International Business Plan

CWK3 – INTERNATIONAL BUSINESS PLAN JENNI LIINAVUORI Fashion Marketing & Communication, Level 6, 2016/2017 Fashion Marketing 2 International Markets Sergio Costa

1. Introduction -Aim & research questions 2. Why expand your business?

3. Internal analysis -Brand background -Company mission, vision & values - Brand overview: significant milestones - Brand key results -Company organizational structure 4. Company's Local Environment -PEST analysis 5. The international environment. Foreign Market Market Audit -PEST Analysis -Internationalization barriers Competitor Analysis -Competitive analysis. Porter’s five forces model, Key success factors -SWOT Analysis for each competitor -Company & Product analysis Market analysis/Cross Cultural purchasing pattern analysis.

-Purchasing behaviour -Which cultural aspects make the new market good or bad choice?

6. Market Entry Strategy -Description, analysis and evaluation -Target 7. Marketing Strategy -Pricing Strategy -Positioning 8. Sales and Distribution 9. Operation Overview -Description -Implementation steps – time table is mandatory 10 - Conclusion and Recommendation 11. Appendices 12. Bibliography

1. Introduction This brand development project will be investigating opportunities for launching a fashion brand to one of the BRIC countries. The research will be used for to create an international business plan for a fashion brand chosen by the author. The brand development and international business plan will be done for a Finnish footwear brand Minna Parikka Shoes Ltd. I decided to choose Minna Parikka because of its unique style, creativity and the brand’s potential grow and develop as a brand in the future. Furthermore I chose Minna Parikka because of my own high personal interest towards the brand and not just as for the project but also seeing it as a possible beneficial for my future’s career path.

The challenge of this project will be launching Minna Parikka to Shanghai. The research will explore the challenges and opportunities that the brand might be facing by conducting internal and external analysis. After conducting the research and analysing the information coming from the research, the market entry strategy was made for the brand.

Aim & research questions

The aim of the research is to understand the brand itself as well the market it would be entering. The information used for this research and to answer the research questions will be coming from online secondary sources, the data used will be gathered from different articles, researches, and interviews.

The research questions used for this project will be: 

What is the Minna Parikka’s situation now?



Why expand to Shanghai?



How is the business environment?



What are the threats and opportunities in the new market?



What is the buying behaviour in the new market?

2. Why expand your business?

By expanding the brand it would not just increase the company’s sales and profits but as well raise the brand recognition, build more value to the brand by offering its products, service and quality for a wider audience. Also it should react to the pressure of the competitors who are already performing in the new market, which is affecting the brands positioning and growth. Minna Parikka has already expanded in China to cities like Beijing, Wuhan, Chongqing, Shenzhen and Hangzhou through different retailers. The marketing leader of Minna Parikka, Heidi Cheng says that the company has retailers over 25 countries and that 10 out of 30 retailers are in Asia. One of the most significant retailer has been Galeries Lafayette in Beijing. The company has set their eye on the Asian market because there is clearly the biggest interest for the Minna Parikka’s products design and style.

(Kylteri.tumblr.com, 2014) As the Chinese income continues to rise every year and their demand for footwear is growing in an average rate of 7% a year. Minna Parikka should take the next step and expand to Shanghai which is one of the wealthiest cities in China and the nation’s economic leader.

3. Internal analysis Brand background Minna Parikka is a footwear brand from Finland that is specialized on affordable luxury shoes for women and just this year the brand also launched their first collection for children. The products are focused to be high quality having a playful twist and inspiration coming from animal and fairy tale world. The brand launches two seasonal collections per year. The brands identity is strongly built around its founder and chief designer Minna Parikka’s vision of femininity and bold uniqueness.

When it comes to the design, Minna Parikka pushes new boundaries with childmind alike designing and combining it to the high quality materials and high-end craftsmanship. The brand has raised a lot of awareness in the past couple years by their hit product Bunny Sneakers, which many celebrities like Kylie Jenner, Taylor Swift and Lady Gaga and fashion influencers have been seen wearing. The brand has operated for 12 years and are currently sold in 25 countries around the world. Their shoes can be found at the infamous stores like Colette, Le Bon Marche and Harrods.

The brand with high-end prices makes the brand positioned on the premium/luxury market sector.

Their key market areas are Europe, USA, Japan and China. (minnaparikka.com, 2016)

Brand Mission, Vision & Values The vision of Minna Parikka is to change the women’s shoe design world which is dominated by men. In order to do this the brand mission is creating designs that are, in Parikka’s own words “like love letters from one shoe love to another. Life is too short to take style too seriously.” (minnaparikka.com, 2016) This statement can be seen in the products of Minna Parikka. The footwear brand is known of combining elements of surrealism, playfulness and contemporary design with a fearless attitude without being afraid of using and trying out different colours and forms. By now there has been shoe designs featuring wings, hearts, sushi, my little pony’s, bunny ears, monkeys and fingers to just name a few. (Appendix A). As an affordable luxury brand, Minna Parikka does not follow trends but sets new ones and creates its demand.

