Open access peer-reviewed chapter - ONLINE FIRST

Tradition and Innovation in the Internationalization of Family Business: A Case Study from the Italian Fashion Industry

By Anna Claudia Pellicelli and Erica Varese

Submitted: October 10th 2020Reviewed: November 8th 2020Published: December 3rd 2020

DOI: 10.5772/intechopen.94947

Downloaded: 49

Abstract

The fashion industry is one of the main businesses in the global economy in terms of employment, investment, trade and revenue, and Italian companies are recognized worldwide as representative of cultural heritage, expertise and high-quality standards. The adoption of traceability technologies, such as Radio Frequency Identification (RFId), from the very early stage of the production chain, may help to obtain a more effective process as well as assure the origin of garments, a key aspect in the fashion industry. This chapter presents a case study of Oscalito, an Italian family business that has adopted RFId technology, joining tradition and innovation in its production. We adopt a qualitative case study methodology to explore this experience within its context. Oscalito applies RFId tags to each garment label to ensure complete traceability throughout the production chain for every single item (and not merely by lots), fine-tuned control over the production process, and timely and accurate shipment. Thanks to the application of RFId tags, the production chain is monitored and the Italian origin of the garments is guaranteed. This research has undoubtedly some limitations due to the applied method. Deeper studies are needed in order to check general fashion industry trends regarding the application of RFId technology.

Keywords

  • country of origin
  • radio frequency identification (RFId)
  • fashion industry
  • family business
  • case study
  • tradition
  • innovation
  • internationalization

1. Introduction

The importance of consumers’ perception of the country of origin, which is a strategic aspect for the Italian fashion industry, dates back to the first decades of the 20th century. In fact, a first set of studies addressing the perception of countries was conducted in the 1930s and 1940s [1, 2, 3, 4]. Since then, the fact that country images are both the cause and effect of social as well as psychological processes, together with the multitude of their possible economic, cultural and political effects, has led to various studies across a range of scientific fields. From the perspective of business studies, different concepts have been developed in the subfield of marketing with a focus on national brands as well as country-of-origin effects including: country of manufacturing [5], country of design [6], country of brand [7], and country-of-origin image [8].

In the field of communication management, Passow et al. [9] and Yang et al. [10] applied a model focused on corporate reputation in analyses of country reputation. Buhmann [11] applied a 4D model to analyze image transfer and halo effects between companies and their countries of origin.

To assure the exact country of origin of a product as well as to consider other strategic issues, such as proving that garments are not counterfeited, business operators in the fashion industry may adopt recent technologies such as RFId tags.

This chapter presents a case study of an Italian family business in the fashion sector. One of the key elements of this company, Oscalito, is undoubtedly the link between tradition and innovation, the latter realized thanks to the use of RFId technology.

Oscalito, established in 1936, initially created clothing lines of underwear and fashion knitwear for men, women and children, using high-quality natural fibers. After the disasters of World War II, in a building located in Torino (Italy) alongside the Po River, the Casalini brothers (Osvaldo and Lino) set up two knitting machines that had survived the war and started production again, in a country where reconstruction was enthusiastically underway. Figure 1 shows the company logo.

Figure 1.

Oscalito’s logo. Source: Oscalito.

In 2012, Oscalito began using RFId tags, linking the tradition of quality of their outputs with innovation and technologies.

This study, which is part of a branch of research (fashion industry and new technologies) carried out by the Authors [12, 13, 14], fills a gap in the literature: to the Authors’ knowledge, this is the first case study of an Italian family business able to join tradition and innovation technologies successfully.

This chapter is divided into 4 sections: Section 1 provides an introduction, Section 2 explains the research methodology, Section 3 presents the Oscalito case study, and Section 4 draws final conclusions.

2. Methodology

With the aim to realize the objective of this research, the Authors developed the following hypothesis:

H1. The Italian fashion industry pushes for maintaining its tradition while using innovative tools to guarantee the origin of production and protecting it against counterfeiting. RFID tags allow the aforementioned objectives to be attained while pursuing and enhancing aspects of the company tradition.

The Authors decided to apply a qualitative case study methodology for exploring this experience within its context [15, 16]. As stated by Yin [17, 18], the selection of this method is justified because there is the necessity to answer “how” and “why” and furthermore because the Authors are not able to influence the conduct of those involved in the research. Lastly, the study focuses on an up-to-date experience.

The Authors chose the company of Oscalito to focus their research because it is a unique case [17, 19, 20]: it has maintained a strong tradition while introducing innovation technologies to monitor the supply chain.

