Table of content:
Introduction:

I) Presentation of Caroll
a) Caroll and Vivarte
b) Historic of Caroll

II) The company’s mix marketing:
a) The product
b) The place
c) The price
d) The promotion

III) Chinese market audit - PESTEL analysis:
1) The political environment
2) The conomical environment
3) The social environment
a) Chinese cultural specificities
b) The chinese purchasing attitude
4) The legal environment

IV) The SWOT matrix
a) Strengths
b) Opportunities
c) Threats
d) Weaknesses

V) PORTER’s five Forces matrix:
a) Threat of new entrants
b) Power of supplier
c) Power of buyer
d) Treat of substitute
e) Industry rivalry

VI) The Boston Box

VII) The Ansoff matrix:

Conclusion:
References

Introduction:

In order to build a marketing plan properly we need to introduce the subject which is the expansion of Caroll in the Chinese middle class market. First it’s important to get to know the market we want to enter; PESTEL analysis will give us an overview of the particularities and difficulties of the Chinese environment we will have to overcome. We will then highlight the strengths and weaknesses of the company and point out the opportunities and threats we’re to meet. To do so we will use different tools matrixes -The Boston box, Ansoff matrix - and analysis schemes such as the marketing mix 4 P’s, SWOT and Porter 5 forces. These elements will help us to define properly the marketing strategy that matches with the Chinese expectations and our abilities.
We are beginning our essay with the presentation of the company and the most relevant facts.

I) Global presentation of Caroll:

a) Caroll and Vivarte:
Caroll Company was created in 1963 by Raphael Levy and Joseph Bigio. It was called “Les tricots Caroll”. It is in 1988 that Caroll became a subsidiary of the group Vivarte. This brand of fashion clothes specialized for women has changed completely its image and nowadays it represents one of the best successes company of the fashion retail.
b) Historic of Caroll :
This " succes story ", one of the most important in the world of the ready-to-wear market, which lasts for more almost a century is not the fruit of the fate. Caroll, it is a well anchored identity combined to a capacity of adaptation to the market and for all the women, a quality product which gathers comfort, elegance and femininity.
Its stitches, in particular the Shetland wool, are appreciated and available in more than 1000 retailers.
In the 1970s the company grows and its market shares also. At the time company’s niche was knitwear only, more specifically Shetland woollens. It was a runaway success with up to 1000 outlets.
In the 1980s, both accomplices launch a collection of ready-to-wear clothing and it is in this period when the first franchised shops are born in the hexagon. Accessories make their entrance and Caroll shops are crowded.
In 1984, Caroll launches an IPO under the name of Caroll International.
After the entry of the Group André ( Vivarte) in 1988, the brand launches "Caroll Paris" in 1994.
Once the network totally developed in France, Caroll, directs its international expansion by multiplying through the globe shops, memberships, franchising and its places in department stores. The brand totalizes today more than 300 shops of which a hundred abroad.

In the 2000s, it is the democratization of the luxury " by Caroll ". The quality of their products and services, the design of the shops which is particularly pleasant gives an impression of refinement and enhance loyalty from its client.

II) Caroll’s Mix Marketing:

a) Product:
Caroll differs from its competitors thanks to the quality of the material used to make their clothing and their unusual but fashion style which is modern and classic at the same time, this is characteristic of the brand. The target market is the women from 30 to 60 years, who earn their living and are independent , clothes are quiet discreet and that’s the reason of their success, indeed, brand has been competitive for almost half a century. Another good point for Caroll is that their collection is narrow, only a few models of dresses, pullovers and trousers are available and one model of shoe, handbag and belt for the 2011 fall-winter collection, definitely carolL’s product are rare and prized.
b) The place:
Nowadays Caroll has 350 franchises in the world among 203 are in France, always in important cities, nice and wealthy areas. The reputation of the brand is bound to the place they sell their products. Moreover Caroll usually settles in the center of the cities in order to reach their medium-high women target easier. Besides, Caroll is implanted in many other countries as Japan, Spain, Lebanon, Reunion and Martinique islands (France), Switzerland and Portugal, always in the best areas or in fashion malls. The inside of the shops are spacious, clothes are individually hung, the decoration is elegant and sober. Shops are al franchises and have a modern retro style which is fashion nowadays and enjoyable for a working woman, assertive, who likes fashion but is not a victim of it.
c) The Price:
Caroll aims to position in the market as a medium upper class clothing company which is different from the low quality, high volume of sales as Pimkie, H&M, Etam, Jennifer and the luxury brands which are Dior, Chanel, Kenzo...
Actually the price is reasonable and the quality is good, this is very appreciated by the customers of Caroll and buying is always a pleasure because they find what they expect. Of course it’s advantageous for the brand who manages to attract their customer and make them loyal thanks to the image of classical but sexy woman they broadcast.
d) The promotion:
Caroll uses mostly female magazines such as “Femme actuelle”, “Marie-Claire”, “Madame Figaro”, “Elle” to promote its brand. These magazines target women from 20-60 and deals with lots of topics that women feel concerned so it’s a nice shot for Caroll. Caroll also communicate through it’s internet website where they explain the philosophy of the brand , clearly addressed to young executives women. Moreover, they invite customers to special events where they can assist to a show with models dressed with new clothes and also buy the new collection in advance. This is the most common tool used by fashion brands to develop loyalty from customers; actually it is the most important factor in this sector.
III) The Chinese market audit:

