Menu
In the contemporary scenario, varios bsinesses aim to enhance their reach to international cstomers residing in different contries in the world. However, the process of international expansion poses several isses for the companies. The present report discsses international bsiness isses for Forever 21 in the Chinese market. The report provides a brief overview of the bsiness of Forever 21. Moreover, the report highlights the bsiness operations that Forever 21 condcts in China. The report frther highlights the crrent isses that the company faces in the market of China. Frthermore, the report carries ot an external analysis in order to identify measres to mitigate internal bsiness management isses in China. On the basis of this analysis, the report highlights measres throgh which Forever 21 can mitigate the aforementioned isses in China. Finally, the report draws conclsions and provides recommendations.
Forever 21 is a fashion retail brand. The fast-fashion retailer has several different store names, inclding Forever 21, XXI Forever, For Love 21, Heritage 1981, and Reference. Forever 21 sells clothing and accessories for both men and women. The company's headqarters are in Los Angeles, California. The company has stores in several locations in the world apart from the home contry of the US. Some major markets of the brand are Canada, Japan and Korea. Forever 21 was established in 1984 and now has more than 550 locations across 27 nations (Forbes, 2023).
Forever 21 is one of the most poplar companies searched online and holds a distinct place in the Fast Fashion market becase of its incredibly low costs, making it a favorite among millennials and Generation Z (Forbes, 2023).
In 2008, the brand made its debt in China before leaving a year later de to isses in operations management. Then again in 2011, it began its expansion into China's expanding fashion sector. The company operated sccessflly this time and achieved growth in the market. Up ntil 2019, Forever 21 operated a network of 11 physical stores arond the nation, inclding flagship locations in Shanghai and Beijing. However in the same year, the company exited several markets, inclding China after filing for bankrptcy. After that, the company was boght by the Athentic Brands Grop (ABG) in 2020. Sbseqently, the company re-entered the Chinese market in 2021 (Hall, 2022). The qick fashion retailer focsed on yong consmers in order to expand into the Chinese market initially selling only throgh online websites like VIPshop and then operating throgh Alibaba's Tmall marketplace (Hall, 2022). The company adopted the method of licensing agreement in order to reenter the Chinese market. One party may tilise the brand of the other party with the help of a legal "licensing agreement" between the two parties. The licensee and the licensor, who is the owner of the property, are the parties to the agreement. The type of licensing arrangement, the sage gidelines, and the method of licensor payment are all specified in the agreement (Bloomenthal, 2022). ABG entered into a licensing deal with Lasonic Electric Xsheng Co. Ltd. of Hong Kong in order to facilitate the bsiness operations of Forever 21 in China. Moreover, the company plans to open brick and mortar stores in ftre as part of this expansion into China (Hall, 2022). The Chinese market has expanded to rank among the biggest in the world in terms of fashion retail. The brand aims to leverage this opportnity in order to achieve growth in the market. However, for mass market international fashion brands, it is still challenging to achieve and keep market share in China (Hall, 2022).
In order to nderstand the international bsiness isses that Forever 21 faces in the market of China, it is relevant to analyse the isses that the company faced dring its failed bsiness stint the last time. The failre of Forever 21 in China was a reslt of otdated tactics and inability to respond to the changes taking place in the indstry, despite it being one of the fields where change happens most qickly. Moreover, Forever 21 failed in China de to its nderestimation of the importance of e-commerce. This is becase China has the most sophisticated e-commerce practises in the world, so effective growth marketing strategies for the companies' e-commerce platforms are essential (Vafoklova & Jraev, 2022).
FSA (Firm-Specific Advantage) refers to the resorces and capabilities that can provide competitive advantage to a firm in the market (Ahsan & Sinha, 2022).
CSA (Contry-Specific Advantage) refers to the external factors in either host contry or home contry that can provide competitive advantage to the firm (Ahsan & Sinha, 2022). The FSA/CSA matrix is given in figre 1.
The elements for qadrant 3 for Forever 21 are:-
The elements for qadrant 2 for Forever 21 are:-
The elements for qadrant 3 for Forever 21 are:-
The elements for qadrant 4 for Forever 21 are:-
FSA/CSA Matrix (Osabtey et al., 2023)
OLI (Ownership, Location, Internalisation) is a framework that is sed to evalate whether it wold be benefirical for a firm to adopt foreign direct investment in a contry (Chen, 2020). It is represented in figre 2.
OLI Framework (Chen, 2020)
Forever 21 has indeed entered into a licensing agreement to condct bsiness in China to leverage the location advantage. This is de to the fact that the company does not have internal prodction facilities in China (Chen, 2020).
