Analysis of the Potential African Markets - Admission/Application Essay Example

Research Paper: International Marketing Assignment Contents Research Paper: International Marketing Assignment 3 3 Introduction 3 Analysis of the potential African markets 4 Social 4 Technology 5 Economic 5 Political 6 Environmental 6 Legal 6 Identification of Target Country 7 Strengths of Zara 7 Weakness of Zara 8 Opportunity for Zara 8 Threat for Zara 9 Works Cited 10 Name of the Student Name of the Professor Name of the Course Date Research Paper: International Marketing Assignment Abstract The researcher acts as an international marketing manager of the luxury apparel brand Zara, who have been asked to frame a proper expansion plan in one of the African countries as the brand is presently in an expansion spree. The author has selected three African countries for the purpose of analyzing their markets and coming to a conclusion regarding the prospective market for Zara. The nations selected in this study are Sudan, Zambia and Cameroon. The analysis has been carried out on the basis of external factors of all the three countries, which might affect the business of Zara and it ends with an empirical study about the internal factors of Zara and the ways to benefit from the external factors of Sudan. Introduction International market is diverse and provides a sea of profitable opportunities for the business managers. In the twenty-first century, no big company can afford to stay and operate only in the local market. In order to expand their customer base and improve brand image, they need to consider the international market. Zara, a Spanish retailer engaging in clothing and accessories based in Arteixo, was founded by Amancio Ortega and Rosalía Mera. Founded in 1975, Zara is presently one of the largest apparel stores. Zara, the primary chain store belonging to Inditex Group, had an estimated brand value of $9.4 bn on 2013 and with more than 2000 stores worldwide, it is ranked as one of the world’s most valuable brands by Forbes in 2013 (“ Zara on the world’s most valuable brand’s list”). Zara is renowned for their expertise in designing a new product and delivering to the stores within two weeks of time, whereas other retailers take at least six months. Inditex group is on an expansion spree, they have planned to open 325 stores in 2013 in order to counter the efforts of their biggest competitor, Hennes & Mauritz, who has planned to open 350 new stores globally. The researcher acts as a marketing manager of Zara and analyses the potential markets in the African continent. He also has to formulate guidelines for entry into the foreign market (The Strategist’s Choice). Analysis of the potential African markets `In the present global business scenario, no company without a global expansion plan can survive in the cut-throat competition. The international market is lucrative, but they are even complex because of different laws and regulations existing in different countries. Sudan, Zambia and Cameroon are the three potential countries, which have been considered in this study and the external environment is analyzed by using STEPLE model. Social The Sudan has 52% of its population in the age group of 15-24 years (“The world factbook: Sudan”). Zara generally targets this bracket, which proves that the company would have adequate market to vouch for. Population grows at a rate of 1.78%. This again is a good sign for the company because there would be an increase in the customer base. The gross domestic product (GDP) per capita is highest among the other two countries (“The world factbook : Sudan”); this is a critical indication as this implies that the income of people here is more than that of the other two countries. Zara being a luxury brand would obviously be willing to opt for the prospect. The real growth rate of Sudan is 3.9% as on 2013. The above factors state that the Sudan market has potential business environment. Cameroon comes next to Sudan with 50% of the population under the target group of Zara on basis of their age. The per capita income of Cameroon is a tad lesser than Sudan (“The world factbook : Cameroon”). They have a primary commodity economy with huge natural resources and agriculture forming the primary aspects of their economy. Zara being a luxury brand must always look out for a market with higher per capita income, so the Cameroon market does not interest them. Zambia, on the other hand, has the lowest per capita income, but a high real growth rate giving an impression of a high prospect in future (Sanyikosa, “Zambias inefficient education system”). Due to the less per capita income, Zara would not consider Zambia as a prospective market (“The world factbook : Zambia”). Technology Sudan is relatively higher placed than the other two countries selected, in terms of technology. They have successfully installed technology in industrial and agricultural projects in order to increase their productivity (Mohamed, Paul and Abdallah, “G-tech advancing agriculture in Sudan”). With Zara having an online expansion plan, which focuses offering online stores in more than 27 countries, they should be interested in such technological advancement (Severt, “Inditex plans to continue global expansion of online platforms”). In the present world, the key to greater development is that of staying updated with the newer age technology, which is properly available in the Sudan market. Zambia lags far behind because of several constraints present concerning implementation of an effective technological structure (Kyambalesa, “Science and technology in Zambia”). They need to address to these constraints at the earliest and put in efforts to bring in technological advancement in the country so as to pose as attractive foreign market for many brands. Even Cameroon has a bleak picture about their technological structure (Mainshah). It would take a long time for them to compete with other developing nations, in terms of technology. Hence, it can be said that even in terms of technological aspects, Sudan scores higher than the other two nations. Economic Zara being a luxury brand of apparels should think about expanding in the economy, which is in a better position and not reeling with political and social instability. Despite being a poor country, Sudan has shown excellent growth over the last decade with the help of growing oil prices. With a GDP of $52 bn, Sudan ranks highest when compared with Zambia and Cameroon. This finding is crucial because higher GDP of a country gives an impression of the country performing well. Service sector contributes to only 13% of their economy. This reflects that there is a huge opportunity for a new business to enter therein and tap the virgin market; Zara comes under service sector. Zambia and Cameroon both fall short in GDP, but with their service sector contributing 47% and 52% respectively, their service sector is more saturated than that of Sudan. Zara should look out for markets that is less saturated and has multiple opportunities for them to tap. Political The political condition in Africa as a whole is mixed. In some of the countries, they have tried and abolished the problems that were prevalent and in some others, the government is still trying to do the same. The present political condition is not conducive in Sudan. Followed by the civil war, Sudan is still in recovery phase. Yet, the peace talks are ongoing in order to minimize political bickering and negotiate for betterment of the country’s economy (“South Sudan political forum demand speedy peace process”). This is good news for the prospect of Zara because when they are entering into a new market as they should be aware of political stability of the place, which would enable them to work in a peaceful environment (“Conflict sensitivity in South Sudan: Ensuring economic development supports peace“). The situation of Zambia is no different as they are also suffering with political unrest, thereby repelling the potential investments. Cameroon is the only country in this list to have relatively more peace politically in their country, though they have to make more efforts to formulate measures in order to bring in foreign investment, which would facilitate development. Environmental Most of the developing nations in Africa are sharing the same environmental concerns like, pollution, scarcity in natural resources and deforestation. These three countries also have the same environmental issues. Zara, before entering these markets, should have a proper measure formulated to address these issues and help the government to improve present conditions. Legal The Sudan government and the Cameroon government have proper foreign direct investment policies. They have provided an environment, which is conducive for business. They are also experiencing a huge rise in the foreign direct investment over last few years. Sudan ranks among one of the top African countries in terms of FDI received. The huge FDI inflow into the Sudan market has attracted many potential investors worldwide (“FDI in the Sudan”). All of them seek a suitable timing and opportunity to enter this market. This finding has made the grounds of Sudan stronger for Zara to enter into this market. Zambia, on the other hand, is still struggling to set a proper foreign direct investment policy in place (Mackay, “Politics threatens progress anew in Zambia”). They are yet to realize relevance and importance of bringing in investment into their country. Identification of Target Country The above analysis on the three potential countries in Africa has enabled us to deduce that Sudan scores highest in terms of opportunities than the other two countries. Zara needs to have a proper business strategy in order to enter the market. Zara must take the intermediate mode of approach. Licensing would be the best way to enter the new market. According to licensing, Zara would give a formal permission and right to a firm or agent located in a host country so as to use the latter’s proprietary technology and other resources in return for a payment. Zara would have the following opportunities and strengths if they expand in Sudan among the chosen African countries. Strengths of Zara Zara’s strength lies in the ability to differentiate themselves from their competitors by improving their supply chain activities. They were famous for claiming that they can design and bring in to the shops a new product within two weeks time, which other retailers would accomplish in six months. In all these years, retailers have tried to emulate Zara’s strategy, but it has been so well-maintained by Zara, that other retailers have found it difficult to counter them in their unique positioning. It is this positioning and brand image of Zara, which have provided them with an average of seventeen visits by a single customer compared to three to four visits for their competitors. The word-of-mouth for this brand is high and Zara even has proper feedback collection from their customers, which speeds up strategic decision making process. If a product line is not accepted well, then they remove it and replenish the popular products at a fast pace, owing to their highly efficient supply chain management. The environment that they provide to customers is same anywhere in the world because most of the stores are company owned and have proper supervising standards for the franchisee stores. They have heavily invested in information technology and online stores, which are planned to be extended in foreign countries. Weakness of Zara Zara has certain weaknesses that they need to overcome in order to create an impact on the new market wherein they would expand. The prices are high. In order to make a mark in Sudan market, they need to improvise on this. As a country within one of the developing countries, they will not be able to afford the price as that of the developed countries. They have centralized production of their products, which will not be possible if they enter the market through licensing strategy. Zara’s present market situation is not too sound as the profit has fallen in past few years owing to fluctuation in exchange rate (“Zara-owner Inditex posts weak profit growth”). The external factors of Sudan favouring their operations Opportunity for Zara If Zara opts for licensing, they can reap most of their benefits because the manufacturer would be near the base of customers, which would enable them to understand actual needs and preferences of the local people. The capital investment is less and the return is high. There would not be any problem like, nationalizing or expropriating of assets, which they will otherwise suffer from if they consider commencing the operation themselves. The new product can be exploited globally. The government contracts can be secured by the local manufacturers. In a recent report, it has been stated that Sudan is welcoming newer retail business in the country. In another study, it was reflected that the consumer-facing industries in Africa are expected to grow more than $400 bn by 2020. Report has found out that the Africans are considerably optimistic about their economic future. The use of internet has also increased significantly in recent times in African countries (United Nations). Another most important factor for Zara is that the African consumers are conscious about brands. As the continent is in the backwaters, companies can sell second-rate merchandise. African consumers are always longing for the latest fashion and want to have a modern shopping experience. Zara is capable of satisfying all these requirements in the best possible manner. Threat for Zara The major threat that Zara might face in the new market is owing to their strategy for fewer advertisements. The competitors would follow suit as soon as they lay their feet in the new market. It would be difficult for them to save their market, when competitors would also venture in the same market. This is because the price tag for Zara is slightly more than those offered by the competitor brands. The competitors also have a proper marketing team in place that looks after the campaigns and promotions through advertisements. In order to stay alive in competition, Zara must think different and invest substantially in advertising and promotional campaigns to gain an edge over their competitors. Conclusion Based on the analysis that has been carried out in this paper regarding Sudan, Zambia and Cameroon, it has been found out that Sudan scores the best points among the other two countries for Zara to have a prospective market for their expansion. Through intensive research, it is evident that Sudan outscores Zambia and Cameroon in technological, social and economical aspects, thereby rendering business environment in the country desirable for Zara. They must start off their business in Sudan with the help of licensing in order to reap the national benefits, which have been discussed above. In addition to the above positive aspects that Sudan provides, Zara would also be able to attain cheap labour, which would bring down their product cost. This would help to set a price, which would be affordable by the people of Sudan. Works Cited “Zara on the world’s most valuable brand’s list.” Forbes, Forbes, 2013.Web. 23 June 2014. “Conflict sensitivity in South Sudan: Ensuring economic development supports peace. “ 2013. Saferworld, Saferworld. Web. 23 June 2014. “FDI in the Sudan.” AEDI, Africa Economic Development Institute, 2014. Web. 23 June 2014. “South Sudan political forum demand speedy peace process.” Sudan Tribune, Sudan Tribune, 2014. Web 23 June 2014. “The world factbook : Cameroon.” Central Intelligence Agency, Central Intelligence Agency, 2014. Web. 23 June 2014. “The world factbook : Sudan.” Central Intelligence Agency, Central Intelligence Agency,2014. Web. 23 June 2014. “The world factbook : Zambia.” Central Intelligence Agency, Central Intelligence Agency,2014. Web. 23 June 2014. “Zara-owner Inditex posts weak profit growth.” 2013. BBC, BBC. Web. 23 June 2014. Kyambalesa, Henry. “Science and technology in Zambia.” Lusakatimes.com, Lusakatimes, 2009. Web. 23 June 2014. Mackay, Mitchell. “Politics threatens progress anew in Zambia.” Business Day, Business Day,2013. Web. 23 June 2014. Mainshah, Henry. “Cameroonians in Oslo, Diaspora, and uses of the media.” (2009): 83-94. Nordicom Review. PDF File. Mohamed, Ali Bader, Rajesh S Paul and Adil Ahmed Abdallah. “G-tech advancing agriculture in Sudan.” Geospatial World, Geospatial Media and Communications Pvt. Ltd.2014. Web. 23 June 2014. Sanyikosa, Robert. “Zambias inefficient education system.”2011. The Post Online, The Post Online. Web 23 June 2014. Severt, Natalie. “Inditex plans to continue global expansion of online platforms.” evigo, evigo, 2014. Web. 23 June 2014. The Strategist’s Choice, “The story of Zara: The speeding bullet.” (2013): 1-3.Unique Business Strategies. PDF File. United Nations, “Economic Development in Africa: Reports.” (2013): 1-158.United Nations conference on trade and development. PDF File. Read More