Marketing Plan for Fat Face Ltd in Canada - Essay Example

?Marketing Plan for Fat Face Ltd in Canada Introduction Fat Face Ltd is an international company that deals with clothing and accessories. The company was founded in 1988 headquartered in Havant in the United Kingdom. It maintains wide ranges of product lines such as shirts, denim clothing, jackets, trousers, jeans, tees, shorts, polos, sweats, sleepwear, hats, gloves, scarves, bags, and belts. The company also provides customers with other special items such as beach kits, sunglasses and jewelers. The most fascinating feature of the company is that it keeps large collection of clothing separately for men, women, boys, and girls. As stated in ‘Fat Face limited’ (March 2011), the distribution network of the company includes its stores, mail order catalogues, wholesale operation, and its website. In addition to its clothing business operations, the company also focuses on charitable activities so as to dispose its social responsibilities more efficiently. “Life is out there, make the most of it” is the philosophy followed by the Fat Face Ltd (‘History our philosophy’, Fat Face, n.d.). The company is always careful in preserving its employees’ interests and wellbeing. Recently, the company has appointed Anthony Thompson as its new Chief Executive. The Fat Face’s latest financial reports reflect that the company is growing fastly. The firm’ financial statements in 2010 indicates that the company achieved a sales rise by 4.3% and obtained a revenue of 135.4 million over the year. In order to take advantages of this increased market demand, the company is trying to open subsidiaries across the globe. This paper intends to develop a marketing plan for Fat face Ltd in Canada. Canadian market conditions When a firm plans to launch its branches in a foreign region, it must be aware of the different market aspects of the target country. In the given case, the Fat Face Ltd proposes to launch its product lines in the Canadian market. Canada is a North American country that constitutes 0.5% of the world’s population. Although Canada represents smaller proportion of population, according to UN HDI, “Canada accounts for 2.2% of global emissions” (Canada: Country analysis report’, March 2010). In order to mitigate the increasing environmental problems, the government has imposed restrictions on certain type of industries. However, the PESTLE analysis highlights that Canada is a high potential country in terms of government effectiveness. The Canadian political world is dominated by the conservative and Liberal parties which together form the strong democratic set-up of Canada. The Canadian government encourages regional trade and it adds to the industrial viability of the nation. It is observed that Canada always keeps better foreign relationship that makes the country a potential market for international expansion. These positive factors would certainly assist Fat Face to run its venture in Canada with little chance of unexpected interruption. At the same time, disparity in developmental operations seriously impinges on the sustainable economic growth of the country. The Canadian economic features of strong banking system and extreme business freedom make the nation’s market potential for foreign business magnets. The global economic slowdown has affected the nation’s development to a large extent because the situation forced Canadian government to extend the rate of unemployment benefits and cut down personal income. The nation’s low productivity can also be directly attributed to the global financial crisis. At this juncture, the unsatisfactory employment rate of Canada is beneficial for Fat Face as this condition would offer sufficient employees/manpower to the firm. Moreover, the impeded economic development may persuade the Canadian government to welcome the arrival of a leading clothing industry to their market. The PESTLE analysis also reveals that country’s population aged 65 and above frequently increases; it may adversely affect the company’s objectives since people under this category do not form a potential group of customers to an organization like Fat Face. The poor education ratio of the country also would make great difficulties to the proposed expansion program of Fat Face Ltd. Although, the development of technology-intensive industries has created ranges of fruitful opportunities in the country, increased governmental focus on the growth of small businesses turns out to be a severe threat to this international clothing industry. Although Canada’s lower tax rates laws would benefit the Fat Face, nation’s multiplicity of business regulations seriously impinge on the financial interests of investors. In order to identify various strengths, weaknesses, opportunities, and threats in the Canadian market, it is necessary to exercise a SWOT analysis in addition to PESTLE method. As we know, the global financial crisis caused recession in Canada by the end of 2008. However, through strategic application of various monetary tools, the government could bring inflation level under control and it further reflected recovery by the second half of 2009. As per ‘Canada: Country analysis report’ (March 2010), Canada could attain an efficient financial system and low interest rates in 2010. Canada has flexible labor market and it contributes to the overall development of the nation. In addition, the country keeps business tax rates low with intent to encourage foreign investors. These two factors seem to be the potential strengths of Fat Face Ltd in the Canadian market. Continuing