Introducing Victoria’s Secret in France

By:

Kaitlin McDonald
Rachel Pelkey
Milena Peneva

Prepared for the partial fulfillments for the requirements for:
IBMK-421-AE International Marketing
Spring 2010

Table of Contents:

Executive Summary
Company Overview
Assessment of Domestic Business Climate
Purchasing Power Related
Macro Level:
GDP Related
Sector & Industry Distribution
Unit Level:
GDP Related (per capita)
Consumption Expenditure
Budget Allocation
French Buying Decisions
Industry Specific Outlook: Lingerie and France
Overview
Buying Preferences
Market Size Related: Population
Growth Rate
Age Distribution
Birth Rate
Sex Ratio
Urbanization
Migration Rates and Patterns
Management of Economy
Fiscal Policy:
Government Budget and Debt
Taxation
Monetary Policy:
Inflation
Assessment of International Business Climate
Exported Related
Imported Related
Government Policies toward Imports
Foreign Direct Investment (FDI)
Volume – Inflows and Outflows
Trends
Sectorial Distribution
Government Policy toward FDI
Balance of Payment
Current Account
Capital Account
Official Reserve Position
External Debt/ Debt Service Ratios
Membership in International Organizations
Demand Forecasting
Entry Strategy
Marketing Mix Strategies
Product
Channels
Promotion
Pricing
Financial Outcome

Executive Summary

With a primarily American market penetration, Victoria’s Secret has vas opportunity to go abroad. In 2011, the Victoria’s Secret brand will enter France, the largest Western European country. It is a prime location for opening a store and introducing a brand for several reasons. It is among the least restrictive nations for foreign direct investment and import requirements. France is also a very lucrative location for lingerie products because of its acceptance and openness of sexuality. There is great opportunity in the lingerie market in France with almost 14 million potential customers for Victoria’s Secret ranging from ages 15-34. Though there are already many lingerie brands in France, the Victoria’s Secret brand stands out from the rest. Competitors of Victoria’s Secret in France are Sara Lee, BodyOne, La Perla, and Triumph International. Victoria’s Secret will be strategically priced to fall in the middle of these brands but continue to produce quality lingerie products. The brand will be sold solely in the Victoria’s Secret store in Paris, unlike many of the competitors who are sold in department stores. The lingerie products will be exported from the U.S. into France, cutting back on production costs. The marketing strategy will target women 15-34 who want quality lingerie products at a reasonable price. They will be able to visit the first store in Paris, or through the catalog and Victoria’s Secret France website. The Paris store will only hold lingerie products, not the entire Victoria’s Secret line including pajamas, loungewear and beauty products. Advertising to promote the brand new to French women will appear on Parisian television stations, popular gossip and fashion magazines, and on outdoor locations. With these marketing strategies, we expect .5% market share and a sales forecast of 67,500 customers per day through the Paris store, catalog, and Victoria’s Secret online shopping websites.

Product/Country Choice:
Victoria’s Secret has had huge success with its stores in the United States and a few other international locations including Canada. With the fifth largest economy in the world and located in an ideal location in the center of Western Europe, we have decided to introduce Victoria’s Secret into France. Victoria’s Secret currently does not have any locations in France. We will not bring the entire line of Victoria’s Secret, only the lingerie. Although this is still a fairly broad product line, none of the swimwear, clothing or sleepwear will be sold in the Victoria’s Secret France.

Company Overview
Victoria’s Secret: History and Success in the United States

Victoria's Secret was established in San Francisco during the early 1970's by Roy Raymond. The original concept was to establish an inviting retail atmosphere similar to that of a victorian boudouir. Victoria's Secret Lingerie grew to include three stores and a catalog business by 1982, when it was acquired by Limited Brands. Today, Victoria’s Secret is one of the most recognizable retailers of lingerie, consisting of traditional Victoria’s Secret Stores, Victoria’s Secret Direct catalogue and website, and Victoria’s Secret Beauty (makeup and body products). Victoria’s Secret has also become known for their Victoria’s Secret Angels, their over the top fashion shows, and their aggressively sexy advertising. Victoria’s Secret has become the most recognizable intimate apparel brand in the United States, combining mass market penetration with prestige products. It holds 15% of the $12 billion lingerie market, and 20% of the $4.5 billion bra market. What was once an underwear company, Victoria’s Secret has branched into clothing, footwear, swimwear, and extended new lines; Victoria’s Secret Pink being their most successful launch.
In 2009, the brand opened several foreign stores. Beauty shops were launched in high-traffic and tourist-driven foreign markets and at the airports. Outside the US Victoria’s Secret is currently available only in select global locations. Stores opened at the airports in Buenos Aries, Argentina, San Paulo, Brazil, Dubai, Barbados and Mexico City.
An average Victoria’s Secret bra is priced in the $20-$30 range, which is more than the generic bras sold in department stores, yet less than boutique level lingerie stores like La Perla.
In 2010, Victoria’s Secret had 1,040 stores operating, with 100 independent Victoria’s Secret Beauty Stores in the United States. In 2006, their total sales surpassed $5 billion. Victoria's Secret also mails out more than 400 million of its catalogs per year.

