ABSTRACT

Market entry of Rahat Continental into the infantwear

market in the UK. Report includes extensive research
about the market, a strategy proposal and an evaluation
of the feasibility of the new venture.

Vigneswaran, Harey
International Business – Claude Littner Business School

RAHAT
CONTINENTAL
Market Entry to the Infantwear market in the UK
EXECUTIVE SUMMARY

Research suggests that consumers place a significant importance on ethical clothing. The infant wear market is polarised,
saturated and hypercompetitive. The market has multiple key players that are well-established and financially resourceful
making it difficult for new entrants to compete on cost leadership. Due to the high range of substitute brands, buyers can easily
and inexpensively switch to more reliable and recognisable brands.

The spending power of parents in this market is high for their newly born child. However, some studies have also shown that this
has caused financial burden for some parents, forcing them to shop for more competitive prices online and benefit from passed
down clothing. Moreover, birth rates are low in the UK due to parents delaying having children, but more disposable income has
been identified amongst grandparents. Consumerism has also given rise to infant and children clothing to be used as a brand
extension creating a market for luxury clothing.

The economic decline and the political uncertainty of Brexit is concerning. Inflation rates are likely to rise, and the post-Brexit
trade agreements may not be favourable for businesses operating in the UK. Moreover, international investments may be seen
as risky due to the falling value of the pound, constraints to free movement of foreign employees and export/import tariffs that
companies may be subject to post-Brexit. Global shortages in organic cotton also threaten the economic conditions, thus using
multiple suppliers may be advantageous.

The company will cater to parents-to-be, first time parents and experienced parents with babies up to the age of two. The parents
are predominantly tech-savvy 25-35-year olds who are price sensitive, ambivalent and connected digitally. Therefore, digital
marketing can be a major driver in the marketing strategy. To target the market segment, the clothing range should be
advertised as stylish baby wear that is playful, stylish, soft and durable.

In sum, the new venture is threatened by political instability, high competition and an economy that challenges working class
and middle-class consumers. The business faces moderate to high levels of risks of failure and should enter this market with
precaution. Before any significant investments are made, the business should seek to prove the ethical infantwear clothing model
in the UK market and limit its risks by forming strategic partnerships, alliances and joint-ventures.
TABLE OF CONTENTS

Executive Summary.............................................................................................................................................................................1
Introduction ........................................................................................................................................................................................ 3
Market Overview ................................................................................................................................................................................ 3
Key Business Drivers........................................................................................................................................................................... 3
The Parental Spending Power........................................................................................................................................................ 3
Change in Social habits .................................................................................................................................................................. 4
Cultural Differences ............................................................................................................................................................................ 5
Barriers to Trade ................................................................................................................................................................................. 5
High Sensitivity to pricing .............................................................................................................................................................. 5
Economic Decline ........................................................................................................................................................................... 5
Political Instability .......................................................................................................................................................................... 6
Ethical and egal Consideration ........................................................................................................................................................... 6
International Marketing ......................................................................................................................................................................7
Target Market identification ...........................................................................................................................................................7
Product and Price Strategy ............................................................................................................................................................ 8
Brand Positioning ........................................................................................................................................................................... 8
Ecommerce vs Retail ...................................................................................................................................................................... 9
Concentration vs Diversification .................................................................................................................................................. 10
Best trade areas ............................................................................................................................................................................ 10
Recommendation and Conclusion ................................................................................................................................................... 10
Appendices ....................................................................................................................................................................................... 12
References ........................................................................................................................................................................................ 16
INTRODUCTION

Rahat Continental was founded as a clearance agent, but has since been involved in relocation services and freight movement.
Having earned its name as one of the leading freight forwarders of Indian soil, the company now takes its first step towards an
undifferentiated market place by utilising its expertise in freight movement.

The consumers growing concerns about environmental and social problems have created business opportunities for companies
wishing to produce eco-friendly products (Gam et al., 2010).

