Moving Victoria’s Secret to Germany
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Introduction
This report describes the opportunity for Limited Brands for the international expansion to
Germany with its largest brand, Victoria’s Secret. Limited Brands sells lingerie, personal care
and beauty products, apparel and accessories through its Victoria's Secret, Pink, Bath & Body
Works, C.O. Bigelow, La Senza, White Barn Candle Co. and Henri Bendel brands. The
company's products are available in North American stores, as well as online in about 40 other
countries worldwide. (Limited Brands, 2007). To best take advantage of the expansion of
Victoria’s Secret into Germany, as the first subsidiary outside North America, the task force
team suggest to start with one store in Cologne, a city known for fashion in Germany, and then
further expand throughout Germany with additional stores in Berlin and Hamburg. The divisions
moved will include the store and a warehouse, in order to facilitate distribution in Germany. As
Victoria’s Secret is now only available through the online channel in many European countries,
the expansion to Germany is a good basis for further expansion all over Europe.
Foreign Country Analysis: Economic Environment
Germany is a member of the European Union, and its economy is very strong. As many other
economies in the world are struggling, the German economy continues to grow. Experts had
predicted that the German economy would decline, but it has had an upward trend. This makes it
a great market for Victoria’s Secret products. As economies grow, the spending on consumer
goods also grows. This will facilitate our business perfectly as it will allow Victoria’s Secret to
make considerable investments without the risk of an unstable economy. Retail in Germany is
the third largest economic sector (HDE 2001). This economy is important when planning to add
two more stores in the near future. We must take advantage of the increased consumer spending,
and establish our stores while that spending is high. Germany also has favorable relationships
with many established nations, as well as emerging nations with high populations. These
relationships will facilitate tourism, trade, and increased spending between nations. People from
nearby countries will have the option of traveling to Germany without restrictions, and being
patrons at our stores. Germany’s central location and its workforce make it very attractive to our
business. The workforce is highly qualified and has a reputation for quality work. The German
economy is very stable, and the inflation rate is considered low by worldwide standards.
Foreign Country Analysis: Cultural Environment
Every country’s culture varies based on its system of norms and values that are followed.
Germany’s values and norms are formed through a variety of factors including political and
economic viewpoints, social structure, and the country’s main religion, language, and education
(Hill et al. 2007, page 191). It has been noted that German fashion is characterized as a classic
everyday wear with a less sporty emphasis than Americans and is seen as inappropriate to appear
sloppy or untidy in public. Germans are known to be conscientious, sparing, and systematic. Its
culture is predominantly made up of Protestant, Catholic, Jewish, and Muslim religions (German
Culture, 2008). The country’s constitution guarantees freedom of faith and religion, in which
many communities are seen as independent public law corporations. Good initial opportunities
for everyone are a key prerequisite for education and achievement. The free cost of schooling is
key to democratizing education and also broadens the possibilities for socially disadvantaged
classes to receive the same opportunities. This classical education puts strong emphasis on
Germany’s heritage in music, history, and art.
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When living and working in Germany, adherence to rules, laws, and procedures are defined
structurally, consequently resulting in low flexibility and spontaneity. This means Victoria’s
Secret’s expatriate managers would be wise to provide German employees with a highly detailed
company handbook that discusses everything they need to know regarding rules and standards
while working, company expectations, and expected goals for employees to achieve. German
employees are very task oriented and less relationship focused, so managers will need to instill
the high importance that will be placed on always helping customers in the store before
continuing with store upkeep or assigned tasks. Customer service is a vital key to any business,
especially when operating in an international company and culture. Germans are also known to
be very individualistic but also want the best for the store. Business ideas and concepts are often
communicated among the mangers and employees, which can sometimes slow progress (Gorrill).
Germany is also very keen on punctuality which means that managers should not have a problem
with employees showing up late, or not at all, to work. Personal rank and status of individuals are
often based on their achievements and titles (Gorrill). This will not only affect how employees
will treat and respect their bosses, but also how employees treat store customers. When
Victoria’s Secret provides training for the employees, this idea will need to be presented and
given situational examples of how to address this issue. When doing business in Germany,
private matters are usually not discussed and indirect communication is seen as insincere
(Gorrill). Employees will need to be trained on what type of ‘small talk’ will be considered
acceptable when helping customers within the store and what will be unacceptable.
Foreign Country Analysis: Political and Legal Environment
The German political environment works off of the system of Fundamental Law. It is a system
run by a parliament, and a president is elected every five years. The German system in
considered to be very fair, and will aid in an easy transition into the country. Germany and the
United States have close business ties, and the German government gives numerous incentives to
companies who want to invest in or move to Germany. These incentives are in cooperation with
the German states and the European Union. Germany is also moving away from large amounts of
taxation, and tax neutrality has been established. The more the taxes subside, the easier the
transition from the United States to Germany will be. The average corporate tax in Germany has
been reduced to less than 30% (Invest In Germany). Germany has a Foreign Trade and Payments
Act in place which has an underlying welcoming and open attitude. In order to acquire a place of
business, a building permit will need to be acquired. Attention will be given to follow the
Planning and Building Regulations Laws. These determine whether the business is a good fit to
the surroundings, and what may be done with the design to fit the company’s needs. Germany
also uses an Environmental and Emission Standard Law. This law will not have much affect on
our business, because we will not be using any types of industrial systems.
