2014 David’s Bridal Goes to Germany
Valerie Spears International Marketing 4/24/2014
Overview of Culture Background Background
Europe’s largest economy, 2nd most populous (after Russia) Two German states founded in 1949 o Western Federal Republic of Germany (FGR) EU & NATO o Eastern German Democratic Republic (GDR) Frontline of soviet-led Warsaw Pact o Decline USSR/ end Cold War unification 1990 European Exchange Currency (EURO) Germany government is known as a federal republic and is located in Central Europe and its capital is Berlin with a climate of cool, cloudy, wet winters and summers with the exception of it having a warmth breeze on the mountains.
Economy
5th largest economy in the world PPP (purchasing power parity) & Europe’s largest Faces demographic challenges to sustained long-term growth Low fertility rates & declining net immigration are increasing pressure on the country’s social welfare system and necessitate structural reforms (reforms launched by government 98-05) 2014 federal budget wants to balance budget After March 2011 Fukushima nuclear disaster, it was announced in May 2011 that 8 of the country’s 17 nuclear reactors would shut down & remaining by 2022 o Replaces nuclear power with renewable energy
GDP: $3.167 trillion o Growth rate: 0.99% o Gross national savings: 24.3% o GDP by use: Household consumption: 57.4% Government consumption: 19.3% Investment in fixed capital: 17.7% Investment in inventories: -0.4% Exports of goods/services: 51.9% Imports of goods/services: -45.9% o GDP by sector: Agriculture: 0.8% (potatoes, wheat, barley, sugar, beets, fruit, cabbage, cattle, pigs, poultry) Industry: 30.5% Services: 68.6%
Labor forces (16th in world): 43.92 million
o Agriculture: 1.6% o Industry: 24.6% o Services 73.8% Unemployment rate (54th in world): 5.5% o Population below poverty line: 15.5%
Budget: o Revenues: $1.535 trillion o Expenditures: $1.532 trillion o Public debt 81% of GDP o Inflation rate 2.1% o Debt (4th in World); $5.719 trillion
Exports (4th in World): $1.46 trillion o Motor vehicles, machinery, chemicals, computer & electronic products, electrical equipment, pharmaceuticals, metals, transport equipment, food stuffs, textiles, rubber & plastic products o Partners: France: 10.1% UK 7.1% Netherlands 6.9% US 6.3% Austria 5.6% Italy 5.4% China 5.1% Switzerland 4.7% Belgium 4.3% Poland 4.1%
Imports (4th in World): $1.222 trillion o Machinery, data processing equipment, vehicles, chemicals, oil and gas, metals, electric equipment, pharmaceuticals, food stuffs, agricultural products o Partners: Netherlands 14.1% France 7.5% China 6.7% Belgium 6.4% Italy 5.5% UK 4.9% Austria 4.4% Russia 4.4% Czech Republic 4.1%
Exchange Rates- EURO per US dollar o 2012: .7752
o o o o
2011: .7194 2010: .755 2009: .7198 2008: .6827
Industries: o Leader in steel, and metal working o Coal reserves for basis on carbo-chemical industry o Automobiles, machines, metals, electrical appliances, chemicals, plastics, and food processing.
