Rahat continental is a business firm which is owned by an Indian family and established in 1986. This organization provides different solutions related to the supply chain. It is also the part of the global WCA Network and through this organization conducts its operations in more than 30 countries across the globe. Rahat generally make investments in such technology which adds value to their business and customers such as automated process, increase team work efficiency. This organization provides different services, and because of this wide portfolio of services there is rapid increase in the geographical coverage and systematic operations which helped them in establishing reputed business (Rahat, 2018).
Rahat decided to set new business venture in UK and in this new venture they decided to introduce e-commerce platform which sell organic cotton wear for infants (0-2 years) in UK. It must be noted that, international expansion of business is considered costly and complex procedure. Before taking such big move, it is necessary that organization must evaluate both internal and external factors (Lumen, n.d.).
Structure of this report is divided into three sections, and each section address different topic. First section provide detail strategic proposal for this new venture. Second section defines key business drivers related to this expansion, and trade barriers. This section also states ethical, social, legal and cross-cultural issues. Third section defines the e-commerce option versus other methods of expansion, aspects of international marketing, and Brexit impact on the venture. Lastly, paper is concluded with brief conclusion.
A strategic proposal is considered as guide which is related to the growth of the business, and this section states the strategic proposal for new business venture of Rahat (Lavinsky, 2013).
Vision of Rahat:
Vision statement of Rahat is to serve the customers and enhance their business. By using their global network and local expertise, Rahat intended to provide organic and best quality products to their customers. This not only improves competitiveness of their product but also help in growing their business.
Mission of Rahat:
To become global supplier of the infants clothing, and provide best organic cotton clothing for other children’s also.
Brief description of business:
Rahat intended to start new business venture in the UK, and in this they start e-commerce platform which sell organic cotton wear for infants (0-2 years) in the UK.
SWOT analysis:
SWOT stands for strength, weakness, opportunities, and threat. This part provides the SWOT analysis of kids wear clothing market in UK:
|
Particulars |
Detail |
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Strength |
Strength of this market includes product mix and quality of the product, services provided to the customers, sales channel, brand identity, loyal customer base, edited range, etc. It also includes premium pricing, early parental engagement, high demand, and strong wholesale presence (IBIS, 2017). |
|
Weakness |
Weakness of this market includes low bricks and motor visibility, Minimum promotions, rationality issues, range of the products are not well established, suitability of products to kids, reliability on few brands, etc. (Craik, 2015). |
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Opportunity |
It is predicted that this market show growth of 15.5% by 2019. It also includes direct competition in same locations which ultimately results in the increase in sales for all retailers and wholesalers (Dunbar, 2014). |
|
Threat |
Decreases in child benefits may put negative effects on spend driving sales for those retailers who are low priced. Some other threats are also there such as similar products, loss of suppliers to competitors, new entrants, etc. Existing competitors can also be considered as big threat for Rahat such as fat face, crew, etc. |
Rahat continental can expand their business in the UK after considering above stated SWOT analysis of kids wear market in the UK.
Goals:
Rahat continental has strong global network, and decision of organization to set new venture in the UK. Goals related to this new venture are stated below:
For the purpose of improving their e-commerce business Rahat frame following objectives:
Customer Targets:
Rahat mainly targets infant market (0-2years) in UK, and for this purpose they can provide different variety of cloths on the basis of seasons and occasions.
Industry analysis:
Higher inflation also affects child wear sector in the UK, and this also impose pressure on the retailers to engross high cost prices or take hit on margins. While taking decision of purchasing customers still give important to the quality of the product, and because of this retailers cannot compromise with the quality and the designs of the product (CISION, 2017).
Key business drivers:
As stated by the Bernadette Kissane, an analyst at euro monitor, global children’s market racked up the sales of €135.6 billion in 2015, up from €122.1 billion in 2010 because of the access of fashion in children’s clothing. Kids clothing only contributes for 12% in the whole apparel market. In last five years, growth in the children’s wear outperformed both the markets that are menswear and women’s wear. Year of 2015 witnessed 6% growth in the children’s wear sector, and both men’s and women’s markets grow only by 4%.
Demographic shifts are considered as major driver of the growth occurred in the Children’s Wear market. In 2014, birth rates in UK began to rise again. Parents in the UK and US also plan children’s later in their life, especially when they are able to spend more amount on bigger wardrobes for their children’s or when they are able to purchase popular and high brands.
