How to Help Riverisland, a UK Apparel Company Enter Iceland Market - Case Study Example

Macro-Level Analysis

Birth Rate

For the year 2014, Iceland reported a total of 4,331 births, which was a decline from the 4,536 births recorded in 2012, which was the highest in Europe; while the number of boys and girls during this period was 969 boys for each 1000 girls (tradingeconomics.com, 2016: p1). The fertility rate in Iceland, which is calculated as the average children that each woman has, has continued to decline across the country standing at 1.93 in 2014 as compared to 2.04 in 2013, which was the first time that this rate dropped below 2.00 in 50 years. Moreover, there is also an increase in the average age of first-time mothers, with most first time mothers aged 30.2 years in 2014 compared 27.3 years in 2013 (tradingeconomics.com, 2016: p1). In relation to health, Iceland’s birth life expectancy was 83 years in 2013, which was at least three years above the average the OECD average.

With regard to age structure, 19.8% of the population is aged between 0 to 14 years, while 14.6% is aged between 15 and 24 years. On the other hand, at least 40.9% of Iceland’s population is aged between 25 and 54 years, which is the largest age group in the country, whereas 11.4% are aged between 55 and 64 (tradingeconomics.com, 2016: p1). Moreover, the smallest age group by population is for those aged between 55 and 64 at 11.4%, while those aged over 65 years make up for 13.2% of the population. Generally in relation to sex ratio for the year 2014, there was 1 male for every 1 female with more males at birth, under 15 years and between 15 and 64 years of age, but significantly more females aged over 65 years (tradingeconomics.com, 2016: p1).

Procedures and Ease of doing Business

In 2016, Iceland was ranked 19th in the world in relation to the ease of starting a business, which was lower than its rank of 18 in 2015; while the country ranked 40th in terms of ease of doing business, which was a decline from its position at 31 in 2015 (PWC, 2016: p1). Moreover, the country ranked 45th in terms of dealing with construction permits and 8th with regard to access to electricity. In addition, Iceland ranked 15th in relation to the ease of registration of property and 59th in terms of ease of accessing credit. Furthermore, Iceland ranked 20th in 2016 for protection of minority investors and 36th in terms of paying taxes, whereas the country was ranked 64th with regard to trading across borders and 35th in terms of enforcing contracts (PWC, 2016: p1). Finally, the country was ranked 15th in 2016 in relation to resolving insolvency.

The most economically important and common form of business in Iceland is through limited companies, although other types of business like foreign company branches have increased in popularity (PWC, 2016: p1). Foreign investments in Iceland tend to take the form of limited company branches or limited companies. Foreign companies with legal domicile within the ECC are allowed to operate branches in Iceland with a 20% corporate income tax, while those domiciled outside Europe could also operate at the same corporate tax rate if permitted by the Minister of Commerce. However, any foreign company must register with the Icelandic Internal Revenue in the Enterprise register division and are required to file several documents including articles of association, incorporation certificate, and written commitment to abide by Icelandic jurisdiction, and financial statements for the preceding year (PWC, 2016: p1).

Personal Income

The average household disposable income per capita in Iceland is $39,000, which is the 10th highest in the world but lower than the average in OECD countries. In relation to employment rates, at least 82% of individuals between the ages of fifteen and sixty four have a paying job, which ranks above the 65% average in OECD countries and is actually the highest rate of employment within the OECD (OECD, 2016: p1). In this case, some 84% of the men in Iceland are employed in a paying job compared to 80% of Icelandic women. Getting a paying job in Iceland is dependent on skill and education level, in which at least 71% of all adults aged between twenty five and sixty four have an upper secondary school degree. This rank below the average OECD rate at 75%, with more men having completed their upper secondary education (OECD, 2016: p1).

Average disposable incomes in Iceland are the 2nd highest within the Nordic region with only Norway having higher disposable incomes; while Iceland’s average disposable incomes are ranked 10th among all countries in the OECD. The hourly labour cost in cost in 2014 was €23.2 compared to €24.1 in the EU region, compared to the highest hourly labour costs in Norway at €571 and the lowest in Bulgaria at €3.4 (OECD, 2016: p1). Moreover, Iceland had the lowest labour costs in 2014 compared to other countries in the Nordic region, with the UK being the only other Northern European country with lower labour costs compared to Iceland. Furthermore, labour costs rose in Iceland between 2008 and 2014 by at least 18%, although the cost in Euros was lower at 5.6% as a result of currency exchange rate impacts (OECD, 2016: p1).

