Business Organisation: River Island's Global Strategy in Spain

This report provides a comprehensive analysis of River Island's business organization and its expansion strategy within the Spanish market. It begins with an introduction to business organizations and the specific context of River Island, a global fashion retailer. The main body delves into the company's background, highlighting its history, mission, and target market, followed by an examination of the business environment in Spain. This includes a PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors impacting the business, and Porter's Five Forces analysis to evaluate the competitive landscape. The report assesses the threat of new entrants, supplier power, buyer power, the threat of substitutes, and competitive rivalry. The report concludes with a summary of the key findings and strategic implications for River Island's operations in Spain, offering a thorough understanding of the challenges and opportunities in the Spanish retail market. The report includes financial data and market share analysis of the Spanish clothing and footwear sector. The report uses analytical frameworks such as PESTLE and Porter’s Five Forces to provide a comprehensive view of the external business environment. The report is a student submission for Desklib.

Business organisation in a
global economy

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Company Background.............................................................................................................3
2. Background to the Business environment...............................................................................5
3.Analysis of Business Scenario..................................................................................................9
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business Organisation is a process in which a group of people controlling the firm and
having an aim of carrying on commercial enterprise by providing goods and services and fulfil
the needs of customers. It is an systematic approach to achieve the goal. The selected
organisation is “River Island” located in Spain. This report is introduces global business
organisation a firm that work in many countries around the world (Straková, Pártlová and
Váchal, 2017). When any organisation enters in foreign market , they have to compete with the
local organisation in that country as the global business leads high-level of competition among
businesses. Moreover, the foreign businesses must produce high-quality product with low-cost.
The primary objective that will be addressed in this report is to expand the operations of river
island in Spain.
MAIN BODY
1. Company Background
While competing in foreign market the River Island is one of the most well known and
high-street fashion brand, which operates a number of worldwide market. The River Island is a
private company having a headquarter in London and founded in 1948 by Bernard and David
Lewis. Within 60years of fashion retailing experience the company build its goodwill and every
customer loved its brand (Rashid and Barnes, 2020). Its main objective is to produce fashionable
cloths for men and woman within a appropriate budget with a mission that they will provide new
fashionable looks for their customers and build their brand name as it is well known nation
brand. As this company mainly focus towards selling of very broad range but in lower-cost by
targeting middle-market men and women. For future consumption the company invest in other
countries. The company success is based on its ability to develop processes that allow to get new
fashion line into its stores quickly. River Island is one of the fast-moving designer brands with
having more than 18 stores in other countries. It is very exciting, innovative, creative and fun
company. River Island use many method to attract customers by including advertising, available
to order clothes online and with home delivery.
As the allocated country is Spain which is located in Southwestern Europe and occupy
85percent of Iberian Peninsula. It is a country of stone castles, vast monuments which is
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favoured travel destination (Feros, 2017). Spain ranks number 30 in the list of dependencies by
population among 196 countries having an estimation 46,332,614 people in 2019. The history of
Spain began with the death of Caudilo Francisco Franco on November 1975. In 20th century civil
war, absolutism and a impressive return to democracy and known for its extremely high living
standard.
The market share of the retail market in Spain has been predicted to grow rapidly at a
CAGR of 2.2% from €213 billion in 2016 to €240 billion by 2021. The total Spanish clothing
and footwear sector has attained the sales of €27 billion in 2016 which accounted for 12.7%
share of the total retail sales on the country. This represents that market share in retail industry is
competitive and has tremendous opportunities in River island applies relevant expansion
strategies. In case of clothing, the market structure in Spain is oligopolistic which means that few
firms such as Zara are dominant in the market the products sold are differentiated. Major
competitors for River island in Spain for high street and luxury clothing/apparel retail sector
would be Zara, Mango, Desigual, Stradivarius, Bimba y Lola, Adolfo Dominguez, Pull & Bear,
Oysho etc.
