tag:theconversation.com,2011:/ca/topics/rolls-royce-18867/articlesRolls Royce – The Conversation2017-11-22T12:08:19Ztag:theconversation.com,2011:article/872952017-11-22T12:08:19Z2017-11-22T12:08:19ZTime for Britain to face up to its post-Brexit skills shortage<figure><img src="https://images.theconversation.com/files/194584/original/file-20171114-27612-nr54xf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/united-kingdom-uk-flag-pattern-on-443094868">Chinnapong/Shutterstock</a></span></figcaption></figure><p>A new and <a href="https://www.theguardian.com/politics/2017/nov/20/theresa-mays-cabinet-agrees-to-pay-more-to-break-brexit-deadlock">dramatic wrinkle</a> seems to be added to the process of Brexit talks every week. But rumbling underneath the political positioning are some fundamental problems for business. Perhaps the most startling challenge is the prospect of a cavernous skills gap.</p>
<p>A lot of attention has been paid to the problems of low-skilled workers – the “left-behind” <a href="https://www.jrf.org.uk/report/brexit-vote-explained-poverty-low-skills-and-lack-opportunities">who voted for Brexit</a> in the first place, and the migrants who are currently propping up the agricultural economy and doing the jobs that UK workers don’t want to do. But a more pressing issue is the fact that for too long a large proportion of our skilled labour has been coming from outside the UK. </p>
<p>This is not only in the form of skilled individuals who are recruited to work for companies and public sector organisations in the UK, but also in the way Britain outsources the manufacture of complex parts to companies in the rest of Europe.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=459&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=459&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=459&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=577&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=577&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194586/original/file-20171114-27576-1vbhqha.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=577&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Can the UK bring skills back home?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/kragujevac-serbia-circa-april-2012-workers-179623988">bibiphoto/Shutterstock</a></span>
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<h2>Qualified successes</h2>
<p>After Brexit – and already people are <a href="https://www.theguardian.com/politics/2017/aug/27/million-skilled-eu-workers-planning-to-leave-uk-brexit">starting to drain away</a> from the country – there will be virtually nobody to fill the gap between low skilled and unskilled labour at the bottom, and highly specialised professionals at the top.</p>
<p>This is because over the past 20 years the UK has lost the training habit for skilled technician-level people. The country will soon pay the price unless the government and the business sector can work together quickly to redress the balance.</p>
<p>First, we need to reduce our current obsession with the “traditional” academic education route, in which GCSEs lead to A-levels, which lead inexorably to university degrees. This has resulted in qualification inflation, whereby jobs that were once trained for through apprenticeships and college courses are now accessible only to graduates. Young people are racking up <a href="https://www.theguardian.com/money/2017/jun/15/uk-student-loan-debt-soars-to-more-than-100bn">large amounts of debt</a> in pursuit of degrees that will never “pay for themselves” in terms of large salaries. And yet there seems to be no alternative.</p>
<p>Second, we need to increase both the quality and status of technical education and training. It should not be the B-stream option for students whose A-level results are not good enough for university, but a positive choice that is seen to lead to solid employment opportunities. </p>
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<a href="https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=497&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=497&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=497&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=624&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=624&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194576/original/file-20171114-27607-137kxp3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=624&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">A new approach to higher ed.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/college-students-learning-education-university-teaching-337088186">Rawpixel.com/Shutterstock</a></span>
