Internationalization of River Island
Assess the attractiveness of the UK market for further growth and identify the potential benefits that can be derived from a further worldwide expansion.
The company is examining the possibility to expand further worldwide and the CEO (Ben Lewis) would like to seek your advice about the feasibility and entry strategies for entering a new country.
You are required to examine the following three aspects of internationalisation and provide recommendations based on the analyses you have carried out:
(a) Suggest only one country to enter and based on thorough analysis provide the rationale for choosing this country for international expansion; this country can be anywhere in the world except those that the company has already a presence there.
(b) Suggest the optimal rate of international expansion in the chosen country (Small or Large scale expansion); and
(c) The most suitable entry strategy and entry mode for entering that particular country.
(60 marks in total for Q2)
For Question 1:
You could do a STEEPLE analysis on the general environment of UK to assess various trends relating to the general environment and identify various opportunities and threats facing River Island. You could also do a Porter’s five forces analysis to assess the attractiveness of River Island. These analyses would help you to gain a good understanding of the situation in the domestic market (UK) and identify potential benefits of internationalization.
Your analysis should also include (i) an examination of the market demand for the high street fashion industry that exist in the UK market (i.e. level of saturation of the market, possibilities for further domestic expansion) (ii) a discussion about whether the company should go abroad for deriving substantial benefits; (iii) cost considerations relating to these potential expansions and other relevant economic issues (i.e. exchange rates); (iv) possible trade barriers might have an impact on overseas expansion; and (v) level of political stability, availability of infrastructure, labour costs and other relevant issues in certain countries which are potential targets for overseas expansion.
For Question 2: Q2(a)
In this question you need to suggest a country which could be chosen as a target for overseas expansion for River Island and provide the rationale for choosing this country. You need to assess the level of attractiveness of the countries under consideration for international expansion by examining the levels of demand for the products that River Island offers, extent of market saturation for these products (i.e. some countries offer excessive range of the above products, some others don’t have). You also need to look at the cultural factors that impact choosing clothes in the host country. After identifying a suitable country for international expansion, you could do a STEEPLE analysis on this country and also a Porter’s five forces analyses of the industries relevant to River Island in this country. These analyses are similar to the STEEPLE and five forces analyses with a focus on the UK market suggested to answer question 1. Here the difference is that you will be focusing on the chosen country when you carry out these analyses.
Here the focus should be on whether the company should start expansion in that country on a small scale or should it go on a large scale. You could examine the advantages and disadvantages of each option by evaluating the conditions that exist and suggest the option to be chosen.
In this question you need to suggest the most suitable international strategy and the most appropriate mode of entry for River Island to enter the foreign market. While discussing about the suitability of the international strategies you could examine the internal resources and capabilities of River Island, levels of pressure for cost reduction the company is facing (high or small?), the extent of local adaptation which have to be implemented while entering the chosen country, the extent of global integration which could to achieved, the advantages relating to economies of scale and scale which can be derived etc. could be examined. These factors along with other relevant factors need to be considered while choosing the most suitable strategy option. There are four major strategies namely Global Standardization, Localization (also known as “Multidomestic”), Transnational and International (also known as “Home Replication”) strategies.
In the second part of the question you need to suggest the most appropriate mode of entry for entering the chosen country. There are six different entry modes namely Exporting, Turnkey Project, Licencing, Franchising, Joint Venture and Wholly owned subsidiary (Greenfield venture or Acquisition). You need to suggest the most preferable