Global Marketing: Burberry in China, PESTLE analysis

Table of contents

Burberry need to scan their market segments in order to gain the most competitive advantage. Pestle analysis looks at the political, economic, social, technological, legal and environmental factors that affect an organisation providing a comprehensive list of influences on the possible success or failure of strategies??™ (Johnson, Whittington, Scholes, 2011). However, the three main changes that focused on in this essay are Economic, Social and Environmental factors. The economy within China is currently very stable being a part of the 4 fastest growing economies in the world (BRIC: Brazil, Russia, India, China), it has made large strides in recent years in the business and industrial sector. , the country has sustained a continual rapid growth in term of GDP per person, indicating that each people is creating more and more values to the society resulting in the increase of the individual consumers??™ purchasing power.

Though the economic situation is seems to be good, the economic development does slow down a little and also with worrying trends such as high inflation rate and high property prices. According to the most recent news, the consumer price index rose 6.1 per cent from a year earlier in September, down from a three-year high of 6.5 per cent in July. Politically sensitive food prices, however, increased by more than 13 per cent. The overall economy has now slowed for three consecutive quarters. In this case, if Burberry were to expand into China they would need to be aware of the fluctuations within China over inflation rates this has caused ripples in consumerism, as more people are saving money for necessities. In terms of socio-cultural factors, the culture is not the same throughout the whole country, the west tends to earn 2.26 times more than workers in the west of the country.

Therefore locations of the company ™s stores would be vital. In 2010, China™s online shopping industry had a turnover of $80bn, and grew 87% year-on-year, with these figures Burberry could potentially just save costs and open a concessions store and simply provide products online plundering most assets in advertising over social media and the internet. According to Boston Consulting Group, the volume is expected to increase fourfold by 2015, given this future prediction we can plan ahead and have short term an long term actions. One major aspect of Chinese culture is that In Chinese business there is often a need and expectation for face to face contact to exist in order to build up a sense of trust which is related to the Hofstede™s notion of individualism-collectivism in which the Chinese culture is considered as having a high collective scores (Hofstede 1997 Currently the environmental condition in China are critical, there is constant air pollution in the major cities, which have caused some health concerns. China relies considerably on coal during their industrial processes which in turn causes severe acid rain. In addition to this, the weather varies from region to region therefore when Burberry expands out into China it will have to be product specific to every region unlike in Europe.

However in recent years China has been a firm supporter of clean energy and low carbon technology, specifically in motorised vehicles and factories. Despite the fact that the environmental protection work is still low in China because the majority of focus and priority had been attributed to the alleviation of poverty and economic development which result in the low public participation in the environmental protection work, in the recent years, with the substantial economic advancement and raised living standard, income level and also the degradation of environment in the country, the Chinese government has started educate the public about the environmental protection

2) Using Hofstede™s 5 Dimensional Cultural Model we can identify and get a good overview of the deep drivers of Chinese culture relative to other world cultures. The following graph retrieved from the Hofstede Centre, explains each dimension and its impact within the world. . Geert Hofstede (1980) describes culture as, a source of conflict rather than synergy. Cultural differences are a nuisance at best and often a disaster??™. Justin Paul (2011) also supports this view stating that, human beings tend to have an instinct deep inside??™ that all human beings are the same. Therefore, if one goes into another country and makes decisions based on how one operates in one™s home country- the chances are that he or she will make some very bad decisions™ (Paul 2011). Hence, different types of factors need to be understood to ensure that you and the business are readily available to adapt to any change in culture or environment, this will be shown by a number of examples involving companies that have successfully set up business and others that have failed significantly all due to the lack of understanding of CCM.

Power Distance is the dimension that deals with the fact that all individuals in societies are not equal it expresses the attitude of the culture towards these inequalities amongst us. At 80 China sits in the higher rankings of power distance a society that believes that inequalities amongst people are acceptable, therefore subordinate-superior relationship tends to be polarized and there is no defence against power abuse by superiors. Individuals are influenced by formal authority and sanctions and are in general optimistic about people™s capacity for leadership and initiative. People should not have aspirations beyond their rank. Standing at a score of 20 China is a highly collectivist culture where people act in the interests of the group and not necessarily of themselves. In-group considerations affect hiring and promotions with closer in-groups (such as family) are getting preferential treatment. Employee commitment to the organization (but not necessarily to the people in the organization) is low. Whereas relationships with colleagues are cooperative for in-groups they are cold or even hostile to out-groups. Personal relationships prevail over task and company. A collectivist culture such as China, will tend to have one overall goal in which everyone would work together to reach that goal, if you are a business trying to form a company in an individualistic culture, you may find it hard to adapt as, you may not have the same amount of help that you usually receive, this is where independence and the ability to take risks would be formed, however this type of ability and skill takes time to acquire, meaning training and research would be required if the business was to be successful. In individualistic cultures it is important for the business to realise that the workers prefer to keep their work life and private life separate, however within collectivist cultures there is no such division (Baumann, 2007).This will affect the marketing mix in many ways, we can examine this by deconstructing the 4Ps Price, Product, Promotion Place: Price: Burberry has a prestige to uphold, meaning it has to keep its prices at a reasonable high price to reflect the quality of its products. In a culture such as China where raw materials are cheap, they may allow restricted discounting
women™s, men™s, seasonal all the way to cosmetic and beauty. However in a society dominated by males, as shown in the graph previously, it may be wise to research into other marketing and advertising methods to appeal to the woman of China, but in addition to this suitably shipping the right products out there to appeal to the market niche.

