FabIndias Entry in Australian Market Table of Contents - Essay Example

FabIndia’s Entry in Australian Market Table of Contents Part A: The Company and the potential Australian market 3 Executive Summary 3 Company Overview 3 Market and competition overview 4 Main competitive advantage for Marketing Expansion in Australia 6 Part C: The Post Entry Strategy 7 Operations Management 7 Production 7 Capacity 7 Distribution Routes 8 Potential Risks and related contingency plans 8 Recommendation 9 Reference 10 Part A: The Company and the potential Australian market Executive Summary This paper primarily deals with the FabIndia, an India-based handicraft manufacturing company seeking to expand its market in the Australia. FabIndia is a successful company and it manufactures and retails hand woven and printed clothes and other handicraft products. Its products are unique and diversified that reflects the core Indian culture, and it is its main USP for its success. The competition in the Australian market is very high as foreign traders from U.S., New Zealand, China and Italy etc are dominating the market. Moreover, Australia itself has a developed textile industry due to higher availability of raw material and of consumers. The Indian diverse handcrafted products and apparels are \very famous in Australian market that indicates a better opportunity for FabIndia. The trade relation between these two countries has been strengthened and there is better scope for FabIndia. In order to offers the diverse products of Indian culture, FabIndia will aim to manufacture its products in India. FabIndia will aim to operate its retail store Australian market and the products will be imported from India. Company Overview FabIndia is India-based apparel manufacturing and retailing organisation. Apart from the manufacturing and retailing apparels, the company also offers health care and home care products. However, the unique selling proposition of the company is that it offers the apparels made of the Indian traditional techniques and fabrics. Its products are mainly manufactured in the rural areas of India where Indias traditional handicrafts skilled people are available (Fabindia-a, 2011). In this process, the FabIndia has offered a significant amount of employment in rural India. On the other hand, it also gets skilled labours and other raw material as must lower cost, and hence, it is also able to offer its products at a much lower cost by targeting the middle income group of people. An American born entrepreneur, John Bissell realized the potentials of diversified Indian traditional weaving and crafting techniques and he started his first retail store for hand woven and printed fabrics in 1960s. Gradually, John Bissell also identified and focused on other segment of products like organic foods. Since last 50 years of operation, the FabIndia has become the pioneer and the largest producers of handcraft products in India (FabIndia-b, 2011). Today FabIndia has opened its retailer stores in all over India, and its presence in India is considerably rising with time. It has provided a source of stable income to the 15,000 Indian craftsmen (NMIMS, 2009). Market and competition overview The primary product offered by FabIndia is its hand woven and printed clothes and hence, the focus on this section will be on the apparels retailing in Australia. Australian clothing and textile industry is highly developed due to availability of high quality raw materials and necessary support from the government. However, after free trade agreement with the counties like China, U.S. etc competition in the textile manufacturing has intensified significantly. For example, the Chinese traders are able to offer their low cost product and whereas, the US traders offers latest fashionable and trendy clothing making tough competition for domestic traders. Most of foreign textile traders offer their products in products by importing from their respective countries (TCFUA, 2005). Therefore, the competition in the Australian textile industry is mainly dominated by the foreign traders and the most prominent competitors are the traders from New Zealand followed by China and Italy. The following figure represents the market share of the major competitors. Figure 1: Australian Market Share in Apparel Industry (Source: Ahern, 2004) Main competitive advantage for Marketing Expansion in Australia Indian handicraft products have always been very popular in the other parts of world due to its diversified cultural blend products. Moreover, in Australia, Indian handicrafts products are very popular and in demand, hence, the exhibition of Indian handicraft product in Australia has become regular trend (Department of Foreign Affairs and Trade, 2003). The trade relationship between the India and Australia is one of the most crucial and key success factor that encourages the trade between these two countries. Both countries are trying to develop and promote their culture by offering their indigenous handicraft products (Joint Standing Committee on Foreign Affairs, Defence and Trade, 2000). On the other, Australia is a developed country with a strong economic condition. This country is enriched with highly diverse natural and agricultural recourses that have brought the economic prosperity. GDP as per purchasing power parity is nearly $889.6 billion and its overall real GDP growth rate is 3.3%. Besides with better economic growth and development, peoples per capita income GDP is very high i.e. $41,300 causing a significant increase in purchasing power of local people (CIA, 2011). Part C: The Post Entry Strategy Operations Management Production The production strategy of FabIndia in the Australian market would include sourcing readymade products manufactured in India. This strategy assumes significance considering the fact that FabIndia’s product offering largely includes handmade products made by rural artists in India. The company would not open any production centres in Australia as the wage rates for labour are very high in the nation and also the fact that the distinctive feature in the product offering comes from its traditional design approach which is exclusive in India (Weller, 2007, p.3). The company would have its products manufactured from the Indian market primarily in the rural