Strategic Management of Card Factory in the United Kingdom - Case Study Example

STRATEGIC MANAGEMENT Name Course Instructor University Location Date Table of Contents Introduction……………………………………………………. ……………3 External Environment and Industry Competition in the Chinese Market…….3 Company’s Resources and Competencies…………………………………….6 Mission and Vision Statement…………………………………………………7 SWOT Analysis and Business Level International Strategy…………………..9 Conclusion……………………………………………………………………...11 References………………………………………………………………………13 Strategic Management Card Factory is the UK’s main firm dealing in greeting cards. The company’s primary business objective is to make a varied range of value cards and products at remarkable charges. In the UK, the consumers can acquire products through the countrywide chain of more than eight hundred storehouses and online shop (Card Factory). The world today is a souvenir community, a society where people have to remember the activities they do and places they visit. As a result, the gift store industry has grown from small set-ups in airports and tourist sites into multi-million cash commerce (Yang & Yang 2016, 523). China will become the world’s leading economic superpower due to the fast growth in the country. Therefore, China makes one of the most desirable locations to set up a business owing to its large market with about 1.37 billion populaces (Morrison 2014, 493). Card Factory setting up in China would necessitate a shift to blend in with the country’s culture as well as a thorough market and industry analysis. This paper is an analysis of the external and internal factors that influence the gift card industry with the aim of developing a business level international strategy for a market entry mode into the new market. External Environment and Industry Competition in the Chinese Market Political stability is an essential factor in setting up a business in any country. Following the World War II, the communists with the leadership of Mao Zedong founded political independence and an autocratic socialist system that, though guaranteeing China’s autonomy, executed strict regulations over daily life. Mao concentrated on political transformation instead of economic growth. However, after 1978, Mao’s replacement Deng Xiaoping emphasized on market-adapted economic growth and social prosperity. In the modern day, under the leadership of Xi Jinping, China has become the globe’s second-largest economy. Xi Jinping concentrates on driving China venture capital overseas and attracting foreign outlay to China for various industries. The government ensures tight security in the country to pull foreign investors. Hence, the political environment in China is suitable for investment and Card Factory has a great chance of expanding their business (Morrison 2014, 493). China’s economic functioning in the past forty years has been remarkable. The country is currently the second-largest economy in the world with relation to its GDP (Gross Domestic Product). As of 2012, basing on the Purchasing Power Parity (PPP), China’s GDP was at 7.20 trillion while that of the US was $14.99 trillion. Over the years, China’s population growth rate has diminished, and in turn, the GDP has grown by 6.7% (Yang & Yang 2016, 528). Additionally, there are high savings and investment rates thus making the market an attractive for foreign investment. There is also the availability of skilled personnel who would work with Card Factory in expanding their business in the nation. A high rate of the growing middle-class population presents potential customers with the company’s products. Looking at China’s current economic environment, Card Factory had a great chance of setting up a productive business in the country (Liu, Daly, & Varua 2014, 84). Due to the wide gap between China’s rural-urban income difference, purchasing power, as well as a retail exigency, differs significantly. According to Panagariya, China’s retail transactions are high in regions such as Guangdong, Shandong, Jiangsu, Zhejiang, and Henan that are rich provinces (2013, 96). Other areas such as Gansu, Hainan, Qinghai, Tibet, and Ningxia have lower sales. China’s retail industry is substantially uneven and comprised of several small and medium-sized stores, unlike in the UK, where big retailers lead. Even though the number of retailers in the country is increasing over the years, there are few cross-provincial dealers due to hurdles in the local market entry (Liu, Daly, & Varua 2014, 89). The social features of China have a significant role in the success of Card Factory as the demographics frequently transform. Currently, there is a decreased population growth rate in the nation. Thus, the rate points to an increased population aging that consequently results in higher reliance proportions and reducing labour force. As a result, the company may experience over time, the lack of adequate skilled personnel that may force them to import labour into the country that will be costly. However, the population growth rates in China keep changing and should they increase; then there would be a high chance of having adequate skilled labour (Amighini, Rabelloti & Sanfilippo 2013, 319). The Chinese society has a culture of sending greeting cards since early times as the people would give each other communications of good will during the New Year (Yang & Yang 2016, 526). Even though gift cards are a comparatively new idea to Asia, the modern tendencies show that more consumers are purchasing the products. As a result, international brands are looking into establishing Chinese varieties of their gift card products. China has put significant emphasis on education, and as a result, a large number of the populace are literate at a rate of more than 90%. Chinese people view education as an asset in human capital as well as an alternative for enduring projections for economic development. Regarding higher education, two of China’s universities are among the top fifty worldwide. The high level of education ensures the availability of an adequately skilled labour force in the country thus attracting foreign investment. There is also a gap between rural and urban areas as well as the rich and the poor that would affect the population’s purchasing power as well as other market trends (Liu & Liu 2014, 2794). Technology is an essential factor in running businesses especially with the advent of online trading. Mobile internet propels the industry