Michael Kors PEST and SWOT Analysis

A brief Overview of Michael Kors
Michael Kors
Holdings Limited has been regarded as one of the leading brand in the luxury
fashion industry of America. The company was established by designer Michael
Kors in 1981 and the product mix includes the hand bags, watches, footwear, apparel, jewelley, leather
goods and other accessories. Michael Kors is operating more than 550
stores and over 1500 in-store boutiques in different countries across the world
(Michael Kors, 2018).

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Although the
Michael Kors started its operations in 1981 but they opened their first retail
store in 2006. The main competitors of the Michal Kors include Louis Vuitton,
Kate Spade and Coach. The hand bags and accessories are most popular among
teenaged girls all over the world as per the survey of 2016. The company has
focused more on sustainability and corporate social responsibility since the
last year and announced that the company will no longer use animal skin and fur
in the manufacturing and production of any of their products.
The existing markets of Michael Kors include United
States, North America, Asia Pacific, Europe, Germany, Italy, France, Middle
East countries including Dubai, Bahrain and some Asia Pacific Countries.
Besides that, Michael Kors has online presence in many countries where they
don’t have any physical stores. The largest geographical
market of Michael Kors is North America and then Europe and Asia Pacific.
In 2017, in order
to increase their market share, the company acquire the business of Jimmy Choo
PLC and they have also plans to expand their business in some other regions of
the world. Moreover, they opened a store in Waterloo in 2018 in order to expand
their presence in the international market.
The Emerging Market for Entering
For the luxury
fashion and retail industry, Asia Pacific is considered as the most attracting
region that provides numerous opportunities to the fashion retailers.
Similarly, Michael Kors has witnessed remarkable increase in the retail value
sales by implementing their expansion strategy in this region. In the year
2017, the retail value sales of Michael Kors Holdings Ltd were 9% of the total
sales of the company. By keeping this thing mind, the company expanded its
international business operations by using different mergers and acquisitions
strategies. For instance, in Greater China regions such as Taiwan, Macau, Hong
Kong and China, they expand through acquisition of its geographic licensees.
Besides that, they have recently acquired some businesses in North Korea
(Almor, 2013).
On other hand, the
company is facing some serious challenges in the North America as their sales
was less than their previous fiscal year. These challenges make it difficult
for the Michael Kors to acquire or expand more business in the region because
it requires a lot of efforts for the company to rebuild their brand reputation
and sustain long term growth in the United States.
By doing through
analysis of the markets in which Michael Kors is operating, the assignment
suggests that India would be the best region for Michael Kors for expanding
their business as people are becoming more aware of the brands and they are
agreed to pay higher prices for luxury fashion brands as well. Therefore, the
report chooses India for expanding the business of Michael Kors as it is an
emerging market in the retail fashion industry and there is a need to expand
business of the company in this region (Barney, 2014).
In order to check
the feasibility of expanding business in India, an analysis of the macro and
micro environment will be conducted and the best strategies will be recommended
on the basis of that. Under the macro environment analysis, the effect of some
factors like Political, Economic, Social and Technological will be analyses
whereas the micro environment analysis includes the impact of consumers,
suppliers, distributors etc. on the growth of the business.
Macro Environment (PEST)
When expanding internationally, firms usually face new political, legal, social and cultural environments. Consequently, foreign operations have many characteristics that are distinct from domestic operations. Facing a new environment in a foreign country, a firm may feel an uncertainty that may negatively affect its operations in that country, and, to reduce the uncertainty that stems from its foreign operations, may act cautiously in its international expansion process. As noted above, the incremental model also argues that firms develop their international operations gradually over time because firms lack sufficient knowledge about foreign market conditions, and international expansion may require a time-consuming accumulation of foreign market knowledge.

India
is a democratic country and the political environment of the country is greatly
influenced by the government’s rules and regulations, policies and different
ideologies. Government has imposed different types of taxes such as the income
tax, sales tax and service tax and it can be said that the India has a
well-developed taxation system. The government encouraged the international
companies to start their business in the country.

India
has a stable economy and its GDP is increasing with each passing year due to
different policies of industrial reforms. India’s economic environment has
achieved tremendous growth since past few years due to various factors such as
liberalization and business reforms. A constant improvement has been witnessed
in the past few years.

Social
factors play an important role in the fashion and retail industry; however, the
social factors of India are suitable for the business operations of Michael
Kors. There is a flexibility and adaptability in the attitudes, behavior and
culture of the people in India. Moreover, the disposable income of people is also increasing due to
which they are attracting towards luxury fashion brands.