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<p>It is ironic that, when polytechnics became universities after the <a href="http://www.legislation.gov.uk/ukpga/1992/13/contents">Further and Higher Education Act</a> in 1992, one of the first things they did was phase out BTECs and other sub-degree technical qualifications, passing them on to colleges of further education.</p>
<p>This sent out a clear message about the worth of these qualifications, and therefore of the benefits of pursuing them. Reversing this perception, and raising the profile and prestige of the technical training route, will require new leadership from the sector.</p>
<h2>Staying put</h2>
<p>Finally, there needs to be a fundamental rethink of recruitment, training, and HR policies on the part of employers. Recruitment has become very lazy: almost every job description now seems to start with the word “graduate”. Training, too, has become truncated and superficial – so-called “apprenticeships” tend to last no longer than a year, and are more like work experience than developing the next generation of skilled workers. </p>
<p>It’s as if employers have believed the hype about people who expect to move jobs every couple of years, and have given up rather than giving them reason to stay.</p>
<p>There are some honourable exceptions. Accountant and consultancy firm PwC introduced a <a href="https://www.pwc.co.uk/industries/government-public-sector/education/higher-apprenticeships/higher-apprenticeships-what-is-a-higher-apprenticeship.html">Higher Apprenticeship</a> that provides a work-based route to chartered accountant status straight from school. And Rolls Royce’s <a href="http://careers.rolls-royce.com/site-services/countries/germany/apprentices-and-school-leavers/create-your-future/engineering-apprenticeships#/">engineering apprenticeships</a> are successfully competing with top universities to attract talented young people. </p>
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<a href="https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/194578/original/file-20171114-27576-1ej1x4w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Engineering a new deal for apprentices.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/indianapolis-circa-october-2016-rollsroyce-corporation-495749437">Jonathan Weiss/Shutterstock</a></span>
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<p>The benefits to both sides are clear. New recruits are paid throughout their training – not a lot at first, maybe, but it’s better than accumulating debt. And the companies can train them in precisely the skills and behaviours they need. In addition, if the trainees are treated well and can see a clear path to progress through the company, there is little reason for them to leave. Employers can continue to reap the benefits of their investment.</p>
<p>There will always be people for whom a traditional academic education is the best choice, and jobs that are particularly suited to graduates. Similarly, there will always be people who are naturally inclined to move about, eager to change jobs, employers, and even careers at regular intervals. But there is no reason to assume that everyone is like this – and nothing to suggest that it would be good for employers or the economy if they were.</p>
<p>If nothing else, the spectre of Brexit has at least forced many within the UK to take a long, hard look at our highly unbalanced economy and recognise where we have let things slide. Whatever happens in the future, the balance has to be restored, and that means starting now.</p><img src="https://counter.theconversation.com/content/87295/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew White and Frank McLoughlin work for Said Business School (SBS) and Education and Training Foundation (ETF) respectively, on a project to train senior leaders from the Further Education Sector. In this respect, the ETF are clients of SBS. </span></em></p>Worries about the loss of low-skilled labour risk obscuring a genuine flaw in the UK economy at the upper end of the scale.Andrew White, Associate Dean for Executive Education and Corporate Relations, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/700812016-12-16T12:03:37Z2016-12-16T12:03:37ZWill services be the saviour of manufacturing?<figure><img src="https://images.theconversation.com/files/150315/original/image-20161215-26051-bgmhxk.jpg?ixlib=rb-1.1.0&rect=134%2C103%2C3823%2C2320&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/pic-509065993/stock-photo-jiangxi-china-september-9-2011-jiangxi-nanchang-jiangling-motor-group-company-the-workers-are-assembling-cars-factory-avtotor-carcar-factory-avtotorworkers-assembled-in-china-made-ca.html?src=ZwjqhFHIOlRXmKBKbY3KZA-2-70">humphery / Shutterstock.com</a></span></figcaption></figure><p>The traditional mission for manufacturers was clear-cut: take a combination of people, processes and equipment, and then transform materials into products for sale. Over the past few decades, however, this simple concept has shifted, drawing together two major parts of the economy we always thought of as separate.</p>
