Market analysis for entry strategy Essay
Market analysis for entry strategy
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Due to advancement in technology and modernization in the world today, most businesses are beginning to explore international markets for better profits and opportunities - Market analysis for entry strategy Essay introduction. In the recent past, trading has become increasingly global in some way because of the need to gather and increase the company’s financial base. Advancement in technology including communication efficiency and better international relations has contributed to the promotion of international trade (Lee, and Carter, 2005). Competition has however become a great challenge to the success of international trade but most companies are rising to the challenge. To achieve greater investments and better market opportunities in the international market, it is necessary that primary and secondary market research is done, market analysis, country analysis, product analysis to ensure that information regarding the country, competitors and possible challenges are obtained in advance
This paper will therefore look into the requirements and plans needed for a company (Henser Inc.) to enter market successfully. The main issues that will be addressed by the paper will be; the market and country analyses of France as a target market for the company. It will also identify the best entry modes the company would when it needs to market the products in that country. It will finally make recommendations of the best strategies the company can use to achieve its best in the French market
Henser Inc. is a British company which is based in Manchester, U.K. The company manufactures, supports, develops and sells a wide variety of alcoholic products including; wines, spirits and branded beers. Henser Inc. is one of the fastest growing companies in the world and based on our financial base, expansion rate and the increase n sales. The company has seen it wise to venture into the international market to improve on its sales. By the end of 2006, the company had an employee capacity of 700 throughout its branches all over the U.K and it hopes to employ more of them when it comes to marketing the product in France.
Analysis of product
The wines, spirits and branded beers are quality products that conform to international standards for alcoholic standards. The products have varied range of alcoholic content depending on the brands of the products. The products have been hailed by the British Bureau of Standards as fit for relaxation and depending on the consumer; it will provide good levels of drunkenness. Being an international marketing manager I would recommend that this company enters the French market. I have made the necessary market and customer information to enable us enters the target smoothly.
Country analysis- France
France is one of the respected countries in the world in terms of its political, economic, and social ability. It is considered a unique country with unique lifestyle, art food, morals culture and fashion. In addition, it also holds an all important seat in the United Nations Security Council responsible for decision making in all global security matters. France being the second largest economic country in Europe is considered a key member of the European Union and it is one of the countries that every company would wish to market its products.
Good economy, stable exchange rates, flexible import duties, better trade tariffs and more importantly, the single currency used by the two countries are factors that promotes international marketing. Europeanization has directly affected the governments of the member states; this means that the developments that France has gained so far in culturally and domestically are linked to the European Union’s progress. In fact, France, being the largest producer and exporter of agricultural products in the whole continent has had economic gains from the common market provided by the EU hence can provide another access entry into other markets bordering it.
Culture is a problematic issue for many international marketers because it is inherently nebulous and normally difficult to understand. It is possible that employees of Henser Inc. can violate the cultural norms of the French people without knowing hence the people in France becomes uncomfortable with the behaviour. The French people have also become sceptical about the way cheap labour is imported to the country at the expense of the locals. As such the French president was quoted saying that there was need for greater protection of the French market meaning that the country has some form of protectionism for its products and employment agreements.
An example would be the need to have better wages for the employees of the company. This has led to conflicts between the EU and the French government which demand that the European Union addresses an array of problems affecting the French people. While there is always some form of criticism, France will always be part of the European Union and will remain as a good destination for the many multinational and international companies wishing to do businesses in France
An opportunity analysis is an invaluable client tool for identifying and prioritizing opportunities to minimize unwarranted variation and inefficiencies (Lee, and Carter, 2005). A powerful resource for employers it is that helps them to understand opportunities and act upon them in a professional manner (Allard, 2005). The analysis can be done using the P.E.S.T analysis method. The simple analysis involves understanding the organization’s political, economic, social and technological environments with reference to those who do business with the company.
The socio-cultural forces in any country may completely affect the way business is conducted in one country. The social/cultural factors are problematic issues for many international marketers because they are inherently nebulous and normally difficult to understand. It is possible that employees of a company can violate the cultural norms of the French people without knowing hence the people in France may become uncomfortable with the behaviour. This company must therefore be able to adjust skilfully to the culture here depending on the marketing strategies to be applied by the company (Knight, 2007).
Attitudes and beliefs
France is among one of the countries with unique culture and beliefs. The country is well known for its diverse but strict cultural understanding for food, religion, family beliefs, and lifestyles among others. All these factors must be inherently taken care of by a detailed preliminary research on the specific cultures that must be incorporated. A nice idea would be to employ as many of the locals as possible to be able to quickly integrate the two cultures adequately.
