Victorias Secrets Entry Into the Argentine Market - Assignment Example

VICTORIAS SECRET ENTERS ARGENTINA By Executive summary Retail marketing deals with marketing the goods and subsequent supply to the final consumers. Victoria’s secret’s entry into the Argentine market is a corporate strategy that needs to be undertaken by the American apparel company. Country analysis takes to account the cultural setting of the Argentine people in which case the Argentine people have the characteristics of the Americans and the Europeans. In the situation analysis, the company develops a swot analysis to effectively check on the viability of the company in the new market. The company is purely strong in many aspects. The current marketing strategy of the company has a very high reliance on the latest trends in advertising such as Facebook and the internet. The marketing objective is to develop a positive growth of over 15% in the coming two years. The segmentation, targeting and positioning of the company has been labelled as targeting the female population in the Argentine market, position itself in the right segment (geographical) and attract the entire female population to its products. The entry strategy will be through exports at the initial levels and then use mergers and acquisitions as well as franchising to develop faster into the new market. With both internal and external controls, the company hopes for a successful venture into the Argentine market. Table of Contents Table of Contents 3 Introduction 4 Country analysis 4 Situational Analysis 5 Current marketing strategy 7 Industry Rivalry 8 Marketing Objectives 8 Strategy: Segmentation, Targeting and Positioning 9 Market Entry 10 Marketing Programme 11 Monitor and Control 13 Marketing and Advertising Budget 14 Conclusion and Recommendation 14 References 16 Appendices 19 Introduction Retail marketing strategy refer to expansion of already established retail stores, the goods therein and the relationship that is created with the customers (Ferrell & Hartline, 2012, p. 34). All these established stores must make decisions about their details in the market as well as the marketing mix to concentrate on. A business strategy must therefore put in consideration all the factors that must be considered before a market is considered for supply as a retail store. Large retail stores may choose to venture into the international markets by virtue of expanding their sales. Victorias secret is the largest company in America specialising in making ladies’ lingerie. Founded in 1977, the company makes women’s’ wear and has progressed to an extent of planning to venture into new markets it has never operated in. This report seeks to establish a retail marketing plan of Victorias Secret Company in its bid to venture into the Argentine market. In view of this, it will make an analysis of the Argentina market structures with special focus on the culture of the country given that the company operates in the cloth line retail industry. A situational analysis will be carried out to establish the company internal and external affairs to measure its ability to enter the new market. The analysis will take into account the marketing objectives of the company and the respective business strategy in terms of the target market segmentation. Entry strategies, monitoring programs and controls are to be put in place for the company to effectively realize the need to develop a sound operation in the Argentine market. Country analysis Argentina lies in the southern hemisphere. Over the years, the mode of dressing has been highly influenced by the climate and immediate weather. However, culture has been the modest determinant of how the Argentine people put on. Their clothing is quite similar to that worn in Europe and the USA. All over the country, one is likely to find a culture endeared to a liking for jeans, slacks, polo shirts or simply the Argentine football national team jerseys (Shaw & Dennison, 2005, p. 106). Tradition can however not be put away from these people and the ‘Gaucho’ or the ‘Argentine Cowboy’ wear has been too prominent to decline from the market. Gaucho is the most acceptable dressing code both in villages and towns followed by an official wear of dress suit, shirt and tie. The gaucho may consist of a wide brimmed hat, a poncho and a pair of trousers tucked in the gumboots. In terms of the customs as an influence to what they dress, the Argentine people have been highly influenced by the American and European culture and customs. The country was occupied by the Spanish in the 16th century and the Spanish way of life has highly influenced their dressing and culture. Religion has been majorly catholic though there is freedom of worship which means that religion does not highly influence the way these people dress. Situational Analysis The situation analysis at the company can well be explained by use of the company swot analysis (Michman & Mazze, 2001, p. 56). This takes to account the internal strengths and weaknesses as well as the opportunities and threats as per its position. The internal strengths and weaknesses will define the position that the company is in to be able to venture