Armani Exchange Foreign Direct Investment Analysis

This assignment requires an in-depth analysis of Armani Exchange's foreign direct investment (FDI) strategy. It involves applying Porter's Five Forces to assess the competitive landscape of the business and conducting a PESTLE analysis to identify potential opportunities and threats. The report also needs to consider the impact of FDI on the business operations of Armani Exchange, as well as developing strategies for reducing the effect of those businesses. The assignment is based on statistical data from Switzerland, which suggests that expanding through foreign direct investment will provide a huge profitability to the business.

Project

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Establishment of the company in the allocated country from foreign direct investment............1
Pestle analysis and porters five forces to analyse the expansion decision of the company........2
Statistical data and its analysis...................................................................................................7
Stock in the FDI of the Switzerland and industries.........................................................................7
..........................................................................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Foreign direct investment refers to a form of investment that results in providing
ownership control to an entity of the foreign country in the business of the local country (Duarte,
Kedong and Xuemei, 2017). FDI helps the company in raising funds for the purpose of
maintaining sufficiency of fund for operations in the business organisation. The present study
shows a business development plan of the Armani Exchange for the purpose of developing its
business in the Switzerland. The Armani exchange was established in 1991 by an Italian fashion
designer. It is the brand that provides a range of fashion accessories to the youth. The major part
if this business plan The business development project of the company includes the information
about the foreign direct investment of the company, pestle analysis and porters five force
analysis of the business market. Further it also shows the table, graphs and statistics showing the
past 3 years data of the company.
MAIN BODY
Establishment of the company in the allocated country from foreign direct investment
Establishment of company
The Armani exchange was established in the year 1991 by an Italian fashion designer. In
the present time the brand sales a fashion clothing’s and accessories to the customers. The firm is
planning to expand its business in the Switzerland. For the purpose of establishing the new
business in the Switzerland for the expansion purpose, the business needs to analyse the overall
market environment of the Switzerland and the competitive analysis of the market as well.
Further, the most important analysis of the business plan is to develop the strategies and
policies as to raise the funds of the business operations. There are several options available for
the Armani Exchange through which the company can raise the funds like, raising funds through
the bank, financial institutions or through foreign direct investment, etc. The foreign direct
investment can be determined as the best source of raising funds due to the following reasons:
Foreign direct investment
Foreign direct investment refers to raising funds from the foreign business entities and
provide them a part of ownership as a consideration (Rios-Morales, Brennan and Schweizer,
2016). In the current period the amount of foreign direct investment is increasing rapidly in the
whole world.
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The foreign direct investment results in providing benefits to both, the company and the
whole country as well. It helps the country by providing economic growth to the country by
bringing large number of foreign currency into the country. Moreover, it also provides benefits to
the company by way of providing tax benefits, huge profitability, enhancement of funds in the
company for the expansion purpose, etc.
Switzerland attracts the foreign direct investment towards it, as it provides effective
suitability like political stability, effective legal system, effective capital structured market, etc.
In this order, the Armani exchange can adopt the foreign direct investment for the purpose of
expansion of the business.
As per the recent statistics, the flow of FDI in the Switzerland has been risen at USD 41
billion and it is keep rising as well. In this regard, the Armani Exchange should develop a
business plan as to expand its business in Switzerland. The amount of investment made by the
fashion industrial sector is 17.2 % of the total investment. It enhances the chances of getting
success from the business (Switzerland: Foreign investment, 2019).
Furthermore, as per the statistical data of Foreign direct investment of the Switzerland,
the amount of foreign direct investment is keep raising (Wong and Eiselé, 2015). Moreover, the
foreign direct investment in the Switzerland would also provide various benefits to the company
by the way of enhancing the profitability of the business, gaining the skill of highly skilled
workers, effective capital market, etc.
In addition, Talking about the government grands, in Switzerland, with the help of
Foreign direct investment, the Armani Exchange will get various tax benefits. Further, the
Switzerland is a small economy and also contains some extra strict rules and regulations for the
company.
