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The Chinese apparel/fashion industry has a substantial competitive advantage in the global market. China has been standing at the top position in the field of clothing export and production across the world. Chinese garment industry follows a processing driven model. To obtain orders from Europe, the United States and other countries, the enterprises of China act as the manufacturers in the global apparel production market (Alden et al., 2013). Due to rise in costs of labour, land and other resources, Chinese apparel industry has been facing several challenges lately. Chinese clothing industry is also facing challenges from new entrants to the global market such as Laos and Vietnam. The Chinese apparel industry indulges in manufacturing several clothing garments and accessories for men, women, and children. They generally use the raw materials as their fabrics (Berthon et al., 2012).
The ICONIC is an Australia clothing retailer company that was founded in Australia. This company provides a wide range of choices and collections for men, women, and children. This brand has also launched its own line of household products, cosmetics, and perfumes (Theiconic, 2016). The main idea of The ICONIC is to make the luxury items accessible to every individual. The ICONIC is inspired by the evolution of fashion and fast fashion. The ICONIC is capable producing and offering fashionable and trendy apparels at affordable prices. The main motive of this company is to get closer to the young people and understand their preferences. The ICONIC has an exact understanding of the needs and demands of its customers and thus responds to their demands very quickly. This is the major secret of The ICONIC that gives it a competitive advantage over its competitors (Theiconic, 2016).
The ICONIC cloth retailing company wants to expand its business in China and therefore, a market analysis of China is done in this report to formulate proper strategies to enter into this new market (Theiconic, 2016).
China is world’s largest economy in the current day after Japan and United States. GDP of China ranks third in the world. China enjoys a healthy economy due to its urbanization and industrialisation. China’s success can be credited to the political stability of the country. China concentrates on maintaining a diplomatic relationship with the major nations like USA, Russia, and Europe etc. China works closely with ASEAN nations to help fight terrorism develop infrastructure and promote economic cooperation. China is a communist country and is ruled by CPC or Communist Party of China (Czinkota & Ronkainen, 2012). Only this party has the power to take decisions on the important issues and policies of the nation. The Chinese government is authoritarian i.e. it has heavy restrictions on the freedom of speech, press and internet censorship. Withdrawal of Google from China shows that market of China is not a free economy market. Strict laws are imposed on the business groups and the organisations have to abide by all the laws of the Chinese government.
The legal structure of China is very complicated. There is lack of supervision and transparency that has increased the corruption in the country. The Chinese government has strict legislation for combating with corruption (Fletcher & Crawford, 2013). The Chinese government has strict policies regarding taxation, expropriation, operating restrictions and ownership controls. They also have policies to avoid frauds, grant license or withdraw license.
Chinese fashion market is characterised by huge regional diversity in the market as well as economic status. These regional diversities is important for the enterprises those are trying to enter into Chinese fashion market. Chinese cities are present in three tiers. The first tier cities which are mostly situated along the coastline are the metropolis. These cities are the major trendsetters in fashion in China. Beijing, Shenzhen, Shanghai, and Guangzhou are the main cities of this tier. These cities have a bright market for the international fashion brands. The second tier cities are the well-developed cities and the capitals such as Xi’an, Changsha, Nanchang, and Wuxi. The third tier cities are present in the northwest, west and southwest China. These cities have very less population (Hallbäck & Gabrielsson, 2013).
The famous foreign fashion brands generally set up their businesses in first-tier cities and then go for the second tier cities. The brands need to be present in first-tier cities to create brand awareness as the people from second and third-tier cities prefer visiting the first tier cities for fashion consumption. All the media of China are based in Beijing and the biggest fashion events are held at Beijing, therefore, all the fashion and luxury brands need to have their headquarters in Beijing.
There are five main trends going on in Chinese fashion market. They are described below:
In China, the luxury clothing and accessories account for $3.1 million and only lack behind in fields of fragrance and cosmetics (Paliwoda & Thomas, 2013). Different high-quality foreign clothing companies are investing in China at a growing rate. In Between 2010 to 2014, this has increased by 50% in their annual sales. China is to become the key driver of the PPR sales in the Asia-Pacific region as more and more foreign brands continue to invest in China.
The major players in the fashion market of China are generally the brands that have been known to the Chinese customers from a longer period of time. There are twelve main players in the fashion market of China whereas almost 40 internationally recognised brands are present in China. The major competitors of The ICONIC can face after entering into Chinese fashion markets are Hugo Boss, Armani, Louis Vuitton, Burberry, Gucci, Coach, Ermenegildo Zenga, and Alfred Dunhill. These companies have been operating in China from a long time and have multiple numbers of stores in China (Papadopoulos & Heslop, 2014).
The organisational capability is the capability of the organisation to manage its resources effectively to gain a competitive advantage over its competitors. The ICONIC has to study the market structure of China apparel industry and manage the resources in order to compete with the already existing fashion brands in China (Turnbull & Paliwoda, 2013). The ICONIC has to understand the customer needs and demands and respond accordingly in the completely new environment.
The SWOT analysis of The ICONIC is described below:
The ICONIC’s supply chain is its major strength that offers many advantages to the company. The ICONIC can react quickly to the needs and demands of the customers and has high control in the entire process of designing to the production of the final product. Supply chains have smooth operations, warehouses and distribution centres. Supply chain strategies of The ICONIC helps in quicker distribution of the products within the larger geographical area. So, The ICONIC can quickly adopt into and respond to the needs of the Chinese customers.
