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Forever 21: PESTLE Analysis of Turkey’s Apparel Industry

Summary

The report discusses international marketing concepts and business expansion via entering new markets. The report utilizes market entry theories to evaluate the prospective businesses in targeted areas while emphasizing the need for expansion in the light of increasing globalization.

Forever 21 is highly competitive fashion brand with a strong international presence. The report analysis the growth prospects for the fashion brand to allow continuous growth and target available opportunities in Turkey that is a promising emerging country. The product offering of Forever 21 are culturally sensitive as major cities in Turkey are prone towards western fashion.

The report will use PESTLE analysis to examine the macro-environment of the country and will use Porter Five Forces analysis to examine the industry competitiveness to decide if the market is an attractive prospect.

Justification of Company  

The table shows facts regarding the company. Forever 21 has a considerably strong presence in the UK with stores in London, Birmingham, and Liverpool. According to figure 3, it has 4 stores in the UK. Forever 21 is the 5th largest retailer in the USA and operates with 600+ stores UK, America, Asia, and Middle East.  

Forever 21 deals in clothing for both genders and also in accessories and cosmetics for all age groups, beauty products to be specific. The top global competitors of Forever 21 include Charlotte Russe, H&M Henn es and Mauritz AB, and Aeropostale Inc. Forever 21 is expanding its operations at a steady pace and this has been a source for sustaining business revenues.

Forever 21 Internationalization

Targeting home market is not enough for business to gain a high scale competitive advantage, as there are limited opportunities and soon market becomes saturated offering low prospects. Engaging in the process of Internationalization organizations can gain high end competitive advantage. According to Knight (2015) internationalization is a process where organization target new geographical regions while integrating products according to cultural dimension and also keeping its international endeavors aligned with core mission and vision.

Market Entry Turkey  

According to Cavusgil, Knight, Riesenberger, Rammal, and Rose (2014) market entry for a corporation is a systematically planned process to offer its services to a target market. The strategy adopted for market entry allows organization the means to develop relations in foreign country and also a network to distribute its products across that country.

Mode of Entry. The franchising model is evaluated as an effective method for entering Turkey for Forever21. According to Al‐Mutawa (2013), Turkey is one of the emerging countries which is developing fast, it’s mainstream fashion is also progressing. The recent investor-friendly policies are critical to making a foreign direct investment in Turkey. The mode of entry recommended is franchising. Considering the risk factor and cultural sensitivity, the franchising model is most effective. This type of market entry process will benefit Forever 21 as they will not have to take all the risk and can enter Turkey with more leverage to respond to challenges in the macro-environment (Lea-Greenwood, 2013).

Furthermore, the established brand image improves the process of brand recognition and can assist in mitigating risks associated with establishing a branch office and running operations without the involvement of locals (Laufs & Schwens, 2014). Hence, Forever21 will be using the franchising model to be more integrated and effective in the foreign markets.

Opportunities in Turkey.

According to Tokatli and Kızılgün (2009), Istanbul can be the next fashion capital because it is not only promoting the Turkish culture in its fashion but it is also giving the same attention to modernism. European Comparison Program for 2015 purchase power parity in Turkey stands 53 (refer to appendix 1) and actual individual consumption lies at 58 (refer to appendix 2). This analysis shows Forever 21 with a competitive pricing strategy can lead among the existing brands. Turkey being an emerging economy has a stable purchasing power and with its government being cognizant in providing basic facilities to its people. When necessities are secured consumer attention diverts towards luxuries. Forever21 can grab attention by offering disposable fashion at a low price to ensure consumers can maintain a trendy wardrobe. Generation Y and Z are developing markets in Turkey and product offerings of Forever 21 suit the needs of target consumers.

Challenges in Turkey: Cultural sensitivity would be a great challenge some of the Islamic population is quite sensitive towards western fashion and avoid it in most circumstances. Local Turkish brands, LC Waikiki has captured a huge volume of the Turkish market. LC Waikiki is also a low-cost brand with the aim that “Everyone deserves to dress well”. Hence, LC Waikiki will present a significant challenge to allow market capture. Political instability and the threat of terrorist organizations like ISIS can present a risk to a foreign brand where their installments can be targeted driving customers away and creating negative publicity.

Macro Environment Analysis

PESTLE Analysis

PESTLE analysis is a macro tool for analyzing firms external environment (Kotler, 2012). According to Newton (2014) it is an analysis to understand the impact of external forces on a business. This tool helps in understanding the situation and planning accordingly to achieve better success.

Political.   According to Hassan (2012), political forces in PESTLE analysis shape up the strategy to understand the local political environment and its risk factor for an organization to strategies its market entry in a foreign country. Armstrong, Adam, Denize, and Kotler (2014) further explain that political factor basically discusses tax policies and trade agreements. Turkish political scenario is stable and govt. has a considerable hold on designing the future of the country. In a political scenario, the army has a secondary role while the city govt. steers country with the mainstream role by designing a high-level strategic outlook (Arat, 2010).

Political scenario remains stable even under recent coup attempt and terrorist attacks. According to the analysis political scenario in Turkey is supportive and franchising model will have increased success percentage for Forever21.