In this regard, it can be analysed that The Switzerland is a small economy with the huge
benefits. The company will get various benefits from, this decision. Therefore, the Armani
should Expand its business through the Foreign direct investment.
Pestle analysis and porters five forces to analyse the expansion decision of the company
For the purpose of analysing the decision, the company needs to analyse the effect of
various external factors over the business of the company. This analysis can help the company in
evaluating the various problems that can arise while expanding to Switzerland.
For this purpose, the Armani Exchange can use the PESTLE analysis as under:
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 Political factors: The major negative impact occurs due to this factor if the company
does not have stable economy. As, it may lead in variation in the rules and regulations
applicable over the business due to which the company may need to change policies and
procedures of the company. The Switzerland have stable economy therefore, Armani
Exchange would need not to amend its policies frequently. In this regard, the political
factor would not affect the business at large scale.
 Economical factor: This factor includes various elements like inflation rate in the
country, saving rate in the country, spending power of the population, etc. This factor
also have influence over the business in the country as it directly affects the number of
sales that can be made by the company. The Switzerland economy is one of the strongest
economy of the world. As per the latest statistical data, the GDP of the Switzerland is
CHF 661.401 billion. Further, in recent time, the amount of FDI in the Switzerland is
increasing rapidly. It is leading in developing the economy stronger. In this regard, the
Armani Exchange would be able to earn more profit in the country by selling higher
amount of products to the customers. Therefore, the economical factor also have positive
influence over the Armani Exchange.
 Social factors: Social factors includes the culture and trends of the country. These
elements have direct impact over the taste and preference of the customers. Talking about
the social, cultural and trends of the Switzerland, the population living there like to invest
their savings into fashion cloths and accessories. In this regard, the Armani Exchange
would be able to attract the larger number of customers towards it and gain maximum
market share as well. Therefore, social factor also have positive impact over the business
of Armani Exchange.
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 Technological factor: In the present time, the technological factor has the major impact
over each business organisation. Switzerland is the most technological updated country
(Müller, 2017). If the Armani Exchange company wants to expand its business in
Switzerland, and gain the market opportunities of the business and attract the larger
amount of customers towards it, it has to enhance the technological advancement in the
company. As ignorance of the technical advancement in the business may lead in
reduction of the number of customers and efficiency of the business as well, due to which
the company may suffer a huge loss. In this regard, the technological factor has a huge
impact over the business.
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Illustration 1: PESTLE analysis
(Source: PESTLE Analysis Singapore Assignment. 2018)

 Legal factor: The legal factors refers to laws, rules and regulations of the country. If the
Armani exchange wants to expand its business in the Switzerland, the company has to
follow each rule and regulations of the country applicable to the fashion businesses of the
country. As non - compliance of any of the above law may lead in attraction of legal
policies and procedures over the business. Although, the Switzerland have a liberal legal
system for the fashion and other foreign companies for the purpose of enhancing its FDI
in the country. In this regard, the legal system is in the favour of the company.
 Environmental factor: Environmental factor included the seasonal and weather
conditions of the country. These factors also change the taste and preference of the
customers. Further, the Armani Exchange, being a part of fashion industry, have a huge
effect over the business (Mäkynen, 2017). The company has to supply the products as per
the weather and seasonal changes of the country. It would lead in keeping the business
with the company for a long time and enhancing its profitability as well. On the other
hand, if the business does not change in the supply, it may lead in losing the customers
and suffering from loss as well. In this regard, this factor also have a huge Impact over
the business. <Seasonal changes is the major environmental factor effecting the business
of Armani Exchange.
In this order, it can be analysed that there are numerous factors that have huge effect over
the business of Armani Exchange if it expands its business in the Switzerland. Although, it can
eliminate the negative effect of the business and gain the business opportunities from the
expansion by developing a new business in the Switzerland.
