Macro-Environment Analysis of Italy and 12 C Frameworks

administrator summary The assignment starts with an introduction and Macro-environment analysis of Italy and 12 C frameworks. Macro environment is base on economic factors, social cultural forces, political and technological things that affect the government activity inside. It is definitive for a fellow air to identify the practical political risk s in the orbit. semipolitical risk is found on changes in the political environment that may arrive at a direct impact on tune.The political factors puzzle influence on the impose that the duty has to paid, the currency of the ground and the blood procedures that need to be carried out in nar range to be sufficient to open a production line in Italy. The economic factors atomic number 18 declarative mood of the economic perceptual constancy of the rustic and ar establish on the GDP, the orbiculate lay of doing course, the influence of touristry. The social environment includes the cultural resistences betwe en Italy and the US and is based on pile behaviour, the capacity to pay and the employment enlisting process.The report intends that spate take in changed their habits and lifetime style to lower-cost activities as a result of the recession. The technology factors describe the profits of development e tradeing. The vesture/ preen commercialize is analysed. This is an heavy factor as it shows who the of import leaders in the market argon. Porter Five Forces mental faculty helps to identify the emulation based on dominance entrants, subverters power, substitutes, suppliers and competitive rivalry. The second part describes the principal challenges that the Italian market presents to the comp whatsoever in selling its products.The third part is about the possible institution module for constantly 21. The entry module is lots selected according to the organisational development. The final part is about the marketing mix and the elements that forevermore 21 needfu lly to adapt to. List of contents page Executive summary 2 List of contents 3 Introduction 4Geographical vault of heaven 4 Political factors 4-5 Economic factors 5-6 Social environment factors 7 Technologies factors 8-9 bring up basketball team forces 9 assess 2 9-10 Task 3 Module entry 10-11 Task 4 commercializeing mix 10-11 Bibliography 12-13 Appendix 1 Starting a transaction in Italy 14 Appendix 2 job procedures 14 Appendix 3 artless comparison 14 Graph 1 europium sell manufacture segment 2009 14 Graph 2 Italy App arl assiduity 15 Appendix 4 Hofsteade module of culture 15 Appendix 5 Advertising media in Italy 16 Introduction evermore 21 is a fashion defecate which is aimed at the 16-to 35-year-olds. The lead customers be the teenagers and the tender adults. The phoner is specialised in the selling of clothe, foot stick out and accessories for women. evermore 21 is looking to open a neckcloth in Italy.To be able to do this it involve to analyse t he Italian market. The use of macro environment analysis and 12 C framework depart help the tune decide whether or not to open a hive away in that post. Geographical argona Italy has an authorized geo-political location. It is dictated in South-Central Europe. To the North it b readys with France, Switzerland, Austria and Slovenia, which think abouts easy access in terms of doing business with these countries. It is a member of Europe Union (BBC condition rude profile 2011). Forever 21 can use ship vessels or air transportation to transfer their products to Italy. Political factors The Prime minister of the country is Silvio Berlusconi.The current government of Silvio Berlusconi has a studyity in Parliament, which makes it possible for him to carry out a number of reform measures and make the main decisions for the country (Data Monitor 2011). Developing close ties with theUS The Italian government has been co- in operation(p) with the US in the formulation of defense, security and peace-keeping policies. This shows that these two countries enjoy h unrivalledst relations. This is an advantage for Forever 21 because this attach to originally came from the US , so that it shouldnt be a problem for an US Company to open a store in Italy. Currency The currency that is use in Italy is the Euro.This mean as that it wouldnt be difficult for the ac political party to exchange US dollars into Euros because Forever 21 has already had experience in this aspect in Dublin. in that location ar various policies that need to be followed in order to sell robes in Italy. The overseas investment laws of Italy ar corresponding to those of sepa count EU countries ( Datamonitor 2011). So it shouldnt be a problem for a foreign company from any of the EU member countries to lean a business in that respect. Taxes bathing tub is an other(a) important factor that any business has to face. VAT is indirect appraiseation which is collected for the government by the seller who is able to add percentage to the basic cost of the product.Italian value-added tax (VAT) is at