Expansion of Hamilton Shirts into Asian Market
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The well-experienced business should always seek the ways to expand into other markets. Each business is like a living organism so that it always seeks for the development.
The pursuit for expansion into international markets is the main goal the leaders of many companies. However, the international expansion as the next step in the business development has a lot of difficulties. If fact, this process can be very risky and complicated.
It has been apparent that most well-established firms nowadays are considering plans to expand their business operations globally. Hamilton Shirts is not an exception. It is one of the leading clothing manufacturer and retailer chain companies in the US. It has the retail stores placed in such states as Alabama, Tennessee, New York, Texas and many more. The company has also international retail stores in Canada, Mexico and Japan (Hamilton, n.d.). In order to improve the company's current position on the world market as well as capitalize the company's continuing growth, it is suggested to open more retail stores in other parts of the world, where clothing market is at high acceptance by consumers. In light with these opportunities for global expansion, this memo will serve as a proposal for the purpose of studying the opportunities to expand Company’s business operations in the Asian market, particularly in China market.
The main limiting factors of the expansion into the international markets usually include the following: extra efforts, additional investment (localization, development of the sales channels, promotion) as well as other additional risks (i.e. currency risks, political risks, legal risks, financial risks) etc.
The first step in the construction of an international marketing system implies the determination of strategic characteristics of the particular enterprise. It is important to analyze the external environment of the enterprise. The analysis examines the macroeconomic indicators such as economic, socio-cultural, political, and technological factors as well as microeconomic factors such as market conditions and the competitive environment.
The effective analysis of the external environment of the enterprise includes the analysis of the world market in order not to overlook the new trends, competitors and market opportunities. This analysis implies the estimation of the company’s strengths and weaknesses as well as the opportunities, threats, as well as global trends. This can help the enterprise determine its competitive advantage. The enterprise managers must be aware of the technological and resource capabilities of the enterprise as well as its potential sales and profit.
It is crucially important to consider the interests and expectations of all stakeholders (shareholders, managers, employees, customers) in the development of the company’s goals as their interests and expectations regarding the company’s size, its profitability and strategy can differ vigorously.
The clear development strategy of the company on the international market provides stability which is one of the key points to the success. The precise in-depth analysis of all sides of the company’s activity helps balance short-and long-term goals as well as determine what is more important in order to increase the market share and the productivity of invested capital. The rapid expansion is possible if the company offers the market a new unique product or makes noticeable marketing company.
In a broad sense, expanding to international market provides companies the competitive advantage over their competitors, and within the process, the Company will increase its cash-on-hand, acquire better employees, improve their production efficiency (Johnson, 2012).
Based on the report by PricewaterhouseCooper or PwC (n.d.), London-based professional services firm, “Asia’s fashion and apparel market will continue to grow at a healthy clip through 2011-15”. The above-mentioned implies that the clothing demand in Asia and Australasia go beyond the demands in Western Europe and North America. In China, the clothing demand continuously grows at a slow pace as expenditure on clothing of Chinese consumers increases. Such demand is highly driven by several factors such as increasing personal disposable income levels, as well as rising focus on fashion products, particularly in the main cities of the country. On the other hand, clothing demand in India is also performing better, by which such demand growth trends are steered by young and middle class consumers with tastes for fresh, stylish fashion that fits the value-conscious Indian market. Hong Kong is also a good strategic location for the expansion, by which the nation’s clothing market will grow to its highest point in 2015, with US $52.65 billion (PwC, 2012). China’s clothing market demand is continuing to grow. The better outlook of the Asian clothing market demand growth suggests that expanding Hamilton’s business to Asian market would be very much feasible. Further, the market demand as per nominal US$ million for the years 2013-2015 in China (90,041), Hong Kong (52,655), India (13,328), and Taiwan (5,268) illustrates that Asian markets are open to foreign clothing retailer companies to operate, with anticipation of providing good business for the company, including Hamilton.
However, capitalizing the Company’s growth and opportunities through international business expansion, there are certain factors that must be considered that could pose challenges for the Company during the process. Deciding to go global must be deliberated and researched carefully, since there are certain challenges and potential obstacles to think about, which cultural and language barriers are the most apparent (Khan 2005).
In order to analyze the risks as well as the benefits the Company could get calls a rigorous international marketing research that will provide recommendations whether or not the global expansion in Asian market will benefit the Company.
The economic feasibility of opening a chain of stores is that the production of Hamilton Shirts clothing brand can also be moved to China. While opening the new factories in the country, the company will be able to save the considerable part of the funds, which also can be invested in the opening of stores. Moreover, it is worth noting that the clothing brand of Hamilton Shirts is positioned in segment different from the standard non-brand clothing from China. Therefore, expansion to the new markets in Asia with the brand, the marketing of which has already spent considerable sums of money in the U.S., could lead to the fact that the brand takes a certain niche in the Chinese market brand clothes.
In order to provide the successful expansion into foreign market, it is crucially important to form the company’s own ideas about the chosen market: the people, the culture, the language and political system. The knowledge of local culture is a key success factor. The auditors, consultants, law firms, trade organizations and business associations can be the efficient sources of useful advice on the international expansion.
One of the key advantages of the expansion into the Chinese market can be the reduced costs. It includes a number of options, for example, the cost of human resources. Among other advantages there are low rent and land value, preferential tax policies. Another reason is that China is a stable country, both economically and politically.
The Chinese market with hundreds millions of consumers has been the dream for manufacturers all over the world. However, due to the variety of customs tariffs as well as non-tariff barriers, regulatory and bureaucratic barriers, “Eastern” complication of the simplest of forms and methods of promotion of foreign goods only a few producers can export their products to China, regardless of the will of the Chinese middlemen. This happens not only because China is striving to be the world’s “factory” of products, giving preference to the import of raw materials and semi-finished products, but also because its trading policy tends to provide benefit to national retailers.
In fact, it can be said that China's market it not a seller’s or a buyer’s market, but the Chinese merchant intermediary market.
It is quite difficult for a foreign company to create a foreign trade company resident in China. In Chinese market the initiatives, opportunities and independence of not only small and medium, but also large foreign manufacturers and exporters are limited.
Chinese market is one of the biggest in the world. In the past years, China remains the single most popular market in terms of expansion. This country has the variety of consumers whose needs are unsatisfied. The Chinese market is constantly growing. However, while doing business with China, the Chinese manufacturers and suppliers it is important to be aware about the specific characteristics of the Chinese market. Without knowledge of the traditions and the negotiation technologies as well as the mentality, the economy it is very difficult to organize the company’s expansion into the Chinese market.
Trying to expand into Chinese market Hamilton Shirts Company has the unique opportunities to become even more profitable.
China has huge population and well-developed economy in many areas, so it is important to define its place in the market. Hamilton Shirts should determine the benefits of their products to find their way, to determine the potential buyers and identify competitors. The reinforcing of the strengths and trying to neutralize the shortcomings, will help to find the niche in the Chinese market.