GET TO KNOW US (Get to know us, n.d). As Kathmandu loves to explore and can thrive in any topography and climate, this report outlines the business sustainability of Kathmandu in POLAND. Poland offers good potential for FDI due to its strategic location i.e. sharing proximity to both European Union and Eastern Europe countries and developing free market economy with growing GDP and huge consumer market with 38 million consumers. Polish people buying power and loyalty stands for brand and quality.
Poland political and legal system imposes taxes plus VAT on exports so Kathmandu can plan to set up a manufacturing unit in Europe to avail tax exemptions and benefits from European Union funding. Poland is quite adventurous country, so for Kathmandu setting up wholly owned subsidiary via greenfield investment is preferred in order to have full control over the renowned products and services. Kathmandu value chain has to be strong for success in polish market like Marketing and sales targeting behavior or lifestyle of polish people, Human resources department has plenty of expertise skilled polish labor, inbound and outbound logistics seems bright in Poland as it offers great logistic hub to international investors with good distribution channels as well.
Kathmandu needs to evaluate the costs undertaken and benefits of new business in Poland. Production technology, marketing strategies, staffing will not be a concern in Poland due to educated population and with time Kathmandu can grab major market share because of quality products and services and brand loyalty of polish people for quality which decide their purchasing capacity.
Poland offers business friendly regulations easing business environment driven by strong domestic demand and politically stable, pro-business country. This report outlines the Kathmandu sustenance in Poland where benefits of doing business will outweigh the costs of doing business.
1.1 Background of The Company
Kathmandu was a small specialist outdoor retailer, manufacturing many of their own products ,selling travel and adventure outdoor apparel and equipment . Kathmandu was founded by Jan Cameron and John Pawson in 1987 in New Zealand and is now leading retailer of equipment sales throughout New Zealand, UK, Australia. They are said to be inspired by customers that are adventurous, travelers as they see outdoors activities as sports and invitation not something to fear. Kathmandu wants to encourage people to get out and explore, therefore creating products that helps gives confidences and safeness to go anywhere in the world.
Kathmandu now has been standing for 30 years and has designed gears to take on adventures and outdoors activities. During the 1990s, their focuses on the designs allowed them to become leaders in product that holds original, sustainability and adaptive. They acquired such achievements due to their testing, trialing, questioning their gear on how it would fit and sustain in the most adventurous conditions, in our own New Zealand. (Kathmandu Holdings, n.d) In 2003/2004, Kathmandu has an OE (Overseas Experience) which is a rite of passage for New Zealanders and Australians. In 2006, 19 years after its inception, a private equity funds has acquired Kathmandu for themselves proposing a changes and a new management systems though Kathmandus core values stays intact. Kathmandu was looking opportunities to grow and that growth itself is what leads them to further opportunities. This can include developments in the team, partnerships with the Red Cross, Outwards Bound NZ and the Australian Himalayan Foundation, etc.
In 2008, Kathmandu has succeeded in opening online operations for the products to be sold and in 2009 Kathmandu was listed in the stock exchange, NZX and ASX. From there onwards, sales, infrastructure, staffs and distribution has increased steadily. In 2018, Kathmandu has purchased the Oboz Footwear which is also an outdoor brand located in the USA, sharing similar values of products. (Kathmandu Holdings, n.d)
2. DISCUSSION AND ANALYSIS
2.1 Market Opportunity Analysis and Choice of Host Country
Why POLAND? Location (Heart of Europe), Political stability, fastest growing economy ,38 million consumers and global tourism destination. Tourism is one of the important industries in Poland with worlds popular global tourism destination (attractive landscapes, geography)(Doing Business in Poland, n.d)
1) Buyer Power: The number of potential buyers is large with high purchasing power and strong wages due to high GDP and rising employment. Their advertising is WORD OF MOUTH, backbone of kiwis which determines their brand loyalty for forever.
2) Supplier Power: Adidas Poland Sp zoo, North face, OTCF etc. are competitive players but polish people starve for quality independent player for supply of adventure outdoor apparel, accessories increasing the sustainability of KATHMANDU there. (Sportswear in Poland, 2019)
3) New Entrants: Small scale entry is preferable and brand strength is important. Kathmandu can serve guarantee of quality to buyer, but new entrant venture is slow and risky.
4) Threat of Substitutes: It is strong due to cheap alternatives. Though polish consumer switching cost is low due to brand loyalty, but monetary concerns are there. So, Kathmandu needs to enter with good quality fair cost products as a predatory invasion to gain brand loyalty.
5) Degree of Rivalry: Big players Iguana group and OTCF favors attractive price quality ratio strategy. So, Kathmandu with strong pricing strategy and product diversification can cater polish outdoor industry. (Outdoor market in Poland, n.d.)
