Category: Events

Global Business Services: the GBS Certification Program comes to MIP

Posted on | by Simona Strepparola | Leave a Comment on Global Business Services: the GBS Certification Program comes to MIP

Filippo Passerini, considered one of the world’s top experts in Global Business Services, illustrates the advantages of a GBS strategy.

A strategy aimed at large companies, thanks to which it’s possible to reduce costs by exploiting economies of scale, freeing up resources from the most repetitive tasks and transforming their business model: «It basically is a matter of aggregating services within a company, when these are dispersed or duplicated in different organizations. This is the essence of GBS (Global business services)», explains Filippo Passerini, director of the GBS Certification Program for MIP Politecnico di Milano.

GBS explained by professionals in the sector

«I had the fortune to build and manage GBS in Procter & Gamble (P&G) for over 12 years. Our business benefited enormously, both in terms of cost reduction and innovation. I would now like to create value for other companies and for individuals, sharing knowledge and skills», explains Passerini. «I’m very satisfied to be able to work with MIP for this programme: it offers an infrastructure that allows you to effectively go to the market and certifies the educational rigor of contents. The latter will be developed by Inixia».
Inixia is a consulting service whose advisors all have concrete experience with GBS and shared services: «They are people who, like me, had worked for P&G, whose GBS model is considered to be a real benchmark. Inixia was created with the aim of setting up a certification programme that allows people to obtain a qualification in this area».
Indeed, GBS can’t be improvised, warns Passerini: «There is a specific sequence of steps to follow, that leads to better results more quickly. There’s a strategy to follow and this is also why it’s important to gain specific skills».
At the same time, the numbers speak clearly: in 2018 the value of the global shared services market amounted to 56 billion dollars, a figure that is expected to double by 2025.
Equally tangible are the advantages for companies: a cost reduction of up to 50%, together with a tripling in value creation. The areas of application involve almost all of a company’s operational services and processes, in any sector: finance, human resources, supply chain, purchasing, IT, marketing and sales processes, customer and consumer service centres.

GBS and the digital transformation

It would be wrong, however, to think that GBS, by now with a twenty-year history behind it, is a static strategy. Just think of the impact the digital transformation has had on the organizational structure of companies. «Digital is a great resource», explains Passerini. «The current organization of companies forces us to use resources, human and material, in low value-added but necessary operational processes. For example, the billing cycle, payments to suppliers, or salaries for employees and many other internal processes: they’re essential activities, but consist of repetitive steps that don’t add value to the core business. GBS is an excellent platform for the digital transformation: these processes can be automated and further optimized by applying new technologies. In this way, efficiency and effectiveness are increased, resources are freed up for more strategic tasks. The benefits can vary widely, from “simple” cost reduction to an engine for innovation of the operational model. And that’s where expertise becomes important».

How the GBS Certification Program is structured

It is for this reason, then, that the GBS Certification programme was created for MIP. «These are short online classes lasting from six to 12 hours», explains Passerini. «The course is structured in five levels. It starts with the Foundation level, which addresses the basic principles of GBS. This is followed by what we have called pillars: Service Management, Operations Management, Transformation. At the end, there’s the Leadership level, after which you obtain certification. We conceived it a little bit like a path that follows a sort of managerial seniority, aimed both at those are at the beginning of their experience or in more operational roles, both senior managers and GBS leaders. It’s a real process of professionalization, to use an English term that I find very appropriate in this case. The goal is to train highly competent people».

Excellence in digital education: the School of Management of Politecnico di Milano is the only Italian recipient of the EOCCS certification for Executive MBAs.

Posted on | by Angela Leone | Leave a Comment on Excellence in digital education: the School of Management of Politecnico di Milano is the only Italian recipient of the EOCCS certification for Executive MBAs.

The certification granted by EFMD (European Foundation for Management Development) rewards high-quality MBA programmes in 22 universities across the world.

The School of Management of Politecnico di Milano is the first Italian business school to receive the EOCCS certification for digital learning courses taught within its Executive MBA programmes. EOCCS (EFMD Online Course Certification System) is a quality benchmark system developed to assess online courses, devised by EFMD (European Foundation for Management Development), the most highly-regarded institute in Europe within the field of managerial education and development.

In 2017, only 35 courses in Europe had received this coveted accreditation, held by 11 universities. Today, EOCCS has endorsed a total of 22 schools globally.