Gross profits of River Island Clothing Co. Ltd (2013-2018)
Figure 1: Gross profit
Source: Statista 2020
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2. Background to the Business environment
For analysing the external business environment and for competitive analysis two
analytical frameworks that will be used are Pestle analysis and porters Five force analysis. An
appropriate analytical framework would be used to allocate the business environment as Porter's
Five Forces of competition position is used to analyze the business. This model is for evaluating
the competitive strength and function that occurred in the business environment (Safari, Farhang,
and Rajabzadehyazdi, 2016) as it is based on a concept that finds out the competitor's strength
and attraction towards the market and also helps to identify the different powers that lie in
business. This model is useful to find out the current position of the company and the
competitors and in the future where the organization may look to move into. Through these five
forces of porters, the businessmen can analyze where the new product and services are
potentially profitable and understand the competitive pressures to maximize the profit (Lewis,
2017). This approach helps the River Island in the development of stores in Spain where the
businessmen can compete by identifying the intensity and attractiveness of competitors in the
existing market. Let us examine each of these forces from a retail industry perspective.
PESTLE analysis: Pestle analysis is a tool which is used to monitor the external environment
factor that having an impact on the firm and breaking down the risk into political, economic ,
social, technological, legal, environmental factors. Pestle analysis can be use in focusing on how
to manage resources, risk and return across a firm and identifying the strategies which is very
important to every industry to growth. For every organisation before starting their business it is
mandatory to make some rules, responsibilities and some strategies to be plan as for that the
pestle analysis helps to implement such plans and recognise the changes (Perera, 2017). As the
external environment impacting to the River Island the pestle analysis influences the factors. The
elements are- Political Factors – There are many elements that influence the external environment of
River Island such as political factor as it is determine the intervenes of the government in
the economy. As how the government policy impacting to the specific firm. This can
include the taxation policy, government attitude towards the change in grow in profit and
business. Due to investment risk the big investment is no longer invested and the stability
in policies are no longer to secure the growth of river island. Spain is European union
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member which would mean logistics, import/ export and supply chain issues along with
duties and taxations for river island. Economic Factors- The economic issues that River Island have to look in order to grow
are interest rate, economic growth, inflation, raw material cost, policies, governmental
activities and so on. As the government are not helping the River Island who are spending
money on organisation that will discourage to go forward and invest in the country and find
themselves to move foreign location which are difficult to work but better for earnings. In
context to labour market in Spain, there has been a growing number of part time workers
and the economic situation might be difficult at household level. However, the purchasing
power of customers is high and also various tourists and expatriates make it a popular
destination for clothing purchases. Social Factors – As far as culture and society is concerned, Spain is extremely unique
where most people follow Catholicism. The people are eager to try out fast fashion and
their tastes and preferences majorly depend on the present fashion trends. The social factor
that affects the River Island are considered the lifestyle and cultural trends of the society,
fashion type with career and work attitudes that affects River Island to increase in job
movement with the employees of River Island find that their employees come to work for a
retailer for a number of month but they move on another job (Rastogi and Trivedi, 2016).
This factor having a direct effect to the customers as to understand their needs and wants.
As for River Island or for any retailer industry it is difficult for them to stay on the top of
the new fashion hypes as for every week the new fashion trends come out which could lose
sales to the competitors. Technological Factor- There are many technological issues that having an impact on the
business of River Island externally such as the new techniques are developed by
government, changes in uses of information technology and internet, changes occurred in
cost, and some technical changes in mobile (Policy, 2018). This all are impacting River
Island as they have to update themselves with the changing trends so that they can develop
their brand name. People in Spain are highly technologically advanced so River Island has
to indulge in social media marketing and influences marketing.
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 Legal Factors- As the organisation must be clear about their legal factors. Spain has
various laws and legal obligations that River Island needs to adhere to, such as health and
safety, equal opportunity, consumers rights and law, licenses, product labelling and product
safety. They must be aware about any changes occurred in the legislation. They must know
the do's and don’ts of their company as every company has different roles and regulations
to be followed. Political factor differs with legal factor as political factors require the link
between business and government whereas legal factor involves the legal formalities what
a business can do or not. According to consumer protection right which protects a
consumer from defective products, safety of the product if the River Island are not carefully
follow these agreements then the consumers can sue their company. Environmental Factor- This factor involves the nearby environment which affect the
business as it includes the climate change, weather condition, pollution, food, temperature,
sound, light and so on (Matovic, 2020). An environmental factor is a factor that influences
living organisms. River Island affected with the environmental factor as by not using
proper resources in productivity that having an impact on the quality of the product which
affect the customers mind of not shopping at their store, this would lead to drop profit and
loss in customers satisfaction which is not good for the business having a high effect on
them. In Spain, the use of renewable energy is growing with the rise in the environment
consciousness which means that River Island needs to adopt green changes like eco-
friendly packaging, waste disposal, focussing in reducing carbon footprint and adhering to
environment laws.