Minna Parikka’s brand purpose is to empower women and self-expression. The Minna Parikka shoes are made to create emotions like joy and boost the women’s confident who is wearing the shoes. Unlike clothing, shoes are different, to look attractive shoes doesn’t have to be inhabited by a body to look attractive. Wearing right pair of shoes, it can change how women look, feel and is seen by others. (minnaparikka.com, 2016) The main brand values of Minna Parikka are fun, adventure, quality and fearless attitude. “Life is too short to take style too seriously” says Minna Parikka. The Finnish footwear brand is all about having fun with shoes and making a statement with them. The brand stands for independent women who doesn’t take themselves, life or fashion too seriously, or care what other people might say. It is about living adulthood with a playfulness and adventurous mind. Furthermore quality plays important part as a Minna Parikka’s brand value which can be seen on the product. The shoes are crafted in Spain from finest materials. The high quality look, feel and design is created by using some of the finest leathers coming from Italy and Spain and with a strong attention on details. All the components from sole to the shoelace are coming from European suppliers. (minnaparikka.com, 2016)

Brand overview: significant milestones

2005

Minna Parikka launches her own footwear brand in Helsinki, Finland

2006

First collection FW06 comes to the markets

2011

Company’s turnover grew by 40%

2012

Minna Parikka Universum (First flagship store) opened in Helsinki, Finland

2014

Young Designer of the Year (Design Forum Finland)

2014

Bunny Sneaks from the SS14 collection creates big buzz and awareness internationally among fashion insiders and A-listers

2014

Sold in 25 different countries

2016

Launched a kids shoes line for S/S16

Even though the brand has a quite short 12 years, history in the fashion world it has already managed to pass some significant milestones. 2014 can probably considered to be one of the biggest years for the brand and its history so far. That is when the Bunny Sneakers were introduced to the world and since then it’s been a huge success for the company and it has got into one of the wellknown department/multi-brand stores. Not only the Bunny Sneakers have created a bigger awareness but it also has created a clearer image and identity around the Minna Parikka brand.

Furthermore it can be stated that the growth of the company with these milestones can be seen steady over these years.

Brand key results

2012/12

2013/12

2014/12

2015/12

811 000

1 088 000

1 334 000

2 240 000

1,9%

34,2%

22,6%

67,9%

Net profit (EUR)

-6 000

188 000

138 000

286 000

Operating Profit Margin

-0,4%

23,8%

12,8%

15,8%

6

6-9

Net Sales (EUR)

Change in net sales

Personnel

4

(finder.fi, 2015)

The results of the past three years shows that the sales have been growing steady. The company is making a solid profit after the 2013 high peek from losing 6000 € in 2012 and turning of making 188 000 € profit. Also what is interesting to see is that the size of the company’s staff has been pretty much the same during the years and that the size of the company doesn’t seem to have effect on the sales.

Company organizational structure

CEO/DESIGNER

SALES

MARKET ING

LOGIST ICS/

HUMAN

DIVISON

DEPART MENT

WAREHOUSE

RESOURCE

SALES

MARKET ING

WAREHOUSE

ST AFF

MANAGER

MANAGER

MARKET ING

DELIVERY

T EAM

COMPANY

PRODUCT ION

MANUFACT URERS

WHOLESALE

RET AILERS

T RAINING

4. Company's Local Environment PEST analysis Finland Political Finland is parliamentary democratic country and has a multi-party system. In 1995 Finland joined to the European Union and four years later adapted the euro for its currency. Finland is also part of the Nordic Countries, among Denmark, Sweden, Norway and Iceland. The political risk in Finland is very low according to a study made by A.M. Best Company (2009). Finland has been ranked as the most stable country during the years 2011-2016. Finland is one of the leader nations with the performance in education, economic competitiveness and civil liberties. Property rights in Finland are well protected and contract agreements are strictly honoured.

Economical Finland is highly industrialised with a mixed economy. Finland is one of the world’s leader nations in industry and trade independence, assets rights and freedom from corruption. Starting a business in Finland takes 14 days, when the world’s average is 35 days, also the entry barriers to Finland is quite low. The largest trade flows are with Germany, Russia, Sweden, the United Kingdom, the United States, Netherlands and China. The trade policy is managed by the Europen Union. The economic growth slowed down in 2009 due to the global recession. The GDP of Finland was 231.95 billion US dollars in 2015 which was the all-time low during the last 9 years. The unemployment rate in Finland was 7.9 in December 2016. The corporate tax rate in Finland stands for 20%. (tradingeconomics.com, 2017)

Social The population of Finland is 5.4 million. Majority of the population lives in the southern region, the capital of Finland, Helsinki has 1.2 million inhabitants. Finland has one of the best welfare systems is the world, social security is covering decent living condition for every resident as well as the health care system covering the nation’s population.

The consumer confidence in Finland increased to 21 in January 2017. Which has been the highest number since September 2010 when Finland’s economy improved and consumers financial situation got better. The consumer confidence average number is 11.78 measured from 1995 until 2017. This has also led to the increase of consumer spending which was 26750 million euros in the third quarter of 2016. The consumer spending in the third quarter of 2016 also reached the all-time high from the 1975 until 2016. (tradingeconomics.com, 2017)

Technological The technological innovations from Finland are very well known around the world. Nokia was one of the leading mobile phone manufacturers during the years 1992 until 2006, the company was sold to Microsoft in 2014 and the company had only 7000 employees in Finland in 2014. Finland has also often referred as the technology leader of Europe. Finland is active on their research and development, the nation have used 3.5% of their GDP for the development of R&D. In order to compete Finland tries to be ahead of the other and be the first developers. This also attracts foreign R&D investments.

