Introduction
The Prada story is one of those unique business cases from which one can learn how to create and maintain strong family brands. It includes all the necessary success factors from the creation of a fantastic product, the undoubted creative talent of the creators, their professionalism and managerial qualities to the ability to build a real business dynasty, in which each new manager of the company only increases the brand’s capital and takes it to a fundamentally new level. The history of the creation of the Prada brand dates back to 1913. Two brothers, Mario and Martino Prada, have opened a small shop in the large shopping gallery Vittorio Emmanuel II in the center of Milan, the world’s fashion capital (Fashion Luxury, 2018). Trade began in leather goods, travel bags, accessories, and luxury goods. The quality of the products was high; the brothers used expensive and exotic, very soft walrus skin.
The brothers’ family business began to bear fruit. Through joint efforts, they managed to attract influential customers to their products. What made Prada products stand out is, first of all, the high-quality products offered, made according to an exclusive design (Fashion Luxury, 2018). Prada has become associated with practical luxury and elegance in the very first years of its foundation. After the death of the founder of Prada in 1953, the reins of the company passed to Mario’s daughter, Louise Prada (Fashion Luxury, 2018). Her most important achievement was the launch of the Prada brand on the international market. So Prada products began to be sold not only in Europe but also in America, as well as abroad. Exclusive leather bags decorated with crystals, precious stones, rare tree species, and even tortoise shells still seemed bulky and immense; they were not willingly bought up. Along with this, Prada is facing a financial crisis.
To improve the family business, the granddaughter of the founder of the brand, Miuccia Prada, took over the company’s management in 1973. The Prada brand endures new reforms and director adjustments. The year 1989 was marked by the release of the first women’s collection Prada Ready to Wear, autumn-winter 1989/1990 (Fashion Luxury, 2018). The appearance consolidated the success of the Prada brand on the screens in 2006 in the film The Devil Wears Prada (Fashion Luxury, 2018). The heroines on the screen mostly wore Prada outfits, complemented by accessories in the form of shoes and bags, where most of the products were from this brand. Famous actresses, models, and even members of royal families are admirers of clothes from the Prada fashion house. For example, two duchesses at once chose Prada outfits to fulfill their royal obligations (Fashion Luxury, 2018). Today, the Prada brand represents success, quality, and elegance. Its popularity is calculated by a considerable number of boutiques around the world.
The brand portfolio is constantly expanding, including through acquisitions and collaborations. In addition to clothing and luxury goods, the company’s portfolio constantly includes the most unexpected new items. So, in 2007, together with LG Electronics Prada, it released the LG Prada phone, the retail price of which was $ 800. In 2010, Prada acquired the Italian footwear brand Alberto Moretti Car Shoes (Fashion Luxury, 2018). Creating brands in the Luxury segment is far from the only achievement of the Prada-Bertelli family. Since 1995, the Prada Fondazione has existed to support contemporary art. The Foundation is engaged in exhibition activities, organizes cultural events, film festivals, congresses on philosophy and architecture, and implements other international cultural projects (Fashion Luxury, 2018). Today, under this brand, perfumes and even furniture come out, in addition to the main line of business. This company is naturally represented in a broad global market and uses different strategies in the regions. The analysis carried out in this paper explicitly aims to assess the foreign methods of work that Prada uses in China and France. A critical review of the effectiveness of these methods and recommendations related to business in these countries are given.
Foreign Operations
Many methods are used to enter the international market or pinpoint openings in certain countries. These approaches are differentiated by the mechanisms of involvement of the brand itself or the delegation of products, investments, and franchises. Expanding geographically, fashion, perfume, and more stores have multiple representation options. Firstly, these are large flagship stores; Prada has similar points of sale on four continents (Prada, 2022). The peculiarity of this form of an institution lies in the innovative and accessible approach to design, advantageous location in the key buildings of large cities, and the implementation of the main task in a brand demonstration (Blazquez et al., 2019). These points, as a rule, are significant; first of all, they present the newest collections before they get to other stores and hold image events.
A concession is a small shop inside a supermarket, where many brands are presented under one roof. London’s Harrods or New York’s Saks Fifth Avenue can be an example for Prada (Prada, 2022). The convenience of location distinguishes these points, the small scale of the products presented, and the pursuit of marketing goals for advertising the brand, showcasing the brightest representatives of the current collection (Blackburne & Buckley, 2019). Although these stores tend to have a small selection, they also help promote sales by constantly presenting the brand in a high-traffic area. In addition to these points, a pop-up format also involves the presentation of a small range of products under a roof, for example, a museum (Alexander et al., 2018). In addition to maintaining its image in unique, vibrant locations, the brand also benefits from spontaneous customer purchases and the opportunity to test experimental products without significant losses.
