Letter of Transmittal
17th April 2014 Ms. Samira Rahman North South University Subject: Submission of report Dear Miss, Here is the report on the „Local firms diversification? that you have asked us to prepare as a part of the requirement for our Mgt 372 course. In presenting this report, we have tried our level best to include all the relevant information and explanations to make this report informative and comprehensive. It was very enriching and exciting experience for us to prepare this report. Our report writing skills and communication skills have improved a lot during the course of writing this report. We look forward to working under your guidance again in the near future. Thank You for believing in us and giving us this wonderful opportunity. Sincerely,
Zakia Fatema Nishu Rifat Arefin Md. Osman Goni Susmita Bashir Numayer Ahmed Chaudhuri Ishika Chowdhury Barua Omar Bin Sajjad
(ID093 0516 0 30) (ID-103 0253 0 30) (ID 103 0927 0 30) (ID-111 0029 0 30) (ID-111 0126 0 30) (ID-111 0222 0 30) (ID-111 0462 0 30)
Acknowledgements
This report would have been impossible without the valuable contributions and limitless help of several individuals. Our first acknowledge goes to the Almighty for giving us the patience and courage to finish this task within its deadline. Then, we cordially thank our respected course instructor, Ms. Samira Rahman for her continuous guidance and support to make this report possible. She assisted us whenever any help was needed. Her generosity and liberality aid us to go further with this report without any hazardous situation. We would like to express gratitude to our friends and classmates for their friendly and cordial cooperation and suggestion during working on the project. They have generously supplied insightful comments, helpful suggestions, and contributions all of which have progressively enhanced this report. Last but not the least we are very thankful to our families. Without their help, kindness, and love this report would not be done so successfully.
Executive Summary
This project discusses about the strategy of a local Bangladeshi firm, namely Persona going for international operations, in United Kingdom. Furthermore this report talks about the political, economical, social, technological aspects of the United Kingdom. Also there is a detailed analysis of various factors that a firm faces when it starts a new operation in a new location. The value chain analysis has been, and how Persona like to do its venture is also been highlighted relating with all the factors.
Contents
Introduction ......................................................................................................................... 1 Company profile............................................................................................................... 1 Why United Kingdom? ........................................................................................................ 2 Value Chain analysis ........................................................................................................... 3 PEST analysis ...................................................................................................................... 4 Political: ........................................................................................................................... 4 Economic Analysis........................................................................................................... 5 Social Analysis ................................................................................................................. 8 Technological Analysis .................................................................................................... 9 Porters Five Forces .............................................................................................................. 9 Threat of new entrants .................................................................................................... 10 Threat of substitute products or services ........................................................................ 10 Bargaining power of customers .................................................................................. 11 Bargaining power of suppliers ....................................................................................... 12 Intensity of competitive rivalry ...................................................................................... 12 Competitors? Strength & Weaknesses ........................................................................... 13 Type of entry mode............................................................................................................ 13 Conclusion ......................................................................................................................... 14 Bibliography ...................................................................................................................... 15
Introduction
Company profile
In 1984, Kaniz Almas Khan, the beauty envoy of the nation started her dream with a modest set up. Since then Persona has successfully proven its excellence and commitment towards the endless journey of grooming lives. Persona is the reflection of Kaniz Almas Khan, the managing director of Persona Group, committed to provide world class beauty care services and solutions. Long term vision, professionalism and sheer hard work have made Persona what it is today. The beauty care industry is one of the fastest growing industries of our country. Lifestyles have changed; people are realizing the importance of good health and presentation and thus becoming more and more concerned about their health and beauty. People have more access to information and media, which makes them more conscious about their well-being, leading to a change in perception. Thus beautification is not considered a luxury anymore; it has become a necessity! It is one of most renowned and oldest beauty parlor of the country. It has sustained its reputation purely because of its unparallel service and dedication towards its customers. They have done immensely good in Bridal make over and has brought about a change in the right directions in terms of make over Why they need to diversify? Persona should diversify because of market and efficiency purpose. Because Persona is dominating Bangladesh and reached at a stage where they can?t expand, though there are cities in which Persona haven?t expanded but considering their target market those place are not perfect either. So it is the time for them to go international. Not only market seeking purpose they will also enjoy resource or asset seeking resource as if they go international they can offer lots of variety and can get hold of new raw materials which are not available here due to poor infrastructure.
