Country Evaluation & Market entry strategies
With respect to Fashion Industry in India
-By AMEYA DESHMANE
PGDM-RM-(54)

ACKNOWLEDGEMENT

I would like to thank Prof. Thomas Matthew for his valuable guidance and advice. He not only suggested the Country Evaluation & Market entry strategies for the project but also contributed to the various attributes to be added in order to make a successful report.

Index | Contents | Page number | 1 | Introduction | 4 | 2 | Country Evaluation | 5 | 3 | Market Entry Strategies- Definitions and Types | 7 | 4 | Joint Venture- Burberry India with Genesis Colors | 8 | 5 | Licensing- Tommy Hilfiger with Arvind VF | 9 | 6 | Franchising- Stuart Weitzman with Reliance Brands | 10 | 7 | Mergers & Acquisitions- LVMH & Gitanjali Jewels | 11 | 8 | Conclusion | 12 |

Introduction
International expansion for fashion companies presents an opportunity for the multinational companies to expand their growth. This may be due to an increase in the local or international competition in the domestic market for the company. In India the recent relaxation in the entry of FDI for single brand and multi brand retailing have prompted us to re-examine some of the market entry strategies that would be appropriate to enter into a country like India. For this purpose initially we will have to evaluate the market scenario in the country after which we will examine the various market entry modes which the companies in Fashion Industry have used to get into the country.

Country Evaluation
Before entering into a foreign country multinationals have to take into consideration many things which affect its operations in the foreign environment. Some of the tools which can be used to gauge the viability of the country-organisation fit are/ 1. PESTLE analysis:
A basic tool which the company uses before doing in depth research about the country-organization fit is the PESTLE analysis. PESTLE studies the Political, Economical, Socio-Cultural, Technological, Legal and Environmental scenario in the country. This gives the company a comprehensive overview of the innate things which directly affect a company’s existence in that particular country.
GENERAL FEATURES in PESTLE:
Economical, Environmental: The general features of a country include a study of the demand scenario in the country which includes Industry demand, Overall market size, growth rate, nature of demand i.e. Derived or Direct Demand, Regular or Seasonal (E.g: A winter wear fashion label would not have much use in the eastern western and southern parts of India), whether the demand is cyclic in nature. Also the Demand Trends would need to be studied. Price elasticity of demand would need to be determined; Substitutes would need to be analyzed. It is also necessary to know who the real consumers are especially for high end Brands. Purchase method of consumers is also another important facet which needs to be studied.
As for the product related studies factors which need to be studied are, Product Details Products and Their Characteristics, Trends in product – market structure 2. Investment Details :
For an MNC it is very important to determine what kind of finances would be required to set up shop in a new country the costs involved in doing so can be determined by studying the cost of entry and exit. Typical Asset Patterns in firms. Rate & Type of Depreciation of Assets, Role of Capital / Investment in success, Availability of Capital / Sourcing – Interest Cost/ Foreign Currency related aspects.

3. INDUSTRY ENVIRONMENT

A study of the industry scenario shows whether the industry is a Fragmented Industry an emerging industry or an industry undergoing a transition to maturity it also helps in analyzing whether the industry is declining.

A study of the Industry scenario will also give us knowledge on the number of players in the market and relative shares of the players. Also the nature of competition can be determined by studying the industry scenario whether the particular industry is a part of a Monopoly, Oligopoly, Perfect Competition or a mixture.

4. BARRIERS IN THE INDUSTRY: It is also necessary to determine whether there are any barriers to enter and operate in the country and if there are how they can be overcome. For this a study of Entry Barriers, Mobility Barriers, Exit Barriers, Shrinkage Barriers, Technology Barriers, Investment Barriers, Size Barriers and Gestation Barriers needs to be done

5. INDUSTRY ATTRACTIVENESS: Industry Potential: The Indian fashion industry is still in its infancy. When pondering its potential growth, experts point out that India is where Brazil was 15 or 20 years ago. They add that Brazilian designers are now gaining global recognition for their ability to serve both local and foreign markets well. The trick, however, is deciding who to create for and who to sell to. For Indian designers, the possibilities on either side of the equation are large. A domestic market with more than one billion potential clients, as well as an international market keen to see them combine traditional flare with Western commercial viability.