5. Foreign Market Market Audit PEST Analysis China Political China or the People’s Republic of China and adopts communism in their political system and is a single party state, governed by the Communist Party of China. The government has the power to control and influence all the citizens’ activities. Due to this China can provide stable environment for people and businesses. But the government’s lack of transparency makes it challenging business environment for foreign companies and investors.

In China the Foreign Investment Industry Guidance Catalogue regulates foreign investments. The catalogue classifies direct investment, depending what your business is, into encouraged, restricted, prohibited or to permitted. To make business in China the company has to find out regulations applied to the particular business type the company is in. The regulations can be such as requiring license to operate with the local authorities or costs and duration of the business set up process.

Other regulatory challenges in China are bureaucracy, unclear regulatory environment, tax administration, obtaining required licenses and legal restrictions on market access. (foreignentrepreneursinchina.com, 2012) Economical The economic performance of China is huge and currently China is the second largest economy in the world, in terms of GDP, after The USA. If the economic growth of China keeps continuing the same phase China will be surpass USA soon. In 2015 the GDP in China was worth of 11007.72 billion US $ which was also the all-time high from 1960-2015. The China’s GDP represent 17.75% of the whole world’s economy. The unemployment rate in China is low, last measured 4.02 in January 2017, which also decreased from December’s third quarter. The consumer prices rose to 2.1 % in China in December 2016. After China joined to the WTO (World Trade Organization) in 2001 China made many changes to its trade regulations which made many economic sectors and certain industries able for foreign investments. Chinese economy was previously dominated by the state owned enterprises which has now switched to domestic private companies and foreign investments being the main driving force of the Chinese economics. (deloitte.com, 2016) The biggest business challenges in China are the rising costs, increasing competition, corruption, IP infringements and the lack of market maturity. (foreignentrepreneursinchina.com, 2012)

Social China is the world’s biggest country by population, with a population of 1.381 billion. Chinese government introduced a one child policy in 1979. The policy was eased in 2013, allowing couples to have two children if one of the parents have been the only child. (cnbc.com, 2013) China considers education as an investment and for a long time economic growth. The top three richest cities in China are Shanghai, Beijing and Shenzhen. Shanghai’s population is 24 million making it the most populous city in the world and it’s the nation’s economic leader and its policies and practices has been used for other rising cities in China. (therichest.com, 2014) The consumer confidence in China was 108.40 in December 2016 and like the graphic shows it has started decreasing. All though the consumer spending in China has increased to 264757.60 CNY HML in 2015 compared to 2014. The consumer spending in 2015 also reached its all-time high from the year 1952. According to Hurun Reseach Institute there are 1.6 million millionaires in China.

Chinese capital, Beijing has the most millionaires, with 192,000, 17.6 percent of China’s total.

Shanghai coming on the second place with 159, 000 and third Shenzhen 50,400.

Technological The infrastructure development is the Chinese government’s biggest priority. This has seen in power and telecommunication updates, investing in rural roads and spending to hedge against flagging economic growth. The nation has its goal to bring the whole nations infrastructure up to the level of middle-income country. Furthermore China has over 420 million internet users. The mobile internet is driving force for businesses. The nation has rapid development in science and technology. Hundreds airports, train stations and ports provide sufficient transportation.

Internationalization barriers In order to establish the company successful it is really important to understand the government.

Due to the China’s complex legislative and political system the entry can be difficult without having a local partner. The local regulators may deduct taxes, coordinate with real estate developers to reduce or eliminate rent, offer discount utility fees, speed up approval processes, or help companies find local suppliers and secure loans. In order to receive these benefits, the local governments can be expecting the foreign company to open more stores for example. In the larger cities the negotiations can be way more difficult due to their bigger range on options. (chinabusinessreview.com, 2011)

Competitor Analysis

Competitive analysis. Porter’s five forces model, Key success factors Minna Parikka’s strength is its differentiation in the footwear market. The brands unique design and style where the trend of playfulness, youth and nostalgia influences the larger adult market. The brand focuses using the unique design with the premium prices as their strategy to meet the needs of a certain segments. The brand differentiated from others competitors being focused and specialized only on footwear. The high quality is also considered to be strength, this is also a big competitive factor when compared to Minna Parikka’s competitors. Because Minna Parikka is manufacturing in Spain, using small manufacturers and not focusing of producing a mainstream product which would effect on the products quality negatively and the brand would lose their customers. The brand has a perceivable flagship store in Helsinki which really communicates the brands luxuriousness in its best, this could be seen also as a big opportunity for the brand as it will create more sales, better relationship with the customers and create more awareness. The Bunny sneakers which are the brands most distinct product has brought global awareness towards the brand and has helped the brand on its identity and situation where is it now. Strong presence in social media without spending huge amounts of money in advertising. Also the popularity among celebrities and other trendsetters has been a huge advantage for the brand in business wise.

