Business assignment in the context of international expansion and entry mode evaluation

Question

Task: Can you select a country of your choice, analyze the FDI available and prepare a business assignment report for management that assesses how ‘attractive’ that country would be for expansion?

Answer

1. Introduction
1.1. Organizational Background
Business is laced with tough competition in every market spanning across the globe and at times it becomes difficult for surviving hence expansion comes into picture so that the aim of staying competitive remains alive. London, remains the major point of focus across UK, the brands always look towards the market for enhancement. The aim of the business assignment is to study the SME that is Pepper London located in England and is striving to expand in Europe. The business assignment will provide meaningful insight into the analysis of the market and the expansion it wants to make. Pepper London is a major British clothing brand with a turnover of £32M. The major point of the brand is to provide quality item that can be used by individuals and stylish garments for the youth.

1.2. Business expansion
The stylish hoodies that have over size have a regular system of creating fashion goals for the youth (Pepper London 2022). Hence, the brand is able to quench the thirst of the youth through providing significant fashion. It is found in the business assignment that the company has significant ability to be inventive and become different in an extraordinary manner. India is undoubtedly standing as the sixth largest fashion maker in the world (Amed 2019). It is an attractive scenario for international brands and the brands that wants to footstep in the Indian industry. Pepper London can thereby ensure a better foothold in the Indian market as the conditions are favorable ranging from FDI to the taste of population.

2. Analysis of critical environmental factors in the business assignment
The apparel market in India will be worth $59.3 billion in 2022 as per the business assignment that makes it the sixth largest in the world in comparison to UK which has $65 billion worth followed by Germany that has $63.1 billion. The total income of the population that is addressable with more than $9500 annual income will tripe by 2025. The growth in the apparel sector is influenced by the increment in the tech savviness among the consumers. The presence of smartphones and the internet has revolutionized the concept of shopping which provides a strong impetus to the brand (FDI India 2022). As per the business assignment the supply side is even robust whereby the growth in the textile and apparel is deemed to accelerate. Raw materials like cotton, jute and silk are highly available that helps in participation of the fashion value chain.

When it comes to a writing business assignment on a developing country such as India, the concept of FDI in the retail segment has been of major advantage and attracted better form of trade. The inclusion of the FDI in the retail segment, the consumers will get better products quality at the lesser price because the competition in the segment is increasing by leaps and bounds. Hence, FDI in the retail segment will help the companies and herein Pepper London will get a major support in terms of its business. Furthermore, fashion in India is a rapidly growing industry with huge domestic and international events. It is found in the business assignment that the diversity in India provides a great chance as it has diverse sense of fashion that is clearly recognized when one moves around the county (Kala 2015).

Pepper London can thrive in India since it has quality stuffs that will match the taste of the younger population and keeping in mind the country’s diverse nature. Furthermore, it can enter into partnership or collaboration with the local designers so that the local perspective can be grasped thereby creating items that are unique to the market. The content of the business assignment can help in creating good rapport with the Indian consumer. FDI is a major driver of economic growth and been a major non-debt financial resource for the economic prosperity of India. Foreign companies prefer to invest in India to take an advantage of the lower wages followed by other special privileges such as exemption from tax, etc. When foreign investment is done in India, it helps in attaining technical know-how and leads to overall employment. The Indian government has crafted a favorable policy and a business environment that is robust in nature ensuring that the foreign capital keeping incoming into the country (Suneja 2020). Different initiatives have been undertaken in the present years like relaxation of the norms of FDI across various sectors (FDI India 2022). The textile sector of India as per the business assignment is influenced by the presence of raw materials and labor with the size of the market standing at US$140.4 billion and expected to enhance to US$223 billion by 2021. For attracting the foreign investors, the government of India ensured that 100 percent FDI is allowable in the textile sector without any requirement of the government approval that comes under the automatic route (Deloitte 2022). Moreover, schemes are being introduced for further development of the industrial ecosystem that includes industrial park and incentives related to production. India is emerging as a mega economy that has skilled human resources followed by the abundance of natural resources. As per the business assignment, India is a country with the largest youth population and hence, clothing brand will get a huge boost in the overall business. It is a strong signal that the government is eager when it comes to the investment in major sector because FDI in various sector is 100 percent. IN FY 2020-21, India attracted huge FDI amounting to US$ 81.72 billion which is 10 percent more than the previous year figure. In the initial four months, India attracted FDI amounting to US$22.5 billion (Deloitte 2022). Even during the pandemic, India was successful in attracting FDI which was owing to the economic shift from China and introduction of appropriate government policy In the case of India, the government permitted 100% FDI in single brand retail which was a move for enabling the foreign players for setting up shops in India without an approval of the government for investments. Further in this business assignment, the government has even eased the relaxed mandatory local sourcing need of 30% that has been a major standing demand from different players (Mishra 2022). India is a potential market for fashion retailers and that is owing to the young adult consumer base in the country that accounts to one third of the overall population in India (Chakravorty 2016). Young adult are the major target group for any fashion player as they project strong interest in the fashion. This would help Pepper London in setting their business as they are targeting the young population with the cool stuffs. Furthermore in this business assignment, the brand would benefit from the growth in the middle income statement will be a major contributor to the expansion of the company. With the increment in the disposable income, Indian consumers will be able to spend a major share of the income on goods and services (Ouimet & Rebecca 2014).

