Kohl’s International Expansion
Before any company or organization proceed with plans to expand internationally, the management needs to assess the viability of doing so. Part of assessment is determining the advantages and potential contributions of international expansion to the organization (Hines & Bruce, 2007). The organization may also assess and plan expansion simultaneously. In this way, the management can determine where the organization will invest for foreign expansion and how the organization would do it. Practices in planning and assessment will be applied in this discussion in relation to Kohl’s. Kohl’s is a retail chain store based in the United States and the discussion focuses on the assessment of the viability of the company’s expansion abroad (Kohl’s Corporation, 2011). The assessment addresses specific questions that concerns Kohl’s potential international expansion in a specific host country.
Determining the reasons why Kohl’s should expand internationally is part of initial assessment. International expansion affords organizations a myriad of opportunities to grow and further facilitate development, which is why organizations such as Kohl’s should be able to take advantage of these opportunities. One of the reasons why Kohl’s should expand internationally is because of the existing market abroad (Brooke, 1996; Scarlett & Koslow, 2009). Some corporations would be hesitant to make major investments at the moment because of the economic situation post-recession. Most industry reports shed light on the state of the economy and reports about the retail sector in relation to the economy similarly show existing opportunities for retail businesses such as Kohl’s and determines viability for expansion. A review of industry reports on Kohl’s, for instance, show that at present time, the company is not in a good position to undergo international expansion considering the significant decline in its shares. One of the major factors that has influenced Kohl’s position in the market is the US economy, which has been on the decline in recent years. Moreover, consumer spending decreased during the past three years after the recession, which also significantly affected the US economy (Kamakura & Yu, 2012; Puri & Steffen, 2011). Consequently, economic conditions in the US is not ideal to fuel Kohl’s continued growth. For this reason, the company should be able to look at other opportunities to expand and the broad international market would allow Kohl’s to do so.
Although current economic conditions in the US do not appear favorable for Kohl’s expansion overseas, the company’s unique services could be a viable reason for it to do otherwise but within the international landscape. One of the measures of success among organizations is the ability to compete or to gain competitive advantage. Kohl’s may gain competitive advantage in a highly competitive global market by capitalizing on the company’s unique services that differentiate it from other businesses in the retail sector. Unlike other companies or brands in the retail sector, Kohl’s adopts an off-mall store model. By instituting their own stores, Kohl’s is able to limit expenditure. Moreover, Kohl’s off-mall store allows customers to experience exclusive services (Ireland, Hoskisson, & Hitt, 2008). Since the company’s operations are off-mall, Kohl’s stores occupy wide spaces. For this reason, Kohl’s is capable of accommodating and offering apparel from various brands. Aside from these features of Kohl’s that create competitive advantage for the company, one of the factors that allows it to do so is the company’s cost strategies. Compared to other retail stores, goods and services at Kohl’s are relatively cheaper (Ireland, Hoskisson, & Hitt). Considering economic conditions in recent years, the competitive price of goods at Kohl’s compared to other stores where goods are more expensive drew increased sales for the company. Due to Kohl’s differentiated model and proposition, the company has potential when it comes to international expansion since it can provide unique goods and services to draw the interest of existing and potential markets.
Although retail stores in other countries, especially in developed countries, offer similar services, there are many other countries including developing nations where off-mall stores do not exist. Hence, Kohl’s should target countries where there is little competition for off-mall stores so the company may capitalize on existing customers in these countries. Kohl’s should look into investments in Asia because of the rising economy in the region. Aside from the growing economy, one of the reasons why Asia is an ideal region for international expansion is because of the existing market based on the region’s population as well as existing economies within it that would accommodate retail stores such as Kohl’s. Figure 1 below shows the viability of expanding in Asia considering the growth of retail sales in key Asian countries.
Figure 1. Asian Retail Sector Sales from 2011
Figure 1 above shows that there is an existing market for stores such as Kohl in Asian countries such as China, Hong Kong, Indonesia, Japan, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam. Kohl’s may also invest in Europe but the clothing retail sector, especially in the United Kingdom is saturated due to the number of stores in the region. In Asia, Kohl’s may compete with other companies because off-mall model stores are limited if not absent. Furthermore, Asia is also home to the healthiest economies such as China, Hong Kong, Japan, South Korea and Singapore among others. The aforementioned countries would especially contribute to Kohl’s growth because of the large customer base in the country. Another reason is that the cost of developing businesses in Asia is less than in other regions. Consequently, Kohl’s can limit expenditure while developing opportunities to capture a larger customer base. Overall, Kohl’s should prioritize the Asian market as the region is a viable location for expansion of international operations. For this discussion, the analysis of Kohl’s expansion will be framed within the context of foreign investments in Singapore. Hence, the objective of the succeeding discussion would be to determine the viability of Kohl’s possible expansion in Singapore.
