Assessing the feasibility of opening an H and M store in Almaty, Kazakhstan
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Abstract
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1. Introduction
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1.1 Introduction
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2. Problem /Opportunity
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2.1 Business problem (opportunity)
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2.2 Research Question
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2.3 Research Purpose
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2.4 Research Objectives
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2.5 Research Scope
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3. Literature Review
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4. Proposed Methodology
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4.1 Research Methodology
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4.2 Ethical Considerations
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5. Project Work Plan and Deliverables
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References
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List of Figures
Figure 1
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List of Tables
Table 1
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1. Introduction
1.1 Overview
Opening a retail franchising store dealing with the sale and competitive prices of fast fashion trends seems to be an attractive business opportunity. This research study will therefore be carried out in order to assess the feasibility of opening and H&M store in a city like Almaty, Kazakhstan. This particular city is chosen because of the benefits its strategic positioning and popularity. Almaty is the largest city of the country Kazakhstan which is largest among the landlocked countries of the world and the city has a positive population growth rate (Kazakhstan Today, 2012). However investment in this area requires a thorough investigation of the viability to open a store. This particular research study will therefore help to evaluate the possibility of popularity and profitability of H&M store. This research topic has been a cause of interest due to the fame and success of H&M Company. This company specializes in fast fashion retail clothing and serves the world with fast changing latest trends (H&M, 2012). This research study is vital to carry out because it will provide a general outlook with solid facts, figures and references. This research would provide an opportunity to learn about the market conditions of the country Kazakhstan and its largest city Almaty, the current situation with the competitors and most importantly, the evaluation of the customers that whether they would be interested and willing to buy the products of this company or not. This research study will provide real facts about the marketing opportunity and chance of success for opening up different stores in this particular area for other researchers. It is crucial to conduct a proper research before investing money into any new venture. However further evaluation of the climatic and economic conditions of the city will be evaluated through this research study. Also the demographics of the city will be evaluated and taste and preference of the people residing in this particular city will also be checked. Therefore this research study will serve to find out that whether it would be viable to invest money into opening franchise retail H& M store in Almaty, Kazakhstan.
2. Problem /Opportunity
2.1 Business problem (opportunity)
It seems to be a good business opportunity for success in the retail business to purchase an established brand and become a legal distributor of a successful world known brand under the franchise agreement. This research present this idea keeping in view the city like Almaty and brand name like H & M. Opening a retail franchising store of this multinational company in a city like Almaty might provide the investor with benefits because Almaty has a percentage of about twenty percent in the annual gross domestic product of Kazakhstan for the year 2010. The city seems to have favorable economic conditions. The climatic conditions of the city are also favorable and pleasant (Almaty, 2009) . From investment point of view these conditions seem suitable for opening up a franchise retail. In order to survive in today’s market competition; venture should be original and successful. A lot of food restaurants, accessory and clothing stores could be seen in every mall. in order to be successful in the retail business originality along with creativity is required to attract the investors (Cumming,2010). The chosen country as explained previously is Kazakhstan and Almaty which is the largest city of this country is selected for opening the franchise retail store because it would be interesting to explore other cultures and finding the possibility of business. The economy of Kazakhstan is attractive for doing business and will be explored further through this research study. The idea of starting the business in Kazakhstan became a lot more favorable in years due to the growth of the economy. With years, a lot of legal framework has changed and the conditions for the foreign investors improved significantly. As an example Kazakhstan is in 59th position out of 183 other countries in doing Business 2011 rank. Kazakhstan progresses rapidly with each year, and the fact is that since last year it jumped 15 countries from being number 74th in 2010, which make it more attractive to investors. (Doing Business, 2011)The research question for this research study will therefore be:
2.2 Research Question
Would it be viable to invest money into opening franchise retail H&M store in Almaty, Kazakhstan?
2.3 Research Purpose
The purpose of the research is to conduct a proper research which relates to the business opportunity using the practical skills as a researcher and thus fulfilling the wishes and demands of clients, business firms and organizations seeking such business opportunities.
