Ross Stores, Inc. has experienced consistent growth over the past ten years in the United States Domestic off-price retail market. As Ross Stores continues United States expansion, it remains second in market share to TJ Maxx while remaining ahead of Burlington Coat Facotry. Given the recent performance of Ross Stores, there is a convergence of factors making international expansion a viable option for Ross Stores growth into the future. An analysis of Ross Stores current market strategy and options within the international market determined that Greece presents the optimal atmosphere for Ross Stores to successfully enter the European market. The value of the off-price business model is the steep discounts on quality, name brand fashion items. Greece has experienced harsh economic conditions over the past ten years, which has left the country with high employment rates and consumers looking to stretch their buying power. Coupled with a high number of tourist to the country yearly, Ross Stores’ off-price brand model, in partnership with an existing, accepted Greek retailer Bershka provides a retail option for consumers within Greece which will allow them to stretch their buying power while continuing to purchase desired and valuable retail fashion apparel.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!

Essay Writing Service

Introduction

During the organization analysis of Ross Stores Inc. (ROSS), the recommendation was for continued brand expansion through continued domestic growth strategy in the United States and exploration of feasibility of brand expansion into the International market. The International expansion of ROSS presents the opportunity to obtain a geographic advantage over its competitor Burlington Coat Factory and to increase competition with TJ Maxx which currently operates approximately 500 locations in Europe and Australia in addition to their Domestic market share (TJ Maxx, 2019). With off-price US retailers experience minimal overseas exposure, ROSS’ movement into a new country, especially those where TJ Maxx has no presence, can provide additional revenue streams for ROSS increasing market share and aiding to their competitive advantage.

Initial research identified Greece as a solid prospect for ROSS’ international expansion efforts, and it provides geographic separation from TJ Maxx operations in the United Kingdoms, Germany, Ireland, Poland, and The Netherlands. The following paper will outline the value of the international expansion strategy of the ROSS brand to Greece. The analysis will classify the opportunities and challenges ROSS will face with expansion efforts and provide a PESTLE breakdown in relation to the Greek Market. With an outline of Global Value Chain and Cultural factors affecting the expansion, a recommendation of ROSS’ fit within the Greek market will be provided, and recommendations for potential partnership opportunities and organizational strategies will be provided.

Country Risk Assessment

With 25 Million tourists yearly and a population of over 10 Million, Greece accounts for $3.6 Billion in consumer fashion retail spending, making it the most non-food important segment of the Greek market (Trading Economics, 2019). Located in Southern Europe, Greece is an archipelago of approximately 2,000 islands and a major tourist destination. Recent recession risks in Greece have given way to minor positive market growth since 2014 and political will to encourage international investment in the country.

Opportunities

Political. Greece is part of the European Union (EU). Membership provides for the free movement of goods, capital, and services throughout Europe. EU regulations permit a one-time tariff on goods brought into the market place. ROSS will not have to pay multiple taxes or tariffs if merchandise is crossing international borders within the EU. Greece also participates in the Euro, which is a common currency throughout Europe. So while Greece may have a weaker economy, the buying power of the Euro presents opportunity and sales will not be as affected by short term fluctuations in the Greek economy. After years of political infighting and confusion over economic conditions, Greece has experience political stability and has been consisten with its messaging on the economy and need for investment and growth (Michalopoulos, 2017).

Long-term tourism. The tourist trade in Greece continues to grow, and retail shopping in major city centers is a continued draw country wide. Tourism provides a steady flow of consumers shopping. Data from the Bank of Greece show record revenue from tourism in 2018, topping $16 Billion USD, which constitutes a 42 percent increase over 2017 (Bellos, 2019). With increased economic stability, as of 2016 Greece has untaken initatives to make signigicant investments in the tourist industry which will aim to deverisfy its tourist trade from sun and beach to include other sectors such as Nautical, Medical and Cultural Religious based tourism (Export.Gov, 2019).

Economic Difficulties. Greece residents still have lower than average disposable income, nearly 50% lower than the OECD average (Organization for Economic Co-operation and Development, 2019). Greece residences have lower incomes, and higher unemployment, coupled with economic austerity, means consumers gravitate toward discount options for retail sales in efforts to stretch income. This model fits ROSS’ business strategy and presents a market searching for ROSS merchandise.

Rental Cost. Greece presents a lower physical operation cost per square foot of retail space as opposed to operating in the United States. While larger US locations such as New York City can run from $500-$800 USD per Square Foot of retail space, locations in Athens will rent for as low as $24 per square foot. (See Appendix 1) This provides ROSS great opportunity with positive cash flows to afford prime retail location in major tourist centers throughout Greece (Statista, 2018).