The EOCCS certification lasts for three years, and has been awarded to two courses held at MIP Politecnico di Milano Graduate School of Business: Innovation Management, taught in English within MIP’s International Flex EMBA, and the course on Supply Chain Management and Purchasing, taught in Italian within the Flex EMBA programme. This is a significant reaffirmation, as both courses had been granted EOCCS certification in December 2017. Both courses are taught in full digital mode.

The EOCCS certification is a further stamp of quality within our programme of online courses, which has been extended and strengthened due to the COVID-19 pandemic. The EFMD brand sets a benchmark for the most outstanding online courses, those that are able to combine the greatest flexibility in studying, methodological rigour, high standards of teaching and a quality of interpersonal relationships that is comparable to in-presence teaching.

Vittorio Chiesa and Federico Frattini, President and Dean of MIP Politecnico di Milano: “We are proud of this renewal to our EOCCS certification, following on from that received in 2017. The endorsement rewards the hard work carried out in our School since 2013 to offer a suite of increasingly flexible courses that respond ever closely to the needs of each student.

Belonging to a select group of schools is particularly gratifying in this period, which sets out the extraordinary importance of good online teaching. The digitisation process has shown that learning opportunities can be multiplied, overcoming barriers and boundaries. Digital teaching is taking its rightful place as a tool for inclusiveness in teaching, now and in the future.”

Insights from an international MBA – part 2

Posted on | by Simona Strepparola | Leave a Comment on Insights from an international MBA – part 2

An international format for an MBA program provides an additional experience that is not limited to learning new subjects or theoretical/practical concepts. Meeting people from all around the world creates a mixture of points of view which enriches the experience at MIP. Let’s hear it directly in the words of my friends and colleagues on the i-Flex program, Claudio Miguel Jamisse Buque from Mozambique and Heidemarie Haupt from Italy.

Why did you decide to pursue an international MBA program?

Claudio: I am an Electrical Engineer by training, and I have been working for almost 9 years in project development and implementation in sub-Saharan Africa. An international MBA program complements my current set of skills and experience. Through this course, I am able to gain a unique mix of skills needed to advance my career in management. I am able to understand the business aspects behind the projects that I work on, making me a valuable asset to the teams that I am part of. In addition, the international program places a lot of emphasis on and exposure to global challenges, which one would not experience through a non-international MBA. This is important for expanding the geographic range of my experience.
Finally, MIP’s i-Flex program has the added advantage of being online, which allows me to continue my professional activities and gives me enough freedom to balance my time between classes, family and work life. The program allows for interaction and networking between students from all parts of the globe, making this a good opportunity to turn my professional network into a global one.

What do you think are the main advantages of an international environment?

Claudio: In an international environment you develop an appreciation for diversity. Diversity comes in many forms ̶ culture, religion ̶ but most importantly, in the way of thinking. Through diverse teams in an international environment, I have experienced a broader and more open-minded approach to problem solving. During the interactions with my colleagues, I am developing an admiration for different ways of solving problems and a better understanding of the term collaboration. Being in an international environment it is also easier to relate to the impacts of global crises, not only in the society you live in but in the entire world.

How can this i-Flex program provide support in making an international contribution?

Claudio: The i-Flex program class is geographically diverse, with students residing in five different continents. The program is taught on an online platform that enables international collaboration. Contributions are encouraged and productive discussions between professors and students always occur across different countries, sometimes in different time zones. The topics for discussion are also international, meaning they usually touch on a range of countries. The platform supports this collaboration across countries in a modern and virtual way. This means the solutions we propose or discuss originate from a truly multinational contribution.

How might a multicultural environment impact your personal and professional life during classes?

Claudio: A multicultural environment is an important attribute for the international MBA. While discussing and solving cases, students develop the soft skills required to succeed in multicultural environments. In my professional life it will help me to adapt more easily to the challenges that a multicultural environment creates, and in my personal life it will help me to take advantage of the opportunities that arise in the context of multicultural networks. In both cases, I can see only positive outcomes to being exposed to a multicultural environment.

What do you expect this program will bring to your life after graduation?

Claudio: Primarily, I look forward to acquiring the hard and soft skills required for growing and succeeding as a manager. These skills will contribute to my professional prosperity, be it in my current position or future placements. Additionally, the friends made and strong relationships built with colleagues are of great value, both in my professional and personal life. I expect to maintain the international connections and to continue to develop close-knit friendships that will benefit my personal and professional life.