Assessment of Domestic Business Climate

1. Purchasing Power Related

Macro Level

GDP Related:
France has one of the largest economies in the world as illustrated by table 1, ranked fifth in the world with a gross domestic profit of 2.634 trillion dollars ($2.112 trillion, when adjusted by the purchasing power parity) in 2009. Gross domestic product (GDP) is the standard measure of the value of the goods and services produced by a country during a period. With the size of its GDP, France is one of the more economically developed countries. The GPD also affects the attitudes towards foreign business activities, and the demand for goods and the entire marketing climate within the country. It is important to note that France’s GDP and other economic indicators did decrease in 2009, after positive growth since 2004. This we attribute to the recent recession which has affected many countries, including France. Therefore, we are cognizant of this decline, yet still believe the overall climate will be favorable for us.

|Table 1: Economic Outlook, GDP Related |
| |

Sector & Industry Distribution:
The French labor force is ranked 20th, with a size of 27.99 million in 2009 and an unemployment rate of 9.7% in 2008. The overall industry breakdown of France is as follows: 3.8% agriculture, 24.3% industry and 71.8% service.

Unit Level:

GDP Related (per capita):

|Table 3: Consumption Expenditure |
| |

Looking at the French economy on a unit level also reveals a strong economic outlook, as illustrated by Table 2. With a GPD per capita of $42,091 in 2009, France ranks respectively in the 36 slot compared to other countries. Per capita GDP is a broad indicator of economic living standards, and directly relates to the overall economic outlook of a country.

|Table 2: Economic Outlook, Per Capita |
| |
|Category | |
|Foodstuffs and non-alcoholic drinks |10.5% |
|Alcoholic drinks, tobacco and narcotics |2.3% |
|Clothes and footwear |3.6% |
|Accommodation, water, electricity, gas and other kinds of |19.4% |
|fuel | |
|Furnishings, household fittings and everyday household |4.6% |
|maintenance | |
|Health |2.6% |
|Transport |11.3% |
|Communications |2.2% |
|Leisure and culture |7.2% |
|Education |0.6% |
|Hotels, cafés and restaurants |4.8% |
|Other goods and services |8.6% |
|Source: INSEE (French Institute of Statistics and Economic Studies) |

French Buying Decisions:

The French purchasing process has evolved in recent years. Where price was once the key element in the French consumer’s buying process, quality has begun to replace it, according to the French Consumer Institute. There has been a shift towards favoring quality label and marks, over price-focused shopping. Also, France tends to be a country in which buying equals pleasure, with the French consumer usually being more impulsive and making frequent purchases. With regards to foodstuff, the French generally prefer to buy domestically.
As far as the apparel market, the attitudes tend to be the same. Labels and quality brand names are highly valued. Shoppers’ perceptions of a particular store or brand are incredibly important.
Who makes purchasing decisions has also evolved. Where the male head of household made the majority or buying decisions fifty years ago, a transition to more equal power among the sexes has come about. Nowadays, females of all ages have significant buying power in France.