Germany rivals the United States with a number of patents and the laws that protect those
patents. Victoria’s Secret will not be using a product that will infringe on any German patents,
and therefore no attention will be needed in this area. Germany is a constitutional state, and its
courts are very effective and efficient. If Germany encounters any legal problems with our
company or any other companies, there is an assurance that the problems will be handled swiftly
and in a fair manner. Germany recently brought forth a directive beginning January 1st 2010,
stating that all standards in Germany must be in metric form (BUYUSA.gov). Victoria’s Secret
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will need to make sure that everything is in Metric form and conform to this recently adopted
reform.
Foreign Country Analysis: Communication Patterns
German businesspersons are individuals that work out of self-interest, but can also be found to
compromise while keeping the welfare of their community in mind. They tend to focus on
objective facts and the analysis of gathered information to make decisions. German
businesspersons are also heavily oriented towards planning and the achievement of milestones.
This will be great for Victoria’s Secret’s German employees working for higher sales/profits, but
may interfere in other areas such as communicating effectively with customers. With their
approach to work, they look at accomplishing tasks before building interpersonal relationships
with their clientele. Victoria’s Secret will need to identify a proper middle line that will help sell
the products while maintaining respect and sincerity to the customers.
These beliefs create a communication style that is direct possibly to the point of
seeming confrontational. However, individuals should not feel as though they are under attack
when an issue arises. Rather, foreign businesspersons should realize that their counterparts are
simply striving to solve the problem at hand. Further, German businesspersons tend to leave
their personal lives out of work. “First names are generally only used with family and close
friends and colleagues” (Gorrill). This and overall formality in communication applies to all
aspects of German business and communication. Flows of communication tend to be hierarchal
as they flow from senior to subordinate. Negotiation processes tend to be detailed, slow, and
complete once the documents have been signed. In other words, foreigners should avoid making
themselves look suspicious to German businesspersons by continuing negotiations after the
paperwork has been signed.
In conclusion, Germany’s culture and style of communication appears to be fairly similar
to that of the United States’. However, when it comes to formality, directness, and structure, the
German businessperson is generally a step above that of the American businessperson.
Business Plan: Main Strategic Intent and Business Objectives
To successfully expand into Germany by renting retail space for three new Victoria’s Secret
stores, the task force group has generated a detailed strategy to reflect the current and future
market. Victoria’s Secret’s approach depends on two main factors: pressures for cost reduction
and pressures for local responsiveness. Due to the fact that Victoria’s Secret will be serving
more of a niche market with it being a specialized lingerie store compared to the many retailers
there carrying various products of different natures all in one location, there will not be high
pressures for cost reduction. However, pressures for local responsiveness will be very high
because there will be differences in consumer’s tastes, industry trends, business practices,
distribution channels, and infrastructure than in the United States. The company’s clients will be
mostly international, so the need to adopt and customize its products to meet local demands such
as color and size alterations, marketing techniques, and store design will be essential in obtaining
long term success. These two factors have led the task force group to choose a localization
strategy, focusing on profitability by customizing Victoria’s Secret’s products as a beneficial
match to German tastes and preferences in the market (Hill et al. 2007, page 191). The visual
representation of Victoria’s Secret’s strategy is shown in Appendix A. The German retail market
is somewhat dynamic and with increased competition likely in the future, Victoria’s Secret will
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need to localize its product offering while continuously striving to be efficient and gain some
scale economies.
The plan to rent and establish three Victoria’s Secret Stores, the first being in Cologne, Germany
is financially feasible and strategically valuable for the company. Victoria’s Secret’s first five
years of profitability is represented in Table 1; although full details have been omitted (See
Appendix B):
Total Sales
Total Costs
Total Profit
Table 1: Sales, Costs, Profit Analysis
2009
2010
2011
2012
$3,600,000 $3,675,000 $7,350,000 $11,025,000
$4,154,837 $3,691,027 $7,412,167 $11,048,038
-$554,837
-$16,027
-$62,167
-$23,038
2013
$11,025,000
$11,031,879
-$6,879
In creating the sales/costs/profit table, the task force group determined what Victoria’s Secret’s
overall sales, operating expenses, costs, and profits would include over a 5 year time span from
the years 2009 to 2013. Overall sales were calculated by the average sales amount per square
foot in the typical Victoria Secret store. It will be placed on a higher frequency street in Cologne,
Ehrenstrasse, where a higher percentage of sales will occur compared to the average U.S. store.
