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Understanding new industry

This paper uses the case of the emergence of the high-end fashion industry in India to demonstrate how a new industry becomes legitimate through the actions of entrepreneurs as well as those of other players in the economic ecosystem of the industry. I chose this setting for two reasons. First, the subjective, the intangible attributes of high-fashion apparel (Crane, 1997) and its close relationship with cultural mores increase the uncertainty surrounding the industry (Dempster, 2006).

Therefore, appropriate framing and “story-telling” are crucial to successful legitimation in this case, as with all new cultural or creative industries in particular (Lounsbury, and Glynn, 2001). Moreover, just as cultural industries shape their social and cultural contexts, so too are they more prone to being influenced by their contexts, making the role of the audience in legitimation more critical in these industries.

Second, this is not a de novo industry; although fashion designers started formally appearing in India only in the mid- to late-80s, the fashion industry per se is quite clearly not a new phenomenon, having existed in Paris since 1850, and in New York and London since the 1930s, and in Milan since the late 1960s (Ewing, 1993;Djelic, and Ainamo, 1999).

This distinction is important

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because the role of the audience is critical in industries that are not “new to the world” but merely geographical extensions; such industries are plausibly better understood by some members of the pioneers’ surroundings, which may aid the pioneers’ legitimation efforts because these industries have existed elsewhere before. Consequently, this case develops a more realistic picture of the emergence of a new industry and indicates that pioneer-entrepreneurs may be aided by other economic players in their quest for legitimacy.

Moreover, the case shows that these outsiders acted out of self-interest, and without explicit intent to increase the awareness and legitimacy associated with the new industry. Finally, and perhaps most surprisingly, the emerging industry was able to gain legitimacy despite the conspicuous absence of coordinated and purposeful actions by both the entrepreneurs and the external entities toward this end/goal.

The paper is organized thus: first I describe the various theoretical frameworks that have been used to understand the evolution of an industry especially in the early days of its existence. Second, I describe the Indian context at the time of the fashion industry’s emergence and the data that I gathered through interviews. Next, I analyze the information from the interviews to discover a pattern of legitimacy-seeking among early constituents of the Indian fashion designers.

Finally, I conclude by explaining my paper’s broader implications for existing organizational theory and the potential for future research in this area. Understanding new industry emergence and pioneer-entrepreneurs: Existing theoretical frameworks Previous research on industry emergence has usually taken one of three perspectives: at the entrepreneur/firm level, at the industry level, or at the level of the institutional and/or social context.

For instance, most studies that examine pioneer-entrepreneurs and their actions take as their starting point Aldrich and Fiol’s proposition that pioneer-entrepreneurs at the point of industry emergence have to struggle to gain legitimacy for their unfamiliar activities by demonstrating that they conform to accepted and established societal norms and values and that they perform activities that are valid and economically valuable (Aldrich & Fiol, 1994).

Aldrich and Fiol suggested that entrepreneurs engaged in new activities have to build trust and reliability at the organizational, industry, and institutional levels in order to gain cognitive and socio-political legitimacy.

They proposed that the following actions would likely enable pioneer-entrepreneurs to gain legitimacy: a) framing their activity in inclusive ways, using consistent stories and symbolic language and behaviors; b) convergence of entrepreneurs around a dominant design; c) mobilizing to take collective action (including lobbying and marketing efforts) and using third-party firms to promote their new activity; and d) negotiating with other industries, including educational institutes (Aldrich & Fiol, 1994).

Thus, all of the credit and blame for gaining cognitive and socio-political legitimacy lay on the shoulders of pioneer-entrepreneurs; most other entities are assumed to be entirely unaware or, worse, suspicious of the activities of these pioneer-entrepreneurs, to have antithetical interests and/or to compete directly with them for resources. Of these actions, the first one–cognitive framing–has gained significant attention.

It has been suggested that entrepreneurs seeking to legitimize a new activity may frame their activities as distinct from existing offerings so that consumers perceive their unique value(Aldrich, and Fiol, 1994;Hargadon, and Yellowlees, 2001;Lounsbury, and Glynn, 2001). At the same time, pioneer-entrepreneurs need to ensure that their framing is not so radically distinct that consumers do not understand the offering, thereby thwarting the effort to gain legitimacy (Aldrich, and Fiol, 1994;Hargadon, and Yellowlees, 2001).