a standard rate of 20% which is applied on the sales value of all heftys (Economic Watch 2011). VAT is payable by all manufacturers, wholesalers, retailers and most service and transport businesses. Contractual obligation These argon the procedures that need to be observed in order to start a business in Italy. The normal commission that needs to be paid is a deposit of 25% of the amounts contributed in cash with a bank. The other thing is to pay a government grant tax to the brook Office which costs 310 euro and finally register online with the Register of Enterprises. Appendix 1 shows that Italy is ranked on 68-th place in starting a business.Appendix 2 shows the business procedures, beats and days that cast off to be observed. Economic factors Since 2008, the country has been under the influence of the global recession. The economic record shows a damaging growth r ate of -1%. The recession has had a negative impact on the country by declining exports and reducing consumer spending. In 2010, the economy showed approximately signs of detecty based on the GDP growing at a rate of 0. 6 comp atomic number 18d to -1% in 2008. In 2011, the economy expects to rise by 1 % ( Datamonitor 2011). Appendix 3 shows that Italy is ranked on 8-th place with relation to GDP. The frugality Set to Go from Worse to Bad. This subject matter the economy doing well, it has managed to recover after the recession.Italy has been playing a significant intent in the knowledge domain economy and is one of the founding members of the EU community. It is the seventh largest economy in the world and the fourth in Europe in terms of GDP, which stood at $1. 11 trillion in 2009 (Datamonitor 2011). This can serve as assure that the country has a good economic stability. The World Economic meeting place (WEF) and the Global Competitiveness Report for 2010/2011 ranked Ita ly 48th out of 139 countries. As a world seventh largest economy, dictated within the European Union, in that respect is a strong competition for a market sh be in all Italian industries and service sectors. This means it could be difficult for Forever 21 to deal with the eminent competition.The World Banks Doing Business Report 2011 ranked Italy 80th out of 183 countries. This shows that there are good conditions for doing business there. The high ranking includes the legal environment for businesses and the easy fashion that a business may be formed and operated in the country. Tourim The countrys main economic sectors are tourism, fashion, motor vehicles and food. Tourism is one of the fastest growing and profitable sectors of the country with 43. 7million supranational tourist arrivals and total receipts estimated at $42. 7billion, Italy is the fourth highest tourism earner and the fifth most visited country in the world (BBC country report 2011). This makes tourism a well -favored contributor to Italys economy.This intensive tourism is an advantage for Forever21 because tourists could be some of their customers, taking into guessation that lower-price items are offered by the company. If the company attracts tourists as buyers, this provide facilitate its popularity because more people may hear about this post and thus make it soft recognised around the world. The Italian economy is separated into a have industrial North, dominated by private companies and a less develop South. Italys northern region is the richest and one of the most dear(predicate) in Europe, season the southern region is kn take in as the Mezzogiorno, where there is high unemployment. This means it may benefit the company if it opens a store in the southern parts.This will create job opportunities for unemployed people and the costs of operating the business should be less dearly-won in this area (World position Book 2011). It is very important for a business to careful ly drive the location because on it will depend how profitable and successful this business can be in future. Comparatively high tax The tax rates in Italy are very high. The local tax rate is 3. 9%, this do the effective tax rate 31. 4% which is high than the other EU countries where the average is 25. 04% ( Datamonitor 2011). This means that when the company opens a store in Italy it will have to pay higher taxes than in other EU countries. Social and environment factors kitchen-gardeningCulture has an important impact on how efficaciously the organisation operates and has an important implication as to employee motivation. Culture can differ from business to business. Failures can amplify significantly when dealing with people whose values, beliefs, springer and first language are different from your own (Hoecklin 1995). However, if a company can manage amidst different cultural environments, this could lead to innovative business practices faster and provide tangible bene fits which can be used competitively. It is important for Forever 21 to identify the cultural differences between the US and Italy in order to be successful with the business. Hofsteade 1995 module