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1.0: Introduction
Next Plc is a British multinational company. Headquartered in Enderby, Leicestershire, it is a
clothing, footwear and home products retailer with over 700 retail stores worldwide. Almost
540 of those stores are here in the UK and Ireland, and the remaining spread out across
Europe, Asia and the Middle East. Next also operates web stores, called Next Directory, and
has over 4 million active customers in the UK and overseas.
Next is in a highly competitive retail industry along with big rivals. Their competitors in the
UK include Marks and Spencer (market cap: £8.5b) [Yahoo Finance, 2015,] Arcadia group,
(total sales: £2.7m) [Arcadia Group, 2014] who own high-street brands such as Topshop,
Dorothy Perkins, and Debenhams. Other high-street brands such as H&M could also be
considered as their rivals.
Next have very loyal customers. Their target markets are those in their 20’s and 30’s who
are looking for affordable and stylish clothing to get them towards the end of the next
fashion cycle. (Hoovers, 2015.)
The British firm also has very strong values they stand by. These include being better by
design, expanding product range, ensuring no one is harmed during production of their
products or when they are being used and are sourced responsibly. This gives customers
great value, as they are receiving all these benefits for affordable prices, as we will see later
on in the report. (Next Corporate, 2015.)
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2.0: Situationanalysis
In this section, both the external and internal environments will be analysed. That will
include the macro and micro environments for the external aspect and Next plc for the
internal environment.
2.1: Macro: PESTLE Analysis
PESTLE is a framework used by businesses to understand the external microenvironment
and how it will affect their firm during critical times such as new product launches.
2.1.1: Political
Political factors affecting the global clothing industry include taxation, legislation,
government agencies and pressure groups. Political and legal factors are very closely related
and will usually be mentioned together.
Political factors are among the least predictable factors in the external environment of the
clothing industry. This is because democratic governments have to re-elect every few years,
changing the politicians in power and therefore changing legislation. Corruption is also a
barrier for growth in many economic industries, as some companies offer bribes to
government officials to help them avoid many legislative rules such as taxation. An example
of this is in the Dhaka factory accident in Bangladesh a few years ago, where factory owners
were known to bribe officials to by-pass or completely avoid safety checks on buildings and
equipment. This relaxed attitude from officials who settled for the bribe lead to the building
collapsing and killing hundreds of employees producing clothes for global retailers. (Ifthekar
Zaman, 2012.) (See appendix A for more information.)
2.1.2: Economical
Within the global clothing industry, economical factors include labour costs, interest rates,
unemployment rates and taxation. Economical factors are also among the least predictable
as they tie in closely with political factors and government legislation. As mentioned in the
political section of this report, many factors are inter-related with the different parts of a
PESTLE analysis, such as taxation mentioned here and in the political section. An example of
an economical factor affecting the global clothing industry is currency strength. For
example, if one currency strengthens, firms in the clothing industry can become more
competitive in pricing since they purchase inputs from foreign countries. This means that
the entire clothing industry can be depressed or lifted with the weakening or strengthening
of that particular currency. (Angie Mohr, 2015.) (See appendix B for more information.)
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2.1.3: Social
Social factors include culture, trends, norms, demographics and population changes. One of
the most significant changes occurring recently and that has had a huge effect on the
clothing industry is the use of social media and mobile phones for younger customers. These
customers may prefer to shop online, whilst older people will stick to their tradition of
shopping at clothing retail outlets, showing the differences businesses need to account for.
An analysis of these factors can pull out faults in a business’s marketing strategy that they
have not noticed previously, and provide clothing firms with new ideas. (Rick Suttle, 2015.)
(See appendix C for more information.)
2.1.4: Technological
Technological factors can have a large impact on the global clothing field, more specifically
on the manufacturing processes involved in mass-producing clothing products. These
include technological advancements, the role of the internet, government spending on
technological research and the impact of information technology on business. Technology
may be the hardest of the six factors to keep up with as there is a rapid pace of change and
unlimited opportunities. One of the most powerful technological changes on the clothing
industry was the invention of the internet and the World Wide Web. It helped provide
clothing retailers new ways for customers to shop, for example online shopping, and also
revolutionised the way they go about marketing and promoting new styles with the help of
social media. In today’s world, many customers have smartphones and/or tablets and use
apps on a daily basis, creating a huge market for firms in the global clothing field. (Rick
Suttle, 2015.) (See appendix D for more information.)
2.1.5: Legal
Legal factors are very closely inter-related to political factors and many factors will be
included in both sections. Factors affecting the clothing industry include consumer law, child
labour legislation, workers’ rights and green laws. Legal factors are also very unpredictable
as they can change with a single government policy, and companies have almost no control
over them. (Rick Suttle, 2015.) (See appendix E for more information.)
2.1.6: Environmental
Environmental factors include pollution, geographical location, weather and climate. They
particularly affect farming and agri-cultural industries.
These factors usually will not have a huge impact on the global clothing industry, unlike
other industries such as car manufacturing. However, there are factors, such as pollution,
7. 6 | P a g e
which will still be a factor firms manufacturing clothes need to look out for. One example of
an environmental factor affecting the global clothing industry is the customer perception of
killing small animals for their fur. This was seen as a poor use of land and inhumane, and
also lead to the drastic decline of the fur market in the 1990’s. Today the industry has
picked up again, however the number of fur farmers have substantially decreased. (Angie
Mohr, 2015.) (See appendix F for more information.)
2.2: Micro: Porter’s Five Forces
Porter’s five forces are used to understand where power and gain lies in a business
situation. It is a powerful but simple tool and is very useful as you can assess the current
situation you’re in and the situation of the new market you want to enter. (Mind tools,
2015.)
Force Level of significance
Competitive rivalry High
Threat of new entry Low
Threat of substitutes Very low
Supplier power Low
Buyer power Low
2.2.1: Competitiverivalry
For the clothing industry, the competitive rivalry will be high. This is because there many
competitors in the market such as Next, M&S, Gap and H&M. (Mars, 2014.) (See appendix G
for more information.)
2.2.2: Threatof newentry
The threat of new entry towards the clothing industry is relatively low. This is due to a
number of factors. Firstly, brand names are well known, which makes it that much more
difficult for new entrants to enter as they do not have any brand recognition or loyalty. (Jim
Wilkinson, 2013.) (See appendix H for more information.)
2.2.3: Threatof substitutes
The threat of substitutes towards the clothing industry is very low. This is because the
choice of substitutes out there is very minimal. (Matt Bodimeade, 2013.) (See appendix I for
more information.)
2.2.4: Supplierpower
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The supplier power in the clothing industry is considered low. There are four types of
suppliers: manufacturers, distributers, independent suppliers and importers. Different
suppliers are used for different industries. (Martin, 2014.) (See appendix J for more
information.)
2.2.5: Buyerpower
Within the clothing industry, buyer power can be considered moderately low. This is
because of a number of reasons. Firstly, there are no or very limited substitutes to clothing
within developed countries, such as the UK and US, as mentioned above in threat of
substitutes. (Jim Wilkinson, 2013.) (See appendix K for more information.)