Weakness

Greece is still digging out of a huge debt burden faced over the last 15 years. While Greece has instituted a series of additional taxes and EU sponsored austerity measures which have stabilized the economy, Greece still has not corrected underlying internal government changes which have continued the weakening of state programs and services affecting business in the country. Benefit programs have been cut; unemployment remains high, leading to less money circulating within the Greek economy struggling for investiment. Business creation continues to be hampered by red tape, and corruption still present in the larger political and business environment (Blanke, 2015). Navigating these waters in Greece presents the largest hurdle for international expansion of ROSS.

PESTEL Analysis

A PESTEL provides a framework to exam the macro-environmental factors within Greece, which can impact positively or negatively on ROSS’ entry into the market. A PESTLE (Political, Economic, Social, Technological, Legal, and Environmental) provides an organization a tool for strategic and marketing planning. For Greece, the following analysis of PESTLE provides the following.

Political. Greece is a presidential, parliamentary system which has been in place since 1975 under the current constitution. The president serves a five-year term. Although recent years have seen political upheaval in Greece, in light of economic failures; it can be assessed the situation is stable and improving. Since 2017 progress has occurred as stability has come to the political establishment in Greece. Movement on the adoption of laws which hope to foster growth while reducing bureaucratic hurdles aims at attracting foreign investment. 2014 saw the establishment of Enterprise Greece. This program merged previous programs developing a single point of entry for foreign investment in Greece. Falling under the Ministry of Economy, there is now a single solid agency to provide information for investors to navigate Greece’s business landscape (U.S. State Department, 2019).

Find Out How UKEssays.com Can Help You!

Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.

View our services

Economical. Economic factors will have a significant impact on ROSS’ business ventures in Greece and their potential profitability. Previous years concerns over economic stability within the Greek economy nearly froze new foreign investment. With Greece’s recent return to positive economic growth in 2017-2018 and expected growth in 2019, coupled with the Greek Government continued desire to increase foreign investments, there is potential room for new foreign investment.

As a member of the European Union (EU) Greece operates on the EURO which as of May 2019 is trading at 1 Euro to 1.12 USD. The current trends and growth in Greece are driven by a more robust household consumption as consumer faith grows. As Greece is no longer operating under the International Monetary Fund (IMF) bailout programs, it is expected that the consumption rates will continue to increase, and unemployment rates will decrease. Dropping from a high of 28% in 2014 to an 18% rate at the end of 2018 equates to more Euro’s into the economy (Trading Economics, 2019) See Appendix 2.

Social. As of May 2019, the Greek population sat at 11,128,003. The male/female population is nearly split at 50% each, with an age structure of; 0-14 years: 13.83% ; 15-24 years: 9.67% ; 25-54 years: 42.45%; 55-64 years: 13.13%; 65 years and over: 20.91% (Index Mundi, 2019). The median age in Greece is 44.5 years old, with a life expectancy of 80.7 years. Birth rates in Greece have been on the decline, down nearly 10% from the 2011 Census. Two third of the Greek population lives in Urban areas, which include Athens, Thessaloniki, Patra, and Heraklion.

A rate of poverty among the largest in the European Union, reveals a widespread economic failure in Greece. According to Eurostat, in 2018, around 34.8% of the population is at poverty or social exclusion. Down from 36% in 2015, there has been an improvement in this area, but it still poses concern (Kampouris, 2018). High-income inequality remains a concern within Greece. According to (OECD, 2019), the Greek Gini coefficient (a measure of inequality in income) was 0.33, which is above the world average 0.313. The Gini coefficient score of zero corresponds to complete equality, while a score of one corresponds to complete inequality.

Technological. Greece ranks on the lower end of innovation, which reflects in the low number of registered patents. Greece filed for 600 patents and only had 239 granted opposed to hundreds of thousands in a country such as the U.S. and China (World Intellectual Property, 2017). As of 2016, internet users as a percentage of the total population stood at 66%, up from 55.38% in 2012 (Internet World Stats, 2019). 88% of people in Greece use Facebook, double the percentage of Americans, while only 1.5% are using Twitter and Instagram for social media (Statcounter, 2019).

Legal. According to (Trading Economics, 2019), Greece’s Corporate tax rate sits at 29% while their personal income tax rate is at 45%, which is above the European Union averages. The high tax rates in Greece are a result of recent economic difficulties and have been trending lower in the last three years even though slowly. In order to promote business growth, Greece has aimed at lower business registration costs. Currently, Greece is rank 72 out of 189 countries for the ease of doing business. While Greece has attempted to ease regulations on business, start-up, and international investment, the move to 72 is a slip from a rank of 67 in 2017 (Trading Economics, 2019). Greece participates in the European Union, which adds additional oversight and political and tax implications for business in Greece.

