Essay, Pages 20 (4912 words)
In 2001, Doole and Lowe defined the international marketing. In a simple class, international marketing involves the firm in making one or more marketing mix decisions across national boundaries. And in a complex class, it involves the firm in establishing manufacturing facilities overseas and coordinating marketing strategies across the globe (Doole & Lowe, 2001). And Chong and Kasturiratne said that, “the world of marketing is a dynamic and very exciting one where decision making is at the heart of the marketing process.
New markets are opening and old markets are evolving, bringing with them new competitors but also alliances (Chong & Kasturiratn, 2009).”
2.1 Primark Background
Primark is an interesting, amazing and growing company that gives customers with low-cost fashion clothing. It has a supply chain, which is very effective. The production link in China, India, Turkey, Bangladesh and other countries, with retail outlets in Ireland, the UK and other parts of Europe (Businesscasestudies, 2011). Primark is a global clothing retailer found in June 1969, and in Mary Street, Dublin, the first Penneys store opened.
The developing speed is fast, from 1969 to 2012, there are 38 stores in Ireland, 35 stores in Spain, 161 stores in UK, 4 stores in Netherlands, 6 stores in Portugal, 9 stores in Germany, 1 store in Belgium and 2stores in Austria. In total, there are 256 stores all over the world (Primark, 2012).
The slogan of Primark is style, quality and affordable prices all rolled into one at Primark. And the key principle of Primark is to provide the consumers with low-coat fashion items. The target consumer is the people who has fashion thinking and want to save money.
By using the way of sourcing productions efficiently, making clothing with easy design, using local raw material, paying attention to the mass size and speeding less on advertisement, the operating of Primark is efficient.
1.2 Chinese fast fashion
According to Barnes and Lea-Greenwood, fast fashion is a kind of marketing strategy. When the demand of consumers touches a top value, to satisfy this peak, the purpose of fast fashion is to reduce involved processes in the buying cycle and save times for delivering new fashion productions into stores (Barnes & Lea-Greenwood, 2006). In recent times, fast fashion developed very fast, it become an emerging market for the whole world, In China, Fast Fashion brands are now learning that the speed of bringing a new style to market is secondary to the speed of reaching the market at all (Poleg, 2012).
2.1 PEST analysis
If an organization want to enter a new market, before the beginning of the process, PEST analysis is very important. The PEST analysis is an efficient tool to understand the market. The factors include political, economic, social-cultural, and technological. Political: The political factor has a big influence on the business. In the year of 2012, the political environment is stable, though it is the time that China’s leader will change from Jintao Hu to Jinping Xi. As one of China’s fundamental political system, the multi-party cooperation system identifies the status and functions of the CPC and the eight other political parties in the political life of the state, and the relations between the parties (U.S. State Department, 2012). And the Chinese government consists of a system of multi-party cooperation and political consultation under the leadership of the CPC. The system ensures that the CPC is the only party in power in the People’s Republic of China (Fogel, 2010). So even though the leader changed, the policy will change limited in the future.
And at the same year, the Chinese government has put forward the 12th five year plan. In the twelfth chapter, there is a plan to improve the level of opening up, in order to make a win-win situation. That policy may be good for Primark’s entry to Beijing’s market. Economic: In recent years, as the result of successful economic reform and nimble marketing strategy, Beijing’s rag trade is becoming prosperous. GDP is becoming higher and higher, so the consumer awareness of people who living in Beijing is stronger than the past time. Rag trade in the Beijing is a big market ranked thirty-sixth (Wang & Zhao, 2012). With the reform and open and the developing of economics, china is the biggest clothing industry and brand development all over the world. Beijing is a city of big consumption for clothing, there is more than 60 percent foreign clothing investment in Beijing. According to the Beijing statistical bureau’s data, in the year of 2011, the disposable income of each Beijing resident is increased 13.2 percent, consumer spending of each is increased 10.3 percent.