Porter's five forces 4 Industry Rivalry 4 3

2 Power of buyers 3

1

2,5

Threat of substitutes

0

Power of suppliers

3

Threat of entrants 4

The porter’s five forces model shows that the industry rivalry is relatively high, as well as the threat new entrants. Because the Minna Parikka’s products is considered to be unique and high quality and really a niche product the threat of substitutes is not that high. Though for example there is cheap

knock offs from some of the Minna Parikka products, the quality is so poor and doesn’t resemble the actual design at all the threat is moderately low. Because Minna Parikka is still a pretty small company when compared to its competitors the power of the buyers is moderately high. The key success factors is to create brand awareness and a personal and loyal relationship with them.

Because China is a diverse country with unique regional markets it is important to know where your target market is and what is the size of it.

SWOT Analysis for each competitor Minna Parikka Strengths

Weaknesses

Unique design

Lack of awareness

Strong brand identity

Offering only shoes

Noticeable flagship store

Small company

Popular among celebrities

Opportunities

Threats

Create awareness

Cheap knock offs

New markets

Competitors copying

New products

Competing with brands that has bigger audience and awareness

Opening new flagship stores

Ted Baker Strengths

Weaknesses

Stable performance in sales

Quality not as good as competitors

Strong brand loyalty Low global brand awareness High level of customer satisfaction

No advertising Relies only word of mouth

Opportunities

Threats

Create awareness

Increasing costs

New markets

Increasing competition

New products

Smaller profits

Brand collaboration New communication strategy

Kate Spade Strengths

Weaknesses

Strong brand identity

Fast expansion

High profitability

Wide scale distribution channels can be difficult to handle and affect product quality

Reduced labour cost Strong brand awareness Strong social media presence Opportunities

Threats

Create more awareness with main target Create personal relationship with the loyal customers New markets

Quality weakening Knock offs Competition with other similar brands

Building a stronger brand community

Moschino Strengths

Weaknesses

Strong brand identity

Limited audience

Strong brand awareness

Highly debated brand

Celebrity endorsements Jeremy Scott as creative director

Opportunities

Threats

Expand product line

Cheap knock offs

New markets

Economic recession

Collaboration with other famous fashion brand

Competitors with cheaper price

Create special services and products

Marc Jacobs Strengths

Weaknesses

Strong brand community

Young audience limitates profitability

Distinct brand values Great global awareness Global expansion in 80 countries

Limited audience Wide range of products can be difficult to handle

Strong and innovative social media reach

Threats Opportunities Create special services and products Collaboration with other brand

Competitors with cheaper prices Other brands offering similar products Economic recession

Company & Product analysis Ted Baker Ted Baker have had stable and strong performance. The company reported sales rising 24.5 per cent year-on-year to £226.8m in the six months to August 15, with pre-tax profit increasing 14.6 per cent to £17.8m. (Financialtimes.com, 2015) The brand has 416 stores, which almost half of them are in the UK. The UK remains Ted Baker’s biggest market, but a strong US performance was singled out by the company as it reported a 24% rise in turnover between February and June.

(TheGuardian.com, 2015) Ted Baker is a global lifestyle brand. Offering both men’s and women’s apparel and accessories. The brand is known of its quirky but at the same time commercial products, using a lot of patterns, colours and details with a sense of humour.

The price level is affordable luxury. Shoe prices going from 55€ to 335€ and bags 41€ to 415€. Materials used are often leather on the more expensive ones and Polyvinyl Chloride

on the inexpensive ones. Ted Baker’s strategy is to become a leading global lifestyle brand. The brands strategy focuses on collection expansion and reacting to trends and meeting the consumers desires. Furthermore the strategy includes their controlled distribution which covers three main channels; retail, wholesale and licensing. And for the last, carefully managing development in the overseas market. Meaning that Ted Baker tries managing the growth both in existing territories but also expanding to new ones. (tedbakerplc.com) At Ted Baker, the approach to marketing the brand remains the same as it was from day one, and that’s primarily by word of mouth and an unconventional approach. Ted Baker is one the few global brands that haven’t chosen to advertise.

Due to this reason the brand has focused creating awareness and build the brand in other ways. For example creating creative and eye catching window displays, in-store giveaways and unique events. (tedbakerplc.com) Ted Baker differentiates from its competitors by not using traditional marketing methods like advertising and rather relies on the word of mouth. The price point is also much lower than the other competitors.

Kate Spade

According to a Chief Executive Officer of Kate Spade the brand made significant progress in 2015.

The brand expanded its product categories by 14 new ones and expanded geographically into 8 new countries. This resulted growth in sales with 21% in 2015. Reported net sales for the fourth quarter of 2015 were $429 million, an increase of $30 million, or 7.6%, from the comparable 2014 period.

(PRNewswire.com, 2016) Kate Spade has over 80 stores in USA and over 100 stores internationally. Furthermore Kate Spade is sold over 400 stores worldwide. (katespade.co.uk) Graphic prints and playfulness combined to sophistication are key elements on Kate Spade’s products. Kate Spade is a global lifestyle brand and it offers women’s apparel, accessories, home décor and fragrances, but it is mostly known from its colourful accessories. Kate Spade also offers personalization for their bags, such as stickers, straps, tassels, initials and charms. The prices in the shoes goes from 55€ to 448€ and in bags 98€-675€. As the brands promotion strategy Kate Spade is focused on their online and social media presence which is focusing on the Kate Spade lifestyle.

