Country-­related, company-related, and business-environmental determinants on sales in the sustainable high-technology luxury market : the case of a sustainable high-technological luxury market

Master  Thesis  

Country-­related,  company-­related,  and  business-­

environmental  determinants  on  sales  in  the  sustainable  high-­

technology  luxury  market  

The  case  of  a  sustainable  high-­technological  luxury  product  

Thesis supervisor: Arno Kourula   Judy Heemskerk 6164188   06-05-2014  

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The sustainable products industry is a fast-growing one, but the luxury segment of that industry remains underdeveloped. In the body of literature surrounding sustainable technology, there currently exists a knowledge gap regarding the luxury segment of that market. With this paper, I intend to clarify the primary determinants for sales of sustainable high-technology luxury. I will engage with existing theories about international strategy, institutional context, high-technology and luxury products as individual entities, and corporate social responsibility (CSR), and I will construct a theoretical framework to examine country-related, company-related, and business-environmental sales factors. I will test this framework with a practical case study investigating sustainable luxury car sales in three different countries and based on the triangulation of a primary document study, interviews, and secondary document studies. Together, the theoretical framework and case study reveal that legislation across different countries is the most significant, proven sales determinant in the sustainable high-technology luxury market. I will conclude by outlining several optimal strategies for improving sales performance in this market.  

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Abstract...2

1. Introduction ...5

1.1 Problem description...5

1.2 Research objective & scientific contribution...6

1.3 Content of the thesis ...7

2.Literature Review ...8

2.1 International Strategy...9

2.2 Institutional Context...12

2.3 High technology products ...16

2.4 Luxury products ...18

2.5 Corporate Social Responsibility ...21

3. Theoretical Framework...25 4. Methodology ...28 4.1 Research design ...28 4.2 Case sampling ...28 4.3 Data gathering ...29 4.4 Data analysis ...30

4.5 Validity and reliability ...31

5. Case description...34

5.1 Fisker Automotive ...34

5.2 Electric vehicle / Plug-in-hybrid vehicle market ...34

6. Emperical Findings...36

6.1 Cross-case study...36

Interview ...36

Document study ...36

Model... 40

6.2 Empirical findings of the Netherlands ...43

Internal Document Study ...43

Interview ... 44

External Document study ... 45

6.3 Empirical findings of Denmark...51

Internal Document Study ...51

Interview ...52

External Document study...53

Model...53

6.4 Empirical Findings of Norway ...58

Internal Document Study ...58

Interview ...58

Document study ...59

Model...60

6.5 Comparing the empirical findings...65

7. Discussion ...67 7.1 Country-related factors ...67 7.2 Business-environmental factors...69 7.3 Company-related factors ...71 8. Conclusions...75 8.1 Summary of findings ...75 1. Country-related factors ...75 2. Business-environmental factors ...76 3. Company-related factors...77 8.2 Managerial Implications ...79 8.3 Limitations ...80

8.4 Further research suggestions...81

References ...82

Appendices...86

Appendix 1: List of internal data sources...86

Appendix 2: List of data used for external document study ...87

Appendix 3: Interview Protocol ...89

Appendix 4: Managerial suggestions for Fisker...91  

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In 1967, Lloyd D. Orr wrote one of the first scientific articles about electric vehicles. He explains that the initial decision to choose for gasoline cars was based on the fact that electric cars have one fatal defect: an inadequate source of energy storage, which creates range-anxiety for consumers. But Orr also understood the advantages of electric cars: less air pollution, durable drive components, and lower operating costs. Several years later, J. E. Calfée (1985) investigated the demand for electric cars, and his work remarkably revealed that, at the time, there was not a significant market for electric vehicles. The combination of further technological advancement and rising gasoline prices creates a negligible market share in the niche of second car purchases for middle and upper class families.  

In the decades since Orr’s and Calfée’s research, sustainable products awareness has increased as expected, helped along by the fear of global warming and exhaustion of natural resources. In 2001, the European Council in Gothenburg launched the EU Sustainable Development Strategy for the continuous improvement of quality of life for current and future generations. This strategy was renewed in 2006. The Eurostat monitoring report, published every two years, provides an objective, statistical picture of progress, based on the EU set of sustainable development indicators; figure 1 illustrates the progress of sustainable development until 2011, showing that, in terms of consumption patterns, sustainable development did not improve (EuroStat, 2011). This conclusion is deeply concerning, and, in order to increase the consuming rate of sustainable products, the EU must focus on developing more suitable sustainable products that match the demand for sustainable goods. (EuroStat, 2011).  

Besides the automotive industry the fashion industry is also experiencing a sudden demand for sustainable products. Beard (2008) explains the sudden interest in ethical fashion and the key factors determining sales for these products; he argues that new developing firms should focus on the complete ethical picture, meaning that the branding and marketing of ethical products should be clear and transparent in all areas of the firms’   business. This kind of transparency can be extremely difficult for industries with development of high-technology luxury products.  

Today, the lock-in technologies meet demands of the modern consumer but remains the same dominant technologies simply because they are already the dominant technologies. Developers and sellers are influenced more by the technologies’  large market share than by their intrinsic characteristics. Robin Cowan and Staffan Hultén (1996) describe the technology lock-in of the automotive industry, especially the lock-in of the gasoline car against a rising demand for electric cars. Studying the path dependence of automotive technology development, Cowan and Hultén conclude that the change over from gasoline cars to electric cars will be a slow one. Eventually, Cowan an Hultén (1996) expect that electric cars will gain a significant market share, but passing new legislation is a necessary step in creating this niche market. The new legislation will contribute to the environmental awareness in countries. The aforementioned articles describe the problem of developing new technologies due to environmental awareness.  

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The present literature on international business is lacking in information on stimulating sales of sustainable products. Herman Aguinis and Ante Glavas (2012) review the current literature about corporate social responsibility (CSR), or: sustainability within companies, and their work reveals a lack of understanding regarding the mediation effects of CSR. Scholars in this field must conduct further research to better explore and explain the processes and underlying mechanisms through which CSR actions and policies lead to particular outcomes. Filling in this knowledge gap might also create a better understanding of the factors that most influence sustainable product sales.  