helps to analyse the differences based onPower Distance, dour Term Orientation, Individualism, Masculinity and Uncertainty Avoidance. In Appendix 4, it is shown that the US have high rank on Individualism, which means that in a business perspective an organisation is not expected to look after its employees sooner the employees are expected to defend their own interests. Italy has a high rank on Uncertainty avoidance, which means that Italians are less risk-taking people. These are some aspects that are specific for the Italian culture. The official language that is spoken there is Italian. It will be difficult to start a business in Italy if you dont know the Italian language (Hofsteade1984). correspond to Lewis analysis, the saying while is money is not a popular phrase in Italy. The y do not make business decisions quickly, they do take their time. every last(predicate) foreign businesses should be aware of the fact that it could take longer time in advance they come to a decision. Italy has developed a reputation for producing high tone luxury goods. Fashion and fashion designs are trademarks of Italy. thitherfore, in the business world, good clothe are a signature of success (Hofsteade 1984). This is based on consumer behavior analysis. That shuffle loyalty exists is a fact. This shows that Forever21 clothes may not be very successful in the Italian market.However, the recession has unnatural the consumer habits, as the Italian economy has been slow to recover and the unemployment rate go along to rise from 6. 2% in 2007 to 8. 4% in 2010. Appendix 3 shows that the country takes the 98-th place in terms of high unemployment and that there is 1. 4% inflation. Opening a store there would create job opportunities. ability to pay Italians have adapted the ir habits and life-styles to lower-cost activities during the economic downturn, which benefited supermarkets or hypermarkets (The World circumstance Book 20110). In 2010, consumers became more price sensitive, in both the foodstuff and non-grocery channels. This is an example of switching costs, it means consumers are able to transfer their impost to unused players.Employment recruitment process Hiring employees in Italy must be interpreted into account before starting a business. You must enter into a contract under the Italian Labor Law and employees enjoy wide rights. If you buy an existing business, you may be required to take on existing staff who cannot be dismissed, otherwise high redundancy earnings have to be paid. Its very expensive to hire employees, because, in addition to salaries, you must pay an additional amount of around 50% in social security contributions, 13 and possibly 14 months salary, five or six weeks paid annual holiday, plus pay for open holidays, sickness, maternity (Datamonitor 2011).This shows that hiring employees in Italy will be more expensive than in the other EU countries in which Forever 21 has already clear stores. Technologies net profit retailing experienced the highest value growth of all retail channels in 2010. A significant proportion of sales shifted from store-based to Internet retailing. The main underlying reason for this was that the Internet is still considered as a low-price retail channel, based on fact that Internet retailing enjoys the last travel and transport cost, and allows price comparisons between umteen competitors (Euromonitor 2010). The benefit of using e-marketing in selling goods and services online allows you to enter the global market and is providence you money in terms of overhead charges (Gaudin 2002).A well designed website with kindly pages may persuade users. Forever 21. com is an example of a well designed web-site. It is divided into various sections, according to the items that the company sells, much(prenominal) as shoes, dresses, have items, sales, accessories, etc. This makes it easy and quick for customers to find what they are looking for (Forever21). Choices It is important for the company to analyse the clothes market for this will help the business identify how risky it may be to open a store there. The retail industry includes all menswear, womens wear and children wear such(prenominal) as tops, underwear, coach, jeans, jackets, dresses and skirts for girls.Graph1 shows that Italy holds 17. 4% of the clothes market. This grants the country the second place in Europe in the retail industry, after Germany which has 19. 5%. The European coif industry is an important economic factor, based on trade, employment, investment and revenue enhancement all over the world (Dtamonitor 2010). Concentration Market value Womens wear is the largest segment of the apparel retail industry in Italy, write up for 54. 9% of the market value in comparison wi th mens wear, which has 31. 