Porters five forces model:
The porters five forces model helps the company in analysing the competition in the
market. For the purpose of developing a business expansion plan the analysis of the Porters five
forces model can provide help in developing the most appropriate strategies for the business and
make the company able to achieve the maximum advantage from the expansion of the business.
The porters five forces model can be analysed as under:
Power of supplier: The suppliers have power to increase the rate of raw materials that the
company purchases from them. It results in enhancement of cost of the company and which
would increase the price of the product as well. In Switzerland there are huge number of
suppliers that provides raw materials to the company. It results in reducing the power of
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suppliers of the Armani Exchange. As, huge number of suppliers results in enhancing the number
of substitutions of suppliers. In this regard, it can be analysed that the power of supplier factor
does not have huge impact over the Armani Exchange in the Switzerland.
 Power of customers: As per the porters five forces model, the customers have power to
reduce the price of the product provided by the company by the way of bargain. This
power of the customers may result in reducing the profitability of the Armani Exchange.
In the Switzerland, due to the large number of fashion accessories providing companies,
the bargain of the customers is at the top in the country. In this order, this factor have
huge impact over the business of Armani Exchange in Switzerland.
 Threats of substitution: Threats of substitution refers to the substitution of customers
towards the other business units. This threat keeps growing with the enhancement of the
number of businesses in the industry (Tanner and Richter, 2018). As the Switzerland
have a large market of the fashion industry, the Armani Exchange have a huge threat of
substitution. Although, this threat can be reduced by the company by providing a unique
range of fashion brand clothing and accessories through which it could retain the
customers with the company for long period of time.
 Threats of new entry: A highly profit margined industry always contains a huge threat
of new entry. The entrance of new businesses becomes a threat for the existing
companies as they need to share the market and profitability of the market with the new
business units. The Switzerland have a largest market for the fashion brand. In this
regard, this market always has this threat (Porter's Five Forces: Analyzing the
Competition, 2018). Armani Exchange needs to develop the most effective competitive
strategies and plans to retain customers as well. It would help the company in enhancing
the attraction of the customer, retain them with the company for long run and gain the
competitive advantages as well.
 Competitive rivalry: This factor says that the company needs to analyse the competitors
of the market. As the competitors have major impact over the profitability and the
market share to be achieved by the business. Due to having a large volume of
competitive market, the expansion decision of the Armani exchange will result in
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suffering from a huge amount of competition in the market. Further, Switzerland also
have a large number of strong competitors. In this regard, the competitive rivalry factor
of this model have a higher impact over the business.
In this regard, from the above analysis of the porters five forces model, it can be analysed
that if the Armani Exchange expands its business in the Switzerland, it would have to face major
threats in the market. Although, these threats can be eliminated by the company by involving
strong strategies like providing unique products, adoption of customer relationship management,
etc. in the business development plan project.
Statistical data and its analysis
Past three years data of Armani Exchange
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Illustration 2: porters five
(source: Porter's Five Forces | SMI. 2018)

Interpretation
From the above data it can be interpret that the value of shares of the Armani Exchange is
keep growing. It is enhancing the value of stakeholders frequently. In this order, it would be able
to attract the FDIs towards it effectively. Therefore, raising funds through FDIs would be easy
for the company.
