Introduction
Background to the study
Over the past few decades, firms in different economic sectors have experienced an increment in the intensity of competition. One of the reasons for the increment in competition is the high rate of globalization. As a result of globalization, management teams of large and small enterprises are considering implementing strategies that can enhance their firm’s competitive advantage.
One of the strategies that these firms are considering in order to attain an optimal market position entails expanding into new markets. Czinkota and Ronkainen (2007, p.282) are of the opinion that effective market positioning acts as a defensive mechanism against intense competition.
Marketing managers are faced with a wide range of options to select from in their quest to expand to the international market. Czinkota and Ronkainen (2007, p.282) assert that venturing into the international market can present firms with an opportunity to attain their profit maximization objective.
According to Czinkota and Ronkainen (2007, p.283), profits act as a main catalyst that stimulates firms to venture into the international market. This arises from the fact that international sales are perceived as one of the avenues through which a firm can attain higher profit margin.
Prior to venturing a new market, it is paramount for firm’s management teams to conduct a comprehensive market analysis of the target market. This enables the management team to attain comprehensive market information. From the market information gained, marketing managers can be able to make decisions on the most effective market entry strategies to adopt.
Currently, the fashion industry is one of the economic sectors that are experiencing an increment in the rate of competition. This arises from the lucrative nature of the industry which is attracting a large number of potential investors. According to Fernie (2007, p.62), the fashion industry has become very dynamic in the 21st century. Customers are also changing their taste and preferences with regard to designs.
Fernie (2007, p.62) asserts that consumers are increasing their desire for the latest designs. Marriot (2008, p.153) asserts that firms in the fashion industry have also become creative in an effort to attain competitive advantage which is necessary for their survival.
The high rate of technological development presents a challenge to firms in the industry. Despite the complexity of the fashion industry, more investors are increasingly being attracted into the industry. One of the fashion industries which have become very attractive is the French Fashion industry.
Aim
This report is aimed at conducting a comprehensive analysis of how companies can successfully enter the French fashion industry.
Scope
To achieve the objective, the research is organized into a number of sections. The first section entails a background analysis of the French fashion industry. This is attained by evaluating the culture, history, consumer behavior and market behavior. The second part entails the analysis of how small and medium companies can succeed in the French fashion industry.
In the third part, a number of strategies on how companies can enter the French fashion industry are illustrated. The advantages and disadvantages of venturing the French fashion industry are evaluated in the sixth and seventh part respectively. Finally, a conclusion and a number of recommendations on how small and medium firms can successfully enter the French fashion industry are illustrated.
Analysis
History, culture, consumer behavior and market behavior in the French fashion industry
The French fashion industry has attained a global recognition for a number of years. France is considered to be one of the vogue designers around the world. Paris is one of the French cities which have attained this type of recognition. Currently, Paris is regarded by various parties as the global fashion capital.
The city has numerous fashion designers such as Prada, Gucci and Chanel. Additionally, a large number of fashion houses, showrooms and outlets are also located in the city. Example of fashion houses located in Paris includes Dior, Balenciaga, Chloe, Lanvin, Yves Saint Laurent, Celine, Givenchy and Jean-Paul Gaultier (Tredre & Polan, 2009, p. 61).
According to Blaszcyk (2008, p.63), domination of Paris as a fashion city dates back to many years. From the 1700’s, many countries have around the world have continuously copied the French fashion. Prior to the revolution, the prevailing fashion in France in the 17th century was widely influenced by the judiciary and the royal family.
This is inline with the findings of Rajagopal (2010, p.6) who asserts that one of the core drivers that stimulate consumer behavior with regard to fashion products is the social interactions. This means that ones preference for fashion is affected by the society.
Additionally, Rajagopal (2010, p.6) asserts that consumers have over the years developed a mechanism of communicating their personality through the lifestyle and fashion that they adopt.
Some of the renowned individuals who influenced fashion in France include Marquise de Pompadour who was the mistress of Louis XV. Her attire was characterized by wide skirts and gowns which had low neckline. The second personality was Marie Antoinette (Dittmar & Halliwell, 2008, p.18). During this period, the fashion industry experienced a significant growth as a result of increased marketing.
