Can Agros Enter the Chinese Market - Essay Example

Research Design Research Objectives A formal ment describing the problems, issues in a particular research constitutes the research objectives. The main characteristics of research objectives are non-ambiguity and specificity. The research objective serves as the roadmap for the entire project. A research objective serves as the basis of evaluation of the research (McDaniel, Gates, 1998, p.28). The Chinese market has shown tremendous growth rates since the liberalisation of its economy. Business organizations all over the world are trying to grab a piece of this lucrative market. Argos is also one such organization that is trying to make its footprint in the Chinese market. The research tries to find out the market potential of the Chinese consumer market. It also tries to find out the effectiveness of the present business plan of the organization and also its effectiveness in the Chinese market. This is because of the fact that different nations exhibit different buying behaviour which requires a different strategy. The study would try to formulate the best possible strategies for the organizations so that it gains a significant market share in the Chinese market. The main objective of the study is to analyse the effectiveness of the business model of Argos in the Chinese markets. The study would try to analyse the business plan of Argos and would find out whether the same model can be effectively applied in the Chinese market to gain sustainable competitive advantage. Research Questions Research questions provide the details of the main research. These questions provide an insight into the main subject of research. They convert the main topic of the study into answerable form of questions. The two main factors associated with research questions are framing answerable questions and making the correct questions. The research questions must be answered by the application of various scientific methods. The selection of a research topic must be followed by the framing of the hypothesis for the research. The nature of the questions should be such that these questions are reproducible when the research question is again presented under the same set of conditions. The selection of research questions is followed by the selection of the right combination of variables to answer the main research question (Bordens,2006, p.34). The main focus of the present study is to analyse the effectiveness of the business model of Argos in the Chinese consumer market. The research tries to analyse the consumer buying behaviour of the Chinese consumers and tries to analyse whether the business model of Argos fits in with the consumer mindset of the Chinese consumer. The main research question for the study is “whether the attitudes of the Chinese customers will fit in with the present business model of Argos, and whether the present business plan of Argos applicable in other countries would also be successful in the Chinese consumer markets as well. The null and alternative hypothesis for the study is as follows- H0: The consumer behaviour of the Chinese customers would help Argos in making its presence in the Chinese consumer market. H1: The consumer behaviour of the Chinese customers would not help Argos in making its presence in the Chinese consumer market. In order to find out the effectiveness of the business model of Argos, the consumer behaviour of the Chinese consumers would be analysed. A primary study would be conducted for the purpose. A questionnaire survey consisting of both open and closed ended questions would be carried out for analysing the consumer behaviour of the Chinese consumer. Qualitative research would be carried out for analysing the consumer behaviour of the consumers. Qualitative research techniques are used for interpretation and examinations of a set of observations gathered through a research (Dantzker, Hunter, 2006, p.67). Qualitative research techniques are those which do not quantify the research data. They rely on the qualitative aspects of data to examine a research question. They are used in determining the effects of attitudes, behaviours etc. The main reason behind using qualitative research is that it is often touted as the best technique for analysing consumer behaviour. Qualitative research is also considered to be more effective in case of a small sample size. The questionnaire framed for the study contains questions that are more of a probing nature, which are best analysed by using qualitative methods of data analysis. Qualitative research also undertakes an interpretative and subject based analysis (McDaniel & Gates, 1998, p.99). Research Method In order to gather the data for qualitative research a questionnaire survey would be carried out. ‘Focussed group interviews’ would be used for gathering information about the research question from the respondents. Focussed Group interviews are those types of interviews whose results are not indicated in any kind of numerical data. This type of interview provides a constant flow of interaction and input which are related to the group. This kind of interviews provide in depth qualitative analysis which is used for making important business decisions in organizations. The choice of this type of interview assumes significance for this study as focussed group interviews are the best techniques in types of research where concept testing is required (Edmunds, 2000, p.3,4). In this research the business concept of Argos is being tested against the consumer behaviour of the Chinese consumers, hence the use of this kind of research technique would help in a better understanding and analysis of the