Cognitive framing is relevant also in the industry—level perspective that uses collective action frameworks to explain new industry emergence and evolution (Fligstein, 1996;Aldrich, 1999;Swaminathan, and Wade, 2001;McAdam, and Scott, 2005). According to these researchers, entrepreneurs in emerging industries face the same challenges and lack of legitimacy that social movements do; hence, pioneering founders cooperate among themselves in order to mobilize resources through collective action.

The commonality between these first two perspectives is the central role that cognitive framing of the new activity plays in both (Aldrich, and Fiol, 1994;Benford, and Snow, 2000). However, the collective-action perspective, while requiring entrepreneurs to adopt appropriate cognitive framing for their activities, adds to Aldrich and Fiol’s (1994) framework an assumption of concerted agency and coordinated cooperative action by early entrepreneurs (Benford & Snow, 2000). Thus, we should expect to see pioneer-entrepreneurs to consciously and collectively coordinate their activities to gain the most benefit from their framing actions.

While pioneer-entrepreneurs are indeed largely responsible for establishing the legitimacy of their activities, it seems unrealistic to presuppose that all other economic entities are always or necessarily antagonistic towards the entrepreneurs and that customers are unaware or suspicious of the product provided by the pioneers. Even when third-party entities are given due consideration in the literature, the presumption is that pioneer-entrepreneurs have to in some way actively co-opt these entities either to mitigate their inimical effects, or to create an impression of stability and longevity (Aldrich & Fiol, 1994).

Part of the reason for this is that researchers tend to use a relatively narrow definition of an “industry” and draw boundaries tightly around firms engaged in producing similar products and competing with each other; as a result, even related, but dissimilar firms are considered external to the industry. Often, when external entities are considered as we will soon see, they are aggregated together as the “institutional context” of the industry, or as customers, and there is no finer-grained examination of different kinds of third parties, their motivations and consequent actions, and their impacts on legitimacy.

Two studies stand out as exceptions: one by Mezias and Kuperman (2000) and one by Audia, Freeman, and Reynolds (2006) that explicitly considered the role of an inter-related “community” of organizations. However, these studies focused on the impact of the interrelated organizations on firm foundings rather than their impact on legitimacy (which I define as generalized acceptance of the new activity by audiences).

If we restrict our consideration to the narrowest parameters of the focal industry, we will likely miss the effects that other entities have on industry emergence and evolution. First of all, ideas do not spawn industries in a vacuum; legitimacy by its nature is a function of perception, and perceptions depend on social and cultural contexts that at different times may favor or disfavor the emergence of new industries for a variety of reasons that only become legible once the social and cultural contexts have been apprehended (Jones, 2001).

Therefore, considering “external,” related constituents is quite important. Second, the notion that a field of production (DiMaggio, and Powell, 1983;Van de Ven, and Garud, 1989;DiMaggio, 1991;Bourdieu, 1993) is a more relevant unit of analysis than an industry has long-standing and strong support. DiMaggio and Powell (1991), for instance, discuss the role of individuals and institutions outside the art arena, i. e. other than artists and galleries, in the development and maintenance of art museums as a distinct cultural field.

The production field concept moreover, has found particular application in studies of cultural (Hirsch, 1972) and creative industries such as fashion and music (Crane, 1997;Anand, and Peterson, 2000;Anand, and Watson, 2004;Peterson, and Anand, 2004) because entrepreneurs in such industries are inexorably embedded in prevailing cultural schemas (Johnson, 2007) and social mores due to which interaction between firms and their contexts is inevitable and has significant impact on the behavior of entrepreneurs and firms.

In this paper, therefore, I explicitly consider and study the role of the ecosystem, or entire “field of production” of the fashion industry in its emergence. This provides a richer and more realistic description of the process of industry emergence and thus adds a new dimension to our understanding of the phenomenon. Finally, some studies that have taken a broader view of industry emergence took into consideration the effect that contextual factors external to both the focal industry and the pioneer-entrepreneurs have on industry emergence and evolution (e. g. Kieser, 1989;Spencer, et al.