In case you missed the quite talk with Heidimarie and would like to know her experience, read her interview and find out her point of view on the international experience offered by i-Flex.

About the author
 Vito Conversano

Student of the International Flex Executive MBA at MIP Politecnico di Milano.
Chief Information Officer @ San Marzano Vini SpA with extensive international experience in IT & strategic consultancy for fortune 500 companies. Creative, Curious, Travel lover. Passionate about discovering new concepts, learning continuously and developing new ideas.

 

From energy to art: the success of Itisartime

Posted on | by Simona Strepparola | Leave a Comment on From energy to art: the success of Itisartime

The experience of two alumni of the Master in Energy Management programme who together manage Itisartime, an Instagram page with half a million followers. From their meeting in the classrooms of MIP to the development of an entrepreneurial mentality, following the concepts of progress, innovation and change.

What’s the relation between a Master in Energy Management from MIP Politecnico di Milano and an Instagram page with over 450,000 followers that talks about art? Apparently none, but in reality, the relationship exists, and it goes beyond the fact that the hosts of Itisartime, Alessandro Brunelli and Andrea Del Moro, are both alumni of the MEM programme. «Art and energy share the concept of progress. Art is by definition creativity, and in turn creativity is innovation and change. And what are the most common words in energy conferences? Progress and revolution», explains Brunelli.

An ongoing project

Itisartime’s experience goes way back. «In part it coincides with my personal story»,  says Brunelli. «At the age of 19 I started to collect small pieces of art that seemed to be talking about me; showing them to everyone on social networks seemed to me an innovative way to tell about myself». A vision that gradually expanded: «When I realized that the world of art was boundless, I decided to go beyond that limit and instead repost all those works that stood out from others. That was the true birth certificate of Itisartime, a project that saw the light in 2015».

The success of the page, which also brought the two to the Affordable Art Fair of Milan, initially took Brunelli by surprise. «I’d never have thought to reach a half million people». Big numbers that require some reflection on the future of the project. And also from this point of view the Master in Energy Management played an important role: «There I met Andrea, who joined the project in a later phase. He has excellent communication skills, a broad commercial and project vision. For all these reasons he came onboard, to transform Itisartime into a more solid reality. We aim to become a reference for the sector», reveals Brunelli.

Five ideas for art in Italy

On the state of art in Italy, and on what concerns its communication and dissemination to the general public, Brunelli has clear ideas: «The potential of our country is enormous, we know it. There are initiatives that I think have represented important steps forward. I’m thinking, for example, of Domenicalmuseo, that brings many people closer to places of art. But also the combination of art and cinema can arouse interest in those who are perhaps tired of the usual exhibits». Obviously, there’s no lack of areas in which it would be possible to do more: «We should maintain and increase subsidies to funds like Fai or to private exhibition spaces, like Hangar Bicocca or Fondazione Prada, to give some examples. The appeal with young people would grow. Secondly, all initiatives should be channelled through an information channel and disseminated. Lastly, try to transform problems in solutions. I’m thinking about street art and urban art: investing on thematic projects could transform acts of vandalism in works, thanks to which you could redevelop peripheral areas».

The added value of the Master in Energy Management programme

Among these and other suggestions, Itisartime looks to the future. And it does so thanks to some lessons that Brunelli and Dal Moro learned during the Master in Energy Management: «I have an engineering background, Andrea an economic one. The first thing a master’s does is to connect people with different backgrounds: it’s from the comparison of points of view and different experiences that good ideas are born. It was a truly lucky meeting, if we think that we now collaborate in a sector so far removed from our training and educational experience. The master’s gave us ideas for professional improvement and more generally of personal development. If today we evaluate job opportunities tied to Itisartime with an entrepreneurial mentality, the credit goes to the MEM», concludes Brunelli.

2020 Full Time MBA: the specialization in Luxury and Design Management

Posted on | by Simona Strepparola | Leave a Comment on 2020 Full Time MBA: the specialization in Luxury and Design Management

This MBA concentration at MIP aims to give students first-hand exposure to Italy’s luxury sector, with a study tour organized in important productive districts. The goal is to train professionals who are at ease working with the main trends underway.

