Petcoats Swot Analysis Paper

Introduction

This report analyses the USA pet market for Petcoats.com. A situational review of the market will be done and recommendations will be made on how to enter the market and how to communicate to consumers. Catering to the USA will have its complexities such as language, culture and foreign exchange risk, nonetheless, benefits such as favourable market growth and wider customer bases make it attractive and potentially profitable (Wind, 1986). According to APPA (2014), 68% of households in the USA own pets and spend an estimated 58.51 billion dollars equivalent to 39.59 billion pounds (1 GBP = 1.47784 USD) on pets. These amounts have consistently increased annually since 1994 (XE, 2015). This pet expenditure is not only greater

than Croatia's GDP, but also reported to be recession-proof (Usborne, 2014). Keynote (2014) highlights the trend for humanising pets and pet owners choosing luxury clothing for their pets. Carter (2015) estimated that margins would increase from 4.3% of revenue in 2009 to about 6.3% in 2014. The number of pet-owning households in the USA and sales of pet clothes are expected to continue increasing steadily, making it a very attractive market for Petcoats.com. The report format will follow McDonald (1987) Marketing Planning Framework as shown below:
Figure 1: Marketing Planning Framework

Source: Adapted from McDonald (1987)

Situational Review
Market audit
This process will help Petcoats.com to develop a clear understanding of the internal and external environment in US market (Doole and Lowe 2008). For the external environment a PESTLE analysis, Porters (1980) Five Forces, Hofstede scale (1991) and Hall (1976) will be used. SWOT analysis will be used for the external and internal environment to summarise my situational overview.

Macro - environmental analysis
PESTLE analysis (external environment)

Figure 2: PESTLE analysis for Pets.com

Source: Adapted from Cadle et al (2010)

Political and Legal
According to AMB (2014) the United States is ranked as a CRT-1 country, meaning it has very low levels of economic, political and financial system risk (see Appendix 1). The Government is stable with reliable infrastructure and has an effective legal system is reliable making it favourable to Petcoat.com. Establishing Petcoats.com in the US would require a Visa (see Appendix 2) for both employees and employers. On average it takes 4-6 weeks for staff to get E1 visas which may be a time consuming process for Pets.com. The Director can travel to the US on a free B1 Visa with a valid British passport for 90 days. Although he cannot develop and direct a business while in the country, this will fit in with initial strategy to operate online (US Embassy, 2015). The UK has bilateral trade relations with the European Union and the US and EU have a free trade dialogue. The US, Canada and Mexico are part of the North America Free Trade Agreement (GOV.UK, 2015) therefore Petcoats.com can trade freely across USA borders. Petcoats.com will need to comply with fabric labelling requirements set by the Federal Trade Commission such as labelling pet clothing made abroad with the name of the country where it was processed or manufactured (APPA, 2014).
Economic
The USA is one of the largest economies in the world (GOV.UK 2015). 68% of U.S. households own pets and around £39.59 billion is spent ($58.51 billion) on them. The number of pet owning households is expected to continue rising, driving up the demand for industry products and pet industry growth (PFMA, 2014). Figure 3 shows the projected Pet industry growth through to 2018. According to GOV.UK (2014), Petcoat.com can invoice in any currency for the goods it supplies however when the UK VAT is due on the transaction, invoices must show total net value of goods and services at each VAT rate and the amount of VAT, if any in sterling.
Figure 3: Projected Pet industry growth through to 2018

Source: (Brough, 2014)
Socio cultural
Mintel (2014) highlights the trend of humanising pets among older age groups, increasing among 45-59 year-olds and remaining high among the over 60s. Empty nesters and wealthy baby boomers were identified as the most likely to indulge their pet. Pets celebrate birthdays and holidays with their family and their owners set up social networking profiles for them. The ongoing trend of pet humanization will increase the demand for premium foods, upscale products, and more specialty services (Brough, 2014). The luxurious premium product range offered by Petcoats.com is very attractive to pet owners because they pamper their pets just as they do beloved family members (see Figure 4).