7% ( Datamoninor 2010) hear Graph 2. This means women buy more clothes than men do. This is a good factor for Forever 21 because their products are not targeted at men.The retail industries in Italy have declined in 2008 and are expected to recover over 2011 (Datamonitor 2010 ). This is a result from the recession as consumers incomes fail, they have less money to spend on clothes than before. thither will be a growing demand for discount apparel retail stores that provide low-cost output fashion. Porter five forces module can help identify the degree of competition based on potential entrants, buyers power, substitutes, suppliers and competitive rivalry. This analysis will reduce the risk of high competition by identifying the competitors strategies for the future. Forever21 can apply some of these strategies and use them in their own business. SuppliersKey suppliers in this industry are clothing manufacturers and wholesalers, with retailers able to solution from both. There is a risk of choosing low chain supplier such as it may not be able to deal with changes in demand, industry, changing in fashion as well. Substitutes While there are no substitutes for womens wear, they are alternatives to retail. These include buying directly from manufacturers as opposed to the conventional distribution chain, something which is facilitated by the growth of online sales. All major womens wear retailers now have their own online store so many people prefer to buy products online. This has increased the buyers power on the market (Dunning 2008).This is a good factor because Forever 21 has their own website where people can entrepot online. Retail The retailer strategy is based on price by providing low-cost products during the recession period. This is their strategy, to recognise the price sensitivity of their target customers and compete on price selling clothes as cheap as possible and as other suppliers. Buyers All buyers are individu al consumers who have different styles and preferences. Buyer behaviour plays an important role for customer pick based on different factors such as home-made clothing, different colours, brand loyalty, price , designer label, reference, supply reliability, fashion, culture, believes, friends and family influence.Competitors These are some of the main players in the retail industries in Italy that will have a direct influence to Forever21 in terms of price, similar target listening and products. These companies also have their own web-sites where customers are able to shop online. These are famous brands companies that sell quality clothes for the young audience. H&M Strengths H&M is a retailer which is targeting its products at women, men, teenagers and children. The company offers national brands and private label merchandise in many categories, including cosmetics, accessories and footwear. H&M operated 1,738 stores in 33 countries in November 2008.H&M adopted the construct of regional grouping with purchases and distributes the merchandise to a region. Their strategies involved transferring the central design, buying, logistics and stock-keeping functions to the new company. The company also has its own web-site where customers are able to shop online, to see whats new in a store, compare prices, etc. Weaknesses There is a high competition as companies such as TopShop, Bershka and Terranova are famous brands that sell similar products on the Italian market and are based on fashion, quality price and the same target audience. The weaknesses for Forever 21 will be the same. Strengths Industria S. A. s created from various different companies, including Zara, Bershka, push and Bear, Massimo Dutti, Stradivarius. All of these companies have a similar culture. All of them are in the clothes industry. However, these companies dont have a direct competition between each other because their product style is differs from one another(prenominal). Breshka clothes are cheap and their audience is the 16-to-25-year age group. Zara is more specialised in the young professionals group. Zara is present in 73 countries, with a network of 1,341 stores located in major cities. Bershka sales format has 626 stores in 41 countries. Bershka stores are large and spacious. All of these companies produce quality clothes and follow the current trends in fashion (Mintel 2011). Task 2The analysis of the retail clothes industry on Italy shows that it will be advantageous for the company to open a store there. The key elements of the research are the strong economic stability of the country, the high tourism, the technologies factors and the place that the Italian market for clothes occupies in Europe. The country has managed to recover from the hulky recession since 2008. This is an advantage for any foreign business that would like to invest in Italy. There are good conditions of doing business there. The market value shows that the women dominate in the cl othes market. The women retail market has 61. 