With the aim to deeply investigate this case study, the Authors used a large variety of sources of information.

As this research was conducted during the COVID-19 pandemic crises (October 2020), the data triangulation suggested by Eisenbardt [21] was realized with some adaptations due to the current situation. It was obviously not possible to conduct a direct observation in the company buildings, but Authors were invited to some online meetings to observe the company behavior in real time. The Authors dedicated a lot of time to analyzing company documents (reports, studies, memoranda, etc.) and conducting interviews (the managing director and other people in the company) via online meetings with video and screen sharing. All these actions allowed the Authors to deeply examine the company.

Both Authors conducted interviews that lasted approximately 45 minutes each.

Further information was collected from the company website.

Both Authors autonomously analyzed all the collected data and then compared results.

In accordance with Ying’s categorization of case studies, this is a “descriptive” one: it defines a “phenomenon and the real-life context in which it occurred” [16, 17].

3. Case study: Oscalito

3.1 Company core values and positioning

The beginning of Oscalito’s production was characterized by use of tubular fabric (without stitching), using circular machines. Lino’s sons, Arrigo and Andrea, later joined the firm, extending the product range to fashion clothes, gaining success even on foreign markets: today 60% of company revenue comes from exports.

Andrea began to experiment with designs on wild and pattern textile machines and with new yarns and fashion garments, broadening the range to more fashionable items. His innovations found favor on the US market while orders, commitments and production took off.

In 1975, Arrigo joined the company, giving a fresh boost to sales, and the following years were marked by constant growth: women’s fashion items began to play a central role as the export market became increasingly important. Oscalito is a family-controlled business, as many members of the Casalini family hold key management positions [22, 23].

The role of entrepreneurship and the culture for facilitating internationalization efforts is strongly supported at Oscalito and ensures a company’s long-term competitive advantage: most businesses originally begin as family businesses then evolve into larger businesses, depending on performance [24].

While Oscalito constantly innovates, it remains true to its core values: turning out first-class garments meant to be worn next to the skin, using natural fibers relying on an entirely Italian supply chain. The narrow space between skin and undergarments determines comfort; this microclimate’s temperature and humidity is kept in perfect balance by living, natural fibers. These fibers react with the external environment just as they do in nature, absorbing or releasing heat and water-vapor molecules. With synthetic fibers, which are non-absorbent, moisture remains on the skin.

In 2014, the third generation joined the company, as Dario Casalini gradually took over the reins in a spirit of continuity, refreshing the brand while expanding onto the international market.

The positioning is the result of the company intention to offer superb comfort, quality and well-being in a unique, original and recognizable style [25].

3.2 Oscalito’s use of RFId tag

Nowadays, RFId technology is commonly used for monitoring food [26] and non-food products.

In the textile sector the implementation of RFId technology is considered to confer great benefits.

The literature, for instance, proves that a resource allocation system that uses RFId tags ensures more effective processes than those realized by conventional procedures [27]. Furthermore, studies demonstrate the positive impact realized along the supply chain thanks to the application of these tags [28].

Many brands (e.g., Tesco, Walmart, Benetton, Prada, and, recently, Zara [29]) have already examined the implementation of this technology [30].

It is in this context that Oscalito, in 2012, adopted RFId technology and applied it to each product label to ensure complete traceability throughout the production chain.

This technology uses radio frequency to recognize, find and trace things [31]. The company uses an RFId tag for each single garment (and not merely by lots): this allows fine-tuned control over the production process, and timely and accurate shipment.

Additional considerations related to RFId technology for monitoring the supply chain and for fighting against counterfeiting may be found in this already published chapter [14].

RFId technology has emerged as a valid support for Oscalito, not only to monitor the supply chain but also to protect the Italian origin of production, improving the link with the company’s tradition.

In the next paragraphs, we provide further suggestions about the company’s use of RFId tags.

3.3 Competition analysis

Upon analysis of the industry using Porter’s Five Forces Framework [32, 33, 34, 35], the Authors affirm that competition within the fashion industry is very high due to the number and the different purposes of competitors, and that the competitive pressure especially derives from chains and department stores.

Oscalito exports about 60% of its products, therefore its main competitors are foreign companies such as Hanro and Zimmerli, which manufacture in Switzerland.

Its suppliers have a high bargaining power, in that Oscalito – to maintain the same level of excellence of the natural fibers and “Made in Italy” mark – sources extremely high-quality raw materials from a very restricted niche of suppliers.