Industry Specific Outlook: Lingerie and France

Overview:

The lingerie industry in France, as of 2008, was valued at $3.1 billion USD, with a projected growth of 0.8% over the next five years. French consumers spend $17.4 billion a year on clothing, with women spending approximately 20% of their clothing budget on intimate apparel. On average, French women will purchase five pairs of underwear and two bras per year, and new pajamas or nightwear every nineteen months. The average annual budget in 2000 for lingerie per woman in France was $ 92.40. Bras represent the largest segment in the lingerie market, with sales equaling $ 1.18 billion.

|Lingerie Budget by Demographic |
|Age |Lingerie Budget |
|14-24 |$125.10 |
|25-34 |$106.7 |
|35-44 |$100.2 |
|45-54 |$97.00 |
|55-64 |$97.10 |
|65+ |$48.10 |
|Source: Infomat |

Women between the ages of 14 and 24 purchase more lingerie than any other age demographic, however they buy less expensive lingerie, spending $125.10 per year. Style matters more for this age group than any other, although comfort is still an important buying factor. Women ages 35-44 purchase less, however they spend more per item, totaling approximately $100 annually. Comfort in usually cited as the most important buying factor for this age group.

Buying Preferences:

Most women chose their intimate apparels with as much care as they show while buying cosmetics. Common criteria cited in lingerie selection take into account lifestyle more than anything. Key words that research finds are mentioned the most b consumers are “simplicity”, “comfort”, “seduction”, and “comfort”. French women in particular seem sensitive to color and textures, preferring soft micro fiber fabrics, practical and easy to clean fabrics, attractive fabrics (lace, embroidery) and transparent or sheer fabrics.

Market Competition:

Major players within the lingerie market are Sara Lee, La Perla, Triumph-International, and Body-One. Sara Lee has over 20 brands under its name including Bali, Playtex, Wonder Bra, and Hanes Her Way. They focus mainly on functionality, but lack the sex appeal of other lingerie companies. These products are sold in most department stores. La Perla sells high end, luxury lingerie, with a price tag to match. Their products are sold in high end department stores, as well as some La Perla retail stores, appealing to wealthy clientele. Triumph-International is the world’s largest lingerie brand, with their products being sold department stores. Body-One, a French chain, offers quality that is very similar to Victoria’s secret, yet have somewhat limited variety. Their products are sold in and alone stores.

|Major Competitors in the Lingerie Industry |
|Competitor |Percentage of Market |
|Sara Lee |12% |
|Triumph-International |8% |
|La Perla |15% |
|Body One |18% |
|Other |47% |
|Source: Infomat |

Beyond these major competitors, brands such as Dior and Dolce and Gabana have begun to expand into the lingerie market. However, these will not be direct competitors, due to the nature of these companies. They, along with lingerie boutiques such as Agent Provocateur, specialize in creating couture, extremely high end and equally expensive products.

Although France sometimes seems synonymous with lingerie, there is still an opportunity to for American companies to penetrate the market. American brands such as Calvin Klein, for example, have been able to make a name for themselves in France. Particularly now that French opinion of American fashion has shifted and has become more receptive to American fashions, the prospect is good. The French, in general, are receptive to the nature of lingerie. They are more open to sexuality and less prude, making it an excellent prospective market for a company such as Victoria’s Secret. French women are very attracted to American brands, and these brands will continue to maintain a strong presence in the French market.

2. Market Size Related:

Population:
In 2008, the total population of France was 64,057,792 (with a growth rate of about .54% from 2007), ranking it the 21st most populated country in the world.

|Table 5. Population of France |
|Year |
|Year |

Age Distribution:

|Table 7. Age Distribution |
|Description |2008 |
|Age break down | |
|Median age |39.4 |
|0-14 |18.6% |
|15-64 |65% |
|65 plus |16.4% |
|Source: Index Mundi |

About 65% of the French population falls between the ages of 15 to 64, whereas people between the ages of 0-14 years old comprise 18.6% of the population and about 16% are 65 years of age and older (see table 7). The median age is 39.4 years. Our target market consists of females falling within the range of the ages 15 and 64, therefore we believe that the 65% of the total population of France will provide good conditions for selling our products.

Birth Rate:

This entry gives the average annual number of births during a year per 1,000 persons in the population at midyear; also known as crude birth rate. The birth rate is usually the dominant factor in determining the rate of population growth. As we noticed the birth rate did not change for the past two years.

|Table 8. French Birth Rates |
|Year |

Sex ratio:

At birth: 1.05 male(s)/female
Under 15 years: 1.05 male(s)/female
15-64 years: 1 male(s)/female
65 years and over: 0.72 male(s)/female
Total population: 0.96 male(s)/female (2009 est.)
Source: IndexMundi
This entry includes the number of males for each female in five age groups - at birth, under 15 years, 15-64 years, 65 years and over, and for the total population. Sex ratio at birth has recently emerged as an indicator of certain kinds of sex discrimination in some countries. As we see from the above Sex Ratio distribution in our target age from 15 to 64 years females and males have equal ratio.

