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NATIONAL ECONOMICS UNIVERSITY

SCHOOL OF ADVANCED EDUCATION PROGRAMS

Survey: Dolce & Gabbana advertising crisis in China.

Student: Đào Thị Thanh Hiền


Student number: 11201406
Class: International Business Administration 62A
Lecturer: Lê Thuỳ Linh

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Table of Contents
1. Introduction...............................................................................................................1
1.1. Rationales.............................................................................................................1
1.2. Research aims.......................................................................................................2
1.3. Research questions................................................................................................2
1.4. Research subject...................................................................................................2
1.5. Research participants............................................................................................2
1.6. Research methods.................................................................................................2
1.7. Methodology (Qualitative research).....................................................................3
2. Literature review ........................................................................................................3
2.1. The growing importance of intercultural communication .......................................4
2.1.1. Markets go abroad.............................................................................................4
2.1.2. The characteristics of culture.............................................................................4
2.2. Technology and social media affect intercultural communication...........................5
2.3. The ability to realize the difference among cultures around the world.....................6
2.3.1. Understanding cultural dimensions....................................................................6
2.4. Review Dolce and Gabbana.....................................................................................8
3. Findings and discussions..........................................................................................8
3.1. Reasons why this scandal occurred ............................................................................8
3.2. Solutions that this brand published..............................................................................9
3.3. Evaluate the solutions:................................................................................................9
4. Conclusion ...............................................................................................................15
References........................................................................................................................ 16

Table of Figures:

Figure 1: Net profits or losses of the Italian luxury fashion company Dolce & Gabbana
between 2014 and 2019....................................................................................................12

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Figure 2: Turnover of the Italian luxury fashion company Dolce & Gabbana from 2011
to 2019............................................................................................................................. 13
Figure 3: The D&G's social media engagement in the first quarter in 2019t...................14

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1.Introduction

In recent years, according to the annual wealth report by Knight Frank, China stands at
the No.2 spot in the ranking of the Big Luxury Spender Index. To meet the demand of
this potential segment, most of up class brands rapidly altered their marketing strategy by
incorporating Chinese elements into their seven communication activities. Many brands
launched special collections and campaigns in China, which is designed in a Chinese
traditional style to attract the clients’ attention. Nevertheless, the difficulty to understand
Chinese traditions and norms put some brands in jeopardy while widening their market in
China, consisting of Dolce & Gabbana.
Dolce & Gabbana, which is a high-end fashion items, had actively localized its brand in
China. However, the "Dolce and Gabbana Loves China" campaign failed in integrating
brands with Chinese culture. The campaign with an aim to promoting “The Great Show”
consists of a series of 3 short videos featuring a Chinese female model eating traditional
Italian food with chopsticks while making funny facial expressions. Because of cultural
differences, the series created a severe misunderstanding among the brand, the Chinese
clients and its supporters, leading to the boycott by Chinese people. However, instead of
having proper and immediate solutions for undesired incident, the conversation insulting
Chinese people by one of two D&G’ CEO with an Instagram user was uploaded on the
Internet. The conversation with inappopriate words about the Chinese by CEO of D&G
such as “China Ignorant Dirty Smelling Mafia” was spread over the globe, making the
problem even worse.
Regardless of D&G’s efforts to ease the crisis, the scandal has already destroyed the
market that the brand desired to have and dominate.
Therefore, it is vital for international business to suitably communicate with various
cultures in the age of integration and information, when a small incident can turn into the
aspect that can ruin the reputation even of a giant brand. As a result, the research was
conducted with an aim to clarify the importance of proper intercultural communication.
1.1. Rationales
Due to the rapid development of globalization, international corporations around the
world must deal with a variety of challenging communication problems, and Dolce &
Gabbana was no exception. As a result, this research will be critical in gaining sufficient
knowledge about D&G's largest advertising crisis so that people are aware of the

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challenges of communicating with different cultures in international corporations.
Moreover, it can be denounced to deal with common communication problems between
international corporations and clients in different cultures.

1.2. Research aims


The obvious aim of this research is to provide a deeper look into a common
communication problem between international corporations and customers, specifically
Dolce & Gabbana corporation, and clients in different cultures. Another intention is to
investigate some subjects that the problem has influenced. Additionally, this research
aims to find potential solutions to the problem.

1.3. Research questions


- Why did the crisis occur?
- What are the impacts of the scandal?
- What are the potential solutions for the problem?

