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Introduction

Padini is a Malaysia-based investment company which headquarters located in


HicomGlenmarie Industrial Park, Shah Alam In !"#!, Padini $ounded as proprietorship
under the trade name Hwayo Garments Manu$actures %ompany Initially, Padini was a
manu$acturer and wholesaler o$ ladies wears A$ter that, Padini added men&s and
children&s lines to its o$$erin's It entered the retail industry with $la'ship brand Padini in
!"#( Padini&s $irst sin'le-brand store distributin' Seed was opened in Sun'ai )an'
Pla*a, +uala ,umpur in !""-
.ow, Padini has become a leader o$ multibillion te/tile and raiment industry in
Malaysia 0he ma1or subsidiaries o$ Padini includes 2incci ,adies& Specialities %entre
Sdn 3hd , Padini %orporation Sdn 3hd, Seed %orporation Sdn 3hd, Padini 4ot %om Sdn
3hd, 0he .ew )orld Garment Manu$actures Sdn3H4,Padini International ,imited,and
others 5PA4I.I 6AMI,7, -8!-9 It has ::8 stand-alone stores, consi'nment counters and
$ranchised outlets in Malaysia and around the world 0he vision o$ the Padini is to be the
best $ashion company ever 0hey are committed to achievin' this 'oal throu'h hard work,
discipline and creative endeavor 5PA4I.I, -88#9
In today business, one success$ul or'ani*ation not only rely on luck, they also
need to 'rasp all the chances that 'iven Globali*ation has created many opportunities $or
those or'ani*ations to e/pand their businesses internationally Globali*ation also has
stren'thened the world economy in the aspect o$ markets and production 0here$ore, this
is the ri'ht timin' $or the Padini to develop their business internationally Padini e/pands
and enters $orei'n marketplace by usin' mode o$ entry Mode o$ entry is the channels
used by the or'ani*ation to entry international market 0he mode o$ entry use by Padini is
throu'h $ranchisin' o$ one or all o$ their strate'ic business units such as Seed, 2incci and
so on 5Padini Hodin's 3erhad, -8!-9 0heir entry into Saudi Arabia, ;'ypt, 3ahrain,
Pakistan and others are usin' $ranchisin'
2.0 Current Expansion Strategy
Padini has become a leader o$ local te/tile and 'arment sector, which they carry the
Made-in-Malaysia stamp $or the abroad e/port market Padini has a wide variety o$
products ran'in' $rom men < women 'arments, shoes, accessories, and so much more
Padini has currently e/pand their business into variety o$ brand such as 2incci, 2incci
Accessories, Padini Authentics, P4I, Padini, Seed, Miki, and P<%o 2incci is one o$ the
brands that has success$ul venture into the abroad market such as 0hailand, =atar,
Pakistan, 3ahrain, ;'ypt, Morocco, 3runei, Philippines, Saudi Arabia, >man, Syria,
Indonesia, ?nited Arab ;mirates and %ambodia Accordin' to Padini annual report -8!-,
0i*io is a new brand has been launched in .ovember 0he store sells a variety o$ shoes,
which are created by in-house desi'ner, while ba's and accessories are imported in $rom
+orea Padini has been reco'ni*ed as Malaysia 0op :8 Most 2aluable 3rands in -8!- and
valued by Interbrand at @M-A8 million 0his awards has indicate Padini is a best and
most pre$erred brand by the customers because it have di$$erent o$ brand can be choose
by customer .ot only that, middle and low income o$ customers also can buy the product
$rom Padini because the price is reasonable
2.1 Franchising
6ranchisin' is a channel o$ distribution which will be the entrepreneur&s choice and also
as a way to promote and e/pand their business by usin' the scarce resources, minimi*in'
a'ency related e/penses, and promotin' e$$iciency in their business operation 5Michael,
!""A9 Accordin' to Padini annual report o$ -8!:, Padini currently has nine labels in its
$amily o$ brands which are 2incci, 2incciB, 2incci Accessories, Padini Authentics, P4I,
Padini, Seed, Miki, and P<%o %onsumers can $ind easily all o$ the brand in ma1or urban
o$ a shoppin' mall Padini has "! $ree standin' stores in Malaysia $or each o$ the brand
Similarity, Padini has !(8 consi'nment counters are operated and run at a shoppin' mall
in Malaysia In the domestic sector, Padini have !C 2incci storess and ! P4I store that is
use $ranchisin' distribution channel to e/pandtheir business 3esides, Padini has D8
2incci stores that are usin' $ranchisin' model to operate in international market 5Padini
Annual @eport, -8!:9
6ranchisin' model is the $ranchisor allows the $ranchisee to use their $irm&s success$ul
business strate'y and model to sell the products or services I$ the $irm lacks o$ the ability
to develop enou'h local in$ormation such as 'eo'raphic location and their own
mana'erial labour, $ranchisin' may be a way to acquire the intellectual capital that are
necessary to e/pand their $ranchise business 54ant and +au$man, -88:9 Padini as the
$ranchisor has a si'ni$icant de'ree o$ control over business operations used by its
$ranchisee 0he $ranchisor will help the new $ranchisee to 'et o$$ the 'round, providin'
advice $or selected location, equipment, sta$$in', trainin' and development and other
aspect to start their new $ranchise business As the return, $ranchisor will receive initial