Understanding the unique characteristics of the Made-in-Italy luxury sector, in order to be able to work in it by both innovating and preserving the tradition of historic brands: it’s the objective of the specialization in Luxury and Design Management, one of the four concentrations that since 2020 allow students in the Full Time MBA programme at MIP Politecnico di Milano to select an area of their choice to study in-depth. «Those who choose the luxury path will be able to discover the secrets of Italian companies, maybe still owned by the founding family, which however have been capable of becoming global leaders in the sector», explains Politecnico di Milano professor Alessandro Brun, Director of the Master in Global Luxury Management (MGLuxM) programme.

Luxury between strategy and operations

Specializations are paths that respond to specific needs of companies, which look for professionals trained in management, but also require more specific expertise. Luxury is one of these areas. «But luxury doesn’t only mean fashion», stresses Brun. «Instead, we mean everything that can be defined as high-end, in any sector. Sports cars, boating, jewellery, design, and furniture. And often foreign students are particularly interested in understanding the profound reasons for the global success of Made in Italy». The teaching methods of the Luxury and Design Management specialization have the same key characteristic of other concentrations: an eminently practical approach. «The first two weeks will have a more traditional start, even if bootcamp mode will already begin in this period, with projects assigned to students to carry out in close contact with company managers. In the first week, we’ll touch on strategic elements: what is luxury, who are the main players and how you compete in this sector, how you carry out a market analysis, how you establish positioning, up to the go-to-market strategy. In the second week, more operational issues are addressed: the sustainability of the supply chain, the different retail models, inventory management, the optimization of supply chain flows».

On the road to discover Made-in-Italy excellence

But it’s especially in the third week that all these elements are truly seen in action. «We have prepared what is a real study tour», says Brun, «a last week of bootcamp conceived and organized as a trip through the Italian productive landscape. We’ll set out from Milan by bus. The first stop will be in the Modena area, a territory with a great production of luxury autos; but there will also be an opportunity to visit a vinegar factory, since balsamic vinegar is also a product with luxury characteristics in the world of food. We’ll then move on to Tuscany, where there are equally interesting districts: leather goods and shoes come to mind. In these years, by the way, we have been working closely with Prada, Gucci, Ferragamo. We also couldn’t skip a few exclusive experiences tied to wine, all accompanied by managers who will talk to us about innovative ideas and business models».

The trends in luxury professions

The objective of this specialization is to contribute to moulding professionals that can take on not only the most traditional roles in the sector, but also those tied to rapidly developing trends. «Let’s think about the centrality of online sales channel in China. By now the use of the web to purchase luxury products is an accepted practice, but you need to be able to manage technological and customer journey elements to guarantee the customer the experience they are looking for», explains Brun. «Not less important is the issue of visibility and traceability: this includes communication, security, the fight against counterfeiting, and sustainability. Luxury companies must design global distribution chains that are a guarantee for purchases. A third issue then involves the challenge of innovation, to implement while maintaining ties to tradition: a luxury good must at the same time be perfectly modern and rich in history. Here you see the ability of those of who know how to manage innovation and design. And a single skill isn’t enough. Several ones are necessary, and you need to know how to integrate them», concludes Brun.

The illimity academy gets under way: first master in credit management in collaboration with MIP Politecnico di MIlano

Posted on | by Chiara Vasta | Leave a Comment on The illimity academy gets under way: first master in credit management in collaboration with MIP Politecnico di MIlano

Illimity, the high-tech banking group founded and led by Corrado Passera, has established the illimity academy, the corporate business school whose objective is to create high-level economic and financial educational paths for new professionals in the credit sector through teaching programmes and training in the field. 

The illimity academy’s first master is dedicated to credit management and its structure has been developed together with the MIP Politecnico di Milano Graduate School of Business, which also has responsibility for scientific guidance. The aim of the course, which will start in September 2020, is to develop new generation Credit Managers with the characteristics sought by neprix, the servicer specialising in managing illimity’s corporate distressed loans. 

The course, which combines a paid internship with direct tuition by a team of lecturers with a background in the academic and consultancy world as well as members of illimity management, will have a duration of six months and accommodate 25 students who are about to graduate in the humanities or science or have just graduated in those areas and been awarded a degree (bachelor’s or master’s) not more than one year earlier. 

At the end of the course students who stand out for ability, motivation and potential will be offered a permanent position as Junior Asset Manager. 