The favorable policy of the Indian government and the robust business environment ensured that the foreign capital keeps inflowing into the country. Different activities are being undertaken by the Indian government in relaxation of different FDI norms (Nayar, Chawla & Pagaria 2021) India is the second largest populated country and consists of huge consumer base which is diversified in nature. The huge middle class families makes it a strong consumer base for the foreign companies and the products (Chakravorty 2016). Market size will be the best benefit to Pepper London when it comes to FDI in India as per the business assignment.

Factor 1 -Policy rationalization
The economic policies are being rationalized by the government of India in such a manner so that it can be easy and lucrative for the foreign companies to invest (Kapur 2021). Pepper London will get ease in terms of regulation and formulation of policies. Moreover, setting up the brand in India will help the brand to cater to a diverse population.

Facto 2 - Strong demographics and quality companies in business assignment
As per the business assignment, India comprises of a talented and entrepreneurial society with young and educated population. The fashion sense of the younger population has changed considerably. This implies that people wants to look good and even the merchandise business has got great scope in the country. Excellent practice and catering to the taste of the population will help in attaining best results (Amed 2019).

Factor 3 - Manufacturing and outsourcing hub
India is undoubtedly a relatively cheaper place when it comes to the conduct of the business in comparison to other countries as they have huge labor availability followed by the access to the markets around Asia (Venkatachalam 2020). Hence, it is a place for the foreign companies to establish their facilities in India. Similarly, Pepper London can avail the advantage and vouch for higher growth. In the past few years as per the data of the business assignment India has undergone strong growth rates mainly in the area if process outsourcing. Such appears to be the major backbone of the country. Hence, Pepper London will be able to get a better understanding followed by back up of a country that has high economic growth (Venkatachalam 2020).

3. Entry mode evaluation
At present the FDI in the single brand retailing is allowable up to 100% while in multi-brand retailing the same is allowed till 51%. At present the retail sector of India is undoubtedly one of the major emerging sectors and hence FDI in retail sector plays a dominating role in the economic growth followed by the country’s development. Hence, Pepper London is a single brand retailing and thereby allowable till 100% (FDI India 2022). According to the business assignment such a step in the FDI retail plays a crucial step in the development of the economy and integrates with the global economy. Pepper London is a single brand retail selling various products under one brand name. The main reason behind the FDI in single brand retailing as per the business assignment is to attract the investment in production and marketing. Hence, for Pepper London the entry to India can be done under the single brand retailing upto 100% under the automatic route and does not require any approval from the government. Thereby an overall analysis of the factors depicts that FDI is the best option available to Pepper London because of policy rationalization, strong demographics and outsourcing facility. Exporting is exposed to pricing or trade restrictions that make the total export unattractive and hence will increase the price of the product thereby FDI option will be better suited to the company.