research question. During the course of the study the questionnaire (refer annexure) would be distributed among the respondents selected for the study. A group of respondents would be selected who would be interviewed using the focussed interview technique. The questionnaire would contain both open as well as closed ended questions. The questions would try to analyse the consumer buying behaviour of the Chinese consumers and would try to find out whether the Chinese consumer buying behaviour is ideal for the present business plan of Argos. The main aim of the interview would be to gather miscellaneous information about the consumer buying behaviour of the Chinese consumers. The respondents would be enquired about their faiths and opinions of Argo’s style of service delivery. The secondary research analysis would be carried out by referring to journals and articles of reputed authors. Data would also be used from the websites of various Governmental sources. These articles would relate the consumer buying behaviour of the Chinese customers with the present business model of Argos. The study would also analyse whether the present business model of the company would be beneficial to the company in generating sustainable competitive advantage. Loopholes in the business plans if any would be highlighted and suitable changes would be suggested to the organizations and policy makers so as to formulate strategies that would help the company in getting a fair share of the customer’s pie in the attractive consumer market of China. Sample Plan The research for the study would be carried out on a sample size of thirty respondents. The respondents have been selected from various demographic segments which include individuals of varying age groups. The respondents would be asked questions from the questionnaire. Sampling the respondents would help in gathering quality information from the respondents. The respondents have been selected from the Chinese Middle class as these represents the target market segment for the company. The middle class also comprises the largest market segment in China and has a great purchasing potential. The interviews of the respondents would be taken in various shopping malls across China. Simple random sampling technique would be used for sampling the population. This technique of sampling employs simple methods to segregate individuals (Kalton,1983, p.8). Data Collection and Analysis Secondary Data Collection The Chinese consumer market presents huge opportunities for various retailers. The economic liberalisation of the nation has seen an increase in the average per capita income of the citizens (Coes, 2007). The high income combined with the large population makes the nation’s consumer markets as one of the most sought after placed by the global retailers across the world. Argos is one of the major retailers based in the United Kingdom. It is the market leader in UK in the general merchandise and the home retail segment. Argos is a multi-channel retailer. The retail chain is known all over the world for its expertise in providing its customer with convenience and values. The company sells its products through an approximate 700 stores across Ireland and UK. The company projected sales figures of approximately 4.3 billion pounds and employs close to about thirty three thousand individuals in multiple segments across the nation. The company operates through multiple supply chains. Its USP lies in its efficient supply chain. The company sells its wide range of products through various channels like retail stores, telephonic orders and though the internet (Databank Consulting, n.d., p.1).The company’s online store format is a huge hit which could be analysed from the fact that the company’s website was the most visited website in UK during the year 2008 (Argos, 2010). Baquero, Bessler & Xu (2010) conducted a research into the operating strategy of the retail houses operating in China. They concluded that most of the foreign retailers had expanded into the nation using a single distribution strategy which was mainly based on the wholesalers. They stated that even though adopting a single distribution partner was beneficial in the beginning but in order to have long term advantage the firms should look for different channels of distribution if they want to attain long term sustainable competitive advantage in the Chinese market. Argos has a direct advantage in such a scenario as it has achieved excellence in supply chain and distribution systems. They operate through multiple channels and could easily repeat their business strategy adopted in this regards to gain sustainable competitive advantage and to grab a share of the lucrative Chinese consumer markets (Baquero, Bessler & Xu, 2010, p.3). The authors also analysed the strategy of the retailers presently operating out of China. They stated certain characteristics of the market. The retailers presently focus on using a push strategy, the sales persons are encouraged to just push the volumes instead of focusing on the needs and wants of the customers. The study also highlights the fact that with the increased purchasing power of the consumers the customers have now become more demanding in nature with every customer demanding a value addition over the current product or service offering. Retailers must concentrate on enhancing the value addition to their product or service offering (Baquero, Bessler & Xu, 2010, p.6). The company has its strengths in an effective supply chain which must be utilised by the company. It could easily replicate its successful model that is being used in UK so as to attain sustainable competitive advantage in the Chinese