An approximate 40% sales amount was added for this particular location, while a 19% sales tax
was deducted from total sales. Operating expenses include the following categories. Rent is
based on the average rent on the street of Ehrenstrasse in Cologne for a current retail outlet
(Specialists in German Retail Property). For future stores in years 3 and 4, a similar rent amount
was assumed for a street with a corresponding frequency rate. Rent varied slightly due to
possible inflation or addition of extra stores. Inventory costs are based on the total amount of
articles transported to U.S., divided by the 5 brands under Limited and the total number of
Victoria’s Secret stores. This number was multiplied by the average price of a lingerie article to
get the total yearly inventory amount. Victoria’s Secret will bring two U.S. managers; hire one
manager in training and one floor manager from Germany, and seven part-time hourly
employees in the first, third, and fourth year. The cost of employees was calculated out of a study
done within the textile industry, TW-Gehaelterstudie Textilwirtschaft, and adjusted accordingly
throughout the next four years when new stores were added. For recruitment and training, costs
were figured for a week of training before opening, assistance from employment agencies, and
advertising for applicants.
Advertising and Marketing costs included the need to translate the American Victoria’s Secret’s
website into German, obtaining R&D services from Pricewaterhouse Competence Center Retail
and Consumer Consulting firm, printing and sending of the catalogue, and the various channels
of advertising needed (Deuscher Direktmarketing Verband). A considerable amount will be spent
to launch the new line/products in the first year and increase the expense with the opening of
each new store. In order to implement and apply with all legal issues, lawyers from a German
legal service, Pricewaterhouse Legal Services, will be hired. Expense for this will be high the
first year due to unknown territory information and increase in years 3 and 4 due to the opening
of new stores. We will use Limited’s current logistics company to ship Victoria’s Secret’s
products manufactured in Sri Lanka to Germany. The cost per container size and the
approximate weight of the products are known, in which we estimated the amount of space and
time needed to transport the products. Additional costs are factored in due to increases in
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fuel/resource prices. Costs increased in years 3 and 4 due to increased levels of inventory for
each new store. Insurance costs include liability and inventory insurance. A website using our
employee count and inventory data were used to calculate these amounts (Beliebte Kategorien).
Store fixtures, signs & equipment, software, and store supply costs were determined through
research of online prices of these products and from a similar retail store’s data under Limited
(Limited Brands). Costs for licenses, permits, and registration costs are based off a current
German industry business example through Pricewaterhouse Legal Service’s website. The
decision was made to rent a warehouse in Germany the first year to have for all 5 years, in which
data was gathered from a German warehousing website for the amount of rent per square meter.
Warehousing costs increased as the second and third stores opened due to increased inventory
levels. After calculating the overall sales and operating expenses, the total profit for each year
was determined. Moving Victoria’s Secret to Germany would be a good investment and research
shows that the German lingerie market is continued to grow and expand. Even through
considerable amounts of first year start-up costs and adding two new stores in the 3rd and 4th
year, profits show a steady incline over the five year period, and it is forecasted that increasing
sales and steady growth will enable Victoria’s Secret to become profitable in terms of long term
goals and profits.
Business Plan: Entry Strategy Choice
Before determining the best entry choice for Victoria’s Secret, the task force group first
addressed three basic decisions a firm must make when expanding in foreign countries: which
market to enter, when to enter the market, and on what scale (Hill et al. 2007, page 251). As
noted earlier, the company plans to enter Cologne, Germany in the year 2009 through a small
scale entry. For this expansion, a wholly owned subsidiary is most appropriate due to the setting
up of a new operation in Germany. This entry mode can help the company gain location and
experience curve economies, while helping to alleviate some of the threats proposed during the
KT analysis (see Appendix C). This will also allow the company tight control over all the
operations within the country; the ability to build the desired culture, determine routines, and the
ability to transfer products, skills, competencies, and know-how to the new subsidiary (Hill et al.
2007, page 269). These will provide great advantages to the localization strategy that as can be
seen in the KT table, could help overcome some associated risks; higher costs and learning how
to do business in a new culture. It works to the company’s advantage to be able to find and rent
stores in a timely manner, make all operations decisions such as hiring local managers for
knowledge and expertise within the market, what products to sell, the culture to create within the
stores, and be able to obtain all the profits.
Business Plan: Organizational Structure Analysis
The organizational structure of Victoria’s Secret will refer to its division of the organization, the
location of decision making responsibilities, and the creation of integrating mechanisms when
coordinating activities (Hill et al. 2007, page 202). Vertical differentiation determines where the
power of decision making takes place in the organizational structure. Victoria’s Secret has
chosen a mix of decentralization and centralization strategies with the vast majority following
decentralization, corresponding with the localization strategy. This will allow Victoria’s Secret’s
top management to focus on critical issues revolving around the company’s overall strategies and
financial decisions, while allowing the foreign subsidiaries greater flexibility to respond to
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changes in Germany’s culture and environment. Expatriate managers will have increased
motivation to give more to making the business successful due to more individual freedom and
control over the store. They will also make better informed decisions with the help of German
managers and employees compared to only managers at home. Lastly, more control will be
implemented by establishing autonomous and self contained subunits that can be held
accountable for performance. Activities such as advertising and marketing, legal issues,
operating activities, production, R&D, and some HR functions will be mostly decentralized. The
expatriate managers in Germany will need to assess how much inventory to keep in stock and
order according to the size of the store, transportation costs, and current demand for the product
by German consumers. R&D will need to be conducted to determine German consumers’
desired styles, tastes and preferences, and come up with new innovative products for future sales.