Micro-Level Analysis

Local Competitors

In the year 2013, Iceland had approximately three hundred and twenty four clothing shops across the entire country; of which at least one hundred and fifty six constituted of online shops and thirty five constituted of leather and shoe shops that are the main focus for River Island. Whereas this represents a drop of 2% for overall clothing shops and a decline of 5% for leather and shoe sops, there was a significant 11% increase in the number of online shops (europa.eu, 2016: p1). Local Icelandic clothing companies have garnered attention globally for their unique and creative designs. Three of these companies, 660 North, Farmers Market, and Nordic store will provide the most competition for River Island. Essentially, these companies are based on a history of weaving, knitting, and use of Icelandic wool to create jacket, cardigan, and sweater designs (europa.eu, 2016: p1).

660 North was founded in 1926 with the aim of providing protective wear to protect Icelanders from severe winters and the forceful weather. Currently, they continue to make durable wear such as fleece garments, coats and parkas, sweaters, and accessories for children and adults (europa.eu, 2016: p1). Farmers market, on the other hand, was founded in 2005 as a clothing company and design brand with a strong inclination to Iceland’s design and music scene. Their design inspiration and concept combines chic modernity and classic Nordic elements of design. Finally, Nordic Store provides its customers with a wide array of Icelandic clothing and design products that are shipped worldwide, with a particularly extensive collection of wool scarves, hats, dresses, jackets, and sweaters (europa.eu, 2016: p1). This store handpicks designers featured at their stores and provides some of the most popular and quality clothing in Iceland.

International Competitors

International clothing companies and fashion brands, it may be argued, is more successful in the Icelandic market than local companies are because most of the large clothing shops are international brands from Bestseller, Debenhams, and Hagar. Hagar operates at least fifty six stores across six retail chains with fashion stores like Topshop, Zara, Warehouse, Dorothy Perkins, and Karen Millen (europa.eu, 2016: p1). Hagar is a leading producer and marketer of men’s tailored and casual clothing and has in the recent past sought to appeal to millennial consumers alongside the older and loyal customers who have been Hagar consumers for decades. The company has also set a target to become a lifestyle brand by introducing new clothing lines over the next five years. Naturally, the company has also significantly expanded in the shoe market supported by its part-owners that produce shoes for new Balance and Nike in Asia (europa.eu, 2016: p1).

Debenhams is another major international competitor for River Island in the clothing and fashion market. As a British multinational retailer, Debenhams operates in the UK and Ireland as department stores and under the franchise format in foreign markets (europa.eu, 2016: p1). Some of the brands sold in Debenhams stores include Warehouse, Phase Eight, Coast, and Oasis; while they have also expanded to sell Sports Direct in its domestic market that should be expanded to foreign markets if successful. Moreover, Debenhams operates retail websites and mobile-enabled mobile apps and websites to allow its customers to shop their entire online range. Finally, Bestseller is a Danish family-owned business that carries 11 brands and has more focus on women’s clothing although it has also introduced menswear and children clothing but to a lesser extent. Most of its shops are in European countries, China, Canada, India, and the Middle East (europa.eu, 2016: p1).

Competition Intensity

As noted above, international clothing companies and fashion brands are the most popular and successful companies in Iceland; although local companies are increasing their market share as they enter the online marketing space. While the global economic crisis of 2008/2009 significantly affected the profitability of smaller clothing companies and favoured larger international companies, competition from local companies has increased over the last five years (statista.com, 2015: p1). However, international companies currently hold the biggest market share although the increase in tourism numbers has provided more market opportunities for both international and local companies. The three leading international companies are financially stable and were able to ride out the financial crisis due to their significant operational efficiency and bargaining power due to their experience and size (statista.com, 2015: p1).

Majority of clothing and fashion consumers in Iceland (54%) purchase their products from overseas through online shopping, compared to 33% who buy their fashion and clothing from local companies (statista.com, 2015: p1). In this case, the most popular overseas shops include Debenhams, Hagar, Topshop, Vero Moda, and Zara. There are currently over three hundred and twenty clothing and fashion shops in Iceland of which almost half are online clothing and fashion shops. The most intense competition is in the online shopping format, which has seen a doubling in the number of outlets. Indeed, close to 10% of Iceland’s overall sales in retail format are from the clothing and fashion sector. The major reason why consumers in Iceland prefer to buy from online shops from abroad is that they are cheaper because children’s clothing, for example, are highly taxed in Iceland (statista.com, 2015: p1).