2.3: Internal: Value Chain model
‘Value Chain Analysis describes the activities that take place in a business and relates them
to an analysis of the competitive strength of the business.’ (JimRiley, 2015.)
According to Michael Porter, the value chain model can be broken down into two sections,
primary and support activities:
Primary activities
Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service
Support activities
Firm infrastructure
HR management
Technology development
Procurement
Businesses can then generate a competitive advantage if they are able to effectively and
efficiently perform and complete these activities. If done correctly, a customer will be
willing to pay more for the product or service, which will exceed the cost of the activities
required to create it. It is through this method that a firm has the opportunity to create
superior value. Companies can use one of two strategies to gain a competitive advantage;
cost leadership or differentiation. (Jim Riley, 2015.)
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2.3.1: Inboundlogistics
Inbound logistics cover everything from receiving, storing and delivering raw materials to
first and second tier suppliers. (Mind tools, 2015.) (See appendix L for more information.)
2.3.2: Operations
Operations include the manufacture of products and services, from the inputs such as raw
materials to the outputs, which are the finished goods or services. (Mind tools, 2015.) (See
appendix M for more information.)
2.3.3: Outboundlogistics
Outbound logistics are all those activities associated with getting the finished product to the
end user. (Mind tools, 2015.) (See appendix N for more information.)
2.3.4: Marketingandsales
Marketing and sales is essentially an information activity since it informs customers about
their product and services as well as everything related to it (benefits, price, use, etc.) (Mind
tools, 2015.) (See appendix O for more information.)
2.3.5: Service
Service is to do with the activities required to maintain the products’ performance after it
has been sold. That includes customer service, warranty and complaints. (Mind tools, 2015.)
(See appendix P for more information.)
2.3.6: Supportactivities
Support activities include procurement, human resource management, technology
development and infrastructure. They help the primary activities and are just as important
in adding value within the chain. (Mind tools, 2015.) (See appendix Q for more information.)
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3.0: Summary ofkey issues:SWOT
According to Jim Makos, SWOT analysis is ‘an analytical tool used for the identification and
categorization of internal and external factors. Strengths and weaknesses in SWOT analysis
are termed as internal factors while opportunities and threats are termed as external
factors.’ (Jim Makos, 2014.)
3.1: Strengths
Next has two very powerful strengths, the first being diversified routes to market. (Kevin
Godbold, 2014.) (See appendix R for more information.)
3.2: Weaknesses
Next have two major weaknesses. The first is that they produce more formal clothes rather
than casual. (Next, 2007.) (See appendix S for more information.)
3.3: Opportunities
One opportunity in the clothing industry is the having access to a new source of material.
(Jennifer Williams, 2015.) (See appendix T for more information.)
3.4: Threats
One threat to the clothing industry is political unrest in an area of raw material supply.
(Jennifer Williams, 2015.) (See appendix U for more information.)
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4.0: Market selectionand entry methods
In this section, five primary markets will be chosen for screening, and of those five, two final
markets will be selected and analysed for Next to enter into. This will include a culture
evaluation of those two markets as well as the recommended entry methods Next will use
for each one.
Below are the five initial markets selected for screening:
Singapore
Italy
Spain
Canada
Argentina
4.1: Market selection: 12 C’s framework
The 12 C’s framework is a model used to analyse international markets. Each C is analysed
for each of the five selected countries, with an overall score decided at the end. The two
countries with the highest scores are selected for Next to enter into. (See appendix V for
more information.)
The two countries chosen for Next to enter into are:
Singapore
Canada
4.2: Culture evaluation
In Singapore, they have a very strong family style culture. (See appendix W for more
information.)
4.3: Market entry methods
Currently, Next use franchising in their 200 international stores. (Next, 2015.) (See appendix
X for more information.)
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5.0: Marketing mix and marketing strategies
The marketing mix is a model used by businesses that refers to a set of tactics or actions
they take to promote a product or brand in the market. (The Economic Times, 2015.) (See
appendix Y for more information.)
5.1: Product
Product is probably the most important aspect of the marketing mix. (See appendix Z for
more information.)
5.1.1: Design
Next has a major USP over their competitors, and that is the design of their products. (See
appendix AA for more information.)
5.1.2: Quality
The quality of the clothes produced will be very important to both Singapore and Canada.
(See appendix AB for more information.)
5.1.3: Branding
Branding is a very important aspect of the product used when promoting yourself. In the
case of Next, it’s branding is all about positioning. (See appendix AC for more information.)
5.2: Promotion
Promotion is the second of the marketing mix 7P’s. It is all about getting the message across
to the customer of the company’s product or brand and the various methods of doing this.
It includes advertising, leaflets and joint ventures. (Business case studies, 2015.)
5.2.1: Advertising
Advertising is all about letting the customer know you or your product exist. (Neil
Kokemuller, 2015.) (See appendix AD for more information.)
5.2.2: Leaflets/posters
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Leaflets and posters are one of the ways firms can use to advertise a new product or their
own brand. (See appendix AE for more information.)
5.3: Price
Price is the most important element of the marketing mix as it’s the only element that
generates revenue for the company. There are many pricing strategies used by
organisations including price skimming, penetration and psychological pricing. (Business
case studies, 2015.)
5.3.1: Penetrationpricing
Penetration pricing is the strategy used by firms to lower the price for a product at first in
order to attract customers away from competitors. (Investopedia, 2015.) (See appendix AF
for more information.)
5.3.2: Costpluspricing
Cost plus pricing is a cost based strategy used by companies to determine the price of a
product or service. (AccountingTools, 2015.) (See appendix AG for more information.)
5.4: Place
Place, or distribution as it’s sometimes called, is how a company gets their products to their
customers at the right time, in the right place and in the right quantities. It is a crucial part
of the marketing mix for any business. There are a number of distribution channels including
retailers, wholesalers, distributers and direct selling through e-commerce. (Business case
studies, 2015.)
5.4.1: Retailers
A retailer is a business or person who sells products to the customer directly. (Business
Dictionary, 2015.) (See appendix AH for more information.)
5.4.2: Wholesalers
A wholesaler is a person or company who buys products in bulk from various producers and
sells them on to retailers who then sell them on to customers. (Business Dictionary, 2015.)
(See appendix AI for more information.)
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5.5: Processes
Processes are mostly relevant to the service industry, as it’s to do the service executed
when inputs are used to produce outputs in the most efficient of ways possible to minimise
costs. (The marketing mix, 2015.) (See appendix AJ for more information.)
5.6: People
People are the most important element of any experience or service as they are the ones
who are directly in touch with the customers. (MarketingTeacher, 2015.) (See appendix AK
for more information.)
5.7: Physical evidence
Physical evidence is also used in the services industry, however, it also includes aspects that
can be implemented by Next. (The marketing mix, 2015.) (See appendix AL for more
information.)