1.4. Research subject


This study will focus on D&G in general, as well as the advertising campaign that was
launched in 2018 to promote the company's upcoming fashion show in Shanghai, China.
A Chinese female model dressed in a crimson D&G gown eats classic Italian meals with
chopsticks while making amusing facial expressions in the marketing campaign's three
videos. The brand's intention is to simply express their admiration for Chinese culture.
However, despite what the brand claims, Chinese consumers see advertising as cultural
prejudice due to cultural differences. In addition, this study will look at how this brand
dealt with the crisis.
1.5. Research participants
- D&G staff
- Chinese clients
- Related parties

1.6. Research methods


- Collecting data:
● Qualitative method: collecting data in the form of words.
● Type of data: secondary data that has already been collected by someone else.

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- Analyzing data:
● Descriptive analysis: describing, showing, or constructively summarizing data
points to fulfill every condition of the data.
● Diagnostic analysis: taking the insights found from descriptive analytics and drilling
down to find the causes of those outcomes.
- Assessing the efficiency of the solution
+ Solution:
● The misunderstanding about a video message between the brand and Chinese
clients: an official video by 2 CEOs to sincerely express their regrets.
● The series of derogatory remarks about China and Chinese people via Instagram:
Announcing the brand's account had been "hacked" and denying having sent the
messages.
+ Sources of solutions:
● The brand’s official social media: Instagram, Weibo, YouTube
● CEO’s official social media: Instagram
+ Efficiency:
Evaluation criteria: Revenue changing from 2018 to 2019.
● D&G’s revenue share in the Asia-Pacific market, including China in 2 years
In 2018: 25% total revenue
In 2019: 22% total revenue
● Other losses:
Within 24 hours, the company's business in China had lost over a billion dollars, and
D&G's sales in China had been steadily declining.
The fall of the Chinese stock market influenced the stock price, causing Dolce &
Gabbana's losses to reach 37.6 billion yuan eight days after the occurrence.

1.7. Methodology (Qualitative research)


A comprehensive poll will be conducted in order to get accurate and additional
information regarding the crises and communication challenges surrounding the "Dolce
and Gabbana love China" campaign. The information will be gathered from respondents
and other online sources. The interview will be conducted via Zoom.vn with a group of
about five participants, regardless of their education, gender, or location.

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2.Literature review
2.1. The growing importance of intercultural communication

In the age of global integration, many international organizations start expanding abroad to
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earn more profit by widening the scale of doing business. According to K. Kim, J-H. Park &
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J. E. Prescott (2003), in addition to functional global integration, cross-functional global


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integration is an important area for future research to more fully understand enterprise-level
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globalization. The global village predicted many years ago has arrived, and intercultural
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communication skills are becoming more and more important. At the same time, cross-
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cultural differences can lead to confusion and conflict, which can be encountered in the
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workplace. Employers, employees, and clients as well are likely to be from different
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cultures. This makes comprehending the powerful influence of culture on behavior reduces
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friction when interacting with people from other nations.


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2.1.1. Markets go abroad


Operating across borders is now commonplace in multicultural businesses, ranging from
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fast food chains like KFC and McDonald's to retail companies like Mercedes, Hyundai, and
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Toyota. Those businesses must cater to the desires of hundreds of countries while also
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meeting the needs of numerous cultures. PepsiCo, for example, launched an oat milk drink
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for the first time to cash in on the lucrative Chinese health drink market. When McDonald's
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entered the Asian market, it came up with a variety of new dishes. Companies presently go
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through acquisitions, mergers, alliances, and acquisitions all over the world, in addition to
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expanding their market in other countries. LVMH, the fashion conglomerate, has made a
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number of large acquisitions, including the purchase of Tiffani & Co for $16,8 billion.in
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2019. Despite deep-rooted cultural distinctions, the increasing global success of brand
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reputation is an indication that foreign clients are becoming more alike, or "homogenized"
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(T. Levitt 1983)


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Multinational firms have developed different tactics to explore new opportunities while h h h h h h h h h h

keeping their unique characteristics in order to survive and thrive in the age of integration.
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On the one hand, they are introducing entirely new products in their new markets. In
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response to the Chinese preference for grains, protein, and veggies at every meal,
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McDonald's and KFC are emphasizing salad and making rice more significant than chips in
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hChina. To satisfy the vegetarian community in India, McDonald's has removed beef and
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hpork from the menu and substituted it with vegetarian options.


