Internationalization of Luxury Fashion Companies: a penetration project in Poland for Salvatore Ferragamo

1 
Introduction 
 
The lowering of trade and investment barriers, the supraterritoriality of companies 
and the technological development achieved in the last decades thanks to the 
globalization process, have drastically changed the world‘s economical scenario 
(Frankel, 2000). Firms cannot anymore isolate themselves from the global market; 
conversely they have to engage an international challenge where the final 
premium is survival.  
What for several firms is a possibility of expanding their horizons worldwide, for 
others has suddenly become a necessity. However, while some companies need to 
adapt themselves to fit new environments, adjusting products‘ characteristics and 
prices, other firms do not. Luxury fashion firms do not conform to the market; 
they shape it.  
Since the purchase of luxury goods is mostly driven by emotional factors 
(Kapferer, May 2011) and only slightly rely on rational indicators, firms operating 
in this sector are entrusted with a great deal of power by their consumers. A power 
they can use to charge on them prices far above the market average (Vigneron F., 
1999).  
The aim of the present thesis is to target the best environment in which an Italian 
fashion company, Salvatore Ferragamo, should expand its business –mainly for 
what concern the tie market-. A precise analysis of the overall environment (CEE 
countries) and of the specific marketplace will be fundamental to formulate the 
best penetration strategy for the Florentine company.  
The role that brand name plays in this scenario, the link between luxury and status 
and the consumers‘ reaction to high price policies are only some of the aspects 
that will be taken into consideration in the first chapter. Subsequently the main 
changes, relevant for the luxury fashion companies, brought by the globalization 
process will be highlighted. Particularly, there will be displayed all those critical 
factors that determine the success or the failure of an internationalization project.
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Finally, the specific case of Salvatore Ferragamo will be brought at the light. The 
third chapter will regard the country selection process and a first analysis of the 
new environment trying to understand the main treats and opportunities that 
luxury fashion companies may face within CEE countries. The study will then 
deeply regard the process of formulation of international strategies in Poland for 
what concern the entry approach, the pricing decisions, the location choices and 
the promotional activities.
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1  The World of Luxury 
 
1.1 What is Luxury? 
 
―Being characterized by the ability to spend considerable amounts of money 
beyond what the functional value of products would command, luxury has always 
been subject to moral criticism. There is no single definition of luxury. Most of 
them do refer to well crafted, hedonistic and aesthetic objects, priced excessively 
above their functional utility, sold in exclusive stores delivering personal service 
and unique consumer experience, most often from a brand with history, heritage, 
the whole delivering a rare feeling of exclusivity‖ (Kapferer, May 2011). 
For better understanding this argument may be helpful referring to the research 
done by Bernard Dubois
1
 that studied consumer‘s perception of luxury goods 
identifying six main facets (Dubois B. L. G., October 2001).  
Excellent quality: It is the very first fundamental notion. The two terms (luxury 
and quality) have to be perceived by customers as synonymous. Because it is not 
possible to judge the product‘s excellence through a personal consumption 
experience (the goods are consumed very infrequently, sometimes even only once 
in their life, as in the case of an engagement ring) different evaluation methods 
must be adopted. Good examples of such methods may be the quality evaluation 
of the ―ingredients‖ used in the process or the perceived delicacy and expertise 
involved in the manufacturing products. Moreover the good is expected to be 
durable and reliable for a long period of time (―A diamond is forever‖).  
Very high price: This is the other fundamental factor that defines a ―luxury good‖. 
Such perception is both related to the absolute value of the price and, more often, 
by comparing it with non-luxury alternatives. It may be interesting to point out the 
fact that this facet is highly correlated with the one seen before: indeed the very 
high price is assumed to be a logical consequence of the excellent quality of the 
                                                 