And for the clothing spending is increased 8.5 percent, which occupy the whole spending 10.3 percent. Last year, the spending on clothing is 46.92 billion. And it occupies 22.6 percent for the last year in the shopping mall (Beijing business information consultation center, 2012). And for the economic growing, it is do a high speed of China’s developing in the past 10 years. GDP is 47156.4 billion, it increased 9.2 percent, and the expert forecast the date will be increased more than 12%. China’s clothing market is very huge, in the year of 2011, the sales volume of transnational clothing corporation is 5700 million, and the sales volume of shopping center is 2340 million (We – the financial channel, 2012). Economic globalization has become the trend of world economic development. In the year of 2012, there are 1419 new foreign investments have been approved in Beijing. The growth year-on-year is 3.73%.
The total investment of new established enterprise is 4.109 billion dollars, and the growth year-on-year is 92.05% (China industry research, 2012). Social: Beijing is the capital of China, so Beijing is the center of political, culture, science and technology, and diplomacy activity. The culture of clothing has a long history in here, there is strength in the culture deposits and arts and humanities. At the same time, Beijing is the center of national minority, it can sufficiently shows the glamour of brand. Beijing is the economical center of northern part of China, there is a vast potential for future development. Nowadays, the developing speed of Beijing’s economic is very fast, followed, the values and taste are changed, too. The demand of new clothing, new brand, and new style is the key point. There is a big latent purchasing power on the people who come from other places. After reform and open up, people travel to Beijing, people work in Beijing, people settle in Beijing.
International stars, HK, Macao and Taiwan compatriots, artists, and famous people, they all like to go to Beijing. All of these make a good foundation for the clothing development. As the capital of China, Beijing is the center of international communication. There are a large number of embassies, trade delegations, and foreign institutions. A lot of meetings in Beijing, China International Clothing and Accessories Fair are now the largest fashion fair in China and it stands for the authority level in China.
The clothing market in Beijing contains top grade brand shopping mall, brand shop, boutique, exclusive shop, and supermarket, all of these make a system that good for new brand located. Technological: In Beijing, people can easy to get information and there is strength for the textile industry—update the technology and imported technology is convenience. So Beijing’s rag trade can follow the international fashion. The development of high technology makes Beijing’s market climb a high level. And there are some top-ranking clothing universities in Beijing, such as Beijing Institute of Fashion, Tsinghua University and China Academy of Art, and so on. There are 10 universities focus on clothing, they make high level talents for design, management and sales, which improve the Beijing’s rag trade.
2.2 Michael Porter Five Forces Analysis
Suppliers bargaining power: A producing industry requires raw materials-labor, components, and other supplies. This requirement leads to buyer-supplier relationship between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry (Quick MBA, 2010). As we mentioned in the Primark background, the first supplier is China, the credible forward integration threat by suppliers, suppliers concentrated, significant cost to switch suppliers and customers powerful make the suppliers are powerful. Primark sell in bulk, and have a mandatory requirement. Primark’s Supplier Code of Conduct is a mandatory requirement within which its suppliers work. It incorporates the United Nations Charter, Chapter IX, article 55 and is subject to strict and ongoing audits conducted by third parties (Primark, 2012).
Primark takes this Code of Conduct very seriously and its management board reviews it regularly. But there is exiting a problem, which is the increasing cost of raw material. Because of the decreasing cotton cultivation makes the cotton price increased in China. So Primark should pay attention to the relationship with suppliers caused by price increasing. Buyer bargaining power: Buyer concentration versus firm concentration refers to the extent of concentration in the buyer’s industry compared to the extent of concentration in business. The more concentrated the buyer’s industry relative to business the greater the bargaining power of buyers (Lima, 2006). By the late 90’s, Chinese rag trade stepped into the buyer’s market. There is no definite brand and positioning, the increasing of productive power is faster than the increasing of order quantity.
The competitors always win by low-cost. And for the targeting group of Primark is young people, there are a few buyers with significant market share and they possess a credible backward integration threat, so the bargaining power of consumers is high. Potential new entrants: The rag trade has low barriers to entry, and in theory, any form should be able to enter and exit a market, and if free entry and exit exists, then profits always should be nominal (Quick MBA, 2010). So, although the rag trade is easy to enter, there is exiting so many competitors. If Primark want to get the profits, it should have its own characteristics and build its own brand name. Like Lima said “Brand identity is the extent to which buyers take the brand name into account when making purchase decisions (Lima, 2006).”