Ambitious consumption of the middle class and the fast expansions of the international brands such as Adidas, Nike, H&M, etc. are considered as major drivers of growth. All these brands are top ten brands of the children’s wear sector, and because of this kids wear sector is considered as fastest-growing market across the globe. During the period of 2015, kids wear market of Asia Pacific was worth €44.1 billion, and it is estimated to reach €65.1 billion by 2020 (Abnett, 2016).
Kids wear market also experienced a level of polarization like the adult clothing market, and this provide benefit to both customer and designer, but it leaves the mid-tier players (specialist of kids wear) struggling for the purpose of regaining the lost share in the market. At higher levels, clothing of kids copy the designs of adult clothing, because parents want that their children’s must follow the trends and this increase the consumption (Business Wire, n.d.).
Trade barriers and protectionist policies:
Protectionist’s policies related to the trade is considered as thoughtful effort for the purpose of limiting the imports and encouraging exports, and this is done by increasing trade barriers. Protectionist is still widely practiced in UK (McGreal, 2017). These policies have number of disadvantages, and the most noteworthy disadvantage of this policy is the pressure imposed by these policies on the essential elements of the free trade. Some other disadvantages are also there, such as it provides support to those firms which give preference to those firms who are giving emphasis to the price over quality. It provides wrong security to the domestic firms and ignores the sources through which customers can get easy access to the particular products. Protectionism policies generally develop tariffs, duties, quotas and any other measures for the purpose of restricting importing goods (Economics Online, n.d.).
The UK is considered as important part of the EU and commercial policy which is regulated by the European commission. Generally, Department for International Trade (DIT) and HM Revenue and Customs (HMRC) deals with the issues related to the trade policy, regimes, and procedures which regulate imports in the UK. UK is an important part of the coordinated trade systems which is introduced by the EU, and in this context both importing and exporting are included in the regulations developed by EC.
It must be noted that, combined tariff of the UK is referred as ‘The Tariff’. Binding Tariff Information (BTI) system is created by the EC and this system is considered as tool which helps in obtaining the classification of tariff in context of import and export. Before shipping any goods, it is necessary to get written BTI customs duty ruling, and this ruling is given by the HM Revenue and Customs (HMRC).
Some non-tariff barriers are also there, and some of these barriers are stated below:
It is necessary to obtain import licenses for different items, such as agriculture products, plants, medicines, food, textiles, etc. It must be noted that requirement of license is based on the country of origin of the product (ATIC, n.d.).
When organization import kids wear, it is necessary for organization to comply with the particular quality requirements if these goods are sold to customers in the UK. Following regulations are applicable on the kids wear imported in UK:
Recommendations related to materials, design, and manufacturing guidelines are provided by the BSI British Standards Code of Practice (reference number BS 7907:2007), and this code is available for purchasing. These guidelines are provided for the purpose of encouraging the kids wear safety.
It must be noted that, as per the VAT rules in UK, maximum products related to children’s clothing enjoy reduced rate of 0% VAT in the UK, which means there is on VAT on these items. However, some exceptions are also there such as those business organizations which only sells zero-rated items must sell necessary requirements related to imports (Gov. UK, n.d.; Veldi & Cali, 2006).
Ethical, social and legal issues:
In this section we conduct PESTEL analysis of kids wear market in UK, and mainly discuss only three issues that are stated below:
Ethical issue: some organizations specifically stated that they are using organic products for manufacturing the kids wear, but in actual they are not using any such products. All these practices are considered as unethical. In UK, customers give preference to the quality and not to the price because of which it becomes necessary for the organizations to conduct such practices which are ethical in nature.
Economic Issue: there are number of factors which directly affect the kids wear market in UK, and these factors directly related to the current state of the economic environment. Those business organizations which use differentiated strategy in the UK as opposed to the cost leader strategy are able to deals with the UK economic environment and also get success (ISSU, n.d.).
Social issues: Numbers of social and cultural changes are occurring in the UK, and this directly affects the performance of the kids wear sellers in UK. The biggest issue in this context is diversion of culture. After the World War II, UK becomes the culturally diverse nation with an invasion of diverse cultures, races and ethnicities. All these factors contributed as cultural backdrop in the social system of UK.
Legal issues: like all other businesses, organizations who sells kids wear must complied with the legal obligations imposed on them such as Rahat must complied with the guidelines stated below:
Cross cultural issues:
There are number of cross-cultural issues in UK related to children’s clothing, and some of these are stated below:
Methods of expansion:
Electronic commerce or e-commerce is consider set of online business activities for products and services. It can be used for conducting any type of business transaction, and at this platform parties to the transaction interact electronically with each other instead of physical contact. In Europe, UK is the clear leader in e-commerce activities. In 2017, experts estimated US$110bn sales in UK through e-commerce transaction. For future, it is predicted that sales through e-commerce in UK show growth of 15% as compared to other Western European countries in the period of 2017-2021. Germany and France holds second and third position respectively in context of e-commerce sales, and it is estimated that Germany witnessed the growth of 11% to reach US$65bn in 2017, while sales in France will rise by 9% to US$42bn. This major driver of this growth is mobile commerce.