$ees paid that will come $rom a percenta'e o$ 'ross revenue, royalties and others $ees
5Sashi < +aruppur, -88-9
6urthermore, a 'ood selection o$ the $ranchisee is also important to the Padini $or its
success$ul e/pansion to market 6or instance, to be a $ranchisees must has e/pert work
e/perience in te/tile and 'arment industry, hi'h achievement e/perience, stron' workin'
ability, knowled'e o$ the speci$ic market and stron' $inancial status 3y $ul$ill these
conditions, $ranchisee able to compete with other competitors that $rom the same
industry
0here$ore, a 'ood ideas and power$ul strate'ies can be launched by them $rom time to
time $or Padini in operatin' their clothin' business 0his will ensure that Padini can stand
stable in the domestic and abroad markets ;ven thou'h the $ranchisin' model has helped
Padini success$ully to e/pand its $ashion business, but like other business model, it also
has bene$its and drawbacks
6ranchisin' channel can help Padini to obtain e/pansion capital $rom the $ranchisee
Padini can invest less capital into the its $ranchisee business since $ranchisee have a
stron' $inancial status to run their clothin' business Some part o$ the capital will come
$rom the initial $ranchise $ees paid such as a percenta'e $rom the $ranchisee 'ross revenue
and loyalty $ee 6urthermore, company can 'ain brand ima'e throu'h $ranchisin'
channel 3y $ranchise the business around the world, customer will know well that Padini
is the success clothin' companies which have variety brands 0his can build out the brand
ima'e with the customer and help in company 'rowth rate
Innovation challen'es will $ace with the company i$ the $ranchisor has come out the new
idea It is di$$icult to innovate throu'h $ranchisin' channel than the company place the
idea on its store )hen $ranchisors come out a new idea, they have to ne'otiate with the
$ranchisee to 'et their approval on developin' the new idea 4ue to the di$$erent culture
and rule in di$$erent countries, the new idea may have di$$iculty to implement in
$ranchisee stores Moreover, company will less control over the mana'er that hire by the
$ranchisee 6ranchisee is an individual businessE they have a di$$erent 'oal $rom the
$ranchisor towards their business operation 0his will easily cause con$lict amon'
$ranchisor and $ranchisee 5Hoy, !""C9, and even lead to le'al trouble that can break down
the company reputation 0his is because some o$ the promotin' strate'ies such as coupon
can be used by $ranchisor but may be not suitable to $ranchisee
2.2 Retailing
Moreover, Padini %ompany has used the retailin' strate'y to e/pand their business
market 0his is the strate'y how Padini e/pand their business and more toward to
'lobali*e their company @etailin' is known as the $inal step needs to provide their
product and service to customer Padini has retail around ::8 $reestandin' stores,
$ranchised outlets and consi'nment counter in Malaysia and all around the world 5Padini,
-8!C9 3esides that, retailin' must able to attract, retain and recruit a talented work$orce
in order to stand up $rom competitor durin' -! century %ompany must provide various
type o$ product as their critical strate'yE it has well successes $or Padini 0his is because
Padini involve di$$erent brand and product line such as 2incci, Seed, 2incci Accessories,
Miki +ids and so on 3esides that, they tar'et customer with various product line such as
$ormal wear, kids, accessories, shoes and etc Padini not only retailin' their product in
domestic market but also at oversea 0he advanta'e o$ retailin' is retailer is $ound in the
valued added delivered to customer, throu'h the per$ormance and activities o$ the
company 0his value added must be $irmly based upon customer needs and values
5%arralero-;ncinas, nd9 >bviously, clothes is one o$ the basic need o$ human, Padini
provide the valuable deliver to $orei'n country such as 3runei, 0hailand, Iran, Saudi
Arabia and so on It is one o$ the competitive advanta'e $or Padini i$ compare with other
industry such as hotel industry Another advanta'e o$ retailin' can increase the sales
volume and publicity 5+oistinen, -88"9, this is more clearly when the company retailed
their market at $orei'n country such as Padini 0his is because company tar'et customer
are increased, it will e/ist di$$erent behaviour and culture o$ their customer, company can
sells their product and service internali*ation Publicity o$ company will increased, this
situation not only happen in local country but it may spread to other country, this is the
basic way that the company entre to the international market
>n the other hand, the disadvanta'e o$ retailin' is the need clearer understandin' o$ the
processes 5%arralero-;ncinas, nd9 It is very important $or a company to understand the
source be$ore movin' their business $rom domestic country to $orei'n country Accordin'
to certain researcher, they su''est that retailer need to $ully understand the role o$
product, li$ecycle, ima'es and etc which is di$$erent with domestic product in creatin' the
advanta'e $or company 6or e/ample, some o$ the country very concern about the