Threat of Substitutes: In Porter’s model, threat of substitutes is caused by the products in other industries. The price change of the substitutes can affect the product’s demand. But clothing is essential for people, it is difficult to find a substitute for clothing. But the consumers in current time, the function of clothing is not only kept warm, but also to follow fashion. So some consumer changes their attention to cosmetic and jewelry. Therefore, the threat of substitutes is high The rivalry among competing sellers: Primark’s main competitors are H&M, ZARA, GAP, UNIQLO and other fast fashion brand. From a macroscopic analysis, there is no different between the competitors. But from the microcosmic, the price strategy of low-cost is an advantage point. So the threat of competitors is high and fierce. When Primark face to the competitors, it should improve the product differentiation, creatively use a distribution channel and improve the relationship with suppliers.
2.3 SWOT analysis
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the form can be classified as opportunities (O) or threats (T). Such an analysis is referred to as a SWOT analysis (Quick MBA, 2010). Strengths: Primark has confirmed the market of goal and brand name. It comes from Europe and it is easy to develop in Beijing. And the style of clothing is prevailing with low price. It is easy to find factory to produce productions. The brand is fits for the youth to follow fashion and fits for their purchasing power.
And it has a good industry chain. Weakness: Primark does not familiar with the market in Beijing, and Chinese consumer does not know the brand. Other fast fashion settle in Beijing early, and they occupy the market. Opportunities: There will be plenty of space for new brand to grow. There is a high purchasing power in Beijing’s market. The education of Beijing is high and people can accept new things. Threats: The culture, policy and human are totally different from Europe, these make difficult to entry. And some competitors have settled in Beijing a few years age, how to attract consumers and how to build brand name is the first problem.
2 STP Analysis
In the marketing theory, segmentation, targeting and positioning are the factors of company marketing strategies. When Primark enters Beijing’s market, it will face to thousands of consumers. The consumer psychology, consumption habit and income level are different. By analysis the strategies factors, we can know which way fits for the Primark in Beijing.
In Beijing’s market, we divide the geographical factors into two parts, one is city consumer, and another is rural consumer. For the city consumer, they need the clothing style full of modern and the productions can follow the fashion trend. For the rural consumer, they focus on the practicability of the productions, and pay less attention to the appearance.
A).Gender: The demand for clothing is different between men and women, women have a high demand for the appearance of the clothing, and men pay attention to the style and practicability.
B).Age: Different age stay in the different level. The young people and students in school are the main consumer group. Based on some researches, the people whose age between 18 and 35 is a big consumer group, they hold the 50% of the clothing market, and there are only 19% held by the age of 40. The young people is the leading group for the fast fashion, different consumer group has its different consumption level. At present, the consumer of high-end expensive and of high quality is 0.6% for the Beijing’s market. And middle class is 70-75% (EFU, 2012).
In Beijing’s market, we divide the psychological factors into five parts. Price| For this group, the first consideration is price. The income drives the purchasing power.| Quality| The consumers pay attention to the quality of the clothing, hats, shoes or bags.| Service| This group pays attention to the pre-sale services and after-sale services. They need high service system.| Fashion| The consumers love to follow the fashion trend and the renewal and replacement is fast.| Luxurious| They pursue the highest price, and they need satisfaction from shopping.
For the confirmedly brand buyer, they only buy one brand, never considering to buy other brand, the purchasing pattern is A.A.A.A.A.A. For the middle brand buyer, they will buy the production from several brands, the purchasing pattern is A.A.B.B.A.A. For the shift brand buyer, they change their mind from one brand to another, it means they have no loyalty for one brand, the purchasing pattern is A.A.A.B.B.B. For the no loyal brand buyer, they do not have the favorite brand and do not care the brand, the purchasing pattern is A.C.E.B.D.B.
After analysis the Segmentation, The target group of Primark is the young people who have higher education in Beijing, because the characteristic of this group is the convergence of purchasing. They may be come from different city, have different personality, but they are in the golden age, they listen to the same music, watch the same movie. Especially the developed internet, they can get the information and then synchronization with the world. So it makes Primark to choose the undifferentiated marketing. Primark enters Beijing’s market, it can use the same production, the same price and the same selling way, but it should make a new business strategy to Beijing’s consumer.