into the international market in Argentina. The internal situation can be analysed using swot analysis as indicated below: Strengths The company has a very powerful brand name and its operations in over 1000 countries make it able to benefit from economies of scale. Secondly, the company has a strong advertising strategy with their frequent use of their top modes acting as brand ambassadors has been very successful. The company also uses active online advertising where they use blogs and catalogues to get their products to the customers. This has proved to be very successful. The brand also uses fair trade raw materials for its clothing lines. These have proved to be very successful strategies to the company (Parsley, 2013, p. 11). Weaknesses The company has not been able to match the fake products in the market being sold at lower prices than the company brands. This has been a source of confusion for the customers in the market. Secondly, the company makes dresses that can only be worn in bars and maybe movies and not in offices. This makes the products lack the diversity to drive it in a wider market. Opportunities The company has limited space which can always be expanded to handle more wears (Pride & Ferrell, 2012, p. 55). The company had a policy of only trading in the USA. However, there are more opportunities all over the world to venture in for expansion purposes. The third effective opportunity is that the company can also invent entry into the men’s’ wear so that their service is unlimited across the sexes. Threats The company does not have a very powerful financial strength and any economic downturn that comes over is highly likely to affect it negatively. Secondly, the company has a high rate of competitors who offer lingerie in the market and any mess in the market can cause a shut down. Many of the companies in the market offer discounts that are more than Victoria’s Secret and in terms of price, people are bound to get to these other companies (Sansare, 2013, p. 07). Current marketing strategy Victoria’s secrets marketing strategy has purely been an Omni-integrated digital strategy. They use: Social media The company uses Facebook, twitter, pinterest and YouTube. It is the 18th most popular company on Facebook. Email marketing The company ‘Email blasts their customers whenever there is a new product in store or when there are offers in the market. Mobile marketing The company has an n application for android, iPhone, ipad and iPod. On this app, their products can be browsed. They also send instant messages to their customers about their products Promotional offers The company organizes an annual Victoria Secret’s Fashion Show with its goods on display and sale. Other methods used in the current marketing strategy are; promotional offers, television commercials, semi-annual sales, the Victoria’s Secret all access, coupons and online deals. The company has been able to use these because of the changes in technology that have prompted people to shift from broad broadcasting to micro-broadcasting where they use mobile electronic gadgets to access the goods they want (Sakarya, Eckman, & Hyllegard, 2007, p. 224). Industry Rivalry The company has a collection of rivals in the industry. These rivals are international multinational companies that compete for the same market and consumers. Sara Lee is one of the competitors to a very large scale. Fredrick’s Company is another company that poses competition to Victoria Secret. Elsewhere, GAP Company launched ‘Gapbody’, a product that directly competed with some of the inner wears from Victoria’s Secret (Chang, Lin, & Mak, 2004, p. 16). Among the younger consumers, American eagle launched direct competition in the underwear by launching Aerie wears. The competition is therefore intensifying with time. Market Base All products in this company are female wears. From pregnant to young mothers, young trendy women and babies, the company has fashionable clothes for all female people. These are served from the entire US market where the company is situated. Marketing Objectives The objectives of the company in moving to Argentina are can be classified as either corporate, business or product diversification objectives. The corporate objectives over the next two years are to increase the production rate outside the USA and occupy at least 15% of the Argentine cloth line industry. It was noted that the company management had directed that the company needs not to operate outside the USA. This corporate strategy will see the company gain the Argentine market through a collection of ways as well as diversifying the market into production of the Gaucho, introduction of the American cowboy and other suitable brands in the country (Victoria’s Secret, 2014, p. 3). The second strategy, mostly at business level is to develop a human management structure that is harmonious with the new Argentine market (Hume & Mills, 2013, p. 134). As noted, most Argentines like dressing officially and this makes them official enough to work effectively. However, creativity in tandem with the Argentine tradition would be one of the marketing objectives. The company’s other marketing objective is to remain aggressive in the new market and develop a comprehensive approach that would see it start taking over the market by the third year. This means that a break-even point must be realised in the second year of operation in the market. Strategy: Segmentation, Targeting and Positioning As mentioned earlier, this company is the number one company in the specified apparel in the USA. It has over 1500 shops all over the world and over 390 million of their catalogues are usually distributed all over the USA annually (Parija, 2003, p. 12). This means it has the biggest market in the USA. The company segments its customers by geographical segmentation and in the same way defining its strategy. The company is fully aware of the age, gender, income status and social class of its entire US market. This is in view of the geographical position of these customers. The company also segments the women between the ages of 18-44 and marketing is therefore done appropriately (Kuchinskas, 1999, p. 331). This has helped the company to maintain a net income of $356.1 Million dating back to the year 2010. At the moment, the image of this company is described in a collection of ways. Most prominent is the use of old shoppers. It has always been described as teen oriented, clearly trendy and flashy. Some social aspects of these products have expressed it as too sexy and uninspiring. As a way to diversify its products, the company has ventured into techno fabrics and stretch laces. Moreover, they have added more flexibility in new styles so that a wide range of customers especially those that do not lie between the ages stated belong. Resources have therefore been highly used to segment the market and targeted women of all ages with each age bracket and geographical position given a special attention (Hume & Mills, 2013, p. 413). In view of the mission of the company, the company has been able to effectively “Deliver a best in class, captivating, branded customer experience that builds loyalty and enables consistent sales and profit growth”. Market Entry The market entry to Argentina is dependent on the market features and the government regulations that affect foreign traders entering the market. Having studied the Argentine market, the company will first inculcate the traditional method of exporting as an entry strategy (Tagg, 2004, p. 12). This is because it has been established that the market follows the American or European way of dressing. The advantage of using this method is that the goods are manufactured back in the USA and therefore the risks of an uncertain market are highly minimised. Secondly, the company can seek for a merger that would see it introduced to the market through an already existing company in Argentina such as the apparel companies La Martina or 47 Street companies (Cuneo, 1999, p. 1021). Marketing Programme The marketing program will reflect a situation where the company markets its products as fun, classic, fresh and clean as the requirements for the new Argentine environment. Any negative insinuations about the company are to be corrected and in this case, the company will then use the 4P’s of marketing mix as a way for entry to the new market in Argentina. There is more emphasis on current products (Aubele, 2003, p. 21). a. Product Product is considered as the actual good being sold, in this case, an example of product is PINK section (underwear, sleepwear, loungewear, beauty products and accessories). These products are to be categorically segmented in the age brackets of 15-22 years, then 18-444 as is in the USA. b. Price In the USA, the company had a weakness of offering prices higher than that of its competitors. As an entry strategy, the company needs to use economies of scale and develop a price strategy that will see lower prices as spelt out in the market description using the PESTLE analysis (refer to appendix 1). The company however has practically employed the aspect of price discrimination after effectively understanding the market (Michman & Mazze, 2001, p. 261). c. Place Place refers to the physical location of the companies in the market. Place would determine whether the company would survive or be ruled out of the market (Peng, 2013, p. 55). From its many products, placement of the products in the stores and location of these stores is very important in developing a marketable cause. For instance, location in Buenos Aires is more important than in the conservative villages in Argentina where people will still want to put on like their grans families. d. Promotion In promotion, the company is to use the current marketing methods as indicted in sections above. The open methods that would be used in Argentina are sales promotion, advertisements, personal selling and public relations. The methods that would be used are the “Victoria’s Secret Angels” strategy. In this case, the company would use a beauty contest and attract famous models in Argentina and these would be used to promote the products through advertising (Marie-Cécile, 2012, p. 321). e. Physical Evidence The only way to develop a market would be to be physically present in Argentina. Physical presence in retail marketing creates a sense of