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International Environment of Business
Transcript of International Environment of Business
Economic Policy Highlights
COUNTRY OF CHOICE
Population: 38.346 million
Capital City: Warsaw
Major Language: Polish
Government type: Republic
German (0.2%) (MarketLine, 2014)
First shop opened in Dublin, Ireland in 1969 under name Penneys
1973 first UK shop in Derby
Over 250 stores across Europe
First shop in Boston, USA in 2015
Associated British Food PLC
Headquarter is located in Dublin (Primark.com,2015)
FOREIGN MARKET SERVICING STRATEGY
The mission statement
: "Primark is to supply quality clothing at prices perceived to offer real value."
The vision statement
: "Primark is to provide quality products and services to their customer through prices strategy"
: "Look Good Pay Less"
Women/Men/home/baby and kids wear
accessories , beauty products, confectionery
Lines for women – fashion, leisure, denim, lingerie
Lines for men – fashion, sport, leisure
Lines for kids
Why Go Global
The country is a member of the North Atlantic Alliance and the European Union (EU). The Polish government has strong ties with the US, Germany, France, UK, Italy, Lithuania, the Czech Republic, Slovakia, and Hungary (MarketLine, 2014)
POSSIBLE ENTRY MODE
How and When to Go Global
Import, export, joint venture, wholly owned subsidiary, franchising (Phatak, Bhagat, and Kashlak, 2005)
Factors to consider
Cultural, political, geographic, economic
Early entry x Late entry
(Lieberman and Montgomery, 1998)
Developed by Alexander Osterwalder in 2008
Accurate and complete mapping of a current business model.
Used by managers in strategic planning.
Displays critical information needed to effectively complete the Foreign Market Servicing Strategy (FMSS).
How will we use it?
Identify factors to develop a complete SWOT analysis
Upcoming Tax Reforms
Not expected to detour FDI (EY, 2014)
Consolidation of debt
Reduce government spending
Reduce of political inefficacy
Maintain considerable growth rate (CIA, 2015)
zł 5.59 = £ 1 BPS (xe, 2015)
Considered stable (MSP 2014, Cbonds 2013, xe 2015, Forex 2015)
Value expected to appreciate against Euro (MSP, 2014)
Influenced by Euro and economic growth (Forex, 2015)
Reluctance to adopt the Euro
Focus of economic policy (Eurostat, 2013)
Eurozone crisis (WSJ, 2012)
Eventually must adopt Euro (Europa, 2008)
Foreign Direct Investment
2014 FDI into Poland:
160.5 Billion Euro
1: Germany at 27.5 bn
8th: United Kingdom at 6.7 bn (PIFI, 2014)
FDI Into retail sector
Projected to grow
Dominated by MNCs
Influenced by interest for cheaper brands (Euromonitor, 2014)
2006-2014 Corporate income tax rate
United Kingdom: 21% (Ernest & Young, 2014)
Miluse Masarova (c7141420)
Corey Novotny (c7151548)
Katelyn Wiater (c7153863)
Rosiana Puspitasari (c7150746)
PRIMARK'S FOREIGN MARKET SERVICING STRATEGY IN POLAND
POLAND APPAREL RETAIL INDUSTRY
- Business growth
- Increase scale of production and lower unit cost
- Slow home market growth (Harrison,2010)
- Home market competitors (Asda, George)
-Global apparel retail industry is estimated to have annual growth rate 5.5%(MarketLine, 2014)
Firm specific factors
- Physical present, following competitors
- Secure market share
- Cheap and skilled labour available (Harrison, 2010)
China, India, Bangladesh, Turkey and Eastern Europe
Code of Conduct
ensuring good working conditions, fair wages, inspections
First store opens in Dublin, Ireland
Mardrid and Spain
Rotterdam, The Netherlands
Lisbon, Portugal and Bremen, Germany
First store opens in Derby, UK
since 2003, poland's economic performance has
been relatively strong
In 2006, GDP grew at 6.23%, owing to an increase in private consumption and strong growth in FDI and exports
In 2007, the Polish economy grew 6.79%. With the start of the global financial
crisis, growth declined to 5.13% in 2008.
