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New market entry
Next plc is a leading British manufacturer and seller of products ranging from clothing, footwear, and other home products. Within the past years, it has realized a very big increase in sales. This is as a result of its massive marketing strategies. Despite this increase in profits, Next plc has not achieved an optimum returns scale. It still needs to come up with a strategy of expansion to increase its markets internationally so as to increase its sales. The main foster behind this is the increased competition from other manufacturers in the same line of business.
However, Next’s operations have faced challenges in the recent past, and it has faced criticism over alleges of breaking consumer protection regulations resulting from customer billings even if the products were returned a week earlier. This report seeks to analyze the market potential of Next plc including its adaptation to entry into international markets. It further identifies possible markets for expansion. As a result of the impressive results, Next plc has resorted to increasing its full prices and impress net sales gain compared to other companies embracing discounting. Its online sales have increased due to the brand and thus, trusted in UK fashion brands.
Macro factors affecting retail markets
The business has less impact itself on these factors and thus, a minimal impact when trying to change them. One of a key factor here affecting Next plc is consumer behavior. These include consumer cultures, lifestyles, norms, population changes and other demographic factors. Given that the company deals in the clothing business, it needs the company to create styles that are appealing to all different cultures.
Contrary to this, the manufacturer may ignore creating a fashion that existed let’s say 100 years ago. A growing population may also demand a different fashion compared to a young population (Fall Diallo, et’ al.,2013). Another macro factor is technology. Next anticipates reaching a large target population through online sales. Unavailability of resources and low demand and production is a derailing factor (Lusch et’ al., 2015).
There could be the scarcity of an essential material such as leather while their highs demand from a certain market. A competitor, for example, Primark clothing, can introduce a product thus shifting demand for the product thus reducing sales at Next plc. It is recommended that massive online marketing is carried out targeting customers.
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Legal and political factors can also impact sales in the retail market. These factors include worker’s rights and laws preventing child labor. The union members within the clothing industry may decide to picket their employers as the case of Primark. This may also affect Next plc. This negatively impacts production and thus a decline in sales. This causes negative publicity because employees may also choose to picket suppliers and customers.
Economic factors also affect the retail market (Russo et’ al.,2012). They both may bring out positive or negative results. An example is during the economic boom where customers have much income at their disposal hence an increase in sales. However, recessions may bring a negative effect due to the low sales. Consumers normally choose to shop on cheap products and as for Next plc, it sales fashion clothes.
Micro factors affecting retail markets
These factors affect the business operations directly. One of a key factor here is the suppliers. Suppliers play a key role in the success of the business. Their supplies are useful in the production of a final product. Thus, they should be accorded the power to be the sole supplier to prevent counter supplies. A new market may lack certain supplies thus making penetration harder.
The resellers also play a key role in the market. Identifying an effective reseller brings a challenge to the new business (Russo et’ al.,2012). These can be intermediaries in the market and resellers who if their reputation is good, and their net sales will increase due to the good public image. Next plc is planning to expand its markets and achieving this can be facilitated by the use of mock-marketing where resellers are identified, and evaluation of net sales carried out.
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The customers determine the market strategies. International customers should not be treated the same way as local customers. Their reasons for buying Next’s products play a major role in marketing the products. The general public must be satisfied by the product. Any action of the company must be analyzed on how it might affect the public. These results from the fact that the public has the power in helping the company reach its goals. A satisfied public will assist in the marketing of a product (Lusch et’ al., 2015).
Because the targeted marketing strategy is online sales through the internet, the followers of the brand will share the strategy. The competitors are an internal factor impacting the retail market too. An example of the competitors is Primark Company. They sell similar products but have many outlet stores across the world. Therefore, the impact of price and product differentiation should be taken into account so as to outplay the competitors.
Effective market potential evaluation
When evaluating an effective market, several factors need to be put into consideration. One of the approaches used is an approach is to estimate demand in the market. This is normally based on the population size. This can be achieved by predicting the market potential by either population or their purchasing power (Hu, et’ al.,2015). However, a developing economy can change rapidly over time.