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6.0: Conclusion
In conclusion, this report has analysed the external and internal environments that Next and
its industry operate in. This was done using the PESTLE framework, Porter’s five forces and
the value chain model for the internal aspect. It also included a short SWOT analysis for the
summary of some key issues such as Next’s strengths and weaknesses. In addition, this
report preselected five international markets for Next to enter into, before using the 12 C’s
framework to narrow them down to two primary markets. The market entry methods and
culture evaluation for the new markets were also mentioned. Finally, a marketing mix along
with it’s marketing strategies was deeply analysed for the entrance into Singapore and
Canada for Next.
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8.0: Appendices
A (2.1.1: Political): In the case of the global clothing industry, political factors will not have
much of an effect. However, there are some factors which may need to be analysed. One for
example is taxation. (Jim Makos, 2015.) Many firms in the clothing industry operate as an
international company, which means they will have different taxation rules in different
countries. Of course, the global clothing industry will have no control over what those
figures will be, making it a powerful factor that firms must understand and know about
before entering that particular market. As we have seen recently, many global firms such as
Amazon and Starbucks have evaded tax or reduced the amount required in various
countries through a loophole in government legislation. This has had a large impact on their
reputation and how they are perceived by customers. Firms in the clothing industry such as
Next will want to avoid such a system as the impact on their business can be severe.
B (2.1.2: Economical):Economical factors play a big role in affecting this industry both
positively and negatively. An example of a positive impact is during economic boom periods,
customers have more disposable income and can afford to purchase more clothing items,
increasing sales for manufacturers, wholesalers and retailers in the global clothing industry.
However, during economic recessions, like the global recession a few years ago, the affect
on the global industry will be the exact opposite. Customers will have less disposable
income and feel less confident in spending that income. Therefore, sales for these clothing
entities will be much lower, leading to retailers being stuck with huge amounts of inventory,
and their cash being tied up in warehouses full of unsold products. To avoid the risk of
having their cash tied up in inventory, clothing retailers may have to lower their prices for
customers to feel confident making a purchase and to compete with brands that are more
generic. As a result, the global clothing industry may shrink, increasing competitiveness
between large brands in order for them to survive. (Rick Suttle, 2015.)
C (2.1.3: Social):Social factors affect the global clothing industry in different ways. For
example, a small clothing retailer may spot an emerging style or trend in the market, and
develop and produce clothes that satisfy that niche segment. However, this style could soon
become mainstream, and major firms within the field will start developing clothes to satisfy
the larger segment that it has grown into, leaving the smaller firm without a market. Many
firms will avoid creating styles that are outdated or fall outside the norms of society.
Another example is an ageing population. As people age, they usually become more
sedentary and less active, and they now require looser fittings of jeans or trousers. (Rick
Suttle, 2015.) Firms in the clothing industry must account for that segment of the market
and satisfy their needs.
Overall, social factors are always changing, and firms in the global clothing industry need to
be able to predict these changes to capitalise on them to satisfy them first.
22. 21 | P a g e
D (2.1.4: Technological):Technological factors affecting the global clothing industry include
scarcity of resources, demand and production. An example of limited resources is the
scarcity of leather. This can force clothing manufacturers to use substitute leather materials
such as faux leather. (Rick Suttle, 2015.) This will have an impact of customer’s expectations
and perception of a firm, as customers will want the highest quality available for the lowest
price, to get the most value for their purchase. But if clothing retailers sell faux leather and
keep the price high, customers will not be satisfied and may switch to rivals. Shortages in a
raw material, such as cotton, may leave businesses with no option but to increase prices of
clothes made with this material to maintain profitability, as they must pay manufacturers
more. Customers again will feel they have not gained any value, and may not come back for
a repeat purchase. An example of production factors may include clothing manufacturers
using more automated equipment such as robots in their plants, which will inevitability
force companies to fire employees. One example of a demand factor affecting the global
clothing industry is the possibility of a larger firm introducing a new trend or clothing style,
which can shift demand away from older fashions, leaving a smaller competitor having to
discontinue particular clothing lines and invest in supplying new ones to match the demand
required by the market.
Technological factors will always change, and change rapidly, requiring firms in the global
clothing industry to keep up with them. Also, with varying R&D budgets for the different
firms in the industry, some of the larger companies may find it easier to innovate with new
technologies or trends, leaving smaller firms in a more difficult position to survive.
E (2.1.5: Legal): The global clothing industry has been hit with a number legal issues such as
child labour laws and workers’ rights. One example of legal factors affecting the clothing
industry is the power of union workers, who may picket their employees, especially if their
medical benefits or wages are much lower compared to similar industries. This can affect
production hugely, and lead to global clothing retailers not receiving their autumn or spring
fashions on time, leading to low stock and unsatisfied customers who are unable to
purchase new styles. Another factor that can affect clothing retailers are activists, who are
not being employed by the firm, can picket retailers for manufacturing clothes in countries
known for violating child labour legalisation. This negative publicity can impact some of the
bigger firms, but can have a detrimental affect on smaller ones, who can be put out of
business due to small profit margins and weaker brand images. (Rick Suttle, 2015.)
Legal factors are those that businesses in the global clothing industry must obey and follow,
as the effect on their firms if they have broken them can be huge. Most of them are
completely uncontrollable, and predicting them can be a challenge due to the ever changing
government policies and elections.
F (2.1.6: Environmental): Fashion is a fast paced industry. Trends change, customer’s tastes
change and manufacturing firms must keep up. Pollution at each step of the clothing life
cycle is produced along with environmental and occupational hazards. An example of this is
23. 22 | P a g e
polyester, which is the most widely used man-made fibre, is actually made from petroleum.
According to figures from the Technical Textile Markets, demand for manufactured fibres
such as polyester have nearly doubled in the last 15 years. To produce these synthetic fibres
requires an energy-intensive process and large amounts of crude oil. Emissions released
include acid gases such as hydrogen chloride and volatile organic compounds, which all
contribute to respiratory disease and are emitted in wastewater, affecting the environment
and all of its habitats. (Luz Claudio, 2007.) Pressure groups such as Greenpeace will give
huge amounts of negative publicity to firms in the global clothing industry who continue to
produce fabrics in this way. This will affect their reputation, but more importantly, help their
rivals gain a large competitive advantage as most customers in todays world are well aware
of the dangers of polluting environments and people, therefore switching to rivals.
G (2.2.1: Competitive rivalry): Having many firms in a market can substantially increase
their competitiveness. This is because there are multiple equal competitors within the
clothing industry, who operate with similar quality and price and therefore engage in
activities that are more aggressive to get a larger chunk of market share. Also, the switching
costs for customers is very low, meaning customers can quickly and easily switch from one
firm to another if they feel unsatisfied, increasing the pressure of rivalry between the firms
to make sure they do not lose customers. (Mars, 2014.)
However, differentiation between companies in the clothing industry is quite high, as firms
can differentiate themselves through style and quality. This helps reduce the competition
slightly, as they do not have to fight over the same segment of customers. For example,
Next’s main market segment are those customers between the age of 24 to late 30’s, whilst
main rival M&S primarily markets towards the over 55’s.
All in all, the intensity of rivalry between the firms in the clothing industry should be
considered high.
