Essay Assignment on The Growth of China and its Influence in the Expansion of International Fashion Brands

Feedback to the Student Explaining why the Theory Development Chapter would not earn a mark

            The theory development chapter will not be awarded with any mark since he vividly fails to articulate the problem definition. Furthermore, the paper does not present a review of the existing literature in a concise manner. The references that are relevant to your research should be clearly summarized in the literature review or discussion part of the paper. The author of the paper does not also indicate clearly the conceptual framework, hypotheses or research questions with which the theory development of the paper is supposed to be built on. The paper does not clearly articulate or describe the existing situation of the research. The author should clearly describe the factors that act as a magnet in attracting international fashion brands into the greater market of China. The author should include factors such as demographic of China, growth of a middle class population who have high preferences and tastes for high quality goods and services thus buy international brands. The author should clearly build a vivid and concise plot of the existing situation in the market of China. The author should clearly discuss the references and others that may be given in the body of the paper.

Research Methods and Theory Development

Introduction

            China is one of the fastest growing emerging markets in the world besides Brazil, Russia, India and South Africa which are well known as the BRICS which is an acronym standing for each of the first letter of each country. China offers one of the strong growth trends for any investor who wishes to invest in China hence has attracted majority of the international brands into the country. Giant fashion brands such as Zara, Gucci, Hermes and Burberry have not been left behind and have expanded aggressively in China through marketing campaigns to capture the conscience of the Chinese consumers. This paper will discussed how the Zara apparel retailer based in Spain can expand thereby increasing its foothold in China.

Body

Review of Existing Literature

Luxury fashion brand consumers in China: Perceived value, fashion lifestyle, and willingness to pay By Guofeng Li, Guoxin Li and Zephaniah Kambele

This paper examines the increase in appetite for luxury goods in the emerging markets of Asia, particularly in China. Consequently, this has led to the growth of the market for luxury goods and services. China has risen over the years to become the largest nation that engages in trading and consuming global luxury goods and services which indicates a promising future in the luxury fashion market in the Chinese economy. Consumers in China have increasingly become aware of luxury fashion brands which they have invested in. There are various factors that influence whether a consumer is willing or not to pay for luxury goods among them being the Chinese culture. China’s culture differs greatly from the Western cultures hence set any precedence or trends in influencing Chinese consumption. The fashion lifestyle of a Chinese consumer plays a crucial role in influencing the decision of purchasing luxury goods. The paper further explores the problem of counterfeiting luxury goods in China which have become a major target for counterfeits since they are cheaper and easy to reproduce. The study provides and suggests various strategies through which luxury fashion brand companies can adopt marketing strategies that are aggressive and competitive and also various ways of improving the relationships between customers to ensure customer satisfaction and customer retention.

Luxury Brands in Emerging Markets: A Case Study on China By Annie Peng Cui, Theresa A. Wadja & Michael F. Walsh (2015).

This paper aims at studying the performance of luxury fashion brands with respect to the vast China market. This study focuses on the difficulties that global fashion brands face while setting up green ventures in China, primarily focusing on the culture fit of global luxury brands in China. International fashion brands have an enormous challenge of coping with the culture in the Chinese market. The global iconic fashion brands find it difficult to adapt while at the same time standardize their brand in tandem with the global image and reputation of the firm. In conclusion, the global luxury fashion brands should strive to strike a balance between the Chinese culture and its global brand image by incorporating and embracing local elements in its products and services. The luxury brands should serve the young consumers who are fashion conscious and demand goods and services that are of high quality.

Luxury fashion consumption in China: Factors affecting attitude and purchase intent by Bopeng Zhang & Jung-Hwan Kim (2013).

The primary aim of this study was to establish the factors that influence the attitudes of a Chinese consumer to purchase luxury fashion goods and services and the intention of purchase. The primary factors that had significant influence on a Chinese consumer on his or her decision to purchase a luxury product include the brand consciousness of consumers, the social comparison and level of fashion innovation within a company. The attitude of a consumer towards luxury fashion goods also influenced his or her intention of purchasing that product.

Understanding luxury consumption in China: Consumer perceptions of best-known brands by Lingjing Zhan and Yanqun He (2012)

This paper seeks to establish the influence of psychological traits and attitudes of Chinese middle-class consumers towards their decisions to purchase luxury brands. The psychological traits that were studies in the research include the value consciousness (VC) of a brand, susceptibility to normative influence (SNI) and the need for uniqueness (NFU). Consumers are more than likely to purchase the best-known luxury fashion brands in the market due to brand consciousness hence expense on luxury brands should not be deemed an extravagant practice. The SNI parameter relates to the attitudes of the Chinese consumer towards the luxury fashion brands which suggests that social influence or peer pressure may influence a customers’ purchase decision. The knowledge of a consumer particularly on a luxury fashion brand influences both the brand consciousness and the attitudes of a customer towards a brand. According to a Chinese customer, the uniqueness of a brand is pegged on the best-known luxury fashion brand which is the particularly the most established brand.

Description of the Existing Situation

            China has experienced one of the most rapid growths in its economy both locally and in the global arena thus alluring investors by the truckload that are willing to capture the potential markets. Demographically, China has the largest population on the face of the earth with residents totalling to over 1.3 billion people. Additionally, China has the second largest growth domestic product (GDP) after the United States of America which gives its economy a sound purchasing power parity (PPP) hence the citizens have a high power purchasing power. China has a large middle class population of about three hundred million. This provides a large consumer base whereby they can afford to purchase large number of goods and services.