 
1
 Professor of Marketing, HEC School of Management, France
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good. As a result, consumers are willing to pay such high price to consume a 
longer-lived good with a superior quality. 
Scarcity and uniqueness: Considering the uncommon nature of the skills adopted 
and the uniqueness of the materials used, the luxury product cannot be mass-
produced. Moreover, the high price constitutes a barrier that not everyone can 
afford. The distribution channels are also different. Most consumers consider that 
truly luxury goods cannot be found in supermarkets and that, viceversa, products 
sold in ―luxury shops‖ (usually branded shops) have passed through a careful 
process of selection. The atmosphere found in the shops, the music, the location of 
the products and even the lighting, constitutes a fundamental aspect that highly 
influences consumers‘ perception (this discussion will be resumed later). Finally, 
the ―extreme expression‖ of a luxury product is the one tailored on the single 
consumer. Those who can afford this kind of service really feel important and 
unique. 
Aesthetics and polysensuality: This fourth aspect is related to the intrinsic beauty 
that a luxury product is supposed to have. Looking at such good opens a world of 
beauty, which makes one dream. That is the reason why many consumers describe 
the consumption experience as a ―hedonic experience which can touch all the 
senses.[…] But the path to heaven is not a smooth one. It requires education, 
knowledge, initiation, and connivance, which, once they are mastered, becomes an 
additional source of pleasure, as for example, when one becomes a collector‖ 
(Dubois B. L. G., October 2001). 
Ancestral heritage and personal history: Another important aspect in defining a 
luxury good is its anchorage with the past. The consumers‘ perception implies that 
to be luxurious a product, or the company manufacturing the product, must have a 
long history or, even better, a myth. This strong connection with the past extends 
the scarcity dimension over time. This is further enhanced when the owner of such 
goods realize that the maximum enjoyment of a product cannot be reached in a 
snapshot but instead is a result of a long process linked with one‘s personal 
history. Logical consequence of this relation to time is that luxury goods are 
expected to be enjoyed for long time and even transferred to future generations.
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Superficiality: Luxury products are not perceived to be necessary for survival. 
They derive their value from additional benefits of different nature. Superficiality 
may be perceived in different ways; overabundance is one of them. While a 
limited number of units of a certain product may be accepted as ―reasonable‖, the 
luxurious behavior appears when one buys a large number of that good, far 
beyond its functional need. Another important aspect may be the one related to 
space. The almost unlimited disposal of space is another very conventional sign of 
luxury (this is very common in the case of houses and cars).   
 
1.1.1 Luxury goods and bandwagon effect 
 
Before proceeding with the analysis some further consideration on the previous 
facets may be relevant. In particular, the debate about the importance of the 
uniqueness of the luxury goods may constitute a really interesting argument of 
discussion.  
The present consumers‘ behavior, at least referring to some fields as the one of the 
so-called information goods, seems to be more oriented to conformity-of-
consumption than to a customization of preferences.  
Consider for instance the ―bandwagon‖ effect. Such phenomenon occurs when the 
demand of a single good increases just because other people are also purchasing it 
(Belleflamme P., 2010). One of the most significant examples of such products is 
the cell phone. Indeed, no one would be interested to have a cellular if he had no 
chance to communicate with the others. The underling logic for the luxury goods 
is just the opposite one.  
These two types of consumers‘ behavior correspond to ―the desire not to be 
identified with the poor, and the desire to be identified with the rich‖ (Corneo, 
October 1997). 
Although this simple comparison appears quite clear, some further observation 
must be done. The most relevant regards the characteristics of the studies devoted 
to these two very different fields. Indeed, while it was quite easy to highlight
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some clear tendency (like the bandwagon effect) in the case of information goods, 
it was not that easy for the luxury market. The reason of such lack can be 
attributed to the peculiarities of the purchasers of the goods. As we have 
previously seen in section 1.1, just a very little part of consumers is known as 
occasional and does not represent the majority of the market. Of course, such fact 
constitutes a strong limit for the scholars and make for them quite difficult to 
create a clear behaviors‘ path.  
This brief discussion served just as an introduction of the argument that will be 
thoroughly treated. It may be significant just to highlight two main points. First, 
the central importance of the uniqueness of the luxury goods compared with the 
conformity-tendency of the others. Second, but even more important (for what 
concerns this discussion) is the necessity for luxury firms to attract people with 
lack of experience and no familiarity with luxury goods. How this can be possible 
will be treated later.  
 
