Osiyan Paris Pestec Analysys - Case Study Example

OSIYAN PARIS PESTEC ANALISYS POLITICAL FACTORS TRADE ISSUES INSIDE EU  (Fojtíková, Nations that are member s of the EU have a joint external trade policy, in which the European Commission discusses trade deals and trading blocs with foreign nations. EU member states have created a common market through which the nations are prevented from importing goods from outside nations at low prices and re-selling them to other member states at high prices. There is also free movement of goods within the member states through the common market. Necessary retaliation or trade protection measures, management of export policy, and stipulation of common customs tariff are collaboratively done by the European Commission and the Council of Ministers. THE RELATIONSHIP BETWEEN THE UK AND THE EU  (Archick, Mix and Derek, 2012). EU member states have a history of tensions among them. The UK and France are good examples of this. While the UK wishes to have the union’s exemption when it comes to its sovereignty as a nation, France seeks greater assimilation into the union. When it comes to particular aspects such as issues regarding home affairs, justice and the euro, the UK is disintegrated from other member states of the EU. ECONOMIC FACTORS After going through a recession that lasted for eighteen months and a lot of uncertainty in the economy, the Eurozone experience an economic growth of 0.3%. Despite the fact that the growth is slow, there is a lot of market optimism. For this reason, economic growth in the European region is anticipated to increase by 1.1% by the year 2014 (Monk, 2013). According to Kirkup (2014), the UK, which was hit by the recession six years ago, has made significant recovery with an n economic growth of 1.9% since then. Over the next 5 years, the global luxury industry is expected grow by 35%; during the past year, it grew to $300 Billion (Euromonitor, 2013 and Hsu, 2013). The main reason behind the growth is the evolution of ‘accessible luxury’ brands as they are growing in popularity, especially since they are good for the mass market (Hsu, 2013). Due to the fact that Osiyan Paris offers premium jewelry pieces, availability of accessible luxury brands through the mass market is beneficial and it appeals to more people. SOCIAL FACTORS Globalization has enabled global expansion of Multinational Corporations (MNCs). As a result of the growth, there has been rise of middle and upper middle class individuals around the globe (Doran, 2012). These numbers are expected to increase from the current 420 million people to 2 billion people by 2030. Moreover, the overall general consumption by middle class people is predicted to increase from $5 Billion a year to $30 trillion by 2030 (Jackson, 2013). Middle class consumers make the most lucrative consumer demographic as a result of the increase in their purchasing power (Hutzler, 2011). The “accessible luxury” market has developed due to a bridge brand that typically operates at the low end of luxury and presents simply high enough prices, yet remains available to the mass consumer (Hsu, 2013). Michal Kors, Tory Burch, Kate Spade, Pandora and Monica Vindamer are just but examples of accessible luxury brands. In terms of categorization, Osiyan Paris falls within the premium sector as it offers high quality and stylish products at fair prices. The world has been driven towards a clustering commonality by Globalization (Levitt, 1983). With the passing day and improvements in internet technology and in travel advancements, consumers are becoming culturally aware due to merging and globalizing traditions and cultures This has led to consumers becoming more conscious about styles, international products, and trends, which increase consumers eagerness to buy the products (Levitt, 1983; Kapferer, 2004) Osiyan Paris’ founder has a lot of experience with different cultures and the company’s products are based on her experiences; this makes the product mix appealing to more consumers, especially given that Osiyan Paris products are familiar to them. Consumers are more demanding  in recent years, there has been the rise of the bohemian style, where products mean different things (Giron, 2010) This can be applied by Osiyan Paris, whose iconic product is the Golden Buddha Bracelet, which stands for spirituality. TECHNOLOGICAL FACTORS E-COMMERCE Today, luxury brand marketing objectives are increasingly incorporating world digital media. Every year, sales of luxury products through e-commerce increase by 25% (Bain & Company, 2012). Due to the great accessibility of the web and the fact that luxury or premium companies are attributed to uniqueness and excellence, it has always been debated whether the web can be beneficial to them. It is a fact that when properly capitalized, the web holds a lot of potential. To make good use of it however, luxury brands should build a unique online experience, almost similar to that which a customer would get in a store (Warncke, 2012). The value of remaining relevant with young consumers and communicating brand experience through a different channel has been realized by luxury companies. Remaining relevant with young consumers is especially important given that a high percentage of luxury consumers are below 35 years of age and are heavily influenced by social media (Euromonitor, 2013). Latest news, images and storytelling can be incorporated in luxury brands websites, to communicate brand essence and heritage and reinforce the brands images (Okonkwo, 2010). SOCIAL NETWORK The growing popularity of social networks is an important aspect of the Internet. People meet, interact and influence each other through social networks. Since interaction allows engagement and discussions with consumers, it becomes the most important feature. On one hand, the internet and social networking sites can both be used to create the desire of purchase in the consumer’s mind. Examples include Facebook, Twitter and Instagram community interested