icebreaker: china market entry decision  Case Solution & Answer

icebreaker: china market entry decision Case Solution

Introduction

Icebreaker is an outdoor clothing brand that was founded by Jeremy Moon in 1995. This company is based in Wellington and has expanded to 1500 stores in over 22 countries.Before the introduction of Icebreakers;many outdoor clothing brands in the market were made up of synthetic materials, like: nylon, polypropylene, and polyester. Contrastingly, Icebreaker is the only brand that provides natural fiber options toits customers. Its target market is based on those groups of people who are hikers, mountain climbers, skiers and desert trekkers because they usually enjoy these clothing lines, like: mid-layer tops and thermal underwear. The clothes are made of merino wool which is not ordinary wool, which is made of a lot of fiber that makes clothes very light to wear and breathable. Merino wool is obtained from merino’s sheep in New Zealand, and it is a more expensive wool in comparison to others. Icebreaker has captured the outdoor clothing market in Australia and has planned on expanding its business to other countries and regions, such as: the U.S. and Europe.

Problem Statement

The CEO of Icebreaker: Jeremy Moon, is thinking about the strengths and weaknesses of expanding rapidly in the American and European markets against extending the decision of entering in China. If it is preferring to enter the Chinese market; it should either stick to its current strategy of technical merit in merino wool or change its strategy according to the Chinese  traditional fashion route, because the market of technical apparel is virtually nonexistent in China.Icebreaker has a defined positioning in the market where it promotes the company as technical apparel instead of apparel manufacturing company. Right positioning directs the company towards a right path. So, Icebreaker always scans for opportunities, and has planned to enter the Chinese market.The objective of this case study is to identify whether Icebreaker should enter the market or not, considering the fact it is the right time to grab the Chinese market, what external and internal environment challenges can be faced by the company and having a situational analysis to make the decision.

1.Market Analysis

Chinese Market

Icebreaker should enter the Chinese market. Undoubtedly, there are many pros and cons of doing so,which are explained below:

Pros

China has a large market which is considered as a saturated market that is always ready to spend on Western items. China’s economy is very stable, and is on the trend of growing every year. The company would have a limited competition in comparison to other competitors, as China has less specialty in outdoor technical sportswear, and there just a few retail stores for technical apparel. In China, the network of fashion distribution is very extensive and it welcomes western goods, which is a good advantage for the company. Chinese people are more concerned about brands, as they prefer luxurious apparel brands instead of traditional apparel. China has maintained a good growth rate in the domestic apparel market and is looking for more rapid growth techniques.

Cons

But there is a risk in establishing the business in China, as the Chinese market is very different than other markets, such as Europe and the U.S. Considering the market size and growth in the apparel industry; Icebreaker can enter the Chinese market, but doing so may cause a change in its brand, as if it enters the Chinese market;  it would shift the industry from technical sports apparel to fashion apparel, which will affect the positioning of its brand and can decrease its brand value as well. Yet in 2007, Icebreaker is unable to  afford the changes in brand positioning, as it has a unique position in other markets. So, the company needs to wait for brand consolidation in the European markets and America, which may  causeit to make changes in its supply chain and distribution channels to enter the Chinese market as its market strategy will be changed. This can cause the company to have a negative brand equity and can put a strain on its products’ development. There is a phenomenon of copying the brand in China as they make copies of the brand, which can cause a reduction in the company’s sales or product development in China. There isn’t any certainty for the company to have brand loyalty among Chinese customers because it cannot be predicted that how the Chinese fashion customers would embrace the company’s brand……………………………

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