1.1.2 Luxury and status 
 
―No other industry but luxury delivers status to so many people‖ (Kapferer, May 
2011). Looking back in history, luxury was a clear signal of powerful people; they 
had access to castles, gold, royal pleasures and they did not work. The amount of 
luxury one person had, was measuring his ranking within the society. Castles and 
gold were lately substituted by yachts and cars but the correspondence between 
status and luxury did not change. Also in our open society, luxury is an evident 
signal of social stratification. 
The question is ―where is status coming from?‖ It comes from those people with 
the ability to deliver it; the elites. Luxury is just the outcome generated by the 
fight among different elites.  
―We now live in the mating society. In the BRIC (Brazil, Russia, India and China) 
countries as well as in the emerging economies, the median age of marriage is 
going up. This leaves much more money for self-pleasure and more time for
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mating. […] Studies have demonstrated that men‘s interest for high status goods 
increases in a mating environment. The mating perspective encourages men to 
attach greater meaning to displaying success through conspicuous objects‖ 
(Kapferer, May 2011). 
Two other social phenomena attached to the concept of status must be taken into 
consideration. First, we live in a storytelling society. Fairytales are rare but once 
they happen are immediately narrated to the population creating a sentiment of 
identification. Many blogs, TV shows and websites tell us what famous people 
eat, how they dress and what they do now that they are celebrities. This increases 
consumers‘ expectations about their future wealth and of course increases their 
willingness to acquire luxury brands. 
Second, but even more important, status cannot be treated like a common private 
good. ―Private goods are characterized by the fact that other individuals consume 
a zero amount of what I consume. Other individuals are excluded from the 
consumption of my private goods‖ (Pagano, 2003). Clearly, this is not the case of 
status. Indeed, because of its non-excludability status must be considered as a 
positional good. ―[…] A pure positional good is a good such that another agent 
consumes the same negative amount as which I consume‖ (Pagano, 2003). The 
fight for acquiring these goods is even much harder and violent than the one for 
the private ones.  
Somehow, it is possible to affirm that ―social scarcity constraints the welfare of 
human kind much more than natural scarcity‖ (Pagano, 2003). This phenomenon 
is highly connected with the notion of luxury. In an office or in a company, only 
chiefs are in power. The others feel a state of powerlessness because they do not 
exercise control on the others. To fulfill this necessity, they acquire visible and 
high manufactured products that will elevate their position and dignity in front of 
the others; they will acquire luxury goods.
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1.2 The Importance of Brand 
 
―Brands are powerful and symbolic elements that have the potential of influencing 
cultures, societies and generations. They play a daily role in our lives from the 
product decisions and choices we make to the people we choose to speak to or 
associate with‖ (Okonkwo, Luxury Fashion Branding, 2007).  
This notion cannot be identified into a single good or into a single service. It is the 
result of a company‘s total offerings that makes consistent and specific promises 
of value, which results in an overall experience for the purchaser. The sum of all 
these experiences creates a distinctive (intangible) image; while products can be 
copied and become outdated, brands cannot. They are unique and timeless.     
Brands represent a guarantee of the quality of the product and assure the purchaser 
that the good he is going to consume will deliver its promises. ―They compete on 
the ability to evoke exclusivity, brand identity, brand awareness and perceived 
quality in the consumer‗s perspective‖ (Ian P., 2000).  
The concept of brand is fundamental for those companies that have the necessity 
to effectively enhance to the purchaser the superior characteristics of the products. 
That is exactly the case of luxury goods. Without branding, there would be no 
luxury products.  
A typical characteristic of fashion is that it ―always incorporates the past and the 
future and is hardly preoccupied with the present‖ (Okonkwo, Luxury Fashion 
Branding, 2007). Every six months luxury fashion brand has to set the trends for 
the next season during fashion events held in New York, Paris, Milan, London 
and other prominent cities. Designers of the major marks tell consumers what to 
wear and not to wear influencing the tastes of the fashion society. They can do it 
because of the great power that consumers have given to their logos. Suddenly 
―the question has then become not do you own a car, but ‗what car do you own?‘‖ 
(Kapferer, May 2011).
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1.2.1 Brand image and prestige 
 
The concept of prestige is highly related with the idea of luxury. Nevertheless, 
these two notions are not identical. 
 Prestige: It is a subjective evaluative judgment about the high social 
position of people or immaterial things such as brands. Of course, the 
evaluative judgments are often linked with emotional reactions. For what 
concerns product categories, the criterion for a brand to be considered 
prestigious is linked with the attributes of high-quality and performance of 
the producer. 
  
 Luxury: ―Whereas the prestige perceptions stem from a unique 
accomplishment inherent to the brand, luxury is of a different nature […]. 
It concerns self-indulgence, be it private or public‖ (Dubois B. C. S., 
2003). Luxury is related to subjective perceptions of beauty, comfort and a 
sumptuous lifestyle. Product and service categories associated with luxury 
are more restricted than those evoked for prestige. 
―A brand is judged prestigious only if unique accomplishment is perceived in it. 
Luxury does not necessarily require such a criterion since it refers to the Hedonic 
benefits of the brands related to a self-indulging refined lifestyle, which need not 
be exceptional. Also, prestige is always a positive evaluative judgment whereas 
luxury can be negative if it is too ostentatious. […] Prestige must be merited, 
luxury not necessarily‖ (Dubois B. C. S., 2003). 
The definition of prestige may vary from people to people, depending on their 
socioeconomic background. ―Consumers develop prestige meanings for brands 
based upon interactions with people (e.g., aspired and/or peer reference group), 
object properties (e.g., best quality), and hedonic values (e.g., sensory beauty). 
Such interactions occur at personal and societal levels. Thus, a brand's prestige is 
created from a multitude of interactions between the consumer and elements 
within the environment‖ (Vigneron F., 1999).
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Because of the various interpretations that consumers may give to the concept of 
prestige, some further explanation must be provided. Indeed, different customers 
assign prestige to different brands according to their feelings and preferences. But 
feelings and preferences are different and so is the prestige assigned. F. Vigneron 
and L.W. Johnson developed a ―Prestige-Seeking Consumer Behaviors 
Framework‖ (Figure 1) with the aim to describe how consumers with different 
preferences assign prestige.  
Before analyzing the four dimensions showed by the framework it is necessary to 
present the concept of self-consciousness ―as the consistent tendency of persons to 
direct attention inward or outward‖ (Fenigstein A., 1975). It is possible to 
differentiate two types of self-conscious people. On one hand, publicly self-
conscious persons, that are particularly concerned about the idea that the others 
have about them. On the other hand, there are private self-conscious people that 
are more focused on inner feelings and thoughts.  
 