Selection will take place in two stages: candidates must firstly send their applications and a motivational video to www.illimity.com/mastercredito by 30 June, while during the second stage selected candidates will be interviewed to assess their skills and potential and to determine whether their profile is in line with illimity’s values and business culture. 

The selected students will attend the course on a daily basis, this alternately involving classroom teaching (400 hours) and tuition at illimity’s offices where the internship will take place (540 hours). 

The illimity Group will bear the majority of costs for the Master, which amount to €10,000 + VAT per student. Participants will be asked to make a contribution of €2,000 + VAT, which will then be reimbursed if they are hired. Study grants will also be available and the internship will be fully remunerated (€700 gross a month plus luncheon vouchers). 

Marco Russomando, Head of Human Resources at illimity, stated: “We have decided to champion the illimity academy as a means once again of investing in talented young women and men and training people in the skills of the future. People are our real strength and resource in illimity, and the numbers go to show that: after little more than a year we can already count on 500 illimiters of all ages, people with a background in 120 different sectors, arriving from 19 countries and having an average age of 36. We have always set our sights on young people, right from our beginnings, and want to continue in this direction. It therefore gives us great pleasure to undertake this journey and arouse interest and readiness in the academic world, starting with a top-level partner such as MIP Politecnico di Milano”. 

Laura Grassi, MIP lecturer in finance and scientific director for the Master stated: “Concentrating on continuous training, selecting young talents, promoting the company’s business and involving the very managers who will lead the change are the distinctive features of this course. One in which MIP, the Politecnico di Milano’s business school, has made its expertise and know-how available and put its belief in the collaborative spirit of an initiative where teachers at key Italian universities will alternate in the classroom with renowned professionals and illimity top management”. 

Milan: living and leading a digital transformation

Posted on | by Simona Strepparola | Leave a Comment on Milan: living and leading a digital transformation

Save the date! From May 25th to 28th Milano Digital Week will promote more than 600 events to spread the digital culture: at its third edition, the main topic will be a focus on an Open and Sharing Experience.

The initiative is part of a wider program to push the city of Milan towards a digital transformation, both offering an appropriate digital infrastructure and fostering the awareness of the potentiality of digital skills among the citizens.

The involvement of the people is also encouraged through the Open Government project, which invites the citizenship to a new participative culture, for example, allowing consultations on city budgets.

Both companies and people are now able to exploit the opportunities of the OpenData project, that allows whoever is interested to download various datasets, for instance about events, medical information, scholars, air quality, or cars.

Milano Digital Week will also offer the opportunity to meet the ecosystem of startups that is growing across the city. The environment of incubators, places of innovation, and co-working spaces is the fertile ground where young professionals can cultivate their ideas and develop their projects.

Shared workplaces are available all over the city and boost the spread of the agile working culture: whoever wants to can rent a desk or a meeting room, wherever and whenever needed.

Alongside those, the city is also home to many different co-working spaces: regardless of the business, a freelancer can find a community to join, build relationships and share knowledge and equipment.

Why in Milan? Because here you can find business opportunities, a network of mature companies and venture capital, digital and transport infrastructure, and a mindset for hard work that has been the pride of the city for centuries.

A strong communication network supports the digital transformation of Milan in a smart city.
OpenWifi offers free internet access in many different public buildings across the city.

Public transportation reaches every corner of the city and with the app, any user can buy tickets and gather information on the service.

A widespread bike-sharing service, car sharing and scooter sharing integrate the opportunities for mobility.

Moreover, Milan is one of the most attractive destinations for innovators, startuppers and wannabe entrepreneurs. Thanks to its ecosystem of startup incubators and accelerators, Milan represents a great opportunity where you can breathe life into your ideas and enjoy an engaging environment for growing your business. An example for all is the renowned PoliHub – the Innovation District & Startup Incubator of Politecnico di Milano – which in 2018 was able to collect more than 1,200 business ideas.

In addition to the digital opportunities and high quality of courses, we, as students at the MIP School of Business, can also exploit the power of continuous learning through the FLEXA Platform and a wide community of alumni to improve our network and find new opportunities for our growth.

For everyone who is looking for an opportunity to grow: Join Milan, enjoy Milan!

About the author
 Fabrizio Liponi

My name is Fabrizio and I work as a tunnel engineer in the construction of Underground Line 4 of Milan. Born, raised, studied, living and working in Milan: I love my city and I’m proud to take part in building its future. Travel addicted, I love to meet people and different cultures.

