Feeds:
Posts
Comments

Posts Tagged ‘Business’

When the fashion house Maskit originally flourished in the 1950s and 1960s, no one probably thought about it as a brand; actually, not many back then thought about ‘brands’ in general, at least not in Israel of those years. Yet if we look at Maskit retrospectively according to the standards of brands known today, it would be acknowledged as a name brand in fashion. The contemporary fashion house of Maskit, revived after a long recess of two decades, has adopted not only the name but also the genuine styling ideation and design creativity of the former fashion house, thus deserving the ‘license’ to exist again. Maskit of our days has already been planned to be a luxury brand based on current knowledge in marketing and management.

Maskit was unlikely to be regarded as a brand in the 1950s-1960s for two conspicuous reasons: First, brands and their functions in modern marketing came to recognition some thirty years later; Second, Israel had a heavy-laden socialist economy with little competitiveness and a just nascent consumer culture (evolving through the 1960s). Furthermore, Maskit was not run in its prime years as a business enterprise: it started in 1954 as a government agency, turned a decade later (1964) into a governmental company. Only in the 1970s has the government loosened its hold on the company and gradually handed it over to private hands. However, that move has more than anything led to the decline and demise of the former Maskit in 1994.

Maskit is very much the story of the people who built it, then and now. The fashion house was founded in 1954 by Ruth Dayan almost incidentally, but with a great spirit for initiative. She was actually asked by government officials to help in identifying and creating employment opportunities in agriculture for new Jewish immigrants from the Middle East and North Africa. However, Dayan noticed that women from North African countries had a special talent and skills in weaving, sewing and embroidery; she also identified that men from Yemen excelled in jewellery. From there the idea of a fashion house employing immigrants started to take form. Since Dayan was not a fashion designer herself, she teamed-up with Fini Leitersdorf, nominated as the house chief designer. Together they developed a unique and genuine concept for fashion design that is at the same time multi-cultural and Israeli-native. Albeit the unusual circumstances of her enterprise, Ruth Dayan was by our current understanding an early woman entrepreneur in Israel of that period. The privatised company did not manage to continue in the footsteps of Dayan and Leitersdorf following their retirement from the fashion house in the late 1970s. Dayan who just celebrated in mid-March this year (2018) her 101st birthday also belongs nonetheless to the present of Maskit as she has helped in creating the newly born fashion house.

  • ‘Maskit’ can have multiple meanings, such as ‘image’ and ‘figure’, but the most appropriate meaning of this old Hebrew word in relation to what the fashion house does would be ‘ornament’.

Sharon Tal, a fashion designer, re-founded Maskit together with her husband Nir Tal in 2014, following more than two years of preparation, research and planning. Sharon Tal is the fashion house chief designer whereas Nir Tal (CEO) is in charge of the business side, specialising in entrepreneurship. Sharon Tal is a graduate in fashion design from Shenkar College of Engineering, Design & Art in Israel. She has subsequently worked in internship for Lanvin in Paris and for Alexander McQueen in London, where she acquired experience in international fashion design. At McQueen in particular she has learned and later advanced to specialise in embroidery, which would prove especially relevant and important for her professional and business venture of re-launching Maskit. On her return to Israel in 2010 she developed interest in starting a fashion house, and with the help of her husband Nir they discovered that the ideals or goals she has been aspiring for in a fashion house had existed in Maskit of Dayan and Leitersdorf.

Sharon Tal met with Ruth Dayan to talk about her interest in reviving Maskit, and it seems that they connected quite quickly — their first meeting extended into several hours, and they continued to work closely together on the initiative thereafter. It appears that shared thinking, the commitment of Sharon Tal to respect and maintain the original vision of Maskit, and the relevance of Tal’s specialisation as well as international exposure for continuing the heritage of Maskit have helped to convince Dayan that Tal was the right person to revive the fashion house. Ruth Dayan has given her blessing to the Tal couple, and has joined them in guidance during the research and planning process. Indeed the success of Maksit to re-establish itself depends greatly on reviving the heritage of Maskit, which Sharon Tal seems to fully recognise and appreciate, as she also respects the personal legacy of Ruth Dayan.

