Versace PEST & SWOT Analysis of China
Versace PEST & SWOT Analysis of China
Political Environment:
Government regulations: China’s political environment is unsettled with the existence of both formalized and informal rules. However, the country has for the past few years tried to work on a legal framework to promote e-commerce (Schürmann, 2016).
Legal aspects: The development of rules and regulation to govern business operations on the e-commerce platform are still at the rudimentary stages. Currently, the country does not have well-defined legislative frameworks for taxation and intellectual property rights. There are also no legislative guidelines on digital signatures, electronic contracts, consumer rights and privacy (Schürmann, 2016).
Economic Environment: China’s economy has experienced tremendous growth in the past few years but recently, the growth rate slowed down and has remained almost stable recording a GDP growth of 6.9% in 2015 down from an annual rate of 7.3% in 2014. The first quarter of 2016 recorded a 6.7% growth, however, this is within the government’s expected range of 6.5% to 7%. Trends like high inflation and increase in property prices are worrying (Zhang et al. 2016).
Social Factors: Despite a population of 1.375 billion and a literacy level standing at almost 90%, the country has only 420 million people using the internet. E-commerce has increased preference for online shopping, but a high number of people still prefer to go shop manually as they try to avoid the risks associated with the poorly regulated e-commerce business platform (Schürmann, 2016).
Technological factors: Even with appropriate physical technology like mobile phones and computers, the poorly developed online platform hasn’t encouraged extensive exploitation of available technology in business (Wen, 2016). With a population of high uncertainty avoidance and long-term orientation, the issues surrounding e-commerce are worsened. The credit card penetration rate in China is also very low, by 2005 the rate was only 1%. This is attributed to the absence of a well-developed online credit card system of payment.
SWOT Analysis of Versace:
The Chinese market has opportunities that Versace can exploit and get reasonable profits. With Versace enjoying good international reputation (Cunningham, 2016), it will obviously attract customers for its luxury clothing. Secondly, the cheap labor in China will reduce the company’s cost of doing business in terms of reducing outgoings on salaries, wages and commissions. The economy is also relatively stable; since Versace clothing targets the high and middle income earners, the high inflation rate may significantly affect business. To adapt to the market, Versace must reduce dependency on online technology and major on creating physical outlets for its luxury clothing. This will enable it to reach most of the shoppers who prefer shopping the manual way. The company must also identify the location of its target market and should majorly concentrate on the up market segment which may not have high uncertainty avoidance rate. The target market for Versace’s luxury clothes should be the cities of Wenzhou, Beijing, Hangzhou, Wuxi, Tianjin, Dongguan, Shanghai, Guangzhou, Shenzhen and Suzhou (Cartier, 2016) as they have most of the targeted upper and middle class customers.
The Chinese market is good for Versace’s luxury clothing and the company should consider exploiting it. As discussed above, the strength and opportunities available outweigh the company’s weaknesses and threats respectively since there is an alternative to the later. As China opens up to international businesses, proper legislative frameworks that will enhance e-commerce are being improved.
References
Zhang, P., Liu, X., Yuan, F., & Zhang, Z. (Eds.). (2016). Annual Report on China’s Economic Growth: Macroeconomic Trends and Outlook. Springer.
Wen, S. (2016). Marketing strategies: Starbucks in China.
Schürmann, G. (2016). A Changing Regulatory and Political Environment: What Impact Does it Have on the Analysis of a Financial Institution?. In Rating von Finanzinstituten (pp. 105-118). Springer Fachmedien Wiesbaden.
Cunningham, P. A. (2016). Fashion in Popular Culture. A Companion to Popular Culture, 361.
Cartier, C. (2016). A Political Economy of Rank: the territorial administrative hierarchy and leadership mobility in urban China. Journal of Contemporary China, 1-17.