Porter's Five Forces: This is a framework used to analysis the competitive position is used to
analysis the business. This model is for evaluating the competitive strength and position
occurred in business environment (Safari, Farhang and Rajabzadehyazdi, 2016). As it is based
on a concept that find out the competitor’s strength and attraction towards the market and also
helps to identify the different powers lies in business. This model is useful to find out the current
position of the business and the competitors and in future where the organisation may look to
move into. Through these five forces of porters the businessmen can analyse where the new
product and services are potentially profitable and understand the competitive forces to maximise
the profit (Lewis, 2017). This approach helps the River Island in development of stores in Spain
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where the businessmen can compete by identifying the intensity and attractiveness of a
competitors in existing market. Let’s examine each of these forces from a retail industry
prospective. Threat for new entry- The new entrants will learn from their past mistakes and improve the
strategies and join the new business by offering low-cost of products so that competitors
may affected. The River Island take care of this threat while entering in new market and get
a opportunity to maximise their sales by offering lower price and attract customers towards
their brand. This level of threat is moderate as there are many upcoming start-ups aimed at
capturing clothing retail market at Spain and well as established companies that are trying
to expand their operations such as H&M. Suppliers Power- As the supplier is one who distributed the products, raw materials or
inputs to industrial players. If the quality of raw material or the inputs are unique will
increase bargaining power of the suppliers. The River Island expand their business by
offering uniqueness in their clothes so that the suppliers can increase the bargaining power.
This level of threat is low as there are various suppliers in Spain as the power of
negotiation is low due to the distribution chains in Spain and also there are various
suppliers from countries like china which provide cheaper raw material in Spanish clothing
industry. Buyers Power- Buyers are the individuals who buy the industrial products and services. If
there are more option of switching to another supplier and the large quantity of products
purchasing, the buyers increase the bargaining power. In case of River Island firm, the
buyers having more options available in retail industry because of easy availability of
clothes with better price offering therefore the buyer’s power will increase in such
conditions. This level of treat is high due to various options available in term of fashion
apparel in Spain. Threat for Substitutes- In an business competition there are more substitute products are
available in the market this will reduce the power of suppliers. As per retail industry, River
Island having a low threat for substitute products in fashion clothing is limited for
satisfaction of customer needs (Mukherjee, 2018). For removing this threat completely, the
retailers must analyse the factors such as availability of more products at online mode,
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home delivery services, modes of payment can be a strength for threats from the
substitutes.
 Competitive rivalry- As this force deciding the numbers and capabilities of competitors in
the market. Many competitors offering quality differences or undifferentiated products and
services in low cost. The higher level of competition may increase the improvement of
services provided by the retailers and decrease profitability. In a retail industry there are
lots of stores who are having a same business they compete and develop their business by
having an intensity in their business. In Spain, the level of industrial rivalry in fashion
industry is high due to majority of established and popular companies that make it difficult
to gain competitive advantage for River Island such as Zara, Bimba y Lola, Adolfo
Dominguez, Pull & Bear, Oysho etc.
All these five forces helps the organisation to get benefit to understand the profitability and
helpful to take decisions regarding entry in new industry, increase capacity and development of
strategies.
3.Analysis of Business Scenario
While entering into a new market the River Island faces some Challengers and opportunities as-
 Labour Consideration- The River Island face a challenge while entering into a market,
the store must require the labour to work and it is difficult to find the right worker who
are experience enough to handle the store.
 Compliances issues- Its an challenge for the River Island to take licensing and regulatory
required for them to work flexible and try to compete with local projects in the market.
 Foreign markets analysis- The River Island doing business in Spain Market in different
levels due to many reasons (Overdiek, 2018). So, keeping track of what's going outside
your country can be opportunity before entering into the market.