In ‘Do consumers care about ethical-luxury?’, Iain Davies, Zoe Lee, and Ine Ahonkhai (2011) describe to what extent the consumer considers ethical issues, including sustainability, when purchasing luxury goods. They conclude that ethics are a low priority for luxury consumers, and, furthermore, these consumers are less inclined to identify or perceive high moral intensity to ethical issues in their luxury products. They also conclude that ethical luxury brands also have less flexibility on price premiums, less active gathering of information by ethical consumers, and low public perception of their ability to create social change (Davies et al, 2011).  

Looking at the problems of lock-in technologies and consumer awareness with luxury products and the gap of literature in factors that could influence sales of sustainable products, it would be interesting to combine these topics. There is less or none research done

in sustainable luxury products industry, which is abnormal because there currently is a large market of luxury products. This research will focus on determine factors that could improve sales of sustainable high-technology luxury goods. The research question is; “What kind of country, company and business-environmental factors influence company’s performance in different markets for sustainable high-technological luxury products?”  This question consists of three different sub questions. The first sub question is; “How do country-related factors influence the sales in different markets for sustainable high-technological luxury products?”   The second sub question is; “How do company-related factors influence the sales in different markets for sustainable high-technological luxury products?”  And the third sub question is; “How do business-environmental factors influence the sales in different markets for sustainable high-technological luxury products?”    

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I will begin with a literature review of the existing work regarding: international strategy, institutional factors, corporate social responsibility (CSR), and high-technological luxury products. From each of these topics, I will glean factors that might influence the sales of sustainably high-technology luxury goods, and I will construct a theoretical framework for these factors. Based on these factors, I will conduct a qualitative embedded case study; this case study will test the given factors and may provide additional factors that influence sales. I will collect the primary data for the study from interviews at Fisker Automotive, a sustainable luxury car manufacturer; I will conduct these interviews at several dealerships across Europe. I will collect the secondary data from existing sources (e.g. about national legislation and taxes). Finally, I will examine my findings to determine a model of all of the factors that influence sales of sustainable high-technology luxury products across different countries.  

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In this section, I will examine the pre-existing literature around my research question. First, I will deal with international strategy; I will explore the possible differences in sales across different countries as they relate to practices within an industry or firm. Second, I will deal with institutional context; I will explore the possible differences in sales across different countries as they relate to the characteristics and policies of those countries. Third, I will deal with product type, specifically with high-technology products and luxury products as individual entities; I will explore differing approaches to sales improvement for both. Finally, I will deal with Corporate Social Responsibility (CSR); I will outline the various aspects of CSR and discuss CSR’s impact on sales.  

I will conclude this section by proposing a theoretical framework to summarize my exploration of the literature and to identify all of the various sales influencing factors on the sales of sustainable high-technology luxury products.  

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Verbeke and Brugman (2009) define international strategy as; “Effectively and efficiently matching an multinational enterprise’s (MNE) internal strengths (relative to competitors) with the opportunities and challenges found in geographically dispersed environments that cross international borders”  (Verbeke & Brugman, 2009). The internationalization process, is a set of actions and decisions a firm has to make in order to successfully set up and manage their operations (affiliates) abroad; a firm must establish motives to invest, determine where to invest, and decide how to invest. These actions and decisions can influence the sales of an MNE.  

In “Dynamic capabilities and strategic management”, David J. Teece, Gary Pisano, and Amy Shuen (1997) present three primary theories of international strategy: 1) Michael Porter’s competitive forces theory, 2) resource-based view (RBV), and 3) dynamic capability strategy.  

The first theory of international strategy, Porter’s competitive forces theory, applies strategies on industries and firm level (external). According to Porter, five forces shape the competition: 1) threat of entry, 2) power of suppliers, 3) power of customers, 4) threat of substitutes, and 5) rivalry among existing competitors (2008); Figure 2 in the appendix charts these forces. First, threat of entry refers to the pressure on prices and costs and to the rate of investment necessary to compete created by new entrants to an industry looking to gain a market share (Porter, 2008). Second, powerful suppliers capture more of the value for themselves by charging higher prices, limiting quality or services, or shifting costs to industry participants (Porter, 2008). Third, powerful customers can capture more value by forcing down prices, demanding better quality or more service (thereby driving up costs), and generally playing industry participants off against one another, all at the expense of industry profitability (Porter, 2008). Fourth, the threat of substitutes refers to the possibility that an alternative product might perform the same or a similar function as an industry’s product by different means (Porter, 2008). Fifth and finally, rivalry among existing competitors takes many familiar forms, including: price discounting, new product introductions, advertising campaigns, and service improvements; high rivalry limits the profitability of an industry (Porter, 2008).  

The second theory of international strategy is the resource-based view (RBV). In “A Resource-Based View of the Firm,”   Birger Wernerfelt describes a resource as: “anything, which could be thought of as strengths or weaknesses of a given firm”  (1983). RBV focuses on the resources of the firm (internal) rather than on the products as a means to achieve a competitive advantage. Resources cannot be valued in isolation; the following market forces determine their value: scarcity, appropriability, and demand (Collis & Montgomery, 2008). RBV makes two key assumptions: 1) that firms within an industry are heterogeneous and 2) that resources are not perfectly mobile across firms (Barney, 1991)(Peteraf, 1993). From these two assumptions, a resource-based model of a company reveals four requirements for that company to secure a sustained competitive advantage; the company’s resources must be: 1) valuable, 2) rare, 3) inimitable, and 4) non-substitutable (Barney, 1991).  

The third theory of international strategy is the dynamic capability strategy, which focuses on the processes and paths of internationalization. In “Dynamic Capabilities: what are they?”, Kathleen M. Eisenhardt and Jeffrey A. Martin (2000) state: “dynamic capabilities are a set of specific and identifiable processes”. Eisenhardt and Martin go on to explain that, although dynamic capabilities are idiosyncratic in their details and path dependent in their emergence, they also share commonalities across companies. They conclude that dynamic capabilities are largely homogeneous, fungible, equifinal and substitutable. Teece, Pisano, and Shuen focus on the distinct qualities, behaviors, and outcomes of dynamic capabilities in high-velocity markets. In moderate dynamic markets, the dynamic capabilities are detailed, analytic, stable processes with predicted outcomes; the industry evolves according to variety in dynamic capabilities. However, in high-velocity markets, the dynamic capabilities are simple, highly experimental, and fragile processes with unpredictable outcomes; here, evolution is dependent upon the selection of dynamic capabilities (Eisenhardt & Martin, 2000). For companies in rapidly changing industries, distinctive processes, specific asset positions, and evolution of its paths are the means to a competitive advantage.  

