Lifeworth Review of 2007 GOTO Lifeworth Review 2007: The Global Step Change
Jem Bendell
Adjunct Associate Professor,

Griffith Business School, Australia

Founder, Lifeworth, Switzerland

Outsourcing Intellects

Perhaps sensing this growing attention to luxury ethics, in November the Harvard Business Review provided an in-depth case study on the commercial pros and cons of outsourcing the production of a fictional British luxury brand, which in many respects mirrored the situation with Burberry.20 That British luxury apparel company had previously raised some concerns in the industry and with unions when it closed its Welsh factory in Treochy earlier in 2007 as it moved more of its production to Asia.21

20 Julia Kirby (2007) Mad about Plaid, Harvard Business Review, November.

Case studies have long been recognised as useful teaching aids for the way they can encourage debate and reflection. After the fictional case HBR included the feedback from four different fashion industry experts. However, what was surprising was that all commentators agreed about the commercial imperative of outsourcing production to places with cheaper labour. Research by marketing agencies, cited in the 'Deeper Luxury' report, suggests that there are strong commercial reasons for luxury brands to maintain high labour standards throughout their supply chain wherever they source from, as well as maintaining a significant proportion of their workforce in the country associated with their brand. Affluent Asian consumers do not expect an expensive British brand to be made in factories on the outskirts of their own cities. "Brand-savvy consumers in India and China are not happy to pay for a premium label assembled in their own backyard," reported the fashion chronicler Monocle.22 This is one reason why the Chinese owners of MG cars are investing in British production. The debate over "Made in Italy" sparked by RAI 3 also illustrates awareness of the importance of providence, but also the importance of maintaining what values and practices a region is meant to embody. Luxury brands involve building in value to the product more than taking out cost. If luxury industry executives are blinkered by mainstream management models into simple cost-cutting strategies then they may be liquidising the cultural capital of the brand: its heritage and its current contribution to society.

22 Monocle (2007), issue 4, p 121.

Although the importance of providence and country of origin is being recognised as important in the high-end marketplace, economic globalisation is doing more than shift the geographies of production beneath the brand. They are also shifting the geographies of ownership. This is not new. For instance Gucci has not been owned by Italians for since the early 1990s, but by Arabs and then the French group PPR, while the British luxury brand Mulberry, known for its attention to heritage and British values, is owned by Singaporean billionaire Christina Ong. In addition to MG Cars being owned by a Chinese firm, Lotus cars has been owned by the Malaysian firm Proton for many years. Despite this, towards the end of 2007 some high-end brand managers expressed concern with takeovers by firms from the global South. There were debates about the effect on brand value, management and employment practice of Tata taking over Jaguar cars. Then the management of Orient-Express gave a snooty response to interest from Tata's hotel business.23 Tata Hotels then protested to the Securities and Exchange Commission for what they called Orient-Express' "fossilised thinking".24 As this globalisation of ownership continues so high-end brands will be less able to rely on consumers' assumptions that the national identity of a brand defines its quality and style. The values beneath those national identities will need uncovering and upholding.

23 Tata's Orient-Express bid hits hurdle,
24 Tata wants US hotel chain to apologise,

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