Internationalization of Koyo Jeans Company

 Internationalization of Koyo Jeans Company

 

Contents

Internalization strategy of Koyo Jeans Company. 3

Environmental audit. 4

Adopting the new strategy. 5

International development and entry modes. 5

SWOT Analysis. 5

Strengths. 5

Weakness. 6

Opportunities. 6

Threats. 6

Lifecycle analysis. 7

Internationalization. 7

Franchising. 7

Suitability of the franchising. 7

Feasibility. 8

United Kingdom.. 8

Entry strategy. 8

Micro and macro levels of Koyo Jeans Company. 9

National comparative advantage. 10

Recommendations and conclusion. 10

References. 11

 

 

 

 

 

Internalization strategy of Koyo Jeans Company

The company was established in Hongkong by William Cheng, a boutique shop and apparel wholesale owner.  The company mainly sold clothes in Hongkong. After traveling to France fashion exhibition show, he realized that the brands he was making were lacking behind compared to those he had experienced at the fashion show, mainly from Europe.  This drove William to find the Koyo Jeans Company.  The company soon became successful and was the first from the region to be embraced by the French fashion store, Galeries Lafayette.

In business, the term Internationalization refers to the process of improving and increasing involvement of business and enterprises in the international markets (Susman, p 27).  This implies that a company of an organization operates activities that require the involvement of different cultural backgrounds and countries.  The products might be produced in one country and distributed or sold to different countries or the company has a franchise of smaller companies in the countries it operates aside from the mother country (Elgar, 2003, p 25).  Those companies operating international business and would aspire to succeed, they need to have the ability of thinking broadly and possess a thorough understanding of cultural diversity. This is very essential for Internationalization since different countries have different people who have diverse cultures.  For instance, the cultures of China are different from those of France and Africa, therefore the type of products Koyo would provide for sale in France might not be appealing to clients from China and vice versa.  By understanding and appreciating values, cultures, beliefs and behaviors of people and companies of different countries, the Koyo Jeans Company will be successful in its guest to internationalize.  The company should also have a growing concern for sustaining quality levels of its fashion products, be  innovative and formulate the best strategies as the company adapts to different countries and cultures (Susman, 2007, p 281).

Environmental audit

The current market in which the company operates has opportunities for the growth of the company. A thorough analysis of the environment revealed that the Koyo Jeans Company can develop internationally in new countries and adopt strategies that will ensure its growth.

Adopting the new strategy

A possible successful strategy that Koyo could adopt so that it increases its international presence in other countries involve increasing and improving its circle size all over the world.  This in turn, will see Kyo Company appealing to a greater section of the customers.  This will ensure that the competitors in the fashion business lose their strength and brand power ( Gandolfo, 1998, p 36).

International development and entry modes

There is an opportunity for the country to set up its operation in other countries this is because the fashion market in the world remains unexploited regardless of the fact that a greater public appreciate fashion (DeGennaro, 2005, p 17).  This thus provides avenues for expansion with countries such as Brazil, Canada and Germany and the Scandinavian is possible host countries for the company operation (Twomey, 2000, p 18).  Another facet of international development is the fashion sense that has been growing among international athletes (Silva, & Naudé, 2000, p 160).  The company could penetrate into new markets by focusing its strength and effort into specific areas of fashion sense.  The company should target new segments such as athletes who have in the recent past, had  a growing touch of fashion (Traill & Eamonn,1998, p 19).  Rapid marketing and advertising could be the other effective entry modes of the Koyo Jeans Company since it will be a new brand.

SWOT Analysis

Strengths

Koyo is a growing brand on the global market.  This is crucial as most customers can recognize it anywhere thus increasing their confidentiality. Furthermore, the company has a strong control over the distribution, financial position, innovation, technological application and very competitive (Rogers,2003, p 30).

Weakness

The company’s financial muscle is dependant on its growth and profitability, which leaves it vulnerable to new trends.  The negative public image of most Chinese firms due to long working hours  and saturation of European market may divert the consumers (Pitelis & Roger, 2000, p 74).

Opportunities

One of the opportunities that the company has is product innovation and development, which makes it a fashion brand that consumers want to be associated with. Building upon the growing brand recognition, the company has an opportunity to expand globally (Sullivan & Steven, 2003, p 157).  This is because there are emerging markets internationally that have disposable income for spending on fashion products such as India.  Technology advancement and innovation is an opportunity that Koyo needs to utilize and develop athlete fashion designs.

