Strategy for Koyo Jeans to Enter into the Market of China - Case Study Example

? End of Module Assignment – Management Brief: Evaluating Internationalization strategy Contents Introduction 3 Environmental audit (current markets)3 SWOT Analysis 5 Life cycle analysis 6 Internationalization 6 External Analysis (new host countries) 6 Evaluation of National Competitive Advantage 7 Evaluation of mode(s) of entry (Suitability and feasibility) 8 Conclusion and Recommendation including pros and cons) 8 Bibliography 11 Introduction Cheung took the initiative to open the first shop in 1997. Cheung partnered with a designer from Korea to set up M&G fashion in 1999. In 2002, he registered the brand name “Koyo” as an independent company. “Koyo” created a brand name by participating in various fashion shows. Koyo William positioned the brand in Korea through a fashion show organized by the Korean government in 2006. The brand name “Koyo” got international recognition in France. The company opened the first showroom outside Hong Kong in 2010. The works of Koyo William attracted trendsetters from Italy, Russia and Asia. The brand has become internationally renowned and the creativity and braveness of Koyo Williams paved the path. Koyo Williams integrated exotic cultures into the works which added international competitiveness. The company targets the customers with excellent sense of styling and designs. Environmental audit (current markets) The clothing market of France largely consists of SME and the clothing industry has witnessed radical transformation. The organization of the sector witnessed an economic as well as technological shift. The industry is heterogeneous with SMEs from differing profiles. The clothing sector of the country has been able to successfully adapt to the creation of more products, matching the demand for clothing with supply, new emerging markets were indentified (QRT France, n.d., p. 20). The menswear market of the country generated total revenue of 16.7 million dollars in the year 2008 which represented a compound annual rate of growth amounting to 1.9% for the period of ranging 2004 to 2008. The women’s wear market generated revenue of 27.9 billion dollars in the same year but the annual rate of growth for this sector is 1.8% for the same period as above. The child wear sector generated revenue of 9.7 billion dollars for the same period which represented an annual growth of 1.1% in the same time span. China involves itself in almost all activities related to the textile and clothing industry. China engages itself in exporting raw materials, fibre as well as purchasing of cotton, wool and other requisites necessary for the production of cloth. China offers the largest consumer market for clothing with massive population and rapid economic growth (Knappe, 2011, p. 2). The country is under the process of urbanization and industrialization. The economy is slowly moving towards a market based economy and provides a dual structure of consumer market. In the phase of transition rural people has migrated into urban places and therefore there is shortage of labour. The demand for clothing of luxury brands is on the upward rising curve and the suppliers are constantly involved in finding out ways that will meet the ever rising demand. The consumers in the end market were sensitive to prices and the fashion with lower prices is the call of the time. Therefore the players in the clothing market are playing according to the trends of the market and fashionable goods with low prices have flooded the market. Probable appreciation of the RMB will enhance the purchasing power of the Chinese consumers. The domestic clothing market of China is undergoing rapid transformation and becoming more versatile and segmented. The consumers are now demanding quality clothing made of pure cotton. The demand for clothing made of other fibres is also on the high. The apparel industry of Spain valued at more than 33 billion dollars in 2011. The industry witnessed growth for the first time since the recession. The country can be characterised as the fourth largest producer of textile just behind Germany. Spain is a diverse country with vast culture and diverse language. The fashion industry got exposed to the risk of financial crisis with the demand of apparels taking the declining curve. The financial crisis posed some kind of threat to the industry. The pricing system is stagnant due to lower demand. The consumers of the country are inclined in wearing casual and sportswear. The volume of sales through internet marketing increased in 2011 (Harvard Kenny School, 2009, p. 6). SWOT Analysis Strength: Koyo jeans have a long background of fashion acumen. The company focuses on innovation and introduction of new designs. It attracts the consumers with trendy designs and the pricing structure is also affordable to the consumers. They set the prices accordingly that attracts the consumers. In other words it can be said that the company follows just the right strategy so as to target the consumers. The product segmentation as well as the pricing strategy of the company under consideration is effective in enhancing the consumer base (Medibtikar, 2007). Weakness: In spite the company tasted success from the initial phases it has failed to carry on the success. The lack of advertisement and brand promotion strategies can be held responsible for the cause. The company has not engaged into any sort of brand association. Therefore it relies only on advertisements and reputation. In today’s world brand promotion strategies is of utmost importance for any brand. The company lacks the initiative in this field. It can be expected that more focus on brand promotion will impose a brand image on the minds of the consumers and the sales of the company will rise. Opportunities: The Company enjoys a major proportion of the market in Hong Kong but there is no such diversification plan. In order to expand the business and avail the opportunities worldwide it is necessary to have diversification plans. The plans will not only contribute in expanding the business of the company but will also bring more consumers under the belt. The consumer base will get cemented further. Threats like financial crisis or natural disaster can pose some problems towards the functioning of the company. If the company diversifies a problem in some country will reduce the sales in that country but economic progress in the other will nullify the reduction in demand. Therefore the company as a whole will remain more or less unaffected. The culture, tastes and preferences of the consumers are changing. To cope with the ever-changing tastes it is necessary to take up actions to as to meet the demand of the consumers. The changing trends of fashion can be taken into account as fashionable clothes with low prices will act as the catalyst in