International Business Assignment
Get free written samples by our Top-Notch subject experts and Assignment Help team.
With a uniform product and a standardized marketing strategy, global firms want to conquer the international market. Many multinational companies, however, have also come to realize that their prospects to become global players would be harmed if they insisted too much on uniformity in each country's market (Knight & De Wit, 2018). Companies operating in the global marketplace must acquire a flexible mindset. Different product compositions may be required for the same product to be marketed in different regions. Some brands have worldwide appeal and just need to employ one advertising message in all of their nation markets, while others face a fragmented global market and need to utilize several messages in each of their country markets. In global marketing, there is no optimal strategy.
Companies must have the right Organisational structure in order to efficiently manage their overseas operations. Exporting, joint ventures, contractual partnerships, acquisitions of an existing firm, and forming a totally owned greenfield investment from start are all options for overseas market access. In addition, it is clear that some emerging countries are becoming new fashion centers throughout the globe (Buckner & Stein, 2020). Among the topics covered in this research are India's growing clothing sector and an analysis of the various entrance strategies used by international corporations over the last decade. There are also plenty of clothing retail outlets to brag about in the fast-growing fashion economy. Due to the growing purchasing power in these nations, multinational retail businesses have been able to make money in these countries. Additionally, local retailers are finding success in the foreign market as well. The report also tends to explore the main reasons for selecting one of these entry methods.
Background of the industry
In the fashion business, India is becoming increasingly important, reflecting a fast-expanding middle class and an increasingly assertive manufacturing sector. With solid economic foundations and a rising tech-savvy population, India is too crucial for multinational companies to overlook. Economic growth is spreading throughout Asia, but experts anticipate India to take the lead in 2019(Mittelmeier et al., 2021). From 2018 through 2022, GDP is expected to rise at an annual rate of 8% because to strong macroeconomic tailwinds (exhibit). Over the same time, India's middle class is projected to grow at a rate of 1.4% per year, outperforming Mexico, China, and Brazil. Consequently, India is expected to become one of most appealing consumer markets outside of the Western world as a consequence of this shift.
FashionScope estimates that India's clothing industry will be worth $59.3 billion in 2022, making it the sixth-largest in the planet, with a value that is equivalent to that of the United Kingdom and Germany. Between now and 2025, the total yearly income of the targeted population (those earning more over $9,500) is predicted to treble (Lahiri, Mukherjee, & Peng, 2020). According to Sanjay Kapoor, the president of Genesis Luxury, an Indian luxury retail group, "We are moving on toward the 'gold collar' worker. To describe the well-paid, highly compensated professionals who are glad to appear and feel their best and who are growing the consumption of our time, we use the word "well-to-do".
Textiles have traditionally been India's second-largest source of employment, behind agriculture, for both skilled and unskilled workers alike. The textile industry is India's second-largest source of employment. It employs more than 35 million people directly throughout the nation. More than 300 foreign fashion labels are projected to establish outlets in India in the next two years as a result of these dynamics. India, on the other hand, continues to be a complicated market with both potential and threats (Dutta, 2021).
The clothing industry is still extremely disorganized, with just 35% of sales in 2016 coming from traditional retail. By 2025, its market share is expected to be about 45%, which is still a small percentage. Indian merchants are using technologies to optimize the in-store experience using digital marketing displays and faster checkouts in order to generate momentum around traditional storefronts. Madura Fashion & Lifestyle, for example, has established the Van Heusen Style Studio, which employs augmented reality to show buyers how their outfits would look on their bodies (Kumar et al., 2017). The amount of area allocated to food and entertainment in malls has also expanded.
Consumers have become much more tech-savvy, which is boosting the garment industry's development. Just five million cellphones were available to just 45 million individuals in a nation of 1.2 billion people, and only 45 million people had access to the Internet. By 2021, when more than 900 million Indians would be using the internet on a regular basis, these numbers are predicted to have grown to 355 million and 460 million, respectively. Leaders in the e-commerce industry are adopting AI-based solutions (Torkelsen, 2017). When it comes to shopping, "personalization and curation based on personal taste becomes a lot more significant," says the CEO of Flipkart's fashion e-commerce platform Myntra, Ananth Narayanan.