Stock of FDI in Switzerland and its industries
Countries invested in Switzerland 2017, (%)
The Netherlands 28.5
Luxembourg 21.7
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Illustration 3: Annual reports
(Source: Annual Reports of Armani Exchange. 2018)

USA 12.5
Offshore centres 9.6
United Kingdom 4.2
Austria 3.8
France 3.6
Germany 2.5
Denmark 1.6
Sweden 1.1
Spain 0.8
Other European countries 1.8
Finance and holding
Trade
Chemicals and plastics
Electronics, watches, energy and optics
Insurance
Banks
0
10
20
30
40
50
60
2017, in %
% of investment made by Various sectors in the Switzerland
Invested Sectors of Switzerland 2017, ( %)
Finance and holding 56.6
Trade 16.1
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Chemicals and plastics 8
Electronics, watches, energy and optics 4.1
Fashion industry 17.2
Insurance 2.3
Banks 2.2
Finance and holding
Trade
Chemicals and plastics
Electronics, watches, energy and optics
Insurance
Banks
0
10
20
30
40
50
60
2017, in %
Interpretation:
From the analysis of above statistical data and the graphs, it can be analysed that the
Foreign direct investments in the Switzerland kept on growing (Switzerland: Foreign investment,
2019). The amount of FDI is increasing in the Switzerland, further, there are approx 4.2% of the
total industries in the Switzerland that belongs to the UK (Steffen and Boßelmann, 2018). In this
regard in can be evaluated that the country is suitable for the businesses of the UK. Further, as
per the above statistical data, the FDI of the Switzerland contains the 17.2% part of the fashion
industry which is showing that the scope of the fashion industry businesses through the FDI is
higher.
Therefore, it can be interpreting that Armani Exchange should decide to expand its
business in Switzerland through FDI.
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CONCLUSION
From the analysis of the above study, it can be concluded that the Armani Exchange
wants to expand its business in Switzerland. The company should expand its business by raising
funds through the foreign direct investment. Further, the study has also concluded that if the
company expand its business in the Switzerland it is going to face a huge amount of problems
like, competitive rivalry, customer substitution, threats of new entry, etc. These can be
eliminated by developing strong strategies for the business. Further, the assignment has also
concluded that there are various factors that are beyond the control of the company, but have a
huge impact over the business operations of the Armani Exchange. The company also needs to
develop strong strategies for reducing the effect of those businesses. Moreover, as per the
statistical data of the Switzerland, it can be concluded that the expansion decision of the Armani
Exchange through foreign direct investment will provide a huge profitability to the business.
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REFERENCES
Books and Journals
Duarte, L. D. R. V., Kedong, Y. and Xuemei, L., 2017. The Relationship between FDI,
Economic Growth and Financial Development in Cabo Verde. International Journal of
Economics and Finance, 9(5), pp.132-142.
Rios-Morales, R., Brennan, L. and Schweizer, M., 2016. An Assessment of Chinese Foreign
Direct Investment in Switzerland. Uluslararası İlişkiler/International Relations, pp.85-
105.
Wong, T. C. and Eiselé, J. L., 2015. FDI World Dental Federation: Responding to New Realities
of Oral Health.
Steffen, B. and Boßelmann, S., 2018, November. GOLD: global organization alignment and
decision-towards the hierarchical integration of heterogeneous business models. In
International Symposium on Leveraging Applications of Formal Methods (pp. 504-527).
Springer, Cham.
Müller, D., 2017. The role of brand communities within the athletic footwear industry: an
assessment of selected brand communities with a focus on the Swiss athletic footwear
industry.
Mäkynen, M., 2017. Sustainable Workwear Label-Business Feasibility.
Tanner, C. and Richter, S. L., 2018. Digitalizing B2B Business Processes—The Learnings from
E-Invoicing. In Business Information Systems and Technology 4.0 (pp. 103-116).
Springer, Cham.
Online
Switzerland: Foreign investment. 2019. [Online]. Available through
<https://en.portal.santandertrade.com/establish-overseas/switzerland/foreign-
investment>.
Porter's Five Forces: Analyzing the Competition. 2018. [Online]. Available through
<https://www.businessnewsdaily.com/5446-porters-five-forces.html>.
Porter's Five Forces | SMI. 2018. [Online]. Available through
through<https://www.strategicmanagementinsight.com/tools/porters-five-forces.html>
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PESTLE Analysis Singapore Assignment. 2018. [Online]. Available through
<https://www.ozassignments.com/solution/pestle-analysis-singapore-assignment>
Annual Reports of Armani Exchange. 2018. [Online]. Available through.
<file:///C:/Users/user/Downloads/Simon%202017%20Annual%20Report%20with
%20Form%2010K_High%20Res.pdf>
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