Internationalization Strategy Management: Selfridges-UAE Dubai Market
Introduction:
The report encases the introduction of the service of Selfridges in a new international market. The product Selfridges has the country of origin of England. The founder of the retail store Harry Gordon Selfridge arrived from Chicago to London having his heart dedicated to fulfilling the dream of making this store. The revolutionary understanding of theatre, retail and publicity helped him fulfil this dream. It is an up-market department store which is based on catering to the need of the higher segment of the mass market retailing a wide range of products stretching to luxury brands. The department store stocks food, homeware, and clothing for men, women and kids, accessories and footwear. The retail stores are located at four points in the UK with its long-established store on Oxford Road, London, and three of the provincial stores in Manchester and Birmingham. The success of Selfridge was based on the relentless innovative marketing of its founder Gordon Selfridge, which considered making shopping as a fun, leisure and entertaining than just a chore. The retail store is known for its historical importance, and how it operates. The department store retails luxury brands to middle-income level items as well. The service of Selfridge is unique as compared to other retail giants because of its unique historical importance, its innovative marketing strategies using art and science for the amusement of its customers (Selfridges & Co, 2018).
Choice & Justification of Service
Selfridge provides one of the unique services by retailing luxury brands and other consumables under one roof with unique marketing techniques. It was back then known for its sumptuous window displays which attracted the customers to the unique art displays. It installed the largest windows in the world and behind them were the most sumptuous displays of the shop. The attitude of Selfridge is what makes it different from other retail stores. The retail store encouraged shoppers who were just looking. Selfridges is one of the tourist attractions in England, which marks the combination of shopping, arts, science and architecture. The retail store changed the shopping experience and did it on a time when the women were gaining economic and social power. The retail store was designed to attract women as much as possible (Harford, 2017). The Birmingham store is an epitome of architecture, which is one of the most attractive tourist attractions in England. Similarly, the London Oxford Street showcases the 2nd largest store in England (Selfridge, 2018).
The market represented by Selfridge Co. Varies throughout the store as it offers a wide range of products. Generally, the market of Selfridges consists of men and women of 25+ ages with a high income who have an interest in style, fashion, art and luxury. The large window displays attract the general public, tourists and families to its inside held exhibitions. The target market of Selfridges usually belongs to self-employed, high-income families, business professionals and individuals from key affluent groups (Huffington Post, 2017). This market is selected as it has high disposable income which gives the opportunity of high spending on luxury products. The UAE market for luxury and fashion products also caters to the same target market of high-income families and individuals.
SWOT Analysis:
Strengths
The company has a strong relation management, promotional and pricing strategy for its marketing. The retailer offers a wide range of products which range from high-end products to luxury items. Celebrities also visit the store as well, which attracts more customers to it. The high pricing of the retailer attracts the customers from the high-end market. The unique marketing technique that Selfridges has been following since its inception shows its strong marketing strategy. The attraction that its stores have because of its unique architecture, its rich history, and the combination of art and science makes it a tourist spot causing it to attract more immediate and long-term customers. It also offers discounted stores for clearance sales. It deals online as well, which is the strength of the company (Baker & Hart, 2016).
Weaknesses
The company offers high priced products more which can be a problem for most of the market as it is not affordable for all of the markets. Another weakness of the retailer is that even though with all of its expansion plans it still only has four stores in the entire of England. The parking of the store is really expensive, and customers tend to go somewhere else for this reason. Some of the products have historically been considered a problem because of animal rights and global warming awareness, and it can still become an issue. Furthermore, the competition in retail is very aggressive, which makes it more important to open more stores in the UK and international markets. The Duke and Duchess of Hamilton had boycotted Selfridges because of foie grass sold in its stores.
Opportunities
The retailer offers a specialised range of products which differentiates it from other retailers like Amazon and Wal-Mart in the international market. It can consider it as an opportunity. The service of Selfridges can provide it with opportunities in international markets like the US, Canada, Australia while the emerging markets present a huge potential for Selfridge services as well. In the US and other American markets, the retail can succeed because of the similar customer preferences as the Selfridges customer preference and the lower exchange rates. It can also diversify its portfolio to have more access to the market. The eastern markets of UAE also present an opportunity as it caters to a wide international tourist market (Wachman, 2018).
Threats
The global financial crisis has made consumers spend less on luxury products. Another threat is the aggressive war between Wal-Mart and Amazon, which is being happened to capture the retail market. It can become a threat as well (Loeb, 2013).