There is a healthy supply of textiles and clothing, and the expansion of textile and apparel exports is projected to continue. "This is not about having the greatest variety; it is about giving the most suitable choices to the client engaged." 41 percent of procurement executives want to boost their sourcing from India, where labor prices are much lower than China's and equivalent to Vietnam's, as per a McKinsey poll in 2017(Hamja, Maalouf, & Hasle, 2019). It's easy to become involved in the fashion industry since raw materials like cotton, wool, silk, and jute are readily accessible. Companies wanting to enter the Indian market should pay attention to this essential piece of advice. 70% of women's apparel sales in 2017 were catered for by traditional clothes, which remains the norm for most women. Western fashion's appeal is predicted to rise, although traditional clothing will have a 65 percent share of the market by 2023(Prentice et al., 2018).
Companies from across the world considering about expanding into India should take note of this warning. 70% of women's apparel sales in 2017 were accounted for by traditional clothes, which remained the norm for most women. Despite a rise in demand for Western-inspired clothing, traditional clothing is anticipated to hold on to a 65% market share by 2023(Hellström, 2020).
Analysis of the prominent emerging economy
India has broken through the international economy in the last decade. The growing and emerging growth rate of the country has helped it become one of the strongest economies at the international level. And also, the country is the fastest-growing economy. With this potential, the country has a great potential to achieve a good position in the fashion industry. As the country has a huge population and diversity in the culture of the country, the international fashion brands try to target the Indian market for increasing their market share and brand image. The country has become a hotbed for international fashion brands in the past few decades. The competition of the international fashion brands is also increasing in India as the global brands are showing interest in opening their market in India. The make in India project has also boosted the fashion industry of the country (Gulhane, 2017). The land has also been emerged as an area of opportunities for international brands because of its huge population, opportunities for globalization, international and global trade, and the spending power of the huge populations.
The clothing industry in India is the oldest economy and the industry is flourishing with a huge market share and growth. The clothing industry of India exports a large portion of its production to the foreign market. At the same time, the foreign clothing industries are expanding in the Indian market. The industry has about 30% of the total knitwear garment production as well as 20% of the total woven garment production and the total knitwear and woven garment productions are sent to the export markets.
The Indian fashion industry has achieved 108 billion dollars and will gain around 220 billion dollars in 2021. It shows that the fashion industry in India has a huge market share and that is being used by the international brands to open their market in India to achieve customer satisfaction and increase the brand image of the company. The industry also contributes to around 2% of the GDP of the country. India is a rapidly growing focal point in the clothing and fashion industry which shows that the powerful manufacturing sector is growing rapidly. Among many other emerging markets, the GDP rate of India is in a good state that is expected to increase around 8% from 2018 to 2022 (Saravanan, 2019). The technological advancements, make in India project. The power and potential to become the strongest manufacturing hub and the economic zones are the major areas that can attract many foreign fashion and clothing brands to enter the Indian fashion Industry. India is also expected to emerge from an increasingly significant hub for sourcing materials to the most crucial and attractive market to attract the consumer markets of the outer area (Turukmane, 2017).
The graph shows that India is outpacing the other emerging markets and the GDP rate of India is also high. Many international brands open stores in India. The market size of the country is complex which provides many challenges to the new foreign companies.
As the technological development in India is growing at a rapid pace, the country has become an emerging e-commerce market through which the companies are attracting a large number of customers to increase their sales (Kapoor, 2018). With the tech-savvy, the companies are increasing the experience with the digital marketing features that have also improved the market of the company. The fashion industries are also using digital services in the Indian market that has helped international brands increase their sales and brand image. International brands like the e-commerce companies like Flipkart and myntra are providing digital services in the fashion industries are also acquiring a great part of the market in India and it has engaged a large number of customers (Kapoor, 2018).