Industry 4.0 and relocation choices: do digital technologies reduce the need for internationalisation of efficiency-seeking firms?

Posted on | by Marta Re Ferrè | Leave a Comment on Industry 4.0 and relocation choices: do digital technologies reduce the need for internationalisation of efficiency-seeking firms?

There is evidence that Industry 4.0 technologies, offsetting the low-cost or high-productivity advantages of some foreign countries, may be a valid alternative to internationalisation for efficiency-seeking firms, which in some cases happen to reshore. Will Covid-19 contribute to boost this trend?

 

Stefano Elia, Associate Professor of International Business
School of Management Politecnico di Milano

 

For several decades, firms have offshored manufacturing activities to countries offering low-cost labour and cheaper raw materials (Kedia & Mukherjee, 2009; Mudambi, 2008). Cost reductions were the primary reasons for US firms offshoring to Mexico and other emerging countries (Lewin & Couto, 2007) and for the enormous transfer of manufacturing activities by Western European firms to Eastern Europe (Fratocchi et al., 2015; Kinkel & Maloca, 2009; Schmeisser, 2013). As a result, more fragmented and geographically dispersed value chains emerged globally (e.g. Gereffi & Lee, 2012) and regionally (e.g. Arregle et al., 2009; Asmussen, 2009; Rugman & Verbeke, 2004).

While this trend is not over, we are witnessing the spatial reconfiguration of these supply chains driven by the emergence of new low-cost and high-productivity destinations, and of different cost and quality factors between countries, which modifies their relative attractiveness (Ellram, Tate, & Petersen, 2013). Companies’ intentions to change their manufacturing source is shifting from “offshore” being the predominant option, to “relocating to third countries” (i.e. moving from a first to a second host country) and “back-reshoring” (i.e., moving from the host to the home country) being viable alternatives to offshore (The Economist, 2013). Barbieri, Elia, Fratocchi, & Golini (2019) recently provided evidence that relocating to third-party countries was a preferred option for efficiency-seeking firms and suggested that by moving manufacturing between countries they adopted a “footloose” relentless search of locations to minimise costs and enhance productivity.
This trend has begun to be challenged and (at least partially) inverted by the new disruptive phenomenon. Industry 4.0, dubbed the Fourth Industrial Revolution, which denotes the emergence and diffusion of new, integrated digital industrial technologies that are widely acknowledged to hold a disruptive potential on manufacturing systems, products, and business models (Frank, Dalenogare, & Ayala, 2019; Strange & Zucchella, 2017). Industry 4.0 provides efficiency-seeking firms with a unique opportunity to use valuable digital technologies to offset the low-cost or high-productivity location advantages of some foreign countries and provide a valid alternative to internationalisation. Recent research undertaken by Politecnico di Milano in partnership with the University of Bologna (prof. Paolo Barbieri) and the University of L’Aquila (prof. Luciano Fratocchi) has provided empirical evidence of this phenomenon. Based on a sample of 118 European firms, the research showed that the development of a firm-level Industry 4.0 competitive advantage (based on the digital technology patenting) could reverse the propensity of the cost-saving firms to relocate to third-party countries, and encourage back-reshoring. Conversely, productivity-enhancing firms increase their tendency to undertake back-reshoring only when their home country adopts Industry 4.0 policies, i.e. a set of national initiatives to transform the production system by adopting digital technologies across several firms and industries.

The reasons behind the asymmetry in the drivers of back-reshoring decisions for cost-saving and productivity-enhancing firms can be found in the location advantages that are searched by these two types of firms. Firms investing abroad to save on costs are likely to exploit the lower cost of labour offered by some host locations. The development of Industry 4.0 technologies by cost-saving firms is a strategy to substitute for low-skilled labour with technology (Ancarani et al., 2019). This situation offers the extraordinary opportunity to switch from a host country-level cost-based comparative advantage to a firm-level competitive advantage based on Industry 4.0 technology intensity. Such a firm-level competitive advantage is likely to increase the degree of freedom of the firm in its relocation choice, including making it possible to return home. After obtaining similar (or a superior) level of cost-savings with digital technologies, the firm can afford back-reshoring to exploit Industry 4.0-based competitive advantages without facing internationalisation burdens such as coordination and transportation costs, institutional and cultural differences etc. (Stentoft et al., 2016; Wiesmann et al., 2017).

