Dynamics of Labour Market Segmentation †Free Samples to Students

Question: Discuss about the Dynamics of Labour Market Segmentation. Answer: Introduction The report talks about Johnson Martin Ltd, a manufacturing Company who deals in the manufacturing of the clothes for the young people. The products provided by the company are fashionable and have quality. The company is established in the UK which is saturated and having the little prospects for the future sales growth. The top management of the company has decided to expand the business in the Middle Eastern Regions and decided three countries as their potential market which includes Turkey, Egypt, and Saudi Arabia. The aim of the report is to assess the opportunities in the Middle Eastern Region. The Johnson and Martin is the medium sized firm who is now looking to expand a business in other regions. The long-term objective of the JM is to set the operation in the Middle Eastern regions. The report includes the research and the analysis on the basis of which the company will decide in which firm they should enter first. At the end, mode of entry is suggested to the company with the help of which the company will be able to enter the market. The company is trying to provide the unique value to the customers that enhance customer satisfaction. The Johnson Martin is providing the quality product which can be felt by the customer after touching the stuff and once the customer wears it. The stuff provided by the manufacturer is made up of that fabric which provides the comfort to the customers (Toytari, et.al, 2017). The manufacturer provides the fashionable products for youth that attracts the youth towards the manufacturer. Identification of target market segment The market segmentation helps the company in identifying the target market. The market segmentation is the process with the help of which the company is able to divide the potential customers into different groups and segments (Wilkinson, 2013). The segmentation of the market will be same for all the markets where a company is looking to expand the business. Demographics- The demographic factors include the gender, age group, income and other factors. Gender- Company deals in the manufacturing of the clothing for the young people. The company is medium sized firm; the firm produces products for both boys and girls. The attire at a store is available for both boys and girls. Age- The manufacturer targets the teenagers and youth having the age group of 13-18 and 18- 25 years. The reason being the company believes in providing the quality and the fashionable product so this age group can easily understand the clothing stuff and quality (Brito, et.al, 2015). Lifestyle- The segment on which the company can focus is a lifestyle of the people. The Middle Eastern regions people lifestyle is different from the lifestyle of UK. The manufacturing firm can produce the product considering the lifestyle of the people in the Middle Eastern regions (Zhang, and Rong-rong, 2016). Geographic segmentation- The different regions have different clothing preference, the company is looking to expand the business in the middle east regions, over here also company need to provide the products considering the demand of the customers and their preference (HORNER, and NADVI, 2017). The Primary focus target market of the company is geographical segmentation; the company is looking to expand the business in Turkey, Egypt, and Saudi Arabia. The demographic segmentation is also considered by the company when the company expands the business in the Middle East regions. The secondary target market for the manufacturer will be a lifestyle of the people living in the Middle East regions as the company needs to consider their lifestyle because each and every people have a different lifestyle (Rosenau, and Wilson, 2014). The culture of the Turkey, Egypt and Saudi Arabia varies a lot similarly their lifestyle varies which makes the difference in their dressing style. Market competitor analysis The market and the competitors in the market varies from country to country, to expand the business company needs to analyze the market and its competitors so that they can select the best potential market for the expansion of the business. The clothing and textile industry is one of the crucial sectors of turkey, as it is the highest contributors to turkey economy and the foreign trade. The contribution