River Island's Expansion into Spain: A Business Report

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BUSINESS ORGANISATIONS AND ENVIRONMENTS IN A
GLOBAL CONTEXTS
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Table of Contents
Introduction......................................................................................................................................3
Background information on River Island.....................................................................................4
Background Information on the Business Environment in Spain................................................8
Analysis of the Business Scenario.............................................................................................11
Conclusion and recommendations.............................................................................................13
References......................................................................................................................................14
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Introduction
The report aims to identify the best appropriate opportunity for River Island clothing co. Ltd in
terms of expanding its business to a new country which will be Spain. The background
information of the company, ownership structure, financial structure and current running
international operations will be addressed in this report. The report also includes a PESTEL
analysis which explains the background of the business environment there in Spain. The five
whys analytical approach will be used for analyzing the business scenario in this report. The
impact of FDI (foreign direct investment) on the international expansion plan of the company
will be discussed in this report.
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Background information on River Island
River Island Clothing Co. Ltd is one of the most renowned fashion brands worldwide. The
company operates its business from its headquarter, which is situated in London. River Island is
a private company which is owned by the Lewis family as well. The company was founded in
1948 by Bernard Lewis and his two brothers. The company deals in fashionable men, women
and kidswear. The company has been operating successfully since long now in the global market.
The company expand into menswear in 1982, and it launched its first Concept Man stores. It has
over 350 stores in the UK, Ireland, Asia, Middle East and Europe as well. Besides this, the
company has six online websites that deals in 4 currencies, which has been shipping over 100
countries worldwide. As in December 2017, the company generates approx £901.9 million
revenue and the operating income of the company was approx £87.7 million as well. River Island
is one of the most well known and loved fashion retailing brand on the high street (River Island,
2019)
River Island aims to bring and connect people with new, original and innovative fashion to the
customers. The company has large creative designing teams that design their products in house.
It will be helpful to the company to supply new fashionable clothing to online and offline stores
every week as well. The company operates through a global supply chain network which helps to
source and manufacturing company's products throughout the world as well. With the help of
this supply chain network, the company has been operating its business internationally. The
company understand the importance of building strong and healthy manufacturing relationships
with its suppliers as well (River Island, 2019). It must be considered as one of the biggest reason
for its continuing success globally.
Structure of River Island
The company was founded in 1948 by Bernard Lewis and his two brothers in London. It is a
private company with share capital, and the Lewis family owned it. The company has been
successfully operating with its four directors, one CEO and one secretary in the company. The
following table will be helpful to understand the structure of the company as well.
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Name Profile
Mr Bernard Lewis Director
Mr Clive Robert Lewis Director
Mrs Vanessa Jane Lewis Director
Mr Benjamin Joseph Lewis Director
Cavendish Square Secretariat Sectary
Ben Lewis CEO
Financial performance of River Island as on Dec 2017
Source: Indole,(2019)
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Turnover of River Island Clothing Co. Limited worldwide from 2013 to 2017 (in millions)
Source: statista,(2019)
International operations of River Island
The aim of River Island international expansion is to become multichannel fashion brand with a
substantial international presence. The company has been shipping its business into more than
100 countries. The ability and willingness for innovating the operations of the company into
international markets encourage the company to perform effective research and development for
the countries which company has been trying to expand its business into. Effective research of
the market is an essential part of the operations of the company international operations strategy.
The company has been driving through a digital transformation because the company understand
the importance of digital advancements in the global market and the company wants to provide a
unique digital experience to its customers as well.
Company has been focusing on omnichannel strategy when it comes to international market. It
will be helpful to the company to connect the customers to the stores through their phones,
tablets, desktops. It helps the company to enhance customer service as well, which will be one of
the most required things for the company in order to achieve its goals successfully in
international markets. Company has been focusing on providing strong online and offline
customer assistance so that customers will come to stores willingly, and it will be one of the
success formula of the company from last many years as well. The company also wants to
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empower its employees or store representatives with all new digital advancements, which will be
helpful to the company to provide better, fast and quick services to the customers as well. The
company understand it well that omnichannel digital transformation will be helpful to the
company in terms of expanding, which helps the customers to provide online and offline linked
seamless digital experiences.
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Background Information on the Business Environment in Spain
As the continue expansion of its business to the international level, the company decides to
expand its business to Spain. Spain has an estimated population of 46.323 million as in 2016,
which is expected to be 45.923 million by 2022. It is considered to be a huge market in terms of
the shopping habits of customers. Now the company wants to to establish its business into a new
country which is Spain. The company has been already operating in Europe, but Spain is a new
place for the company in terms of business. It is considered to be one of the most positive
opportunities for the company because it has a huge customers market for the company as well.
Spain is one of the growing economies of the country, and the government of Spain is very
favourable for the companies who want to expand or establish their business to the country. The
new government of Spain introduces the FDI scheme (foreign direct investment), which will be
very helpful in terms of attracts new investment in the country (Alaverz & Cantwell, 2017). The
government has been providing many other facilities to the companies under the foreign direct
investment scheme as well. All these factors will be helpful to River Island for expanding its
business into Spain so far. The PESTEL analysis will be helpful to understand the background
information and external environment of the country as well.
Political – In the past few years, Spain government has been facing some troubles, and because
of that in 2015, the country was unable to find a proper prime minister as well. All the political
parties of the country have been trying to resolve the issues to set for an end to political unrest. In
2016, the revenue of the Spanish government was Euro 424.229bilions and expenditure was
around Euro 475.946 billion as well, which ended government borrowing negative at Euro
51.717 billion. It helped to understand that the government didn't have enough financial
resources available, but now the government allowed FDI (foreign direct investment) scheme
which helps to attract the foreign investment to the country (Yuksel, 2012). Besides that, the
government is providing different other facilities to the companies so that they easily expand
their business that will be helpful to increase their growth, revenue and GDP of the country.