market. Given the liberalisation policies adopted by the Chinese government Argos can easily replicate its model os logistics in the Chinese market which would enable it to gain sustainable competitive advantage in the Chinese market. The Chinese retail market is considered to be highly fragmented in nature. The Chinese retail market is composed of many small and medium retailers. Data sources state that China has an approximate 549,000 small and medium size retailers whose average employee strength is lower than fifteen Moreover due to the presence of local market barriers interprovincial retailers are also present in very few numbers. The organised retail sector is valued at about 17.8 million Yuan (as of 2008) the market also has the presence of international retail giants like Wal-Mart and Carrefour. Foreign retailers constitute only five percent of the total retail market in China. The Chinese Government has started giving permissions to foreign retailers to set up businesses in the country across any of the provinces in the nation. The online retail market has also grown considerably during the recent years. The online retail market has been valued at 250 billion Yuan in the year 2009. This represents nearly a twofold growth from its previous year. The major products sold through the online channel are apparels, books, cosmetics, electronic goods etc. Argos has a well defined online distribution channel. The company can leverage on its skill sets in this sector to gain a considerable market share (Lu, 2010). The rise in the retail sector in China could also be attributed to the greater access to credit. Consumer finance has also grown rapidly in the recent years which have enhanced the purchasing power of the consumers. Argos operates through multiple distribution channels, the online distribution channel is perhaps its most formidable strength. The company has tie ups with mobile operators which has enabled the customers of the store to shop for goods and services using a mobile. The company has been making serious efforts towards improving its supply chain network. The company is known to operate through a network of more than five hundred suppliers. The company is trying to desperately improve its process of supply chain management in an attempt to make its business model more efficient. It is trying to use sophisticated technology to modernise its supply chain network (Databank, n.d, p.1-4). In order to create a success story in the Chinese market, Argos must apply the concept of ‘think global and act local’. This concept is used by a firm which operates in many nations across the globe. The concept states that firms operating in multiple nations take care of the local sentiments and culture before making any strategy. This concept assumes importance because consumer buying behaviour is said to be influenced by cultural factors. Keeping this aspect in mind Argos must formulate strategies which take into account local cultures and sentiments of the local population. This would enhance the positioning of the firm in the minds of the customer which would help the firm in gaining a considerable market share in the lucrative Chinese consumer market (Thompson, 2008, p.213). Primary Data Collection The primary data was collected by using a questionnaire survey which was administered to the respondents using a focussed group interview. The response generated from the survey is generalised and shown below. During the course of the interview it was found that most of the respondents visited the stores once a week to purchase goods. This highlights a good opportunity for retailers as its shows a high frequency of shopping. This was followed by individuals who visited the stores twice a week. Argos must formulate its strategy which would attempt to increase the frequency of shopping by these individuals. This can be achieved by using an effective promotional strategy highlighting the benefits of the company’s products and services. During the course of the interview it was also found that most of the individuals felt that time constraint was one of the factors that slowed down their frequency of purchase. Argos could utilise its online channel so as to lure these types of customers who are prevented from visiting the stores due to time constraints. The company should effectively promote its online delivery channel which would enable the customers to shop for goods and services without actually visiting the stores. It was also revealed during the course of the survey that most of the retailers presently operating in China do not provide home delivery services to their customers.This is mainly because of the fact that most of the Chinese retail market is presently occupied by the traditional Chinese stores. These stores have the majority market share in the market, these stores mostly believe in a push strategy where the frontline sales personnel are encouraged to just sell more and more products to the customers. Very little effort is being made to understand the needs and wants of the customers. This leads to a situation where the customer returns with a feeling of dissatisfaction. Argos has considerable expertise in the field of Customer Relationship Management (CRM)_. Customer Relationship Management involves using strategies that tend to improve the relationship between a consumer and the firm. Argos has considerable experience of CRM in the UK market such as proper ambience , well trained and helpful staff etc. which could be again replicated in the Chinese market to attain a fair market share. It could use its expertise and try to formulate Customer Relationship Management strategies that would enable