Page 1
Why United Kingdom?
Doing business in United Kingdom
No.
Procedure
Time to Complete
Associated Costs
1
Check name for uniqueness at the company names index database on the web
Less than one day (online procedure) 1 day
no charge
2
Prepare memorandum and articles of association; fill out and sign Form IN01 (application for registration).
GBP 35
3
File incorporation documents with the Registrar of Companies at Companies House
1 day
GBP 30
4
Contact HMRC and register for VAT
Less than one day (online procedure)
no charge
5
Contact HMRC and register for PAYE Sign up for employer?s liability insurance
8 days, simultaneous with previous procedure
no charge
6
1 day
no charge
Starting a business is UK is easier than most of its neighborhood countries and they are current ranked as 28th country on ease of starting new business. Doing business in United Kingdom shall be of great profit for Persona as there are 451,532 Bangladeshi people in United Kingdom. As Bangladesh shares it border with India and was under Pakistan so our cultural difference is a bit less. So Persona can take this opportunity and even target a wider market for makeover saloon. As of 2011 there 1.4 million of Indians and 1.1 million Pakistanis as of 2010. So this gives Persona a wider target group and further profit making opportunity.
Page 2
Value Chain Support analysis Activities
Administration and Infrastructure
Human Resource Management
IT Department
Public Relations
Accounts
Primary Activities
Outbound
Marketing and Services Sales
Inbound Logistics
Operations
Logistics
Collection of Service: *Time *Request *Processing Bringing materials into business Inventory control of required supplies.
Operating different machineries/tec hnologies likerebounding machines, coloring hair, massager.
Providing different kinds of services like spa, massage, pedicure, haircut, beauty treatment and so on.
Different kind of promotional activities, advertising of the products or packages.
Customer support, Information facilities regarding beauty tips.
Page 3
Competitive Advantage
PEST analysis
Political:
The United Kingdom is a unitary democracy governed within the framework of a constitutional monarchy, in which the Monarch is the head of state and the Prime Minister of the United Kingdom is the head of government. Policies regarding FDI UKTI in Bangladesh helps companies in Britain increase their competitiveness through overseas trade in Bangladesh. We also offer professional, authoritative and personalised assistance to help companies in Bangladesh locate and expand in the UK.) Finance, grants and incentives for businesses in the UK Businesses based in the UK have access to the one of the biggest financial services sectors in Europe. Options range from simple, low cost and accessible business banking services through to specialist corporate funding products or full listing on the London Stock Exchange. In addition businesses can access a wide range of grants, incentives and tax allowances, providing financial support and assistance for R&D, investment in business and networking. Corporation tax reduced to 20% from April 2015 –lowest in the G8 From April 2013, the rate of UK corporation tax will stand at 23%. This will be reduced to 21% in April 2014 before being cut further to 20% from April 2015. By then, the UK will have the lowest in corporation tax rate in the G8 and joint lowest in the G20. Export Policy is not relevant for our type of business as we will using their resources, as Persona does not produce anything of its own which is unique in nature. So regardless of whether export policy is rigid or easy does not make of a difference for a company like Persona.
Page 4
Political Stability UK Overview The UK is an OECD country located in Western Europe. It covers 241,930.00 square kilometres (80th largest in the world) and has a population of n.a. million people (22nd largest in the world). UK's population grew by 0.75% in 2012. The UK's average population density is 259.38 persons per square kilometer. 20.24% of UK's population is rural and 79.76% is urban. 17.54% of the population is under the age of fifteen, and 17.16% of the population is over the age of 65. In n.a. the UK's GDP was USD n.a. billion. The UK's GDP grew at n.a. in n.a.. GDP per capita, in purchasing power-adjusted dollar terms, is USD 36,569. This makes the UK a wealthy country
Economic Analysis
In the Economic analysis section, some of the economic indicators like- GDP growth, FDI inflow and Outflow, Purchasing power parity, per capita income etcetera are discussed briefly. GDP Growth The economy of the UK is one of the most developed one in the world. During the oil price shock the economy experience the greatest growth in its history. In recent times the economy of UK was more rely on the service sector rather than manufacturing. The sector-wise share of GDP is represented through the pie chart.
Agriculture Industry Services Imports Exports
Page 5
From the most recent GDP growth analysis of UK, gives a number of 2.8%in 2013. The graphical representation shows the growth from 2012„s first quarter to „13?s 4th quarter.
