Italian Textiles and China Harvard Case Solution & Analysis


Italian Textiles industries are well known in the world for the high quality of their products and the competitive marketing strategies with which they have made a distinction over the rest of the market. The Italian economy is based upon a very dense network of textile firms and it has been enjoying a sustainable market position throughout several generations.

Resource and Capability analysis of Italian firms

The major competitive advantage of the Italian textile giants is their long life experience in the manufacturing of quality footwear and highly admired designs of readymade cloths, which has provided them a superior branding strategy in the market. These firms have good relations with their suppliers and exercise a strict control over their activities to produce best quality raw materials, they have also a better management of prices and the export function of their respective geographical locations. These firms are also enjoying a competitive market positing for their brands, but the recent increase in competition and low cost leadership from the Chinese firms have posed a number of risks to the market position and brand value of the Italian firms. However, the highly strategic positioning of the Italian brands in the global market has provided them an opportunity to take advantage of getting a rapid entry into the Chinese markets and establishing a long chain of retail stores, i.e. Ermenegildo Zinga, which is known for the high quality of men’s suit had taken the advantage of its strong brand in 1991 and made its first investment in the Chinese retail industry. Now the company has more than 90 retail outlets in the country and operating successfully in the textile industry of the country.

Competition Analysis

In the past, most of the Italian firms had a central concentration over the production and brand evaluation of their products into the regional market of the country, but due to the increasing globalization and the maturity of the domestic industry, these firms have started to extend their business to the other regions of the world as well. For example, about 20 years ago, the leading Italian textile giant, Benetton had a 90% of its multi-colored cloths supply of the national market only, but today even less than 30% of the company’s production is falling in the Italian market. Another, reason behind this change was the increasing interest of the Chinese firms in the textile industry and their emergence as a new dominating force in the market by the end of 2005. Therefore, the Italian firms have slowed down their activities in the native market and increase their interest in the international market with certain fast and improved strategies. The increase in competition from Chinese firms has also threatened the market position of different Italian textile manufacturing branches and the overall economy of the country as well. In order to strengthen the branches and make them capable of responding to the increasing competition, all the branches at the time of release of cloths, textile and footwear are divided into two categories: those who have the ability to fight against the competition from the Chinese players and those who are unable to adapt their strategies according to the changing needs and requirements of the market. The branch competitive environment is also managed by the firms through directing their efforts towards the traditional business models and transferring the production activities of the company in the regions of China or Eastern Europe to concentrate on marketing and improvement of the designs of the products, because these are the potential areas of competition, where the Italian firms can also take over the local Chinese market and firms, which are comparatively in a stronger position. However, the Chinese competitors responded to these initiatives by developing product differentiation strategies and focused upon the market niches of ready to wear cloths and other textile products. These initiatives are successfully executed due to lower labor cost and raw material advantages of the companies, which have provided them an opportunity to produce good quality products with very low production cost. This advantage will also make them able to execute the cost leadership strategy in the future and gain economies of scale by operating in the global markets...................

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