Another important aspect of international strategy is the decision how to invest, which entry-mode is most suitable for the company. Pan and Tse (2000) developed a comprehensive model for the decision on entry modes. They state that the choice of market entry first can be viewed as equity-based versus non-equity-based. Then these decisions can be divided into sub choices. Within equity-based the choice is between wholly owned

operations and equity joint ventures. The non-equity-based decision can be divided in contractual agreements and export (Pan & Tse, 2000). In the Appendix 6 is shown what this hierarchal model looks like. In the article of Dikova & Witteloostuijn (2000) is the same process described. They divide the foreign direct investment choices between establishment mode choice and entry mode choice. The establishment mode choice is the acquisitions vs. greenfields, meaning starting a company from scratch or taking over an existing company. The entry mode choice is a wholly owned outlet vs. subsidiary with shared ownership. It is important to investigate what foreign direct investment mode is chosen in different countries because the entry/establishment modes can effect the firms performance (Dikova & Witteloostuijn, 2000).  

The international strategy theory identifies three different ways of sustaining international sales and competitive advantage. The first is Porter’s five forces focusing on the external sources of competition. The second is the RBV view focusing on the internal strengths of the company, and the third is the dynamic capability strategy focusing on the dynamic evolvement of the company. At last there is also the entry mode theory, which divides the entry of firm's substitutes by equity-based decisions. The combination of these international strategies indicates the factors that could influence the sales of international products. The factors based on international strategy will be further elaborated in the theoretical framework paragraph.  

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The political, economic, and legal characteristics of a country make up the institutional context of that country; differences in institutional context across different countries influence companies’   and performances of technical innovations across those different countries.  

  the institutional context in different countries is influenced by the forms of economic organization. In “The Institutional Structuring of Innovation Strategies: Business Systems, Firm Types, and Patterns of Technical Change in Different Market Economies,”   Richard Whitley (2000) defines six major forms of economic organization, or: business systems. Whitley’s six types of business systems are: 1) fragmented, 2) coordinated industrial district, 3) compartmentalized, 4) collaborative, 5) highly coordinated, and 6) state organized; these types differ in system characteristics, firm characteristics, and institutional features (Whitley, 2000). Appendix Figure 1 offers an overview of the six types and their characteristics.  

The combination of a firm’s preference and capabilities for generating and diffusing various innovations leads to contrasting approaches between firms in regards to risk management, or: institutionalized ways of dealing with technological and market uncertainty. Different firms have different governance structures and capabilities according to their business systems and to their institutional context, and so different firms vary in the kinds of innovation they are able to introduce efficiently in the market. There are five types of innovation strategies: 1) dependent, 2) craft-based responsive, 3) generic, 4) complex and risky, and 5) transformative.  

First, dependent innovation strategies organize relatively well-known product qualities within widely understood frameworks. Technical and user uncertainty is low; dedicated and differentiated product qualities are considerable; innovation is not based on current organizational competencies; reliance on formal codified knowledge is low; and, finally, reliance on a complex and varied knowledge base is low.  

Second, craft-based responsive innovation strategies are proactive and develop new product qualities for differentiated uses, often closely linked to the reputation of the producers. There is some technical and user uncertainty; dedicated and differentiated

product qualities are considerable; innovation is considerably based on current organizational competencies; reliance on formal codified knowledge is limited; and, finally, there is some reliance on a complex and varied knowledge base.  

Third, generic innovation strategies develop standardized products and services for largely anonymous users and reduce costs by routinizing process improvements. Technical and user uncertainty is limited; dedicated and differentiated product qualities are low; innovation is loosely based on current organizational competencies; reliance on formal codified knowledge is considerable; and, finally, reliance on a complex and varied knowledge base is limited.  

Fourth, complex and risky innovation strategies develop new product qualities with a wide range of uses and may lead to market restructuring as previous products become obsolete. Technical and user uncertainty is considerable; dedicated and differentiated product qualities are considerable; innovation is considerably based on current organizational competencies; reliance on formal codified knowledge is considerable; and, finally, reliance on a complex and varied knowledge base is considerable.  

Fifth, transformative innovation strategies are destroying competencies and often involve the establishment of new industries with new product qualities to meet or to generate new needs. Technical and user uncertainty is high; dedicated and differentiated product qualities vary; innovation is not based on current organizational competencies; reliance on formal codified knowledge is high; and, finally, reliance on a complex and varied knowledge base is high.  

In “Innovations across Europe: How important are institutional differences?”, Natália Barbosa and Ana Paula Faria examine the relationship between innovation and institutional context. Barbosa and Faria investigate whether institutional variance across different European countries might explain differences in innovation intensity. They conclude that stringent product and labor regulation affect innovation negatively; more developed credit markets better foster innovation. Contrastingly, energy efficiency regulation can have a positive impact on innovation and can push firms into developing efficient and sustainable products.  

To conclude, a country’s institutional context does have an influence on industry innovations, and that influence can be positive or negative.  

  Below there is a table with the characteristics of a firm, business systems and institutions that are likely to be the most closely associated with the different kinds of innovation strategies. The link of the characteristics of the firm related to the different institutional factor should give a good indication of which innovation type should be used in which country. Choosing the right innovation in a country could highly contribute to the sales of the product.  

  FI G U R E 1 : BU S I N E S S SY S T E M S ( WH I T L E Y, 2 0 0 0 )  

  FI G U R E 2 : BU S I N E S S S Y S T E M S A N D IN N O V A T I O N S T R A T E G I E S ( WH I T L E Y, 2 0 0 0 )  

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The specific technological characteristics of a product also factor into sales of that product; high-tech firms have made a number of breakthrough technologies and products, but those same firms are still struggling to create and extend market opportunities.  