A study of the Forecasts Averages and Norms typical of the Industry would give a company a comprehensive view over how the industry is expected to grow. Also factors such as Relation of Life Cycle, Basic Determinants of Demand, Likely Future Pattern, Forces Shaping Competition, Production – Sales – Profitability – Technological Advancement is essential part of the evaluation.

6. COUNTRY’S APPROACH TOWARDS MNC’s
A country’s approach towards MNC’s is portrayed by its acceptance of concepts such as Globalization, Liberalization and Privatization which facilitate economic progress If the countries approach is healthy, countries which are hostile towards foreign players manage to drive away foreign investments.

Market Entry Strategies
A market entry strategy is the planned method of delivering goods or services to a new target market and distributing them there. While importing or exporting services it refers to establishing and managing contracts in a foreign country. There are several strategies which a company can opt for while entering into a foreign market. To enumerate a few
Joint Ventures
Licensing
Franchising
Contract Manufacturing
Counter Trade
Management Contract
Assembly Operations
Strategic Alliance
Fully Owned Manufacturing Facilities
Third Country Location
Mergers and Acquisitions
Since the subject chosen for study is with respect to fashion industry in India not all of the above strategies apply, Strategies are also explained with relevant examples from the Industry itself.

Joint Ventures
A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. There are other types of companies such as JV limited by guarantee, joint ventures limited by guarantee with partners holding shares.

Fashion Label Burberry which initially had entered India through a franchisee arrangement with Media Star Pvt Ltd terminated the franchise to enter into a joint venture with Indian company Genesis Colors. Sequoia-SVB Capital-Mayfield backed Genesis Colors picked a 49% stake in a joint venture with British luxury goods retailer Burberry to open stores in India. Both Genesis and Burberry brought in around Rs 16.5 crore each for the stake.

Licensing Licensing means renting or leasing of an intangible asset. It is a process of creating and managing contracts between the owner of a brand and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory. Licensing is used by brand owners to extend a trademark or character onto products of a completely different nature.

Tommy Hilfiger is one of the largest-selling apparel brands in the US, The $6-billion apparel giant Tommy Hilfiger Corporation has entered a strategic licensing agreement with the Ahmedabad-based Arvind group to market the Tommy Hilfiger brand in the country.

Franchising
Franchising is a mode of entry where the domestic company uses an Multinational corporations successful business model for operations in a foreign country.

Reliance brand has signed a long-term franchise agreement with Stuart Weitzman, Reliance Brands operates single-brand stores for famous foreign brands, likes Ermenegildo Zegna, Paul & Shark, Diesel, Quiksilver, Steve Madden, Kenneth Cole, Brooks Brothers and others.

Mergers and Acquisitions
Mergers and acquisitions are both an aspect of corporate strategy/finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or new location, without creating a subsidiary, other child, entity or using a joint venture. Mergers and acquisitions activity can be defined as a type of restructuring in that they result in some entity reorganization with the aim to provide growth or positive value.

Louis Vuitton Moet Hennessey, through its unit L Capital, acquired a minority stake in Gitanjali Gems. L Capital picked up stake using money from its $500 million L Capital Asia Fund, which was raised in 2010. Gitanjali was founded in India in 1966 as a single company specialized in cutting and polishing diamonds for the jewelry trade. The company integrates all operations, from rough diamond sourcing, cutting, polishing and distribution, and jewelry manufacture, to jewelry branding and retail, as well as global lifestyle brands, in India and abroad.

Conclusion
As studied above with the help of examples from the fashion industry we can say that various market entry strategies can be used as per their suitability to the countries environment determined through the country evaluation and also by the mode which is most convenient for the company.