4. Recommendation
According to the business assignment foreign Direct Investment (FDI) in the retail segment has proven to be a major step when it comes to the transformation of the country. It is thereby recommended that the foreign business before venturing into any country must check the FDI options that would help the business to flourish. As for India, the policies are lenient thereby helping the country to avail maximum returns and even help the company in stabilizing the business. The FDI of upto 100% under the automatic route is a great revolution that will enable India to reap gains in the long run. India is a fastest growing economy and a scheme of FDI upto 100% is a massive step towards the growth which would lead to potential gains. India’s competitive advantage followed by the large and growing domestic market ensures a stellar performance to the investors. If the investors are satisfied the work will be progressive and thereby the country can benefit. It is evident from the business assignment that the introduction of FDI in retail has led to massive change in the retail sector from the traditional to the modern format with major exponential growth in the metro cities and hence a developing country like India, the idea of FDI in the retail sector has created job opportunities for the youths that are unemployed and led to reduction in the production cost followed by the benefits to the consumers. Moreover, it benefits the company that wants to establish its own business in India. Hence, as discussed in this business assignment Pepper London will avail maximum advantage and thereby the decision to expand in India is best.

References
Amed, I (2019) How India’s ascent could change the fashion Industry. Available from: https://www.mckinsey.com/industries/retail/our-insights/how-indias-ascent-could-change-the-fashion-industry business assignment [Accessed 5 July 2022]
Chakravorty, S (2016) An Analysis On Foreign Direct Investment In Retail Trade. Available from: https://blog.ipleaders.in/analysis-foreign-direct-investment-retail-trade/ [Accessed 5 July 2022] Deloitte (2022) India major destination for investments; must attract FDI to become $5 trillion economy by FY27: Deloitte. Available from: https://www.businesstoday.in/latest/corporate/story/india-attractive-destination-for-investments-must-attract-fdi-to-become-5-trillion-economy-by-fy27- business assignment deloitte-306678-2021-09-14 [Accessed 5 July 2022]

FDI India (2022) Why India. Available from: https://www.fdi.finance/why-india [Accessed 5 July 2022]
Kala, A.V (2015) India Attracts Enough FDI to Join Global Top Ten. Available from: https://www.wsj.com/articles/BL-IRTB-29862 [Accessed 5 July 2022]
Kapur, Y (2021) Investing in India Textiles sector: key points for foreign investor. Available from: https://www.india-briefing.com/news/investing-in-indias-textiles-sector-key-points-for-foreign-investors-22160.html/ [Accessed 5 July 2022]
Mishra, A.S (2022) India's FDI rank rises to 7th position in business assignment despite falling inflows: UNCTAD. Available from: https://www.business-standard.com/article/economy-policy/india-s-fdi-rank-rises-to-7th-position-despite-falling-inflows-unctad-122060900883_1.html [Accessed 5 July 2022]

Nayar, M., Chawla, A., & Pagaria, P (2021). Textile & Apparel Industry: The Change Agent of India. Available from: https://www.investindia.gov.in/siru/textile-apparel-industry-change-agent-india [Accessed 5 July 2022]

Ouimet, P, and Rebecca Z (2014) Who Works for Startups? The Relation between Firm Age, Employee Age and Growth. Journal of Financial Economics 112 (3): 386-407. Pepper London (2022) Pepper London 2022 profile. Available from: https://www.peppertreelondon.co.uk/ [Accessed 5 July 2022]
Suneja, K. (2020). Govt releases consolidated FDI policy document; replaces countries of concern with land border. Available from: https://economictimes.indiatimes.com/news/economy/policy/govt-releases-consolidated-fdi-policy-document-replaces-countries-of-concern-with-land-border/articleshow/78916870.cms [Accessed 5 July 2022]

Venkatachalam, S (2020) FDI in Indian Textile Industry. Available from: https://www.fibre2fashion.com/industry-article/5354/fdi-in-indian- business assignment textile-industry [Accessed 5 July 2022]