Describe about the Marketing Plan of Michael Kors.
Michael Kors is a well-known manufacturer of readymade men’s and women’s accessories, watches, and fragrance products. It is a global brand and running its operations from more than 35 years. The company operates in all levels of the supply chain and has primarily three distribution modes, namely, retail format, wholesale format and licensing format (Michael Kors, 2016). It produces budget-friendly yet stylish products. The primary markets of the company are Europe and the USA. Recently, the company is focusing on expanding its business in other emerging markets such as China, Iran and India. The following report conducts a thorough analysis of the potential markets for the company to expand. In this regard, the macro and micro factors impacting the fashion industry are explored, the internal business factor of Michael Kor’s are discussed, the potential markets are evaluated on the basis of 12 C’s international market strategy, and recommendations are provided so that the company can enter the market successfully.
The global fashion industry is influence by several factors on which the business owner has little control. It is important that a company adapt itself to these factors to succeed. In this report, the macro environment of the fashion industry is analysed through PEST analysis (Applegate & Johnsen, 2007).
Political factors: The fashion industry is influenced by the labour laws and political environment of a country. The trade laws and the export laws also influence the fashion companies.
Economic factors: In the times of economic boom, the customers have more disposable income in their hands. Therefore, the customers are more inclined to buy fashion products. In contrast to it, recessions have a negative impact on the sales of the fashion industry.
Social Factors: It includes factors such as culture, lifestyle, and demographics. The fashion companies have to create items that appeal the targeted market segment. In addition to it, demographics also influence the consumer behaviour, for example, in places where the birth rate is low, demand for baby clothes will be low (Duff, 2016).
Technological Factors: In fashion industry, technology plays a critical role in marketing and operations.
The micro environment includes those factors that can be controlled by the management of the organisation. The most important factors are competition, supplier and consumers. The micro environment of the fashion industry is analysed by the porter’s five force model. The porter’s five force analysis examines the competitiveness in a given market on the basis of five forces, namely, buyer power, supplier power, competitive rivalry, the threat of new entrants and the threat of substitution (Porter, 2008).
Buyer Power: In fashion industry, a consumer has multiple options for a single product. There are numerous international and national competitors and the consumers can easily switch companies without any switching cost. Therefore, the bargaining power of the consumers is high.
Supplier power: In the fashion industry, the products are outsourced from cheap labour companies such as China and Bangladesh. Thus, the suppliers share significantly amount of the net profit. Moreover, they can be easily replaced. Therefore, the bargaining power of the suppliers is low.
Industry Rivalry: In the fashion industry, there are a large number of retailers who sell similar products. Therefore, there is intense competition among the companies. There is very small innovation in the industry and most of the companies are at price wars. However, there are also several luxurious brands sell products at a high cost, but the market share for these companies is very low. As a result, the industry rivalry in this industry is high.
Threat of New Entrants: Fashion industry is considered as a saturated industry due to the number of retailers in the business. There is little innovation in the industry, which makes it difficult for the new organisations to distinguish themselves from the older ones. However, the companies can utilize extensive marketing strategies to distinguish themselves. The operational costs of the companies are also medium. Therefore, the threat of new entrants in neither low nor high in fashion industry.
Threat of substitution: There is no substitution to the fashion apparels and the fashion products. Therefore, all the substitution to the fashion products is between different companies and brands. The threat of substitution in the fashion industry is low.
Porter’s Value Chain Framework
The value chain framework provides an analysis of the activities that allows a firm to obtain competitive advantage and gain shareholder value. It is a generic model that examines the range of activities which are differentiated as primary activities and secondary activities (Wiedemann, 2013). The value chain analysis of Michel Kor is conducted below:
Inbound logistics: Most of the products of Michael Kor are manufactured in the Asian countries and stored in British Virgin Islands. It results in cost and tax saving for the company. Furthermore, storing manufactured in British Virgin Islands result in easy accessibility of the products to the major markets.
Operations: It is the process of transforming inputs into finished products. The company has robust operations. It has skilled workforce and technically advanced machinery to transform input into finished products and services.