Economical – Spain economy is the 4the largest economy among all the countries in Eurozone.
The fashion & clothing industry has a huge potential of growth in Spain market. The GDP of the
company has been growing from the last many years as well. Due to some political unrest, the
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economy of the country faced some GDP contraction in 2017, but the things have been settling
now. The employment rates which were high earlier, it became come down by 27% to 20% in
recent years. The economy has some negative aspects, along with many positive aspects as well.
The FDI (foreign direct investment) scheme helps to increase the economy because many
companies have been expanding their business into the country.
Social – The Spanish people, loves shopping. It has a huge demand for consumer products.
People love to wear fashionable garments, which indicate that it might have good opportunities
for the company in Spain. In terms of education, Spanish people are considered to be one of the
most educated people among other countries as well. People are highly educated and have
advance college degrees there. The Spanish people are very aware of the fashion & clothing
industry and well known for their innovative fashion approaches, especially Spanish women
(Song, et al., 2017). It helps to understand that Spain will be a great opportunity for the company
because people there understand fashion and brand already has popularity in Spanish market so
far. It all indicates that Spain would be a good choice for expansion its business for the company.
Technological – Spain spends more than $19.2 billion on research and development, which
make the country 16th most of those countries which spends a huge amount on research. When
the whole world has been facing economic recession and reduces the cost of research, the Spain
is the only country which increased the budget of research by latest 2% of the country’s GDP.
The Spanish people are considered to be the most tech-savvy people worldwide with 65%
internet usage rates as well. It helps to understand that people are quite aware of the technical
advancements all around the world. Omnichannel strategy is a huge part of River Island’s
international expansion strategy, and it might be helpful to attract the tech-savvy people of Spain
towards the stores of the River Island. In terms of using the company's technical advancements
for customers will going to work effectively for Spain. It will be helpful to increase the
profitability of the country there (Pan, et al., 2018).
Environment – Spain is one of those countries which are aware of the environment very much.
The country has set some rules and regulations for pollution control, uses of natural resources
and climate change as well. the environment is a serious topic not only for the government but
also for the people who lives there. The companies want to establish or expand their business in
Spain have to follow all the rules and regulations with seriousness in the amount of the pollution
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the companies create, the resources the companies use or event the segregation of those
companies rubbish. It indicates that River Island has to follow some rules and regulations related
to the environment there.
Legal – The legal factors in Spain are as strict as any other country in the Eurozone. The
copyright policies, data protection laws are very strict in the country. Spain is a very bureaucratic
country, which indicates that there are a fair number of legal hoops to jump through when it
comes to those companies which want to start their business there or even opening a local
business as well. River Island has been running its business in different countries, which will
make it easy for the company in terms of expanding their business in Spain as well (Lamas Leite,
et al., 2017).
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Analysis of the Business Scenario
River Island Clothing Co. Ltd wants to expand its business into Spain, one of the fast-growing
economies in the European countries as well. Spain is considered one of the biggest
opportunities for companies in terms of the international expansion of the business of the
company. The country allows FDI (foreign direct investment) scheme for promoting their
country as the popular place for foreign companies to expand or establish their business,
therefore. The five whys will be the best analytic approaches to evaluate Spain as the best
country to expand the business for River Island clothing Co. Ltd. it will be helpful to answer
WHY, Spain is the best available option for the company.
Why? – River Island Clothing Co. Ltd must consider Spain as its new international expansion
country because of FDI (foreign direct investment) scheme. In this scheme, the government has
been adopting a helping attitude for the companies who want to expand their business into Spain.
River Island has been already operating internationally in different countries along with different
countries in the Eurozone as well. It helps the company to understand the complexities which the
company should have to face when it comes to establish or expand its business into a new
country. When it comes to FDI scheme, the government of that particular country will become
very helpful to those countries as well. It will be helpful to the companies in terms of expanding
their business. The government provides different other favours such as taxation rebate,
administrative help and infrastructure help as well. FDI must be the answer to the first why for
the company.
Why? – The possible reason for allowing and adopting FDI to the country (Spain), would be the
instability in the country in the political context. The country has been facing a few political
issues in all the big political parties in the country which ended up no stable government in the
country in 2015. If the government wasn’t stable in the country, it wouldn’t be possible for the
economy and GDP of the country to make any growth as well. It has ended up the government to
allowing and adopting FDI to the country as well (Key, 2019). It would be helpful for the growth
of the GDP and economy of the country, which is considered to be one of the biggest
requirement for Spain right now.
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Why? – There are two big political parties in the country which has its candidates in the election
of the country. Among all the population in the country, the youth population is the highest part
as well. It must be really required that the highest majority part of the population must be
satisfied with all the policies of the government. The major part of the population, the young
people, were not very happy with the policies with the government.
Why? - The biggest issue behind this unhappy attitude of young people in Spain was the higher
unemployment rates in the country as well. It will be one of the good opportunities for the
company to get cheap labour costs in the country which the company needed in order to expand
its business successfully in Spain.
Why? – For providing good and sufficient employment opportunities, it will be really required
that the government allows different foreign companies to open international trade. In the time of
globalization, Spain is one of those countries which have been known for its strict rules and
regulations as well. Before FDI, it was not possible for many of the companies to even think
about expanding their business there. (Serrat, 2017)
Overall, all these factors help to understand that Spain must be considered as the best available
option for the River Island for expanding its business as well. All these factors will b helpful for
the company to run its business.
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