Urbanization:

Urbanization: urban population: 77% of total population (2008 est.)
Rate of urbanization: 0.8% annual rate of change (2005-10 est.)
Source: IndexMundi

Approximately 77 percent of the total population of France (2008 est.) inhabit urban areas, meaning that France has very urbanized population, which will increase the demand forecasting for our products.

Migration rates and patterns:

Net migration rate: 1.48 migrant(s)/1,000 population (2009 est.)
Rank: 48
Source: IndexMundi This entry includes the figure for the difference between the number of persons entering and leaving a country during the year per 1,000 persons (based on midyear population).

Based on the findings on the demographics of France, we believe that introducing a Victoria’s Secret store will have success. The population of France has been increasing in the last years with a growth rate approximately 0.55. Looking at the age distribution we discovered that around 65% of the population falls between the ages 15 to 64, which will be very beneficial for our business since our target market are females of age 16 to 34. France is relatively urbanized, with about 77% of the population living in metropolitan areas. Paris is France’s most densely populated city, with its residents comprising about 19% of the total population.

3. Management of the Economy

Fiscal Policy: Government Budget and Debt

According to Radio France Internationale (RFI) France’s budget deficit reached the record 7.5 per cent of gross domestic product (GDP) in 2009.This is its highest level and more than twice the maximum agreed for members of the European Union. The French budget deficit reached 144.8 billion euros last year, according to National Institute of Statistics and Economic Studies in France (INSEE). Over the same period the public debt of France rose to 1.489 trillion euros or 77.6 per cent of GDP and INSEE predicts that the debt will increase in 2010 hitting 83.2 per cent of GDP and 87.1 in 2012 and it will start falling after 2013.

| | |
|Table 9: Government Budget & Debts |
| |

* General government deficit differs from net borrowing by swaps interest payments (0.3 billion euros in 2008).
(**) The public net debt is equal to the general government debt notified minus the currency and deposits, the loans, and the securities other than shares held by the general government on the other sectors.

Taxation

All foreign companies with a permanent establishment in France has the same obligations as the French companies to register with “register du commerce”(trade registrar) and to pay taxes.
Corporation tax:
Most French limited liability trading companies are subject to the Impôt sur les Sociétés (I.S.) being the French equivalent of Corporation Tax. This tax is payable upon the net profits of the corporation and the rate is currently fixed at 33.33%, plus a surtax of 3%, which brings the effective tax rates to 34.33%.
Other significant direct contributions and taxes:
Social security contributions are levied on gross salaries at 35 to 45% for the employer, and 14 to 20% to the employee.
Separate general social security contributions are levied on all income at a rate of 10% in most cases.
International Transactions:
There are number of tax rules that prevent or penalize indirect transfers of profit abroad, fraudulent transfers of tax residence by individuals who are residents, and repatriation of profits originating from a Tax Haven.
Indirect taxation:
- Value Added Tax
Almost all of the economic activities in France are subject to VAT. There are different rates that are applicable, but the standard rate is 19.6%.
-Stamp or registration duties
Stamps or registration duties are payable on transaction on shares, real estates, intangible assets of all business entities. Rates vary from 1% to 15%.

Monetary Policy:

Inflation

This entry furnishes the annual percent change in consumer prices compared with the previous year's consumer prices. From the table below the inflation rate almost doubled from 2008 to 2009. This raise might have a negative impact on the determination of the prices of our products. Due to the global economic recession in the last couple of years and the unstable situation with the Greek economy, the inflation rates might increase, therefore we need to be able to adjust our prices in regards to the current inflation in the country of choice.

|Table 10. Inflation |
|Year |

Assessment of International Business Climate

Export Related
In 2009, exports from France totaled, just over $6 trillion, a %10.24 increase from 2008. In addition, France imports from the rest of the world totaled $6.92 trillion, a 15.16% increase. France is both the 5th largest importer of foreign goods as well as exporter of domestic goods, with its annual growth rates increasing. This indicates a favorable and balanced trade environment.

|Table #: Exports and Imports |
|Description |

With Victoria’s Secret as our focus, further statistics pertaining to apparel importations are also important. In 2005, France’s apparel imports totaled about $17.74 trillion, with female specific apparel imports totaling $4.18 trillion.

