France. It was Charles Frederick Worth that set up the new rules of the garments industry. Dressmakers in the past did not build up style or dictate fashion before Worth's attempt. They were only suppliers for wealthy clients to make them copies of journal illustrated gowns or appreciated dresses from society gatherings. Elements of making dress from fabric to colors to appearances of the dress were all decided by clients themselves. However, Worth was the first couturier to implicate his own desire and taste on women. Having in common with today's most talented designers, like Galliano, McQueen, Worth came from a relatively humble background. He started his design from dresses for his bride and soon his elegant work was noticed by customers and his business expanded not only because creative stylish design and handwork, but also his genius on marketing. By gathering his clients to sit down and giving them a little show of dressed attractive young women, the concept of fashion model was invented. Although in today's fashion marketing, more ingredients have been matured and added, Worth's pioneer effect established a patter for all other designers to follow. Fashion from its born is not only just about clothes and accessories but more related to highly influential pattern of society's culture, identity and lifestyle. The impact of luxury fashion is even further to emphasize and promote the revolution of society (Okonkwo, 2007).

2.2 Ideology in luxury fashion industry

In previous notions, fashion innovation and business intelligence have been regarded as two parallel lines with no meeting point. In luxury fashion industry, this view was more reinforced since emphasis has been put on design and creativity there. Nevertheless, these assumptions are not insisted nowadays because the business of luxury fashion today calls for sophisticated management techniques in addition to a continuous high level of creativity and innovation. The big progress of business strategy aspect of fashion management and its harmonizing act with the changeable world commands an examination of luxury fashion strategies (Okonkwo, 2007).

This fast-developing industry is driven by numerous sophisticated marketing and branding techniques, which are worth examining. Luxury fashion brands have been considered as "experiential", which means that it is difficult to distinguish one product for another before trial (Aaker, 1995). Hence, branding in this industry helps differentiate nondescript products through expressing the experience as a whole and making intangible quality and brand idea successfully get across to the customers(Kendall, 2009).

Tungate (2005) distinguishes traditional marketing with fashion branding in their product creation process. The former is based on need, which means, a product is created to satisfy the existing demand in the market and try to compete the others to become the best in its category. However, on contrary, fashion is to create a new need in reality there is nonexistent. Hence, according to Tungate (2005) "Fashion is a factory that manufactures desire."

Luxury Fashion brands make various efforts for achieving innovation, differentiation and attractiveness. It is because the key to fashion business is forward-thinking (Kendall, 2009). Fashion always associates and integrates the past and the future however it is barely preoccupied with the present. By drawing inspiration from the past, it generates the desire for the future. The present is only a temporary stage for the reason that if fashion is here today, it is already old-fashioned. This is why the role of branding has extreme importance for luxury fashion business because it ensures the continuous desire of luxury products despite the constant changes of fashion (Okonkwo, 2007).

2.3 World's luxury fashion industry

The broad concept luxury nowadays refers to not only tangible products, including automobiles, watches, apparel, food, wines but also intangible services.

Market researcher Mintel suggested that value of the global luxury is probably to be worth 100 billion US dollar by 2008 (Tungate, 2005). The apparel sector including fashion and leather goods makes up 42 per cent of sales, taking the largest proportion of the market. Additionally, Perfumes and cosmetics, which usually licensed under the name of fashion designers, account for 37 per cent. The rest part is taken by watches and jewellery.

Recently, the world luxury industry has developed into new stage, changing into an oligopoly dominated by a few large multi-product organizations. The expansion strategy of many organizations has been typified by a similar pattern: brand names in specific product lines was established initially by all successful companies, for example, both Gucci and Prada, two among most largest groups in the industry began their business by producing and selling leather goods. After specific production and customers' attention caught, they invested on their brand names and expanded business to other sections. They then diversified into clothing, footwear, accessories, and perfumes and so on. (Rabellotti, 2003). Eventually the new trend recently has indicated that they began to grow through acquiring other recognized brands which are relatively mature and repudiated. From 1997 to 2000, mergers and acquisitions in the fashion industry have almost doubled yearly from 31 in 1997 to158 in2000 (Rabellotti, 2003). Moreover, referring to Wendlandt (2010), the weaker Euro offers opportunities for buyers from China, Japan and other emerging markets to purchase European luxury brands to selling in rapid growing home market or develop a global expansion attempt. Meanwhile, big groups keep their spree in mergers and acquisitions to consolidate their influential positions in world market (ibid).

The economic rationale behind these expansion strategies is a need for scale and scope economies in business activities, rather than manufacturing, but for branding, marketing, and advertising as well as the increasing bargaining power to open mono-brands shops in the most exclusive and expensive locations in the world. According to Kaplinsky (2000), the entry barriers to manufacturing has lowered but profits concentrated on other non-production activities such as branding, marketing, advertising, which require high capital cost, meaning high barriers to entry. Therefore, it is very expensive to create and maintain an international well-known brand and only those with access to global financial markets are able to afford the expense. Top firms are consequently growing via mergers and acquisitions, capitalism on their core competencies like design, brand naming, marketing which are not sector specific. This implies the logic of luxury fashion industry here consisting of all clothing, footwear, accessories and even cosmetic industries as sub-system of global fashion system.