H (2.2.2: Threat of new entry): In the UK clothing industry, M&S and Next are well known
brands with long history and high levels of customer loyalty, therefore increasing the
difficulty for a new brand to enter and become competitive. Secondly, the initial capital
investment is high due to all the production and manufacturing costs a potential rival will
face if they decide to enter. Initial costs include production costs, shipping costs and retail
outlet space costs. Potential entrants may choose to be solely online, therefore reducing
initial costs, but the other costs will remain. (Jim Wilkinson, 2013.)
However, in the clothing industry, customer-switching costs are quite low, making it easy for
customers to switch to rivals when they want. This might be a motive for potential entrants
as they may see potential customers turning to them instead of rivals, especially if they can
differentiate themselves quite well. (Jim Wilkinson, 2013.)
24. 23 | P a g e
Overall, the threat of a new entry should be considered low.
I (2.2.3: Threat of substitutes):Homemade clothing or ‘couture’ can be considered a very
weak substitute, as many people in the countries where clothing firms operate can afford to
purchase clothes and do not have the time or even the skills to create their own clothing.
Another minor substitute is buying from manufacturers directly, which again, many
customers may not opt to do.
However, as we have seen during the economic slowdown of 2008/2009, the clothing
industry is more prone to economic shocks than other fields. This shows that customers will
be willing to back away from purchasing clothes from high street retailers such as Next and
Gap, and therefore many may opt for some of the substitute products mentioned above
such as homemade clothing or purchasing directly from manufacturers. (Matt Bodimeade,
2013.)
In conclusion, the threat of substitutes is very low.
J (2.2.4: Supplier power): There are hundreds of suppliers all across the world who supply to
major firms in the clothing industry including Next. For example, for Next, they have
suppliers based in Cambodia such as Fortune Garment and Woollen Knitting Factory. (Nick
Mathiason, 2006.) Many firms like Next use a first-tier supplier who produces the product
and a second-tier supplier who produces the primary yarn and fabric for the main supplier.
The reason supplier power is considered low is because there are many suppliers and the
switching costs for companies to change to another supplier are quite low. Having less
supplier power helps clothing retailers as costs can be reduced due the lower power, and
therefore lower negotiation power, suppliers have. In addition, because their products are
undifferentiated, suppliers such as Fortune Garment will have less power as retailers can
easily switch between various manufacturers. (Martin, 2014.)
However, as suppliers have the ability to produce the products themselves, they have the
opportunity of integrating forward and begin the start selling the product as well as
manufacture it, which could pose as a danger to major retailers like Next. (Martin, 2014.)
Overall, it can be said that supplier power in the clothing industry is low.
K (2.2.5: Buyer power): This means customers in these markets are almost forced to
purchase clothing from the major retailers available. Secondly, most buyers are normal
everyday customers who will not purchase in large amounts or volumes. This again reduces
their power, leaving them with little power overall against clothing retailers such as Next.
(Jim Wilkinson, 2013.)
However, buyers can have some power. For example, they are price sensitive, meaning they
will switch to rivals if they feel they are not getting the value. This, along with the fact that
they have a number of major brand options to choose from, gives them more power. This
25. 24 | P a g e
then leads to firms in the clothing industry becoming more competitive to ensure customers
stay loyal to them, in turn increasing the competitive rivalry between the few companies,
which explains why competitive rivalry is considered high in this industry, as mentioned
above. In addition, buyers in today’s world are usually well educated regarding the product
thanks to the power of the internet and global media firms. For example, customers will
now know if a firm uses supplier’s responsibly and if they have taken any action regarding
reducing carbon dioxide and wastewater emissions from their factories. If a firm has not
paid attention to ethical matters like this, customers can easily boycott this firm and worse
still, move to a rival. (Jim Wilkinson, 2013.) A great example of supplier responsibility is what
happened in the Dhaka factory in Bangladesh a few years ago, where many employees
where killed due to an accident in the building structure. That could have been prevented
had clothing retailers asked officials to ensure regular check-ups for health and safety were
done properly.
In conclusion, buyer power in the global clothing industry can be considered low.
L (2.3.1: Inbound logistics): For Next, that includes the raw materials their suppliers receive
such as cotton and wool from their respective farmers. Next implement the ‘Next Code of
Practice’ for their suppliers and raw material suppliers that they have had in place since
1998 to ensure ethical trading, and it forms an integral part of their company. In addition, it
fulfils international labour standards and helps share responsibility with their suppliers.
Many of their competitors have implemented a very similar method, which does not help
Next differentiate themselves, and therefore they need to change it. One way of improving
their inbound logistics is to take over the raw material supplier part of their supply chain,
meaning they have their own employees who go out and farm for raw materials such as
wool and cotton. This may be expensive, but it can differentiate them greatly as no other
competitor currently has this practice in place. (Next, 2015.)
M (2.3.2: Operations): Next have more than 500 stores in the UK and Ireland. (Next, 2015.)
Their products are manufactured by their first and second tier suppliers. Over the years,
Next have formed strong relationships with their suppliers and have worked hard to ensure
working conditions and pay is fair and equal. This has led to the creation of the ‘ethical trade
programme’ where Next work and communicate with their suppliers to keep health and
safety standards high and develop workers and their conditions further. At the present time,
outsourcing is the most efficient and effective of ways to manufacture products in the
clothing industry, and along with the fact that it’s the cheapest option available, Next should
keep using this method and work only on improving it every time. (Next, 2015.)
N (2.3.3: Outbound logistics): For Next, outbound logistics include the delivery of finished
products to customers who order online through their Next directory. Next continues to
innovate in that area, such as including next day home delivery when orders are placed
before 11PM. However, most of their strong rivals offer the same options if not better.
Therefore, Next need to differentiate again by possibly offering delivery at times or in areas
26. 25 | P a g e
other competitors cannot match such as Sunday delivery. Alternatively, they could try to go
for cost leadership, such as outsourcing their product delivery to a specialised firm, which
will be cheaper for them, however may come at the expense of quality customer service,
which they consider as one of their integral values. (Next, 2015.)
O (2.3.4: Marketing and sales): Next have not always been very keen on expenditure in
marketing, however more recently they have started to invest strongly to market the Next
brand within a challenging and saturated environment. One way they are doing this is
spending £16 million every year just on advertising through billboards, press and TV ads.
(Next, 2015.) They have also understood the importance of brand positioning, and position
themselves as established brand, with beautiful design, good quality and great prices. Prior
to 2009, Next did not invest in marketing at all, however they have recently changed that
culture as they saw room for growth through this, and now them seem to be very strong at
understanding how to market themselves correctly. (Jim Riley, 2015.)
P (2.3.5: Service): According to Next, it is one of their priorities to ‘provide a high level of
service to all our customers.’ (Next, 2015.) This can be seen throughout both of their selling
methods, through their retail stores and their online presence, Next Directory. One way to
differentiate themselves from the competition with regards to customer service is to
provide free online chat on their Next Directory website. It is something they currently do
not have, and can be very useful to customers who want an answer to a quick query or
require some advice.