Pricewaterhouse Coopers Legal Service will provide legal assistance while Pricewaterhouse
Competence Consumer Service will guide them with various market trends, marketing and
advertising, and finding the best location at the best price.
Victoria’s Secret will continue to keep some aspects of the company centralized. One important
reason for this is to make sure that activities between all activities and divisions are well
coordinated. Essential decisions affecting various divisions’ financial stability and strategic
decisions need to stay consistent with organizational objectives, avoiding costly duplication of
activities throughout subunits. The three main divisions of Victoria’s Secret, Intimate Beauty
Corp., Victoria’s Secret Direct, and Victoria’s Secret Stores, will create and maintain overall
division objectives and strategies for expatriate mangers in Germany to maintain (See Appendix
D). However, the processes expatriate managers and German employees use to perform the
activities in order to maintain the objectives and strategies may be altered due to cultural or legal
differences. In regards to horizontal differentiation, Victoria’s Secret will follow a worldwide
product divisional structure. For a visual representation of what this may look like, refer to
Appendix E. The headquarters located in the United States will retain responsibility for the
overall strategic development and financial control, while the German subunits will be selfcontained autonomous entities with control over their own value creating activities. As
mentioned above, Victoria’s Secret contains three main divisions that will help ensure
coordination between the U.S. headquarters and the German subunits. The German stores will be
responsible for enhancing and developing value creating activities in Germany through their
marketing and advertising, R&D, human resource development, lowering costs, and increasing
profits. Successfully performing these activities will allow Victoria’s Secret to realize location
and experience curve economies. One challenge will be for the product divisions and the
expatriate managers to communicate closely and allow flexibility to still apply local
responsiveness to the German consumers and market.
The need for coordination will be relatively low because the German Victoria’s Secret stores will
have a lot of control and flexibility with a majority of their activities and operations. Since there
is not a large need for coordination, Victoria’s Secret will have very few integrating mechanisms
needed. There will be three stores created by the end of the five year time period within
Germany, which means managers between these subunits will need to keep in direct contact
when questions or issues may arise. There may be slight variances between the different store
locations, but most activities will be able to be performed similarly. Since this is the case, these
managers can provide beneficial feedback and will be good resources for each other when
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managing each new store. With Victoria’s Secret following a localization strategy, there tends to
be low performance ambiguity, interdependence, and costs of control since each store is
independent from one another and can be judged on its own merits (Hill et al. 2007, page 223).
Incentives will be linked to performance metrics at each Victoria’s Secret subsidiary.
Organizational culture will be low due to the amount of low coordination and integration within
a localization strategy.
To see and understand how Victoria’s Secret structure and strategy correspond, see Appendix F.
This representation will reveal the need for a mixture of centralized and decentralized activities,
a worldwide product divisional structure, and the minimal need for coordination and integrating
mechanisms.
Business Plan: Human Resource Management
Victoria’s Secret has chosen to follow a polycentric staffing approach when managing stores in
Germany. Expatriate managers will occupy key positions at corporate headquarters along with
each subsidiary for one year, while German managers and employees will be recruited from a
German location. This will allow managers and employees to pursue the greatest amount of local
flexibility and is relatively inexpensive to implement (Hill et al. 2007, page 293). Expatriates
will be expected to uphold the rules and values of The Limited, while also conforming to local
mores and folkways. The rules and values of The Limited will be enforces as they are in the US,
however conformance to local mores and folkways will be assessed on a subject by subject basis.
Two expatriates will be necessary in the start-up of the first store. They will hold the high
responsibility of organizing and coordinating the start-up, along with hiring management and
retail employees for Victoria’s Secret Germany. Expatriates will work in coordination with the
German management, a pre-chosen marketing firm, and a lawyer toward the successful
completion of a pre set time table (Refer to Appendix G).
Training will be provided for expatriates entering Germany and for local recruits. The chosen
expatriates must be fluent in the local language. Prior to leaving the US, expatriates will
participate in a two week course covering all aspects of the business plan and preparing
them/assessing their readiness for the international project. Training of local management will be
the responsibility of the expatriates. Prior to opening of the first store, a local manager must be
chosen and trained on all aspects on the Victoria’s Secret brand; being instrumental in the
development of local strategy. Upon the success of this first manager, responsibility will be
given for the training of the management of future store locations. Local hires are to be trained
by respective local management. Local managers will be informed of the training methods of
The Limited, and adjustments compensating for local norms will have been made in coordination
with expatriates. Employee training will require a minimum of one week of in store education so
that each employee has a standardized understanding of their respective responsibilities.
Expatriate compensation and benefits will continue to be handled as they are in the US. Raises
and bonuses for expatriate status will be applied on a subjective basis. Insurance coverage for
dependants will continue during the expatriates’ time outside the country. All health costs of the
expatriate will be covered a foreign insurance provider. Local managers and employees will be
compensated in strict accordance with German law. Management will be paid a salary which will
be decided in negotiations during the hiring process. All other employees are to receive pay
based on an hourly rate to be determined by management. Extra hours will be compensated
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either financially or through additional vacation days. Overtime compensation through additional
time off will require a prior contractual agreement.
