The world of business today goes beyond the U.S. borders, so executive education programs like MBAs have a global component. For example, Woodbury University is part of a customized MBA program through the newly formed Carl Benz Academy for employees of Mercedes Benz and its affiliate companies.
Andre van Niekerk, Ph.D., dean of the School of Business at Woodbury University, says the program specifically serves employees in the luxury brand segment in emerging markets.
“There’s always a market for high-end brands, and that fully applies to the developing world,” he says.
Smart Business spoke with van Niekerk about the challenges and opportunities in marketing luxury brands in the world’s emerging economies.
Given the uneven recovery from the global recession, how open to luxury brands are today’s developing economies?
Virtually all luxury brands are jumping, or have jumped, into the developing world. That market — that collection of economies — is reaching a near-saturation point for some. To a large degree, it’s a matter of numbers; the size of the individual markets is key. If millionaires represent 3 percent of the population of China, for example, companies will pay attention.
Of course, if you step back and ask, ‘what is luxury?’ Your immediate response might be that people who have very little define luxury. In some parts of the world, two meals a day would be considered a luxury. There’s clearly a different context in the developing world, when contrasted with the developed world.
Having said that, however, luxury brands appeal to similar demographics worldwide. The people who buy and consume what are generally recognized as luxury goods, from clothes to jewelry to cars, are simply not as affected by economic downturns as the rest of the population. There’s just less price sensitivity.
Combined with quality and aesthetics, exclusivity is central to marketing a luxury brand. But the richer the world gets, the tougher it is to keep that exclusivity. Brands can artificially impose exclusivity by raising prices. Price, therefore, confers status — the status the brand affords the consumer. It’s an implied status, creating a desire to move up. The challenge for manufacturers is to keep customers brand loyal, wherever in the world they may be.
How do cultural differences come into play, as manufacturers introduce products and develop strategies to market them?
While many recognized luxury brands have a genuine global reach and can be considered universal, local tastes and accepted local norms matter. A specific handbag may become a roaring success in the U.S. but may not be as desirable in China. Or a specific color popular in Western Europe may not resonate somewhere else. Cultural nuances are often reflected in advertising, and it’s common for brands to reword and reposition ads for each market. Some nuances simply can’t be transplanted.
Status exists in every culture, and everyone has an ego, but the drivers for status differ across cultures. The U.S. is largely externally driven, as places like Newport Beach, Rodeo Drive or the Chicago Loop suggest. Other cultures are very circumspect — you don’t wear status on your sleeve.
What impact has the proliferation of luxury brands in the developing world had on those same brands in the developed world?
That trend has given rise to knockoffs. Counterfeit goods pose a huge problem for luxury brands, especially when the population at large may not be knowledgeable about what’s real and what’s fake. Knockoffs can ruin the brand by association. That’s why manufacturers confiscate and prosecute — they actively pay for that vigilance.
Things may be changing on this front, however. In a deal with China, Ralph Lauren agreed to overproduce by approximately 4 percent. Local merchants are allowed to sell the overproduction in controlled outlets at a slightly lower price. It’s a total win — a way to spread the brand successfully and locally, while helping to undercut the market for counterfeit merchandise. ●
Insights Executive Education is brought to you by Woodbury University
Recently, President Barack Obama outlined a plan to combat rising college costs by holding colleges and universities more accountable for results. The foundation of this plan is a ratings system that would provide students and families with information to help them select a school that offers the best value. Ultimately, Congress may tie the provision of federal student aid to a college’s rankings.
What might the proposal mean for colleges and universities and the businesses that hire their graduates?
Smart Business spoke with Luis Ma. R. Calingo, Ph.D., president of Woodbury University, about the challenges of making college more affordable.
Will this proposal help colleges do a better job of turning out graduates who are prepared, for example, for a career in business?
The ultimate impact of the president’s proposal is difficult to gauge. However, the debate must begin with understanding the role of higher education.
Colleges and universities exist for one reason: to produce graduates with highly valued degrees who have the knowledge and the character to serve and lead. President Obama’s proposal enjoins colleges and universities to return to basics.
Doesn’t it make sense to focus curriculum on courses that are most essential to a student’s future career?
While that makes sense at the graduate level, there are benefits to a broader undergraduate liberal arts education, which is when students ought to be exploring their interests.
Businesspeople often say they can’t understand why any undergraduate student would pursue a history major or take a philosophy course. But the students who study history or philosophy are those who end up in law school, just as those who pursue biology may end up in medical school. These are the courses that enrich the mind so that students become better business executives by being more critical in their thinking and more socially responsible. All of those things come from a liberal arts education, which is why many professional degree programs have a strong foundation in liberal education.
On a personal note, my daughter is majoring in theology and minoring in Arabic in preparation for a career in law and foreign service. She’s a prime example of why it’s important to debunk the myth that a liberal arts education does not contribute to preparation for a business or other professional career. The dichotomy between liberal education and professional preparation is an artificial one.
What can be done to reduce the spiraling costs of a college education?
How people respond to the cost question depends on their perspective.
If you are a parent or student who relies on federal Pell and/or state grants, any move that reduces public funding for higher education is of great concern. It also depends on where you live. A state university education in Ohio costs two or three times what it costs in California.
At Woodbury, what we do and what we spend is related to producing quality graduates. As with most universities, we spend 70 to 80 percent of our budget on personnel. We consistently apply a student-to-faculty ratio to determine new faculty hires. Any inflationary increases are generally tied to the Consumer Price Index. That’s how we establish the bulk of our budget.
In fact, Woodbury is doing a business process improvement study of our student services and business processes to improve our operational efficiency. Other colleges, large or small, should do the same.
Of course, universities like Woodbury could reduce the numbers and kinds of courses offered to focus on those required for majors. That, however, would be counter to the argument that business and other professionals benefit from a grounding in liberal education. ●
For more of Calingo’s perspective on the challenges facing colleges and universities today, visit his blog, Pursuing Excellence in Higher Education, which debuts in October.
Insights Executive Education is brought to you by Woodbury University
Additional blogs and articles with Luis Ma. R. Calingo: