Designers handbags for women - Assignment Example

?Designer’s handbags for women Introduction Handbags are one of the most fashionable items. The demand of handbags has been growing and there are number of international brands that have gained popularity by capitalizing on this increasing demand of handbags. In the present scenario, women are more interested in having a handbag than any other fashionable luxury items because it reflects the status and power in a society. With the passage of time, the designer handbags have grown popularity and women have shifted from just handbags to designer handbags. Both might be considered the same by many but for women, designer handbags are statement of their style, their unique image and their temperament. Designer handbags have gained popularity in different parts of the world including in Asia. Women are now more comfortable with the designer handbags rather than just leather handbags. Designer handbags are the first choice of women when it comes to selecting between handbags and for the very reason Luxurious has aimed to provide the customers with an exclusive range of designer handbags in Asia. These designer handbags offered to the customers are unique and different from others in the market and because of their uniqueness in style they are liked by a large number of women. With the potential of the market and increasing demand of the handbags (Venugopal, 2010), this report analyses the possibility of introducing one of the designer handbags offered by Luxurious in Indian Market. Indian Market is one of the most lucrative and highly potential markets for handbags (Venugopal, 2010) and therefore this report analyses the positives and negatives of the Indian market and how fruitful Luxurious can be if it introduces its hand bags in the Indian Market. With the increasing competition in the designer handbags industry, there are different factors that influence the consumers to buy the handbag. Design although has always remained the most important factor, but the price has also played an important part to encourage the consumers to buy the product. Luxurious handbags in India would be offered with competitive and very reasonable prices and this has been predicted as the main reason why large number of consumers would be attracted to use the products of Luxurious. The competitive price of these Luxurious designer handbags would be helpful in gaining more attention as women are fond of collecting designer handbags but due to the high prices many of them are not able to afford such bags. There are number of factors that would help Luxurious to be successful in India and some of the major factors include; highly populated country, demand of luxury products including handbags, purchasing power of India, and culture of India etc. Luxurious can enter the market of India and it can open up its outlets in the Indian market and at the same time offer its products online as well. This decision is based on the fact that the purchasing power of customers has greatly increased due to which the demand for quality designer handbags have increased and the trend of online sales have also been increasing. Background India being one of the fastest growing economies of the world has much potential than other markets of the world. The women in this region are more inclined towards designer handbags than any other local handbags available to them. The rising income is another factor due to which the demand for the designer handbags is preferred over simple and local handbags. The main reason to select this region over others is the potential growth and opportunities that could be availed in this market. India is emerging as one of the developing countries in the world. The designer handbags industry in this country is improving even though demand internationally has been reduced because of recession. With the rise in the income level in India, more and more women are intending to purchase designer handbags. The market has great potential for designer handbags as fashion industry in this country is rapidly growing along with the handbags industry (Venugopal, 2010). Although, the market is saturated with different companies offering handbags however still the market has great potential and this is the idea of the management of Luxurious to introduce handbags in India. The following image shows that the market of luxury goods in India will further grow in the years to come: (Sharma, 2011) The overall world demand of handbags has been estimated to grow. The demand of United States handbags is estimated to reach up to $9 billion by 2015 (PRWeb, 2012). The Indian women handbag market is estimated to be Rs. 20 billion with a forecast to grow at an annual rate of 15 percent (Technopak Advisors, 2011). This shows that the market is projected to grow to Rs. 40 billion in the next 5 years. This is mainly due to the high demand for the designer handbags in India and other factors that have helped in increasing this growth are the rising purchasing power and the rising income. Due to such an impressive growth prospects many international companies have already entered the Indian market through joint venture and franchise. Even the local companies that did not belong to this industry are now entering the market with impressive and lucrative handbags to capitalize on the opportunities available. Some of the international companies that have entered the Indian market are Jimmy Choo, Hermes, Guess, Kiplings and Dior. These international brands have entered the Indian market due to its continuous growth and opportunities. In addition to this, there are some local companies operating in the same industry as well and these include the VIP, Samsonite, Holii and Hidesign etc (Chatterjee, 2012). Many of the companies mentioned above are operating in the Indian market for couple of decades while others have just entered the market. This shows that the competition in the market is increasing day by day. This rapid growth has attracted many of the international brands and local brands to utilize this opportunity and one such local company is VIP (Chatterjee, 2012). The regulations related to the Indian handbags industry are strict. For an international brand to enter the Indian market, the international company must setup a joint venture or open franchise unit with a local Indian company (PWC, 2011). Due to such terms and conditions, most of the successful brands and companies have not set foot in the Indian market. Along with these regulations the taxes imposed are very high. This is another reason which restricts the international companies to set their foot in such market. The