of these two sectors in the economy of turkey is approximately 7%. The country includes more than 56,000 textile and clothing companies and these companies give employment to at least two million people (Bureau of Economic and Business Affairs, 2016). In the year 2013, the company got the 8th and 4th position in the global cotton production and consumption respectively and got the 3rd position in organic cotton production after India and Syria (Fibre2Fashion, 2017). The country is included in top ten exporters of textiles in the year 2015. FKN is the turkey leading clothing brand and the apparel wholesalers, who offers its services across the world. This is leading turkey clothing manufacture and company will find the tough competition (Jony Moin, 2013). The company has the opportunity to expand the business in Turkey as the most of the industry of the country is engaged in the cotton manufacturing. The company will get the opportunity to form the new links with the retailers of the Middle East regions. These connections can give the opportunity to the company for the overseas growth. Though, along with the opportunity, the company will also face the threats from the local competitors (Aiama, et.al, 2016). The companies who are already established in the market have a strong reputation and brand value. Hence these companies can be a threat to the JM Ltd. Egypt market includes the production process which consists of the cultivation of cotton, to making yarns and fabrics along with the ready-made apparels. Textile and the apparel industry is the 2nd largest sector, following to agro and play an important role in shaping the Egyptian economy. Apparel sector accounts for the 3% of GDP and approximately 27% of the industrial output (Fibre2Fashion, 2017). Approximately 25% of the total industry is attentive on the textile production; out of this 12% are involved in the home textile, 8% in cotton yarn and approximately 5% in other textiles. According to the research conducted in the year 2010, the textile sector of the Egypt consists of 3,243 companies with the total investment of 3.2 billion USD. The industry is soon going to get more of the support from the government (Zawya, 2016). PULLBEAR and Bershka are the company who manufacture clothing for the young people. These companies can become the big competitor of Johnson Martin Ltd. Identification of opportunity and threats The company has the opportunity in the Egypt as the clothing manufacturing industry contributes a high proportion of the GDP. Though, the market of the Egypt is already developed so if any new company will enter the market will take time to establish the brand name and value. The company has an opportunity to hire the workers at the average wages which leads to the profit (Vadicherla, and Saravanan, 2015). The threat that can be faced by the company in Egypt, this threat includes the successful establishment of the company because the market contains tough competition among the company and these companies make strategies for the new entrance in the market. The Saudi Arabia market for the clothing manufacturing is the growing market. The manufacture of Johnson Martin Ltd has an opportunity to grow in the market. The textile industries producing the apparel for the youth are increasing and over the last five year, 28 factories increase in Saudi Arabia. Considering the industrial activities 1429 to 1433H, the textile and apparel industry shows a growth of 23, 45% and 35, 9% respectively (Al-Hassan, 2013). PULL BEAR is having operations in Saudi Arabia and the company manufactures the clothing for the young people. Identification of opportunity and threats The opportunity for the company in the Saudi Arabia is more as compared to Egypt and turkey because the Saudi Arabia market is the developing market but talking about the market of the turkey and Egypt both markets are developed. JM can easily make the brand value and goodwill in the developing market. Though, the company needs to form the links so that they can provide the products to the retailer who can buy the product in bulk with the JM. The company can face the threat of the success of business in the market of the Saudi Arabia. Apart from the success, there can be a threat to profitability or sales or revenue of the company (Hodges, et.al. 2015). Each and every company make use of different market strategies for the company. The clothing manufacturing