Facebook have been significant sales tool for the brand, not only engaging with costumers but also offering special sales and previews. According to CEO Craig Leavitt their direct email base has been the strongest because they are the most loyal customers. (mashable.com, 2011) Kate Spade differentiates by being much more of a mainstream brand with the affordable luxury price points and commercial products.

Moschino After naming Jeremy Scott as the fashion house’s new creative director in 2013 the brands sales grow 10 times in two years. (businessinsider.com, 2015) The Italian luxury fashion house is specialized in ready-to-wear, leather accessories, shoes and perfumes. The products are often inspired from pop culture, from fast-food to different cartoon themed collections. The bags has a common element of often having Moschino logo with golden letters. The design mentality of Moschino’s products is to see and feel humour. The prices on the shoes ranges from 459€ to 1 615 € and other accessories like handbags goes from 205€ to 3 375€. Moschino has a global retail network of mono-label stores and franchise stores, shop-ins-shop, corners and soft corners. Over the last few years, mono-label boutiques have been opened internationally over 20 countries to complement traditional distribution in multi- label stores. In addition, many dedicated spaces, shopsin-shops and corners have been opened in the most prestigious department stores in the world such as Saks Fifth Avenue and Nordstrom in the United States, Harvey Nichols, Harrods in London, Printemps in Paris etc. (wikipedia.org/wiki/Moschino) Moschino differentiates from others being more a niche brand, having a rather small audience with the unique design and luxury prices and focusing few product categories.

Marc Jacobs

With a huge range of styles, Marc Jacobs footwear line for both men and women offers shoes for any kind of occasion needed. Every year he comes up with new innovative ideas that are pushing fashion boundaries. According to financial intelligence group PrivCo, Marc Jacobs revenue reached 950$ million in 2015. Marc Jacobs has over 200 retail stores in 80 countries internationally.

Marc Jacobs is known from its unique designs with a hint of punk and gothic vibe combined to the ultimate New York coolness, which have become popular among young consumers. The brand offers clothes, accessories and fragrances for women. The collection structure cover products with a more creative and shocking touch and then some more sophisticated and suitable for the masses.

Shoes prices range 250€-2395€ and bags with 50€ up to 3000 €. It is also notable that the more unique and special the product is the higher the price. Marc Jacobs is known from casting models for campaigns with the help of social media. Campaigns indicating freedom, edginess, underground crowd and New York lifestyle. Trying to make people feel part of a new fashion generation. (racked.com, 2015) Marc Jacobs differentiates with its young audience and bold design mentality by breaking the rules and creating a new fashion generation.

Market analysis/Cross Cultural purchasing pattern analysis Purchasing behaviour Due to the massive economic growth in China during the past decades the shopping habits have changed a lot and are still evolving. In general the older consumer value price over quality but there is a shift happening with the new generation who are becoming more quality conscious. Usually Chinese develop shopping habits when they are young and have them through their whole life. The Chinese can be divided into several consumer groups having characteristic buying habits.

Sparing retired; they are born before the 60’s and grew up during the tough economic and political times. They aren’t well educated and worked at public enterprises. Because of the difficult times they used to live it made them sensitive to the changes and are consuming sparingly.

Wealthy retired; they grew up in the same environment but were working on government funded enterprises and receiving high salary also. And now having good pension. They are less sensitive to the changes of prices and value the quality over cost.

Sparing forties; grew up at the time of the Cultural Revolution. They could have worked both in private and state own enterprises and were earning moderate income. They save most of their earning for to take care of their children and parents. For example it is really common that the family saves money for their children’s education for hoping them to have a better future. Wealthy forties; also grew up in the same environment during the Cultural Revolution. But worked in enterprises with higher salaries. They value the quality and are willing to pay premium prices for it.

Thirties; most of them are well-educated and have grown up in a more transparent environment than compared to their parents. They don’t save money as much as the older consumers. They also shop often online. They also values quality and premium prices.

Twenties; these consumers coming from the one-child-policy times have different shopping habits compared to their parents. Though they have learned some of their parent habits but this consumer group is known of consuming more and saving less. They also like to shop online and can be more impulsive consumers.

The new generation; they are under their twenties and they are the changing shift for the overall Chinese consumption. They are more Westernized, modern and open for trying new products. They are looking for unique products and follow trends and shop online.

The wealthy and rich; there is approximately 1.6 million millionaires living in China and the numbe r is still growing fast. These rich consumers are living in big urban cities like Beijing, Shenzhen and Shanghai. They look for the best products and services especially imported ones. Furthermore the wealthy consumer group also has its own seven segments (Appendix B.) Furthermore it is expected that during the years 2015 and 2030 China will be having 3.4 million more wealthy individua ls. (luxurysociety.com, 2016)

Like stated before a lot of Chinese demand for less expensive products but many is willing to pay more for higher quality. The young and modern Chinese population is becoming wealthier and are going to increase the consumer demand for the higher price and quality products which is also creating more opportunities for foreign brands. (chinabusinessreview.com, 2011) Chinese consumers are known to be interested of buying brands with big logos and showing their status. There though is a shifting trend to this as more Chinese has become interest of buying niche fashion brands. They are looking for quality items and search brands with different positioning.

