Pestle analysis of uae 2019

MKW 3444
International Marketing

Group Assignment:
International Market Entry Plan
of
dUCK Group
Group Members:
Lamees Ariefdien - 27179168

Eirwan Merican - 29346460

Mahle Yolisa Sijovu - 28077504

Shannon Zo Ee Wong- 27918858

Jan Yeremia - 28017765

Tutor:

Mr Dinesh Sundaselom

Tutorial time and day:

Thursday 14:00

Table of Contents
Executive Summary 2 1.Introduction 3 2. Company Appraisal 4 3. Potential Country Market for First Time Entry 4.Environmental Assessment of the Foreign Market 4.1 Swot Analysis 6 4.2 Pestle analysis 7 4.3 Competitive Forces Analysis 10 5. Market entry strategy 11 6. Marketing Strategic Plan 12 6.1 Product 13 6.2 Distribution 14 7. Future Challenges and Contingency Plans 15 7.1 Technological Challenge 15 7.2 Economic Challenge (Shannon) 16 8. Conclusion 16 Reference List 17

Lists of Tables
Table 1: SWOT analysis

Table 2 : Market Entry Strategies Risks & Returns

Executive Summary
Current Word Count = 4214

1.Introduction Comment by Mahle Sijovu:
324

dUCK Group was founded in May 2014 in Malaysia by Vivy Yusof and is mostly based as a successful online fashion company(The dUCK Group, 2017). The company was successful enough online that it opened four physical stores in Malaysia mostly in the KL region and opened one store in Singapore("dUCk | FashionValet", 2019; "The Duck Cosmetics Store – dUCk", 2019). Through its online platform dUCK was able to reach most Southeast Asian countries as well as MENA Regions additionally as providing global shipping to multiple countries(FashionValet, 2019). dUCK’s main product line is their scarves collections which can range from basic designs to extremely colourful and exotic designs, additionally, their product line also includes cosmetics, stationeries, home & living products and lastly handbags(The dUCK Group, 2017). The company positioned itself as an affordable luxury lifestyle brand for the modern city girl who is classy, playful and fashionable(Abdul Aziz, 2016). However, as the success of the company grew the company repositioned itself to appeal as a high-end luxury fashion accessory(Adreena, 2017). Therefore the main customer market that dUCK would want to attract would mostly relate to career women who would purchase their scarves or other products as an investment to their wardrobe as well as view their purchase as rewarding(The dUCK Group, 2017). Due to The dUCK Company’s success, there is potential for the company to expand its market beyond online sales by opening a physical store in the United Arab Emirates (UAE).

Thus, the essay will firstly discuss an appraisal of the company’s competitive advantages and challenges for intended expansion into the UAE. This is then followed by discussing the potential market entry strategies available to the company when expanding. Thirdly the essay will provide an assessment of the foreign market and will then address the market strategic plan that they would use and lastly the essay will address a number of future challenges the company might face since entering the UAE market.

2. Company Appraisal 428
One of the key strengths of dUCK as a company operating in a business-to-consumer product market is its success especially with its luxury scarf product line (Adreena, 2018). dUCK scarves is not only one of the leading brands for premium Muslim headscarves in Malaysia but has attracted a global following among Muslim women in other countries through the e-commerce platform site in which the brand is exclusively sold in known as FashionValet (The dUCK Group, 2017). For example,sixty percent of dUCk scarves market share comes from within Malaysia and the remainder from buyers abroad in Singapore, Brunei and the United Kingdom that is with more than a million scarves sold worldwide in total since its inception four years ago (Ihsan, 2019). The company has also seen revenue growing by more than hundred percent each year and has attracted significant capital funding with the latest being an undisclosed amount of funding from Khazanah nasional Berhad which is the Malaysian arm for investment (Salikha, 2018). In addition, despite negative growth in retail in recent years, the company has also seen double digit growth annually which makes it one of the fastest growing Malaysian companies (Ihsan, 2019). Thus, with its domestic success, growing global following and new sources for capital funding, the brand is looking at expansion into other Muslim markets such as the UAE which Basaruddin (2018) asserts is a move to protect itself against growing competition from rising domestic brands for headscarves and to take advantage of the growing global demand for Muslimah fashion to increase its revenue streams which the Global Islamic Economic Report 2017-2018 predicts that by 2020, the industry for Muslimah fashion would be worth US $373 billion (Badarudin, 2018).That being said however, possible challenges that the brand could face in expanding into the UAE is the lack of an understanding of how to manage offices in different regions and a tendency to move too quickly without the right connections to establish in a foreign market which ultimately, led to the failure of the brand’s expansion into Jakarta in 2015 (Salikha, 2018). However, this failure can also be a useful learning experience as the brand moves forward in its long-term strategic plan to expand into the Middle East with carefully planned mitigation strategies which will be explained in the sections below and as shown by their recent successful expansion into Singapore ("Singapore Got dUCk-ed - Lifestyle Muslim Magazine", 2018), its past failure in managing its international marketing activities can serve to be a reminder of a threat and an opportunity to grow if managed carefully.

