PESTLE Analysis of Indian Market

David Jones a leading retail company in Australia has decided to enter a new international market. The company has planned to enter the Indian retail market after analyzing the extensiveness and diversification of a large number of populations in the country. In this assignment, a discussion on the market choice of the company, issues that could be faced by the company as an emerging organisation, competitive analysis in the international market and subsequent organizational analysis is been provided.  

Figure 1: Logo of David Jones

(Source: Shop.davidjones.com.au, 2017)

In order to analyse the market value of business of David Jones in India, PESTLE analysis is been conducted. 

Figure 2: PESTLE analysis

(Source: Floh et al. 2014)

India prolongs a good relationship with other countries in respect of political grounds. Grant (2016) has shed light on the strategic dialogue been formed between Australia and India in 2015 that provided an opportunity for enhancement of business between the two countries. However, the company can face a hindrance in their business activities due to the campaigns recently promoted by Indian Government. PM has launched a ‘Make in India’ concept in retail sectors, where, textile and garment manufacturer from rural areas of India are being exposed to the local as well as international market by the Government initiatives (ETRetail.com, 2017). David and Jones, being an international company may counter such political scenario and not get sufficient exposure on entering Indian market as Government is focusing of retailers within the country.

Australia being a developed country has a much less inflation and unemployment rate. On the other hand, India is facing huge economic issues in the past few years an inflation and unemployment are much prevalent in this country (Dess, 2013). A significant impact on the export and import of goods is made by RBI affecting tax rates. This could have affected the growth of a new business in the Indian retail market.

Social aspect in India and Australia are completely different. India is a country-inhabiting people of different cultures, religions, lifestyle and family structure. David Jones will have a great scope in attracting customers in India regarding social aspect (Grant, 2016). However, they might face competition from domestic market, being more associated with Indian culture. This would prove to be a negative factor since this organisation would be launching Western dresses which other international organizations’ like Burberry, Zara have already captured.

Competitive Analysis

Technology is facing an exponential growth in India in the last few years, enhancing import export activities, foreign direct investment and in licensing agreement. In addition to this, online medium is greatly influencing urban society of India. Thus, David Jones will be entering a country that is being technological rising and the organizing will be able to conduct their promotional activities via online medium on entering this new market (Zhang, Guo & Goes, 2013).

Tax system in India can have a significant impact on entry of David Jones in this market. Frequent increase in decrease of tax, emergence of new tax system like GST, can affect the business activities of a newly emerged organisation in Indian market (De Knop & Meunier, 2015). Prevalent legislations are also needed to be followed by the company in a methodical way, which may be time consuming. This may cause a disruption in convenient operations of their business.

Tropical summer climate is prevalent in India and people mostly prefer cotton clothes. David Jones, coming from a temperate climate country, needs to modify their clothes to make their target customers feel comfortable on availing their service.

David Jones on entering their new market in India needs to segment their market, target their customers and position their product offering. 

Figure 3: STP model

(Source: Zhang, Guo & Goes, 2013)

On the basis of four factors, David Jones has segmented their market in India that is being discussed below:

• Geographical situation of India covers an extensive boundary, being the 7th largest country in world in terms of population (Zalengera et al. 2014). Company has scope of segmenting their customers based on 28 states of the country having various cultures.
• Demographic situation of India portrays that women are adhered to ethnic clothing; however, David Jones primarily sells western outfits. In this context, there is a huge chance of facing competition. Thus, company is focusing on teenagers and women below 25 in availing their western outfits.
• Psychographic factors of Indian customers lean towards a traditional lifestyle, where their culture and ethical values play an important part (Zhang, Guo & Goes, 2013). Company needs to focus on personality and style statement of people and accordingly segment their market, since; India is a country full of mixed culture.
• Behavioral factors include desires, personal beliefs as well as creativity of customers. The company, being new to market, will face difficulty in analyzing behavioral aspect of customers and their choices.

On successful analysis of the market segmentation, David Jones needs to set a particular segment and target customers of that segment, which will provide them maximum profit. David Jones has primarily set their customers as per the demographic factors. They would target teenagers and women their age ranging from 15-25 years, and thereby promote their western outfits. Pawliczek & Rossler, (2016) have opined that women of this age range would be keen to shift their choice of clothes from tradition to western outfit.

Company needs to identify a unique selling proposition, considering the factors as to why Indian customers would be availing their service. They need to portray a positioning map and note the perception of their target customers about their products. As stated by Fernie, Fernie, & Moore (2015), a value proposition is to be created to explain the fulfillment of target customers’ needs and adopt appropriate promotional strategies.

