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SWOT Analysis

Write a report on International Marketing?

Today’s economy is a globalized economy, and, as a result, international marketing plays a very important role in the business scenario of the world as a whole. International marketing is also accompanied by strategic alliances which includes mergers, acquisitions, joint ventures etc. and as a result helps in the growth of the market share and hence the business as a whole and also increases the profit margins. In case of loss also the amount can be shared by the companies that merge together. The proceeding report consists of a detailed analysis of the growth of the business of luxury fashion accessories in the global market, and an analysis of the prospective potential markets, with special reference to the Chinese market as it has the maximum expected growth in this particular business. A swot analysis of the particular business in the overseas market has been done in addition to the PESTEL analysis of the Chinese market, which also helps in formulating marketing strategies and other future plans for the company. Market entry strategies and market mix has been recommended for the business of luxury fashion accessories in the market of China. Graphical analysis has also been done about the future estimates of the market of a China relating to the demand for the market of luxury goods (PuškoriÅ«tÄ— and Zitkus, 2013). Some marketing mix strategies have been recommended which should be implemented by the new company and will be helpful in framing marketing strategies to enter the new proposed market and to expand and develop the new business.

A swot analysis of the new business of luxury fashion accessories with a particular focus on overseas growth (Smith, n.d.) -

Strengths

High quality of goods

Good marketing communication channels

Monetary possessions

Growing market

weakness

Not well-known in the overseas market

Lack of innovative products

Position of the market

Competition

Opportunity

To expand the business and become a well known global brand

To increase the market share

To maximize profits

Strategic alliance through mergers, acquisitions, etc.

Threats

Probability of rise in the prices of the raw   material

Chinese economic bubble

Inflation

Recession

Presence of substitute products

With the growth of technology and internet an increased growth is noticed in the world of online marketing especially for the women’s luxury fashion accessories and in the near future it is expected to grow from 3% to 17% of the total global market, especially in the markets of the west and is expected to grow exceptionally in the market of China. The other prospective potential market includes US and Germany with an expected growth of 17% and 12% respectively, while the growth percentage of China is expected to be 70% (Walley and Li, 2014).

The market of luxury fashion accessories is growing year after year in China with the growing demand and preferences for the same day by day. A graphical analysis of the growth in luxury consumption in China as follows -

Year

Currency In Billion Pounds

2007

4.5

2008

5.9

2009

7.1

2010

9.2

An Evaluation Of The Market Potential


Fig 1- Growth of luxury consumption in China

Source:- (LI, 2012)

The reason behind the growth of the luxury fashion accessories market or the growth of luxury consumption is the increase in the income level of the people of China, which has resulted in the per capita income of the country as well; as a result the demand of the luxury goods is estimated to increase in the future.

The following graph indicates the growth in the demand for luxury goods in Chinese market in future –

Fig 2 – Demand estimates of Chinese luxury goods

Source: - (LI, 2012)

The micro environmental factors can be analyzed in brief using the analysis method of PESTEL, which is stated as follows –

  • – Political factors plays a very important role in the business world of China. The government of China has made changes in the rules and regulations to promote business in China. The government of China is now laying emphasis on the growth and development of e-commerce (Salonen, 2011).
     
  • Economical – China has a significant growth rate in the economy over the last few years, but it is uncertain that the trend will remain the same in the future as well that is there is a probability that the rate will slow down in the near future and the probable causes are supposed to be the rise in the rate of inflation and the rise in the prices of the property in China. Even the interest rates have been increased by the banks of China and the central banks have imposed limitations for the home purchases. As the national income of the country has increased, the potential buyers have also increased and, as a result, the business of luxury fashion accessories has a great market potential in China (Chen, Chen and Gong, 2012).
     
  • – The cultural and social factors of China has a strong impact on the constant demographical changes of China. The factors that fluctuate mostly are the growth in population and the distribution of age. The social culture, the size of the family, educational background, the personality, lifestyle, the attitude of the people affects the decision taken by the customer (Hassan et al., 2013).
     
  • – Technological breakthroughs plays a very important role in the promotion and expansion of business. E-commerce has now become the favorite mode of shopping of the customers or rather the local people of China. The internet,   the Extranet and Intranet have become important and hence very useful methods of communication among the people. Internet and telecommunications through mobile proves to be very useful in creating an awareness of the product, promoting the product, getting direct feedback from the customers about the product, etc. There is a chief technological trouble in China about the growth of the B2C industry as it fails to have a safe and secure system for online payment.
     
  • Environmental – All the companies in the China have been given special instructions to be environmental friendly; any product that is found to be hazardous for the environment is banned in the China. Therefore, all the waste products should be treated before dumping and the carbon content of the waste products should be minimized as much as possible (Makos, 2015).
     
  • Legal – The legal rules and regulations of China relating to the e-commerce is still at its budding stage in China. China lacks experience in the drafting of legislations relating to the e-commerce. The country does not have any regulations to support the privacy, rights of the customers and legislations required to validate the electronic contracts.