The ICONIC’s business model has few weaknesses like it is difficult for the company to exploit the scalability of the expansion. The vertical integration of its supply chain has many limitations on the scalability (Turnbull & Paliwoda, 2013). The ICONIC cannot manufacture a larger quantity of the products in for lower cost as its concept is based on quicker distribution to the stores and limited edition products. These rapid processes may also compel it to compromise with the quality of its apparels. Thus, may fail to achieve success in the Chinese market.
Online shopping and e-commerce is a significant concept in Chinese fashion market. The customers go online and order their requirements. The ICONIC should allow its customers to purchase its apparels online that will result in increased sales for The ICONIC in the Chinese market.
The competitors present in Chinese market may provide a substantial threat to the company. The high rents in the malls of China are also another threat. The ICONIC will have to afford high cost by increasing its prices or decreasing its operational costs (Yang & Fam, 2012). The major competitors of The ICONIC in the Chinese market will be Gucci, Armani, H&M, and Louis Vuitton etc.
The ICONIC will start its flagship store at Shanghai’s Hua Hui Road. The foreign market strategy of The ICONIC is the combination of the generic strategy of differentiation and cost leadership. The ICONIC considers labour cost, productivity, shipment cost and distribution cost of the raw materials. Market entry strategies of The ICONIC also includes micro factors including demand, the location of stores & competitors and macro factors including political conditions, tax, and tariffs. Legislations of government, local producers, and protection issues are also taken into considerations (Turnbull & Paliwoda, 2013).
The ICONIC has always targeted the teenagers or the people in their twenties. The ICONIC also targets the customers in its campaigns. These strategies of The ICONIC in China will tell that it is not a mere clothing company but is way ahead of its competitors. Determination of the power of celebrities and the purchasing power of youngsters is done by The ICONIC. Accumulation huge profits by applying this strategy to target its consumers can be done in China. The ICONIC can also apply segmentation strategy in the fashion market of China to differentiate its customers into various target segments to formulate different strategies for each of them and to manufacture the items according to different demands from different segments (Majaro, 2013).
The ICONIC needs to position itself as a high-quality fashion distributor in China market. The ICONIC should concentrate on selling high quality of designs and commodities. The company in order to achieve success in the Chinese market will have to leverage its competitive advantages to achieve desired position (Majaro, 2013). The ICONIC should provide better designs in low prices along with its brand name promotion to get to a better place.
The market mix of The ICONIC in Chinese market involves 4Ps i.e. Product, Price, Promotion, and Place.
Product– The ICONIC requires developing unique and high-quality latest trends apparels and offering them to the Chinese customers at lower prices than its competitors. If a product is not selling, it should be immediately removed from the stores (Paliwoda & Thomas, 2013). The ICONIC must utilise innovation to manufacture unique garments for men, women, and children. The ICONIC must keep in mind the cultural requirements of China while designing its products.
Price– Initially, The ICONIC must provide its products to the customers in China at reasonable prices. It should make sure that its customers find the pricing of its apparels quite affordable. But the customers in China will compare The ICONIC to other brands like H&M, Gucci, Louis Vuitton or others. The ICONIC has to adopt a premium pricing strategy by optimising its operational costs.
Promotion– The ICONIC should make use of money to advertise its brand name and the opening of its new stores in China. This will help the people of China to get to know about the new brand in the market. The key marketing strategy should be based on affordability, differentiation, exclusivity, and experience (Turnbull & Paliwoda, 2013). The ICONIC can make use of different social media to connect with its customers and promote its brand name.
Place– The ICONIC should manage to design, distribute and manufacture its products itself. The ICONIC should also place its stores at the premium first tier and second-tier cities in China. It should focus on expanding its business and stores. The ICONIC should also get into joint ventures with any local company of China.
The long-term objectives of The ICONIC for sustaining in Chinese market should be:
Several planning strategies can be formulated by The ICONIC to attract and retain its customers in China. It can be assumed that as the fashion market of China is flooded with various domestic and foreign brands and because the market is highly competitive. The ICONIC may find it difficult to compete and capture the market initially. But, it can be recommended that The ICONIC should stick to its original plans in order to achieve success in Chinese fashion market.
The ICONIC should concentrate on innovation in the items like broderie Anglaise blouses, metallic espadrilles, and lace dresses as they are highly in demand in Chinese fashion market. The ICONIC’s seasonal collections can push its sales up to further 15% while keeping its costs constant. The ICONIC should look for opening new stores in China that can increase its overall growth to 12%. The ICONIC will have approx. $17 billion overall sales after expansion to China (Papadopoulos & Heslop, 2014).
Various sustainable action plans can be taken up by The ICONIC to reuse and recycle its products, to influence the customer behaviour group, to design the garments for longevity and improving the brand impression. The company should go hand in hand with the rules of the Chinese government and aim to achieve its targets.
The ICONIC will have to prepare for investing a heavy amount for expansion in China as it will have to hire world-class designers and other staff members to cope up with the demands of the new environment. The ICONIC need not have any budget for the advertisements. Instead, it should spend money in buying stores next to other luxury brands to have direct competition with them. The total budget of The ICONIC for China expansion should be around $7 million.
The company should monitor and control all the activities starting from design of the item to its manufacturing to get superior quality output (Papadopoulos & Heslop, 2014) The ICONIC should in view its strategies and objectives and therefore indulge in proper monitoring and controlling of all its business operations in China. It should train its staff members to enhance their communication skills that can help monitor the activities better. The ICONIC should also use advanced technologies to help in monitoring and controlling operations.
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