|Table #: Imports (Apparel Specific) |
|Description |

Import Related

In 2009 the volume of the import of France was $532.2 billion and the country is ranked 5th in the world. In comparison to the previous year 2008 the import has decreased with 23 % from $692 billion to $532.2 billion, which might be due to the world economic crisis. Date of Estimation: 2008

Date of Estimation: 2008

Source: World Trade Organization

According to the World Trade Organization the three main import commodity groups of France are agricultural products (9.3%), fuels and mining products (19.5%) and manufactures (70.4%). The major import group is the manufactures, which will gives us a great opportunity to expand our products to the French market. As it showed in the table above United States possesses 5.5 % of the total imports of France.

Government Policies toward Import
Import Tariffs - Member states of the European Union have established a Community Integrated Tariff (TARIC) system, where duties are applied to imports from non-EU countries. TARIC was established by the 1958 Treaty of Rome as part of the European Economic Community (EEC).This system was established to regulate the imports from non-EU countries. All imports coming from these countries are subject to rates between 5 and 17 percent on manufactured goods.
Required Documents to import into France
Shipping documents
Commercial invoice
Delivery and payment terms
Bill of Lading or Air waybill
Certificate of origin

Foreign Direct Investment (FDI)

Volume

Inflows and Outflows

Based on tariffs applied on partner countries, in France, the industry of textile, clothing and leather is one of the sectors that has the least potential to attract investment.
| |TARIFFS |
|COUNTRIES |2008 |
|USA |1,533.0 |
|France |937.5 |
|Italy |813.0 |
|Source: IMF | |

|FDI |FDI |FDI |FDI |FDI |FDI | |INDUSTRY |2008 |2007 |2006 |2005 |2004 |2003 | |Textile, clothing and leather |937.5 |1,025.1 |243.4 |534.7 |449.5 |232.5 | |Source: IMF | | | | | | | |

Trends

France habitually records large inward and outward FDI flows relative to the size of its economy. However, there was a drop in inward FDI from USD 42 billion in 2003 to USD 24 billion in 2004 that was influenced by declining inter-company loans, but it also reflected a drop in equity investment from $17 billion to less than $5 billion, according to specialists.

Sectoral Distribution

Financial Sector

Real-Estate Investment

Pharmaceutical & Biotechnology

Government Policy toward FDI

Entry and Establishment: government approval needed for investment exceeding EURO 1.5m and for investment in strategic sectors.

Ownership and Control: there are no limits to equity ownership although government maintain monopoly on public services. EU limits retain of golden shares

Foreign Exchange Controls: no restrictions on the repatriation of capital, transfer of profits, interests, or services fees.

Incentives: Encourages R&D and technology development programs at European level. Special tax treatment, local and regional tax exemptions for company headquarters.

More than 22,000 foreign companies currently do business in France.

Foreign investors owned 39.2 % of the equity of the companies listed on the CAC 40 at the end of 2008.

The equity ownership of all French publicly listed companies is among the most international in the European market: 47.7% compared to 47.1% in Germany and 30.7% in the United Kingdom.

Euronext (which includes the Paris stock exchange) joined forces in April 2007 with the NYSE to create NYSE Euronext, the world’s largest and most liquid stock market platform.

Balance of Payment

Current Account

Currents Accounts |2003 |2004 |2005 |2006 |2007 |2008 | |Credits |1.936 |3.349 |2.567 |1.902 |2.470 |2.114 | |Debits |-10.196 |-1.539 |-1.905 |-2.174 |-0.951 |-1.096 | |Net |-8.260 |1.810 |0.662 |-0.272 |2.470 |1.018 | |Source: IMF | | | | | | | |

Includes all international merchandise trade and service accounts for the value of all merchandise and services imported and exported and all receipts and payments from investments.

machinery, chemicals, automobiles, metallurgy, aircraft, electronics; textiles, food processing; tourism
Electricity - exports: 58.69 billion kWh (2008 est.)
Electricity - imports: 10.68 billion kWh (2008 est.)
Oil - exports: 554,100 bbl/day (2008 est.) (
Oil - imports: 2.346 million bbl/day (2008 est.)
Natural gas - exports: 1 billion cu m (2008 est.)
Natural gas - imports: 49.35 billion cu m (2008 est.)
Current account balance: -$43.67 billion (2009 est.)