3. Potential Country Market for First Time Entry Comment by Mahle Sijovu:
645 Words

International Marketing is the execution of business tasks that are drafted to plan, promote, and direct the smooth flow of a company’s product to the consumers or the customers in more than one country. This is a strategy that is used by the company and regardless the marketing plans; their objective remains the same.

The FashionValet’s dUCk Group is seeking to enter a new market identified market which is the UAE, more specifically Dubai. Dubai is a nation that compromises almost entirely of Muslims culture. This was one of the factors that made the FashionValet dUCk Group to expand its branches to Dubai (Thean, 2015). dUCK entry to the Dubai market is crucial in that they anticipate high-profit margins from the sales of their quality scarves that are significant to the local womenladies of Dubai. Additionally, in Dubai and the Muslim community in general, it is fundamental for the ladies to cover their heads which is also another factor encouraging dUCk entry to the market.

Also there are justifications that led to the decision of dUCK to seek the Dubai market. For example, there are theories of internalization that are to be discussed which has impacted to the entry of the FashionValet dUCk into the Dubai market. These theories of internationalization include the Kruger’s First Mover Advantage and Vernon’s Product Lifecycle Theory. Unlike dUCk, other companies are against the business internationalization as it is expensive and drains a lot of resources. Kruger’s First Mover Advantage Theory describes the ability of a business company to enter a new market the first one by outplaying their competitors (Suarez & Lanzolla, 2007). Additionally, this theory of internationalization describes the specific advantages of a business to be a first mover in the market industry. Therefore, due to the unique quality brands of scarves that are being offered by the FashionValet dUCk into the Dubai market, there has not been another company that has since produced such quality scarves to the Dubai people. Additionally, the scarves sold by dUCk are not only limited to adult womenladies only, but also small girls. Due to their unique quality brand of scarves, the FashionValet dUCk will be the first foreign company to be established in Dubai dealing with quality women scarves. There are several advantages with this move in that; dUCk can be able to utilize the available free zones in the Dubai market since being the first in dealing with the type merchandise they sell. With the utilization of the free zones, dUCKthe FashionValet can maintain 100% foreign ownership of their business in Dubai. Additionally, being a first mover in the Dubai market, dUCK will find it easy to do business in Dubai since they can wave off competition from other companies dealing with the same merchandise.

Vernon’s Product Lifecycle Theory of internalization was developed by Raymond Vernon in 1996 which explain the various scopes of the product that influences the development of the foreign market (Hines, Francis, & Found, 2006). Moreover, according to this theory, several factors should be considered which are the characteristic of the product, the outcome in foreign production, and the consequences of the establishment of foreign investments. Therefore, it is of importance to note that foreign investments are majorly contributed by the urge to market the various products and maximize profits. Hence, dUCk, a company dealing in the female scarf merchandise was majorly influenced by the Muslim community of the Dubai people. Since it a norm of the Muslim community to encourage women to always cover their heads with a piece of cloth or scarf, dUCk took up the opportunity to expand its branches to the Dubai market. Being one of the few international companies to enter the Dubai market, dUCk will be able to experience an increase in their products since most of the Dubai citizens who live a lavish lifestyle always demand quality of products they purchase.

