international business report fast retailing uniqlo enters indian garment industry

TABLE OF CONTENT Part I: Country research 1.1 Introduction 1.2 History and Demographics 1.3 Primary Exports/ Imports and Trading Partners 1.4 Forces PESTLE Analysis - Economic, Socioecon

NGUYEN MY DUNG - 22117012 QUACH KHANH HA - 22117014 PROGRAM: Master in Business Administration

Hanoi, 2023

TABLE OF CONTENT

Part I: Country research

1.1 Introduction

1.2 History and Demographics

1.3 Primary Exports/ Imports and Trading Partners

1.4 Forces (PESTLE Analysis - Economic, Socioeconomic, Political, Legal, Financial and Labor

Part Il; Company research

f) Global Value Chain

2.2 Explain How the country’s forces affect the company international business strategy when entering this market

a) Entry mode into India market

b) India’s forces affecting the Uniqlo’s entry mode

List of Figures & Figures

Figure 2: Proportions of economic sectors in the gross

domestic product (GDP) in selected countries in 2021

Statista, 2023

Figure 3: Inflation rate from 1987 to 2028 in India (compared

to the previous year)

India is a nation located in South Asia and is predominantly known for its capital city, New Delhi, which was established tn the 20th century as the administrative hub

of the country It follows a constitutional republic form of government and represents

an incredibly diverse population comprising thousands of ethnic groups and potentially hundreds of languages over 28 states and 8 territories In terms of geographics, India is the 7th largest country in the world with a distinct geographical entity The country is directly bordered by 7 countries: China and Nepal in the north, Sri Lanka in the south, Bangladesh, Bhutan, and Myanmar on the east and Pakistan on the west Significant proportion of overseas migration have been immigrants from Bangladesh

With a population accounting for approximately one-sixth of the global total, India is the second most populous country worldwide, surpassed only by China According to UN data, India’s population is estimated at 1.38 billion people by mid- year June 30, 2020 It is expected that the Indian population will continue to grow and reach an estimated 1.68 billion on December 31, 2050

Before the COVID-19 pandemic, India experienced an average annual growth rate

of approximately 7% from 2010 to 2019, making it one of the fastest-growing economies globally (HKTDC Research, 2022) As of 2021, India holds the position of the world's sixth-largest economy in terms of GDP and ranks second in total population According to Bloomberg news, the UK has lost its position as the world’s fifth largest economy to India amid high inflation and an energy crisis (VietnamInsider, 2022) In the early 1990s, the country initiated economic liberalisation measures aimed at making the economy more market-oriented and expanding private and foreign investment These measures included reducing controls

on foreign trade and investment India has been a member of the World Trade Organization (WTO) since January 1, 1995, and has implemented policies to promote foreign companies’ establishment in the country, such as the Make in India and Digital India initiatives

The Indian economy has shown stable, diversified, and resilient long-term GDP growth However, the benefits of economic growth have not been evenly distributed among different population groups and regions, resulting in high income inequality The majority of the Indian workforce operates in the informal sector, despite the abundance of labour In the formal sector, strong employment protection laws discourage formal hiring

Uniqlo, Zara and H&M and other big fashion brands are eager to enter the Indian market due to its large and growing consumer base, the liberalisation of the retail sector allowing foreign investment, the demand for trendy and affordable fashion, and the opportunity to leverage their global brand reputation With a population of over 1.3 billion people, India offers a significant customer base for these fashion retailers to tap into The relaxation of regulations in the retail sector has made it easier for them to establish their presence and engage directly with Indian consumers Moreover, the evolving fashion landscape, urbanisation, and changing consumer preferences in India align with the fast-fashion business models of these brands In 2019, Uniqlo stepped into one of the world's fastest markets of 1.3 billion Indians with a mega-store in the heart of India - New Delhi By entering the Indian market, Uniqlo aims to expand their reach, capture new customers, and establish a strong presence in a country with immense growth potential and a thriving fashion industry Thus, this report aims to shed light on the main characteristics of the Indian market, as well as how these forces affect Uniqlo’s international business strategy when entering it