<p>For manufacturers seeking customer satisfaction, competitiveness and sustainable revenue, simply making and selling physical products is no longer enough. In the drive to build and protect customer bases and profit lines, services now have a pivotal part to play. The manufacturing sector finds itself transitioning to a new way of doing things: “servitization”.</p>
<p>In simple terms, it is about manufacturers building their revenue streams through services. You will have experienced something like it if you have ever gone for a new car on a <a href="http://www.autoexpress.co.uk/car-news/90794/pcp-personal-contract-purchase-car-deals-explained">Personal Contract Purchase (PCP) contract</a>. It is basically a leasing model, in which the car manufacturers charge their customers based on the estimated mileage for a fixed period, rather than just the price of the asset. Repair and maintenance are usually included in these contracts, meaning that the customers would only need to fill the tank and enjoy the drive. </p>
<p>But servitization goes way beyond that in this new era and, of course, services themselves are not homogeneous. A variety exist – and they differ substantially in their level of risk, level of competition and potential to create competitive advantages.</p>
<h2>Power games</h2>
<p>In industry, debates about servitization almost invariably refer to <a href="http://www.rolls-royce.com/media/press-releases/yr-2012/121030-the-hour.aspx">Power by the Hour</a>, the pioneering engine maintenance solution introduced by Rolls Royce in the early 1960s. It involved extensive changes to processes, structures, technologies and personnel within Rolls Royce and provides a benchmark for others. It also changed the deal with customers from a transactional purchase of equipment towards a ten-year contractual relationship. </p>
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<a href="https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/150302/original/image-20161215-13648-1953qix.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Can services be an engine of the manufacturing economy?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/18378305@N00/7426133522/in/photolist-cjdSLS-hFR3Qq-hFQFuN-7JLjrb-hF3B2J-hF4Pri-hAwgvT-dZqEoE-9CXfYP-nEmbDY-i3VxXQ-eo7KH9-f2UGrG-9vDFwo-enx6jP-7JhgrN-jm1d5d-bLsxLt-7Zgydh-9DDuo1-nkxPFg-bnx9Mv-8fLCyH-hE5oza-eXxvGy-9D1t3W-9NGYu8-9CBFye-kMsD3-7JLjKy-pACfmn-nA7hNC-eXxo2s-jic8V7-7APufU-9LBtV2-ojekDp-9CEyKb-eC29G8-bB568d-fM39Ao-qgQcDj-hAwUjo-9D1d1w-ioJfC-b4CR3z-bAuSZC-fCQfSd-7YLgj7-dRaKw4">Can Pac Swire/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
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<p>These days there exists a remarkable breadth and depth of different offerings. Some manufacturers may offer an ever greater variety of “intermediate services”, including condition monitoring, maintenance, repair, overhaul and remanufacturing. Some move towards advanced services – such as Power by the Hour. These plans can include penalties if a product fails to perform when in service, or a system of payments structured around product usage all wrapped up in long-term contractual agreements which span up to 15 years.</p>
<p>Other examples include <a href="http://www.alstom.com/Global/US/Resources/Documents/Download%20Centre/Brochure%20-%20TrainLife%20Services.pdf">Alstom’s TrainLife Services</a>. In this, French group Alstom provides the train with a bundle of repair and maintenance services and charges the operators (such as VirginTrains) based on the miles travelled through 15-20 year contracts. <a href="https://www.xerox.co.uk/en-gb/services/managed-print">Xerox’s Print Management</a> system offers a services and copier bundle which charges customers based on the number of papers they have copied or printed, and <a href="http://www.man-tco.co.uk/finance/">MAN’s pay-per-kilometre</a> programme does a similar thing based on the distance its trucks are driven. </p>
<p>Such offerings are widely associated with a wholesale shift in ideas about the very nature of manufacturing. Ultimately, these make the deal more of a partnership than a transaction. </p>
<h2>Momentum</h2>
<p>More and more manufacturing firms are joining in. A few weeks ago, <a href="https://www.genewsroom.com/press-releases/ge-digital-acquires-servicemax-extend-predix-and-analytics-across-field-service">GE Digital announced</a> the acquisition of ServiceMax, a cloud-based field service management company – which, in theory, will enable GE to develop and deliver smart and connected industrial machines more smoothly and quickly than its competitors. </p>
