Scenarios for the Danish fashion industry for the year 2015pure.au.dk/.../Scenarios_for_the_Danish_fashion_industr… · Web viewScenarios for the Danish fashion industry for the

Scenarios for the Danish fashion industry for the year 2015

1. Introduction

There are many changes going on in this vast growing world where today is nothing like the day

before or the way it will be tomorrow. The pace of change leaves many people paralyzed and a

victim of circumstance or chance. But what happens if we were to look at the future with curious

and open eyes - If we were to forecast the future in preparation for the unknown.

The problems or possibilities we experience today will pass and new ones will come. It is

impossible to make exact predictions about the future; however it is possible to take whatever

information we can gather and from that make a map, a plan or a projection of what might happen

and thereby sharpen our awareness. To understand the patterns and systems of events and see

possible repetitions and recognize trends is a useful tool in making it in the business world.

Right now the situation of the financial crisis shapes the visions and progress of all companies. But

the financial crisis does not stand alone. Many other factors like globalization, demography, health

and lifestyle are key trends that have a huge impact on companies and people in general. Like any

other industry, the Danish fashion industry is also affected by these factors. An industry that already

is subject to rapid changes given the kind of trade it is in and therefore use to moving in a fast pace.

However, with the increasing globalization, the financial crisis and the constant changes in lifestyle,

to name a few, how will the future look for this industry? In what way do all these drivers influence

the fashion industry? What will spring from this new evolving financial trend? What other trends

will be affected and how? What kinds of precautions and measures will the governments,

international bodies and companies take in the future in order to handle all the influences from the

drivers? And all though we are now in the midst of a financial crisis, one crisis seldom comes and

goes without other crises following, spreading the consequences like rings in the water.

Recent developments have had an impact on the fashion industry where the companies have

experienced some changes. Due to intense globalization and increasing competition companies see

the need for layoffs, restructuring and a change of strategy both in export and import or delay in

expanding the company. Others will find ways to exploit the possibilities and maybe take some risk

in buying up other companies, expanding while the economy is slow or getting a head start and

develop on new ideas before competitors realize the opportunities.

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Uncertainty about the future and what will come is one of the main motivators for strategizing in

business. But what kind of strategy is necessary for coping with the future? How will the outlook

be for the fashion industry with regards to production of textiles, sales, export and import,

employment opportunities and development of education and skills in the face of all these odds?

1.1. Problem statement:

What will the Danish fashion industry look like in the year 2015 and what strategic

impacts will that entail for the companies?

More specifically:

o What is the state of the fashion industry today when applying Michael Porter’s five

forces model, generative forces and consulting an expert?

o What are the current trends and uncertainties that will shape this industry?

o How will scenarios about possible futures look like?

o What could be the strategic implications of these scenarios?

o What will characterize the future of the fashion industry

Today more than ever there is a need for seeing the interrelationships of things rather than things,

for seeing patterns of change rather than static snapshots. Systems thinking is needed because of the

growing complexity around us and in the business world. Thinking in systems is equal of seeing the

wholes and this is relevant when considering strategizing (Senge, 2006: 68-69). Scenario planning

is a tool for strategizing, for systems thinking. By some it is considered part of the answer to not

only keep up with the competition, but also to be in front, preparing for or controlling the events of

the future. There are more reasons to use the futuring method of scenario exercises. Some may wish

to plan ahead and prepare for events before they happen as being alert and well prepared means

avoiding damaging the company in any way and keeping the course planned for the company.

Others will want to be a leader in their business environment, controlling things and perhaps even

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turn them around to the advantage of the company. These clients are the more progressive ones who

use scenarios to create or pave the way towards leadership.

To answer these questions I will apply the strategic management tools of scenario planning. These

tools will be applied with the Danish fashion industry as the subject. The aim with this thesis is to

provide scenarios about the fashion industry years from now which the textile trade union and

organization “Dansk Mode & Textil” (herein after DMT) will be able to build on. DMT could also

take the scenarios and pass them on to their members so they can get inspiration to either do the

process themselves in the companies or build on the scenarios and use them as stepping stone for

other projects regarding planning for the future. Building on trends and uncertainties to make an

image of possible futures is the main aim because creating a map of what might happen years from

now will help the trade organization and its members realize some of the future threats and

opportunities; Thereby being a catalyst for new ideas. The reason for making this scenario exercise

is based on the ongoing need for seeking better understanding of the ever changing business

environment; Changes of global, economical, legislative or demographic kind among other.

The interest in the process is the main driving force behind this thesis. I find that the preparation for

and the development of scenarios is an interesting way of solving decision making in strategic

management. First of all, the need for forecasting and preparing for the future is ever present.

Secondly, scenario planning constitutes a creative framework for using conversation, teamwork and

imagination. All of which make up an alternative to usual strategic planning methods.

The thesis has been developed in cooperation with the Danish trade organization, DMT. The trade

organization has provided information in form of brochures and statistics and also in form of

interviews by some of the employees. Furthermore they have offered assistance if any questions

should come during the exercise and writing of the thesis and stated that they would like a copy of

the thesis when finished. DMT is therefore the considered the client of the scenario process.

DMT is both a trade organization and an employers’ association and it has around 90% of the

companies in the industry as its members. The members are all different types of textile companies

varying from carpets and interior textiles in cars to fashion companies. The organization serves its

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members in several different aspects among other it gathers and provides trade information, and

offers consulting on legal matters, retail, CSR, environmental issues, financing, export, and

communications.

1.2. Empirical material

The data collected for the thesis is based on interviews from the industry. These open-ended

interviews are made with the employees of DMT, the fashion companies Won Hundred,

Peppercorn, Thelin and with Patrizia Venturelli Christensen from Kopenhagen Fur. Together with

the information from the interview, the thesis also builds on other data from existing business

analysis and relevant reading material on the fashion industry and the business environment.

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2. Methodology The following chapter will outline the scenario, the research and data collection methods of the

scenario planning process. Therefore this chapter will first touch upon the meta-theoretical

considerations that lay the ground for writing the thesis, outline of the primary and secondary data

collecting method, discuss the various approaches of scenario planning and the one selected for the

thesis, and why it is chosen. Finally the delimitations and the structure of the thesis will be

presented.

2.1. Meta-theoretical considerations

This presentation is meant to serve as a context for the discussion of the methodology applied in the

thesis and the later theoretical outline of scenario planning. There are different aspects of

epistemologies or theory of cognitions when considering the approach of a writing a thesis.

However, the findings and research made in this thesis are a largely a result of a single approach,

namely the hermeneutic approach to theory and science. Understanding the nature of wholes and

how parts are and these whole are interrelated is essential to understanding living systems. In

observing living systems the constant growth and development springs to eye.

“The whole exists through continually manifesting in the parts, and the parts exist as embodiments

of the whole.”

(Senge et al, 2005: 6)

Understanding the relationship between parts and the whole is important when considering the

evolution of global institutions, historical events, nations’ development, the global climate or global

policies or trade. The key to learning is to become aware of these dynamic wholes and parts (Senge

et al, 2005: 6-13).

From a hermeneutic approach it is believed that interpretation of meaning is central with

specification of the type of meaning sought and attention or focus on the questions asked about a

text. Here, the concepts of conversation and text play central roles and the interpreter’s

understanding of the text and its subject is stressed. Thus, the hermeneutic discipline is a study of

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objectification of human cultural activities such as texts. The purpose is to interpret these texts and

thereby find the intended meaning in order to establish a common understanding or consensus

(Kvale, 2006: 55-57).

Interpretation of meaning is characterized by the hermeneutic circle. The fundamental idea of this

circle is that the understanding of a text as a whole is established by reference to the individual parts

and understanding of each individual part is established by reference to the whole. Neither the

whole text nor any individual part can be understood without reference to one another, and hence

the notion of a circle (Kjørup, 2000: 270). The dialectic play between parts and the whole not only

relates to text, but also the relationship between text and its author, according to Schleiermacher.

For Schleiermacher the understanding comes from both reading the text and having knowledge of

the context and the author as well (Kjørup, 2000: 271-73).

In principle, there are many ways of broad and narrow apprehensions of the hermeneutic approach.

In his work Gadamer concludes that the purpose of hermeneutic is to bring us in touch with the

traditional truths based on our own pre-understanding. Pre-understanding is the concept that every

understanding has its roots in a previous understanding. In other word, pre-understanding has the

bearings of prejudice. Gadamer viewed understanding as linguistically-mediated, through

conversations with others in which reality is explored and an agreement is reached that represents a

new understanding. In this sense it is argued that the researcher is affected by pre-understanding and

also the context in which the text or conversation occurs. As a researcher, it is impossible not to be

affected by the cultural ballast, the society or the family to which we belong and this must be

factored in when we have to understand something new. (Kjørup, 2000: 277) In other words, it is

the eyes of the beholder that judge the content of any conversation or text.

Contemporary, or modern, hermeneutics encompasses not only issues involving the written text, but

everything in the interpretative process. This includes verbal and nonverbal forms of

communication as well as prior aspects that affect communication, such as presuppositions,

preunderstandings, the meaning and philosophy of language, and semiotics1. The descriptions and

1 http://en.wikipedia.org/wiki/Hermeneutics

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analysis of the various interviews and trends that are part of the scenario planning method may be

characterized as hermeneutic. The scientific research method of qualitative interview, this thesis

would argue, belongs to the hermeneutic discipline. The researcher interprets the interviews based

on an individual perspective on the subject or questions that needs investigation. In order to analyze

the interview, the researcher goes beyond what is said and analyzes implicit aiming to work out the

meaning structures and relations understanding that are not always directly expressed (Kvale, 2006:

199). In relation to these meta-theoretical considerations the next section will elaborate on the

primary and secondary data collecting methods used in this thesis.

2.1.1.1. The primary data collecting method

Overall, there are two distinctive methods for collecting data, the quantitative and qualitative

method. The difference between them is that quantitative research can be based on meanings

derived from numbers, the data can be is collected in a standardized way and the analysis often

results in diagrams and statistics (Saunders et al.2003: 378-379). The objective of using the

quantitative method is often to collect descriptive and explanatory data about opinions, behaviour or

attributes. The questionnaires are used in surveys and the questions are standardized. This makes it

possible to generalize the findings and check the validity and reliability of the questionnaires

(Saunders et al. 2003: 316-317).

Qualitative research on the other hand is based on meanings expressed in words, the data may be

collected in a non-standardized manner and the analysis requires some sort of classification into

categories. (Saunders et al. 2003: 378-379) The qualitative interview offers a unique opportunity to

understand the interviewee’s experience of the everyday life and its meaning. The research

interview is a special way of human interaction where knowledge is gathered through dialog

(Kvale, 2006: 78). The interaction is not anonymous or neutral as when using questionnaires,

neither is it too emotional and personal as a therapeutic interview (Kvale, 2006: 130).

The critique of the qualitative research approach is issues of reliability, bias and generalisability.

Because of the lack of standardisation, the concern is that the interviews may not be reliable. The

question is whether another study would come up with the same form of information. The bias issue

is both a concern in connection with the interviewer as well as the interviewee. The interviewer

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must be careful not to direct or impose own beliefs through the questions asked. The interviewee

may also be bias. If there is certain sensitive subject or question that the interviewee wants to avoid,

he or she may refrain from answering and thus cause a bias situation. To overcome the situation of

bias, the researcher has to be prepared and be aware of his/her behaviour and the manner in which

the questions are asked.

To make generalisations about an entire population is not possible with the qualitative research

method because it is based on small and number of cases. However the assumption behind this type

of research method is that it is complex and dynamic. Furthermore, the result or findings of the

interviews may not be intended to be repeatable because it is made in a context of change and must

therefore reflect the current situation (Saunders et al. 2003: 252-254).

2.1.1.2 Qualitative research method

For the purpose of this thesis, the qualitative method is chosen because of the nature of a scenario

exercise. The thesis is undertaking an explanatory and exploratory study and a combination of the

in-depth and semi-structured style mentioned above is practised. The interviews are based on the

semi-structured concept and therefore an interview guide is made. However, the goal with the

interviews is to get the interviewee to open up, and should an interesting subject arise during the

interview, the course of the conversations may deviate from the interview guide.

Interviews may vary in their degree of structure and formalisation. The most informal, the non-

standardized, interviews are called semi – or unstructured interviews. For the semi-structured

interviews, the researcher may use a list of questions or themes as basis for the interview. These

lists may differ depending on the context of the interviews and the specific case. Unstructured are

the most informal and here the researcher explore in-depth a general area of interest. There is no

fixed list of questions and the interviewee is given the opportunity to talk freely. Another possibility

is to use structured interviews with a precise list of prepared questions, a form of questionnaires.

Choice of interview type depends on the purpose of the exercise. If it is a descriptive study the

choice of a structured interview is often made. However, if the purpose is exploratory and

explanatory the choice is often the semi-structured or in-depth interview method (Saunders et al.

2003: 246-248).

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The whole idea is to elicit information and to get the interviewee to think about concerns, but also

to consider alternative futures. The conversation must be open and the questions asked must trigger

the interviewee to talk openly and freely, drawing upon his/her knowledge about what is currently

happening and also his/her intuition about what might occur in the future. There are different

methods for asking questions. Questions on how a desirable/undesirable future would look like and

what have to happen in order for these futures to come true may encourage the interviewee to think

about possible future outcomes (Heijden, 2006: 176). This is a process that is made possible with

the qualitative interview method. If the quantitative method such as questionnaires where chosen,

the outcome would be entirely different. The questions would be fixed and the answers would be

narrow.

In the preparation for these interviews, material on the client and the fashion industry were read and

used to make a list of themes of interest and questions. All though there is some planning and

preparation before conducting the interviews it is important to keep an open mind and go with the

flow of the conversation. Therefore, the list of subjects of interest only serves as framework for the

interview (Heijden, 2006: 174). It is suitable to have an open-ended interview style where there is a

framework layout for the interview, but the questions and the conversation is evolving as the

interview progresses. The framework here is in form of an interview guide (Appendix 9).

There are certain elements to consider while planning and conducting the interview. The purpose of

the interview and the scenario exercise must be explained to the interviewee and so must the use of

the outcome of the interview. This briefing of the interviewee will help establish trust, which is

necessary for the interviewee to express what he/she thinks are areas of possibility and concern. In

order for the conversation to be built on trust and be as free flowing as possible, the interviewer

needs to practice active listening. This implies that the interviewer does show that he/she is listening

by nodding and repeating the statements said by the interviewee. This confirms the statements and

lets the interviewee know that what he/she says is matter of importance. The trap is here to maintain

a balance so that the interviewer interacts, but takes care not to overdo it and end up forcing the

conversation in a certain direction (Heijden, 2006: 174-175).

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The primary source of information when researching for the scenario agenda in the thesis comes

from representatives of the client of the thesis, selected companies, business leaders and a

prefessional from the outside with expertise on the matters of the industry and the process of

scenario planning. It is necessary to elicit the views and insights of these people and analyse and

interpret the responses made.

During the interview a lot of information will arise which can be used not only to describe areas of

concern, but also constitute a vital part of the knowledge needed for the analysis of trends and

uncertainties. This thesis will make use of the interview method for getting an overview of the

fashion industry in general but the interviews will also serve as background information for when

the trends and uncertainties will be described later on in the process. Statements and facts from the

interview will be included both in the trends analysis and conclusion on the scenarios.

2.1.1.3. Analysis of the qualitative interviews

In order to analyze the interviews, a transcription of each of them is carried out. A transcription

cannot be regarded as the fundamental data of the research in itself, but is an artificial construction

of a verbal communication into a written communication. Therefore it is necessary to have a set of

rules that governs the transformation. Transcriptions are interpretational constructions that vary

according to the purpose of the interviews. There is no correct way of handling them. If the research

is of linguistic nature is would probably be correct to transcribe word for word (Kvale, 2006:163-

171). In this thesis the understanding and meaning is essential and therefore the transcription will

not include pauses, repetitions and tonality.

There are different ways to analyze an interview. The overall method for this thesis is the

hermeneutic approach and closely linked to this approach is the meaning interpretation of an

interview. For the purpose of the thesis the views and insights expressed during the interviews are

all interpreted, analyzed and transformed into a study of the fashion industry. The expressed views

are thereby re-contextualized in a broader frame of reference. (Kvale, 2006: 191)

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2.1.1.4. The secondary data collecting method

Secondary data is typically documentary, survey based or a combination of the two. This type of

research includes raw as well as published data for example in the form of reports from companies

or governments, information from news papers, television documentary or surveys and statistics

(Saunders et al. 2003: 188-193). In this thesis, secondary data is collected via different futuring

method tools for eliciting empirical material and it is a combination of researching the history of the

industry, environmental scanning, and internet search, reading existing trade analysis, media scan,

news paper reading etc., all of which belong to or are part of scenario planning method. As is the

case with this thesis, secondary data is often used to provide comparative and contextual data

(Saunders et al. 2003:200-201). The findings from the primary research will be put into the context

of the secondary data when analysed in the trend analysis and used for scenario creation.

2.1.1.5. Analysis of the secondary data

The methods for analyzing the secondary data will be described in detail in the chapter on

theoretical background.

2.1.1.6 Different approaches to scenario method

After studying the methods used by a number of scenario planners it is clear that there are two

different approaches to scenario planning. The first is an intuitive, fluid and progressive approach

that builds on creativity and sensitivity. The other way is more formal, based on processes

following models and a certain structure. There are arguments that weigh for and against both ways.