However, Nordic countries rare more mature in context of e-commerce transactions, and this is reflected through 10% increase in retail sales in Nordic countries through e-commerce. In UK, Germany, France, Italy and Spain e-commerce sales only contributed sales of 9% in average.
In rest of Europe there is slow growth in e-commerce, and sales related to e-commerce sales in Central and Eastern Europe will reach US$43bn in 2017, which is equal to just 4% of retail sales. Share of e-commerce in retail sales will continue to be low throughout the next five years reaching only 5% by 2021 (IPC, n.d.).
After considering these figures, it can be said that e-commerce platform is the best option for Rahat to expand its business in UK. However, some other methods of business expansion in UK are stated below:
Direct export- business organizations in UK take orders from the international customers and directly ship those orders to the international customers.
Selling through overseas- a distribution or agency contract is made with one or more intermediaries. In this both Distributors & agents purchase the stock for the purpose of meeting the local demand of customers. Generally, customers are owned by the distributor or agent in this method.
Operation at overseas- in this business organization establish physical stores at different locations in the target market. Initially, these stores are only sales office, and this based on the production facilities.
Joint venture or overseas business purchase- in this business organization can acquire or make investments in an existing business which is already operating in the existing market (Business, n.d.).
International marketing aspects:
This part states different aspects of international marketing which are appropriate for this new venture:
Supply and demand- supply and demand aspects is considered as most important element of international marketing and it play major role in trying to market the products manufactured by organization across the globe. In this company analyze deep analysis of potential markets for the purpose of selling products in right way and at right time. In this organization evaluates the demand of product in potential market and supply the product as per the demand (Anastasia, 2015).
Financial transactions- for the purpose of funding the products and services marketing offered by organization it is necessary to consider and evaluate different financial options. In those countries which are prosperous, it is normal that customers can buy goods internationally and make payment through credit cards, debit cards, online payment processors, etc. but this scenario is not same in every country. This type of option affects the marketing strategy of organizations. Therefore, financial aspects must be evaluated before expanding the business.
Laws- generally, every country frame few rules related to product advertisement and other marketing strategies. Business organizations must comply with these rules before framing marketing strategy.
Export research and planning- when organization decided to expand their business, they generally target those companies which are similar to their country in different aspects. Both India and UK are culturally diversified countries. Before expanding the business in an unfamiliar market, companies must prepare themselves in proper manner (Varghese, 2015).
Impact of Brexit:
On 23rd June 2016, referendum known as Brexit was introduced in which UK voted to leave the European. The residents of the UK decided to leave the benefits of unified monetary body for the purpose of getting the advantages of free movement of immigration.
Economy of UK witnessed the growth in the last three months of 2016, and this is stated in the official statement. As stated by Office for National Statistics (ONS), GDP of UK is increased by 0.7% up from 0.6%. This growth is the result of continuous efforts of manufacturing industry. Estimates of growth by ONS are cut down in 2016 to 1.8%, which is less than 2%. Some hints are there which state that Brexit hit the confidence of business organizations. ONS further stated that there is reduction in business investment which is fell by 1% as compared to previous reporting’s (Bowler, 2017).
Whether Brexit provide any benefit to the business will completely depends on the negotiations made by government in context of trade, access to high-skilled migration and other factors. Interest of business organizations are considered by the government while making those negotiations. Still there is uncertainty for business organizations (Market inspector, n.d.).
However, as stated by the experts Brexit supports the free trade and encourage international business. Therefore, there are chances that Brexit provide more opportunities to Rahat.
Conclusion:
After considering the above facts, it can be said that UK witness high growth in the child wear market in future and it provides different opportunities to the overseas business organizations. Global expansion is considered as costly and risky in nature, and for offsetting such cost and risk, it is necessary that organizations must develop strong and effective strategic plan. This strategic plan must focus on the three major areas that are global concentration, global synergies, and global strategic motivations.
This report provides detailed strategic proposal for new venture initiated by Rahat in Uk, and also defines key business drivers related to this expansion, trade barriers, ethical, social, legal and cross-cultural issues. It states e-commerce option versus other methods of expansion, aspects of international marketing, and Brexit impact on the venture.
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