Labor (Work Force) o Laborers, entrepreneurs, employees, and clerical workers, managers and administrators, and various professions o Determined by family background, individual ability, education or training. o Highly skilled, complete vocational trainging o High labor costs
Technological Environment
Electricity production: 575.6 billion kWh (7th in World) Exports: 66.81 billion kWh (1st in World) Imports: 46.27 billion kWh (2nd in World) From fossil fuels: 55% of total installed capacity (143rd in World) From nuclear fuels: 23% (6th in World) Renewable sources: 13% (17th in World) Crude Oil: 169,500 bbl/day- 41% Telephone mainlines: 50.7 million (4th in World) Mobile: 107.7 million (11th in World) Internet users: 65.125 million (5th in World) Media= 90% of households have cable/Satellite TV Airports: (13th in World) Railways (6th in World) Roadways (11th in World) Waterway (19th in World) Merchant Marine (24th in World)
Culture: Ethnic make-up consists of: o 91.5% German
o o o o o
2.4% Turkish 6.1% other (made up largely of Greek, Italian, Polish, Russian, Servo-Croatian, Spanish)
Religions make-up consists of: o 34% Protestant o 34% Roman Catholic o 3.7% Muslim o 28.3% Unaffiliated or other
28%
Religions Make-Up
4%
34%
34%
Protestant Roman Catholic Muslim
Languages: Germany is another country that has a lot of different languages, however; its official language is German. o 95% of the population speaks German as o their first language o German is the 11th position language worldwide o German is the official language for 7 countries o Minority language in 10 other states
Society & Culture: o Known as the masters of planning o After they have a great plan they’re not flexible when trying to change their perspective on another way to plan something o Work and personal lives are rigidly divided o Use time management appropriately
A German Home: o They take great pride in their homes o It is imperative that common areas such as sidewalks, pavements, corridors (in apartments), and steps be kept clean at all times o Really informal, a place to relax and express yourself in a comfortable manner
German Etiquette & Customs o Meeting Etiquette Formal Firm handshake Titles are very important and denote respect Use title and their surname until told otherwise Say Herr or Frau and the person’s title and their surname o Gift Giving Etiquette if and when invited to a German’s house: Bring chocolate or flowers Yellow roses or tea roses are great as a gift
Red roses are not a great gesture unless you are trying to be romantic Carnations represent mourning Lilies or chrysanthemums are used for funerals If you bring wine, it should be imported, French or Italian Normally opened when received
o Dining Etiquette if and when invited to a German’s house: Don’t arrive early or late, arrive ON-TIME which indicates you planned properly Send a handwritten thank you note the following day to thank your hostess for her hospitality o Table Manners if and when invited to a German’s house: Wait until you are told where you will sit Table manners are Continental- fork on the left hand and the knife in the right Wait until hostess begin eats or someone’s say’s “guten appetite” (good appetite) Most common toasts (‘good health’): Wine: ‘Zum Wohl!’ Beer: ‘Prost!’
Business Etiquette and Protocol in Germany: o Relationships & Communications High-trust societies, however, as a group they are suspicious of hyperbole, promises that sound too good to be true, or displays of emotion Display great deference to people in authority, so it is imperative that they understand your feel relative to their own Do not have an open-door policy—you’ll need to knock and wait until invited to enter Communication is formal Direct and to the point (bluntly) Expect a great deal of written communications o Business Meeting Etiquette Appointments are mandatory and should be made 1 to 2 weeks in advance Letters should be written in German Punctuality is taken extremely seriously and can jeopardize doing business with them if you cancel at the last minute Formal Initial meetings is a way to determine if you are trustworthy Direct eye contact while speaking
At the end of a meeting, some Germans signal their approval by rapping their knuckles on the tabletop Strict protocol to follow: Eldest or highest ranking person enters the room first Men enter before woman, if their age and status are roughly equivalent
Business Negotiation o Heavily regulated and extremely bureaucratic o Go straight to business o Material should be available in English and German o Contracts are strictly followed o Decision-making is held at the top of the company (hierarchical) o Once a decision is made, it will not be changed
Dress Etiquette o Do not wear ostentatious jewellery or accessories o Formal and conservative Men: dark coloured business suits Women: Business suits or conservative Dresses Political/ Legal Environment Government: o Parliamentary democracy- where public authority is divided among federal, state, and local levels of government o In federal elections: Held every 4 years 18 and older can vote- which form Bundestage (parliament) on the basis of vote distribution Majority party or coalition then elects the head of the governmentKanzler (chancellor) who then appoints the heads of the various government departments o In state and local communities elect parliaments or councils and executives to govern in their constitutionally guaranteed spheres. Each state government appoints three to five representatives to serve on the Bundestrat, or federal council, an upper house that must approve all legislation affecting the states
Social Problems and Control: According to Culture of Germany, in the Federal Republic of Germany, police forces are authorized by the Departments of Interior of the sixteen federal states. Their activities are supplemented by the Bundesgrenzschutz (Federal Border Police) and the Bundesamt fur Verfassungsschutz (Federal Office for the Protection of the Constitution). In the early twentyfirst century, organized crime and violence by rightwing groups constituted the mos tserious domestic dangers.