Managing the spply chain that crosses international borders is one of the major challenges of condcting bsiness globally. The particlars of imports, exports, offshore shipping, and other operations are governed by international laws and other foreign rles. If the organisation imports goods and services as is the case for Forever 21, managing spply chains may pose a severe threat to global trade. The strategic decision to grow abroad shold be taken following the development of a solid spply chain strategy becase it will affect the long-term sccess of yor bsiness. Spply chain strategies mst be created specifically for the regions where yor bsiness wants to expand in accordance with yor needs. Researching local trade reglations, external variables, the crrent spply chain, and the availability of local resorces are reqired to do this (Li, 2021; Li et al., 2022).
There are several reasons for foreign companies to face spply chain isses in China especially after the coronavirs pandemic. China is well known for its prodction capabilities (Demchk et al., 2022). However, it was the first region that had to be closed after the onset of the global pandemic. Prodction, the export of components, finished goods, and raw materials, as well as the import of raw materials and parts, all came to an end. This cased major disrptions in the air freight and ocean freight indstries, as well as availability isses in many global prodction facilities. With the global and Chinese economy still recovering from the after effects of the pandemic, the spply chain isses leading to enhanced costs are prevalent for foreign clothing brands in the crrent scenario (Li, 2021; Li et al., 2022).
In terms of water transportation, there aren't enogh ships available to transfer the prodcts to their ltimate locations within the contry since the shipping companies are nable to meet the demand. As a reslt, China has a significant shortage of shipping containers, despite the fact that companies are increasing their orders to make p for the slowdown from the previos year. De to this, transportation costs are as mch as ten times higher than pre-Covid period. Therefore, the foreign companies, like Forever 21, that are dependent on imports are strggling to optimise the spply chain costs in order to meet the demands (Li, 2021; Li et al., 2022).
Moreover, worldwide air freight capacity has not yet srpassed pre-Covid levels. The main reason for this is fewer passenger flights. This has an impact on air freight becase a sizable percentage of the available space for cargo on passenger trips is in the cabin. Becase most freight reaches China by other means of transportation, the impact is not as significant as with the other modes of transportation. However, this factor still makes it difficlt for Forever 21 to operate efficiently in China by increasing the costs of transportation for the company (Li, 2021; Li et al., 2022).
Frthermore, road freight in China is impacted by growing demand as well as traffic at the border and trck driver confinement. Commodities entering China present more of a challenge for road freight than do those leaving the nation. De to the growing stacks of containers at the ports that need to be transported within the contry, bsinesses are looking for other avenes to export their goods into China (Demchk et al., 2022). However, de to high demand and congestion, the costs incrred for Forever 21 to manage its spply chain in China is significantly high. Additionally, Forever 21 can also se rail freight to move its goods within China. De to two problems, the railway system that connects China, Rssia, and the CIS contries with Erope is having capacity concerns. Firstly, there are not enogh containers available for rail transportation. Another problem is the capacity of the train system. There is a limit to how many trains can operate simltaneosly (Li, 2021; Li et al., 2022).
Even thogh Forever 21 does not manfactre in China, there are several barriers to the company to start prodction in the contry. One of the barriers is related to the breacracy within China. In order to start prodction, the company wold need to obtain licences and permits. However, foreign bsinesses commonly enconter difficlties with Chinese laws and reglations, with breacracy cited as their main concern. Ths, it wold be time consming for Forever 21 to obtain licences and permits before starting prodction in China. The isse of spply chain management for Forever 21 poses risk in terms of increased labor costs, delays in shipping thereby leading to inability to meet demand, isses in qality control process, and enhanced overall costs of transportation (Hall, 2022).
Forever 21 is dependent on imports and is strggling to optimise the spply chain costs in order to meet the demands. Moreover, it leads to increased labor costs and delays in shipping for the company. Therefore, the company is not able to achieve its performance objectives in terms of revene de to these factors. With the Chinese consmers preferring cheap prices and fast delivery for e-commerce prodcts, this isse not only impacts the financial performance of the company bt also leads to negative brand image (Hall, 2022).
China has seen significant class mobility over the past two decades, and the consmer environment has expanded significantly. However, it is completely blocked off from global markets, and some enterprises in China have failed as a reslt of disregarding client preferences. There are several reasons for this isse:-
One of the reasons is the difference in cltre. Chinese cltre has a long history which dates back 5000 years. Moreover, the inflence of several philosophers and faith systems have led to the development of a distinct vale system within the contry. This vale system drives the behavior of the people in the society and ths, drives the behavior of consmers in the contry. Frthermore, the preferences of the consmers are also dependent on the recent political developments in the contry that focs on nationalism. Ths, cltre plays a crcial role in consmer behavior in China (Zho et al., 2022). International bsiness theories have traditionally focsed on the nmeros bsiness operations condcted in the global marketplace, where different cltral gropings may clash or coexist amicably. However, the development of Hofstede's cltral dimensions and other cltral distance stdies, which provided the first measrements of cltral differences between contries, have reslted in better nderstanding of international bsiness isses related to cltral differences. Ths, it is significant to stdy how these inflence both direct and indirect critical decision-making, resorce allocation at the headqarters, relationships within the global network and organisational performance of Forever 21 in China (Li et al., 2020).