Porters five force model is a method for determining and analyzing the micro environmental factors of the relevant industry in this the relevant business is that of luxury fashion accessories in the proposed potential market of China. This following analysis is done using the method of Porter’s five force model –

  • Probable threat of the New Entrants – As the luxury fashion accessories are in a great demand in China the probability of new brands entering the market is very high and the most important barriers to their entry is the economies of scale, cost effectiveness, access to the raw-materials as well as other inputs and the already established brands are also big threat for the new entrants.
     
  • Analysis of the capacity of bargaining of the Buyers – This force focuses on the power of customers to affect the pricing and quality of the product. In the Chinese market the number of sellers as well as the number of buyers are huge and hence the bargaining power of the buyers is not that effective as does not affect the price and quality of the products especially in the business relating to the luxury fashion accessories as the demand for these products are huge in China (Lu et al., 2013).
     
  • Analysis of the capacity of bargaining of the Suppliers – The suppliers in the Chinese market especially in the business of the luxury fashion accessories have low bargaining power as the number of suppliers are very large as the result they have little effect on the pricing of the products.
     
  • Competition between the accessible firms – The competitive rivalry between the existing companies is very high. Although the customers are not loyal to a particular brand they like to switch their loyalty towards other brands and hence all the brands have equal opportunities to set up their business and attract more and more customers with the help of random advertisements and by using unique promotional strategy.
     
  • The threat of competition from the substitute products – Substitute products are a major factor of concern for the company. The relevant price of the products, quality of the substitute product and also switching loyalty of the customers towards a brand will pose a threat to the new business trying to establish their business in China (Woo, 2013).

The following is the proposed segmentation, targeting and positioning strategy –

  • Segmentation is all about dividing the market in terms of likes and dislikes of people, in terms of geography, in terms behaviour, etc. The life style of people, social class to which they belong, their income group, age, gender, family size, psychographic, generation, etc. all needs to be analysed carefully for segmentation. The primary market includes the modern or urban females, while the secondary market includes the modern or urban males (Kang, 2012). The company should increase the product range so that it can approach the older people as well. For the new company psychographic which includes personality and lifestyle, demographic and segmentation based on income will be most important.
     
  • Targeting – The target market or the target customers for the business of luxury fashion accessories are the females within the age group of 18-38 as females and mostly the young females are more attracted towards the accessories than the males. Young professionals including males are also interested in luxury fashion accessories and hence they are also included in the target market (Jiang and Cova, 2012).
     
  • Positioning – The Company should position itself as a young, trendy, sophisticated and elegant brand to attract young college goers and office goers. The advertisements and promotional campaigns should also contain that the company provides quality products that are in line with the evolving fashion so that the young customers are attracted towards the brand (Bouchamma,Ruel and Basque, 2012).

China is among the top consumers of the luxury goods in the global market and is expected to become the topmost within a few years. Entering the market of China is not only very risky but also is accompanied by many risks and yet no luxury fashion accessories producer can become a global supplier without the presence of the Chinese market. For entering the Chinese market the following factors must be taken into account – marketing strategy for the product, creation of a brand and hence creation of an identity, proper communication channels which includes retailers, licensing, technology, etc. The supply chain management and logistics plays a very important for a company for entering a new market (Arline, 2015). The choice of the product design is very important to create a unique identity of the brand; it provides information about the company to the customers. The distribution channels have a great impact on the establishment of the business. The strategies for distribution include intermediaries that are wholesalers, retailers, etc., joint ventures with a local company that is a China based company, mergers, subsidiaries, etc. Strong financial resources are also essential for the stable set up of the new business. The country from which the company belongs to or originated from also matters a lot for the people of China, as the Chinese people love purchasing luxury goods belonging to foreign brands and hence foreign goods are very demanding in China and as the new company has its base in UK it is expected to do well in the Chinese market (Horichi, Isobe and Mogi, 2010).

Pestel Analysis Of The Proposed Market China

Fig 3 – Market share and growth rates of luxury sales in China

Source:- (Sivakumar, 2012)

The recommended marketing mix for the proposed market that is China is as follows –

  • Product – As the products of the new company are not unique hence the design and styling of the products must be unique to attract customers and must continuously augment themselves to retain customers. Wider range of products should be made available to the customers who should be exclusive in nature so that wider range of customers could be attracted or rather approached (Benghozi, Krob and Rowe, 2013).
     
  • Price – A varied price ranged products must be able to customers so that the customers belonging to different income groups can easily afford them. Price should not be a barrier especially for a new company entering a market. A varied range of price is also helpful in dealing with the already established brands as well as the substitute products.
     
  • Place- The place chosen should be such so as to ensure continuous availability of the target audience so that the product is available to the customers. It includes shopping malls or shops near colleges and offices. Shops near the tourist spots or the heritage spots of China can also prove to be profitable for the company.
     