, 2005). At the highest level, McKenna (2006), for instance, described how a regulatory change—the passage of the Glass-Steagall Act in 1933—was largely responsible for the rise of the management consulting profession and industry. Jones (2001) took a slightly different, but similarly broad-based view of industry emergence and evolution in her study of the early American film industry. She proposed that entrepreneurs’ careers, firm capabilities, competitive dynamics, and the institutional framework of the industry coevolved, leading to a specific trajectory of industry evolution.

However, she did not explicitly consider the role of non-film entrepreneurs or entities in this emergence and evolution. At an intermediate level-between the narrow consideration of only the focal industry and pioneer-entrepreneurs, and the broad-based consideration of the inter-relationship between the institutional and social context and industry emergence—is the community ecology perspective (Astley, and Fombrun, 1983;Astley, 1985;Ruef, 2000). This perspective takes into account the ecosystem of a new industry (i. e. other industries that are related to it) rather than focusing only on the entrepreneurs within that industry.

Per this perspective, a common technology platform links together multiple organizational populations, and the consequent interdependencies between them fuse these populations together into functionally integrated systems or organizational communities (Astley, 1985). Although a technological innovation is the central force that drives community evolution and the emergence of new populations, market success rises not only from technological superiority, but also from the level of organizational support that the technology attracts (Wade, 1995).

This perspective is therefore more useful and relevant to understanding the emergence of industries that are born out of a technological innovation, and is less directly applicable to cultural industries. While each of these perspectives gives us an understanding of industry emergence at a different level of analysis, each also provides a clear picture of only one aspect of industry emergence rather than proposing to analyze entrepreneurs, and their broader sociocultural context together.

This limitation restricts our ability to explain industry emergence. I propose to circumvent these traditional limitations by studying the emergence of an industry at multiple levels of analysis and by using qualitative data. In this paper, I examine the individual and collective actions of pioneer-entrepreneurs, as well as the interactions among the entrepreneurs and other economic players within a more broadly conceived field, in order to gain a more comprehensive picture of industry emergence. My argument is twofold.

First, I build upon previous work on institutionalism to propose that the very changes in socio-economic and cultural contexts that are claimed to give rise to new industries may also favor the establishment of related and adjacent firms, institutions, and industries. Thus, what is created is not an industry in isolation, but in fact a field of inter-related economic entities. These related entities and institutions make the industry appear larger and more complex and hence more established, and thus impart legitimacy to the focal new industry.

Second, I propose that these entities’ actions may not deliberately be intended to aid pioneer-entrepreneurs in their endeavors to gain legitimacy; rather, each entity pursues its self-interest, but that pursuit also legitimizes the new industry. Thus, while pioneer-entrepreneurs definitely have to struggle to establish their legitimacy, the contributions of other entities to the pioneer’s success may not be part of a coordinated effort by the pioneer to co-opt these other players.

Also, the other players do not necessarily act in concerted fashion, but rather as separate entities. My claim is not that pioneer-entrepreneurs need do nothing in order to gain legitimacy and that the ecosystem will provide for them. I do expect to find specific cognitive frames adopted by entrepreneurs that enable them to gain acceptance. I also do expect to see active cooperation and collective action among the early entrepreneurs so that they gain critical mass that aids them in their quest for legitimacy.

However, in addition to these actions of pioneer-entrepreneurs, I expect to see other entities whose own self-interested actions augment these legitimacy-seeking efforts. The setting I have chosen for this study—the high-end fashion industry in India—enables us to examine all these aspects of industry emergence, and additionally has a unique, theoretically interesting feature in that it is not a de novo, or “new to the world” industry, but rather an industry that has migrated across geographies. What would the implications of such a phenomenon be for pioneer-entrepreneurs?

Presumably, because an activity or industry is well-established and/or accepted somewhere in the world, entrepreneurs in other geographic areas would not have to expend the same amount of energy to re-establish legitimacy in their country. Moreover, compared to entrepreneurs in de novo industries, such entrepreneurs do have one advantage – the ability to refer to and adopt the institutional infrastructure that supports the industry elsewhere and gain legitimacy thereby. Naturally, they can also learn from and implement the legitimacy-seeking activities of pioneer-entrepreneurs elsewhere.

