Feathers UAE Company: Internationalization Strategy

Introduction

The idea of globalization constitutes one of the essential growth strategies that can be adopted by any company with the vision of increasing its competitive advantage. One of the major limitations that companies seeking to exploit foreign markets may face is the challenge of linking stores established in foreign markets to the organizational culture and policies. However, Feathers UAE stands to gain from its anticipated internationalization strategy. Globalization has resulted in easing of communication due to the immense development of the telephony and Internet technologies. This aspect implies that the organizational challenges of expanding markets into the global arena have been eased significantly.

Feathers Company opened its door to customers on October 10, 2010 in the UAE. The company opened its first store at Dalma Mall. It deals with jewelries and various fashion accessories reflecting the lifestyles of the UAE’s middle-class consumers. The company borrows its inspiration from the beauty coupled with the symmetry of the feathers of a peacock. The entrepreneurial idea behind the creation of the company as the first luxury brand in the UAE belongs to Khalid Basaeed. His idea came up when he was studying at Edinburg College. He identified a gap of luxury brands in the UAE market.

Following three years of incredible success, Feathers opened a second store in the Festival City in 2013. In the same year, it also opened another store in the Mirdif City. The stores are highly successful. According to the company’s management, it will pursue an international and globalization strategy at the right time to accelerate its growth as it pursues its mission of becoming a major luxury brand not only in the Emirates, but also globally. Feathers UAE business goals entails the enlargement of product lines associated with the brand and opening of more outlets (boutiques) within the UAE and the GCC region before extending into the global platforms.

This project paper develops and discusses a strategic plan for Feathers UAE to facilitate its internationalization strategy by opening stores in the UK. It presents an interview with the company executives to identify the main issue affecting the company’s success including an analysis of the competitors and targeting strategies using the 4Ps. It then describes the organization’s products before conducting an environmental assessment of the UK market to establish an appropriate marketing and market entry strategies.

Interview with the company executives

The different methods of primary data collection may include questionnaires and interviews. Interviews help in the collection of qualitative information in a more detailed manner than using questionnaires or any other primary data collection methodology. The discussions of this strategic plan for the internationalization strategy for Feathers UAE are based on an interview with the company’s CEO, Khalid Basaeed, which was conducted via the phone. The interviewer called a week before the interview to look for an interview possibility and acquaint with the interviewee. The following is the interview conversation between the interviewee (Khalid Basaeed) and the interviewer.

Interviewer: Hello, good morning sir

Interviewee: Hello, good morning

Interviewer: How are you doing now at Feathers UAE?

Interviewee: Thank you, we are doing great. A lot of business going on and strategic planning to meet our production capacities to serve the growing market demand.

Interviewer: I understand that Feather UAE is now becoming a major luxury brand in the GCC region and the entire Middle East. What is your success story in the local market?

Interviewee: Thank you. It has been a long journey in making a successful luxury brand. Every business starts with the identification of the market gaps and generation of an idea to fulfill it. My idea came up when I was pursuing a master’s degree in design of urban areas. The degree opened my eyes on how new products are designed. I also attended many exhibitions coupled with various shows relating to product design. This exposure presented an opportunity of designing new products and constituting a successful brand out of them. On identifying that the UAE market lacked luxury brands with a merit on local cultural taste, the Feathers UAE brand was born and I opened the first store at Dalama Mall towards the end of 2010. We later opened two more stores in 2013.

Interviewer: What about internationalization strategies?

Interviewee: Every company wants to become big by increasing market penetration levels to include the international markets. However, at Feathers UAE, we are careful to make the right strategic decisions and cross bridges when we reach them. Before extending into the international market, we believe that we should satisfy the market demand in the Emirates and the GCC region. We believe that less means more. Therefore, we prefer to address issues close to us and then focus on those far away later. However, when time comes, we are thinking of trying the global market. Nevertheless, this ambition requires the development of an effective marketing plan.

Interviewer: Any challenges in the local market?

Interviewee: Every market has its challenges. Sales patterns are often irregular with more sales done at the end of the month. While this trend is understandable, most people receive salaries in the local market at the end of the month, and thus competition from substitutes is inevitable.

