Report: Analyzing Christian Dior's Business Expansion in South Korea

This report provides a comprehensive analysis of Christian Dior's potential expansion into South Korea. It begins with an introduction to the company and its business objectives. The report then delves into a PESTLE analysis, examining the political, economic, social, technological, environmental, and legal factors that could impact Dior's operations in South Korea. Following the PESTLE analysis, the report assesses the business scenario, outlining opportunities such as focusing on accessories and male consumers, and threats like increasing competition and counterfeiting. The analysis further incorporates Porter's Five Forces model to evaluate the competitive landscape, including the threat of new entrants, the bargaining power of suppliers and buyers, the threat of substitutes, and the intensity of rivalry. The report concludes by summarizing the key findings and their implications for Dior's expansion strategy in the South Korean market. The analysis is designed to provide insights into the feasibility and challenges of Dior's strategic move.

Business Organisations and
Environments
TABLE OF CONTENTS

INTRODUCTION...........................................................................................................................3
TASK...............................................................................................................................................3
3 Analysis of Business environment...........................................................................................3
4 Assessing business scenario.....................................................................................................6
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Christian Dior SE is one of the leading company in the world of luxury and fashion,
located in the heart of France and established in year 1946 by popular designer Christian Dior. It
has mainly two divisions, Christian Dior couture and LVMH. Latter deals in wines, Watches,
Jewelry, Cosmetics, Perfumes, Leather goods etc. It has its stores and branches in more than 100
countries and is now planning to diversify its business in South Korea. The objective of report is
to assess the feasibility of the expansion. The report looks through the analysis of PESTLE and
Porter's five force model in context with Dior company.
TASK
3 Analysis of Business environment
PESTLE analysis
Political factors
Political factors have a major impact on the organization operating in dynamic
environment. These generally includes political stability, foreign trade policy, tax policy,
government policy etc. Being a french company, Dior operates in the country where they legal
and tax system are not complex. Moreover, French has signed a trading agreement with EU
which eventually enables Dior to trade their products on international platform. This could be an
opportunity for Dior who is panning to expand its business in south Korea where the political
stability has been a major issue for most of the businesses. Federal laws and the corrupt practices
in Korea could be a challenge restricting Dior to operate in south Korea. Besides this, Scandals
remains a major part of politics in south Korea. Park's scandal in Korea has led to a substantial
change in the reforms and has weakened its corporate governance which would hinder Dior's
entry.
Economic factors
Economic factors encompasses inflation rate, GDP, exchange rate, unemployment level
etc which can either be beneficial or harmful for the company. South Korea is well known to
maintain its economic stability even during the period of high crisis. GDP of south Korea
increased in 2017 to 3.1% and in 2018 to 2.8% because of development of real estate industry
and growth of fiscal and monetary measures thus this becomes a golden opportunity for Dior to
establish its stores in Korea. Apart form this, the inflation rate in South Korea is highly stable

and is expected to increase to 2% in upcoming years. Fiscal surplus was made powerful in 2018
and now constitute 2.4% of GDP. These all factors will go a long way in helping the Dior to
serve Korean customers. But the major challenge which Dior may face in south Korea are
weakening exports and static investment which would alleviate its economic growth to 2.8% in
2019 as well as in 2020. Unemployment rate might reduce from 3.7 to 3.2 which would make it
difficult for Dior to employ skilled staff for future development(Vinichenko and et.al., 2016).
Social factors
The major social factors which the organization should consider while operating
internationally are population size, growth rate, lifestyle, attitudes, cultural beliefs etc. The
population size of South Korea has been doubled from past few years and has undergone a rapid
transformation. Mortality rates has now declined and and life expectancy has increased from
5.1 % to 7.2%. Besides this, the poverty level as reported in 2016 was 17.9% which has lowered
down to 15% in 2019. This has indirectly increased the spending power of Koreans on goods and
services. In addition to this, the evolution of makeup culture has made Koreans fashion-centric
and consumers are now purchasing more fashion product. These all factors will affect Dior in a
positive way who wants to establish its business in South Korea. But the emergence of other
competitors to entice the Koreans would be a challenge for Dior(McHale, 2019).
Technological factors
With the advent of digital technology, It has become essential for all the organization to
incorporate technology in each and every bit of the business. They should consider level of
innovation, automation, growth of R & D activities etc. South Korea is well known for its
innovative technologies and has inculcated development in every sector. It has transformed itself
into high tech and skilled workers(Mežinska, Lapiņa and Mazais, 2015). South Korea is
spending a huge amount on research and development and has invested 4.29% of the GDP in
2018 Thus this will be a great opportunity for Dior who is technology oriented and brings
innovation in each and every sector. Dior will have to focus on latest equipments and machines
to attract the Koreans and will have to have to update its SEO. Moreover, they will need to
emphasize on automating its operations and support activities. The utmost challenge which Dior
may encounter while expanding its business will be cost of acquiring these high tech equipments
and apparatus and fulfilling the high demand of online marketing among consumers as Dior till
now has not widen its online presence to great extent.