Expatriate performance will be based on progress as based on a pre-set time table. The points
of progress are as defined in Appendix G. In the event that expatriates should fail to reach their
goals, the situation will be assessed at its specific point of progress and a corrective action plan
will be implemented. Corrective action is at the discretion of The Limited’s foreign investment
team and may consist of re-evaluating deadlines or financing and removal/replacement of
expatriates. If issues arise with local management or employees, the corrective action will be
decided at the discretion of the expatriates. Employees are allowed to work 48 hours per week
(or 8 hours/6 days). Special consideration must be made for the fact that the labor laws and
benefits in Germany are a bit less business friendly than in the US. Examples of special
considerations would include Sunday work, breaks, vacation and public holidays, sick leave, sick
pay, maternity, and employment of disabled persons.
Business Plan: Business Communication Strategy
The aspects of communication in Germany, which were outlined in the Communication Patterns
part in the Foreign Country analysis, will have a considerable impact on Victoria’s Secret’s
Communication Strategy. Compared to the US, Germany has a higher low-context and more
explicit communication culture. For the communication this means that expatriates have to be
trained to say more precisely what they mean and express their position directly and explicitly
(Hodgetts-Luthans-Doh, 2005). For successful negotiation, it is critical to be well prepared and
follow the established protocol during business meetings in order to build and maintain business
relationships (Kwintessential). It also has to be considered that humor is not appreciated during
business meetings (Hodgetts-Luthans-Doh, 2005). Germans are suspicious of promises that
sound too good to be true and any exaggerated presentations (Kwintessential). A small margin
should be integrated in the opening bid for unexpected developments since Germans like
negotiations that are realistic early on. In the decision making process, Germans are likely to
need more time than Americans to deliberate and confer with responsible colleagues (The
German Negotiator, 2001).
The method of addressing somebody is an important indicator of the relationship between two
people, in which expatriates will be trained in this field and policies will be established. There is
always the choice between "Du" ("you" familiar) and "Sie" ("you" formal) when addressing
somebody. “Sie” is used with anyone who is not a close friend or a family member (Schaupp,
2007). This means for any communication outside the company with suppliers, partners and
customers, the formal “Sie” has to be chosen. For the communication within the company, the
decision has to be made determining if the communication style of the US will be maintained.
But as a localization strategy is pursued, formal communication, using “Sie” is recommended. It
is likely that employees will start to use more informal communication due to the rather young
age and branch of business, but communication with the management will remain formal.
As Victoria’s Secret stores will only be in certain locations and not spread all over Germany,
advertising should be done on a regional basis by using flyers and posters in the city centers and
malls. According to the German communication style, advertising has to be direct and down-toearth. The research showed that competitors like H&M have posters all over the cities showing
women only wearing lingerie. In order to draw the attention of customers on our products the
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advertising and marketing strategy has to be adapted to local customs. In order to address the
German customers, the expansion should be supported by a local advertising company. Findings
showed that Pricewaterhouse Competence Center Retail & Consumer Consulting has experience
in the lingerie business and would be beneficial to employ them to plan the strategic marketing.
Advertising can strongly benefit from an already existing modeling contract with Heidi Klum,
since she is from Germany and is well known to the population. Engaging her in our first
marketing campaign will greatly facilitate the market entry of Victoria’s Secret.
Business Plan: Ethical Concerns
As a company, Victoria’s Secret is committed to conducting business in accordance with the
highest standards of business ethics and complying will all applicable laws, rules, and
regulations. The responsibility to do what is right for our business, our stakeholders, and the
global community helps guide the principles, actions, and demonstrate core values (Social
Responsibility). When making and distributing the employee handbook during the training
week, Victoria’s Secret will include a commendable section including the company’s codes of
ethics for different levels throughout the organization. This will include responsibilities of the
company, managers, and employees, how to live up to the code, reporting violations, and
consequences for unethical actions. Victoria’s Secret should concentrate on allowing high levels
of open communication between the expatriate managers, German managers, and German
employees; permitting employees faced with ethical decisions to openly communicate ideas and
concerns as a group. To portray the importance of ethics within the company, comments and
concerns will be addressed in 360 degree performance evaluations with employees and
managers. Victoria’s Secret will also maintain all of its efforts and accomplishments dealing
with social responsibility on the Limited Brands website for company employees as well as the
public to see at all times.
Victoria’s Secret supports many community programs that help to empower women, nurture
children, and enhance educational efforts. Great lengths have been taken to associate the value
of diversity within the company and its community programs. Especially in the devotion to
education, Victoria’s Secret is committed to enriching the cultural arts (Social Responsibility).