Foreign Trade: UK has continued to strengthen its position as the leading European destination for foreign direct investment. United Kingdom experience the highest inward investment position in 2012 which was almost £936 billion and the outward investment position remained stable and similar to 2011s which was £1,088 billion. Another analysis shows that the European countries are the investment leaders in the UK. Europe almost occupied the 47% of the total inflows followed by America and Asia.
Page 6
Position in world competitiveness rankings The UK is among the world?s top 10 countries in competitiveness rankings. The UK countries are in the 8th position. The country improves its performance in several areas like efficiency in labor markets (5th). The United Kingdom countries to have sophisticated (8th) and innovative (10th) businesses that are highly adapt at harnessing the latest technologies for productivity improvements and operating in a very large market (it is ranked 6th for the market size). The financial market also continues its recovery, ranked 13th, up from 20th last year. All these characteristics are important for spurring productivity enhancements. On the other hand, the country?s macroeconomic environment (110th, downfrom 85th last year) represents the greatest drag on its competitiveness, with a fiscal deficit nearing 9 percent in 2011, an increase of 5 percentage points in public debt amounting to 82.5 percent of GDP in 2011 (127th) and a comparatively low national savings rate (12.9 percent of GDP in 2011, 113th).
Page 7
Social Analysis
Language-Language of the UK is English. This is spoken as the primary language of 95% of the UK population. There are several other living languages in the country; various religious dialects include Welsh, Irish, Ulster Scots, Cornish, Gaelic and British sign language. Immigrants have naturally brought many foreign languages from across the world. Population-Population size is 60,776,238 Religion – Christian – 71.6%
Muslim Hindu Other unspecified
2.7% 1% 1.6% 23.1%
Social Strata: There are 7 social classes in UK. These social classes are based on the economic, cultural and social capital. 1. Precariat- this is the most deprived class of all with law levels of economic, cultural and social capital. 2. Traditional working class- this is also a deprived group of people but not in the poorest group. 3. Emergent service workers- this new class has low economic capital but high level of cultural and social capital. 4. Technical middle class- this is a group of high economic capital but less socially and culturally engaged. 5. New affluent workers- This class has medium levels of economic capital and higher levels of cultural and social capital
Page 8
6. Established middle class- members of this classes have high level of all 3 capital although not as high as „Elite? group. 7. Elite- This is the most privileged class in UK who have high level of all 3 capital.
Technological Analysis
Technological analysis is not required for the type of business Persona will be doing. Though United Kingdom has a sound infrastructure and a very strong technological base, so in future if Persona want to innovate into something which requires strong technological base then they can afford to do it.
Porters Five Forces
The industry environment of the host country in which the company is operating: From the Five Forces Model of Michael Porter we know that there is consideration of five forces for industry analysis. Those forces are Threat of New Entrants, Threat of Substitute Products or Service, Bargaining Power of Customers, Bargaining Power of Suppliers and Intensity of Competitive Rivalry which we have covered here:
Page 9
Threat of new entrants
In United Kingdom barriers to entry is low. This results in many new entrants, which eventually will decrease profitability for Persona. If the entry of new firms can be blocked by incumbents, the abnormal profit rate of the firm will trend towards zero (perfect competition).Some competitors of Persona in UK are: Panacea Beauty Salon, Angel Beauty Salon, Islington Beauty Salon etc. The following factors can have an effect on how much of a threat new entrants may pose:
?
The existence of barriers to entry (patents, rights, etc.). The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.
? ? ? ? ? ? ? ?
Government policy Capital requirements Absolute cost Economies of scale Product differentiation Brand equity Switching costs or sunk costs Customer loyalty to established brands
Threat of substitute products or services
The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. (Johnson G. et al, 2006 p.82). Persona beauty parlor competes within the overall leisure goods and activities market. The fact that the beauty care service offered, with all the added service and features, is often branded as “luxury”, places the industry in a wider competitive environment. Moreover, threats from service complementary such as Health Spa and Fitness Club, Hairdressing and the growing market for DYI are expecting to put even more pressure in an already very competitive market. Consumers tend to be the most price-conscious in this case. Potential factors Persona Beauty Salon:
Page 10
? ? ?