areas and its products would essentially include the aspects of traditions blended with modernisation. The products would be made out of pure cotton that would make the apparels and other products largely light and comfortable. These products would be then sourced to the Australian markets. The company would not have a large manufacturing hub but would have numerous individuals who after rigorous quality training would produce the goods primarily at the rural centres. These would be labelled, packaged and shipped to the overseas markets. Capacity According to a report by the Australian Centre for Retail Studies most of the apparel industry players are essentially trying to outsource their manufacturing hubs to other locations where labour is comparatively cheaper. Being located close to India and China most of the leading apparel stores following government deregulation are setting up manufacturing units in these nations or are sourcing most of their raw materials from these regions to gain cost advantage (Diviney & Lillywhite, 2008, p.2-3). FabIndia would use its existing model of Community Owned Company (COC) where small firms having a very small shareholding in the parent firm would act as intermediaries between the firm and the manufacturers primarily individuals living in rural areas (FabIndia-a, 2011). Accordingly the production centres of FabIndia would be located at India. Initially there would be no increase in the production capacity of the firm but the capacity would be enhanced after making a break even in the Australian market and subsequent expansion and penetration in the nation. Distribution Routes The company would manufacture products in India and would source them in Australia. The company’s entry strategy would largely be based on a strategic alliance with a local partner in the related industry segment. The company would not use any intermediary as it would directly procure the readymade products from its COC’s and would use an effective market forecasting technique to source adequate number of products to Australia. In addition the firm would also introduce the online distribution channel where the customers in Australia can use the web page of the firm to select products and get them delivered at their doorstep. During the initial phase the company would subsidise the cost of delivery so as to create awareness of the brand in the minds of the targeted customers. Potential Risks and related contingency plans In addition to framing marketing strategies FabIndia would also need a feedback and monitoring mechanism to analyse the outcome of its strategies. The present production strategy put certain elements of risk that can affect the firm. Firstly sourcing of products from India can lead to inventory management issues as a considerable amount of time would be required to ship in the products from India. Secondly delivery of goods in small numbers would also lead to cost escalations. In order to avoid such risks the firm must use efficient methods of forecasting based on real time data that would eliminate instances of stock outs as well as overstocking. The firm must also use a balanced scorecard method for analysing and evaluating the financial as well as non financial aspects so as to make the business strategies more effective in achieving their goals (The Balanced Scorecard Institute, 2011). Recommendation The expansion of FabIndia into the Australian markets would not only provide the firm with a good market expansion strategy but would also open up new avenues for the company. Successful expansion into foreign markets would enhance its brand image as well as positioning that would help generate greater value for the stakeholders. In addition the learning experience of the international marketing strategy in a competitive market like Australia would add to the learning curve of the organization for its future expansion strategies. Inventory management using real time data would also help in generating operational efficiency for the firm that would enhance the operational aspects of the organization. Finally a successful entry in the Australian market would generate an alternative market that would not only supplement the earnings of the company but would also open a can of opportunity for the firm to expand into the other developed market segments. Reference Ahern, A. (2004). APPAREL IN AUSTRALIA. [Pdf]. Available at: http://www.apparelandfootwear.org/pdf/isa0409australia.pdf. [Accessed on May 16, 2011]. CIA. (May 4, 2011). The World Factbook: Australia. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/as.html. [Accessed on May 16, 2011]. Department of Foreign Affairs and Trade. (October 2003). AUSTRALIA-INDIA FOCUS. [Pdf]. Available at: http://www.dfat.gov.au/aic/newsletters/australia_india_focus_2003_sep_oct.pdf. [Accessed on May 16, 2011]. Diviney, E. & Lillywhite, S. (2008). Ethical threads: Corporate social responsibility in the Australian garment industry. [Pdf]. Available at: http://www.buseco.monash.edu.au/centres/acrs/research/whitepapers/ethical-manufacturing.pdf [Accessed on May 16, 2011]. FabIndia-a. (2011). About the company. [Online]. Available at: http://www.fabindia.com/company/. [Accessed May 16, 2011]. Fabindia-b. (2011). 50 years of Fabindia. [Online]. Available at: http://www.fabindia.com/50-years-of-fabindia/. [Accessed May 16, 2011]. Joint Standing Committee on Foreign Affairs, Defence and Trade. (2000). Australias Trade Relationship with India. [Online]. Available at: http://www.aph.gov.au/house/committee/jfadt/india/Indch3.htm. [Accessed May 16, 2011]. NMIMS. (2009). Fabindia- Fabric of India. [Pdf]. Available at: http://www.nmims.edu/images/Fabindia.pdf. [Accessed May 16, 2011]. TCFUA. (June 30, 2005). SUBMISSION OF THE TEXTILE CLOTHING AND FOOTWEAR UNION OF AUSTRALIA: AUSTRALIA – CHINA FREE TRADE AGREEMENT. [Pdf]. Available at: http://www.dfat.gov.au/fta/acfta/submissions/4NMA_13_TCFUA%20.pdf. [Accessed May 16, 2011]. The Balanced Scorecard Institute. (2011). Balanced Scorecard Basics. [Online]. Available at: http://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx [Accessed on May 16, 2011]. Weller, S. (2007). Retailing, Clothing and Textiles Production in Australia. [Pdf]. Available at: http://www.cfses.com/documents/wp29.pdf [Accessed on May 16, 2011]. Read More