Thus, they may be better able to frame their activities in a way that is easily comprehensible because it has worked elsewhere. However, there has been little research on this topic, and consequently we know little about how entrepreneurs adapt strategies and institutions across geographical regions; although Westney’s work is an exception, she focuses more on the diffusion and adoption of organizational practices or systems or more generally, “ways of doing things” than on specific strategies and institutions (Westney, 1987).

Similarly, Guler, Guillen, and Macpherson (2002) describe the institutionally-driven international diffusion of a specific practice (ISO Quality Certification) across various industries, but not the adoption of industry-specific institutions from existing counterparts in other nations by an emerging industry. I find, unlike the aforementioned studies, that existing blueprints for industries will generally not be adopted in the forms established elsewhere, regardless of their success abroad. Instead, I find that imported or borrowed institutional practices will be heavily adapted in locally specific ways.

In a paper on the global expansion of management education, Hedmo, Sahlin-Andersson, and Wedlin (2005) tackle the issue of how fields are transported across new geographical areas. Their primary premise is that the globally expanding field of management education has been translated to new areas through imitation of practices in such a manner that although the field tends to look homogenous at first glance, there are in fact subtle variations in the practices and ideas that actually take root in the newer regions.

They explain the occurrence of variations on the basis of underlying differences in the constituents of the field; management students and recruiters in different countries want different things, for instance, and therefore, even though the overarching philosophy of management education remains similar across countries, there are variations in the final product and in some of the institutional logics adopted by players in regional fields.

These findings match what I observed in the Indian fashion industry when I examined how institutional practices were adopted and adapted from existing industries. To summarize, pioneer-entrepreneurs in a new industry are expected to pursue their necessary efforts to legitimize their activities and/or firms alone and unaided, i. e. , they are believed to have few interested stakeholders in the course of their efforts. However, I believe that a more analytically powerful depiction of industry emergence should also consider the co-evolution of an ecosystem that supports and aids the new industry.

Additionally, when an industry is not entirely new to the world, we can expect pioneers to be aided in their legitimacy-seeking efforts because they can adopt practices that have already succeeded and been institutionalized elsewhere and because other economic players may have some understanding of the new activity. However, neither the actions of entrepreneurs in the geographic extension of a new industry nor the impact of other players on the legitimacy-seeking activities of pioneer-entrepreneurs is well-understood.

This study accordingly seeks to understand and describe the emergence of an industry in a new geographic and economic context, the actions of pioneer entrepreneurs as they seek to establish the legitimacy of their new (to that country) activities, and the role and impact of other economic players in the ecosystem of the new industry. The Study The context for this study was the high-end fashion industry in India.

This setting was chosen because it is a creative industry with a product with subjective attributes and all its attendant uncertainties, and it is not a de novo industry. Moreover, since the industry is only about 20 years old, I was able to talk to the pioneer-entrepreneurs in the field to gain their perspective. At the same time, the industry has been in existence for sufficient time for it to have seen some evolution and development, so that the perspectives of newer entrants are different from those of the pioneers.

The Indian Fashion Industry: A Definition I drew the boundaries of the Indian fashion industry around firms that design, create, and sell (either directly to consumers, or indirectly through stores) apparel that explicitly derives its value from its association with an individual whose creativity is assumed/perceived to be embodied in the design, which in turn incorporates significant elements of exclusive hand-work and craftsmanship. This definition thus excludes pure retailers, i. e. apparel stores or even apparel brands such as J. Crew (although no true J.

Crew equivalent exists in India at the moment) where the apparel sold in the stores is indeed designed in-house, but where the designers are anonymous, and where the label, while certainly associated with a price point and a certain look, is nevertheless not linked to an individual. The definition also excludes bespoke tailors and/or dressmakers who do not define the design, but rather engage in a collaborative effort with their clients to arrive at a mutually accepted set of specifications according to which the garment is sewn. This distinction is especially critical in the context of the Indian fashion industry, as we shall see.

Finally, in this study, the Indian fashion industry is specifically defined as being limitedly comprised only of “home grown” Indian designers and therefore, it does not include design firms such as Louis Vuitton or Chanel, which operate stores in India and are of course part of the global fashion industry, but are domiciled outside of India and therefore count as multinational corporations that have entered the Indian fashion apparel market. Moreover, these firms only recently entered the market (after a regulatory change in 2005), and were therefore not involved in the emergence and evolution of the Indian fashion industry.