Q (2.3.6: Support activities): Procurement is all to do with how a business acquires raw
materials, such as negotiating and sourcing. (Jim Riley, 2015.) For Next plc, they are not
responsible for this part of the value chain, as their manufacturing suppliers, who deliver the
finished products to Next, are the ones who deal with procurement. (Next, 2015.) However,
as mentioned above, Next could have a huge differentiator against their rivals if they take
control of manufacturing, and that way, deal with raw material suppliers directly. This will
ensure Next could monitor the quality of raw materials being delivered and even have the
power of asking for better quality or faster delivery times. Ultimately, this will affect Next
greatly, as the raw materials affects everything else in the value chain, from manufacturing
the products to the finished goods customers receive and base their perception of the
company on.
Human resource management consists of recruitment, development, motivating and
rewarding employees. According to Next, their aim is to ‘attract, inspire and retain the right
people to work at every level.’ (Next, 2015.) They are also committed to respecting human
rights and have identified a number of key impact areas such as labour rights within the
supply chain. In addition, they are able to do all of this in a cost effective manner, which
gives them a strong competitive advantage over their competitors.
27. 26 | P a g e
Technology development is all about managing information systems, processing and the
protection of ‘knowledge.’ (Jim Riley, 2015.) For Next, this involves managing and protecting
personal information of customers who use Next Directory such as names, addresses and
bank details. Fortunately for Next, they have not had a cyber attack or any form of hacking
into their systems, which indicates their systems are robust and secure. However, hacking
firms are always improving their methods of breaking into information systems. A clear
example of this is the recent TalkTalk cyber attack which stole personal details of 157,000
customers, including bank details. (James Temperton, 2015.) Therefore, Next can always
differentiate themselves by constantly improving their IT systems, so if an attack does occur
on one of their rivals, they can use this to their advantage and ‘show-off’ how secure their
ones are.
Finally, infrastructure is all to do with a range of support functions and systems, such as
planning, finance, quality control and senior management. (Mind tools, 2015.) Next plc has
always had strong infrastructure in place, from a secure and stable website, to a motivated
and clear-thinking senior management. (Next, 2015.) This has helped differentiate
themselves from other rivals, and can also help them grow by building on the foundation
they already have.
R (3.1: Strengths): Next has two routes to market, the first being through a retail outlet, and
the second being an online presence through their Directory website. Their retail stores
brought in 48% of their operating profit, with 49% from their Directory arm in 2013. (Kevin
Godbold, 2014.) Now, it seems like their online route to market will soon overtake the
traditional retail store method, which considering the difficult economic times the high
street is in, is quite an impressive strength.
Their second strength is their brand strength. Next have a strong brand identity and is seen
by customers as trendy but affordable. They provide customers with high quality products
at a low cost relative to their rivals, increasing the value a customer perceives. In addition,
brand identity is intangible, which means that competitors cannot copy or steal the idea,
unlike a physical product such as a new style or trend. This makes brand identity unique to
Next, and only beneficial to them. (Kevin Godbold, 2014.)
S (3.2: Weaknesses): Producing more formal wear rather than causal can be seen as a
weakness since the current trend is to wear clothing that is both formal and causal at the
same time. Most of their competitors have already moved into that stage, and are satisfying
their customers correctly, whilst Next has yet to change, keeping them from capitalising on
this big opportunity. (Next, 2007.)
Their second weakness is their geographical concentration. Next had 95% of their sales in
2007 come from the UK. Whilst they have over 200 stores across Europe, the Middle East
and Asia, revenue numbers from those countries only contributed to 5% of their total sales
in the same year. When compared with their nearest rival M&S, their geographical
28. 27 | P a g e
concentration is not just focused on the UK alone, but rather through all of their retail
outlets across all regions. (Next, 2007.)
T (3.3: Opportunities): This can be used by the firms within the industry as a new product to
reignite the desire in customers for the latest trends and materials. For example, a new
green source of material such as a sustainable natural fabric can be a huge opportunity as
customers today understand more than ever the the affect we all have on the environment
and how we must start changing our ways now to preserve it. This can be seen as a massive
boost for the clothing industry in terms of revenue and relationships with external forces
such as the government, who may loosen up restrictions on firms for the invention.
(Jennifer Williams, 2015.)
Another opportunity in the clothing field is the advancements in technology. This could
affect machinery, as an example machines that cut up more materials at a time can help
make distribution lines faster and more efficient, ultimately increasing sales and customer
satisfaction. (Jennifer Williams, 2015.)
U (3.4: Threats): It is a factor that companies within the industry cannot control, and if it
does occur, it could have serious implications on their processes. This is because their
inbound logistics may take a hit as many raw material suppliers may not supply fabrics
anymore, and their first tier suppliers who manufacture the products may shut down for
safety reasons. (Jennifer Williams, 2015.)
Another threat is an economic downturn that may lead to restrictions on customers
spending habits. It is another factor that businesses within the clothing industry cannot
control. This may be a big problem for the clothing industry, as many customers during an
economic downturn will stop purchasing any new clothes as they may find it as something
that is unnecessary, and stick to the clothes they currently have. In addition, many trends
may not become as ‘viral’ as others as customers now are not worried about having the
latest fashions, but would rather spend their reduced income on more necessary
requirements such as food. (Jennifer Williams, 2015.)
V (4.1: Market selection: 12 C’s framework):
12 C’s/Countries Singapore Spain Italy Canada Argentina
Country Democratic
country, lowest
political risk in
Asia.Free speech
restricted slightly.
Vibrant, free
market economy,
developing very
quickly,cheaper
labour costs in
neighbouring
countries helps
Pro-euro stance,
tensions formed
when government
increased cuts on
healthcareand
education. Fourth
largestEurozone
economy, highest
interest rates on
loans in all of
Europe.
Unemployment
Good
international
relations,no
restrictions on
imports and
exports. Stable
political regime,
however lawsuits
tend to take time
and are
expensive. Italian
economy is
Democratic
country with
parliamentary
government.
Tenth largest
economy in the
world, Per capita
GDP is $51,147.
71% is services
sector.
Canadians have
strong senseof
Presidential with
federal structure.
Country suffered
huge political and
economic crisis in
2001.Corruption
levels are
relatively high.
GDP to debt ratio
quite high, but
country is on a
gradual economic
29. 28 | P a g e
Singaporekeep
costs low.
Constraints
includelabour
shortages and
labour costs.
Socially,itfollows
traditional family
values,however
younger
generation tend to
followWestern
cultureand
values.Huge
technological
advancements,
powerful internet.
Infrastructures
very strong, with
70% customers
have broadband.
Legislation on e-
commerce has
been available
since1998.
Government
constantly
monitor air quality
and other
environmental
issues,dependent
on Malaysian
water supply.(Jim
Makos,2015.)
26.7%. Total
population is 47.1
million,most
speak Castilian
Spanish.One of
the largestmobile
networks in
Europe, 4G and
broadband is well
established.
Spanish legislation
permits foreign
investment of up
to 100%equity. EU
monitors many
environmental
aspects such as air
quality and waste.
