Competiting – Italian style

Here is a story from this morning’s Wall Street Journal — How Small Italian Firms Married Style to Globalism:

PUTIGNANO, Italy — For more than half a century, wedding-dress maker Giovanna Sbiroli SRL built its brand and customer base by serving the Italian market. But over the past decade, the company — one of around 40 small wedding-dress makers in and around this remote hill town — watched its share of the Italian market drop by 20% as Chinese imports and goods made in other low-cost countries flooded in.
“Fewer orders were coming in, and we began to realize that we were losing our customers,” says Gianpiero Lippolis, a principal in the firm. “If we didn’t react and attack these markets, then we risked having to shut our doors,” he says.
Today, Giovanna Sbrioli exports to 18 countries, and foreign sales account for 30% of its business. Though it employs only 50 seamstresses, down from 80 a decade ago, it has made up for its smaller workforce with new technology, and annual sales have remained steady at about $7.3 million.

And that includes booming sales to China.
All is not completely rosy, however:

Even as these companies are succeeding in selling their Italian style and know-how on the world stage, they are straining to maintain their own quality and traditions at home. Most of the seamstresses in the area have 20 years of experience and replacing them is difficult. Few young women are interested in becoming seamstresses, aspiring to become designers instead. To find local talent, the companies scout trade schools, advertise in newspapers and rely heavily on word-of-mouth.
Last year, Mr. Lippolis gave 15 young seamstresses a trial run at the company but hired only two of them. “There is on-the-job training, but we can’t invest time and money in people who don’t show a real interest in the craft,” he says. Soon he may have to start relying on immigrants from Hungary or Romania to make the dresses. But, he says, “It will still be made in Italy, always.”

Can the US economy succeed following this niche strategy? Unclear. It may work for a portion of the economy but may not generate enough exports to offset our imports. It does bring us back to what Michael Porter said decades ago: you either compete on price or on premium. Those in the middle of the road are roadkill. Thus, if you can’t match the “Chinese price”, your only alternative is the high end model – as these Italian dressmakers have found out.

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