XYZ company's international expansion: Canada, United Kingdom, and China

Company International Expansion

Potential Countries for Expansion

Canada

United Kingdom

China

Country for Expansion

Expansion Advice

Potential Countries for Expansion

In this case, we will discuss the potential for the expansion of XYZ company, based in the U.S., to another country for business. At the beginning, we choose three possible countries where the business can set up expansion projects and then compare the various business, economic, political and legal aspects to choose the best destination for expansion. In the second part, we would also weight the possible modes of market entry and subsequent expansion. For the first part, we choose three potential countries for expansion -- Canada, the United Kingdom, and China.

Canada

There has been a modest growth in the overall apparel market since the dollar value was unfavorable and the market was affected by retail competition. Expanding online options also gave rise to price wars. There has been downward pressure on the price and value of growth due to the growth of the discount retailers and fashion brands that are cheap fast. The spending by the consumer was also cautious. The positive trend is however supported by growth in demand for luxury and mid-luxury apparel among men. The retail market has also seen a change in the last couple of years with international brands flooding the Canadian Apparel market. With the advent of international brands such as Chico's and Uniqlo and U.S. chains like Nordstrom and Saks Fifth Avenue have changed the market environment (Euromonitor.com, 2016).

The entry level barriers to this market are low and a free trade agreement between the U.S. and Canadian government could facilitate quick set up of business. The open market laws of Canada are also favorable to the expansion of business in this country. However, the threat is from rising international brands and the upgrading national bands of Canada. The geographical nearness of Canada with the U.S. is an advantage for the company in terms of logistics and movement. The cultural closeness and similarity between Canada and the U.S. are and added advantage for XYZ Company to set up shop in the Canada.

China

It is expected that the apparel and clothing sector would perform well in China in the next few years despite the slowdown in its economy which is still growing at a greater rate that most of the developed economies. The growth in demand and the industry in the last couple of years have been steady and market experts predict a more stable outlook for the industry in the coming years. Branding exercises and customer loyalty programs are expected to flourish in the ext few years in the apparel and clothing segment in China. The growing focus on current retail value terms and the effort of the national government to convert the Chinese economy to a consumption-based economy has the potential for huge growth in the future given the fact that the Chinese population is the largest in the world. However due to the general slowdown in the national economy as well as the global economy the segment has also witnessed a slowdown in overall growth. There is also a rising fashion and brand consciousness among consumers in China and that has created an opportunity for foreign brands like XYZ Company. This has resulted in the stable value growth of the segment in China in the last couple of years (Euromonitor.com, 2016).

The entry level barriers into the Chinese market are however not as easy as in Canada and the UK. The company would have to comply with a number of requirements mandated by the Chinese government before it can start a business in China. There is also a distinct cultural gap with the U.S. which could be a problem for XYZ company communications in China. However, the most promising factor is the huge local populations and the increasing awareness of the consumers towards international brands. International names in apparel like Topshop and Old Navy have already entered the Chinese market. Online retailing is also on the rise in china at a much faster pace than any other country in the world. Moreover, china can also be considered as the gateway to the Asian markets and Japan as the geographic nearness of chain with Asia would help XYZ Company to sell its products after it starts a manufacturing unit in China.

Country for Expansion

Canada being the closest of the three countries being considered would provide operations flexibility and ease and the company operations in Canada can easily be conducted from the U.S. Moreover, costs of transportation would be very minimal which would give the company the capacity to go for tight pricing strategy at least in the beginning. However, there is severe competition in the Canadian market. The sector has not grown as much as was expected in the last few years. Barring the men's section, there has not been much of a growth in demand for apparel and clothing in Canada as people are still cautious in spending for high-value products.

The UK is easy to set up business but is plagued with the same problems as Canada. The demand has been stagnant in the last few years and there has not been much of a growth. On the other hand, consumers are reluctant to spend on high-value products at the moment. There is a however forecast of disposable wealth coming into the hands of the consumers and growth in value is expected. UK's nearness to other European markets is also a plus point.

Expansion Advice

It is advised that China would be the best country to expand into right now. The strongest factor in Chinas favor is the huge consumer population, the rising trend of awareness about foreign brands, the rise in online sale being the highest in the world and yet the limited number of international brands in the local market and the economy moving towards a consumer based one and these are the primary reasons for choosing the China (Wu and Chen, 2014).

Since market entry barriers into China is high and since there is a distinct cultural and political difference with the U.S., it is advised to go for the joint venture as a market entry vehicle. This will enable XYZ Company to easily set up business in China. Despite the distance, the costs of market entry would be low as it can take advantage of the already existing infrastructure of the partner. The U.S. company would also be able to get ready access to the consumer base of the partner which can be further exploited. Further, there are a number of Asian economies that are emerging like India, Thailand and South Korea. Australia and Japan would also be within the vicinity for exporting from China. Hence despite the obvious geographic distance from the U.S., the high entry level barriers and cultural differences, as an investment for the future China at the moment seems to be the best option available.