Ease of substitution. Suit research and development for different target groups High quality service
Bargaining power of customers
Most of the buyer?s negotiate payment rates and they dictate them. Parlors must accept these rates as Persona is following LOCALIZATION STRATEGY by customizing the firm?s services so that they provide a good match to tastes and preference in United Kingdom. Persona will manage care plans, although the firm has no dictatorial power over rates. Nevertheless it can exert control over where consumers receive care, and hence have a great deal of power. For examples, in last ten years, using internet allows customers to share their views worldwide which have greatly increased the power of customers of this particular service. Sometimes positive word of mouth can be beneficial to the parlor. The resulting power shift has an enormous impact on the strategy for which parlor has to rethink their fees and other price.Around 50% of women consider about their beauty due to changes in society. Educational level, income, social class, occupation, relationship & feelings most affect to women to pay more attention on their beauty. Persona can take measures to reduce buyer power in future, such as implementing a loyalty program like membership cards, discounts. The buyer power is in United Kingdom high as if the buyer has many alternatives. Potential factors of Persona Beauty Salon:
?
Buyer concentration to firm concentration is low which means few buyers with significant market share.
? ? ? ? ? ? ?
Unique products so buyer will not switch easily to other products. Sufficient buyer information availability Force down prices Less substitute products Buyers are price sensitive. Differential advantage (uniqueness) of industry products Because of brand identity of Persona possesses a credible backward integration threat.
Page 11
Bargaining power of suppliers
Suppliers of raw materials, components, labor, and services (such as expertise) to Persona Beauty Salon are a source of power over the firm as there are few substitutes. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources. The firm is attractive as the supplier has not as much of bargaining power. Persona has many suppliers in processing their product, so their supply bargaining power is low. Potential factorsof Persona Beauty Salon: Supplier switching costs is low relative to firm switching costs
? ? ? ?
Impact of inputs on cost or differentiation Strength of distribution channel is appreciable. Employee solidarity No supplier competition.
Intensity of competitive rivalry
For industries like parlor the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. Persona tries to focus on its competitive advantage that is low price compare to that of United Kingdom. Only threat of Competitive rivalry is Barriers entering market is low. The condition of the firm will not cause high rivalry among competing firms Potential factors of Persona Beauty Salon:
? ? ? ? ? ?
Limited number of competing firms. Consumer will not switch brand easily. Sustainable competitive advantage through innovation Level of advertising expense Powerful competitive strategy Degree of transparency is high
Page 12
Competitors’ Strength & Weaknesses
Strengths ? Use Herbal Products ? Qualified Employees ? Use Technical Instruments ? Location ? Provide high quality service ? Attractive work place Weaknesses ? ? ? ? ? ? Higher Prices for services. Contacting owner might be difficult Lower Customer Loyalty Close on holidays Takes more time per customer Lower relationship among employees
Type of entry mode
Persona will choose FDIC in terms of Joint Venture, but as in the beginning small scale entry is ideal for in terms of making profit. With joint venture they will get benefits like ? Firms benefit from a local partner's knowledge of local conditions, culture, language, political systems, and business systems ? ? The costs and risks of opening a foreign market are shared They satisfy political considerations for market entry
Though there are some disadvantages as well ? ? The firm risks giving control of its technology to its partner The firm may not have the tight control to realize experience curve or location economies But this advantages of joint ventures overweighs the disadvantages In UK there are quite a few companies owned by Bangladeshi people so a joint venture would be ideal to spread the name of Persona. This will also go with the target market as because those people are accustomed on visiting local stores so it will easily catch their attention. No other entry mode shall be ideal for Persona to move to UK at this moment.
Page 13
Conclusion
Considering all the facts and theories, all relating together it is a timely initiative for Persona to make a move from Bangladesh and serve this niche market and get some extra profit. As no other firms of same industry has taken the risk to make a move, so Persona can be a trend setter in this case. With joint venture they will get much desired knowledge about the country and can create the right position of them to their target market. All in all this venture for Persona shall be a very profitable venture and at the same this will open up many opportunities for Persona to wide spread their brand into a global brand.
