This is the project report of international business analysis.

1. 1
1) Explain the 4 steps for accessing the selected foreign market (United States, US)
Introduction & Background
Agreements under the World Trade Organization (WTO) has led to the positive impact of imports
related to the apparel industry within United States. This is due to the agreement that the US would
lower trade barriers involving tariffs and quotas lower than before. This resulted consumers to
demand lower prices for their apparels selection and foreign imports are usually the provider to
their needs. The apparel industry requires high and cheap labor with little capital investment which
suits best the actions of developing nations (Parish E et al. 2006). Nonetheless, the financial
constraints of the society present there do not contribute to the purchase of the manufactured items,
hence requiring the capitalization of the purchasing power of developed nation’s consumers. The
fact that US has significant purchasing power per capita and is the most developed nation, it makes
it highly desirable to market these products. This retail company that is used in this market
evaluation is company EZ who has already establish proper sales portfolio within the South
American region. Their manufacturing factories are centralized in Mexico. Hence, this promotes
a great opportunity to diversify their products and penetrate the US apparel market. EZ company
strategy is by capitalizing a niche market based on their variety of apparels to suit a particular
niche. In addition, their recent capability of using e-commerce as a mode of sale can be a strength
to the US market whose consumers are projected to contribute 86.4 billion USD of sales by using
e-commerce as seen in Figure 1 below.

2. 2
Figure 1: Projection of US apparel and accessories E-Commerce Sales
Market Potential
GDP
The Gross Domestic Product (GDP) measures the income of a nation and its correlation with the
nation’s economy. The GDP is equivalent to the total expenditures for goods and services within
the country within a timeframe. Based on data analyst, there is significant and stable growth of
GDP consistently since 2006 onwards moving in into 2015. This shows a healty purchasing power
of consumers and the capability to contribute income to company EZ upon venturing its market to
US. Below will be the GDP details which shows healthy increment throughout the years and is
forecasted to do the same.

3. 3
Figure2: Projection of US GDP
Public Infrastructure
US has significantly acknowledged and highlight the importance of ensuring constant
improvement of public infrastructure to ensure smooth flow of foreign imports into the nation to
boost its economy. This can be seen in their American Society of Civil Engineers (ASCE) annual
report which highlight the limitation and improvements required to constantly ensure optimum
public infrastructure. Among the focused agenda highlighted which will further ensure why US is
the right choice for EZ apparel company to venture are;
Surface Transportation (Roads, Bridges and Transits)
US has acknowledged that the deficiencies in America’s surface transportation systems has cost
businesses nearly 130 billion USD annually. It was even forecasted that there will be an increment
of 82% to 210 billion USD by 2020 and 351%, 520 billion USD by 2040. Hence, various methods
of improvisation is being taken place to ensure this is prevented. As EZ factory production line is

4. 4
based in Mexico, hence a lot of road logistics will be used to deliver stocks to the US. Hence,
making the condition of surface transportation vital to optimize business expenditure reduction.
Airport, Inland Waterways & Marine Ports
Certain areas within US especially access to local communities will require the usage of inland
waterways. Airport and marine ports are vital as well to ensure that EZ will be able to deliver its
stocks of apparels to certain regions within US. The importance of these infrastructure has been
noted by US in their ASCE report and have even related these deficiencies to be the root problem
of lower projected level of US imports, lower GDP and disposable personal income within nation.
Below will be a tabulation of the mentioned initiative of US to ensure proper growth of foreign
companies’ investment.
Figure 3: Tabulation of effects of failure to invest in airports and inland waterways within US. Source: ASCE, 2015

