Topshop and Kate Moss Collaboration - Report Example

INTERNATIONAL MARKETING STRATEGY FOR TOPSHOP A REPORT FOR THE CEO TABLE OF CONTENTS Page 3 2 Introduction 4 3 The Home Market for Topshop 4 4 A Case Study for International Marketing 5 4.1 Protectionism 6 4.2 Buyer Behaviour 6 4.3 Importance of Communication 6 4.4 The Economic Aspect of International Marketing 7 4.5 The International Marketing Strategy 7 4.6 International Marketing Research 7 4.7 Modes of Entry 8 4.8 International Pricing Policy 8 4.9 The Similarity Factor 9 4.10 Strategic Decisions 13 5 Recommendations 14 6 Bibliography 15 1 Abstract Topshop has launched a new fashion range in collaboration with Kate Moss that has been a great success in UK, US and Europe. This had led the International Manager to think of expanding and he has prepared a report on the best overseas market for this range for the top management. He has explained the parameters of International Trade along with constraints and opportunities and has carried out a PESTEL and SWOT analysis of India, his recommended destination. 2 Introduction At Topshop as a multinational company we have an amazing story. We sells an average of 30 pairs of knickers a minute, 6,000 pairs of jeans a day and 35,000 pairs of shoes every week. Our claim is “Topshop attracts women from their teens to the 40s searching for a weekly fashion idea”. (Topshop Website). While basically aiming at the female section, we also fashion lines for men as well as babies. But our co-branding with Kate Moss, the famous Model earlier this year was a calculated move to give a fresh thrust to move deeper into the lucrative American and European markets, and it has proved to be correct. Indeed the first week’s sales at the UK outlets of the Kate Moss collection exceeded £ 3 million, were beyond expectations and are going strong ever since. (Fashion United News). 3 The Home Market for Topshop Celebrity names do have a positive impact on sales and profit figures and those especially from the world of fashion and entertainment, after sports, are engaged regularly by consumer product manufacturers and retailers. (Sarah Modlock). Consumers have favoured products sponsored or endorsed by celebrities and this is particularly true for apparel and accessories as people have a penchant to look good and thereby feel good. Introducing and aligning with Kate Moss by Topshop was a brilliant move and has paid handsomely. It is expected to improve the sagging bottom-line of the company and will be a grand success. The Kate Moss experiment and experience has opened wider markets of US and Europe for Topshop and we should now look beyond the Home Market of UK and Ireland. We have an International presence, but are in position to make a major foray into larger markets. This report will present a case for Topshop entering into the huge International Market. 4 A Case Study for International Marketing According to Doole and Lowe (2004), there are many companies with export prospects that keep away from doing business beyond their home market. Often the reason is apprehension. They are afraid of failure on account of the challenges of competence and cultural factors. Largely they end up with exporting through distributors, adopting the strategy of least involvement, but while this may work in the short run, it never lasts in a longer perspective. (Doole, Lowe, 2004). However there are some other roadblocks on the way. 4.1 Protectionism By its very nature International Marketing is fraught with vested interests found both in nations and its own industry. Almost everywhere there is some element of Protectionism that is overtly or covertly practiced. Most countries, led by US declare that they favour Open Market policies but indeed protect their own home industries with some form of duties, tariffs or taxations that discourage or at least restrict outsiders from invading their home territories. Unfortunately this is as true for developed and wealthy nations as for the developing and poorer nations. Under the prevailing circumstances the criteria for selection for Topshop for a new International market from some 250+ nations across the world can be determined by examining several aspects related to International Marketing practices. 4.2 Product Mix The 4P’s of marketing, Product, Price, Promotion and Place have been successfully applied within the Home markets. (McCarthy E.J,. 1964). However their application in an International setting has been well explained by Hollensen (2002). He stated that selling one standard product or set of standard products that are also sold in the Home market help in saving money on market research and product development. But not many firms have been successful with this strategy. With adaptation to the requirements of the buyers preferences of the target market the company can achieve success but will have to bear the additional cost of such changes. Yet another strategy is to have separate set of Products for both Home and Export markets. This will have a bearing on Pricing Policies. Setting a standard price across markets may be a good policy to convey uniformity but it can mean loosing out on opportunities and exposing weakness that can be exploited by competition. Having a separate pricing is however difficult as it could lead to customer resentment, but will bring in greater profits. This can be well handled by having well designed Promotion Policies that will cater to local cultural requirements and satisfy the local customers of that market. By addressing local issues with international Products the image of the company can be stabilised. Communication with the market and other stakeholders is extremely important and beneficent. 