German people have long upheld cultural traditions in social aspects such as the arts, music, and
history. German managers and employees will play a vital role in educating and informing
American managers on these traditions, as well as the best way to implement and portray these to
the public. It is believed that vibrant cultural art corresponds to a diverse community, which will
help expose many different perspectives that entertain, educate, and challenge people’s way of
life. Victoria’s Secret is currently active in its “Think Pink” campaign for breast cancer
awareness in the United States, in which all proceeds are given to the American Cancer Society.
Victoria’s Secret will follow the same approach in Germany with the German Cancer Society,
especially the Breast Cancer Action program (Die Brustkrebsaktion 2007/2008). The task force
group believes these programs will correspond well with Germany’s culture and ideals for social
responsibility.
Recommendations
The proposal of Victoria’s Secret entering into Germany is seen as profitable move for the
Limited company and should be highly considered. The German retail industry is becoming
more competitive in nature, however due to Victoria’s Secret’s specialized product offerings in a
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niche market, the task force group believes this will be a suitable time and location to sustain the
business profitably. The current economic situation in Germany is showing improvements in
industry growth and is promoting the idea of free enterprise through a social market economy.
When competing in business internationally, Victoria’s Secret will need to be well educated and
willing to adapt to the unique differences in various aspects of German culture and business
etiquette ideals. It will be essential to provide German managers and employees with rules,
standards, and structures that will be a guide in providing excellent customer service while
increasing the company’s profitability. Germany is also a welcoming location due to its political
encouragement with foreign business corporations.
Finally, the business plan outlines the recommendations that the task force group believes will
grant Victoria’s Secret success. By following a localization structure, Victoria’s Secret will be
able to differentiate its products by variances in customer’s tastes, preferences, and market
trends. With placing itself in a niche market, there will not be high cost pressures and will
attempt to obtain location and experience curve economies. Victoria’s Secret’s success will thus
be largely obtained through the knowledge of Germany’s culture and business experience
provided by the German managers and employees. Another characteristic to its success is its
location on a highly traveled and highly shopped street in Cologne, Germany the first year of
operation. Most of the German stores will be decentralized, providing each unit the flexibility to
make decisions based on its location and market opportunities, while the overall corporate and
financial objectives will remain centralized. Pricewaterhouse Competence Consumer Service
will provide advantages through its many services providing knowledge in consumer
preferences, lower cost locations, marketing and advertising strategies, and market trends. A
worldwide product divisional structure will be followed, allowing many of the stores to be self
contained entities and have control over most value creating operations. The task force group
also recommends a polycentric approach in order to best attract managers and employees with
knowledge about German business and culture. The United States will occupy key positions at
headquarters while having German managers and employees at each foreign subsidiary.
Expatriate managers will only remain in Germany one year to oversee operations and then return
home and leave German managers in charge. Expatriate managers will need to be informed and
trained for differences in German business and culture, as well as developing a training program
for new German managers and employees. Each German subsidiary must be formally trained
and informed about the differences in etiquette with customers and other professionals.
Victoria’s Secret must also continue its commitment in Germany to its social responsibility and
ethical codes of conduct as in the United States. The expansion into Germany will not only
promote profitable growth for the Limited, but also encourage growth in German communities
through its various cultural programs initiated.
By following these recommendations and entering the German market with an open mind and
the ability to adjust to cultural and other country differences, all parties involved will be mutually
benefited. Victoria’s Secret will increase its profitability, gain insight into a new type of market,
and gain experience for future global expansion efforts. There will be many benefits that
accumulate through the expansion process in Germany, in which a greater understanding of its
culture and environment will help Victoria’s Secret cope with associated risks that may evolve.
The task force group believes there is no reason to suspect anything but growth and profitability
from this new exhilarating prospect.
Moving Victoria’s Secret to Germany
Page 11
References
"Beliebte Kategorien." Finanz Service Online. 2008. Finanz service Online. 6 Apr 2008
<http://www.finanzserviceonline.de/>.
“Business Guide to Germany”. Invest in Germany. <http://www.invest-ingermany.com/homepage/business-guide-to-germany/>.
"Deutscher Direktmarketing Verband e.V.." Deutscher Direktmarketing Verband. 20 Feb 2008.
DDV. 6 Apr 2008 <http://www.ddv.de/english/english_about_us.pdf>.
"Die Brustkrebsaktion 2007/2008." Die Brustkrebsaktion 2007/2008. January 2008. Deutsche
Krebsgesellschaft e.V.. 5 Apr 2008
<http://www.krebsgesellschaft.de/index.php?seite=ba07_brustkrebsaktion_info&navigati
on=6072>.
“EU Standards”. BUYUSA.gov. <http://www.buyusa.gov/germany/en/standards.html>.
German Retail Federation. 2001 HDE <http://www.einzelhandel.de/servlet/PB/s/1yd948d1296z7j1jph53svwuzig1855uw7/menu/1063765/index.html>.
“Germany as an Economic Hub”. Thomas Straubhaar, Facts About Germany
<http://www.tatsachen-ueber-deutschland.de/en/economy/main-content-06/germany-asan-economic-hub.html>.
"Germany Culture." Maps of World.com. 2008. MapXL. 4 Apr 2008
<http://www.mapsofworld.com/germany/germany-country-and-germany-states/germanyculture/index.html>.