In an effort to market their products, retailers and manufacturers of fashion products incorporate both pull and push marketing strategies. The core objective is to create awareness of their products to a large number of potential customers and make their products to be appealing. The resultant effect is that they are able to influence the consumers in their decision making process.
For example, through promotions, a fashion retailer or manufacturer can be able to development of a culture that arouses fashion oriented attitude amongst the consumers. For example, the fashion press which emerged during the early 1670’s increased public awareness regarding fashion products in France. Additionally, the press increased consumer awareness regarding change in fashion style (Dittmar & Halliwell, 2008, p.18).
During the 20th century, the French Haute Couture emerged. The French haute couture was one of the elite industries which were widely known for its production of fashion accessions and dresses for the elite customers (Dittmar & Halliwell, 2008, p.18).
Currently, Haute Couture has managed to develop itself as one of the leaders within the fashion industry. As a result of World War II, many fashion houses in France were closed. The industry was revived in 1947 by Christian Dior. Other designers have ventured the industry from then.
According to Dittmar and Halliwell (2008, p.18), consumers associate products with certain symbolic meaning. For example, the Rolex watch enables consumers to develop a perception that they are successful. With regard to consumer culture, it means that the Rolex watch regarded to be a sign of success. Similarly, the French have developed a particular culture with regard to fashion.
They have integrated fashion in their consumption patterns. The fashion market is lively. This is evidenced by the numerous label outfits retailers. With regard to the French fashion industry, consumers have developed a culture of elegance.
Most consumers prefer wearing stylish and designable apparels. Additionally, Paris was ranked as the most excellent Romantic Area around the world. This arises from the large number of lovers who prefer to go to Paris for their honeymoon. The city also hosts numerous fashion occasions such as the Paris Vogue Week.
The fashion culture in France has significant contribution to other members of the European Union. Consumers in France tend to incline towards high end fashions.
According to Rajagopal (2010, p.6), consumers within the fashion industry are influenced by the attractiveness of a particular fashion product. This means that they may develop a high store-loyalty depending on the quality of the products. Rajagopal (2010, p.6) further asserts that consumers in the fashion industry are not necessarily sensitive to price.
With regard to this, the French are very conscious of the market trend which makes them to be looking for new fashion trends. The conscious nature of the French consumers with regard to fashion has played a vital role towards their civilization.
This means that firms in this industry have to be very innovative in order to maintain their competitive edge. For example, consumers would like to wear the most recent apparel or accessory worn by celebrities. According to Lamont (1992, p.90), the French culture is mainly characterized by the need to attain self-actualization.
This means that the French fashion culture is characterized by actualization. The French always desire to be in the most optimal position. This explains why the French are civilized (Ucucshar, 2009, para. 7).
Strategies which firms can use when entering the French fashion market
In an effort to enter the foreign market, there are a wide range of entry modes that firms’ management teams can consider. However, when selecting the market entry mode, it is vital for the management team to ensure that the entry mode to be adopted is inline with the organization’s goals.
According to Bennett and Blythe (2002, p.194), there are a wide range of constraints that may limit a firm’s effort to enter a foreign market. Some of these constraints relate to scarcity of resources such as financial and human resources.
Taking into consideration these constraints, a firm’s management team can select the most appropriate market entry mode. In an effort to venture the French fashion market, small and medium firms can consider the methods discussed below.
Exporting
According to Longenecker (2006, p.382), small and medium fashion firms can consider exporting as their mode of entry into the foreign market. To achieve this, the firms should undertake their production process in their domestic country and export the finished products the target market.
According to Pride, Hughes and Kapoor (2011, p.82), minimal expenses are incurred through exportation. This means that it is an effective method through which small and medium firms can establish themselves in the foreign market.
To be effective in penetrating the French fashion market through exportation, it is paramount for the exporting firm to establish effective marketing and distribution channels. One of the ways through which the firms can attain this is by entering into a contract with firms that operate within the fashion industry in the host country.