Outbound logistics: Michal Kor has a technically primarily three channels for product distribution, namely, retail outlets, wholesale outlets and licensing format. It has not participated in other distribution channels such as franchising and joint ventures to enter in international markets. It has a limited market mainly in Europe and the USA; therefore, the company has limited market.
Marketing and Sales: In the recent year, Michael Kor has gained substantial market in Europe and the USA due to extensive and attractive marketing method (Lutz, 2012). It has targeted its marketing strategy on these higher middle-class and growing affluent class.
Service: The staff of the company is focussed on providing good services to the customers and be available to their every requirements to achieve customer satisfaction.
In the value chain framework, the primary activities of the organisation are supported by:
Infrastructure of the firm: Michael Kor is a leading organization in the fashion industry. The infrastructure and the control system of the company is well-establishes and state-of-the-art.
Technology: The Company has embraced technology in all its operations to achieve efficiency and support all the value-creating activities.
Human Resource management: Michael Kor tries to gain competitive advantage over other competitors by recruiting and training the best talent in the industry. It put special emphasis in employee retention, development and training to enhance productivity of the organization.
Procurement: Over the years, the company has established a robust supply chain that includes the purchase of materials, supplies and equipment at low cost and high quality.
The SWOT analysis is a framework that analyses the internal strengths and weaknesses and external opportunities and threats (Pahl, & Richter, 2009). It assists an organisation in strategic management by identifying opportunities and strengths.
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Strengths · The brand is very popular among the ladies. · The company has used the strategy of celebrity endorsement wherein a number of Hollywood celebrities have worn the brand on red carpet and endorsed it. · It has carved itself a niche market segment and is hugely popular among the young generation. · All the designs are developed by the renowned global designers |
Weaknesses · It serves a limited marketing segment in the US and Europe. · It is lesser known globally. · As per the recent strategy of the company, the brand has lowered its cost which has made the consumer perception of low quality and mass company. · |
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Opportunities · Emerging markets in developing countries in China, India and Israel. · Trust-worthy brand, popular among the consumers as a reliable brand. · Rapidly growing luxury lifestyle market due to increase in higher middle class in the global population. · Nowadays, many companies are trading through internet and e-commerce platforms. It is an opportunity for Michael Kors to increase market penetration and customer base. |
Threats · It provided limited options or choice of products. · Other emerging companies which are trying to obtain the market segment held by Michael Kor. · There are a number of competitors in the luxury penalty. |
A company can analyse international markets opportunities using the 12 Cs framework. According to this framework, the 12 Cs are country, culture & customer behaviour, concentration, communication, channels of distribution, capacity to pay, currency, control and coordination, commitment, choices, contractual obligations, caveats. With this framework, a business organisation can examine the viability of the business venture.
Country: China is the most populated country across the globe. In the recent years, the economy of the country has substantially grown and as a result the affluent middle-class section of the society is growing. It also has a relatively better infrastructure than other Asian countries and cheap-labour.
Culture & Customer Behaviour: Majority of the Chinese population follow Buddhism religion. The young generation are attracted towards brands and luxury goods. The growing middle-class has increased the disposable income in the hands of the customers and expanded the luxury apparel market of the country (McKay, 2012).
Concentration: The country has high population and industrial concentration in Shanghai, Beijing, Ghuangzhou and Hong Kong. In the recent years, the Chinese government has implemented various measures to increase the urbanization of the country.
Communication: In term of telecommunication, China has the maximum users of mobile phones and internet. However, there is substantial restriction over foreign media. China has its own internet and social media services (McKay, 2012).
Channels of distribution: As Michael Kors imports manufactured products from China, Bangladesh and other Asian countries, it can avail local distribution channel. The net cost associated with distribution will also be significantly less.
Capacity to pay: A large number of customers will be capable of paying (McKay, 2012).
Currency: Chinese currency is stable.
Control and coordination: There is significant control of the Chinese government on the local markets but they are becoming more flexible to expand its economy.
Commitment: The Company has commitment to provide quality products at reasonable cost.