 Direct competition analysis- Before analysing demand and purchasing situations, it's
important to analyse supply. It is important to know where your competitors are and
where you are going to compete so that it may increase an opportunity for an business to
grab more customers towards their company.
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As an impact of opportunities and threat, different graphs and diagram of macro-environment are
included to know the inflation and GDP of Spain. For forcasting the Spain economy including
long-term outlook -
The Gross Domestic Product (GDP) in Spain expected to reach 1200.00 USD Billion by the end
of 2020. According to econometric models for long-term the GDP of Spain is planned to around
1280.00 USD Billion in 2021 and 1380.00USD Billion in 2022. GDP of spain will be $1.2
trillion (nominal, 2020 est.) $1.8 trillion (PPP, 2020 est.) (Spakul and Tregub, 2020).
International Monetary Fund estimates of world GDP to reached 86.6 trillion and advanced
economy to be reached 51.7trillion and developing economies GDP will reach 34.9 trillion
during 2019.
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Illustration 2: GDP of Spain
Source: Spain - Economic Forecasts – 2020-2022, 2020

The Graph below provides the advanced v/s developing economies GDP data from 1980 to 2020.
Illustration 3: Advanced vs Developing Economies
Source: World GDP Share 1980-2020, 2019
CONCLUSION
It can be concluded from the above information that this report is for business
organisation in a global economy which include the information regarding the organisation
“River Island” in Spain. It is one of the most well known and loved brands on the high-street.
This report is also study about the allocation of the business environment by the Porter's Five
Forces, PESTLE analysis and demand and supply scheme and how this allocation of applications
are appropriate for analytical framework. The opportunities and challenges faced by the River
Island in new market are also studied in this report.
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REFERENCES
Books and Journals
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Guiso, L and et.al., 2017. Demand and supply of populism. London, UK: Centre for Economic
Policy Research.
Larondelle, N. and Lauf, S., 2016. Balancing demand and supply of multiple urban ecosystem
services on different spatial scales. Ecosystem Services.22. pp.18-31.
Lewis, R., 2017. Porter's Five Forces of competitive advantage.
Matovic, I.M., 2020. PESTEL Analysis of External Environment as a Success Factor of Startup
Business. ConScienS, p.96.
Mukherjee, I., 2018. Applying Porter’s Five Force Framework in Emerging Markets—Issues and
Recommendations. In Strategic Marketing Issues in Emerging Markets (pp. 307-316).
Springer, Singapore.
Overdiek, A., 2018. Opportunities for slow fashion retail in temporary stores. Journal of Fashion
Marketing and Management: An International Journal.
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Policy, P., 2018. What is pestle analysis.
Rashid, A. and Barnes, L., 2020. Exploring the blurring of fashion retail and wholesale brands
from industry perspectives. The Journal of The Textile Institute, pp.1-7.
Rastogi, N.I.T.A.N.K. and Trivedi, M.K., 2016. PESTLE technique–a tool to identify external
risks in construction projects. International Research Journal of Engineering and
Technology (IRJET), 3(1), pp.384-388.
Safari, N., Farhang, M. and Rajabzadehyazdi, E., 2016. The study on the competitive status of
construction companies based on Michael Porter's five competitive forces (Case study:
Armeno Project Development and Management Company). European Online Journal of
Natural and Social Sciences: Proceedings.(3 (s)). pp.pp-72.
Spakul, Y. and Tregub, I., 2020. FORECASTING THE GDP IN SPAIN USING THE
ECONOMETRIC MODEL. Научный электронный журнал Меридиан, (9), pp.574-
576.
Straková, J., Pártlová, P. and Váchal, J., 2017. Business management in new global
economy. Acta Oeconomica Universitatis Selye.
Online
Spain - Economic Forecasts - 2020-2022 Outlook.2020. Available Through:
<https://tradingeconomics.com/spain/forecast>
Spain.2020. Available Through: <https://www.nationsonline.org/oneworld/spain.htm>
World GDP Share 1980-2020.2019. Available Through: <https://mgmresearch.com/world-gdp-
ranking/>
Gross profits of River Island Clothing Co. Ltd (2013-2018), Staista 2020, Available through:
<https://www.statista.com/statistics/829167/river-island-clothing-gross-profit-
worldwide/>
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