UK Companies Looking for Overseas Opportunities
Filed in Sales on Apr.04, 2006
Lee Dawkins asked:
Trading conditions might be tough and domestic retail might be suffering, but
there are some UK companies looking for overseas opportunities to increase their
profit. Many may wonder where they are looking and how this is possible, but
apparently some of these companies are really on to something.
Take Hamleys, for example. They are getting set to capitalise on the excellent
reputation that they have built as a well-known and world famous tourist attraction
by entering into the Indian retail market. The toy store, which has been in
business for 250 years, announced recently that they are entering into a joint
venture with a large industrial conglomerate within India called Reliance Retail.
Hamleys is just one of a number of retailers who have either told the public
they intend to open in India or have been conducting research needed to figure
out how they can open an operation in India and it be successful. This has been
happening increasingly for the past year to two years with hopes that UK companies
can enter into the growing Indian market.
Other companies that are in talks with Reliance Retail and Marks & Spencer
and Wal-mart, which is also scheduled to open its first cash-and-carry operation
in December 2008. Georgio Armani is also entering into a joint venture with
DLF, a real estate developer, in an effort to open stores that will sell various
Armani brands. This comes to no surprise since the Indian market is now worth
approximately $330 billion.
However, India does have its restrictions. It restricts what is called Foreign
Direct Investment, which was put in place by the Indian government in order
to protect independent retailers that range in numbers from 12 million to 15
million. 51% of these retailers are single brand retailers. Foreign Direct Investment
in multi-brands is forbidden, but cash-and-carry businesses are allowed to be
multi-brand retailers. This is when foreign companies start becoming involved
through partnerships with other India retailers and franchise agreements with
retailers.
Nevertheless, it seems that some of the restrictions on Foreign Direct Investment
will be relaxed, according to finance minister P Chidambaram. He says that it
will take some convincing of the mom and pop stores to let them know that these
retail agreements are not going to cause them to lose business. Chidambaram
has said in the past that it was only a matter of time before policies would
be changed to allow Foreign Direct Investment into retail, especially with a
market that is constantly changing.
As it stands now, it is mostly through franchising agreements that some retailers
have become some of the forerunners in India. One of those companies was Mothercare
who was one of the first to explore how franchising agreements would work in
India by teaming up with Shoppers Stop to make a prominent presence in the market
by opening 11 franchises in 2006. As a result, it seems that their approach
is now paying dividends because it seems that 80% of the middle class in India
is aware of Mothercare. And now it is believed that the expansion programme
that Mothercare could possibly double their opening programme in India as well
as Russia.
However, there are a number of barriers that must be overcome after all political
hurdles are cleared. There is a certain degree of resistance against organised
retail and that resistance is making itself known. In 2007, Reliance Fresh,
a major food store operator, was forced to close 47 retail outlets by the government
because of riots by smaller retailers who felt that the store was taking their
business.
In the meantime, UK businesses are finding ways to overcome these hurdles and become even more profitable by getting in on the thriving Indian market, which can be beneficial to the UK in a variety of ways
Perfect UK Business
Trading conditions might be tough and domestic retail might be suffering, but
there are some UK companies looking for overseas opportunities to increase their
profit. Many may wonder where they are looking and how this is possible, but
apparently some of these companies are really on to something.
Take Hamleys, for example. They are getting set to capitalise on the excellent
reputation that they have built as a well-known and world famous tourist attraction
by entering into the Indian retail market. The toy store, which has been in
business for 250 years, announced recently that they are entering into a joint
venture with a large industrial conglomerate within India called Reliance Retail.
Hamleys is just one of a number of retailers who have either told the public
they intend to open in India or have been conducting research needed to figure
out how they can open an operation in India and it be successful. This has been
happening increasingly for the past year to two years with hopes that UK companies
can enter into the growing Indian market.
Other companies that are in talks with Reliance Retail and Marks & Spencer
and Wal-mart, which is also scheduled to open its first cash-and-carry operation
in December 2008. Georgio Armani is also entering into a joint venture with
DLF, a real estate developer, in an effort to open stores that will sell various
Armani brands. This comes to no surprise since the Indian market is now worth
approximately $330 billion.
However, India does have its restrictions. It restricts what is called Foreign
Direct Investment, which was put in place by the Indian government in order
to protect independent retailers that range in numbers from 12 million to 15
million. 51% of these retailers are single brand retailers. Foreign Direct Investment
in multi-brands is forbidden, but cash-and-carry businesses are allowed to be
multi-brand retailers. This is when foreign companies start becoming involved
through partnerships with other India retailers and franchise agreements with
retailers.
Nevertheless, it seems that some of the restrictions on Foreign Direct Investment
will be relaxed, according to finance minister P Chidambaram. He says that it
will take some convincing of the mom and pop stores to let them know that these
retail agreements are not going to cause them to lose business. Chidambaram
has said in the past that it was only a matter of time before policies would
be changed to allow Foreign Direct Investment into retail, especially with a
market that is constantly changing.
As it stands now, it is mostly through franchising agreements that some retailers
have become some of the forerunners in India. One of those companies was Mothercare
who was one of the first to explore how franchising agreements would work in
India by teaming up with Shoppers Stop to make a prominent presence in the market
by opening 11 franchises in 2006. As a result, it seems that their approach
is now paying dividends because it seems that 80% of the middle class in India
is aware of Mothercare. And now it is believed that the expansion programme
that Mothercare could possibly double their opening programme in India as well
as Russia.
However, there are a number of barriers that must be overcome after all political
hurdles are cleared. There is a certain degree of resistance against organised
retail and that resistance is making itself known. In 2007, Reliance Fresh,
a major food store operator, was forced to close 47 retail outlets by the government
because of riots by smaller retailers who felt that the store was taking their
business.
In the meantime, UK businesses are finding ways to overcome these hurdles and become even more profitable by getting in on the thriving Indian market, which can be beneficial to the UK in a variety of ways
Perfect UK Business
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