Global Expansion Strategy: U.S. Fashion Brand in China and France

The Situation and Business Objectives

The forces of globalization are generally credited with a major role in increasing organizations' access to countless resources. Due to market liberalization, for instance, large corporations are able to import cheap resources from various global regions and thereby compete through price leadership strategies. Another crucial characteristic of globalization is that it allows economic agents incremental access to larger customer markets — manufacturers can sell their products across numerous global regions and exponentially increase their revenues.

Miana Fashion is one company currently looking to expand its business outside the United States and benefit from the advantages offered by globalization. The company has been present within the American industry for just over ten years. Throughout this period, it has succeeded in forming a loyal customer base, satisfied with the high quality of its products, competitive prices, and the reputable and polite sales staff who meet customers in each of the company's five stores. Today, the organization's sales levels have declined as a result of the economic crisis, which has reduced customers' purchasing power. Nevertheless, the organization possesses sufficient financial resources and considers this slow period the most beneficial time to pursue growth strategies.

The managerial team at Miana Fashion has identified two desirable locations for business expansion: China and France. Each of these prospective locations is characterized by unique features that could determine either the success or the failure of Miana's international growth endeavors. The aim of this report is to conduct an analysis of these European and Asian markets in order to identify their compatibility with Miana's objectives.

Necessary Business Structure

In order for Miana's penetration of the two foreign markets to stand the best chance of success, it is necessary that the two foreign locations present as few barriers as possible. For instance, it is desirable for them to maintain legislation that does not impede the efficient operational activities of foreign investors. Examples include a lack of financial barriers — meaning that foreign investors are not required to pay excessive import duties when bringing goods into the destination country — as well as the lifting of any restrictions on commercial transactions.

Secondly, a general state of stability is required, referring primarily to the economic and political climate. A favorable economic climate translates into an enhanced ability for citizens to purchase various products, including those sold by Miana Fashion. Third, it is critically important for destination countries to possess strong and reliable infrastructure — including roads, airports, waterways, and other transportation facilities — which allow the American company to transport its merchandise efficiently. It is equally important for these countries to have strong technological infrastructure, enabling Miana's leadership to communicate effectively.

The final element to be highlighted here is the existence of genuine demand for Miana's products. Both China and France must possess customer markets that are interested in and financially able to purchase the company's items. It is imperative that both conditions be met simultaneously: individuals who are interested but lack purchasing power are not viable customers, nor are those who have the financial means but no real interest in the products.

The External Environment: China and France

China and France are both strong international players whose environments have been shaped by hundreds of years of struggle and development. From an economic standpoint, China is the third largest economy in the world, with a gross domestic product of nearly $8 trillion, while France is the ninth largest economy, with a total national output of $2.1 trillion. Both countries have maintained a growth trend. Notably, despite ranking below China in overall economic size, French individuals enjoy living standards well above those of the average Chinese citizen. The income per capita in France stands at approximately $33,000, compared to only $6,000 in China; the global average income per capita is $10,000, meaning the Chinese earn less not only relative to France but to most of the world. This disparity is largely explained by China's enormous population.

China hosts approximately 1.33 billion people, making it the world's most populous nation. The Chinese people follow numerous traditions and live within various social restrictions. France, by contrast, is home to only 64 million people, who are comparatively liberal and modern; France ranks as the 21st largest country by population. The French population is also better educated: France has a literacy rate of 99%, compared to 90.9% in China. The average French individual spends 16 years in school, while the average Chinese individual spends 11 years.

In terms of religion, Roman Catholicism is the most widely practiced faith in France, with over 80% of the population subscribing to it. The remainder follow Protestant, Jewish, or Muslim beliefs, while 4% are atheist or unaffiliated. In China, the most common religions are Daoism and Buddhism, with the remaining 6% attributed to Christianity and Islam.

The matter of language in China is complex, given the existence of numerous dialects — including Yue, Wu, Minbei, Minnan, Xiang, Gan, and Hakka — though the most common is Standard Chinese, generally known as Mandarin. A similar diversity of dialects exists in France, including Alsatian, Breton, and Catalan, though these have been declining in popular use. Both countries primarily communicate in their respective native languages.

Regarding legislative structures, France operates under a bicameral parliament composed of the Senate and the National Assembly. The country regulates its affairs through a civil law system adapted to various indigenous principles. The French constitution has been amended frequently, unlike the Chinese constitution, which has been amended only twice since its promulgation in 1982. The Chinese constitution remains somewhat ambiguous — a characteristic arguably traceable to its derivation from the principles of the former Union of Soviet Socialist Republics. China's legislative branch is the unicameral National People's Congress, and its legal system is also based on civil law.

Both China and France possess highly developed technological infrastructure, well above the global average. China is the largest country in terms of main telephone lines in use and mobile telephones; France ranks eighth and eighteenth, respectively (Central Intelligence Agency, 2009). As of January 1999, France's official currency is the euro (EUR), the currency of the European Union. China's currency is the Renminbi, or Chinese Yuan (CNY). At the time of writing, one euro traded at approximately $1.4767 USD, while one Chinese Yuan was worth approximately $0.1464 USD (Currency Converter at Yahoo Finance, 2009).