4.3 The Importance of Communication Doole and Lowe (2004) opine that the international reputation of a company depends upon the good relationships of the customers and stakeholders. The internal relationship depends on the awareness of the marketing strategies. Communications at different levels have to be addressed with finesse and expertise to achieve a correct image of the company and its products. Internal competencies of a company will not be sufficient to guarantee success. External stakeholders like the distributors have to be fully aware of the marketing policies. 4.4 The Economic Aspects of International Marketing Organizations are also dependant on their external environment for resources (Pfefferand Salanick 1978), as a result the environmental factors will determine the economics of the international venture of a company. This must be considered when selecting the target country. But it has been explained by Hofer & Schendel (1978) that organizations are able to overcome the environmental challenges through marketing strategies. 4.5 The International Marketing Strategy The reason for going to the international market will determine the marketing strategy to be adopted. The Home market may be reaching saturation, there maybe intense competition that is stifling market or there maybe an opportunity to exploit a product or idea whose time has come. In all cases the common factors will be careful planning, allocation of adequate resources, organizing contingencies and having an implementation schedule. A careful monitoring of the implementation process with measurable performances is a must to make the whole exercise meaningful and productive. 4.6 International Marketing Research It is also prudent to make a careful research of the target market. The data for this research is often available at government data collection agencies of the market as well as private agencies that collect data with different objectives. It is important to be able to ask for and obtain the right data as this can sometime be misleading as perspectives differ. This is the secondary data and primary data can be collected through talking directly to various distribution channels. 4.7 The Modes of Entry There are three general modes of entry to a potential export market. The first is by exporting the products directly to them; to large customers or buyers who then independently decide on their sales strategies. The second is by having a contractual agreement with a distributor or franchisee that is bound by terms and conditions for sales and marketing. The third is by making investments in the designated country either by opening own property like showrooms or even setting up own factories to assemble or manufacture the product and then sell it locally. “The secret is to select that alternative that is most appropriate for the firm within a particular foreign market setting.” (Darling & Seristö, 2004, p.33). The mode is however determined by the marketing strategies that may be decided. 4.8 International Pricing Policy While pricing in general has bee explained above but specific Pricing Policy is required by companies according to their situation. Regulation of Tariffs, Taxes and Duties all affect the prices in a given country (Cavusgil et al., 1993). In reality no single strategy in any given condition and Global marketing decisions on Price, Promotion and Distribution depends entirely upon the local environment. (Jain 1989). Although standardization brings in homogeneity across markets as well as customer satisfaction and cost savings in many ways, it has been argued that it also causes economies of scale and offers a low-cost competitive position in the global market (Cavusgil et al., 1993). However this is a very simplistic view and, as explained elsewhere, an adaptive view of pricing which takes local factors into account is more practical. (Douglas & Wind, 1987; Wind, 1986). This calls for a PESTEL Analysis of the target country. 4.9 The Similarity Factor There are many uncertainties when a company plans to exports to another country where conditions differ from the Home country. (Erramilli & Rao, 1993). Conflicting data and its interpretation make it difficult to arrive at decisions. (Boyacigiller, 1990), and in absence of adequate information it is impossible for companies to project consequences of their strategic decisions. (Achrol & Stern, 1988). Indeed this may lead to wrong and harmful decisions effecting performances overseas. (Lee, 1998). To overcome this difficulty Johanson & Vahlne (1977, 1990) and Wiedersheim-Paul, Olson, & Welch (1978) suggest that it is best if the target country is closely similar to the Home country to ensure success. Undoubtedly similarities are easier to manage and less challenging and more likely to succeed. This calls for a PESTEL and a SOWT analysis of the intended market. PEST stands for Political, Economical, Socio-Cultural, Technological and Legal influences that affect a business. These are all external factors that are beyond the control of management but deeply