Finally, an online store helps to consolidate such success for the brand. Having this sales opportunity for Prada, first of all, dramatically simplifies the entry into international markets due to the actual presence in the developing sector of its brand. The company must be able to make sales in the country from which it has access to the online store, as well as properly deliver goods. With this approach, statistics can be used to study the approximate demand for goods, make appropriate cultural adaptations, and consider collaboration opportunities in the market since Prada is often open to such proposals (Adidas, 2021). At the same time, this approach has several significant disadvantages specific to this type of retail. Firstly, online stores must be accompanied by an infrastructure where the received item is tried on by the client or be able to maintain a constant stream of returns and exchanges. Secondly, this sales method often raises the issue of data security, which can be accessed by attackers and leaked, as was the case with other brands (Mariani et al., 2021). Finally, the obvious disadvantages of this approach are the long wait and, in some cases, expensive delivery. However, with all these shortcomings, the online sales sector is a must in the modern world to maintain competition, including in international markets.
The store presentation forms described above are used by Prada worldwide. Opening stores abroad entails licensing by the brand itself to sell in the country, franchising, or direct investment (Martin et al., 2022). Prada owns the vast majority of its stores, even if it is taken into account the company’s brands, including Miu Miu, Church’s, Car Shoe, and many others. They own twenty times more points of sale than open franchisees, of which there are only 21 (Statista, 2022). As a result, franchising is not a priority foreign operation method. All listed franchise stores are open in the Asian region, except Japan, where 88 of the 420 brand stores are open worldwide (Prada, 2022). This paper will analyze the brand representation in China as one of the most densely populated countries in the region.
The main driving force behind Prada’s international development is the wholly-owned subsidiary when the organization fully and independently launches the process of opening stores under its control. The benefits of a luxury and fashion brand are clear: vertical integration of supply chains, risk management, centralization of financial performance, and complete control over operations (Martin et al., 2022). Prada chooses this type of presentation in the international market mainly because the authenticity of the brand’s products and its reputation is much more critical than its pricing and costs. However, within the framework of this approach, there are several shortcomings, which for the most part, rest on significantly higher costs than with franchising, licensing, and other foreign operation methods. First of all, the specifics of economic and legal issues in some countries may include multiple taxations, similar to how the entire income of a company is taxed in some US states (Blanco, 2022). Moreover, in addition to the financial issue, time resources are also significantly spent, which in modern society requires spending on paying attention to the country’s culture, consumer behavior, and assortment formation. Although Prada has a firm name on the world stage, its products are diversified enough that a marketing strategy needs to be developed.
Finally, such a mechanism as a joint venture or the formation of alliances with other companies to capture a larger audience or enter other market segments is often seen as a practical tool. Collaboration processes are not uncommon for Prada; quite often, the company engages either well-known artists or other cultural figures, or well-known brands to create a unique collection of products and mutual marketing purposes: for example, Adidas or L’Oreal (Adidas, 2019; L’Oreal, 2021). Creating blockchain alliances with the Cartier and Louis Vuitton brands is primarily like fighting counterfeiting and smuggling but indirectly contributes to a favorable environment for entering new markets (Williams & Nanda, 2021). A joint venture is an approach in which a company joins with another to create a new unit in the intended market. Prada, in turn, has a rather radical position on brand independence and therefore considers only acquisitions, but not mergers of equal companies (Prada, 2022). This fact confirms the exit from the share of the Fendi fashion house due to unprofitability and the absence of the lion’s share of the company’s influence. In addition, Prada’s fundamental goals do not correlate with the existence of joint ventures, which rarely last more than a few years (Martin et al., 2022). As a result, this brand uses subsidiaries and partly franchising to enter new markets. In this paper, France will also be considered a representative of exclusively wholly owned subsidiaries of the brand.
Analysis
The previous chapter identified the main foreign operation methods by which Prada enters new countries and markets. For a more specific consideration of the implementation of the mechanisms of these techniques, it is necessary to refer to the examples of the two countries. Each country was identified using two different methods: France is associated with wholly-owned subsidiaries, and China has potential franchised stores. A critical analysis of the effectiveness of these methods will be focused not only on the process of deploying a business in a new market but also on the many external and internal factors that accompany sales in these countries. The Asian region, as mentioned above, is the only one at Prada where franchised stores are open.
The company entered the Chinese market a relatively long time ago, but the exit strategy was a worthy competitive offer. Prada can be considered an exclusive fashion brand, almost par with Louis Vuitton and Gucci. Even in the early 1920s, Prada offered a broader alternative to China’s hinterland through product diversification and more affordable pricing amid growing fashion sales in China (Reuters, 2013). Then the brand gradually merged into Asian culture, offering unusual marketing solutions. For example, in 2021, a vegetable market in Shanghai became the location of the brand’s promotion, which attracted many young people and bloggers to this location (Che, 2021). Such a choice does not seem spontaneous, Prada in Milan has already diversified its business towards coffee shops, but at the moment, it has not yet gone beyond its birthplace. Turning to the vegetable market, Prada has focused on the segment of the non-target audience, for whom the brand’s products may be too expensive, but they have the opportunity to become part of it.