2.4 Research Objectives
Objective of this research is to scan and analyze local market, find trends, conduct marketing research and conclude whether this business have the solid ground for startup in Kazakhstan market.
2.5 Research Scope
Scope of this research is very broad. It would comprise of looking for all kinds of information. For example financial data and calculations, local market conditions, government policy for investments. The scope of this research and data would be two sided as a businessman and as the consumer. Besides it would be useful to add any marketing information. In fast paced business research and consulting sphere the scope of the work amount requested is reasonable and could be completed in a specified time period.
3. Literature Review
According to Christ (2008) franchising means following the footsteps of an already well established company or organization and get benefits by working under such an organization or company by attaining a legal license agreement. Christ (2008) is of the view that opening a franchise retail store is beneficial for any risk taker and investor willing to start a business. The chance of success in opening a franchise is much greater than setting a new business from scratch. The ideas of Christ (2008) had been focused on opening a retail store but does not provide an in depth knowledge of areas like Almaty, Kazakhstan which seems economically attractive for starting a franchise store. This research study is primarily focused on such areas and with the help of surveys and content analysis ideas will be developed which will benefit the companies, organizations and decision makers to start their business in such areas. The reason for carrying out this research study is to identify the benefits of working in areas like Almaty, Kazakhstan.
According to Engle (2007) the history of retailing business dates back to the time when human started wearing clothes. Barter system had been utilized in order to attain the clothes when human societies started to develop. Trade was the very first business that was common in the history of human kind. And gradually as time goes by this field of retailing started to develop further and there had been a time in era in the year of 1600 when the foundation of Hudson’s Bay Company was emerged on the map of the world. The very first shopping mall was established in the year of 1785. The emergence of retail industry officially was stated in the 18th century and retail stores were established. The history of retailing provided by Eagle (2007) has been on the context of big countries like United States of America and does not mention the emergence of retailing with context to other areas. This research study will be different as it will focus on the retailing industry in general and it is necessary to carry out in order to find the business opportunities in new areas with favorable economic conditions.
Engle (2007) has described various type of retail business like for example retail business that comes under the traditional comprises of selling the goods through some location that is physically available. However retailing is possible through internet, online placement of orders and also through mail orders. According to Sidhpuria (2009) retailing is an essential part of the supply chain management and is considered a final step in the overall process of the distribution of the goods. Ramsey & Ramsey (2010) are of the view that in order to startup a retail store under a franchise first of all it is vital to analyze the business thoroughly. Proper investigation for the investment is necessary in order to take a decision for starting up business. It is also very important that the product that is being franchised has the capability of providing profitability. The ideas of Ramsey & Ramsey (2010) are in accordance with the research question of this research study as this research study seeks the viability and feasibility of opening and H & M store in Almaty, Kazakhstan. Ernest and Young (2011) have explored the possibility of doing business in Kazakhstan and from their research it seems that this area has the potential to provide the returns to investment in terms of profitability. Tungate (2008) has argued that multinational company like H & M has made it possible for the general public to get access to the world of fashion. There are various brands that are available in the market that are not accessible by the general public. It could be said that this research study will evaluate the preferences and tastes of the people residing in Almaty, Kazakhstan so that the chance of success could be formulated.
In the light of discussion carried out on the basis of the work of previous researchers it could be argued that it seems viable to invest money into opening franchise retail H & M in Almaty, Kazakhstan however through proper investigation that will be carried out through this research study a statement in favor or against the research question will be established that will benefit the researchers of the future and the decision makers interested to start business in new areas that have not been explored before but are beneficial. Such a research study is essential before establishing any business that investors can have an advantage for starting their business based on the conclusions. As to society, it also will be very beneficial since if the project would be viable and such store would open here in Almaty, local population will have much more choice in the retail clothing. So it is evident that all parties will be benefiting from this research.