Kohl’s Expansion in Singapore
Furthermore, Singapore’s GDP growth has been consistent over the years. Despite the impact of the economic recession in 2008 and the slow economic growth that it brought about, Singapore’s economy was able to recover in the past few years after 2008. Singapore’s inflation and unemployment rate is also significantly lower than in other countries. Income distribution is also satisfactory in Singapore compared to other Asian countries, which facilitates upward social mobility in the country. Aside from encouraging foreign investments, Singapore also invests in tourism development. For this reason, foreign investors such as Kohl’s would not only be able to tap into Singapore’s existing population but also the tourist population who visit the country not only to engage in tours but also to shop. To facilitate tourism development and foreign investments, Singapore also focuses on infrastructure development. Hence, trading and shipping are more efficient in the country, making infrastructure more dependable and thus, profitable for investors. Kohl’s would be able to take advantage of this as Singapore’s existing infrastructure would be able to improve the flow of goods in the company’s supply chain. Overall, the political, economic, legal, and technological environment in Singapore appear to be workable for companies such as Kohl’s that are planning to expand internationally.
Since Kohl’s operations are differentiated, the organization can independently launch stores abroad without getting into collaborative ventures (Ireland, Hoskisson, & Hitt, 2008). One of the reasons why Kohl’s has gained competitive advantage over the years is because the organization follows a unique model by making off-mall stores. To maintain this standard in its international stores, Kohl’s must take on the transformation of its own to preserve organizational culture instead of striking partnerships or negotiations with other organizations. Kohl’s can develop a standard size store only if it secures locations in Singapore where the economy is significantly driven by consumer spending. Furthermore, primary activities in this country include shopping for clothing or apparel from middle to high-end brands not only for locals but also for tourists. Kohl’s would benefit from the existing consumer in Singapore to launch its international business.
Considering the abovementioned conditions surrounding Kohl’s possible international expansion, the organization’s pros or advantages include its differentiated business and service model. Kohl’s would be able to thrive in the international market because it employs a unique model of service that promotes convenience for customers. The existing market in Singapore is another reason why expanding internationally would be advantageous for Kohl’s. The Singaporean market presents opportunities for Kohl’s to tap new and emerging markets to increase its global market share and revenue.
Figure 2. Consumer Spending in Singapore 2011 to 2014
The impact of the global economic recession, however, is a threat and is therefore disadvantageous because it affects the buying power of consumers, and therefore, the potential sales of retail stores such as Kohl’s. Figure 2 illustrates the impact of recession in Singapore particularly in terms of consumer spending, which only showed signs of improvement in 2014. Since there are both pros and cons to expansion, Kohl’s needs to thoroughly assess opportunities and threats in the market. Hard criteria include the market size in Singapore and its impact on Kohl’s future growth, regulatory and statutory issues that would affect internationalization, competition in the Asian market, and the needs of the local market in the region. On the other hand, soft criteria include economic and political stability in Singapore, as formerly discussed, the availability of human resources to uphold the culture and practices of Kohl’s, and infrastructure to facilitate production and distribution. Other issues that Kohl’s management also needs to address include geographical features in Singapore and the impact of culture and diversity on operations.
Aside from the foregoing issues, other concerns that Kohl’s need to consider involve cultural distance, administrative distance, geographic distance, and economic distance as in aspects of the CAGE framework. If Kohl’s expands in Singapore, for instance, the American company would need to adjust its policies and practices so they would fit with the local culture. Administrative distance refers to the openness of governments in target economies to foreign investments. Geographic distance refers to the distance to target economies as well as the geographical features that would affect operations such as access to transportation and shipping, transportation infrastructure that affects delivery, and climate, among others. Economic distance refers to the gap between economies that would affect Kohl’s operations, especially in terms of spending on labor and employment, infrastructure development, and even currency exchange.
The CAGE Framework
Kohl’s PESTEL, Globalization, and Scenario Analyses
Another way of analyzing the viability of international expansion for Kohl’s is to employ PESTEL (Political, Economic, Social, Technological, Environmental, and Legal) analysis. Political issues that would affect Kohl’s expansion are dependent on the location of the target markets. When it comes to expansion, retailers such as Kohl’s would often look into laws, policies, and regulations of foreign investments. Organizations would more likely invest in countries where laws, policies, and regulations are encouraging of foreign investments such that corporate taxes are reasonable and requirements are less. In Singapore, the government has well established ties with foreign companies because of the extensive retail brands in the country. This proves that foreign investments are viable in the Singaporean market. Singapore’s economy has also grown throughout the years. As formerly noted, consumer spending in Singapore has also improved especially in 2014. For these reasons, the Singaporean economy offers opportunities for Kohl’s to grow through an existing extensive market equipped with buying power due to a healthy economy.