urbanization in Canada would also add to the viability of the company because it would enable the firm to exert certain business tools like market segmentation. It is identified that Canada’s health care system is satisfactory. A healthy population is a vital element for the growth of any organization. In the case of Canadian political arena, lower tax rates and rising investment prospects clearly contribute to the nation’s potentiality. Moreover, the Canadian culture is characterized with an efficient social security system that would motivate foreign industrialists and new entrepreneurs to launch their business into the country’s market. At the same time, fluctuating inflation levels and GDP growth rates turn out to be the growth impediments to the country. The instability in GDP Growth rates and inflation levels would negatively affect the stability of economic growth rate of the nation. Similarly, continuously varying import and export rates will damage the industrial operations as well. There prevails a growing tension between immigrant workers and native residents in Canada. It is also noted that imbalanced growth of country’s different provinces has also become one of the impediments to the developmental notions of Canada. These adverse Canadian market conditions may weaken the expansional concepts of the organization. In contrast, the impressive Gender-Relate Development Index (GDI) of the country becomes a potential opportunity to Fat Face clothing industry as it would enable the company to ensure increased market demand for its products. The country’ employment policies aim at the promotion of labor force participation. Although, growth disparities of some provinces negatively affect the country, development of some other metropolitan provinces would become the growth engine of the Canadian economy. Moreover, the absence of prominent clothing industries would increase the company’s opportunities. Anyhow, the business regulations would raise major threats to Fat Face Ltd in the Canadian market. To illustrate, many economic scholars opine that fiscal deficit would be developed as a strong threat to Canadian economy in the near future. The persisting education system of Canada is not much effective as it cannot meet the knowledge economy needs. Obviously, immigrant population is increasing in Canada and it may negatively affect the proposed business strategies of international business organizations. Marketing plan for Fat Face in Canada Through the application of SWOT and PESTLE analyses we have discussed various opportunities and threats prevailing in Canadian market. The study reveals that the impact of global financial crisis is still prevailing in Canadian economy and it hurts employment rate and overall development of the country. In this situation, a competition oriented market development plan is not recommendable for Fat Face Ltd. In order to implement a competition-oriented strategy, existence of a potential market is essential. Since the government has cut down individual income in Canada, probably people would not purchase more than what they actually require. Since Canada represents only 0.2% world’s population it the clothing industry has to focus on a small segment of customers. Hence, intense competition techniques and thereby increased promotional expenses would not adequately contribute to the firm’s profitability in Canada. The direct entrance into a market also requires large amount of initial capital; and this practice include huge elements of risk. Under this condition, it is better for the company to explore more effective expansional methods rather than directly entry to a new strange market situation. To be more specific, mergers and acquisition techniques would benefit the company more in the current Canadian market. The concept of merger and acquisitions (M&A) is a corporate strategy by which a corporate management deals with buying, selling, and combining of different companies. This strategy assists a growing company to expand rapidly without practicing techniques of newer business entities. The two terms, ‘mergers’ and ‘acquisitions’ are strategically different from one another. The term merger is a financial tool by which two or more companies are joined together on the strength of a mutual agreement. By this concept, the merging companies aim to enhance their long term profitability by expanding and integrating operations. In contrast, acquisitions occur between the bidding company and the target company. Under an acquisition strategy, often it is seen that bidding company purchases the assets of the target company. There are several types of M&A such as horizontal, vertical, conglomerate, and congeneric; the appropriate one it is chosen according to the nature, market position, and requirements of concerned companies. Here, Fat Face Ltd is a new entrant in the Canadian market and it has limited information regarding the market trends. It is advisable for this company to get effective support from a prevailing Canadian organization that possesses long industrial experience. Therefore, horizontal integration is advisable for Fat face clothing industry. It is the process of merger of two competing companies with intent to take advantages of its similar product lines and markets. So as to practice this amalgamation process, the Fat Face must conduct an effective market research program that would discover a potential partner. International retail giants like Casual Male retail Group will be a good partner for the Fat Face since both these organizations vie with each other