In “Winning strategies for innovation and high-technology products management,”   Sang-Hoon Kim and Kun-Huang Huarng (2011) engage with this struggle by exploring issues regarding successful innovation, technology diffusion, adaption of high-tech products, technology management, and marketing strategies. Kim and Huarang’s work reveals several factors that might influence sales of high-technology products. Related to successful innovation are the different stages of adoption, which determine the potential sales of a product.. Technology diffusion over countries differs in technology readiness, which is a factor that influences sales. The adaption and diffusion of high-tech products is related to the online buzz or word-of-mouth generated every day. There are also risks–related adaption barriers, which negatively influence sales. A firm’s global marketing strategy has a positive effect on it global market performance. The key determinants of organizational performance (and therefore influencing sales) are; brand equity, online services, networks and virtual shopping.  

In “External learning, market dynamics, and radical innovation: Evidence from China's high-tech firms,”   Yongchuan Bao, Xiaoyun Chen, and Kevin Zheng Zhou (2012) examine how two types of external learning—technical learning and administrative learning—might affect radical innovation; they further examine the extent to which these effects are dependent on two types of market dynamics: technological turbulence and competitive intensity. Their research demonstrates that both types of external learning can help firms to generate radical innovation, but market dyanmics can behave as either a positive or a negative force on the overall effectiveness of external learning. Technological turbulence reduces the effect of technical learning but enhances the effect of administrative learning; competitive intensity enhances the effect of technical learning but reduces the effect of administrative learning (Bao, Chen, & Zeng Zhou). With the right market dynamics, external learning can have a definite positive impact on radical innovation.    

In “Strategic resource commitment of high-technology firms,” Neelankavil and Alaganar (2001) identify three important strategic variables within the high-technology sector: research and development (R&D) expenditure, capital expenditure (CPX), and sales & administrative (S&A) expenditure. The strategic variables test for causality among the three variables as it impacts revenues.  

The marketing of high-technology products differs from the marketing of other products. Gardner, Johnson, Lee, and Wilkinson (2000) define high-technology products as: “products that are the result of turbulent technology and which require substantial shifts in behavior of at least one member of the product usage channel.”  Their definition is based on the interaction of levels of technology and consumer/user perception of that technology. Unlike traditional, or low, technology products, high technology products have yet to become familiar to and accepted by the consumer. The difference between high and low technology products necessitates different marketing strategies for each. Marketing strategies for high-technology products require: an increased number of sales people and channel intermediaries, greater R&D investment, increased importance of product warranties, and a higher price relative to low technology products (Gardner, Johnson, Lee, and Wilkinson, 2000).  

In “New Product Launch, Marketing action and launch tactics for high-technology products,”  Beard and Easingwood (1996) identify three further differences between high and low technology products; high-technology products are influenced by short lead times, rapid technology changes, and high levels of uncertainty. From these differences, Beard and Easingwood conclude that high-technology marketing strategies should focus on specifically targeting potential consumers and increasing awareness among potential consumers. Davies and Brush (1997) complement to these findings that high-technology products have a extended marketing mix consisting of factors such as; market research, product policy, product requirements, quality requirements & control, pricing, naming, packaging, advertising, collaterals, selling, promotion & public relations, distribution and technical support.  

To conclude: the primary influencing factors on the sales of high-technology products are technology-readiness in a country, the learning process of the technological innovation, and the marketing strategy for the individual product.  

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In the last few years the market for luxury products has expanded extremely. The market for luxury brands is no longer limited to the developed countries in the West; the market has expanded to the “new rich”   countries of the East. The new luxury market is divided into three subgroups: accessible super premiums, old brand luxury extensions, mass prestige. The development of the new luxury market is caused the trading-up phenomenon, this means that people earn more money and luxury good get more accessible (Silverstein and Fiske, 2003). The difficulty related to the trading up phenomenon and therefore related to the luxury market is the definition of your target market. This phenomenon creates the different subgroups within the luxury market. The expansion of the market and the subsequent proliferation of sub groups within the market have made targeting the right customer group significantly more difficult.  

Another trend in the luxury market is the reinterpretation down to the mass market. Kapferer and Bastien (2008) acknowledge this trend and show that the economic crisis influences the purchasing behavior of luxury consumers. A growing opportunity to cope with the mass-market trend is the experiential marketing strategy (Atwal and Williams, 2009). There are four dimensions within a luxury experience; educational, entertainment, escapist and aesthetic. These dimensions help to achieve a pleasurable experience to achieve competitive advantages over other luxury brands.  

The automotive industry is showing another trend in solving the mass-market problem of luxury brands: blending luxury and mass-market automobile brands into one corporate portfolio. This approach takes advantage of scale and scope economies but may also fatally corrode the brand (Strach and Evertt, 2006). Consumer perceptions of luxury products are influenced by the commonness of the mass-market brands that are mixed with the luxury brands.  

The expansion of the luxury markets makes it harder to identify the factors driving luxury brand purchases; customers’  motivations in individualistic versus collectivist cultures differ considerably. In “Purchase intention for luxury brands: A cross cultural comperison,”   Bian and Forsythe (2012) investigate the effects of uniqueness, self-monitoring, social-functional attitudes, and affective attitudes on consumers' intent to purchase in collectivist

versus individualist cultures. These factors that are related to the culture of a country, could influence the sales of luxury products.  

Another influencing factor on the sale of luxury goods is supply chain management. In “Supply chain management in the luxury industry: A first classification of companies and their strategies.,”  Caniato, Caridi, Castilli, and Golini (2011, p. 632) state: “high standards can and must be maintained throughout the supply chain, from production, to distribution to retail stores.”  In order to receive the demand quality of luxury product the supply chain is an important factor influencing this quality.  

Caniato, Caridi, Castilli, and Golini define “luxury product”   within three subgroups; these subgroups differ in supply chain strategy as well as in manufacturing, sourcing, and distribution practices. Caniato, Caridi, Castilli, and Golini also identify the critical success factors (CSF) and traditional success factors (TSF) for luxury good sales within each subgroup. The three subgroups are determined by the following factors:  

1. Product fashionableness: a fashion-sensitive vs. a fashion-insensitive market   2. Brand reputation: a technical, symbolic, or technical-symbolic brand  

3. Sales volume: high or low volume (consider a threshold of 100,000 units sold per year to represent high volume)  

4. Product complexity: high or low complexity (consider a threshold of 100 components in the bill of materials to represent high complexity)  

5. Company size: small or large company (small meaning turnover below 50 Mh, and large meaning turnover above 50 Mh)  

High-technology luxury products are fashion-sensitive; technical-symbolic; exclusive, meaning low in sales volume; highly complex; and international, meaning sold by large companies. These characteristics place high-technology luxury products in subgroup three. According to Caniato, Caridi, Castlli and Golini (2011, p. 631): “Subgroup three is comprised of large firms that sell low volumes of complex products. Their brand reputation is both technical and symbolic; the technical performance of the product is the presumed origin of the brand’s prestige, which has now become a symbol.”  The products of subgroup three have low seasonality, long lifecycle, long lead times, and customized production processes. The CSF of subgroup three products are: lifestyle, exclusivity, emotional appeal, performance and innovation, style and design, quality, service level, and flexibility.  