These consumers are less interested of showing their status or wealth with luxury items with huge logos. The purchases are for themselves and not for showing other that they are able to purchase luxury products. More Chinese consumers have started to pay more attention on details, material and manufacturing process. (fashionchinaagency.com, 2015) The Chinese consumers favour foreign brands, they will rather pay a premium price for foreign brands and make sure buying a quality product. It is known that some Chinese brand register their company in USA or Europe and brand it as being a foreign brand rather than Chinese. Due to this many people choose famous brands that they know to be foreign and not domestic. Because of this it is important that the brand entering to the Chinese market already has some recognition in its local environment so the Chinese consumers will know the brand and its products true origin. (chinabusinessreview.com, 2011) Chinese shoppers usually believe that the higher the price it is the better the quality is. If foreign brands prices are lower than the local prices Chinese consumers can be thinking that the product has flaws. This though is also linked to the different consumer groups. Most of the older consumers

don’t believe on the foreign products being better quality but the younger ones does. (chinabusinessreview.com, 2011) Over 75% of the luxury purchases the Chinese make are made overseas. This is because of the tax of imported luxury goods is really high, making the prices around 40% higher in the Chinese local stores.

Also because of the high amount of counterfeits in China it is hard for the Chinese consumers find authentic products. Buying the luxury products outside China makes the Chinese also confident that they are buying the authentic product. (fashionchinaagency.com, 2016)

The reputation of the brand is one of the key factors on a Chinese consumers buying decision process.

Luxury fashion brands from Europe like Louis Vuitton and Gucci are very good examples of brands that have been popular for a long time among most of the Chinese consumers. But there has also been a growing interest on affordable luxury brands like Kate Spade, Michael Kors and Tory Burch coming from the States, which are mostly popular among the Chinese middle-class. (marketingtochina.com, 2016)

Furtermore, though the slowdown of the luxury market in China it is predicted that 2020 the luxur y markets sales revenue would be increased to over 70 billion euros. On a global scale accessories cover 30% of the luxury market. High-end shoes market growth has been growing stable and it is still expected to do so with a 4% constant exchange rate reaching a value of 16 billion euros in retail.

The total Chinese footwear market in 2015 had a value of almost 354 billion RMB according to Euromonitor International. And the estimated value for 2016 was 360 billion. Also it was estimated that the Chinese shoe market will continue growing with 7% average rate. Brands which are imported either from Europe, often from Spain or Italy, or USA are dominating the high-end footwear market in China. (daxueconsulting.com, 2016)

Leather shoes are the most popular products in the Chinese footwear market (Appendix C).

Euromonitor International also states that leather shoes are the most popular in the leather goods market. According to the survey 84.9% of the respondents said that they have bought leather shoes during the last 12 months, with the average of 2.8 shoe pair. Purchasing leather shoes is higher in the eastern religions than the others. The average spending for leather shoes in eastern China was the highest, reaching RMB 1 236. The study also claims that the Chine visits these stores at least once a month, mostly during weekends or holidays. Over 50% respondents said that the best place to shop leather goods are department stores. (china-trade-research.hktdc.com,2016) The Chinese footwear market is dominated by the women consumers, which covers over 50% of the total footwear sales in China. They are more interested in luxury brand. The women in China has become more independent and wealthier they also have more money to spend on themselves. Chinese women are also said to account almost half of the Chinese luxury consumers. Shoes are usually the first thing they are buying from the luxury goods market because they are less expensive than for example a handbag and often required more time to make the buying decision. Wearing luxury shoes for the Chinese women means self-expression and showing your status. (daxueconsulting.com, 2016) Exclusivity is important buying factor for the Chinese female consumers. Most of the luxury footwear stores are located in Beijing and Shanghai. They are well informed buyers and know where the high quality shoes are produced. A study made by KPMG showed that the Chinese consider the best countries for shoe production being Italy (43%), France (19%) and USA (10%). The Chinese consumers get their information about the brands from Internet, brand’s websites and different apps, blogs and social media platforms like Weibo and Wechat. (daxueconsulting.com, 2016)

The Chinese have a taste for multimedia campaign. Also storytelling is really important for the consumers. To attract Chinese customers a storytelling campaign could have a big potential to work and have an effect on creating emotional connection with the brand which would be generating to sales. The campaign has to be passioned and emotional in order to work. The Chinese don’t need convincing but feelings in order to attract them. (jingdaily.com, 2014)

Which cultural aspects make the new market good or a bad choice to internationalize your company?

The fact that the consumers are becoming more and more open to new products and are not just looking for the most known fashion brands is a benefit for Minna Parikka. Also like the analysis stated that there is a trend of consumers being after niche brands and becoming more quality

conscious and being more interested also about the materials and details. Though for Chinese it is very important to show your status to others wearing products with big logos on them is not as desirable anymore. Though it is a positive thing that the consumers want to buy imported brands it is important that the reputation and background of Minna Parikka will be transmitted to the audience. Due to the reason that the Chinese can be doubting the products or brand’s origin.