Interviewer: Who are your main competitors?

Interviewee: Well, there are many big and small outlets dealing in beauty products. However, they mostly deal with imported products. Thus, the gap in fashion and jewelry products in local Middle Eastern glamour is still not fully utilized. Other potential competitors focus on low-class segments. Such competitors’ products are produced with local material just like in the case of Feathers UAE. Thus, they pose a major competitive threat if they expand their target customers to include middle class.

Interviewer: How do they compete with respect to products, price, place, and promotion?

Interviewee: Many of the competitors dealing with fashion and jewelry products offer expensive product lines as they focus on the 20% upper segments of the population. Even though maybe they want to offer competitive prices for the products, the costs of importation duty cannot be evaded. Such distributors are located in high-end shops across the UAE.

Interviewer: How do competitors view international expansion and where would they like to expand?

Interviewee: For the local producers of low-end jewelry products, the internationalization strategy is perhaps far placed. They lack economies of scale and the necessary resources to institute international expansion strategies successfully. Their particular concern is whether products with the local Middle Eastern glamour can attract international appeal.

Interviewer: I understand you are a busy person. I would not like to take more of your time. Thank you so much for honoring this interview request.

Interviewee: Thank you for having me today. It is such an honor.

Products description

Organizations offer products and services for sale to consumers in a bid to generate revenue. Feathers UAE offers luxury jewelry and fashion products. However, in the process of delivering these products, employees also render services through customer service. Indeed, the degree of satisfaction of the products to customers also depends on the manner of the products delivery. This process involves interaction with customers. This aspect suggests that customers’ service helps in building the brand of Feathers UAE apart from offering high quality and utility products.

Feathers UAE products reflect an era in the production of luxury goods across the GCC coupled with the Middle Eastern markets. This aspect has occurred through the introduction of luxury items enhanced by the Emirati and the Arabic culture. For example, some products reflect the Middle Eastern cultures due to the use of camel leather. Camel is a common animal found within the Middle Eastern region. The products have also received immense success and reputation akin to their quality coupled with their offer in the market at competitive prices.

Feathers UAE’s products are produced using the concept of minimalism, which constitutes a major theoretical approach in designing across the globe. This aspect explains why customers perceive many of the products as simplistic having been designed in a minimalistic manner. The products also take consider their practicalities coupled with creativity in design to reflect the needs of the target consumers.

Environmental assessment

Many firms across the globe are resorting to the internationalization strategy in a bid to increase their competitive advantage. For these organizations, the initial choice of crucial market entry mode in a foreign market may produce imperative implications on successful entry of a company coupled with its survival in the international market. Arguably, therefore, the decisions on survival mechanisms in the foreign nations entail one of the mega decisions that a firm has to make before channeling its resources to establish its presence in the foreign nations. Another crucial decision encompasses the entry mode in the international business (Hague and Jackson 47).

Choosing an appropriate entry mode in the identified markets requires an organization to have established an appropriate marketing targeting strategy favoring the entry mode upon conducting an environmental assessment of the chosen market. This section conducts the environmental analysis of the UK jewelry market with respect to social-cultural forces, socio-economic forces, legal forces, political forces, and labor forces.

Social-cultural forces

Different social-cultural issues influence the consumption of products in the marketplace. Social factors entail issues like the rate of population growth, the people’s perceptions on the utility of products and the products’ attributes, and age distribution characteristics among other factors. For example, health consciousness and perceptions of the safety of goods and service influences buying decisions among the UK consumers.

Social factors have a cultural dimension attached to them. For example, fashion consciousness is a cultural dimension shaping the social aspect of people’s perceptions on the usefulness of jewelry. The UK population has a strong tradition of using both general jewelries and costumes jewelries as an indication of fashion consciousness and measures of social economic status and people’s tastes on fashion trends. The trends of social characteristics of the population within a nation affect the demand for different types of goods and services including the cost of doing business. For instance, nations with high aged population may have a small number of people willing to be employed and this aspect increases labor costs.