Maskit has made different types of garments in the days of Leitersdorf and Dayan. The concept that was special in many of them was mounting quality fabrics with motives of different ethnic cultures in embroidery.  They combined modern styles of the times with design traditions of embroidery embellishments “made by immigrants, as well as by Druze, Bedouin, Palestinian, Lebanese and Syrian women” [E1; also see Maskit.com: About]. They used for decoration articles like buttons (e.g., made from river stones and shells), some were initially brought by immigrants from their countries of birth. Maskit also produced jewellery, pillow covers, and other home artifacts. Silver and gold for jewellery were also used in decorating garments. The Hungarian-born Leitefsdorf created the integration of Western (European) practices, materials, and design styles known to her with ethnic styles of different communities she came familiar with in Israel. It was a unique way of adopting cross-cultural ethnic fashion styles and designs, fabrics and colours, and fitting them to the Israeli habitat (nature, climate, and contemporary culture), hence making their clothing and other products ‘Israeli native’.

  • Ruth Dayan provided employment to the immigrants and hence has given them an opportunity to assimilate in the country, as well as helping them to preserve their traditions. It should be noted, however, that immigrants fleeing from Arab countries were at great disadvantage with limited choices compared with more veteran immigrants, mostly from European countries, who formed the dominant classes in the young state. Dayan benefitted from belonging to the latter (‘elite’) classes and was close also to ruling political circles (married at the time to General and later Defence Minister Moshe Dayan), which further helped in obtaining funding.

Sharon Tal has the will and intention to proceed along the same guiding lines of design and craftsmanship set by Dayan and Leitersdorf. But the aim of the renewed Maskit is not to relive the past; instead, the Tals strive to fit the concepts and practices of former Maskit to contemporary styles and tastes of our days. Their priority is to keep the fashion house being Israeli-native, representing its culture and nature, but that also means expressing the multiple original ethnic cultures that make up the Israeli society. Their emphasis also appears to be on handwork production and authenticity in everything they do. These implied ‘values’ could be key to achieving high quality, uniqueness and luxury positioning. Authenticity is seen as a basis for differentiation of the fashion brand; it is also approached as a way of establishing luxury in the sense that authenticity has become hard to find in many areas, and in fashionable clothing in particular. Maskit may be authentic in the fabrics and other materials they use, the methods they apply, and the personal and attentive treatment and service they would provide to their customers (including personally customised designs).

Here are some aspects in which Sharon Tal works to continue the heritage of Maskit. The fashion house uses, for instance, soft fabrics as in the past (including silk, linen as well as leather). Weaving in-house is no longer feasible as in the past so quality fabrics are imported (e.g., from the same suppliers as those Lanvin and McQueen work with). Yet Tal still sees hope that it will be possible to acquire quality fabrics made locally, and perhaps produce at Maskit, in the future [H1]. Among the creations of Leitersdorf, one that has given Maskit greater fame is the desert coat (or cloak) — Sharon Tal designed a new ‘desert collection‘ that is “re-interpreted for today’s woman and her lifestyle”. One of the differences in the desert coat of today from the previous is in its being made in linen rather than wool [E1]. Embroidery designed and prepared in-house remains an identifying signature of Maskit. However, the renewed Maskit is ready to give more credit to artisans working with the fashion house, unlike in the past.

Sharon and Nir Tal are clear about their high ambitions. They want Maskit to be an international leading luxury fashion brand. It is meant to compete on a world stage against international fashion super-brands and challenge renowned fashion retail chains. They do not see their competition against fashion designers in Israel since they look forward to see more Israeli designers succeed and the whole fashion industry in the country developing (H2). That may sound a little co-descending but it can also be interpreted as saying that they hope Maskit will be able to pull the fashion industry in Israel up with them, as Maskit has done before in its earlier life. Accordingly, while they aspire to reach overseas, they intend to extend their efforts to global markets only after establishing Maskit in Israel [E1], and wish to be able to return Maskit into being an international fashion house operating from Tel-Aviv [E2], apparently keeping this home base as their anchor.