Chapter Three: Review of Chinese Luxury Industry

3.1 Difficulties faced by local luxury fashion industry

3.1.1 Environmental constraints

3.1.1.1 Traditional belief limits

Affected by traditional culture permeation, Chinese are proud of being diligent and thrifty but shame of extravagance and waste. When talking about luxury, it is always related to the capitalist class's extravagant life and people would easily consider it as the same as waste. Moreover, on consumption model, saving is a popular method for Chinese to plan for the future. (Sun, 2011). There, it is quite unacceptable for Chinese to spend a large amount of money, even the money tomorrow on one single luxury product. These notions slow the growth of local Chinese luxury brand, leading to a white page for a long time.

3.1.1.2 Consumers' prejudice

Chinese consumers do have awareness for luxury brands, but too much for foreign brands. Many Chinese hold the view that imported goods is better than produced locally. Actually this phenomenon is not common in foreign countries, but particularly for Chinese (Shen, 2007). After becoming a custom to buy foreign luxury fashion product, it is hard for them to accept a new local brand considering as similar value.

3.1.2 Industrial limitations inside Chinese enterprises

3.1.2.1 Lack of knowledge about luxury fashion

Most of Chinese entrepreneurs get to know about luxury fashion only since economic revolution decades ago (Degen, 2009). Not everyone understands what is luxury about, the insight of each brand, and the attitude and lifestyle it try to express. How to manage a luxury company, how to do product design, to discover target customers, find their needs and keep a sustainable relationship, all these questions challenge inexperience Chinese enterprises (Sun, 2011).

3.1.2.2 Lack of marketing experience of luxury fashion brand

It takes long time to build a luxury brand and people need time to establish awareness to luxury brand as well. Foreign luxury fashion brands usually have long history, for instance, Armani was founded in 1970s, Dior born in 1946 and Gucci started in 1921 (Gucci, 2012). On the contrary, Chinese luxury fashion brands are short of both historical accumulated deposits and practical experience.

3.1.2.3 Shortage of human capital for luxury management

Currently, few domestic higher education institutions have set up special major for branding or luxury management. In addition, the majority of branding elites at present have a non-luxury branding academic background (Sun, 2011). Moreover, despite overseas returnees and international branding elites are occupied with professional management skills, they still lack of knowledge about Chinese enterprises' status and context, leading to hindering the internationalization of Chinese brands. Many brunches or flagship shops of foreign brands also find that it is difficult to recruiting senior management team in China. In these conditions, insufficient professional management personnel make it hard for Chinese enterprises to create a local luxury brand.

3.2 Three basic overseas expansion modes for Chinese luxury brands' internationalization

In general, firms can implement their overseas expansion strategies through exporting, licensing, joint venture and green fields. None of these entry modes, however, guarantees smooth expansion. Choosing among the various modes involves inevitable trade-offs as it determines the level of control, resource commitment and risk. Referring to related entry-mode choice theory and Chinese luxury firms' characters, three main foreign market entry mode have been summarized (Tu & Yang, 2010), they are, exporting, OEM; joint venture through merger and acquisition and direct investment by establishing new ventures.

3.2.1 Original Equipment Manufacturer exporting

For Chinese luxury enterprises which are absent from renowned international competitive brands or intellectual property rights, taking advantage of its comparative strengths have been critical important. The large population base leading to a relative low labor cost have attracted international brands to outsourcing their manufacturing in China for decades. Some regional economies have been equipped with ability to provide auxiliary items, raw material cost cutting, flexible market mechanism and fast logistic flow (Zheng, C., 2011). All these evade Chinese luxury fashion's shortcoming such as designing and branding. Through combining comparative advantages owned by local Chinese firms and multinational companies' branding strength, luxury products made in China then enter the global market.

Hangzhou Sun Hong is the largest manufacturer for Italy luxury brand Giorgio Armani, Max Mara in China (Tu & Yang, 2010). These clothes have been sold at premium price.

Expansion through exporting as original equipment manufacturer can scale down investment risk to some extent, meanwhile, previous manufacturing and management experience can be obtained through close cooperation with world top luxury companies. Nevertheless, the disadvantage for pure exporting is to slow down Chinese luxury companies' own brand building path and leading brands' key competence like designing cannot be learned through OEM. (Peng, 2011). Hence, this entry-mode is usually adopted in the beginning stage lacking of mature conditions. And through using exporting as expansion strategy, it is important to accumulate resources and experience and keep building own luxury fashion brand.

3.2.2 Merger and Acquisition

Economic globalization has made international merger and acquisition as the most popular investment method as it enables the firm to obtain immediately the full set of resources required for competitive advantage within an industry (Colley, Doyle & Hardie, 2004). In 2000, international merger and acquisition raise to the top with a total amount reached 1143.8 billion dollars, making up 82% of foreign direct investment (Tu & Yang, 2010). With the guiding of the government policy "going out", a number of Chinese enterprises have considered international M & A as the fastest pathway for internationalization, leading to a wave of M & A in global market, so as to luxury fashion market.

Chinese famous footwear producer Red Dragonfly has purchased an Italian brand with over 100 years history to enter luxury market (He, 2008). Obviously, M & A enable companies to gain new distribution channels overseas immediately, or ensure sufficient supply and diversifies new business fields. Despite these advantages, acquisitions can have serious drawbacks. As a very expensive way to enter a market, risk seem high in making adjustment for organizational culture differences between existing firms and human resource management, which will directly affect the performance of new company(Colley, Doyle & Hardie, 2004).