The selected firm will act as a foreign agent for the firm. This will enable the firm to use the marketing and distributional channel of the agent. In return, the firm will be required to pay a commission to the contracted firm as compensation.
Alternatively, the exporting firm may also decide to establish distribution outlets in the foreign country. This means that the exporting firm will be extensively involved in the distribution process. The resultant effect is that the firm gains substantial knowledge of the foreign market.
Licensing
According to Pride, Hughes and Kapoor (2011, p.82), licensing entails entering into a contractual agreement with another firm through which the other firm is given the right to produce the products of the firm that issues the license. However, the firm issued with the license is required to adhere to the branding requirements.
In return, the firm issued with the contract is compensated. In this case, the small and medium firms intending to venture the French fashion industry may issue a license to a firm in France to undertake the production of the fashion apparels and accessories.
According to Pride, Hughes and Kapoor (2011, p.82), licensing is an effective strategy that small manufacturers which intend to launch their product into the international market can use.
This arises from the fact that minimal cost is incurred since there is virtually no investment that the entering firm will be required to undertake. However, it is paramount for the licensing firm to ensure that the contracted firm maintains the image of its products.
If this is not adhered to, there is a high probability of the product’s image being damaged. Another challenge that firms that utilize this method of entry may face is that they will not develop an effective market experience.
Joint ventures and strategic alliances
According to Pride and Ferrell (2010, p.263), joint ventures entail a partnership between a foreign firm and a local firm. As a mode of entering the international market; joint ventures are most common if there is a relatively high market risk.
Considering the intensity of competition in the French fashion industry, foreign small and medium manufacturers that intend to enter the market can achieve this by entering into partnership with local firms within the host country. Their partnership agreement may be based on specific predetermined goals or to operate as a partnership for a certain period (Hitt, Ireland & Hoskisson, 2009, p.225).
The small and medium firms entering the market may not be conversant with the existing market conditions in the host country. However, there is a high probability of the firms succeeding in the foreign market. This arises from the fact that the local firms are conversant with the local market.
Alternatively, the firms may also consider forming strategic alliances. According to Pride and Ferrell (2010, p.263), strategic alliances are mainly formed with the objective of developing the desired competitive advantage.
For example, the foreign fashion firm may have effective marketing strategies while the local firm in the host country may be efficient in its production. Through the alliance, the firms can be able to exploit the market opportunity more effectively.
Foreign Direct Investment
The firms may also intend to develop extensive involvement in the foreign market. To achieve this, these firms may establish their own facilities in the foreign market.
For example, the small and medium fashion apparels and accessories manufacturing firms may establish their own marketing and production facilities within France. According to Pride, Hughes and Kapoor (2011, p.84), foreign direct investments enable firms to have absolute control over their operations.
However, the degree of risk involved in undertaking foreign direct investment is relatively high compared to the other forms of market entry. As a result, it is critical for the firms have acquired comprehensive knowledge regarding the French fashion market.
Acquisition
According to Hitt, Ireland and Hoskisson (2009, p.227), firms can also implement their internationalization strategy by acquiring other firms in the foreign market. The high rate of globalization is stimulating firms to undertake cross-border acquisitions in an effort to attain competitive advantage.
Considering the fact that the French fashion industry is characterized by a large number of fashion houses, investors who intend to venture into this industry can identify potential firms to acquire. Hitt, Ireland and Hoskisson (2009, p.227) are of the opinion that acquisition is one of the most effective ways through which a firm can enter into a new market.
This means that there is a high probability of the firms becoming established in the French fashion industry. Prior to acquiring a firm, it is paramount for the acquiring firm to analyze the feasibility of the acquisition succeeding. This arises from the fact that acquisition may result into the acquiring firm inheriting some debts which means that the firm will be faced with an extra cost.
Franchising
According to Pride and Ferrell (2010, p.262), franchising refers to a form of licensing whereby one firm (the franchiser) gives another firm (the franchisee) authority to deal with its products. However, the franchisee is required to retain the logo and logo of the franchiser. Additionally, the franchisee is under an obligation to adopt the operation methods of the franchiser, for example, the advertising strategies.