France reported a current account deficit equivalent to 3.4 Billion EUR in January of 2010. France is the third-largest trading nation in Western Europe. The main exports are: machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceutical products, iron and steel, beverages, wheat, beef, pork, poultry, dairy products and wine. French principal imports are: machinery and equipment, vehicles, crude oil, plastics and chemicals. The Trade with European Union countries accounts for 65% of French trade. [pic]

Trade surplus is likely to contribute to a Current Account surplus while a trade deficit will likely cause a Current Account deficit. Generally the French current account is a useful measure of international trade flows that directly affect the value of Euro. A French current account surplus means that more Euros are flowing into France and this puts upward pressure on the value of the Euro. On the contrary a current account deficit reflects Euros leaking out of France ; this can exert downward pressure on value of the Euro.

This means that changes in the patterns of trade are key drivers in the current accounts of most of the world's economies. However, for the few countries with substantial overseas assets or liabilities, net factor payments may be significant. Positive net sales to abroad generally contributes to a current account surplus; negative net sales to abroad generally contributes to a current account deficit. Because exports generate positive net sales, and because the trade balance is typically the largest component of the current account, a current account surplus is usually associated with positive net exports. In the case of France, the country is paying more than it is taking in interest, dividends, etc. If the current account is in surplus, the country's net international asset position increases correspondingly. Equally, a deficit decreases the net international asset position.

The French current account is a useful measure of international trade flows that directly affect the value of Euro.

Capital Account

CAPITAL ACCOUNTS |2003 |2004 |2005 |2006 |2007 |2008 | |Credits |1.936 |3.349 |2.567 |1.902 |3.421 |2.114 | |Debits |-10.196 |-1.539 |-1.905 |-2.174 |-0.951 |-1.096 | |Net |-8.260 |1.810 |0.662 |-0.272 |2.470 |2.114 | |Source: IMF | | | | | |

Record of direct investment, portfolio investment, and short term capital movement to and from countries,

Official Reserve Position

Record of exports and imports of gold, increases or decreases in foreign exchange, and increases in liabilities to foreign central banks.

Reserves of foreign exchange and gold: $102.9 billion (31 December 2008 est.)

External Debt / Debt Service Ratios

Debt - external: $5.021 trillion (30 June 2009)

[pic]

The IMF says that debt-to-GDP ratio of advanced countries, including France, is expected to rise by 20 percentage points in 2009 - the most pronounced upturn in the last few decades. More than a quarter of this increase is due to financial sector support packages. The Fund continues by saying that fiscal balances will be severely affected by the crisis in the short run. For G-20 advanced economies, fiscal balances are projected to worsen, on average, by 8 percentage points of GDP in 2009 relative to 2007, reaching 93 ⁄4 percent of GDP in 2009. The fiscal balances for the advanced countries, half of the deterioration is due to fiscal stimulus and financial sector support. Still according to the fund, many countries have recapitalised their banks, particularly the systemically important ones. For the advanced G-20 countries, the average outlay to date is projected at 3.2 percent of GDP, with considerable variation across countries (ranging from 4.6 percent in the United States to none for Australia and Spain). Among smaller advanced economies, Austria, Belgium, Ireland, and the Netherlands have announced large programs, ranging from 3½ to 5½ percent of GDP.

The debt levels of several European countries, including the U.K., France and possibly Germany and Spain, will quickly approach or exceed 90 percent of GDP, a critical level. However, France will be relying on "markedly favorable" economic assumptions to lower its deficit from 8.2 percent this year to 3 percent in 2013. In the likely event that such growth fails to materialize, France's debt ratio will surge beyond 90 percent.

Membership in International Organizations

Central bank discount rate: 3% in December 2008 – 5% in December 2007. This is the European Central Bank's rate on the marginal lending facility, which offers overnight credit to banks in the euro area.

Since its creation in 1945, France has been a permanent member of the security council of the UN. Additionally, French is one of the six official languages and of the tow working languages.

Recently, the International Monetary Fund (IMF) and France have signed an agreement to provide the Fund with up to the equivalent of €11.06 billion (about US$15.8 billion). The agreement is part of a commitment made by the European Union to contribute up to €75 billion to support the IMF’s lending capacity in order to provide timely and effective balance of payments assistance to its members in the current crisis.