<p>Goodyear <a href="http://www.marketwired.com/press-release/goodyear-launches-new-business-connected-fleet-management-solutions-2178154.htm">has also announced</a> the launch of Goodyear Proactive Solutions. This will aim to use new technologies such as predictive analytics to help truck fleet managers better handle how their vehicles are used. The common thread is that the outcome is not the sale of a product, but capability delivered through the performance of the product.</p>
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<span class="caption">Purple patch. Brompton bike hire arrives in Birmingham.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/birminghamnewsroom/14865540468/in/photolist-eeMU2G-smAfpw-oDBMgS-oDB38D-oW77C2-oVQt5H-bshgt5-pMkRtW-buQvGd-ecHEYZ-DknC41-eeGcSp-eeGaq4-eeMUCJ-acoCzC-eeMUbs-BWZmgd-Cdqrvn-rUzc1g-wD6rdL-waw3tW-yaDi6H-z7wioc-wM9znZ-xnNp47-L7kpev-HHYU33-GX36PV-Cb8T9o-vSH2UB-fh2m1r">Birmingham News Room/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
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<p>Servitization has emerged in business-to-business (B2B) offerings. But the concept is also starting to touch our everyday lives at a business-to-customer (B2C) level. Take Daimler’s <a href="https://www.mercedes-benz.com/en/mercedes-me/">Mercedes Me platform</a> which remotely notifies drivers if the car requires maintenance or repair work. Brompton, the British manufacturer of popular folding bikes, now <a href="https://www.bromptonbikehire.com/">rents the bikes</a> via docks across the UK to provide a more hassle-free option. </p>
<h2>Advantange</h2>
<p>Before it becomes ubiquitous, as it may well do, servitization offers manufacturers a key competitive advantage. Those who embrace the idea should be able to help customers better achieve key strategic aims and, in doing so, offer something their rivals cannot. That in turn should deliver business growth and sustainability for both themselves and their customers. </p>
<p>Manufacturers get long-term contracts, closer relationships with clients, new business opportunities and revenue streams – and an enhanced image alongside that market differentiation. Customers should be able to squeeze out greater value from operations, better predict costs, and find it easier to scale up their operations.</p>
<p>The trend offers a future which will penalise the laggards. More and more technology-focused firms are moving into the product manufacturing space and disrupting their value networks. Take Uber, the ride-sharing tech company which is moving into the long-haul transport business with <a href="https://freight.uber.com/">Uber Freight</a>. This will allow a shipper to directly connect with a truck, challenging the traditional business model: in short, cutting out the middle man and offering real-time pricing. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/150311/original/image-20161215-26045-17asqjb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Branching out. Uber gets trucking.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/pic-312342911/stock-photo-chiangmai-thailand-september-1-2015photo-of-wwwubercom-uber-homepage-on-a-monitor-screen-through-a-magnifying-glass.html?src=AZaFawq_ayCZCaDzlpQ0aw-1-64">GongTo/Shutterstock</a></span>
</figcaption>
</figure>
<p>Moves such as this create an active network in which manufacturers must be involved. The parts of the network evolve together to improve capabilities, and investments are aligned to create value or improve efficiency. What that means in practice is that a collaborative network is built between distributors, suppliers, technology and customers, which creates a resilient barrier that inhibits the entry of new players.</p>
<p>It is true that manufacturing firms can see an advanced services model as high-risk. The traditional product-based mindset is hard to break out of and realising the full potential of servitization demands innovation of the business model, a willingness to embrace new technology and new skill sets, as well as – ultimately – a wholesale change to the organisational culture. </p>