Firms investing abroad to enhance their productivity are likely to rely on other advantages than merely the exploitation of low labour costs while still pursuing conditions that can make them competitive on price. The primary mechanism such firms can use to enhance their productivity via cross-border investment is to “learn-by-interacting”. This occurs by gaining access to different international business networks that expose the firms to the various technological, managerial and organisational capabilities that are available in the foreign country’s ecosystem (Alcácer et al., 2016; Bertrand & Capron, 2015). In other words, firms can enhance their productivity by sourcing knowledge, resources and experience from the foreign production system by establishing economic relationships with the networks of suppliers, buyers, competitors, partners, associations and labour markets (Alcácer et al., 2016; Alcacer & Oxley, 2014; Johanson & Vahlne, 2009; Oxley & Sampson, 2004; Oxley & Wada, 2009; Pisano & Shih, 2009). This is possible when there is a technological and competitive gap between the host and the home country (Bertrand & Capron, 2015, p. 644). Introducing an Industry 4.0 policy in the home country could enable the host economy to fill any gaps as policies can be designed for many companies and attempt significant changes within the production system that increase competitiveness and technological intensity. This offers firms located abroad for productivity-enhancing reasons the opportunity to implement their learning-by-interacting strategy in the home country, reducing the need to relocate to third-party countries in favour of the probability of returning home. This allows a policy implication to emphasise the crucial role of Industry 4.0 not only in transforming the national production system but re-attracting the productivity-seeking firms located abroad and contribute to the return of manufacturing within Europe.

The Covid-19 outbreak is expected to boost the relocation phenomenon further. According to UNCTAD, this health emergency might have a potential long-term effect on the reconfiguration of the Global Value Chains (GVCs). The pandemic is demonstrating how having too many interconnected and distant countries might become a critical issue for global production networks. This is especially true when they are also dependent on one main manufacturing centre (such as China), and all nodes are asynchronously subject to an emergency that stops production activities and shuts down the entire GVC for some time. This worldwide health emergency might lead to a reconfiguration of the GVCs, and a partial relocation or de-concentration in fewer or closer countries that were less affected by the pandemic or which could ensure faster and more coordinated recovery of the production activities and the value chain. Hence, Covid-19 is expected to further accelerate some trends that were already happening, i.e. decoupling (or loosening) of GVC ties and relocation across countries, which were prompted by other forces such as the trade wars and the challenges posed by climate change. All these forces demand more regional, resilient and sustainable supply chains (Economist, 2020). This goal can be reached only through widespread adoption of digital technologies, which facilitate the reconfiguration and partial reshoring of the GVCs, and provide a strategic tool to redesign the firms and countries’ competitive advantages.

Covid-19 impact on Luxury Industry

Posted on | by Marta Re Ferrè | Leave a Comment on Covid-19 impact on Luxury Industry

How the pandemic will change luxury consumers behavior

 

Prof. Alessandro Brun, Professor of Quality Management, Director of the Master of Global Luxury Goods and Services Management (MGLuxM)
Coauthor Cecilia Castelli Extended Faculty MIP Graduate School of Business
School of Management Politecnico di Milano

 

Last week, luxury groups posted their Q1 2020 results and – not surprisingly – numbers are confirming that even the industry that doesn’t know crisis capitulated to the effect of Covid-19 outbreak. Hermes proved to be “the” evergreen luxury, with “just” a single digit reduction in Q1 revenues (-6.5% vs Q1 2019). Double digit losses for LVMH (-15%), Kering (-15.4%); Moncler posted a -18%, after 24 consecutive quarters of double-digit growth.

In this scenario, brands are reflecting upon the future of luxury industry after the pandemic.

The most important reflection is that the lockdown is changing the habit of people globally. I think that, after the emergency will be over, some of the luxury consumers will change their spending pattern permanently.