In “The Market for Luxury Goods: Income versus Culture.,”  Dubois and Duquesne (1992) divide the influencing factors on luxury product sales into two categories: 1) consumer's income and 2) culture. The consumer's income of the market segment influences the likelihood of buying luxury goods. Culture impacts buying decisions in two key ways: 1) people with a positive attitude towards change are more likely to buy luxury products, and 2) people buy luxury goods to extend their self-personality or to symbolize themselves. The sources of utility for luxury products are: quality, design, and excellence of service.  

To conclude: the primary influencing factors on the sales of luxury products are identification of the right target group, cultural, and quality of the supply chain.  

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The history of CSR stretches back nearly eighty years, but the modern concept was introduced in 1953 with the publication of Howard Bowen’s Social  Responsibility  and  the   Businessman (Caroll, 1999). CSR literature rapidly expanded in the 1960s, and the number of definitions for the term increased in turn. The 1970s brought specialization in the definitions of CSR and the alternative emphases—e.g. social responsiveness, corporate social performance—became commonplace. In the 1980s, the trend started to operationalize the CSR concept and to combine other concepts that were consistent with CSR theory but that took alternative emphases or themes as their centerpiece. In the 1990s there war more attention drawn to measurement initiatives and continuing theoretical developments (Carroll, 1999).  

The history of CSR shows the importance of CSR in the management literature. An analysis of CSR literature (between 1992 and 2002) shows that the most important issues of CSR investigated are the environment and ethics (Lockett, Moon & Visser, 2006).  

In “Corporate Social Responsibility Theories: Mapping the Territory,” Garriga and Melé  (2004) attempt to map the many theories of and growing approaches to CSR. The main CSR theories and related approaches are divided into four groups:

1. Instrumental theories: in which the cooperation is seen as only an instrument for wealth creation, and its social activities are only a means to achieve economic results  

2. Political theories: which concern themselves with the power of corporations in society and the responsible use of this power in the political arena.  

3. Integrative theories: in which the corporation attempts to satisfy social demands.   4. Ethical theories: based on the corporation’s ethical responsibilities to its society.  

In this section, I will focus on CSR as an influencing factor on the sales of high-technological luxury goods, specifically investigating how the sustainability of a product might contribute to the sales of that product. Therefore, I will focus on instrumental theories in the CSR literature. According to Friedman (1970): “The only one responsibility of business towards society is the maximization of profits to the shareholder within the legal framework and the ethical custom of the country;”  he continues: “There is one and only one social responsibility of business, to use its resources and engage in activities designed to

increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”   There are three different objectives defined within the instrumental theory: 1) maximizing shareholder value, 2) achieving competitive advantage, and 3) achieving cause-related marketing (Garriga and Melé, 2004). Garriga and Melé's (2004) research focuses on maximizing sales by leverage CSR into a competitive advantage over non-sustainable high-technology luxury goods. There are three approaches for using CSR to gain competitive advantage:  

1. Social investments in competitive context  

2. Natural resource-based view of the firm and its dynamic capabilities   3. Strategies for the bottom of the economic pyramid  

The first is irrelevant to sustainable high-technology luxury products because the products are sustainable from start-up. The third approach is also irrelevant because it does not apply to luxury products. The second, applying the natural resource-based view (RBV) of the firm and its dynamic capabilities, is suitable for sustainable products. The second approach suggests that the company should follow the strategy of the RBV and dynamic capabilities explained above in the literature review of international strategy (Garriga and Melé, 2004). In “A resource-based perspective on corporate environmental performance an profitability,”   Russo and Fouts (1997) investigate: 1) whether or not using RBV strategy for CSR activities might positively influence corporate financial performance (CFP), and 2) whether or not and to what degree industry growth rate moderates that influence. Russo and Fouts conclude that: 1) using RBV strategy for CSR has a positive influence on CFP, and 2) that this effect tends to be stronger in a high-growth industry.  

In “The effect of corporate social responsibility in consumer satisfaction an perceived value,”   Loureiro, Dias, and Reynders (2012) further investigate the influence of CSR on CFP, specifically examining what factors are influenced by CSR and how these factors influence CFP. Loureiro, Dias and Reynders (2012) hypothesize that customer satisfaction might also be affected by CSR, and they studied three car manufactures in the EU to test their hypothesis. Their results demonstrate that CSR within a company does lead to higher customer satisfaction as well as increased productivity and higher customer satisfaction, all of which contribute to higher CFP.  

Hull and Rothenberg (2008) examine whether or not the relation between CSR and CFP is positive when firms have higher differentiation. This differentiation effect is

moderated by innovation and differentiation in the industry. Hull and Rothenberg conclude that the level of differentiation and the level of innovation both influence the relationship between CSR and CFP; CSR most strongly positively affects performance in industries with little differentiation and in low-innovation firms.  

In “Green and Competitive: Ending the Stalemate,”  Porter and van der Linde (1995) explain that the environmental regulations in a country influence competition among companies. The companies face dynamic competition therefore the standards can trigger innovations. Porter and van der Linde argue that reducing pollution often enhances competition; pollution is a sign that resources have been used inefficiently, incompletely, or ineffectively. Innovation in response to environmental regulation falls into two categories: 1) new technologies and approaches that minimize cost of dealing with pollution once it occurs, and 2) resource productivity improvement that addresses the root of pollution. One critical principal of good regulation according to Porter and van der Linde is: create maximum opportunity for innovation by letting industries discover how to solve their own problems. A second principle of good regulation is: foster continuous improvement. According to these two principals, environmental regulations in a country could have a positive influence on the acceptance of CSR products in that country.  