in the international market. While selecting a merging partner, the firm must make sure that their strategies and goals go hand in hand. A good partner selection would benefit the Fat Face Ltd to dominate the Canadian market without much effort. When Fat Face Ltd merges with another company, the results will be large scale production, limited cost of production, and finally increase in profitability. Horizontal merger strategy is one of the best techniques to achieve geographical or international expansion. When Fat Face combinedly operates with a Canadian clothing retailer, it gets easy access into the existing customers of the merged Canadian Company. Therefore, the firm can avoid the costs such as promotional expenses and other launching expenses associated with initial market acquisition. Similarly, the merged company may possess a well established supply chain and it may ensure the effective coordination of the integrated firm in its distributional operations. For instance, it is better to assess the merger of Daimler Benz and Chrysler Corporation described in ‘Daimler- Chrysler merger’ (February 2000). Both of these organizations were the dealers of vehicles especially, cars. This horizontal integration is considered to be the first huge merger transaction between United States and Germany; however, this process has helped the integrated firm to acquire widespread public attention across the globe (ibid). Since the merged concern is characterized with access to a potential group of customers, its new innovations in product lines and strategies would be rapidly accepted in the market; this territory expansion enables the merged entity to sell more of the same product. It is evident that the large scale operations will certainly increase the market reputation of the integrated firm, which would in turn enable the firm to successfully negotiate with its suppliers and buyers. We know that the company needs to deal with bulk purchase when it operates on a large scale. Under such a situation, the company gets high bargaining power over its suppliers and it assists the company to take advantages of cash and trade discounts. However, this strategy would certainly reinforce the market position of the Fat Face in the Canadian market. It is obvious that Fat Face Ltd is a well established company having specific objectives and well framed policies. Moreover, it is a leading retailer company in the international market. Therefore, it does not have to deal much with product innovation and strategic management. At this juncture, the company just requires fit its product lines and policies with new market environment without pumping huge launching costs. Previous global experiences assert that horizontal integration would be more appropriate in such a condition. For instance, the Standard Oil Company’s acquisition of 40 refineries can be attributed to a horizontal merger. In the opinion of Frensch (2007, p.45), a horizontal M&A aids the integrated firm to divide the labor among different large organizational units effectively. An effective division of labor across different territorial units would benefit the organization to bring some positive outcomes as the efficient coordination of employee potentials play a vital role in organizational success. This type of merger aids the firm to avoid some risky competition practices such as unprofitable price reductions as this integration process would successfully defend rivals to a large extent. This concept may help Fat Face to create a situation of market monopoly. As described in ‘Horizontal integration’ (n.d.), the most attractive feature of this strategy is that it would assist the Fat Face Ltd to share resources common to different products and this feature is commonly known as synergies. As discussed earlier, Canadian government has imposed restrictions on companies that cause the emission of green house gases. The manufacturing process of Fat Face clothing industry involves the emission of harmful green house gases. For instance, Nylon is an inevitable element of any clothing industry and its manufacture creates nitrous oxide; “a greenhouse gas is 310 times more potent than carbon dioxide” (Environmental impacts, n.d.). This condition would cause some difficulties to Fat Face Ltd if the firm directly entered the Canadian market. In contrast, the Canadian partner with years’ experience in the Canadian market would guarantee strategies that comply with Canada’s regulations. In other words, the horizontal integration and thereby the partner firm’s environment-friendly production techniques would help Fat Face Ltd to operate its business smoothly under Canadian regulations. Likewise, factory operation in foreign market helps the Fat Face to cut down the expenses related to international trade. The merging partner of Fat Face would be familiar with Canadian market so that they can procure labors at cheap cost. In addition, Canada’s employment rate has declined by global financial crisis and it would assist the organization to obtain adequate potential employees. Risk diversification is another potential benefit that obtains from Horizontal merger. As the article Horizontal mergers- horizontal integration, horizontal monopoly, horizontal expansion (n.d.) describes, when a company jointly operates with another company, it would enable the firms to share the elements of risk. The horizontal integration will also assist Fat Face to raise immediate funds in times of contingencies as it gets the support from the merged partner. The creditworthiness factor that derived from a good