Environmental. As a member of the European Union, Greece participated in numerous environment international agreements. For purposes of ROSS, many of these agreements will have little effect on the established business model. Regulations which aim to curb global warming and air pollution may result in an increased tax on the business sector.

Global Value Chain

The basic fashion industry value chain (Appendix 3) is universal within the industry. ROSS’ entry into this Global Value Chain occurs at the Logistics/Networks and flows through Sales and Distribution. Since ROSS currently executes a strategy which operates on opportunist buying and inventory efficiency, they benefit from simple economies of scale. Design, Raw Material, and Production have already occurred before ROSS inserts into the chain and will not be affected by ROSS business model. ROSS’ strategy for international expansion in Greece provides outlets for Apparel manufactures to continue to sell overstocked and out of seasons items which may otherwise go unused. Partnered with a local firm, ROSS increases marketing for these items allowing for continued revenue growth for everyone in the chain. Within Greece, 72.57% of the workforce in the service industry (See Appendix 4). ROSS’ expansion into the international market adds continued value to the employment industry still struggling to recover from 24% unemployment (Statista, 2019). Additionally, sales and distribution of these off-price items throughout Greece offer an alternative option for apparel at a cheaper cost which allows a strapped consumer base larger buying power, bringing more revenue to the economy. As ROSS provides no production with thiss value chain and they seek to move no organizational processes oversees, the position of ROSS is to provide a catalyst into the global value chain increasing factors for other portions with in the industry.

Culture

ROSS will experience minimal difference in customer service, sales expectations and processes between Greece and their domestic operations. European standards for this area are on par with what ROSS is accustomed to in the United States. ROSS’ international expansion however poses potential difficulties with cultural factors which will differentiate its Greece operations. Most people are Greek Orthodox and religion is highly regarded among the population. There is a respect for hierarchy and view of the family as a single unit of strength. Greece is a culture driven by trust, and businesses must embody that trust. Greece, like many EU member states, have stricter truth in advertising laws than much of the United States. While ROSS may not intentially try to mislead the Greek public with marketing, they will have to develop a marketing strategy which leverages these factors to succeed in Greece. A Strategy which is inclusive to the entire market young to old and advertisement which clearly reflect the overall Greek Culture and value of the off-price discount brand will provide an advantage in the market place (Export.Gov, 2019).

Business meetings are warm and friends, and often a business dinner, a 30-minute late arrival can be accepted as standard. The Greek business model is hierarchical, and decisions are driven top down. Managers will often look for consensus before making a decision. The Greek’s are not a deadline driven cultural in business; building trust and friendship is as important to the Greeks as a deadline (Commisceo, 2019). ROSS will have to soften the traditional U.S. business model. ROSS empowers employees to take action, especially at the store level. In Greece, this model may meet with resistance in a hierarchical structure where age may be more valued. Development of deals with potential Greek suppliers may require more rapport building and friendship than ROSS is accustomed to the United States. The movement of deals and actions within the Greek organization of ROSS will be slower to develop but will be stronger once accomplished.

ROSS personnel while operating in Greece need to take the time to show care for their counterparts, to inquire about their well being and family before getting to business. Thoughtful debate on topics is common partice and should not be taken as disagreement or argument when discussing business options. Verbal promises hold wait in Greece and are often treated as contractual agreements, so ROSS personnel need to ensure carefull wording during business meetings (Cultural Atlas, 2019).

Entry Strategy

Resulting cultural differences can affect the entry strategy for ROSS’ International expansion to Greece. The selected entry strategy must mitigates identified cultural differences to ease expansion. The formal off-price business model is not wholly developed in Greece. Discounts and sales to stave off overstocked items, or perishable items in a slowing economy is well practiced, but not operated daily. Introduction of ROSS’ brand into the Greek market without navigating the potential pitfalls of Greek Cultural and the Political and Legal structures which may happen business development create a failure for ROSS. To ensure success, ROSS should develop an International joint venture with an established retail provider in Greece, which can facilitate international expansion. Combining two organizations, one with an already established Greece presence and ROSS’ strong off-price brand, will create a third independently managed brand poised to develop and maintain a competitive advantage in Greece.