It is worth noting that the definition and boundaries that I employ are along the lines of the definitions used to delimit the boundaries of the high-end fashion industries in New York, Paris, and Milan (Ewing, 1993;Mendes, and De La Haye, 1999;Laver, 2002). Although designers create apparel for both women and men, for the purposes of this study I focus only on women’s fashion. This does not lead to any selection problems because Indian designers have begun designing for men only since 2000, and only in small quantities.

Data and Methods First, I read historical accounts of the emergence, evolution, and current state of the fashion industries in Paris, New York, and Milan in order to understand the definition and boundaries of fashion industries and to obtain a perspective on the evolutionary trajectory of the industry. I integrated this knowledge of the industry with theoretical frameworks about industry emergence and evolution in order to explain and understand anomalies unique to the fashion industry’s evolutionary path.

I then went into the field to interview people (see Table 1 for details) related to the Indian fashion industry either directly (fashion designers), or indirectly (faculty in fashion design institutes, fashion journalists, trade associations, buyers, and retailers). These interviews were open-ended and semi-structured, and usually lasted between one to two hours. Some of these interviews were conducted over the phone, but most were conducted in person. Concurrently I also tracked media accounts of the industry in India and read available books on the subject (e.

g. Sengupta, 2005). I also read and familiarized myself with the history of the textiles and apparel industry in India, as well as the historical accounts of traditional Indian textile weaving and embroidery crafts (Irwin, and Hall, 1971;Kulkarni, 1979;Uchikawa, 1998;Chishti, and Jain, 2000). After most of the interviews were completed, I revisited the theoretical frameworks to understand what aspects had to be modified in order to fully understand the pattern of evolution in the Indian fashion industry.

I also conducted some follow-up interviews with some of the original interviewees, and some additional individuals that were suggested by some interviewees during my initial conversations. The aim of these follow-up interviews was to clarify either certain issues raised during the earlier interview or points that occurred to me after revisiting the theory. Finally, I collected data on the other members of the ecosystem—media and educational institutions—and from the industry trade association to explore the trends in these industries.

Data on the founding of Indian fashion magazines were obtained from the website of the Office of the Registrar of Newspapers for India (https://rni. nic. in/about. html; accessed on various dates in July 2007). This is the most comprehensive listing of all periodicals in India, and I used the database of 13,836 English magazines founded in India in the period 1920-2007 to identify magazines whose titles indicated that they were fashion, apparel, textile, or design magazines.

I tracked only English magazines because magazines in other Indian languages tend to have a regional rather than national focus, due to which they cover broader topics only perfunctorily, if ever. From this database, I also noted their periodicity, the name and location of the publisher, and the year of first registration, which is the year of founding, since periodicals cannot be published in India without prior registration. This yielded a list of 56 magazines.

Next I searched for the websites of these magazines, or for other information on these magazines. Through this step, I was able to eliminate periodicals that dealt with the apparel industry, but not high-end fashion (trade journals for apparel manufacturers, textile mills, etc. ) or periodicals that dealt with design, but not fashion design (engineering and product design, architecture and interior design), and also find founding year information for some magazines. This brought the number of relevant magazines to 21, all of them founded after 1959.

I also obtained membership information (number of applications as well as number of final accepted members) from the industry trade association—the Fashion Design Council of India—for the years since its inception. The FDCI also provided me with the number of participants at every Fashion Week they had organized since founding. Finally, I tried to get an estimate of the trends in fashion education. I searched the terms “fashion institutes India” and “fashion education India” online as well as these same terms after substituting the words apparel and textile for fashion.

All of these terms yielded a very similar set of results—a set of India-focused web portals—that provided information about the degrees and courses that one could obtain in the field of fashion/apparel design. My research assistant comprehensively catalogued these portals (http://www. webindia123. com/career/fashion/list_all. asp, http://www. searchindia. com/search/Education/Colleges/Fashion_Technology/index. shtml, http://www. scholarshipsinindia. com/fashion. html, http://www. icscareersonline. com/design_fashion_institutes.

htm, all accessed on dates between July 23-26, 2007), and noted the name of the institute, the year it was founded, the address and phone number, and the number and types of courses offered (degree, diploma, certificate courses in “fashion design, fashion technology, apparel design, textile design, textile technology”). If the institute had a website listed, she went to the website to determine the year it was founded. For the institutes with no websites, she conducted a web search to determine the year of founding. This yielded a list of 92 institutes, of which 26 had websites, and we had founding dates for 41 institutes.

