Company background and Target Market
The John Lewis partnership is an employee earned company based in the United Kingdom which operates through a structure of department stores, Waitrose supermarkets as well as specialist services such as currency, insurance and solutions for Business. John Lewis main business platform is based on their signature department stores.
The Target Market for the John Lewis Partnership is structured towards the Middle and Upper class social brackets because there is easier growth opportunities towards these markets. This is because these social groups have a good level of disposable income so therefore have strong purchasing abilities which in turn allows the John Lewis Partnership to be able to implement a Business
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strategy which involves developing products which will provide a high amount of revenue. The overall attractiveness of India Regarding the potential of John Lewis entering the Indian Market there are many benefits associated with this. These are: . Increase in wealth - India not long ago went through a shift in culture where more and more people are leaving poverty and entering the middle class generation of society. FIG 1 With every new market entered there is always a degree of risk associated with that decision however I strongly believe that the less intense growth of the middle class there is then there will be less risk as thee will be less investors looking to enter the Indian Market as they will be more concerned with the faster developing markets which therefore gives John Lewis the chance to enter a niche market and have time to establish a Market share in an open market.
Gap in the Market -. Currently in India there are no luxury department stores occupying the Market so therefore this presents a Business opportunity for John Lewis partnership to be able to fill a gap in the market which will allow the company to be able to expand significantly since there is a growing interest for luxury retail as disposable income amongst consumers in India is on the rise.
Rise in annual disposable income – The chart above shows the Annual disposable income for India. The year end 2014 is forecast to be a successful year in terms of annual disposable income growth. This data further reinforces the point of an available Gap in the Market because the more disposable income consumers have means the more spending power they will have available which therefore means there needs and wants are going to change meaning this group of society will be shifting more towards luxury high quality goods
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. Costs of entry The initial capital star up costs for expanding the John Lewis Partnership in India are relatively high.
This is due to initial set up costs and professional support which is essentially needed when first entering the market in India. If John Lewis take the decision to expand in India they will need to cover the following initial costs:
. Trade Tariff- the Indian Government have a trade tariff policy in place regarding foreign investments. John Lewis currently source their stock within the United Kingdom so therefore initially John Lewis would be subject to paying import tariff in order to import stock.
. Human resource cost- John Lewis will have to source Human capital within India in order for the market entry to be successful. It will be essential for John Lewis to employ human capital since there will be a language barrier so therefore there will be the requirement to employ staff within the country to ensure there are no communication issues
Overall John Lewis should financially plan expenditure of 14.6% of income per capita.
Risks The main operational risks that would be associated with the Market entry would be the following: Culture barrier- The majority of India is Hindu so therefore their culture differentiates very much from the Western Customer base of John Lewis. Although a large proportion of India`s society are moving up to the middle class bracket, these consumers may not yet have adapted to western tastes so therefore John Lewis run the risk of entering the Market with the wrong product strategy meaning they would have to re-develop their product strategy which could be financially disastrous within the initial entry stages Competition – Although there is a gap in the market for Luxury retail , John Lewis are still taking a risk as there are still other retailers operating within the retail market who have already well established brand loyalty. John Lewis will be a very new brand so therefore in order for the Business model to be Successful it is essential that John Lewis are able to effectively compete with other retailers in order to establish their brand identity and develop customer loyalty. Currently the main Competitors that John Lewis face are Big Brazer, Lifestyle and Marks and Spencer. All these Companies have already established and respected brands so therefore John Lewis will have to compete against these brands. Overall evaluation of Entry to India Overall I consider India an attractive country to enter for Business development purposes. I firmly hold this view due to the significant economic growth India has experienced over the last 24 months. To the end of June the Economy grew by a total of 5.7 percent, the highest growth for 2 years. Further to this the middle class economy of India has grown by a total of 25,000. Due to this it has led to an increase an overall consumer spending power meaning the current market conditions for retail Businesses are promising due to the overall consumer spending power growing in India. The growth of the middle class in India has also resulted in more of society appreciating western culture therefore making now the correct time for retail Businesses to enter the market in India. Entry mode If John Lewis partnership make the decision to enter India there are several different market entry strategies they could follow. The available market entry strategies available are the following; Joint acquisition- A joint acquisition is where John Lewis would enter the market in India would enter the market in conjunction with another firm. If the John Lewis partnership were to consider a joint venture as means of entering the market within India they should consider the potential of working in conjunction with a retail firm already based in India. Entering the market via a joint venture with a retail firm already based in India would allow John Lewis to benefit from the following factors: . Market expertise- John Lewis would benefit from market expertise as the firm they would work with would already have full knowledge of the market therefore reducing risk substantially . Economies of scale- John Lewis would be able to integrate resources with the other company so would therefore be able to benefit from economies of scale within Human Capital, Marketing, financial investment and purchasing. The only downside to using economies of scale would be John Lewis would not have full control over the brand and would not have the opportunity to be able to dominate the market as this would be split between the other companies. Greenfield investment- A Greenfield investment is where a Company individually invest in a market with no third party support. Greenfield investments can produce incredible business results however can also be incredibly risky. The main advantages of Greenfield investments are that it would allow John Lewis to have full market control as they would have full ownership. A Greenfield investment would also allow John Lewis the Opportunity to implement a long term Business strategy in India. A Greenfield investment could however be extremely risky for John Lewis to use because it will mean they will have to enter the market with no experience or local expertise and will also have to pay initial high entry costs Franchising – In order to achieve rapid expansion within India John Lewis could look at the possibility of operating a franchise in India once they have initially opened their first location. Franchising would allow John Lewis the benefit of rapid market growth however there are still downsides to this strategy are that it would mean John Lewis would not receive full success of any market growth as they would not receive full profits. John Lewis also run the risk of losing brand reputation as they need to ensure franchisees operate the franchise following the correct procedure. I feel the most suitable entry strategy for John Lewis to follow in order to enter the Indian market is to enter as a joint venture. I believe this is a suitable entry strategy because this is the most risk free solution. Entering the market in India through a joint venture will allow John Lewis to be able to work with a company which already has market experience and establishment which will therefore allow them to achieve growth as they will be working with someone who already has experience of the market. It will also allow John Lewis to benefit from economies of scale thus reducing initial entry costs substantially. Conclusion To conclude I feel John Lewis have a very strong Business opportunity in India. The Economy in India has this financial year achieved the best growth for 2 years and is predicted to grow even further. The demographics of the Economy are also looking promising with an increase of the middle class by 25,000 there is a strong market for John Lewis. The middle class of India have increased spending power so are shifting towards western commodities so therefore there is a gap in the market for John Lewis product range. Although it will be highly challenging for John Lewis entering India if they carefully and correctly implement a joint venture then they will able to effectively enter the market as the joint venture will allow them to work with a company which already has a market strategy successfully in place.
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