Market Research identified over 100 different Apparel Brands within the Greek market today. Options include Serapis, Mohxa, H&M, the Raw Greek and Bershka. Of these market participants, Bershka offers ROSS the closest match to their business needs and provides an established brand throughout Europe, which includes 30 stores in major Greece cities. Bershka was created in April 1998 as a new store and fashion concept, aimed at a young target market. Bershka is a sub-brand under the Inditex Group which operates over 1000 stores in 71 countries around the world. Bershka averages approximately 1.8 Billion in sales annually with operating margins of 15.43, making Bershka is an attractive Brand for ROSS to partner within Greece (Fashion Bi, 2018).

As part of the Inditex Group, ROSS’ venture with Bershka will provide access to an extensive network of clothing brands and suppliers across Europe, totaling over 1800 (Inditex Group, 2019). Access to these suppliers negates ROSS need to develop new relationships within the European supplier network. Bershka, 20-year history, provides name recognition within Greece aiding to the legitimacy of the off-price brand model ROSS provides. With a brand which offers evening wear, casual, basics, sports, jeans, accessories and footwear, Bershka name provides a wide range of options for ROSS to incorporate the off-price model into (Inditex Group, 2019). Additionally, Bershka markets to a younger population which will be eager to find well-known clothes at discounted prices given years of financial hardship and high employment in Greece, which sees consumers looking to stretch their buying power.

Greece Operations

ROSS’ entry into the Greek market poses potential risks which a International joint venture can help to mitigate. Bershka, as an established brand with 30 stores in Greece, understand the local culture, marketing, and business customs better than ROSS. As such, these organizations should focus on a limited partnership creating a strategic alliance leading to optimal advantage for ROSS. The limited partnership will be under a contractual agreement between ROSS and Bershka. Bershka will act as the local firm in this partnership, while ROSS is the outside entity. Bershka focus will be on providing their brand image to the partnership as well as access to supplier networks and local expertise in such areas as legal oversight, real estate, and employment laws in Greece. ROSS will provide a majority of the financial backing to the venture for the purchase of inventory and retail space and incur a majority of the risk. Bershka’s share of the profit will be limited to what they provide into the venture financially as well as the risk to their brand image.

The advantages for ROSS include leverage Bershka’s name and existing processes for distribution, marketing, and suppliers within Greece, which greatly speeds time to market over a fresh startup. Bershka poses the local knowledge within Greece and is positioned to reduce political friction to open a new operation. Bershka has access to established European suppliers and 30 existing locations in Greece, which equates to understand the licensing and property retail concerns of the new business.

The disadvantage for ROSS is the integration of ROSS and Bershka strategies. ROSS has an established off-price model, and bringing that to Bershka will involve ROSS giving up some control business operations. Bershka and ROSS will face potentially competing tax implications with this venture, and the structure of the leadership and management could also be at odds. In order to ensure ROSS navigates these disadvantages, they will have to ensure legal representation while working with Bershka that understands the Greek laws, regulations, and business environment. Without such protection, ROSS’ eagerness to complete an agreement and move international expansion forward could put them at a disadvantage in negotiations (Lordot, n.d.).

A limited partnership joint venture with Bershka will require a large investment from ROSS. Captial investment required for retail locations, initial inventory, and required licensing and business fees for Greece should be based off of existing ROSS Domestic operations. ROSS will plan investment off of current U.S. domestic estimates for setting up a new operation. Startinng with a base figure, ROSS will add an additional 20% for initial set up of each location in Greece. Greece and the European Union will present additional stand up and operating cost, which could be higher or additional to what ROSS is accustomed. The Euro trades higher than the USD, which will add additional cost to ROSS initial development. While Greece real-estate cost may be lower, employee compensation and salary cost can be higher.

Structure

It is recommended that the limited partnership organizational structure construction leverages the attributes of each organization in this partnership. Where possible, the new organization should hire local Greek workers within their retail locations but also at the corporate level. C-Suite positions within the new organization will come from ROSS and Bershka Executives. It is perferable to bring an outside Chief Executive Office (CEO) into the organization who has experience within the Apparel industry, but is outside of ROSS and Bershka. An individual with experience in the European or specifically Greek market will provide needed expertise to the organization. Appendix 5 provides a draft of a purposed organizational structure at the C-Suite level as well as the essential duties of those positions. The overall makeup of leadership will be developed to ensure the optimal balance of expertise and experience.

Findings

The business model for ROSS is the acquisition of merchandise through identification of opportunistic purchases from vendors with overruns or canceled orders. Using an established logistical mechanism, ROSS can quickly move these acquisitions to stores across the United States, quickly allowing merchandise to be sold at the lowest prices possible. These opportunistic purchases of fashion basics tend not to be affected by changing trends or seasonal changes. These purchases often tend to be of well-known and acceptable brands which consumers are thrilled to find at low prices.