We then separated institutes that had one or more of the words—fashion, apparel, textile, design—in their names from those that did not, in order to distinguish between institutes that had been founded explicitly to provide fashion-related education and institutes that had adopted fashion-related curricula after founding. Of the 92 institutes identified, 48 institutes had the words—fashion, apparel, textile, or design—in their names. I also obtained recent data on the number of applications received by two of the most prominent and reputable fashion design programs in India, directly from the respective institutes.

These data are not complete, and the years of founding for several magazines and institutes are missing. However, the available data do give us a fair idea of the general trends, as we shall see. The issue of legitimacy of a new industry One of the methodological problems of studying legitimacy in a new industry is the issue of endogeneity: the legitimacy-seeking activities of pioneer-entrepreneurs are rationalized to increase the legitimacy of the activity, which leads to an increase in the number of firms and individuals engaged in the new activity, which in turn is considered an indication of the increased legitimacy of the activity.

This study is not entirely exempt from this problem. However, I operationalize legitimacy as a diffuse property rather than as a count of the number of firms in the fashion industry in India; legitimacy is the general sense of acceptance of a new activity, the development of a (perhaps ineffable) collective understanding of the boundaries of the activity, and a reduction in the unfamiliarity with which the new industry is perceived. Another concern is the question of who the audience of the pioneer-entrepreneurs is.

The specific audience for cognitive legitimacy has not been pinpointed in previous research, although there is a general understanding that it is likely the potential customers and other stakeholders, such as suppliers. However, when one considers (as in this study) the role of other stakeholders in the establishment of the legitimacy of a new activity, endogeneity becomes salient once more; pioneer-entrepreneurs seek legitimacy in the eyes of external players, some of whom in turn consciously or inadvertently play a role in enhancing the legitimacy of the activity in the eyes of others.

Therefore, I again consider legitimacy to be a more diffuse understanding and acceptance, than a specific quantifiable property such as number of firms or sales. This definition is along the lines of the accepted definition proffered by Suchman (1995: 574): “legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions. ” The Indian Context at the Time of Emergence of the Indian Fashion Industry

India has had a strong and diverse tradition of textile weaving and fabric embellishment, i. e. dyeing, printing, and embroidery, including embellishment with beads, precious metals like gold and silver, and semiprecious stones (Irwin, and Hall, 1971;Gillow, and Barnard, 1991;Chishti, and Jain, 2000;Mathur, 2002). In fact, textiles and fabric constituted a major portion of India’s trade with other ancient civilizations (Murphy, and Crill, 1991). Each geographical region within India has evolved its own unique style of weaving and embellishing textiles.

But British rule brought with it mill-made cloth, which soon threatened to destroy traditional handloom centers. The government of India, after India gained independence from its British rulers, was acutely aware of this threat and made conscious efforts to preserve and revive handloom and handicraft traditions. These efforts however, were not very successful, and soon India became a large exporter of cheap apparel made from mill-made cotton (Uchikawa, 1998).

The vast Indian populace, however, for the most part did not buy any of these mill-made or similar garments, since the exported apparel tended to be Western clothes such as shirts, trousers, and skirts. Although most men (particularly in urban areas) had adopted western garments, most Indian women continued to wear (either out of preference or due to social norms) the traditional Indian garb of a sari or salwar-kameez until the late 1960s.

Due to the absence of organized retail, most women tended to go to a local tailor to get bespoke garments sewn for everyday wear; formal occasions usually called for a sari, which itself did not require sewing, although the blouse to go with a sari had to be obtained from a tailor. The vast array of textiles (both handloom and mill-made) available in India meant that one could be reasonably sure that no two individuals would ever have identical clothes. In fact, when small amounts of traditional Indian clothing became available off-the-rack, they tended to be u

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