In venturing the French fashion industry, the small and medium investors should identify potential investors in the sector with whom they should enter into a franchise agreement. Through franchising, there is a high probability of the firms being successful in the French fashion industry. This arises from the fact that they will not be required to undertake any investment thus saving the firm the much needed finance.
Additionally, there is also a high probability of the firms attaining its profit maximization objective. This arises from the fact that the franchisee may be required to pay a fixed fee or royalties to the franchiser.
Through franchising, the franchiser is able to manage and retain its brand while at the same time increasing market penetration of its products. This arises from the fact that the franchiser will control the behavior of the franchisee thus retaining its public image.
Advantages of entering the French fashion market
By entering the French fashion market, there is a high probability of the small and medium firms attaining their profit maximization objective. This arises from the fact that there is a high market potential within the French fashion industry. As a result, there is a high chance of the firms developing their financial stability.
According to Steele (1998, p.220), France is experiencing an increase in the number of consumers who travel to the country with the objective of gaining an experience of the fascinating lifestyle emanating from the fashion industry. Therefore, by entering the French market, there is a high probability of the firm attracting foreign customers.
The resultant effect is that the firm’s publicity on a global scale will be enhanced. Additionally, the French tourism industry has also undergone a significant growth over the past few years. For example, from 2007 to 2008, France tourism industry grew with a margin of 5.6%. Haberer (2010, p.4) asserts that France hosts approximately 75 million tourists annually.
It is projected that the tourism industry will grow from its 800 million pounds in 2008 to 1.6 billion pounds by 2020(Haberer, 2010, p.4). Growth in tourism within France illustrates that new entrants can increase their customer base significantly hence maximizing their sales revenue.
By entering the French fashion industry, the new firms will benefit by gaining knowledge on how to design their fashion apparels and accessories. The resultant effect is that the firms will become more efficient and effective in their innovative processes. In the long run, their competitive edge will be improved.
Disadvantages of venturing the French fashion industry
Despite the lucrative nature of the French fashion industry, the intensity of competition is very high. This is evidenced by the large number of fashion houses and showrooms within the market. Examples of these fashion houses include Christian Dior, Emanuel Ungaro, Christian Lacroix Prada, Gucci, and Lanvin amongst others. Some of these fashion houses are locally owned while others are foreign owned.
The intensity of competition means that the small firms will be disadvantaged compared to the large firms which are already well established within France. For example, the firms may not be effective in their competition. Considering the dynamic nature of the consumers with regard to fashion, there is a high probability of the firms not attaining their internationalization objective.
Conclusion
The analysis above indicates that the fashion industry in France is very lucrative. This is evidenced by the large number of fashion houses in the industry. The report has also indicated that culture within France has played a vital role in the growth of the industry. For example, the French are very dynamic and are always looking for new fashions in the market.
This means that consumers are not sensitive to price as a market variable. This has stimulated the rate of innovation within the industry. However, the large number of firms in the industry has culminated into increment in degree of rivalry. Despite this, entering the market can be profitable.
To enter the French market successfully, there are a wide range of entry modes that firms can consider. These include exporting, licensing, franchising, foreign direct investment, strategic alliances, joint ventures and acquisitions.
Recommendations; Analyzing how small to medium companies can succeed in the French fashion industry
For small and medium companies to succeed in the French fashion industry, it is paramount for the management teams to make optimal decision on the most effective mode of market entry considering the competitive nature of the French fashion industry.
It is important for small and medium enterprises to adopt less risky market entry modes. One of the market entry modes which the management teams of the small and medium firms should consider is exportation.
This is due to the fact that the firm will not be required to make any foreign manufacturing expertise. The only investment that the firm may be required to undertake is with regard to distribution and marketing channel. These firms can attain this by contracting French agents within the fashion industry.
Additionally, the firms should also consider licensing a firm within the host country to undertake the production of its products. Alternatively, the firms may also consider entering into strategic alliances with local firms within France. This will contribute towards cost sharing between the two hence increasing the probability of the firm succeeding.
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