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2.1.2. The characteristics of culture


Each country and region has its own history and traditions that have been passed down from
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generation to generation. When people live in the age of globalization, they must anticipate
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adapting to new situations and gaining new experiences. To do so, people must first gain a
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thorough understanding of the features of each culture in order to integrate into other
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civilizations.
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Culture's primary characteristic is that it can be learned. The norms, values, and attitudes
of a culture are taught and passed down from generation to generation. Eastern cultures,
for example, allow people to express their emotions more freely than Western cultures,
where people are less prone to share their feelings and emotions with strangers. People
are influenced by their surroundings from the moment they are born, and they will
continue to be so for the rest of their lives.
Furthermore, culture incorporates both visible and invisible features. Things that happen
in everyday life are the most evident component of our culture to visitors. People can see
cultural variations on the surface, such as in the language and eating etiquette. They are,
however, only the tip of the iceberg, as unspoken conventions influence how people in a
community live and prosper. Understanding only the visible characteristics of a culture is
insufficient; it must also take into account the interior aspects.
The final factor to consider is that culture is ever-changing. Over time, cultures develop
and evolve. Changes are brought about by technological advancements and globalization.
National borders and regional divisions are being steadily eroded or obliterated. Natural
disasters, migration, and conflicts are all examples of events that generate change.

Although we can identify the characteristics of a cultural dictionary for all cultures, many
of us will never have the opportunity to completely comprehend it. As a result, the vast
majority of us will need to rely on a variety of sources and have an inclination to
investigate and adapt to other cultures in order to enter other cultures and communicate
effectively.

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2.2. Technology and social media affect intercultural communication
Culture's primary characteristic is that it can be learned. The norms, values, and attitudes of
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a culture are taught and passed down from generation to generation. Eastern cultures, for
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example, allow people to express their emotions more freely than Western cultures, where
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people are less prone to share their feelings and emotions with strangers. People are
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influenced by their surroundings from the moment they are born, and they will continue to
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be so for the rest of their lives.


h h h h h h h h

Furthermore, culture incorporates both visible and invisible features. Things that happen in
h h h h h h h h h h h

everyday life are the most evident component of our culture to visitors. People can see
h h h h h h h h h h h h h h h

cultural variations on the surface, such as in the language and eating etiquette. They are,
h h h h h h h h h h h h h h h

however, only the tip of the iceberg, as unspoken conventions influence how people in a
h h h h h h h h h h h h h h h

community live and prosper. Understanding only the visible characteristics of a culture is
h h h h h h h h h h h h h

insufficient; it must also take into account the interior aspects.


h h h h h h h h h h

The final factor to consider is that culture is ever-changing. Over time, cultures develop and
h h h h h h h h h h h h h h

evolve. Changes are brought about by technological advancements and globalization.


h h h h h h h h h h

National borders and regional divisions are being steadily eroded or obliterated. Natural
h h h h h h h h h h h h

disasters, migration, and conflicts are all examples of events that generate change.
h h h h h h h h h h h h

Although we can identify the characteristics of a cultural dictionary for all cultures, many of
h h h h h h h h h h h h h h

us will never have the opportunity to completely comprehend it. As a result, the vast
h h h h h h h h h h h h h h h

majority of us will need to rely on a variety of sources and have an inclination to investigate
h h h h h h h h h h h h h h h h h h

and adapt to other cultures in order to enter other cultures and communicate effectively.
h h h h h h h h h h h h h h

According to research published in 2016 by S. Husain, A. Ghufran, and DS. Chaubey, the
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impact of social media on marketing strategy has increased dramatically in recent years,
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indicating that enterprises need prioritize their social media strategy. As a businessperson,
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specifically as a business communicator, you will certainly be affected by a number of


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trends. Simultaneously, communication tools via social media, 24-hour availability


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expectations, and global rivalry are all components of today's trends. This makes
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communication crucial, but also tough, in every business, especially when companies want
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to expand their institutional structure to a global scale, where they must consider a number
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of different factors, including the cultural perspective.


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Moreover, the advancement of technology and social networks has had a significant impact
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on communication as well as national and cultural borders. New communication


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technology allows people to have better access to a variety of information sources, making
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intercultural involvement possible. It is used in varied degrees by businesses all around the
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world, exposing the values and traditions of each country.