Technology highly impacts the product
development and manufacturing processes of an organization. Besides that, it
also enables the companies to introduce latest cost cutting processes (Barney,
2014). India has high level of technological advancement as it possesses one of
the strongest IT sectors in the world. The country promotes developments within
IT sector, software updates and other technological advancements that enables
the international companies to start their business easily.
Micro Environment (SWOT)
The micro environment of a company is affected by different factors such as suppliers, employees, customers and some others. In order to assess the micro environment, SWOT analysis (strengths, weaknesses, threats and opportunities) is conducted to identify the current situation of the luxury fashion industry in India.
The luxury fashion industry of India is booming rapidly
as different fashion brands including Kate Spade, Calvin Klein, louis Vuitton,
Hermes and Gucci have opened their stores in big cities of the country and
people are inclines towards buying luxury fashion products. The retail industry
of India is growing at the rate of 40% every year and its estimated worth is
$200 million. Besides that, it has been estimated in a marketing report that
the Indian luxury fashion goods market was worth around $3.4 billion in 2016
(Quartz India, 2018).
The threat in the Indian luxury fashion industry is not
very high because very few international brands have opened their stores in the
country. However, it is good opportunity for Michael Kors to open their stores
at different cities of the country and also make their digital presence strong
because the trend of online shopping is also increasing among consumers in
India. Moreover, some of the considerable threats and challenges that may face
by some international brands for market entry includes growing market of
counterfeits, rental costs, high tax rates and lack of suitable infrastructure
in the country (Economic Times, 2018).
Target Audience of Michael Kors in India
Basically, the
target market of Michael Kors is both men and women under the age of 25-54
years with annual income above $50, 000 (Business Wire, 2013). However, the
teenage girls and boys also use the luxury products of Michael Kors; the
handbags and shoes are widely popular among young girls all over the world. For
the long term growth and marketing strategy, Michael Kors target young
customers who overlooked by luxury brands and having affluent demographics (Almor
(2013). Similarly, they can target the same segment of the market for their
products as the youth population of India is highly energetic, working and
spend more on luxury goods market.
Most Appropriate Entry Mode
For entering into
a new market, Michael Kors always uses the innovative approach for which it is
also termed as an omni-channel retail (Nasdaq, 2018). For expanding its
business in India, purchasing Liscece has suggested as the most appropriate
approach. The licensee may find that the cost of the agreement is less than if
the development were accomplished internally. From the licensor’s point of
view, the use of a licensing agreement might be a feasible option because risks
associated with operating facilities and holding inventories can be reduced. However,
the licensor may face fundamental problems and certain risks. By transferring
rights to the licensee, the licensor undoubtedly loses a measure of control
over the asset. The licensor also risks developing a future competitor after
the licensing agreement expires (Hoffman et al., 2016). Even before an
agreement is terminated, the licensor may have to compete with the licensee
because the licensee has made improvements on the licensed technology that make
the original patents obsolete.
In the process of
international expansion, firms usually begin with exporting and then come to
directly manage foreign operations through FDI. Investigating international
expansion within a specific operational form only, both the export development
models and the FDI development models fail to view export or FDI as part of a
firm’s overall choices among diverse operational forms. Given the limitations
of the export development models and the FDI development models, attention must
be paid to the whole process of internationalization that a firm may implement
over time, and in particular to the incremental model (Autio et al., 2011).       
A substantial
amount of research investigating firm internationalization has focused on the
exporting activity of firms. The exporting development models explain how firms
change their exporting operations over time. When engaged in exporting, firms
may face uncertainty due to lack of information on foreign markets and
operations. Such uncertainty is greater for firms at initial export stages when
firms usually have limited knowledge about not only exporting itself but also
foreign market characteristics (Frasquet et al., 2018).
Firms at initial
export stages thus enter li foreign markets via indirect export methods, such
as export merchants, trading companies, resident buyers, or export agents. As
firms gain more experience and knowledge, their level of uncertainty about the
export market gradually diminishes (Al‐Aali & Teece, (2014). Firms at
advanced stages thus come to use direct export methods, such as agents,
distributors, and sales branches. The models identify major facilitators and
inhibitors in the export development process. The pattern of firm behaviors in
the export development process depends largely on the type and amount of
organizational resources available for export expansion (Aversa et al., 2018).
Firms in more advanced stages need to commit more organizational resources to
their expansion efforts. Organizational resources thus either facilitate or
inhibit export expansion. Foreign market experience also facilitates or
inhibits foreign expansion because it determines the level of uncertainty firms
face.
The effect of foreign market uncertainty on
incremental expansion is expected to vary from firm to firm, moderated by
variables at the firm, industry, and host country levels. The amount of
resources available to a firm may affect its international expansion process.
They also argue that firms strive to minimize the risks. As other researchers
maintain, variations in international expansion can be explained, to a
significant extent, by organizational and management characteristics. Thus,
variation in firm resources and risk-taking orientation may affect a firm’s
propensity to undertake incremental international expansion (Vicari, 2016).
The Product Mix
The product mix of the Michael Kors includes hand bags, shoes, accessories, jewelry, watches and other accessories for men and women both. The company do not need to change its product mix while entering into India because people in India are trendy and acceptancy is higher among them. Moreover, hand bags of Michael Kors are more popular among teen age girls all over the world so they can also same product mix to people in India with some affordable prices (Ritala et al., 2014). The response of young people in India is fast and quick towards changing fashion habits and retail trends.
References
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