When Primark enters Beijing, the first consideration of position is competitors. The tentative competitors in Beijing are H&M, ZARA, GAP and UNIQLO.
Product- positioning map 1
In fact, the productions of Primark have a competitive advantage on the price, but it will lose in the popularity of brand. Therefore we should pay attention to build the brand name. Then the Primark can attract more potential consumers (middle & shift brand buyer). High popularity with low price
Product- positioning map 2
For the entering of Beijing, one thing is difficult to change, that is equipment. The quality level is similar, and then Primark must put itself into a high service. As known, the shop of fast fashion is self-service just like supermarket. So Primark should improve service and then establish a good presence in Beijing’s market. Primark’s clothing is full of British style, the selling point is designed in British, and then the brand value in Beijing could be higher than the value in UK. And based on the price in the UK, Primark’s strategic positioning is middle class in Beijing. The middle class can help Primark to establish brand image and keep it have a long future.
3 Entry modes analysis
When a company entry a new market, there are two major modes: they are equity mode and non-equity mode. The equity mode comprises joint venture and wholly owned subsidiaries, and non-equity mode comprises export and licensing. And the main purpose of each company is to establish itself in the aim market (Zekiri, 2012). According to Charles, no matter which entry mode the company chooses, it has implications for how much resources the company must commit to its foreign operations, the risk that the company must take, and the degree of control that the company can exercise over the operations on the new market (Charles, et al., 2011). The following tables will analysis the four entry way, and the factors that influence the entry mode, then we will know which way should chosen by Primark.
Factors that influence the entry mode
Based on above analysis, we can see the country risk is low in Beijing’s market, and the polity and economy are stable recently in China, for these factories, exporting and Joint Ventures do not fit for Primark’s entry. Furthermore, Primark in the UK’s market, brand name has been built. It owns a lot of consumers not only in UK, but also in Europe. So the international experience is experienced. Finally, for the reason of big firm resources, experience abroad, low local market risk and a little intensity of the competition, it seems the most adapted for Primark entering in Beijing is direct investment. The direct investment, it may bring pressure to the investment and the company may take more risk. But the cost of the clothing is low, and the labor cost in China is lower than UK. The productions of Primark follow the fashion trends, which need the company uses the short time to produce, transport, and product release in the first time. Building the factory in Beijing can satisfy the need of market. At the same time, Primark can catch the Beijing’s fashion trend, which makes the production diversification.
5. 7P marketing mix
Booms and Bitner suggested that adding three factories in the marketing theory of 4Ps in the year of 1981 (MATT, 2012), the three factories are People, Process and Physical Evidence. In this section, we will use the marketing theory of 7Ps to analysis the implementation of Primark.
The marketing theory of 4Ps is leaded by the product, and Primark do well in product, there are two aspects to show the Primark’s product structure. A) From Primark’s website (2012) we know, there are three clothing style in Primark, they are menswear, womenswear and childrenswear. The womenswear include four branches, the first is atmosphere, which is high fashion clothing for women, with a focus on key fashion trends, classic casuals, accessories and footwear; the second is DENIM, which contain all the fashion style of pants; the third one is secret possessions, which is a branch to Primark’s underwear for women, from underclothes multipacks, to individual items and nightwear; and the fourth one is backswing, which is a sports branch with the emphasis on technical functionality.
According to the Primark’s website (2012), the style for men is enough to male consumer. Primark has the clothing style for all occasions, consumer can buy everything from the formal one to the casual one. All of these make the Primark’s product structure complete, give a lot of choice for different consumer, and let each consumer have a good shopping experience. B) The quantity of each clothing is every huge, as Primark said “we buy and sell in bulk – Primark has over 230 stores in Ireland, the United Kingdom, The Netherlands, Spain, Germany, Portugal and Belgium.” The huge quantity satisfies the demand from the new market.