ownership which would at last lead to brand loyalty. When the customers for instance see a PINK brand market, they will be happy to associate themselves with it given that the company only produces quality products (Maarif, 2014, p. 21). f. People And Progress The company depends on various categories of people as their key sources of both human resource and customer base (Michman, Mazze, & Greco, 2003, p. 56). The company needs to plan to make the human resource from a mixture from Argentine expatriates and collection of American specialists in retail marketing. However, some external specialists are to be taken from an external market like Canada to vent their experience in managing the international retail base in this new market. As far the market is concerned, the company wishes to remain with the focus of dealing with female apparel. This strategy helps increase their customer base since knowledge on female trade indicates that they tend to influence each other more than males. The progress will be measured by the response of the people to the new development in the new market (Conti & Born, 2004, p. 1121). Monitor and Control Monitoring and controls of the operations will be both internal and external (Cardona, 1999, p. 381). This will be based on both the external environment and internal requirements. Contingency planning will be important in this section so that the company is not affected by the unknown forces in the new market. Things seldom go as planned and monitoring those helps set up sufficient controls to manage these. Monitoring and control will both be internal and external. In the internal control measures, the company will evaluate a collection of procedures both locally in the USA and in the new market in Argentina. It will consider; Monitoring by the management board Creation of internal control procedures Monitoring by the larger aspect shareholders and the financial institutions in both countries The external governance monitoring and controls measures take to account the influence of the external stakeholders to the business; Pressure from the media Regulations by the Argentine and US governments Human resource market considerations and Debt covenants Marketing and Advertising Budget Victoria’s secret is a large company. In 2012 for instance, the sales amounted to $6.12 billion and the operating income was just over $1 billion (Stone & Villachica, 2014, p. 335). The advertising budget would therefore be 30% of the world-wide sales gross considering that this would take to account the Argentine market share; Total marketing expenditures expressed in % form /30% of sales budget Online advertising 1.7 Catalogues and brochures 4.2 Conventions 1.2 Victoria’s secret fashion show 2.7 Victoria’s secret Angels 2.0 Print advertising 3.5 Radio 5.0 Promotional items 3.5 Publications 4.0 Sales training 1.2 Magazines 1.0 Total percentage of the sales budget 30% As stated, the above percentages will constitute the consolidated budget of all its operations all over the world so that the operating amount remains as high as possible. Conclusion and Recommendation Retail marketing and entry of Victoria’s Secret into the Argentine market was a corporate strategy that would see its expansion and subsequent increase in the revenue realised. This report has developed a comprehensive entry into the new market that had never been entered. Starting with country analysis, it was realised that Argentine people have adapted more of Euro-American way of dressing (Olazábal, Cava, & Sacasas, 2003, p. 41). A situational analysis at the company through a swot analysis shows the company in a better position to venture into the market that looks familiar. Going by its economies of scale and experience, it is ultimately able to operate in Argentina. On the other hand, it uses the marketing strategy where it involves use of the most current methods of promotion especially the social media. This enables reaching out to as many youths and possible. The marketing program involves use of the segmentation bases so that the market is clearly demarcated. With a clear understanding of the USA market, the company will wish to have an equally impressive understanding of the Argentine market. Monitoring and control was also discussed and it was realised that there are two types of controls; internal and external. In the internal section, the company considers all internal factors that affect a business and these ranged from human resource to product quality and satisfaction levels. The budget has been discussed as being set at 30% of all gross sales. This is a consolidated budget meaning that it includes the sale of all the products in all the countries of operation. Argentina is a big market and therefore more resources would be needed to venture into it. With its diverse culture that is relatively different between the urban and rural setting, the methods of promotion would differ. That is why the budget has to be as large as possible. It is therefore highly recommended that the company takes a go at the market since there are similarities between the American and the Argentine market. The strategy is workable given the company economies and