Childrenswear is booming with sales of £135.6 billion in 2015 worldwide and 12% accounted towards infantwear. An increase of
13.2% is estimated in the next five years to £6.1 billion (Kay, 2017). Ethical clothing is a growing sector, valued at £89 million in
the UK in 2007 forming part of the market for ethical products estimated at £35.5 billion (Goworek, 2011). New business ventures
have been key to introducing radical and more sustainable offerings, such as pure organic cotton, to the market place. Such new
ventures offer higher sustainability standards complying to global standards to ensure every item in the line is made in a fair-
trade work environment.

MARKET OVERVIEW

The baby market in the UK was estimated to be worth £782 million in 2013, equivalent to £193 to every child in the UK up to
the age of 4. Parents spend an average of £65.00 for their child under five years every month (Pragmauk, 2017)

The comprehensive research suggests that the potential of organic cotton infant wear market in the UK can be realised with a
blue ocean strategy. The market is largely monopolised, however without a market leader that places a focus on sustainable infant
wear. Research suggests that consumers place a significant importance on ethical clothing. The wider infant wear market is
polarised, saturated and hypercompetitive. Due to the high range of substitute brands, buyers can easily and inexpensively switch
to more reliable and recognisable brands.

The infant clothing market in the UK is competitive with well-established global players like H&M, Asda (George), Next,
Riverisland, Mothercare, Primark, Disney and many more competing on digital1 and retail platforms making it challenging for new
entrants to compete on a cost leadership strategy. New firms entering the market may, therefore, require a large capital
investment with a strong supply chain network and/or a strong product differentiation strategy – such as a focus on
sustainability and ethical clothing. The market has recorded declining unit sales due to tough retail competition between pri vate
label, fast fashion and internet retailing (Euromonitor, 2017). New ventures entering the market place have also shown to
introduce higher sustainability standards than existing players in the market who adopted a more “watered down” approach.

The demise of BHS in 2016 has left its £108 million childrenswear business up for grabs (PR Newswire, 2017).

KEY BUSINESS DRIVERS

THE PARENTAL SPENDING POWER

Parents have always felt the need to provide for their children. Official organisations, such as the Office for National Statistics
(ONS) or the British Retail Consortium (BRC), do not hold data on how much parents spend on their children. However, multiple
studies (Halifax, 2017 and LV, 2016) confirmed that the cost of raising a child has increased by 61% since 2003.

The study conducted by Halifax (2017) involving a 1000 parent of 0-11 year olds confirmed the cost of raising a child up to the age
of 11 to be almost £60,000. For parents raising the children in London, this could rocket to a budget of over £100,000. This equates
to an average of £448.41 a month on a variety of different items or almost a fifth of the average salary (£29,009).

1
Leading infant and childrenswear e-retailers include Childrensalon.com, Kiddicare.com and Alex and Alexa selling more than
10,000 items by labels including Dior, Fendi, Burberry and Ralph Lauren. Net-a-Porter has recently also registered the domain
name Petite-a-Porter.com and Harrods recently expanded its childrenswear department to 66,000 sq ft. (Craig, 2015).
A related study by LV Insurance (2016) estimates that parents will typically spend a quarter of that
budget between the age of 1-4. When split by age, toddlers aged 0-2 cost the parents the most
at nearly £537.25 per month. Thus, the total cost for the first-year amounts to £11,498, and for
the next three consecutive years to an average of £15,806 per year (as shown in Figure 1)

Some parents start setting money aside once the pregnancy or adoption has been confirmed. As
financially stable mothers enter motherhood, they are spending more on baby products. A study
conducted by Aviva involving 2,000 parents in the UK found that on average a UK family spends
£1,619 on baby and infant products upon birth, up by 17% since 2012 (Euromonitor, 2015) - thus
making the baby and infant market a highly lucrative business.

The average spend per child varies from region to region which is supported in table 1 from the
study conducted by Halifax (2017).

