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Introduction
The ongoing process of internationalization raises potential opportunities to multinational corporations worldwide. Over the last decades, there has been a shift in concentration of economic power from the western world to Asia, and this change is powered by emerging Asian economies such as China and India. Currently China is the world’s largest consumer market that has a great potential for further growth. In this context, multinational businesses worldwide seek an opportunity to enter the Chinese market in an attempt to enhance their sales volume and to strengthen global presence. This paper will evaluate a hypothetical company’s (X-fashions) scope of expanding into the Chinese market and selling their fashion apparel products there.
Product/industry analysis
The scope of selling fashion apparels for youngsters in China will be evaluated in this section, giving particular emphasis to the competitiveness of the Chinese clothing industry. The Porter’s Five Forces analysis of the Chinese clothing industry seems a relevant approach for evaluating the scope of fashion apparels in the country.
The intensity of competition is high in the Chinese textile industry because China is one of the world’s largest exporters of apparels along with U.S and EU. There are a large number of well-established market players in the industry, and therefore, it is really a challenging task for a clothing manufacturer/distributor to increase its share of the Chinese market.
Threat of new entrants
Since the textile industry is labor-intensive, nations having cheap labor can gain significant advantages. Reports indicate that labor-costs are rising in China, and therefore, cheap labor is no longer available in the Chinese textile industry. In this context, apparel manufacturers from emerging low labor-cost countries like Vietnam, Sri Lanka, and Bangladesh are likely to enter the Chinese market. Hence, the threat of new entrants is relatively high in the industry.
Threat of substitutes
Threat of substitutes is low in the textile industry because there are no close substitutes to textile and apparel products. This market scenario adds to the scope of selling fashion apparels in the Chinese market.
Buyer power
The bargaining power of buyers is high in the textile industry because a significant percent of customers buy fashion apparels in bulk quantities, and hence they enjoy a great bargaining power. However, customers do not bargain over branded apparels.
Supplier power
The bargaining power of suppliers is low in the textile industry as there are numerous potential suppliers operating in the market. In addition, today apparel manufacturers/dealers have an extensive exposure to low-cost offshore materials and labor and hence suppliers do not have a bargaining power over manufacturers.
Company analysis
In this section, a hypothetical company called X-fashions is defined giving particular emphasis to the size and resources, competitive advantages, positioning, target market, and overall orientation of the firm.
Company size and resources
X-fashions, an American based multinational manufacturer of fashion apparels, has been in market since 1995 and the organization enjoys a strong global market presence. The company focuses specifically on the production and distribution of fashion apparels for young people aged 12 to 30. As of March 2016, the company has an operational presence in 29 countries and employs over 30,000 workers worldwide. Although the company has a strong business presence in American and European markets, it holds only a poor share of the Asian textile market. The X-fashions operates its own manufacturing facilities in major cities of US and UK in addition to low-cost countries like Bangladesh, Mexico, and Sri Lanka. For the last few years, the company has been taking vehement efforts to improve its market share in Asia considering growth potential of emerging Asian economies like India and China.
Competitive advantages
Since X-fashions is a multinational corporation with an operational presence in 29 countries worldwide, the company can take advantages of economies of scale. For instance, the organization is able to save on advertisements and logistics activities when it operates business on a large scale. Risk diversification is another competitive advantage of X-fashions because the company has a strong global presence. Therefore, the organization is able to seize the opportunities emerging in the global market environment bearing a moderate amount of risk. A key competitive advantage of X-fashions is that the company has a strong social media presence, which can determine a business’ customer management efficiency to a great extent today. In addition, the firm has an enhanced brand image that keeps this fashion apparel brand recognizable throughout the global markets. Such a strong brand value can really benefit the company to cut down its promotional expenses notably and hence improve profitability. Emerging demand for Western fashion apparels in Asian markets also adds to the competitive advantages of X-fashions.
Positioning
While analyzing the positioning of the X-fashions, it is identified that consumer perception of this brand is promising in American and European markets. Since X-fashions has been in market for over the last two decades, it is not such a difficult task for the company management to influence the consumer perception of the brand. The X-fashions management gives importance to brand positioning efforts so as to enhance value for its products and services. When it comes to brand positioning, it seems that a unique fashion design together with improved customer relationship management benefits the organization to differentiate itself from competitors. The company is prominent for its innovative product design that incorporates fashion and culture. As the firm’s product designs give specific focus to local cultural aspects, the X-fashions enjoys a great level of cultural acceptance.
Overall orientation
According to Narver and Slater (990), “market orientation is the organization-wide generation of market intelligence pertaining to current and future customer needs, dissemination of the intelligence across all departments, and organization-wide responsiveness to market intelligence” (Egboro, introduction). While analyzing the overall market orientation of the X-fashions, it appears that the organization takes great efforts to stay informed of the current and future customer needs. The company performs periodical market surveys and researches to be aware of the changing market trends and thereby remain competitive in the marketplace. In addition, the X-fashion’s top management conducts periodical sales team meetings in order to discuss likely shifts in demand and product designs. This practice really benefits the organization to plan for the future effectively and hence to frame proactive strategies to address expected future market shifts.