5. 5
Levels of Competition
Understanding the number of competitors and relating, market size as well as business strategy
will be the key point for EZ company in capitalizing the US market. A tabulation of relevant
information is as below;
Table 1: Tabulation of information related to apparel growth and competition. Source: Swedish Trade Council, 2014
Size and Growth - Largest in the world with 28% share in
total relating to the apparel industry
- Growing at a very steady pace for all
competitors as the apparel market
overall is blooming.
Industry Structure - 40 largest apparel organization holds
around 1/3 of total shares
- Strong acceptance and presence of
foreign brands
- Market leader usually diversify and
manage several brands to ensure large
market share and managing risks.
Consumers - Competitors are aware of the necessity
to increase variation to suit the
diversity of the US community.
Channels - Though presence of conventional
stores are highly present, nonetheless,
e-commerce is gradually growing in
demand. Hence, this suite the business
philosophy of this company who plane
to use e-commerce as a method of
branding.

6. 6
Competitors are fully aware of the potential growth of the US apparel industry based on convincing
projection stats. This industry is expected to rise up to 342 billion USD by 2016 as the economy
brightens. Below will be the relevant information;
Figure 4: Projection of the US apparel industry

7. 7
Market Structure with Competitors
The US market is home to hundreds of large brands and the industry is still considered to be
fragmented. Few competitors are among the top 40 companies globally. Among those are Adidas
and H&M. Among the recent successful foreign entrants into US are Uniqlo, Zara and Lululemon
Athletica. It is to note that none of the successful apparel competitors fall within the luxury
segment as most falls under the low-middle segment group.
Copying strategies from other successful entrants are part of the new competitors strategy in
adapting and ensuring market success within US. Competitors look forward to widening their
portfolio to protect market share and increase competitive advantage. Among the competitors to
take note within US is shown below;
Figure 5: List of apparel competitors within US

8. 8
Among the proposed distribution strategy to look into by EZ in the US would be niche marketing.
Niche marketing is a method of tailoring specific goods according to the needs of customers
present within that particular segment. It uses a bottom up approach whereby the marketer analyses
the needs of small groups of customers and work upwards to larger crowd. This will allow better
understanding of the diverse US market consumer needs that varies according to different locations
in order to monopolize and be an advantage compared to other competitors (Parish et al. 2004).
Legal & Political Environment
In order to ensure the success of exporting products to the US, it is vital to understand the trade
barriers and policies that are present within a targeted location. In addition, proper analysis of the
political stability will be vital to ensure the success of a company venturing into a new market.
The US is viewed by many investors as a very safe market to penetrate due to its political and
economic stability. This ensures great FDI. US has some of the world’s amazing distribution
systems (KPMG, 2015). There are no internal customs or trade barriers as well as no foreign
exchange controls. Though there are some sort of protectionism, nonetheless, this applies to the
US manufacturing plants and not the apparel industry.
Sociocultural Influencers
Cultural environments is made up of the influences of religions, family, educational and social
systems within a potential market. US is made up of very diverse background due to the various
nationalities living there. Nonetheless, in general within the US, in terms of values, time, religion
and taboos, the citizens of US are very much adaptable to various differences and changes and are
not to affected by it. This tolerance to diversity and values allows better prospect for foreign
investors, in this case EZ company to market its apparel products (Boundless, 2014).

