Country Road has been an iconic Australian brand for 36 years, building its success on its high quality and unique designs that look effortlessly casual yet stylish. Following the high financial performances of their Australian stores, Country Road decided to embark into the United States of America (US) in 1989, in hope of realising the financial gains they saw here. Unfortunately, their strategies didn’t work, and they found obstacles which hindered their success in the US. This essay examines the types of strategies Country Road has pursued and what led Country Road to follow an international expansion strategy.
Further, we discuss the impediments to Country Road succeeding in the US retail market, before suggesting strategy options for Country Road in the future. The main vision of Country Road, like any organisation out there, is to earn market share. One way of doing this is by increasing customer satisfaction. Country Road exited the wholesale market in 2006 and entered the retail business (Annual report, 2006). The purpose of doing this was to allow them to have complete control over their business and ensured that their customers received consistent shopping experiences (Annual report, 2006).
As customer service is a very important core competency in retailing business, Country Road has introduced a fair and flexible workplace in order to retain and attract good employees (Working Families Council, 2010). Other than customer service, Country Road has most of their stores located in large stores like David Jones and Myer in Australia (Annual Report, 2007). They also had their stores in multiple shopping hotspots on both East and West coasts of the US (Kerr & Sarina, 2006). This is to make sure they have a wide distribution of products that are available to everyone.
Country Road also uses corporate social responsibility to add value to their business strategy (Honey, 2008). They cooperated with Redkite, an Australian charity organization for childhood cancer and helped fund the red bag program. Furthermore, another strategy that Country Road used to increase their market share is by repositioning themselves from the premium market to the middle market (Kerr & Sarina, 2006). Country Road did this by lowering their selling prices but at the same time, maintaining the quality of their clothing.
To do this, they have sourced for suppliers that are willing to cooperate with them in cost reductions (Australia’s best retail, 2011). This is a win-win situation for both Country Road and their suppliers where Country Road gets to reduce their cost to maintain profit and their suppliers gained good reputations. Another strategy they have used on cost reduction is by introducing product distribution directly from their China-based distribution centre in year 2007, which eventually reduced their operating cost and lead time (Annual report, 2007).
In addition, Country Road also pursues a differentiation strategy. This can be seen by the unique architecture and layout of their stores which makes them stand out from their rivals that were located geographically close and also the marketing of their Australian brand image (Kerr& Sarina, 2006). Country road has been well established as an Australian brand in Australia before it engaged in globalization. Having a strong foothold in the Australia fashion, it is one of the most representable and well-favoured fashion brands in Australia.
With its growing success, this gave the firm the confidence to venture into the global market and had the capabilities to do so after Myer Emporium Limited took over it. One of the reasons for the firm to globalize is the opportunities available in foreign markets. For example, the US has large market size with rapid market growth rate as well as high profitability when Country Road started its globalization. Another reason is the core competencies that the firm holds.
Not only does the firm have unique architecture and layout of its stores, it also have strong brand image as Australian fashion and produces quality products compared to other firms. During that time, the Australia tourism campaign was aggressively promoting Australian lifestyle and Australian movies received good reactions from foreign countries. With the increasing interest of foreigners in Australia, this gave an advantage to the firm in marketing their brand and products in foreign countries.
One of Country Road’s key competencies was in real estate; their unique layout and design differentiated themselves from key competitors, and their locations were situated in popular shopping malls (Kerr & Sarina, 2006). However, Country Road failed to conduct research into its competitors, and how they should have positioned themselves, in relation to the fierce competition that existed. Firstly positioning themselves as a premium product, fierce rivalry among competitors forced them to move down into the middle market (Spadafora & Majumdar, 2011).
Conversely, this move proved ven more competition existed, and Country Road was forced to lower its prices which in turn damaged their image of high quality (Spadafora & Majumdar, 2011). One factor that Country Road didn’t take into account of was the differences between the countries of Australia and the United States of America (US). The US had different geographical areas that differed not only on aspects of climate, but demographics and lifestyle as well (Halepete, Hathcote & Peters, 2005). For a company to be successful, consideration needed to be taken as to the difference in needs between such a large population.
Statistics showed that minority groups such as African Americans, Hispanic and Asia Americans are increasingly populating America, and their purchasing power has increased, which sees a need to satisfy these groups as well as Caucasians (Halepete, Hathcote & Peters, 2005). What Country Road failed to do, was upon entering the US market, conduct market research to discover the different needs of the population among different geographical locations. Other successful apparel retail outlets had chosen to sell different items of clothing according to climate.
Country Road needed to ensure stores located in colder destinations sold long sleeve shirts and heavier outerwear, whilst stores located in warmer places sold short sleeve shirts and lighter outerwear (Halepete, Hathcote & Peters, 2005).. Lifestyle is also an important factor. Stores that were located in resort areas should have stocked beachwear items, bright prints and casual wear, whereas stores in richer areas, should have had formal wear more readily available (Halepete, Hathcote & Peters, 2005).
Retail outlets have come to realise that selling the same type of products in every store does not equal to success. Ethnic factors also come to play in deciding what to sell in different areas. Areas with more Asian populace would stock smaller sizes, while areas with more black populace, would stock basic colours instead of bright, pastel colours (Halepete, Hathcote & Peters, 2005). Country Road didn’t learn to customise their products based on these factors, which turned out to be a major obstacle, hindering their potential success in the US.