strengthening the consumer base. Threats: the competitors in the market can pose serious threats to the company. The competitors in the market enjoy a large proportion of the market and the strategic plans undertaken by those companies can act as a threat for Koyo jeans. The established brands like LEVI’S and GUESS have taken the diversification plans and brand image of those companies is not good for the company under consideration. The international markets can be volatile. Plans must be undertaken before hand to deal with the volatility which will act as the shield for Koyo jeans. Life cycle analysis The sales growth of Koyo jeans has been stable and therefore it can be said that the sales growth has reached the maturity stage. If the phase of recession is ignored it can be stated conclusively that the company has achieved its maturity in Hong Kong. The various promotional strategies and the brand image contributed towards the success of the company. Internationalization External Analysis (new host countries) Based on the discussion able it will be wise for the company to undertake diversification plans to enter into the market of China. The market in the country is large although governed by brand names. Koyo jeans enjoys its brand value in Hong Kong but as the market for China offers a level playing field for the company it will be wise from the point of view of the company to apply diversification plans for China. The population of China is large and the customers re trendy and fashion conscious. Since Koyo jeans focuses on the trends in fashions and also initiates to incorporate new fashion trends in the market, China is the place to be. The Chinese market is currently experiencing growth and therefore if the company takes the initiative to undertake the diversification plans to enter the market of China it can be expected that it will be able to generate large sales revenue. Evaluation of National Competitive Advantage Pest Analysis of China will make the picture clearer. Political: The country of China allows foreign businesses to enter into the country. Although the country imposes some barriers for certain online games the barriers is not related to the company under consideration. Therefore it will be easier for Koyo jeans being a foreign business to enter into the market of China. Economic: The economy of China is the third largest in the world and can be regarded as a growing economy. Although there are limited trade between Japan and China, Koyo jeans can take the initiative of trade to other countries from China. The Chinese economy is harmed by the trade limitations. The trade of some electrical and clothing goods can find their markets in Japan but because of the presence of trade limitation they cannot exploit the market. Social: The huge population of China offers potential customers for Koyo jeans. The purchasing power of the customers is on the high with appreciation of RMB. Koyo jeans can get the benefit of higher sales volume. Technological: The Chinese economy is the hub of technological advancements. Many countries tend to copy the technological advancements of China and the Chinese government also supports research and development in different sectors. Evaluation of mode(s) of entry (Suitability and feasibility) To enter into the market of China, “Koyo” jeans can take the entry strategy of joint venture. There are certain players in the clothing industry of Japan. Koyo jeans can identify some local players and deal a joint venture with them. These local brands already enjoy a small proportion of market share. If Koyo jeans enter into a joint venture with the local brands they will have access to that percentage of market share (Shaw and Onkvisit, 2009). Now if Koyo jeans can take the appropriate strategies consumers will get attracted towards their shops. The percentage of market share will increase in the long run. Joint venture has some advantages like sharing of risk and ability associated with introduction of new technology and in depth knowledge of technological knowhow. The financial strength is stronger with the participation of two or more companies, a supply source to other countries. The disadvantages include less control over management for individual firms and limitations in recovering capital and difference in opinions on expected benefits (Food and Agriculture Organization of the United States, 2012). Conclusion and Recommendation including pros and cons) Conclusively it can be stated that China is the most appropriate country for the company under consideration which provides a level playing field for the company. The SWOT analysis sheds light of the various dimensions of the company. If the management makes the right call within a specific time frame it can be expected that Koyo jeans will begin to make its mark on the mind of the consumers. The joint venture plans are anticipated to be effective for a new entrant. The diverse economy of China generates huge demand for the clothing industry every year. An analysis of the clothing sector will reveal that the sector is experiencing growth in demand conditions on a sustained basis for some time span. It can be recommended for Koyo jeans to take the brand promotion strategies as soon as possible as in today’s world advertisements play a huge part in attracting consumers. Only ensuring quality will not solve the purpose. The companies are driving consumers towards the shops. Therefore the management needs to take the initiatives in doing so and enjoy the sustained growth in the near future. References Harvard Kenny School, 2009. Apparel Cluster in Galicia (Spain). [pdf]. Available at: http://www.isc.hbs.edu/pdf/Student_Projects/Spain_Apparel_2009.pdf. [Accessed: 26th December, 2012]. Knappe, M. 2011. THE CHINESE MARKET FOR CLOTHING. [pdf]. Available at: http://www.intracen.org/uploadedFiles/intracenorg/Content/Exporters/Sectors/Food_and_agri_business/Cotton/AssetPDF/China%20final%20technical%20document%20for%20print1.pdf. [Accessed: 26th December, 2012]. QRT France, n.d. France’s textile and clothing Industry. [pdf]. Available at: http://portale.parma.it/fashion-net/allegato.asp?ID=458190. [Accessed: 26th December, 2012]. Food and Agriculture Organization of the United States, 2012. Market Entry Strategies. [online]. Available at: http://www.fao.org/docrep/W5973E/w5973e0b.htm. [Accessed: 26th December, 2012]. Medibtikar, 2007. “1.3. Strengths and opportunities”. [online]. Available at: http://www.medibtikar.eu/1-3-Strengths-and-opportunities.html. [Accessed:26th November, 2012]. Shaw, J. and Onkvisit, S. 2009. International Marketing: Strategy and Theory. Taylor & Francis. Bibliography Kline, J. 2010. Ethics for International Business: Decision-Making in a Global Political Economy. Taylor & Francis. Carbaugh, R. 2010. Contemporary Economics: An Applications Approach. M.E. Sharpe. Read More