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Individuals, families, clubs, and organizations appear to enjoy connections and intercultural
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dialogue via online applications in today's culture. With the encouragement of


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communication, it is willing to reach out over the borders that exist in our environment. On
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any social media platforms, users can approach a multicultural environment.


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On the one hand, contemporary corporate trends such as globalization, a varied workforce,
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team-based companies, technological advancements, and a flatter organizational structure


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have an influence on workplace communication trends (Bardia, 2010). On the other hand,
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technology is brought down to the personal level, and an employee's geographical location
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is frequently irrelevant as they become a member of the global network (Charles, 2011).
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2.3. The ability to realize the difference among cultures around the world
2.3.1. Understanding cultural dimensions
Recognizing the need for dimensions that may be used to categorize and define cultures all
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across the world. Many international organizations are concerned about culture when it
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comes to developing their business in other nation. Many anthropologists have studied this
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subject, and there are four essential variables that might help us comprehend cultural
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similarities and differences:


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● Context: High and low context


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The most significant cultural feature is context. Context, in his theory, refers to the stimuli,
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surroundings, or atmosphere that surround an event.


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Low-context cultures (North America, Denmark, and Germany) depend heavily on the
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context of a situation to communicate their meaning. They assume that the audience knows
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nothing and that they need to be told basically everything.


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The listener in high-context cultures (Korea, India, and Arab countries) does not require
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much background information. Communicators in high-context cultures devote attention to


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interpersonal interactions, nonverbal expressions, physical settings, and social


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circumstances in addition to the words said.


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● Individualism: Individualism and collectivism h h h

Individualistic cultures consider the individual's demands over the requirements of the
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collective as a whole. People in this society are considered as self-sufficient and


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autonomous. Individual attitudes and preferences have a strong influence on social


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behavior. Individualistic cultures predominate in North America and Western Europe.


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High-context culture members tend to be collectivist. They promote acceptance of


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collective ideals, responsibilities, and choices by reinforcing participation in organizations,


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groups, and teams. Self-assertion and individual decisions are discouraged in group-
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oriented cultures, such as in many Asian nations.


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In reality, many cultures are complicated and cannot be categorized as completely


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individualistic or group-oriented. European Americans, for instance, are typically quite


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individualistic, whereas African Americans are less so.


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● Time orientation h

Time orientation refers to a preference for the past and tradition above living in the now or
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investing for the future (Henry 1976). Depending on their cultural backgrounds, some
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people are more prone to a past-orientation, while others are more prone to a future-
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orientation.

 Power distance h

The degree to which the less powerful people of a society accept and expect that power is
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distributed unequally was first observed by Greek Hofstede, and it is an important part of
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culture.
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In low power distance culture, people complain about unequal power distribution. Senior
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and junior people respect each other equally. In contrast, in high power distance culture,
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people certainly accept the unequal power distribution in society. Junior people respect the
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senior people and seniors expect obedience.


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2.4. Review Dolce and Gabbana

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Dolce & Gabbana is now available in 40 countries across the world, and the brand's
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management is based in Milan, with branches all over the world, ensuring sustained
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expansion and elevating the brand's global status. The brand's status has been shown by its
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presence in Shanghai, the world's most populous city.


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Each year, Chinese consumers spend more than $70 billion on luxury goods, accounting for
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about a third of the global brand market. In 2018, China accounted for 75 percent of
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worldwide market growth. Dolce & Gabbana saw the potential in Shanghai and decided to
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organize "The Great Show." It was supposed to be the biggest fashion show in Dolce &
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Gabbana's 33-year history, with 300-plus looks, 140 performers, and 1,400 guests in
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attendance, including local celebrities and influencers.