Table 1. Average monthly cost per child by region (Halifax, 2017)

CHANGE IN SOCIAL HAB ITS

From 2008 to 1016, birth rates are down by 9% as adult’s delay having children during times of economic uncertainty
(Euromonitor, 2017). However, despite having children later in life (average at 30.5 years), UKs birth-rates remain relatively high
compared to other European countries. Combined with grandparents with more disposable income makes the infant and
childrenswear a highly lucrative business (Craik, 2015). This is particularly evident in the designer market where children have
become a brand extension for the elite – “designer babies”.2

Comfortable clothing and low price takes a priority over quality of clothing according to the above Mintel (2013) study.
However, the importance placed on value for money varies depending on the child’s age and how affluent the parents are.
Children and babies growing out of their clothes remain a deterrent for parents to spend more money on clothing (Euromonitor,
2015).

Other major social trends lie in health, fitness and sports. Interest in ethical consumerism has given rise to “organic clothing wear”.
Seventy-two per cent of consumers considered ethical clothing to be important to them according to a dated study by Wrigley

2
The way people dress is integral how they regard themselves, and is not necessarily dictated by the clothing industry or by
fashion. A Mintel report (2013) shows that over a third of consumers are willing to pay more for well-known branded
childrenswear. Led by UK’s Prince George, the rise of the “celebrity infant culture” has trickled down to middle class consumers.
However, the research also suggested that parents are more inclined to purchase branded wear for older children aged 10-15.
The social fragmentation has opened the global infant and children’s wear market to clothing for upper class providing offeri ngs
from brands such as Gucci, D&G and Chloe, Moncler, Fendi and more (Kerley, 2015).
et al. (2008). In addition, consumers are open-minded and positively surprised by the styles of the garments that are organic
and ethical – adding to the shift of consumer preferences (Goworek, 2011).

CULTURAL DIFFERENCES

UK is a low-context culture in which people tend to hold short-term relationships, follow rules and standards closely and are
generally task oriented. They communicate directly and don’t tend to rely on written communication and facts and evidences.
India in comparison ranks strongly as a high context culture where communication is often indirect and requires a deep
understanding of the cultural context to understand the underlying meaning. Therefore, the use of a polycentric strategy
incorporating an adaptation approach will be conducive to operating in the host country.

The widely-recognised comparison of Hofstede provides greater insight into the mindset of British consumers by looking at
various measures. Figure 2 below shows a divide in Power Distance in which the social divide in India (i.e. wealth, cast and social
class) is accepted as part of culture, whereas in Britain equalities amongst people are often minimised.

UK ranks as one of the highest in Individualism around the world, in which children are taught from an early age to think for
themselves and find their purpose in life. Indian in comparison, promotes social cohesion and interdependence. Another area of
consideration must be the level of Indulgence, which may be conducive to business. While India does not place a great emphasis
on leisure time, consumers in the UK are more forthcoming about realising their impulses and desires.

Figure 2: Hoefstede comparison of India (left) and UK (right) – (Hoefstede, n.d.)

BARRIERS TO TRADE

HIGH SENSITIVITY TO PRICING

Three quarters of parents have expressed concerns over unexpected one-off purchases since the day the children were born –
having to cut down on other expenses. This is further supported by almost half of parents claiming that they have cut back on
going out socialising since having children. Similarly, 44% of parents have cut back on meals out and restaurants and 31% are
spending less on holidays. The financial burden of raising a child has also led parents to cut corners – two fifth (39%) of
parents shop around more for more competitive prices and 35 per cent of parents pass down clothing and toys. This has
created a “passing-down” trend hurting the industry.

ECONOMIC DECLINE

UK’s Gross Domestic Product (GDP) growth is expected to slow further in 2018 due to public spending cuts and the Brexit-related
uncertainty. Unemployment rates is expected to remain steady with wage growth to remain low – resulting in falling wages
(Trading Economics, 2018). The Bank of England has aggressively signalled recently to raise inflation rates over the coming years.
The UK economy has seen a spike in inflation from close to zero to three per cent following UK’s vote to leave the EU in the
summer of 2016. This has also resulted in a sharp fall in the value of the pound affecting international trade.