2.2 Host Country Details
Poland is republic democratic country where head of the government is Prime Minister and chief of the nation is president. Poland emphasizes in multiparty system. National assembly is the designation of polish parliament. Since 1989 it has two assembly room lower house as well as upper house. People use voting system to choose head of the government. (Embassy of poland, n.d.). Poland government always want to attract the foreign investors to invest in the country. For that government made easy to register property, pay taxes, and enforce contracts.
Poland economy is the fastest growing economy in the EU. Prior to Second World War, Poland economy was free market economy heavily found on crofting with very little producing and mining. During the period of communist they have introduced state run command economy but that was not successful. (Britannica, n.d.). At present Poland is again emphasizing free market economy system where individual have rights to own their property except some of the industries. Poland economic growth is the slowest in 25 years since embraced free market economy.(BBC News, n.d.).Certain industrial sectors are still own by the government such as coal, salt, glass, textiles and machinery. (Countries and their cultures, n.d.). Polish government is making 14 economic zone by 2026 in combination with industry and technology parks in order to offer foreign investors to choose their attractive locations for opening business. (Rodl and partner, n.d.).
Polish legal system is based on the continental civil law tradition associated with Poland civil law code. Supreme Court is the most important of judiciary system. Judges has got the control of public administration as well as laws. Judges can change the laws and apply it. Government has no control over it. (Globa lex, n.d.). At present, Poland legal system offering special level of protection to the modern business. (Danse bank, n.d.)
Poland culture has developed over the periods by their geographic location. In 1939, there were strong social stratifications, but all had vanished now because of the Second World War. In World War 2, Nazis and communist party both killed educated poles. Polish people believe in classes and cast system. There are at present six grouping in Poland culture, peasants, workers, intelligentsia, slazlacta (nobles or gentry), the nomenclatcha (the communist government), and a nascent middle class. (Countries and their cultures, n.d.). Poles are very friendly with foreigners. They maintain status, seniority and title as well. English is the second language of Poland. Literacy rates of Poland is very high and they are technically good. So, it will be easy for business to hire employee from the country. Poles people believe in religious independence. Approximately 90 to 95 percent people are there is Roman Catholic. Everyone has got respectful attitude towards women. People in Poland love to live with their family as they do not believe in individualism. Poles are interested to take risk but they do not like the rules breaker. (SPU, n.d.). Poland people like quality products
2.3 Market Entry Mode
For starters, Kathmandu is a company that sells product for outdoor activities, therefore, research has shown that Poland is quite adventurous, for example cycling, hiking and especially skiing, skiing is the most famous activities to do there. Due to this information, Kathmandu has chosen to open up a branch there, the goal obviously is to be the market leader in selling adventurous products. Research has also shown Poland is a cold country. There are also brands that sells similar products which makes them the competitors such as Decathlon which is a French sporting goods retailer is said to be the largest sporting goods retailer in the world. Piotr Turkot says that starting up a outdoor gears in Poland market has been considered with a huge potential and the specialized outdoor brands has limited itself to few and small companies although good reputation. (Piotr, 2017)
We believe if that is the case, starting up Kathmandu, a product from New Zealand that is known to many can apply Wholly Owned Subsidiaries as a market entry mode, it has the potential to compete directly with the leading brand in Poland. In Poland, research said that for the last 2-3 years, disproportion between market players has increase, in other words big players are becoming bigger, while smaller ones are downsizing and in many cases they have to struggle in order to survive (Piotr, 2017). This statement makes it clear that Kathmandu, who is a great company can enter into the big market.
2.4. Marketing Plan, Staffing and Other Resources
The target market for Kathmandu in Poland are people 18 65 years old that enjoy outdoor activities. Since Poland is in a cold region, it also fits with Kathmandu since the company provides a large range of outer wear products. Moreover, because Kathmandu is an outer wear clothing company, their main target consumers are customers that enjoy going to the outdoors and joining outdoor activities such as climbing, hiking or camping. They have a very active lifestyle and need these clothes in order to help them remain comfortable outdoors.
Kathmandu makes not only outdoor clothes, but also a range of outdoor equipment such as camping gear and products. The best quality is that the company is able at providing customers with good quality products for outdoor lovers. The company will also focus on the types of products that Poland people would need the most, which include the things like warm clothes and jackets etc.
The company provide customer with some high-quality products that are customize for customer needs. This value is shown in their prices, which are medium to high prices. However, the company is also sensitive to their products price elasticity and the demand from customers, with flexibility in their pricing depending on the specific seasons. Therefore, while the prices will be considered premium prices, they will adjust based on demand and the seasons that the clothes are being sold in.
