Its impact on quality

Brands are very important part of our life: we can find them almost anywhere. But we should remember that truly great brands are more than just labels of products. A real brand is a very difficult, complicated thing, with its own way and history. As mentioned in the Philip Patek advertisement “You don’t own a brand. But it owns you”. And for me this is the most accurate definition of this concept “brand”, because only truly great brands can give you trust and inspire fierce loyalty. We know what a brand is about, what it means, and what it is going to deliver time and time again. In a world of endless choices, a brand can give you something to fix on – it’s a kind of beacon in the darkness and that’s why brand can tap into our emotion and inspire fierce loyalty. They are much more than just a product or service: they’re an attitude, and that’s carried through in everything about the brand.

The word “outsourcing” entered the business lexicon in 1990s and means the transfer of part of the company functions to the outside supplier. The definition of outsourcing includes offshore. Traditionally offshore means financial centers attracting foreign capital by providing special benefits to the companies which agree to be registered on the offshore territory. Offshore outsourcing gives the firms the advantage to use cheap labor force and foreign currency.

So, why companies do it? Because outsourcing to low-cost countries allows to considerably reduce costs. Among the reasons companies choose to outsource include the avoidance of burdensome regulations and high taxes for government.

Such countries as China and India also have advantages from outsourcing by Western countries – the increase of salaries and quality of life, prestigious jobs and education.

COACH, the USA leather goods maker, is a classic example. Over the past five years, it has lifted all its gross margins by manufacturing solely in low-cost markets.

But in spate of all these advantages the companies producing luxury fashion products usually don’t want to move their production offshore because it may damage the reputation of their luxury brands.

For example, Burberry. This brand has many Asian licensing arrangements. Almost half of Burberrys sales at retail value are produced under license in Asia. But at the same time however, Japanese customers prefer the groups European-made products.

Domenico De Sole of Gucci says: “The Asian consumer really does believe – whether it’s true or not – that luxury comes from Europe and must be made there to be the best”.

Therefore, a brand is a set of associations in the mind of the consumer and one of this is the country of origin. For luxury goods, the role of the brand is crucial. To damage it is a cardinal sin and no brand manager will want to get the balance between manufacturing location and the brand image wrong.

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