Watching the three main actors of the market, H&M, Zara, and Caroll, we saw that Caroll had a problem of positioning within the French market: Caroll was a little bit more expensive and customers were not making any difference of quality between Caroll and its competitors. Then, it is obvious to say that women preferred to go to the competition thinking to have a better price/quality ratio somewhere else other than Caroll’s stores. Caroll’s position was right in the middle between low priced brands (examples: H&M and Zara) and higher end brands (examples: Gucci, Vuitton).
Moreover, we already know that women who have a restricted clothing budget prefer to buy in low priced stores and that wealthy women go to high end ones. The French middle class market is weakening. Consequently, Caroll had to reposition itself in this market and decided to play the card of quality launching its new brand “Caroll Paris”, synonym of high end brand. Additionally, Caroll created a new range of accessories like shoes and bags aiming to the same objective: to reach the superior quality market.
The second opportunity for Caroll is to sell its clothes and accessories within new countries where it is not implemented yet.
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The Republic of China is the fastest one over all emerging countries and it is the most valuable opportunity for Caroll to penetrate this market because China is going to be as much developed as western countries soon. This is the reason why we are going now to discuss about a penetration strategy of the Chinese market by Caroll.
Several figures can influence Caroll to enter this skyrocketing market: first of all, the Chinese economy is marked by a double-digit growth of 11.1 percent in 2006 (ranked 11th by the CIA) with a GDP per capita of 7,800 dollars in 2006 (ranked 107th by the CIA). Those figures are taken from the CIA’s Internet site (CIA’s_Staff, 2007). As we can read in the electronic article of Mustapha Kessous from LeMonde. fr, the objective is clear: to allure the Chinese middle class estimated at 300 million persons representing 23 percent of the national population. It represents almost the same number of customers than the whole American market.
The Shanghai province is even more populated than the United Kingdom (Kessous, 2007). It is said and said again that China is going to be the major economic power in a maximum of two decades. As we can see on the following chart from the National Bureau of Statistics of China, Mc Kinsey Global divided the Chinese population into five parts. Since 1985, when 95. 2 percent of the population was considered poor, earning less than 25,000 Yuan Renminbi a year, one category is always increasing and it is the one of upper middle class, passing from 1.2 percent of population to 24. 2 percent in 2005.
The category is also expected to reach 51. 1 percent of the population in 2025. Thus, it is the most emerging class of China and people from it earn between 40,000 and 100,000 Yuan Renminbi per year. Thanks to this income increase, Chinese clothes purchases have increased of 15 percent last year. This enormous potential has already been detected by the two major competitors of Caroll we talked about in the competition analysis of the previous part of this paper: H&M and Zara.
The competition being already there, Caroll has to review all its marketing mix in order to be efficient in this market penetration. As already said, the two main competitors of Caroll in Europe are the same in China: H&M and Zara. Thanks to Mustapha Kessous’ article, we understand that Zara penetrated China very carefully: they started with a restricted number of stores which allows seeing what the possibilities of a specific country are aiming to gain a substantial number of clients.
The first store was located in Hong Kong and launched in May 2004. Thanks to the Chinese welcoming, Zara decided to expand its business in the continental China in 2006. Today, Zara has nine stores in the country of which five are in Hong Kong (Kessous, 2007). This cautiousness translates a good adaptability to the market which H&M didn’t have when it started its business in China in April of this year: its first store has been launched in Shanghai but H&M forgot to offer products under the size of 32.
But actually, the medium size for Chinese women is 30. Two other H&M stores have been open so far (Kessous, 2007). Marie-Chantal Piques, chief of the sector of goods’ consumption at the economic mission in Shanghai, tells us that “if companies want to succeed in China, they have to upgrade their products range”. Because Chinese people are were “occidentalized”, Zara decided to use the western fashion notoriety to make the difference while selling its merchandize at the same prices practiced in Europe (Kessous, 2007).