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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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
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Scenarios for the Danish fashion industry for the year 2015
is both a concern in connection with the interviewer as well as the interviewee. The interviewer
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 nonstandardized, 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
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Scenarios for the Danish fashion industry for the year 2015
explanatory the choice is often the semi-structured or in-depth interview method (Saunders et al.
2003: 246-248).
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
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Scenarios for the Danish fashion industry for the year 2015
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).
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, 2006:163171). 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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Scenarios for the Danish fashion industry for the year 2015
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
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Scenarios for the Danish fashion industry for the year 2015
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
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: 108110).
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.
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Scenarios for the Danish fashion industry for the year 2015
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
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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Scenarios for the Danish fashion industry for the year 2015
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
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Scenarios for the Danish fashion industry for the year 2015
beyond the mental model and look for internal and external changes (Heijden, 2006: 58). Many
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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Scenarios for the Danish fashion industry for the year 2015
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).
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Scenarios for the Danish fashion industry for the year 2015
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
18
Scenarios for the Danish fashion industry for the year 2015
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
19
Scenarios for the Danish fashion industry for the year 2015
(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 preestablished 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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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:
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Scenarios for the Danish fashion industry for the year 2015

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: 166169).
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 semistructured 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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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
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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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
Scenarios for the Danish fashion industry for the year 2015
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 endstates 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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Scenarios for the Danish fashion industry for the year 2015
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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Scenarios for the Danish fashion industry for the year 2015
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
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Scenarios for the Danish fashion industry for the year 2015
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
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Scenarios for the Danish fashion industry for the year 2015
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
3
http://www.fri.dk/mode/modeuge-naar-koebmaend-laver-toej
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Scenarios for the Danish fashion industry for the year 2015
creating a great decrease in buyer base for the industry (Appendix 4:19; Appendix 1:8). The
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
Scenarios for the Danish fashion industry for the year 2015
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
Scenarios for the Danish fashion industry for the year 2015
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.
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
Scenarios for the Danish fashion industry for the year 2015
4.3.2. Cluster: Globalization
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).
36
Scenarios for the Danish fashion industry for the year 2015
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
7
(http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm)
(http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm)
37
Scenarios for the Danish fashion industry for the year 2015
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
Scenarios for the Danish fashion industry for the year 2015
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
Scenarios for the Danish fashion industry for the year 2015
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
8
http://www.copenhagenfashionweek.com/26395/About
40
Scenarios for the Danish fashion industry for the year 2015
3:10). If the company uses the same amount of money outside the fashion fairs for room in fashion
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
9
http://www.business.dk/article/20090119/design/90117025/
10
http://www.danishfashioninstitute.dk/uploads/23597/DAFIaarsberetning2006-A4printvenlig.pdf
41
Scenarios for the Danish fashion industry for the year 2015
knowledge between the parties in the industry.11 The vision was initiated in the years before the
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).
11
http://www.foranet.dk/Publikationer/Rapporter/Data/Brugerdreven%20innovation%20i%20dansk%20mode%20%20en%20surveyunders%C3%B8gelse.aspx
12
http://www.business.dk/article/20090119/design/90117026/
42
Scenarios for the Danish fashion industry for the year 2015
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
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
43
Scenarios for the Danish fashion industry for the year 2015
production/collection to another, but maintain and build good and strong relation with their business
partners (Appendix 4: 5-6).
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
44
Scenarios for the Danish fashion industry for the year 2015
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
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
45
Scenarios for the Danish fashion industry for the year 2015
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
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.