While the UK clothing industry is estimated to grow at 16.6% over the next five years, the market is expected to be driven by
inflation. Furthermore, a study by PR Newswire (2017) identified that the childrenswear market is the weakest out of all
clothing sectors with a growth rate of 10.4% over the next five years. This trend is unlikely to improve with Brexit’s impact on
the pounds – putting additional pressure on the prices and margins. Volumes are expected to remain weak as consumers are
likely to prioritise essentials such as food and grocery due to the squeezable income (PR Newswire, 2017).

Global shortage in organic cotton also threaten the economic conditions of international trade. Cotton supply exceeded
demand in 2010 which led to India - the second-largest producer of cotton - banning exports of the fibre to help its domestic
textiles industry. This resulted in a volatile run surging prices by over 150% (as shown in Figure 3) and added pressure on retailers
(Fortanella-Khan, 2012). The global supply has since been stabilised, and the Indian Cotton Advisory Board expect for export to
rise by 15 per cent in the current year (The Economic Time, 2017). Moreover, multiple regions of India continue to provide
subsidies, central government schemes and technology upgradation, to support with the growing pressures on farmers (The
Economic Times, 2018).

Figure 3: Cotton commodity trading price (Business Insider, 2018)

POLITICAL INSTABILITY

The departure of UK from the European Union poses uncertainty for the future of the clothing industry. The industry risks a
further devaluation of the British pounds most likely resulting in lower customer confidence – which in turn will affect retail
sales. Post-Brexit, EU and British citizens may also be constraint by free movement creating problems for foreign employees.
Recruitment and retaining employees may become more challenging. Furthermore, companies may also be subjected to trade
tariffs on imports and exports. According to Hoang (2017) from the Business of Fashion magazine, textile goods may face a tariff
of 12 per cent in duties (Key Note, 2016). Currently, India requires an export duty of 10%, however the UK does not pose any
import duties on these goods (CBEC, 2015).

The UK leads the way on the Index of Economic Freedom. However, broken down by individual scores, it becomes apparent that
Trade and Investment Freedom suffer due to political interests, high regulations and high standards posing a challenge for
businesses entering the UK. This is partly due to economic and non-economic rationales to protect the economy – however it
may hamper the growth of foreign investments into the infantwear industry. The investment will boost employment in the UK,
promote ethical practises, and promote sustainable commodities and a “green economy”. As a result, the government is unlikely
to view foreign investments with an environmentally friendly differentiation as threatening to the UK economy.

ETHICAL AND EGAL CONSIDERATION

This section of the report focuses on any additional factors of considerations the new venture must consider.

ETHICAL IMPLICATIONS
The industry has repeatedly been affected by issues relating to workers’ rights and child labour laws. Increasing imports and
globalisation have given rise to consumers questioning the source of clothing products. Ethical issues in the clothing industry
commonly involve environmental and social sustainability, the use of pesticides, the volume of clothing consumption, the
working conditions for manufacturers’ employees and the disposal of used garments (Birtwistle and Moore, 2007 as quoted by
Goworek, 2011).

Moreover, e-businesses must also be mindful of online data theft and security that may compromise sensitive information. The
UK government has set out data compliance and privacy laws that the new venture must adhere to. In addition, product must be
accurately listed by making every effort to list the products accurately, completely and honestly. Users privacy must also be
respected in marketing activities (in accordance with GDPR regulations that are coming to effect from May 2018 in the UK).

Cotton growth can only take place effectively in tropical or sub-tropical climates (i.e. Pakistan, India, China or Turkey). However,
these developing countries inadvertently also affect cotton growth due to soil degradation, water scarcity and climate
change. The lack of education in the use of pesticides also affect soil quality and local waterways. Standard cotton farming causes
substantial problems and is responsible for eleven per cent of the world’s pesticide consumption (Clay, 2012). 3 Issues regarding
recycling of used garments are also growing areas of concerns.