and facilitates communications as well as marketing of products. The use of E-commerce has allowed companies to straightforwardly and quickly sell and market their products. Due to the easy access to the internet and a high rate of technological development in China, with about 420 million internet users, most consumers shop for various goods online. Card Factory has a well-established online store in the UK that could be replicated to fit into the Chinese market. The company could also sell their products through linkages with existing E-commerce websites such as Taobao and Alibaba. Nevertheless, there are still people who would rather evade the risks that come with online shopping and prefer physical stores. Despite that, the consumers could learn about the products online as well as the physical locations of the shops (Yang & Yang 2016, 532). Regarding competition, the Chinese have a highly competitive spirit. If an organization puts up a business that turns out to be successful, the Chinese corporations will imitate them swiftly and persistently. There are already established companies in China such as Shuangxin Greeting Cards Factory. Other retailers include stores such as Wal-Mart that also sell cards. Therefore, for Card Factory to be successful in the Chinese market, they should be able to offer something unique that will differentiate them from their competitors (Amighini, Rabelloti, & Sanfilippo 2013, 322). Furthermore, they can partner up with online gift card retailers such as Alibaba to build and expand their business. Company’s Resources and Competencies Card factory concentrates on value as well as the mid-market sections of the UK’s greeting cards industry. The company has a large variety of products such as gift dressings at good prices. The factory’s establishment was in 1997 with a single store and has since grown its store holdings chiefly owing to organic expansion into a market-domineering significant retailer with a countrywide coverage. The company’s stores are located in various regions in the UK from small towns to big cities, factory outlets, as well as online shops. The group’s products include single cards that depend on occasions such as birthdays, congratulations, seasonal, anniversaries, weddings, new baby, and get well soon among others. Non-card goods include greeting dressings, party materials, calendars, diaries, and small gifts such as candles. The company also retails Christmas boxed cards. The broad range of products and public establishment of the company gives it a competitive advantage in the UK. However, starting up in China will be an entirely fresh beginning (Card Factory). As from 2005, Card Factory has operated on a vertically integrated business model. The design includes an internal printing service and focal warehousing capacity of more than 360,000 square feet. The business model helps to cut on costs and adds quality to the products thus placing the company at a good competitive level. The company regulates the quality, design, and sale of its products and are thus able to produce based on consumer preferences. Additionally, the model ensures that the card designs are unique compared to others. The company is also able to act on market trends easily as they have a better confidence in supply chain and luminosity of stock. Lastly, the company has an experienced and skilled personnel and management that steer the organization towards more productive grounds in the industry (Card Factory). Mission and Vision Statement Card Factory operates on a clear philosophy with the “aim to produce a broad range of outstanding quality cards and products at exceptional value.” The company’s motto is “compare the quality, compare the price” (Card Factory). By venturing their business into China, Card Factory will need to ensure that their mission and vision statements fit in with the country’s culture, customer preferences, and market status to attract more consumers. The corporation’s motto suggests that they provide high-quality products at affordable prices. The high competency tendencies in China are likely to attract retailers who can replicate Card Factory’s products at lower prices. However, producing the same quality as Card Factory will be impossible. The company can only be competitive in an environment where the consumers are looking to acquire high-quality products. The Chinese consumers are very simple people. However, research shows that recently, they tend to embrace international brands and superior quality products (Amighini, Rabelloti, & Sanfilippo 2013, 334). The philosophy and the motto that the company works on would fit into the Chinese setting. However, there is need to consider the cultural differences in the UK and China before settling on a vision and mission statement. In a new market, the company would need a clear mission and vision statement to attract consumers as well as stakeholders that are essential to the expansion of the business. Additionally, the Chinese speak a different language from the customers in the UK. Therefore, there would need to ensure an accurate interpretation of the mission and vision statements. Therefore the company can reframe the statements to allow them a competitive advantage in the new market. For instance, the mission could be, “To produce a broad range of outstanding quality cards and products at affordable prices.” The vision on the other side can read, “We aim at providing our customers with a remarkable shopping experience through a broad range of superior quality products at exceptional values, clear and safe payment techniques, and excellent delivery.” Using the statements, the consumers can have confidence in the new card retailer in the market. SWOT Analysis and Business Level International Strategy Card Factory has numerous strengths that would contribute to the company’s ability to show good performance in China. The corporation is well established in the UK with an experience and expert management. Therefore, setting up in a new country would be easier since the company can replicate some of the structures that can fit into the Chinese market from the parent organization thus reducing the costs of hiring experts. The skilled management team can aid in the interviewing and selection of personnel who would be able to ensure productivity. The company has a high-level value positioning due to its integrative model that ensures they have no dependence on suppliers and efficient