protection o$ wild animal, the company which produces the leather product is very
challen'in' to enter to this country 0he limitation o$ retailin' also included the 'ap
between the host and home environment in $our areas which is outlets o$ store $ormat,
consumer behavior, network and environment 5%arralero-;ncinas, nd9 %onsumer
behavior is di$$erent in every countries, the most common o$ this problem that happened
in clothin' industry is the si*e and colour 6or e/ample, the ran'e o$ si*e in 0hailand is
smaller than Malaysia, so Padini %ompany should do some research be$ore retailed their
product to $orei'n country 3esides that, environment considered as e/ternal in$luence $or
every company 7ou try to ima'ine that your company placed at very remote places and
maybe there e/ist some pollution at that area 0his situation will a$$ect the per$ormance
o$ company directly
3.0 Future Expansion Tstrategy
Increase the competitie adantage
0he competitive advanta'es able to achieve throu'h the acts o$ innovation that occur as a
company diversi$ied which brin' new skills and resources to other industry 5Porter,
!""89 3y havin' the competitive advanta'es, the company able to protect itsel$ $rom the
competitors and the potential competitors It helps the company able to survive in the
markets It also can help the company able to compete with other competitor and have
more competitive advanta'es to success in the market
Expand mar!et opportunity and increase pro"it
International e/pansion provides $irms to have potential market opportunities $or 'rowth
53uhner, !"D#9 0he competitive advanta'es that 'enerate pro$itability in home markets
stimulate the international company that apply the same competences to $urther enhance
its pro$itability 5Porter, !""89 3oth home country and the international country are able
to attract more customers and e/pand their current markets It will be increase the sale o$
the business in both countries and create many market opportunities $or the business and
countries to 'row
Increase the productiity and control cost
3eside, the 'lobal company will be e/ploitin' $rom economies o$ scale 53artlett, !"D"9
;conomies o$ scale allow $irms to increase their e$$iciency and productivity It makes the
countries able to increase their productivity with lower vtariable cost 0he countries may
'et the raw material $rom the international country in a cheaper price
#ecrease unemployment rate
>ne o$ the importance o$ veri$yin' into a new country $or host country is it will decrease
the unemployment rate because when a business is e/panded into a new country, the
or'ani*ation will need to hire a number o$ local employees to work $or it Globali*ation
creates more 1ob opportunity, when more the $irm e/pand internationally, more
work$orces is needed 5@uby 7an1ie %hen9 It will increase the 1ob opportunities and
decrease the unemployment rate o$ that new country because there are many 1ob
opportunities that can be $ound on the market so many o$ the unemployed work$orces can
'et their 1ob easier
Recommendation
3.1 $icensing %ethod
)e recommend Padini use licensin' method to e/pand to %hina Padini should have a
licensin' a'reement with %hina $or 'rantin' o$ permission to use its intellectual property
ri'hts, such as trademarks, patents o$ Padini or technolo'y It can able to allow Padini to
take its product to the market without the e/pense o$ settin' up the business locally
52irtuoso ,e'al9 6urthermore, it also provides an instant market access and makes
competitors di$$icult to enter into the market and prevents imitators to copy its products
52irtuoso ,e'al9 Since licensin' does not 'ive a $irm the ti'ht control over
manu$acturin', marketin', and strate'y in a $orei'n country 5%H9 so it can help Padini
to enter into %hina easily because It can help %hina able to accept easily the enterin' o$
Padini since the %hina 'overnment still can control over the business %hina 'overnment
intervention in business will a$$ect the e/pansion o$ business into %hina, a bi' portion o$
publicly traded %hinese $irms were controlled by the 'overnment 50he ;conomist, -8!!9
3y usin' licensin' method, it helps or'ani*ation to save more money on research and
development e/penses 0he or'ani*ation does not need to conduct a research in the new
country and they also do not need pay the e/penses o$ research and development
52irtuoso ,e'al9It helps or'ani*ation to save a lot o$ time and resources since they do not
need to conduct the research so they can enter into the market throu'h licensin' in a very
$ast speed 0he home country is able to learn the ways that the international country
operate the business and 'enerate new product that suitable $or new country&s customers
0he potential cost o$ licensin' is licensin' is less pro$itable compare to others because the
incomes must share between two countries 52irtuoso ,e'al9
3.2 &oint 'enture
)e also recommend Padini to use 1oint venture strate'y 3asically, accordin' to
investopediacom, 1oint venture is de$ined as a business arran'ement in which two or