LEGAL IMPLICATIONS
Importing Children and Infantwear in the UK requires companies to meet certain requirements, including the General Safety
Regulations 2005, the Children’s Clothing (Hood Cords) Regulations 1976 and the Nightwear (Safety) Regulations 1985. A BSI British
Standards Code of Practice outlines the recommended practises to promote safety. In addition, under VAT-rules, most items of
children’s clothing and footwear are eligible for a reduced rate of 0% VAT.

Legal implications may also incur by improper labelling. Fair trade products must meet requirements set out by regulatory bodies
to qualify using terminologies like “organic”, “pure cotton” or “fair trade”. Failure to do so, may result in prosecution or license
being revoked.

The Global Organic Textile Standards (GOTS) is an internationally-acclaimed textile processing standard for organic fibres that
promotes environmentally and socially responsible manufacturing. The certification - available at an annual cost of about £150 -
is recognised in all markets and provides credible assurance to the end consumer (Bhajekar, 2017).

INTERNATIONAL MARKETING

TARGET MARKET IDENTI FICATION

The following market segments have been identified in Figure 4.

Figure 4: Market segmentation for Infant wear in the UK (Vigneswaran, 2018)

3
In comparison, organic cotton has gained more popularity, but due to the prohibition of using toxic and persistent agro-
chemicals its output has been greatly constraints to 0.04 per cent of global cotton market (Kooistra and Termorshuizen, 2006
as quoted by Goworek, 2011).
SUMMARY
✓ The company will cater to parents-to-be, first time parents and experienced parents with infants up to two-year olds.
✓ Consumers buying gifts to close ones
✓ Tech-savvy 25-35 year olds parents receptive with social media presence
✓ Living in urban and sub-urban cities

PRODUCT AND PRICE ST RATEGY

PRODUCT AND SERVICE SELECTION FOR TARGET MARKET

The infant and childrenswear market continues to face high competition due to the tough retail competition between private
label, “fast fashion” and “internet retailing”. The new venture should focus on stylish baby wear made with a hundred per cent
of organic cotton that are playful, stylish, soft and durable.

To compete with fast-fashion retailer such as H&M, George and Primark, the company must also be able to deliver on the fashion
needs of parents by continually updating its lines.

The recommendation is to cater products in the following product categories:

Casual Trendy Formal

Each of the product categories will appeal to a different market segment while some categories will meet multiple market
segments. The catalogue of products should include the following items:

Tops & T-shirts Coats and Jackets Trousers and Shorts

Accessories Dresses Sleepsuits

The customer segmentation discussed above, identified that customers are looking for, not only a physical product, but also
service, advise, information, interaction and overall a great experience. To succeed in the infant market, the new business
venture must consider offering a customer-centric approach that adds value not only during the sale, but also pre-sales and
after-sales. This may be achieved by engagement programs through digital channels (educational blogs, nurturing via social
media channels, etc.).

PRICING STRATEGY
Couples have been shown to be price conscious when purchasing baby and childrenswear as clothes are typically outgrown before
they are worn out. As a result, the market is dominated by low-priced private labels. In addition, fast-fashion is also led by H&M,
George and Primark who have won the hearts of price conscious parents (Euromonitor, 2017).

The pricing of goods has also been affected by digital developments giving rise to online marketplaces for parents to connect
and sell used infant and children’s apparel.

To succeed in this hypercompetitive market, the pricing strategy must take the above factors into consideration. The costly
nature of organic cotton may result in higher manufacturing and raw materials cost than competitors who compete on cost
leadership. Thus, the value proposition stems in the quality of goods and the environmental and health benefits of the organi c
cotton. However, pricing it above the competition will also deter new parents from trying a new brand.

An apt pricing strategy will position the price band on par or slightly lower than Mothercare. This will allow for parents to recognise
the value proposition while allowing them to consider alternating to a new brand.

BRAND POSITIONING
Rahat Continental has built a reputation for reliability, honesty and inclusivity by taking an open minded and customer-centric
approach in the freight shipment industry. However, due to the nature of the diversification, this report does not recommend
stretching the brand to be inclusive of baby wear – but instead, create a brand that represents the target audience for this
new venture.