In “Does it pay to be green?,”  Ambec and Lanoie (2008) outline different factors for reducing costs and increasing revenue in order to positively influence CFP through CSR. Their four factors for reducing costs are: risk management and relations with external stakeholders, cost of capital, cost of labor, and cost of material. Their three factors for increasing revenues are: better access to markets, product differentiation, and pollution control technology. Product differentiation means that better environmental performance through greener products or services allows companies to use a differentiation strategy. This differentiation strategy can exploit niches in environmentally conscious markets segments. The extra costs of green products are transferred to the consumer, who is willing to pay more for green products. The differentiation strategy is more likely to work under the following conditions: when the information about the environmental features is credible (e.g. ecolabel), consumers are willing to pay extra, and there is a barrier to imitation from competitors.  

Institutional factors could also influence the way that CSR projects are accepted in a country. Different institutional contexts certainly have different influences on the CSR

policies of European firms. Anglo-saxon countries (see table 1), in which the markets are more liberal, have a higher CSR than coordinated market economies. Coordinated market economies use CSR in more implicit forms while the liberal market economies have a more voluntary approach. National, institutional. and sectorial level factors have a asymmetrical effects, influencing the minimum standard but not the best practice for CSR. The positive side of institutions about CSR in a country is that it helps firms to frame, communicate, and monitor CSR.  

To summarize the main theories of CSR and their influence on sales: CSR influences the sales of products through different strategies. The main strategy for sustainable high-technology luxury products is to develop a sustainable product and use its dynamic capabilities to gain competitive advantages. The sustainable product can gain competitive advantage through lower costs, increased productivity and higher customer satisfaction, which lead to a higher CFP. Low diversified industries and pollution control also positively influence CFP. Institutional context can also influence the effect of CSR on CFP; in high it regulated countries, the CSR regulation can both positively and negatively affect CFP.    

3.

T

F

In this chapter, I construct a theoretical framework that is based on the literature review. The model indicates how and which parts of the literature might influence the sales of sustainable high-technology luxury products. The literature review is divided into five sub-chapters: 1) international strategy, 2) institutional context, 3) high-technology products, 4) luxury products, and 5) corporate social responsibility (CSR). My theoretical framework (Model 1) illustrates which factors belong to which sub-chapters.  

The country-related factors are based on the institutional context literature the high-technology product literature. The institutional context literature describes the different business systems of countries and shows that different countries have contrasting approaches towards risk management and market uncertainty; this literature outlines the characteristics of complex and risky innovations. The high-technology literature links successful innovation to differing adaption stages and technology readiness; these stages of adaption and technology readiness differ from country to country. Some countries have an early adaptors culture while other countries might wait to see the results of the technology first.  

The business-environmental factors are based on the international strategy literature, the luxury product literature, and the CSR literature. The international strategy literature suggests that the power of consumers influences the competitive advantage of the company. The paying consumer may no longer be willing to pay, if their power gets too high. The luxury products literature complements on the international strategy literature; the demand for luxury products is affected by the low seasonality, long life cycle, long lead times, and customization of the products. Some of the CSR literature argues that CSR is most positively effective in little differentiating industries; conversely, some scholars identify differentiation as a good strategy for CSR products when: the environmental features are credible, the consumer is willing to pay more, and when the imitation is difficult for competitors.  

The company-related factors are based on the international strategy literature, high-technology product literature, luxury product literature, and CSR literature. According to the international strategy literature, the motive(s) of a company to invest affect sales. The choice

of supplier for a company can affect the competitive advantage of a company, thereby affecting the sales as well. The literature states that competitive advantage of a company depends on encouraging technological, organizational, and managerial processes internally within the firm. The high-technology products literature identifies various strategies for marketing these products. Global marketing strategy has a positive influence on the global market performance. An online created buzz or word-of-mouth is related to the adoption and diffusion of these products. Similarly, the luxury products literature identifies various strategies marketing of these products. Luxury products must be unique and self-monitoring and have social-functional attitudes and effective attitudes. The critical success factors of luxury products are: lifestyle, exclusivity, emotional appeal, performance, innovation, style and design, quality, service level, and flexibility. The whole supply chain from production to distribution to retail stores must also adhere to the luxury standard. According to the CSR literature, CSR can influence the performance of a company from within via: creating better access to markets, differentiating products, and selling pollution control technology. The company can also reduce cost via: risk management and relations with external stakeholders.  

In this research a case study will examine the theoretical framework. The theoretical framework is shown on page 20. This research will show the influences that could affect the sales of these products. Sales are used as a parameter to compare the performance of the companies over different countries. In the article of Wall et al. (2004) the difference between objective performance measurement and subjective performance measurement is described. Objective measures are for example productivity, profit, or return on assets, sales. Subjective measures rely on the reports of respondents of interviews and questionnaires. In this case study is chosen to compare the qualitative findings of the research with the objective performance measure of sales numbers. If there is also subjective measurement used to compare the qualitative findings with, it would be more difficult to draw country specific conclusions. The reason for using the sales number as an objective measure is because of the start-up phase of the company. There are not that many cars sold and cost are relatively high for start-up companies. The sales numbers are easy to compare across countries.

4.

M

4.1

R

In the following sections, I perform an exploratory embedded case study at Fisker Automotive, collecting qualitative data through interviews at different Fisker dealerships in different countries. Eisnehardt (1989) states that: "A case study is a research strategy that focuses on understanding the dynamics present in single settings"; an embedded case study is a single study with multiple levels of analysis, which, for my work, means comparing a single study across different countries (Yin, 2009, p. 51).  

My case study will provide qualitative data to determine the relationship between sales and several potentially influencing factors and to examine why sales differ between countries. Qualitative data is particularly useful for determining why or why not emergent relationships hold; when a relationship does hold, the qualitative data often provides a good explanation for the dynamics underlying the relationship, or: the ‘why’  of what is happening (Eisenhardt, 1989).  

The results of my study provide some insight into the reasons why some countries have higher sales than others. I will outline the influencing factors on car sales, and I will suggest which factors might be improved in each country.  