The more intuitive approach opens up for creativity and experiments. However, some regard it as

too loose and the resulting scenarios are too general and far fetched giving way to more doubt and

concern than necessary.

The critique of scenario planning is often that it is too unstructured and based on intuition.

Therefore it can be perceived as difficult to trust the results from the scenario stories. These are not

created only from mere facts, but also from speculation and guesswork. In a business world where

numbers and facts are normally measurable and the research is quantitative, the more loosely and

qualitative scenario approach is by some seen as unreliable. Michel Godet is a known scenario

planner who has the opinion that scenarios work, however, the process must be structured along the

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lines of models and formal steps in order not to become to elusive. This direction of his belongs to

the more formal approach in which tools are regarded as essential to the process (Godet 2006: 108-

110).

A believer in the structured approach is also the theorist Michael Porter. He warns that the scenarios

must not become too general and thereby inapplicable to strategic decision making. He suggests

that the process should be conducted according to the industry of the company. The data collected

and the following analysis must be done with the concrete industry in mind or ells it can easily

loose track and focus. Porter’s preferred method for scenario planning is something he calls

industry scenario (Porter 2004: 445-468). This particular scenario method allows for the industry to

be the centre and the result is therefore more useful for the company. The second scenario method

that he describes is the macro scenario, where larger trends and uncertainties are studied. This gives

a very overall view of an industry, which is why he cautions about the tendency to become too

general in describing the scenarios. Thus, in his opinion, the best practice is to conduct industry

scenarios.

Godet and Porter represent the formal method which is an expression or an attempt to make

scenarios that can be accepted as solid decision making tools. This scenario process tends to be very

structured and some would say, more rigid.

Another critique of scenario planning is of a different kind. Two known authors, Gary Hamel and

C.K. Prahalad, claim that scenario planning is limited in its method for seeking industry insight.

The argument is that while scenario planning can be applied for considering a specific outcome of

an increase in oil price of say 5 dollars, it cannot be expected to come up with new insight into the

future product innovation necessary or the needed technological advances for the existing product

line. The basis of scenario building begins with looking at what already exist and then project it

forward, thus getting a result that says something about what might happen. If the industry in

question is too unstructured, the resulting multitude of scenarios will do more damage than good.

Instead, Hamel and Prahalad believe that in order to gain true industry foresight the company must

pick another starting point. The best way to figuring out the future is to imagine what could be and

then move backwards to find out what must happen in order for this future to come true. Despite

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this view, they are not dismissing scenario planning completely. Scenarios are viable as building

blocks in the process of future thinking. (Hamel et al, 1996: 88-89) First, however, a company has

to be able to imagine a future before it can create it. All though deep knowledge of trends is

necessary, imagination is also a vital part of industry foresight.

Peter Schwartz is working more intuitively. Collecting clues from the present and piecing a puzzle

together with them about the future is the strategy preserved by this theorist. Schwartz refers to the

scenario building as an open and fluid process with some elements of structure (Schwartz 2007:

108). The theorist, which this thesis primarily builds on, is Kees Van der Heijden. Heijden has the

understanding that the working process of constructing the scenarios open to intuitive leaps and the

use of imagination. As long as there is only a limited number of scenarios constructed, each being

plausible, consistent, and relevant to the client and the result of the scenarios is a new and original

view of the concerns of the client, then the scenario planner has free hands (Heijden 2006: 226).

The tools are only meant as helpful working instruments.

2.1.1.7. Choice of approach

Scenario method varies according to what kind of project, problem or purpose the client has. The

approach chosen for this thesis is a mix between the intuitive and the more formal method.

There are two arguments for doing so. The first is that it suits the terms under which the thesis is

written. Because of the limited scope explained in the chapter on limitations for the thesis, there will

be a need for doing a more simplistic scenario process. Another argument for the use of the intuitive

method is that a part of the concept of scenario planning is to create and use the imagination. This

can be lost if the process is forced into rigid models and concepts (Schwartz 2007: 108). There is a

fine line between having a process of going with the flow or being hung up on concepts and models.

This does not mean that there will not be any concepts and models in this thesis. However, the

process will be conducted according to some more intuitive methods and also be structured along

various theorists, instead of staying in line with only one certain theorist and model.

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The empirical material will be gathered along various theorists. The trend analysis is described as

an effective tool by most theorists as is the brainstorming, impact/affect analysis and interviews of

relevant persons.

Regardless of approach chosen, there are certain elements to a scenario process that are

fundamental every time. It always begins with an issue or a question that the company, organization

or even individual needs to resolve. Next begins the information seeking period where all that may

be of interest in relation to the question or dilemma is sought out and collected. The ways to gather

information varies from scenario process to scenario process and also depends on the planner. Some

often selected methods are environmental scanning, interviews from people within the company and

people outside, who might possess valuable knowledge and trend analysis.

Using imperfect knowledge of the future instead of not doing anything at all is vital if the

organizations want to act while events are still fluid or on the way – before they have hardened into

realities that cannot be changed (Cornish, 2005: 3).

Hamel and Pralahad argue that most companies fail to anticipate the future. Hence, making an effort

to try to give an estimate must be worth while, also even though this amounts to scenario planning.

This may only be the beginning, but still, thinking and working with the future is better than doing

nothing at all.

2.1.1.8. Reasons for scenario based planning (Hereinafter, SBP)

Many managers today find themselves overloaded with information. They work until they feel a

situation makes sense, until it correlates with prior beliefs. When sense is achieved there is no need

to carry on. This way of working does not require SBP, but it may satisfy an instant need for

certainty in the day-today practise. This practise is called the Business-As-Usual model. Even

though the company arranges environmental analysis, the problem is that the mental model of

Business-As-Usual often limits the search and is prejudicing the answer (Heijden, 2006: 55- 56).

“Strategizing only on the basis of Business-As-Usual is fighting yesterday’s war and is doomed to

fail” (Heijden, 2006: 56). A company choose SBP as method for strategizing when it wants to go

beyond the mental model and look for internal and external changes (Heijden, 2006: 58). Many

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organizations attempt to introduce a process where a space of new and unique insight can be found.

Such a process is SBP.

Scenario planning is by some considered part of the answer to not only keep up with the

competition, but also to be in front, preparing for or controlling the events of the future. There are

more reasons to use the futuring method of scenario exercises. Some may wish to plan ahead and

prepare for events before they happen as being alert and well prepared means avoiding damaging

the company in any way and keeping the course planned for the company. Others will want to be a

leader in their business environment, controlling things and perhaps even turn them around to the

advantage of the company. These clients are the more progressive ones who use scenarios to create

or pave the way towards leadership.

2.2. Delimitations

As stated in the methodology chapter, there are several tools and approaches to a scenario exercise

and it all depends on the planners and purpose of the exercise. For this thesis, the scope, time limit

and resources are automatically generating certain limits to the scenario exercise. Therefore best

practise according to the idea of the exercise will be preformed, including in the exercise an

industry analysis, trend analysis and the writing and analysis of the scenarios.

In the matter of making the trend analysis I will focus on the trends and uncertainties that appear to

affect the industry the most as it is not possible to make a complete investigating of all current

trends in the industry today. The priority of the most influential trends will be made according to the

specific areas of concern that will arise during the analysis of the interviews. Thus it is necessary to

focus the trend analysis.

To keep the area of the thesis narrow and focused, the subject of the thesis will be one part of the

whole Danish textile industry, the fashion industry. To further narrow it down, the main objects of

the scenario exercise are the small and medium sized companies. The Danish industry mainly

consists of small and medium sized companies with a turnover of less than 1 billion DKK and with

less than 50 employees. (Appendix 6: 1) Thus, the interviews made for the thesis are with

companies that are within the range of this category. The reason is that to be able to conduct a

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thorough exercise, a priority in this respect is necessary. To have the whole textile industry as

subject is not possible under the given circumstances.

2.3. Structure of the thesis

The structure of this thesis follows the structure of the scenario exercise. The first part of the thesis

is the theoretical presentation which highlights scenario planning as a management tool. In this

particular case strategic management encompasses the concept of a learning organization; a

principle that belongs to strategic management. The theoretical chapter will only include the

scenario method used in this thesis at a general level. Further theory on the individual tools is

inserted, when necessary, into the chapter when the actual exercise is carried out.

After the theoretical chapter, the thesis will now begin the initial part of the scenario exercise,

namely, the preparation phase. Here, the ground work for scenarios is laid out. The primary purpose

of this preparation phase is to present the fashion industry and the concerns it has for the future.

After this initial ground view of the industry, the centre of the thesis, namely the process of the

trend analysis and the construction of the scenarios will be completed. The exercise consists of

three parts, the preparation, the trend analysis and scenario building.

To finish this thesis there will be a discussion on the strategic decisions that a company or DMT

could consider after having seen the scenarios and evaluated on the outcome. Furthermore, a

conclusion on the thesis and the process will be completed.

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3. Theoretical background

This chapter will touch upon the theoretical background of scenario based planning and the various

aspects of this. First, a brief introduction will be given to the discipline of SBP offering an

explanation of SBP belonging to the area of strategic management. Next, a description of the

principles of scenario exercise follows. These two sections are meant to provide a basic

understanding of the theoretical roots of a scenario exercise. The last section of the theoretical

background will be an outline of SBP in practise. When giving an introduction to the theory behind

SBP it is difficult not to include a description of the process of scenario exercise at the same time.

As stated above, scenario planning is a multi-disciplinary field and the method and theory are

closely linked. Therefore, this section will be a mix of the steps taken in the scenario exercise,

particularly those of this thesis and the reasons why, together with the theory behind it. The

theoretical outline in this section is meant to be applied later in the thesis when the analysis begins.

3.1. Strategic management

Scenario planning functions as a strategic management tool, often as a part of decisions making. A

definition is offered by Schwartz.

“The scenario process provides a context for thinking clearly about the impossible complex array

of factors that affect any decision”.

(Schwartz 2007: xiv)

Working with scenarios creates a common language in the organization which gives management

and employees an opportunity to talk about all the influencing factors and the “what-if” stories of

the future. What if this and that happened, what would we do then and how can we prepare for such

an event? In some cases only a few steps of the scenario exercise is carried out, but even though the

whole process of scenario method is not completed, the advantage of having the participants going

over the options and possibilities of the future is immense (Schwartz 2007: xv).

17


When strategizing is necessary it is because there are elements of both uncertainty and predictability

in the business environment. If only there were predictable and certain elements in the business

world there was no need for strategy (Heijden, 2006: 92).

“The business environment is uncertain. Business is about taking risks. Strategic management is

about exploiting opportunities within a context of uncertainty about the future.”

(Heijden, 2006: 91)

“(…) the ultimate purpose of strategizing (….) is to gain a new original and unique insight in where

the business environment is going in the future, in an area where the strengths of the organization

can be utilized. The business environment can be interpreted as a system. Insight means perceiving

the connections and finding the sensitive points of maximum leverage. Strategizing, thinking and

practice, is about perceiving what, behind the apparent uncertainties, is predetermined, as the basis

for the unique insight that is needed for a strategic edge.”

(Heijden, 2006: 55)

SBP is a strategic management tool that can guide the decision makers to elicit the right choices for

strategic planning. It is a learning process in which ideas and thoughts are considered and tested

against the research and following stories. In looking at the multiple futures, the organization can

act quickly and prevent being outmanoeuvred by competition or getting economic damaged. Instead

of being passive or simply react on the flow of events happening in the organization and business

environment, the organization can make the changes necessary upfront and even be a market leader

in some situations.

3.2. Scenario Based Planning

The theory that this thesis is based on is scenario-based planning theory. SBP is a systems thinking

concept where the planner looks for the cause behind the events occurring in the business

environment, recognizes a system and thereafter frames those systems into scenarios. The scenarios

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help create a forum for strategic conversation, innovation, and exploration of alternative futures

which the companies can choose to deal with in an appropriate and relevant manner.

Deciding what is worthwhile focusing resources and skills on can be a huge and sometimes difficult

task for a company. Therefore the company needs a way to select which areas need attention and

which do not (Heijden, 2006: 92). The process depends on the particular case or situation, the

company or organization developing the scenarios and also on the purpose of the entire exercise.

Still, there are some principles to scenario planning that are recurrent among theorists.

3.3. Principles of scenario planning

Lindgren et al, like many of the other theorist within this field, state that there are principles to

scenario planning that are part of every scenario exercise and which need consideration no matter

how and why the exercise is preformed (Lindgren, 2009: 118-137). For the purpose of this thesis, a

number of the principles will be mentioned here because of their high influence on the way the

thesis is conducted.

A primary factor is to keep the client in mind, when creating the framework and executing the

scenario work. This means that what is important strategically to the client must be the centre of the

entire scenario exercise. Ensuring the client’s interest and concerns is done by setting the scenario

agenda. The scenario agenda constitutes the areas of concern for the fashion industry and in this

thesis this is done by interviewing the client and thereby elicits the insights and views.

Yet another principle is the principle of systems and structure. The perspective governing all

scenario planning is the system perspective which basically says that there are multiple levels of

explanation to in any complex situation. According to the theories of Senge the systems perspective

requires more than just simply looking at events and individual mistakes. Instead, it is necessary to

look beyond these and focus on the underlying structures which in turn shape the conditions under

which events become likely. The term structure in this connection does not refer to the logical

structure of a conversation or the structure on an organization chart. It refers to key

interrelationships that influence behaviour over time; interrelationships between key variables such

as population, natural resources or know-how in different areas of a company working together

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(Senge, 2006: 42-44). Senge discusses this system perspective and has made a diagram over the

multiple levels of explanations. See diagram below.

Systemic Structure (generative)

Patterns of Behaviour (responsive)

Events (reactive)

(Senge, 2006: 52)

“The key to deeper learning is becoming aware of the dynamic wholes of systems because when this

is achieved knowledge and awareness of what is emerging evidently follows.”

(Senge, 2006: 10-12).

Most action in a company happens on an event level. This is the reactive learning level where the

actions taken are actually re-enacted habits and the result becomes a reinforcement of pre-

established mental models. However, short term reactiveness does not hold for long. The next level

is called Patterns of Behaviour explanations and the focus here is to see the longer term trends an

assessing their implications. At this level, a company begins to see how it can respond to the shifts

happening around it. The rarest, but most significant level is the structural explanations level. Here,

the focus is an understanding of what causes the patterns of behaviour seen in the surrounding

environment (Senge, 2006: 42-53). By many theorists, the image of an iceberg is used as illustration

of this perspective (Heijden 1996: 104; Lindgren et al 2009: 132-134).

Structure plays a vital role in every scenario exercise and design. Some elements of the future are to

some extent predetermined and some are very uncertain. The purpose of analysis is to find

something of the underlying meaning of events that happen in the business environment. An

analysis therefore begins with perception, and perception starts with observing the events. When

these events are investigated patterns and trends begin to emerge. Considering where these trends

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and patterns originate from is called causal thinking. By thinking in terms of patterns and trends the

driving forces become clear and the structure becomes visible (Heijden, 2006: 102-107).

Scenario planning is all about viewing the business and environment differently from what a

company normally does. Normally a company practises an inside-out focus. The focus is usually on

the day to day business and when considering strategy the company begins by looking at its own

organisation and then outwards to the competitors and customers within their own near

environment. This approach suffices for when the company wants to make changes or new strategy

in a stable business environment. In a complex and developing environment this will not be enough.

To prepare for the new changes appearing in the future an outside-in approach is needed. Because it

is so difficult to foresee what will happen in the future it is necessary to discover the driving forces

that influence the marketplace, trade and thereby the company. This perspective applies particularly

in the search for the trends and uncertainties in the industry (Lindgren et al, 2009: 59-60). The

perspective of looking outside in is structure thinking.

Even though scenario planning is about risk assessment, there are some elements that are highly

predictable. Among theorist these elements are called predetermined elements. Whether an element

is predictable or not also varies according to the horizon time of a scenario exercise. Typical

predetermined elements are demography, culture or climate. These are all over a term of 2 – 15

years mostly considered predetermined since they exhibit some kind of predictability, a stable

structure maintained over a larger timeframe. The elements that appear in a scenario exercise which

are predetermined will be included in every scenario. The way that scenarios differ is along the line

of different alternative structures, namely structural uncertainty (Heijden, 2006: 101-103).

Developments in a business environment can be explained in more than one way which means that

there are numerous different cause and effect structures that could explain what is happening. This

is structural uncertainty and scenarios operate in this area. Which ever structure is found or used

will affect the outlook of the future (Heijden, 2006: 102-103). Thus, scenarios are a part of this

structural perspective. In summary, it could be said that there are three basic elements in a scenario

exercise. Looking at the events and trends and divide them into uncertainties or predetermineds.

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In order to find the casual structures there are some steps to take. An analysis of structures usually

involves a process of:

Specifying important events (…)

Discover trends

See the patterns of the variables

Develop the structure

Use the structures to project future behaviour with multiple structures leading to multiple

scenarios

In order to execute this analysis the methods of futuring are taken into use. Thus, here follows the

last principle that will be stressed here is the notion of a toolbox. Scenario planning can be

described as a decision making toolbox with radar capabilities. There are many tools to choose from

in this particular box and the most important capability is the radar effect. The radar is a metaphor

for the way that the industry and the business environment is scanned. It picks up events and trends

of interest to the planner (Schwartz 2007: 61). In order to do this tools and methods for identifying

trends and uncertainties, identifying their consequences and generating alternative scenarios are

needed. The notion of constructing a toolbox for completing a scenario planning exercise is

mentioned among theorists (Heijden, 2006: 162).