David Jones can analyse the market competence on their entry to the retail market of India with the assistance of Porter’s Five Forces of Competitive theory. This has been discussed below:

Competitive rivalry	?       Tough competition will be faced by company from the existing local retail market (Westside, Max, Provogue) as well as international organizations (Amazon, Gap, Burberry) that are operating in India prior to entry of David Jones ?       Existing companies have greater knowledge of customers as well as prevalent market situations. Thus during adverse market conditions, David Jones will face a tough time in sustaining in market.
Supplier bargaining power	?       David Jones, being a new entrant in Indian retail market, will come across a number of suppliers. A new organisation is also subjected to switching to an alternative supplier, on being rejected from one (Pawliczek & Rossler, 2016). ?       High bargaining power of suppliers will be faced by David Jones on entering Indian retail market.
Buyer bargaining power	?       Company will be getting a number of buyers since, customers are generally curious of availing the services of a newly entered company in market. ?       David Jones will be attracting a large number of women customers, as they are launching western clothing and apparels for women.
Threat of Substitution	?       Products of David Jones have high chances of substitution on entering Indian retail market, since they will be facing huge competition from its both local and international rivals (Westside, Burberry). If customers are dissatisfied with their services, they would substitute it with products of the competitors.
Threat of new entry	?       Company will counter high threats from other international companies that are planning to launch their products in Indian market by adopting technological advancements and innovative marketing strategies. ?       In addition to this, there is a constant entry of local retail companies in the market who are well acquainted with customer choices and market factors. They may also impose a threat to David Jones.

STP Model of David Jones in India

In order to evaluate the situation of the organisation on operating its business activities in India, SWOT analysis is performed:  

Figure 3: SWOT analysis

(Source: Brito et al. 2015)

Strengths ?       Firm supply chain management system is prolonged by David Jones. They follow convenient stages of supply chain management, which are selection of raw materials, process of manufacturing and distribution process. ?       Bull et al. (2016) said that, effectual management of production adds value to its sustainability in market. A specific design is maintained by the company to stock management system that varies from 4-5 weeks. After that, a new set of designs are being formed. As a result, company fulfils customer needs more, compared to other companies.

Weaknesses ?       Self contained or centralized distribution system is the main weakness of David Jones. Owing to this system, fault in any one factors of the production can cause the whole system to get collapsed. Decentralized distribution system is followed by rival companies of David Jones that has allowed them to gain competitive advantage. ?       Advertisement process and communication with customers are not being appropriately implemented by this company. Lack of promotion can cause a huge impact on business.

Opportunities ?       Scope of global expansion in other continents has imposed a great opportunity on enhancing the business activities. ?       Focusing on online market can also be a great opportunity

Threats ?       Extreme competence in market has caused a great threat in operating business activities. ?       David Jones has not collaborated with any of the eminent international designers, thus there is no such brand label.

David Jones is a retail company based in Australia. They intend to expand their operations in India. They have a chance of generating an additional profit of 4% annually from the new operations. In addition, the company aims at deriving additional 12% profit margins annually with intended 10 % sales derived from internet operations. Based on the growth opportunities in the Indian Market, the company has a high expansion opportunity, which calls for proper planning and implementation. David Jones is well positioned to take advantage of the existing market segments in India. The key marketing strategies used by David Jones will be the 4P’s of Marketing; people, prices, promotion, and places. The company will operate at a low price strategy, which will be facilitated by reduced costs of operations. The expected sales for the first year will be approximately $ 28.8 Million.

To become the global leader in retailing and satisfy the needs of all our customers though provision of quality products in timely and convenient manner.

• Sales of by the second year
• Always have a margin of 12% on all products and services
• Derive at least 10% sales through the internet
• Develop joint ventures and Strategic Alliances with both local and international, and in India.

A market Entry mode strategy involves the company realizing their growth by focusing on the already existing customers. This will be possible through the current retailer’s retailing programs. The available opportunities that will either attract consumers from their already existing market who have not currently patronized with David Jones (Farris, 2004). To penetrate new markets easily the company will use entry strategies such as; direct investments, this will be by opening up streams of subsidiaries in foreign markets after having met all the legal requirements of that country (Homburg, 2009). Second, they will use joint ventures in regions with potential markets but high barriers to entry. This will be by entering into partnership with local firms operating in India (Farris, 2004). Third, the company will apply the Strategic alliance strategy, by this the company will enter the market as a direct investor but using UPS or DHL to lower risks. 

This model has grown to be the saving most popular model in developing effecting communication strategies. The STP Model mostly deals with the target market audience authors (Fifield, 2008). Segmenting strategies entails the identification of potential consume who have unmet customer needs and then positioning themselves to target that market group.

To strategically position themselves, the retailer will create a distinct product design and make use of a unique retail mix to enhance a good retail image in the minds of the customers in comparison to the image they have concerning the company’s competitors (Fifield, 2008). Positioning concerns itself with the image in the mind of the customers not the ones in the retail manager’s mind. Thus for David Jones, they need to identify what their image is like and ensure image consistency based on the needs of the customers in all the markets.

SWOT Analysis

 David Jones Retail should make effective use of all the communication devices that are applicable in generating public awareness about their existence and the type of products available in their stores (Aaker, 2007). These efforts are important as they facilitate the building up of a retail store image. To promote the company, David ones uses advertisements, sales discounts promotion, publicizing themselves, and personal selling through public relations (Dawson, 2005). The marketing mix strategy involves a combination between four major elements; Product, Place, Price and Promotion. It is worth noting that none of the four Marketing mix can exist on its own. To reap positive outcomes David Jones must ensure that they effectively the company should distribute shaping strategy.