4.2

C

In case study research, case selection is very important; the selection of an appropriate population controls abnormalities in variation and helps to define limits for generalizing the findings. The difference with traditional research is that cases can be selected randomly while with case studies the cases are select to extend the theory (Eisenhardt, 1989)  

Fisker Automotive is a sustainable high-tech luxury car manufacturer. This research chooses the case of Fisker Automotive because of the high overlap of products described in the literature. Also the availability to conduct the research at this company was an important factor for choosing this case.  

I compared my case study across three different countries: The Netherlands, Denmark, and Norway; these countries differ in sales performance, sales availability, and sales

probability. I selected the Netherlands because Fisker has higher sales performance here than in any other European country; because sales of electric vehicles are relatively to other European countries high in general; and because the Netherlands was the first reseller of Fisker cars in Europe. I chose Denmark because this country is also the regional distributor of Fisker cars in Europe; because Denmark have a moderate probability to sell electric cars; and they have low sales performance relatively to other European countries. I chose Norway because electric car sales are high, and, contrastingly, sales performance is relatively low compared to other European countries.  

There were only three countries available to research. To supplement the findings of my embedded case study, I also conducted a secondary data study.  

4.3

D

I gathered data through a qualitative research process, consisting of primary and secondary data. I gathered primary data through a document study of the organization (i.e. Fisker) and of each of the three countries (i.e. The Netherlands, Denmark, and Norway).  

For the organizational portion of the study, I conducted an administrative document study focusing on such topics as sales performance and implemented strategies. For my country-specific research, I focused on the potential influencing on sales, including regulation, values, and beliefs. (Yin, 2009, p. 101-104). A list of primary documents appears in the appendix.  

Following the document study, I conducted interviews with the top Fisker managers in each of the three countries; I also conducted a fourth interview with the distributor for northern Europe. I conducted the interviews by telephone because the participants are managers from countries all over Europe; telephone interviews were advantageous in access, speed, and lower cost (Saunders et al, 2009, p. 349). I conducted all of the interviews in English with the exception of the interview with the manager from the Netherlands, which I conducted in Dutch. The duration of each interview was approximately 1.5 hours, and, at the beginning of each interview, I asked permission to audio-record the conversation (Saunders et al, 2009, p. 339). These interviews reveal important insights in human affairs and behavioral events as well as shortcuts into the prior history (Yin, 2009, p. 108). The interviews are semi-structured, meaning the participant is guided towards subjects but has the freedom to bring up other information (Saunders et al, 2009, p. 320); the subjects of the

interviews are based on the factors that influence sales found in the literature overview and in the document study. Interview guidelines can be found in the appendix.  

The overlap between data gathering and data analysis allows researchers to take advantage of flexible data collection. A key feature of theory building case research is the freedom to make adjustments during the data collection process. In the data gathering process a new data collection opportunity could arise or a new line of thinking could emerge, allowing the researcher an opportunity to alter the data collection; these alterations are likely to better ground the theory or provide new theoretical insights (Eisenhardt, 1989). Because of this advantageous overlap between data gathering and data analysis, I crudely analyzed the primary document study findings before conducting the interview portion of the study.  

This case study consists of only three sample case countries; for this reason, I supplemented my case study with extra secondary data on the countries investigated. I collected this secondary data to check the findings from the interviews and to add further perspectives on subjects not covered in the interviews. I gathered the through the University of Amsterdam’s database, which is connected to the EBSCO host and ScienceDirect databases. In the appendix, I have provided a list with the documents used for my secondary data study.  

4.4

D

In “Case study research,”  Yin (2009) identifies four general analytic strategies: 1) relying on theoretical propositions, 2) developing a case description, 3) using both qualitative and quantitative data, and 4) examining rival explanations. The strategy for my case study is to rely on theoretical propositions.  

In “Building Theories from Case Study Research,”  Eisenhardt (1989) explains that the analytical process consists of processing the within-case data and searching for cross-case patterns. The data in case studies is often open-ended, and the within-case study helps the researcher to determine early in the process which data is relevant for the research and which data is not. According to Eisenhardt:  

The   overall   idea   of   a   within-­case   study   is   for   the   researchers   to   become   instantly  familiar  with  each  case  as  a  stand-­alone  entity.  This  process  allows   the   unique   patterns   of   each   case   to   emerge   before   researchers   push   to   generalize   patterns   across   cases.   In   addition,   it   gives   investigators   a   rich  

familiarity  with  each  case,  which,  in  turn,  accelerates  cross-­case  comparison   (2009,  p.  540).    

A cross-case comparison combined with a within-case analysis often reveals important patterns in the data. This is also an analytic strategy described by Yin (2009). In this logic of pattern matching, it compares an empirical based pattern with one or several predicted patterns. The empirical pattern in my case study of Fisker Automotive suggests factors that might influence sales of sustainable high-technology luxury goods, and the case study will prove if these factors are indeed influencing Fisker’s sales, specifically. Eisenhardt (1989) offers three tactics for counteracting these tendencies of sales patterns by looking at the data in different ways. The first tactic is to select categories or dimensions of results and then to look for within-group similarities and intergroup differences. For my case study, this means that the factors that influence sales are collected for each country and then compared on country-level. The second tactic is to select pairs of cases and then to list the similarities and differences between each pair. This tactic forces researchers to look for subtle similarities and differences (Eisenhardt, 2009, p. 540-541). The last tactic is to divide the data by data source (Eisenhardt, 2009, p. 541). For my case study, this means comparing the different document studies and interviews of each country.  

Combining Yin’s analytic tools and Eisenhardt’s tactics will lead to more reliable data, findings closer to the data, and a higher probability of finding novelties. In this case study, I will discuss: the results per country, the general findings not related to any one specific country, and a comparison of the results across different countries. The influencing factors determined from the literature will form the dimension that are tested over the different countries, and will form the bases for the comparison.  

4.5

V

In discussing the validity and reliability of the case study method, Yin (2009) offers four tests for the quality of research design: construct validity, internal validity, external validity, and reliability.  

Yin defines construct validity as: “identifying correct operational measures for the concepts being studied”   (2009, p. 40). This is especially difficult when conducting case studies. The ways to improve the construct validity are to gather multiple sources of evidence, establish a chain of evidence, and have a draft of the research reviewed by key informants. In my case study, I use multiple sources to establish a chain of evidence.  