This middle class population presents the workforce that propelled China’s economy from the abyss of poverty into the limelight of economic prosperity and success. They have enjoyed increase in earnings hence they have disposable incomes which they can spent on the goods and services they feel like. Due to this, the middle class demand goods and services that are of a higher premium. Moreover, they demand a high quality lifestyle. Majority of the middle class population are young and fashion conscious consumers who are also tech savvy. They have affinity to well established and international brands. They demand goods and services that of high and think that the foreign international fashion brands can meet their demands. Fashion and brand consciousness make these middle class population be affiliated to a particular fashion brand such as Burberry, Mulberry or Gucci just to mention a few hence they are loyal to a brand. Brand loyalty by consumers may be an important factor for companies to ensure customer retention.

From this perspective, China must be in the top priority for expansion of the Zara brand into the market. This will give it a large market where it can cast its net through improving its revenue and profit margins. The international fashion brands are not only attracted into China by the vast middle class population but also by saturation of markets particularly in the developed markets such as US and European countries. In the developed markets, the fashion markets are highly formalized characterized by highly curated store environments and attractive shopping malls. There is also stiff competition from other established fashion brands such as Gucci, Marks & Spencer, Abercrombie & Fitch and Prada just to mention a few. Hence, there is need for high differentiation of the fashion brands to increase market and brand visibility.

Due to high saturation of fashion markets in the Western Countries their revenue and profit margins have eroded over time hence they have to look to the developing markets to improve their revenue and profit margins. The developing markets also referred to as emerging markets are the frontier markets which offer growth prospects for the lagging fashion brands in the developing world. Nevertheless, the road to growth in China is filled with potholes and is not no rosy. There are numerous challenges encountered and return on investment is not guaranteed. Hence, since Zara is factoring in an expansion strategy towards China it should ensure that it addresses the bottlenecks on the first leg to build a solid foundation that will act as the springboard into the larger Chines market. The Chinese fashion market is full of complexities and Zara has to ensure it considers various alternatives and strategies while considering its entry plan into the vast Chinese market. Zara should ensure the Chinese customers and buyers are able to associate and appreciate its brand reputation. Zara should not build its brand reputation around human rights and politics which can negatively impact the presence of its brand.

Zara should step up its marketing and advertising campaigns to increase the recognition of its brand. Brand awareness and brand loyalty play a crucial role in influencing the purchasing decision of a customer. Zara should clearly outline the plan of how its plan to enter and set up its operations in China. The company should ensure that it has properly planned its resources and human personnel expertise that should enable it finance and maximize its retail expansion. The company should enter into its market through various strategies such as full ownership of its operations through registering a subsidiary, establishing joint venture strategies and franchising its brand and operations to third parties who will manage it for them.

The plan should factor in an exit strategy that is simple and flexible to ensure that it will close down its operations and exit the market in case the venture does not prove lucrative. Additionally, there is an immense problem of building strong brands in China since it does not guarantee long-term investment returns. The Chinese market is full of cultural differences, market differences and language barriers. Language barriers will be one of the factors that may lead to Zara pulling the plug on the Chinese market. Zara should consider training its employees and sales representatives in speaking Mandarin to avoid instances of miscommunication and misunderstanding as a result of language barriers. There are wide cultural differences in the Chinese market and hence Zara may not be easily appreciated. Market differences also arise hence the organization has to adopt strategies that will enable it to penetrate the market and enjoy a higher market share.

Besides establishing its own e-commerce website, Zara should consider partnering with online retailers stores in China such as Xiu.com and Tmall shopping website to increase its internet visibility in the Chinese e-commerce segment. Zara should come up with a solid social media marketing campaign to capture the consumers who are always interacting and communicating on the social media channels such as Weibo and WeChat. Additionally, Zara should establish a strong and effective public relations (PR) strategy through relenting partnerships with the primary fashion websites in China and other media channels. Zara should ensure that it selects its social media engagement sites effectively. Storytelling campaigns have also been identified as an effective way of marketing brands not only in the home market but also internationally. Zara should establish the strategies it intends to adopt on digital and e-commerce operations vividly. Establishing an online store through a solid e-commerce strategy is an alternative marketing channel to the usual brick and mortar mode of operations.

References

Cui, A. P., Wajda, T. A., & Walsh, M. F. (2015). Luxury Brands in Emerging Markets: A

Case Study on China. In Entrepreneurship in International Marketing (pp. 287-305).

Emerald Group Publishing Limited.

“Global Luxury Trends: Innovative Strategies for Emerging Markets.” Journal of Product &

Brand Management 23, no. 4/5 (2014): 373-374.

Li, G., Li, G., & Kambele, Z. (2012). Luxury fashion brand consumers in China: Perceived

value, fashion lifestyle, and willingness to pay. Journal of Business Research, 65(10), 1516-1522.

Zhang, B., & Kim, J. H. (2013). Luxury fashion consumption in China: Factors affecting

attitude and purchase intent. Journal of Retailing and Consumer Services, 20(1), 68-79.