taxes imposed by the country are quite high due to which the price of the products in the market shoots up (Rediff, 2012). To survive in the Indian market, Luxurious must set such a price that it is able to compete in the market, pay taxes accordingly and at the same time it is able to achieve substantial profits. PEST Analysis Luxurious aims to sell its designer handbags in Indian market. To analyze the Indian market, PEST analysis is used. This analysis would provide an insight regarding the macro-environment of the country and how the microenvironment factors can influence the business. These are the factors that are beyond the control of the business but it is important for the business to be aware of these factors. Political India is one of the fastest growing economies of the world. With an aim to attract foreign direct investment (FDI) the government has been making different efforts and because of the efforts of the government, the country has been able to attract FDI accounting total of 53,600 USD million. Currently the foreign investment allowed by the country is 51 percent for the single brand retail, and 100 percent for the wholesale format. Due to such policies the share of FDI has increased as the countries such Italy, France, Germany, United States and United Kingdom have frequently bought investment overtime. India being one of the most important hubs for fashion and luxury items has brought in many international brands such as Jimmy Choo, Hermes and Dior through joint ventures. However, several other international brands are still planning and analyzing the feasibility of entering the Indian market. However, the duty structure in the country is set so high that the brands either have to set their prices high in order to survive in the market or to simply exit from the market. The import duty is also set to 30-40 percent along with the VAT (Value added Tax) set to 12.5 percent that eventually increases the prices of the luxury brands in the market. This luxury market’s duties are even higher than the European market but with the growth opportunities and potential customers many companies are entering the Indian luxury market. As other international companies including companies offering handbags are also paying similar duties, thus the company entering the Indian market can still achieve the profits by offering competitive prices (Venugopal, 2010). The country has also set regulations for the international brands to enter the market. The international brands can either enter the Indian market through franchise and joint venture (PWC, 2011) providing both the local and international companies chance to work together and to flourish the economy of India. Economical India has become the third largest economy of the world in terms of frequent purchases of products. With an inflation rate increasing from 8 percent to 8.2 percent, the real GDP has declined from 6.9 to 4.4 percent. But with prosperous time ahead, it is expected that the GDP of India would move up to $4.5 trillion by 2020. In other word India will be more prosperous and advanced in the forth coming years (Maps of India, 2012). The corruption in the country has always hurt the economy and become a barrier in its growth. With rising FDI (foreign direct investments), the corruption rate in the country has also increased to a great extent. Income inequality in the country is high. The income inequalities have also increased with the passage of time making the economy of the country unstable. The level of poverty in the country has also increased. The people below the poverty line in the year 1991 were 40% which has increased to 65% in the year 2011. However, the literacy rate in the country has increased from 52 percent in the year 1991 to 65 percent in 2011 shows that India is advancing to grow. Social With 500 million Indian under the age of 25, the preference is quickly shifting from the normal handbags to designer handbags. These young individuals have more access to money than previous generations due to which they are inclined more towards the luxurious and fashionable items. The changes in taste preference have played an essential role in the purchase of luxury brands. With the increase in income, the demands for the fashionable brands have increased to a great extent and the consumers are now more interested in the purchase of international brands than the local brands. The Indian women are now more brand conscious due to which the branded luxury items are now in fashion (Sharma, 2011). This growing consciousness of people of India has a crucial role in the growth of the market. Although 70 percent of the market is captured by the local and unbranded products but due to the growing interest in the designer handbags, the market for designer brands can quickly swap positions with the unbranded products. These local products are now considered as out-dated in the Indian market due to which many of the women have shifted to international brands as they are much comfortable and convenient to portray their unique image (Sharma, 2011). Technological Advancement in technology has played a significant role in improving the economic condition of India. With technology on the side, the country has prospered and flourished as more and more customers are now interested in purchasing products online rather than visiting the stores and waiting in queues for their turn. This shift has increased the customer’s interaction with the company by eliminating the intermediary such as retailer. Even though the customers are now more interested in online shopping, companies have their retail outlets for those customers that prefer traditional shopping over online shopping. The emerging concept of e-commerce in the luxury industry has quickly gained importance throughout the world including in Indian market. Due to such advancement in technology, the industry has been able to report higher sales as people have welcomed the concept of online shopping. With constant innovation in the technology, more and more companies are now getting involved in selling their products online and are working to increase the interaction with the customers. Therefore, it can be said that the companies are working to further penetrate in the market with internet and trying to make it easier for the customers to shop while staying at home. Through this emerging medium, women are more relaxed and confident to search for any product they require and according to their need. The trend of online marketing has increased popularity over the last few years and many brands are now using the internet to market and promote their brands. Social media is another