3% of the total market by selling clothes and accessories (Datamonitor 2010). There is a monopolistic competition within the clothes retailers.This means many firms sell products that are similar but not identical based on brand, quality, designer The environment factors show that consumers have adapted their lifestyle to discount retailers. It will be an advantage for the country to have a retailer of non-designer womens wear, curiously for customers with lower disposable incomes. The good relations between the US and Italy also plays an important role for opening a business in Italy. The Italian government has played an important role in the industry by attracting foreign investments to the country through low-barriers entry. It is say in the report that the government uses similar restrictions as are used in Europe.The Italian government welcomes foreign investments in most industries especially when they create jobs. All factors sh ow that it will be challenging for the company to open a store in Italy and adapt to the Italian culture. still then, isnt doing a business a challenge in itself Task 3 Module entry International Franchising is the possible module entry to Italy that is appropriate for the company based on all factors described in the report. The Franchising method will be easy to transfer to foreign locations. The licensing treaty and franchising agreement are put on formal contract with typical terms. Franchising is a method of distributing goods and services by licensing a business brain or concept to another. (Amerilawyer 2011) International Franchising is a faster form of external business. A firm sells limited rights to the use of its brand name to a foreign firm in return for a sum payment and share of 50% of the profits. There are a lot of advantages of using the franchise. The prerogative can establish a well know product and operating system, good reputation, support services and i t can expand internationally. The Franchise will reduce the risk and cost of module entry and easier time securing financing because the Franchisor typically has an established trademark and good marketplace experience. These are the reasons why Forever 21 should take it into consideration.The franchise also involves some local market customs and culture from the host country (Griffin and Pustay 2010). However, there are some disadvantages of the franchising agreement such as the profit needs to be shared, there is dependence on the licensee as to how to sell the products including policies, potential loss of control of manufacturing and marketing. The Franchisor controls any advertize conducted by the Franchisee. Task 4 Marketing premix The Marketing Mix includes Product, Price, Promotion and Place. In order to achieve their marketing objectives, Forever 21 needs to have a strategy that includes different elements the various parts of the marketing mix. ProductClothes normally have short life cycle based on seasonal factors and fashion. The brand is very successful and well known in the US. However, it will be new for the Italian market. It may take a long time for the company to create a strong brand name there. According to Lynch 1994, it will take it at least five historic period to establish a brand and short-term reimbursement should not be expected. The brand is an important part of any business because this is the thing that makes the products different from the competitors and are easy to be recognised as a design and a way to an established product position in the market. This makes it easy to buy or sell products.A strong brand speaks about the function and contain of the product and helps consumers decide whether this is their kind of product, specially when new and untried products are considered. Creating brand loyalty and creating something special to consumers mind makes it difficult for the competitors to touch it (Brassington and Pettit t 2007). The Italian culture shows that quality plays an important part in the consumer behavior in Italy. It will be an advantage for the company to improve the quality of its products in the first stage and, on the next stage it may increase the price so that it may compete on the Italian market with other companies. exploitation sales advisor will be another advantage which could make more people prefer to go shop in the Forever 21 stores. PricingPricing is an important part of the Marketing Mix because it is a balance between serving to customers needs and wants and serving the needs of the organisation to cover its costs of manufacturing, marketing and qualification a profit. The company is famous with the fact that it produces clothes that are not expensive and many people can afford them. The environment factors show that consumers in Italy are prepared to pay more but to wear quality clothes. The company has to come with determine strategies to increase the price of the p roducts and create better quality or to keep the same as it is now. The choice of a launch price should take into account the future plans for the pricing and positioning of the product. Penetration pricing is one of the possible price strategies that Forever 21 may use.Penetration pricing is used when entering a big market for a short period of time and then the organisation may price aggressively below the existing competition. However, this method could be a risky strategy because it could establish a poor quality brand image. The latter may lead to a situation where it will be difficult to raise the price (Brassington and Petitt 2007). The company may consider using 20% discounts for students because their target audience is based on young people. This will surely attract more customers. Promotion The power of the media has a big influence on building a brand. Brand advertising may increase the buyer power. These are some of the leading media groups in Italy Mediaset is one of t he leading commercial television operators with 32. % of the Italian media Gruppo Editoriale LEspresso has 14. 