3.2.3 Establishing own brand

Since 1990s, in order to satisfy various needs from foreign markets, more and more Chinese companies started to go abroad, establishing overseas manufacturing plants and distribution channels, to realize international expansion (Tu & Yang, 2010). Chinese luxury brand can refer the expansion pathway of home appliance pioneer companies like Haier, TCL and take advantages of strong cultural background and its impact, introduce local brands to the world market, avoiding peer competition faced in domestic market and strengthening the global status (Zheng, 2011).

In 1998, Chinese artist Yifei Chen created Layefe apparel brand, registered in Shanghai and New York at the same time, entering the world's top department stores (Tu & Yang, 2010). Local luxury brand's success requires Chinese enterprises should be equipped with strong synthesis power, including economic capability, risk control ability, brand awareness so as to obtain market control and permanence and realize further profit.

Chapter Four: Research Methods

4.1 Specific research questions:

What are the major motives for Chinese entrepreneurs to devote into luxury fashion industry?

How do they develop a Chinese luxury fashion brand? Explore one or several typical pathways.

How they expand their market overseas? What are the entry modes do they utilize when going abroad? And why do they choose these modes?

What difficulties do they come across during the expansion process?

How do they expect the future of Chinese luxury fashion industry? What are the immediate support they eager to obtain?

4.2 Methodology

Multiple case studies will be used to complete this research. According to (Yin, 2003), other ways of doing social sciences research include experiments, surveys, histories, and the analysis of archival information. The selection of each strategy rely on three conditions, they are, (a) the type of research question, (b) the control an investigator has over actual behavioral events, and (c) the focus on contemporary as opposed to historical phenomena. Case study, as a research method, receives a distinct advantage when "a "how" or "why" question is being asked about a contemporary set of events, over which the investigator has little or no control". In this research, questions are more likely to be in form of "how" "why" "what", and research field is related to current luxury fashion industry in China, over which is out of researcher's control(Yin, 2003).

Multiple case studies strategy is chosen over a single case study because that in order to better describes the industry phenomenon, the more cases examined the more representative the research results are. A comparative case study method is appropriate since any single case cannot stand for the whole industry. (Yin, 2003) Multiple-case studies should follow a replication, not a sampling logic, and require a researcher select each case carefully. The cases should serve in a manner similar to multiple experiments, with similar result (a literal replication) or contracting results (a theoretical replication) predicted explicitly at the outset of the investigation. As suggested by Yin (2003), the individual cases within a multiple-case study may be either holistic or embedded. When an embedded design is used, each individual case study may in fact include the collection and analysis of highly quantitative data, including the use of surveys within each case. Nevertheless, due to large amount of efforts needed to be made for each case study, two typical cases are decided to be examined in this research. One is Redstone Haute Couture Co. Ltd, which starts its businesses by acting as agencies for foreign luxury fashion brands, such as Valentino, Salvatore Ferragarmo, and Yves Saint Laurent in China and then turned to build alliance with existing Italian luxury brand GIADA, participating in brand management process and is pursuing to create own Chinese luxury brand and a multi-brands luxury group enjoying world influence power, like LVMH group. The other is NE-TIGER, a leading Chinese luxury brand founded in1992 focusing on fur and leather products aiming at both domestic and foreign markets. Chinese national labeled haute couture offering tailor-made outfits forwarding and festival and celebration events as well as Hua Fu collection has been introduced.

The reason to choose these two cases is that both of them are successful Chinese luxury companies have global market impact to some extent. They were founded in mainland China decades ago, after gaining success domestically; they also began to seek foreign expansion opportunities. Their moves are representative and it is interesting to exploring their adopted strategies and the motives behind. The results may have both similarities and contrasts. Other Chinese brand like Shanghai Tang or 1436 are not chosen because either they are not originated in mainland China, or do not have obvious overseas expansion activities. Another reason for selecting Redstone is because the easy access to the data since the researcher is a present employee in that company. The pathway of history and current strategy can be accurately interpreted as a participant observer.

4.3 Research Process

Protocol

4.3.1 Introduction to the case study and purpose of protocol

As mentioned above, the purpose of this research is to identify the answers to research questions and find a practical way to develop a luxury fashion brand in China context at present. This protocol provides a guide to conduct the research following a reliable logic to carry out the data collection and analysis for cases. It is a standardized agenda for researcher's line of inquiry. (Yin, 2003) By using this protocol, researchers' attention is keeping targeted on the subject of the case study and they will be forced to previously consider the problems my come across during report presenting, or data gathering, avoiding disastrous outcomes in the future.

4.3.2 Data collection procedures

4.3.2.1 Names of sites to be visited

Official websites of both companies:

RedStone: www.iredstone.com, NE-TIGER, www.ne-tiger.com

Contact persons list:

Eleven Zhu, Store Manager at RedStone, 9 years length of service;

Christy Wang, Manager of Public Relations Department at RedStone, 2 years length of service;

Ting Zhang, Marketing Officer at NE-TIGER, 2 years length of service;

Yvonne Fan, Media Specialist at NE-TIGER, 6 years length of service;

4.3.2.2 Source of evidence and data collection plan

Documentation from memoranda, meeting minutes, training notes as well as website publications. Besides, formal studies on the same subjects will also be referred to. The benefit of using documentation as a sourcing method is for four reasons. Firstly, it is stable thus it can be assessed repeatedly. Secondly, unobtrusive is another feature of documentation because it is objectively existent not created for single case study. Thirdly, it contains exact information of an event, like names, references. Fourthly, broad coverage of time spreading and events number increase the reliability of sources. Nevertheless, the access to those documents may be blocked because some of the information is confidential to company. As a participant observer, the author is able to obtain some inner documents at RedStone, better than sources on the Internet.