9. 9
2) Explain 3 potential benefits of the selected foreign market (United States, US).
One of the potential benefits that the United States offers to an international Apparel retail
company its ready market due to high population. The demand of apparels depends on the
population of a country among other factors. When the population is high, it means that it will be
easier for a company to target a particular or multiple market segments. The more the segments
targeted, the more the chances of a company becoming successful because if one of the segments
fails the company will be able to depend on another market segment. The United States is one of
the most populous countries globally: it is ranked in the third position. The country has a total
resident population of 32, 729,000. More than 80% of this population lives in urban centers with
New York City having the highest population. The information on the population of the United
States offers promising news for an international Apparel retail company that is focused on
venturing in the United States. However, the international retail company should try to understand
the target market even though the United States is highly populated. According to the demographic
trends, the baby boomers have been an important segment of the market but their focus on fashion
has outgrown, however, the younger generation offers a potential market but provides an elusive
demand source. Baby boomers comprise of over 70 million Americans, and they have
demonstrated changes in priorities and attitudes in fashion: they spent less on the apparel shopping
(Nguyen, 2004). However, they are grouped as the largest per capita purchasers of apparel and
thus they are still potential customers for the international company (Nguyen, 2004).
Another potential market segment in the United States market is the Generation Y: those who were
born between 1977 and 1994. The generation Y forms 25% of the United States population and
have a high spending of $200 billion annually (Nguyen, 2004). This population group is known to
set the fashion trends in the country: it influences the designs of different attires and as such it
forms a promising market for the international apparel retail company. Additionally, the United
States demographics offers potential benefits to the international apparel retail company because
teenagers also provide a large market which is not fully exploited. According to (Nguyen, 2004)
teenage girls and boys spend more than 50% of their earnings on the clothing: the girls spend 75%
while boys 52% of their earnings. Although the teen forms important customers, they tend to be
specific on brands and their fashion trends keeps on changing. As stated earlier the high population

10. 10
in the United States offers, multiple benefits because apart from the baby boomers, the generation
Y, and teenagers market segment there is also the plus size men and women. These are two
different fastest growing marketing segments for the apparel industry (Nguyen, 2004). The weight
and size of most Americans have increased and thus increasing the need for clothing for such
people. Therefore, the American high population offers a ready market for an international apparel
retail company.
Secondly, United States markets offer benefits to an international apparel retail company because
of the high level of technological advancement. Technology has a significant role on the in the
apparel industry. It helps a company venturing in the apparel industry to expand its operation to a
global scale (Nuray, 2011). If the company expands its operations to the United States, its potential
of expanding to other countries globally will also be enhanced through the use of technology. The
company will be able to post its products online and communicate with customers from different
parts of the globe using the technology (Nuray, 2011). Additionally, the technology helps to
promote a close working rapport between the retailers and manufacturers. As a retailer in the
United States, the international company will be able to communicate with manufacturers all over
the globe so that they can receive supplies in a timely manner (Nuray, 2011). For example, the
international company will be able to use improved electronic data interchange (EDI) system in
the United States to connect with manufacturers and ensure the retail store will operate without
any difficulty of acquiring apparels. The EDI can collect information about customer's preferences
depending on what they buy from the retail stores and sent it to the manufacturer who then uses
the information to design new products such as clothes. The data can also be used by the
manufacturer to note when a retailer is out of stock and then send the stock in good time.
Additionally, the shoppers in the United States have adopted online shopping which makes
marketing easy for the company.

11. 11
Lastly, an international apparel retail company will enjoy the benefits of operating in the world's
largest national economy. In 2015, the GDP for the United States was estimated at $17.91 trillion:
it represents 17% of the global GDP. The U.S. dollar is one of the most valuable currencies in the
world. Most participants in the international transactions prefer to use the currency. Additionally,
it is a reserve currency in most nations while other countries use it as an official currency. The
dollars will, thus, tend to make imports cheap and exports expensive (Sijia & Joseph, 2010).
Therefore, operating in the United States will allow an international apparel retail company to
borrow and also import cheaply from other nations (Cathy, 2009).

12. 12
3) Choose a market entry mode and explain the factors would influence your entry mode
selection.
Choosing the optimal entry mode in USA has been the most crucial decision for our company as
it will have a bearing on our success. Being a large international apparel retail company, we hold
the resources to have the Foreign Direct Investment in USA. Therefore, the entry mode we have
selected is to participate in a Joint Venture with a host clothing line distributor holding relatively
the higher percentage of shares (Roy, 2010). There are several factors that influence our entry
mode selection (Griffin and Pustay, 2012) as presented below:
Figure 6: Factors affecting the influence of entry mode selection
These factors are explained on the following pages:
Ownership advantages will play a pivotal role in our selection of entry mode and will help us
overcome the liability of foreignness. In joint venture the company will hold more resources (both
tangible and intangible) which will help it to engage in international expansion, achieve
competitive advantage and to successfully compete with the competitors in USA market. The
company’s brand, size and multinational experience will gain it more bargaining power, understate
the potential risk and entry mode negotiation as to compete within the US market, our company
must possess these superior assets and skills that can earn economic rents that are high enough to
counter the higher cost of servicing the market (Vabale, 2015). Empirical evidence indicates that