4.Environmental Assessment of the Foreign Market
237 Words = 1 583

An environmental analysis provides a firm with an understanding of the activities occurring both within and outside of the controlling capacity of the firm in order to ensure progressive growth when choosing to expand the organisation in an international market and maintain success through profitable gain (Sharma, 2017). Conducting an environmental analysis internally, can help an organisation identify its strengths and weaknesses while the opportunities and threats describe the external influences as per the SWOT analysis. An external analysis can be conducted using the PESTLE tool and Porter’s five forces (Mariadoss, 2017).

Lau, Liao, Wong and Chiu (2012) explain that one reason that leads to the failure of an organisation in the international market is the lack of attention paid to the aspects other than the financial which provide further insight into the market and its functions. The coordination and performance of an environmental analysis is a fundamental process that organisations need to consider before participating in international marketing (Friesner, 2017).

The environment in which organisations operate in consists of controllable and uncontrollable forces and elements which can offer the organisation beneficial attributes that lead to success and the rise of opportunities or unfavourable conditions that introduce threats and challenges for the organisation (Jaideep, 2015). The degree of a firm’s international success is largely dependent on the overall influence the market factors have in the industry and on its ability to respond effectively to the marketing environment.

4.1 Swot Analysis
42 Words

The SWOT analysis assesses the internal strength and weakness and the external opportunity and threats in order to possibly evaluate the advantages of the organisation and shortcomings to assess the probability of success and possibilities of development (Ma, Zhang, Hu & Dong, 2013).

INTERNAL

Factors of the company

STRENGTHS

Strengths are resources that contribute to an organisation’s competitive advantage (Kavanaugh, 2018).

One of dUCK’s strengths lies within their reputation, it is well known for its premium quality. Their strength is also their association with FashionValet which furthers the organisation’s proprietary knowledge and consumer base.

The organisation’s product line and portfolio ranges from scarf accessories to handbags giving the organisation depth.

The quality of the products provided by dUCK contribute to its strengths as it ensures value is delivered to customers.

WEAKNESSES

dUCK is an e-commerce organisation, this is a weakness as their products are only accessible online.

Their lack of a presence in the international market equates to a lack of the brand’s name recognition.

Continuous change is required in the organisation. It functions within the fashion industry which is notorious for its fast-changing trends and consumer preferences.

EXTERNAL

Factors of the environment in which the company operates

OPPORTUNITIES

Emerging markets much like United Arab Emirates provide the dUCK company with the opportunity to expand into international activities which contributes to the growth and increases consumer consumption of the premium brand.

Lifestyle trends are evolving, this is an opportunity for dUCK as they are a premium brand that would rely on lifestyle trends becoming more high-end.

Niche target market for dUCK is applicable as it targets a subset of a market - it focuses its marketing to appeal to certain demographic which increases brand loyalty lessens competition as the market has been minimised.

Partnerships with FashionValet and any potential organisations as a subsidiary is an opportunity.

THREATS

Much like most organisations, a major threat is competition.

Another threat is the easily accessible product substitutes of the products offered by the organisation, these substitutes could be cheaper alternatives to the premium quality offered by dUCK or more well-known brands such as Guess or Versace which also specialise in accessories.

Within an organisation which is a fairly new company in the industry such as dUCK, the question of their ability to sustain internal capabilities is a threat.

Table 1: SWOT analysis

4.2 Pestle analysis
843 Words

A PESTLE analysis technique provides organisations with an overview of the macro-environmental factors that could have an impact on the international marketing activities of their operations.

With a critical analysis through the PESTLE tool the organisation can determine the macro-environmental factors which can become barriers for firms or provide the organisations with an advantage and better their chances of succeeding in the market (Mamdouh, 2016). This analysis would be conducted by in order to better understand United Arab Emirates and its environmental factors.

4.2.1 Political

The political factors consider the United Arab Emirates’ current political situation. There is a focus on how the political conditions of the country would affect the organisation as well as the global political situation effect on United Arab Emirates and Duck (PESTLE analysis Contributor, 2015).