it to bridge the present gap between the consumer’s expectations and the actual products and services provided. Most of the present retail stores in the Chinese market do not have efficient CRM practices, Argos could use its expertise in the field to provide greater value to the customers. The company could impart excellent training program for the employees where they would be encouraged not just to push the sales volume but to understand the actual needs and wants of the customers. The sales persons must not only try to push products but should rather try to analyse their needs and provide a viable so\lution that caters to the need of the customers. This would enhance the customer satisfaction and would enhance the positioning of the store which would reap competitive benefits to the company. The survey also revealed that most of the customer would prefer to switch between the retailers if they provided home delivery service. This factor reduced their frequency of visiting the stores. The absence of competition and the lack of better Customer Relationship Management practices have resulted in the dissatisfaction of the customers. It was also revealed during the course of the survey that a considerable number of respondents favoured shopping using a credit card. The development of consumer credit facilities has enabled the large scale use of credit cards. This represents good opportunities for retailers including Argos whose feature of online shopping is directly dependent on the use of plastic money like credit cards. Moreover the availability of plastic money also increases the propensity of the customers to purchase more products during their visit to a store. In response to a question regarding online shopping most of the respondents revealed that they preferred the idea of online shopping. They responded that they frequently used web based portals like e-bay to purchase goods over the internet. This represents good opportunities for Argos as it has an efficient online portal directed towards online shopping. The survey also revealed a surprising fact that most of the consumers went for online shopping only in case of luxury products. It was also revealed that customers normally belonging to upper income groups went for online purchase of products. Consumer durables formed the next largest sold item among the choices provided to the respondents. A very meagre percentage of the respondents went in for shopping fast moving consumer goods over the internet. Argos must frame up an effective promotional campaign to promote its online store format. The promotion would try to induce customer towards using the feature of online shopping. Quality of products and price forms the most important factors that are taken into account by the customers while making a purchase decision. The aspect of price was considered to be more important for consumers belonging to low or medium income segments. The quality factor was considered important for customer belonging to the upper income groups. These types of customer stated that they would be willing to pay a premium for goods and services provided that the goods and services were of excellent quality. Argos must decide on its targeted customer segment. It should decide whether to follow a low price strategy like the one adopted by retail chains like Wal-Mart or provide high quality goods and services at a premium pricing. It can also decide on a mix of the two strategies wherein it would cater to the two segments equally. While exercising this strategy the firm must ensure that there is no confusion in the minds of the customer with regards to the categorisation of the store. Effective promotional campaigns must be launched so as to avoid instances of confused positioning among the customers with regards to the image of the store in the mindset of the customer. The respondents also stated that they would increase their spending on purchases if they had an option of getting discounts on the products and services. They were of the opinion that the marginal amount gained out of the discounts could be utilised in purchasing extra amount of goods from these stores. This response was generated from those customers who were highly conscious about the pricing of goods and those who reported that price plays the most important factor that they prioritised while making a purchase decision. The respondents also revealed that they are not brand conscious especially while going for the purchase of the items that were used in their day to day life. They believed that the brand image of the store was not important to that extent as the brand image of the individual products available in a particular store. Argos has a good band image in markets where it presently operates. This strategy could be replicated in the Chinese markets. The survey also reveals that the respondents of the higher income groups were more brand conscious as they were willing to pay an extra amount of money for products of a better brand name or for shopping in a store with a high brand image. On the contrary brand image was considered to be low on the priority list of those respondents who laid a greater emphasis on the pricing factor before making a purchase decision. A majority of the respondents also revealed that they preferred switching between retailers if they had had an option of getting favourable prices for goods and services. This response was more pronounced from those respondents who were more conscious about the prices of the goods and services. Results On the basis of the primary and secondary research it can be very well concluded that the consumer behaviour of the Chinese consumer would help Argos