management. Card Factory has a large number of valued store chains that contribute to the company’s reputation in China. Moreover, it has an online store that is functional in the UK, and hence they can easily come up with one that can operate in China (Card Factory). Therefore, with the advantage of an established business operations model and recognition, the company has the benefit of venturing into China. Despite the strengths, there are numerous weaknesses that Card Factory has to encounter. The company has to revolve around the same price range to retain their consumers since the industry is quite competitive. In the online business, a limited variety of cards would mean they have a minimal share in the industry. Therefore, the company would need to continually ensure that they have an extensive card range to remain relevant in the industry. The company is also based in the UK and tends to focus on the trends in the country. However, they fail to adapt to the changing trends all over the world in the greeting card markets to attract consumers from various backgrounds (Card Factory). Even with the weaknesses, the company has several opportunities that they could take advantage of to expand the business. The fact that the corporation has established itself as an efficient business model offers the chance to expand into other countries as well as in the UK. The advance in technology and E-commerce all over the world provides the opportunity to improve the business through online stores (Yang & Yang 2016, 529). The company can also mix online and physical marketing to have access to a wider market. Additionally, the corporation can increase their product range since they already have the needed resources to produce their products. The global move towards international marketing and foreign investment enables Card Factory to have more openings to set up in other nations. There are several threats that Card Factory has to incur. The greeting card market has slow growth rate thus making it impossible for the company to grow at a fast rate. Online retailers are also increasing in different ventures thus making the competition fierce. The gift card industry is also easy to replicate thus minimizing the ability of a company to stand out. There are also increasing delivery costs that add to the charges that the company has to incur. Therefore, the corporation has to deal with the threats for them to be able to venture into China successfully. Therefore, Card Factory would need an efficient business-level for market entry mode into the Chinese market. China has a multifaceted business licensing technique and market entry confines. The company must exercise patience in investing in the country due to the numerous control policies. Card Factory should, therefore, research and keep track of policy developments, line up their approaches with government primaries where achievable, and take maximum advantage of government agendas. The company should also strategize on making use of E-commerce to expand their businesses. With the current advances in technology, online stores are gaining more consumers all over the world due to the easiness in online shopping (Sauvant & Chen 2014, 149). Retailers in the industry should be able to have a strong support through partnering up with different relevant parties such as third-party logistics, delivery, and market analysts. The company should also employ local managers who would help in ensuring the strategies fit in with the country’s social and cultural systems. The availability of national market analysts is essential in ensuring that the company stays on track with the trends and changes. Establishing a prosperous retail business in China necessitates a thorough market study and precise planning. There are also low self-brand chain rates in China. Thus, the company should take advantage of their strong brand to expand their business. Additionally, the corporation should make an effort to fully incorporate the Chinese cultures and language into their business for their success (Panagariya 2013, 96). Conclusion Gift cards are among the most popular gift items all over the globe. They are adaptable and warrant that consumers can buy something based on their personal desires. Therefore, to successfully venture into China, Card Factory should put in place strategies that will facilitate the company’s growth. The political stability in the country is essential for investment. The fast rate of economic growth in China also offers a higher chance of successful ventures in the country. Socially, Chinese exchange gift cards and would thus provide a broad customer base. However, the Card Factory would have to deal with the high competitive nature of the people as well as already established companies in the same industry. The availability of skilled personnel in the country due to high education level would ensure the supply of a competent workforce. Therefore, the company would need to set up effective strategies before setting up in China. The existing business model would ensure cost reduction. Nevertheless, thorough research is essential in coming up with effective policies for the success of the company. References Amighini, A., Rabellotti, R., and Sanfilippo, M., 2013. China’s outward FDI: An industry-level analysis of host-country determinants. Frontiers of Economics in China, 8(3), pp.309-336. Card Factory. Retrieved from www.cardfactoryinvestors.com. Li, D.Y. and Liu, J., 2014. Dynamic capabilities, environmental dynamism, and competitive advantage: Evidence from China. Journal of Business Research, 67(1), pp.2793-2799. Liu, K., Daly, K., and Varua, M.E., 2014. Analysing China's foreign direct investment in manufacturing from a high–low technology perspective. Emerging Markets Review, 21, pp.82-95. Morrison, W.M., 2014. China's economic rise: history, trends, challenges, and implications for the United States. Current Politics and Economics of Northern and Western Asia, 23(4), p.493. Panagariya, A., 2013. India and China: trade and foreign investment. Economic Reform in India: Challenges, Prospects, and Lessons, p.96. Sauvant, K.P. and Chen, V.Z., 2014. China’s regulatory framework for outward foreign direct investment. China Economic Journal, 7(1), pp.141-163. Yang, H.F., and Yang, H.L., 2016. Development of a self-design system for greeting cards on the basis of interactive evolutionary computation. Kybernetes, 45(3), pp.521-535. Read More