1.2 History and Demographics

India has a long and diverse history that spans millennia It was the site of the ancient Indus Valley Civilization, which emerged around 2500 BCE Throughout the centuries, India witnessed the rise and fall of different dynasties and empires, each leaving its mark on the country's culture and economy The colonial period brought British rule, significantly influencing India's trade and industrial development British East India company is a company that was founded by way of a charter from the monarch of Britain for pursuing trade with the East Indies, but ended up trading mostly with the Indian subcontinent, present-day Pakistan and parts of Iran The British wanted many of the raw materials India produced, such as cotton, indigo, spices, sugar and tea These materials were shipped to Britain for use in British factories - finished products were then shipped around the world to British colonies India achieved independence in 1947 and Mahatmas Gandhi was the primary leader of India’s independence movement Since then, India has pursued economic liberalisation, creating opportunities for businesses to enter and thrive in a rapidly growing market Understanding India's historical background 1s crucial for businesses

aiming to navigate the complexities and leverage the immense market potential of the country

India offers a rich and varied demographic landscape that holds significant implications for businesses With a population of over 1.3 billion people, the country showcases a vibrant mix of ethnicities, languages, religions, and socio-economic backgrounds:

Gender

India exhibits a relatively balanced distribution of males and females, presenting businesses with opportunities to cater to the unique preferences and needs of both genders through targeted marketing strategies and gender-specific product offerings

Education

Figure 1: Literacy rate from 1981 to 2018 in India, by gender

India: Literacy rate from 1981 to 2018, by gender

198 1991 2001 2006 2011 2015 2018

@ Overall @ Men @ Women

Source Additional Information

World Bank Vorid Bank: 1981 to 2018: 15 y« ‘da

"¬ ee atista |

The literacy rate in India has witnessed significant improvement since the late 20th century However, a notable gender disparity persists, with approximately three- fourths of males being literate compared to around half of females

Over time, education levels in India have seen steady growth, resulting in an expanding pool of skilled professionals and a burgeoning middle class Furthermore, India is the second largest English-speaking country in the world (Largest.org, 2022) This development presents businesses with a potential market for high-quality products and services that appeal to an increasingly educated and discerning consumer base

Income

India showcases a diverse range of income levels, with a substantial proportion of the population belonging to the middle-income segment This creates a sizable consumer base with considerable purchasing power, providing businesses with potential opportunities to offer products and services that cater to varying affordability levels

Religion

Religion plays a prominent role in Indian society, with Hinduism as the dominant faith, followed by Islam, Christianity, Sikhism, Buddhism, and Jainism Recognizing the religious sensitivities and preferences of diverse communities allows businesses to design culturally appropriate products and implement targeted marketing campaigns

Family Life Cycle

Family structures in India exhibit variation, with jomt families prevalent in certain regions and nuclear families becoming more common in urban areas This diversity in family life cycles enables businesses to customise their offerings to suit the specific needs and preferences of different family dynamics, providing opportunities for family-oriented products and services

Socio-Economic Status

Socio-economic status in India displays significant disparities, with variations observed between rural and urban populations as well as across different states and regions According to the findings of the National Family Health Survey (NFHS-I), it was revealed that 18% of households in India possessed a high standard of living, while 44% had a medium standard of living, and 36% were classified as having a low standard of living (J Family Med Prim Care, 2013)

1.3 Primary Exports/ Imports and Trading Partners

India has a diverse array of primary exports and imports, and it maintains trade relationships with various partners In terms of primary exports, India is a major exporter of petroleum products, including refined petroleum, petroleum oils, and bituminous substances It is projected that India's exports of goods and services may reach $900 billion in the ongoing fiscal year, marking an increase from the previous year's figure of $770 billion (Reuters, 2023) Additionally, India holds a prominent position in the global market for gems, diamonds, and jewellery The country's pharmaceutical industry is also noteworthy, as it exports a wide range of medicines and pharmaceutical products Other significant exports include textiles and garments, automotive components, chemicals and chemical products, and software services, particularly in IT and software solutions