Its customers also have a high bargaining power due to low switching costs that push them to spend less money on underwear products by purchasing from competitors that produce low-cost products and sell them at accessible prices.

Barriers to entry are high – due to the sector’s high competition level – with the only relevant threat being the recent emergence of e-commerce underwear companies attempting to enter the sector. The threat from substitute goods is low, but the high quantity of competitors does offer numerous alternatives to Oscalito products.

Hanro and Zimmerli and all other direct competitors to Oscalito do not use RFId tags: without the application of this technology, the supply chain and the subcontracting (for instance those linked to East Europe, Portugal, China and India) are not put in evidence.

RFId tags may be considered as a competitive advantage only for the retailers receptive to the “Made in” mark, which, nowadays are still a tiny minority.

3.4 Value chain and success factors

The source of Oscalito’s competitive advantage lies in its differentiation [36, 37], allowing the company to impose a premium price thanks to the high fiber quality, product excellence and “Made in Italy” mark.

Customers are willing to pay a premium price as they can perceive the higher quality offered by the company as opposed to its competitors.

Another source of competitive advantage is the product innovation pursued through use of tubular machines (Figure 2), allowing the company to produce seamless knitwear.

Figure 2.

Tubular knitting machines. Source: Oscalito.

RFId technology enables consumers to be fully informed about the origin of products and protects them from misleading indications of origin.

As well as its differentiation strategy, Oscalito also pursues cost advantage, especially by means of process innovation. Its slow production allows close control of the vertically integrated supply chain. Moreover, it achieves cost reduction through innovative use of RFId tags, which allow tracking of every single item of clothing throughout its entire lifecycle, all the way to its sale to the end user, thus a guarantee of full traceability and extensive control over manufacturing and shipping. RFId is useful for monitoring supply chains and as a tool for fighting against counterfeiting [14].

Upon analysis through Porter’s Value Chain, one may comprehend the uniqueness of Oscalito products and how the company manages to turn input into high-quality output by means of vertically integrated activities within a fully “Made in Italy” supply chain.

The production phases range from yarn spinning to the finished product: weaving, fabric finishing, cutting, sewing, finishing of the end product, quality control and warehouse logistics.

The initial phases (weaving and fabric finishing) are performed using bar codes bearing all the information related to the manufacturing steps to make the finished product; such data is then transmitted via the RFId antenna. In the cutting phase, the cutting slip includes details of the fabric bolt or bolts, and the sewing slip includes bar code details related to the bolt, the cut area and the bill of materials, which also includes past details related to the bolt, the cut area, finishing and origin of the thread.

When the item is complete, an RFId tag is applied – containing the information listed in the preceding paragraph – in that, until that moment, it is simply considered a unit of production. Upon application of the tag, the logistics history of the item becomes independent and contains data related to shipping, recipient, store to which the product is shipped, and quantity sold (only for wholly owned stores and franchisees).

Figure 3 shows some crucial phases of Oscalito’s production.

Figure 3.

Some phases of Oscalito’s production. a) Design and prototyping; b) lace cutting; c) rib fabric manual catting; d) sewing line. Source: Oscalito.

3.5 Marketing activities, distribution, and network

Oscalito’s levers of success may be identified upon analysis of the marketing mix.

The brand’s products are made of extremely high-quality natural fibers, and the slow production philosophy preserves such quality and guarantees maximum wellness to its end users.

The premium price applied to the goods is justified by their quality level, and consequently the customer perceives an excellent value for the money spent.

The promotion and communication policy are mainly based upon the “Made in Italy” mark, and Oscalito transmits an image coherent with its brand values through elegant, refined and neutral-colored retail outlets.

The products are distributed to a number of countries through independent agents, distributors, monobrand stores and – in certain countries – the e-commerce channel.

The vision is to wear 100% Italian, high-quality underwear or knitwear.

In order to compete with other players in the fast fashion business – offering the same functional benefits as Oscalito – the company needs to leverage its unique social and emotional selling proposition, making consumers conscious of the greater benefits that purchasing Oscalito products may imply.

Elegance-conscious consumers with middle-high incomes experience a feeling of great wellness offered by the natural fibers that preserve the necessary microclimate for maximum comfort.

Oscalito stands out from its competitors due to the raw materials and manufacturing technology it uses to create its products, with a constant commitment to investigating new styles and developing new production methods in line with environmental responsibility.