International fashion bsinesses contine to lose market share in China's competitive sector, where desire for local labels has grown de to a rise in nationalism. As a reslt, Forever 21 faces the isse of attracting new cstomers in China. This effect is more significant since the company has recently re-started operations in China and does not have a well developed consmer base in the contry (Zho et al., 2022). The Chinese consmers prefer to by clothes at cheap rates. Moreover, they want fast delivery from the e-commerce platforms. Ths, Forever 21 strggles to compete with local brands that adhere to these two factors. Another factor is that Chinese people consider the prodcts of foreign fast fashion brands as monotonos designs. Ths, they cannot differentiate the different foreign brands as these do not have a niqe design style (Li et al., 2020). Therefore, Forever 21 also faces the isse of meeting diverse design reqirements of the Chinese consmers.
De to the inability to nderstand the consmer preferences of Chinese people, Forever 21 faces the isse of stagnancy in conmser demand for the prodcts of Forever 21. Ths, it is not a sitable sitation for the company that aims to reestablish its bsiness and achieve growth in China (Li et al., 2020).
In order to identify factors that cold mitigate the aforementioned isses for Forever 21, an analysis of the factors that cold help the company to improve its bsiness are as follows:-
One of the ways for Forever 21 to mitigate the isse of spply chain is to set p prodction in Vietnam. Mltinational firms have long otsorced prodction in an effort to redce costs and gain market dominance. However, the way enterprises adapt their bsiness practices and whether or not contries are sccessfl in attracting capital inflows seem to be sbject to change. Over the past ten years and Vietnam in particlar, have qickly emerged as ideal locations for relocation. Vietnam's ability to compete with China as a prodction location can be attribted to its close proximity to China, a readily available labor pool, and a vast network of trade agreements with China that facilitate easy movement into the contry. By locating prodction centres close to mainland China, Forever 21 can redce costs withot casing any delay or distrbance to the crrent spply chains (Feng, 2022).
Another method throgh which Forever 21 can mitigate the isse of spply chain management for its bsiness in China is throgh greater control over the spply chain in order to control costs. This can be done with the help of software based spply chain management systems that not only facilitate greater control bt also provide means for optimising the spply chain in order to redce operational costs for the company (Cordon, 2023).
The varios nations of the world all have niqe cltres. Understanding the many cltres to which the cstomers and employees belong enhances management and strengthens cross-cltral bsiness ties. This minimises the difficlties of condcting bsiness globally over time and enhances the effectiveness of the processes. Ths, the operations of Forever 21 in China will be immensely aided by nderstanding their cltres and employing emotional intelligence, whether in management of overseas offices, marketing prodcts to Chinese consmers, or managing an overseas manfactring plant. This can be done throgh the help of Hofstede&rsqo;s cltral parameters which can help the management of the company to make informed decisions on managing bsiness operations in China (Li, 2021). Moreover, Forever 21 can also make se of consmer data and data analytics to nderstand the preferences of Chinese consmers. Cstomer analysis is the process of analysing cstomer data to get insights and inform company decisions. Cstomer analysis ses market analysis techniqes to nderstand crrent sers in order to attract new cstomers. By analysing a combination of data, Forever 21 may classify cstomers and nderstand how their prodcts and services satisfy cstomer needs. As a reslt, it may create tailored experiences based on factors like client preferences. Frthermore, AI can be sed by Forever 21 to identify trends and designs that cater to the demands of the Chinese cstomers. Additionally, the company can also collaborate with Chinese designers to develop clothing lines that adheres to the preference of the Chinese consmers (Li, 2021).
