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Question 2 Entry model:

According to factors influencing entry modes (Lasserre P, 2003), it must be considered internal and external factors when analysing Arcadia entry mode. The capitalization of Indian market According to the Table 1, the average number of market capitalization of listed companies is 83. percent between 2004 and 2010. The companies should face the high capitalization especially in 2007 as a result the capitalization of companies rapidly reduced in 2008. The number in 2010 is percent which is beyond the average number so that the capitalization in Indian apparel market is high. The high capitalization can be refers to the high aggregate value of Indian apparel market. It is a good new for foreign companies like Arcadia because the apparel market in Indian plays an important role. It will provide opportunities for Arcadia due to the large Indian market. Country Name India 2004 53.8 2005 66.3 2006 86.1 2007 146.4 2008 53.2 2009 85.4 2010 93.5

Table 1: Market capitalization of listed companies ( % of GDP ) Source: WDI and GDF 2010 Political climate 1. Foreign Direct Investment (FDI) up to 100 percent for cash and carry wholesale trading and export trading allowed under the automatic route.
2. FDI up to 51 percent with prior Government approval (i.e. FIPB) for retail trade of

'Single Brand' products, subject to Press Note 3 (2006 series). That means India government reopened retail to foreign companies. For Arcadia, if the company wants to choose to adopt the route of 51 percent partnership, Arcadia should tie up with a local partner. 3. FDI is not permitted in multi-brand Retailing in India. Arcadia is required that the company entry India can not have new brands in India. India's FDI policy is low liberal. It is unfavorable climate for foreign investment. Country risk The economic slowdown is a sharp decline in investment. New investment proposals downed 45 percent in 2011 to a five-year low of $209.2 billion. This compares with $376 billion in 2010(The Economic Time of India. 2011). It can be seem that the economic crisic affect the confidence of foreign companies to entry India market. Arcadia entries Indian strategy should consider the Indian economic performance. The

low economic performance affects the demand of customers. Low demand of necessary things will exist when the economic underperformance. Consumers consider the budget when buying clothing. Arcadia should consider the price when entry India. It is important that the consumers accept the price of clothing. Arcadia can use more local suppliers which reduce the costs of the products. Internal capabilities Arcadia internal capabilities contain historical financial oversea invest experiences. Income statement Revenue( million) Net Income( Million) Net profit margin (%) Aug 2010 4,308.99 220.66 5.17% Aug 2009 3,220.68 247.94 7.70% Aug 2008 3,363.02 298.83 8.89% Aug 2007 3,742.69 238.09 6.36%

Table 2: Arcadia Group Historical Financials Source: Hoovers Historical Financials According to the table, it can be seem that the company net profit margin was to reduced since 2008. It has decline to 2.52% between 2009 and 2010. Another bad news is that the company cash generated of 297.4 m in 2011 comparing with 383.1 m in 2010. It was down by 22.4%. Arcadia's financial performance is underperformance recent years. The strategy for Arcadia to entry Indian market is to find partners. Arcadia should seek local financial support. Arcadia may entry Indian market not too quick because unfavorable financial performance. Arcadia has operate a franchise programme for more then twenty years (Arcadia 2011). The company has 33 markets worldwide. The experiences of the global market operate will help Arcadia to resolve problems in Indian market. Conclusion According to Influencing Factors of Collaboration (Johnson, Scholes, & Whittington 2005) and Factors influencing entry modes (Lasserre P 2003) The apparel market of Indian is big and the capitalization of market is high. The political climate is unfavorable all these factors affect Arcadia entry Indian by using license. It is an economic way for Arcadia entry Indian market. Arcadia using five years to entry Indian market that due to build a long-term relationships with local government and partners. The risk would be reduces by using licensing. Despite the company using franchise many years in the global market, the franchise is not suitable used in India for Arcadia.

Franchise requires more responsibilities than licensing (Lasserre. 2003). The uncertain of Indian market management and Arcadia underperformance of financial affect to choose licensing. The disadvantage of using licensing is to damage the Arcadia reputation if licensee is not quality conscious. It is important for Arcadia to seek suitable partners. Another negative effect affects the company lacks of control in Indian. For Arcadia the company only receiver a loyalty fee from licensee. Arcadia using licensing to build Indian's business relationship during 2013 to 2018 after that the company can change the strategy.

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