Page 14
Bibliography
British Bangladeshi. [online]. Available from World Wide Web: British Indian. [online]. Available from World Wide Web: DANIELS, John. International Business. Prentice Hall. Ease of Doing Business in United Kingdom. [online]. Available from World Wide Web: Foreign Direct Investment Involving UK Companies, 2012. [online]. Available from World Wide Web: Persona. [online]. Available from World Wide Web:
Page 15
doc_552794562.docx
17th April 2014 Ms. Samira Rahman North South University Subject: Submission of report Dear Miss, Here is the report on the „Local firms diversification? that you have asked us to prepare as a part of the requirement for our Mgt 372 course. In presenting this report, we have tried our level best to include all the relevant information and explanations to make this report informative and comprehensive. It was very enriching and exciting experience for us to prepare this report. Our report writing skills and communication skills have improved a lot during the course of writing this report. We look forward to working under your guidance again in the near future. Thank You for believing in us and giving us this wonderful opportunity. Sincerely,
Zakia Fatema Nishu Rifat Arefin Md. Osman Goni Susmita Bashir Numayer Ahmed Chaudhuri Ishika Chowdhury Barua Omar Bin Sajjad
(ID093 0516 0 30) (ID-103 0253 0 30) (ID 103 0927 0 30) (ID-111 0029 0 30) (ID-111 0126 0 30) (ID-111 0222 0 30) (ID-111 0462 0 30)
Acknowledgements
This report would have been impossible without the valuable contributions and limitless help of several individuals. Our first acknowledge goes to the Almighty for giving us the patience and courage to finish this task within its deadline. Then, we cordially thank our respected course instructor, Ms. Samira Rahman for her continuous guidance and support to make this report possible. She assisted us whenever any help was needed. Her generosity and liberality aid us to go further with this report without any hazardous situation. We would like to express gratitude to our friends and classmates for their friendly and cordial cooperation and suggestion during working on the project. They have generously supplied insightful comments, helpful suggestions, and contributions all of which have progressively enhanced this report. Last but not the least we are very thankful to our families. Without their help, kindness, and love this report would not be done so successfully.
Executive Summary
This project discusses about the strategy of a local Bangladeshi firm, namely Persona going for international operations, in United Kingdom. Furthermore this report talks about the political, economical, social, technological aspects of the United Kingdom. Also there is a detailed analysis of various factors that a firm faces when it starts a new operation in a new location. The value chain analysis has been, and how Persona like to do its venture is also been highlighted relating with all the factors.
Contents
Introduction ......................................................................................................................... 1 Company profile............................................................................................................... 1 Why United Kingdom? ........................................................................................................ 2 Value Chain analysis ........................................................................................................... 3 PEST analysis ...................................................................................................................... 4 Political: ........................................................................................................................... 4 Economic Analysis........................................................................................................... 5 Social Analysis ................................................................................................................. 8 Technological Analysis .................................................................................................... 9 Porters Five Forces .............................................................................................................. 9 Threat of new entrants .................................................................................................... 10 Threat of substitute products or services ........................................................................ 10 Bargaining power of customers .................................................................................. 11 Bargaining power of suppliers ....................................................................................... 12 Intensity of competitive rivalry ...................................................................................... 12 Competitors? Strength & Weaknesses ........................................................................... 13 Type of entry mode............................................................................................................ 13 Conclusion ......................................................................................................................... 14 Bibliography ...................................................................................................................... 15
Introduction
Company profile
In 1984, Kaniz Almas Khan, the beauty envoy of the nation started her dream with a modest set up. Since then Persona has successfully proven its excellence and commitment towards the endless journey of grooming lives. Persona is the reflection of Kaniz Almas Khan, the managing director of Persona Group, committed to provide world class beauty care services and solutions. Long term vision, professionalism and sheer hard work have made Persona what it is today. The beauty care industry is one of the fastest growing industries of our country. Lifestyles have changed; people are realizing the importance of good health and presentation and thus becoming more and more concerned about their health and beauty. People have more access to information and media, which makes them more conscious about their well-being, leading to a change in perception. Thus beautification is not considered a luxury anymore; it has become a necessity! It is one of most renowned and oldest beauty parlor of the country. It has sustained its reputation purely because of its unparallel service and dedication towards its customers. They have done immensely good in Bridal make over and has brought about a change in the right directions in terms of make over Why they need to diversify? Persona should diversify because of market and efficiency purpose. Because Persona is dominating Bangladesh and reached at a stage where they can?t expand, though there are cities in which Persona haven?t expanded but considering their target market those place are not perfect either. So it is the time for them to go international. Not only market seeking purpose they will also enjoy resource or asset seeking resource as if they go international they can offer lots of variety and can get hold of new raw materials which are not available here due to poor infrastructure.
Page 1
Why United Kingdom?
Doing business in United Kingdom
No.