46
Scenarios for the Danish fashion industry for the year 2015
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
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
13
http://www.ebst.dk/publikationer/rapporter/innovationssystem/kap02_1.html
14
http://www.landsorganisationen.dk/upload/LO/Documents/D/Dokumentationsrapport%20Innovation_3273.pdf (P
12, 13)
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Scenarios for the Danish fashion industry for the year 2015
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
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)
15
http://www.ebst.dk/publikationer/rapporter/innovationssystem/kap02_1.html
16
http://www.ebst.dk/publikationer/rapporter/innovationssystem/kap02_1.html
17
http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909514-3/html/kap02.htm
18
(http://www2.mst.dk/common/Udgivramme/Frame.asp?pg=http://www2.mst.dk/Udgiv/publikationer/1999/87-7909-514-3/html/kap02.htm)
48
Scenarios for the Danish fashion industry for the year 2015
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)
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.
49
Scenarios for the Danish fashion industry for the year 2015
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.
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
19
20
The Economist, special report, p 4, 5, April 17th 2010
The Economist, special report, p 6, 7, April 17th 2010
50
Scenarios for the Danish fashion industry for the year 2015
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
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.
21
The Economist, p 12, April 17th 2010
The Economist, p 12, April 17th 2010
23
The Economist, special report, p 3, April 17th 2010
24
The Economist, p 12, April 17th 2010
22
51
Scenarios for the Danish fashion industry for the year 2015
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.
-
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.
25
The Economist, special report, p 3, April 17th 2010
52
Scenarios for the Danish fashion industry for the year 2015
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.
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
26
The Economist, p 12, April 17th 2010
The Economist, p 12, April 17th 2010
28
http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm
27
29
http://news.bbc.co.uk/2/hi/business/8493356.stm
30
The Economist, special report, p 3, April 17th 2010
The Economist, special report, p 4, April 17th 2010
32
http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm, 31
The Economist, special report, p 4, April 17th 2010
53
Scenarios for the Danish fashion industry for the year 2015
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.
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 midrange 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
33
34
35
The Economist, special report, p 3, April 17th 2010
http://www.dtcchina.um.dk/NR/exeres/99AF57C1-A90A-45D9-882E-15927FB6EDD6.htm
36
The Economist, special report, p 4, April 17th 2010
http://www.guardian.co.uk/technology/2010/jan/12/google-china-ends-censorship
37
The Economist, special report, p 7, April 17th 2010
54
Scenarios for the Danish fashion industry for the year 2015
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
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:
38
39
The Economist, special report, p 3, 4, April 17th 2010
http://www.norden.org/da/publikationer/publikationer/2006-522/at_download/publicationfile
55
Scenarios for the Danish fashion industry for the year 2015
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.”
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
56
Scenarios for the Danish fashion industry for the year 2015
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.
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.
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
57
Scenarios for the Danish fashion industry for the year 2015
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
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
42
http://www.eurofound.europa.eu/pubdocs/2009/73/en/3/EF0973EN.pdf
43
http://www.eurofound.europa.eu/pubdocs/2009/73/en/3/EF0973EN.pdf
44
http://www.eurofound.europa.eu/pubdocs/2009/73/en/3/EF0973EN.pdf
45
http://news.bbc.co.uk/2/hi/business/8493356.stm
58
Scenarios for the Danish fashion industry for the year 2015
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
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
46
47
48
49
http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm
The Economist April 24th 2010, page 12
http://news.bbc.co.uk/2/hi/business/8471613.stm
http://news.bbc.co.uk/2/hi/business/8471888.stm
59
Scenarios for the Danish fashion industry for the year 2015
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
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.
50
51
52
http://news.bbc.co.uk/2/hi/business/8471613.stm, - http://news.bbc.co.uk/2/hi/business/8471888.stm
The Economist April 24th 2010, page 27
http://www.economist.com/displaystory.cfm?story_id=16060103&fsrc=nlw|wwp|05-06-2010|politics_this_week
60
Scenarios for the Danish fashion industry for the year 2015
-
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
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:
53
http://www.foreignaffairs.com/articles/60825/neil-c-hughes/a-trade-war-with-china
54
http://www.um.dk/da/menu/Udenrigspolitik/Landefakta/LandefaktaAsien/Kina.htm
55
http://en.ce.cn/Industries/Consumen-Industries/200810/14/t20081014_17060726.shtml
56
http://www.cbsnews.com/stories/2010/01/18/opinion/main6114041.shtml
61
Scenarios for the Danish fashion industry for the year 2015
"The ability to operate with confidence in cyberspace is critical in a modern society and economy."