4. Proposed Methodology
4.1 Research Methodology
Saunders, Lewis and Thornhill (2009) have argued that research methodology is fundamental for carrying out a research study. The research methodology for this particular research study will be on the basis of the famous research onion model. This model is widely used and is a vital tool in order to understand the necessary steps required for carrying out a research study.
Source: Saunders et al (2009: 132)
Figure 1
As it could be seen from the figure provided above that research onion model comprises of many layers and these define the steps of conducting a research study. Some of the necessary steps will be discussed here that are necessary for this research study.
4.1.1 Research Philosophy
The figure provided above shows that there are various research philosophies that are suggested by Saunders et al (2009) and these are Positivism, Realism, Interpretivism, Objectivism, Subjectivism, Pragmatism etc. out of these research philosophies the two most widely used are the Positivism Research Philosophy and the Interpretivism Research Philosophy. According to Cooper and Schindler (2006) the Positivist Research Philosophy moves from general points of view and perspective to a specific one and require the testing of the developed research hypothesis. The Interpretivism Research Philosophy is opposite to the Positive Research Philosophy and does not require the testing of hypothesis and is based on the qualitative research study. The Positivist Research Philosophy is usually used for the quantitative research study. There is a third research philosophy which is also used by the researchers and comprises of a mix of both the Positivist Research Philosophy and the Interpretivism Research Philosophy and this is termed as Realism. This Research Philosophy is a combination of quantitative and qualitative research study. The research philosophy that is chosen for this particular research study is Realism and is chosen because the research study will follow a mix method research approach.
4.1.2 Research Approach
As it could be seen from the figure given above that there are two approaches for carrying out a research study and these are the Inductive Approach and the Deductive Approach (Saunders et al, 2009). According to Cooper and Schindler (2006) Inductive Approach is related to the Interpretivism Research Philosophy and move from a specific point of view to a general one. The deductive approach is opposite to inductive approach and is related to moving from general to specific and is related to the Interpretivism Research Philosophy. This research study will use the mix method approach comprising of both the inductive approach and the deductive approach.
4.1.3 Data Collection and Analysis
The data for this particular research study will be collected with the help of primary and secondary sources of data. According to Saunders et al (2009) the primary sources are the data collected at first hand by the researcher and the secondary resources are the already published work of previous researches. A survey will be carried out for this research study targeting a sample size of 100 people of Almaty, Kazakhstan in order to get an idea about their taste and preferences. A questionnaire will be developed for this purpose. For answering the research question in terms of feasibility and viability to invest money ethnographic content analysis will be carried out using the secondary sources. For example the main instrument for this research would be official information about the company which is to be analyzed. It is needed to have all the necessary information on H&M and this will accessed easily through their official yearly and quarterly reports from their official web site. 2011 H&M Annual Report is the latest and fullest report available up to this date. It contains wide range of crucial information necessary for this research study, previous year reports could also be used for combating the financial information. It is necessary to analyze the company first and retrieve as much of financial, marketing, and brand information as possible, since the company analysis is a crucial step before the company can enter any new market. So such annual reports can provide with enough information in regards to the company’s financial position, their marketing trends and habits, and also information on franchising. These reports will provide solid ground for full research. Besides company information, there is a second factor which needs to be thoroughly studied. Since the business opportunity plans to be executed in the foreign market, this market and country should be properly analyzed and assessed. Recently, Ernst & Young, which is known and respected globally, made a report: Doing Business in Kazakhstan (Ernst & Young, 2011). This report gives a good amount of relevant information in regards to opening business entity in this country. First, it provides with information on types of legal entities and how to establish a legal presence. Moreover, such informative report provides researcher with scope economic information in the country and options for running business. This report would provide me with information on taxation, legal framework and initial information which would a reliable source to study Kazakhstan regulations and market. So by acquiring information on Kazakhstan market and its business opportunities this research study contribute to a more thoroughly research if the venture would be viable in the local market. Furthermore, in order to gain more information on the local market and economy in general, trusted internet resources such as Index of Economic Freedom and Doing Business will be used. Both of these resources provide important information on economic resources, local market trends and options for opening up venture in this country .Moreover, both of these resourced outline key statistics and already analyzed research on economic information in the country. By analyzing available information, it could be seen that Kazakhstan is in spot #47 in global ranking, and by researching all the data available from these resourced could provide the research with a good deal of crucial data and information (Heritage , 2012). Thus by using these secondary sources the research question will be answered.