Maskit led by Dayan has already reached overseas, mainly to the United States. Since 1956 the fashion house presented in fashion exhibitions in New-York and other American cities. Their designs sold at department stores of Neiman Marcus, Bergdorf Goodman, and Saks Fifth Avenue, and they featured in leading magazines like Vogue. Sharon and Nir Tal expect to take the renewed Maskit in the same direction, and their emphasis at least at start also is on the US. Targets are shifting with time, however: many female customers turn to fashion chains to buy their casual and less costly clothing, then invest in more special dressing, higher quality and enduring, from name designers or specialty boutiques — the latter is where Sharon Tal seems to be aiming. As a luxury brand, Maskit would also target women who buy primarily from famed designers [H2]. In addition, Maskit of the past attracted in Israel tourists visiting the country and their relatives (i.e., mostly Jewish, American, and more wealthy). Yet, Israeli customers also used to buy gifts from Maskit, mostly when they wanted to bring or send them to their relatives abroad to leave a good impression on them. This should stay valid today as then. Maskit may also be able to tap a growing desire in Israel to return to its roots (‘authentic Israeli’) or to connect generations of customers wearing Maskit then and now.

The prices of Maskit to end customers are in the mid- to high-range, not for every occasion.  Their blouse shirts or dresses can be even expensive relatively for their categories. Evening dresses or gowns may cost, for instance, from just below 2,000 shekels ($570, €465) up to a few tens of thousands shekels (e.g., a dress with handmade embroidery in a unique technique was sold for 25,000 shekels or more than $7,000)[H2]. The price of a bridal dress may cost (selling only) in the range of 7,500 to 25,000 shekels (~$2,000-7,000)[H3]. Bridal dresses and customised dresses are the more expensive on offer. A blouse could cost, for example, 900 shekels (leather-trimmed tunic blouse — ~$260, €185)[E1]. The items of Maskit, according to Nir Tal, are made to appeal to women who are “pretty sophisticated, and appreciate the art of this clothing” [E1]. The prices are clearly set to support perceived high quality of garments, and in particular the investments in craftsmanship and dedicated handwork.

  • The flagship shop and studio of Maskit are located in the American-German Colony in the old city of Yaffo adjacent to Tel-Aviv. The place is designed to resemble an atelier of many years in business, and includes museum-like displays next to selling areas (also see photos in H3].

From the business perspective, the Tals approached the launching of Maskit as when creating a start-up, guided primarily by Nir Tal. They wanted the revival of Maskit to be special and different, following the model of revival of brands like Burberry and Lanvin [E1]; it had to reflect the significant achievements of Maskit as a leading fashion house in the country in past years [H2]. It meant that greater effort and resources would have to be invested in the initiative, as in a start-up. The Tal couple gained major funding from key Israeli industrialist Stef Wertheimer, together with his invaluable business wisdom. Launching Maskit as a start-up sounds reasonable in order to recruit the energy needed and concentrate financial and organisational resources in launching the business. However, soon enough comes the time that the fashion house is established and has to realign itself to run for the long-term. There are good indications Maskit could be near that time, if they have not passed it already, and it does not require that they should be established off-shore first. For the long-running fashion house, sustained creativity and innovation are important as much as persistence and discipline. Maskit would be wise not to push itself too far too fast, so as not to burn itself like a start-up.

  • Note: Start-ups in hi-tech, particularly in Israel, do not have too good a reputation in holding for long, hence it would not be wise to use them as a model if the fashion house desires to exist in the long haul and does not plan an ‘exit’.

The brand of Maskit in fashion was not properly valued nor appreciated by the establishment in Israel more than forty years ago (Ruth Dayan noted jokingly in interviews that she lives on a monthly pension of 5,000 shekels as a former worker of the Labour Ministry). But Dayan together with Leitersdorf have demonstrated that a successful brand can be created even without having their minds set to it. Sharon and Nir Tal now have the opportunity to show how high Maskit can reach, and to develop and strengthen its brand, with the much greater marketing and management knowledge and best practices they can now employ. Reborn Maskit is positioned as a luxury brand for women with fine taste in fashion and appeal to nostalgia. The brand’s distinction remains dependent on their commitment to an Israeli-native identity with original creative design in high quality, and keeping their base in Israel even as an international brand.

