International Expansion of Victoria's Secret - Essay Example

? International Expansion Proposal Introduction Victoria’s secret is a multinational company and the largest lingerie retailer in America with outlet stores in Canada, United Kingdom, Netherlands, Middle East and Poland. The company was founded in 1977 by Roy Raymond but later sold to Leslie Wexner, the creator of Limited Stores Inc., in 1982 with headquarters located at Three Limited Parkway, Columbus Ohio. The company is in the apparel industry with gender-specific specialization on women wear; lingerie, Bras, panties, beauty garments, swimming and sporting bras/panties, clothing, shoes and beauty products such as lipsticks and fragrances. The company is wholly owned by publicly traded Limited Brands Company; operating 1,017 company-owned stores and 18 independently owned stores, with annual sales of $6 billion and an operating cost of $1 billion as of 2012. The company has hierarchic system of governance with Sharen, Jester Turney as the CEO and President of Victoria’s Secret Megabrand and Intimate Apparel while Lori Greely as the CEO of Victoria’s Secret stores. (Website:www.victoriassecret.com/victorias-secret-sport). Victoria’s Secret intends to diversify its market by opening new branches in China; the world’s most populous country with population of over 1.35 billion people, second largest country in the world by land area after Russia and a socialist country espousing communism (Meng, 2011). Economically, it is the second-largest economy in terms of nominal Growth Domestic Product [GDP] totalling approximately $8.227 trillion by 2013 as per International Monetary Fund [IMF]. Reasons for expansion to China To tap into the growing market of the China’s women population 48.73%, and demographic distribution of 13.3% and 42.8% on 0-14 years and 15-59 years respectively. Tap into the industrialization advantage in China to reduce cost of production Maximize profitability with the competitive exchange rate To maintain the competitive standards of Victoria’s Secret and brand image as a global outfit To tap into China’s skilled and multi-talented fashion designers, workforce, view point and knowledge to ensure growth as a company To tap into China’s economic wellbeing and favourable trading environment Tap into China’s favourable climatic environment and Sporting culture of basketball, tennis, swimming and martial arts Internal Analysis Value Victoria’s Secrets has with time strengthened value on its products starting with lingerie to diversify to sporting attires, swimming costumes, bras, panties, sleeping gowns, clothing and shoes. The launch of “PINK”, a new lingerie line targeting 15-22 years old with products such as underwear, sleepwear, loungewear, beauty products and accessories; will create value in the new Chinese market more so through their product lines such as Angels, Very Sexy and Body by Victoria, intended to transition buyers into more adult product lines. The competitive exchange rate of the dollar and the Chinese Yuan, gives the company a competitive advantage of price and cost leadership giving the company capability to mitigate threats in the market (Barney & Hersterly, 2010). Rarity The uniqueness of design and the PINK product line creates the competitive advantage in the Chinese market coupled with the new accessories and fragrance lines which will match with the economies age distribution. The company’s customer service experience coupled with loyalty cards promotions and effective marketing strategies such as their catalogue, sporadic arts in fashion publications and referrals/word of mouth will help conquer the new market. In addition the company has employed social media marketing with incorporation of sites such as Twitter, Facebook and Pinterest account; expanding its website to feature behind-the-scene contents of its catalogue, in the Victoria’s Secret Direct, which are the strategies we can apply in the new market to lure the youthful and techno-savvy population. Imitability Most of the products by the company are original to the extent that they are designed and engineered by qualified and experienced designers coupled with the value and quality will give the company a competitive advantage in the new market. The financial and capital base of the company can necessitate implementation of Costly-to-imitate strategies and enhance valuable resources in case there is competitive threat in the new market. In addition to this, the company intends to engrave an openly visible and unique trademark on its products and accessories to avoid competitive imitation. Organization The company enjoys a democratic hierarchy of leadership matched with motivation of its employees which has improved the running of the stores and outlets. With the division of the company into franchises such as Victoria’s Secret stores, Victoria’s Secret Direct and Victoria’s Secret beauty, all with different CEO’s and independent management has strengthened operations and the decision making procedures of the company, which we intend to transfer to the Chinese market to achieve maximum potential. In addition, the company’s corporate culture combined with the training, and research & development which brings out the competitive advantage in