Using PESTEL analysis, 
 
 Political factors:
 -Regulation improvement in 2004 as part of China's WTO agreement. Under the revised regulation, businesses are allowed to enter the China market without the need of a joint venture with a local partner.
  
 Economic factors:
 -China is the fastest economy in the world with a growth of 11.4% in 2007. The blooming economy means that there will be a growing middle-income group in China, who have higher consumer spending power and dispensable income.

 Socio-cultural factors:

-With raising income and global influences, the younger generations are becoming more brand conscious and require higher service standard.

 
 Technological factors:

-Supply chain management and franchisees management process have been stabilised with the aid of technology.

-The stabilisation result in efficiency and thus lower cost incurred.

 Ecological factors:

-China is make up of many difference province and each province has their own set of culture, values, and preferences. Different pricing and selection is required to cater to the unique trends and seasonal differences of different region.
 
 

Legal factors:
 -The instability of China’s legal system possess higher risks when making investment and ventures. Legal protection against unfair competition and practices and legal changes affecting operations and production could jeopardise the reach into China.

 2. Describe the competitive forces of the market in which Baleno operates in. 

 

Rival Brands holding bigger market shares.

 

With the flood gate now open to the Chinese market, both foreign and local brands compete head to head in a bid to secure larger market shares. This competition and similar use of western quality management and focus on marketing component require companies to work harder to differentiate themselves becoming more and more market-oriented to secure the Chinese market and to build long-term loyalty.   

 

New entry to market

As the economy progresses new start-ups such as Feel 100%, Free Bird, Jianlong and Tahan have started emerging backed by stronger local knowledge and local community support, foreign brand have to fight harder for the acceptance by the Chinese consumers. The legal system in China is a double edge sword, it allow some flexibility in operations and manufacturing. However, it also meant that Baleno might be under threat from plagiarism, undercutting or even commercial sabotage.   

 

China may be higher populated, but the fight for quality staff, location, and product maybe one of the biggest hurdle all companies need to overcome. With so many rivals vying to hire good staff at all level quality staff need to be recruited and retained with good HRM practices. The fight for good locations and high quality manufacturer will also become tougher as the demand by local and foreign retailers increases as the economy grow. 

 

 3. What are the capabilities of Baleno?

Clear positioning 

 

Baleno take control of it operational quality. 

 

 

 

 4. Do you think Baleno is market-driven?

 

Yes, Baleno is market-focused as they do more than just providing a product to customers. Training is provided to their employee for the sole purpose of serving the customers better. On top of that, managerial decisions are also customers centric as location are selected based on customer convenience and a unified image is portray across all outlet to be more relatable to customers. They have a CRM system in place is manage by the franchiser to ensure quality improvement of the franchisee. Marketing effort is also not universal, it is however very personal to each region in order for the customer to feel and get the most out of campaigns. 

   

 

Luk, S., & Chen, I. (2009). Baleno: Expanding Retail Operations in China This case was prepared by Sherriff T. K. Luk and Ivy S. N. Chen of the Hong Kong Polytechnic University as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative or business situation. Asian Case Research Journal, 13(01), 1-27.

 

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1.     Describe Baleno’s macro environment.

            

Political 
– lifted restrictions on the operations of foreign retailers and do not           need joint venture partners

 
Economic 
– Higher disposable income, leading to more spending

 

Socio-Cultural 

–      Adopting trends from western countries

–      More brand conscious

 

Technological 

 - Internet savvy has made people more aware of fashion trends

 

Legal
 - Unpredictable government intervention

 

Ecological

-       Certain areas of China are seasonal and during winter, would wear more clothes to cater to the different weather

 

 

2.     Describe the competitive forces of the market in which Baleno operate in.

 

            Competitive Rivalry

-       Faces competition from mostly from Hong Kong brands such as Giodarno, Jeanwest, Espirit and Yishion

-       Local competitors such as Wei ping and Anta

-       There were also global competitors 

 

            Threat of Substitution

-       Other companies can easily copy Baleno’s approach and even their own staff would do that and start their own business and consumers could go over

-       Counterfeit products is also a problem and consumers could buy those

 

            Threat of New Entry

-       Threat of new entrance is high with China lifting regulations on foreign retailers

 

            Bargaining Power of Buyers

-       Consumers could easily switch to another competitors as Baleno sells clothes that are not very distinct from others

 

            Bargaining Power of Suppliers

            - This is unknown however Bossini negotiated with supplier for lower costs          between 1998 and 2000. Thus, Baleno could have tried to do the same.

 

 

3.     What are the capabilities of Baleno? 

Distinctive capabilities of Baleno 

-       Consistent brand image: store theme, marketing campaigns, recruitment & franchise, training, choosing store spaces

-       Management Development and training

-       Strong market sensing to cater to the different needs from the different regions of china

 

 

4.     Do you think Baleno is market-driven?

      

Baleno is market driven to a certain extent where they are able to deliver the value of what the customer wants such as choosing the best locations, having strong brand image with hiring Andy Lau, Shopping environment, customer service, etc.