Yong Zhao's Portforlio

Problem:

Dolce & Gabbana (D&G) is an Italian company that runs luxury fashion business. Due to a lack of cultural awareness, D&G has caused a huge controversy with one of its target markets, China.

In 2018, D&G published a series of videos to advertise its fashion show that aimed to boost its brand awareness and make connections in China. However, it’s a misunderstanding of the Chinese culture caused a backlash and resulted in the cancellation of the fashion show and a boycott from the Chinese (Shih, 2018). Furthermore, the incident also cost D&G a fortune; major Chinese e-commerce companies are removing D&G products from their sites (Wilkinson, 2018). According to FUNG Business Intelligence, 32% of luxury goods were bought by Chinese customers in 2017 and the percentage is expected to rise to 40% in 2024 (“Luxury Market. Spotlight on China Retail 2018”, 2018). As a luxury brand, the impact of losing the Chinese market for D&G would be substantial.

Besides the video misstep, D&G’s Chinese shopping site also plays a role in losing the Chinese market. As you can see, the pages are partially translated and poorly designed. the Chinese shopping site is unlikely to encourage people to make purchases (https://us.dolcegabbana.com/zh/children-landing/).

All in all, the fundamental problem of D&G is lacking globalization strategies. If D&G does not introduce proper globalization strategies to restore its Chinese market, it would keep losing profits.

Solution:

To address the deficit of cultural awareness issue, D&G should establish a globalization team which will be responsible for the following two tasks:

Firstly, the globalization team should start conducting marketing research about local taboos and consumer behavior in China in order to rebuild D&G’s brand image. According to the American Marketing Association, although surveying a customer costs around $10, the return on investment is 750% (Vikas, 2017). The research process should be repeated and continue until the company has decided to suspend its operation in the area (Haron, 2017). Based on the market research (2018), a recovery plan including an authentic and customized Chinese market campaign can then be carried out to solve D&G’s enormous financial losses in China. In order to be successful in the global market, companies should be really sensitive about the diversity of different cultures and human needs (Rettig, 2017).

Secondly, localization specialists on the team will help D&G address the incomplete translations and poorly designed pages issue. By doing so, D&G can provide customized shopping experience. This strategy can have a positive effect on Chinese shoppers’ engagement (Swallow, 2017). According to DePalma (2006) who worked at a research and consulting firm called Common Sense Advisory, based on the experience companies have had when it comes to localization, there are various maturity levels. D&G is currently on the -3 level, which is “undermining or discouraging” with no localization expertise’ involvement. Kelly (2012) stresses that 72.4% of customers would purchase products with descriptions in their own language. The localization specialists will expand the current two languages supported by the D&G official website to eight languages to provide D&G customers from all over the world customized shopping experience.

Competitive Advantage:

Roque (2018), who has been writing articles about marketing since 2004, points out that market research can reduce the chances of making mistakes for business. Had D&G conducted a focus group testing, it would have known that the videos would make bad impressions. Instead of issuing apologetic videos and assuming the financial losses of products removal after the misstep, a globalization team can help D&G make better decisions from the outset. Other major international businesses have also carried out similar processes to make sure their products fit into the target markets (Wills, Samli & Jacobs, 1991).

A website tailored to target customers would be beneficial. According to statistics published in Statista (2019), D&G suffered financial losses in 2015 and 2016. A website that supports eight languages rather than just two can retain 72.4% of customers and drastically increase its sales as stated by Kelly (2012).

Cost

The total estimated cost to build a globalization team in D&G’s headquarter, Milan, is around €1,205,695.85.

The globalization team should have three localization specialists in charge of the end to end localization programs and responsible for providing D&G’s customers a culturally tailored shopping experience based on Glassdoor Job description (2019). There should be one market research specialist on the globalization team who will conduct secondary market research focusing on cultural awareness and customer behavior. According to Average Salary Survey (2019), the average salary of a general project manager in Italy is around € 53,808, so the total payroll cost is around € 215,232 per year. Specifically, to solve D&G’s public image crisis in China, Hallanan (2018) recommends that there should be an authentic Chinese market campaign budgeted around 1 million dollars. In addition, to localize the official website and online shopping website into eight languages by utilizing vendor resources, Transifex suggests that the budget should be set according to the number of source words*the cost per word*the number of languages Approximately, the number of source words is around 50,000; the cost per word for the highest service-level is 30 cents, and there are eight languages to be done. Therefore, the vendor cost is 50k0.38 = $120,000, which is about €106,000.

In a nutshell, forming a globalization team in D&G to solve its public image crisis is justifiable and worthwhile, and the potential future value will be immeasurable.

References
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FUNG Business Intelligence. (2018). Spotlight on China retail 2018 – luxury market, 7. Retrieved from https://www.fbicgroup.com/sites/default/files/SCR2018_7_Luxury_Market.pdf

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Net profits or losses of the Italian luxury fashion company Dolce & Gabbana between 2014 and 2017 (in million euros). (2019). Retrieved March 26, 2019, from
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Rettig, T. (2017, December 25). 5 things you should be aware of when marketing across cultures. Retrieved March 27, 2019, from https://medium.com/intercultural-mindset/5-things-you-should-be-aware-of-when-marketing-across-cultures-980ef7626c4b

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Shih, G. (2018, November 23). Chinese campaign to boycott Dolce & Gabbana mounts as co-founders issue apology. Retrieved March 20, 2019, from https://www.washingtonpost.com/world/chinese-campaign-to-boycott-dolce-and-gabbana-mounts-as-co-founders-issue-apology/2018/11/23/2ff1e69e-ef07-11e8-9236-bb94154151d2_story.html

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