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3. Findings and discussions


3.1. Reasons why this scandal occurred
Instead of bringing the brand to a new and broader audience, "The Great Show"
encountered a complete boycott by the Chinese. The brand's efforts to strengthen its
position in China were counterproductive to the brand's initial goals when the brand
unwittingly offended the country's culture, resulting in a powerful wave of public
opinion, and the cancellation of 'The Great Show' shortly after. There were two main
reasons that led to the brand failure.
November 18: Dolce & Gabbana launched the racist advertising series
The firm launched a campaign consisting of three short movies in which a Chinese model
did not know how to use chopsticks to eat Italian food in order to promote "The Great
Event," D&G's biggest show ever in China. Although the movies' backgrounds featured a
variety of Chinese traditional patterns, the model's expressions caused controversy. The
Chinese accused D&G of being stereotypical and racist in the promotional videos and
demanded an explanation.
November 20: Stefano Gabbana’ horrifying messages when talking about the
China’s dignity was leaked
When the recordings were still going viral in China, a communication between an
Instagram user and Stefano Gabbana, one of two D&G CEOs, was leaked. Mr. Gabbana
used insulting words regarding the Chinese in the discussion, such as "China Ignorant

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Dirty Smelling Mafia," resulting in an even more serious situation for the brand to
handle.
Cultural differences and a lack of intercultural communication in international business
are the root reasons of the incident. When entering a new market, the brand lacked a solid
understanding of Chinese culture. As a result, they were subjected to a Chinese boycott
and have been unable to reclaim the potential market until now.

3.2. Solutions that this brand published


The brand removed the controversial series from Weibo less than 24 hours after its
release; nevertheless, the series remained on the brand's official Instagram account,
raising questions about whether the brand comprehended the serious of the situation.
After their Shanghai fashion show was canceled, the company issued a public apology
post for the racist films on their official Instagram account three days after the incident.
Nonetheless, Instagram is a social networking platform that is prohibited in China.
On Friday, November 23, only 5 days after the controversy, the two founders of the
brand, Domenico Dolce and Stefano Gabbana, appeared for the first time and apologized
on camera. "I love the nation and Chinese culture," one of the two founders of this luxury
apparel label remarked in the film. On the same day, both the brand and Mr. Gabbana
announced that their accounts had been hacked, and that he was not involved in the
occurrences.

3.3. Evaluate the solutions:


To evaluate how the brand addressed the racist problem, we first take the reaction of
Chinese clients into consideration. The brand's controversial video was deleted less than
24 hours since it was published. However, the anger of the whole of China did not stop at
that moment. It was only four days since the brand posted the videos, even when the
brand had deleted the racist video, and posted apology statements and videos the brand
had to encounter extreme outrage from not only Chinese customers but also
disappointment from their partners who had been supporting them for a long time.
Although D&G addressed the problems, the brand was forced to cancel the Great Show
by China’s Cultural and Tourism Department after attracting the Chinese government’s
attention over the dispute, which led to the show receiving the penalties only a few hours
before it took place. However, even if China’s Cultural and Tourism Department did not
make the decision, it was hard to continue the show as all the models and celebrities

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refused to show up, such as Chen Kun and Zhang Ziyi. Lucky Blue Smith, a model and
Instagram influencer with 3.2 million followers who has become a young Dolce &
Gabbana icon, decided not to participate in the show with the excuse posted on his
official Instagram account that we should treat all people and all cultures equally. Besides
that, the brand’s ambassador in China and ambassador in the Asia-Pacific region declared
the termination of the contracts with the brand and expressed their love and respect for
the culture of their homeland.
When it comes to the clients who directly consume the brand products, it was also a hit to
the brand’s image. D&G products from shoes, clothes to accessories that were in flames
were the subjects of hundreds of videos posted on Weibo. Mr. Xiang Kai, a director and
writer based in Shanghai, who was one of the hundred owners of videos burning D&G
products, said to the New York Times that the aim of his behavior was to awaken the
national pride of the Chinese and he did not regret after wasting thousands of dollars on
destroying those fashion items. The image of the brand was not destroyed online only but
the stores of Dolce and Gabbana in China were attacked by angry clients as well. The
label’s storefronts were plastered with “Not me” posters with the aim of mocking Mr.
Gabbana’s response to the scandal.
Moreover, most popular shopping online platforms removed the D&G products from
their websites such as Alibaba, TMall, and even giant department store Lane Crawford
did the same as others. The situation was even worse when all the retailers reported that
customers wanted to return the goods that they had already bought before. Therefore, we
can partially assess that the solutions are not approved by all the shopping online
platforms which are so famous in China.
Nevertheless, the brand also lost the trust and commitment of many of its supporters in
European and America after watching their ways of solving the scandal. Lucky Blue
Smith is one of many examples. Estelle Chen, Victoria’s Secret model was another,
writing on her personal Instagram: “Saying your accounts was hacked shows how much
of a coward you are. Could you please at least take responsibility for your behavior?”.
There were a lot of supporters who decided to turn their back on the brand as they felt
unsatisfied with the way the brand solved the scandal.
The impact of the crisis is still being felt in China as even though the brand has tried to
promote its products through various campaigns since 2018, it rarely defuses the backlash
and holds the client’s attention anymore. For instance, in June 2021, three years after the