Figure 5: Perceptual map of infant clothing brands in the UK (Vigneswaran, 2017)

The following table compares the positioning of other major brands with Rahat Continental’s new venture:

Table 2: Comparison of Childrenswear retailers in the UK (Vigneswaran, 2018

ECOMMERCE VS RETAIL

The target market is predominantly tech-savvy and research has shown that 73% of childrenswear buyers have bought clothes
for babies and children online, rising to 90% of parents with children ages 0-3 (Mintel, 2014). The rise in competition has given
parents the ability to shop around to find the best product at the lowest possible price making them more price sensitive and
ambivalent (“cognitive dissonance”).

The introduction of m-commerce (mobile commerce) and e-commerce can allow new firms to become 24 hour shops for parents.
If the new venture can address this need, it can expand its profit margins and reduce the risks. Four out of five parents now own
a smartphone, creating a need for a mobile app. Future plans may include introducing the companies offerings in departments
stores and boutiques and ultimately opening its doors to its own branded stores.

CONCENTRATION VS DIVERSIFICATION

International expansion can be achieved using a diversification, concentration or a hybrid strategy. A high growth rate in the UK
market and the vast cultural differences identified above warrant the new venture to concentrate on the UK market to gain a
sizeable presence and commitment. Other reasons for concentration include the sales stability the UK market offers and the
need to satisfy the tighter foreign regulations and standards.

Setting up a liberal licensing policy may be a point of consideration to simultaneously build surrounding markets in the European
Union and benefit of the spill-over effect in awareness. Once the new business has accumulated sufficient resources for the initial
widespread expansion, the company may want to consider taking on activities that it first contracted to other companies (Daniels
et al., 2013).

BEST TRADE AREAS

Upon market entry into the UK, the new venture will deliver nationwide using its e-commerce platform. The higher spending
power in London identified above can be realised by focusing marketing efforts predominantly in that region.

The UK accounts for 15.1% of the European childrenswear market value. The UK processes the biggest retail value sales in
Western Europe in 2014 (Euromonitor, 2015). This is followed by Italy and France, Spain and Germany.

Figure 6: Westerns Europe – Childrenswear Value Sales 2014 and Total GDP 2009-2014 (Euromonitor, 2015)

RECOMMENDATION AND CONCLUSION

The infant wear market is polarised, saturated and hypercompetitive. The spending power of parents in this market is high with
the average parent spending £537.25 per month for their newly born child. However, some studies have also shown that this has
caused financial burden for some parents, forcing them to shop for more competitive prices online and benefit from passed down
clothing. Moreover, birth rates are low in the UK due to parents delaying having children, but more disposable income has been
identified amongst grandparents. Consumerism has also given rise to infant and children clothing to be used as a brand extension
creating a market for luxury infant and children wear.

The economic decline and the political uncertainty of Brexit is concerning. Inflation rates are likely to rise, and the post-brexit
trade agreements may not be favourable for businesses operating in the UK. Moreover, international investments may be seen
as risky due to the falling value of the pound, constraints to free movement of foreign employees and export/import tariffs that
companies may be subject to post-Brexit. Global shortages in organic cotton also threaten the economic conditions, thus using
multiple suppliers may be advantageous.

Conducting business in the UK must follow a polycentric strategy respecting the nations low-context culture where
communication is often direct and consumers are drawn towards rules and standards. The company follows a sustainable
business model which is welcomed by the government. However, utmost caution is necessary in issues affecting workers’ rights,
child labour laws, the use of pesticides, the depletion of natural resources and other legal and ethical concerns. The new venture
must follow the code of conduct set out by the government and match the business practises in the industry.

The company will cater to parents-to-be, first-time parents and experienced parents with babies up to the age of two. Customers
who buy gifts for family, relatives or friends may also be the target market. The parents are predominantly tech-savvy 25-35 year
olds who are price sensitive, ambivalent and connected digitally – making digital marketing a major driver in the marketing
strategy.