TOWS Analysis:
The TOWS Analysis is an extension of the SWOT analysis in which the defined strengths and weaknesses of the company; Selfridges is compared with the defined external environment to come up to strategic options.
Strengths-Opportunities:
As per the strengths of the company Selfridges, the company has a strong marketing and promotional strategy which helps it differentiate. The Selfridges store in itself is a tourist spot. The opportunities show that the emerging and American markets represent the strong potential for retailers like Selfridges. It shows that Selfridges can expand its business into these markets to use this opportunity. Furthermore, another strategic option could be to diversify its portfolio to add more products which market to middle-income households to widen its market.
Weaknesses-Opportunities:
The weakness of Selfridge is its dependence on one market segment of high-income households. The opportunity lies in the area of expanding its portfolio to cater to other market segments as well. Another weakness of Selfridges is that it has not expanded from four stores. The opportunity in American and emerging markets can be utilised for expansion. The company can also evaluate its portfolio regarding any controversial product for environment or animal rights to not get into any trouble in future because of it. It can also market this step to show its commitment.
Strengths-Threats:
The threat as analysed in the earlier section shows the aggressive competition as one threat. Secondly, the market share war between Amazon and Wal-Mart is very aggressive as well. US and Canada’s markets have strong retailers as well. However, it is evident that there is space for a retailer like Selfridges in international markets which combines shopping experience with entertainment. With its strong, innovative promotional strategy and expertise in retail theatre, Selfridges can make space in the aggressive international retail market for itself. Another strategic option can be to expand its business in England only. As Wal-Mart has recently sold its share in the UK market and is focusing on Indian market instead, Selfridge can work on expanding its share in the home market (Stacey et al., 2018).
Weaknesses-Threats:
As shown in the SWOT Analysis, Selfridge weakness is its dependence on the high end market, and the company has some serious competition in the international market which can become a threat for it in future. It calls for the strategic option of widening the market base. It can be done by expanding the product portfolio or by entering into new markets internationally.
Two International Markets
UAE/Dubai:
The UAE fashion industry is not like any other in its growing landscape and it’s latest designs and trends which are attracting both the traditional and international markets(Macadam, 2018). The UAE retail markets have attracted foreign investment from luxury brands like Vogue, and Dolce & Gabbana. The Dolce and Gabbana have launched its new modest wear fashion range in the UAE markets, which are a trend that has also been followed by brands like Tommy Hilfiger and Oscar de la Renta. The variety in fashion designs has been given prime importance in the luxury retail market of UAE to make it an attractive fashion capital (Nazeer, 2017). Dubai specifically is home on apparel and footwear market (Ken Research, 2018) which was valued at $11.5 billion in 2016. It is one of the largest chunks of the retail sector of the Emirates. Apparel leads the retail market of Dubai with 73% of the market share with footwear at 18% and sportswear at 9% of the market share. The sales events, shopping festivals, and galas help the demand to rise. The trend is expected to grow through 2021 with a compound CAGR of 3.4%. The market value of the Dubai retail sector second largest product category of personal accessories is $4.2 billion. The personal care and beauty market of Dubai is valued at $1.52 billion, which provides a promising potential for foreign investors (Arabian Business, 2017). The environment in Dubai is ripe for luxury clothing brands. The UAE has enough spending power having a diversified economy in the GCC countries and has no lack of high net worth individuals as its residents. It was ranked as the 21st most expensive city in 2016. Arab consumers have spent around $320 billion on luxury products in 2016 as per the WWD report (Brannigan, 2017).
India:
The Indian luxury market is expected to grow to $ 23.8 billion by the end of 2018 because of the high demand for the luxury products among the Indian youth and the upper class higher purchasing power. The higher disposable incomes and urbanisation has aided in propelling the growth of this market segment in India. The entering of the retail luxury brands in the market has also helped this trend (Gupta, 2018). A stable economy, well-travelled consumers, and a young population coupled together with increasing disposable income show great potential for luxury brands. India is a market which is no longer ignored by the world. However, the lack of appropriate infrastructure, rental costs, high tax rates, very uncontrollable counterfeit markets are some problems which are being faced by the luxury brands in India. Thus, even though it represents a huge opportunity, it has its loopholes as well (The Economic Times, 2018).
Environmental Analysis:
PEST Analysis
Political:
Dubai is one the seven states of United Arab Emirates. The political environment of Dubai and UAE is stable, and the government structure is more dynastic. It operates as a loose confederation of the seven states. The ruler of Dubai is usually the vice president of the UAE while the ruler of Abu-Dhabi is the president of the UAE. The legal framework for the business and ownership rules are well defined, and foreigners have permission to own as much as 49% of the limited liability companies. Furthermore, foreigners can own 100% of the foreign companies, their branches, and offices. The state has many free zone enterprises as well. The state is very pro-business and applied liberal economic policies for the protection of various business rights ranging from intellectual rights to counterfeit and copyright laws.
Economic:
Even though UAE is known for its dependence on oil, gas and petroleum-like all Gulf States, Dubai depends mainly on tourism, financial services and tourism for its revenues. The corporate profits or personal income does not have any direct taxes except for the oil companies which pay a flat 55 % and the foreign banks which pay 20% on their profits. The customs duties are at 4% along with many other exemptions as well. The repatriation of profits and capital up to 100% is permitted. There are no competitive import duties, quotas, trade barriers or foreign exchange controls(Arabian Business, 2018). Dubai has seven industrial areas which have three successful free zones, two international seaports, the main international airport, highway network, power and telecommunication network, and one business park. The state of Dubai is served by 120 shipping lines and 85 airlines to 130 global points (Harris, 2018).
Social:
Dubai has more than 80% of the expatriate population. The male population is dominant in Dubai with 70% of the population. Vogue has recently collaborated with Dubai based company Nervora to launch Vogue Arabia. The digital launch of Vogue Arabia was subscribed by native campaigns and displays of Chanel, Dolce & Gabbana, Dior, Louis Vuitton, Tiffany & Co, Bulgari, Burberry, Fendi and Saint Laurent. The wide interest of the Arabian youth in e-commerce is notable as well. The market is home to international tourists, and then there are those as well who come to Dubai for the sake of shopping only (Brannigan, 2017).
Technological:
With the rise in the use of mobile in the Middle Eastern youth and their more interest in e-commerce has caused an increase in the demand of companies to cater to the market online needs. Only recently, e-commerce has become an important part of the luxury market shopping pattern. This digital and e-commerce development has been drawing much international attention towards the Dubai luxury market. The consumer dynamics and e-commerce penetration signals a bright future for luxury clothing and other brands for this region (Brannigan, 2017).
Recommended Mode of Entry:
The foreign firms which are seeking entry into the UAE market need to have a local sponsor as they are limited to have minority ownership in the joint venture. Finding of the right partner, distributor or agent in the UAE is critical for the company to have success in the UAE. As a trade hub, and a centre of international business it is a firm where the foreign companies are expected to face strong competition from multi-nationals. However, the technology and the quality advantage can offer competition with the lesser expensive foreign competition. Trade shows, conferences and exhibitions are often conducted in the market in which companies seeking to enter into the regional UAE market can test their water and meet their buyers and other suppliers (Export.Gov, 2018).
One mode of entry for the Selfridge is a joint venture with a local company, distributor or agent who would have the majority stake (Doole & Lowe, 2005). However, Selfridge can launch their brand as foreign company subsidiary as the profits and revenues can be 100% repatriated from the UAE. Thus, this would be the recommended mode of entry.
Challenges:
The foreign direct investment in the UAE is composed of 23% of the retail segment. The growth of e-commerce is posing challenges for the UAE brick and mortar retail segment. The retail segment is about 11% of the UAE of the GDP. However, the brick and mortar segment is going to stay relevant in the market as it has been investing hugely in all relevant segments (D”Souza, 2016). Furthermore, the retail sector of Dubai is also battling oversupply and residual weakness in its consumer spending. The lower oil prices have influenced purchasing power. The rise of e-commerce has compounded the structural issues (Townsend, 2018). Some economic challenges are going to be seen in 2018. The VAT, tightening of monetary policy and high fuel prices provides a challenge to the private sector, households, and the corporate sector (Diaa, 2018). The trickle-down impact of the crash in oil prices has been influencing much of the earnings of the foreign companies (Staff Writer, 2016). About half of the economy of Abu Dhabi depends on the hydrocarbon segment, which shows that the oil and gas companies are returning the office space to the market. However, the occupancy rates and footfall have not weakened in the retail market of Dubai. However, tertiary retail properties have seen signs of weakness with larger malls also witnessing some softening in their earnings (Wachman, 2018). The challenges are not too gruesome as compared to other international markets. The comparative advantages are vast, and thus, this calls for a true opportunity for the Selfridge Co to enter the Gulf Country and expand its market area. It can further lead to more openings in Abu Dhabi or other Gulf states within or outside the UAE. The opportunities in the other emerging markets are lucrative as well and can be tested by entering into these states as well.