emerging technological advancement that has been used by many companies to get engaged with the customers. To enhance the customer’s experience, companies are managing their social presence carefully and using it to good effect. Moreover, with the increasing trend of Indians using social media, firms have realized the opportunity to market their offerings through social media as well. SWOT Analysis The other technique or tool that has been used to analyse the how Luxurious has been operating in the Indian market is SWOT Analysis. SWOT analysis would help Luxurious to identify the internal Strengths and Weaknesses (SW) and external Opportunities and Threats (OT) faced by the business. The SWOT analysis of the business is as follows: Strengths Reasonable Prices Being in the luxury industry, the major strength of Luxurious is the competitive and reasonable prices in the market. Other players in the market are offering high prices; therefore by offering quality products at reasonable prices, Luxurious can attract a large number of consumers. Moreover, it would help Luxurious to increase its sales over others in the market. Understanding the Needs Luxurious has over 25 years of experience in the designer handbags industry internationally. The management of Luxurious understands the needs of women associated with the luxury brands. This understanding of needs helps Luxurious to provide the customers with variety of handbags due to which the company has always remained the top priority in handbags industry when it comes to designer handbags. Multi-Channel Retail Network Luxurious also has multi-channel retail network due to which Luxurious meets the demands of each country accordingly and timely. This retail network provides support to the company in meeting the demands of the customers in European market. Financial performance Financial performance is another major strength of Luxurious. Luxurious enjoys strong financial position in the international market and due to its strong financial performance; Luxurious is constantly able to open retail outlets in many foreign countries. Established Brand Name With the passage of time, Luxurious has established its name in the handbag industry. Throughout the history, Luxurious has developed a reputation to provide its customers with both quality and value handbags. These attributes have helped the company to remain at the top-of-the-mind of customers. The well established brand name of Luxurious can be helpful for the company to get good response from the Indian market as well. Quality For more than two decades, Luxurious is known for its quality at reasonable prices. The higher quality offered by Luxurious is major advantage that sets the company and the competitors apart in the market. This competitive advantage of the company is a major source to attract new customers and to retain old customers. Moreover, the quality of the products offered by Luxurious can be one of the major strengths for the company to attract and retain a large number of consumers in the Indian Market. Innovation Luxurious is known for its innovation over the years. Luxurious provides variety of designer handbags to its customers and the variety constantly changes with the taste, style, fashion and demand of the consumers. With this constant innovation Luxurious can attract high valued as well as middle class customers in the Indian market Weaknesses Some of the most important weaknesses that the company must overcome in order to be successful in India have been discussed below: Relying Heavily on the European Market Even though Luxurious provides designer handbags to 40 countries of the world but the company heavily relies on the European market for 70 percent of its sales. The company has somehow has limited its expansion to most of the European market due to which the company can face difficulties in successfully expanding in other parts of the world such as India which has a different culture than European countries. Declining Margins Due to the recessionary periods and declining demand for luxurious designer handbags in Europe, Luxurious has been forced to reduce its price to meet the demands of the customers and eventually to survive somehow in the market. However as the economy has started to recover from recession, Luxurious will also be able to increase its margin. Opportunities There are different opportunities that Luxurious can capitalize and some of these have been discussed below: Expansion in Asian Market India is one of the emerging economies of the world due to which the market in this region has potential growth prospects. Expanding in the Asian market would serve the purpose of increasing profit of the company and to meet the demands of the customers (women) in the market. Moreover, as Luxurious expands in India and from here it can further expand to other countries having somewhat similar cultures like Nepal, Bangladesh and Pakistan. Increase the number of retail outlets To meet the rising demand of luxury brands in the Indian market, the company has an opportunity to open up more retail outlets in Indian market. This would help Luxurious to attract more consumers and penetrate more in the Indian market. Influence of Foreign Brands India being an emerging market and with increasing living standards of people of India, the customers are now more interested in the foreign brands than local brands. The customers have more influx of foreign brands due to which the company would be able to satisfy the needs of potential customers that are eagerly waiting for the fashionable brands offered by the company. Thus, Luxurious can capitalize on this opportunity and increase its profits. Rising Income The rising income is the best opportunity to grab the customers in purchasing the company’s brand. Due to the rising income level of the women in India, women are more interested in changing their current lifestyle from old-fashioned to modern luxurious and fashionable lifestyle. This rise in income level would also help the company to set the prices of designer handbags offered by the company by gaining insight from the women through observation and surveys. Technological Advancement Technological advancement would also help the company to serve its purpose. Through the modern means, the company would be able to meet the needs of the customers. Luxurious would also be able to identify what the customer actually wants. By online shopping medium, the customers would be encouraged to provide feedback and their requirements to enhance the interaction between the customers and company. Threats There are different threats that Luxurious faces in the Indian market. It