Group Consulting Project Oroton International Entry and Expansion Strategy in China
3662 WordsMay 12, 201315 Pages
Oroton is an Australian owned company making luxury goods, from bags to clothing. This study first goes through a resource and capabilities analysis for the Oroton Company. We follow this with an external environment analysis and fashion industry analysis in Oroton’s host market, namely, China. In addition, this study is an analysis on their plan to enter the China luxury goods industry, through setup of a Wholly Owned Subsidiary with a view to using a “Focus” and “Differentiation” strategies. Last but not least, the recommendations are provided for Oroton in terms of how the company can enter into China’s market and further develop its international business efficiently.
1.0 Introduction Oroton was founded in 1938…show more content…
This clearly shows the fast paced growth of the China economy. Chart 2 (adapted from National Bureau of Statistics of China 2012) indicates the average GDP growth rate has shifted from 2.1% to 2.5% from 2011 to 2012.
Despite a small dip in the second quarter of 2012 the China GDP growth rate is beginning to recover. Also despite a small drop in the demand of luxury goods recently retail sales have grown steadily. Consultancy firm McKinsey & Co predicted that by 2015, China will be the largest luxury goods market in the world (China Daily, 2012). Tariffs have been a main factor affecting the development of China’s luxury market. After joining the WTO in 2001 China committed to reduce tariffs. Despite this people still prefer to buy luxury goods overseas because the existing tariffs create higher prices. A survey of 20 luxury brands sold in China shows prices are 45% higher than in Hong Kong and 51% higher than in U.S (Lan, 2011). After 2001 tariffs for jewellery were 20%-35%, clothing 14%-20%, watches 11%-23%, and bags 14%-25% (WTO accession China tariff schedule 2003). Despite an announcement on June 15th 2012 from Yao Jian in the Ministry of Commerce that a further cut would occur on import tariffs the Ministry of Finance has said this has not been