Threats

The company is an international business which means it is exposed to diverse currencies hence varying cost margins in the short run (Medema, 2004, p 30).  This may lead to a loss.  The fashion industry is competitive and competitors are developing new products to have a competitive advantage.  Human rights and civil rights activists are the other threat that the company has to deal with.  Continued import/export challenges coupled with economic downturns also faces the company.

Lifecycle analysis

The Koyo Jeans Company was established in the Hongkong market and it created a personality brand that allowed it to expand and grow.  This personality that made it appreciated when being established include, quality of the products, the lifestyle it presented and packaging.  This successful establishment of Koyo brand allowed the company to extend its growth to France and now it is aspiring to develop internationally.  The Lifecycle of Koyo company is at growth stage and it is yet to reach maturity since it is at the peak of its expansion and development.  The fourth stage is extended significantly due to strong establishment.

Internationalization

Franchising

Franchising is simply the use of another firm’s successful business venture. The success of the franchisor depends largely on the success of the franchisee. In distribution terms supplier (franchisor) allows an operator (Franchisee) to make use of the franchisor’s trademark and distribute the Suppliers merchandise and the supplier receives a fee from the operator (Bator, 1958, p 352).

Suitability of the franchising

This entry strategy in Germany is suitable for Koyo jeans as there are no specific rules in most of the European countries including Germany with specific regulations concerning Franchises. Due to the fact that Germany is the largest European market Koyo jeans can identify a firm of its own in the German market.

 

 

Feasibility

Due to increased globalization and World Trade Agreements tariffs and international trade barriers have reduced. The quality of the clothing and the design from Germany firms is better as compared to that of the Koyo jeans. This would make the products of the Germany’s firms get better international market in the Hong Kong market. Production in Germany of textile products is of high quality and Koyo jeans can utilize this (Ingham, 2004, p 28). Koyo jeans can also re-brand its name and establish a new venture both domestically and internationally.

United Kingdom

United Kingdom produces high quality clothing’s including Marks and Spencer which attract a wide range of customers around the world (International Monetary Fund, 1993, p 56). The firm has reported it can do well in world countries like Dubai, Hong Kong and China. The United Kingdom firms include: Burberry, Aquascutum, and Hudson’s Bay Company among others. The UK does not have specific international barriers on franchise agreements (Krugman & Wells, 2006, p 20).

Entry strategy

The entry choices involve the choice of an international arrangement for business transaction organization and conduct (Grönroos,1999, p 295). Koyo jeans can use franchising or re-branding to enter the British market. As the British firms also struggle to get market in the other parts of the world including Hong Kong re-branding its products with similar names used in united kingdom would attract more customers (Pitelis & Roger, 2000, p 75), (Coase, 2007, p 37).

Under franchises as an entry strategy there are modes applicable to the parties involved. Under Equity franchising modes companies take advantage of a certain level of ownership of the market operations which include wholly-owned subsidiaries and joint ventures between the Koyo Jeans Company and British firms. The non equity franchising mode does not give the companies some degree of ownership and it includes a combination of exportation with other forms of agreements like licensing and franchising (Hunt, 2002, p 120). Franchising has more advantages than chain ownership due to possible conflict of interest.

Koyo Jeans can search for possible joint ventures with British firms locally and in the United Kingdom and re-brand to enjoy a wide customer base. It can also enter into franchise agreements and supply the goods from British firms and also get an avenue of marketing its domestic products. This would give Koyo Jeans a strong foundational experience of the Internationalization process as it mingles with products from diverse origin and producer (Au, & Yeung, 1999, p 170).

Micro and macro levels of Koyo Jeans Company

At micro levels Koyo jeans produces and manufactures its own products and the production takes place in its two factories in Dezhou. The company hires experienced management team to oversee its production processes. It does marketing and market research to reach its customers’ needs. At the macro level the company is outsourcing of raw materials and also finished products. It adheres to the rules and regulations of the home country in all aspects including labor laws, tax obligations among others. Internationally the Company has entered into joint ventures for example in France and has potential growth in the Internationalization process (Blaug, 1992, p 190).

National comparative advantage

The success of the Koyo Jeans Company has been due to many success factors: Koyo is a fast growing fashion company in China and this puts it in a strong position such that unit can benefit from opportunities in the men’s casual market; strength in brand management; product design; extensive sales network and an experienced management team. This success factors have contributed to the increase in revenue and profit levels (Rodriguez, 2009, p 115).