is important for Luxurious to identify these threats and take steps to minimize these threats. Some of the major threats are: Rising Competition Due to the emerging market and growth prospects, many international and local companies are now opening up their outlets. This would distribute the customers in the market due to which the company would not be able to meet the needs of the whole target market. This distribution of the market would eventually reduce the profitability of the company and its market share. It is important for Luxurious to take steps to minimize the impact of increasing competition. Customization offered The major threat that Luxurious faces is the customization offered by the international companies. This threat could reduce the market share of the company and less audience would be attracted to the company. Recommendations Being effective in the Indian market is essential for the company to boost its sales and revenues. The company can improve its market share and profitability in different ways. One of the recommendations to improve its market share is by analyzing the strengths, Luxurious can capitalize on these strengths and make sure that the company is able to make use of its strengths. By identifying the weakness, Luxurious can make sure that it is able to overcome its weaknesses and it will help Luxurious to improve its market share. Moreover, by identifying the opportunities Luxurious would be able to analyse what it needs to do to improve its profitability and market share. By identifying the threats in the external environment, Luxurious would be able to analyse threats that can hurt the company and can take steps to minimize the impact of these threats and thus it will help the company in not being hurt from these threats. Some strategies and further recommendations have also been provided in this report for Luxurious to increase its market share and profitability in the Indian Market The company should do proper research regarding the needs and requirements of the customers. Due to the recent shift from old-fashioned to modern lifestyle many business were affected and after doing research it needs to come up with handbags accordingly so that Indians like the handbags and the bags are according to their taste and preferences. Attracting customers in the Indian market is not so easy. With variety of local and international brands available offering the same product, the company must be able to create a point of differentiation between the company’s products and the rest of the market. High advertisement would be required to attract the customers. TV, internet, billboards, social media and other marketing mediums could play essential role in grabbing the customer’s attention. The company must be able to select a niche location in order to attract most of the customers. With the income on the rise in India, many individuals are now interested in international brands. Location would play an essential role in the sale of the company’s designer handbags. Social media is the one of the best marketing strategies for the Indian market. As most of the individuals are between the ages of 18-35 in India, social networking would be the best source to market the product. The company should create a website specifically for the Indian market. The website should provide all the information regarding the products offered by the company so that the customers would not have to surf other competitors website. To boost the sales within the first year, the company would have to setup events. This would serve two purposes; it would create awareness in the customers regarding the product and secondly, the company would get a direct feedback from the target audience. Conclusion It could be concluded that to sell the product offered by Luxurious in an emerging economy such as India, the company would have to face some tough competition in the market. But with a market of Rs. 20 billion with potential growth of 15 percent per annum, Luxurious would have to take some serious steps in order to attract the women to purchase the designer handbags. After conducting the PEST analysis, the market in India would be one of the best possible countries to introduce the product of Luxurious; designer handbags for women. The economy of India is booming with the opportunities and growth, Luxurious should enter the market with franchise units. Since joint ventures are not a preferable solution for the company, the main focus to enter the market should be kept limited to franchising. The SWOT analysis indicated that Luxurious has several strengths that its competitors do not possess. The strengths and opportunities of Luxurious are greater than the weaknesses and threats due to which the company would have a competitive edge in the market over both the local and international companies offering quality handbags. However, it is important for Luxurious to capitalize on the opportunities using its strengths and make sure that it is able to overcome the weaknesses the company has and take steps to reduce the threats being faced. References Chatterjee, P. (2012). VIP sets its sights on handbag category. Business Line. Available from http://www.thehindubusinessline.com/industry-and-economy/marketing/article2363034.ece [Accessed 11 December 2012] Maps of India. (2012). India Economy. Available from http://www.mapsofindia.com/india-economy.html [Accessed 12 December, 2012] PRWeb. (2012). US Handbags market to reach US $9.0 Billion by 2015. Available from http://www.prweb.com/releases/handbags/leather_handbags/prweb4264634.htm [Accessed 12 December 2012] PWC. (2011). Wining in India’s retail sector: factor for success. Available from http://www.pwc.com/in/en/assets/pdfs/rc-publications/WinningSector.pdf [Accessed 13 December 2012] Rediff. (2012). India in 2012: Strategic and security challenges beckon. Available from http://www.rediff.com/news/column/yearend-2011-india-in-2012-strategic-and-security-challenges-beckon/20120103.htm [Accessed 12 December, 2012] Sharma, R. (2011). Indian luxury market – a snapshot (Part II). Available from http://www.indiabiznews.com/?q=node/1704 [Accessed 12 December 2012] Technopak Advisors. (2011). KIT: women’s handbags market in India. Business Standards. Available from http://www.business-standard.com/india/news/kit-women%5Cs-handbags-market-in-india/446513/ [Accessed 10 December 2012] Venugopal, V. (2010). For luxury brands, India is a tiny market right now. Live mint and The wall street journal. Available from http://www.livemint.com/Companies/0fibNwwi6MUU8qHIm8XvGK/For-luxury-brands-India-is-a-tiny-market-right-now.html [Accessed 13 December 2012] Read More