The analysis of Caroll’s strategy to enter the Chinese middle market requires to focus on several aspect of the future company’s environment, to do so we will use the PESTEL analysis.
1) The political environment:
As we know China is a communist country which has opened its frontiers to the international business. However it’s still a narrow-minded country due to a millennium history culture. Thus, the government is well known for its lack of freedom of speech, protectionism, social inequalities…
In spite of being a major partner for every country in the world, it’s also risky and unethical country who adopted unfair rules in order to deter non-Chinese companies to settle.
2) The Economical environment:
China is the largest world exporter country, and the second world biggest economy (recently overtaken japan’s).
In 2000, China represented 7,1 % of the world’s total GDP. By 2015 China will have a 19% share of global GDP. However, according to the World Bank data, China ranks at 119 in terms of average income (per capita).Wages costs are now rising in China, a 5 year plan aims to achieve doubling wages from 2011-2015 and foreign based companies will have to pay more. This might be good news for Caroll, still Food and living costs are also expected to increase.
During the past few years Chinese population has moved from the countries to big cities and international experts says it’s only the beginning, these working consumers are climbing the ladder and becoming massive middle class consumers which is a very good for Caroll’s business. Source: National Bureau of Statistic of China : Mc Kinsey global institute analysis 3) The social environment:
Social environment is maybe the most important factor in order to succeed in running a business in such a different country.
Chinese cultural specificities:
Asian cultures are sometimes difficult to understand, and communicating with Chinese is not an easy task. That’s why it’s preferable to deal with a native person who also knows the western cultures. What’s more relationship with the authorities is very useful and sometimes the only way to do business. Actually foreign companies are not always welcomed in the country especially if they are competing with the Chinese industry flagship: textile
a) The Chinese purchasing attitude:
Of course China with its 1,3 billion of inhabitant among 50% are less than 30 year old is a tremendous market for Caroll, however many of them live in countries and other cannot afford these kind of consuming goods.
One of the issues that Caroll will have to face is the high rate of Chinese household’s savings. Source: National Bureau of Statistics (Flow of Funds data).

Chinese households save a large share of their disposable incomes and their average saving rate has increased over the last decade and a half. This pattern is particularly pronounced for urban households, which account for about two-thirds of national income. After remaining relatively flat during the early 1990s, the average saving rate of urban households relative to their disposable incomes rose from 18% in 1995 to nearly 29% in 2009. This situation is getting better thanks to the economy reinvigoration and the unemployment rate that has decreased since 2009. Nevertheless, according to Artiff Gill an analyst of “Kurton Salmon”, a global management consulting firm specializing in the retail, consumer goods and health care sectors says that only 15% of China's walk-in browsers usually end up making a purchase, compared with about 30% to 35% of shoppers in Europe and the U.S.

It’s important but difficult to make the Chinese change the way they consume, it’s going to be a gradual change that has to be achieved by a proper promotion and communication. However a recent survey shows that Chinese are concerned about the quality of the products they buy specially clothes. Actually Chinese attach importance to the way they dress because it’s a proof of wealth, besides rich Chinese love wearing French “haute couture” garments, by the way many luxus French designer such as Dior, Chanel, Hermes have settled in China and make design items for Chinese customers.
China has a high potential as we can see on exhibit 1, almost 50% of the urban population will belong to the low middle class category by 2015 and 21% will be considered as upper middle class population. Therefore Caroll’s decision to enter the middle market is a strategic choice.