In the United Arab Emirates, there are occasional political conflicts concerning ownership of oil reserves or land with neighbouring countries (Bush, 2016a), this may affect dUCK as the periodic instability caused by the conflict could mean fluctuation in the economic status of the country. The United Arab Emirates has lucrative trade relations with many countries across the globe (Bush, 2016a), an opportunity could arise through this factor as dUCK further explores their international expansion options through their joint ventures in Dubai.

4.2.2 Economic

Economic factors include the determinants of the economy and the economic state. These are factors that can conclude the direction in which the economy might move. So, businesses analyse this factor based on the environment. It helps to set up strategies in line with changes. The United Arab Emirates has an exceptionally high GDP per capita (Trading Economics, 2018) a testament to the standard of living in the country which can translate into meaning that the organisation would be targeting the appropriate market to export the premium dUCK products into. The country also boasts a very low unemployment rate (Bush, 2016a). This could be a challenge for dUCK as it means they will be dealing with a smaller labour force with skilled employees to select from while operating in the country. United Arab Emirates also has one of the highest amounts of Foreign Direct Investment in the region as the steady development of the country attracts investments from foreign nationals (Bush, 2016a).

4.2.3 Social

The varying attitudes and distinctive mindsets of a country would have an impact on the organisation as the social factors might alter consumer perceptions of the product and as a result, affect sales of the product (PESTLE analysis Contributor, 2015).

Due to the high GDP per capita in the country, the nationals and inhabitants of the country are accustomed to a comfortable lifestyle which translates to a typically upper class social standing in the country. In terms of the cultural occupation, there is a continuously growing variation of cultures as a result of globalisation in the United Arab Emirates (Bush, 2016a). Religion has a great influence in the country and impacts the behaviours and preferences of society immensely, this is an advantage for dUCK as it specialises in producing accessories suitable for Muslim women - the predominant religion in the country.

4.2.4 Technological

Technology is a continuously advancing factor which greatly influences organisations (PESTLE analysis Contributor, 2015). dUCK is an online performing organisation, meaning that they rely on technological advancements which is constantly updated. Apart from the online store platform, organisations need technology n order to gauge consumer trends and preferences. In the United Arab Emirates, the younger population which forms as a part of the target market are described as being technologically inclined (Rashed, 2013) making it easier for organisations such as dUCK to leverage that factor to their advantage. The wealth of the country enables them to purchase new equipment and technology that further their technological advancements, providing organisations with the necessary infrastructure to utilise the best technology.

4.2.5 Legal

Periodic legislative alterations of a country could affect the business environment. If, for instance, a country’s regulatory body enforces a regulation for a specific industry, that law would impact industries and business in that economy (PESTLE analysis Contributor, 2015). In the United Arab Emirates, the legal environment is made up of the Federal Law, the Judicial Branch, Immigration Law, the Reserve Bank and the Economic Law (Rashed, 2013).

In this circumstance, economic law would govern dUCK the most as it concerns the business fundamentals in the country, including the United Arab Emirates Commercial Companies Law that stipulates that every organisation set up in the country should have one or more UAE national partner who is accountable for no less than 51% of the organisation’s capital (Rashed, 2013).

4.2.6 Environmental

The location of the business will influence the international marketing operations of export. For instance, changes in climatic changes could have an effect while consumer reactions to the organisation’s offerings could be a challenge (PESTLE analysis Contributor, 2015). The United Arab Emirates’ is situated in a location close to a few coastal areas, allowing for easier cargo transportation and trade by sea (Bush, 2016a).

4.3 Competitive Forces Analysis
461 Words

Michael Porter’s Competitive Forces Model is a tool necessary in analysing the environment in which an organisation operates (Laudon, & Laudon, 2018). It provides an organisation with an overview of what their competitive advantages are, and what factors influence it. dUCK is an organisation operating in the constantly changing fashion industry that faces various competitive forces as a result.

Competitors describe the the number of competitors in an industry and their advantage over a company. It can be concluded that the more competitors exist paired with the similarity of their offerings to those of a company, the lesser their power (Chappelow, 2019). dUCK’s competitors are vast as they operate in the fashion industry that is rather saturated, however their unique product offerings set them apart and function as their core competency, and in this instance they have a greater power to charge higher prices for their quality and competency.