Economic Factors. In PESTLE analysis Newton (2014) explains economic factors include growth rate, employment levels, cost of energy, raw material, and interest rates. The growth rate for Turkey was 4.1 % in 2013. The purchasing power of consumers in Turkey is also strong as shown in (Appendix 1 and 2). In these economic conditions, Turkey shows a positive return on investment for Forever21. The growing consumer base and increasing spending power of consumers is a good sign that the economic position is developing. Increasing FDI has improved growth and creates job opportunities for locals. According to Kultur.gov (2017), Tourism has experienced a dip however, remains strong (refer to appendix 3). The unique product offering of Forever 21 and the developing economy of Turkey provides a greater opportunity to offer continuous innovation in trends at a low cost to remain ahead of the competitors. 

Social. Yüksel (2012) explains social factors in Pestle analysis include cultural analysis and study of people’s attitude towards foreign brands. This will allow businesses such as Forever21 to make critical decisions before entering the market.   

As Turkey is historically a Muslim country but it is constitutionally recognized as a secular. Culturally millennial and generation Z sharing a higher percentage of the population and their definition of fashion is bold yet original to the culture. Turkey is becoming a hotspot for trendy brands in fashion industry. Forever21 is culturally sensitive since it offers a trendy fashion statement that links up with the basic needs of the Turkish youth. Furthermore, it is low cost and according to purchase power it is most integrated and can sustain the challenge. Furthermore, Joung (2014) explain fast pace fashion brand need strong integration with the local market and it is key competitive source to sustain in an international arena. Turkey strongly co-relates with UK hence it is a positive element to consider for Forever21.

Under these circumstances, Forever21 will be using the data to decide either to localize or standardize. Localization is a competing concept against standardization product offering to the target market. Forever21’s mission is to provide trendy fashion at a low price and corporate orientation links up with the youth in Turkey who have a need to express themselves in a cost-effective manner. Localization means tailoring the product according to the needs of customers considering their cultural preferences while standardization means the product offered will be based on some international standards and kept similar for each customer. In the fashion industry, standardization doesn’t have real application since consumer tastes and requirements are fast changing. In this regard, Forever21 will use its Franchisee partners’ knowledge and with collaboration, they will have to adopt a little towards Turkish culture and offer more culturally sensitive clothing with fashion statements expressing Turkish youth.

Forever21, is culturally sensitive since it is the voice of youth and people who want change continually. Generation Y and Z in Turkey are adopting fashion to make a statement, fashion in Turkey is bold yet integrated with social moral standards. Hence, Forever21 will have to adopt its fashion brand to fit local needs and cannot offer all of its standard products as it is 100%.

Technological. Technology in Pestle analysis records needs for new technology to penetrate the market and to understand how technology interplays with organizational goals. People of Turkey have become technologically advanced and just like other countries, internet usage is also at its peak in Turkey (Çelik & Yilmaz, 2011). Considering technology, it can be analyzed that Forever21 will have to design a customized website for Turkish people that covers Turkish fashion platform and also define prices according to the purchasing power and currency. Furthermore, it can connect with consumers on social media to understand their acceptance level before actually making a franchising agreement (Tiago & Veríssimo, 2014).

Legal. This factor in Pestle analysis considers legal compliances that businesses will have to comply with in order to do business. This will involve, Taxation and business registration policies. Forever21 has an opportunity to take benefit of investor-friendly policies hence can make an entry into the market. Forever21 will have to adopt a Turkish commercial code that offers an international approach to corporate governance. Since the legal environment is supportive for Europeans the legal environment will be supportive for Forever21 to tap into the Turkish market.

Environmental. This relates to a sustainable supply chain where Forever 21 can maintain sustainable sourcing, manufacturing, distribution, and disposal of its clothing line to ensure their contributions are positive towards society. Furthermore, Forever21 doing something for Turkish society can create a positive image in front of the customers and extend its CSR. This will also help to increase the sales and customers will also associate it with the brand name and brand image.

Competitive Strategy

Turkey is a huge market in apparel industry, it is most probably the leading sector in country’s economy. Jeans sector in last year experienced an increase of 13% and competition is equally strong in the market with top brand offering their products at premium price (Eren-Erdogmus, Cobanoglu, Yalcın, & Ghauri, 2010). The brands operating are Wrangler, Levis, and Mavi Giyim Sanayi ve Ticaret A.S. (domestic market leader). Forever21 has a competitive advantage in comparison to these brands since it has strong brand image and low cost. It is recommended that Forever 21 maintain its price leadership strategy and tailor its products to the local taste.

Forever 21 can quickly expand in the price-sensitive market and grab significant market share. Not just jeans rather whole apparel industry is experiencing a significant boost (Karabag, Tuncay-Celikel, & Berggren, 2011). Mavi has successfully penetrated in apparel market and has developed a strong footing to achieve its goals. Being a market leader it communicates with consumers via social media and has a strong fan following. Forever21 can survive in the market since it is providing fashion at a low price and would not directly challenge the premium brand. The market being considerably large it has the potential for a dynamic brand like Forever21 to beat the competition by grabbing market share (Chattopadhyay, Batra, & Ozsomer, 2012).

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