<p>But it might just be worth it. Manufacturing firms across the globe face a period of socioeconomic uncertainty. In the UK, Brexit is only adding to the challenges from a fragile recovery after the 2008 financial crisis, marked by intense competition from low-cost economies. In such an environment, servitization can offer a defensible long-term strategy that localises value creation and value capture.</p><img src="https://counter.theconversation.com/content/70081/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ali Ziaee Bigdeli is part of an EPSRC funded project (Ref: EP/K014072/1; EP/K14064/1; EP/K14080/1; EP/K14080/2) in partnership with the Advanced Manufacturing Research Centre (AMRC) of Sheffield University. The project focuses on developing applied game technologies to transform the servitisation of mainstream manufacturing companies. </span></em></p>Making products in our new economic age is fast becoming a partnership with customers, not just a transaction.Ali Ziaee Bigdeli, Senior Research Fellow, Aston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/612282016-06-20T09:02:12Z2016-06-20T09:02:12ZRolls-Royce’s luxury vision of the future tells us more about ourselves<figure><img src="https://images.theconversation.com/files/127127/original/image-20160617-11101-1x7xhsf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Rolls-Royce Motor Company</span></span></figcaption></figure><p>Rolls Royce Motor Cars has unveiled a <a href="https://www.theguardian.com/business/2016/jun/16/rolls-royce-unveils-first-driverless-car-vision-next-100">concept car</a> that showcases what the firm thinks luxury vehicles might look like in 100 years’ time. The “<a href="https://www.press.rolls-roycemotorcars.com/rolls-royce-motor-cars-pressclub/article/detail/T0261167EN/rolls-royce-vision-next-100-%E2%80%93-a-grand-vision-of-the-future-of-luxury-mobility">Vision Next 100</a>” is a 5.9 metre-long zero-emission, self-driving car complete with an artificial intelligence virtual assistant and a silk sofa – but no steering wheel.</p>
<p>Concept cars are one-off designs that have two purposes: to show the world what a brand has to say about the future, and to show the brand what the world has to say about its ideas. Somewhere between these two poles, the company will harvest the impulses for the development of new cars.</p>
<p>While concept cars rarely get made into the real thing, they are still a foreshadowing of things to come. Car manufacturers don’t make decisions lightly and they know that putting something out into the public domain under their good names may be perceived as a promise. But they often tell us more about the present than they do about the future.</p>
<p>With the Vision Next 100, Rolls-Royce has undertaken the eyebrow-raising feat of forecasting transport solutions a full century ahead. This is most unusual, as these vehicles usually only try to test the waters for up to a decade ahead. But, like all concept cars, this vehicle is also merely a projection from today’s perspective. While it might be possible to make educated guesses about <a href="https://theconversation.com/self-driving-cars-could-be-the-answer-to-congested-roads-33438">future technological advances</a>, it is impossible to accurately predict things like emerging styling preferences, tastes, or social changes that could affect the actual outcome.</p>
<p>Concept vehicles can teach us something about our present time – our dreams, fears and our vision of what the solutions will be. Unfortunately, we won’t know exactly what these things are until years later when we look back at them. Cars predicting the future tend to become monuments to the <a href="https://theconversation.com/how-hollywood-saved-a-futuristic-car-from-obscurity-49641">aberrations in taste</a> of their time. I predict we will one day be smiling at the Vision Next 100 as much as we do now at the concept cars from the 1960s, few of which actually ever came close to hitting the mark regarding predicting the future.</p>
<figure>
<iframe width="440" height="260" src="https://www.youtube.com/embed/xIguhErUQgQ?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
</figure>
<p>We smile because we recognise the good old times in those vehicles, which become time capsules of the era that created them. And the same will most likely happen to this vehicle. It will become a museum of our time’s aspirations, and one day, perhaps a hundred years from now, people will say: “Wow, look at that – this is so 2010s!”</p>
<p>Few concept cars have successfully predicted the future. Some were ridiculously far off, such as the 1962 <a href="http://www.gizmag.com/ford-seattle-ite-one-of-historys-most-significant-concept-cars/2798/">Ford “Seattleite”</a>. Its downfall was the lack of justification for the solutions it presented, such as four front wheels, giant rocket-engine style protruding taillights, and a glass cupola roof. Others were interestingly close to what later did become relevant concepts, such as the <a href="http://www.carstyling.ru/en/car/1970_ghia_city_car/">1970 Ghia City Car</a>, which is not too far removed from what we now know as the <a href="http://www.topgear.com/car-reviews/smart/fortwo">Smart Fortwo</a>.</p>
<h2>Mini prediction</h2>
<p>What may be the most successful predictor in automotive history comes from the opposite end of the spectrum from Rolls Royce: the original 1959 Mini. <a href="http://www.aronline.co.uk/blogs/cars/mini-classic/the-cars-mini-development-history-part-1/">Commissioned as</a> a radical British alternative to the German bubble car, it carried particular importance because it managed to solve a large number of poignant problems society and manufacturers actually had at the time.</p>