The international brands are focusing on attracting a large number of customers in the Indian market as the country has diverse cultured and religious people and the tastes and preferences of the customers of India are also different. Depending on this, the international brands try to target diverse customers to meet the needs and requirements of the customers. Providing the customers with the fashion accessories and clothing as per their needs using the e-commerce sites and in the physical stores have also heled the foreign com[anise achieve the market of the country. Also, the online selling in the Indian market by international brands has provided an opportunity to sell the products to Indian customers by taking advantage of a few regulations (Cano, 2020). The companies of the international brands sell their products to the customers of India using the online portal by using third-party portals. It has brought the chances to the international brands to open their market in India and make India an international fashion hub.
The government’s huge support to relax the Foreign Direct Investment rules and regulations is also another reason that has helped India become an emerging market for the international market. The FDI in India contributes to a large extent to the growth and development of the country (Walvekar, 2017). With the rules and regulation of FDI in India is slackened which has been used as a good venture for the international brands to enter the market of India to expand the brand value and achieve a good market share.
Comparative investigation of the entry modes used by foreign firms
In fiscal year 2018, India's national garment market size was valued at more than five trillion Indian rupees. Companies from around the world thinking about expanding into India should make a note of this warning. 70% of women's garment sales in 2017 were accounted for by traditional clothes, which remains the norm for most women (Torkelsen, 2017). Spite of the increase in demand for Western-inspired clothing, traditional clothing is anticipated to hold on to a 65% market share by 2023. There seem to be a number of companies eager to capitalize on India's burgeoning economy. Three options are most likely to be chosen by the majority. The first option is for players to work with established e-commerce companies (Palanivelu & Apdhulkathar, 2018). With minimal brand recognition and little resources to spend, this is best suited for smaller businesses that want to test market demand and client preferences.
The second option is by using a franchise model, which allows new businesses with limited local experience and a desire to join the market fast to do so. As a last option, gamers who have significant knowledge of the area and substantial monetary resources may open their own shops. There is no doubt that the Indian government is eager to encourage investment (Sharma & Srivastava, 2020).
Permitting 100% foreign-owned single-brand retail enterprises would likely result in an increase in the number of overseas-originating activities across the value chain. In the coming years, we may anticipate an increase in the number of brand-owned shops without Indian partners, as well as an increase in outsourcing (Torkelsen, 2017). According to population trends, increased purchasing power in cities, and the development of infrastructure in large metropolitan regions are projected to lead to the majority of activity in these places. In summary, the Indian market has a lot to offer. We believe that despite the nation's fundamental obstacles, including inequality, transportation, and market fragmentation, strong economic development, size, and emerging digital savviness will conspire to create the country the next great global potential in fashion and apparel.
There is a slew of clothing retail outlets to brag about in the fast-growing fashion economy. Due to the increased purchasing power in these nations, multinational retail businesses have been able to earn profit in these countries. Additionally, local retailers are having success in the foreign market as well (Hamja, Maalouf, & Hasle, 2019). When it comes to pricing and quality, Indian customers are a lot like the rest of the world. They want to have everything under one roof. However, most of the time, you'll receive what you're looking for. The retail industry in India is growing steadily. It provides all of the advantages that customers are looking for. There have been a lot of foreign-owned retail establishments sprouting up. There is a lot of public interest in local retail establishments as well. Three of the five most important emerging economies in the fashion sector are Asian, indicating that Asia is obviously the leader in this game. As time goes on, there may be more alternatives available to consumers. As a result of their retail outlets, rising fashion markets have a great deal to offer the international market in terms of fashion.
Inditex (the business behind Zara) adopted a joint venture plan with Trent Limited, a Tata Group firm, a well-known clothing line distributor, to penetrate the Indian market. The tactic of co-operation between the local company and the international firm in the market, particularly in big, competitive markets, where it would be difficult to obtain property to set up retail outlets or where other kinds of hurdles necessitate co-operation with a local firm toward which Zara regards its shops as one, is the reason why Zara chose joint ventures as its entry mode into India (Su, 2020).
One of the most important aspects of retailing is that it serves as a dividing line between customers and the rest of the company. Zara was hesitant of entering the Indian market because of reservations about the country's demographics and culture. India has a populace of over 1.2 billion people; thus, the target audience is likely to be much larger than envisaged. The demand for trendy and high-quality apparel in India will grow as the country's economy improves. Additionally, Zara aimed for the top two spots in India's apparel market, which it achieved. In terms of production, marketing, and distribution, any one of these jobs would be adequate for Zara.