Assessing economic conditions, however, also necessitate a review of the global economic climate. Until today, the global economy is still recovering from the economic crisis in 2008. Although the economy improved over time due to various economic stimuli such as increased consumer spending and improved income distribution, Kohl’s still need to analyze long-term economic projections to determine the viability of developing the business abroad. One of the strengths of Kohl’s is that compared to other retail stores and brands, it offers affordable brands and goods or services to its customers. Considering the impact of recession on the economy, customers in the Singaporean market would more likely be drawn to affordable clothing and apparel such as those offered by Kohl’s. For this reason, Kohl’s may take advantage of these markets because it can provide consumers’ demand for affordable clothing.
Social factors that would affect Kohl’s operations not only include socio-economic status but also culture. A clothing retailer would succeed in a local market where a culture of spending exists, for instance. Influence of popular culture that consequently develops a strong consumer value not just for clothing or apparel but also for brands is also a social factor that affects international expansion. Considering social factors, the Singaporean market proves to be a viable target for Kohl’s expansion. If we look at the market conditions and consumer values in Singapore, we can identify social factors that would allow Kohl’s to acquire market share in the country. Western influence has spread in the East due to globalization and vice versa and this manifests in the popularity of Western culture and brands in Asian countries. Top successful retailers in Singapore are primarily Western brands. Not only do locals frequent these brands but tourists also visit Singapore in order to shop in these stores.
Technological challenges for Kohl’s in Singapore concern infrastructure. As formerly noted, opening stores abroad would necessitate a robust infrastructure to facilitate production and delivery. Hence, Kohl’s need to assess infrastructure, particularly trading and production, in Singapore to determine and assess the efficiency of production and delivery of goods and services to consumers. Moreover, Kohl’s need to develop an effective structure that would facilitate communication between Kohl’s headquarters in the US and the off-mall store in Singapore. To address this problem, the company can take advantage of technologies to bridge the communication gap. The same principle applies to the company’s supply chain. Since US and Singapore are separated by distance, Kohl’s must find a way particularly through the application of technology to make delivery of services faster and more efficient. Kohl’s may look into and exhaust technological developments in shipping and manufacture to improve its supply chain for the Singaporean market.
Environmental and legal issues are similarly dependent to policies and regulations in Singapore. Although Kohl’s is expected to adopt and comply with Corporate Social Responsibility (CSR) standards and practices, the organization must still be mindful of laws and regulations in Singapore in order to ensure that production, operations, transport, and delivery would not significantly impact the environment or violate laws implemented by the local government. One of way ensuring that business development and operations would meet standards is to study foreign investment policies in the country. In Singapore, the government has set policies and standards for foreign investors. Kohl’s need to comply with Singapore’s sustainability standards since the local government is pushing for a reduction in carbon footprint. Hence, the primary issue is for Kohl’s to assess these policies and determine whether it would be able to comply with standards and requirements. Kohl’s may continue to comply with environmental standards and policies by assessing its supply chain and determining operations and other aspects of planning to delivery stages that must be altered in order to decrease carbon footprint and impact on the environment. The primary issue in looking into environmental issues is to ensure that Kohl’s policies would meet environmental standards in Singapore, that operations and practices would not harm the environment, and that the company would be able to establish a physical store in an appropriate and accessible geographical location.
Similarly, studying the legal framework for investment in Singapore is necessary as Kohl’s needs to comply with local laws and policies on taxation, trading, and labor and employment among others (Norton Rose Group, 2010). Although Singapore does not implement significant restrictions for foreign investors since the government is open to this enterprise, Kohl’s must still remain mindful of local laws and policies. Kohl’s, for instance, must comply with requirements such as acquiring permits, following building regulations, and implementing laws for human resources that comply with local labor laws and policies, such as salary standards and acceptable working conditions. The overall PESTEL analysis for Kohl’s is summarized in Table 1 below.