affect its business strategies. PESTLE Analysis Political India is the largest democracy in the world today and has retained a lot of its colonial habits including the education and culture. It is therefore much easier to penetrate into this market as it is not alienated in any way. It embraces and in fact adores foreign products and is very receptive to all things foreign. Largely the political situation is stable, although different political parties rule the different states of India and there are deep differences between them. However there is broad consensus that the economic liberalization that began in 1990 should be carried forward. Economic As a result of the reforms the economy has grown at scorching pace and industry has by and large been unshackled and value has been unlocked. The stock market is at an all time high and the mood is buoyant. Industrial growth is at an all time high and exports and foreign exchange reserves keep growing. The investment climate is very good and largely the Indian government is receptive to foreign investments. There are some restrictions or conditions attached to investments but they are more regulatory in nature and not restrictive. The GDP rate is over 9% and is one of the fastest growing in the world. There is high demand of products of all kinds and international trades are on the increase. A huge number of foreign companies are setting up operations, either as wholly owned companies, or as joint ventures with local partners. Being the second most populous country in the world, India provides both manpower and customers to the foreign companies. Socio-Cultural The country is rich in heritage and culture and there is great cultural diversity in its population. With at least three big religious followings and more than twenty main languages, it presents a diverse market that can easily accept any other culture comfortably. The multi-ethnic communities offer a new marketing challenge and opportunity to those who venture in this region. Technological India has made great strides in the technological field. In the arena of Information Technology, it is admitted that they have been the co-founders of large and new enterprises that dominate the world. Not content at that, they are also the drivers of these hoses of knowledge and technology. Hardly is there any IT company in the world which does not significantly depend on their contribution. India is the hub of Information highway and an important centre in the world today. A host of multinational companies like Microsoft, Google and HP have substantial presence in the country. Environmental India is blessed with a long coastline extending beyond 3000 miles or 4600 kilometres. It has several international ports on both the eastern and western coasts and has numerous international airports. It various regions are also well connected by rail, road and air. However the infrastructure is of poor quality. Many ambitious schemes are under way for improvement, but they will all take time to fructify. The movement of goods to the interior is slow but available nevertheless. Communications are improving faster with teledensity increasing at a very fast pace due to introduction of mobile phones. Legal India has an efficient Judicial and legal structure that is more like the west than any other country. It still draws its legal base from English law and as such is more acceptable to the west than any other country in the east. Special laws have been passed and are constantly evolving to make it easy and profitable for foreign investors to operate in India. SWOT Analysis SWOT analysis is an effective way of identifying strengths and weaknesses, and of examining the opportunities and threats the company is likely to face. A SWOT of India as a destination reveals many interesting features. (McCarthy 1964) Strengths Weaknesses 1. India is a fast growing Economy with annual growth in the range of 9% 2. Huge middle income population of 300 million makes a large customer base 3. Hundreds of urban and semi-urban centres with great spending power 4. Vast educated man power pool is available for employment 5. Quality work space available at reasonable prices 6. Several religions have great number of festive occasions which create special marketing opportunities 7. The customer is very price conscious and will favourably look at price cuts 8. Good legal and commercial environment 9. A new high end set of customers are emerging which creates a new and paying segment. 10, Cost of Promotion through media is reasonable and effective 1. Infrastructure is poor 2. There are some government restrictions on investments in India by foreign players. 3. There is widespread corruption in beurocracy and politics 4. Local taxation is high compared to other destinations. Opportunities Threats 1. The potential of the market is very big 2. With new retail space being built at a fast pace, there is plentiful choice 3. The middle class is educated hence appreciates foreign made goods 4. Western clothing is quite popular and has great acceptance 1. The competition from local players is tough 2. Traditions of Indian customers have to be understood and catered to. 3. Other large foreign labels have already established themselves and will offer tough competition 4. Local resistance backed by political interests is a problem in certain pockets. 