To encourage foreign investment in the retail sector, India has allowed 100 percent foreign direct investment (FDI) in single-brand retailers, as well as up to 51% FDI in supermarket chains as well as other multi-brand outlets. H&M competes with Inditex, a Spanish retailer that owns Zara and Massimo Dutti, which sells stylish and athletic clothes and accessories for women, men, teenagers, and children primarily in Europe and the United States (Jamble, 2021). In 2009, a joint venture among Trent, the Tata group's retail arm, and Zara brought the brand to India.
In India, Marks & Spencer has a lot more room to develop. A relationship with Planet Retail and running 14 franchisees in India already gives them a footprint in the nation, but maintaining their own shops gives them a stronger foothold. In the following four years, the firm wants to grow its local sourcing to 70%. Non-executive Chairman Sir Stuart Rose of M&S has indicated that the business will be making major investments in India, which could grow at a pace of ten percent over the next several years (Munjal, 2019). To prepare for the Indian market in the next 10 years, M&S is now laying the groundwork. Managing consultants is a concern for the corporation, which also intends to spend £750 million on developing operations in India. Constructive criticism does not frighten me, and I maintain mine composure while others lose theirs. Even though I am sensitive to the sentiments of others, I am able to maintain my objectivity and make the right decisions when the situation calls for it.
Arvind Brands, which has already opened Calvin Klein Underwear shops in New Delhi and Hyderabad, plans to build a new store in Fun Republic Mall in Lucknow via Abacus Agencies in the coming years. For more than a decade, Abacus Agencies has been a franchisee for a number of popular brands, including United Colors of Benetton, Calvin Klein, Spykar, Pepe Jeans London, and others.
After signing a partnership with Calvin Klein, Arvind Brands as well as Retail has hired Parag Dani to lead its operations in India. Calvin Klein Jeans and Calvin Klein Underwear operations in the nation will be expanded and enhanced when PVH Corp, the holder of the Calvin Klein trademarks globally, and Arvind announced the arrangement, the latter opted to concentrate on the growth and improvement of current companies in the country (HR & Aithal, 2020). Lalbhai-led Arvind is expected to benefit from the joint venture partnership in the mid-premium market. Last year, Philip Van-Heusen Corp., an American apparel behemoth, spent 2.9 billion dollars (about Rs 12,000 crores) for the denim brand.
Critical assessment of motivation behind the choice of entry modes
Direct exports, licencing, greenfield joint ventures, and complete acquisitions are just some of the ways in which internationalising enterprises might access international markets. A company's international operations must be properly managed via a suitable organisational structure. Market entry has always been linked to the launch of a new firm or to the expansion of the already established business into a new market (expansion, scaling, etc.). The effectiveness of this is due to the capacity of companies to compete with the other brands and their willingness to accept risk. There are several steps involved in developing a strategy for entering a new market. The project's success is negatively impacted by a lack of knowledge. In order to join the Indian clothing market, multinational clothing companies investigated a variety of entrance methods. Inditex (the company behind Zara) entered the Indian market via a joint venture with Trent Limited, a Tata Group company and a well-known distributor of apparel lines, as seen in the comparison above.
Zara have chosen joint ventures as its entry method into India due to the obvious necessity of cooperation with such a local firm toward which Zara regards its shops as one, especially in large, competitive markets where it would have been hard to obtain property to established retail outlets or where other kinds of obstacles necessarily require cooperation with a local firm. Zara's approach in India was to offer a mix of local and foreign apparel brands, but to keep Zara as the core brand in the country (Su, 2020). Furthermore, Zara aimed for the top two spots in India's apparel market, which it achieved. In terms of production, marketing, and distribution, any of these jobs would be adequate for Zara. Using these spots, Zara may promote their apparel lines and other unique fashion items. '
Marks & Spencer has much more space for growth in India. While they already have a partnership with Planet Retail and 14 franchisees in India, having their own stores provides them a stronger foothold in the country. The company plans to increase its local sourcing to 70% in the next four years. " Sir Stuart Rose", M&S's non-executive chairman, has said that the company plans to spend heavily in India and expects it to develop at a rate of ten percent over the next few years (Munjal, 2019).