  • Promotion – The promotional strategies should be innovative and unique so as to attract the younger generation. The young rock stars, movie stars, or any of the youth icons can be appointed as the brand ambassador for promoting the brand. The internet and mobile telecommunication should be as a medium for advertisement (Khan, 2013).

Conclusion

It can be concluded from the above report that there are huge prospects of growth especially for the luxury fashions accessories or luxury goods for the market of China. Although the prospects of earning profit in the market of China are very limited as there are a number of companies offering luxury fashion accessories and, as a result, the market of China is very competitive and the product offered by the new company is also not innovative. In this case, the company should stylize its products innovatively and must ensure continuous innovation of products to sustain in the market and also to earn the profit. Unique promotional strategies and advertisement campaign should be used to promote the product and create brand awareness among the target audience. Proper distributive channels and medium of communication should be used as they play a very important role in the establishment of a new company. Special discounts and other such offers should be made to attract the customers. It is very important for the company to enter the market of China in order to develop business overseas and hence the recommended strategies must be implemented in order to enter the market of China, sustain there for a longer period of time and also gain profit.

References

1. Arline, K. (2015). https://www.supplymanagement.com. [online] Available at: https://www.businessnewsdaily.com [Accessed 31 Jul. 2015].

2. Benghozi, P., Krob, D. and Rowe, F. (2013). Digital Enterprise Design and Management 2013. Berlin: Springer.

3. Bouchamma, Y., Ruel, C. and Basque, M. (2012). Writing Performance, Practices and Locus of Control of the Five Linguistic Groups in Canada. Creative Education, 03(08), pp.1384-1389.

4. Chattalas, M. and Shukla, P. (2015). Impact of value perceptions on luxury purchase intentions: a developed market comparison. Luxury Research J., 1(1), p.40.

5. Chen, Q., Chen, D. and Gong, Y. (2012). An empirical analysis of dynamic relationship between stock market and bond market based on information shocks. China Finance Review Intl, 2(3), pp.265-285.

6. Hassan, L., Shaw, D., Shiu, E., Walsh, G. and Parry, S. (2013). Uncertainty in ethical consumer choice: a conceptual model. Journal of Consumer Behaviour, 12(3), pp.182-193.

7. Horichi, A., Isobe, K. and Mogi, G. (2010). Optimum Strategy and Defensive Investment of Firm in Duopoly Market: Strategy Analysis of Manufacturing Industry under Competition. Journal of Real Options and Strategy, 3(2), pp.205-225.

8. Jiang, L. and Cova, V. (2012). Love for Luxury, Preference for Counterfeits –A Qualitative Study in Counterfeit Luxury Consumption in China. IJMS, 4(6).

9. Kang, O. (2012). 1 UPPSALA UNIVERSITY Department of Business Studies Master Thesis Spring Semester 2012 Consumer Behavior  and Marketing Strategies  in the D uty  F ree  Market. 1st ed. [ebook] Available at: https://www.diva-portal.org [Accessed 31 Jul. 2015].

10. Khan, O. (2013). How to crack china's luxury market. [online] Available at: https://www.supplymanagement.com [Accessed 31 Jul. 2015].

11. Lu, W., Ye, K., Flanagan, R. and Jewell, C. (2013). Developing Construction Professional Services in the International Market: SWOT Analysis of China. Journal of Management in Engineering, 29(3), pp.302-313.

12. mMacintosh, G. and Stevens, C. (2013). Individual differences in opportunistic claiming behavior. Journal of Consumer Behaviour, 12(1), pp.10-19.

13. Makos, J. (2015). PEST Analysis of China. [online] Available at: https://pestleanalysis.com/ [Accessed 31 Jul. 2015].

14. Puškoriūtė, N. and Zitkus, L. (2013). Consumer Behaviour And Its Influence On Consumer Rights Violations. EurInsStud, 0(7).

15. Salonen, A. (2011). Service transition strategies of industrial manufacturers. Industrial Marketing Management, 40(5), pp.683-690.

16. Sivakumar, S. (2012). Luxury China: Market Opportunities and Potential20122M. Chevalier and P. Lu. Luxury China: Market Opportunities and Potential . Singapore: John Wiley & Sons (Asia) Pte. Ltd 2010. S Asian Jnl of Global Bus Res, 1(2), pp.314-317.

17. Smith, C. (n.d.). SWOT in Marketing Analysis. [online] Available at: https://smallbusiness.chron.com [Accessed 31 Jul. 2015].

18. Walley, K. and Li, C. (2014). The market for luxury brands in China: Insight based on a study of consumer’s perceptions in Beijing. J Brand Manag, 22(3), pp.246-260.

19. Woo, L. (2013). Flash sale marketing. [Pomona, [Calif.]: California State Polytechnic University, Pomona].

20. LI, B. (2012). Analysis of Business Opportunities for  Luxury Brands in Second - tier Cities in  China. 1st ed. [ebook] Available at: https://www.politesi.polimi.it [Accessed 30 Jul. 2015].

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