Integration in the luxury fashion value chain is thus causing a process of functional
downgrading at district level in those activities that are the typical core cross-sector
competencies of luxury fashion companies, namely design, branding and sales.
Nevertheless, although Brenta is showing a trajectory of functional downgrading
resulting from the integration in top brand chains, it has to be underlined that many of
the leading companies in those chains are Italian. Therefore, by moving from a narrow
district perspective to take into consideration the evolution of the Italian fashion system
as a whole, our conclusions may be very different. The Italian luxury goods industry is
definitely undergoing a process of functional upgrading and concentration in rent-rich
activities by exploiting cross-sector its core competencies in design, branding,
marketing. This is very different from what is often occurring in developing countries.
Small Brenta producers are abandoning some key activities which have moved to the
headquarters of the chains’ leaders in Milan. In the case of producers taking part in
global chains in the developing world, these activities are never carried out within the
country, instead they are fixed in New York, London or other cities in the developed
world.
Apart from design, the functional downgrading that is occurring in Brenta concerns
activities in which local enterprises, probably including the majority of small Italian
footwear firms, have traditionally been rather weak , i.e. branding, marketing and sales
strategy. In our sample, 60 per cent of firms do not perform any marketing at all and the
existing brand names are sometimes recognised at national level (mainly in Germany)
but never globally. A reason for the very limited local investments in these activities is
the average company size. Firms are too small to afford very expensive strategies in
marketing or advertising and to impose a brand name in the global market.
Local entrepreneurs are aware of their weaknesses and are beginning to accept that
in the global market high production skills are no longer enough to sell their products;
brand names and aggressive marketing strategies have become unavoidable competitive
factors. Therefore, many of them agree that becoming subcontractors to luxury fashion
companies is a way to face the challenge of globalisation despite the cost of functional
downgrading.
Furthermore and quite unexpectedly, according to Rabellotti (2001) this choice is
not an impoverishing strategy. There is evidence of a statistically significant positive
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