Economic and socio-economic forces

Economic factors refer to all economic policy-related issues influencing business decisions. These factors may include anticipated extents of economic growth, adjustments on inflation, and the cost of credit and currency exchange rates. For instance, the credit interest rate determines the cost of capital needed to establish and run businesses. Thus, it determines the degree of business expansion and growth. The exchange rate determines the value of a nation’s currency. Exchange rate is an important economic factor for Feathers UAE in deriving marketing strategy in the UK’s market. Exchange rate determines the value of the company’s jewelries in the UK comparably to that in the local market (UAE).

Economic forces determine prices of foreign nations’ manufactured products and exportation costs. In addition, this aspect affects the behaviors of manufacturing firms and prices of value added goods especially where the raw materials are imported. Fast growing economies experience reducing unemployment levels so that the buying power of the general population including that of luxury goods increases. Compared to any other EU nation, the UK is the most attractive access point to EU markets for Feathers UAE due to the increasing economic growth and appetite for luxury goods.

The UK is the fastest expanding economy within Europe. “Deloitte” reckons that last August, “the Bank of England expected the unemployment rate to stay above 7.0% until the second half of 2016” (par. 7). The unemployment dropped sharply below the expectations of the Bank of England. The bank’s forecasts indicate that the UK economy will grow by 3.4% (“Deloitte” par. 7). This note indicates that the UK will emerge as the fastest growing economy amongst all industrialized nations, but will also grow at higher rates than emerging economies like Russia, India, and Brazil. Feathers UAE needs to take advantage of this economic growth to place its luxury brand in the market.

Legal forces

Organizations considering targeting international markets need to consider various policy guidelines on different issues like disposal of products and the associated wastes. While operating in the UK’s market, Feathers UAE needs to comply with the recently established legislation on minimum wage and legislations requiring firms to recycle their wastes as measures of environmental conservation. Legal provisions have impacts of raising the costs of running a business.

The legal environment implies the factors that directly relate to business activities. For the UK’s market, these factors include antitrust law, the laws enhancing anti-discrimination, environmental safety, and consumer law. In the EU markets, including the UK, controversies exist over various safety, health, and consumer laws, which business actors believe are inappropriate and unfavorable in fostering entrepreneurship and direct foreign investments. In particular, the English product law places legal liability for companies in the event their products cause damage to their users.

The UK also abides with international pacts regulating trade in some commodities. In the EU jewelry sector, the Kimberley pacts now bide all the member states including the UK. The pacts regulate trading in rough diamonds. The law regulates the flow of diamonds in the global supply chains by ensuring their legitimacy. Thus, in case Feathers UAE may decide to expand its products lines to target the UK high demand on diamond jewelry it must provide written guarantees on personal knowledge that the diamonds are free from conflicts or economic crimes.

Political forces

Political aspects underscore the degree to which economic systems are subject to tax policies, environmental law, tariffs, and restrictions of trade, labor laws, and regulations among other factors (Farok 49). In all nations including the UK, organizations operate under systems governed by politically influenced policy frameworks. Thus, for efficient operations, political stability is incredibly important. For instance, investors are keen to invest in the UK due to the high anticipations for long-term political stability. Indeed, the political climate influences the easiness of exportation of goods and services including luxury products into a nation. Through the provision of an effective political climate, the UK government has played significant roles in enhancing competitiveness of both local and international organizations.

Companies seeking to establish outlets in UK need to consider duty coupled with taxes implications on their business at the fundamental stage. This assertion holds because these factors can “impact both the desired price points and profits margins if regulatory charges are factored in after these figures are set, they will become distorted” (“i2i” par. 8). The UK political climate favors the development of regulations and laws that favor both international and local business operations. Its anticorruption measures ensure that the government maintains high levels of integrity. It has well-established and independent judiciary in all jurisdictions. Political regimes in the UK have also ensured limited governmental impacts on the economy.

