The Singapore Fashion Industry - Research Paper Example

Title: International economic environment of business – Singapore Business background The fashion industry in Singapore experiences growth each year. This is fueled by local consumer demand and also high tourism rates that come from diverse international travellers. Fashion trends differ significantly depending on the market of operation, cultural values at the consumer level, and the efficiency of the business infrastructure associated with advertising opportunities. Before entering a new market, in this case Singapore, understanding the micro- and macroeconomic factors that drive business success or failure is imperative. The Singapore fashion industry, in its current form, is a $1.1 billion industry (mfa.gov.sg, 2008), presenting lucrative opportunities for new fashion companies to make their mark in the country. Economic and political factors The Minister of Trade and Industry identifies that Singapore is a quality country in the pursuit of raising funds, including venture capital and banking loans (Satapathy, 2003). The country has a well-developing banking and investment system that offers securities trading, export and import finance financial services and documentation (Loh, 2010). When establishing a new fashion business in Singapore, the high volume of credit availability makes expansion and sustainability possible for capital production. There are generally no risks when it comes to the procurement of finance and financial support in the country’s world-class investment and business infrastructure. In regards to politics, Singapore receives considerable business support from the country’s leadership and Ministry of Trade and Finance. Singapore is considered one of the easiest locations to conduct business, with ample market availability and favourable taxation structures. Smaller-sized companies without massive revenue streams experience full tax exemption on the first $100K in annual profits for the first three years after launching companies (Sheth, 2010). In addition, governmental tax reductions provide further partial exemptions on annual profits reaching $300K, taking the corporate tax rate from 20% to 9% after launch of the business (Sheth). This is one of the most favourable corporate tax rates internationally. The economic environment, in regards to consumers, is also very favourable for new market entry in fashion. The unemployment rate in 2009 was only 3.3 percent, spurred by the government’s Jobs Credit programmes and reskilling/training programmes that provide better job opportunities and a more skilled workforce (tourism.sa.gov.au, 2010). In Singapore, the government is supportive of international companies and works consistently to raise the disposable income ratios of multiple consumer groups by focusing on job growth. An emerging fashion industry should have no problem recruiting a qualified and stable workforce with top-quality education provided by the country’s many universities with strict standards for entry and graduation. Cultural factors English is one of the most widely spoken languages in Singapore (Herrick, 2008). This is significant in a country that experiences tourism from international customers at a rate of approximately 9.8 million each year (ivythesis.typepad.com, 2010). The majority of travellers hail from countries such as Australia, China, Japan, the United Kingdom and the United States, regions where English is common practice in education and the conduct of international business (singstat.gov.sg, 2010). Language barriers at the consumer level do not represent any significant business risk for new market entry. Keng (1995) identifies that there is a growing cultural importance of the family unit in Singapore, supported by a national Family Day where Singapore citizens explore their recreational activities as a family unit. This cultural aspect represents opportunities to gain higher sales revenues if promotional materials are geared toward making shopping and fashion brands part of the family culture. Women are currently accepting minimalism in their fashion choices, with a flair for international modernism in design. Mercury Marketing, L’Oreal Professional and Calvin Klein partnered in a recent runway show that “showcased distinct forms and contemporary minimalism” (mfa.gov.sg, 2008, p.7). This show recorded 20,000 visitors over a 10 day period with a blend of international and local designers. Visual analysis of clothing illustrated in these shows featured very classic dresses for women, with child models showcasing youth fashions. The current trend toward minimalism represents the bulk of the female shopping markets. The consumer profile in Singapore, as a mass target group, are very discerning individuals and very familiar with international fashion brands (austrade.gov.au, 2010). When considering fashion needs, the Singapore consumer looks for aesthetic features on clothing, perceived quality and value, and have already established considerable brand recognition (austrade.gov.au). Culturally, the markets represent sophistication, with critical analysis of clothing options, and recognition of many international fashion brands. Entry strategy A fashion company looking to set up operations in Singapore can consider several options due to the minimal risks associated with governmental influence and the investment infrastructure in the country. Entering the Singapore fashion market involves establishing a hub of operations that consists of either direct foreign investment in the construction of a manufacturing facility or direct importation of goods produced domestically. Both strategies have benefits and the infrastructure, consumer demand levels, and governmental influence favour virtually any entry strategy. However, Canadian companies advise that entering the Singapore market with the same methodology used in North America will lead to failures. It is advised that entry strategies involve more production of marketing materials in order to develop relationships with consumers in Singapore (innovationcentre.ca, 2009). Because there is already brand recognition and preference for both domestic and international fashion marketers, entering the market without preliminary relationship management tactics will likely provide the new fashion brand with obscurity among large fashion players. Well-established fashion manufacturers will require a significant budget investment in providing brand identification and making the firm or clothing line have meaning for the regional cultures. Differentiating the new fashion brand from existing competition is the first step in new market entry through concentrated advertising. Each new fashion company is going to have their own capital requirements whether deciding to build a manufacturing and distribution hub in Singapore or simply import their domestic-made goods into the region. Land procurement costs in Singapore are considerably high and there is little territory that is not currently developed. Importation strategies are the most cost-efficient and easy to secure once preliminary brand identification has been established through advertising. Because markets in Singapore are fragmented, preliminary quantitative and qualitative studies on current behaviour and attitudes toward fashion from male, female and youth markets should be undertaken to identify trends or risks. Companies that choose importation as the appropriate market entry strategy will be facing heavy, concentrated competition in the main regions of Singapore. Currently, very established fashion retailers exist in this market environment such as Tangs, a segmented store with multiple levels offering fashion apparel, technologies, kidswear and office/lifestyle clothing options. Additionally, Japanese retail powerhouses such as Takashimaya operate with multiple floors of lifestyle clothing and international brands such as Bvlgari, Hermes, Diane von Furstenberg and Coach (limomaxi.com, 2008). The importing company will require procurement of a self-branded retail facility or find adequate retail space within existing fashion brand infrastructures. Modification of product involves much more than simply an adaptable production line, it involves strategic consideration for promotion and advertising as a means to create better consumer sentiment over that of competing brands and retailers. Product modifications for Singapore Fortunately, the fashion industry in this country experiences growth year-on-year and is supplemented by very high tourism rates that represent over £12 billion in total revenues from tourists (ivythesis.typepad.com). As the newly launched business attempts to gain market share from competition both domestic and foreign, there are extended service-related components that require consideration. Singapore consumers are very familiar with consumer care sectors and demand full customer service and product support as with other international countries or manufacturers. This demand is found in companies such as Kimberly-Clark, L’Oreal, Johnson & Johnson, and Unilever (edb.gov.sg, 2009). Customer service will be expected as it is provided by the current market saturation of competition that is present in Singapore. This will represent excess costs of establishing a customer connection system or customer relationship management software system to provide guarantees, warranties, and other consumer care issues. There must be a budget put toward what would be perceived as a quality support system for sophisticated and discriminating customers. The extent of customer support needed represents a budgetary risk, however one that will likely be unavoidable. Extensions of existing support services or creation of outsourced agencies and professionals will need to be considered prior to entry. Foreign investors with domestic manufacturing facilities will need to consider the local fashion needs of consumers and be tailoured with these demands in mind. Minimalism, the sun dress concept, and modernism in design is the favoured product preference for the female consumer. This will require addition of new line production capabilities, including the labour support needed, operational upgrade costs, and with flexibility for new design offerings. In Singapore, it is common practice to purchase textiles and then simply dispose of them in landfill sites (Morgan & Birtwistle, 2009). There does not appear to be an ecological movement for sustainable fashion disposal, thus no budgetary risks or corporate social responsibility requirements placed on business strategists. There is a high frequency of keeping fashion products only for a short period of time before disposing them, thus representing a need for flexibility and adaptability in production coordination and implementation for new clothing offerings. Female consumers tend to buy cheaper shoes with high perceived quality due reduce guilt created by high replacement ratios (mgm409.wikispaces.com, 2005). Footwear represents a $443 million industry in Singapore, thus fashion businesses with better capital positions can diversify their product lines in a fast-turnaround fashion environment with consumer behaviour patterns favouring rapid replacement and disposal of fashion garments. Marketing strategies Marketing will require a coordinated integrated marketing communication strategy that begins pre-launch, with a post-launch duration of approximately six months. Pre-launch activities will involve heavy concentration of non-personal selling, including advertising and product placement in a growing film