For each scenario exercise a toolbox should be constructed with tools that are aligned with the

purpose and focus of the entire exercise. To facilitate the exercise for this thesis, appropriate tools

are selected form various theorists, according to what serves the purpose of the exercise best. In the

following section these tools and the theory of this thesis will be described.

3.4. Scenario planning tools for research and analysis

There are some steps or parts of scenario planning that are very common or basic, often taking

place in any scenario process. In this thesis there are three parts to the scenario exercise. The first

part is the preparation phase in which there are several important steps involved, which are:

22


Finding of purpose and focus

Level of system

Scenario agenda (direction of the scenario exercise)

The second phase is the trend analysis and the third phase is the scenario analysis. These phases will

be described below in the right order of sequence.

3.4.1.1. Scenario agenda

The scenario agenda is a matter of identifying the issues or concerns that need investigation. There

can be a number of questions or decisions that need answers or solutions. The task of defining these

questions is done in collaboration with the client (Lindgren et al, 2009: 56-57; Heijden 2006: 166-

169).

First, there it is necessary to get an understanding of the client and its concerns. Elicitation of the

views of the client may be conducted in a number of ways. The typical procedure for elicitation of

views of business leaders are either through SWOT, group brainstorming or in depth individual

interviews. For this thesis the method of interviews was chosen. With regards to detail it gives a

more productive result than the other two methods (Heijden, 2006: 168). The in-depth and semi-

structured interview approach mentioned in the methodology chapter will be applied in this thesis.

When the interviews are made and the transcriptions finished, the analysis can take place. The result

from the interviews is usually a mix of internal and external information of the company and

industry. Internal information is typically issues in areas the client organization or company has

control over. It is called the transactional environment and involves matters of strategic options,

business policies or competitors close to them (Heijden, 2006: 185). The internal information can be

used for making a Business Idea (herinafter BI) description. Because of limited time and resources,

it is not possible make a complete BI. For the purpose of the thesis the internal information will be

used after the description of the scenarios to look at the strategy needed in the future should any of

the scenarios happen in reality.

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The external information is called the contextual environment and concerns matters of society,

economic developments or powers of buyers and suppliers as examples. All though the client or

company has very little or non-existing control in this environment, the changes happening here can

be of utmost importance. Scenarios are playing out in this contextual environment and therefore it is

important that only the external information will be used for the further process leading towards the

scenarios. In that way the external developments are expressed in scenarios and separated from the

internal issues which belong to strategizing. This is important because scenarios are meant to be

testbeds for strategy (Heijden, 2006: 186-190).

Thus, the analysis of the interviews will concern the external information drawn from the interview.

There are three parts to consider when looking at and analysing the external information in this part

of the analysis. It is necessary to look at the generic forces and the driving forces. Looking at the

generic factors involves taking out all the statements made that concerns generic factors, such as

society, technology, economy and globalization (Heijden, 2006: 183). In addition to extracting these

factors it is necessary to consider the structure of the industry. This may be done by the use of

Porter’s five forces of competition as a frame (Heijden, 2006: 186-187). The five competitive forces

consist of relative power of potential entrants, suppliers, buyers, potential influence from substitute

products and generic competitive forces among existing competitors in the industry (Heijden, 2006:

186-187).

Together with these two forces the use of novel information is necessary and added in the form of

an interview with a RP (Appendix 8). These remarkable people have knowledge on the areas of

concern and may therefore be very helpful. They often see things that the managers or business

leaders cannot, which sometimes leads to new understanding or linking of the trends and

uncertainties. In this thesis, an expert is also used to highlight important changes occurring in the

industry. The three parts of the generic factors, the driving factors and the statements from the RP

will all be melted down to an exposition on the Danish fashion industry.

3.4.1.2 Clustering

The process of analysing and melting these three parts down to an exposition will be done

accordingly. The first step is to get an overview of all the facts and statements made during the

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interviews. This is done by clustering the information down to areas of concern and insights. To

cluster means to narrow the information into categories as independent as possible. Since the

overview is important at this stage of the process visual methods are often used (Heijden, 2006:

184-185). The chosen clustering method for this thesis is the tool of mind mapping. Mind mapping

is visual and often used as a method for getting an overview, brainstorming or identifying issues

related to a problem (Cornish, 2004: 130-131). The procedure for analysing and clustering the

statements will be as follows. First, the main statements from each interview will be written down

on the computer and then turned into key words on a mind map. An example of a mind map from

one of the interviews is enclosed (Appendix 10). Each mind map with the clusters will be a direct

reflection of the statements made involving information on the above mentioned areas.

3.4.1.3. Time horizon

In order to limit the extents of the research of trends, a time horizon for the scenarios is necessary.

This decision on when the scenarios should take place comes after the scenario agenda is made. It is

called the horizon time and is important for the research developed. The horizon needs to be

carefully picked out and framed. It varies whether it is 5, 10, 15 or more years from when the

exercise is taking place. If the scenario agenda or focal question constitutes urgent problems facing

the client in the near future, a 5 year horizon may be appropriate. If it is a long term change that

needs investigation it may be appropriate to pick a 10 or 15 time horizon. (Heijden, 2006: 192;

Lindgren et al, 2009: 57)

3.4.1.4 Trend analysis

This part of the process is about tracking the trends and uncertainties that have influence on the

scenario agenda areas of concern and then analyse them. Trends, drivers and uncertainties are all

important to consider because they have impact on the future and the strategy of a company.

(Lindgren et al, 2009: 59)

Like the other parts of scenario planning, tracking and identifying trends and the underlying drivers

can be preformed in a number of ways. Media scanning, internet search, focus group learning,

professional networks or historical analysis are all valid methods for getting a clear overview of the

trends and uncertainties in the industry (Cornish, 2004: 78-79). Trends may also be identified along

25


certain classifying methods. Many theorists suggest using systems like DEGEST which classifies

trends according to six categories of Demography, Economy, Government, Environment, Society

and Technology (Cornish, 2005: 83-84; Heijden, 2006: 183). Besides the in-depth interviews

already described, environmental scanning and historical analysis will be used for the trends

analysis part. In order to keep the scenario process intuitive and open, trends will not be tracked

according to fixed categories, but instead will be explored openly with basis in the scenario agenda.

Environmental scanning is a critical method and consists of examining the trends to see what they

entail, how they progress and the potential impacts on the fashion industry. Reading existing trade

analysis and searching the internet, media and publications for relevant material is part of the

scanning. Relevant data will also be sought out from books, the news and different publications like

newspapers, the Economist and Time, all of which will be an essential part of the empirical data

search (Lindgren, 2009: 63; Cornish, 2005: 81-82). When looking for information and data, the

search will be wide and open. Areas of interest will include technology and science, the economy,

the development of the new attitudes of consumers and the events that shapes the perception and

ideas of the global society in general.

Looking at the history or the past of the fashion industry as well as the present and future is

essential. Knowledge of the past can be used to prevent future events from happening. Taking

historical events and relating them to the current situation is an important tool. An example of this

could be the late “Internet” bubble which came as a shock to many and now serves as a warning of

when or if similar signs for a bubble should occur. Thus, examining the past in areas of global

business and trade will be one tool used in this exercise (Cornish, 2005: 78-79, 133-139).

3.4.1.5 Cause and impact analysis

Analysing the trends is to examine the underlying conditions and driving forces of the trends in

order to better understand them. The methods again vary but here a cause analysis is made and it is

done by searching for the forces that are creating these trends. Each trend is analysed by asking

what kind of actors that could have an influence of the trend and then listing them (Cornish, 2005:

88).

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Additionally, an impact analysis is conducted. Here, the key is to identify the effects that a trend has

on other things. The consequences of a trend may be hard to predict and too often these

consequences go unnoticed. By using logic, a list of all the consequences will be drawn for each

trend (Cornish, 2005: 88). Uncovering these layers of the trends makes the underlying causal

structure visible and this is helpful for when the scenarios is to be written. Another reason for

conducting a thorough trend analysis is that these trends do not always stay on course. Sometimes

they take on a new direction or reverse. Discontinuities happen and for this the planner should also

be prepared (Heijden, 2006: 230, 231).

Each trend implies a variable. To further improve the knowledge of the trends and uncertainties an

influence diagram, also know as causal loop diagram, will be made for each scenario. (Lindgren et

al 2009: 67-68, 178). The method of the influence diagram is to take the identified trend or viable

and ask what could make this viable go up or down, increase or decrease. Such explanations

provide insight into what is driving what. For each explanation a new link in the diagram is added

(Heijden, 2006: 230-234). In the process, the goal is to find the underlying driving forces and then

the critical uncertainties affecting the situation or scenario agenda, the areas of concern (Heijden

2006: 230-234). The outcome of the influence diagram is an overview of the causal links and

system patterns of the two critical uncertainties chosen, together with the predetermined elements

and driving forces. The next step is to craft the storylines of the scenarios, or to flesh out the story.

The trend analysis is a part of the structural analysis and thinking which the whole idea of scenario

planning is based on. All of the above mentioned theories and tools are leading towards the creation

of scenarios. The next phase is therefore the scenario phase.

3.4.1.6. Scenarios

The outcome and understanding reached when making cause and impact analysis together with the

influence diagram, is very helpful for the next move which is the process of constructing the future

scenarios. At least two scenarios are needed to reflect uncertainty, but the limit is four scenarios

because more end to be counterproductive and impractical. Each scenario must be plausible and

internally consistent and must involve issues relevant to the client (Heijden, 2006: 224-226). For the

purpose of this thesis the “matrix method” will be applied. This is a deductive approach based on

27


identifying two key structural variables or driving forces, on the basis of which the scenarios will be

disinguished. The dual scoping outcome will then create a 2 x 2 matrix, indicating four scenarios

(Heijden 2006: 242-250; Lindgren et al, 2009: 72-74). The matrix model for the scenarios is shown

later in the thesis under the chapter on scenario building

Structuring the scenario involves building from a general framework to specific scenarios, i.e. the

scenarios are specified in terms of the scoping outcome of two selected critical uncertainties, the

scenario dimensions. This helps establish the basic nature of each scenario. Then each scenario is

filled with the data from the research and analysis previously conducted. In choosing which

uncertainties to use for the scenario dimensions it is important to consider two aspects,

predictability and impact on the client. The way to do this is by ranking them on their level of

uncertainty and impact on the client (Heijden 2006: 242-250). When the choice is made of which

two critical uncertainties to use and the scoping outcome is defined a matrix with two scoping

outcomes of different dimensions are combined to specify a future world.

The next step is to ask what kind of world would it be in which these two scoping outcomes have

become reality? Now the details of each scenario have to be described in a story on how the end-

states are reached from the today and to the scenario year. Developing the storyline is done in a

narrative manner where the trends and the drivers that are established as predetermineds appear in

each scenario and the two critical uncertainties are the basis of what differentiates each scenario

from each other (Heijden, 2006: 257-259). The scenarios serve a very special function. They are

meant to be illustrative and perhaps even provocative in their language and expression.

After the scenarios are written their implications on the client and the business environment is

discussed and related to what was stated during the interviews. For an overview of the method and

tools selected for the thesis, here is a list:

1. phase: Preparation

Qualitative interviews

Research from existing reports

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Media scanning

Porter’s five forces model

Generic forces

RP consulting

Clustering

2. phase: Trend analysis

Environmental scanning incl. media, news, magazine and news paper, existing trade analysis

Qualitative interviews

RP consulting

Cause and impact analysis

Influence diagram/causal loop diagram

3. phase: Scenario analysis

The matrix

Strategic decisions implications

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4. The First Phase: The Preparation

Initially, the preparation is about finding the purpose and focus of the exercise (Lindgren et al,

2009: 50-55). The purpose of this exercise is to open the eyes of the readers of the thesis and help

them gain insight into the business environment and the trends and changes occurring. In this way,

they might be able to draw up new strategies for future actions in a changed market. The focus is on

the old business and the challenges facing the Danish fashion industry. The main reasons for the

purpose and focus chosen are that the industry has gone through some transition years the last

decade or two and now stands in the middle of an economic crisis like the rest of the world.

Therefore there is now more than ever an incentive or motive to explore the past and current

business world and plan for the future.

Writing this thesis is for now a one-time project, even though it can be used to develop new ideas

and further scenario strategizing. The purpose is to generate an idea of the possible futures of the

fashion industry and to pass this idea on to the trade organization and its members, making it a

learning process. In the long run, the thesis could be the beginning of an ongoing decision making

activity in the companies therefore contributing to the learning organization (Heijden, 2006: 161).

The next step is finding out exactly what system needs to be analysed. Sometimes it serves the

client and exercise to investigate a specific event or operation because of its significance for the

future strategy. Other situations require an analysis of a broader view of the future which may then

give clues of where to look closer and make a deeper analysis (Lindgren et al, 2009: 55-56).

4.1. System level

As a whole, the level of system for this thesis is the Danish fashion industry. The choice of this

general level is based on two things. First and foremost, the purpose is to facilitate new strategies

for the fashion industry in a changing market. Therefore the market for fashion is a suitable systems

level to study. Secondly, the conditions for this scenario exercise are such that there is no time and

resource for choosing and going into detail with a specific topic or issue of one company. Instead,

for this thesis to produce useful results, the level needs to be general thereby maintaining

importance and efficiency. The choice of generalizing the focus level in the thesis derives from the

search for the greater picture and the wish to inspire individual organizations to go on with the

30


process from their particular businesses and view point. Once the purpose, focus and systems level

have been outlined, it is time to look at the direction of the remaining part of the scenario exercise.

The scenario agenda will, as set forth in the theory section, be a list of the main concerns expressed

during the interviews. The next section will give a brief description of the working process prior to

the resulting scenario agenda.

4.2. Elicitation of the concerns and anxieties

For elicitation of the concerns and views of the client, the companies and the RP the chosen method

was conducting qualitative interviews. These interviews have been made according to what is

prescribed in the method and now needs to be analyzed. The first basic step in the analysis is to get

an overview of the statements from the interviewees. Therefore, a mind map of each interview was

carried out and collectively these mind maps are then turned into an exposition of the main views

and insights of the interviews.

The exposition is made on the basis of the mind maps from the interviews (Appendix 10). The

exposition therefore reflects the outcome of the interviews and is made along the lines of the

statements from the RP, the driving forces and generic forces expressed during the interviews. It

therefore illustrates the status of the fashion industry based on the elicitation of the views and

insights of the client and fashion companies. Furthermore, the exposition will also include

information stemming from existing reports and analyses will be used as background material.

In the next section, the industry will be described according to the cluster subjects deriving from the

three parts mentioned under the theory on interview analysis, the generic force, the five industry

forces and statements from the RP. The exposition is a direct reflection of what the interviewee

expressed about the industry, the concerns and also possibilities of the current and future situation.

4.3. Exposition of the Danish fashion industry

The industry is dominated by small and medium sized companies. About 90% of the Danish

clothing companies have less than 50 employees.2 The top 3 companies, Bestseller, BTX Group and

2 http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm

31


IC Companys, are all in the high end, but the majority only has 5 – 20 employees or less. (Appendix

3: 11) It is possible to run a fashion business with very few employees because much of the work

intensive job functions like sowing have been outsourced to countries where the labour is cheap.

Because of the outsourcing, the main work areas left are those of designing, construction work,

marketing, sales and financial departments (Appendix 7: 2). Often in the small companies it is the

designer who is also the owner and managing director. Typically, the designer starts the company

and from there it develops with a few people getting on board.

Outcome wise, out of the app. 1200 companies in total, only a few earn more than a million DKK.

a year. On a list of companies and their turnover it is only the top 150 that have a turnover of 1

million DKK or more. From that point and downwards the rest of the 1200 companies make 1

million or less. (Appendix 5:18) It is safe to say that it is only a few that makes really big money,

the rest have little or no real turnover or even run on deficit. The current economic crisis is therefore

hard for the industry, especially those that have scarce resources.

4.3.1 Cluster: The Economy

The overall dominant subject when interviewing the fashion companies, employees of DMT, and

the RP was the financial crisis that began with the US housing bubble 2005 and still affects the

business and trade of everyone today. Until now, an estimated 40-50 companies in Denmark have

had to close because of crisis (Appendix 5: 18). Not as many as first expected has gone bankrupt,

but many are probably running on the last resources. Some have been saved by being bought by

others in the industry. An example is Baum und Pherdgarten which was bought by Bruuns Bazaar

when it filed bankruptcy last summer 3 (Appendix 3: 12). In an attempt to get by, others have made

new consolidations, working together on different matters such as marketing and having shared

storage places, thereby saving on expenses (Appendix 5: 2). So the crisis has forced many changes

and it is necessary to act. Retailers have made a though rough cut down on brands, only keeping

those that sell well (Appendix 3: 4). The situation is that there is less money in the hands of the

retailers because they failed to put aside money from their equity capital when times where better.

They are therefore more hesitant, cutting down on their purchasing and less willing to take risks

creating a great decrease in buyer base for the industry (Appendix 4:19; Appendix 1:8). The 3 http://www.fri.dk/mode/modeuge-naar-koebmaend-laver-toej

32


consumers are also more hesitant and saving their money even though they have disposable income

with the release of the Special Pension funds, SP, and the tax cuts (Appendix 6: 2, 20).