Labor forces

In the UK, organizations are required to adhere to strong labor standards. In all economic sectors, child labor, forced labor, and poor working conditions are prohibited. Feathers UAE needs to understand that in the UK, forced labor includes deprivations like the withholding of salaries. It also involves restriction of movement of employees. The UK permits people to engage in labor unions. This element includes permitting the freedom of association coupled with the engagement in collective bargaining with the employers. Collective bargaining involves “negotiation of terms and conditions of employment such as wages, working hours, conditions, grievance procedures, and the rights and responsibilities of each party” (Cloke and Goldsmith 61). In the UK, the general rule is that parties taking part in a negotiation should do so while observing principles of good faith and with a reasonable commitment to ensure that parties strike an agreement.

In the labor sector, it is illegal to discriminate employees on the ground of their race, religion, nation of origin, race, or political inclination among others demographic and personal factors. Employers must ensure that work fosters good work-life fit. If they must work overtime, appropriate remuneration must be provided.

Marketing strategy

An appropriate marketing strategy for an internationalizing company depends on the analysis of the market. Targeting and market entry strategies depend on the environmental assessment and traits of the market developed thereafter. How then does the UK jewelry market look like in terms of segmentation and competitor target market, competitor product strategies, positioning, and differentiating features and attributes, competitor place (including distribution strategy), competitor pricing strategy, and competitor promotional strategies?

Market analysis

Market analysis yields crucial information on the necessary segmentation and positioning strategies. In the UK market, costume jewelries outperform real jewelries. New designers are venturing into this category. The category has an immense price range. Therefore, Feathers UAE should focus on this category considering that it is likely to create great mass appeal among the consumer segments. However, it is important for the company to gather information on the competitors in the market in an effort to develop an appropriate market targeting strategy.

The UK consumers buy their costume jewelry products from various fashion outlets like H&M. At this store, consumers can purchase costume jewelries as low as 5 pounds. However, in the upper markets located in departmental stores, jewelries can cost up to 900 pound (“Euromonitor International” par.1). Price differentiation helps to create differing appeals for the jewelries among the British consumers. This aspect suggests that the competitors’ pricing strategy depends on the target customers’ social-economic status. As “Euromonitor International” notes, “Many costume jewelries’ designers have recently been entering partnerships with high-end apparel and footwear specialist retailers and mono-brand luxury goods retailers” (par.1). These partnerships act as promotional tools for the fashion end costume jewelries. The partnerships also ensure great products distribution efficiency.

Offering products at different prices and material compositions implies market segmentation based on social economic status of the target customers. In a bid to ensure that Feathers UAE secures a sizeable market share, it needs to segment its customers depending on their social economic status. This aspect suggests the need to innovate and incorporate new materials in the design of the products to meet aesthetic appeals necessary in the determination of buying decisions among the UK consumers and people from other nations living or visiting the UK.

The UK market may present both challenges and success to the Feathers UAE. The market offers low-risk access coupled with expansion. The competitive environment brings in various European and US-based players. However, the UK is perhaps the most important market for organizations seeking to gain access to the European markets as part of their globalization strategy.

Fashion brands are likely to yield more success in the UK as compared to anywhere else in the world. In particular, “i2i” notes that retailers have to offer, “a compelling proposition in terms of value, price, and service as those with a generic and undifferentiated product will struggle in this environment” (par. 9). Success in the UK markets does not only depend on product and price mixes, but also on determining the requisite channel mix. The UK has a multi-channel retails in which consumers shop through a variety of physical and digital platforms. These channels are incredibly helpful to international brands as they increase the distribution choices depending on preferences of an organization. For the Feathers UAE, it can take advantage of digital distribution channels to promote its products through new media.

Marketing strategy

Feathers UAE aim is to place its current and potential brand in the international markets. For the UK market, it can assemble its raw materials in the country after airlifting them from the UAE or ship in already finished products for distribution. The attractiveness of the adopted strategy depends on factors affecting the UK manufacturing sector as compared to the economic factors affecting the UAE manufacturing sector. For the Feathers UAE, it is important to overcome barriers related to legal and labor forces in the UK by manufacturing locally to export already finished jewelry items. The company should overcome the country of origin effect. The UK is a developed economy. Therefore, consumers may tend to associate products originating from a developing economy with poor quality. However, the company has managed to build a strong brand based on quality.

