Determinants of Production Cross-Border Relocation Destination Choice in The Luxury Fashion Industry by European Companies: The Cases of Burberry and Versace

With the globalization of the world economy, many multinational companies have relocated parts of their production processes abroad, primarily to countries with lower labor costs. However, the luxury fashion industry in Europe has traditionally been conservative, with brands promoting local craftsmanship and manufacturing domestically. This thesis focuses on the determinants of production cross-border relocation destination choice in the European luxury fashion industry. The research problem addressed in this study is the potential benefits and risks associated with production relocation in the luxury fashion industry. While cross-border relocation offers advantages such as cost-saving opportunities, risk diversification, and supply chain optimization, luxury fashion products have a specific nature and customer perception, which pose risks when manufacturing is moved abroad. Therefore, understanding the determinants of destination country choice becomes crucial for European luxury fashion brands to maximize benefits and minimize risks. Tthe study analyzes two European luxury fashion brands, Burberry and Versace, and their production relocations to third countries, including China, Italy, and Bulgaria. Bulgaria is not considered a typical country for manufacturing luxury fashion products compared to Italy, France, and the UK and was interesting to examine, the trend of reshoring production to Eastern European countries confirm the relevance of the choice. The chosen case of Burberry was interesting as it has relocated once the production to China and then cancelled it due to the reasons investigated in the research; the second case of successful relocation of production of Burberry’s leather goods to Italy is also analyzed. Several hypotheses are examined, focusing on cost-saving opportunities, availability of skilled workers, stable economic and legal environments, attractive markets for luxury fashion sales, quality and image-related risks, and reputation of countries as luxury fashion producers. The research methodology involves conducting a literature review to establish theoretical foundations. The empirical research includes an overview of production cross-border relocation in the luxury fashion industry by European companies, followed by case studies of Burberry and Versace's relocations to identify determinants for country choice. The thesis concludes by deriving key findings, offering practical recommendations for European luxury fashion brands regarding production cross-border relocation destination choice, and highlighting limitations and suggestions for future analysis. The thesis addresses the determinants of production cross-border relocation destination choice in the European luxury fashion industry. It explores the theoretical and empirical aspects of the topic, providing valuable insights and practical guidance for European luxury fashion brands considering or undergoing production relocations.