4.2 Ethical Considerations
Ethical Consideration is fundamental for the primary data collection. This research study will be conducted keeping in view the ethical issues and laws of the area for conducting the survey. No personal harm would be done and no personal information will be asked from the respondents. This research study will be carried out for the academic purposes and will not be used for any other purpose. Permission from the university will be taken in order to conduct this research study. The secondary data will be attained and utilized keeping in view the strict rules of plagiarism.
5. Project Work Plan and Deliverables
The time allotted to each portion of the project could be described with the help of the following Grantt chart:
Time in Weeks 1 2 3 4 5 6 7 8 9 10 11 12
A Selecting the research tile and getting the title and proposal checked
B- Studying the previous literature available relevant to the research topic
C- Preparing the research methods to be used
D- Finalizing the research methodology
E- Gathering the required primary data
F- Presenting the results and data into charts
G- Converting data into results and findings and performing the analysis
H- Writing the conclusive points
I- Compiling the whole thesis
J- Presenting the finished thesis report
Table 1
References
Almaty, R., (2009). The official site of ALMATY city: History. [online] Available at: http://www.almaty.kz/page.php?page_id=384&lang=2 [Accessed: 5 Aug 2012].
Christ,P. (2008). Know This: Marketing Basics. KnowThis Media.
Cooper, D. R., and Schindler, P. S., (2006). Business Research Methods, McGraw-Hill Irwin
Cumming, D. (2010). Venture Capital: Investment Strategies, Structures, and Policies. John Wiley and Sons.
Doing Business (2011). Ease of Doing Business in Kazakhstan. [Online] Available at: http://www.doingbusiness.org/data/exploreeconomies/kazakhstan [Accessed: 5 Aug 2012].
Engle, J. (2007). How to Open and Operate a Financially Successful Retail Business. Atlantic Publishing Company.
Ernest and Young (2011) Doing Business in Kazakhstan. [online] Available at: http://www.invest.gov.kz/upload/docs/en/fe7b5ae9e350a23a97174ac289889332.pdf.
H & M (2012) H&M offers fashion and quality at the best price. [online] Available at: http://www.hm.com/entrance.ahtml?orguri=/ [Accessed: 5 Aug 2012].
H & M Annual Report (2011). Investor relations. [online] Available at: http://about.hm.com/content/hm/AboutSection/en/About/Investor-Relations.html [Accessed: 5 Aug 2012].
Heritage (2012) Kazakhstan Economy: Facts, Data, & Analysis on Economic Freedom. [online] Available at: http://www.heritage.org/index/country/kazakhstan [Accessed: 5 Aug 2012].
Kazakhstan Today (2012) Kazakhstan Today. [online] Available at: http://www.kt.kz/index.php?lang=eng&uin=1133435211&chapter=1153468039 [Accessed: 5 Aug 2012]
Ramsey, D., and Ramsey, J. (2010). The Everything Guide to Starting and Running a Retail Store: All you need to get started and succeed in your own retail adventure. Everything Books.
Saunders, M. Lewis, P., and Thornhill, A. (2009), Research Methods for Business Studies, 4th edition, Essex: Prentice Hall
Saunders, M., Lewis, P. and Tornhill, A. (2009) Research Methods for Business Students, Fifth Edition, Italy: Rotolito Lombarda.
Sidhpuria (2009). Retailing Franchising. Tata McGraw-Hill Education.
Tungate, M. (2008). Fashion Brands: Branding Style from Armani to Zara. 2nd ed. Kogan Page Publishers.