The present report discssed international bsiness isses for Forever 21 in the Chinese market. The report provided a brief overview of the bsiness of Forever 21. Moreover, the report highlighted the history of bsiness operations of Forever 21 in CHina. The report frther highlighted two crrent isses that the company faces in the market of China. One of the isses is de to spply chain management problems faced by Forever 21 in CHina. The other isse is the inability of Forever 21 to adhere to consmer preferences in CHina. Frthermore, the report carried ot an external analysis in order to identify measres to mitigate internal bsiness management isses in CHina. The report frther highlighted the measres throgh which Forever 21 can mitigate the aforementioned isses in CHina. Finally, the report provides following recommendations:-
Ahsan, F. M., & Sinha, A. K. (2022). Internationalization motives, location advantages and performance: the case of Indian firms from knowledge-intensive indstries. Cross Cltral & Strategic Management. https://doi.org/10.1108/CCSM-07-2021-0119
Bloomenthal, A. (2022). Licensing Agreement: Definition, Example, Types, and Benefits. Investopedia. https://www.investopedia.com/terms/l/licensing-agreement.asp#:~:text=By-,What%20Is%20a%20Licensing%20Agreement%3F,brand%2C%20patent%2C%20or%20trademark.
Cordon, C. (2023). The end of &lsqo;made in China&rsqo;? Five ways to ct spply chain risks. IMD. https://www.imd.org/ibyimd/spply-chain/the-end-of-made-in-china-five-ways-to-ct-spply-chain-risks/
Chen, J. (2020). Eclectic Paradigm: Definition, Example, Advantages. Investopedia. https://www.investopedia.com/terms/e/eclecticparadigm.asp
Demchk, A. L., Mišić, M., Obydenkova, A., & Tosn, J. (2022). Environmental conflict management: A comparative cross-cltral perspective of China and Rssia. Post-Commnist Economies, 34(7), 871-893. https://doi.org/10.1080/14631377.2021.1943915
Feng, H. (2022). Managing Yor China Manfactring & Spply Chains Dring COVID Otbreaks. China Briefing. https://www.china-briefing.com/news/managing-china-manfactring-spply-chains-dring-covid-otbreaks/
Forbes. (2023). Forever 21. Forbes. https://www.forbes.com/companies/forever-21/?sh=30c24015365f
Hall, C. (2022). Forever 21 takes third crack at China with new bricks and mortar store. Reters. https://www.reters.com/bsiness/retail-consmer/forever-21-takes-third-crack-china-with-new-bricks-mortar-store-2022-06-15/#:~:text=Forever%2021%20had%20a%20network,Grop%20(ABG)%20in%202020.
Jaekel, B. (2023). Forever 21 niqely drives sales throgh consmer-generated otfit gallery. Retail Dive. https://www.retaildive.com/ex/mobilecommercedaily/forever-21-niqely-drives-sales-throgh-consmer-generated-otfit-gallery
Li, L. (2021). Internal Analysis of Forever 21&rsqo;s Failre in China. Chinese Stdies. 10(3). https://doi.org/10.4236/chnstd.2021.103009
Li, Y., Collinson, S., Cooper, C., & Baglieri, D. (2022). International bsiness, innovation and ambidexterity: A micro-fondational perspective. International Bsiness Review, 31(3), 101852. https://doi.org/10.1016/j.ibsrev.2021.101852
Li, Y., Lee, J. M., & Lee, C. (2020). The challenges and opportnities of a global health crisis: the management and bsiness implications of COVID-19 from an Asian perspective. Asian Bsiness & Management, 19, 277-297. https://doi.org/10.1057/s41291-019-00084-0
Osabtey, E. L., Papanastassio, M., Jin, Z., Navare, J., & Agyapong, A. (2023). Revisiting FSAs and CSAs in Sb-Saharan Africa: Evidence from Ghanaian Firms. International Bsiness Review, 102106. https://doi.org/10.1016/j.ibsrev.2023.102106
Vafoklova, M., & Jraev, U. (2022). Marketing strategy and failre of Forever 21.(What is the reason behind Forever 21&rsqo;s failre?). Erasian Research Blletin, 4, 67-75.
Zho, J., Wang, W., Zho, J., Zhang, Z., L, Z., & Gong, Z. (2022). Management effectiveness evalation of world cltral landscape heritage: a case from China. Heritage Science, 10(1), 1-9. https://doi.org/10.1186/s40494-022-00660-2
You May Also Like:
International Business Assignment Help
International Business Dissertation Topics
GMDGBS206 International Business Law Assessment Answer
1,212,718Orders
4.9/5Rating
5,063Experts
Turnitin Report
$10.00Proofreading and Editing
$9.00Per PageConsultation with Expert
$35.00Per HourLive Session 1-on-1
$40.00Per 30 min.Quality Check
$25.00Total
FreeGet
500 Words Free
on your assignment today
Request Callback
Doing your Assignment with our resources is simple, take Expert assistance to ensure HD Grades. Here you Go....
🚨Don't Leave Empty-Handed!🚨
Snag a Sweet 70% OFF on Your Assignments! 📚💡
Grab it while it's hot!🔥
Claim Your DiscountHurry, Offer Expires Soon 🚀🚀
+61 435 881 621
+61 435 881 621