Deep interviews with four contact persons are focusing on the topic of the study and provide insightful casual inferences. For interviews in this study, a consistent line of inquiry following the protocol should be pursued. And the questions during the interview can be asked in unbiased manner and open-ended questions are preferred. Excluding starting questions about interviewees' background information, "why" and "how" questions surrounding on research questions should be the main part of interviews to lead the interviewees to give satisfactory answers.

Direct observation in boutiques to raise interest of environmental relevant behaviors is useful in offering additional information about the topic being investigated.

The author of this thesis is a present employee of RedStone, holding a position of Assistant to Store Manager for two years. Distinctive opportunity to approach to otherwise inaccessible data is possible through this method. On the other hand, research ability for the author to perceive reality from the viewpoint of being inside the luxury fashion industry also has been raised for two years experience working as a functional role at RedStone.

Calendar for site visits:

Documentation: March 2012 - May 2012

Interviews: June 2012 - July 2012

Direct Observation: June 2012

Participant Observation: September 2010 - June 2012

4.3.3 Outline of case study report

A) Company review

B) Brand building strategies of each company

C) International expansion strategies of both

D) Practical implications of the case study

E) Difficulties for Chinese luxury fashion companies in current stage and suggestions for solving problems.

4.3.4 Case study questions

Specific fields to be examined:

Chinese entrepreneurs' motivation to involve in luxury fashion industry.

Brand building strategy for Chinese luxury fashion companies.

International expansion strategies adopted by RedStone and NE-TIGER and their entry modes chosen to go overseas.

Difficulties they come across during the expansion process and their expectations for the industry future.

4.3.4.2 Evaluation

Content analysis techniques and Rival explanations are used to analyze the data collected to make comparison and contrast between those two companies. In this study rivals are history of both companies, review of cultural aspects of both and other research fields. Moreover, a case description strategy will also be used when interpreting the data to give a logic report to the research.

After presenting the findings of research, recommendations for the difficulties Chinese luxury fashion companies experience will be provide to make contributions to the future development of these two company as well as other participants in this industry.

Chapter Five: Company Review

5.1 RedStone Haute Couture Ltd.

RedStone Haute Couture is a world-renowned management company for luxury brands. Since the founder Yizheng Zhao started the company in 1995, it has successfully introduced international brands like Salvatore Ferragamo, Yves Saint Laurent, and Valentino into China market by acting as an international luxury agent in its earlier years (RedStone Haute Couture Ltd., 2012).

With appropriate development strategies, business operation and personnel management, RedStone has enlarged its business and established boutiques in main cities in the Greater China area. After gaining experience in luxury retail industry as being an international agent for years, with strong operating network and reliable senior management team, 53 GIADA boutiques have been set up from 2006 to 2012 (ibid). GIADA is an Italian luxury brand which is the fastest growing luxury brand in the Greater China area. RedStone has made a large capital investment into GIADA S.p.A. in November 2011 under permission of Development and Reform Commission and Department of Commerce of People's Republic of China. Through this action Redstone became the authorized operator of the Italian luxury brand GIADA, and thereby by owning the brand helping the company make a full preparation and solid foundation for GIADA's further expansion internationally in Italy, France, UK and USA. Moreover, Hua Qin Fashion Co. Ltd, as a subsidiary of RedStone, has opened 6 stores of a Taiwanese fashion brand, Angel Lover in cities such as Shenzhen, Guangzhou, Chengdu and so on (ibid).

It is the innovation in product and business model that ensure RedStone an incredibly rapid development and amazing achievements as well as its leadership in luxury industry in China and growing effectiveness globally.

The company has stated its mission on website as,

"We strive to become an influential fashion holding company in the world's fashion realm through professionalism and cultural cohesion, so as to contribute to the peaceful rise of China."

Following with this mission, the company makes efforts to achieve its goals through various operational methods, from being an agent, to take over an existing overseas brand, and to eventually build a wholly owned brand itself. Experiences came from practices of failure.

According to the interview with Zhu, store manager in RedSotne, when cooperating with Valentino, a world famous luxury garment brand, whose product obtains prime quality and reputation worldwide, problems occurred because RedStone was not the only agent in mainland China. Valentino's headquarter in Italy had licensed too many district agents and some of them began to use this Italian brand name to manufacture fake products or to register a Chinese label in advance. The brand image in China then became less valuable. Customers considered the brand as a famous foreign brand but not too much related to luxury. Fake products can be seen everywhere. RedStone then terminated the agency contact with Valentino.

Zhu also has given another example of the RedStone's cooperation with Salvatore Ferragamo. Dissimilar with Valentino's decentralized strategy, Ferragomo employed a centralized international expansion strategy. After licensed mainland China's distribution management, it still held the tight control over brand management details, not only the advertising, promotion campaigns, but also inventory and sales data. That made the RedStone less control over the brand management. Experience for luxury brand management is not easy to be gained due to limited work can be done by just being an agent and it is thereby unhealthy for the company's own development.

After getting through difficulties being a pure agent, RedStone is also seeking ways to build a Chinese own luxury brand. However, condition is not ready. A third way came up to RedStone's management. Working together with Italian designer who has not make a name for himself/ herself yet, then buy part of equity of the original company and eventually obtain the control over the operation rights and realize the management practice. It is the story of successful experience of GIADA brand.