The fact that leather shoes are the most popular items in the leather goods market is a big opportunity for Minna Parikka, since most of the products are made from leather, coming from either Spain or Italy. Though the KPMG survey showed that Spain is not among the most popular producing shoe countries in the Chinese consumers’ minds the fact that the products are made in Spain with small manufacturers and using materials only coming from inside Europe should not be seen as a problem. The brand just has to inform the Chinese audience well enough so they will understand the quality and value over the brands product.

Furthermore though Minna Parikka has already established a great online presence it has to take into consideration the tools that the Chinese consumers are using for gathering their information about brands. This can be first time consuming to understand the different platforms that the Chinese are using due to their difference but this will be a mandatory tool for the consumers make know about the brand.

Negative factor in the Chinese consumer environment, especially in the luxury sector, is the fact that over 75% of Chinese buy their luxury goods when they travel due to the taxes of luxury items.

This can be seen as a challenge, to get the consumers buy domestically the brand should create more localized marketing strategy, create unique buying experience and try to adjust the prices so they are working in favour for the company.

The popularity of buying leather goods in department stores can be also seen as a big challenge due to the fact that it is extremely competitive environment to sell your products, especially when the brand is relatively small and having less awareness then main competitors.

6. Market Entry Strategy There are variable modes for foreign market entry and they are all different from each other. Each modes has their own risks and before choosing the entry mode it is important to think what the market entry plan is and who the brand’s target market are. It is also important to take into consideration the control the company wants to have, how commitment they are, how much

resources the entry mode would need and what would be the realistic assumption of the return of investments.

The entry mode that I chose for Minna Parikka entry to Shanghai would be the export entry. The mode was chosen because the company is still rather small and this mode doesn’t require as much capital. The risky side of this entry though is the limited control because the brand would need to use intermediary agent for the entire process and a local Chinese distribution partner for to import the sales in China. The lack of control could be affecting to the products quality.

Furthermore the decision of using export entry for the entry strategy is also linked to the consumer behaviour research which showed that 50% of the consumers are buying leather goods (which most popular category in the Chinese market is leather shoes) in department stores. The department stores are also going to be used for the brands distribution strategy which is going to be described more on the sales and distribution part.

Target The target group that Minna Parikka wants to reach with the strategy will be the wealthy Chinese women between 25 to 45 years old. They are well educated and successful career women. They are either independent wealthy single women, comes from a wealthy family or they are married and have kids. Furthermore they are living in big cities and are interested about fashion and are eager to try new products. They enjoy social life and want to look good. For them their look is also a sign of wealth and status. High quality, look and experience are important factors when they are shopping.

They want to stand out from the mainstream and look for unique quality designs and are also willing to pay for them. The target group uses a lot of free time on shopping. They like to shop in luxury department stores and online. They are loyal to brands that they like and offer good buying experience. The inspiration for their style they get from social media platforms like Weibo, from their friends, blogs and celebrities.

7. Marketing Strategy Pricing Strategy The current Minna Parikka’s pricing strategy is selling their product in the luxury price point.

Adults price range going from 230€ to 1000€ and children 130€ to 290€. Prices of the shoes are set by the materials, details used and the uniqueness of the shoes. The lowest price level for women

goes from 230€ -325€ and it has the biggest range on products. The highest price level goes from 445€ up to 1000€. The medium price level of the Mini (children) collection is close to the women lowest price level.

PRICE LEVELS (WOMEN) 6% LOW PRICE LEVEL 230€325€ 32 %

MEDIUM PRICE LEVEL 330€-420€ 62 %

HIGH PRICE LEVEL 445€1000€

PRICE LEVELS (MINI)

20 %

15 % LOW PRICE LEVEL 130€ MEDIUM PRICE LEVEL 235€-250€ HIGH PRICE LEVEL 260€290€ 65 %

Because the quality is really important for the Chinese consumers as the consumer analysis stated, and for the brand as quality is one of the brands core values as well, Minna Parikka is not going to reduce on the manufacturing costs because it would effect negatively on losing customers. Due to this, there is two prising strategies that Minna Parikka can use. They can either choose to keep the same profit levels, meaning that the taxes would be effecting on the prices being much higher in mainland China or reduce the price gap between Europe and Asia. Luxury brands like Chanel and

Cartier have obtained this as their new strategy in order to encourage more sales in the Chinese market. This though could be too risky for a company like Minna Parikka who is still in such early stage compared to these major fashion houses. So this been said the pricing strategy will be having the same profit levels as usual but the prices in China will be effected due to the luxury tax policy.

This means that all the product imported will have a 40% higher price than regularly due to the import taxes.

Positioning Minna Parikka

Ted Baker

Strong community

Wide range of products

Kate Spade Playfulness 5 4,5 4 3,5 3 2,5 2 1,5 1 0,5 0

Moschino

Marc Jacobs

Iconic products

Quality

The positioning map above shows the main competitors of Minna Parikka in the market and measuring how the brands are performing in different sectors, which are playfulness, iconic products, quality, wide range of products and strong community. Comparing Minna Parikka to its competitors it lacks on having a strong community and with range of products, since Minna Parikka is only offering shoes. Futhermore quality, playfulness and iconic products were segments that the footwear brand is performing well and has a competitive advantage over some of the competitors.