<p>In contrast to its contemporaries, the Mini made astonishingly good use of the available interior space, seating four passengers in a way normally only found in much larger cars. It was built low to the ground, with a low centre of gravity, and its four wheels were situated as close to the chassis’s corners as possible. This design made it more nimble than even the most highly regarded sports cars and even enabled the small vehicle to <a href="http://www.autoexpress.co.uk/mini/89423/paddy-hopkirk-and-the-mini-that-won-the-monte-carlo-rally">win rallies</a>.</p>
<p>Its overall body construction and package was also revolutionary in its efficiency, as it no longer used a chassis frame and was able to use 80% of its floor space for passengers and luggage because of the position of its engine. As a consequence, more and more manufacturers more or less by default started resorting to the solutions outlined by its designer Sir Alec Issigonis. Sixty years on, today’s average vehicle still mirrors <a href="https://theconversation.com/sublime-design-the-mini-27642">his vision</a>. Front-wheel drive, front mounted engine, independent suspension and efficient interior space use can be found in pretty much all compact and even most mid-sized cars on the market.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/127116/original/image-20160617-11101-14dvwco.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Surprisingly accurate vision of the future.</span>
<span class="attribution"><a class="source" href="https://commons.wikimedia.org/wiki/File:1959_Morris_Mini-Minor_Heritage_Motor_Centre,_Gaydon.jpg">Mark Brown/Wikimedia Commons</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>In contrast, the Rolls Royce Vision Next 100 is blissfully lacking reason. Not that Rolls Royce cars have ever been particularly famous for being rational anyway, but the extent to which its latest concept focuses on glamour is exceptional even for the famous British marque. It comes with an artificial servant and provides no driver controls of any sort. It is the ultimate, elitist vision that we can conjure up from today’s perspective.</p>
<p>And yet this grandiose idea is probably in line with developments in the fields of robotics and artificial intelligence. It may even turn out to be as visionary as Issigonis’s Mini was. Who says artificial servants are really all that far off? Just because 1950s science fiction literature promised them and our society has so far failed to deliver them, <a href="https://theconversation.com/we-built-a-robot-butler-but-dont-throw-out-the-ironing-board-just-yet-46480">robotic servants</a> may well become commonplace within another hundred years.</p>
<p>A projection of one century into the next is likely to be more poetry than proposal, and this concept in particular, as it banks on technological developments that are yet to take place. But a company like Rolls-Royce doesn’t need to be accurate every time. It is the brand whose motors used to eschew horsepower ratings in their brochures, supplanting them instead with assurances of “sufficient power”. It is nice to see this aloof spirit return.</p><img src="https://counter.theconversation.com/content/61228/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Chris Ebbert does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Vision Next 100 concept car promises 22nd century luxury but is more likely to become an amusing curiosity – just like its predecessors.Chris Ebbert, Senior Lecturer in Product Design, Nottingham Trent UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/450692015-07-29T05:20:17Z2015-07-29T05:20:17ZConsumers in Asia buy luxuries for different reasons to the West<figure><img src="https://images.theconversation.com/files/89375/original/image-20150722-1447-1afiw6v.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Different mindsets: the world does not view luxuries in the same way</span> <span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span></figcaption></figure><p>From Louis Vuitton to Chanel, Rolls Royce to Johnny Walker, Asian markets have become vital for the growth of luxury brands. Asia turned over some $90bn (£58bn) in luxuries in 2014 according to <a href="http://www.euromonitor.com">Euromonitor</a>, roughly tied with North America and not far behind Western Europe. The region is also forecast to be the main driver for growth among these big markets over the next five years, as the chart below suggests. </p>