A brief introduction of all brands owned by RedStone currently, GIADA and AngelLover are presented as below.

GIADA, to be presented briefly, is an Italian luxury brand in pursuit of style and caliber. In Italian, GIADA is a common name for girl and this word originally means "beautiful jade", which is just exactly same meaning as RedStone (Hongjue, Pinyin for Chinese brand name) stands for in Chinese. As being the brand consultant in GIADA store, the author has learned that Rosanna Daolio, the brand founder, and her partners are all appealed to the precious stone, jade, from the Orient. In their views, jade is not only like diamond which obtains noble character, enjoyable bright luster and constant vitality, but also expresses the soft power of women. It is always believed by Rosanna Daolio that "Elegance is soft power". In 2000, Ms. Rosanna Daolio relocated GIADA creative studio from Florence to Milan (RedStone Haute Couture Ltd. â…¡, 2012).

Nowadays GIADA's creative team consists of members of world talented specialists in their own fields, which can be seen clearly in the following table. Rosanna Daolio started her career in Emanuel Ungaro and then had worked in MaxMara as a stylist for 13 years. She was encouraged by her family and friends to start her own brand and to combine her gift in drawing art to fashion design. Her design is considered to be more functional. Fabio Piras was graduated from London based Central Saint Martins College of Art and Design and was hired as Creative Dirctor of Brioni's Women's wear Department. His design strengthens artistic concept of clothing. This kind of association determines that GIADA style lies between functional and stylish, which is more acceptable for daily fashion wear. (Training Material in GIADA boutique, 2012)

Position

Name

Brand Founder

Rosanna Daolio

Creative Director

Fabio Piras

Window Displayer

Bruno Bambara Vetrine

Boutique Designer

Patrick Bruce

Art Directing

David James

Art Directing

Doug Lloyd

Another brand owned by RedStone is a multi Taiwanese designer brands chain, AngelLover. In the beginning of 21th century, referring to the official website of RedStone (2012), the brand founder got chance to know many Taiwanese friends. Taiwan's distinctive aesthetics that combines the cultural essence of the Orient with the West, which have influenced the designs of Taiwanese style, was appreciated by the founder. With full capital support from RedStone, he then made a decision to open multi-brands buyer chain to bring in fashionable high-end Taiwan brands into mainland China. A number of fashion-forward customers were fascinated by this stylish brand.

The brand name AngelLover comes from a beautiful story in Taiwan. There are five boys, who were inspired by the name of love, made up their minds to help every woman they came across and provide them with genuine gentle care like from their lovers. These five boys, acting just like angels, spread seeds of "goodness" around the world, letting the women they served even more attractive and gorgeous. This story is just right in consistent with the founder's expectation of brand,

"To be the angel lover for all women, genuinely caring about their beauty and life."

RedStone has also has published its 5-year Plan on website (RedStone Haute Couture Ltd. â…¢, 2012). First, to continue develop GIADA brand both in China market and the international, meanwhile to improve its global influence in luxury fashion industry. Second, it will embark on new partnerships with French or Italian luxury brands to replicate the successful way of GIADA's management and market development pathway. Third, a new haute couture brand created by Chinese designers will be launched to showcase the essential of oriental cultures. Last but not the lease, wholly-owned subsidiary of RedStone, Huaqin is expected to enlarge AngelLover's market in mainland China with a speed-up development.

As stated by Wang, manager of Public Relations Department at RedStone during the interview, employees at RedStone are called RedStoners, and they are considered to be the key competitive advantage for the company. They are expected to be loyal to our motherland China and be courageous to devote themselves to realizing their dreams. The company also anticipates RedStoners work hard and fight for remarkable achievements in order to fulfill personal value while accomplishing the ideal of RedStone. RedStone aims to encourage those outstanding, motivated persons who are full of faith and hope, and trying to overcome difficulties encountered on the way through active efforts.

Furthermore, RedStone is the world's only company which is constantly participating in charities through employees' initiative monthly donation. As observed by the author, each employee voluntarily has made denation to "RedStone Fund" monthly since he/ she entered the firm and gradually turn charity into a habit. More spiritual fulfillment and happiness through charity engagement can be received by them. Charity, assumed by RedStoners, is not equal to the offering of wealth, but a transformation of love and hope. The majority of donations are used to help destitute students to go to university thereby continue their dreams.

5.2 NE·TIGER

NE·TIGER, an original Chinese luxury brand, occupied a leading position of Chinese luxury fashion, was founded in 1992 by Mr. Tiger Zhang. The design philosophy of "Integrate Antiquity to the Present, Converge Chinese and Western" is rooted from the fascination of Chinese clothing culture and heritage, smoothes the way to revitalization of Chinese luxury culture and the overseas emergence of Chinese luxury brand.

Having started the business from the design and manufacture of fur collections, NE·TIGER soon established its top status in China's fur industry. It has subsequently introduced evening dress, western wedding dress, Chinese traditional wedding dress and its Haute Couture brand - Huafu in the past 20 years. NE·TIGER positions its product style as nobility, elegance and luxury, and devotes itself to offering successful women with respectable and convenient experience.

In ancient China, the collection of beautiful dresses was called "Hua", while Chinese character "Xia" stands for a precious tradition of great manners of China. Huaxia's dress is how Huafu come from, representing the core and soul of China's culture and history. For that reason, Huafu is also named as China's National Dress.