companies also make use of the different strategies for different countries. Though, the core marketing strategy for the company is same for all the countries (Solomon, 2014). The objective of the company is to expand the business in the Middle East regions. The company is clothing manufacturing that produces a product for the youth and at the same time, the company believes in providing the quality of the products. The company core strategy is to target the youth who are looking to buy the fashionable products. The company is looking to expand the business in the other regions because they want to enhance the sales of the clothing they are providing (Armstrong, et.al, 2014). The company decided to expand the business because they want to earn more of the profit and wants to generate the awareness in the market. The company marketing strategy is the launch of the product and the growth of the business. The company is planning to grow in the markets of Turkey, Egypt, and Saudi Arabia, and to grow in the market the company need to launch the different and unique clothes for the young people because the culture of the Middle East regions is totally different. The company startup in Turkey and Egypt will help the company in making a profit because the market is well known for the clothing manufacturing and in these potential markets company will face the tough competition from the existing companies. JM Company can also expand the business in Saudi Arabia as the market of this region is developing. The competitors available in this market are less as compared to the other market because the market of the Saudi Arabia is the growing market (Barquet, et.al, 2013). The company can expand the business in the Saudi Arabia but the company at the same time might face the difficulty in the sales and the revenue of the company. Financial projections The market of the Middle East region is selected because the company knows it very well that this region consists of many countries where the company can expand the business and can easily make the profit out of it. The market of turkey in the clothing manufacturing is reaching on a hike, if the company is looking to expand the business in turkey then the company need to invest the huge amount (Balasubramanyam, and Togan, 2016). Considering the financial requirement in the business the projected profit and loss statement, balance sheet and cash flow is given below:- Johnson Martin Ltd. Profit Loss Statement Amount ($) 2016 2017 2018 Sales $580,000 $649,600 $812,000 Miscellaneous income $0 $64,960 $81,200 A. Total $580,000 $714,560 $893,200 B. Cost of Sales $377,000 $357,280 $446,600 C. Gross Profit (A-B) $203,000 $357,280 $446,600 D. Operating Expenses Salary $100,000 $105,000 $110,250 Rent $12,000 $12,600 $13,230 Utilities $1,000 $1,050 $1,103 Insurance $500 $525 $551 Depreciation $35,000 $36,750 $38,588 Marketing $10,000 $10,500 $11,025 Maintenance Repairs $5,000 $5,250 $5,513 Other $2,500 $2,625 $2,756 Total $166,000 $174,300 $183,015 Operating profit $37,000 $182,980 $263,585 Less: Interest $20,000 $17,500 $15,000 Profit before tax $17,000 $165,480 $248,585 Less: Tax @ 30% $5,100 $49,644 $74,576 Net Profit AT $11,900 $115,836 $174,010 Johnson Martin Ltd. Balance Sheet Amount ($) Assets 2016 2017 2018 Current $50,000 $60,000 $72,000 Fixed $350,000 $350,000 $350,000 Other assets $140,000 $100,000 $100,000 Total Assets $540,000 $510,000 $522,000 Liabilities Non-Current (Borrowings) $400,000 $350,000 $300,000 Total Liabilities $400,000 $350,000 $300,000 Equity $140,000 $160,000 $222,000 Total Liabilities Equity $540,000 $510,000 $522,000 Johnson Martin Ltd. Cash Flow Statement Amount ($) 2016 2017 2018 Cash Flow from Operating Activities Cash sales 174,000.00 194,880.00 243,600.00 Realization from Debtors 203,000.00 430,360.00 511,560.00 Payment to Creditors - - - Expenses paid (289,800.00) (378,182.00) (568,148.00) Total 87,200.00 247,058.00 187,012.00 Cash Flow from Investing Activities Machinery Purchased (200,000.00) - - Equipment Purchased (150,000.00) - - Total (350,000.00) - - Cash Flow from Financing Activities Equity capital 600,000.00 - Borrowings 400,000.00 350,000.00 300,000.00 Total 1,000,000.00 350,000.00 300,000.00 Cash surplus/ deficit 737,200.00 597,058.00 487,012.00 Opening balance - 737,200.00 1,334,258.00 Closing balance 737,200.00 1,334,258.00 1,821,270.00 The analysis of the financial projection shows that if