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scandal, Hong Kong pop singer Karen Mok was wearing a D&G fashion item while
taking a photoshoot to promote her new music video. Right after the picture was
officially uploaded on her social media account, the singer was almost boycotted as
Chinese people considered her a traitor when promoting a brand that had shown
disrespect towards the country's culture.
It can be understood from the reactions of the clients in 2018 and at the moment in 2022,
that the way that the brand addressed the problems in the past was unable to ease the
outrage of the Chinese. Hence, the Chinese are unable to forgive the brand even if the
scandal has happened for too long and the brand has put lots of effort into promoting its
recent campaign.

+ The company’s report:

Besides the reactions of parties involved in the incidents, the reports related to the
brand’s finances and popularity from the past until now are vital when evaluating the
solutions carried out by D&G.
The foremost factor in the existence of every business is finance. At the time when the
scandal happened, China was considered to make up around a third of the brand’s total
sales. Therefore, it was understandable that the two years 2018 and 2019 witnessed the
most severe net loss of D&G in the 5-year period, which was -24,11 and -34,2,
respectively

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Figure 1: Net profits or losses of the Italian luxury fashion company Dolce &
Gabbana between 2014 and 2019
In addition to that, the brand’s revenue shares of Asian-Pacific possessed a 3% decline to
22% of total turnover from 2018 to 2019, which implied the problem-solving way of the
brand could not satisfy its clients and there were more Asian people who chose not to
purchase the brand’s fashion items.

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Figure 2: Turnover of the Italian luxury fashion company Dolce & Gabbana from
2011 to 2019
According to the Los Angeles Times, a London-based Brand Finance firm estimates that
the scandal might devalue the D&G brand by up to 20%. Besides that, D&G’s reputation
and the brand prospect can also be reflected by the popularity of the brand on social
media among clients in their market, which the brand lost after the incidents. The brand’s
social media engagement was recorded to be 98% lower than in the first quarter
compared with the same quarter last year by the Luxury China 2019 study.

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Figure 3:; The D&G's social media engagement in the first quarter in 2019
In summary, despite continuous efforts to gain back its position in China, D&G has not
succeeded in doing that. Based on the financial reports since 2018, which showed a
reduction in the revenue and turnover rate, and the report about the decline in the
popularity of the brand in China, it can be seen that the brand strategy to solve the
communication crisis in 2018 is not effective.

When it comes to the strengths and the weaknesses of the controversial campaign, we can
say that the idea of the campaign is a good strategy when an international business wants
to enter a completely different market. The brand wanted to adapt to another culture by
blending the two cultures into one to stimulate the harmony between two different
cultures, Italian and Chinese. However, the way that the brand turned the idea into reality
has gone the wrong direction, which showed the weakness in communicating with
international clients in the age of integration and the lack of thorough market research. In
addition to that, the brand also did not have the proper way to ease the crisis when it
emerged, we can say that the brand responds too slowly in the position of a luxury brand
with worldwide outlets and experience in the international market.

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4.Conclusion
Since 2018, "Dolce & Gabbana's advertising problem in China" has been one of the most
severe controversies in the fashion business. The scandal has been thoroughly examined
as a communication problem, and the efficacy of solutions is considered to be the main
aim of this research.

Firstly, the research mentions the causes leading to the incident. In addition, the study
shows how the brand coped with the crisis. Finally, all the solutions given out by the
brand are evaluated whether they are effective based on various. Through the evaluation,
it could be seen that the brand approaches to addressing the communication crisis did not
meet the demand of its clients and failed to win back the potential market.

Although the primary objectives were met, the study had some limitations. The data
collection technique is the most major one. Instead of using primary data, secondary data
was primarily used to conduct the research. However, to avoid erroneous values, every
data included in the study was carefully acquired and picked from reputable sources.

“Dolce & Gabbana’s advertising crisis in China” is one example of international


communication issues. As the result, the research findings could help students who are
the future labor workforce and businesses understand the value of communication
between different cultures, thanks to the information that has been meticulously collected
and examined.

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