The strategy Primark used is low cost strategy. The target group is young people with higher education, their age between from 18 to 35. They have the purchasing power for the fashion trend, but they do not have the power to purchase the luxury. So the price can satisfy the demand of this group. When Primark entry Beijing’ market, it will use the same price strategy. As Zollinger said “prices that already exist in the subjective memory of consumers (Zollinger, 2011).” When a consumer choose a goods, if the performance, appearance and value are similar, one factor should considered by the consumer is the price. For long term thinking, the price is interrelated with sales. The low price could be got a higher level of the sales in the new market; and if the sales have risen, it can drive the financial income increase; the competition will face the austere market; the low price discourages the potential competition; and finally market does not allow a high price in the same level (Danciu, 2001).
5.3 Promotion and Place
When a company entries a new market, an important point is promotion. There are 5 aspects of promotion. They are advertising, personal selling, sales promotion, public relations and direct marketing. But in fact, according to Primark’s website (2012), it said that Primark has no advertising costs, instead relying on their customers “advertising on mouth (word of mouth)” about their products. But the competitors like H&M, GAP and UNIQLO pay much attention to the advertising and designing. There are three main ways of Primark’s communications. The first is mentioned in the website “word of mouth”. The second is the product structure of Primark, which is the fashion design, diverse style with low price to attract the consumer. The third is the geographical position. Primark always set the shop in the city center or the bustling shopping mall.
Although the rental cost is much higher than other competitors, Primark always give consumer a good shopping experience. However the shopping experience is different from Europe to China. Advertisements surround Chinese everywhere they go. Based on my personal experience, a good advertisement will attract me to try new product. According to Carl Hose, the purpose of advertisement is to sell the product.
It is a communication of one-way form from company to consumer, and it will give consumers the important information to make a buying decision and attracting new consumers. It tells consumers about the products and how to get it. The purpose of advertising is to sell products and to build brand name (Carl Hose, Demand Media, 2011). Consequently, when Primark entry Beijing’s market, it need advertising to build the brand name at first time, and then it can use the promotion used in Europe. At the same time, Primark should keep the low price strategy and set the shop in the city center.
When Primark entry to Beijing’s market, if it wants to move forward, the management should knows what has to be achieved, departments should know their role and stuff should know their goals. And they all should know what the consumers need. For Primark, it should hire the people who study abroad. Because they are familiar the behavior and thinking mode of Chinese cultural tradition, they can easily communicate and cooperate with the stuff, and make the management more effective. At the same time, the hired people got the western educations, they understand the western way of dealing problems and behaviors, and they can understand and implement foreign boss’s management concept. So, these people have important function to deal the culture conflict, promotion to cooperate effectively (Sun, 2010).
5.5 Process and Physical Evidence
The service is an essential point for the Primark entry the new market. It can build the brand name, at the same time, it can keep the consumers. Like James A Karl said that service good in an operation will greatly help in attracting new customers and the amazing consumer service can keep the consumer coming back. This is indeed a fact because people like to do business with the people who they trust and had a good experience (Karl, 2007).
Conclusion and Critical Reflection
6. Conclusion and critical reflection
After the Pestle and Porter five forces analysis in the first section, Primark seems to ready to entry Beijing’s market. But no one can predict the future and the condition of Beijing’s market is changing every time. For entry, the strong new market can help Primark to develop itself, at the same time, the new market may be weaken the brand name of Primark. Though the situation is good for Primark’s entry, it is an armchair strategist. There are so many problems we cannot consider, such as financial crisis, the changing of price and the changing of exchange rate. Primark’s strategy positioning is middle class in Beijing, and the target group is the people who have higher education, using the direct investment with low cost strategy. But the strategy cannot force the competitors, the success of Primark in Europe is decided by the strategy used in the UK’s market, and Primark has experience to face the competitors, but Chinese condition is different from Europe.
Another problem is the cognize of price in China, Chinese always think the high price is equal to high quality, and low price is equal to low quality. So the effectiveness of low price strategy is worrying. And there are two problems we should consider, one is money, another is store. Because the direct investment, it will cost a large number of money. And the store should build in bustling street, but the Beijing’s bustling shopping mall seems in a situation of saturated. When Primark set in Beijing’s market, the 7P analysis is a basic for implementation. But the development of Primark should change the idea with the changing of each factor from 7P. When Primark face to the new market, the new policy, the new consumers, all the analysis engage in idle theorizing.
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