Environmental factors
Environmental factors involves changing environment, nature and its element which
affects the functioning of an organization. These includes Environmental policies and climate
changes. For maintaining the better quality of air, South Korea launched a air quality control
plan to utilize the energy and avoid wastage thus Korea is highly concerned for its citizen when
it comes to managing sustainable environment. This will help Dior in future whose strategic
view is to produce environment friendly products and protect the customers from its harmful
effect. Dior is now focusing on sulfur free beauty products and ammonia free cosmetics to
prevent the emission of ammonium gases in environment. Besides this, Dior implemented
various measures in order to mitigate greenhouse gas emission, and taken steps for energy
efficiency. Thus their contribution to Eco-friendly products will aid them in expanding their
business in south Korea. But the changing climatic conditions and global warming could be one
of the challenge that Dior must consider before entering Korean market(Nieuwenhuis, Vergragt
and Wells, 2017).
Legal factors
Legal factors includes Employment laws, consumer protection laws, copyright and
patents etc. South Korea has a civil legal system and impose the heavy restrictions on
organizations for doing business. Dior is one of the well recognized brand in fashion industry
and has maintained its goodwill by following the strict legal legislation. All the products of Dior
are copyrighted and does not believe in stealing the competitor's designs. Besides this, Dior
emphasizes on avoiding false advertisement and take this law very seriously to maintain its
goodwill. Therefore all these essentials will help Dior to succeed in South Korea where the legal
structure is highly stringent when it comes to complying with the laws(Kirton and Trebilcock,
2017).

Illustration 1: PESTLE analysis
(Source: PESTLE analysis, 2018)
4 Assessing business scenario
Opportunities For Dior -
In many parts of the world the focus has shifted from absolute luxury brands to
affordable luxury brands. So Dior could acquire small competing companies to grow more in the
market of the South Korea. By acquiring the small competing companies Dior could become a
company with huge capital and grow in the market with new innovation and manufacturing the
different competing products and become the popular brand among the market. Dior can mainly
focus on manufacturing the accessories and apparels for male consumers as there are less
competitive companies in the market who manufactures the apparels for male consumer's. And
men are now a days more addictive of brands so they can attract the male consumer's easily by
its amazing range of products for man's. The present generation is more addictive to technology
all times. So Dior could try to bring more technological innovation in its products. Dior could
bring innovation in its technological products such as watches they can introduce a smart watch
with a different innovative features. Could also manufacture the innovation in the trimmers as
this is the basic need of every man's in today's generation so it can be a first prefrence of the
male consumer's. Dior along with South Korea could expand its business in Taiwan, Thailand
and India as the young population of these countries have started to buy luxury goods due to
their uniqueness and exclusivity. This help Dior to become more popular brand among the young
population and could manufacture the products according to the needs and demands of the
consumers(Jenkins and Williamson, 2015).

Threats for Dior
The major threat which Dior might face while expanding its business in South Korea is
increasing competition from the leading fashion brand like Chanel, Burberry. While these
companies are highly concerned with innovation and development, Dior still lacks behind in the
pace with which it is exploring new arenas and incorporating innovation in its products.
Therefore, the less investment in innovation may hinder its performance in some or the other
way(Pettinger, 2016).
Another threat which Dior might encounter is counterfeiting which is the cross selling of the fake
goods through illegal channels. Counterfeiting is one of the major risk which will affect the
revenue generation and profit of Dior in a great way. Counterfeiters dominate the customers and
markets obstructing the manufacturers producing genuine products. For example, sales of the
cosmetic division of Dior might affect if another channel imitate their perfumes in terms of
shape, size, fragrance, ingredients, and packaging.
Having a low social media presence might make it difficult for Dior to thrive in the South Korea
market and establish its position. As the Koreans has now become technology oriented therefore
Dior would face problems in fulfilling the needs of its online customers as it has not expanded its
online presence across world till date and has not invested much in automation and digital
technology. For example The Instagram account of Dior to promote its products has not gained
much success as it mainly targets niche audiences(Hillary, 2017).
Porter's Five Forces Model
Porter's Five Forces Model is also known as the Competitive Forces Model. The main
purpose of the model is to determine the profit potential of a business sector in the market.
Porter's five forces consist of forces which are adjacent to the company that impact on its quality
to satisfy it's consumer's and made a huge profit. The five forces are discussed below -
Threats of New Entrants -
This industry have huge profit margins, so more and more new entrants will try to enter
into the market. It is necessary to to block new entrants in the industry because somehow new
entrants will eventually effects the profit margins in the industry. Copy rights and patents are the
barrier to entry for Dior in the South Korea. Dior would require a high capital to expand its
business in South Korea, it is the basic necessity of a industry to start a new business. The
Company should be aware of all government restricted policies before planning to explore its