  • Wealth, not income – If before the outbreak, HENRYs (High-Earning, Not Rich Yet) would spend a considerable fraction of their disposable income in luxury goods and experiences, after the lock-down several families may have limited cash availability for superfluous spending, while HNWI (High Net Worth Individuals) may have their spending capacity unaffected.
  • For those who will stay home – people will travel less – especially flights will be affected – due to governmental restriction, fear of infection, companies organizing more efficient conference calls in place of face-to-face meetings. This will impact negatively on some channels (especially Travel Retail), specific destinations (e.g. Las Vegas), specific customer segments in the flagship stores of world’s fashion capitals (Chinese visiting Milan, London, Paris, and exploiting tax free shopping), and product categories (suitcases and luggage). On the contrary, many people are rediscovering the joy of cooking (in March 2020, Bread machines was the second fastest growing category in eCommerce after disposable gloves, according to a Stackline study1), Hence, with the reopening, socialization occasions may happen at home, and categories such as Art de la Table may benefit.
  • Hedonistic experiences – After the sacrifices of lock-down, customers will crave for hedonistic products and services to satisfy the need of self-indulgence and personal pampering – shifting away from the “band-wagon effect” and moving into the “luxury as a personal affair” area. Premium beauty products, but also home-spa and home-wellness, and intense sensorial experiences in the fine food and drinks territory, could benefit.
  • Responsible luxury – The pandemic outbreak stimulated deep societal reflections around the main theme of “where is humanity going?”. Consumers will be even more aware of sustainability, and brands and product categories allowing “responsible consumption” will be privileged. Giorgio Armani penned an open letter to WWD, in which he challenged the current fast-fashion mindset, saying he believes in an “approach to the design and making of garments that suggests a way of buying them: to make them last”2.
  • Looking for discounts – if, on the one hand, we could expect a wave of anti-consumerism, the habit of waiting for end-of-season sales and doing pilgrimages to Factory Outlets and buying from off-price channels will be further strengthened by the self-appeal to frugality. If brand and retailers would resort to significant discounts to get rid of the unsold SS20 collection, they would risk to foster the vicious circle of off-price and bargain hunts. A recent McKinsey study revealed that special promotions were the main reason for purchasing clothing during the crisis for 56% of consumers3.
  • Online is the new normal – the transition to a life in the digital world was accelerated as through a time warp, and customers are buying more online as well as consuming more digital content. This represents a major change in paradigm. When we started designing the first “Master in eFashion” at MIP, 15 years ago, the online penetration in the Personal Luxury Goods segment was only 1%. In 2013, according to a McKinsey study, 44% of the 220B€ total luxury sales were influenced by digital – yet the perspective was still that the brick and mortar retail was the “normal” way to make business. Whether the perspective in the post-pandemic will turn 180 degrees, so that the online will be the norm and the brick and mortar will be a way to “support” it’s hard to say. But one think is unquestionable: a brand without a strong online presence, today, is a non-existing brand in the eyes of many a consumer.
  • When your own initials are enough – Economic theories say that after a “quarantine of consumption” (as Li Edelkoort defined this unprecedented period of forced fast from conspicuous consumerism4), consumers may switch “revenge spending”5.

But after the lockdown is over, the world will enter into a “stage 2” of the war, in which the Covid enemy will still be there in the battlefield, thus reducing the appetite for conspicuous consumption. Before the crisis, brands with a very bold visual identity (such as Gucci) were performing extremely well thanks to the enthusiasm of brand sensitive customers – but in a climate of “social thriftiness”, luxury consumers could steer towards the quality and intimacy of “no-logo brands”, as they are finally understanding the meaning of Bottega Veneta payoff (“When your own initial are enough”: there’s room for feel-good purchases even without a big flashy logo on your t-shirt).

  • A renewed pride for local producers – this may vary in strength on different markets and for different product categories, but we are already witnessing the first signs that are forewarning the rise of full-fledged “buy local” movements.

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1 J. Styrk. The top 100 fastest growing and declining categories in eCommerce. Stackline, March 31st, 2020

2 L. Zargani. “Giorgio Armani writes open letter to WWD”. WWD, April 3rd, 2020

3 Amed, Berg, Balchandani, Hendrich, Rölkens, Young, Jensen. The State of Fashion 2020: Coronavirus Update. BoF e McKinsey&Company

4 M. Fairs. “Coronavirus offers ‘a blank page for a new beginning’ says Li Edelkoort”, Dezeen, March 9th, 2020
https://www.dezeen.com/2020/03/09/li-edelkoort-coronavirus-reset/

5 N. Gopalan. “Revenge is a dish that’s off the china menu”, Bloomberg, April 21st, 2020
https://www.bloomberg.com/opinion/articles/2020-04-20/china-luxury-revenge-spending-surge-is-likely-to-fade