Five major features of Huafu's design concept have been generalized by NE·TIGER,

" 'manners' as the soul, 'jin (traditional royal silk fabric)' as material, 'embroidery' as the craftsmanship, 'five coulors' as the core, and then 'Huafu' as the symbol of China."

Huafu gathers the clothing intelligence of thousands of years by various minority groups and develops a distinctive dress image of contemporary China.

Tiger Zhang, the founder and artistic director of NE·TIGER, is the co-President of Asian Fashion Union China Presidium, Vice-President of China Popular Colour Association. He is also acclaimed as "China luxury NO.1" with the concept of "Integrate Antiquity to the Present, Converge Chinese and Western" creating NE·TIGER's noble, elegant, and sexy luxury style. The development of NE·TIGER was originated from its viewable fur collections in 1992, and established its high-end fashion positioning since then; after ten years' development, creative haute couture evening dress collection started the China evening dressing Original Year in 2003; innovative western wedding dress then caused a domestic wedding dress revolution in 2005; the next year, ideal traditional Chinese wedding dress facilitated the revival and emergence of Chinese traditional clothing culture; the latest event happened in 2008 was that the symbolic haute couture "Huafu" became contemporary National Dress. Zhang has successfully led NE·TIGER to an international luxury fashion brand which congregates Huafu, fur, evening dress, and wedding dress to full collections of Chinese style luxury fashion.

"Ne" as part of the brand name is short for northeast, making the brand NE·TIGER a direct meaning translation for Chinese brand name "Dongbeihu". At the same time, NE also contains a deep value that N stands for noble, E stands for elegant, and Tiger refers to the great king manner the brand always pursues. This brand name perfectly expresses the noble, elegant tiger which is also extremely feminine.

On March 27th, 2010 the 2nd Sino-Europe Top Brand高峰论坛 was held in Shanghai, focusing on the topic "China, world luxury's lucky place". Zhang discussed the current development of Chinese luxury market and challenges of competition with foreign brands faced by domestic luxury companies. He has also suggested that Chinese luxury brands should take courage to break the current fashion discourse right, meanwhile set up and lead new rule. The deepen revival opportunity for Chinese luxury industries was coming.

NE·TIGER published "Chinese luxury's Dawn". In this paper, three stairs was indicated as procedure for reaching the contemporary situation of world's luxury industry. Hundreds of years' history made Europe the first stair for luxury; after the Second World War, the United States has become the leading economy and made it the second stair for luxury due to its half century's boom economy; Japan and China's economic takeoff should make East Asia the third stair, but the fact is not. However, Chinese luxury market has achieved a yearly growth around 20 to 30 percent during worldwide luxury sales depression.

Since the foundation of NE·TIGER, the history and culture of luxury from the Eastern and the Western has been researched by the company. The research discovers that Chinese luxury has owned a long history and has conquered the world since ancient time. In Han Density, Zhang Qian went to the Western Regions with diplomatic mission and constructed Silk Road, brought exquisite beautiful silk to the Roman Empire, leading European lifestyle then. Also in Tang Density which is 1300 years ago, it was not only the world political, economic and cultural centre then, but also is the world fashion centre, which still has a distinct influence so far. As to the Ming Density, Zheng He was sent to distribute renowned silk, jade, china and tea to the rest of the world through Maritime Silk Road, which had just built luxury culture foundation in the Western. It is the Feudal system that hindered the development of Chinese luxury brand as well as enterprization and branding of Chinese luxury production. Nevertheless, this does not mean that China lose the chance to create its own luxury brand forever. The globalization has pushed culture mixture to the highest level, and the hope to spread Chinese luxury to the whole world motivates NE·TIGER to realize their Chinese luxury fashion dream.

Chapter Six: Brand Building Strategy

6.1 RedStone's Brand Building Strategy

As introduced before, RedStone has adopted a complex brand development strategy through various trials. First, it was established as an international luxury agent company to obtain management experience as well as capital base. During this stage, RedStone, as a corporate brand, was widely spread to the global market. Second, in the process of growth, it tried to find proper partners to create an original Chinese luxury brand, but failed. In order to find such partner, it sponsored "RedStone Cup" of Haute Couture Design Competition to discover genius ethnic Chinese designer, but the condition was not ready then. Therefore, RedStone constructs a new way of brand development.

As being familiar with Italian brand growing process and regarding to their features, it has been discovered by RedStone that there are lots of high quality Italian personal garment factory. Because of Italian business law and traditional slow lifestyle they enjoy, many of them lack of motivation and ambition to expand their business to large scale, although the designers are talented and stitch work is fantastic. RedStone then cooperated with GIADA's founder Daolio Rosanna, brought GIADA into China market, gradually bought the share of GIADA Spa., and took over distribution right in Asia Pacific area and finally the whole brand management rights. An Italian brand managed by a Chinese company, this innovative action creates a new way for luxury brand developing.

GIADA has become the fastest growing luxury brand in China market, attaining good reputation within industry and RedStone has also received great expectation by international competitors. Presently, RedStone is considering set up an original Chinese brand with the same name as the company. The preparation process is nearly finished, which is believed that the public get the chance to see an original Chinese luxury fashion brand in the near future.

Briefly speaking, RedStone's brand building strategy differs according to the industry and the customer. For the industry, it concentrates on corporate brand construction while to the public, individual brand impact is more urgent work for them. It is because the industry customers are more knowledgeable and comprehensive than consumers in the market.