David Jones require an exceptional promotion of their products and services. To achieve this, the company will use their database to identify which of their products are consumed more and by which class of customers (Goi, 2009). After this identification, promotions will be carried out focusing to offering these products as first products. The promotional activities are aimed at creating brand awareness which will then foster a band equity.

 Second, the other most relevant in the marketing mix is the location of the company. The location of the new David Jones stores should be an area with ease of accessibility. For example, most of the intended locations will be in malls, which are areas with high people traffics (Lehmann, 2007). In addition, areas near colleges and universities are preferred. The importance of the locations’ strategy is that it cannot be imitated. Once David Jones has identified the best place to locate their stores in India they can then consider searching for a second best location (Aaker, 2007). This is the best Strategy as it will enable the company to develop a strong competitive advantage across India (Aaker, 2007). This will facilitate thorough marketing of their recent market and endures that it has been penetrated and exhausted completely before moving to a different location.

Third, David Jones value their people, their customers are treated as the most significant resource in the organization. Their customer services extend to great heights beyond their complementary services (Etgar, 2007). All employees know all-important key details regarding their customers. This is the same strategy that the company plans to extend the same customer value to their new markets in India. David Jones has planned to build a strong customer base in India (Goi, 2009). To establish a sustainable competitiveness, this will be possible by creating a strong and loyal pool of customers for the company. This will be enhanced through strong and excellent customer services (Etgar, 2007). In addition, the company values the role their employees play in serving their customers and creating high customer loyalty. The company will have highly knowledgeable staff merger who are highly committed to the realizing the goals of the organization (Cateora, 2011). To create a pool of competitive employees who are committed and loyal to the company, David Jones goes ahead to drop several of the traditional ways of running organization in a hierarchical manner, they offer flexible working hours, and hold continuous leadership meetings during which all employees are equipped with leadership skills hence sweeping away the hierarchical leadership, each employees leads at them of own levels and space (Laermer, 2007).  David Jones will also add more satisfied employees by motivating employees, fostering and organizational culture that embraces and effectively manages diversity.

Conclusion

Last, David Jones intends to use the price marketing mix to attract large volumes of customers in their new markets in India. In order for them to offer quality products at lower prices the company needs to have effective cost reduction strategies and also ensure that they have the right merchandize at all times (Lymbersky, 2008). To lower the operating costs David Jones plans to use efficient distribution and Information systems that facilitates chances of low operating costs.

Economic evaluation helps a company in giving a breakdown of all financial related issues including revenues and expenditures. It acts as a financial indicator for any firm willing to fund the project. For David Jones, their economic evaluation is as illustrated below;

Step 1 

The company aims at tapping 4% of the market share within the first year of operation in the new market. The total market share of this product in the new market is 4 million target customers.

Market size=3.6 million

Expected customer size in year 1=3600000/0.4= 144,000 customers

Average Annual Purchase= A$200

Estimated Annual Revenue=A$ 28.8 million

Step 2

To penetrate the market a detailed analysis of the target market will be carried out. This will involve visiting the market to determine the strategic market segments to be covered and the specific business location. During these processes, the business incurs the following costs;

Travel costs to and from the new market= A$2 million

Costs of identifying and paying for the premises= A$1.5 Million 

Step 3

Product Mix Costs; Production, Research and Development = A$ 5 Million

Promotion Mix Costs=A$ 1 Million= A$ 1 Million

Distribution Strategies and People related costs= A$ 3.5 Million

Physical Cues Costs; rent =A$ 2 Million

Total Costs = A$9.5 Million

Step 4

The company anticipated revenue totals ton 28.5 Million with a total spending of 9.5 million. This therefore shows that despite investing in the foreign market being a plan that illustrates the expected dignify for the inability to penetrate new foreign markets. This is important because it will help the organization determine the viability of the intended expansion project

Activity	Responsible	Start Date	Completion Date
Grand Opening	Start of operations in India	1/02/2017	1/02/2017
Joint Ventures	Ease the penetration of the Indian Market	09/10/2017	09/10/2017
Strategic Alliance	Lower the risks associated with new market penetration for direct investors	06/12/2017	06/12/2017

David Jones oversees operation require contribution from several stakeholders. For instance, the employees’ contributions are very critical because employees offer a direct link between the company and the customers. In addition, the company will continuously engage with customers, suppliers, competitors, business partners, and the other organizations that they intend to enter into Strategic Alliances with.

Conclusion

David Jones has extreme potential to become one of the leading international retail companies. On their entry to Indian retail market, they would face a large number of adverse factors that would risk their sustainability in the market. In the assignment, probable market analyses have been performed that would help the company in managing revenue growth, following unique business strategy and understanding the needs of customers in the new market. Evaluation of the market analysis and successful implementation of the strategies would help the organisation gain profit in the international market.

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Make in India’ rolled out for textile & garment industry – ET Retail. (2017). ETRetail.com. Retrieved 2 August 2017, from https://retail.economictimes.indiatimes.com/news/apparel-fashion/apparel/make-in-india-rolled-out-for-textile-garment-industry/43430184

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