the American market; and by transforming the same energy into the Chinese market, by budget evaluation, will enhance quick and effective market penetration (Chapman, 2010). Value Chain Analysis Victoria’s Secrets business approach of diversification of its products to meet the ever changing market needs and focus on fashion trends gives it a competitive advantage to penetrate the Chinese market. The outsourcing strategies more so on production such as Intimate fashions, a manufacturer with factories in south India and factories in Thailand, will ensure supply in the large and growing Chinese market. The virtue market chain coupled with the physical value chain will enhance convenience and improved client touch more so in the large Chinese market where technology and consumer taste is a factor to capture the market. Strategy Implementation To achieve the Chinese market penetration, the company intends to apply a mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage (Frazelle, 2008). For example, opening of stores in Shanghai, the largest city with the youthful population and sporting activities; coupled with the penetration of the PINK and INCREDIBLE BRA franchise in the city, will ensure convenience and variety in the market. At the product level, the company intends to apply differentiation of its products such that the swimwear, loungewear and beauty products and accessories associated with 15-59 years age bracket have a unique texture, pink in colour and have the “INCREDIBLE” trademark on them. In addition the company will ensure customization of these products with the client’s desire such as her name, her favourite city/pet; and the introduction of the product lines such as the Angels, Very Sexy and Body by Victoria in the market which will trade at a relatively low price to capture their income worth. To supplement the transnational strategy, the company intends to apply focus strategy so as to concentrate on a the specific regional market and the buyer groups in the Chinese market. At the firm level, the company intends to expand its research and development to help in unearthing the consumption trends of the new market, their needs and income distribution structure to enable effective resource allocation and consumer satisfaction. The firm will increase its production capacity to capture the large Chinese market incorporating their culture and aspirations in order to comprehensively satisfy the market. In addition, the company will improve its distribution channels and expand on its customer service and satisfaction strategies in a bid to successfully lure the consumers away from the potential competitors within the Chinese market. These will be implemented through effective leadership and the company headquarters and its subsidiaries, improving its information and control systems, strengthening its structural design on its products to meet the new market’s needs and strengthening the human resource department to ensure quality employee-customer relations (Warner, 2010). At the international level, the company intends to combine the transnational strategy with that of multi-domestic strategy in that it will seek to balance global efficiencies and local responsiveness through combining the standardization and customization for a product in manufacturing and advertising strategies. For the multi-domestic strategy it will seek to handle markets differently for each market and adapt to different marketing/advertising strategies which will be necessitated by the liquidity in the market and its respective tastes, preferences and needs (Doole & Lowe, 2011). Conclusion Victoria’s Secret has with time grown and developed to be a multinational company through its dedicated work force of retailers, design and development department, budgeting department and its management at large. The profitability margin of the company as at 2012 coupled with growth in number of stores is a mark of effective management and dedication by employees in a bid to meet and surpass the target objectives. The franchising of the company’s products to meet the ever-growing and varied consumer needs is an indication of a team and a company determined to prosper in the apparel industry more so on the gender-specific products and product lines. The company’s diversification of the products to include clothing and shoes captures the needs of any given market comprehensively in that if one does not fancy lingerie and other lifestyle-oriented products such as swimwear and/or sport wear, she will have something to shop at their outlets may it be shoes or clothing. Furthermore, introduction of backpacks with their franchise’s logo/trademark on them acts as a marketing tool of their product and the promotional strategies such as Angel Card whenever one buys a given product will help them attract more customers and retain them at the same time. The incorporation of social media as form of marketing and improved customer service through emails, catalogues, text alerts, quick help and hotline numbers will strengthen the client-business relationship which will in turn promote growth of the franchise at any given market. References www.victoriassecret.com Doole, I., & Lowe, R. (2012). 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