At the end of 1990, the company created a sorting system for processing stations based upon an IT system: each processing station is automatically distributed by a CPU to the various processing machines. After the sewing phase, each item of clothing undergoes quality control (Figure 4), which allows only 1% of company products to go to waste.

Figure 4.

Quality control on shaping lamps; a) and b). Source: Oscalito.

Since its establishment and until the 1980s, Oscalito had a single sales network: independent agents (as the company did not have the necessary turnover to hire exclusive agents) who also sold complementary products.

In the fashion industry, the evolution of the supply system has had a strong impact on the market.

From the business point of view, regardless of the size, management of distribution channels is a crucial element that may determine the success or failure of the firm itself. Within such sector, manufacturers and large brands offer a value proposition that depends on the combination of physical traits of the product and its related intangible elements and services [38].

Oscalito has recently opened an e-commerce platform in the United States.

When a sales network is deeply rooted in a country, it becomes dangerous to launch an e-commerce platform, in that other retailers view it as a direct competitor. This danger exists both in Italy and France, where the retail network is deeply entrenched. Launching an e-commerce platform also implies an increase in stock and in investment in logistics.

On average, in the clothing sector, 12% of turnover is spent on marketing. Oscalito, instead, spends 1%. In order to compensate for such lack, the company has adopted a number of solutions: seminars for retailers in Italy and France and industrial tourism, namely visits to the company. The problem is that it is crucial to the company that retailers inform customers about the Oscalito production process and product.

Oscalito belongs to company networks that offer promotion of the brand through free-of-charge advertisement, namely Italian Lingerie Export and Exclusive Brand Torino. Italian Lingerie Export is the consortium bringing together Italian companies that manufacture high-quality lingerie. Exclusive Brand Torino is the consortium for the promotion of selected brands and top products from the Piedmont area on the foreign market, whose member companies share a set of values, such as attachment to the territory and excellence. Nevertheless, the consortium’s multi-sector nature is also an obstacle, in that it struggles to offer common initiatives.

Currently, Oscalito has not implemented marketing strategies for consumers focused on the application of RFId tags because, from the company point of view, it is not easy to choose the appropriate information to give to consumers. It is crucial not to benefit competitors (for instance, by identifying which material is used to obtain a certain high quality) and to avoid creating problems for retailers (for instance, indicating the date of production may reveal to the consumer that the item has been stored for a long time).

3.6 The international market: advantages and critical aspects

Countries offering the greatest opportunities in the fashion industry are developing countries such as China, India and Japan.

An additional market that has recently gained high relevance in the sector is the Iranian market, especially in terms of luxury European brands, due to the abolition of economic sanctions and consequent facilitation of luxury brand imports. Ever since the 1970s, Iran has suffered enormous fines introduced after the Khomeini revolution. Sanctions were renewed in the following decades due to human rights violations and the development of nuclear technology. Furthermore, it is estimated that the average expense per capita on underwear will increase by a considerable margin in the next few years. Until 2016, Iran faced a trade embargo, usually eluded through contraband imports. Despite this, upon the end of the sanctions a great customer pool has developed, fast-growing and including young consumers.

Moreover, the Iranian market was historically linked to Italy and responsive to the “Made in Italy” mark.

Presently, small and medium retailers dominate the market, but shopping centers are growing exponentially. Such growth is due to the fact that Iranian consumers associate European and US products with high quality.

The fast growth of the underwear market in developing countries is also due to the fact that women are gaining the confidence to show themselves in public, and are expanding their perspectives in terms of acceptance of underwear, dedicating more and more time to its purchase [39].

The Asia-Pacific market (China, Japan and South Korea in particular) and the Indian one are growing most rapidly. This is due to the transition in consumer lifestyle, supported by growing urbanization and buying power [36].

The methods Oscalito uses to choose its distributors and retailers include:

  • Product placement, which must be adequate, not only in terms of price (Oscalito products belong to the high-end market), transportation and customs charges (particularly high outside of Europe), but also in terms of the ability to maintain a product placement that is suitable to the brand image.

  • Reliability of the distributor in financial terms, in that the Oscalito supply chain is very long, thus a canceled order is a relevant issue for the company.

  • The ability to describe the product, which must be very strong. The distributors and retailers shall have the skills and motivation to describe the product to the end customer.

The future of distribution within the analyzed industry appears to be organized retail, where the brand is provided to the retailers who each have their loyal brand or pool of brands. Nevertheless, market growth also includes online stores.