The understanding of these new markets requires learning the variation in the structure of the economy and its performance in the past. There could also be changes in the business environment. This can be approached comprehensively thus needed in making a meaningful assessment of the potential of a market now and in the future (Goworek, et’ al.,2012).
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It is recommended that various markets which include China, The United States, Italy, South Africa and Switzerland be considered for expansion. However, changes in recent economic structures should not have caused a tremendous impact on their economic performance (Schneider, et’ al.,2014, January). Spectrum approach to the study of policies can be used and the market opportunities available. Also, their market potential was evaluated describing the specific geographic areas to serve in. The market share revenue of these identified markets are seemingly high and thus expected returns are higher with a leading potential market identified.
Recommended markets
The United States market
The US advantage in per capita output, apparently in the recent years, can be attributed to its large domestic market. Despite the decline in mall traffic in the US clothing sector, it sets up a good market potential for entry. The US’s disposable income and consumer sentiment are increasingly on the rise hence driving in an increased for high-end products carried by international companies. The industry’s growth expectation is to increase in the next five years facilitated by the rise in high-income households. The current players in the market give less of discounts and have not invested much in online sales thus giving Next plc a great go-through.
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Furthermore, the cost of capital that is associated with establishing clothing stores is relatively low, and the only barrier that can reduce entry is brand awareness and competition. The challenge in the US market is that existing players have already established their brand names, and thus Next plc might need to invest their money and time to sway consumers into preceding other products and buying their products as per Odell, J. S. (2014).
The US marketing is cost effective because of the improved technology and thus, minimal time is wasted in marketing the new product. Next plc has a unique blend of fashions for children, women and men. This makes it easy to make shopping within one stall. It is proposed that Next plc opens a store in two states of America. These will act as the supply center to other sub stores and online orders.
There are very few legal requirements for the entry into US market and thus making it less costly for Next plc. The US has an extremely large population that creates a very large market for these goods. The unique blend of fashion from Next plc is sure to win the US market over a short period. It is therefore proposed that the US be chosen for expansion.
China
Despite the harsh climatic conditions of the economy in European countries, the United States, and Africa, China’s economy has been growing over the past few years. By the year 2020, China is expected to be the largest economy in the world. China has a large demography, increased consumer spending and rising incomes. Also, the business environment here is open thus making it attractive for investment. It is proposed that Next plc opens a branch in the main cities of China that are economic blocks.
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With a population that exceeds 1.3 billion people, it presents a good market for cloth, footwear, and household goods. Although China is a leading foreign seller, it mainly deals with machinery products and thus should not be viewed as a hard to enter the market. China’s consumers spend most of their incomes on food and clothing (Hu, et’ al.,2015). This brings in an opportunity to present the fashion by Next plc. China’s regulations do not limit the operation of a clothing business.
It, however, has regulations on industrial and mechanical practices. With the increased Chinese technology, Next’s online sales will be easily accessible. It is proposed that after an entry into the market, a massive online advertisement is carried out. The investment in tier towns of China will facilitate this.
The Chinese government is focused on rapid economic growth, and the presence of a gap in the clothing sector presents an opportunity to Next Plc to carry out business. The huge population will present a good market. It is proposed that a trial store is opened in one of the tier cities of China. The expansion plan will start from one of these cities before expanding the business to other parts of the country.
Justified market entry strategies
When entering the proposed international markets, it is proposed that Next plc uses a variety of entry strategies. Direct entry strategies can be adopted whereby the products are sold directly to the buyers in the target markets. Achievement of this can be through the use of local sales distributors or representatives who may choose to sell the products by not taking the title to the merchandise.
Indirect strategies involve the use of intermediaries such as trading companies or trade agents. They will in turn be paid in commission. This strategy is most applicable where the agent has a clear knowledge of the market due to its complexity (Johnson, et’ al.,2013). The agents will be required to gather market information and provide any promotional advice to Next Plc. This will simplify the entry and the risks associated with exporting.
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An overseas company can also be selected to own permission of sales through licensing. This can be through patents, designs, and brand names. This helps reduce the appearance of Next’s products on the black market. Next plc can also come up with strategic alliances with an international business dealing with the same line of business. It is proposed that the strategic alliance is carried out for a short period until it is fully adapted to the new market. Also, joint ventures can play a key role.
