International expansion

The fashion industry is global in nature with many fashion companies operating around the world. Within this global context are laws and regulations concerning international expansion and trade that affect fashion companies.

As fashion companies grow and evolve, many will want to expand beyond the boundaries of their home country. However, international expansion strategies can be complex and risky as consumer behavior, legal mandates, and operational structures vary across countries. Therefore, strategies that involve legal agreements are often used to assure effective international expansion. These include licensing agreements, franchise agreements, and joint ventures.

As noted earlier in this chapter, trademarks are typically protected on a country-by-country basis. Therefore, licensing agreements are often used when fashion brand companies are expanding to regions of the world in which they currently do not have operations or distribution (Colosi and Friedman 2010). Under these agreements, the licensor grants a partner company the rights to manufacture and/or distribute merchandise with their trademarks within a particular country or region of the world (referred to as territory).

These agreements are typically exclusive in nature. For example, Korean company Descente Ltd acquired regional trademark for international brands including Arena, Umbro, Munsingwear, and Le Coq Sportif. In addition, they have regional licensing agreements for brands including Cutter & Buck, Marmot, Avia, and Lanvin Sport. Through these arrangements, Descente Ltd has the exclusive rights to manufacture and distribute these brands in select Asian countries.

Figure 2.19: Descente Ltd has the exclusive rights to manufacture and distribute Cutter & Buck merchandise in select Asian countries.

Franchise agreements are used when a fashion brand retailer wants to expand their retail concept into new territories. Similar to licensing agreements, in a franchise agreement/contract, the parent company gives the franchisee the exclusive right to distribute a well-recognized brand name in a specific market area, as well as access to trade secrets associated with an organization, visual merchandising, training, and management. In return, the franchisee pays the parent company a franchise payment or fee. Typically, the franchisee does not have the right to design and/or manufacture under the agreement.

Joint ventures are also used to expand operations into new territories. With a joint venture, a fashion brand company partners with another company, each contributing investments, and expertise to create a new business entity. For example, US fiber producer INVISTA has entered into several joint ventures with companies around the world, including Belgian chemical company Solvay, to produce textiles and chemicals used in these textiles.

In the next step, the meaning of international trade will be identified.