business in the other countries. They should assume the switching cost high to retain their
customer's trust for their brand. Somehow customer' loyalty must plays an important role so they
should more emphasis on the consumer's loyalty among their existing brand so their customer's
do not switch to other brand(Director and et.al., 2016). If Dior will not emphasis on its existing
customer's than their customer will switch to the Chanel a huge competitive company for Dior. It
is the moderate level of threat to overcome this Dior should attract more suppliers and
distributors to supply and distribute their brands among the country and promote their brands
more and more globally(Davies, 2016).
Threats of Substitutes -
If good and services are not up to the standard, consumer can use a substitute and
alternative and switch to other brand which doesn't make any extra effort and no major
difference among the product(Neubauer and Lank, 2016). Contractual and legal barriers also
effect the buyers propensity to substitute so the Dior should emphasis more on the brand's loyalty
among its consumers. Dior must be aware of its product's number of substitutes available in the
market to identify deficiency of its product among those substitute available in the market so
they can improve their product. Reduction in the quality of the products of the brand let the
consumers to switch to the other similar option. If Dior is not providing the good quality product
then their customer's will switch to other substitute brand such as Gucci, Burberry, Zara, Hugo
Boss etc. which satisfy the similar needs and demand. This brands are close substitute to each
other the Dior must emphasis on its quality, price and quantity of the products while expanding
to South Korea so their consumers doesn't need any substitute(Tang, 2019).
Degree of Industry Rivalry –
It is very vital for a company to understand the industry rivals to make its product
successful among the market. It describes how the public perceives the product and distinguish
the product from its other competitors. An organization must work on its competitive strategies
and pricing and positive reactive to changes made. Company should be more innovative to be an
more competitive company among other company. While expanding its business in South Korea
Dior must be more innovative and should explore up with new innovations in its product to
sustain in the market for long term and compete with the other competitive companies. Due to
lesser online presence of Dior its major competitors such as Chanel, Burberry, Zara, Hugo Boss
etc. could become more popular brand among the consumer and will have a more profit margin

as compare to Dior. In the today's growing internet trend every consumer wants to fulfill its all
needs and demand online so to sustain in the market for long term and to sustain huge profit Dior
should use online Advertising and online selling of its product through different apps and
websites(Erasmus, Strydom and Rudansky-Kloppers, 2016).
Bargaining power of Buyers -
The buyers power is high if they have too many alternatives and the buyers have the less
power if they have lesser options and switching. If Dior wants to explore its business in South
Korea then they should have a more product alternative so its consumer would have a different
alternate within the company this will lead company to sustain among the other competitive
companies. Dior should set the prices of the product according to the needs and demands of the
consumer's. Dior should have uniqueness in its product so it can easily compete with Ralph
Lauren and Prada and become the first preference of the consumer's(Nicolescu and Nicolescu,
2017).
Bargaining power of Suppliers -
Bargaining power of the suppliers is also known as market of inputs. If there is limited
alternative of suppliers then there is threat of high price for the unique resources. If the supplier
of leather for Dior makes threats than substitute provides and alternative to them so that they can
switch to other supplier. While exploring its business in South Korea they should concentrate on
the distribution channel and form a strong channel so they could easily grow in new competitive
market and could sustain for long term.

Illustration 1 – Porter's Five Forces
(Source : Porter's Five Forces Model, 2019)
CONCLUSION
From the above study it is concluded that by applying PESTLE company could determine
the external and internal factors which affects the macro environment of the company and could
work on gaining profit in such a competitive trend. By analyzing Porter's Five Forces Model
company could attract more and more customers and fulfill the needs and demands of the
consumer and could become a popular brand in the South Korea and gain a huge profit. By
optimization the future opportunities and threats for the brand the company could sustain in the
market for long term and could gain the huge profit and become the popular brand among the
competitive brands.

REFERENCES
Books and Journals
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management. Oxford University Press Southern Africa.
Hillary, R., 2017. Small and medium-sized enterprises and the environment: business
imperatives. Routledge.
Jenkins, W. and Williamson, D., 2015. Strategic management and business analysis. Routledge.
Kirton, J.J. and Trebilcock, M.J., 2017. Hard choices, soft law: Voluntary standards in global
trade, environment and social governance. Routledge.
McHale, J., 2019. The changing information environment. Routledge.
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sustainable and socially responsible organisation. Total Quality Management & Business
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Management in the Economic Paradigm of the XXIst Century (pp. 366-373).
Nieuwenhuis, P., Vergragt, P. and Wells, P., 2017. The business of sustainable mobility: from
vision to reality. Routledge.
Pettinger, R., 2016. The Business of Business: The Context of Organisation and Commercial
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Tang, K.N., 2019. Power and Politics of Business Organisation. In Leadership and Change
Management (pp. 69-74). Springer, Singapore.
Vinichenko, M.V and et.al., 2016. Modern views on the gamification of business. Journal of
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Online
PESTLE analysis. 2018.[ONLINE] Available through;
<https://www.cipd.asia/knowledge/factsheets/pestle-analysis>
Porter's Five Forces Model. 2019.[ONLINE] Available
through;<https://www.toolshero.com/strategy/porter-five-forces-model/>

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