India witnessed an increase in imports to USD 653.47 billion from April to February 2022-23, compared to USD 549.96 billion in the same period of 2021-22 (The Economics Times, 2023) It is worth noting that the majority of India's merchandise imports, which constitute 82 percent, can be attributed to six categories of products: petroleum and crude oil, coal and coke, diamond and precious metals, chemicals, pharmaceuticals, rubber, plastics, electronics, and machinery Notably, India primarily imports these goods from countries such as China, the UAE, the US, Saudi Arabia, Iraq, Russia, Indonesia, Singapore, and South Korea With regard to steel, metals, ores, and minerals, the report cautions India to be cautious of subsidised imports due

to excessive capacities in China, Korea, and Japan, as well as the imposition of carbon border taxes, which will restrict exports to the European Union (The Economics Times, 2023)

With various international trade agreements with other countries, this enables India to intensively engage in trade with numerous countries across the world The United States stands out as a major trading partner for India, with bilateral trade encompassing sectors such as information technology, pharmaceuticals, and machinery China also holds significance as a trading partner, with trade involving various goods such as electronics, machinery, and chemicals The United Arab Emirates (UAE) plays an important role in India's trade, particularly in sectors like petroleum products, gems and jewellery, and textiles Saudi Arabia is another noteworthy trading partner, primarily in sectors such as petroleum products, chemicals, and textiles The European Union (EU), including countries within the bloc, is a significant trading partner for India, involving sectors such as textiles, machinery, and chemicals India also maintains trade relations with the United Kingdom, where trade encompasses services, pharmaceuticals, and textiles Lastly, Singapore has a notable trade relationship with India, primarily in sectors such as petroleum products, chemicals, and IT services

India actively participates in various international trade agreements to foster economic growth and expand global trade relations These agreements include bilateral and regional partnerships, as well as involvement in organisations like the World Trade Organization (WTO) Notable agreements include the South Asian Free Trade Area (SAFTA) which promotes regional trade liberalisation among South Asian countries, the Comprehensive Economic Cooperation Agreement (CECA) with Singapore, facilitating trade in goods, services, and investments, and India's membership in the Regional Comprehensive Economic Partnership (RCEP), a mega-regional agreement

in the Asia-Pacific region While these agreements present opportunities for India, challenges have arisen, particularly in sectors like agriculture and small-scale industries Balancing liberalisation and protectionism is a topic of debate, with considerations for the welfare of domestic farmers and local businesses Overall, India's engagement in international trade agreements reflects its commitment to global economic integration and expanding trade networks, necessitating careful evaluation

of potential benefits and challenges aligned with its economic goals

Table 1: India’s main trade agreements

Trading bloc Members Yearitcame | Type of

into force agreement Asean-India Trade in| Brunei, Cambodia, Laos, | 2010 FTA

Goods Agreement Indonesia, Malaysia,

Myanmar, Philippines, Singapore, Thailand, Vietnam and India

South Asia Free Trade | Afghanistan, Bhutan, 2006 FTA

Agreement (SAFTA) Bangladesh, Maldives,

Pakistan, Sri Lanka, Nepal and India

India-Sri Lanka FTA India and Sri Lanka 1999 FTA

Asia-Pacific Trade | Bangladesh, China, Laos, | 1976 PTA

Agreement (APTA) South Korea, Sri Lanka

and India India~-MERCOSUR PTA India, Brazil, Argentina, | 2004 PTA

Uruguay and Paraguay

Asean-india CECA Brunei, Cambodia, Laos, | 2015 CECA

Indonesia, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam and India

India-Malaysia CECA India and Malaysia 2011 CECA

India-Korea CEPA India and South Korea 2010 CEPA

India-Japan CEPA India and Japan 2011 CEPA

1.4 Forces (PESTLE Analysis - Political, Economical, Sociocultural, Technological, Legal and Environmental Factors)

A significant number of the government's choices in India are driven by political considerations, particularly in its efforts to ensure fair distribution of investments among the various states of the country While the government plays a substantial role

in the economy, large corporate entities dominate many sectors of modern economic activity However, the majority of employment opportunities stem from numerous small-scale agricultural holdings, as well as petty commercial, service, and craft enterprises When formulating India's constitution, the architects drew inspiration from multiple external sources, with a notable emphasis on the British model of parliamentary democracy (Britannica, 2023)