in case the company form the business in turkey then in the initial year the company might face the profit but the amount of the profit will be too less as it will take time to set the business in Turkey, in the following years the company can easily make the profit out of business. The market of Egypt is not better than turkey; the market of turkey is established market but if in case the company decides to expand the business in Egypt then a company will make the profit (Ward, 2017). The financial projection shows that the company will make the profit in the initial year and will increase more than twice in the following years. Johnson Martin Ltd. Profit Loss Statement Amount ($) 2016 2017 2018 Sales $520,000 $580,600 $650,000 Miscellaneous income $0 $60,000 $72,000 A. Total $520,000 $640,600 $722,000 B. Cost of Sales $286,000 $319,330 $422,500 C. Gross Profit (A-B) $234,000 $321,270 $299,500 D. Operating Expenses Salary $90,000 $94,500 $99,225 Rent $9,000 $9,450 $9,923 Utilities $1,500 $1,575 $1,654 Insurance $550 $578 $606 Depreciation $32,000 $33,600 $35,280 Marketing $10,000 $10,500 $11,025 Maintenance Repairs $4,500 $4,725 $4,961 Other $3,000 $3,150 $3,308 Total $150,550 $158,078 $165,981 Operating profit $83,450 $163,193 $133,519 Less: Interest $15,000 $12,500 $10,000 Profit before tax $68,450 $150,693 $123,519 Less: Tax @ 30% $20,535 $45,208 $37,056 Net Profit AT $47,915 $105,485 $86,463 Johnson Martin Ltd. Balance Sheet Amount ($) Assets 2016 2017 2018 Current $75,000 $90,000 $108,000 Fixed $250,000 $250,000 $250,000 Other assets $200,000 $175,000 $150,000 Total Assets $525,000 $515,000 $508,000 Liabilities Non-Current (Borrowings) $375,000 $350,000 $325,000 Total Liabilities $375,000 $350,000 $325,000 Equity $150,000 $165,000 $183,000 Total Liabilities Equity $525,000 $515,000 $508,000 Johnson Martin Ltd. Cash Flow Statement Amount ($) 2016 2017 2018 Cash Flow from Operating Activities Cash sales 156,000.00 174,180.00 195,000.00 Realization from Debtors 182,000.00 203,210.00 227,500.00 Payment to Creditors - - - Expenses paid (258,615.00) (337,765.75) (389,213.04) Total 79,385.00 39,624.25 33,286.96 Cash Flow from Investing Activities Machinery Purchased (200,000.00) - - Equipment Purchased (100,000.00) - - Total (300,000.00) - - Cash Flow from Financing Activities Equity capital 600,000.00 - Borrowings 375,000.00 350,000.00 325,000.00 Total 975,000.00 350,000.00 325,000.00 Cash surplus/ deficit 754,385.00 389,624.25 358,286.96 Opening balance - 754,385.00 1,144,009.25 Closing balance 754,385.00 1,144,009.25 1,502,296.21 Saudi Arabia The market of the Saudi Arabia is growing and it is also known as the developing market for clothing manufacturing companies. The company can set up their business as they will be able to make the space easily in the market. Though, the company needs to form the connection with the retailers to whom they can sell their product and make a profit out of it (Al Mallakh, and el Mallakh, 2015). At the initial year company might have to bear the loss in the business but later on, a company can earn the profit. Johnson Martin Ltd. Profit Loss Statement Amount ($) 2016 2017 2018 Sales $400,000 $550,600 $652,000 Miscellaneous income $0 $55,000 $75,000 A. Total $400,000 $605,600 $727,000 B. Cost of Sales $260,000 $357,890 $423,800 C. Gross Profit (A-B) $140,000 $247,710 $303,200 D. Operating Expenses Salary $120,000 $132,000 $145,200 Rent $12,000 $13,200 $14,520 Utilities $2,000 $2,200 $2,420 Insurance $500 $550 $605 Depreciation $30,000 $33,000 $36,300 Marketing $12,000 $13,200 $14,520 Maintenance Repairs $6,000 $6,600 $7,260 Other $2,500 $2,750 $3,025 Total $185,000 $203,500 $223,850 Operating profit -$45,000 $44,210 $79,350 Less: Interest $20,000 $17,500 $15,000 Profit before tax -$65,000 $26,710 $64,350 Less: Tax @ 25% -$16,250 $6,678 $16,088 Net Profit AT -$48,750 $20,033 $48,263 Johnson Martin Ltd. Balance Sheet Amount ($) Assets 2016 2017 2018 Current $90,000 $108,000 $129,600 Fixed $300,000 $300,000 $300,000 Other assets $150,000 $125,000 $125,000 Total Assets $540,000 $533,000 $554,600 Liabilities Non-Current (Borrowings) $375,000 $350,000 $325,000 Total Liabilities $375,000 $350,000 $325,000 Equity $165,000 $183,000 $229,600 Total Liabilities Equity $540,000 $533,000 $554,600 Cash Flow Statement Amount ($) 2016 2017 2018 Cash Flow from Operating Activities Cash sales 120,000.00 165,180.00 195,600.00 Realization from Debtors 