International Market Selection

[Name of the Writer]
[Name of Instructor]
[Subject]
[Date]
International Market Selection
Introduction
The Irish Company selected for the research study is Primark. The company is an international clothing retailer with being one of the largest companies in Ireland. Primark owns 325 stores in different regions in the Europe and the United States such as Austria, Belgium, France, Germany, Ireland, Italy, the Netherlands, Portugal, Spain, the United Kingdom and the United States. Primark at this point intends to grow. For this purpose, the management has analyzed a number of international markets where the company could enter to expand its current market and increase revenue. The company has not yet ventured into markets outside the Europe and the United States. In order to achieve its objective of expansion, the company after careful analysis, plans to enter a new market in which it has never ventured before. The market is India which is the second most populous country in the world with a population of approximately 1,251,695,584. In terms of economy, India is one of the largest economies in the world ranking at 6th position in terms of nominal GDP and at 3rd position in terms of purchasing power parity.
India as a new international market has been selected after going through the process of International market selection. IMS refers to the process in which a firm goes through the screening of various markets in order to achieve its objective. There are two approaches to International market selection, Systematic, and Unsystematic.

This research study would focus on the systematic approach of International market selection which would consist of analytic hierarchy process (AHP). The systematic approach in this research study would focus more on “Economic”, “Political” and “Cultural”. India as an international market has been selected after carefully analyzing the above variables.
Pairwise comparisons among objectives/alternativesEconomic
The first criterion of the systematic decision-making process is Economy. This is due to the fact that economic benefits are the prime objectives of any commercial firm. It is, therefore, important to analyze the economic benefits more carefully than all other objectives. If the firm is able to reap economic benefits from its decision making, all other objectives can be managed by one way or the other. If firm, however, is not able to reap economic benefits all other factors might be unable to contribute to firm’s survival. The economic factor, therefore, is greater than all other factors. Considering this fact, it is important to first analyze the overall economic condition of the country and its impact on Primark’s entry into India market. As discussed earlier India is the second most populous country in the world. This makes the country, the preferred choice for businesses all over the world as after China; India is the largest market in the world providing great opportunities to the businesses. If Primark enters the Indian market it would be having the opportunity to serve more than one billion potential customers. From the perspective of economic factors, India has a growing and increasing middle-class and upper middle-class demography. It is the working class of the country which is educated and takes an interest in fashion and clothing. Education is the reason, the working class increases its knowledge on changing trends and fashion. Along with the prosperous class of the society, the middle and upper middle class which is in millions can prove to be the greatest potential customers for Primark. As the company would operate in retail it is important to have an overall analysis of the sector as well. A T Kearney, a US Based global management consulting firm has ranked India as the fourth most attractive nation for retail investment among 30 flourishing markets. There are certain key drivers of the Indian Retail Industry. With the changing dynamics emergence of nuclear families has added to the growth of retail growth in India. The double-income household trend has increased considerably providing more opportunities for the families to increase their spending. An increase in disposable income and customer aspiration is a beneficial factor for Primark’s success in India. The increase in expenditure for luxury items, growing preference for branded products and higher aspirations and growing liberalization of the FDI policy in the past decade are some of the other key drivers.
Economic to Political=5.00
I have given “economic” 5 times higher ranking as compared to “political”. This is because
1-Economic viability is the prerequisite for the success of Primark. Therefore this goes beyond all other factors.
2-India has a stable political structure. The political structure is as good as economic structure of the country except for certain problems that Primark might possibly face. The details are provided below
Political
India is ranked in one of the largest democracies in the world. Unlike other countries in its neighborhood, India never witnessed military intervention. This implies that the country’s political system has great strength and a number of political parties, actively participate in politics. The country runs on a federal form of Government. Similar to the United States, the country has also been ruled on the basis of two party systems with Congress and Bharti Janta party being the two largest parties in the country. Along with these, there are a number of provincial and regional parties that have their particular influence in different regions of the country. The policies change significantly with change in the government. Both the major political parties have certain specific ideologies with which they carry their programs. The last general elections led to the triumph of Bharti Janata Party and its nominated candidate Narendra Modi became the prime minister of the country. Narendra Modi has vast political experience with the prior experience of chief ministership of Gujrat one of the largest states of India. BJP specially and Narendra Modi specifically is known for their economic liberalization policies and give greater importance to economic prosperity and freedom. Furthermore, since the introduction of economic liberalization policy in 1991, foreign direct investment has been flowing into the company and a number of new foreign companies are venturing into India due to the presence of such a large market. There are however certain problems with the political system of the country. Corruption is one of the main problems of the country. The bureaucracy of the country at all levels is known to accept bribes for the completion of the governmental tasks. For registration procedures and other formal processes, Primark might also have to face difficult situations. This is one of the reasons why I have given economic more priority over political because economics conditions are more favorable to the political condition. Another problem that the Indian consumers are facing at present is the currency shortage. This is although a temporary problem but has impacted the consumer power and has as well heated up the political front of the country.