Procedure
Time to Complete
Associated Costs
1
Check name for uniqueness at the company names index database on the web
Less than one day (online procedure) 1 day
no charge
2
Prepare memorandum and articles of association; fill out and sign Form IN01 (application for registration).
GBP 35
3
File incorporation documents with the Registrar of Companies at Companies House
1 day
GBP 30
4
Contact HMRC and register for VAT
Less than one day (online procedure)
no charge
5
Contact HMRC and register for PAYE Sign up for employer?s liability insurance
8 days, simultaneous with previous procedure
no charge
6
1 day
no charge
Starting a business is UK is easier than most of its neighborhood countries and they are current ranked as 28th country on ease of starting new business. Doing business in United Kingdom shall be of great profit for Persona as there are 451,532 Bangladeshi people in United Kingdom. As Bangladesh shares it border with India and was under Pakistan so our cultural difference is a bit less. So Persona can take this opportunity and even target a wider market for makeover saloon. As of 2011 there 1.4 million of Indians and 1.1 million Pakistanis as of 2010. So this gives Persona a wider target group and further profit making opportunity.
Page 2
Value Chain Support analysis Activities
Administration and Infrastructure
Human Resource Management
IT Department
Public Relations
Accounts
Primary Activities
Outbound
Marketing and Services Sales
Inbound Logistics
Operations
Logistics
Collection of Service: *Time *Request *Processing Bringing materials into business Inventory control of required supplies.
Operating different machineries/tec hnologies likerebounding machines, coloring hair, massager.
Providing different kinds of services like spa, massage, pedicure, haircut, beauty treatment and so on.
Different kind of promotional activities, advertising of the products or packages.
Customer support, Information facilities regarding beauty tips.
Page 3
Competitive Advantage
PEST analysis
Political:
The United Kingdom is a unitary democracy governed within the framework of a constitutional monarchy, in which the Monarch is the head of state and the Prime Minister of the United Kingdom is the head of government. Policies regarding FDI UKTI in Bangladesh helps companies in Britain increase their competitiveness through overseas trade in Bangladesh. We also offer professional, authoritative and personalised assistance to help companies in Bangladesh locate and expand in the UK.) Finance, grants and incentives for businesses in the UK Businesses based in the UK have access to the one of the biggest financial services sectors in Europe. Options range from simple, low cost and accessible business banking services through to specialist corporate funding products or full listing on the London Stock Exchange. In addition businesses can access a wide range of grants, incentives and tax allowances, providing financial support and assistance for R&D, investment in business and networking. Corporation tax reduced to 20% from April 2015 –lowest in the G8 From April 2013, the rate of UK corporation tax will stand at 23%. This will be reduced to 21% in April 2014 before being cut further to 20% from April 2015. By then, the UK will have the lowest in corporation tax rate in the G8 and joint lowest in the G20. Export Policy is not relevant for our type of business as we will using their resources, as Persona does not produce anything of its own which is unique in nature. So regardless of whether export policy is rigid or easy does not make of a difference for a company like Persona.
Page 4
Political Stability UK Overview The UK is an OECD country located in Western Europe. It covers 241,930.00 square kilometres (80th largest in the world) and has a population of n.a. million people (22nd largest in the world). UK's population grew by 0.75% in 2012. The UK's average population density is 259.38 persons per square kilometer. 20.24% of UK's population is rural and 79.76% is urban. 17.54% of the population is under the age of fifteen, and 17.16% of the population is over the age of 65. In n.a. the UK's GDP was USD n.a. billion. The UK's GDP grew at n.a. in n.a.. GDP per capita, in purchasing power-adjusted dollar terms, is USD 36,569. This makes the UK a wealthy country
Economic Analysis
In the Economic analysis section, some of the economic indicators like- GDP growth, FDI inflow and Outflow, Purchasing power parity, per capita income etcetera are discussed briefly. GDP Growth The economy of the UK is one of the most developed one in the world. During the oil price shock the economy experience the greatest growth in its history. In recent times the economy of UK was more rely on the service sector rather than manufacturing. The sector-wise share of GDP is represented through the pie chart.
Agriculture Industry Services Imports Exports
Page 5
From the most recent GDP growth analysis of UK, gives a number of 2.8%in 2013. The graphical representation shows the growth from 2012„s first quarter to „13?s 4th quarter.