(Arnab Ray, 2015.)
based on services
and industry.Per
capita GDP is
$30,200.
Unemployment
relatively high.
Very strong
family structure,
being the centre
of society. Way
you dress
indicated social
status,
educational
background,etc.
Italianshavea
strong culture.
Italy is beginning
to adaptinternet
technology, R&D
is lowand
innovation
output is
relatively low
too. (Ana María
Maldonado,
2012.)
belongingand
high strong
family
relationships.
80% of
Canadians use
internet for
personal use.
Calgary and
Saskatoon most
internet savvy
cities.Only
supreme lawhas
authority to bind
all courts with a
singleruling,
similar to USA.
Second largest
country by size,
however very
thinly populated.
Extreme long
and cold winters
are typical.
(Ankit Sharma,
2012.)
recovery.
Argentina
depends heavily
on exports for
growth, leaving
currency in major
depreciation.
Gender inequality
still exists,with
women salary 30%
lower than men’s.
The government is
reducinghigh
pollution.(2015
Index of Economic
Freedom,2015.)
Choices High potential due
to democratic
country, free
market economy
and huge
technological
advancements.
Low potential due
to tensions with
government, high
unemployment
levels and
languagebarriers.
Low potential
due to economy
based on services
industry and
unemployment
levels arequite
high.
Medium
potential due to
democratic
country, strong
internet use and
good
infrastructure,
however it’s
thinly populated.
Very low potential
due to huge
economical
problems, high
corruption levels
and major
currency
depreciation.
Concentration High
concentration
(stores from
competitors such
as M&S and H&M
already exist.)
Medium
concentration (few
rival stores exist
from M&S and
Topshop.)
Medium
concentration
(many stores
existonly from
H&M.)
Low
concentration
(No stores exist
from rivals.)
Low concentration
(No stores exist
from rivals.)
30. 29 | P a g e
Culture Strong family
culture, however
younger
generation follow
Western values.
Spanish areproud
of their language,
so Next must
understand the
language
importance and its
meaning.
Family is the
centre of society,
meaning Next
must understand
its importance
when marketing
or producing
clothes.
Canadians havea
strong senseof
belongingto
their country,
very patriotic.
Next must
understand this
when bringingin
new trends and
styles.
Could be a huge
boost to Next if
they enter
Argentina and
provideequal
opportunity to
both males and
females.
Reputation of the
company will
increase
dramatically.
Consumption Singaporeholds
2% of global
clothingsector.
Generates sales of
US$3.6 billion. (ie
Singapore, 2013.)
Clothingmarket
valued at $33.3
billion,growing
fastafter 2008
recession.
(azayfert, 2011.)
Italian clothing
industry growing
back after 2 years
in decline. (ISLA
AND BINNIE,
2014.)
Revenue of $1.8
billion in
September
2015.(Statistics
Canada,2015.)
Market worth $7
billion in 2011,
and constantly
growing. (Ivan
Freeman, 2011.)
Capacity to pay Strong capacity,
income is very
high, customers
comfortable with
expenditure.
Average capacity,
country has just
come out of a
deep recession,
people still unsure
and have lost
some confidence.
Good capacity,
country growing
back after
recession and
clothingmarket
growing after
decline.People
gathering more
confidence.
Willingto spend
on style.
Strong capacity,
most people
earn high
incomes, willing
to spend on
clothingbrands
and styles.
Low capacity,
country has been
in deep recession
for many years,
people have little
confidence in
government and
market conditions.
Currency Singaporedollar is
a very strong
currency,
maintained a
steady risein
recent times
againstthe US
dollar.Country
depends on more
modern markets
such as tourism
and airlines,
keeping the
currency reliable.
(CI, 2011.)
The Euro is a
stablecurrency as
its adopted by 19
countries.The way
it is managed
shows its stability
and contributes to
low inflation and
makes it more
efficient by
increasingprice
transparency.It
eliminates
currency exchange
costs and the size
and strength of the
Eurozone protect it
from shocks such
as unexpected oil
pricerises.
(European
commission,
2015.)
The Euro is a
stablecurrency
as its adopted by
19 countries.The
way it is
managed shows
its stability and
contributes to
low inflation and
makes it more
efficient by
increasingprice
transparency.It
eliminates
currency
exchange costs
and the sizeand
strength of the
Eurozone protect
it from shocks
such as
unexpected oil
pricerises.
(European
commission,
Not very stable,
as the Canadian
dollar is tied up
with the priceof
oil.Canada
depends largely
on exports, and
oil was one of
the biggest
exports they
had, however it
is not required
anymore,
meaning the
currency will
startto
depreciate.
Increasingly tough
controls on the
Peso has lowered
investment and
driven up
inflation.They also
have a multiple
exchange rate
system which has
hurt savers and
has not benefited
exporters. (HILARY
BURKE, 2012.)
31. 30 | P a g e
2015.)
Channels of
distribution
Singapore
distribution
channels are
simple,directand
open to foreign
firms who
establish
themselves in
Singapore. (US
commercial
service,2014.)
Spain has two
major hubs,
Madrid and
Barcelona.Many
distributors and
agents will be
based in at least
one of those two
cities.Therefore
channels in those
two cities is widely
open.
Similar to Spain,
Italy has
distributors in
urban areas such
as Milan where
commonly
distributed
products include
clothingand
footwear.
Canadian
distribution
channels arealso
open and easy to
understand.
More recently,
Canadians have
focused on the
Internet as a
major distributor
of goods, which
may be of help
to Next.
In Argentina, it’s
best to market
your products
through an agent
or representative
as recently there
have been
restrictions.In
addition,agents
can help you
promote and
position your
brand effectively.
Commitment Many competitors
of Next are
already based in
Singapore, making
it difficultfor
them to exploit
the market.
Few stores from
M&S and Topshop
already exist,
makingit more
difficultfor Next to
exploitthe market.
H&M is the only
rival thathas a
serious impacton
the market in
Italy,so Next will
have to compete
hard with them
in order to
exploitthe
market.
Next can exploit
the market well
in Canada,as no
rival stores exist.
No competitors of
Next have a
presence in
Argentina, so
exploitation can
be possiblefor
them.
Communications Very strong
infrastructure,
includinghigh
speed broadband
availableto over
70% of the
country, meaning
promotions
through online
mediums is very
easy and effective
in reachingtarget
audience.
Spain has one of
the largestmobile
network in Europe,
with 4G and
broadband very
common and
widely available.
Communications
through the
internet may be a
good choicefor
Next.
Italianstend to
watch a lot of TV;
in fact, it has one
of the largestTV
watchingfigures
in Europe. The TV
medium may be
a strong choice
for Next to
effectively target
their audience.
Nearly half of
Canadians read
the newspaper
everyday. This
may seem likean
effective method
for Next to
communicate
their brand and
products
effectively.
For Next,
billboards and
outdoor
promotions may
be the best way to
communicate
themselves as
many
Argentineans
spend most of
their day outside
and not indoors
watchingTV for
example.
Contractual
obligations
Typical legal
frameworks apply.
Typical legal
frameworks apply.
