Emerging Market Entry Analysis: Mexico and Colombia
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The document analyzes entering the markets of Mexico and Colombia for a luxury fashion brand currently operating in 38 countries. It finds opportunities in the growing middle and upper classes in both countries. Mexico offers economic stability and liberalized policies favoring foreign companies, while Colombia has laws favorable to foreign direct investment. Potential threats include high import tariffs, currency fluctuations, and developing local competitors. Target markets are identified as Mexico City and Bogota based on population and wealth demographics. Retail strategies proposed include both company-owned boutiques and franchised stores, with promotional events to launch in each market.
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Emerging Market Entry Analysis: Mexico and Colombia
- 1. Emerging Market Entry Analysis
- 2. Current Markets: 267 Stores / 38 Countries V. Pisipati & E. Molder | February 26, 2015
- 3. V. Pisipati & E. Molder | February 26, 2015 Market Entry: Mexico and Colombia Market Opportunity: • 46% of population is 24 or under • 155,150 millionaires • Many luxury brands are already present • Increasing brand awareness and demand Regulatory Evironment: • World-class transportation infrastructure • Economic stability and liberalization • Record $35.5B of FDI in 2013 • FTA with 45 countries • Policies favorable to MNCs Colombia Market Opportunity: • GDP per capita tripled in the past 10 years • More millionaires than Saudi Arabia and UAE • Competitors already doubling retail presence • 22% annual growth in shopping mall purchases Regulatory Evironment: • Laws favorable to FDI and MNCs • Employment policies similar to USA • No restrictions on fund transfers • Improving IP protection; No import quotas Mexico
- 4. SWOT Analysis: Mexico and Colombia V. Pisipati & E. Molder | February 26, 2015 S W O T Strengths Opportunities Threats Weaknesses • Limited knowledge of brand within MX and CO • First-mover disadvantage with e-commerce cost • High import tariffs will impact pricing • Potential confusion about French v. Japanese brand identity in new market • Development of local competitors – Kenzo differentiation is based on aesthetic • Currency fluctuations and inflation • Maintaining a qualified sales team • Growing upper-middle class and upper classes • E-commerce adoption increasing • First-mover advantage with e-commerce • Operational efficiency – improving laws for MNCs • Unique design aesthetic • LVMH already has brands within markets • Backing from LVMH group (financial, resources) • More affordable price-point than high-luxury – ability to capture “aspirational luxury” purchases
- 5. • Mexican and Colombian young-adults are buying more clothing in edgy or alternative designs, hipster aesthetics, and defining unique pesonal styles • Due to proximity to the US, Mexican and Colombian trends tend to closely follow American trends Brand Positioning: V. Pisipati & E. Molder | February 26, 2015 Styled Classic Premium Luxury Price Point BrandAesthetic
- 6. $3,000 $3,000 HNWI’s Total Population: 21.5 M Population by Wealth Class Mexico City, Mexico Population by Age Mexico City, Mex Estimated Target Market: 575,400 x 16.4% = 94,365 Females 575,400 x 15.7% = 90,337 Males 184,702 Individuals Target Market: Mexico City, Mexico V. Pisipati & E. Molder | February 26, 2015
- 7. Population by Wealth Class Bogotá, Colombia Population by Age Bogotá, Colombia 10,237 Individuals Target Market: Bogotá, Colombia V. Pisipati & E. Molder | February 26, 2015 Estimated Target Market: 32,500 x 15.8% = 5,135 Females 32,500 x 15.7% = 5,102 Males
- 8. Centro Commercial Andino Boutique Size: 130 M2 Distributor and Franchisee: Executive S.A.S. Monthly Rent: $16,470 $122 / M2 Monthly Wages: $6,800 Wage / Staff Member: $850 No. of Staff: 8 Franchise Setup: $340,500 Import Tariff: 15% - 20% VAT at Sale: 16% Retail and Distribution Strategy: V. Pisipati & E. Molder | February 26, 2015 Mexico Antara Fashion Hall Boutique Size: 150 M2 Company-Owned Boutique: LVMH already in Mexico City Monthly Rent: $21,000 $140 / M2 Monthly Wages: $6,400 Wage / Staff Member: $800 No. of Staff: 8 Store Setup: $400,000 Import Tariff: 11.5% VAT at Sale: 16% Colombia
- 9. V. Pisipati & E. Molder | February 26, 2015 Promotional Strategy: Magazine Advertising Mexico / Colombia Mexico / ColombiaColombia Launch Events with Brand Ambassadors: Eugenio Siller Andres Mercado Altaír Jarabo Duina del Mar Mexico: Colombia:
- 10. Questions
- 11. • http://mcgladrey.com/content/mcgladrey/en_US/what-we-do/services/tax/tax-alerts/mandatory- electronic-filing-in-mexico-begins-in-january-2015.html • http://www.worldbank.org/en/news/press-release/2013/10/28/mexico-among-the-top-improvers-in- business-regulation-since-2005 • http://www.doingbusiness.org/Reforms/Overview/Economy/mexico • http://www.economia.gob.mx/trade-and-investment/foreign-trade/international-trade-negotiations • http://www.promexico.gob.mx/en/mx/tratados-comerciales-inversion • http://www.tradingeconomics.com/mexico/foreign-direct-investment • http://www.shift-schedule-design.com/Staffing_Calculator • http://www.latameconomy.org/outlook/2011/the-middle-sectors-fiscal-policy-and-the-social- contract/who-pays-the-taxes/ • http://www.state.gov/e/eb/rls/othr/ics/2013/204622.htm • http://www.startupoverseas.co.uk/expanding-a-business-in-mexico/entering-the-market.html • http://www.pwc.com/es_MX/mx/industrias/archivo/doing-business-maquiladora.pdf V. Pisipati & E. Molder | February 26, 2015 Works Cited: