Michael Kors PEST and SWOT Analysis (2024)

A brief Overview of Michael Kors

Michael KorsHoldings Limited has been regarded as one of the leading brand in the luxuryfashion industry of America. The company was established by designer MichaelKors in 1981 and the product mix includes the hand bags, watches, footwear, apparel, jewelley, leathergoods and other accessories. Michael Kors is operating more than 550stores and over 1500 in-store boutiques in different countries across the world(Michael Kors, 2018).

Although theMichael Kors started its operations in 1981 but they opened their first retailstore in 2006. The main competitors of the Michal Kors include Louis Vuitton,Kate Spade and Coach. The hand bags and accessories are most popular amongteenaged girls all over the world as per the survey of 2016. The company hasfocused more on sustainability and corporate social responsibility since thelast year and announced that the company will no longer use animal skin and furin the manufacturing and production of any of their products.

The existing markets of Michael Kors include UnitedStates, North America, Asia Pacific, Europe, Germany, Italy, France, MiddleEast countries including Dubai, Bahrain and some Asia Pacific Countries.Besides that, Michael Kors has online presence in many countries where theydon’t have any physical stores. The largest geographicalmarket of Michael Kors is North America and then Europe and Asia Pacific.

In 2017, in orderto increase their market share, the company acquire the business of Jimmy ChooPLC and they have also plans to expand their business in some other regions ofthe world. Moreover, they opened a store in Waterloo in 2018 in order to expandtheir presence in the international market.

The Emerging Market for Entering

For the luxuryfashion and retail industry, Asia Pacific is considered as the most attractingregion that provides numerous opportunities to the fashion retailers.Similarly, Michael Kors has witnessed remarkable increase in the retail valuesales by implementing their expansion strategy in this region. In the year2017, the retail value sales of Michael Kors Holdings Ltd were 9% of the totalsales of the company. By keeping this thing mind, the company expanded itsinternational business operations by using different mergers and acquisitionsstrategies. For instance, in Greater China regions such as Taiwan, Macau, HongKong and China, they expand through acquisition of its geographic licensees.Besides that, they have recently acquired some businesses in North Korea(Almor, 2013).

On other hand, thecompany is facing some serious challenges in the North America as their saleswas less than their previous fiscal year. These challenges make it difficultfor the Michael Kors to acquire or expand more business in the region becauseit requires a lot of efforts for the company to rebuild their brand reputationand sustain long term growth in the United States.

By doing throughanalysis of the markets in which Michael Kors is operating, the assignmentsuggests that India would be the best region for Michael Kors for expandingtheir business as people are becoming more aware of the brands and they areagreed to pay higher prices for luxury fashion brands as well. Therefore, thereport chooses India for expanding the business of Michael Kors as it is anemerging market in the retail fashion industry and there is a need to expandbusiness of the company in this region (Barney, 2014).

In order to checkthe feasibility of expanding business in India, an analysis of the macro andmicro environment will be conducted and the best strategies will be recommendedon the basis of that. Under the macro environment analysis, the effect of somefactors like Political, Economic, Social and Technological will be analyseswhereas the micro environment analysis includes the impact of consumers,suppliers, distributors etc. on the growth of the business.

Macro Environment (PEST)

When expanding internationally, firms usually face new political, legal, social and cultural environments. Consequently, foreign operations have many characteristics that are distinct from domestic operations. Facing a new environment in a foreign country, a firm may feel an uncertainty that may negatively affect its operations in that country, and, to reduce the uncertainty that stems from its foreign operations, may act cautiously in its international expansion process. As noted above, the incremental model also argues that firms develop their international operations gradually over time because firms lack sufficient knowledge about foreign market conditions, and international expansion may require a time-consuming accumulation of foreign market knowledge.

• Political Factors

Indiais a democratic country and the political environment of the country is greatlyinfluenced by the government’s rules and regulations, policies and differentideologies. Government has imposed different types of taxes such as the incometax, sales tax and service tax and it can be said that the India has awell-developed taxation system. The government encouraged the internationalcompanies to start their business in the country.

• Economic Factors

Indiahas a stable economy and its GDP is increasing with each passing year due todifferent policies of industrial reforms. India’s economic environment hasachieved tremendous growth since past few years due to various factors such asliberalization and business reforms. A constant improvement has been witnessedin the past few years.

• Social Factors

Socialfactors play an important role in the fashion and retail industry; however, thesocial factors of India are suitable for the business operations of MichaelKors. There is a flexibility and adaptability in the attitudes, behavior andculture of the people in India. Moreover, the disposable income of people is also increasing due towhich they are attracting towards luxury fashion brands.

• Technological Factors

Technology highly impacts the productdevelopment and manufacturing processes of an organization. Besides that, italso enables the companies to introduce latest cost cutting processes (Barney,2014). India has high level of technological advancement as it possesses one ofthe strongest IT sectors in the world. The country promotes developments withinIT sector, software updates and other technological advancements that enablesthe international companies to start their business easily.

Micro Environment (SWOT)

The micro environment of a company is affected by different factors such as suppliers, employees, customers and some others. In order to assess the micro environment, SWOT analysis (strengths, weaknesses, threats and opportunities) is conducted to identify the current situation of the luxury fashion industry in India.

The luxury fashion industry of India is booming rapidlyas different fashion brands including Kate Spade, Calvin Klein, louis Vuitton,Hermes and Gucci have opened their stores in big cities of the country andpeople are inclines towards buying luxury fashion products. The retail industryof India is growing at the rate of 40% every year and its estimated worth is$200 million. Besides that, it has been estimated in a marketing report thatthe Indian luxury fashion goods market was worth around $3.4 billion in 2016(Quartz India, 2018).

The threat in the Indian luxury fashion industry is notvery high because very few international brands have opened their stores in thecountry. However, it is good opportunity for Michael Kors to open their storesat different cities of the country and also make their digital presence strongbecause the trend of online shopping is also increasing among consumers inIndia. Moreover, some of the considerable threats and challenges that may faceby some international brands for market entry includes growing market ofcounterfeits, rental costs, high tax rates and lack of suitable infrastructurein the country (Economic Times, 2018).

Target Audience of Michael Kors in India

Basically, thetarget market of Michael Kors is both men and women under the age of 25-54years with annual income above $50, 000 (Business Wire, 2013). However, theteenage girls and boys also use the luxury products of Michael Kors; thehandbags and shoes are widely popular among young girls all over the world. Forthe long term growth and marketing strategy, Michael Kors target youngcustomers who overlooked by luxury brands and having affluent demographics (Almor(2013). Similarly, they can target the same segment of the market for theirproducts as the youth population of India is highly energetic, working andspend more on luxury goods market.

Most Appropriate Entry Mode

For entering intoa new market, Michael Kors always uses the innovative approach for which it isalso termed as an omni-channel retail (Nasdaq, 2018). For expanding itsbusiness in India, purchasing Liscece has suggested as the most appropriateapproach. The licensee may find that the cost of the agreement is less than ifthe development were accomplished internally. From the licensor’s point ofview, the use of a licensing agreement might be a feasible option because risksassociated with operating facilities and holding inventories can be reduced. However,the licensor may face fundamental problems and certain risks. By transferringrights to the licensee, the licensor undoubtedly loses a measure of controlover the asset. The licensor also risks developing a future competitor afterthe licensing agreement expires (Hoffman et al., 2016). Even before anagreement is terminated, the licensor may have to compete with the licenseebecause the licensee has made improvements on the licensed technology that makethe original patents obsolete.

In the process ofinternational expansion, firms usually begin with exporting and then come todirectly manage foreign operations through FDI. Investigating internationalexpansion within a specific operational form only, both the export developmentmodels and the FDI development models fail to view export or FDI as part of afirm’s overall choices among diverse operational forms. Given the limitationsof the export development models and the FDI development models, attention mustbe paid to the whole process of internationalization that a firm may implementover time, and in particular to the incremental model (Autio et al., 2011).

A substantialamount of research investigating firm internationalization has focused on theexporting activity of firms. The exporting development models explain how firmschange their exporting operations over time. When engaged in exporting, firmsmay face uncertainty due to lack of information on foreign markets andoperations. Such uncertainty is greater for firms at initial export stages whenfirms usually have limited knowledge about not only exporting itself but alsoforeign market characteristics (Frasquet et al., 2018).

Firms at initialexport stages thus enter li foreign markets via indirect export methods, suchas export merchants, trading companies, resident buyers, or export agents. Asfirms gain more experience and knowledge, their level of uncertainty about theexport market gradually diminishes (Al‐Aali & Teece, (2014). Firms atadvanced stages thus come to use direct export methods, such as agents,distributors, and sales branches. The models identify major facilitators andinhibitors in the export development process. The pattern of firm behaviors inthe export development process depends largely on the type and amount oforganizational resources available for export expansion (Aversa et al., 2018).Firms in more advanced stages need to commit more organizational resources totheir expansion efforts. Organizational resources thus either facilitate orinhibit export expansion. Foreign market experience also facilitates orinhibits foreign expansion because it determines the level of uncertainty firmsface.

The effect of foreign market uncertainty onincremental expansion is expected to vary from firm to firm, moderated byvariables at the firm, industry, and host country levels. The amount ofresources available to a firm may affect its international expansion process.They also argue that firms strive to minimize the risks. As other researchersmaintain, variations in international expansion can be explained, to asignificant extent, by organizational and management characteristics. Thus,variation in firm resources and risk-taking orientation may affect a firm’spropensity to undertake incremental international expansion (Vicari, 2016).

The Product Mix

The product mix of the Michael Kors includes hand bags, shoes, accessories, jewelry, watches and other accessories for men and women both. The company do not need to change its product mix while entering into India because people in India are trendy and acceptancy is higher among them. Moreover, hand bags of Michael Kors are more popular among teen age girls all over the world so they can also same product mix to people in India with some affordable prices (Ritala et al., 2014). The response of young people in India is fast and quick towards changing fashion habits and retail trends.

References

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