5. Intellectual Property rights not really observed and a big market of fake goods erodes the potential 6. Often price is more important than quality and can disrupt strategies 4.10 Strategic Decisions With the above considerations a Strategic decision is now required to select one destination for the new venture. A background and situation analysis will lead to making a Strategic Plan with an Implementation Plan to be followed by measurable targets. Such a plan will ensure the success of the export venture. A note of caution is that the plan must include an appropriate marketing mix, meaning a portfolio of adequate products, for a successful export venture. Implementation of Strategies is indeed equally important and has become more difficult with complexities. Darling and Seristö (2004) have stated that foreign co-workers must not be isolated and the all co-workers must be integrated and motivated into the activities for achieving goals. Evaluations of these activities are the measure of success of the plans and strategies. 5 Recommendations Having arrived at a decision to export based on above factors it is recommended that India be the next destination for export of the Kate Moss Collection. The SWOT and PESTEL analysis of India clarify and support this recommendation. India represents a bright future for Topshop. Venturing into an export market is always a risky venture despite the best of analysis. The turbulent international political situation and the great economic strides of the hereftobefore sleeping giant presents a fluid situation. Yet a decision is required on the issue as it represents a new opening for the company. The factors favouring India are its huge economy that has already become a power in the world. It can be used as a manufacturing base for Topshop to cater to the whole of Asia and the Pacific Rim regions. India has only a 1% share of the world trade and has a democratic setup that has great respect for the judiciary. Its liberal reformative policies are attracting a lot of foreign investments and the fundamentals of its corporate sector are very sound. It is slower in decisions and actions but is more sure footed. An investment opportunity exists here and it is emerging as a manufacturing hub for Asian destinations. It is therefore recommend for Topshop to venture into India with the Kate Moss collection and set up a trading presence to be followed by manufacturing investment after the initial period of say about 2-5 years. 6 Bibliography Achrol, R. S. & Stern, L. W. (1988). Environmental Determinants of Decision- Making Uncertainty in Marketing Channels. Journal of Marketing Research, 25 (February): 36-50. Boyacigiller, N. (1990). The Role of Expatriates in the Management of Interdependence, Complexity and Risk in Multinational Corporations. Journal of International Business Studies, 21 (3): 357-381. Cavusgil, S. T. & Zou, S. (1994). Marketing strategy - performance relationship: An investigation of the empirical link in export market ventures. Journal of Marketing, 58 (January): 1-21. Cavusgil, S. T., Zou, S. & Naidu, G. M. (1993). Product and Promotion Adaptation in Export Ventures: An Empirical Investigation. Journal of International Business Studies, 24 (3): 479-506. Darling, J. R., & Seristö, H. T. (2004). Key steps for success in export markets: A new paradigm for strategic decision making. European Business Review, 16(1), 28-43. Doole, I., Lowe, R. (2004) International Marketing Strategy (4th) Edition. London;Thomson Learning pp 146 Douglas, S. P. & Wind, Y. (1987). The Myth of Globalization. Columbia Journal of World Business, 22 (4): 19-29. Erramilli, M. K. & Rao, C. P. (1993). Service Firms International Entry Mode Choice: A Modified Transaction Cost Approach. Journal of Marketing, 57 (July): 19-38. Hofer, C. W. & Schendel, D. (1978). Strategy Formulation: Analytical Concepts. St. Paul: West Publishing Company Hollensen, S. (2001). Global Marketing: a market responsive approach (2nd ed.). Harlow, England: Pearson Education Limited. Jain, S. C. (1989). Standardization of International Marketing Strategy: Some Research Hypotheses. Journal of Marketing, 53 (January): 70-79. Johanson, J. & Vahlne, J.-E. (1990). The mechanism of internationalization. International Marketing Review, 7 (4): 11-24. Lee, D.-J. (1998). The Effect of Cultural Distance on the Relational Exchange Between Exporters and Importers: The Case of Australian Exporters. Journal of Global Marketing, 11 (4): 7-22. McCarthy, E.J. (1964), Basic Marketing, Richard D. Irwin Homewood, IL. Pfeffer, J. & Salancik, G. R. (1978). The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row. Wiedersheim-Paul, F., Olson, H. C. & Welch, L. S. (1978). Pre-export Activity: The First Step in Internationalization. Journal of International Business Studies, 9 (Spring/Summer): 47-58. Wind, Y. (1986). The Myth of Globalization. Journal of Consumer Marketing, 3 (Spring): 23-26. World Wide Web Fashion United News available at : http://www.fashionunited.co.uk/news/topshop.htm accessed on 26 Oct 2007 Modlock. Sarah,. Are Celebrety Endorsements Worth it?, available at: http://money.uk.msn.com/mymoney/womenandmoney/article.aspx?cp- documentid=4881712 accessed on 26 Oct 2007 Topshop available at: http://www.topshop.com/webapp/wcs/stores/servlet/StaticPageDisplay?storeId=1 2556&catalogId=19551&identifier=ts1%20about%20topshop accessed on 26 Oct 2007 Read More