<p>But there’s a paradox. The marketing strategies for many luxury brands <a href="http://www.ft.com/cms/s/2/bf783338-ef22-11e4-87dc-00144feab7de.html#axzz3gdbPlrVi">are not</a> producing the desired returns in that part of the world. So what’s the problem – and what can be done about it?</p>
<p>We all buy and consume what we believe offers value. It is one of the fundamental drivers of people’s purchasing decisions. For products that we buy regularly, the value that we perceive is largely a trade-off between what it costs, mainly in terms of price, and the benefits in terms of how useful it is. In other words the more useful a product to us, the higher the price we are willing to pay. </p>
<p>With luxury goods this equation becomes more complex. Here the costs are high and the benefits are not just about utility, but much more about personal pleasure and social status. But what many luxury businesses don’t understand well enough is how this varies between different countries.</p>
<p><strong>Forecast growth in luxuries to 2019</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=271&fit=crop&dpr=1 600w, https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=271&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=271&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=340&fit=crop&dpr=1 754w, https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=340&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/89475/original/image-20150723-22834-6nh8u3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=340&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">Euromonitor</span></span>
</figcaption>
</figure>
<p>Many a time on my travels I have seen the same adverts, messages and communications employed by luxury brands across the world to serve vastly different markets. Sure enough, analysts say one key reason why <a href="http://www.ft.com/cms/s/0/b48440c6-3e7d-11e4-adef-00144feabdc0.html#axzz3gdbPlrVi">some luxury brands</a> underperform in Asia is because their owners see Asian and Western markets as homogenous. </p>
<p>It seems many luxury businesses have erred in believing in the universality of their brand’s message. This is baffling when analysts and researchers like me <a href="http://researchonline.gcu.ac.uk/portal/en/publications/comparing-the-importance-of-luxury-value-perceptions-in-crossnational-contexts(24f10e6d-545b-439e-8fbe-adab0f163773)/export.html">tend to</a> emphasise the diversity of individual markets in terms of geography, demography, culture and consumption patterns. To find out more about the distinctions in relation to luxuries, <a href="http://link.springer.com/article/10.1007%2Fs11002-015-9358-x#page-1">my co-authors</a> and I <a href="http://researchonline.gcu.ac.uk/portal/en/publications/comparing-the-importance-of-luxury-value-perceptions-in-crossnational-contexts(24f10e6d-545b-439e-8fbe-adab0f163773)/export.html">asked 900 luxury consumers</a> about how they see the value of such products in the UK and in leading emerging luxury markets including India, China and Indonesia. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=500&fit=crop&dpr=1 754w, https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=500&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/89374/original/image-20150722-1423-uygcw3.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=500&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">‘He who buys Ferrari needs no more good fortune’</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/chrisjunker/5528427560/in/photolist-9qwCUy-e7tuyA-eg9fss-aRMiRV-9FWNmS-t1o8vk-8YWqso-9L7TeE-9waCzG-9hqL8s-9Ceii2-9vL43i-nD4fTH-a48nhx-95YCti-9pUouM-biiCpZ-8Wvh6H-82gvzT-bZwYdo-9cppma-9Wk53s-a9Fjdb-95HKgQ-8TZLtm-9V9GjA-aKWmqB-9cpf1e-9JSexk-9vKaP8-93PejX-dUp2Zz-dZhLz7-8n9CT7-d6s92f-9tbyah-eAoaVT-aFn5Hc-954QoY-8WhrTR-927UQz-9kpjNB-9pV1gv-9udCna-93S6rA-7QEhqc-5Ui4Ve-9xV9yp-7WY8PT-9di8q4">Christian Junker</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<h2>East vs West</h2>
<p>Indian luxury consumers are particularly influenced by what others think of them. They consume to achieve societal acceptance, reflecting the hierarchical nature of the society. They use luxury brands to indicate social status, symbolising achievement, wealth and prestige. Shopping for luxuries is fundamentally not an individual experience. Instead it seems rooted in group decisions, meaning that people’s choices of luxury purchases are directed towards others rather than themselves. </p>