Ron Ventura, Ph.D. (Marketing)

References in Hebrew:

[H1] Interview with Ruth Dayan & Sharon Tal at Maskit Studio, Xnet, 18 October 2015 (Xnet is an online ‘magazine’ section of Ynet news website, fashion section)

[H2] The New Life of Maskit, Calcalist (economics and business newspaper), 13 December 2017

[H3] New home for Maskit fashion house, Xnet, 28 June 2016

References in English:

[E1] “A Ready-to-Wear Fashion House in Israel’s Ethnic Past“, Jessica Steinberg, Times of Israel, 26 May 2014

[E2] “How the Israeli Fashion Brand Maskit Delivers Authentic Luxury“, Joseph DeAcetis, Forbes’ Opinions, 16 May 2017

 

Advertisements

Read Full Post »

In 2016 General Electric (GE) sold its domestic appliances division to Haier from China. The American company reached a dismal situation wherein it needs to repay a large debt and streamline its businesses. Selling the consumer-oriented business may have seemed to the management, led at the time by previous CEO Jeff Immelt, as a means to relieve the company from a business that is out-of-line with its other mostly industry-oriented business areas. However, that division was an asset whose value could not be measured just in financial terms — it was more than a capital asset. It provided a valuable support to the brand of General Electric, together with the lighting business. The incoming CEO John Flannery is planning even more drastic changes to the company’s composition, but removing the appliances division might turn out as an obstacle to his mission. The industry brand of GE could benefit from its long appraised consumer brand.

General Electric is engaged in a range of business areas. In some of them the company has obtained or enhanced its capabilities through acquisitions during the tenures of CEOs Jack Welch (1981-2001) and Jeff Immelt (2001-2017). The businesses of GE feature: (1)  Additive –advanced manufacturing technologies (e.g., 3D printing); (2) Aviation — engines, components and electric systems for jets, and avionics (e.g., innovative digital pilot dash-boards); (3) Power, including gas, steam and nuclear power; (4) Industrial Connections, including electrification, grid and control; (5) Healthcare — medical technologies such as ultrasound, MRI  & CT, digital integrated care (i.e., data sharing and management), patient monitoring, surgical imaging and more; (6) Renewable Energy, including wind, solar and hydro, and innovative hybrid solutions; (7) Transportation — digital automation and industrial Internet-of-Things (IoT) solutions for  locomotives, marine (drilling) and mining.  The businesses of GE today are directed largely to industrial, commercial, and public clients. The last business that targets consumers at least in part is Lighting, offering advanced LED bulbs (e.g., smart IoT-controlled, HD-quality), linear fluorescents, and other products.

Noteworthy, digital transformation is omnipresent through most of the businesses of the company, entailing advanced computer-based digital systems, interfaces, and mobile applications (e.g., IoT apps developed in co-operation with leading hi-tech companies). Much of the digital activity seems to be originated, planned and developed at the Digital division or unit of the company (e.g., industrial apps serving IoT products, Predix — the online platform applying IoT data and predictive analytics, manufacturing software, as well as cybersecurity). Internet-of-Things functionality applies also to lighting products for consumers; it was supposed to be implemented as well in their domestic appliances. In practice, the appliances may still be reliant on GE for IoT technology even after the transition.

For many years the Appliances of GE were commonly associated by consumers with quality and durability — having a refrigerator carrying the art-graphic logo sign of GE in the kitchen was taken as a symbol of social status. In 2015 the appliances division generated revenues of $6.34bn, 7.1% of GE’s total revenues. The combined revenues of GE from appliances and lighting, as reported by the company, stood at $8.8bn (an increase of 4.8% from the previous year). Combined profits were $700m, a margin of 7.7% as percentage of revenues (GE 2015 report on financial results, Segment Operations: Appliances and Lighting). GE overall reported a loss in 2015 (see Chart 2). The company first tried to sell its appliances to Electrolux but the deal was objected by the American Department of Justice. A new process for selling the division started with Qingdao Haier, and after six months of negotiations a deal was closed in June 2016 at a price of $5.6bn. The range of appliances in their new ‘home’ includes refrigeration, cleaning (dishwashers), cooking, laundry (washing machines), accessories such as water filters, and air-conditioning.