Note: German is the official language for the following 7 countries: o Germany o Lichtenstein o Luxembourg o Belgium o Italy o Austria o Switzerland German text is longer than English therefore when translating a word(s) then it’s imperative to have enough space on our word doc to fit all the German words It was really interesting to learn that while in US if an employee works overtime it’s simply because they have too much work whereas in Germany it’s a negative effect. In Germany it could simply mean that you didn’t plan your day accordingly. I didn’t realize that it may be an insult to the host if you decide to give them a wine. They will it take it personal and think that you viewed them as not having a suitable and reputable (quality) wine. Selling Products and Services in Germany
When using an Agent/Distributor o Agreements should be in accordance with the EU and member state national laws. There is minimum protection for self-employed agents that sell or purchase goods on behalf of partners. The Council Directive 86/653/EEC establishes: Rights and obligations of the principal and its agents Agent’s remuneration Conclusion and termination of an agency contract Among other clauses Franchising o In general, the German market is fairly hearty and friendly to franchise systems. Franchising laws within the EU are broad, allowing good competition. Franchisers should look at EU regulations and local laws for franchising. o More information can be found on the European Franchise Federation
Joint Venture/Licensing
o Joint ventures are difficult to process. Legislation is ruled by the Federal Cartel Office. Joint ventures must engage in “genuine entrepreneurial” activities. o The law prohibits mergers if they are “expected to create or strengthen a dominant position.” o As far as licensing, owners are free to use their industrial property rights or exploit patented innovation (as long as it does not allow them to gain a dominant market position.) o Selling to the Government o Government procurement is mostly non-discriminatory and is compliant with the GATT Agreement on Government Procurement and the Europeans Community’s procurement directives. However, there is a challenge competing with major German and EU suppliers that have created long-term relationships with purchasing entities. o EU Regulations- The EU public market is regulated by three Directives: Directive 2004/18 on Coordination of Procedures for the Award of Public Works, Services and Supplies Contracts; Directive 2004/17 on Coordination of Procedures of Entities Operating in the Utilities Sector, which covers the following sectors: water, energy, transport and postal services; and Directive 2009/81 on Coordination of Procedures for the Award of Certain Works, Supply and Service Contracts by contracting authorities in the fields of defense and security. o Companies who face discriminatory public procurement practices are covered under some remedy directives. o U.S. companies are able to bid on supplies and services contracts from European public contracting authorities. (Made possible by both countries part take in the WTO and the GPA)
Distribution and Sales Channels o Are similar to those in the U.S. however, restrictions are imposed on multilevel networking systems.
Selling Factors/Techniques o In order to be successful, companies must have a long-term commitment to market development and sales backup. This includes having successful export relationships, and a credible support network (i.e. after-sales support).
Trade Promotion and Advertising o Trade fairs are prominent in Germany. Almost every industry sector hosts a major world-class trade event. They mostly prevail because true business transactions, such as contracts and negotiated deals, are done in these fairs. Trade fairs can also be used to conduct market research, catch up on the competition, and test pricing strategies. Companies also benefit by having a large audience, composing of buyers from different countries. o Regulations in advertising are composed of basic rules and guidelines developed by major industry associations. The “Law Against Unfair Competition” does not allow advertising that “violates accepted mores.” Also, advertising practices that are allowed in the U.S. are not allowed in Germany, such as offering premiums. Advertising should be discussed with business partners or with an advertising agency to ensure no violations of law.
Pricing o Is increasing in importance as a competitive factor since most consumers are becoming more price-conscious. Quality, timely delivery, and service remain important.
Sales Service/Customer Support o Customers expect to talk to his/her dealer and have replacement parts or service quickly available to them. Therefore, companies should avoid having distributors at a far distance. They should also ensure to have service capabilities and dealer mark-ups. o Discrepancies exist among EU member states regarding product labeling, language use, legal guarantee, and liability. However, suppliers need to be aware of legislations that affect sales, service, and customer support, since the EU is trying to harmonize national legislation. o Amended in 1999, the 1985 Directive on liability of defective products hold the producer liable for damage caused by a defect in his/her product. The victim must prove a correlation between the defect and his/her injury if not, a reduction of liability is granted to the manufacturer. o The General Product Safety Directive was implemented to introduce a general safety requirement for manufactures to place harmless products on the market. In 2001, it was revised to include an obligation on both the producer and distributor to notify the Commission on any problems with a product. Additionally, it created the European Product Safety Network and it but a ban on products to be shipped to third countries if they were deemed unsafe in the EU.
o The 1999 Directive on the Sale of Consumer Goods and Associated Guarantees was established to require sellers to provide a minimum two-year warranty on all consumer goods. Remedies available to consumers for noncompliance include: Repair of the good(s); Replacement of the good(s); A price reduction; or Rescission of the sales contract. o Other consumer rights and protection issues are also intact.