"Germany - Language, Culture, Customs and Business etiquette." Kwintessential Cross Cultural
Solutions. 5 Apr 2008 <http://www.kwintessential.co.uk/resources/globaletiquette/germany-country-profile.html>.
Moving Victoria’s Secret to Germany
Page 12
Gorrill, Jodie. "A German Culture Overview." 2007. Communicaid Group Ltd. 5 Apr 2008
<http://www.communicaid.com/%5Ccross-cultural-training%5Cculture-for business-andmanagement%5Cdoing-business-in%5CGerman_business_culture.php>.
Hill, Hodgetts, Luthans, Doh, (2007). International Management Mgmt 414. McGraw-Hill/Irwin.
Limited Brands. 2007. The Limited . 5 Apr 2008 <http://www.limitedbrands.com/index.jsp>.
Schaupp , Gretchen . "Mind your manners." Mind your manners. December 2007. Language
Institute TREFF. 5 Apr 2008 <http://www.german-business-etiquette.com/>.
"Social Responsibility." Limited Brands. 2007. Limited Brands. 5 Apr 2008
<http://www.limitedbrands.com/social_responsibility/index.jsp>.
"Specialists in German Retail Property." Kemper's. 2008. Kemper's. 6 Apr 2008
<http://www.kempers.net/index.php?spath=101&lan=1&cbox=&bestell=&PHPSESSID=
e807b5b3baeae81bb160d50b8c1dc3e6>.
The German Negotiator. 2001. LEC-Online-Lehrverbund . 5 Apr 2008 <http://www.zmk.unifreiburg.de/ss2000/texts/gesteland%20germany.htm>.
Moving Victoria’s Secret to Germany
Appendix A: Visual Representation of Strategy
Page 13
Moving Victoria’s Secret to Germany
Page 14
Appendix B: Expanded Sales, Costs, and Profit Analysis
Sales
Operating Expenses
Sales Taxes
Rent
Inventory
Wages
Advertising
Insurance
Recruitment and Training
Transport Costs
Marketing Expenses
Legal Support
Store Fixtures, Signs &
Equipment,
Software, Store Supplies
Licenses, Permits &
Registration Costs
Warehouse (Rent Cost)
Total Profit
2009
2010
2011
2012
2013
$3,600,000
$3,675,000
$7,350,000
$11,025,000
$11,025,000
$684,000
$643,797
$1,080,000
$394,400
$82,500
$40,140
$25,500
$225,000
$750,000
$150,000
$698,250
$643,797
$1,134,000
$433,840
$82,500
$40,140
$7,500
$236,250
$300,000
$45,000
$1,396,500
$1,287,594
$2,268,000
$867,680
$165,000
$80,280
$33,000
$472,500
$630,000
$105,000
$2,094,750
$2,027,961
$3,337,200
$1,206,864
$247,500
$120,420
$58,500
$708,750
$990,000
$120,000
$2,094,750
$2,068,520
$3,370,572
$1,267,207
$259,875
$120,420
$22,500
$715,838
$900,000
$90,000
$25,500
$21,000
$46,500
$72,000
$63,000
$9,000
$45,000
$1,500
$47,250
$10,500
$49,613
$12,000
$52,093
$4,500
$54,698
-$554,837
-$16,027
-$62,167
-$23,038
-$6,879
Moving Victoria’s Secret to Germany
Page 15
Appendix C: KT Table
Identify Concerns
Threats
Separation &
&
Clarification
Opportunities
of Concerns
Market Size
Market
Expansion
Niche Market
Appeal
Opportunity to sell
to
untapped buyers.
There is low
competition in
stores carrying
only lingerie and
beauty
products
specifically.
Competition does
exist through
department stores
carrying various
other products in
combination with
lingerie.
We plan to
differentiate our
products to create
a unique sense
of value to
present/potential
consumers.
Set Priority
Current
Impact
H
H-
M+
Future
Impact
H
M
M+
Time
Frame
M-
M+
M
Next Steps
Plan Involvement
Highest
Priority
Action Needed
Help Needed
1
Need to develop
market
research. Find a
consulting firm to
help
evaluate the
industry, determine
target
segments, best
location, and current
market trends.
Need to have local
expertise in all
areas of the retail
consumer textiles
industry. Contact
Pricewaterhouse
Competence
Center Retail &
Consumer
service.
2
Take advantage of
current trends by
creating
a large customer
base through various
marketing
and advertising
techniques, building
consumer
relationships,
and portraying value
through the
product/service.
3
Emphasize a
considerable amount
of finances
into R&D. Use
Pricewaterhouse
Competence Center
Retail & Consumer
service to assist with
financing and areas
most needed of
research.
Plan for rivalry and
potential
competitors.
Use
Pricewaterhouse
Competence
Center
Retail & Consumer
consulting firm to
help build a
strategic
management plan
and stay ahead of
competition.
Need to complete
a thorough
customer
analysis and
determine current
industry trends.
Can apply for
national/local R&D
loans/grants to
help with funding.
Provided by
various state and
federal
government
organizations/
departments.