As per the Ansoff Model, the company can look for market development to increase their market base and have new markets, or they can work on new products in existing markets or new products in new markets through diversification (Ansoff, 2016).
| New |
Market Development |
Diversification |
| Markets |
Market Penetration |
Product Development |
| Existing | Products & Services | New |
Conclusion:
In the end, it can be concluded with such words that even with the challenges of economic crisis, and lower oil prices, and financial challenges, the company Selfridge can enter in the market of UAE and Dubai as a foreign subsidiary. The market of the UAE has been considered as one of the main trade capitals and offers a very friendly business environment. The pro-business environment, the high purchasing power of the households, tourism status, relaxed taxes on foreign business, permission of repatriation of 100% of the profits and revenues makes it a lucrative location for the Selfridge. Thus, being a foreign subsidiary the company of Selfridge can enter the luxury retail market of UAE Dubai and expand its business internationally.
References:
Ansoff, H.I., 2016. Strategic Management. Springer.
Arabian Business, 2017. Revealed: clothing, footwear is UAE’s biggest retail sector. [Online] Accessed 9 December 2018].
Arabian Business, 2018. Arabian Business. [Online] [Accessed 9 December 2018].
Baker, M.J. & Hart, S., 2016. The Marketing Book. 7th ed. New York: Routledge.
Brannigan, M., 2017. DUBAI IS QUICKLY AND QUIETLY BECOMING THE WORLD’S NEXT GREAT RETAIL CAPITAL. [Online] [Accessed 12 December 2018].
D”Souza, H., 2016. UAE’s retail sector grows despite digital challenges. [Online] [Accessed 9 December 2018].
Diaa, S., 2018. UAE economic challenges to persist in 2018. [Online] Accessed 9 December 2018].
Doole, I. & Lowe, R., 2005. Strategic Marketing Decisions in Global Markets. 1st ed. Cengage Learning EMEA.
Export.Gov, 2018. UAE – Market Entry Strategy. [Online] [Accessed 9 December 2018].
Gupta, A., 2018. How luxury brands should target India’s super-rich. [Online] [Accessed 9 December 2018].
Harford, T., 2017. How department stores changed the way we shop. [Online] [Accessed 9 December 2018].
Harris, S., 2018. Technology in Dubai – birth of a technology hub. [Online] [Accessed 9 December 2018].
Huffington Post, 2017. Which Luxury Brands Are Reaching Millennial Shoppers? [Online] [Accessed 12 December 2018].
Ken Research, 2018. UAE Online Fashion Market is Expected to Grow at a CAGR of 21% During the Next 5 Years Till 2022: Ken Research. [Online] [Accessed 9 December 2018].
Loeb, W., 2013. Selfridges: A Shopper’s Paradise With A Colorful Founder. [Online] [Accessed 9 December 2018].
Macadam, D., 2018. What will drive UAE fashion and retail? [Online] [Accessed 9 December 2018].
Nazeer, T., 2017. UAE Fashion: A Lucrative Industry For The Business World. [Online] [Accessed 9 December 2018].
Selfridge, 2018. The Selfridges Story. [Online] [Accessed 9 December 2018].
Selfridges & Co, 2018. Selfridges Co. [Online] [Accessed 9 December 2018].
Stacey, K., Nicolaou, A. & Fontanella-Khan, J., 2018. Walmart shifts global strategy to battle Amazon. [Online] [Accessed 12 December 2018].
Staff Writer, 2016. UAE retail firms face challenges amid VAT launch in 2018. [Online] [Accessed 9 December 2018].
The Economic Times, 2018. India’s luxury market to cross $30 bn by year-end: Assocham. [Online] [Accessed 9 December 2018].
Townsend, S., 2018. Dubai retail sector battles oversupply but prime occupancy stays firm. [Online] [Accessed 9 December 2018].
Wachman, R., 2018. Challenging times for UAE retailers, but Dubai well positioned. [Online] [Accessed 9 December 2018].
+447462439809