industry produced locally in Singapore. Singapore has a first-class transportation infrastructure consisting of subways, buses and trains that serve the entire region (app.www.sg, 2009). Non-personal selling at pre-launch will consist of standard advertisements that announce the launch of the new fashion brand, using local models, to create recognition with target buyers. Since there is higher usage of public transportation systems than in other international locations, making use of the marketing infrastructure already in place provides a more in-your-face advertising awareness. A fashion manufacturer with pre-launch advertising can coordinate with government, ad agencies, or city officials to procure ongoing advertising space on these systems. Product placement efforts, as part of pre-launch strategy, will require gaining an understanding of the popular culture driving television or film entertainment in Singapore. Key programmes with high concentration of viewership, based on contracted agreements with producers, can spotlight the brands and give them higher visibility before launching the new fashion line or lines. The marketing goal is not to cheapen the new fashion brand, thus incentives-based sales promotions such as discounting and coupon redemption will create consumer perceptions of low quality, value-minded merchandise. Post-launch, sales reports and quantitative surveying of consumer groups will determine who the most valuable target markets are. Once the brand is recognized by these consumers, the marketing strategy will seek sponsorship for publicity and inclusion in the many fashion catwalk events occurring in Singapore. The brand logo should be showcased and businesses be prepared to underwrite multiple levels of sponsorship for active involvement in growing fashion events in order to reach more markets. International consumers already familiar with the fashion brand require direct marketing in affiliation with local hotels, restaurants, or other revenue-building tourist locations. Letting customers familiar with the fashion line understand that the brand has presence in Singapore will gain loyalty revenues without considerable investment in concentrated promotional materials. After establishing the fashion line, direct mailing instruments can be considered, produced in local management teams or with the domestic manufacturing marketing division. V.I.P. events or exclusive bonuses, not discounting incentives, will add more appeal to the fashion line and give targeted consumers motivation to experience the full offerings provided by the brand. These are low-cost marketing angles that can be developed monthly or as periodic as sales expectations determine. Dealing with risks The largest risk to the new business model is the presence of domestic and internationally-based competition that has saturated this market environment. In order for the new fashion line to remain competitive and maintain an edge over established or developing fashion manufacturers, differentiation of product is necessary. Large, well-established names such as Coach, Jimmy Choo, Georg Jensen and Hermes (among countless others) have the advantage of a strong brand and considerable positive consumer sentiment. Risks with high competition require dedication to monitoring and establishing a system of controls over marketing effectiveness. “Where branding is weak, unique selling points and competitive pricing are crucial to capture the mass market” (austrade.gov.au, 2010, p.1). Flair for innovation in design or establishing a pricing structure that brings no negative transparency will be necessary in order to outperform the many fashion brands already favoured in this region. By choosing an importation strategy, negating foreign investment in manufacturing in a high-cost real estate market, more emphasis on competitive pricing can be tested and then monitored for effectiveness. A comprehensive revenue management system is required to locate redundancies and eliminate them from process before new pricing policies can be established. As the brand becomes more familiar, so will the pricing and differentiation risks. There is a lack of understanding with most Singapore consumers about the impact of their fashion disposal methods on the environment (Morgan & Birtwistle). This represents a potential edge for dealing with the risks associated with a potentially weak brand strategy. Informative literature and introduction of greener textiles can work as a contingent risk management tool in the event that differentiating between competitors meets with less-than-expected sales results. Offering consumers information about their fashion consumption patterns, combined with governmental or environmental statistics, gives a new market entrant an edge and provides extended value for the fashion line. Low unemployment rates and highly-educated workforces pose a risk to the human resources model in relation to recruitment and retention. Since local support will be required as salespersons or other brand representatives, there is risk posed associated with potential high turnover rates. The environment is favourable for employees to maintain a certain level of control as replacement careers are widely available; a substitute. Therefore, compensation policies must be both competitive and have an edge to appeal to retention needs. Since this business will be operating in a foreign environment, the ability of locals to deal effectively with the customer service needs of the domestic consumer target groups is vital. There must be devotion to incentives packages, bonus structures, and perhaps even employment contracts to avoid the problems with training and then retraining an employee-controlled labour market. 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