There has to be an agreed-upon aim and criteria laid forth in the JV agreement in order for a joint venture in India to succeed. It is also possible to handle the risks of new enterprises together in a joint venture. By forming a joint venture, they are able to reduce their individual liability by sharing the risks. When all domestic and federal (tax) responsibilities have been paid, India authorizes free of charge return of earnings. Foreign currency for repatriation has not been an issue for India in its history.
Exiting an investment is similarly a straightforward procedure, and earnings may be returned to the country of origin provided all tax obligations and other conditions have been met. By building the foundation today, M&S is preparing to enter India's market within the next decade. Marks & Spencer has partnered with Reliance Retail to enter the Indian market. By establishing six more locations in the next two months, the JV plans to further strengthen its market position (Palanivelu and Apdhulkathar, 2018). M&S opened its first shop in India in 2001 and then collaborated with Reliance Retail to even further develop its retail footprint in the country. It presently has 71 outlets in the country's most populous cities. And that is why multinational companies choose to enter the Indian textile business via joint venture as an entrance strategy because of its cultural barriers.
Single-brand stores in India are permitted to have 100% foreign direct investment (FDI), whereas supermarket chains and other multi-brand outlets are allowed to have up to 51% FDI. H&M rivals with Inditex, a Spanish store that owns Zara as well as Massimo Dutti, which mainly provides fashionable and sporty apparel and shoes for women, men, teens, and children in Europe and the U.S. For instance, in nations such as India, corporations might benefit from reduced labor expenses.
H&M, for example, has access to competent workers in the target market, as well as information from individuals in that market. First to join a country like India where there is a great demand for western services and goods with strong brand equity might have significant benefits. A long-term competitive advantage may be gained by using this method.
After previously opening Calvin Klein Underwear stores in Delhi and Hyderabad, Abacus Agencies is aiming to develop a new store in Lucknow's Fun Republic Mall over the next few years. Franchisee for over a decade of well-known companies, including United Colors of Benetton, Calvin Klein, and Spykar to name just a few (HR and Aithal, 2020). Parag Dani has indeed been engaged by Arvind Brands and Retail to head its presence in India after the formation of a collaboration with Calvin Klein Multinationals' India strategy relies heavily on local partners. To overcome difficulties inside the Indian market and as a viable expansion strategy, corporations engage local partners.
Therefore, it can be concluded that India is a rapidly growing and expanding fashion hub for international fashion companies. The fashion industry of India in the early decades was stylish and colorful and as time passed, the industry has developed, and now it has become a fully grown upmarket with its geared-up potential. The entire discussion has spotlighted the various modes for the international brands to enter the market of India and how these brands have become successful. There are various reasons that have motivated international brands to enter the Indian market.
The fashion industry acquires a significant portion of the market share and GDP of India. The online portals used by the global brands have also provided the customers of India get the branded products at their doorstep which has also provided enough potential to the international brands to get enough success in the Indian market. The international brands have also attained good customer satisfaction. The economic development, developing tech-savviness and economic scale of the Indian market is altogether the reasons for the emerging growth of global fashion brands.
Anuj, K., Fayaz, F., & Kapoor, N. (2018). Impact of e-commerce in Indian economy. Journal of Business and Management, 20(5), 59-71. https://www.academia.edu/download/56836052/H2005065971.pdf
Buckner, E. & Stein, S., (2020). What counts as internationalization? Deconstructing the internationalization imperative. Journal of Studies in International Education, 24(2), pp.151-166.
Calderón Carrillo, J.M., (2019). Relationship analysis between culture and business within the indian market. Case: Mcdonald’s, Hennes & Mauritz and L'oréal (Bachelor's thesis, PUCE-Quito).
Dutta, M., (2021). Becoming ‘active labour protestors’: women workers organizing in India’s garment export factories. Globalizations, pp.1-16.
