July 31, 2011
Table of Contents
Market Trend Analysis5-7
Competition and Barriers to Entry13-17
Market Entry Strategy17-20
Appendix I: General Economic Profile
Appendix II: Product-Specific Demand Profile
Appendix III: Market Accessibility Profile
Appendix IV: Sales and Delivery Profile
The Chinese market has quickly risen to the 2nd largest World economy and the largest apparel market in the world (World Bank, 2011). China’s resilience in the global financial crisis reflects the country’s ability to support business. China produces $110 billion in apparel sales in 2009 and is projected to reach $200 billion by 2014 (Guild & Hu, 2011). The 12th Five Year set forth by the Chinese government has exhibited a commitment to increasing per capita income and the Chinese economy (Guild & Hu, 2011).
The current median age for women in China is 36.2 which exhibits a strong demographic for the Forever 21 customer (CIA, 2011). Chinese youth are drawn to upscale casual wear but also are highly concerned with a strong value proposition (Guild & Hu, 2011). The lack of brand loyalty in China makes the market ideal for entry because the consumers have not developed an exclusive desire for one brand over another (Paine, 2010). Forever 21’s ability to deliver trendy, quality apparel at a strong value makes them an ideal brand for the Chinese market.
The current product and promotional efforts of Forever 21 align with the Chinese young adult consumer. The utilization of designer promotions at discounted rates bring quality to the brand without losing the value proposition (Edelson, 2010). Modifications to communicate channels will need to be made because the Chinese young adult collects most of their information from Internet sources as opposed to fashion magazine and traditional advertisements (Guild & Hu, 2011). The heterogeneous nature of the Chinese trands will require designs to differ from one region to the next to align with current trends.
Forever 21 is able to expand with little adjustment in China because the current manufacturing facilities are located here (Forever 21, 2011). The infrastructure is in place to manufacture products but additional facilities and delivery services will need to be obtained. Product in China is delivered from the manufacturing plant to retail locations (China Textile University, 2011). Chinese fashion differs greatly by region and thus requires designers in each area to create the designs for the factory (Guild & Hu, 2011). The first phase of expansion focuses on the two largest Chinese cities Shanghai and Beijing and will expand further to larger cities based on success. Forever 21 faces competition from domestic companies Meters/bonwe, Giordano and Baleno. Each company offers comparable products are a similar price point. The advantage Forever 21 has is a pre-existing successful structure and the desire of Chinese to adapt Western cultures (Bastin, 2011). Major competitor, Meters/bonwe, is rapidly expanding and adding the option of Internet purchases (Flannery, 2010). Meters/bonwe’s business model found great success and has been adapted by US brands like H&M and Zara (Bastin, 2011). Furthermore, US brands have an advantage over domestic apparel companies in Tier 1 cities due to the thriving adaptation of Western culture (Bastin, 2011). This makes it difficult for Chinese companies to compete. The Chinese government is open to foreign businesses that are able to demonstrate a future contribution to the state (Paine, 2010). The Chinese government...