57
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 highend 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
57
http://www.guardian.co.uk/technology/2010/jan/12/google-china-ends-censorship
58
http://news.bbc.co.uk/2/hi/business/8456950.stm
59
http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingand
Design/FashionClothing/
62
Scenarios for the Danish fashion industry for the year 2015
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
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 midmarkets 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.
60
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61
http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingand
Design/FashionClothing/
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Scenarios for the Danish fashion industry for the year 2015
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)
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
62
The Economist, special report, p 7, April 17th 2010
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Scenarios for the Danish fashion industry for the year 2015
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
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
63
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Design/FashionClothing/
64
http://www.dtcchina.um.dk/en/menu/CommercialServices/Marketopportunities/Sectoranalyses/FurnitureClothingand
Design/FashionClothing/
65
http://en.wikipedia.org/wiki/Facebook - http://en.wikipedia.org/wiki/Twitter
66
http://en.wikipedia.org/wiki/Facebook
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Scenarios for the Danish fashion industry for the year 2015
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
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.
67
http://en.wikipedia.org/wiki/Microblogging
68
http://tradecouncil.china.um.dk/NR/rdonlyres/55BBBE97-5F4F-4494-9AF972D49873A5D6/0/TheChineseretailmarket.pdf
69
The Economist, April 24th 2010, page 59
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Scenarios for the Danish fashion industry for the year 2015
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
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
70
http://news.bbc.co.uk/2/hi/africa/7118941.stm
71
http://www.foreignaffairs.com/articles/65916/deborah-brautigam/africa%E2%80%99s-eastern-promise
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Scenarios for the Danish fashion industry for the year 2015
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
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.
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Scenarios for the Danish fashion industry for the year 2015
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.
-
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
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Scenarios for the Danish fashion industry for the year 2015
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.
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.
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Scenarios for the Danish fashion industry for the year 2015
6.1. The matrix
Scenario 1:
Scenario 2:
Destination
Chinese Fashion
Africa
Mogul
Scenario 3:
Scenario 4:
Isolated Nordic Queen
Wiping Out the Black
of Fashion
Sheep
Failure in becoming 5th
fashion cluster
Success in becoming 5th
fashion cluster
On the road to full
economic recovery
The economy taking another hit
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Scenarios for the Danish fashion industry for the year 2015
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
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.
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Scenarios for the Danish fashion industry for the year 2015
6.3. Scenario 1: Africa I presume
Leaders
The Economist February 4th 2015
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
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.”
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Scenarios for the Danish fashion industry for the year 2015
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.
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:
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Scenarios for the Danish fashion industry for the year 2015
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)
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.
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Scenarios for the Danish fashion industry for the year 2015
6.4. Scenario 2: Chinese Fashion Mogul
Leaders
The Economist February 4th 2015
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
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.
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Scenarios for the Danish fashion industry for the year 2015
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.
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.
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Scenarios for the Danish fashion industry for the year 2015
6.5. Scenario 3: Isolated Nordic Queen of Fashion
Leaders
The Economist February 4th 2015
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
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.
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Scenarios for the Danish fashion industry for the year 2015
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.
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.
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Scenarios for the Danish fashion industry for the year 2015
6.6 Scenario 4: Wiping out the black sheeps
Leaders
The Economist February 4th 2015
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
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
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Scenarios for the Danish fashion industry for the year 2015
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.
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.
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Scenarios for the Danish fashion industry for the year 2015
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
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
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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.
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
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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.
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
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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.
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.
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Scenarios for the Danish fashion industry for the year 2015
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
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
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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
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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