the market looks viable for trade. References Aubele, J. (2003). Unlocking Victorias Secret. Energy Markets, 8(7), 76. Cardona, M. M. (1999). Victorias secret eyes magazines for beauty. Advertising Age, 70(15), 329-388. Chang, C. C., Lin, A., & Mak, C. (2004). The Silky Strategy of Victoria’s Secret. Toronto: Khemsurov. Conti, S., & Born, P. (2004). VICTORIAS SECRET TAKES BEAUTY ABROAD. Journal of Marketing and Business Strategy, 188(61), 1121. Cuneo, A. Z. (1999). Victorias Secret: Edward Razek. Advertising Age, 70(27), 1021. Ferrell, O. C., & Hartline, M. (2012). Marketing Strategy. New York: Cengage Learning. Hume, M., & Mills, M. (2013). Uncovering Victorias Secret. Journal of Fashion Marketing and Management, 17(4), 413. Hume, M., & Mills, M. (2013). Uncovering Victorias Secret: exploring womens luxury perceptions of intimate apparel. Journal of fashion marketing and management, 17(4), 134. Kuchinskas, S. (1999). Victorias secret. Journal of Fashion and Market Expansion, 40(26), 331. Maarif, N. N. (2014). Power of Marketing. New York: Penerbit Salemba. Marie-Cécile, C. (2012). Victorias dirty secrets: effectiveness of green not-for-profit messages targeting brands. Journal of advertising, 41(4), 312. Michman, R. D., & Mazze, E. M. (2001). Specialty Retailers, Marketing Triumphs and Blunders. London: Greenwood Publishing Group. Michman, R. D., & Mazze, E. M. (2001). Specialty Retailers: Marketing Triumphs and Blunders. Washington : Greenwood Publishing Group. Michman, R. D., Mazze, ‎. M., & Greco, ‎. J. (2003). Lifestyle Marketing, Reaching the New American Consumer. Atlanta: Greenwood Publishing Group. Olazábal, A. M., Cava, A., & Sacasas, R. (2003). Marketing and the law. Journal of the Academy of Marketing Science, 31(4), 30-45. Parija, B. (2003, February 11). Victoria’s Secret: No Angel Here. CNN/Money, p. 12. Parsley, K. (2013, July 3). Victoria’s Secret Marketing Strategy. Retrieved April 4, 2014, from Digital Retailing: http://kaitlinparsley.wordpress.com/2012/07/03/victorias-secret-marketing-strategy/ Peng, M. (2013). Global Strategy. New York: Cengage Learning. Pride, W., & Ferrell, O. C. (2012). Foundations of Marketing. Atlanta: Cengage Learning. Sakarya, S., Eckman, M., & Hyllegard, K. H. (2007). Market selection for international, Assessing opportunities in emerging markets. International Marketing Review, 24(2), 209-234. Sansare, V. (2013, February 26). Market entry strategies, Victorias Secret. Retrieved April $, 2014, from http://www.slideshare.net/vineetsansare/market-entry-strategies-16784323#btnNext Secret, V. (2014). Redeem your Secret Reward Card. Retrieved April 4, 2014, from Victoria’s Secret: http://www.victoriassecret.com/sale Shaw, L., & Dennison, S. (2005). Pop Culture Latin America!: Media, Arts, and Lifestyle. New Jersey: ABC-CLIO. Stone, D. L., & Villachica, S. W. (2014). Lessons learned from victorias secret: Ensuring the “pull” in performance improvement. Performance Improvement, 43(8), 334-339. Tagg, T. (2004, April 29). What’s Victoria’s Secret?? Retrieved April 4, 2014, from Appendices Appendix 1 PESTLE Analysis of Argentina Textile Industry POLITICAL A pariah state A lot of corruption and cronyism Bidding to re-enter global direct investment and funding Improved production in the raw material sector ECONOMICAL Still recovering from the world economic crunch of 2008 High GDP growth rate in recent years Initially an exporter of the agricultural sector. Has developed in other sectors Self-sufficient in energy needs A lot of welcome investment to US companies in manufacturing and retail sectors SOCIAL Strong family ties than any other American country in the region Relatives highly influence behaviour of individuals Clearly differentiated gender roles Higher class stratifications and very high per capita income in the region TECHNOLOGICAL Technology highly concentrated in towns Inconsistent infrastructural development Relatively weaker infrastructural system LEGAL Each province has own court system ENVIRONMENTAL Environmental matters are vested in the ministry of public health All businesses must get clearance from this ministry before operations Appendix 2 SWOT Analysis of Victoria’s Secret STRENGTH High utilization of social media platforms Large amount of stores A well established brand Sub-brand PINK targeting late teens and college students a huge success Organic and fair trade shows a big boost WEAKNESSES Relatively higher prices due to low discounts on products Large supplier base would not guarantee quality and efficiency Concentration in the US as opposed to the rest of the world OPPORTUNITIES Could benefit from personalizing shopping experiences Venture into more international market THREATS Current economic situations High rise in competition e.g. American Eagle Fake imitation and replicas Highly fragmented industry would mean low level brand loyalty Appendix 3 Countries Attractiveness Similarity in corporate culture to the USA and Europe No strictness to religion issues Developing market in the cloth line industry Higher per capita income means ability to buy A fashionable nation Higher population mixture with more youth. 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