140,000.00 192,710.00 228,200.00 Payment to Creditors - - - Expenses paid (150,500.00) (281,470.00) (352,205.00) Total 109,500.00 76,420.00 71,595.00 Cash Flow from Investing Activities Machinery Purchased (250,000.00) - - Equipment Purchased (100,000.00) - - Total (350,000.00) - - Cash Flow from Financing Activities Equity capital 600,000.00 - Borrowings 375,000.00 350,000.00 325,000.00 Total 975,000.00 350,000.00 325,000.00 Cash surplus/ deficit 734,500.00 426,420.00 396,595.00 Opening balance - 734,500.00 1,160,920.00 Closing balance 734,500.00 1,160,920.00 1,557,515.00 Identification of resources required and financing In the business, there is a need for the resources considering and these resources requirements vary from country to country. Resource Requirements Resource Amount ($) Stores and Supplies 50,000.00 Machinery 200,000.00 Equipments 150,000.00 Labor (30 workers*$3,000) 90,000.00 Office Staff (10 officials*$10,000) 100,000.00 Working capital 410,000.00 Total 1,000,000.00 Saudi Arabia Resource Requirements Resource Amount ($) Stores and Supplies 50,000.00 Machinery 250,000.00 Equipments 100,000.00 Labor (30 workers*$3,000) 90,000.00 Office Staff (10 officials*$10,000) 100,000.00 Working capital 410,000.00 Total 1,000,000.00 Once the Resource Requirements will be identified by the company then the company will think for financing the resources (NAGARIA, 2016). The company makes use of different sources for financing the capital. The below table shows the sources of capital:- Capital Requirement and Sources of Capital 1,000,000.00 Equity Common stock 600000$ Debt Loan from bank 300000$ Cash Credit 100000$ Identification of material risk and mitigation The company might face many risks like changes in the prices of the raw material or the equipments which is required to the company on daily basis. This might create the challenge in front of the company so that the company will not be able to provide the product at the same prices. The company should mitigate the risk by keeping the appropriate prices so that later on they dont have to make changes in the prices (Knechel, and Salterio, 2016). If in case the company bring changes in the prices there will be an indirect impact on the reputation of the company. Recommendation It is recommended to the company to enter the Turkey market first; the reason being turkey is one of the leading markets in clothing manufacturing. The company can form the alliance which is going to help while setting the stable business. Each and every company select a mode of entry while entering into Turkey. It is recommended to select Joint venture as the mode of entry. Joint venture refers to as the formation of the alliances with the company to run the business. The JM should form the alliances with the company who is already registered in Turkey so that company can get the support while conducting the working activities. The company can take the benefits of the joint venture in which both the companies share the capital, risks and the profit and losses. Being in a joint venture, JM Company will get to know about the retailers with whom they can perform the business deals. This helps the company in the formation of the network and links. Furthermore, these networks help the co mpany to expand the business in the other Middle East regions. Conclusion The report talks about the opportunities in the Middle Eastern region. The JM top management has decided to expand the business in the potential markets such as Turkey, Egypt, and Saudi Arabia. The identification of the market along with the mode of entry is essential to expand the business. The report shows the target market, market, and the competitors analysis. Considering the same, the company can make the marketing strategies. The financial projection of the company in each of the country is discussed which helps in understanding the opportunity for the profit. Furthermore, identification of the resources and their financing is discussed and the recommendation is stated. References Aiama, D., Carbone, G., Cator, D. and Challender, D., 2016. Biodiversity risks and opportunities in the apparel sector.International Union for Conservation of Nature: Gland, Switzerland. Al Mallakh, R. and el Mallakh, R., 2015.Saudi Arabia: Rush to Development (RLE Economy of Middle East): Profile of an Energy Economy and Investment(Vol. 28). Routledge. 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