 

 

Recommendations and conclusion

After analyzing the current market position of the Koyo Jeans Company and its potential international growth,  some recommendations can be inferred to realize the continued development of the company and its future success. The company’s expansion strategy on the world market should be continued and rapidly expanded.  Recent research on fashion business reveal that there are demands for fashion all over the world and since some of those markets have less trade barriers it will be easier for the company to enter and operate.

There are more opportunities in the market for fashion products, the company could franchise or seek joint ventures with companies in different countries within the industry so that product portfolio is expanding.   This will facilitate the company to benefit from economies of scale.Communication awareness and campaign create excitement on the brand name of the company, therefore the company should liaise with renown sport personalities to build their brand name.  This works to appeal to the fans of the particular game and player used.

In conclusion, the company is growing well and its strategies of international development are helpful, but the company needs to be innovative, and adopt new strategies so that its business can thrive all over the world.  The company has many opportunities for growth and development, therefore it should seize these opportunities and make them its strength in this competitive industry.

 

 

References

Au, K., & Yeung, K. (1999) “Production shift for the Hong Kong clothing industry”, Journal of Fashion Marketing and Management, 3 (2), 166 – 178.

Bator, M. (1958). “The Anatomy of Market Failure”. The Quarterly Journal of Economics, 72 (3): 351–379.

Chen, R. & Daniels, J. (2001), Market entry and international technology transfer: A case analysis of ten U.S. high-tech firms in China and Southeast Asia, in  Axinn, C  Matthyssens, p  (Ed.)            Reassessing the Internationalization of the Firm (Advances in International Marketing, emerald Group Publishing Limited, pp. 133-155.

Coase, H. (2007). “The Nature of the Firm”, Economica 4, 386-405.

DeGennaro, P. (2005). “Market Imperfections”. Working Paper. Federal Reserve Bank of Atlanta – Working Paper Series.

Elgar, E. (2003). Learning in the Internationalisation Process of Firms. New York: Springer.

Gandolfo, G. (1998). International Trade Theory and Policy: With 12 Tables. New York: Springer.

Grönroos, C. (1999) “Internationalization strategies for services”, Journal of Services Marketing,  13 (4/5), 290 – 297.

Hunt, E. (2002). History of economic thought: A critical perspective. New York: M.E. Sharpe.  Blaug, M. (1992). The methodology of economics, or, How economists explain. Cambridge University Press..

Ingham, B. (2004). International economics: a European focus. London: Pearson Education.

International Monetary Fund, (1993). Balance of Payments Manual, fifth edition (Washington, D.C.)

Krugman, P., & Wells, R. (2006). Economics. New York: Worth Publishers.

Medema, G. (2004). “Mill, Sidgwick, and the Evolution of the Theory of Market Failure”. American journal of economics, 3 (17) 25-57.

Pitelis, C., & Roger, S. (2000). The nature of the transnational firm. Hymer (1960, published in 1976), Kindleberger (1969) & Caves (1971). London: Routledge.

Pitelis, C., & Roger, S. (2000). The nature of the transnational firm. London: Routledge.

Rodriguez, C. (2009) “Foreign Operation Methods: Theory, Analysis, Strategy”, International Marketing Review, 26 (1), 113 – 116.

Rogers, M. (2003). Diffusion of Innovations, 5th Ed.. New York, NY: Free Press.

Silva, R., & Naudé, P. (2000). “Marketing to UK retailers: Understanding the nature of UK retail buying of textiles and clothing”, Journal of Fashion Marketing and Management, 4 (2), 162 – 172.

Sullivan, A., & Steven, M. (2003). Economics: Principles in action. Upper Saddle River, New Jersey.

Susman, G. (2007). Small and Medium-sized Enterprises and the Global Economy. Camberley: Edward Elgar Publishing.

Susman, G. (2007). Small and Medium-sized Enterprises and the Global Economy. Bell & Young, 1998. Cheltenham: Edward Elgar Publishing.

Susman, G. (2007). Small and Medium-sized Enterprises and the Global Economy. Young et. Al., 2003. Cheltenham: Edward Elgar Publishing.

Twomey, J. (2000). A Century of Foreign Investment in the Third World. London: Routledge.

Traill, B., & Eamonn, P. (1998). Competitiveness in the Food Industry. Porter. New York:Springer.

 

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