Focusing on GIADA brand process, it was introduced as an Italian brand in China, making it acceptable for Chinese consumers to trust the quality and value of products. Choosing only good locations in top shopping mall or five-star hotels ensures the quality of consumers and superior position in their minds. Relying on sophisticated and well-trained sales, a warm and pleasant atmosphere is built in the selling process with consultancy service provided which is very different from other international luxury boutiques' cold profession. High quality apparel as well as kind professional service is the main impression GIADA leaves to consumers. Increasing investment in public relations also helps strengthen the brand position in marketplace.

By successfully running a young luxury brand, GIADA now is confident to take actions in future steps to build its luxury fashion empire, not only buying brands from other companies, but also create an own one. The management is well-prepared for the challenges.

6.2 NE·TIGER's brand building Strategy

The branding strategy for NE·TIGER is more simple. Without buying or borrowing, it was at first set up mind to build its own brand. In 1992, the founder Tiger Zhang registered the brand NE·TIGER, and put his eye into global prospect. Subsequently, NE·TIGER established global design & marketing centers in France, Italy, Russia and Hong Kang, starting the process of Chinese luxury fashion brand building independently. According to Tiger Zhang, at that time, NE·TIGER's raw materials, designs and purchasing are all equal to global standard. The only shortcoming is the degree of internationalization of its brand.

Before NE·TIGER was founded, he had had a long career in garment industry from a tailor to factory owner. His factory's main business was Original Equipment Manufacturing for foreign brands, waiting for international clients to make orders and make clothes as their requirements. After witnessing the price difference between made-in-China non-labeled clothes and foreign branded ones in the same quality, he made up his mind to create a Chinese originated fashion brand. Gifted learning ability motivated him to keep operating his manufacturing factory on one side, at the same time, to set off for learning foreign brands development procedures.

In his research, it was discovered by him that western luxury brands also has distinct operating systems, especially in distribution of products. American luxury brand mainly use department stores as their distribution channel while in Europe, boutiques are the key method. Some European boutiques may do not have big operating area, but it might have existed for centuries of years, their special hand-made skill in making suit was passed on from one generation to another and this is how these brands comes from.

Rather than a process of learning Western brand building strategy, it is much like making comparison between the Oriental and the Western so as to absorb the essence of both. As mentioned by Tiger Zhang, he was interested in examining the history of every brand to discover his own strengths and drawbacks. In this way, proper positioning would be settled according to what should be kept and be abandoned.

To move concentration back to China is to strike root domestically to realize the concept of "Integrate Antiquity to the Present, Converge Chinese and Western". Tiger repositioned his company strategy and positioning since the brand NE·TIGER was started, cleaned out industries it had involved but having no relation with fashion, going back to focus on the industry he really loves. He slowed his step to expand business just for earning profits and being diversified. It is not an effective brand building strategy only enlarging production scale by increasing the number of factories and workers. Inspired by traditional Chinese culture, NE·TIGER devoted itself into Chinese luxury fashion brand creation and culture rejuvenation.

It is more profitable for NE·TIGER to register an overseas brand in foreign countries and then market back to China or simply being Original Equipment Manufacturing. Still, insisting building a Chinese own luxury fashion brand is the most effective way to fulfill the dream. Step by step, NE·TIGER started from fur series, then expanded its fashion design to haute couture evening dress, western wedding dress, traditional Chinese wedding dress and latest "Huafu" as national dress, continuously create miracles in Chinese luxury fashion industry through solid mind and efforts.

Chapter Seven: International Strategy

7.1 RedStone's International Exploration

It takes years for RedStone to start its overseas expansion. GIADA is the brand the company decides to market abroad, though it is an original Italian brand. When the company brought this brand into China, as mentioned above, has seldom boutiques overseas. China is always the biggest market for GIADA and RedStone has been patient to wait for this essential market to grow mature. In RedStone's future plan, boutiques in Milan, New York, London, Paris and Tokyo are all expected to open around the year 2013. So far, Milan and New York's boutiques' location has been already chosen. Mr ZHAO Yizheng, the founder of RedStone stated in Annual Training, it demands large amount of capital investment in each foreign boutique in main representative luxury street. For example, hiring sophisticated sales and high rent of hot real estates, not mention the precious decoration within boutiques. A single boutique should cost around 100 million dollar investment. GIADA will not expand its overseas market without full preparation. Now it is the time for GIADA to fly to the whole world.

The entry mode for GIADA's international expansion is direct investment in targeted countries. Knowing clearly about shortcomings of licensing and franchising, GIADA will not take the risk to lose control over its overseas expansion quality and future brand positioning by taking advantage of short-term economic benefits. Not only the product quality, the risk of having the trademark and reputation ruined by a useless partner is also worth worried. Moreover, the foreign partner can also grow to be a competitor by selling the parent company's garment where it already in. These two modes do work for the company to enter the countries where strict political risk exists and a new business market it is going to develop.