All of this has forced companies to take precautions and change their business strategy. Thus, in

these times of instability, the majority of the Danish companies look to the near markets to trade in

a safe environment that is close and will improve the chance of return of the money. Countries like

Russia and China are normally seen as great importance to the Danish clothing companies and

continue to be so, all though not at the same level of interest. Due to the financial crisis, there has

also been a tendency to focus more on sale and buying instead of spending resources on marketing.

Focus is on near markets such as Germany, the Netherlands, Sweden and Denmark. Germany is the

biggest export market for Danish clothes, but compared to how much the companies sell per

inhabitant/person they have a fairly small share of the market (Appendix 5: 15). Therefore,

Germany is a huge future potential and Denmark is reconsidered as a potential market. Just three

years ago, everyone went for the bigger market shares in foreign markets and Denmark was by

many considered too small a market to invest in. It is the companies with the greatest export share

that also have the largest turnover. Thus, sales on the export markets are important and make up

app. 90% of Danish clothes sold (Appendix 5: 1, 16).

Besides changing strategy and focusing on the near market many have also been forced to put their

plans for expansion on hold until the outlook is better or improved (Appendix 3: 3-4). Won

Hundred had a plan in the beginning of last year (2008) that included expansion into more European

countries. This strategy has been shelved during the crisis, but the dream is to open own stores from

which much of the future profit is expected to come (Appendix 3: 10-11). Now, instead the

company has taken advantage of the situation and bought shares fairly cheap in another fashion

company which has got a few of its own retailers (Appendix 3: 2-4). With this new takeover of

shares and entailing new sales outlets, Won Hundred will be more diversified and ready for when

the crisis is over, being able to address a bigger market in a new way. For now, however, keeping or

maintaining turnover level during this crisis is considered a good thing and very satisfying since the

retailers are more careful now when they send out orders on collections (Appendix 3: 4).

33


Getting back to the level of growth and sale before the crisis might not happen in the near future.

Because of high lending there was a consumer spending hype which had a cumulative effect and

made the sale explode into an unnatural high (Appendix 6: 21) The media helped create this hype

around Danish fashion and it has also helped the hype around the crisis driving the negative and

careful sentiment of the population. A lot of it is psychology which plays a major role in which way

the crisis will go. Despite that the purchase power has collectively risen, the public still refrained

from buying, mainly because of the hype around the crisis. For now, though, is seems that the

negative feeling has slowly been shaken of. The industry is running on fragile optimism, but it

would only take two banks crashing, then it is right back to the bad situation from 2008 and January

of 2009. Key threats would come from the global market, because the trade is global (Appendix 3:

13-15).

Right now, the main concerns are that the aftermath and repercussions of the crisis, which is not

quite over yet, will be severe. The really big question in the industry today is whether the crisis is

on the rebound or whether it still has not hit bottom yet. There is the chance that it has not and

therefore would prolong or even get worse (Appendix 4:19). This could mean that the banks have to

be even more careful and thus less willing to take risks, closing down for further funding (Appendix

6: 20; Appendix 4: 19). The feeling in the industry is that the crisis is not over yet and could take

another dive. The consequence of this would be that a whole new group of companies probably will

close or go bankrupt. Many companies have made it so far surviving on the last capital and now

they are running out of resources (Appendix 2:15-16). If volume of purchase does not rise when the

retailers order from fall collection many of the companies will have to close. The pain thresholds

will be reached because they have no more capital resource (Appendix 3:16; Appendix 6:21).

Overall it is the small companies which have felt the current crisis the most.4 . In the danger zone

could be those brands that have a big name but only a fragile or modest profit behind it. There are

many big or known brands in the media that hold a good position on the market but have a

relatively small sale. Some of these brands could be very interesting for potential investors because

they are big in the media and the awareness of the public (Appendix 3:16-17).

4 (http://www.danskmodeogtextil.dk/Brancheinformation/Pressemeddelelser/ModebranchenGorKlarTilBedreTider - http://www.business.dk/article/20090119/design/90117024/

34

http://www.business.dk/article/20090119/design/90117024/

http://www.danskmodeogtextil.dk/Brancheinformation/Pressemeddelelser/ModebranchenGorKlarTilBedreTider


Even though the crisis is tough on the industry the overall opinion is that it is a good thing that the

crisis fosters a weeding out process. There are too many existing, too many wants a piece of the pie

and the hope is that the crisis will put the weakest out of business. So it seems that there is this kind

of last man standing sentiment in the industry. With or with out eventual deficit, if the company

gets through the crisis and stands on the other side with the rest of the survivors, there will be more

room to maneuver in and make progress (Appendix 3:13, 17).

Economically, the hope is that it will not be two or more years until help arrives from either in the

form of a low interest rate or a government intervention boosting peoples’ economies and

increasing disposable income (Appendix 2:13). Before the crisis, the Danish government was really

supportive of the industry. The thought now is though that because of the crisis the government

might choose to back the biggest companies in order to keep the wheels running. This would leave

the main part of the industry more vulnerable. The textile industry is the fifth or fourth largest

export industry in Denmark and therefore very important to the ministries, but there is an

uncertainty in the industry as to whether the government will continue to support the small

companies in their effort to progress and develop (Appendix 5:19; Appendix 1:11). Due to the fact

that the industry is globalized there are many outer aspects to consider than just the Danish politics

and system.

Because of the industrialization and liberation of the world market the industry has gone from

having focused on the home market to being much more oriented towards the export markets.5 The

clothing industry has evolved gradually along with the increasing globalization which among other

made the outsourcing in the 80’ties and 90’ties possible. The production has mainly been moved to

East Europe or South East Asia whereas design and product development remained in Denmark. All

over the world liberalization has made it easier to exploit global differences.

4.3.2. Cluster: Globalization

5 http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm

35


Globalization and liberalization has long been one of the main trends driving the international trade.

The world is getting closer by the minute and changes happening in places like the Far East Asia or

Africa have an impact, also on the Danish trading. The constant development regarding

infrastructure such as logistics and communication has improved and thereby also facilitated trade.

This has all benefitted the clothing industry which has main production in other countries. The

increasing globalization enables reaching far and broad markets (Appendix 5: 20). It is also easier to

sell products because they do not need to be so differentiated in a close and globalized world

(Appendix 4:19).

Despite all the benefit of a small world there are also obstacles and free liberal trade and

transparency does not yet exist. There are still problems with trade barriers in places like China,

Canada and South Korea. (Appendix 5: 19). Globalization therefore offers possibilities and threats

for any industry. An interesting development to follow is the ongoing power struggle between

China and the West, including the US and the EU. The increasing economic power of China can be

seen as a potential threat or benefit (Appendix 1: 7).

First of all, China is a huge potential market and the Danish companies are beginning to see this.

The companies are less afraid of being copied and that has to due with the crisis which is putting a

lot of pressure on them. They are realizing that by the time the Chinese have copied the Danish

company is already launching a new collection. To do well against the Chinese competitors is to be

a step ahead and maintain the upper hand on style and design know-how (Appendix 1: 2-3). Right

now, China and also India are changing from merely being a place for production, to turning into a

potential consumption market of Danish clothes; a future outlet for sale and stores. However, for

many companies setting up business and selling in China and India is still for now too big an ordeal

(Appendix 5: 14-15).

As to whether China will remain a profitable place to maintain production facilities and also future

outlet for selling Danish fashion remains to be seen. An alternative to China as production facility is

Africa. The Danish industry is already looking towards this continent for when and if it will be

necessary to move production there (Appendix 6:4).

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China and India are seen as growing future competitive threats regarding setting up stores in Europe

and selling Chinese brands (Appendix 5:15; Appendix 4:20). The possibility of new Chinese brands

increasing competition globally is in the near future, maybe within the next 5 – 10 years. The

country has gone through a fast pace of growth the past two years and they are constantly increasing

their knowhow and their design abilities and creativity. Compared to Europe the Chinese mentality

is different. They are fast and determined to continue growth and learning (Appendix 1:3-4)

Chinese retailers setting up business in Denmark and ells where in Europe may not happen the next

couple of years, but other changes are happening in the Danish retailing industry right now.

4.3.3. Cluster: Retailer structure

Retail structure is one of the main subjects from the interviews. The shift in connection with retail

chains the last 5 years and up until today has gone in a direction towards more and bigger chains,

capitalized and private arranged chains, centralizing and developing a strong buying power. In

every town, in every city, the chains dominate the picture 6 (Appendix 6: 17-18). A sign that the

chains gathering ground, is that the retail market looks more and more alike. The stores and the

shops in the center of towns become increasingly uniform. According to fashion company Thelin,

diversity is scarce (Appendix 2: 6; appendix 4: 10-11). It is especially the low price brands that are

getting stronger and more powerful, brands like H&M, Mango or Zara, that is found on every

corner in Denmark and everywhere ells creating uniformity (Appendix 5: 11). Typically it is also

those which have their own retail outlet.

The chains’ domination is displayed by a 43% market share of the total number of shops in

Denmark. Further, these chains are even bigger with regards to turnover, where they have a much

larger market share and are gaining grounds as well. There are a lot of advantages of being a chain.

They have the advantage of economics of scale, regarding buying power and marketing in

particular. This is not possible for the individual shops. 7 The individual retailers have selected

brands in the shop and work on own initiative, independent of chains and brands. This is a

diminishing group because of an increasing pressure from the chains and supermarkets. They are

6 (http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm)

7 (http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm)

37


loosing market shares to the different chains which make up an increasing competitive force in the

industry.

This trend towards buyer centralization has consequences for the fashion companies. Competition

for the individual shops is increasing because the shops are being pressured by the constant growing

number of retail chains. This means that the fashion companies without their own shopping chains

loose their buyers. Companies like Thelin are selling to individual shops and when these shops are

disappearing Thelin and others like them experience stronger competition. In order to get the foot

inside selling to the big chains the company needs to have a good quality product, with a good prize

and design, a factor that is sharpening the competition (Appendix 6: 7-8).

Besides the centralization there is also an increasing commercialization and professionalism

experienced in the industry of the retail chains resembling that of the supermarkets. The

supermarkets register what sells and what does not sell at the cash register and then they look at

how much the product sold compared to how much shelf space it occupies. If it does not add up, the

supermarket finds a replacement product (Appendix 5: 10).The same situation is happening in the

case of fashion companies and the chains. Competition is pushing the smaller brands because the

chains bought by large capital funds narrow their selection of brands down by an estimate on what

sells compared to shelf space. The outcome is that many deals with brands will be terminated

(Appendix 5: 8).

If a brand is pushed out it leaves the company with the choice of either building/starting their own

retail or maybe turn to web based sale. Both solutions are costly and often out of the question for

smaller companies because of their small capital foundation. Those that are unable to find a solution

will crack according to DMT (Appendix 5:8).

There seems to be an overall concern as to where and how far the changes in retail structure will

take the industry (Appendix 1:8). However, buyers are not only the retailers, but also the consumers

which are the ones that decide whether a product or piece of clothes is worth buying. There are two

important things to pay attention to regarding the consumers. One is that there is a global consumer

polarization occurring where a large group prefers cheap clothes and buys a lot on discount, mainly

38


because they cannot afford the more expensive clothes. In the other end of the polarization is a

group of consumers that prefers luxury items and clothes even though it is more expensive, but they

believe in buying quality that last longer, classic clothes. The consequence of this polarization is a

gap where all the mid-prize companies are left behind (Appendix 1:12).

The second thing is that the consumer is primarily disloyal towards brands and also pays attention

to the image of the company and brands. The companies interviewed say that the end buyers play a

role in that they decide whether to buy or not, whether the clothes are commercial enough. That is

in fact their power. So image plays a role, and so does publicity and branding (Appendix 6:9).

4.3.4 Cluster: Branding

Overall, Danish brands have a good image internationally (Appendix 3:19). Each new Danish

collection typically shows something new and this approach differentiates itself from foreign brand.

The Danish or Nordic brands offer new collections with almost entirely different design, based on a

look significant for the brand; unlike the foreign brands where half the collection is new and the

other half redesign or signature products. This is some of the reason why it is has been very

attractive for the foreign buyers to come to the Copenhagen Fashion week (Appendix 3: 20-21).

For an industry it is not enough to be good at high volume production and sale. To drive

competition it is also necessary to have a few icons that can set standard and pull the industry

forward. These icons are an inspiration and the foster of dreams. In Denmark the closest to an icon

is the internationally known brand like Marlene Birger, but the industry lacks true icons like old

European fashion houses of Chanel and Gucci (Appendix 1: 3). These icons are important for

Europe in the role of branding globally especially when considering the future threat of a Chinese

fashion cluster with strong competitive brands. These fashion houses have a colorful historic

background which the Chinese lack and which they admire. Therefore, the role as dream creators

and inspiration on style and design of the European houses is important to the continued

development and growth of European fashion in general. They serve as drivers of international

competition. There are very few brands that reinvent themselves every time a new collection is

designed. It is the great fashion houses of Armani and Gucci which are coming up with new trends

and styles, creating what some call art. Many ideas for new collections spring from the fashion

39


clusters in Paris and Milan etc. All though each Danish company makes collections that are unique

to their image, design and brand most have their own designers or constructors travelling for

inspiration to the fashion centers of Milan or New York. They look at trend books and trend internet

home pages in a search for new ideas. Others have trends spotters who work closely with the

designers of the supplier (Appendix 2: 3).

4.3.5. Cluster: Denmark as the 5th fashion cluster

To position one self on the global hypercompetitive market is a challenge and it takes a lot of

branding and promotion. Big scale marketing rarely occurs because the profit of such does not

match the costs (Appendix 4:13). It is very expensive to advertise when being a small company

with limited resources.

Promoting the brands in ads in fashion magazines or getting stories written by reporters in case of

events like fashion shows or new undertakings are the common ways. Also the website of the

company functions as advertising. Sometimes the company chooses to send out a temporary

campaign offer on a particular set of clothes or makes billboards posted in the retailer shops.

All in all, the biggest promotion event in Denmark is the Copenhagen Fashion Week held twice a

year in February and August. It is the largest fashion event of Northern Europe with new as well as

known Danish talent giving a preview of their upcoming collections. The event is a combination of

catwalks and 3 trade fairs held at CIFF, Gallery and CPH Vision with around 1000 exhibitors. In

total there are over 2,300 international brand name collections there.8 Making an appearance on

fairs and fashions shows in Copenhagen is by some considered necessary to be or stay visible in the

competition. Some find that is has little or no consequence for the actual profit, but they feel

inclined to participate because of the hype around the events (Appendix 2: 6-7). All the same, some

of the regular designers and companies chose to skip the fashion week in 2008 and 2009. Due to the

crisis some regular companies, visitors and exhibitors have dropped the Fashion weeks to save time

and money. At Won Hundred they have chosen to use the PR money for arrangements where the

company invites buyers to more intimate arrangements showing them the collections (Appendix

3:10). If the company uses the same amount of money outside the fashion fairs for room in fashion

8 http://www.copenhagenfashionweek.com/26395/About

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magazines and advertising it gets more value for the money. The company had a fashion show on

the fair in Copenhagen in 2008, but it did not pay off and did not give enough publicity compared to

the cost of making the show collection and the whole set-up around hiring models and advertising.

Publicity during the fairs might give half a page in magazines where as it gives much more room in

the fashion columns doing regular PR (Appendix 3: 9-10).

The decline of the regular names like Won Hundred has made room for newcomers and thereby

changed the dynamics of the fairs and fashion shows. Though it may not generate profit, it is still

the event of the year. During this event the temperature of the industry is taken and the press is there

so it is an opportunity to get attention and promote the brand.9 It is also considered the best Nordic

Fashion fair compared to the one in Sweden for instance (Appendix 3: 9).

Being the largest Nordic fashion fair the Copenhagen Fashion Week is part of the plan to make

Denmark, the 5th fashion cluster globally. A vision long been the in the launching phase and shared

by the government and various parties such as DMT and Danish Fashion Institute.10 The importance

of the existing fashion clusters in London, Paris, Milan and New York for the growth and further

development of the global industry is clear and it is believed that there is possibility to create such a

cluster in Denmark. The potential is there based on the facts that the Danish fashion industry has the

world’s highest degree of outsourcing and highest productivity per employee. The Danish industry

is also the 9th biggest exporter among the OECD countries with an export amounting to 15 bn.

Kroner a year. Being the next cluster in the line after the existing clusters presupposes that the

framework is in order. Here a well functioning and centralized Nordic fashion fair and event like

CFF would help, but it is not enough. There are aspects that exist in each of the international

clusters mentioned which are lacking in the Danish industry. Compared to these clusters Denmark

needs further competencies and a focus on user-driven innovation. It is also necessary for the

development of knowledge and education institutions and improved cooperation and sharing of

knowledge between the parties in the industry.11 The vision was initiated in the years before the

9 http://www.business.dk/article/20090119/design/90117025/

10 http://www.danishfashioninstitute.dk/uploads/23597/DAFIaarsberetning2006-A4printvenlig.pdf

11 http://www.foranet.dk/Publikationer/Rapporter/Data/Brugerdreven%20innovation%20i%20dansk%20mode%20-%20en%20surveyunders%C3%B8gelse.aspx

41


crisis, but the question is how the outlook is now for establishing Denmark as an up and coming 5th

cluster.