Poland was the only country in the EU that escaped recession in 2009,
recording growth of 1.63% owing to its strong economic policies and robust domestic demand.
A resilient banking sector
and a flexible currency also supported the country's growth. The economy grew by an average of 3.47% during 2010-12.
In 2013, growth rate slipped to 1.58% due to a protracted impact of the euro area crisis, which had an impact on
consumer and business sentiment
According to MarketLine (2014) forecasts, the economy will grow by 2.99% in 2014, due to brighter economic outlook of its trading partners and domestic demand.
The Polish apparel retail industry experienced moderate growth over the period 2009-2013. This trend is predicted to
continue over the forecast period through to 2018.
The Polish apparel retail industry had total revenues of $8.0bn in 2013, representing a compound annual growth rate
(CAGR) of 5.1% between 2009 and 2013
Poland accounts for 1.9% of the European apparel retail industry value.
MARKET SEGMENTATION IN POLAND
According to MarketLine, the Polish apparel retail industry experienced moderate growth over the period 2009-2013.
The Polish apparel retail industry is typically composed of large numbers of similar retailers, many of which are independents
PRIMARK TARGET MARKET
Especially Teen to Young adults under 35 years of age
Middle to low income Polish
Using cost leadership strategy in the UK market
To attract its customers Primark offers affordable good quality products
Primark has a fashion scheme for people less than 35 years of age
By volume Primark is now the second largest clothing retailer in UK
Primark does not advertise
Their line of services and product innovations should be enhanced to achieve their goals
Primark's child labor
Poor working conditions and disrespecting workers rights are other issues
Absence of Online store (Businessteacher.org.uk)
Huge market opportunities around the globe
Use cheap and skilled labor for the supplying of product
Day by day the demand for latest design with low price are increasing
Expanding ventures (Businessteacher.org.uk)
Complex business environment
Increase of competition
Increasing labor and raw materials
7 in 10 people people bought clothes online in the past 12 months in UK alone (Mintel, 2014)
21% of Poland population shop online (eCommerce Europe, 2013)
: Lack of social services
: Building a partnership between private and public sector
Zloty as the currency
Any business operating or trying to start up in any country has to take costs into mind
Costs occur on all levels from labor and taxes to supplies and distribution
Poland looks good for foreign investors (Carmichael, 2006)
Poland social sector is by far its weakest aspect
Much money is being spent by the Polish government as well as being aided by the European Union in order to bring some of the social services up to standard (Carmichael, 2006)
Increases wealth and efficiency in all nations
Support efficiency of locals firms
Enhance trade (Harrison, 2010)
Elimination of jobs and lowering wages in developed countries
Exploiting workers in developing countries
Loosing national sovereignty/cultural identity (Harrison, 2010)
Poland has had to de-monopolize it’s technology providers for services
People are becoming more dependent on online shopping (Carmichael, 2006)
Argument for globalization
Low Dissemination Risk
Wholly-Owned Greenfield Investment
World Bank Data (2015)
(Market Line, 2014b)
Wholly-Owned Greenfield Investment
Apparel Retail Industry Geography Segmentation
Gradual incremental steps to international business expansion is based on a series of incremental decisions, whose successive steps are based on learning and knowledge acquisitions about foreign market and operation (Johanson and Weidersheim-Paul, 1975)
M1 Shopping Mall
25,000 sq. feet
Low-Middle Price Range
Magnolia Shopping Mall
30,000 sq. feet
capitals and city centres
retail locations and
shipping from existing
– Health enables returns
health care education for women working in factories
Primark has been using Uppsala since 1973, beginning of their business operation.
Gradually opening through Europe
They will apply this knowledge as they go to the U.S.
High start-up costs
Criteria for selecting entry mode
Characteristics of Entry Modes
Acquiring an existing firm in the host country
Weaker supply chain
Different corporate culture
Strong Primark Brand Identity
Location of choice
Suggested Entry Mode
Future Uppsala Expansion
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