The division of appliances is now identified as ‘GE Appliances: A Haier Company’. This company is in an interim period of transition, alas outwards its status creates a bit of confusion about who is really in charge. The company’s website is resident at a domain titled ‘geappliances.com’ and the company retains the brand identity of GE. The association with Haier does not seem too committing. For example, whom consumers should expect to be responsible for their appliances? Or, how to distinguish between appliances that originate from GE or from Haier? The headquarters of GE Appliances remains for the time being in US territory in Louisville, Kentucky, under American executive leadership. Recently, the new company announced the creation of appliance connectivity — operation command by voice and through mobile apps (IoT). Yet the technology is reasonably a direct extension of GE’s development of capabilities of Artificial Intelligence and IoT in their businesses for industry.

Haier has thereof received a strategic foothold on US soil, in hope to strengthen its position in the country and establish a long sought market share in the American market; American consumers have refrained from buying appliances of Haier. The Chinese manufacturer rose from a failing refrigerator factory in Qingdao of thirty years ago by instilling over time quality standards that were much higher than those accustomed in China. Zhang Ruimin, leading the transformation, succeeded remarkably in turning the company into a major national appliances manufacturer in China with global extensions. However, the quality standards at Haier remain behind those of developed countries and therefore the company’s efforts to sell in the ‘West’ have been lingering (1). Haier still has a challenge of closing a gap in quality and credibility, which the acquisition from GE is expected to help overcome.  Many consumers in the US as well as in other Western countries will probably remain concerned by ambiguity about the source of their appliances, being of GE (United States) or Haier (China). Haier also gained important American technological know-how (e.g., in AI) from the American company. General Electric apparently gained a financial relief, but one that may be only for a short-term, and the company may have to pay for it in the future.

The new CEO of GE, John Flannery, revealed in an annual ‘Investor Day’ meeting last month (Nov. ’17) the company’s plan to focus on three business areas: power, aviation, and healthcare. It will exit completely some of its existing business operations (e.g., transportation, lighting, industrial solutions, electrification) while reducing its effort and involvement in others. For example, the company will retain its digital unit or division to develop and sell apps to customers for operating and monitoring equipment reliant on Predix platform, yet with a smaller budget. Flannery was less clear on the future of some areas such as renewable energy where the company is not completely willing to leave and some other arrangement may have to be found. Strategically, the plan is to reduce the span of businesses the company engages. In addition, the CEO informed analysts that the company will have to cut in half its dividends.

The share of GE climbed from a level of $25 to $30+ in late 2015 and held its price as high through 2016 with small fluctuations. Then, the price started to slip down continually through 2017. So much for the effect of selling GE Appliances on equity. By August 2017 the share price already came back to $25. Since Flannery entered the CEO office, and subsequently following the announcement of his plan and the harsh cut in dividends, the share price steeply fell to about $18, as low as the band of $15-20 in which the share fluctuated in 2009-2011.

Chart 1 GE Share Price

Analysts were left unsatisfied and critical about the turnaround plan at GE. They complain for instance that the company is too expansive, and that it must increase efficiency and reduce duplicate costs across the organization (Reuters, 13 Nov. ’17). Others express concern in particular about the debt at GE, and that the plan includes insufficient measures to fix problems with the company’s businesses (CNBC.com, 14 Nov. 2017 — also noted, GE share underperformed S&P 500). Part of the cure will have to include exit from some businesses (e.g., where GE entered by acquiring another company or where it did not build a substantial advantage). Nevertheless, increasing efficiency and reducing duplicate costs can be achieved also by merging some associated areas and consolidating them into a new division, though perhaps narrowing the scope of operation in each field. One example for doing so may be in the area of energy: sources, production or distribution (i.e., power, renewable energy, connections). Another area to consider is ‘digital’ — balancing between development of original technologies and solutions in a central unit, and their implementation for specific systems and equipment in the various business divisions. Letting go of the appliances business could be seen as a logical way to free resources for advancing industry-related areas of expertise that remain. But solving problems of over-expansion and inefficiency in the industry-oriented businesses did not have to come at the expense of the consumer-oriented business in which the company developed product and brand advantages over decades.

The company has to come to terms now with damages from excessive expansion-by-acquisition, a strategy led by Welch and followed by Immelt. The ‘elephant in the room’ for the company is GE Capital, the investment bank of General Electric, whose troubles particularly since 2009 inflict on the whole company. Now the company under Flannery plans to heal by letting go of some more of its genuine businesses such as transportation and lighting (Matt Egan, CNNMoney.com, 20 Nov. ’17), that is, in addition to the appliances already shed by Immelt. The company has built an expertise in transportation, especially locomotives, during the past hundred years. Lighting can be regarded as a founder’s asset of the company (i.e., attributed to Thomas Edison); as described by Egan, lighting “symbolizes the company’s history of innovation”. General Electric could find it very difficult to continue after removing parts of its heart and soul.