4.3.6. Cluster: Innovation

Innovation is necessary both considering the future of the important European fashion houses and

the Danish possible future position as 5th fashion cluster. There are signs that the European icons are

having trouble both with the crisis but also with reinvention and innovation. An indication that

shows how much the current crisis has affected the global business is the fact that the popular and

know fashion houses in Europe have suffered losses as well. Fashion giants like Prada, LVMH and

Burberry have lost millions worth of stock which is a direct reflection of how the industry is doing

globally. The global industry will see some changes, bankruptcies and layoffs in this time of crisis.12

Also, these companies have had the same designers behind the brands that were there from the

beginning, maybe even started the companies. The people and the styles and brands have not been

changed much since the beginning and they have failed to consider what should happen with the

brands and companies in the future. The European fashion industry is at a tipping point and there is

a need for new names and brands that can move into a new era. The possibilities and potential is

there, but it takes knowledge, courage, creativity and willpower (Appendix 1:6). Like the European

icons need to change to keep up with a globalized competition so does the Danish industry,

especially when and if the goal is to foster Danish icons that could carry the industry forth. There is

a need for innovation in all levels of the business (Appendix 5: 6). This is particularly evident in

management. There is a need for more business sense and know-how in the industry, a kind of new

vision for how to handle a company. Many are strong in the creative department, but do not have

the necessary skills for planning long term and focusing on the bottom line (Appendix 1:5).

4.3.6.1. Delivery – logistics

The old ways where the retailer ordered a collection 6 months in advance and thereby held the risk

economically is still existing, but not at a large scale. From the point of view of the companies, the

12 http://www.business.dk/article/20090119/design/90117026/

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trouble with this form of the distribution is that each time the company orders the collections its

available funds sink which means it is bearing a lot of risk (Appendix 3: 17). The big problem in the

industry is also that the companies do not have large capital funds available that could help them in

these trouble times (Appendix 6: 21). Because many are running a business where they produce big

collections twice a year and sell in season on a smaller scale, they have a lot of risk riding on

whether the retailers buy and reorder collections. A company has sometimes used al available funds

to buy things for the collection and this money first return 3 to 4 month later when the retailers get

the bill and the respite ends (Appendix 3: 17). Therefore the risk is big and it does not take much for

something to go wrong.

A way to handle the economic risk was to make in season collections. These in season producing

company can keep the available fund running and sells evenly around the year because they have

express delivery. They watch what the customers want, make a production and go out and sell it or

show it to retailers (Appendix 3: 17).

It seems that there is a growing tendency towards this kind of fast delivery, or so called just-in-time

delivery. High volume brands are easier to adjust to just-in-time delivery whereas high profiled

clothes, expensive and exclusive collection still “have to” be sold 6 months in advance. To cover

both ends a company like Thelin has made the choice of keeping the brand Thelin as a high profiled

collection with a six-monthly production and restructured the brand Image to be a high volume

brand producing clothes in season with just-in-time delivery (Appendix 2: 3-4).

Regarding the suppliers, many of them are in China and India. The choice of supplier seems to

depend on whether the company can afford to pick the best. If there is resource to do so, the

company chooses the one that is most capable. If not, then it chooses the cheapest supplier

(Appendix 2: 5). Distance between supplier and company is compensated by the quality control and

close working relationship between them. They do not switch supplier from one

production/collection to another, but maintain and build good and strong relation with their business

partners (Appendix 4: 5-6).

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Often the suppliers are sending the clothes to Denmark wherefrom it is shipped of to the retailers or

buyers. This takes time and effort which could be changed if the Chinese or other supplier could

send the clothes directly to the buyer. However, for the moment, this is not possible because the

suppliers seldom are equipped or able knowledge wise to handle this process Where the logistics to

be turned over to the supplier, it would reduce cost considerably. It would require IT solutions and

training of supply partners (Appendix 4: 4-5, 18).

The process from idea to final product takes time and a lot of the steps could be easier if the right

technology was available (Appendix 2:2). Chinese suppliers need more control than other perhaps

European would. It is necessary constant checking up on each step of the production, sending color

samples back and forth checking the quality (Appendix 4: 5). A web based solution would make it

easier to communicate with foreign suppliers online via camera (Appendix 2:5). Another

technological improvement would be to get a new logistical system. It requires technology to keep

up with what is selling in the shops and producing and reordering parts of the collection and if the

company wants to stay competitive and be able to handle faster and faster delivery it is necessary to

look into new IT systems (Appendix 5: 9-10). These technological solutions already exist, but as in

many other cases with the small companies in the industry there is a lack of resources for

investments.

4.3.6.2. Technology

One aspect of innovation is online sale. There is an inconsistency between the amount of sale of

clothes online and the relatively small number of companies with their own web shop (Appendix

5:7) Here the obstacle is not a lack of resources, but a concern and skepticism through out the

industry of whether it is possible to handle. (Appendix 4:18) First of all companies are afraid that if

they set up sale online they will easily step on the toes of their buyers, the retailers. (Appendix 6: 8)

It is a fragile business relationship between the company and retailer and if the retailer feels

neglected or something goes wrong with the online shopping site, it will get out of the deal with the

company and then the company looses a buyer. (Appendix6: 9) The primary concern is that when

the company sells from its own web page it competes with its own buyers in form of the retailers.

So it is a grey zone and the answer could be to only have an outlet sale on web page. This way the

company does not interfere with the sale of the retailers. (Appendix 3: 21) Whether or not online

44


sale will pick is an uncertainty. (w 21) It is a fact however, that online sale is in development.

(Appendix 5: 20) A company like Bonaparte is doing great by selling online. (Appendix 4: 18)

Perhaps in the future every company has its own internet sale. (Appendix 2:17) When looking at

what is on the internet it appears to be an online jungle with so many brands that a single one can

easily be lost (Appendix 5: 11) The question is whether it is necessary to be part of the jungle to

make it in the future where the world is getting smaller and increasingly globalized.

All in all, the interviews revealed that the companies have no patience regarding waiting on or

planning along the lines of innovation and technological improvements of textiles. (Appendix 6:5)

They revealed a certain lack of planning for the future but also what is believed to be the trends and

uncertainties today and in the future, both seen with the eyes of the companies and the DMT.

4.4. Scenario agenda

It is not possible to handle more than a maximum of five broad themes or areas of concern in a

scenario exercise (Heijden, 2006: 187). Therefore it is necessary to cluster the information in the

exposition down to a limited but doable number on the scenario agenda. The list is based on direct

and indirect concerns derived from the exposition above. The ones most important to the industry

and subject to further analysis are here stated as headlines:

1. Innovation

2. Denmark as the 5th fashion cluster

3. Economic crisis

4. China as competitor (emerging countries, BRIC)

5. Power struggle between China and the West (Europe and the US)

6. Polarization of consumers

7. Centralization of chain structure

4.5. Horizon year

Deciding on the horizon time is the fourth step. After the horizon year is found, the next move will

be to make an analysis of the trends and uncertainties of the scenario agenda. This is done in order

45


for the scenario planner to get a clear overall picture of the current business situation, the history

and the pieces of the puzzle that should be included in the scenario building. The horizon year of

the scenarios in this thesis will be the year 2015. The reason is that the scenario agenda offers

concerns that are all influencing the near future. The main concerns listed in the scenario agenda are

now analyzed further in their capacity as trends and uncertainties experienced by the industry.

5. The Second Phase: Trend analysis

The following chapter is divided into a number of steps according to the practice of the trend

analysis. The analysis consists of environmental scanning, historic background checking, internet

46


search, reading existing trade analysis and when needed information from the RP consulting and

qualitative research from the open-ended interviews will be included. First of all, each concern is

analyzed and described. During the analysis and description of these concerns some drivers or

trends may appear that also need further investigation. These will therefore also be analyzed and

described. Afterwards, some of the trends are analyzed using cause and impact analysis. As stated

in the delimitations of the thesis there is a need for focusing the procedure, therefore there the

following trend analysis is a brief and concentrated description of the trends and drivers that will

form the basis of the scenarios. Also the cause and impact analysis will only be carried when there

is a need to further explore the entailments of the trend. The choice of which ones to include in the

trend analysis is motivated by the primary concerns described in the interviews. Therefore this

section will only include an investigation of the primary concerns and the key trends and drivers

that turn up during the investigation. All trends happen on both micro and macro level. (Schwartz,

2007: 242) .Therefore the section will include information on both levels.

5.1. Trend: Innovation

The following definition of innovation is used in reports and literature on the subject. Translated,

the definition is: “Innovation is a new idea that creates new value when it has been carried out.”

Innovation takes place when a new product, production process, new service is made or introduced

to a new market. 13 So called radical innovation is when a new product or process is changing a

production process fundamentally or applying new knowledge in new markets in a totally different

and new way. This kind of innovation does not happen often because it is very demanding of time

and resources. More typical is the incremental innovation which is gradual or step by step

improvements of a process or product.14

In a survey from the Danish Ministry of Economic and Business Affairs, Denmark is compared

with other countries with regards to level of innovation. According to this survey there are a few

facts concerning Denmark and innovation in general. The survey concludes that there is a strong

correlation between size of a company and the level of innovation; the smaller the company, the

less innovation is carried out. It also states that the Danish industry structure, including the textile

13 http://www.ebst.dk/publikationer/rapporter/innovationssystem/kap02_1.html14 http://www.landsorganisationen.dk/upload/LO/Documents/D/Dokumentationsrapport%20Innovation_3273.pdf (P 12, 13)

47

http://www.landsorganisationen.dk/upload/LO/Documents/D/Dokumentationsrapport%20Innovation_3273.pdf


industry, is characterized by far more incremental innovation, and very few, if any, radical

innovations. 15

All in all, for a small open economy like the Danish compared to others, gradual renewal or

incremental innovation is more crucial for growth potential than the radical new innovations. 16 This

is also the case with the fashion industry. Using incremental innovation the strategy for designing

and launching the product for a company is following the procedure of being a kind of “number 2”.

Watching what the rest of the market is selling, extract ideas from that and then make one’s own

product with modifications. A survey made by the Danish Ministry of the Environment concludes

that it is indeed more profitable being number 2 than using resources on inventing entirely new

clothes. 17

All though the industry is well positioned as a characteristic number two using incremental

innovations, there are lacks to report in other areas. Technological and logistic innovation is also

called for in the fast developing competitive world. To ease the need for fast pace from idea to end

product and sale, the use of electronic registration and data systems have become necessary. Here

technology and innovation play an important part. All though these systems by large already exist

and are used by some, the technology is expensive. Therefore many small companies do not have

the necessary capacity to use, develop or finance such systems.18 (Appendix 2:5)

Some of the technology that could make a difference for a small fashion company is a web based

communication systems where the fashion can hold a web conference with the supplier in another

country. Now, the product has to be shipped back and forth for approval. Via the system, the

fashion company could be shown the final product and approve it over the web. This system would

facilitate and speed the process considerable. (Appendix 2: 5)

15 http://www.ebst.dk/publikationer/rapporter/innovationssystem/kap02_1.html16 http://www.ebst.dk/publikationer/rapporter/innovationssystem/kap02_1.html17 http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm18 (http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm)

48


On the other hand, technology is not very complicated with regards to the manufacturing part of the

clothing industry. The machines necessary are not high tech and this area can therefore not be used

as a parameter for competition. Consequently, it does not take a lot of resources to setting up a

business.

Innovation in areas of management/strategizing

According the RP, the companies are typically built and run by a designer. Consequently, this

means that there is a lot of creativity and engineering in the industry which makes it interesting and

attracts many newcomers. However, the owners or designer often, do not have trade and

management experience. Thus, today there is a growing need for bringing in people that possess

management skills and bottom line vision. There is a lack of resources for looking at the long term

perspective and strategizing. The everyday business often comes down to this year’s strategy. There

is in the industry a need for innovation of talent and resources regarding management and strategic

planning (Appendix 1: 5). The trend in the companies is that they have a general focus on the short

term goals and management, but only vague planning for the long term.

The RP goes on saying that, innovation is either opportunity or necessity driven. Some have the

possibility of taking advantage of the current crisis and pull all the strings they have in order to

boost innovation on all levels of their company. However, during crisis times like the one

experienced right now, it is likely that innovation will be necessity driven. When the crisis hits

bottom, companies will be forced to rethink their strategy and innovation could be an area of focus.

(Appendix 1: 5) So the next 3-5 years some changes probable will occur. The trend of innovation

can go either forward or backwards. It depends on the companies, the resources they have and the

will to move forward.

In order to survive the competition from especially the Chinese and other emerging countries

innovation is necessary throughout Europe. As stated in the exposition, the Europeans as well as the

Danish fashion companies need to build stronger management skills and think long term when

strategizing. The European fashion icons are needed to market and brand the European style and

design, but there is a lack of innovation concerning this matter.

49


The overall picture is that the level of innovation in Western countries is low compared to the

emerging and developing countries. With regards to innovation the emerging countries are

becoming experts in what is called “frugal innovation”. Together with exploitation of cheap labour

the key difference in these emerging companies is that they getting better at taking already

established products and redesigning them, thereby reducing costs. These countries are using the

division of labour and the advantage of economies of scale and producing products without

sacrificing quality and often containing the latest technology. Furthermore the products need to be

robust and easy to use because they are sold to people in the countryside and for different kinds of

situations. Combining technology with new business-model innovation, a country like Kenya has

come up with entirely new categories of service. It offers money transferring via mobile phones.

Innovation is no longer a case of getting technological breakthroughs or developing entirely new

products made by a closed and elitist group and later distributed to the masses. Thus, many of the

most important innovations today happen on another level. They are incremental innovations that

reach out and meet the needs of the middle or bottom of the income pyramid. 19

Frugal innovation is about:

- Contracting out more and more work

- Using existing technology in new and creative ways

- Applying mass production techniques in new and unexpected areas such as health care

- Reducing cost and increasing flexibility by putting together customer supply chains from

network of associates and control the quality and order fulfillment – this means a heavy

reliance on suppliers, working with them and giving them sketches instead of blueprints,

encouraging them to be innovative… 20

A special report made by The Economist claims that what is happening now in the emerging

countries resembles the situation when Japan in 1950’ties and onwards turned into a hotbed for

business innovation, with the resulting new kind of innovation called lean manufacturing. Back then

in the later 1980’ties the global world was shaken, particularly the US car industry. Now, a

19 The Economist, special report, p 4, 5, April 17th 201020 The Economist, special report, p 6, 7, April 17th 2010

50


prophesy is that something similar is happening in the emerging countries that is turning the

business world order upside down. 21

Some of the reasons that the West is loosing ground to emerging countries are that they have no

only outsourced production but also many companies now have their R&D departments placed in

China and India, etc. In a survey from the Fortune 500 companies, states that app. 98 of the

companies have R&D in China and 63 companies have their department in India. Other reason are

the fast developing emerging-market companies that apply for patents in much larger number than

any Western companies. 22

Key reasons that these emerging countries are rushing ahead and becoming leaders of innovations

are that they on one hand fear the even cheaper competition from competitors in Vietnam or

Cambodia as examples. On the other hand they also are driven by an incredible level of ambition

not seen in the Western world. 23 As the RP states, the young Chinese people are good examples of

this drive and these dreams. They are becoming more educated, learning languages, and in many

ways overtaking the lead compared to young Westerners. (Appendix 1: 4) A clear sign of this is the

fact that young Chinese now spend more time on the internet than their young American peers.24

The downsides are maybe easy to spot; however, the benefits of these frugal innovations are also

important.

5.1.1. Cause analysis: Innovation

- Emerging countries fear loosing ground to the even cheaper competitors like Vietnam that

are climbing the value ladder chain.

- Emerging countries are driven by motivation and ambition level much higher than in the rest

of the world.

21 The Economist, p 12, April 17th 201022 The Economist, p 12, April 17th 201023 The Economist, special report, p 3, April 17th 201024 The Economist, p 12, April 17th 2010

51


- The emerging countries have been using a lot of resources on education the past couple of

decades 25

5.1.2. Impact analysis: Innovation

- A wave of low-cost disruptive innovations (primarily incremental) flooding the rich world

and pull the rug from under the established rich country companies.

- The new innovations creating cheaper products on the market is helping all the consumers

that cannot afford pricy products.

- Western monopoly on “clever jobs” is disappearing

- Western consumers, who possibly face slow income growth, benefit from flood of cheaper

products

- The clever ways of exploiting cheap labour and economies of scale combined, may very

well rub off and help boost public sector productivity, also in Western countries.

- Innovation always encourages more innovation – emerging countries innovation will boost

rather than undermine innovation in Western countries. An example is the Japanese model

of lean manufacturing, which at first was a threat, but then the Western carmakers learned

the lesson and profited.

5.2. Trend: Emerging countries, BRIC

The second concern is the increasing competition from emerging countries like Brazil, Russia, India

and China. In this trend description and analysis the focus will be on China and in some parts also

India, Russia and Brazil, countries that all represents the emerging growing power and force of

capital, economy, innovation and knowledge.

The world’s centre of economic gravity is shifting towards emerging markets. Markets like China

and India have experienced an annual average growth rate the past five years of more than 10% and

8% respectively. 26 Within the next few years, European multinationals predict that about 70% of

the world’s growth will come from emerging countries, China and India representing 40% of this.

These emerging countries are no longer satisfied with providing cheap labour and low-cost brains.