The new venture will follow a transnational strategy providing centralised benefits from a global strategy combined with the local
responsiveness of a domestic strategy. To target the market segment, the clothing range should be advertised as stylish baby
wear that is playful, stylish, soft and durable.

In sum, the new venture is threatened by political instability, high competition and an economy that challenges working class
and middle-class consumers. The business faces moderate to high levels of risks of failure and should enter this market with
precaution. Before any significant investments are made, the business should seek to prove the ethical infantwear clothing model
in the UK market and limit its risks by forming strategic partnerships, alliances and joint-ventures.

The launch of this new venture early next year, would set the likelihood of success between 50-60% based on the
information available at present.
APPENDICES

Appendix A: Communication Strategy

The recommendation of this report is to communicate sincerity by appealing to the following core values:

Down-to-earth Honest Wholesome Cheerful

Family-oriented Sincere Original Sentimental
Small-town Real Friendly

The business will aim at providing a premium customer experience on its e-commerce platform. The focus is set to educating
customers and offering them solutions upon assessing their needs. The target market is responsive to social engagement; thus,
the marketers must engage in regular nurturing activities that may bring repeat business (“loyalty”)

The new business venture must adapt its operational practises to the new UK market to build an effective marketing mix. While
resources of Rahat Continental may be shared, the brand must exist as a separate entity to avoid confusions in the minds of
customers. All future market expansions into European countries may also follow the standardised advertising approach to
benefit of the cost savings and the common global image.

The marketers of this new venture must consider Integrated Marketing Communications (IMC) to overcome communication
across borders, channels and business functions. This will lead to buyer confidence and guidance through the various stages of
the buying process. This will help the new venture to consolidate its projected image with a unified front, develop a dialogue
and nurture relationship with its customer. This can develop a competitive advantage, and boost sales and profit while saving
money, time and resources.

Entering a new market can take time to understand the market and re-adjust, therefore the use of an External Integration
strategy should be incorporated into the business plan. The company may benefit working with a Global Advertising Agency
Network that has an existing presence in multiple countries making future expansions effective and fast. Major considerations
must include its decision process (centralisation or decentralisation), its national responsiveness and the area coverage.

The vast differences in culture and history may call for adaptation in the communication messages. During the early stages of
market entry, the company must attempt to build loyalty with its customers. This is most effective if the relationship is
nurtured organically through Social Media channels (i.e. Facebook, Instagram, YouTube)

Research conducted by Mothercare (2015) has shown that consumers are increasingly researching and buying products online,
with a growing demand for 24/7 availability. Therefore, to survive in the competitive landscape, organic traffic alone is not
sufficient. The clothing vendor must engage in both pull and push techniques. The campaigns should be educational or
highlight the ethical or health benefits associated with the organic cotton wear.
Appendix B: Porters 5 Forces Analysis of the Organic Infant Wear market in the UK

Potential of new entrants into the industry - moderate

Entering this playing field comes at a high price, requiring sizeable initial capital investment to compete in par with the key
players. Alternatively, new entry can succeed by focusing on differentiation and targeting a niche audience. New entrants must
also be mindful of the regulations in the clothing industry and the strong loyalty customer hold against their brands. The key
players in this market are well established global brands. This might be a deterrent for relatively new small-to-medium size
companies considering entry into the market.

Power of supplier – moderate

Raw material suppliers do not pose a threat of forward integration. Raw materials are often undifferentiated (i.e. organic
cotton) and have no organic substitutes. It’s advisable for Raha to work with multiple suppliers to increase its’ bargaining
power, and security of supply. If viable, the firm should consider a backwards integration strategy by acquiring the
manufacturing plant to limit the risks, reduce costs and allow greater quality control.