4) The Legal environment:
China is well known for its protectionist laws that favor national companies to win contracts (request by proposal) by being very punctilious or by voting last minute laws that prevent companies from issuing a request for proposal or by asking very complicate administrative forms for foreign companies. This situation has gotten worse since the economic crisis because the government fears for the unemployment. It’s sometimes an obligation for the companies to hire Chinese consultant experts at national and local level to provide enough information in order to access the market and even so, you never sure the government won’t adopt more coercive measures (as tax rising) from day to day and make your business less profitable. Thereof it’s a risky investment for Caroll which will have to take this issue into account.

IV) The SWOT analysis:
Based on the information that we have stated above, we are going to summarize it in a SWOT analysis:

a) The strengths:
-Caroll is well developed and notorious in France
-Has a previous experience in foreign countries (Spain, Portugal, Switzerland and especially Japan which is sharing some particular aspects with the chinese one).
-Caroll makes good quality clothes regarding to some of its competitors.
-Caroll belongs to Vivarte group which is a guarantee for corporate banking establishments; it may also be valued by the Chinese customer.
-Caroll has half a century of experience in the business and may adapt easier to changing environment

b) The Opportunities:
-China has a fast growing middle class, a huge potential market to grab for Caroll.
-Women are also more attracted by fashion than before and tend to claim their autonomous status.
-Chinese love “French couture”, plus it’s a way to express one’s social class belonging.
-As we explained before more and more rural Chinese are moving to big cities, a bargain for Caroll.
-Only a few Western brands that target middle market have settled in China; the penetration rate in still low.
-The quality of the clothe Chinese do is improving.
-The workforce is still low cost in China.

c) The Weaknesses:
-Vivarte group owns Caroll among other fashion brands whose target is similar, this situation may create cannibalism.
-Caroll only produces female clothing unlike some competitors (Zara)
-The target of Caroll is the women from their 30’s, with an acceptable education and professional background who have an appeal for classical clothes. Maybe Caroll should broaden its target.

d) The Threats:
-Main threat comes from counterfeited items which erodes the image of the brand. In this case it would be so easy and quick to sell fakes, as a consequence, middle class buyer wouldn’t even buy Caroll’ products because of the confusion it could create between the real and the fake, it would be a disaster.
-Government protectionism makes the company invest more (hiring experts, spending time with partners and suppliers to gain there confidence, paying more taxes…) and taking more risks.
-Difficulty for a foreign company to enter the market (especially in Asian culture) if no relationship.
-Corruption and bribery make the business uncompetitive for big companies that refuse blackmail.
-In China one of two inhabitants is less than 30, so Caroll should also aim very young teens otherwise it loses a huge market.
-Caroll will have to adapt the products to Chinese morphology (smaller) but also the communication, it has to seduce Chinese and have a clear message.
- Threat may also come from competition, Chinese are also proud of their brands and they have the ability to make the same garments at a lower price.
V) Porter’s five forces strategy: Source: http://notesdesk.com/notes/strategy/porters-five-forces-model-porters-model/
a) The new entrants
The increasing purchasing power of Chinese lead lots of business to launch brands adapted to this population. Bessides since China entered the OMC in 2001, the Chinese government put several measures in place to favour investments and make implementation easier. Access to distribution channel is for instance simplified.
New business lead by Chinese people is definitely a huge threat. Chinese are masters in the art of copying and improving their copy and even overpass the originals, especially if we talk about clothes’ industry. If somebody produces Caroll’s products counterfeit items it could damage the company’s reputation. In China, it is very difficult to protect against this problem regarding the legislation
The most important barrier that remains is the cultural barrier and adopting quickly tricks to bridge the gap of cultures is a key success factor. That’s why, to me, this is essential that Caroll build a network in China with Chinese people who have the qualifications to understand business both in China and Europe. I believe the manager should have the ability to switch from one culture to another in order to fit the market without having to disavow the facts and believes that makes Caroll’s organizational culture.

b) The power of supplier:
Actually, competition is becoming more and more intense in China, suppliers can chose to supply one or another company. Actually, Caroll as a new entrant will have to order a large quantity to have a weight and be able to negotiate prices, and other conditions of the deals. However it’s not all, in China relationship is very important, and creating a special feeling between Caroll and its suppliers may take a long time.

c) The power of buyer:
Caroll wants to enter the Chinese market to reach the middle class population, the market is big but there are also many competitors out there including European competitors such as Zara which are doing good quality products and are already settled for a long time in China (2004 for Zara). Fortunately Caroll will benefit of a French brand image, very appreciated in the country, this added value is a considerable edge for the company.