Foreign Trade: UK has continued to strengthen its position as the leading European destination for foreign direct investment. United Kingdom experience the highest inward investment position in 2012 which was almost £936 billion and the outward investment position remained stable and similar to 2011s which was £1,088 billion. Another analysis shows that the European countries are the investment leaders in the UK. Europe almost occupied the 47% of the total inflows followed by America and Asia.
Page 6
Position in world competitiveness rankings The UK is among the world?s top 10 countries in competitiveness rankings. The UK countries are in the 8th position. The country improves its performance in several areas like efficiency in labor markets (5th). The United Kingdom countries to have sophisticated (8th) and innovative (10th) businesses that are highly adapt at harnessing the latest technologies for productivity improvements and operating in a very large market (it is ranked 6th for the market size). The financial market also continues its recovery, ranked 13th, up from 20th last year. All these characteristics are important for spurring productivity enhancements. On the other hand, the country?s macroeconomic environment (110th, downfrom 85th last year) represents the greatest drag on its competitiveness, with a fiscal deficit nearing 9 percent in 2011, an increase of 5 percentage points in public debt amounting to 82.5 percent of GDP in 2011 (127th) and a comparatively low national savings rate (12.9 percent of GDP in 2011, 113th).
Page 7
Social Analysis
Language-Language of the UK is English. This is spoken as the primary language of 95% of the UK population. There are several other living languages in the country; various religious dialects include Welsh, Irish, Ulster Scots, Cornish, Gaelic and British sign language. Immigrants have naturally brought many foreign languages from across the world. Population-Population size is 60,776,238 Religion – Christian – 71.6%
Muslim Hindu Other unspecified
2.7% 1% 1.6% 23.1%
Social Strata: There are 7 social classes in UK. These social classes are based on the economic, cultural and social capital. 1. Precariat- this is the most deprived class of all with law levels of economic, cultural and social capital. 2. Traditional working class- this is also a deprived group of people but not in the poorest group. 3. Emergent service workers- this new class has low economic capital but high level of cultural and social capital. 4. Technical middle class- this is a group of high economic capital but less socially and culturally engaged. 5. New affluent workers- This class has medium levels of economic capital and higher levels of cultural and social capital
Page 8
6. Established middle class- members of this classes have high level of all 3 capital although not as high as „Elite? group. 7. Elite- This is the most privileged class in UK who have high level of all 3 capital.
Technological Analysis
Technological analysis is not required for the type of business Persona will be doing. Though United Kingdom has a sound infrastructure and a very strong technological base, so in future if Persona want to innovate into something which requires strong technological base then they can afford to do it.
Porters Five Forces
The industry environment of the host country in which the company is operating: From the Five Forces Model of Michael Porter we know that there is consideration of five forces for industry analysis. Those forces are Threat of New Entrants, Threat of Substitute Products or Service, Bargaining Power of Customers, Bargaining Power of Suppliers and Intensity of Competitive Rivalry which we have covered here:
Page 9
Threat of new entrants
In United Kingdom barriers to entry is low. This results in many new entrants, which eventually will decrease profitability for Persona. If the entry of new firms can be blocked by incumbents, the abnormal profit rate of the firm will trend towards zero (perfect competition).Some competitors of Persona in UK are: Panacea Beauty Salon, Angel Beauty Salon, Islington Beauty Salon etc. The following factors can have an effect on how much of a threat new entrants may pose:
?
The existence of barriers to entry (patents, rights, etc.). The most attractive segment is one in which entry barriers are high and exit barriers are low. Few new firms can enter and non-performing firms can exit easily.
? ? ? ? ? ? ? ?
Government policy Capital requirements Absolute cost Economies of scale Product differentiation Brand equity Switching costs or sunk costs Customer loyalty to established brands
Threat of substitute products or services
The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives. (Johnson G. et al, 2006 p.82). Persona beauty parlor competes within the overall leisure goods and activities market. The fact that the beauty care service offered, with all the added service and features, is often branded as “luxury”, places the industry in a wider competitive environment. Moreover, threats from service complementary such as Health Spa and Fitness Club, Hairdressing and the growing market for DYI are expecting to put even more pressure in an already very competitive market. Consumers tend to be the most price-conscious in this case. Potential factors Persona Beauty Salon:
Page 10
? ? ?