For a firm to succeed in positioning and differentiation of its brand, it needs to determine its market segment precisely. Market segmentation encompasses the division of consumers into subsets constituted by common needs in terms of consumption of goods and services offered for sale (Yelkur 106). Once the segmentation is done, the appropriate market campaigns are set to target the subsets. For Feathers’ UK market, segmentation can be accomplished in two main ways, viz. demographic and psychographic segmentation. Demographics refer to the characteristics of people such as age, religion, gender/sex, and social class among others (Menon et al. 22).

Psychographic segmentation is based on the reason why people buy products and services. Xiaoni posits that by “creating psychographic profiles, marketers are able to understand the motivation and conscious drives of a target audience” (9). In terms of segmentation, psychographics encompass the people’s opinion and interests coupled with opinion variables.

As argued in the market analysis section, the demand for jewelry is now shifting towards costume jewelries. Considering that Feathers UAE also deal with fashion-end products, it can launch its costume jewelries concurrently with the UK costume jewelry trends. Precious metal and material jewelries are mainly targeted to the high-end consumers in terms of social economic status. Thus, it important to segment the market and focus mainly on middle incomes earners who cannot afford or may take a long time to afford jewelries made from precious materials like gold, diamond, and silver.

The products sold by Feathers UAE are made from local materials. Therefore, in marketing, it is important to launch the brand as bringing in alternative fashion in the UK jewelry market influenced by the Middle East culture. In terms of distribution channels, the company can consider mono-brand retail or partner with established jewelry distribution outlets.

The first approach gives the company control of its brand and it provides room for establishing close relationships with consumers. However, as argued in the market analysis section, many consumers for jewelry brand are opting for multi-brand distribution approach through partnering with high-end apparel retailers. Feathers UAE should consider such partnerships. This approach provides an opportunity for the company to have its products promoted by the retailers through new media and ensure high physical and online distributions.

Instead of pursuing the same-cost approach in all the UK market segments as in the UAE, the company should differentiate its prices and products depending on the locations of outlets in the UK just as other organizations do. Since the UK market requires differentiated products amid pursuing a similar market strategy to organizations like H&M, competitors do not offer products with the Middle Eastern cultural ancestry. This aspect already implies a differentiated product, which UK shoppers can look up to as the next in thing in the costume jewelry market.

Market entry strategy

Feathers can pursue different entry methods into the UK’s selected market segments in the marketing strategy section with the recommended marketing mixes. Examples of potential entry strategies include licensing, joint ventures, and exporting. Each of the entry modes presents some merits and demerits. According to Hough and Neuland, exporting is the easiest mode of selling a firm’s products in foreign markets (14). This strategy permits an organization to export indirectly or directly. Indirect exporting involves the sale of a firm’s products in foreign markets through an agent who is based in the home markets, while direct exporting involves a firm that sells its products to an importer or a buyer in a foreign market.

Licensing entails “an agreement in which a licensor grants the rights to intangible property to a licensee for a specified period and in return, the licensor receives a royalty fee from the licensee” (Hough and Neuland 21). Joint ventures constitute business collaboration between two companies based in two or more countries sharing ownership of an enterprise established jointly for the production and distribution of goods and services. Stemming from the marketing strategy and competitive dynamics of the UK jewellery market, Feathers UAE should pursue the exporting entry strategy into the UK market.

Conclusion

An interview with the Feathers UAE CEO revealed the company’s intention to venture into international markets in a bid to increase its competitive advantage. This aspect gave an opportunity for this project paper to give a proposal on the most promising region to initiate the strategic initiative of internationalization. The project identified the UK as the most promising region. The company should focus on costume jewelries by segmenting its target customers demographically and psycho-graphically. Using marketing mixes, the company should exploit exportation as the entry strategy. Once the products are in the UK, Feathers UAE should distribute its products through multi-channel distributors that can also promote the products online using new media to create mass appeal.

Works Cited

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Deloitte: Global Powers of Luxury Goods 2014: In the Hands of the Consumers 2014. Web.

Euromonitor International: Jewelry in the United Kingdom 2014. Web.

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