A business with the same objectives is chosen to enhance easy expansion and make it possible to enter a complex market like the Chinese market. A wholly owned subsidiary can be opened in the proposed markets as per Majaro, S. (2013). It will be controlled directly by the mother company through foreign direct investment. A new investment store can be purchased or rented in the new country. However, the cost can be higher because of the substantial costs involved.
Export processing zones can work well in some markets. It is proposed that it will form an investment incentive while creating employment thus, transfers of skills. This provides a base for transfer of skills thus providing a line for transfer of goods in and out of a country as per De Mooij, M. (2013). These market entry strategies need to be weighted so as to come up with alternatives that will best suit Next plc. Every approach should pay attention to marketing, the risks involved and the control and management available. A matrix of the entry strategy can be drawn so as to choose the best approach
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Adaptation of Next’s marketing mixes to the new markets
In the face of the increasing importance of an international market for many businesses to survive and increase profitability, several factors such as economies of scale and competitive strike are key areas of concern. The marketing mix concept is a key area of concern in international marketing and penetration (Cavusgil, et’ al.,2014). This helps the Next plc’s products to adapt and suit the country they are carrying out their business. Having had a thorough understanding of the global markets, the promotion strategies need to be defined and analyzed if a change is needed. Next plc is adapted to the new market in its marketing mix as illustrated below.
Product support: Next plc has a good product support and helpline for assisting its customers. This helps in critical areas like product sourcing. The company’s existing products match the markets due to their new product development. Next plc has a product testing and management department where products are tested to match the international markets. The unique labeling, packaging, and production control put Next plc at a forefront.
Price support: prices from a key factor because most of the competing businesses depend on it to win customers. Next plc has well-established prices to suit all classes of customers. Discounts should be given to loyal customers in the new market. The price lists are nearly constant thus improving customer trust. The customers and agents are provided with training on the use of products thus easy penetration to a new market.
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Promotion/selling support: Next plc has invested on promotional strategies making new market entry easy. Through their sophisticated advertising machinery and sales force, the company can reach out to the targeted customers in the new market over a short period. Product promotion helps the product gain knowledge from the new customers. New markets such as China require massive advertisement.
Inventory support: Next plc has a well-established inventory control system. Inventory management forms the basis for controlling the level of production of the company. The large number of stores and warehouses of Next plc gives it a nice stand. The supply procedure is easy, and one can make online orders.
Distribution support: Next plc provides distribution support to its customers through various ways. There is fund provision to agents and orders are also processed within a short time. This means that order delivery is timely thus winning the customers in the new market. There are a fast export preparation and documentation. It also provides insurance to a product purchased by a customer that is rare among competitors.
Service support: Next plc provides a range of services to its customers. The services that will contribute to easy entry to the market vary depending on customer needs. Next plc processes quote within a short time. After-sales service is offered to customers, which is a rare ingredient between many competitors. There are guarantees and warranties that cover any sales thus improving customer trust. Next plc always publishes sales reports and catalogs to be distributed citing the good performance of the company. This helps in publicity and improving the company image.
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Therefore, before designing any international marketing mix of the business, Next plc should design an analysis of every country they would like to open or start the business. This helps in determining the items that are to be included in the marketing mix. The ones to be standardized and those to be adjusted to suit local needs are analyzed. Every country may need its different marketing mix.
It is, therefore, proposed that Next plc used both online presences for marketing in the new markets and built a store or stores for presence. This helps facilitates the process of supply of goods to the customers. Next plc can achieve its projected anticipated increase in their profits and market if they adopt this report. It is proposed that some parts of this report may need amendments over time.
However, it is upon the management to consider following the guidelines herein. The SWOT analysis of Next plc puts it in a greater position of becoming a leading clothes seller both locally and in the global market. It is proposed that due to Next plc’s market potential, it will easily adapt to the new business and expect less competition. The sales procedure and the marketing plus supply affectivity of Next plc will help in winning large international markets. The customers can make purchase and payments online with instant delivery.
Bibliography
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