13. 13
the impact of company’s size, multinational experience and resources invested in the foreign direct
investment is positively correlated with its propensity to enter foreign markets (Ramaswami,
2012).
Location advantages are certainly higher as the USA market is enormous which offers more
chances of obtaining higher returns compared to home market with the opportunity to establish
long-term market presence. It has a highly skilled workforce with low wage rate and more
immobile created resources. In high market potential countries like USA, investment modes such
as FDI are expected to provide greater long-term profitability to the company, compared to non-
investment modes such as exports and franchising (Koch, 2011).
Internalization advantages have a great impact on our
selection, since we are retail business we don’t produce the
apparel ourselves and we rely on our producers and suppliers.
Therefore, the transaction cost is high in USA market due to
high exchange rate so joint venture will allow the company to
reduce such costs (DEMİREL, 2013).
The company has been dealing on a large scale with the global strategy to have a strong global
synergies with high degree of control over the businesses processes in order to have greater
influence and authority in all the markets. This requires the company to have greater resource
availability in its foreign markets as well in the home market (Yao Lu, 2011). In addition, USA
follows strict government policies regarding the import and export activities which will restrict
the company to opt for exporting. Therefore, joint venture will provide higher control as well as
enhance the company’s potential to avail those resources. Also, the
company will be able to avail the shared logistics facilities and
benefited by the distribution channel of the partner venture company
(Santamaría, 2008).

14. 14
4) Assume the apparel company has decided to enlist a foreign partner in a strategic alliance.
Which form of strategic alliance do you suggest? Why?
Our suggestion is that we choose the Chinese market as alliance partners and by also going ahead
with the equity alliance option. This will reduce the cost of re-establishing a new company or the
acquisition of a subsidiary, but at the same time, ensuring profits. This also promotes the reduction
of competition among these companies. In addition, it also makes it harder for other companies to
dominate over. These holdings can make the interests of both companies to change the same, and
the decision is still in their respective companies.
China has very good textile technology and artificial low cost competitive advantage, but the lack
of international brand influence, equity alliance can be mutually beneficial, complement each
other, to form a more powerful competitiveness. Any enterprise has its own strengths and
weaknesses, different stages, different time, different locations, should have their own focus on
the development of different strategies. It is necessary to carry out cooperation, to achieve the
purpose of complementary advantages, especially when they have obvious disadvantages, but also
for the time being no capacity or energy to take into account, it is necessary to find a partner to
make up for their own shortcomings, the advantages of the advantages of potential. Equity Alliance
has very significant advantages, such as fast, complementary, low cost, effective and well as a
relatively easy implemented strategy.
In addition to that, China has a huge customer market to tap into within the process of production
and sales. It not only will expand the sales market but also reduce the cost of transportation as well
as reducing the time of local culture and customs. China’s low labor costing will also lead to better
profit margin for the apparel industry which requires high labor forces. This will support EZ
company’s strategy of using Mexico which also sources out cheap labor cost.
Final Word Count: 3120 Words