The Oscalito brand not only represents high quality and excellence through slow production but also represents “Made in Italy.”

“Made in Italy” is one of the bestselling global brands and is linked to positive values such as creativity, esthetics, quality and attention to detail. It has become a synonym of “knowing how to make things well,” and is an added value to our production system: basically, a collective asset [40].

Upon analysis of such data, the Authors may firmly state that the European and US markets have a high level of attractiveness and competitiveness, thus it is worth maintaining corporate presence within such markets.

The problem of counterfeiting and imitation is an issue that starts, above all, from China, jeopardizing brand images and offering fake products that brands need to be protected from. Every day there are attempts by China to register a certain brand. In one particular case, the Oscalito brand was filed on non-clothing classes. The company attempted to appeal, but the transaction was not successful and further costs would be incurred.

Fighting against powers such as China at a local or national level is quite difficult, expensive and disadvantageous.

Traceability obtained thanks to RFId tagging is much appreciated abroad; however, sometimes the market requires other appropriate certifications. It is for this aim that Oscalito obtained the Italian Identity Certification [41], which covers the whole supply chain, and very soon it will be certified by the Tessile e Salute (Textile and Health) Association as well [42].

4. Conclusions

With reference to the fashion sector, this chapter attempted to verify the possibility of guaranteeing the origin of the production of an Italian family business and protecting against counterfeiting while pursuing and enhancing aspects of the company tradition.

Some scholars express criticisms about the case study method, as it is not rigorous and, because it focuses only on a single case examination, it is difficult to obtain a generalizing conclusion. Regardless of these critical and generally accepted issues, the Authors of this chapter trust that through the evaluation of the Oscalito case study, they have been able to describe how innovation, mainly represented by the application of RFId tags, has been capable of guaranteeing the origin of the production and ensuring the transmission of traditional characteristics of the company.

RFId tags guarantee full traceability and extensive control over manufacturing and shipping.

Thanks to the implementation of RFId tags along the supply chain, Oscalito, as a proof of excellence, has earned the Italian Identity certification issued by Italcheck, as well as the “bestseller” award from magazines specializing in underwear.

Another consideration is that this research has been realized during the COVID-19 pandemic and, as it is not predictable when this crisis will be over, most of the aforementioned thoughts may be reconsidered in light of the ongoing global pandemic crises.

Oscalito, during these months, has immediately reinvented itself and decided to contribute to the fight against the Coronavirus by producing masks. They have succeeded, despite suffering economic damage and without the necessary aid, in creating a new product that is innovative as well as produced, designed and packaged entirely in Italy. In addition, this product has a supply chain with almost total sustainability and transparency. These masks are “medical device CE certified (surgical masks Type II registered with n. n. 1955886 and 1955920) in pure Egyptian cotton jacquard fabric with lateral adjustable drawstring, elastic for ears and bottom opening to refill disposable SMS40 filters. The ideal solution to combine safety (certified medical device), health (breaths in cotton and not in plastic), environment (removable and recyclable disposable filters) and savings (the filter is much less expensive than a disposable medical device).” The mask is also CE patent pending.

This research has undoubtedly some limitation due to the applied method, as it has been adopted as a qualitative methodology for a single case study. More extensive researches are needed in order to check general fashion industry trends regarding the application of RFId technology.

Acknowledgments

We would like to express our sincere gratitude to the editor and anonymous referees for their insightful and constructive comments. We also thank Dr. Dario Casalini (Oscalito) for his helpful advice and suggestions on various issues examined in this chapter.

Conflict of interest

The Authors have no conflict of interest.

Other declarations

Both authors contributed equally to this chapter.

Download for free

chapter PDF

© 2020 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution 3.0 License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

How to cite and reference

Link to this chapter Copy to clipboard

Cite this chapter Copy to clipboard

Anna Claudia Pellicelli and Erica Varese (December 3rd 2020). Tradition and Innovation in the Internationalization of Family Business: A Case Study from the Italian Fashion Industry [Online First], IntechOpen, DOI: 10.5772/intechopen.94947. Available from:

chapter statistics

49total chapter downloads

More statistics for editors and authors

Login to your personal dashboard for more detailed statistics on your publications.

Access personal reporting

We are IntechOpen, the world's leading publisher of Open Access books. Built by scientists, for scientists. Our readership spans scientists, professors, researchers, librarians, and students, as well as business professionals. We share our knowledge and peer-reveiwed research papers with libraries, scientific and engineering societies, and also work with corporate R&D departments and government entities.

More About Us