Foreign direct investment (FDI) is not a new concept, and many international companies are interested in FDI in markets with new business growth opportunities. The present study focussed on the UK-based retail company, Vera, which is a fashion and homeware retailer that has decided to go with FDI. The company is considering investing in the Indian retail market and setting its distribution network as a value perspective.
The current study proposes that Vera should consider FDI policies for India, as well as the norms and regulations of the market, to operate successfully and meet anticipated objectives. The retail industry of India is large and significantly contributes to economic growth; it is expected that the retail market will develop even further in the near future. Vera should consider various legal norms, such as corporate tax and trade policies, and risks, such as competitors and market structure, to ensure positive investment results.
This study includes Political, Economy, Social, Technology, Legal, International, Environmental and Demographics (PESTLIED) and Strengths, Weakness, Opportunities and Threats (SWOT) analyses to determine whether the Indian retail market is suitable for Vera as a direct investment. The joint venture method is suggested as a suitable mode of entry because it would save costs and easily target existing suppliers that could provide support while the company establishes a strong distribution network. Additionally, FDI inflow to the Indian retail market has increased, and more international companies are expected to invest in this market. It presents positive opportunities for Vera too to invest in Indian market and set distribution channel in the targeted market. Therefore, it is recommended that Vera directly invest in the retail sector of India to increase its business borders.
Investments in foreign markets have significantly grown, as many international companies have expanded into new markets to gain market advantages and a strong customer base and to build a global image (Froot 2008). FDI allows companies to stimulate economic development in a target country by creating a more conducive environment for investors and has facilitated international trade, which allows firms to transfer technology, products or services at lower costs. However, organisations must understand the market and economic situation of a target country before deciding to invest in a foreign market (Blaine 2009, p. 175).To aid in this, market studies inform firm decisions about which entry modes are most productive and ensure long-term growth and sustainability. This report focuses on the Indian market, which Vera, a United Kingdom (UK)-based retailer, is targeting for expansion and for international operations. Thus, Political, Economy, Social, Technology, Legal, International, Environmental and Demographics (PESTLIED) and Strengths, Weakness, Opportunities and Threats (SWOT) and competitor analyses are performed to understand the market situation, and a specific mode of entry is proposed to ensure the company’s expected results.
2. Statement of the scope and opportunity of investment
Vera is a well-established fashion and homeware retailer in the UK and has been successful in increasing its number of stores across the country. The company sells their own brand of clothing, as well as other well-known brands, and is popular among youth. However, the company has been facing stiff competition from the many other clothing retail firms in the UK.