Moving Victoria’s Secret to Germany
Consumer
Acceptance
Need to appeal to
the
consumerswithin
the German textile
market. Need to
develop customer
acceptance of the
store, brand, and
products that
Victoria's Secret
has to offer.
Production
Costs
Will need to
determine the
best mode
of transportation
to maintain
reasonable
transportation
costs. Determine
manufacturing
location, distance
from Germany,
and what mode of
transportation will
be the best fit.
Location
Finding space in
already
established malls
or shopping
areas.
Locate appealing
site high customer
interaction
but with
reasonable
rent/costs.
Government
Restrictions
Employment Laws
H+
M-
H
M
Page 16
L-
M+
L+
L
H+
M+
H-
H+
4
5
6
7
Find a local
marketing/consulting
firm to help develop
a strategic business
plan to coordinate
various techniques to
appeal to
consumers.
Hire services from
Pricewaterhouse
Competence
Center Retail &
Consumer service.
The Intimissimi line
and many other
Victoria Secret
products are made in
Sri Lanka. Need to
determine lowest
cost mode of
transportation.
Look into a firm
that can help with
the logistic
planning.
Research shows
that Limited owns
its own logistics
company that we
will use in
Germany and Sri
Lanka.
Create good public
relations with other
businesses
and industry
professionals.
Use
Pricewaterhouse
Competence
Center Retail&
Consumer service
to find the best
locations at the
best prices.
Conduct legal
research for any
restrictions
that the company
might come across
when starting up a
store in Germany.
Find a legal
consulting firm and
a lawyer to help
guide the
company
through any
legal/governmental
procedures while
starting up the
business.
Will use
Pricewaterhouse
Coopers Legal
Services.
Moving Victoria’s Secret to Germany
Warehousing
Costs
Will need to
build/rent a
warehouse at a
reasonable
distance from the
store location to
contain the
necessary
inventory stock.
Government
Restrictions
Do legal research
on decency laws
that may need
attention.
Employment
Finding the
needed amount of
skilled workers to
create the
necessary selling
environment for
Victoria's Secret
products.
L-
L
L+
Page 17
M-
L-
L
M
M
L
8
Operational
Planning. Use
Limited’s present
logistics company to
help determine
essential details
for the optimum
location,
transportation mode,
and supply chain
solutions.
Outsource
manufacturing and
production to Sri
Lanka. Will rent
a warehouse in
Germany location
to keep
satisfactory
inventory levels.
9
Consult with a Legal
Service to determine
any legal or political
restrictions when
advertising/marketing
the store and
product.
Hire a lawyer from
Pricewaterhouse
Coopers Legal
Services.
Will need to
determine the best
and most reliable
way to advertise,
recruit, and train
employees.
Get advice from
local
employment
agencies,
such as the
German
Federal
Employment
Agency.
10
Moving Victoria’s Secret to Germany
Appendix D: Company Architecture
Page 18
Moving Victoria’s Secret to Germany
Page 19
Appendix E: Worldwide Product Division Structure
Victoria’s Secret’s
Headquarters
Victoria’s Secret
Beauty
Victoria’s Secret Direct
Victoria’s Secret
United States
Functional Unit
Victoria’s Secret
Germany
Functional Unit
Victoria’s Secret
Stores
Moving Victoria’s Secret to Germany
Page 20
Appendix F: Strategy and Structure
Strategy
Localization
International
Global
Standardization
Transnational
Vertical Differentiation
Decentralized
Core
Competency
Centralized,
rest
Decentralized
Some Centralization
Mixed Centralization
and Decentralization
Horizontal
Differentiation
Worldwide Area
Structure
Worldwide
Product
Division
Worldwide Area
Division Structure
Informal Matrix
Need for Coordination
Low
Moderate
High
Very High
Integrating
Mechanisms
None
Few
Many
Very Many
Performance
Ambiguity
Low
Moderate
High
Very High
Moderate
High
Very High
Structure & Controls
Need for Cultural
Controls
Low
Moving Victoria’s Secret to Germany
Page 21
Appendix G: Timetable for Germany’s Victoria’s Secret Startup
Timetable for Germany’s Victoria's Secret Startup
Arrival
End of month 1
End of month 2
Hiring
Begin Search for
management
Begin employee
search
Have hired
assistant manager
and employees
Marketing
Meet with
marketing firm
Begin advertising
Advertising strategy
in full swing
Strategy
Research, plan,
and implement
market strategy
Work with manager
and marketing firm
on market strategy
Strategy is
developed and is
implemented
Training
Develop German
training strategy
Begin training of
manager and prep
employee training
plan
Begin training
assistant manager
and finish employee
training plan
Store
physicality's
Work with
marketing firm on
store design and
layout
Work with manager
and marketing firm
on store design and
layout
Store setup has
begun
End of month 3
Store opening
and beyond
Hiring is complete
minimum of two
weeks prior to
opening
Advertising strategy
in full swing
Strategy is
developed and is
implemented
Employees have
had two weeks of
training and
managers are
ready
Store is ready to
open
Prepare the
venture for long
term success