Unanswered Questions Some of the concerns we have with this market is not knowing exactly who we are competing with. It is hard to research the bridal shops in Germany since they do most of their bridal shopping online. The small mom-and-pop bridal gown shops usually do not have any websites, and can reach their target market in different ways than an international company could. We also know that we will have to alter our dresses to fit the German bride. This raises questions about what their needs are. There is a lot of information about what they wear. Customarily, the bride wears a dress with no train, and a veil that is fingertip length. However, that is just on the third day of the wedding, which is the religious section of the whole ceremony. Since German weddings last three days, there is a lot of unanswered questions about what they wear the first two days. There is limited secondary sources for this type of information. There are some for-pay sources out there, but translation is kind of an issue. A lot of their bridal magazines joke about sex, and do not really talk about the wedding itself. There was also a book found at Barns and Noble, but it did not really explain the attire. It did explain some of the ceremony customs, but would not really help with our case. It seems as if most Germans get their wedding done online instead of using magazines or shows like we do in America. Most of the information for our questions are found on websites of German cultures. Even a lot of the articles only talk about what the bride wears at the religious part of the ceremony. Without actually going to Germany, we do not seem to have the whole wedding concept down, which can be difficult when we enter the market.
Mode of Entry Based on our findings, realistic entry options for David’s Bridal would be to benefit from a first-mover advantage approach. Currently, there is a significant amount of demand for online wedding purchases. Therefore, David’s Bridal would profit from furthering their operations and opening stores in Germany. David’s Bridal would be considered a
first significant competitor in the market; since not many businesses exist in Germany that competes in this industry. As a whole, Europe is a developed country, and Germany is located by surrounding countries that might also be attracted to the upcoming David’s Bridal stores. As David’s Bridal executives, we have concluded that by expanding internationally we will have to consider licensing as a mode of entry to expand our operations abroad. The factors that we will have to closely monitor: joint ventures, dealing with the Federal Cartel Office and franchising (master franchises), in addition, we will need to ensure that our strategy is not affected by gaining a dominant position in the market. The advantages we will experience include the free use of our industrial property rights and the right to exploit patented innovation. Currently we are thinking of franchising and shipping our product to the various stores locations. However, if and when the business is successful, we will consider local manufacturing in the area. David’s Bridal Information “David's Bridal is the largest and fastest growing bridal retailer in the world, with over 300 stores located across the United States, Canada, Puerto Rico and the United Kingdom. We are constantly looking for talented people to build our team. With beautiful boutique-like store environments, and the opportunity for a great earning potential, David's Bridal has become one of the most desirable companies for employment opportunities in specialty retail. David's Bridal is currently involved in an ambitious expansion program in all aspects of our business. We continue to add new stores throughout the US and to explore international markets. As a result of this tremendous growth, we are constantly looking to add more positions throughout the company: in the field, corporate office, manufacturing, and distribution center.”
Positioning and the Marketing Mix David’s Bridal Germany provides German brides with a unique wedding shopping experience. We offer a mix of German tastes with American flavor to create the ultimate wedding for each bride. We are prepared to help the bride through this grand ceremony, and understand the German regulations. We help by having checklists the bride can go through to make sure she is following German laws and preparing for her three day wedding properly. The bride will find our shop convenient for her every need, which sets us apart from our competition. Product Line By understanding germans cultural preferances we adapt our dresses accordingly in order to be successful in the local markets. To the extent that fashion and tastes differ in Germany, Davids Bridal would have to change the style of dresses. We remove the train from our dresses, unless the bride requests it. The
taste of German Brides is usually a more structured dress, without the train. We will provide fingertip legnth vails, and more simple dress to fit to their tastes. Our product line will provide similar dresses as the companies here in the US, but without the trains, that is preferred by the German bride. The dresses will not have over the top embellishment, because the German bride tends to pick more simple dresses. Our dresses will include: Ballgown (very popular in Germany) A-line dresses Empire dresses Mermaid dresses
(pictures listed in order. Davidsbridal.com)
We will also offer fingertip length veils that are very common with the German brides. The veils will be simple, like the dresses. We will work with the bride to understand their tastes, and offer various samples for them to try on. The bride’s feedback will be very important to what products we will provide. We will work to have some primary data, like surveys the brides can take so we will know what products to offer.