more parties are comin' with an a'reement to pool their resources to'ether in order to
achieve the 'oal o$ completin' a speci$ic task 5investopedia, nd9 0he task mentioned
can either be a new pro1ect or it can be other business activities In conductin' a 1oint
venture between two companies, both parties are responsible $or the pro$its, losses and
costs associated with it
6irstly, 1oint venture allows a company to per$orm works pro$essionally which helps to
increase the implementation o$ plan to be conducted smoothly 0he 'roupin' o$ two or
more companies allows each company&s pro$essions to work to'ether )ith more
e/pertise 'athered and worked to'ether, brainstormin' will be very e$$ective and
mistakes done inside a plan can be determined quickly and allows the plan to be
completed with hi'h quality Since Padini has not e/pand its business in %hina, so we
recommend Padini to use the 1oint venture strate'y as this strate'y helps $irms to access
into new markets, knowled'e, capabilities and other resources 5Fiatao ,i, !"""9
0hen, the $actors that in$luence the success$ulness and $ailure o$ 1oint ventures depend on
the e$$ectiveness o$ the leadership team 5Fiatao ,i, !"""9 0he structurin' o$ the
mana'ement team has a bi' e$$ect towards the 1oint venture&s per$ormance as these
mana'ers brin' their own e/periences and their parent&s perspectives to international
1oint ventures 0rustin' is very important because it increases the satis$action and
commitment to 1oint venture 5%ullen, Fohnson, < Sakano,!""(9 0he 'oals that each
partner achieved in a team will be directly a$$ected by the quality o$ workin' relationship
between partners So, Padini should construct its mana'ement team in %hina properly i$ it
needs to e/pand its business in %hina So, by havin' trust a'ainst the mana'ement team
in %hina, it helps to enhance satis$action and commitment to 1oint venture
(.0 Conclusion
0hrou'hout this assi'nment, we analy*ed Padini had success$ully enter into the
international market by various e/pansion strate'ies 0he current e/pansion strate'ies
used by Padini are $ranchisin', e/portin' and retailin' Padini uses $ranchisin'
distribution channel to e/pand their business in the domestic sector and even international
market In domestic sector, Padini have !C 2incci stores and ! P4I store that is use
$ranchisin' distribution channel and D8 2incci stores that are usin' $ranchisin' model to
operate in international market Padini also use the e/portin' strate'y to sell their 'ood
and service at 0hailand, 3runei, Saudi Arabia and so on Padini try to use this strate'y to
internali*e their business 0he last e/pansion strate'y use by Padini is retailin' Padini
has retail around ::8 $reestandin' stores, $ranchised outlets and consi'nment counter in
Malaysia and all around the world
Insi'ht o$ Padini
@ecently, we $ind out that Padini&s Holdin's has increased as in -8!C the net
earnin's o$ Padini has beyond its e/pectation 3ased on Padini, it said that the revenue
shown is due to the e/pansion o$ Padini&s retail distribution network with the open o$
three Padini concept store and a total o$ $our 3rand >utlet Store
6uture 4irection o$ %ompany
Padini who treats the retail environment as a whole will not stop to be more and
more challen'in' %ompetition that occurs between consumers and markets 0his causes
the competition $or consumers& spendin' @ecently, customers tend to sit at home instead
o$ spendin' outside due to economic conditions However, some consumers who are with
hi'h level o$ standard livin' will still continue to take up $or premium 'oods to enhance
their own li$estyle In $uture, Padini plans to have the chance to e/pand business
0he success$ul o$ the company in the international market depend on the strate'y
that the company implements 0here$ore, it is important $or the company to implement
the most suitable strate'ies in that country 0he success$ul role model that we can see is
Padini In order to be success likes the Padini, we think that other clothin' companies can
practice the 1oint venture strate'y 0he 1oint venture strate'y is de$ined as 1oint between
two or more parties in order to achieve the common 'oals Sometimes, they also can
cooperate with their competitors, customers or partners 6or e/ample, Pepsi%o has
invested to the di'ital media in 3ra*il 0his is because they could build the stron' ima'e
throu'h media industry
)e hope Padini can e/pand its business into the %hina market in $uture As we
know, %hina is the country that have hi'h rate o$ population in the world 0here$ore, this
can provide many business opportunities to Padini In addition, the hu'e rate o$
population also can help Padini to enhance the sales rate and earn hi'h amount o$ pro$it
0he livin' standards o$ %hina people now are become hi'her than be$ore Ma1ority
middle classes o$ the %hina people had up'rade to the upper classes 0here$ore, they have
the capable to buy more and spend more 0his is the 'reat business opportunity provides
to Padini so that we hope Padini can take advanta'e o$ this rare business opportunity
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