The intensive occupation of the company with allocation of capital was initiated and developed by Welch but it spiralled out of control under the leadership of Immelt. The latter quadrupled the amount of capital invested in the company (from $42bn in 2001 to $163bn in 2009) which involved a significant increase in borrowing. By 2011 it was recognised as a major problem with the management of Immelt. Geoff Colvin of Fortune described how Immelt as CEO remade the portfolio of GE, for instance by entering new “future industries”  (e.g., healthcare, green energy). However, his aggressive expansion came at a high cost. While the CEO already tried to unburden the company from some businesses (e.g., NBC and Universal Studios), it was seen by analysts as insufficient. The real issue at GE, as Colvin noted, was capital allocation, and it became more so critical at GE Capital (2). The decision to quit the involvement of GE in TV broadcasting and online media (NBC) as well as cinema productions (Universal) sounds very reasonable. Conversely, the claim supported also by Colvin that Immelt was waiting too long to unload appliances (executed only in 2016) and lighting (never completed to-date) from GE should be much less applauded because these business areas made-up a distinct branch at GE with deep roots, and were also carriers of its consumer brand, a valued non-tangible asset.

In a highly critical opinion column in the Financial Times, John Gapper argues that focusing management on capital allocation could kill GE as an industrial company. It would make GE operate more like an equity fund. The company needs to shift because it may no longer be sustainable to run a manufacturing conglomerate as in the 1980s. However, it does not require to treat the business units as equity holdings for capital optimization: “Once efficient allocation becomes the priority, it is hard avoid this cycle.” It cannot be surprising for Flannery to continue this path, following the leadership of Welch and Immelt, considering his long career at GE Capital, up to the latest post he held as head of that division. Culture and a style of management have kept the units of GE stick together like a glue for many years. Without them, Gapper wonders how longer GE can hold together (FT.com 15 Nov. ’17).

The financial figures of GE in 2015 and 2016, as published in the Fortune 500 ranking, show little so far in favour of the impact of exiting from some business activities such as Appliances, measures taken by Immelt to heal the company in his last years in office: The revenues have fallen, but moreover the return on revenues has also decreased from a level of 8%-10% in 2011-2014 to 7% in 2016, after recovering from a loss in 2015 (Chart 2 below). It should be noted nonetheless that the value of assets has already shrunk by 50% between 2011 ($717bn) and 2016 ($365bn).

Chart 2 GE Revenues and Profits

  • General Electric descended from former 6th-9th positions in the ranking of Fortune 500 (US) to 11th place in 2015 and 13th in 2016.

The products of GE for consumers, both appliances and lighting devices, were the ‘face’ of the company to the wide public and a closer form of connection with consumers. Their contribution is in providing stability and longevity to the GE brand, identified by name, logo, and other associated elements. Above all, the brand was represented in products, equipment and devices, in millions of homes, to be useful in the everyday lives of the consumers and make their lives more comfortable. The domestic products also were a channel to implement some of the technological progress and innovation of the company and demonstrate them to a wider public audience. Consequently, exposing consumers (who also happen to be small investors) to GE could help to increase public confidence in the company, especially in turbulent times.

General Electric did not depend on the appliances and may do well without that business. The same may be true for the lighting business. But removing them will not bring the cure either– the selling of GE Appliances apparently has gone wasted so far. Instead, keeping the consumer products would have enhanced the corporate brand. The management could perhaps have gained some peace of mind while reforming their industry-related businesses. In the medium term, making reforms could be a little harder for Flannery and his top-management team to push through. In the longer term, leaving consumer products out of the company — as already happened with the appliances and is expected to repeat with lighting — may remain as a wound, something amiss, in the reputation and brand image of General Electric.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) “Zhang Ruimin’s Haier Power”, Michael Schuman, Time (Europe), 14 April 2014 (183 (14)).

(2) “Grading Jeff Immelt”, Geoff Colvin, Fortune (Europe), 28 February 2011 (163 (3)).

 

Read Full Post »