Introduction
In the contemporary business environment, international marketing enables an organization to compete effectively. Most organizations go global to increase their market share and succeed (Alon et al., 2020). H&M is one of the companies using internationalization as a strategy to achieve a competitive advantage. For example, the company wants to enter Brunei to increase the sale of its products. The country offers the best market of entry due to its political stability, potential economic growth, and other factors. The country has the lowest corporate tax rate for political factors compared to other states in the market. In addition, H&M should use an e-marketing entry strategy to access the country. Therefore, this paper critically examines Brunei’s marketing environment, company competition level, and entry strategies.
Critical Analysis of Brunei’s Marketing Environment
Political Factors
Political factors are actions taken by the government that impact daily business activities. It includes tax policy, trade restrictions, environmental regulations and political stability. Brunei Darussalam is among the few countries across the globe that uses an absolute monarchy system of government (Yusof, 2017). There is no election in Brunei because the monarch is hereditary. Based on this, the country is one of the best in terms of political stability compared to countries such as the US, UK, Canada, and many more. This is considered a favorable environment for organizations such as H&M, which want to expand their operations globally. Therefore, a stable political environment assures investors to venture into the country’s rich market.
Apart from political stability, the other factor of analysis is the taxation system set by the government for businesses. The corporate tax rate is usually charged on the profits of a corporation and is determined by the country of operation. This does not include value-added tax, sales tax, goods and service taxes, and others. In 2020, Brunei’s corporate tax rate was 18.50%, which is the lowest compared to the US, which was 21% (Trading Economics, 2022). This indicates that corporates operating in the US are likely to pay more in terms of corporate tax than when they operate in Brunei. As a result, Brunei is a desirable location for commercial businesses to establish and expand their operations. Thus, this is a significant measure of the country’s ease of doing business.
Economic Factors
One of the economic factors to consider is Brunei’s Gross Domestic Product (GDP). This is an accurate indicator of the size of an economy. In 2020, the country’s GDP was $12 billion, and it is expected to be $16 billion in 2022 (Trading Economic, 2022). The value of the GDP represents 0.01% of the world’s economy. Since the country relies more on oil and gas production, it is expected to experience changes in the GDP due to an increase in its demands across the globe. In addition, the average annual growth rate of 0.36% from 2004 up to 2021 shows that the company has the potential to grow economically (Trading Economic, 2022). This also shows that Brunei is not inferior to major countries for firms such as H&M to enter. As a result, the country’s GDP indicates effective performance.
The inflation rate of a country is also a major indicator of economic performance. It is defined as the rate of increase in the prices of goods and services in a nation over a given period of time. The yearly inflation rate in Brunei increased to 2.2% in December 2021 from 1.9% in the previous month (Trading Economic, 2022). This is considered dangerous because it is above an average of 2%. The adverse impact of this inflation is decreased demand for products due to an increase in the price. This is an unhealthy trend because it shows a sense of instability in the inflation rate. In addition, the trend is not an assurance of financial viability for firms such as H&M, which wants to enter Brunei to make a profit.
The unemployment rate is another economic aspect to consider. This is the percentage of people in the labor force who are now unemployed in a given economy. Like other countries, Brunei wants an adjustment between inflation and unemployment. In 2020, the unemployment rate increased to 8.4% from 6.8% in 2019 (Trading Economic, 2022). The trend is worrying because it goes beyond the normal rate between 4 to 5%. This indicates the available local workforce that H&M can employ to provide services. However, the high unemployment rate also shows that many people lack the ability to purchase goods and services.
Social Factors
Social factors include population growth, cultural norms and expectations, health consciousness and other aspects that affect an organization. According to the latest census, Brunei had about 450,000 million people (Hamdan & Hoon, 2019). This factor inhibits foreign companies from entering the country due to limited market potential and size. In addition, the number of people in Brunei is less compared to countries such as China, the US, the UK and another potential market for H&M. The larger the population of a country, the greater is its demand for consumer goods. Despite its small population, Brunei is economically and culturally wealthy, providing a variety of options for international firms to explore.
Moreover, Bruneians are conventional in their social interactions in the business environment. They communicate indirectly, formally, and respectfully, which affects how they interact with people. This information is critical while doing business because a lack of comprehension of this communication style could lead to a negotiation failure (Sarraf, 2019). Although Malay is the official language, English is commonly utilized in the corporate world. Because Islam is the official religion, sensitivity in relationships, religious customs, and dress rules is essential. For example, gifts as part of commercial agreements are frequently not allowed due to business norms.
Technological Factors
Despite the fact that Brunei is seen as a slow country, it has one of the most advanced telecommunication facilities in the region. It has an extensive network of external plants linked through fiber optic cables (Sarraf, 2019). The increase in the use of smartphones is an important factor that can attract businesses. In addition, this provides a platform for effective communication for H&M and other companies that are interested in entering the country. Therefore, the advancement of technology in Brunei makes it attractive to firms.