Choices: The competition between the luxurious apparels is evident in China. Recently, several companies have entered the country to exploit its expanding market.
Contractual obligations: In the recent years, the country has transitioned from planned economy to mixed economy to open market. The government has loosened control over international companies and market to attract more foreign companies to the market. The contractual terms such as warranty, guarantees and penalties are similar to other countries (McKay, 2012).
Caveats: The Chinese citizens prefer to buy luxury clothes from foreign countries. Recently, Michael Kor has also lost its status of celebrity brand and become more a mass product.
Country: It is second most populous country of the world and fastest growing economy after the economic reforms in 1991 (EY, 2016).
Culture & Customer Behaviour: It is a traditional country and recognized as multi-ethical and multi-lingual society. A significant section of the society comes in middle-class; however, they prefer traditional and ethnic wear. Recently, this trend has changed.
Concentration: The country has high population and industrial concentration in cities like Delhi, Mumbai, and Bangalore (EY, 2016).
Communication: It has a fast growing communication sector with more and more customers using internet and smartphones every day.
Channels of distribution: The products can be outsourced from the nearby countries which are already producing the finished goods for the company. Other than that, it can adopt the indirect or direct distribution strategy wherein the goods can travel through an intermediary to customers or directly to the customers respectively.
Capacity to pay: Growing affluent class has high disposable income in their hands.
Currency: Indian currency is stable.
Control and coordination: It is a mixed economy but the government has strong hold of the market and there are strict legislations and taxation structure.
Commitment: The Company commits to provide quality products at reasonable cost.
Choices: Several international brands have entered into the Indian markets to exploit the opportunities of the growing market.
Contractual obligations: It has strict legislation and taxation structure; therefore, the companies are required to maintain certain contractual obligations while doing business in India.
Caveats: The Indian market has issues like complex taxation structure as well as duplication market. Copies of the products of high brand are available at very low cost and people prefer to buy them. Recently, Michael Kor has also lost its status of celebrity brand and become more a mass product.
Country: The country is politically stable and developed economy.
Culture & Customer Behaviour: The country is rich in culture, arts and performance. The people are inclined towards aesthetically beautiful things, designs and clothing.
Concentration: It has a relatively high population, but the concentration is relatively low.
Communication: It is a developed country with a strong infrastructure for telecommunication.
Channels of distribution: The infrastructure of the country is ageing and inadequate. It has a well-developed system of railways and inland waterways. The company can use indirect or direct distribution methods for goods distribution (Dellloite, 2016).
Capacity to pay: As Russia is a developed country; the customers have a high capacity to pay.
Currency: Russian Rubble is strong and stable.
Control and coordination: Russia is a federal republic with semi-presidential system. It has a mixed economy with government control over certain domains. It is relatively free for fashion industry.
Commitment: The Company is committed to consumer experience which can be observed in its experience.
Choices: High competition due to large number of foreign and local merchandisers.
Contractual obligations: The companies are required to maintain certain contractual obligations while doing business in Russia (Dellloite, 2016).
Caveats: Recently, Michael Kor has also lost its status of celebrity brand and become more a mass product.
Country: The country is a strong middle-eastern and regional power. It is a democratic country with Islamic theocracy. It is a multicultural and multi-ethnic country.
Culture & Customer Behaviour: It has a relatively old culture which is influenced by several countries like Greece, Italy and India. It has a traditional culture influenced by Islam, and people wear traditional dresses and women wear hijab (Spivack, 2016).
Concentration: It has a relatively high urbanization rate. Majority of the population is saturated around Tehran, Mashhad and Isfahan.
Communication: It has serious limitations in telecommunications as all the media channels are government owned and all the outlets must be approved by government before releasing them to public.
Channels of distribution: The infrastructure of the company has serious imitations because of technological lags. It is advised to follow the business to business distribution model as Iranian business men have a very different style of conducting business.
Capacity to pay: It is home to a market of 60 million as well as it is strategically located so that the company can access the whole central Asian market (Spivack, 2016).
Currency: Iranian currency has a strong value.