Figure 1 – Prestige-seeking Framework 
 
Source: Personal elaboration of the ―Prestige-Seeking Consumer Behaviors Framework‖ by F. 
Vigneron and L.W. Johnson.
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The Veblen Effect: Perceived conspicuous value. 
 The Veblen effect illustrates how the conspicuousness of a product is positively 
related to the reference-group influence. Although conspicuousness only partially 
explains the perceived value of prestige products, Thorstein Veblen (1899) has 
demonstrated the positive correlation between the two. So, publicly consumed 
luxury products are more likely to be conspicuous products than private consumed 
luxury products. The exception to such ―rule‖ is represented by those subjects that 
really enjoy high quality goods for their intrinsic characteristics without the need 
to display them with the others. This may be the case of a person that consumes 
fine wine at home. 
Several authors have also demonstrated the correlation between high level of price 
and perceived quality (Erickson G.M., 1985) (Lichtenstein D.R., 1988). These 
studies have showed that consumers assign a higher degree of quality to those 
products with a higher level of price. In addition, customers tend to consider 
expensive products more valuable than the cheap ones, conferring them a higher 
degree of prestige. Thus, consumers consider price as a surrogate indicator of 
prestige. In conclusion, ―Veblenian consumers attach a greater importance to price 
as an indicator of prestige, because their primary objective is to impress others‖ 
(Vigneron F., 1999). 
The Snob Effect: Perceived Unique Value. 
The snob behavior can be described analyzing two main circumstances. First, it is 
the case of a person that will immediately acquire the new-lunched prestige 
product to be within the limited elite that owns such good. Second, it is the case of 
a consumer that rejects a particular product when he sees it is consumed by the 
general mass of people. 
 ―Items that are in limited supply have high value, while those readily available 
are less desirable. Rare items command respect and prestige‖ (Solomon, 1994). 
This need for rare goods is the outcome of a process of social comparison. The 
individual‘s desire is to be recognized as different from the others. Peculiarities as 
scarcity and exclusivity, typical of prestige goods, would satisfy the purchasers‘
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need of uniqueness. Of course, as it was previously stated, the level of prestige is 
even reinforced through a high price level. ―Snob consumers perceive price as an 
indicator of exclusivity, and avoid using popular brands to experiment with inner-
directed consumption‖ (Vigneron F., 1999).  
 
The Bandwagon Effect: Perceived Social Value. 
The concept of bandwagon was already presented in the subsection 1.1.1. . Such 
phenomenon occurs when the demand of a single good increases just because 
other people are also purchasing it (Belleflamme P., 2010). It was also already 
stated that such idea is not typical of luxury goods. Indeed, people acquire luxury 
goods to feel different from the mass of consumers.  
Nevertheless, it may be possible to observe the situation from another point of 
view. Consumers acquire luxury products as symbolic marker of an elite group 
membership. In other words, bandwagon effect influences an individual to 
conform to prestige groups and/or to be distinguished from non-prestige 
consumers. 
It was ―demonstrated that people tended to conform to the majority opinion of 
their membership groups when forming attitudes‖ (Festinger, 1954). Then, it is 
possible to observe a person that during his work, to conform to the colleagues, 
use high prestige brands while, during his free time, consumes modest brands, 
maybe to better conform to the social status of his neighborhood. 
―Relative to snob consumers, bandwagon consumers attach less importance to 
price as an indicator of prestige, but will put a greater emphasis on the effect they 
make on others while consuming prestige brands‖ (Vigneron F., 1999).  
According to the first three cases analyzed, the consumption of prestige seems to 
have a strong social function. For this reason, interpersonal effects may be 
significantly affecting the willingness to purchase or consume (Figure 2).