0%. These companies are concentrated on publishing, radio, advertising, internet businesses and national television, newspapers and magazines (Datamonitor 2011). Appendix 5 shows that people in Italy are more influenced by the TV adverts and newspapers. This means it will be a good idea if Forever 21 uses TV commercials to advertise the opening of the new store in Italy. However, this is the most expensive method and will cost a lot of money to the business. Using online advertising will help the company attract the right audience by using Facebook, Yahoo and MSN because these web-pages are part of everyday life of the young people. PlaceThe company has to decide in which part of Italy it would be operable to locate the store, in the North or the South. Most businesses are located in the northern region. However the company has to find a big place with an average area of 5 ,000 sq. m. This will be very expensive in the North and could be difficult for the company to afford it. For this reason, the company may open an out- of- town store, which would be cheaper than the town centre location and also could offer a big parking facility for the customers. A product sold out- of- town is likely to be cheaper than in a store located in the town centre. Bibliography Amerilawyer(2011)Franchise agreement (Internet) uncommitted from http//www. amerilawyer. om/agreements/agreementindex/assetpurchase/franchise. htm find on 17 April 2011 Brassington,F and Pettitt,S(2007)Essential of Marketing, 2nd mutation Personal Education hold in april,p242 Datamonitor (2009) Europe retail industry segment (Internet) Available from www. Datamonitor. om Access on 15 April 2011 Datamonitor(2010) Italy apparel retail industry(Internet )Available from www,Datamonitor. com Access on 15 April 2011 Datamonitor(2011) Italy earth analysis report In-depth PESTLE Insights(Internet)Ava ilable from www. Datamonitor. com Access on 16 April 2011 Doing Business( 2011) Italy making a difference for entrepreneurs (Internet )Available from http//www. doingbusiness. rg//media/fpdkm/doing%20business/documents/profiles/country/db11/ita. pdf Access on 13 April 2011 Dunning, J. 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W( 2010)International business Global Edition 6th edition Personal EducationEconomic watch (2011) Value Added tax, (Internet) Available from http//www. economywatch. com/business-and-economy/italy. html Access on 10 April 2011 European country( 2011) Italy (internet)Available from http//europa. eu/abc/european_countries/eu_members/italy/ Access on 11 April 2011 Euromonitor International( 2011) Retailing in Italy Available from http//www. euromonitor. com/retailing-in-italy/report Access on 14 April 2011 International VAT service(2011) Italian VAT (Internet)Available from http//www. tmf-vat. com/vat/italian-vat. html Access on 12 April 2011 Lynch ,R(1994)European Business Strategies The European and Global Strategies of Europes Top Companies,Kogan pageMintel Global Market navigator (2010) Italy Advertising Market segmentation by value (Internet)Available at www. Mintel. com Access on 17/04/2011 The world bank doing business (2011) Ease of Doing Business in Italy (Internet) Available from http//www. doingbusiness. org/ExploreEconomies/? economyid=96 Access on 10 April 2011 Worldwide tax (2011) Italy VAT ant other tax (Internet)Available from http//www. worldwide-tax. com/italy/ita_ other. asp Access on 13 April 2011 The world fact book (2011)Europe Italy( Internet)Available from https//www. cia. gov/library/publications/the-world-factbook/geos/it. html Access on 15April 2011 Appendix 1Start a business Doing Business 2011 rank Starting a business 68 Register property 95 Getting course credit 89 Paying taxes 128 (Doing business 2011) Appendix2 Business procedures Procedure number 6 days 6 Cost of income per capital 18. 5% Paid negligible capital 10. 1% Appendix 3 Country Comparison Rate2010 Country comparison GPD 1. 1 8 Unemployment rate 8. 98 Public account 118. 1% 8 Inflation1. 4% 36 Graph1 . Europe retail industry segment 2009 pic(Datamonitor 2009) Graph 2 Italy apparel retail industry pic (apparel retail in Italy Datamonitor 2010) Appendix 4 Hofsteade module of culture differences pic Appendix 5 Advertising media pic (Mintel Global Market Navigator 2010) Segment 2009 (m EUR)