The ambition RedStone of being a world leading luxury corporate prevent it to use exporting as foreign entry method, neither do other luxury brands use it. Because luxury industry's characteristic determines the minimum control over global quality control, superior level of service is the part of its product. By using exporting, foreign importers directly purchase luxury goods from the company and sell them through their distribution channel in those countries. Exporting mode can achieve fast market access with little or no financial commitment, thereby low risk exists and the management team is not distracted. Meanwhile, economies of scale can be realized by concentrating the resources of production. However, this mode is not proper for those companies who want to gain experience in how to operate overseas and incorrect choice of market and distributors may cause inadequate marketing feedback influencing global success of the company. In addition, the price of each piece of apparel is uncontrollable. If the selling price is too high, potential profits are missed by the company and when eventually the company decide to enter the market directly, it is difficult to set the right price. On the other hand, if the price is too low compared with in domestic market, such as low discount to get rid of high level on inventory, harm to the brand value will be led to. In general, this mode is utilized by the company considering their domestic market more important and still requires large amount capital investment in research and development, marketing or sales.

Joint venture is a common method for international expansion, with the purpose of market entry, risk sharing, joint product development and conforming to government regulations. The partners of joint venture are usually have limited size, market power, and resources compared with market leaders and they are able to learn from the other while restricting access to their own proprietary skills. Problems also exist when there is conflict over asymmetric new investments or distrust over proprietary knowledge and other benefits issues. Different corporate culture of partners may cause cultural clashes, leading to inefficient operation of the cooperation work. Nevertheless, the nature of joint venture decides it is unable to satisfy RedStone's needs. In joint venture, the partners should intend to maximize the advantage of both, but they also want to maximize their own competitive position. Additionally, joint venture is worked through negotiations and coordination processes, while each company wants to have a hierarchical control. RedStone would not allow the share of control of business to another and it is capable of expanding to abroad alone. For these reasons, setting up wholly owned subsidiaries is the only choice for RedStone.

However, without a promising brand to be marketed, it is meaningless to discuss the international expansion strategy. GIADA is the brand choice for RedStone to market internationally. The first step for RedStone's international strategy is to acquire part of GIADA Spa.'s share. After acquisition of GIADA, RedStone was then allowed to set up subsidiaries in foreign countries.

GIADA has started its international recruitment since 2010, intending to find suitable candidates, who are willing to believe in value and enjoy the culture of RedStone in these countries. Some of the candidates are Chinese who has been studying or worked abroad for years, obtaining an abundant understanding of local customs and culture, as well as equipped with qualified professional knowledge or luxury management experience. After selecting international specialists, all of them are required to come to Shenzhen, headquarter of RedStone, to be trained and study the brand knowledge.

Some of them in retail position are asked to go to the boutique to learn about the selling skills, retail management skills, and staff training skills in practice. The selling style in GIADA is unique compared with other luxury brands. There are three distinct features of GIADA's selling style, warm, professional, and love. Every customer will be warmly welcomed as long as they enter GIADA shop, suitable clothes would be recommended and they are very welcome to go to the fitting room. In addition, all GIADA sales girls, also name brand consultants, are well trained of brand knowledge and product information including colours, fabrics, maintenance method, and dress collocation. They are all profession in fashion. Last but not the least, love, comes from a heart of charity. They consider each selling process as a chance of spreading charity to the customer, not just a simple process of earning money by completing the deal. To dress up a lady, making her own elegant appearance and confident in mind is just like a big charity to the society. During the selling process, the customer was carefully treated, and her needs and preference are taken into account by brand consultants and finally only the best fitting ones will be suggested to the customers and a pleasant long-term relationship with customer is expected to be created.

After learning about in-store selling skills in China and boutique management experience, they will be sent to foreign countries to take charge of international operation of GIADA. These are the key human resources for RedStone's international expansion. Along with sufficient capital resource and luxury management experience, RedStone is confident on its future in world luxury market.

7.2 NE·TIGER's Global Attempts

NE·TIGER as a luxury brands, it has not begun its international expansion formally, though its fur products has been sold internationally since early years. It did participate in numbers of international effective events. In the end of 2008, NE·TIGER successfully released its Huafu series in Tokyo at 2nd China-Japan-South Korea Super Model Competition. NE·TIGER regarded this model competition as a perfect opportunity to help the brand present to the rest of the world of the time-honored tradition of Chinese garment as well as the rise trend of Chinese luxury. During the fashion show, the international participants were highly impressed by the cultural richness, leading design and elegant charm demonstrated by NE·TIGER's Huafu. It was NE·TIGER's Huafu series' first overseas showcase following its debut show at the 2009 China International Fashion Week in Beijing. This fashion show exhibited the fabulous tradition of Chinese garment production, implying NE·TIGER's ambition in reviving the Chinese luxury tradition.

On October 21th 2011, NE·TIGER was invited to Chinese Culture Year in Italy to participate in Chinese Apparel Exhibition. Six pieces of classic Huafu was chosen to statically be displayed in museums located in Rome and Milan; five pieces of Chinese traditional clothes was selected to take part in the showcase in the Opening Ceremony of this event. The three in Rome's design inspiration was from essential symbols of Chinese culture, including Chinese national flower, peony blossoms, grand and magnificent ink landscape painting, and auspicious phoenix. On the other hand, the three pieces demonstrated in Milan was designed according to the year 2010, 2011 and 2012's animal signs of the Chinese horoscope, tiger, rabbit and dragon. All these design implies that NE·TIGER was using its unique apparel language to express the past, present and future and China. Participants and audience in Rome and Milan were deeply impressed by Huafu's amazing stitch work plus strong cultural base, just like wearing China's history and civilization.

It is because of NE•TIGER's own historic accumulation that has received a premium appreciation from the Italian. On October 25th in the same year, the first fashion show in China International Fashion Week took the mystery out