<p>Contrast Indonesia, where the culture revolves around how you judge yourself, not how others see you. Indonesians seek to enhance themselves through consumption. Despite the general perception of the country as a collectivist society where people tend to see themselves as similar, consumers won’t follow the recommendations of others if the choice is distasteful to them. They also value luxuries as an enjoyable experience, and may buy such goods as a distraction from the problems in their lives. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=413&fit=crop&dpr=1 600w, https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=413&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=413&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=519&fit=crop&dpr=1 754w, https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=519&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/89376/original/image-20150722-1479-109w7lq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=519&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Where to spend it in Jakarta: the Mal Taman Anggrek.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/58847482@N03/6893829009/in/photolist-bvbFbR-nRdDwA-buu4Hm-o8BBeb-bvbE26-3bkrvg-6P7Q4d-32y5bz-oewwYd-qp4si4-f6N1V3-rc5FV3-6r413t-6wBmjK-98tDsc-6ozkMZ-6wFvKj-voNGoW-cgh1As-q1wyME-9Fds8P-cDQCwd-6ozfge-bqU1ct-gKoTmv-brnLZc-9Fgoob-5m84Se-7zZe3U-6HcGMn-6HcHNp-f6N693-3bkmDk-pmjhTR-dkKD1J-bqU2N2-3gWLDZ-2HmCkU-4tbhfy-6ozhRT-5Y8DuN-3gWLPa-2HmW3N-qrNcit-bro5Ya-catuHQ-6obyRw-dy1RU-dy2id-brnMVt">Matthew Tenwrick</a>, <a class="license" href="http://creativecommons.org/licenses/by-sa/4.0/">CC BY-SA</a></span>
</figcaption>
</figure>
<p>In China, despite <a href="http://blogs.ft.com/beyond-brics/2012/12/12/chinese-luxury-top-of-the-shoppers/">spending more</a> on luxuries than even the US, the country’s attitude to this market has been strained in recent years. In 2013 luxury advertising on television and radio <a href="http://www.bbc.co.uk/news/world-asia-china-21349722">was banned</a>, which may explain why consumers do not strongly attach such purchases to social status or personal pleasure. Even the country’s premier <a href="http://www.telegraph.co.uk/news/worldnews/asia/china/9851793/China-cracks-down-on-adverts-promoting-luxury-gifts.html">got involved</a>, calling on Chinese officials to refrain from luxury gift giving. </p>
<p>But what we found was still very important to Chinese consumers – and also to a lesser extent those in India and Indonesia – is the quality that luxury brands represent. They are willing to pay a premium price as a result. </p>
<p>In Britain, meanwhile, consumers attach less psychological meaning to luxury goods than in India, China and Indonesia. They are not swayed significantly by the pleasures offered by these brands – which may partly be because many brands have long since gone mass market. Analysts <a href="http://www.euromonitor.com/luxury-losing-its-lustre-in-personal-accessories/report">have observed that</a> the likes of LVMH and Gucci have lost their lustre because they are widely available both in the UK and in other developed markets (the report costs £800 – a sign that luxuries is a valuable business).</p>
<h2>The execution question</h2>
<p>The question for the people who sell luxury brands is how they should be applying these insights in their marketing strategies. Much of it follows logically. Given that consumers in India and the UK care more about what others think of their purchases, for instance, they are likely to be drawn by messages about the product’s social acceptability and by symbolism connected to achievement, prestige and wealth. </p>
<p>In Indonesia, you would want to customise the sales pitch to include some emphasis on how a brand could enhance a consumer’s sense of self and make them feel good about themselves. You would also focus on the experiential aspects of buying and using the brand. </p>
<p>Because of the way the government has been intervening against luxury purchases in China, pursuing consumers requires a far more subtle approach – away from the bans on television and radio, of course. Connecting the idea of buying luxury brands with personal identity and pleasure may be the best strategy. </p>
<p>At the same time it would be important to emphasise quality, not only in China but also in the other three countries too. The fact that consumers in all these markets thought that a product’s functional value was important indicates one area where the same kinds of messages might cut through – pointing to at least some potential for economies of scale. </p>
<p>Aside from this, the clear message is that different countries in East and West perceive luxuries very differently. However much it is convenient to treat the world as one market, it doesn’t fit the reality on the ground.</p><img src="https://counter.theconversation.com/content/45069/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paurav Shukla does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When it comes to advertising luxury brands, marketers tend to see the world as one homogenous lump. It’s time they wised up.Paurav Shukla, Professor of Luxury Brand Marketing, Glasgow Caledonian UniversityLicensed as Creative Commons – attribution, no derivatives.