15. 15
References
1. Erin Dodd Parrish, Nancy L. Cassill, William Oxenham, (2004) "Opportunities in the
international textile and apparel marketplace for niche markets", Journal of Fashion
Marketing and Management: An International Journal, Vol. 8 Iss: 1, pp.41 – 57
2. Erin D. Parrish, Nancy L. Cassill, William Oxenham, (2006) "Niche market strategy in the
textile and apparel industry", Journal of Fashion Marketing and Management: An
International Journal, Vol. 10 Iss: 4, pp.420 – 432
3. Trading Economics (2015). ‘United States GDP’. [online]. Available from:
http://www.tradingeconomics.com/united-states/gdp. Accessed on: 22 November 2015.
4. ASCE (2015). [online]. Available from:
http://www.asce.org/uploadedFiles/Issues_and_Advocacy/Our_Initiatives/Infrastructure/
Content_Pieces/failure-to-act-transportation-report.pdf Accessed on: 22 November 2015
5. Export Radet (2015). [online]. Available from: https://presentingsweden.si.se/wp-
content/uploads/sites/7/2013/07/The-U-S-apparel-and-fashion-industry-what-its-like-and-
how-to-enter-it.pdf Accessed on: 22 November 2015
6. E-Marketer (2015). [online]. Available from: http://www.emarketer.com/Article/Apparel-
Retailers-Ecommerce-Direct-Marketers-Dominate/1012671 Accessed on: 22 November
2015.
7. Cathy, L. J. (2009). ‘How Do Exchange Rates Affect Import Prices? Recent Economic
Literature and Data Analysis. U.S. International Trade Commission.’ [online] Available
from http://www.usitc.gov/publications/332/ID-21_revised.pdf. Accessed on 23
November 2015.

16. 16
8. Nguyen, V. (2004). “Analysis of the luxury goods & apparel and footwear industries”,
Journal of Undergraduate Research of the University of Wisconsin-La Crosse, VII, 1-23.
[online]. Available from http://www.uwlax.edu/URC/JUR-online/PDF/2004/nguyen.pdf
Accessed on 23 November 2015.
9. Nuray, T. (2011). ‘The impact of e-commerce on international trade and employment’.
Social and Behavioral Sciences 24: 745–753. [online] Avilable from http://ac.els-
cdn.com/S1877042811015382/1-s2.0-S1877042811015382-main.pdf?_tid=d9f78fb2-
9218-11e5-acfb
00000aacb35e&acdnat=1448307293_ba6efa26e81f5e18e50c4dff2da15309 Accessed on
23 November 2015.
10. Sijia, Z., & Joseph, B. (2010). Effects of exchange rate volatility on export volume and
prices of forest product. Can. J. For. Res. 40: 2069–2081. [online]. Available from
http://web.b.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=d3711160-b06c-41e6-b395-
a9f33990e426%40sessionmgr114&vid=0&hid=128 U Accessed on: 23 November 2015
11. Adam J. Koch, (2011) Factors influencing market and entry mode selection: Developing
the MEMS model.
12. Sanjeev Agarwal and Sridhar N. Ramaswami, (2012) Choice of Forein Market Entry
Mode: Impact of Ownership, Location and Internalization Factors.
13. Priyanka Bedi and Ekta Kharbanda, (2014) Factors Affecting The Choice Of Entry Mode
By MNCs.
14. Beatriz Santamaría, Shuang Ni and Leif Linnskog, (2008) Entry Modes of Starbucks.
15. Murat Ali DULUPÇU and Onur DEMİREL, (2013) Globalization and
Internationalization.

17. 17
16. Saumya Roy, (2010) Forbes Magazine Zara entry modes in international market.
17. Griffin and Pustay (2012) International Business.
18. M. Lundan, (2010) What are Ownership Advantages?
19. Mirela Matic Vita Vabale, (2015) Understanding internationalization patterns of Zara.
20. Robert Hauswald, (2009) Ownership and Control in Joint Ventures.
21. Yao Lu, Elena E. Karpova and Ann Marie Fiore, (2011) "Factors influencing
international fashion retailers' entry mode choice", Journal of Fashion Marketing and
Management: An International Journal, Vol. 15 Iss: 1, pp.58 – 75
22. David Arnold, (2003) Strategies for Entering and Developing International Markets.