This model has worked well in the United States and will work well within Greece. Greek consumers, much like U.S. consumers, are thrilled and anxious to locate deals. Stretching buying power in a struggling economy is essential to the Greek consumer. With Breskha’s partnership, ROSS will have access to the vendors required within the European market to provide the same logistical expertise and speed that it has been able to accomplish in the U.S. market. Development of a market strategy which leverages the Berskha brand will be the quickest route for ROSS to see success in this new international market. Berskha presence within Greece with 30 existing stores also provides ROSS with a partner who can navigate the legal application of ROSS expansion into the market. Overall this partnership will provide a solid strategy for success.

References

Bellos, I. (2019, January 23). 2018 Was a Record Year for Tourism Revenue. Retrieved from Greece IS: http://www.greece-is.com/news/2018-record-year-tourism-numbers/
Blanke, J. (2015, Jul 12). World Economic Forum. Retrieved from The 3 competitive waknessess Greece needs to address : https://www.weforum.org/agenda/2015/07/its-not-just-debt-these-3-competitive-weaknesses-are-holding-greece-back/
Commisceo. (2019). Greece – Language, Culture and Doing Business Etiquette. Retrieved from https://www.commisceo-global.com/resources/country-guides/greece-guide
Cultural Atlas. (2019). Greek Culture. Retrieved from https://culturalatlas.sbs.com.au/greek-culture/754-do-s-and-don-ts#754-do-s-and-don-ts
Export.Gov. (2019). Greece Country Commerical Guide. Retrieved from https://www.export.gov/article?id=Greece-Trade-Promotion-and-Advertising
Fashion Bi. (2018). Bershka. Retrieved from Financials: https://fashionbi.com/brands/bershka/financials
Index Mundi. (2019, May). Greek Age Structure. Retrieved from https://www.indexmundi.com/greece/age_structure.html
Inditex Group. (2019). Our Suppliers. Retrieved from https://www.inditex.com/our-commitment-to-people/our-suppliers
Internet World Stats. (2019, May). Greece. Retrieved from https://www.internetworldstats.com/eu/gr.htm
Kampouris, N. (2018, October 17). One in Three Greeks Live in Danger of Poverty Data Shows. Retrieved from Greek Reporter: https://greece.greekreporter.com/2018/10/17/one-in-three-greeks-lives-in-danger-of-poverty-data-show/
Lordot. (n.d.). Internation-Expansion Entry Modes. Retrieved from https://saylordotorg.github.io/text_international-business/s12-03-international-expansion-entry-.html
Michalopoulos, S. (2017). Business chief: Greece is politically stable and now needs productive investment. Retrieved from Euractiv: https://www.euractiv.com/section/economy-jobs/interview/greek-business-chief-the-country-is-politically-stable-and-now-needs-productive-investment/
Mind Tools. (2019, May 10). PEST Analysis. Retrieved from https://www.mindtools.com/pages/article/newtmc_09.htm
OECD. (2019, May). Income inequality. Retrieved from https://data.oecd.org/inequality/income-inequality.htm
Organization for Economic Co-operation and Development. (2019). Better Life Index. Retrieved from Greece: http://www.oecdbetterlifeindex.org/countries/greece/
Research Gate. (2019). The Basic Fashion Industry. Retrieved from https://www.researchgate.net/figure/The-Basic-Fashion-Industry-Value-Chain-Source-Adapted-from-Gereffi-and-Frederick-2010_fig1_287988779
Statcounter. (2019). Greece. Retrieved from Global Stats: http://gs.statcounter.com/social-media-stats/all/united-states-of-america
Statista. (2018, January). Prime retail street locations ranked by rental rate in Greece in 2017* (in euros per square meter per year). Retrieved from https://www.statista.com/statistics/511525/retail-streets-by-rental-rate-greece/
Statista. (2019, May 10). Greece Apparel. Retrieved from Statista: https://www.statista.com/outlook/90000000/138/apparel/greece
TJ Maxx. (2019). Global Growth. Retrieved from https://www.tjx.com/investors/success-factors/global-growth
Trading Economics. (2019, May 10). Greece Consumer Spending. Retrieved from Trading Economics: https://tradingeconomics.com/greece/consumer-spending
Trading Economics. (2019, May). Greece Unemployment Rate. Retrieved from Trading Economics: https://tradingeconomics.com/greece/unemployment-rate
U.S. State Department. (2019). Investmnet Climate Statement 2018 Greece. Retrieved from Bureau of Econmoic and Business Affairs: https://www.state.gov/e/eb/rls/othr/ics/investmentclimatestatements/index.htm#wrapper
World Intellectual Property. (2017, December). Greece. Retrieved from Statistical Country Profile: https://www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=GR