Power of buyer - High

Increased competition in the market makes switching by consumers easy and inexpensive. Similar products offered by
competitors at a lower cost may be a contributing factor for an erosion of customer loyalty. This makes the product category
very price sensitive and subject to seasonal buying. Raha’s focus on organic cotton infant wear reduces the number of
competing products in the product category, and provides environmental benefits. While this adds value for the customer, it
must be noted that organic products are often assumed to cost the customer more.

Threat of substitute products - Low

The risk of substitute products in the clothing industry is low. However, while the product doesn’t have a substitute, every
brand has several competitors making it easy for consumers to switch. The brand loyalty is high with branded wear but low with
companies differentiating themselves on product differentiation, thus making the price point an important consideration.

International SWOT analysis

Strengths Weaknesses
• Ethical dimension and • Undifferentiated
perceived health benefits of diversification: Lack of market

S W
organic cotton experience
• Extensive logistical network • Start-up constraints of limited
with strong supply chain resources
experience •
• Start-up mentality with proven
business acumen
Opportunities Threats
• Growing market without • Established global brands have
market leader for organic experience in the infant

O T
infant wear clothing market
• Streamline supply chain and • Price point of organic goods
offer cost effective freight may be a deterrent for
movement consumers – lack of demand
• Insufficient financial resources
to stand-out in the market
Appendix C: VRIO Framework and USP

Resources and capabilities need to seize opportunities and neutralise threats identified in an organisation’s market,
complementing the external analysis (Johnson et al., 2017). This section of the report uses the VRIO framework to examine the
competitive resources and capabilities of the new venture. It evaluates the company’s competitive resources and capabilities in
terms of value, rarity, inimitability, and organizability in relation to the competitive and operating markets.

The following resources/capabilities have been identified as contributing factors to the company’s competitive advantage:

Costly to Imitate?

Exploited?
Value?

Rare?
RESOURCE / CAPABILITY

Sustained Competitive Advantage

ESTABLISHED LINKS, NETWORKS AND SUPPLY CHAIN BY RAHAT CONTINENTAL

The proven and established supply chain network provides the new venture with a valuable resource
that is cost and time effective. The network may also give the new venture the advantage of bringing YES YES YES YES
products quicker to market without the overheads of a manufacturing plant in the UK.

ORGANIC COTTON

The use of organic cotton adds a perceived value to the business. Consumers are likely to be more
inclined to choose a product that are associated with higher health benefits for their newly born. In YES YES NO NO
addition, they also benefit of having peace of mind supporting the environmental well-being

The company stands out by building “flexibility, visibility and pro-action points” by “assessing needs and providing the required
links, services, and networks” using “KPI’s and Personal Standard opening procedures” in “all aspects of deep sea, air, customs
and logistical networks” (Rahat Continental, n.d.).

Customers benefit from this seasoned company’s tailored approach, know-how and supply chain network providing value for
money. Future ventures by Rahat Continental may benefit of this established network by saving costs in logistics. The know-
how and contacts this parent company brings may also avoid costs occured in trial and error during early stages of a start-up.
Appendix D: Expansion Strategy

The new clothing venture will follow a transnational strategy. This approach acknowledges the differences in different markets
and therefore adapts its offerings to the market or region. A transnational approach provides the centralised benefit from a
global strategy along with the local responsiveness of a domestic strategy. However, the disadvantages include the need for
elaborate mechanisms to integrate dispersed operations, the difficulty in
coordination and the challenges associated with performance downfalls
(Danielets et al., 2013).

Rahat Continental has decided to pursue a diversification approach to enter

the market in the UK. While this new venture utilises the company’s
expertise in freight shipment, it must be noted that the new business
venture comes with risks. The report recognises the potential growth in this
sector and the value the parent company can bring to the new business.

There are two common strategic frameworks for market entry – waterfall and
sprinkler strategy. The former focuses on a linear and gradual growth model,
while the latter attempts to roll out a product/service to as many markets as
possible in a relatively short time.

This report recommends to follow a waterfall strategy to expand the baby

clothing range to the UK and subsequently consider expansions into other markets within the same region (i.e. France, Spain or
Germany) to benefit of the spill-over effect in awareness (see Figure X)
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