Figure 4: Pet ownership styles 2013
% of respondents with at least one pet who agreed to this statement

Source: (Euromonitor, 2014)

Hofstede scale (1990)
Hofstede (1990) scale will help understand cultural differences between the United States and the United Kingdom so that Petcoats.com do not appear ethnocentric by disregarding the America culture and their way of doing things (Newman, 1996). According Hofstede (2015) (see Figure 5), the highest score for the USA is (91) for individualism. This means Petcoats.com may need to consider adapting pet coats and offering a wider range of products to cater for customer wants and needs. The USA has a score of 46 for uncertainty avoidance showing that they are less likely to try new ideas and innovations. Petcoat.com will have to win the trust of the USA consumers by making sure the perceived image of products matches the actual product. They may also have to offer custom/traditional products for events as birthdays and holidays. A low score for long term orientation suggests that Petcoats.com need to make a good impression in a short time and make sure their products provide instant gratification. USA is an indulgent country due to the pet humanisation trend (Euromonitor, 2014) where pet owners are described as being less driven by price than emotion and passion (Bloomberg Business 2007). Keynote (2014) points out the trend for humanising pets and pet owners choosing luxury items for their pets.

Figure 5: Hofstede’s model United States in comparison with United Kingdom

Source: (Hofstede, 2015)

Hall (1976)
Hall (1976) emphasized that cultures differ in how contextual information is viewed and interpreted. It is not only what is said and how it is said, but more importantly, how the information is perceived. The USA as a low context culture is said to focus on the specifics of what is written or said and direct eye contact, smiling and gestures are commonly used (Newman, 1996). There are key language differences between the UK and the USA in shopping terms (see Appendix 3). Petcoats.com needs to familiarise with the language differences in order to communicate effectively with customers on the website and through emails. Pratt (2015) mentioned the benefits of the United Kingdom as a country of origin as British products are perceived to be of high levels of quality, history, tradition, luxury and stereotypes such as pictures of the Queen and red phone booths are very popular.

Technological
The growth of the Internet as a distribution channel allows for the targeting of a high volume of consumers relatively cheaply from any geographic location. Petcoats.com can target consumers in the USA whilst still located in the UK. Chaffey (2014) pointed out that 40% of the world population (almost 3 billion people) use the internet. Social media usage is high among pet owners and they put up photos of their pet as profile pictures, share videos or set up actual profiles on pet-specific social networking sites (Euromonitor, 2014). Petcoats.com could conduct social media promotions and encourage customers to post photos of their pets wearing their coats to win competitions. This will help to increase the awareness of brand and has the potential to be viral therefore drawing more pet owners to spend their money on their website.

Figure 6: Internet users total and percentage 2005-2014

Source: (Chaffey, 2014)

Environmental
People for the Ethical Treatment of Animals is the largest animal rights group in the world. It opposes the use of animals for producing clothing using materials such fur and leather (PETA, 2015). Petcoats.com has to adhere to this to avoid negative publicity and show their support for ethical business. It is of paramount importance to be global citizens (Jefferess, 2009) who aware of how environmental issues such as rising sea-levels, destruction of natural habitats and pollution and what role to play in reducing this.

Conclusion
Favourable political stability, trade routes, disposable income for baby boomers, number of pet owning households, humanising trends, country of origin effects, growth in internet users are encouraging for Petcoats.com. However particular attention needs to be paid to the language and cultural differences, labelling requirements as well as ethical concerns. I will now look at the industry using the Porters (1980) Five Forces theory.

Industry overview
Micro-environmental analysis
Porters (1980) Five Forces

The industry has high levels competition, high threat of new entrants, medium threat of new substitutes, moderate bargaining power of buyers and low levels of the bargaining power of suppliers.

Figure 7: Porters (1980) Five Forces framework

Source: Adapted from Porter (1980)

Bargaining Power of Buyers (Moderate)
Main stockists are retailers, supermarkets, specialist stores and the internet. Petcoats.com have to have a make their product more preferable to pet owners to justify their premium prices. Their differential advantage is bespoke, quirky and British pet coats which should represent luxury and encourage customers to buy them (Doole and Lowe, 2008).

Bargaining Power of Suppliers (Low)
There are numerous suppliers of raw materials for pet clothing therefore there is no dominating supplier in the industry. Supplier power is therefore low.

Threat of New Substitutes (Medium)
Demand has increased for specialized pet services such as pet walking, pet hotels, premium pet food, grooming and training. Premium services such as pet therapy sessions and doggy hotels have been increasing in popularity (Brough, 2014). Pet owners have a lot more substitutes to choose from which is a threat to Petcoats.com is because they could potentially reduce the amount that they spent on their offering.