Typical legal
frameworks
apply.
Typical legal
frameworks
apply.
Typical legal
frameworks apply.
Caveats NA NA NA NA NA
Singapore was chosen because it received the highest rating of the five countries. It has high
potential, high consumption meaning the country is willing to purchase new clothes and
new styles and it has a strong economic stance as their currency is very strong and their
average income is very high, indicating they can spend comfortably.
Canada was chosen as it received the second highest rating of the five countries. It is a
democratic country and has a strong capacity to pay for brands and styles. It’s main selling
point however is that it has a low concentration of competitors, as none of Next’s rivals
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have a physical presence there, encouraging Next to take a first-mover’s advantage and
establish a strong brand with a large market share before the rest follow in.
W (4.2: Culture evaluation): This means that most of Next’s target audience will be large
families who may have a different style of clothing to young couples for example. Next must
account for this, as not doing so will mean they will not satisfy their customers, leading to
low sales figures and a relatively weak reputation.
However, Singapore also have the younger generation who like to follow western values
and ideas. This means that a large part of their market have very different styles and tastes
to the family culture and Next must account for them too. It may be a good idea for Next to
bring along the latest trends and styles in the western world and market it towards the
younger generation. So for example if a new type of material is now being used in the UK
and US and is going ‘viral,’ Next can bring that same material and use it to satisfy the needs
of the younger target audience.
In Canada, the target audience is very patriotic to their country. This is a very important
aspect Next must understand, as people can get offended if Next do not satisfy them
correctly. Unlike the younger generation is Singapore, it may be a good idea for Next to not
bring the latest trends and styles from the US especially since they’re geographically close,
but rather develop trends and styles specifically designed for the Canadian market. This way
they avoid creating tension and insulting their target audience which can be very dangerous
as it can lead to a very bad reputation of a company and losing trust in the brand.
X (4.3: Market entry methods): The benefits of franchising include using a well established
brand, reducing the risk of failure and being very profitable. (IFA, 2015.) Therefore, a
recommended market entry for Next will be to use franchising in both Singapore and
Canada.
Franchising in Singapore can be very difficult if you do not have a well-established brand,
which fortunately Next does. It will require a lot of capital invested to make sure it is
successfully started, which should not be a problem for Next. However, the profits from
franchising is huge as well as rapid expansion, which is something Next need to focus on to
get up and running quickly in Singapore and many of their competitors are already based
there and will compete with them strongly from day one.
The major benefit for Next to franchise in Canada is that none of their rivals have a physical
store presence there. This is a huge advantage for Next, as they can make use of being the
first mover there and establish strong brand loyalty with their customers and take up a large
chunk of market share before rivals think of doing the same. The unique thing about Canada
that Next must look out for is that five of their provinces (Alberta, Ontario, New Brunswick,
Prince Edward Island and Manitoba) have specific franchise disclosure legislation, which
Next must comply with if opening up stores in those particular areas. (Gowlings, 2015.)
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Y (5.0: Marketing mix and marketing strategies): It consists of the 7P’s which are product,
promotion, price, place, processes, people and physical evidence. The mix is vital to business
success so businesses must get it right, otherwise it may take them years to recover. All
seven aspects in the marketing mix affect each other, so all must be taken into account
when promoting a brand or product.
Z (5.1: Product): Without a product or service, a firm has no business, and therefore will not
make a profit. For Next, their product will be clothing that will be sold in the two proposed
markets, Singapore and Canada.
AA (5.1.1: Design): For Next to become successful when entering the two new markets, they
must ensure they stick to providing high quality design of their clothing to their potential
customers.
The cultural differences in Singapore are quite different from the differences here in the UK.
In Singapore, they have a very strong family culture. To cater for this difference, Next will
need to adapt their current products to fit the Singaporean economy. For example, one way
to do this is to introduce new designs of clothes that fit what Singaporeans families may
wear when at work or out and about. However, Singapore has a very large segment of the
younger generation who tend to follow Western values such as here in the UK, and so Next
must account for this as well by keeping many of their products standard as they do not
need a change to fit that market segment. (Kwentissential, 2015.)
In Canada, their cultural differences are also very different. Canadians have a strong sense
of patriotism, meaning they have a sense of belonging to their country. This is a very
important aspect of their culture, as ignoring it can have serious implications against Next.
One way to respect this difference is to adapt the designs of their clothing used here in the
UK to fit Canadians. For example, a new trend used here in the UK may not be the right
trend used in Canada, or they may have a different style for that particular period in time, so
Next must take this into account. One aspect Next could standardise is seasonal design of
clothes, such as thick coats during winter, as the UK and Canada have similar weather
patterns. (Kwentissential, 2015.)
AB (5.1.2: Quality): In the UK, Next already focus on providing their customers will high
quality products, and that should be carried over to the two countries planned for entrance.
In Singapore, customers have very high income levels, and so are willing to spend more on
clothing. This indicates that Singaporeans are looking for quality products as they are able to
spend the extra dollar to get it. In order to become successful overseas, Next must
understand this aspect, and provide the Singaporean economy with high quality products,
probably even higher than what is provided here in the UK. This adaptation of providing
higher quality products will be vital to compete with all the other major clothing retailers
already based in Singapore.
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This is a very similar scenario in Canada, as customers also receive high income and are
willing to spend on high quality products and brands. Next must also ensure that high
quality products are delivered to their potential customers in Canada in order to develop a
strong brand reputation and loyalty to gain a first-movers advantage before other
competitors decide to enter that market as well.
AC (5.1.3: Branding): Next must position themselves correctly in Singapore. The
Singaporean market has strong family cultures, and so when promoting themselves, Next
must ensure they respect this cultural difference. One way to do this is to position yourself
differently in Singapore than in the UK. For example, when promoting their product, Next
need to ensure their promotion is targeted correctly at families, and not for example single
people. This will position Next in the correct manner in a customer’s mind, leading to trust
from the customer.
In Canada, Next need to position themselves correctly to not disrespect their cultural
difference of being very patriotic. For example, when promoting themselves, they should
show themselves as a company who also respect Canadian patriotism to ensure they do not
disrespect the customer as well as position themselves correctly in their minds for trust and
loyalty.
AD (5.2.1: Advertising): It includes various aspects such as social media marketing,
billboards, posters, TV ads and radio commercials.
In Singapore, adapting advertising to their cultural differences will be vital to the success of
Next. This is because advertising will be the main method customers use to perceive the
company. Therefore, Next must ensure they are perceived in the correct way. To do this,
they must advertise themselves with the customer’s cultural differences in mind. For
example, when promoting a new trend of clothing in a TV ad, they must make sure this TV
ad is suitable for the family audience. This means that many aspects of their advertising
here in the UK will need to be adapted to fit the Singaporean culture of a strong family.
In Canada, a similar approach must be taken by Next. As an example, when advertising a
product, they must make sure they do not offend the sense of belonging to their country
Canadians have. One way to do this is to not include British styles and trends when
advertising on social media for example, but rather adapt it to fit Canadian principles, as this
can be taken as disrespectful to Canadians and their cultural differences.
