A CEO of a successful US clothing store that sells men’s and women’s athletic we

Question

A CEO of a successful US clothing store that sells men’s and women’s athletic wear is considering expanding to markets outside the USA. The company is well established in the US and most popular with teenagers and young adults between the ages of 20-38. The company has a differentiation strategy encompassing fashion forward, trendy designs and colors. The products command higher prices due to their unique patterns and perception of high quality and style. The goods are sold in stand-alone stores as well as integrated into A level department stores and boutiques.

The company is unusual since all the design, manufacturing and, of course, distribution is done in the USA.

For a couple of years, sales have remained steady. The CEO has been thinking about expanding into international markets to increase sales or perhaps outsource some of the production processes to reduce costs and has decided to hire a consultant – YOU, to help make these decisions.

The CEO is considering Brazil, Russia, India or China as locations for new markets or production. Which of these countries would you recommend and why? Perhaps you would choose a different country: which one and why? What are some of the potential opportunities and challenges the CEO needs to be aware of?

A. Share your advice on selecting markets for new sales

B. Share your advice on selecting locations for production

Explanation / Answer

A.
I would like to recommend India as a new market for sales because it creates a plethora of opportunities for the company. These opportunities are identified on the basis of following factors.
1.   Emergence of India as one of the most promising developing economy
2.   Accelerated growth rate and emergence of upper middle class to whom, products can be catered
3.   Favorable government policies that can help the entry an easy process for the MNC
4.   Stability in governance, law and order
5.   A progressive economic environment with improving purchasing power of the people
6.   Presence of different types of distribution channels
7.   Supporting lifestyle
Though, there are also some challenges. Some of the most prominent challenges are as follows:
1.   Cutthroat competition
2.   Building balance with trends and preference among the population
3.   Long list of approval process
4.   Price competitive market can make thinning of the profit margin
B.
I would like to recommend China as a location of the production of products because it brings opportunities on the basis of following factors:
1.   Large and low cost manpower
2.   Expertise of China as manufacturing economy
3.   Favorable government policies
4.   Economy of scale further reduces the cost of production
5.   Political stability
The challenges are also there. Some of them are as follows:
1.   Issue of transfer payment
2.   Repatriation of funds to the native country
3.   Exporting product from China to India can attract heavy import duties and tariffs

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