Target market
Currently, the X-fashions is planning to expand its business into the Chinese market. However, it would not be a sensible approach for the company to focus on the Chinese textile market as a whole because China is the world’s largest consumer market. It appears to be better for the company to target specifically on big cities in China such as Beijing and Shanghai as the company markets fashion apparels. It is obvious that people living in large cities generally follow a modern lifestyle and they are likely to buy fashion apparels. Furthermore, today a significant percent of young people work in big cities in an attempt to explore better job opportunities and living standards. These favorable market situations in big cities can really benefit the organization to cut down initial entry costs associated with promotion.
Proposed tactics
In order to enter the Chinese market effectively and to achieve brand positioning fast, the X-fashions has to design and implement a sensible marketing mix strategy. The company should introduce a diverse line of fashion apparel products so as to meet the tastes and specifications of different customers. As discussed already, the organization may focus on large cities in China such as Beijing and Shanghai to obtain a great exposure to a huge number of potential young customers. A premium pricing strategy along with extensive social media promotion can benefit the X-fashions to take great advantages of the growing potential the Chinese fashion apparel market. It is recommendable for the business to invest heavily in marketing campaigns initially because Chinese people may not be much aware of the brand. Although this approach may cost the organization heavily in the initial phases of business expansion, it would be really beneficial for the X-fashions to add to its brand recognition. For instance, the company is advised to convene special events as part of sales promotion because such events can gain wider market coverage. Furthermore, the X-fashions management should include local candidates in its workforce so to be well conversant with the cultural traits of the Chinese market.
Strategic plan
Since X-fashions is new to the Chinese market, a well-structured strategic plan is necessary for the company to promote its business in China. The following part will discuss the details of the firm’s strategic plan.
Product positioning and modifications
For product positioning, it is better for the company to rely on the ‘features approach’ that attempts to communicate to the consumers about the brand advantages that are measureable, tangible, and specific to the particular product category. This product positioning approach can really benefit the organization to capture market attention quickly because X-fashions has been in market for over last two decades with a significant global market presence. Therefore, the management can easily convince customers that this brand has superior advantages over its competitors. In addition, the company should make necessary changes to its product lines from time to time so as extend the product life cycle and to keep customers loyal to the brand in the long term.
Pricing strategy
As suggested already, it would be better for the organization to adopt a premium pricing strategy to establish its business in China. Under the premium pricing strategy, a marketer keeps the price artificially high with intent to promote favorable perceptions of the product among buyers. This pricing strategy will certainly benefit the company because there is a common belief among fashion-conscious customers that high-priced items are of superior quality. Hence, a premium price may help the organization convince consumers that they would be delivered exceptional quality items (Bidgoli). In the textile industry, it seems that consumers are willing to pay a premium price for trendy designs and therefore the proposed pricing strategy would add to the competitiveness of the business.
Distribution strategy
Since the company has potential financial background, it is advisable for the company to establish its own logistics network in China so that it does not have to depend on external logistics providers. In terms of distribution, it would be good for the company to rely greatly on internet to enhance the efficiency of the firm’s distribution network. To make it clear, the organization may integrate internet-based distribution facilities such as online booking and tracking. This distribution strategy can really assist the company to ensure timely and uninterrupted supply of goods and thereby achieve customer loyalty in the long-term.
Promotional strategy
In the current market context, it is recommendable for the organization to give particular emphasis to social media marketing because today there is a growing volume of customers buying apparel items online. The most potential feature of social media marketing is that it can benefit the X-fashions management to reach a wide range of customers at cheaper costs. Another advantageous feature of this promotional strategy is that it can help the organization collect real-time customer feedbacks and thereby respond to them appropriately (Briz and Rose, 132). In addition, the company may also rely on other internet-based promotion techniques such as You Tube videos, online discussion forums, and pay per clicks.
Growth stimulating factors and constraints
There are many factors that determine the success in marketing fashion apparels product to Chinese customers. The primary factor is that China is a communist nation, and therefore, it may not be possible for the X-fashions to run its business smoothly in China unless the company’s operations are in strict compliance with laws and regulations of the Chinese communist government. Today the Chinese government pays particular attention to environmental sustainability in the c,ontext of global warming and climate change, and hence, the firm may be forced to abide by the environmental regulations of the country. In addition, China is a country that gives great emphasis to its cultural traditions. Therefore, the X-fashions can achieve marketing success in China only if the company focuses specifically on the cultural norms and beliefs of Chinese people. At the same time, there are a few constraints too that can potentially impede the marketing efforts of X-fashions in Chinese market. Mainly, the degree of competitive rivalry is increasingly high in the Chinese textile industry because a large number of firms are marketing high-quality fashion apparel products in the Chinese market.
Conclusion
The high intensity of competitive rivalry along with increased threat of new entrants limits the scope of X-fashion’s business in the Chinese market to some extent. However, the long experience in the clothing market together a great brand recognition can assist the company overcome such threats and gain a dominant position in the Chinese market. It is recommendable for the company to adopt a premium pricing strategy and a social media marketing approach to support its brand positioning in China. Finally, the company is advised to establish its own logistics network in China so as to enhance smooth, fast, and uninterrupted delivery of products to suppliers.
Works Cited
Bidgoli, Hossein. The Handbook of Technology Management, Supply Chain Management, Marketing and Advertising, and Global Management. US: John Wiley & Sons, 2010. Print.
Briz, Brooks and Rose, David. Getting a Social Media Job For Dummies. US: John Wiley & Sons, 2015. Print.
Egboro, Felix. “Marketing Challenges of Satisfying Consumers Changing Expectations and Preferences in a Competitive Market”. International Journal of Marketing Studies. (2015). 7(5).