France joined the World Bank in January 1, 1995 and is now one of the largest shareholders of the group. The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. While the overall goal of the GATS is to remove barriers to trade, members such as France are free to choose which sectors are to be progressively liberalized, under which mode of supply a particular sector would be covered under, and to what extent to which liberalization will occur over a given period of time. Some activist groups consider that the GATS risks undermining the ability and authority of governments to regulate commercial activities within their boundaries, with the effect of ceding power to business interests over the interests of citizens.

France is member of the EU and friends of ambition (NAMA)

Demand Forecasting

For our demand forecasting we decided to estimate the potential market share by multiplying the 50% awareness rate, based on our promotion and the fact that the brand Victoria’s Secret is already known in France by the 10% available rate of the products, based on our store, catalog and website by the 20% Trier rate, these will be the promotions and by 50% Repeat rate, which will be the women who have tried the products and they are satisfied with it.

[50% Aware] X [10% Available] X [20% Triers] X [50% Repeaters]
= .5%Market Share

Based on the information above that French population is around 64 million in 2009 and the sex ratio in the age 15 to 64 is 1 male to 1 female, therefore there are approximately 32 million females in France.

Our target market is women between age of 16 to 34 and the percentage of purchase by this age group is approximately 42%, which is around 13.5 million French women.

Source:Infomat

[13.5 million Potential Customers] X [ 0.5%Market Share] = 67,500 Customers per day

This the demand forecast that we expect, based on our calculation, but in reality this number will be much lower, because of different and various causes.

Entry Strategy

Entry Strategy: Our entry strategy is to export the lingerie products from the United States into France. Manufacturing in France right now is not an ideal location for production, so importing the product into France will be the most beneficial strategy. There are already many existing American subsidiaries in France who produce and manufacture within French borders such as Warnaco (Warner's Calvin Klein, Lejaby), VF Diffusion (Bestform, Variance, Lou, Bolero) and Sara Lee (Playtex, Dim and Wonderbra) (Fashion.Infomat). However, many are recently choosing to move production abroad to cut cost of production. Warnaco subsidiary Lejaby just announced its closing of three manufacturing plants in France due to the loss of almost 200 jobs (Just Style). These American subsidiaries have been very successful in France and gives Victoria’s Secret an opportunity to do the same. But with the international success of Victoria’s Secret, keeping the brand reputation and brand name true to its American roots with minimal adjustments is our strategy. Rather than changing the name for French customers, the Victoria’s Secret name will be kept the same and displayed in the Paris location. There are no quotas on imports of apparel goods manufactured in the United States, so it will not be too costly to import the product into France. As the exporter, we would need to provide a certificate of origin for the apparel entering France as well as include the country of origin on the label of the apparel. The limited restrictions on imported foreign goods makes the import of the lingerie products into France simpler than producing the products locally.

Marketing Mix Strategies

Product- The product will be the existing Victoria’s Secret lingerie that will be appropriate in a French market. French women have chosen lingerie in a recurring trend: attractive with feminine charm, yet with focus on technology, comfort and price. They also look for lingerie that has bright and shiny fabrics, that is shape enhancing, and that is comfortable at the same time. In terms of comfort, they specifically look for textiles that preserve warmth and coolness. Victoria’s Secret lingerie is just that. The stores in France will carry only the lingerie section of Victoria’s Secret, not the entire line including the loungewear, beauty and fragrance and swimwear. Though we will only start with brassieres and panties in the France location, if the store becomes successful, introducing the rest of the Victoria’s Secret brand including the clothing and beauty sectors may be a beneficial step towards a larger market share and higher profitability.

Channels: Our channel to sell the Victoria’s Secret brand in France is twofold. A Victoria’s Secret store will open in Paris, France where French women will be able to get a full Victoria’s Secret experience and interact with the apparel as opposed to the previous option of only shopping online. Paris is a prime location for the first Victoria’s Secret in France because of its large metropolitan population and density. It is also one of the most popular travel destination cities in the world, so there is a large number of tourists traveling through the city everyday. Victoria’s Secret apparel will also be available online in a Victoria’s Secret France website and catalog where customers can get products shipped directly to their home. Though there will only be one store in the initial entry into France, once the brand name is established and we build brand awareness throughout France, there will opportunity to expand the Victoria’s Secret store with more locations.