Threat of New Entrants (high)
Euromonitor (2014) predicted the USA pet industry to grow by 2.3% from 2014-2019 and pointed out recession proof margins. This attracts new entrants to industry to exploit the growth. There are low barriers to entry therefore the threat of new entrants is high. The industry is estimated to be worth over $8.9 billion in 2019 – it will be sustainable enough for Petcoats.com and other new entrants (Mintel, 2014). Increasing pet ownership levels and the increasing trend for humanising pets will continue to attract new entrants to the industry.

Competitive rivalry within the industry (High)
The key challenge to the industry is to provide luxurious products with an innovative edge and making them preferable over competitors (Brough, 2014).

Constant developments and innovation mean that product lifecycles are much shorter and the industry is now characterised by strong competition placing a strong emphasis on development and trends (Cadle et al, 2010). The industry is in maturity. The majority of competitors in Table 1 except for luxury stores all compete on price, however Petcoat.com is a luxury store that offers premium price pet coats. PetSmart and PetCo account for more than half of the industry revenue (Carter,

2015).

Figure 8: Competitor analysis for pet supplies

Source: Adapted from Carter (2015)

Summary of Situational Analysis
The situational analysis has highlighted a number positives for Petcoats.com operating in the USA market. The market is politically stable with established trade routes and has viable size of pets owning households. Pet stores are recession proof and pet owners demand premium/ luxurious products as a result of the humanising trend. This is an advantage to Petcoats.com which specialises in providing quirky hand-made, bespoke pet coats and operate at the high end of the market. They will stand out from competition and be preferable over substitute products. The industry has high levels competition and high threat of new entrants. Social trends highlighted the high disposable income for baby boomers, positive preferences of British products by Americans and the increasing number of internet users. However particular attention needs to be paid to the language and cultural differences, labelling requirements and ethical concerns. A SWOT analysis will be done to be used to determine market entry strategies, formulate an accurate STP and appropriate communication channels.

SWOT
Strengths
• Established UK brand running for 5 years
• Strong sales performance – turnover this year predicted to be £600K – a 7% increase from last year
• Positive public relations – local coverage on BBC East Midlands and featured in the Daily Mail newspaper.

Weaknesses
• Small workforce. Number of employees is 4
• The employee who manages the website (also the one who designs the coats) is part time
• Lack of international experience

Opportunities
• The internet user
• The baby boomer customers
• Country of origin effects

Threats
• Threat of substitutes
• Diet and the health needs of pets may become a priority over pet clothes.
• Competition due to the low barriers to entry

The Segmentation, Targeting and Positioning

Figure 9: The Segmentation, Targeting and Positioning framework

Source ().
Segmentation
Segmenting international markets is complex yet when done right can lead to better matching of customer needs and enhanced profits (Abratt, 1993). The STP framework will be used following from the opportunities highlighted by the SWOT analysis. Effective segmentation must be done where segments are substantial, measurable, actionable, accessible and differentiable (Dibb and Simkin, 2008). Appendix 4 shows the attractiveness of segments to Petcoats.com’. Segmentation is based on the following variables: geographic, demographic, socio‐economic, psychographics and behavioural (see Appendix 4). For Petcoats.com the customer is different from the consumer (pets) so the segmentation is based on the customers (dog owners).
Socio-economic
Pet owners are willing to buy luxury products for their pets and their spending is recession proof. Baby boomers (45-58 years) are said to be the highest spenders because they are at the peak of their income earning years and they have no children at home (Euromonitor, 2014).
Demographics
Pet owners are segmented by age and the baby boomers (45-58 years of age) make up 28% of pet owners (Euromonitor (2014). Empty nesters (over 65) and baby boomers were also identified as the most likely to indulge their pet.

Figure 10: Graph of the percentage of pet owners by age

Source: Adapted from Euromonitor (2014)
Geographic
According to Carter (2015) (see Appendix 6) five of the top ten pet owning states in the USA are in the West and they experience low temperatures at the beginning of the year and hot summers from June. Oregon and Washington are more predictable and likely to rain.

Figure 11: The USA states segmentation

Source: (Carter, 2015)
Psychographics
Most popular pet owners who have children who have gone away to college, gotten married, or simply moved out (Vetere, 2015).
Behavioural
There is an increasing trend of humanising pets especially among empty nesters and baby boomers resulting in treating them like family members. Pets are treated to luxury products and they celebrate birthdays and holidays with their owners (De Mooij, 2010).