AE (5.2.2: Leaflets/posters): In Singapore, this may be an effective way of advertising as the
consumer behaviour in that economy fits the idea of promoting using leaflets and posters.
This is because Singapore is an economy that’s always out and about or on the move.
Therefore, having posters up on buildings or leaflets handed out to offices and businesses
can be a powerful way of marketing effectively.
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In Canada, this may not be as effective. This is because the consumer behaviour has recently
changed drastically to being a very internet savvy country. This is due to the strong
infrastructure that has been built to cater for strong internet communications. As more and
more Canadians are using the internet, having posters and giving out leaflets will not be an
effective method of advertising. Advertising through internet means such as social media
marketing may be more powerful for Next to promote themselves and their products.
AF (5.3.1: Penetration pricing): For Next in Singapore, this will be an effective strategy to
use as many of their competitors are already based there and have developed large
customer’s bases. In order for Next to gain a large market share and gain some customer
loyalty at first, they need to provide similar products to that of their competitors at a lower
price to attract customers to them rather than their rivals. As in the UK Next do not focus on
the lower income group, this will be an adaptation of their current pricing strategy, as they
have not used penetration pricing before and will need to do so when entering Singapore.
This will be a similar situation in Canada, where consumer behaviour is that the majority of
Canadians do not like to spend extra to purchase a product, and would always go for the
cheaper option even when their income levels are relatively high. So whilst there are no
competitors in Canada for Next, lowering their price using penetration pricing will help them
greatly when trying to gain a large market share as quickly as possible by satisfying their
customers correctly.
AG (5.3.2: Cost plus pricing): Under this method, the total cost of a product is found by
adding the direct and indirect costs, and then adding a mark-up percentage or a profit
margin to find the overall price for a product or service. (AccountingTools, 2015.)
For Next, this may not be an effective strategy to use in Singapore as they have many
competitors with strong competition. This method is used by many companies when
competition is not much of a problem, however for Next, competition is a problem they
must keep an eye over, and so this makes this strategy unviable for use in Singapore.
On the other hand, this method may be viable for Next to use in Canada as none of their
competitors operate there in a physical manner. As Next will be entering Canada for the first
time, and they have no competition over there, pricing their products through a simple cost
plus method can be an easy and effective way to gain market share and keep profit margins
high.
AH (5.4.1: Retailers): As Next already have many retail stores in the UK and Ireland, this will
be a familiar method of distribution for them when entering new markets.
For Singapore, having a retail presence of their own will be a safe and strong option to go
for as it’s something they have done before and have experience in doing it. This will be one
of the standardised elements of the marketing mix when entering Singapore, and will be
good enough to compete with the various competitors who also have a physical store
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presence abroad. As noted in the 12 C’s framework below, Singapore has a simple, direct
and open distribution system for foreign firms who want to establish themselves in the
country, which will prove to be very helpful for Next when entering for the first time.
In Canada, they also have an easy and open distribution systemfor foreign firms, making it
easier and cheaper for Next when opening up new retail stores there for the first time.
However, Canada has recently been investing heavily in internet communications
infrastructure as many of their people are starting to use the online method for shopping,
social media and communications. This may be something Next will want to improve and
capitalise on to get ahead of their rivals, as many of them, including Next themselves, have
an online presence there.
AI (5.4.2: Wholesalers): For Next in Singapore, this may also be another viable distribution
channel. This is because there may be many smaller retailers in Singapore who have access
to a large base of customers, but cannot purchase the goods from Next directly as it’s quite
expensive for them. Having a wholesaler in between helps lower the price of each good, and
therefore making it easier for retailers to purchase the product and sell on to customers.
This will benefit the retailers, customers and Next themselves, so it’s a win-win situation for
everyone, making it something Next can look into more seriously.
In Canada, Next can do the same thing as there are also many retailers who have access to a
large customer base. This will also be very helpful to Next by not only being able to reach a
larger target audience, but also having help distributing goods when entering a new country
in which they have had no experience before, making it easier to understand legal
obligations and avoid any unnecessary problems.
AJ (5.5: Processes): However, it can still affect Next as they require the raw materials as
inputs to product their clothing products, then send those clothing product to all the various
retail outlets across the world. It also includes technological processes such as electronic
point-of-sale (EPOS) and even other systems such as the distribution system. (The marketing
mix, 2015.)
For Next in Singapore, they will need to ensure their products which are produced in
Cambodia, arrive quickly and efficiently in Singapore for their retail outlets there. This
process will be standardised as they use the same system when delivering their products
from the manufacturer to their outlets in the UK. Their EPOS systemwill also be
standardised as it will be the same systemthat is used here in Great Britain, however their
payment service will need to be adapted as there will be different banks and different
methods of payment in Singapore, even though they use the same major credit card issuers
such as Visa and MasterCard.
In Canada, it will be a very similar situation for Next, as they will need to ensure the same
standardised service of getting products from the manufacturer to the retail outlets is done
37. 36 | P a g e
correctly. Their payment service will also be very similar to that of the UK, as they also use
contactless and other payment methods such as Apple Pay, which means this aspect can
also be standardised for Next, making it easier and less costly for them.
AK (5.6: People): As well as people working within the company, it also includes the
company’s target audience. In order to deliver a high quality service to it’s customers, a firm
must find people who truly believe in the companies’ products to be able to perform at their
highest ability.
For Next in Singapore, it must train its employees correctly and ensure they are selected
from the same cultural background as the majority of their customers. This is because these
customers will understand best the cultural differences there are in Singapore and will be
able to deliver a much higher level of service and make sure they do not insult the culture
when trying to sell a product or answering a customer’s queries. As Next will be entering
Singapore for the first time on a physical presence, they will need to convince their potential
employees to believe in their products and their organisational culture to ensure they work
to the best of their potential.
In Canada, Next will need to work even harder when trying to convince their potential
employees as Canada do not have any UK based clothing retailer operating there, and so do
not know what the UK retailers can offer that’s better than their own Canadian clothing
retailers. In addition, they will also need to train their potential employees to respect the
cultural differences but also to deliver the same, standardised service Next provide in all the
other countries they operate in to ensure it’s a unified service wherever a customer decides
to go.
AL (5.7: Physical evidence): For example, physical evidence also pertains to how a product is
perceived in the market. Part of this concept is branding and the physical environment a
customer is in, so in Next’s case, it’s their retail outlets. (The marketing mix, 2015.)
In Singapore, Next will need to standardise its physical environment of it’s retail stores to
give customers the same ‘feel’ when entering just like in another country such as back here
in the UK. One example of this, is the amount of space in a retail store. Next is known to
have plenty of spacious place in their retail stores to keep customers comfortable, so they
will need to implement the same idea when opening their retail stores in Singapore.
In Canada they will also need to standardise the same spacious layout they usually offer, but
also include aspects of how their branding is perceived. This will be vital to their success
overseas as Canadians are not used to having British clothing companies move in, so Next
will need to ensure they are perceived correctly by their potential customers to remove any
friction or anxiousness for customers when wanting to purchase a product.