Environment Factors
Although Brunei has no significant environmental pollution problems, effective environmental management is acknowledged as vital in population growth, modernization, and economic growth. Brunei is increasingly concerned about air pollution to promote the health of its citizens (Sarraf, 2019). Based on this, the companies that want to operate in the country should ensure that their operations are friendly to the environment. For example, they should reduce their carbon footprint and help in creating awareness of the need to protect the environment. As a result, the demand for environmentally friendly operations is crucial to H&M because it makes them more sustainable.
Level of Competition
In the fast fashion industry, the level of competition is high because there is a high number of businesses offering similar products. This indicates that customers in the market have various companies to choose from in the market. Some of the main competitors are Jati Freedom Textile, Brutex, Aewon Garment and embroidery, and others in Brunei (Salam et al., 2019). Even though there are a number of competitors in the market, H&M has risen to the top of the fast-fashion business by utilizing its supply chain and technology as important competitive advantages. In addition, its business concept is to provide value to customers by offering fashion and quality at the lowest price. Therefore, H&M is becoming effective in the sector due to providing customers with quality products.
The Target Market
H&M’s target market is broad due to its extensive product portfolio. However, their main target is women between 20 to 34 years because they desire trendy fashion at a low price. These ladies are trendy, up-to-date, and fashionable consumers. According to market segmentation theory, businesses usually target markets that will give them the most value (Cortez et al., 2021). Market segmentation allows an organization to determine who the best consumer is and then tailor their product or service to them to turn them into adoring fans. In this case, women are the target because they provide H&M with a platform to market and sell their products. As a result, the increasing demand for quality and trendy apparel makes women the main target for Brunei.
The other target market is teenagers, who tend to purchase the products. The teen usually goes shopping with buddies and dresses fashionably casually. According to the Fashion Law, fast fashion is the practice of quickly transforming high-fashion design ideas into low-cost products. Therefore, the market is adequate for entry because a majority of the teenagers in Brunei embrace fashion. In addition, most of the young population in this country have smartphones and access to the internet, making it easy for the company to reach them for marketing and other communication. Thus, the target market enables H&M to produce and sell the products effectively.
Market Entry Methods
E-Marketing Strategy
H&M can effectively use an e-market entry strategy to enter Brunei. E-marketing refers to strategies and techniques that use online channels to reach out to potential clients (Strauss et al., 2019). Millions of people use the internet on a daily basis, accessing various websites using a variety of devices such as laptops, tablets, and smart devices, and the number of people using the internet is growing all the time. As a result, it seems like every business is coming on board with online marketing. The internet is the most effective tool for putting any company on an equal footing with market giants.
There are several advantages and disadvantages of an e-market strategy. The internet provides service to its consumers 24 hours a day, seven days a week. As a result, an individual may create and maintain relationships with customers all over the world, and your customers can shop or order products at any time (Strauss et al., 2019). In addition, many social networking networks, such as Facebook, enable ones to freely market and advertise your business. However, if the corporation wants to have a successful internet advertising strategy, it will have to spend money. When providing a service or product online, the cost of website design, software, hardware, business site upkeep, online distribution expenses, and committed time must all be considered.
Foreign Direct Investment
One of the primary entry strategies used by H&M is Foreign Direct Investment. This is an investment of a company in one country into another business to create an abiding interest (Doole et al., 2019). The main purpose of foreign direct investment is to gain control of the company. Normally, control denotes the desire to rule and actively affect a foreign company’s activities. For example, N&M identifies a company of interest in another country and invests with them through shares and other form of investment. Through this investment, H&M intends to influence the decision-making of the identified firm in the market producing almost the same products.
There are various merits and demerits of foreign direct investment. This strategy makes global trade easier to complete, especially in countries with high export and import tariffs. Because a minimal interest in a foreign organization occurs with this investment, limiting or removing tariffs becomes possible (Doole et al., 2019). This gives the local company more market control while allowing for pricing competition. It also gives H&M the necessary experience to run its business. However, when investors invest in foreign countries, they may discover that the cost of goods is higher than when they are exported. For example, machines and copyrights are typically purchased with more money than salaries for local employees.
Contract Manufacturing
Contract Manufacturing is a low-cost foreign market entry strategy that comprises a binding contract between a local company and a contract manufacturer in the target country. In this situation, a company with a worldwide marketing strategy collaborates with companies in other countries to produce or assemble items while keeping the marketing duty (Kenyon & Isobel Doole, 2019). This is common in the international market because it saves on cost and eliminates the need to look for vendors, which might be challenging when entering a new market. However, the company should surrender the production process control when using this strategy. The firm also risks losing important information and skills about production procedures if they cede control.
Conclusion
The best entry strategy for H&M in Brunei is e-marketing because it is convenient, less risky, and cost-effective. This is where an organization enters a company through a website as a platform for a business transaction. With the advancement of technology, there has been an increase in internet or online users (Doole et al., 2019). The analysis shows that Brunei is advancing digitally, and most residents have smartphones, especially teenagers. Coupled with the target market, which is young women in the country, e-marketing is likely to help the company attract more consumers and achieve its objectives. Therefore, H&M should consider building an interactive website to effectively enhance its operations in the new market. In addition, this should be made in the interest of young consumers because they are the target.
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