Kathmandu can use direct marketing. Because their products are long lasting and lightweight, they can be delivered to the customers from a center location direct to the Poland customers through some delivery services when they are brought online (The National Business Review, 2016). Secondly, the company can set up their own stores in Poland as well in order to sell direct to customers, with the initial plan is to set up 2 stores in the country.
Since Kathmandu products last a long time, promotions should focus on annual sales that customers can buy every year. This include for example yearly discounts at the beginning or end of the year, which older items are given big discounts in order to encourage people to buy new products to replace their old one. Another promotional activities can include things like online advertisements. This includes using Facebook and Google advertising so that the company can post ads on Facebook and Google search areas where it has a high chance of being seen by many people that use the internet nowadays.
The plan will need 30 staff at the beginning of the plan. This will include 10 staff to help manage and operate the 2 separate Kathmandu stores in Poland, which will each have 5 staff. This will help make sure that there are enough sales staff in order to be able to fulfil the needs of the company in order to sell the products to customers in physical stores in the country.
Secondly, there will be 5 staff will be needed in order to help run and manage the online website that will be used for Poland. Since the company will also use an online store to sell to the company, the main thing that they need to do is to make sure that the online store is running properly and complete any administrative duties for the company. The last 15 people will be hired as customer service agents, who will be answering calls made from local customers that have some problems with the products or some questions that they have about the products.
1. All staff will need to be full time workers that work 40 hours per week for 5 days a week.
2. The shifts for the staff must begin between 8 to 9 am in order to ensure the stores can open on the right time.
3. At least one full time worker needs to be on duty at all time during the day.
4. With all the benefits and hourly wages included within the costs, the labor cost for each employee will be an average of $20,000 per year (Warsaw Local, 2017).
The total cost of setting up 2 new stores in Poland will require an upfront investment of $300,000 dollars, with the website likely will cost $50,000 dollars (Renee, 2019). Additionally, the salaries of the 30 employees is expected to cost around $600,000 per year based on the average salary in Poland (Warsaw Local, 2017). This all added together make the total cost for the market entry into Poland to be around $1,850,000 dollars for the first year.
2.5 Financial Issues
Financial market in Poland generates interesting investment opportunities with strengthen GDP in euro zone.
The polish legislature provides full foreign enterprises ownership and no set maximum for foreign investment and full repatriation of investment profits to parent country without any special foreign exchange permit. (Manakkalathil, J., & Chelminski, P. 1995)
Poland is a port country so shipping freights is cheaper than air freights and good connectivity of Poland to big cities of Europe via road. So, Kathmandu serves easy, convenient and cheap access from New Zealand to Poland.
In Poland majority of goods and services are charged to 19% corporate tax and 23% VAT with some state social fund contributions. (Challenges of doing business in Poland, n.d.)
The labor cost in Poland is much lower than other European countries and highly qualified specialists are easily available with management know how. Cost of marketing and sales for establishing or promoting Kathmandu and cost to educate customers is low in Poland due to high literacy rate.
Pricing is the key for successful selling of goods and services in Poland. Price advantage to European producers burdened other exporting countries. Kathmandu can overcome this by setting distribution channels or manufacturing unit in Europe so as to achieve experience curve.
Inbound and outbound logistics with efficient distribution channels in a value supply chain needs to be considered. Since Poland as a European logistic hub attracting investors for trade, investment and consumer demand opportunities. Therefore, Kathmandu has good market opportunities.
Polands judicial system supports investors with easy access to credit from banks. Bank costs are low to finance the development cost of business. Proper screening is required while entering in new market to avoid overpaying for acquisition. (Challenges of doing business in Poland, n.d.)
3. CONCLUSION AND RECOMMENDATIONS
Poland emerging as a free market economy offers strategic location, politically stable, good consumer market, skilled workforce and plenty of global tourism to Kathmandu to start with. Polish people fall for brands and quality or after or before services where Kathmandu can serve purpose. Though report decides for wholly owned subsidiary by greenfield investment it will be slow, risky and costly but crucial to gain loyalty share of Polish market. Strong marketing and sales department with real time distribution channels can establish firm there. For technology know how higher personnel are required to repatriated to Polish market with the employment of polish workforce for management know how. This combination can gain above average returns. In cost benefit analysis venture of Kathmandu benefits for investing in Poland outweighs cost which shows a brighter side of investment.
Diversification of Kathmandu for Polish market so as to acquire big market.
Poland taxation system is very complex. So, government needs to regulate it with reduction of tariffs or taxes to attract more Foreign investors.
Kathmandu can provide loyalty cards to customer to grab their essence of premium customers feel in the country.
For product advertising we should use polish advertising agency with a commitment Word of Mouth for the polish community.
Polish are risk takers but repels rules breakers, so Kathmandu has to serve all the rules and regulations in Poland.