Professional Documents
Culture Documents
23 ottobre 2009
Structure
• Research questions
• Literature review
• The Brazilian luxury market
• The Brazilian luxury consumer
• The Giorgio Armani case
• Limitations
Research questions
• The subject of this dissertation falls into the International Strategy (IS) field of
research.
• The case of Giorgio Armani, one of the first international brands accessing the
Brazilian market and currently among the most successful ones, has been used as
a reference during the analysis.
3
Brazil and the internationalisation
• Among emerging economies, China and India result the primary objects of
investigation.
• The majority of the studies about the rationales for the internationalisation focus on
knowledge and/or technology intensive sectors.
4
The “global localization” issue
• The trade-off between the strategies of cross-national integration and local adaptation
is an emerging issue in IS and it has been extensively developed by Tallman and Yip
(2009) and Grant (2009).
• It is interesting how both the works conclude with the same recommendation to try
reaching a balanced compromise in order to meet both the challenges.
• Yet, Tallman and Yip assert that MNEs’ marketing programs are not adapted to fit
emerging consumers’ characteristics.
5
The Brazilian luxury market 1/3
• Brazilian luxury market accounts for 75% of the whole Latin America region and
around 3.5% of the global sales (in 2006, it was just 1%).
• The credit crunch affected the performance of the segment: 2008 growth reached
12.5% (US$ 5.99 billion).
Nationality of the firms in the Brazilian luxury market Sectors in which companies in the Brazilian luxury
(2008 – total number of firms: 295) market operate (2008)
Sensible data, for more details please contact the author
Others
F ashio n 27%
North-America
6% F o o t wear 17 %
7% C ars 10 %
Jewellery 10 %
A lco ho l ic B ever ag es 8%
C o smet ics 8%
D ressmaki ng 8%
In 2008, the number of international brands
F ur nit ure 7%
increased of six units (2 Europeans and 4 North-
Americans).
6
The Brazilian luxury market 2/3
• 131,000 HNWIs.
• Approximately 30 millions of people earning more than US$2,400 per
month (Class A and upper tier of class B).
450
400 415
• 75% of all luxury purchases take place
350 +23% 364 in the city of São Paulo.
345
300 +19.1%
-31.7% +14.2%
-28,6%
250 -8.4%
200
• 95% of the luxury shopping in São
150 Paulo occurs in four places: Shopping
143 136
100 120 131
100
123 119
97
Iguatemi, rua Oscar Freire, Villa Daslu
50 84
0
and Shopping Cidade Jardim.
Brazil India China Russia
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The Brazilian luxury market 3/3
Brand 9%
communication 61% Taxation
11%
Human resources
8
The Brazilian customer of luxury
31%
36-45 years
9
Brazil as an opportunity
• Brazil represents a good opportunity for luxury brands, and it is likely to acquire even
more importance in the future.
• Although the credit crunch hindered its economic development in 2009, Brazil
emerged as one of the most rapid countries in reacting to the crisis.
10
Giorgio Armani’s entry strategy 1/3
• Giorgio Armani was one of the first international luxury brands to enter in the Brazilian
market after the opening of import trade in 1992.
• The entry strategy for the Brazilian market involved a franchise agreement with a local
partner that was already well-known by the management.
• According to Grant (2009), the evaluation of the optimal form of market entry should
consider five key issues:
1. The source of competitive advantage.
2. Product tradability and barriers to trade.
Sensible data, for more details please contact the author
3. Firms’ resources and capabilities portfolio for establishing a competitive advantage
in the foreign country
4. Return appropriability and rights enforcement.
5. Transaction costs.
• In the Brazilian market, the most relevant issues seem to be the need of country-
specific knowledge and capabilities and the importance of sharing the risk with a local
investor.
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Giorgio Armani’s entry strategy 2/3
• 1997 The Brazilian franchise opens its first Emporio Armani store in the Jardins
district in São Paulo.
– The choice to start with Emporio Armani finds its rationale in the lack of culture
about international fashion that characterized the Brazilian market at this time.
Relationship marketing • The contact with the customers starts with the • Same attention as GA, but due to the higher
first purchase, when the customer registers number of customers, the commercial return is
into the database. around 45%.
• The relationship with the customers is so • Email is used, as the type of customer is more
strong and close that the mailing of the casual in comparison with GA one.
collection catalogue (whose cost is extremely • Events suit a younger and more casual public,
high because of the quality of the publishing) often with a Dj playing. Also, trunk shows are
has a commercial return around 65%. organized.
• Email is not used.
• Events are very discreet, coherently with
customers' attitude, and closed to a small
number of guests.
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Giorgio Armani’s entry strategy 3/3
• 1998 Shopping Iguatemi (São Paulo) requests to host a shop.
• 2001 Five years after the entry in Brazil, the market shows to have developed its
own knowledge and perception about the brand: customers directly ask for
company’s top label Giorgio Armani.
• Actually, Brazil is the biggest market for Giorgio Armani in Latin America. The
Brazilian franchise runs five direct point of sales:
– 2 GA boutiques (São Paulo)
Sensible data, for more details please contact the author
– 3 EA boutiques (2 in São Paulo, 1 in Rio de Janeiro)
– The other fashion labels of the brand are distributed to selected stores.
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“Global localization” in Brazil:
the tropicalization
• Brazilian luxury customers’ peculiarities and the custo Brasil challenge require the
development of country-specific capabilities.
• It has been analysed how Giorgio Armani found its balance between global integration
and local adaptation in Brazil:
– Product: global integration is convenient especially considering the production
process.
– Marketing: the design and ambiance of GA shops can be adjusted on national
culture and tastes. Also communication strategy and CRM should be tailored.
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Limitations
• The focus on the analysis of the market and the customers forced to only cite the
problems affecting Brazil’s development, instead of describing them in detail.
• Also, it must be considered that this thesis observes only the entry strategy in case the
firm planned solely to sell its goods/services.
• Moreover, this analysis does not focus on a specific sector but rather offers a general
overview of the luxury segment in Brazil.
15
Thank you.
Carlo Valentini