d) Threats of substitute:
China is the country of textile, thus there are many opportunities to sell clothing. Chinese are very concerned about price and they may chose internet to purchase their clothes in order to make a discount. What’s more on the one hand low middle class population are more likely to buy poorer quality clothing much cheaper, on the other hand upper middle class Chinese might buy “Haute couture” clothing such as Armani, Versace, Boss, Dior… very appreciated in China.
e) The industry rivalry:
The textile industry is one of the more competitive because it’s very easy to enter, especially when we are talking about the China. Caroll is to face very well-known and appreciated companies when tackling the Chinese market. In my opinion its best rival will be the Inditex group owning Zara, Massimo Duti…
Zara is very implanted in china since 2004 and achieved a achieved a prestigious positioning in the market, close to Hugo boss and Giorgio Armani. It’s strategy is a very rare communication and few promotional campaigns and above all, very nice and expensive places (close to famous Italian and French best designers as Gucci and Louis Vuitton) in the most important cities, it’s a very smart idea. Zara has opened 75 shops in the coutry last year and plans to open 120 additional, the firm is now present in 42 cities, (30 in 2010). Plus, in 2011 the designer is to open 500 shops among half in Asia.
Other brands are potential threats for Caroll, as H&M (Swedish) or Etam the French designer which benefit of long time experience in china and maintains first class relationships with their suppliers. The problem is that even though H&M and Zara are not direct competitors in France because they target younger people than Caroll’s, in China there position may vary a little bit due to the perception of the product or the decision of the company to target younger women, as a result competitors may become a serious threat and Caroll could be asphyxiated.

VI) The Boston Box:

Star products: Stars are products in the growth phase but not necessarily highly profitable. The Star products of Caroll are accessories and jewellery, it’s a quiet recent but growing activity. Bags, belts, necklaces are affordable products that women buy more often when times are difficult.
The cash cow: market growth slows down, products with high market share. The cash cows product of the brand are definitely shirts and trousers which do not high yield products but are sold in big quantities and are profitable for the company.
Question mark products: These products are growing highly but have a relatively low market share. These products are usually new collection clothes, if these products meet the expected success they will become star products otherwise they will become dogs.

VII) The Ansoff Matrix:

Market penetration strategy

Well implanted in European markets
-Succeeding with accessories and clothes
-maintaining average market shares Product development strategy

Market development strategy:
-Expand market to Chinese market
-Target new segments in China Diversification
Adapt products & stores to Chinese demand
-Differentiation to the competition

In the Ansoff Matrix, we can analyze the strategies applied by Caroll. We can clearly define that Caroll moved from a market penetration strategy to a market development strategy. In fact, the brand is established in many countries around the world, and the strategy consists in developing the same products in a new market also known as market development. However, Caroll will probably have to slightly modify some products to suit and fit specific Chinese demand; in this case it would be a diversification strategy.
It’s important to remind that in the textile sector it’s not advisable to change radically the line of products because it may damage the brand image and create confusion in the customer’s mind.

CONCLUSION:

The Chinese middle class market is skyrocketing in China, what a wonderful opportunity for Caroll. Unfortunately the environment is repellent, Chinese regime is very procedural, protectionist and corrupted. In addition, China has a very different culture compared to the westerns and doing business is very often a source of misunderstanding. Caroll should hire managers who can deal with both cultures, In China the franchise business model seems to be unviable. Moreover, competitors such as Zara are very well settled in China and already benefit of relationships with providers, and the local state representatives which is helpful. Caroll will have to make big efforts to attract customers and develop loyalty even though the French touch is tremendous competitive advantage. Caroll objective is increase its turnover keeping the values such as quality that made its reputation.

References:

http://www.lemonde.fr/economie/article/2007/08/06/pret-a-porter-les-marques-europeennes-a-l-assaut-de-la-chine_942267_3234.html http://www.caroll.com/ http://www.creadersnet.com/newsViewer_english.php?id=667353 http://www.franchise-magazine.com/annuaire/caroll-226.html http://tutor2u.net/blog/files/Revision_China_Effect_2011.pdf http://www.siboni.net/resources/China$27s+Middle+Class.pdf http://www.france24.com/fr/20110305-protectionnisme-chine-commerce-international-marche http://en.ec.com.cn/article/newsroom/newsroomindustry/201104/1135394_1.html http://www.lefigaro.fr/societes/2011/03/23/04015-20110323ARTFIG00784-zara-dope-par-son-expansion-en-asie.php
http://www.lsa-conso.fr/h-m-sur-les-traces-de-zara-en-chine,54828