Pricing We will offer pricing categories for dresses including: Under €100 €100-200
€200-400 what is €400-800 Euros and over €800
These pricing categories are similar to offered in the United States, but with
Many of the competitors offer the same prices that we offer. We give the brides a variety of pricing options
Distribution We will open stores in Berlin, Hamburg, and Munich. These locations have large populations, and are spread over Germany to give brides living in different parts of Germany. We are the retailer, and will not be using local wholesalers or agents. We are the retailer because we are the final member of the consumer distribution channel, because we purchase project for resale for consumers. We are in a selective distribution market that employs few stores per market area. By having three stores, we compete in a market where brides go from bridal store to bridal store to shop. Our channel length is shorter due to our products distribution density, the average order quantity, and availability of our channel members.
The channel alignment will be easier to ensure because of our short channel length.
Since we have our products already manufactured in Germany, we can manage our distribution easier.
Traffic Management- we will use railroads to transport our dresses from one location to another. It is more profitable, and faster to use this system to transport our dresses in a timely manner. Inventory Control- by using just in time inventory, as stock is moving out we will have stock readily available to replace what is sold. We will ensure we will have the right amount all the time. Order Processing- since we already have it in stock, there will be no need to have a big processing process. However, if the bride needs her dress customized, we can order products for her which will take 1015 days to order. Material Handling and Warehousing- our manufacturers will hold some of our dresses, but will be moving inventory. Since our inventory is constantly moving, storing dresses will not be held for long period of times. Fixed-Facilities Location Management- our warehousing is located in areas close to our stores. This will provide easy flow of inventory, and easier ordering transporting. Since we have this all located in Germany, it will be cheaper and easier to reach our inventory, and is convenient for the bride.
Promotion We are going to use a pull strategy where we rely heavily on promotion including sales promotion and advertising. This strategy will be directed at the final buyer, or end user for our product and services. As part of our primary research, we will have to understand the purchasing behavior, buying criteria, language, and business etiquette. How do the consumers shop? What do they buy? We need to focus on how to translate our services and products. Once we research these aspects, we will learn how to adapt our business customs to their business customs. By using sales promotions and discounts, we will have to be aware of German laws enacted in the 1930s that mandates some of the promotional uses. Types of Promotions: One of the main promotions that we are expanding into the market is to have an exposé at one of the trade fairs. This will help expose new
customers to our products and services. This will also give us the chance to meet prospective customers in a less formal atmosphere. We can also do buzz marketing because it is cheap, and encourages customer referrals. We can do this by creating buzz on social media, and encourage American customers to help us promote the new German stores.
Advertising: Ensure proper translations o Enlist local nationals or language experts In the EU many advertisers emphasize visual communication rather than attempting to communicate their message through the regions various languages. Advertise in global magazines o Cosmopolitan o Elle Work with domestic advertising agencies to handle our advertisement due to their experience and capabilities within the country
Works Cited “Germany - Language, Culture, Customs and Business Etiquette." The Translation Agency For A Complete Professional Translation Service. N.p., n.d. Web. 22 Feb. 2014. "Countries and Their Cultures." Culture of Germany. N.p., n.d. Web. 23 Feb. 2014. Added from HR book: Managing Human Resources (Snell * Bholander) http://export.gov/Germany/MarketResearchonGermany/CountryCommercialGuide/Sellin gU.S.ProductsandServices/eg_de_034830.asp "David's Bridal | Help | Company Information." David's Bridal | Help | Company Information. N.p., n.d. Web. 29 Mar. 2014. "Selling U.S. Products and Services." CCG 2012 Selling US Products & Services. N.p., n.d. Web. 16 Mar. 2014.