To improve the brand positioning it should focus on building a strong community and create new products for the market. This could also help the company to reach wider audience and create more sales.

8. Sales and Distribution Like the market analysis already stated most of the Chinese like to buy their products from department stores. Especially their leather goods. Due to this conclusion the distribution channels in Shanghai will we the luxury department stores where Minna Parikka will be having own selling corner. The corner will be have same kind of feel and atmosphere with the use of similar decoration element as the brand has in their flagship store in Helsinki (Appendix D ) in order to provide the customers similar shopping experience as in they would be shopping in the Minna Parikka store.

Because many of the target customers are shopping online Minna Parikka would also try to get into the luxury e-commerce sites like mihaibao.cn or shangpin.com. The company should not just consider one potential option but to negotiate with different potential partners in the market. This will help to understand better the customers’ demands and finding a right partner that fits with the Minna Parikka’s business model.

Minna Parikka will be selling both collections the women and mini, as they will be targeting also women with families. Some of the Bunny Sneakers comes in a same models for women and kids so both the mum and child can have the same shoes. This has been seen already trending in social media where their customers are sharing their pictures wearing the product.

Design

Sample check

Production

Distribution

14 days

10 days

2 months

23-25 days

Retailers

The products are designed in the Minna Parikka Shoes Ltd. headquarter in Helsinki by Minna Parikka which after that are send to the manufacturers in Spain. The manufacturers will be first make samples of the designs which will be then sent to Helsinki for to make changes if needed, check the quality etc. After the samples are approved the manufacturers can start production. The products from the manufacturers will be send directly to retailers around the world, including China, which will cut the cost and time on the transportation when compared sending the products from Finland. The products will be distributed by train. There is a new railway line that goes from Madrid to Yiwu, China. The train transport from Madrid to Yiwu takes 21-22 days. When arrived to Yiwu the products will be take another train to Shanghai. The transportation takes more time than with a plane but is less expensive and also more environmentally friendly. The lead time from the actual design process getting inside to the retail stores is approximately five to six months.

9. Operation Overview Minna Parikka has stated in an interview that she takes inspiration to her design from her everyday life and everywhere she goes. Often she goes to travel for to seek inspiration, Asia being one of them. The designing part is not taking more than two weeks when she gets inspired. Like stated before Minna Parikka is using small manufacturers, usually small family businesses, in Spain. The research couldn’t find out how many manufacturers they are using or in what cities. For control and quality checks Minna Parikka visits the manufacturers for six times in a year. Minna Parikka also does all the material sourcing in Alicante, and uses either Spanish or Italian leather. After coming up with the sketches of the samples and prototypes they will be sent to the factories to be made.

After the samples are ready to be tested the final structure of the collection can be set upped and the production orders will be sent to the manufacturers. Because Minna Parikka is using these small manufacturers, and focusing on the high quality by having small production lines this is the most time consuming part. Products made in Spain, assuming some in Alicante, the products will be transported to Madrid via train from where they will travel to China, first to Yiwu and from there to Shanghai’s retailer(s). Because there is so many middle-men in this process and the control over the quality is effected by this it is really important for the brand and its image to find partners who will understand this and ensure that the quality will not suffer. Especially when hiring the people on the department’s store Minna Parikka’s selling space. These sales persons also has to understand the importance of creating the luxury image and experience when buying the product.

Consumer maintenance

Consumer acquisitions Consumer satisfaction

VALUE=

Product/ Service

Image

Relationship

Uniqueness Responsive

Functionality Time Price Quality

Brand equity

Trusted Transparency

Implementation steps

The chart above shows the implementation steps and duration for each step from the Minna Parikka’s design process of Spring Summer 17 collection to the retailers in Shanghai.

10. Conclusion and Recommendation

The business opportunities for Minna Parikka looks promising. The consumers are becoming more open to new products and are not just interested of buying famous luxury brands like Louis Vuitton, Gucci, Chanel among many others. The Chinese consumers are getting year after year wealthier meaning that more people would be able to buy Minna Parikka’s products. The high prices and quality also turns for Minna Parikka’s favour because most of the consumers that the brand is targeting are valuing quality products with premium prices. Also a promising sign was that the new generation is becoming not just more open to try new brands but also their spending habits are growing. Though this is noticed already in some of the consumer groups due to the economic levels rise, the consumer habits are expected to get even better in future which works in favour for the brand. Because this change is happening already in a really fast phase it is really important for the brand to already get in the market and create the awareness and image of the brand.

Though China is a promising environment for business, it also has many challenges. Like the both PEST analysis shows, the environments are really different and China has to be handled differently than the company is used for many of the Western countries. Recommendations that Minna Parikka has to consider when entering to new market in China is trying to establish good quality control, protect the brand with the protection of intellectual property (IP), select qualified personnel who understands the values and background of the brand but also knows the Chinese culture and how to communicate with the consumers, also establishing a personal relationship will be important in order to compete with the competitors.

Appendices Appendix A: Minna Parikka Products

Appendix B: Segments among Chinese wealthy

Appendix C: Imports of selected footwear products in China in 2015

Appendix D: Minna Parikka Universum/ Pop-ups

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