PESTEL Analysis of Kohl’s External Environment
Other aspects of analysis include the impact of globalization and scenario analysis of integrating Kohl’s into the international market. Considering Kohl’s potential international expansion, the organization’s expansion is considered geographical since the plan is to target the Singaporean market. Kohl’s will not change its business model since its off-mall based position is one of its strengths. Hence, Kohl’s growth is through internationalization, which appears to be viable because of globalization. Through globalization, retail organizations such as Kohl’s find it less complicated to look for target markets abroad and expand internationally. The strategic diamond also justifies the potential of Kohl’s international expansion. The strategic diamond focuses on five aspects – arenas for expansion, vehicles for expansion, staging, differentiators, and the economic logic of doing so. We have already established Kohl’s differentiation, such that it is an off-male based store that sells low-cost brands. In terms of arenas for expansion, Kohl’s may expand internationally by developing physical stores. Through international expansion, Kohl’s may take advantage of robust economies not only in Singapore but also in other countries in Asia such as South Korea, and Japan, specifically in key cities such as Seoul and Tokyo, among others, where tourists abound. Hence, aside from targeting local consumers in these host countries, Kohl’s may also take advantage of tourist populations that frequent Singapore in order to shop clothing and apparel at known brands. Kohl’s can make the store experience in Singapore tourist experience by transforming the store through destination marketing. Vehicles for international expansion involve licensing and franchising and international development in general. International development may come in the form of developing warehouses for storage and employing an efficient shipping system for raw materials or product transfer and delivery.
In terms of staging, Kohl’s may start by capitalizing on the company’s strengths that set it apart from other companies. Kohl’s may offer brands that have not penetrated the Singaporean market. Nonetheless, Kohl’s must remain loyal to its mission and vision of offering affordable clothing or apparel brands to consumers. Kohl’s will retain its affordable pricing in order to accommodate the needs of consumers that value practicality over luxury as a result of the global economic recession and the slow economic growth. Overall, the analysis of Kohl’s internal and external environment prove that there is an existing market for the company but it needs to determine viable local markets and take advantage of its business model to do so. Kohl’s viable market is the Singaporean market because of the potential market population in this country and the healthy economy, as well as other opportunities to expand in neighboring countries after its success in Singapore.
Kohl’s Global Expansion
One of the greatest challenges for Kohl’s would be to meet the demand after international expansion. When it comes to hosting customers around the world, Kohl’s needs to restructure its supply chain in order to meet the demand for goods and to deliver these goods within an acceptable period of time. It would not be as simple as creating an online store because this also involves the development of infrastructure to accommodate the storage and delivery of goods to various parts of the world. Kohl’s must look into opportunities to expand internationally but the organization needs to develop a supply chain that would be able to deliver goods and services to the target market population, especially because of issues concerning distance. Targeting Singapore, for instance, would prove to be challenging in terms of the delivery of services because of the distance between two countries. Furthermore, Kohl’s would have to address issues concerning culture in Singapore, which is different from American culture, and compliance to environmental and legal policies as formerly mentioned.
POLC Framework
Using the P-O-L-C framework, Kohl’s can launch a plan for international expansion. Through planning, Kohl’s can set objectives (strategic planning), which should include the development of an online retail store, streamlining the company’s supply chain to make international expansion possible (tactical and operational planning), assessing the internal and external market environment, and determining the viability of international expansion for the company. In terms of organizing expansion, Kohl’s would need to review the local labor market in Singapore in order to determine how to structure the organization abroad. Part of organizing is also assessing needs in management, specifically the selection of well-trained managers who would be able to handle the difficulty of adjusting in a new work environment and dealing with human resources from a different cultural background. Designing jobs must match the needs of the organization in a foreign setting. Leading, on the other hand, concerns the involvement of managers. As formerly noted, Kohl’s must select a skilled manager who would be able to handle the demands of a new work environment. It is important to appoint a manager from Kohl’s to ensure that operations abroad would be in line with the company’s practices and operations. Controlling involves the assessment of performance. Company managers also play an important role in ensuring control within the work environment. Kohl’s priority is to ensure that human resources’ actions and behaviors comply with organizational mission and vision. Managers must then be able to communicate Kohl’s goals and objectives and manage in a way that human resources would work toward these aims.
Strategizing in P-O-L-C
Conclusion
Based on the foregoing discussion, there are various opportunities for Kohl’s to expand internationally particularly in Singapore. Nevertheless, the company should go about the transformation slowly due to risks and threats, specifically the slow growth of the global economy since the recession. Kohl’s should, in the meantime, remain local and work instead towards planning to facilitate seamless international expansion. Current data about the retail industry show that Singapore is an untapped market that Kohl’s can take advantage of. Considering the internal and external environment of the company as well as the retail environment in Singapore, the company take advantage of increased consumer spending and amenable economic and policies in the country that facilitates growth of foreign investors such as Kohl’s.
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