Edwards, R., Hunt, T. & LeBaron, G., (2019). Corporate commitments to living wages in the garment industry. Sheffield Political Economy Research Institute.
Gulhane, S., & Turukmane, R. (2017). Effect of making in India on the textile sector. Journal of Textile Engineering & Fashion Technology, 3(1), 84-90. https://www.researchgate.net/profile/Ranjit-Turukmane/publication/321290844_Effect_of_Make_in_India_on_Textile_Sector/links/5a954c3c45851535bcdb5efa/Effect-of-Make-in-India-on-Textile-Sector.pdf
Hamja, A., Maalouf, M. & Hasle, P., (2019). Assessing the effects of lean on occupational health and safety in the Ready-Made Garment industry. Work, 64(2), pp.385-395.
Hellström, C., (2020). Empowerment in the Garment Industry: A Study on Home-Based Workers in Delhi, India.
HR, G. & Aithal, P.S., (2020). Measuring the True Potential of Lifestyle Brands in India: A Firm-Level Scale for Existing and Potential Investors-(FL-LBSi). International Journal of Applied Engineering and Management Letters (IJAEML), 4(1), pp.279-302.
Jamble, R., (2021). A Comparative Study of Online Fashion Promotion: Hennes & Mauritz (H&M) and Label in India. IAR Journal of Business Management, 2(4).
Kamble, A. A., & Walvekar, S. (2017). Policy regulations in E-commerce sector–Critical analysis of FDI guidelines for market place model. Journal of Commerce and Management Thought, 8(3), 409-421. https://www.indianjournals.com/ijor.aspx?target=ijor:jcmt&volume=8&issue=3&article=003
Kaushik, V., Khare, A., Boardman, R., & Cano, M. B. (2020). Why do online retailers succeed? The identification and prioritization of success factors for Indian fashion retailers. Electronic Commerce Research and Applications, 39, 100906. https://www.sciencedirect.com/science/article/pii/S1567422319300833
Knight, J. & De Wit, H., (2018). Internationalization of higher education: Past and future. International Higher Education, (95), pp.2-4.
Kumar, T.S., Soumya, P.R., Manjari, V.M., Aishvariya, R.E. & Akalya, N., (2017). Implementation of lean manufacturing tools in garment industry. IJLTEMAS VI (iii), pp.39-43.
Lahiri, S., Mukherjee, D. & Peng, M.W., (2020). Behind the internationalization of family SMEs: A strategy tripod synthesis. Global Strategy Journal, 10(4), pp.813-838.
Mittelmeier, J., Rienties, B., Gunter, A. & Raghuram, P., (2021). Conceptualizing internationalization at a distance: A “third category” of university internationalization. Journal of Studies in International Education, 25(3), pp.266-282.
Munjal, S., (2019). Entry modes and dynamics. In Indian Business (pp. 117-129). Routledge.
Palanivelu, V.R. & Apdhulkathar, A., (2018). Export performance of readymade Garments industry in Salem city, Tamil Nadu. Journal of Emerging Technologies and Innovative Research, 5 (10), 207, 211.
Prentice, R., De Neve, G., Mezzadri, A. & Ruwanpura, K.N., (2018). Health and safety in garment workers’ lives: Setting a new research agenda. Geoforum, 88, pp.157-160.
Saraswat, S., (2018). Strategies v/s Consumer Perception of Brand Zara-India. IITM Journal of Management and IT, 9(2), pp.68-80.
Saravanan, R. (2019). Is traditional retail moving to e-commerce in the field of the fashion industry in India? (Doctoral dissertation). https://iconline.ipleiria.pt/handle/10400.8/4623
Sharma, L. & Srivastava, M., (2020). A scale to measure organizational stress among women workers in the garment industry. European Journal of Training and Development.
Su, Y.Z., (2020). The Internationalization Strategies of Fast Fashion Clothing Retailer Brands: A Cases Study of ZARA, H&M, UNIQLO, and Gap.
Torkelsen, F.H., (2017). Textile and Garment Industry in India-Challenges of realising human rights and the impact of the Ruggie Framework (Master's thesis, Oslo and Akershus University College of Applied Sciences).