25 The Economist, special report, p 3, April 17th 201026 The Economist, p 12, April 17th 2010

52


They are redesigning products and business processes to reduce costs not by 10% but a mere 90%.

They are constantly working on improvement and doing better than their Western rivals. 27 Today

China is the third largest economy in the world among other things because of an increasing export,

an increase in foreign direct investments, and an improvement in infrastructure, production facilities

and construction sector. 28 The OECD estimates that China may very well overtake the US position

as the biggest economy within the next 5-7 years.29

The drive and ambitions is incommensurable with the stagnant state of business in the West. The

young and hungry employees in the East have never experienced anything but growth. Their spirit

and mentality have much to do with the current drive in emerging companies. 30 There is a growing

optimism present and it is fueling and stimulating economic growth and creativity.

The emerging countries are pouring money resources into their educational system. Every year,

China and India produce 75,000 and 60,000 people respectively, with higher degrees in engineering

or computer science. 31

For the multinationals these emerging markets offer possibilities and threats in one package.

Potentially these markets are huge opportunities for investments, doing business and selling to a

growing and hungry consumer group. Alone in China there is a population of 1.321 billion people

and out of this potential consumer market millions of them are entering the middle class segment.32

Western multinational companies are hoping that the by investing in the emerging markets they will

get profit from the brain power and economic growth. 33 Brainpower is cheap and abundant.

27 The Economist, p 12, April 17th 201028 http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm29 http://news.bbc.co.uk/2/hi/business/8493356.stm30 The Economist, special report, p 3, April 17th 201031 The Economist, special report, p 4, April 17th 201032 http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm, - The Economist, special report, p 4, April 17th 201033 The Economist, special report, p 3, April 17th 2010

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For the fashion industry, there is a growing perspective in the consumption market in China. All

though China is the number one factory in the world, the main product position lays in the mid-

range or low end of the market. Therefore there is a hug potential for foreign entrants to position

themselves in the mid, high and most certainly the luxury end of products. 34

There are a large number of factors that constitute obstacles for a Western company that wants to

set up business or sell its product to a country like China. The downside to these emerging markets

is that they are among the toughest to enter into. The governments are protectionists, piracy is

common, distribution especially in the waste rural areas is difficult, and income is unpredictable. 35

An example of how a company can hit a brick wall and ends up withdrawing is the global internet

company Google. Recently this multinational company backed out of China after having

experienced the complicated and at times impermeable protectionist system. It refused to exercise

the censorship on sensitive material laid upon it by the government. 36

The distribution channels offer yet another complication. Around 54% of China’s population lives

in rural areas and here there is no such thing as a well functioning distribution network.

Furthermore, modern retailing only accounts for a third of the consumer goods sold in China and a

fifth in India. 37

The implications are numerous. In many cases the business order is reversed. Innovation is being

produced by emerging countries with the West as a bystander. Supply chains have been reversed

with the emerging companies now buying their components parts from the West and using them in

their new business or production facilities. Emerging companies are adapting their products to their

consumers, but from a different angle tan most. They are taking the needs of the poor as a starting

point and working their way backwards and at the same time stripping the products down and

removing all unnecessary items and functions. 38

34 http://www.dtcchina.um.dk/NR/exeres/99AF57C1-A90A-45D9-882E-15927FB6EDD6.htm35 The Economist, special report, p 4, April 17th 201036 http://www.guardian.co.uk/technology/2010/jan/12/google-china-ends-censorship37 The Economist, special report, p 7, April 17th 201038 The Economist, special report, p 3, 4, April 17th 2010

54


The BRIC nations are moving towards industrialization and accumulation of knowledge. The 4

countries constitute around 3.2 billion people in total and by the account of Ridderstråle et al these

countries are forces to be reckoned with; forces that will flood the rest of the world with cheap

products in every area except raw materials in the future. (Ridderstråle et al, 2008: xv)

This trend is considered to be a predetermined trend because of the continued growth these

countries have shown despite factors such as the economic crisis.

5.3. Trend: Denmark as the 5th fashion cluster

The third concern in the industry is whether or not Denmark will become the next fashion cluster in

line after clusters like London, Paris, New York and Milano. The concept of user-driven

innovations is beginning to spread in the fashion industry globally and this type of innovation seems

to have an effect on an industry or company’s ability to make it in the future. Becoming a fashion

cluster could be realized by building on user-driven innovation and the framework necessary in

order for it to thrive.

In high costs countries like Denmark, companies have gone from focusing on price innovation to

more technological a research oriented innovation. However, it is now clear that this focus is not

enough. R&D investments and knowledge intensive focus do not alone lead to high product and

process innovation. An aspect such as consumer needs has to be included in order for innovation

investments to pay of.39

The criteria for having user-driven innovation are the following:

o “The design and brand of the product has to be connected to or signal a certain lifestyle in a

visible manner.”

o “Access to competencies which can decode the needs of the consumers is required.”

o “The company has to work systematically with consumer needs and design and evaluate

whether the needs are met.”

39 http://www.norden.org/da/publikationer/publikationer/2006-522/at_download/publicationfile

55


In the Danish fashion industry user-driven innovation is only beginning to immerse. Danish fashion

companies are influenced by the needs of the consumer when working with innovation. In a survey

conducted by FORA around 91% of the companies state that they get inspiration for innovation

from the consumer. Product development is for many based on the lifestyle, needs and values of the

customers. In order to be able to decode the needs of the consumers, knowledge and the proper

resources are required. This means that the companies either have to have employees with these

skills or have to use external resources. Internal resources, knowledge and competencies of the

employees on matter of cooperation and sharing of knowledge with suppliers and customers, exist

at a satisfying level. However, when it comes to external resources it is an entirely different matter.

Newly educated people do not possess these skills. Also there is a lack of access to knowledge from

external partners, lack of knowledge sharing and cooperation in general between companies and

knowledge institutions and schools. The survey also concludes that all though the will is there to

work with user-driven innovation, there is no systematic analyzing of customers carried out in the

companies. Overall, the trend in Danish fashion is that the companies are beginning to open their

eyes to this new phenomenon of user-driven innovation, but it is yet to be exploited in full.

In order for user driven innovation to function and exist there are some criteria or frames that are

essential. These are the following:

o Critical mass – the total number of companies should constitute a critical mass.

o Enough students must graduate, having the right competencies

o Centers of knowledge – the right knowledge and competencies must be present

o Network activities – network between the actors should be facilitated

The question is if Denmark posses the frame mentioned here. This is evaluated and discussed in a

report on user-driven innovation made by FORA. Each of these criteria will be elaborate on in the

following.

56


Critical mass is already obtained. On the other hand, getting the critical educational level, the

knowledge centers or the networking culture established is an entirely different matter.

There seems to be innovation networks in some areas of Danish and global trade. These networks

primarily functions as platforms for knowledge sharing and boosting growth and development.

Within the Danish boarder, the building of networks is a growing trend. Among other, the furniture

and wood industry has its own network with members of the different areas and sectors the

industry, educational and governmental departments and institutes. 40 Such networks are

increasingly emerging, but thus far no such network exists in the fashion industry. According to the

Danish fashion companies there is reluctance for the sharing of knowledge (Appendix 7: 9). There

is high competition from other nations trying also to become clusters for fashion. In China, the

CHIC fashion fair, existing since 1993, has had great success in contributing as a platform for the

Chinese fashion industry. At this fair both domestic but also foreign brands are displayed. 41

Whether or not Denmark will be capable of creating a 5th fashion cluster is in this thesis deemed

rather uncertain. Therefore this trend belongs to the list of critical uncertainties.

5.4. Trend: Economic Crisis

Crises come and go over history in an almost cyclical progression. In order to understand the

current economic situation and crisis it is necessary to look at the factors that brought about the

recession. Earlier recessions or crises have had some sort of pattern, and searching for and being

aware of these patterns and structures serves to be prepared for the next crisis to turn up.

The primary reason for the financial crash was the American housing market bubble in 2006, where

house prices had increased by 50% between 2000 and 2005, the largest boom in US history. The

bursting bubble was triggered by a rise in defaults by subprime mortgage borrowers followed by the

implosion of the market for securitized assets backed by such loans. The highly leveraged and

interrelated house of financial cards then came falling down. This probably set of the crisis but

40 http://www.fi.dk/innovation/samspil-mellem-forskning-og-erhvervsliv/innovationsnetvaerk/udviklingscenter-for-

moebler-og-trae

41 http://www.chiconline.com.cn/En/intro.asp

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another contributor was the almost synchronistic banking crisis which is said to have pushed the

recession into a more severe level than ever seen. Leverage grew to historically unprecedented

levels, with even some commercial banks lending up to 30 to 40 times their capital. In the autumn

of 2008, several US banks, and some European banks, failed or would have failed had they not been

supported by the monetary authorities. The dramatic fall of the big US investment bank, Lehman

Brothers, set the world’s financial system into panic. 42

Up until the crisis, the global world had experienced a long and steady period of non-inflationary

growth, which began in the early 1990s. This growth together with significant shifts in the balance

of global trade and capital flows that gained speed in these years is believed to have been further

instigators for the bust. 43

Experience from earlier recessions leads the Eurofund to believe that the crisis might not be over

yet. Previous experience proves that a recession fueled by financial crisis takes longer than other

recessions to fully recover from. 44 The economic and social implications of the current crisis are

plenty.

China has been affected by the economic crisis, but only to some extent. 45All though the growth

rate has taken a fall, the balance of payments has maintained a surplus. In the beginning of the

global economic crisis the Chinese government made an effort to avoid overheating the market, but

from 2008 and onwards the government has modified its restrictions and led a growth-accelerating

politic with supporting stimuli packages. The government owned banks are ordered to lend money

to boost private spending again. All in all, there have not been the same implications of economic

crisis in China as in the rest of the world. 46

42 http://www.eurofound.europa.eu/pubdocs/2009/73/en/3/EF0973EN.pdf



45 http://news.bbc.co.uk/2/hi/business/8493356.stm

46 http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm

58


Finally it now seems as if the recovery of the global economy is well on its way. The latest forecasts

suggest that the global output is now back to where it was before the crisis. Global business

investments are accelerating, consumer spending is increasing again and optimism that the recovery

from now on will be self-sustained is growing. 47

What could go wrong?

There are several factors that may influence the global recovery, whether it goes well or the crisis

will take another leap down. The interesting thing will be to see what happens once the economic

stimulus packages ebb away. The World Bank predicts that the global economic recovery will slow

down later in 2010 because of the ending stimulus. Also China’s economy has grown this last year

and now economists worry that it might be expanding too quickly. They fear a chance of

overheating of the Chinese economy. Investors are also nervous because it is uncertain what action

the Chinese government might take in order to prevent this potential overheating. The interest rate

might rise, lending controls are likely to be tightened and the Yuan may be allowed to gain value

against the Dollar.48

An example of how it can go wrong is the Japanese economy in the 1980s. Back then the prediction

was that Japan would overtake the US economy one day. The Japanese economy was growing at a

staggering pace. Banks were lending freely and house prices rose enormously. Then the bubble

busted with people and companies loosing everything because the value of their investments

dropped and the investments were all made on loans. All though the Japanese government tried to

rescue the economy by spending huge sums in infrastructure the result was still a massive national

debt. 49 Despite Japan’s national recession they are still quite prosperous compared with China. The

fact is that the wealth in China is spread over 10 times more people, and there are still 150 million

poor people in China. 50

47 The Economist April 24th 2010, page 1248 http://news.bbc.co.uk/2/hi/business/8471613.stm49 http://news.bbc.co.uk/2/hi/business/8471888.stm

50 http://news.bbc.co.uk/2/hi/business/8471613.stm, - http://news.bbc.co.uk/2/hi/business/8471888.stm

59


Another area in which the future is uncertain is the EU Euro zone where everybody is holding their

breathe. Greece has course a lot of headache with its deficit and near bankruptcy. The fear is that

the downfall of the Greek economy will take other countries with it in the fall.

A country that is deemed a possible follower of Greece is Portugal. With its chronic week growth,

the drastic loss of competiveness when joining the Euro-zone and high public and private

indebtedness there is no room for mistakes. These weaknesses could easily undermine the situation

in Portugal. 51

In an attempt to save Greece, and the rest of the Euro zone, a bail-out is already in the pipeline. The

problem is that there are countries that are reluctant offer such funding of the Greek tragedy. In

particular, Germany is accused of holding back. 52

5.5. Trend: Power struggle between China and the West

China and the US are closely linked, but there is also tension between the two nations. Long before

the economic crisis, China experienced massive growth and this had a lot of impact on the rest of

the global market. Especially the US feels pushed by the new dominant Chinese market and has

been accusing China for foul play. Vice versa China is reluctant to give into American terms of

reducing its surplus.

The main Sino-American tension is here captured in bullet form:

- Iran’s nuclear plans which the West opposes and wants sanctions, and China is overlooking

because of interest in resources.

- Americans want the Chinese to revalue the Yuan upwards, accuses China of pegging the

Yuan to the Dollar in an attempt to keep export high

- The loss of jobs

- Conflict over business like Google that had experienced the Chinese protective style

51 The Economist April 24th 2010, page 2752 http://www.economist.com/displaystory.cfm?story_id=16060103&fsrc=nlw|wwp|05-06-2010|politics_this_week

60


The Americans are blaming the Chinese for having deliberately kept the Yuan undervalued by

pegging it to the Dollar in order to gain an unfair export advantage, of stealing US jobs, of violating

the rights of its workers to keep labour cost down, of exporting deflation by selling its products too

cheap, and last for failing to honour the commitments to the World Trade Organization. 53

The US has an increasing trade deficit with China and there is not an agreement on how this

problem is solved. China has plans for improving the trade balance by long term activities, among

other by increasing domestic consumption. On the other side the US government wishes that the

Chinese government would revalue the Yuan. 54 The Yuan gained more than 10% against the dollar

in 2008. 55

Another struggle that potentially could turn ugly is the fight over natural resources in Africa. China

is right now investing and building Sino-African relation and this without the usual strings that are

attached when the Western world do business or aid work in Africa. The US and West watch while

the Chinese government makes deals with less democratic African leaders and ignores human rights

and corruption. The fear from the US point of view is that once China has gotten the foot in the

door, there will be no room left for Americans and their hope of getting access to vital energy

supplies. 56

The US government has been trying to mend the hard and sometimes impossible structures and

rules imposed on multinationals trying to enter the Chinese market. When Google had disputes with

the Chinese government the US government meddled and stated that:

"The ability to operate with confidence in cyberspace is critical in a modern society and economy." 57

53 http://www.foreignaffairs.com/articles/60825/neil-c-hughes/a-trade-war-with-china54 http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm55 http://en.ce.cn/Industries/Consumen-Industries/200810/14/t20081014_17060726.shtml56 http://www.cbsnews.com/stories/2010/01/18/opinion/main6114041.shtml

57 http://www.guardian.co.uk/technology/2010/jan/12/google-china-ends-censorship

61


Google has now chosen to leave China and set up business in Hong Kong instead. Multinational

like Google are beginning to be fed up with the difficult trading environment in China and many are

contemplating whether it is worth have their business there. 58

5.6.Trend: Centralization of chain structure

The trend is that the number of individual shops has shrunken compared to the increasing number of

retail chains. This trend is regarded by the industry as a fixed tendency and therefore it will be

included in the scenarios as a predetermined trend. As there has been made an elaborated

description of the trend in the exposition it is only briefly mentioned here in the trend analysis.

5.7. Trend: Polarization of consumers

As the exposition showed there is an increasing polarization in the market consumption structure.

In many places the market is dividing into two different sub-markets, a high-end market with focus

on well known brands, and a low-end market with relatively unknown brand focus. In China the

rapid growth of the high income population has fostered a strong demand for luxury items and high-

end goods such as clothing. An increase in big modern shopping plazas shooting up especially on

the Eastern part of China is an indication that the fashion clothing market is expanding. The

dominant brands in the luxury end are foreign internationally well-known names like Gucci and

Armani. These brands thrive because of the consumers need for “showing face” and Western brands

are associated with style and status. 59

The low-end clothing brands in China are also profiting and one reason is that the main customers

are students of the universities and young people in general, all of which make up a large proportion

of the Chinese population. All in all, a study shows that the amount of consumers that will trade up

in the future is larger than the amount that will trade down. 60

58 http://news.bbc.co.uk/2/hi/business/8456950.stm59http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingandDesign/FashionClothing/60http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingandDesign/FashionClothing/

62


Among other, this transformation has its roots in the economic developments where some because

of the crisis are forced to buy low budget and others experiencing increase in disposable income can

afford high end products or luxury. The growing low-end consumer group is also due to the many

young students that buy in from this category. Does this mean that there is no room for mid-price

products any more? By no means. Indications like a succeeding Zara in China prove that mid-

markets brands are able to make it. 61 The reason that Zara has made it, a contrast to the failed

launch of Bennetton or Esprit in China, is that the concept of offering Prada-look-a-like clothes at

lesser price is working.

Despite a small opening in the market for mid-price brands in China, the global trend is a

polarization towards each end an away from the middle.

5.8. Trend: Individualization

The polarization of consumers has consequences that maybe will inflict blows to the Danish fashion

industry in the years to come. However, one thing that has long been a consumer trend is the lack of

brand loyalty and individualization among both the Danish and international population.

The individualization trend is spreading to every aspect of human life. Companies can no longer

count on that consumers stay loyal to their brand or that the employees want to stay working in their

company for ever. (Ridderstråle 2004: 41) There is no such thing as life long loyalty anymore.