New market entrants also have an effect on the power of a company. The threat of new entrants is a weaker force in the fashion industry as its saturation and dense population require great differentiation if an organisation seeks to penetrate the industry (Pratap, 2018). dUCK has an advantage as it is a brand with a unique offering and acquires success through this still, brands can find unique ways to grow popular and acquire success.

The threat of product substitutes and services pose a threat for organisations internally within the industry. For organisations such as dUCK which focus on luxury and premium offerings, there are substitutes which can duplicate the high-end style for a lower price. Ultimately there is no substitute for the accessories and clothing items in general, there is however a substitute for the brand (Pratap, 2018).

The bargaining power of customers concerns the ability that customers have lower prices. In the case of the industry in which dUCK operates, the power of buyers is a powerful force as they are becoming progressively well informed in terms of their product alternatives and with the multitude of competitors and brand substitutes to choose from, customers power is greater (Bush, 2016b). The bargaining power of customers becomes evident through higher quality of products offered, price decreases and a differentiation in product offerings (Varga, 2010).

Bargaining power of suppliers addresses how easily suppliers can drive up the cost of inputs (Chappelow, 2019). In the fashion industry, the power of suppliers is relatively weak as the suppliers are usually low cost labourers and manufacturers who follow the specifications set by the organisation (Pratap, 2018). This means that suppliers are dispensable to organisations such as dUCK, making them replaceable, Bush (2016b) further states “as a result, input prices for this industry are relatively low and will stay there until the global development gap closes up significantly.”

5. Market entry strategy Comment by Mahle Sijovu:
(78 Words) = (262)

The dilemma of choosing the suitable market entry strategy has been a great interest to marketers and academics (Ekeledo & Sivakumar, 1998). The chosen market entry strategies will then shape the marketing programs of the firm in the country, ultimately determining their success (Chen et al., 2006). Direct exporting, franchising, and joint ventures are some of market entry strategies a firm may adopt. These methods will definitely differ in terms of commitment, risk, profit, and control (Kwon & Konopa, 1993).

Direct Exporting

Franchising

Joint Venture

Commitment

Low

Moderate

High

Risk

Low

Moderate

High

Profit

Low

Moderate

High

Control

Low

Moderate

High

Table 2 : Market Entry Strategies Risks & Returns

(184 Words)

Apart from abiding Article 10 of the UAE Commercial Companies Law which obligates 51% of shares to be possessed by UAE national (Clyde & Co., n.d.), it is more sensible for dUCK to enter UAE by joint venture with an UAE company. A high degree of control with desirable profit returns (Chung & Enderwick, 2001) alongside with knowledge offering by local partner about customers in the country (Jin et al., 2016) are some of the factors dUCK needs to consider in selecting joint venture as their method of entry.

Since dUCK requires to choose a partner who complements them in terms of resources and skills (Choi & Beamish, 2013), it will be preferred for the firm to partner with Al Tayer Group. As the largest luxury retailer in the Middle East, Al Tayer group had partnered with some of the world’s most luxurious fashion brands like Coach, Moschino, and Alexander Mcqueen (Al Tayer, n.d.). With Al Tayer’s position as luxury retailer that complements dUCK’s upcoming positioning in the UAE market, the market knowledge and expertise Al Tayer offer will undeniably be beneficial to dUCK’s group.

6. Marketing Strategic Plan Comment by Mahle Sijovu:
(138 words)

A marketing strategic plan discusses the continued efforts and the particular approach that will be employed in trying to execute a marketing plan (Mangram, 2012). The strategic plan articulates the actions an organisation would take in ensuring the goals are met while ensuring that the plan remains aligned with the objectives of the organisation. The strategic plan is an indication of how the organisation plans on entering the market - it combines the marketing goals into a comprehensive plan (Nykiel, 2011). dUCK’s marketing strategic plan will focus on the marketing mix, namely: product, price, distribution and promotion. This tool will ensure that the organisation enters into the market with the intention of producing the appropriate response from the target market as it influences the demand for the products offered by dUCK.