Economic to Cultural = 7.00
I have given “economic” 5 times higher ranking as compared to “political”. This is because
1-Economic viability is the prerequisite for the success of Primark. Therefore this goes beyond all other factors.
2-There are great cultural differences in Ireland and India. However, with respect to the offerings of Primark, cultural relevance is not important. The company would be providing products according to consumer demand. Further details are provided below.
Cultural
I have given “economic” seven times higher ranking than “cultural”. This is due to a number of reasons. At first, as compared to economic viability, the cultural viability of Primark with India is very low. The company has operated in mostly in the Europe. It has worked and operated in a culture which is completely different than India. The way of doing businesses in the Europe significantly differs than that of India. For this reason, the cultural similarity of Primark and India is relatively lower. Another important reason is the culture of India and Primark’s product offerings. We need to understand that Primark’s strength is western clothing, and this is exactly what it offers to all the regions where it operates. The dress code in Indian culture is different than that of western dressing. Furthermore having hundreds of different culture, each culture has its own respective dress code. This makes the cultural relevance of India with Primark extremely low. Still, Primark has a greater opportunity to perform in the Indian because western clothing can now be considered the second national dress code of India. Western clothing is worn by millions of people in India. The middle class, upper middle class and professional class of the country prefer to wear western clothes along with their national dresses. For this purpose, it can be argued that although, the cultural relevance of Primark with India is low, the changing social dynamics are relevant for Primark’s success.
Political to Cultural=5.00
I have given “Political” 5 times higher ranking as compared to “Cultural”. This is because
1-India’s political structure is more relevant to the entry and operations of Primark than its cultural values.
2-From the perspective of the success of operations. The political structure of India may provide fewer obstacles to Primark (discussed above) than the different cultural values of India.
Pairwise comparisons for sub-criteria with respect to EconomicsGDP Growth to Inflation= 7.00
I have given GDP growth seven times higher ranking than Inflation. This is due to the fact that in terms of GDP, India has performed quite impressive in the past. Its GDP growth has continuously been increasing since 1965. In 2008, the GDP growth in India stood at 3.891 %. This has increased to 7.3% in the third quarter of the current fiscal year. With the Modi government in place, it is expected that the GDP would increase further in the coming years as the Modi government is completely focused on expanding the economic growth of the country. This strength in GDP and its expected growth is the reason why I have given higher ranking to GDP growth as compared to Inflation. GDP growth also reflects the net spending of the country. The same is expected to grow in the coming years increasing the potential for Primark to get its fair share of businesses from the increasing spending in the country.
Inflation in India has generally been in the range of 0% to 20% since 1980. In 2015, the average inflation in the country stood at 5.88%. This implies that it is easier for Primark to estimate the range of inflation it might possibly face in the coming years as it has generally been in a range. The GDP, on the other hand, has been growing. This creates a favourable situation for Primark as it can devise strategies to deal with inflation and reap benefits of the growing GDP. If Primark intelligently utilizes the combination of inflation with the exchange rate, this can create more room for the firm to transfer profits back home in Ireland.
GDP Growth to Exchange Rate = 7.00
The reason to give GDP higher ranking has been discussed above. It is important to discuss the relationship of GDP and exchange rate. The currency of India is Indian Rupee while the currency of Ireland is Euro. The current exchange rate between INR and EURO is 70.87, i.e. 1 euro equals to 70.87 Indian rupees. Since 2007, Euro has witnessed a bullish trend against INR. In 2007 it went as low as 53.89581 and as high as 90.88577. The five-year trend is bearish as the price of Euro is going down. This means that the profit which Primark would earn from Indian market would be increased when the profit would be converted into home currency. However, if we analyze the foreign exchange rate from a long-term perspective than the ten-year trend is definitely bullish. If the analysis is based on long-term assumption, it could be argued that the currency pair might complete its retracement and regain its bullish trend in the coming period. This would lead to Primark receiving less from its foreign operations when the currency is converted back to Euro. Primark in this situation has the possibility of both gains and losses in the foreign exchange conversion. The impact of such, however, can greatly be reduced by means of financial instruments such as Hedging. This can, therefore, be argued that by means of careful planning, the impact of currency can be reduced. The impact of GDP, however, is beyond firm’s control. For this obvious reason, GDP has been given higher ranking than Foreign exchange.
Inflation to Foreign exchange= 4.00
The details with respect to both the inflation and foreign exchange have already been discussed. I have given Inflation four times higher ranking than Foreign exchange due to the fact currency movements is something that Primark can control by means of effective planning. The same would not be available to Inflation. It is beyond the control of the firm and also has the potential to impact firm’s revenue in the longer run. For this reason, Inflation has been ranked higher to foreign exchange.