(Ridderstråle 2004: 42) Loyalty has to be earned.

Some of the reason for this individualistic trend is that the conditions of life have changed. People

have more and more choices. Those that thrive on endless choice and possibilities succeed in life.

The downside to individualization is that people tend to feel lonelier than before. There is a kind of

aura of fragmentation surrounding individuals, companies and the society as a whole. Isolation is

becoming a more frequent feeling. (Ridderstråle 2004: 43)

61http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingandDesign/FashionClothing/

63


If people are not able to deal with the pressure, they are left behind. People that lack adaptability,

will not be able to follow the fast changes in society. They freeze instead of acting out the process

of globalization. They act collectively, but feel trapped as individuals.

The reality is that the trend of individualization creates very hard and though competition. People

and businesses that are able to differentiate themselves are succeeding, but those who react instead

of being proactive are falling behind in the race. (Ridderstråle 2004: 85)

The Danish and the global consumer have long exhibited an individualistic style and preference and

appealing to the consumers is not an easy job. Brand loyalty in China is nearly zero and therefore

companies face a much tougher marketing situation than in the rest of the world. Companies here

have to adjust their products to the taste and like of a much diversified nation. Because of this

highly diversified culture the companies have to get inside the heads of the consumers and learn

their habits and tastes’ and this is not easily done. The obstacles are many; the consumers are often

skeptic towards foreign products, competition comes from rivals that they have never heard of and

piracy is normality. 62 Strategic measures are taking in use in order to get through to these critical

consumers. Any companies are beginning to use sales persons to demonstrate the products. Also

The consumption pattern around the world is changing along with the economic and society

progress and developments that take place. Due to the growth in income demand for high price and

luxury items is increasing. Yet another reason is the fact that the Chinese and emerging country

consumers in general desire luxury items, whether it is clothes, shoes, cars or mobile phones. Here

appearance or “Face” is everything and therefore both the middle and upper class requires status

symbols. This tendency has helped along a boost in the fashion industry in China. 63

These consumers go for clothes that can best express their taste and individuality. They want fine

fabrics, modern design and superb workmanship and for this the mass-produced ready-to-wear

clothes no longer is enough. The trend within the individualization is therefore hat the consumer

62 The Economist, special report, p 7, April 17th 201063http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingandDesign/FashionClothing/

64


wants quality and design. Overall, whether it is in China or ells where it seems that the individual

style is dominant. 64

5.9. Trend: Technology

Technology is regarded as a predetermined trend. It has developed from being the domain of the

military, over to the latest in entrepeneuring to being an instrument of mass entertainment.

Technology is constantly changing and developing creating communication and information

systems. The reason it is unstoppable is the fact there would be no fun in being the only one in the

world with a computer or a mobile phone. Once these new networks of communication have

reached critical mass they tend to explode. It appears too fun to be part of the networks and people

do not want to be left outside. Examples of such networks are Twitter and Facebook. Facebook is a

social networking website with over 400 million users worldwide currently and Twitter has an

estimated 100 million users.65 IT, networks and blogs, digitization over all, helps decrease time and

space. Furthermore it opens up for and aids transparency. (Ridderstråle 2008: 35 – 45) Afraid of

public criticism in countries like Syria, Iran and China the network has been banned. 66 However, it

is not only social networks like Facebook that are used as outlets of peoples’ voices and opinions.

Blogging in general has become the place of discussing everything from what people are having for

breakfast to the latest trend in cars. Commercial weblogs also exist where companies promote their

latest product. 67

IT will probably extinguish the intermediary links and replace them with infomediaries or

information brokers. These infomediaires are functioning as purchase agents for customers and

sales department for sellers at the same time. The global market and consumer are re-entering the

information jungle with information ready online. The media based information technology is

important in spreading knowledge and doing business. According to Ridderstråle et al, one certainty

64http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingandDesign/FashionClothing/65 http://en.wikipedia.org/wiki/Facebook - http://en.wikipedia.org/wiki/Twitter

66 http://en.wikipedia.org/wiki/Facebook67 http://en.wikipedia.org/wiki/Microblogging

65


is that “infostructure”, the electronic nervous system of a company, will become more important

than infrastructure. (Ridderstråle 2008: 35 – 45)

When considering the trade and marketing, technology is an important trend. The e-commerce is

increasing, especially in countries like China. China has the largest internet population in the world

and the number is expected to increase further.68 Access to internet is now easier than ever with an

increase in computers, inter-cafes and web-browsing mobile phones. Customers have been quick to

buy such products as clothes and electronic devises online. Benefitting from online sale is not only

the consumers, but to a large degree also the companies with well-known and trusted brands. These

brands are easy to spot online and this as meant a huge boost for Western companies which

otherwise had a hard time competing on the Chinese market. The online sale counterbalances the

disadvantages normally experienced by the foreign companies. 69

At first, technology does not seem to be a dominant concern of the companies interviewed.

However, given the factor that such technological elements as online sale and online social and

commercial networks have grown over the years and surveys point in a direction of continued

growth in e-commerce, it is important to analyze the trend and include it in the scenario

descriptions.

5.10 Trend: Africa – China –the Western world nations

A new trend that seems to prolong is the interest in Africa as the place for production and

investment. The developed and the emerging countries are showing interest in establishing relations

with some of the most well functioning African nations.

China is right now making a lot of effort in providing resource-backed infrastructure and

development loans in several African nations. Chinese companies and government have built roads,

railways, hospitals and water systems in Africa and in return gotten natural resources like oil, coal

and other minerals. The Chinese government also has focused on building economic trade zones in

68 http://tradecouncil.china.um.dk/NR/rdonlyres/55BBBE97-5F4F-4494-9AF9-72D49873A5D6/0/TheChineseretailmarket.pdf69 The Economist, April 24th 2010, page 59

66


Africa, supporting Chinese companies setting up in the zone. The carrot stick for doing all these

projects and deals is the expected results. The Chinese government wants to relocate jobs in order

for the domestic industrialists to move up the value chain; in essence, to make room for further

growth. In the aftermath of the recession, the wages and benefits are expected to pick up where it

left before the crisis and keep on rising in Eastern China. The latest estimate says that there is now

app. 750,000 Chinese migrants in Africa and it does not end there. 70

In reality, China is only doing what has proved to be working within its own boarders. In the

1970’ties China leveraged its natural resources and in return got Japanese investments in new

technology and infrastructure. 71 All this is happening now in Africa. While the West supports

microfinance for the poor, China is setting up a $5 billion equity fund to boost investments in

Africa.

5.11. Finding the predetermined and critical uncertainties

The primary concerns gave rise to yet another set of trends and drivers that was investigated and

analyzed. Above was a description of the all of them. Having described the concerns which in fact

are a combination of the trends and drivers of the industry experienced today the next step in the

analysis is to determine which factors are critical uncertainties and which are predetermined. Out of

the above described and analyzed list of concerns and trends the following are established as

uncertainties because they can go up or down, either way would mean critical impact on the client

and the business environment.

Uncertainties:

- Power struggle between China and the West (Europe and the US)

- Economic crisis

- Innovation Management/organizational innovation

- Denmark as the 5th fashion cluster Education (students) - Knowledge centers - Network

Critical mass

70 http://news.bbc.co.uk/2/hi/africa/7118941.stm71 http://www.foreignaffairs.com/articles/65916/deborah-brautigam/africa%E2%80%99s-eastern-promise

67


The predetermine trends are those that have been following a certain pattern in recent years and are

expected to continue this pattern in the near future. These predetermined elements are not

depending on any particular chain of events. No matter what scenario comes about, the

predetermined element seems certain to continue its cause.

Predetermineds:

- China, competitor and potential (focusing on emerging countries, BRIC)

- Centralization of chain structure

- Polarization of consumers

- Individualization

- Technology

- Africa – China –the Western world nations

- Innovation Products/process innovation

The trend of innovation is deemed an uncertainty in the area of management/strategizing and a

predetermined in the area of product/process innovation. Therefore it is represented two places on

the list.

6. The Third phase: Scenario building and analysis of implications

In this chapter the construction of the scenarios is explained and carried out. After each scenario

story a brief outline of main implications for the particular scenario is presented.

First of all, the two scenario dimensions are found. This is an intuitive approach in which the

uncertainties discovered are discussed and analyzed according to the future impact and importance

of the client. There were 4 distinct uncertainties in this analysis, and each is now briefly discussed

and accounted for.

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- Economic crisis

The economic crisis has been dominating the global business ever since 2005 and the

housing bubble in the US. Despite growing optimism, a few obstacles in form of Greece and

a potential overheating of the emerging countries are still lurking in the corner. Furthermore,

given the influence and impact the crisis already has cause the industry and adding the

obstacles to that, there is a critical chance that the new recovery experienced could reverse

and cause another downfall or even worse, hit a deeper low.

- Power struggle between China and the West/US

The uncertainty of the power struggle between China and the West, in particular the US is

also relevant. Tension is already there mainly due to the factors mentioned above in the

trend analysis. If the emerging countries keep on the fast pace of growth and the US trade

deficit also keeps on increasing it could set of a whole new dimension of conflict between

the two nations. China has of yet been reluctant to give in to the American demands and

should this new economic power choose to demonstrate its dominance a conflict could

develop that will have an impact on global trade and politics in the future.

- Denmark, the 5th fashion cluster

Denmark has long had the vision of becoming a fashion cluster. Besides boosting the

industry it would also help secure the companies and help them grow and maintain a high

level of innovation and creativity. Everything such a cluster entails, from network, to better

education system and high level of innovation would be profitable for the whole industry.

But the increasing global competition is tough. Therefore, the vision is very important.

- Innovation in management and strategy

Regarding the increasing competition, the level of innovation in the area of strategy and

management is also important. The fashion icons in Europe are struggling to find new

people that can takeover from the legends and lead the brands into the future. In Denmark

new leadership is also required in order to survive. Talent and creativity are essential for

making it, but also business knowledge is necessary. Here, the current and the future level of

innovation is uncertain.

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The scenario dimensions in the matrix model in this thesis are:

- The economic crisis going bad and hitting another low, or turning into complete recovery.

- Denmark on the way to becoming the new 5th fashion cluster, or Denmark out of the run for

5h place.

These two are picked primarily because of their immediate and high relevance for the client. The

power struggle and the innovation level are also important, but perhaps not to same extent. If

Denmark was to become the 5th fashion cluster it could help innovation of management and strategy

on the way. And if the crisis hits again it could bring about further tension between China and the

US. These two uncertainties therefore seem highly relevant and important and are therefore chosen

for the matrix. Below, the two scenario dimensions are the displayed in the matrix model.

6.1. The matrix

70

Scenario 1:

Destination

Africa

Scenario 2:

Chinese Fashion

Mogul

On the road to fulleconomic recovery


6.2 Influence diagram

Now it is time to develop each scenario in full. As preparation for the scenario storylines, an

influence diagram is depicted for each of the scenarios. This will help finding out how the trends

and uncertainties described in the analysis above are connected and influence each other. In the

process of drawing these influence diagrams new driving forces may appear and these are then

included in the scenarios as well. (Appendix 11) The next step is to write the scenario stories.

Scenarios are meant to be eye opener for any business leader who wishes to be upfront with the

current and future situation. They are imaginative and still factual pictures of what might happen in

the future in regard to a specific topic, a company, line of business or area of concern for the

company. The trademark of scenarios is they bring the listener or viewer into a different

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Scenario 3:

Isolated Nordic Queen

of Fashion

Scenario 4:

Wiping Out the Black

Sheep

Succ

ess i

n be

com

ing

5th

fash

ion

clus

ter

Failure in becoming 5th

fashion cluster

The economy taking another hit


psychological state of what it will be like in 5, 10, or more years from now (Cornish, 2005: 29).

They help us understand our options for the future. (Cornish 2005: 36)

“It is a common belief that serious information should appear in tables, graphs (…) or at least

sober scholarly language. But important questions about the future are usually too complex or

imprecise for conventional language (….). Instead, we use the language of stories and myths.

Stories that have a psychological impact that graphs and equations lack. Stories are about

meaning; they help explain why things could happen in a certain way.”

(Schwartz 1998: 37-38)

The choice is for this thesis to use a journalistic narrative approach as means of making the

listener/reader pay attention and to get them thinking. The story is displayed as an article in the

news magazine, The Economist, outlining the important features of each scenario scoping outcome.

The language is colorful and at times provocative. All this is an attempt to get the stories of the

scenarios to come to life and to create images and pictures in the head of the reader.

6.3. Scenario 1: Africa I presume

What to do with all this productivity?

Amid the glitter and glamour of the Copenhagen Fashion Week it is easy to forget that the world on

recently have recovered from a devastating economic crisis. In our series on the industries that

shine, this time the designated reporter has chosen to report from the Copenhagen Fashion Week,

the hotspot for global fashion. Every Tom, Dick and Harry is here, but most appealing to the

consumers are the luxury and budget brands. Copenhagen is the new fashion cluster puppy

72

Leaders The Economist February 4th 2015


following in the line of fashion centres like New York and London. This upcoming star is a clear

proof that the economy is now completely back on track.

Before the recent crisis, the hope was that Copenhagen would become the 5th fashion cluster – and

now, it is really happening. The most evident proof of success are the large and prominent brands

with the cooperate chains behind, pulling the strings and campaigning massively. It is fair to say,

that all the work with establishing networks and creating a new education and knowledge centre is

bearing fruit. The leader of the brand new knowledge and creativity centre, Rikke Damsgaard,

explains:

“We have managed to create a forum here at the centre where companies can see the latest in

innovation, technology and design. Through us, they can get in contact with students that need an

internship and the education institutes can get in contact with our industry leaders who regularly

hold seminars and lectures. This new network is made in collaboration with DAFI, TEKO, DMT

and the company members. Also they can follow the development in Africa where we are trying to

set up similar centre in South Africa. The primary function of this centre will be to monitor and help

the process of building relations with African production companies, because this is not an easy

job.”

Not an easy job, indeed. The rise in disposable income with the economy on the fast track has

benefited everyone, also the late and not so rural and poor parts of China. The salaries have risen

and the advantage of cheap production is getting harder and harder to spot. Companies from all over

the world are now looking for alternative options for production facilities. But look no further!! The

African dream is here.

The problem is though that China already has a foot in the door in Africa and there is not much

room for newcomers. In 2012 China established its first clothing facility in Congo and ever since

many Chinese fashion companies followed suit. The European and US governments have been

occupied with imposing democratic strings attached to its trade with African leaders whereas China

and the other BRIC countries have conquered big market domains by offering loans and building

infrastructure.

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To the ignorant bystander this might not seem such a big problem, and as of yet it isn’t been. The

big question is whether the black cloud that has floated in the air over Sino-America will increase in

size because of the growing competition over African soil and cheap labour.

6.3.1. Main implications of scenario 1

This scenario is built on the premise of a positive economic recovery and the vision of Copenhagen

as the new 5th fashion cluster being completed. All though these alternative future outcomes offer

positive changes there are some factors that need to be taken into consideration. First of all, a lot has

to happen in order for the scenario to come true. The scenario offers a glimmer of how the first sod

is cut for being established as the 5th cluster.

Right now the educational institutions and DMT are working on trying to establish a network

culture in which all the parties, companies, schools, governmental institutions and trade industries

cooperate. At DMT they are taking steps to realize a networking culture, however, the problem is

that the fashion companies tend to hold their cards close to their “cooperate chests” and do not seem

all that interested in cooperating. The attitude of the companies is that it is impossible to create such

an environment. (Appendix 2:

Should the scenario become reality it will also mean that the industry has to begin its search for

alternative production facilities in other countries. China experienced an increase in income before

the crisis and this growth has picked up again in the recent period of recovery. (Appendix 6:3) A

further boom in economic growth would help the income further along. Together with the Danish

government, DMT has been in Tanzania and Kenya in order to investigate the possibility of

establishing production there. However, at present time DMT does not see it as realistic that the

industry will have to move there, but nevertheless, the trip was made to ease the decision-making

for when and if it should be necessary to outsource to Africa. (Appendix 6:4)

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The trend is that China develops in very fast pace and is already present in several African nations.

Thus, it could be a wise move to do more than just investigating the possibilities of opening

production facilities in Africa. Further steps are necessary in case scenario 1 should happen.

6.4. Scenario 2: Chinese Fashion Mogul

China-mania

Consumers love Chinese collections

The bi-annual Copenhagen fashion week is buzzing with anticipation and excitement.

Unfortunately, with the eyes of European reporter, it is not due to any particular success of behalf of

the Nordic fashion industry. The thing causing the commotion is the presence of the highly praised

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and very well known luxury brand from China, Shanghai Tang. In 2010 this brand already had

some 39 boutiques around the world including in New York, London and Tokyo. Now Shanghai

Tang has taken a step further and announced the opening of a boutique in Copenhagen. This

opening will mean that the Danish fashion companies have to step up their game. Last year

Shanghai Tang opened a boutique in Berlin and soon after Chinese low prize brands were emerging

on the German market. This has been a pattern throughout Europe. The Chinese brands are

conquering the global market driven by the rise of a new fashion cluster in Beijing. Today, when

you say Beijing, you also say fashion. Led by a steady economic growth, a high level of innovation

and a new creativity and design style, Beijing has established itself as a strong competitor. The most

dominant contenders on the global scene are the big and ever growing retail chains. It is not just the

new Chinese chains, but big chain in general that have prospered in the strong economic climate.