Control and coordination: The taxation structure in Iran is highly complicated (Spivack, 2016).
Commitment: The Company is committed to good consumer experience.
Choices: A significant number of foreign companies have entered Iran which provides customers numerous choices in fashion apparels.
Contractual obligations: The labour laws in Iran are very employee friendly and they have a peculiar style of following all the business dealings.
Caveats: It has an unstable government and rules and regulations.
In the present situation, partnering is the most appropriate strategy for Michael Kor’s to enter in the foreign markets. It is the particularly beneficial strategy when the company is planning to enter a foreign market in which the both social and cultural differences are highly prominent. On the basis of 12 C’s framework, China is selected as the most suitable country for market expansion due to its infrastructure, suitable distribution channel, large market and capacity of the consumers to pay. However, the company has to make changes in its market mix to appeal to the local customers.
Product: As Chinese society is conservative and traditional, it is important to integrate the ethnic taste and culture while developing the clothes and apparels for the traditional customers (Wenderoth, 2009).
Price: As discussed, there is a large segment in the Chinese society who is willing to pay higher for valued products. However, inexpensive products lost their appeal to large section of society. It is important to determine the price of the products according to a specific strategy.
Promotion: The Chinese customers are different from their Western counterparts. Therefore, various advertisements popular in the USA and Europe might be perceived as confusing in China. It is important to develop a promotional strategy inspired by local culture.
Conclusion
Michael Kor’s has carved itself a distinct place in the fashion industry. Following the intent of expanding into international markets, the report has examined the current position of the company and potential markets, namely, China, India, Iran and Russia for future expansion. It has been evaluated in the report that China is the best market for the company, if changes are made in its marketing mix.
References
Applegate, E., & Johnsen, A. (2007). Cases in Advertising and Marketing Management: Real Situations for Tomorrow’s Managers. Rowman & Littlefield.
Dellloite. (2016). Doing business in Russia 2016. Retrieved December 9 2016 https://www2.deloitte.com/ru/en/pages/tax/articles/2016/doing-business-in-russia-2016.html
Dilys. (2014). Fashion and Politics. Centre for Sustanable Fashion. Retrieved December 9 2016 https://sustainable-fashion.com/blog/fashion-and-politics-a-multidimensional-relationship/
Duff, V. (2016). Important factors of competition in the Clothing Market. Retrieved December 9 2016 https://smallbusiness.chron.com/important-factors-competition-clothing-market-81643.html
(2016). Doing business in India. Retrieved December 9 2016 https://www.ey.com/in/en/services/tax/ey-doing-business-in-india-2013-14
Lutz, A. 2012. hy Michael Kors Is Having A Blockbuster Year. Business Insider. Retrieved December 9 2016 https://www.businessinsider.com/why-michael-kors-is-successful-2012-9?IR=T
Martin, M.J. (2016). What Contributes to the Fashion Industry’s Being So Competitive? Retrieved December 9 2016 https://smallbusiness.chron.com/contributes-fashion-industrys-being-competitive-23840.html
McKay, Z. (2012). The Ten Principles For Doing Business In China. Retrieved December 9 2016 https://www.forbes.com/sites/insead/2012/03/06/the-ten-principles-for-doing-business-in-china/#2118fa1a1176
Michael Kors. (2016). Michael Kors. Retrieved December 9 2016 https://www.michaelkors.com/
Michael Kors. 2016. Investors. Retrieved December 9 2016 https://investors.michaelkors.com/resources/supply-chain-disclosure/
Pahl, N., & Richter, A. (2009). Swot Analysis – Idea, Methodology and a Practical Approach. GRIN Verlag.
Porter, M.E. (2008). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Simon and Schuster.
Spivack, M. (2016). What to Know About Doing Business in Iran. Retrieved December 9 2016 https://hbr.org/2016/05/what-to-know-about-doing-business-in-iran
Wenderoth, M. (2009). Particularities in the Marketing Mix for Service Operations. GRIN Verlag.
Wiedemann, L. (2013). Business Strategies and Value Chain Management. Author House.
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