Promotion: Advertising is a key factor in establishing the Victoria’s Secret brand in France. Because the product is brand new to most French women, the brand needs to be aggressively advertised to appeal to French women’s expression of their sensuality and femininity (Fashion.Infomat). Victoria’s Secret appeals to a large demographic of women including different social classes, races, ages and geographic locations. To reach all of these French women, our promotional strategies must be varied using multiple media outlets. Our target market is women, primarily 15-34, college educated, middle to upper middle class, urban, single and married. To reach this demographic we have to carefully choose the best mediums to attract Victoria’s Secret customers. Because we are entering the market with a single store in Paris, advertising on local channels will reach the customers we are attracting for in store purchases. Paris based television stations targeting entertainment and local news will be most effective in reaching our target market. Metropole 6 provides entertainment programming that targets adolescent and young adults, and often airs American and British TV shows. M6 offers entertainment programming tailored to adolescent and young-adult demographics. It airs American and British TV shows., and France 2 is a Paris based station covering entertainment programs and local news. It is the largest French public TV network. Placing edgy, sexy commercials similar to the Victoria’s Secret commercials that air in America on these channels will promote the Victoria’s Secret brand and enhance purchase intent. (Mondo Times) As an iconic fashion center of the world, fashion magazines are very popular in Paris. However, our target demographic is looking for lower priced products like Victoria’s Secret, not La Perla. Print media will be where we invest the highest percentage of our budget because magazines have the potential to reach our very specific demographic. Placing a provacative Victoria’s Secret ad in popular French gossip and fashion magazines that target more of an average woman rather than higher end fashion magazines like Vogue and Femme could. Magazines like Femme Actuelle, Public, and Cosmopolitan France are popular among young French women. Another way to grab the attention of the masses and promote the brand name in Paris is to launch outdoor advertising. Ads will appear on billboards, bus shelters and train stations, where may Paris residents frequently commute around the city. This will increase the reach and frequency of the exposure to Parisian women. With this advertising mix, we will be able to gain brand awareness throughout Paris in particular, which will spread throughout France allowing opportunity in the future to expand to multiple locations in France.

Pricing: With a high concentration of competition in the French lingerie market, Victoria’s Secret pricing in France has to be comparable to other popular brands. Because we want to reach a fairly large demographic, pricing too high will turn off to many of our younger target audience members. Pricing too low will deter many customers thinking the product is of low quality. the pricing for Victoria’s Secret France will fall in the middle of our main competitors prices. This is due to the wide selection of lingerie at the store ranging from lower to moderate prices for a brassiere or pair of panties.

Company |Brassieres Price Range
(in Euros) |Panties Price Range
(in Euros) | |Body One |19-25 |7-12 | |Victoria’s Secret France |18-45 |7-15 | |Triumph International |30-50 |12-20 | |La Perla |75-220 |32-95 | |

Financial Outcome

As we explained in the Demand Forecasting part the maximum potential customers per day can be 67,000 people and the average price per item in the store/catalog will be $21.25 which will give us the maximum potential revenue per day of $1,434,375.

Maximum potential customers per day = 67,500
Average price of $21.25 per item in the store/catalog
67,500 X $21.25= $1,434,375 potential revenue per day

Works Cited:

United States of America Department of Commerce. April 23, 2010. http://www.buyusa.gov/france/en/116.html#_section6
Economy Watch. “France, Trade Exports and Imports.” April 17, 2010. http://www.economywatch.com/world_economy/france/export-import.html
Mondo Times. “Paris France local news media.” http://www.mondotimes.com/1/world/fr/80/3398
Goldsmith, Belinda. “Milan strides past New York as world's fashion capital: poll.” Mon Jul 20, 2009. Rueters. March 30, 2010.
Franchise Key International. April 23, 2010.
Todd, Stuart. “France: Lejaby to close three plants, axe 197 jobs.” April 7, 2010.
Fibre2fashion.com. “Lingerie and lingerie's only–A global report- France”, April 2, 2010.
Infomat. March 27, 2010. dfat.gov. March 25, 2010. INSEE. April 4, April 7, 2010.< http://www.insee.fr/en/>
Indexmundi. April 4, April 6, 2010. France Current Account. April 1, 2010.
Doing Business. March 29, 2010.
Cia.gov. April 1, 2010.
International Monetary Fund. March 28, 2010.