in the brand. On the other hand, the essence and heritage of the brand can be communicated through social networks. A customer’s ability to interact through comments or the upload of video and images, clarity on brands, and complete transparency are necessary features for this type of communication (Okonkwo, 2010). It is a fact that Osiyan Paris understands the benefits of being online and interacting with its consumers through social media. This is because the company has its own e-commerce website and is also active on Facebook and Instagram. ENVIRONMENTAL FACTORS As mentioned before, current consumers appreciate products that stand for something more. For this reason, they prefer and look for brands that respect human beings and natural resources (Giron, 2010) When there is the assurance that in the entire supply chain, integrity is observed within the business sustainability is forged (Women’s Wear Daily, 2013). Companies that give back to society are supported by 66% of consumers and they prefer to buy products from them, while extra pay for goods and services from these companies is supported by 46% of consumers. COMPETITIVE FACTORS PORTER 5 FORCES – when rivals compete, profits are driven to zero. It is for this reason that firms seek competitive advantage. 1. Potential of new entrants into industry  High Jewelry brands face few barriers entering a market although threat of new entrants is usually high. Additionally, more brands continue to enter the UK market and this does not require a lot of capital. Between established and new brands, customers have more loyalty to established ones. Examples of established luxury brands in the UK include Links of London, Pandora, Topshop and Accessorize. Access to distribution  this depends on the taste and concept of the independent boutiques. Osiyan products are distinctive, which could gain them competitive advantage  Product Differentiation (Golden Buddha and Ganesh Bracelets)  Niche Premium Market (Reference from Hemal) Profitability of the industry  The UK costume jewelry market is lucrative, which makes it highly attractive. Due to the economic downturn, consumers migrated towards costume jewelry, which affected sales of high-end jewelry. In 2013, costume jewelry experienced the fastest value growth which was at 2% (Euromonitor, 2013). In the forecast period, costume jewelry is anticipated to perform more strongly than real jewelry. This is in part because costume jewelry is competitive on price and is a smaller category, which attracts customers (Euromonitor, 2013). Brand Equity  Osiyan is not currently established  For this reason, consumers would be hesitant to purchase products from the brand. 2. Power of suppliers  High Gemstones/ Semi – Due to the fact that precious stones and mineral stones are scarce, suppliers would highly influence the selling price. Osiyan is too small of company to have its own supplier. The supplier would then be a supplier for other companies as well, which would eliminate sole reliance on Osiyan. 3. Power of customers  Moderate The ability of customers to put the firm under pressure, which also affects the customers sensitivity to price changes. As Osiyan is a small company and serves a niche market, buyers may not have a high bargaining power on prices. This is also due to the fact that Osiyan is an independent company. It is possible for an industry to set its price points as high or as low as it chooses when there is a large market of buyers. 4. Threat of substitute products  High Number of substitute products available in the market  The number of brands competing in a costume jewelry market are many  For this reason, buyers choose cheaper substitute products for those of high quality and with high prices. Buyer switching cost  Due to the fact that buyer switching cost requires effort from buyers to search and explore for new companies, the cost is expected to be low as consumers may not put it a lot of effort to switch to other brands. In order to spend more lavishly on luxury jewelry such as Diamonds among others from brands like Tiffany and Co., Graff, De Beer among other brands, consumers may save on premium jewelry. 5. Intensity of Competition in the Industry  High Due to the fact that there are a variety of luxury brands in the marketplace, there is overall high competition in the market. In the premium jewelry market, Osiyan offers unique products  For this reason, the brand would be able to sustain competitive advantage through constant innovation of its product lines and maintenance of the high quality of its products. As the company is new  there is need for an advertising budget  this however highly depends on the stockists. The fact that Osiyan Paris is online (E-commerce website & social media) gives it a competitive advantage over many other small jewelry brands. LEGAL BARRIERS Entering a new market is a difficult task for any company. Legal barriers are the greatest problems that companies face as they attempt to enter into new markets. The UK government allows establishment of business presence through various ways. These include conducting business via internet sites, setting up a branch in the UK, incorporating an LLC as a subsidiary in the UK, acquiring an existing UK company which could be through a joint venture, signing of a partnership agreement or franchising (Olswang, n.d.). The UK applies the use of intellectual property rights in the establishment and running of businesses, especially new ones. Trademarks, patents and designs in the UK are protected by the intellectual property law. The most recent addition to the list of UK’s intellectual property laws is the database right. For Osiyan Paris to operate in the UK, the company’s trademark needs to be genuine and registered first. The company also has to follow the UK’s guidelines on patents and designs. Reference Olswang, n.d. Guide to Doing Business in the UK. [pdf] Available at: < http://www.olswang.com/pdfs/guide_to_doing_business_in_the_UK_oct09.pdf >. Read More