Ease of substitution. Suit research and development for different target groups High quality service
Bargaining power of customers
Most of the buyer?s negotiate payment rates and they dictate them. Parlors must accept these rates as Persona is following LOCALIZATION STRATEGY by customizing the firm?s services so that they provide a good match to tastes and preference in United Kingdom. Persona will manage care plans, although the firm has no dictatorial power over rates. Nevertheless it can exert control over where consumers receive care, and hence have a great deal of power. For examples, in last ten years, using internet allows customers to share their views worldwide which have greatly increased the power of customers of this particular service. Sometimes positive word of mouth can be beneficial to the parlor. The resulting power shift has an enormous impact on the strategy for which parlor has to rethink their fees and other price.Around 50% of women consider about their beauty due to changes in society. Educational level, income, social class, occupation, relationship & feelings most affect to women to pay more attention on their beauty. Persona can take measures to reduce buyer power in future, such as implementing a loyalty program like membership cards, discounts. The buyer power is in United Kingdom high as if the buyer has many alternatives. Potential factors of Persona Beauty Salon:
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Buyer concentration to firm concentration is low which means few buyers with significant market share.
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Unique products so buyer will not switch easily to other products. Sufficient buyer information availability Force down prices Less substitute products Buyers are price sensitive. Differential advantage (uniqueness) of industry products Because of brand identity of Persona possesses a credible backward integration threat.
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Bargaining power of suppliers
Suppliers of raw materials, components, labor, and services (such as expertise) to Persona Beauty Salon are a source of power over the firm as there are few substitutes. Suppliers may refuse to work with the firm or charge excessively high prices for unique resources. The firm is attractive as the supplier has not as much of bargaining power. Persona has many suppliers in processing their product, so their supply bargaining power is low. Potential factorsof Persona Beauty Salon: Supplier switching costs is low relative to firm switching costs
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Impact of inputs on cost or differentiation Strength of distribution channel is appreciable. Employee solidarity No supplier competition.
Intensity of competitive rivalry
For industries like parlor the intensity of competitive rivalry is the major determinant of the competitiveness of the industry. Persona tries to focus on its competitive advantage that is low price compare to that of United Kingdom. Only threat of Competitive rivalry is Barriers entering market is low. The condition of the firm will not cause high rivalry among competing firms Potential factors of Persona Beauty Salon:
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Limited number of competing firms. Consumer will not switch brand easily. Sustainable competitive advantage through innovation Level of advertising expense Powerful competitive strategy Degree of transparency is high
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Competitors’ Strength & Weaknesses
Strengths ? Use Herbal Products ? Qualified Employees ? Use Technical Instruments ? Location ? Provide high quality service ? Attractive work place Weaknesses ? ? ? ? ? ? Higher Prices for services. Contacting owner might be difficult Lower Customer Loyalty Close on holidays Takes more time per customer Lower relationship among employees
Type of entry mode
Persona will choose FDIC in terms of Joint Venture, but as in the beginning small scale entry is ideal for in terms of making profit. With joint venture they will get benefits like ? Firms benefit from a local partner's knowledge of local conditions, culture, language, political systems, and business systems ? ? The costs and risks of opening a foreign market are shared They satisfy political considerations for market entry
Though there are some disadvantages as well ? ? The firm risks giving control of its technology to its partner The firm may not have the tight control to realize experience curve or location economies But this advantages of joint ventures overweighs the disadvantages In UK there are quite a few companies owned by Bangladeshi people so a joint venture would be ideal to spread the name of Persona. This will also go with the target market as because those people are accustomed on visiting local stores so it will easily catch their attention. No other entry mode shall be ideal for Persona to move to UK at this moment.
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Conclusion
Considering all the facts and theories, all relating together it is a timely initiative for Persona to make a move from Bangladesh and serve this niche market and get some extra profit. As no other firms of same industry has taken the risk to make a move, so Persona can be a trend setter in this case. With joint venture they will get much desired knowledge about the country and can create the right position of them to their target market. All in all this venture for Persona shall be a very profitable venture and at the same this will open up many opportunities for Persona to wide spread their brand into a global brand.
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Bibliography
British Bangladeshi. [online]. Available from World Wide Web: British Indian. [online]. Available from World Wide Web: DANIELS, John. International Business. Prentice Hall. Ease of Doing Business in United Kingdom. [online]. Available from World Wide Web: Foreign Direct Investment Involving UK Companies, 2012. [online]. Available from World Wide Web: Persona. [online]. Available from World Wide Web:
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