Promotion: Burberry relies heavily on technological advertising and integration. Most of it advertising is not done on television or newspapers but rather huge events that take place on a monthly basis. In China you the company would have to see if this is the right way to approach consumers.

Place: The placement of stores is crucial in order to obtain maximum revenue. Only certain regions of China have consumer capable of affording such expensive clothing, question that would be asked are whether, a flagship store should be opened, should it be a small pop up/concession store to start off with and build from there. (Martin, 2012)

Future recommendations that could be provided based on the results shown in Hofstede™s graph are:

Power Distance: Use teamwork to involve as many individuals as possible in the decision making process

Individualism: Acknowledge accomplishments, encourage debate and expression of ideas, however continue to respect culture and traditions and introduce change slowly.

Masculinity: Ensure job designs and practices do not discriminate from gender to gender. Treat men and women equally.

Uncertainty Avoidance: Be clear and concise about expectations and parameters

Plan prepare and communicate early on to avoid confusion. Express emotion through physical self, such as hand motions and gestures. (MindTools , 2013) 3b)

There are many differences between the managing styles of the west and east.

East

  • More Open and direct
  • Greater value on seniority, and family ties
  • More flexible and creative
  • Paternalistic
  • Favour databases and statistics and resist intuition
  • Support lifetime employment and oppose hire and fire
  • More productivity orientated
  • More emphasis on corporate loyalty
  • Characterised by individual initiative
  • More resistant to women assuming positions of power

In order to find the right method of management, the company must plan for global marketing in order to achieve this an management information system would be used

Shown below are two models created by Kotler (1988) showing a basic Marketing information System.

The information needed by marketing managers comes from three main sources:

  1. Internal company information
  2. Marketing intelligence – suppliers, customers, and distributors. It is possible to buy intelligence information from outside supplier, who set up data gathering systems to support commercial intelligence products that can be profitably sold to all players in a market.
  3. Market research

“ Management cannot always wait for information to arrive in bits and pieces from internal sources. Also, sources of market intelligence cannot always be relied upon to provide relevant or up-to-date information (particularly for smaller or niche market segments). In such circumstances, businesses often need to undertake specific studies to support their marketing strategy. Burberry would be constructing and piecing together their own research this can be done either by doing surveys within China and the different potential regions. Possibly, using past demographics and existing data to draw to a conclusion, etc.

A marketing information system has four components: the internal reporting system, the marketing research systems, the marketing intelligence system and marketing models. include orders received, inventory records and sales invoices. Marketing research takes the form of purposeful studies either ad hoc or continuous. By contrast, marketing intelligence is less specific in its purposes, is chiefly carried out in an informal manner and by managers themselves rather than by professional marketing researchers (Kotler, 1988). A large company such as Burberry has indispensable amounts of resources that could be used to deconstruct the markets within China providing the data needed to organise and come up with a viable business plan, which can be implemented immediately.

References

  1. Agnilar, F.. (1967) Scanning The Business Environment, Macmillan, New York, p.47. Hofstede Centre, http://geert-hofstede.com/china.html [Accessed: 5th November 2013]
  2. Hofstede, G, (1980), Culture™s Consequences, Sage Publications, CA Johnson. G, Whittington. R, Scholes. K, 2011, Exploring Strategy, Pearson, England Keegan. W, Green. M, 2013, Global Marketing, Pearson Education, England Kotler, P., (1988)
  3. Marketing Management: Analysis Planning and Control, Prentice-Hall p. 102. Martin, A, 2012,
  4. Marketing Management: Burberry, http://prezi.com/pnirxtdktlox/burberry/
    [Accessed:2nd November 2013] MindTools, 2013, http://www.mindtools.com/pages/article/newLDR_66.htm [Accessed: 2nd November 2013]
  5. Mintzberg. H, Lampel. J,Ghoshal. S, 2002, The Strategy Process: Context, Concepts, Cases, Prentice Hall, England
  6. Paul, J, (2011), International Business, Fifth Edition, PHI Learning Pvt. Ltd. Price, R,2011, What are the Benefits of Strategic Planning, http://blog.gcase.org/2011/03/22/what-are-the-benefits-of-strategic-planning/ [Accessed: 2ndNovember 2013]

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