Yin defines internal validity as: “seeking to establish a causal relationship, whereby certain conditions are believed to lead to other conditions, a distinguished from spurious relationships”  (2009, p. 40). The ways to improve the internal validity are matching patterns, building explanations, addressing rival explanations, and using logic models. In my research, using multiple sources from different countries can lead to pattern matching in the analysis, which decreases the possibility of internal validity.  

Yin defines external validity as: “defining the domain to which a study’s findings can be generalized”  (2009, p. 40). The way to improve the external validity is to use replication logic in multiple case studies. In my case study, in which I examine only three different cases, external validity could be a problem. Further research could improve this external validity.  

Yin defines reliability as: “demonstrating that the operations of a study can be repeated with the same results”  (Yin, 2009, p. 40). The ways to improve the reliability are to use a case study protocol and to set up a case study database. Mine is not a very extended case study; therefore, replicating this case study would increase the reliability.  

The above tests reveal strengths and weaknesses of the case study method. According to Eisenhardt (1989), the strengths of a case study design are:  

• A higher likelihood of generating a novel theory  

• Likelihood that the emergent theory can be tested with constructs that can be readily measured and hypotheses that can be proven false.  

• A likelihood that the resultant theory will be empirical valid because it is closely tied to the evidence  

And the weaknesses of a case study are:  

• A limitation of theory building constricted by the perceptions of the researcher.   • A temptation to build theory that tries to capture everything.  

• A possibility that building theory from cases will result in narrow and idiosyncratic theory   Interviews are also limited by weaknesses, and there are some very important weaknesses to consider. The first weakness is interviewee and response bias; these biases

are related to subjective answers of the responder (Saunders et al, 2009, p. 340). The second weakness is the audio recording of the interview, which might inhibit some responses and reduce reliability (Saunder et al, 2009, p. 341). The researcher must take both weaknesses into account when analyzing the data.  

For my case study, I also used triangulation, meaning multiple methods of data gathering (i.e. document study and interviews). Triangulation provides stronger substantiation of constructs and hypothesis (Eisenhardt, 1989).  

5.

C

5.1

F

A

Henry Fisker and Bernhard Koehler founded Fisker Automotive in 2007. Fisker Automotive is a car manufacturer that produces plug-in-hybrid electric vehicles. They launched their first model, the Fisker Karma, in 2008 at the North America Auto Show. They planned to start selling the Fisker Karma in 2009; the actual start date of the sales was 2011. In the summer of 2012, the production of new vehicles stopped. This was due to the battery producers declaring bankruptcy and to the search for new investors. The developments of a new Karma model and of a second model for Fisker Atlantic were postponed. In October 2012, Hurricane Sandy destroyed the fleet of European cars that were supposed to be shipped to Europe. Together, the destruction of the fleet and the closing of the factory caused a shortage of Fisker cars in Europe.  

Co-founder Henry Fisker is responsible for the design of Fisker Automotive’s cars, and he has a wealth of experience as a luxury car designer. He designed the Aston Martin DB9, V8 Volante, Artega GT, and the BMW Z8.  

5.2

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The electric car market is primarily made up of two different types of electric vehicles: 1) battery electric vehicles (BEV), which are charged by an external source of electricity (i.e. a plug-in source); and 2) hybrid vehicles (HEV), which, in addition to their electric batteries, are powered by a conventional fuel engine. Pure hybrid vehicles—as opposed to plug-in hybrid vehicles (PHEV)—are not typically considered a part of the electric car market  

By 2013, the HEV portion of the market was well developed for Europe, North America, and the Asian-Pacific region, but the rest of the world still had a very small number of HEV cars. Today, the availability of BEV and PHEV is rising but these vehicles are still not widely available. The Navigant (see figure below) expectation is that, by 2014 or 2015, BEV and PHEV will be more common and will be produced by every mainstream manufacturer.  

The price of an electric vehicle is usually higher than that of a conventional fuel car. This price difference is largely due to the electric vehicles’  expensive battery packs. Right now, the battery pack of an electric car accounts for almost half of the total cost of the car, but the price of battery packs is expected to drop in the distant future. Range and driving performance are also likely to improve during the same time.  

Below is a prospect table of the market for BEV, HEV and PHEV.  

Navigant Research forecasts global growth of 11.5% for HEV, 31.9% for PHEV, and 31.5% for BEV. The Asian-Pacific region is expected to be the largest market for PHEV and BEV by 2020. North America is the only market anticipated to have significantly higher sales of PHEVs than BEVs (a 1.5:1 sales ratio). The countries in Western Europe, Asia-Pacific, and Latin America are expected to have roughly equal sales for the different types of electric vehicles.  

6.

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F

6.1

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IN TERVIEW  

This general European distributor interview was done to obtain general data of the sales of Fisker in Europe. The interview shows that tax benefits are the most important influencing factor on Fisker’s sales. In the Netherlands and Belgium, tax benefits are based on low emission standards. In Denmark, hardly any tax benefits exist for PHEV, only for full electric vehicles (EV). Norway has tax benefits based on the electric parts of a vehicle; Norway has the highest acceptance of electric vehicles as well as the highest demand for electric cars.  

The luxury market is stronger in the Netherlands; in the luxury market, image is also an important influecning factor on sales. Henry Fisker is Danish; this could have positive cultural influence on the image of the brand.  

Weather conditions could also influence sales in colder countries where four-wheel drive vehicles might be more suitable.  

Fisker based its European sales plan on the highest potential market: The Netherlands. The Netherlands had a high potential for electric luxury cars due to the large luxury market and to the tax benefits. The Netherlands also had a well-established relationship with the dealer and the high motivation and participation. The interest of the Netherlands to sell the Fisker cars in the Netherlands was really high from start-up phase. Based on the county specific research, all of these aspects turned out to be key influencing factors on Fisker’s sales. Marketing also shows to be as important positive stimulant for sales. The marketing budgets provided by the distributor were based on the prospected amount of cars that would be sold in a country.  

DO CU M EN T STU DY  

In studying external data sources for additional information beyond the interview, I found several important differences and similarities between the external and internal data.  

The legislation on CSR and on electric vehicles differs between countries, but despite these differences, there is an overall tendency to develop support schemes in order to reduce consumer costs and to scale-up production for electric cars. Some countries also use “soft