The unprecedented success of the Chinese brands is owed to the fact that they appeal to the

preference and taste of the consumer. These brands have understood that the consumer tends to go

for either the cheap budget clothes or luxury items.

The hope now is that the Chinese presence here will bring new life to the Fashion Week which

otherwise have been completely falling apart. After the crisis from 2005-2010 there was a brief

moment of optimism, but this was soon crushed by the outlook of the highly industrious and

productive competitive force of China. With a continued boom in online sale, innovation and a

growing mass of talent and creativity in young people, China is like an unstoppable force.

The economic recovery, mainly driven by the emerging countries like China and India, did not help

the small and medium sized Danish companies much. On the contrary, the recovery increased

global competition in many aspects. Danish export has been squeezed by the boom in export from

India and China. Furthermore, outsourcing for cheap labour in China is beginning to fade. In the

long term perspective it will no longer be an option to have production in China because income

here has risen even in the most rural areas. Now, companies are therefore looking at alternative

places to have their collections manufactured.

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The good news is that all this innovation, buzzing young talent and industriousness in China

eventually will rub of on the bystanders. Luckily the Danish industry already is present in China

and may in the long term benefit from this. Cooperation instead of denial could save the industry.

The other good news is that banks are beginning to lend money again because of the recent years

with economic growth and stability. This might be the helping hand that the industry so badly

needs.

6.4.1. Main implication of scenario 2:

The economic growth and the failure of the becoming the 5th fashion cluster are the two scenario

dimensions in this scenario. Here, the main implications are the strong force of Chinese innovation,

booming luxury and budget brands, and income rise. In order to handle such a scenario the Danish

industry will have to become even more visible in China, establishing further contact and trade

relation. This way the industry can profit from the inevitable force of nature that China represents

on the behalf of the rest of the BRIC countries.

Embracing the competition instead of trying to avoid it, and then keep on doing what we do best in

Denmark; focusing on design, quality and talent building is the recipe. This conclusion is backed by

the RP who states in the interview that Denmark has to realize that China is right behind us in the

race and soon it will catch up (Appendix 1: 4-5) Furthermore, all is not over yet in this scenario.

The stabile economy leads bankers to open up and offer loans for the hard pressed industry.

6.5. Scenario 3: Isolated Nordic Queen of Fashion

A glimmer of hope in the sea of despair

In the midst of the glooming economic outlook there is a beacon of light shining in Denmark.

Standing here at the Copenhagen Fashion Week 2015 brings hope despite the ongoing economic

devastation. Who would have thought that the economic crisis hitting again last year could have

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made room for anything but destruction of industries such as the fashion industry. Nevertheless the

new Nordic fashion cluster is proof that something good can come out of the crisis. The crisis has

made the consumer attitude towards foreign brands turn and today’s consumer is now focused on

keeping it local. Consumers are now more than ever going for either cheep or luxury products and

this suits the new and upcoming names and fashion icons from Scandinavia. As one of the Danish

fashion experts states:

“I have seen the future of fashion, and it is called Marlene Birger” Uffe Buchard.

Since the crisis has taken another turn, the companies in the fashion industry do as their designated

consumers. They all focus on the near market. Though still experiencing growth, China is not the

competitive force it was 5 years ago, and this has made room for the industrious small and medium

sized companies in Scandinavia. The talent of the Scandinavian designers combined with a strong

sense of business and strategy is making people from even the most remote areas visit the

Copenhagen Fashion Week this year.

However, life is not just a bed of roses for the Nordic fashion industry. The Chinese dragon is

breathing fire. Increasing conservatism and protectionism in China is affecting foreign companies’

chances to maintain production facilities and trade. This explains why everyone is now fighting

over Africa. Since China closed down, companies worldwide have been looking for alternative

production sites and Africa is on the top of the wishing list.

6.5.1. Main implications of scenario 3:

The background for this scenario was the economic crisis hitting a new low and the 5th fashion

cluster becoming reality. Making it and becoming the 5th cluster in this scenario depends on whether

the industry realizes that the consumer is going for luxury or budget clothes. If the industry can

muster up a few icons then chances are that these icons could help pull the rest of the industry

along. Getting to the point where the Danish fashion environment has a few icons is not entirely

unrealistic. If the crisis gives a hand and help level out the competition there would be room for

manoeuvring for new Danish international brands.

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Africa is not just an option for if and when the income rise in China reaches a threshold. The chance

that it becomes too difficult to maintain or set up production in China is also a possibility. As stated

in the trend analysis, Google has already pulled out of China and many other companies are

considering whether it is worth the effort to be in China.

6.6 Scenario 4: Wiping out the black sheeps

Meltdown in the world order

We did not see it coming. Europe failed to acknowledge that it was facing a ticking bomb, Greece.

All though the fears that have instigated this new downward economic spiral were relatively

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unfounded back in 2010, investors have a mind of their own. Their lack of confidence in Greece

and the other swaggering line dancers Portugal and Spain has made the Euro zone a new war zone.

The problem was that the EU with Angela Merckel in the lead was too late to save Greece from

bankruptcy. The steps taken in 2010 with first one bailout fund and then another in 2011 did not do

the trick.

The pessimism could not be more evident than at the Copenhagen Fashion Week this year. The

Danish industry has made unavailing attempts to become the next fashion cluster in the line of the

great centres in Milan, New York, London and Paris, but the sad fact is that it wasn’t enough.

Because of the new economic downturn, resources for innovation, for creating new knowledge

centres and boosting the event of the fashion week have been scarce. Attendance at the Copenhagen

Fashion Week was slim and the most prominent names have chosen to pull out entirely.

In the midst of all this despair, there is an upside. The black sheep in the industry have disappeared.

They have been vanquished in the race for survival; a sad consequence for some, a relief for others.

It is expected that the ones who have survived will benefit greatly from this. There is now much

more room for manoeuvring and creativity. Gone are those that were just living on a name, a

façade, but did not have any real turnover, and left are those with a relatively healthy business

despite the blows taken during the crisis. With room for aspiring talent, the hope is that a few

Danish companies could prove to be future icons. Because the so-called BRIC countries have

overheated and are now focused on damage control, the level of competition is equalized and the

game is on for those how dare to play. But make no mistake. China is still a force to be reckoned

with because of the high level of innovation of cheap quality products. The consumer is having a

field day in a sea of plenty, and they do not care whether the clothes are made in Hong Kong or

Turkey. As long as it fits today’s taste.

A real challenge will be to restructure the industry and pay attention to the ever growing segment of

consumers that prefer to buy less, but luxury items. In the other end of the scale there is also the

young and the fabulous online users that shop around for cheap quality items. If a company could

appeal to either segment, it would be like finding the end of the rainbow in an otherwise cloudy sky.

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6.6.1. Main implications of scenario 4:

The main implications of a continued or worse crisis and the failure of becoming the 5th fashion

cluster are off course that the competitive environment is stronger than ever. It is every man for him

self, but within this bleak expression also lays a truth.

There are many opportunities and chances in starting over. Once the bad lot has been wiped out,

there is room for talent and ingenious. Also, appealing to the consumer’s wish for either luxury or

budget items is a possibility for future prospect. Online sale is ever increasing, but the Danish

companies are still reluctant to begin competing in this area. (Appendix 2: 6) So if the industry is to

benefit from online sale, it has to move and take the necessary steps, perhaps in cooperation with

the retailers.

As expressed after the individual scenarios, each of them offers unique opportunities and threats.

Some of the predetermined elements present in every scenario offer general implications for the

industry today. The consumer individualization means that the companies have to work hard at

getting the attention of consumer. The attitude of the disloyal consumer, one moment choosing one

brand, the next moment moving on to a new brand, is clearly

The retail chains’ strong position represented in many of the scenarios is also factor worth

considering, especially for those companies that do not have their own retail outlet.

With respect to competition and establishing Denmark as the next fashion cluster, there are certain

elements that are lacking and need improvement. As mentioned in the exposition and in the trend

analysis, Denmark must push for internal cooperation between the various parts involved, network

is necessary and also consumer focused innovation. Looking at the existing fashions cluster in New

York or Milan, these are some elements that are dominant and seem to be the key to establishing

and maintaining a cluster.

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7. Conclusion

The purpose of this thesis was to explore what the Danish fashion industry will look like in the year

2015 and what strategic impacts will that entail for the companies. In particular, the thesis set out to

investigate the current state of affairs for the industry, the trends and uncertainties shaping the

future and the implications of such trends and uncertainties projected into the year 2015.

Various theoretical and empirical surveys helped provide insights into these issues. By applying a

framework of Michael Porter’s five forces model, the generative forces and consulting an expert, a

picture of the current state of the industry became clear. Danish industry is highly potential and

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flexible. Among other, this is shown by the quick outsourcing moves where the industry proved to

be visionary and ahead compared with Southern European countries; all of which failed to

outsource even though they had more than a 10 year period to adjust and move.

All though there is a high degree of adaptability there is a restriction in the limited resources that is

typical of the small and medium sized companies. Very few make a real turnover and this has

consequences for their ability to take action towards more PR, export launches and expansion of the

business. Some of the companies who have the necessary capital have been able to take advantage

of the crisis. They have managed to either buy up other companies or expanded with the opening of

new retail shops. Yet another advantage seems to be that crisis is helping sorting the good from the

bad, the strong ones who survive and the weak ones who succumb.

The crisis has caused a few companies to close, but it has also meant a change in strategy and

attitude towards trading and cooperation among the parties involved in the fashion industry. Focus

now is on the near market and this is a good thing. Among other, Germany is a huge market where

Denmark only has a very small percentage of the sale compared to number of habitants.

China and its growing consumer market also represent a huge potential. Before the crisis the

companies were beginning to think of China as more than just mere production place, but the

though process has never been realized. Because of the growth in income China may not continue

to be the most suitable and cheap place for production and the industry has taken some steps

towards considering Africa as a future outsourcing place.

With regards to the centralization of the retail chains, the companies experience an ever increasing

pressure. The chains are pushing the individual brands to constantly perform better, if not, the chain

will choose another supplier. The companies are all focused on improving their relation with the

suppliers and the retailers selling their collections. Sharing knowledge and cooperating in this

manner is a step in the right direction, because further down the line, it might lead to network

building.

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In general, it is an industry that is affected by the crisis, but otherwise very competitive and with

visions of becoming even stronger. The Copenhagen Fashion Week is regarded as the event of the

year. It used to be very important for the companies to be represented here, but now, many are

choosing to spend their scarce resources on other PR actions. The fashion week is one of the

strongest supporting factors to help realize the goal of becoming the 5th fashion cluster. The other

dominant factors are the level of innovation, network, education and the creation of knowledge

centres. It is reckoned that the Danish industry has potential, but still to some degree lacks the right

amount of the mentioned factors. If Denmark had a few internationally known fashion icons it could

boost the rest of the industry. The designer, Marlene Birger is mentioned as a potential future icon,

but for now we do not have any real contenders.

Technology and delivery are interrelated by the fact that increasing delivery demands could be

eased by technology. Chains demand faster deliveries of clothes. The companies today are not only

working with 8-12 season collections which require development and innovation in the logistic

system and stock capacities. Perhaps the most critical area where technology is making a difference

is in online sale. All though online sale is increasing globally, the Danish companies have not yet

shown real sign of trusting that it really works. Despite its lack in the areas mentioned there is a

strong sense of achievement and grocer mentality on which the industry will go far.

The trend analysis helped shed some light upon the current trends and uncertainties. In the eyes of

the world China represents the near future challenges, possibilities and threats. Therefore, there has

been a focus on this country in the exposition, the trend analysis and scenarios. Given the

circumstances in the BRIC countries, the industry will have to follow them and their development

closely. Evidence proves that they are right behind in the global competition race and will probably

grow in strength and number in the years following the scenarios, after 2015.

The reason that the crisis hit the business world so hard is that we live in a globalized

neighbourhood where action taken in Bangladesh or Peru may potentially affect the rest of the

world. The consequences of decisions made in China or the US could damage or benefit the global

trade. Therefore the tension between the two nations also contributes to the overall global trade and

confidence. For now, it seems that the two are doing a tap dance in an attempt to avoid coalition.

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Optimism is running through the global world, but it is a fragile sentiment. It only takes some bad

decisions on the part of the banking world or a few pessimistic investors to change the attitude of

the whole. Psychology can mean the difference of further growth or another downfall. The

overheating of the economy, the tension between the nations and the Euro zone trouble could all

potentially lead to a change in direction of the current recovery.

The consumer polarization and individualization are trends that shape the industry. The Danish

companies are primarily situated in the mid prize segment so it will take some restructuring and

strategizing in order to change and appeal to the consumer.

The question is what kind of picture the scenarios have shown and the implications entailing such

scenarios. All four scenarios have offered their vision of alternative futures. These scenarios are

central to the whole process of trying to establish an image of the implications of the trends and the

uncertainties. The main story in each scenario builds on the economic crisis and the vision of

becoming the 5th fashion cluster. Mixed together in a 2x2 matrix these scenario dimensions illustrate

different world of the future.

The first world offers a general positive outlook, but the main implication here is other side of the

medallion. The massive productivity, innovation and competitiveness have boosted the economy so

much that outsourcing to China is becoming too expensive and the industry has to turn to Africa.

The problem is that Africa is already spoken for. China’s presence there makes it urgent business of

any industry to consider building a trading relation with some of the African nations.

The second worldview is a Chinese worldview. A Chinese industry that is taking over the trade

within both luxury and budget sales, but also a Chinese industry that inspires and could generate

growth and creativity in the Danish industry as long as the Danes stay close and maintain good

relations.

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The third world is built on Denmark’s success as a fashion cluster. Everywhere around the cluster,

the crashing economy has made the otherwise competitive forces less difficult to cope with. The

reason that Denmark is managing to create a cluster in this devastating environment is that it has

managed to restructure and produce clothes for the polarized segments of luxury and budget. The

last reason is that a few icons have made onto the global scene and are now pulling the rest of the

industry along.

At first, the last scenario worldview looks a bit gloomy and any aspects of the scenario are indeed

fairly pessimistic. With the chance of the economy falling apart and the failed effort to become the

5th fashion cluster there are certainly enough precautions to take. The lesson learned by the recent

crisis is that having capital raised for such occasions is the key to survival. However, there is a light

at the end of the tunnel, so to speak. Should the scenario come true, the weaker links in the fashion

industry chain would not survive and this would have a huge impact for the ones that remain

standing.

If there is no growth in the future, there will be a risk of loosing more companies and growth

depends on innovation in technology, distribution and know-how. If a company does not keep

progressing, developing and nurturing knowledge, innovation, branding and retailing, then it does

not stand a chance in a globalized world.

The need for many companies to get closer to both their retailers and also their suppliers in order to

tie a good and solid business relationship is evident. The companies will have to make changes in

their way of producing collections so they can better serve the retailers and remain competitive

against the growing centralization.

The future will also be characterized by being focused on branding and developing along the line of

either luxury or budget collections. The Chinese are developing in fast pace. They have knowledge

on production and frugal innovation, but soon they will also have the design and creativity part

covered. Compared to Denmark, they are in front when it comes to investing in education,

innovation, and their attitude towards winning and competing is fierce. Maintaining a position in

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China and building a strong bond will ensure that the Danish companies are capable of monitoring

the developments and perhaps even stay ahead in the game.

In the area of knowledge the fear is that we will become mere trading houses without a profound

knowledge of the process of producing clothes. Left is only the design and creativity part and here

the Danish industry risks being overtaken by the upcoming Chinese brands. The keywords for the

future are knowledge, innovation, strategizing and cooperation.

All of the above came to life in a scenario process that was tailored to the fashion industry. There

are many ways to proceed in scenario planning, many methods and tools that can be incorporated in

the process. The main findings described and included in the scenario stories and the conclusions

are all signs that the industry has to stay alert to the changes happening in the fast developing global

world. In order to be ahead of the game and also to some extant plan for the future SBP can be used

as a tool. It is my belief that the scenario exercise has proven this and also illustrated the benefits

and advantages of using such an approach.

7.1. Limitations of outcome

The empirical surveys are based on a theoretical background that by no means is exhaustive in

relation to conducting a scenario process. The combination of an intuitive and formal approach used

in this thesis leaves many other options open. The scenario process could have been made in

various other ways and the result might also differ. Therefore, the outcome of the scenarios is not

meant to be a final answer to the how the future could turn out for the fashion industry, rather the

outcome serves as a guideline for further investigation and analysis.

During the process of the writing the exposition, analyzing the trends and completing the scenarios

much information and interesting aspects came up that was not included in the thesis. An example

of a concern that could have been investigated further is the conflict between the Nordic countries

in the EU and the Southern countries. The Nordic countries have outsourced their production to

countries with cheap labour cost whilst the Southern countries have maintained most production

domestically. This has been the cause of conflict in the past and could become the centre of tension

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in the future when it is no longer possible for the Southern countries to keep production within EU

boarders.

It is important to be aware of the fact that scenario dimensions chosen in this thesis do not give

away a final result, but are merely outcomes which the fashion industry can prepare for. They are

meant as guidelines towards what could be explored in further detail. Additionally it is important to

recognize that the empirical data collection and analysis have been conducted on a very general

level. Further exploration is possible if the client or reader wish for more detail.

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