Overall, India's stable democracy provides a favourable political environment for businesses, ensuring stability and predictability The government's policies and regulations, including taxation, foreign investment, trade, labour, and industry-specific regulations, shape business operations Political stability, although subject to variations, offers an advantageous climate for long-term investments and growth Economic Factors:

India's rapidly growing economy presents significant market potential for businesses With a large consumer base and an expanding middle class, there is increased purchasing power, creating opportunities for businesses catering to rising consumer demand Infrastructure development initiatives, such as transportation, energy, and telecommunications, contribute to improved business connectivity and logistics India possesses one of the world's largest and most diverse economies; however, due

to its vast population, it ranks among the poorest nations in terms of income and per capita gross national product (GNP) Following the collapse of the Soviet system in the early 1990s, India implemented a series of market-oriented reforms, which propelled the growth of its middle class The country's well-educated and skilled workforce played a crucial role in establishing India as a global hub for the high- technology industry that experienced significant annual growth rates since the late 20th century While the agricultural sector remains the primary employer, contributing approximately half of the workforce, it no longer holds the largest share in the gross domestic product (GDP), which has shifted towards other sectors such as manufacturing Notably, trade, finance, and other services have emerged as the largest component of India's GDP, driving substantial economic growth

Figure 2: Proportions of economic sectors in the gross domestic product (GDP) in selected countries in 2021

Proportions of economic sectors in the gross domestic product (GDP) in selected

countries in 2021

@ Agriculture @ Industry Services

Source Additional Information

The COVID-19 pandemic had a significant economic impact on India in 2020, resulting in fluctuations in the country's inflation rate Strict lockdown measures and disruptions in supply chains led to challenges on the supply side and fluctuations in demand, contributing to the volatility in India's inflation rate Throughout the fiscal year 2020-2021, the inflation rate reached a peak of 6.18% 2020 (Statista, 2023), primarily driven by higher prices of essential food items The government implemented measures to address supply chain disruptions and mitigate the impact of rising food prices The Reserve Bank of India (RBI), as the central bank, plays a crucial role in managing inflation by employing monetary policy measures, such as adjusting interest rates and liquidity management, to maintain price stability The target range for inflation in India is typically set at 4% with a tolerance band of +/- 2 percentage points

Figure 3: Inflation rate from 1987 to 2028 in India (compared to the previous year)

India: Inflation rate from 1987 to 2028 (compared to the previous year)

This diversity necessitates adaptation of products and marketing strategies Changing consumer lifestyles resulting from urbanisation and exposure to global trends have influenced preferences and behaviour, driving demand for innovative products and services Additionally, the importance placed on education has led to a growing pool

of skilled professionals and an increasing demand for quality education services Technological Factors:

India is home to three of the world's most densely populated and cosmopolitan cities, namely Mumbai (formerly Bombay), Kolkata (formerly Calcutta), and Delhi Additionally, Bengaluru (Bangalore), Chennai (formerly Madras), and Hyderabad have emerged as rapidly expanding high-technology hubs, attracting global attention These cities are witnessing substantial growth, with a significant presence of major information technology and software companies, as numerous global corporations have established their offices in India

India's digital transformation is characterised by widespread smartphone adoption and internet connectivity This creates opportunities for businesses to leverage technology and digital platforms to reach a tech-savvy consumer base The presence of a skilled workforce in the IT, software, and outsourcing sectors further enhances India's appeal for businesses in these industries The rise of innovation-driven startups contributes to

a culture of entrepreneurship and technological advancements

Legal Factors:

India's complex legal system encompasses various regulations that businesses must comply with, including intellectual property rights, labour laws, consumer protection, and competition regulations Compliance with these regulations is crucial for successful business operations While efforts to liberalise foreign investment have been made, certain sectors still have restrictions and require approvals for foreign participation

Environmental Factors:

India's increasing focus on sustainable development emphasises environmental regulations and social responsibility Climate change challenges, such as extreme weather events and water scarcity, can impact industries like agriculture, infrastructure, and manufacturing Considering environmental sustainability and resilience to climate change risks is important for businesses operating in India

Part Il: Company research

2.1 Introduction