market stature also benefits the integrated firm to raise finance from banks and other financial institutions (ibid). Benefits from lower tax rates found to be other advantage of integrated operation. The market power that obtained from merger may aid the company to defend new entrants effectively. On the other hand, any other expansional technique would necessitate the provision of separate reserves for meeting the costs of market competition. This concept would also be helpful for the company to produce some changes in the share market. When the firm’s market stature is increased by the proposed integration process, it will positively affect the firm’s value per share and price earning ratio. Moreover, this strategy may very much motivate the firm’s managers since they get the feeling of being grouped (ibid). While the company deals with horizontal merger, it must also notice that this concept has some disadvantages also. Firstly, the integration process involves many legal formalities that would consume much time and money. It is also often observed that the anticipated economic and organizational gains do not materialize. For instance, as illustrated in ‘Horizontal integration’ (n.d.), computer hardware manufacturers integrate with software business on the belief that there are synergies between hardware and software. In actual practice, the interconnection between hardware and software may not necessarily produce the estimated economic outcomes (ibid). Anyhow, these pitfalls can be overcome if the integration process includes effective negotiation phases. It is advisable for Fat Face Ltd to select a merging partner which has large industry experience in the Canadian market. Implications for future international expansion Although, the merger would present some benefits to Fat Face Ltd, this process may cause many impediments to company’s future international expansion. During the integration process, both the firms jointly form an agreement on future market operations. The terms of this agreement may not always fit with fluctuating global conditions especially, Canadian market environment. Under such circumstances, provisions of horizontal integration would adversely affect the future business notions of Fat Face clothing industry. This amalgamation may also be affected by Canada’s poor R&D biotechnology industry. When two large players in the industry integrates together to increase their territorial area, they will be surely targeted by other clothing industries of the country. Although, the integration would assist the Fat Face Ltd to defend the competitors effectively, the grouped attack by other organizations may weaken the compatibility of the firm. In the opinion of Cai and Obara, horizontal integration “gives the merger firm more room for sophisticated deviations” (Cai & Obara, n.d.). It is evident that horizontal merger increases the geographical area of the industry and thereby volume of trade transactions. Since the Fat Face Ltd already deals with large numbers of international trade transactions, this merger would probably multiply its transactional volume and associated risks. As a result, even small global market fluctuations may vary the Fat Face’s profitability to a large extent. In addition, inventory losses by theft and fire would largely affect merged Fat Face as they deal with large quantities of goods. As we discussed, Canada is a country that greatly suffers from environmental issues. This situation may cause frequent changes in governmental regulations on industrial operations. Under such a political situation, the Fat Face Ltd would face difficulties to formulate business policies because a new government regulation can hurt the practicability of the proposed program. Since the merger would increase the size and complexity of Fat Face, it is very difficult for the firm to modify its strategy once it is formulated. Conclusion The above discussion as a whole reflects the fact that Canada will be a potential market for Fat Face Ltd, only if the firm initiates an effective expansion program. Although the impacts of global financial crisis have affected the stability of Canadian economic growth for the last few years, Canada is a developed country that offers an array of attractive features to industrialists. Among the different international expansion strategies, horizontal merger would be the best fitted strategy for the Fat Face Ltd in the long run. The Horizontal merger would increase the firm’s business arena so that Fat Face can take advantages of large scale operation. Although, some features of horizontal integration and some Canadian market features raise considerable threat to the firm, they can be overcome through the application of effective organizational strategies. References Cai, H & Obara, I (n.d), ‘Firm reputation and horizontal integration’, viewed 27 March 2011, ‘Canada: Country analysis report’, March 2010, Datamonitor. ‘Daimler- Chrysler merger’, February 2000, International Tax Review, viewed 27 March 2011, ‘Environmental impacts’, n.d, Green Choices, viewed 27 March 2011, Frensch, F 2007, Social Side of Mergers and Acquisitions: Cooperation relationships after mergers and acquisitions, DUV, Germany. ‘Fat Face limited’, March 2011, Bloomberg Businessweek, viewed 27 March 2011, ‘History our philosophy’, n.d, Fat Face, viewed 27 March 2011, ‘Horizontal integration’, n.d, Quick MBA: Knowledge to Power Your Business, viewed 27 March 2011, ‘Horizontal mergers- horizontal integration, horizontal monopoly, horizontal expansion’, n.d, Economy Watch, viewed 27 March 2011, Read More