in making its presence in the lucrative Chinese market. Hence we can accept the null hypothesis which states that the consumer behaviour of the Chinese consumers is fully fit for the business plan of the company. It can be concluded in general that the present business plan of Argos could be very well replicated in the Chinese market. The Chinese consumer market presents great opportunities for the company in terms of business opportunities. The company also has a very good marketing channel which could be easily leveraged to gain competitive advantage. The company’s online sales channel presents a tremendous scope for the company in terms of gaining sustainable competitive advantage in the Chinese consumer market. It should also realise the effects of the local sentiments and culture of the Chinese population while framing strategies for operations in the Chinese market. The concept of ‘think global and act local’ should be used by the company to gain strategic advantage and to gain sustainable competitive advantage in the lucrative Chinese consumer market. The aspect of thinking globally and acting locally must be reflected in the marketing mix of the firm. The promotional strategy must have a local flavour such as language and using local icons to promote the services of the firm. Introduction of locally famous products would also help in generating competitive advantage for the firm in the Chinese market. Limitations and Expected Contributions The research study has been carried out with great care and the best possible references have been selected for the study. However as it happens with almost every research study; this research study also suffers from certain limitations; firstly respondent errors may lead to variations in the result. Respondent errors may arise due to selection of wrong category of respondents; it may also arise due to instances of wrong information provided by the respondents during the course of the interviews (Turner, Martin & National Research Council, 1984, p.135). These types of errors may lead to the variation in the results. Secondly the research articles referred in the secondary research have been prepared on the basis of a different research question. This may prove to be a limitation since the research question varies between the referred article and the present research study (Aakar, 2006, p.104). Moreover the research has been carried on only a single Chinese city which may not necessarily reflect the consumer buying behaviour for the entire Chinese population. Qualitative research methods also suffer from limitations as the population selected for the study may not necessarily match the intended population for the particular research (McDaniel & Gates, 1998, p.100). Finally the sampling process also has certain limitations as it does not provide a complete coverage of the views of the entire population (Beri, 2007 p.156). Scope for Further Research The research study conducted above also shows the scope for future research in this area. Research could be undertaken to build up a positioning map of the Chinese market with respect to the present retailers. This map would help in identifying the gaps in the present consumer market of the country. These gaps would reflect the differences between the actual product or service offering and the actual demands of the customers. It would also highlight the possible areas that could be used as stepping stones for the firm to gain a strategic market advantage in the Chinese consumer market. References Aakar. 2006. Marketing Research. Wiley-India. Abbott, L.F. 2003. Engineering Firms: A Survey of Factors Affecting Their Growth and Performance. Industrial Systems Research. Argos. 2010. About us. [Online]. 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Kogan Page Publishers. Appendix Questionnaire for the research 1. Age 13yrs to 19yrs 20 yrs to 30yrs 31yrs to 40yrs 41yrs to 50yrs 51yrs to 60yrs 61yrs + 2. Gender Male Female 3. Employment Status Employee Businessman Pensioner Student 4. Income Group (Annually) More than $4500 $4500 to $3000 Less than $3000 5. How many times do you visit retail store for buying daily necessary products? Daily Once in a week Twice in a week Twice in a month 6. Does your retailer provide home delivery services? Yes No 7. Will you shift to a new retailer if it provides you home delivery services? Yes No 8. Do you use credit cards for shopping? Yes No 9. Do you buy products online? Yes No 10. Which products do you buy online? Fast moving consumer goods Consumer durable Luxury items All products 11. What are the factors that you consider while buying the consumer goods? Brand Price Quality Convenience 12. Will you exceed your shopping budget if discounts are available? Yes No 13. Do you always buy products from a particular branded retailer? Yes No 14. Do you shop from different retailers on the basis of favourable pricing? Yes No Figure 9: Financial performance of Argos over the years. (Source: Swann, n.d., p.6) Figure 10: Drivers of growth of Argos. (Source: Swann, n.d., p.10) Figure 11: Break up of goods sold in Argos (Source: Swann, n.d., p.13) Figure 12: E-Commerce as a percentage of total sales of Argos. (Source: Swann, n.d., p.19) Figure 13: Direct sales as a percentage of total volume of goods sold (Source: Swann, n.d., p.19) Figure 14: Operating Profit as a percentage of sales. (Source: Swann, n.d., p.7) Figure 15: Consumer spending in China. (Source: Delloite, 2005, p.4) Figure 16: The Chinese retail market in terms of ownership (both retail and wholesale) (Source: Lu, 2010) Figure 16: The Black Box Model of Consumer Buying Behaviour. (Source: Meldrum, McDonald, 2007. p.70) Read More