However, the direct approach when entering the Chinese market focused on digitalization and online sales platforms. Presence on sites such as Tmall, Secoo, and JD was a priority for the company, which soon introduced its sub-brands such as Miu Miu (Daxueconsulting, 2021). At the same time, unlike its competitors, Prada accompanied the entry into the online sales sector with physical experiences or other social actions: for example, a demonstration of the production of nylon (Daxueconsulting, 2021). This approach ensures closer contact with customers since the distance between online and offline events is quite close in China, unlike in other countries (Daxueconsulting, 2021). To develop the market, Prada uses a key opinion leader strategy, choosing bright personalities who become ambassadors or the face of the brand (Daxueconsulting, 2021). Adding to this the localization of products around the Chinese New Year and the tight association of activities with the online environment, Prada is successfully capturing various segments of the Chinese market, as evidenced by the opening of new stores and growing revenues in the region.
Franchising is quite rare in Prada as a whole, but most of these mechanisms are implemented in the Asian region. Unlike other, more numerous fashion brand franchises, Prada maintains increased control over franchisees, as the position of independence and reputation in the world are very important to the company (de Koning, 2019). The company’s critical success in entering the Chinese market was precisely the correct positioning, focus on the online environment, correct and effective marketing campaigns, and offering products with more democratic pricing compared to competitors. This soil has allowed the franchise to operate with greater confidence in maintaining its reputation through a well-thought-out strategy.
Prada entered the French market a long time ago with the help of subsidiaries. At first, the company adhered to the basic principles underlying the goals and mission of the brand, only then constantly diversifying and expanding the possible boundaries. With the development of the online environment, brands have had to freshen up their marketing campaigns for more presence in potential customers’ lives. The primary tool, in this case, is localization, which is opposed to the universal global marketing approaches that prevailed before. Companies began to look for ways to maintain a balance between the face of the brand and the potential boundaries of product localization. In part, these approaches have been reinforced by the impact of the pandemic, which has significantly reduced travel and overseas shopping opportunities (Brydges et al., 2021). On the other hand, this process was launched as a reaction to the globalization of brands, which had drawbacks in the form of potential conflicts of marketing programs with any foundations and cultural traditions of individual regions, including France (Griffith, 2020). As a result, companies spend more time and resources to adapt their activities but eliminate possible conflicts with customers and increase engagement and a sense of belonging with a specific demographic group.
The Italian manufacturer in the French market is still a reflection of the long-standing rivalry of cities for the title of capital of fashion. Historically, it was Milan, but gradually Paris took over the laurels, just as French companies forced a potential first place in fashion in the sale of their products. Being part of the Italian culture, Prada has long maintained a geographic exclusivity, preferring the preservation of heritage rather than displaying it on an international marketing level. However, such a systematic approach could not cope with the processes of globalization and the need to remain competitive. Like other French brands, Prada began a worldwide development, which was usually accompanied by the creation of subsidiaries in other countries. In a country like France, a company focused on exclusivity, reputation, and independence could not rely on momentary income from a franchise, licensing, or joint venture.
Recommendations
Prada quickly recovered from the pandemic, during which net profit went into the red. To further expand the market in China and France, Prada may continue to capture the market segment with more budget offerings. Firstly, marketing campaigns similar to the one that took place in Shanghai at the vegetable market are aimed in this direction. Consequently, the company may consider the second-hand industry, which will feature quality products with a brand reputation at highly affordable prices. Secondly, Prada has already touched on this issue in the press and considered the possibility of a hybrid implementation of this direction (Jucca, 2021). This approach assumes either pure export in the framework of cooperation with any player in this market or diversification of points of sale, which will be located in the hinterland of China or France and offer a wide selection of products with democratic pricing. Looking at the method through the prism of foreign operations, Prada can discover a new direction of the export or licensing and continue the procession to new geographic regions, within which it was previously impossible to open expensive boutiques.
In addition, the experience of social media presence in China can be extrapolated to other countries while maintaining the main brand image. A wide range of actions, accompanied by a demonstration of sustainability, can be advantageous on the current agenda in the US or Europe, where renewable energy transition trends have become extremely important (Pegels et al., 2018). This policy will help attract attention to the brand representatives of various segments, increase the reputation and create a potential basis for other marketing campaigns. No other fashion retailer has ever enjoyed such a competitive advantage.
Conclusion
Prada is an example of a company that, over a long history, has preserved the most important traditions and its own identity, which distinguishes the company in the market. At the same time, the brand has been able to adapt to the new conditions and requirements of the global fashion industry, localizing products, turning to franchises, and balancing between global uniqueness and local solutions. The company is traditional even in the choice of foreign operation methods, where, as a way of maintaining reputation, the approach of the exclusive opening of subsidiaries is used, which must meet the independence and uniqueness of the brand. Prada resonates with many cultural events, including film and music, which contribute to the brand’s globalization, regardless of the various attempts to localize in specific markets. As a result, the company has profound experience entering the international arena and can use it to achieve its various goals.
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