Pairwise comparisons for sub-criteria with respect to PoliticsStability to Market Economy= 3.00
I have given Political stability three times higher ranking than the market economy. There are a number of reasons of it. At first, India is the most politically stable country in the region. Never in its history has it witnessed any kind of military intervention. Secondly, political stability is prerequisite to economic stability. Without political stability, a country cannot expect its economy to grow and prosper. For the importance of political stability, it has been ranked higher against the market economy. Stability to Regulation = 6.00
The importance of stability has already been discussed above. Regulations have been ranked lower because regulations in India with respect to foreign business are not ideal. There is more room for improvement. However in these not-so-ideal conditions as well, many foreign firms are not only surviving but thriving as well in the India. Due to this reason regulation has been ranked lower to stability as against political stability; the importance of regulations is lower.
Market Economy to Regulations= 4.00
The market economy is where the firm has the freedom to do the business. This is an ideal atmosphere for the firm to conduct business. After the liberalization policy of 1991, the Indian government has been constantly working to increase investor’s confidence. The condition of the market economy is available in India. This factor has more importance than regulations because almost every economy in the world is regulated to a certain extent. However if the market economy is not available, the firm cannot perform to its maximum efficiency. In the retail sector in India, Primark would have greater benefits of the market economy. For this reason, the market economy has been ranked higher against regulations.
IMS Favorability Score
The final analysis in this process is selection on the basis of IMF favourability score. An 80% score makes this market feasible to select while a score lower than 80% leads to its rejection. The process consists of giving global priorities a ranking among the alternatives of “very unfavorable”, “unfavorable”, “favorable” and “very favorable”. The first variable is GDP growth having a “Global Priority” of 51%. This has been ranked very favorable. This is due to the ideal conditions prevailing in India with respect to the economy and GDP growth. The first and foremost reason is the improving and growing GDP of India. It is also expected to further grow in the coming years. Furthermore, with the election of Modi Government in the center, which is primarily focused on economic development, the prospects of further economic and GDP growth are quite bright. Due to above reasons, GDP growth has been given the ranking of “very favorable”. The IMS favourability score for this is 51%. Inflation has a global priority of 13%. This has been ranked “Favorable”. This is due to the fact that inflation in India has remained in a range for a number of years. This becomes a favorable situation. It has not been ranked as very favorable because Inflation is an external factor which is beyond the control of Primark. The IMS Favourability score for Inflation is 9%. The exchange rate has a Global priority of 5%. This has been ranked as favorable. This is because the medium to short term trend for EUR to INR is in favor of Primark. Furthermore, any adverse movement can be managed by means of hedging and other financial instruments. This has not been termed very favorable as similar to Inflation; Exchange rate is also beyond the power of Primark. Political stability has a IMS favourability score of 15%. It has been ranked very favorable due to strong political and executive system in India. The market economy has an IMS favourability score of 4% as it has been ranked favorable. This is because that the markets in India generally and retail sector specifically is open for international firms where they could utilize their maximum potential. Regulation has an IMS favourability score of less than 1%. It has been unfavorable because in terms of regulation Primark may have to face difficulties and the corruption of Indian bureaucracy. The Cultural similarity has an IMS favourability score of 2%. This has been ranked Unfavorable because India and Ireland differ vastly in terms of both the national culture and the business culture.
Conclusion
The IMS favourability score for India is 86%. This makes a feasible option for Primark to select it as its preferred market for expansion and growth objective. The research study focuses on variables such as Economical, Political, and Cultural to conduct the systematic analysis for International market selection. The information led to the decision that India is a favorable market for Primark to achieve its growth objective. Primark should, therefore, enter the Indian market and test its potential as a retail giant. Primark might possibly have to face problems with respect to understanding the Indian culture and as well as dealing with the government officials of the country. However at the end it could be argued that once successfully dealing with this phase, the prospect of growth is quite brighter for Primark in India.
Works Cited
“2015 Economic Statistics, Economic Indicators Database For Year 2015”. Economywatch.com. N.p., 2017. Web. 5 Jan. 2017.
“Forbes Welcome”. Forbes.com. N.p., 2017. Web. 5 Jan. 2017.
“India GDP Annual Growth Rate | 1951-2017 | Data | Chart | Calendar”. Tradingeconomics.com. N.p., 2017. Web. 5 Jan. 2017.
“Primark – Our Stores”. Primark.com. N.p., 2017. Web. 5 Jan. 2017.
“Thanks, Penneys. The Rise And Rise Of Primark”. The Irish Times. N.p., 2017. Web. 5 Jan. 2017.