Targeting
Targeting the pet owners who sees their pet as a beloved family member. They not only indulge their pet but they humanise it therefore spend on premium pet coats especially on birthdays and holidays. Demographic targeting is 45-58 year old pet owners who are nearing retirement and have no children in the house. High disposable incomes and the absence of children in the household favour indulgence of pets in luxury, bespoke and quirky pet coats (Pooler, 2002).

Table 2: Targeting for Petcoats.com

Geography Psychographics Purchase occasion Behavioural Socio economic Demographics
The Western states of USA
(Montana, Wyoming, Colorado, New Mexico, Idaho, Utah, Arizona, and Nevada,
Washington, Oregon, California) Nearing retirement and have no children present in the home Events such as birthdays, Halloween, Christmas, New Year and the Fourth of July
Pet treated as part of the family.
Pet indulgence (expensive and luxury items). At the peak of their income earning years. Preferring expensive and luxury items. Age 45- 58 years.
Source: Adapted from Euromonitor (2014)

Positioning
This involves arranging Petcoats.com to occupy a clear, distinctive and desirable place – relative to competitors’ positioning in the minds of pet owners. Dickinson (1994) emphasized the importance of distinctive products and brand proposition as a competitive advantage and when done right can persuade customers to prefer their products over rivals and substitutes. Differentiation strategy (Porter, 1990) will be used to emphasize uniqueness and adaptability to added customer value for Petcoats.com include being British, luxurious, bespoke and quirky justifying premium price for pet humanisers. These pet owners love their pets and are willing to spend heavily on them.
Market entry
There are 15 entry methods (see Appendix 7) however we will use direct exporting because manufacturing will be based in the UK thus making it less risky and there will be greater control in elements of the marketing mix. Direct marketing in particular will be used by setting up on the Internet and directly deliver products to customer therefore cutting of the middlemen. Customers can shop at any times in a place of their choice. Credit card companies such as MasterCard and Visa and PayPal as well as international delivery services such as UPS, DHL and Federal Express, make deliveries and payments to the USA relatively effortless. Petcoats.com will be an internet based store because of the benefits such low levels of involvement, absence of geographical limitations and costs that are lower than those of physical stores. A physical store would have costs such as rent, lighting and staff costs (Cateora et al, 2011).

Product

Source: (Google, 2015)
Luxurious petcoats for big and small dogs.

Adapted to weather. Thicker padded one for winter and lighter coats in the summer

How is it branded?

differentiated versus your competitors?

What is the most it can cost to provide, and still be sold sufficiently profitably? (See also Price, below). Quelch and Hoff (1986)

Quality Adaptation

Occasion coats eg Christmas Day and birthday

Brand personality, brand identity and brand image Establish a clear identity, name, logo, positioning,

which is clear, credible, consistent and competitive

Price

Coats will be sold at the same price $182 (£120) for a small dog to $455 (£300) for a larger one and shipping costs will be added when checking out. Petcoats.com will operate at the high end of the market using the premium pricing strategy. This means that price is set high to reflect the exclusiveness of the product. Customers can pay using credit cards, debit cards or

PayPal.
Place
A direct-marketing channel will be used since it has no intermediary levels. The pet coats will be sold and exported directly to customers using UPS, DHL and Federal Express delivery services (Cateora et al, 2011). Petcoats.com will be an internet based store because it is cheaper than setting up a physical store and allows the business to eliminate geographical limitations. Siegel (1999) stated the attractiveness and functionality of websites in terms of 24 hour availability and shopping from places of convenience using computers, laptops or mobile devices. Customers in the USA will automatically directed to an American version of the website with appropriate terminology and currencies.

Promotion

I recommend that Pets.com gives customers the choice to tick a box to subscribe to offers and monthly newsletters to inform pet owners of any offers, new products and relevant news.
I recommend using positive public relations such as donating pet coats to the RSPCA and any pet charities to create good relationships with the media, customers and the general public.
Advertise in agazines –
(BBC News, 2012)Social media-
pet-specific social networking sites, including Catbook, Dogbook, Critter, Catster and Dogster Pet Business Magazine: Publication devoted to helping pet retailers improve their profits, Pet Business delivers significant editorial content that gives pet retailers essential information to help them increase their current and future financial success. Editorial content provides vital how-to information and analysis from industry experts.
Attending and taking part in The World Pet Association trade show held in southern California (target location) and Global PET Expo the largest USA annual pet products trade show exhibitions meeting potential customers, show samples, give out website information and follow up on all leads.