The main language of the French people is the French language. French is the overall language adopted nationally among the French population. However, there are also other foreign languages that have been adopted such as English, Japanese and Spanish. All these languages are international and it is possible for any company to find a conducive environment for trading.
Market entry strategies
Since the company has decided to enter oversees market (French market) a variety of options were open to the company. These options vary with cost, risk and the degree of control which can be exercised over them in terms of security. Henser Inc. uses the following methods of international marketing especially in some countries, such as those France in Europe where the country has a developed infrastructure, organized import duty regulations etc.
Exporting is the direct sale of domestically produced goods in another country and does not require that the goods be produced in the target country. An example of this kind of marketing is counter trade, direct method etc. (Egan, and Lofhjelm, 2007)
Direct method of business can be applied where there is expansion of operations in markets where competition is less but currency based exchange is not possible (Knight, 2007). In this method, you may agree to build a plant in France and then operate it as a full entity in the country. Direct methods have the following limitations; it is difficult to set price and service quality and also there are a bit of inconsistency in specifications and delivery of products. This method of exporting entails that Henser Inc. builds a plant in a certain country and either distributes or manufactures their products and then operates as a full entity in the target country. Direct methods have the following disadvantages
It is difficult to set price and service quality
‘Dumping’ may occur since it is not covered by GATT
Inconsistency in specifications and delivery
Quality may not be of international standards becoming so costly to the customer and trader.
The indirect marketing of products involves the marketing of goods produced in one country into another through agents or other marketing agencies. In this case, there is no direct manufacturing in the intended country but significant investments in marketing are required. Henser Inc. can therefore manufacture their products in the main country i.e. in U.K and export them directly to France (Thompson’s, 2005). The advantages for this method are; production is home based hence less risky, gives an opportunity to learn markets abroad, potential risks of operating abroad are minimized. The only disadvantage of this method is that the company is at the mercies of unscrupulous agents who make more profit than the company itself.
The method of marketing does not require that the company invests in production facilities in the country and therefore, it is cheaper. The company can set an office in a particular target market and us it control all its operations. It is usually not expensive especially in terms of costs. The only costs that will be incurred are the marketing, transport and government expenses (Thompson’s, 2005). This kind of marketing require full cooperation of the following players; the exporter, who will be in this sense Henser Inc., importer in the target country, transport agents and the government trade officers.
Customer information and start-up costs
Customers in a foreign market are normally sensitive on currency, quality and quantitative figures of countries which the products originate from. Therefore in building a market entry strategy, various issues need to be taken care of; the infrastructure, market information and other resources are needed for a start. First, it begins with the development of buildings and other networks that are crucial to the company. Secondly, are the government issues such as licensing, taxing, policies and duty remittances In addition, massive start up campaigns are necessary to reach all the target within a very short time (Dale, 2006). Transactional costs are crucial to international marketing because there are language barriers, logistic costs; physical distance and other bargaining costs make initial costs very high. Enforcement of contracts and weak legal integration between countries are also issues of concern for Henser Inc.
Pricing and terms of access
There are many ways by which Henser Inc. can use to price its product in France. A price matrix will be suitable that will incorporate factors such as demand, supply, quality and economy (Thompson’s, 2005). The price mix will be suitable when considering the right pricing strategy to utilize which include;
a) Product adoption strategy- making modifications to existing product and raising its price
b) Availability and security strategy- countering perceived risks by overcoming transport risks and other costs then making a suitable price for the product
c) Technical strategy- demonstration of superior products. In this case, issues such as shortening life cycles for manufacturing equipment will be considered and technical advise given to the customers accordingly since they might complain of high prices
d) Total adaptation and management strategy- it guides the company’s organizational and technical portfolios especially the development of new products for low earning persons who want to enjoy the drinks
e) Conformity strategy- strategizing on how legal matters, tariffs and legislation for the business will be handled without hitches such as encountering losses
Methods of pricing
Premium pricing is the use of a high price which indicates uniqueness about the alcohol products. This approach is applicable where a substantial competitive advantage is in existence such as for luxuries.
In this pricing strategy, the price for the alcoholic drinks can be set to be lower than what it is in other countries so as to gain a market share. It includes a low price strategy enables a penetration price which is necessary to allow more products to sell at first but when it catches up, other pricing strategies are adopted.
In this case, the cost of marketing and manufacture are kept at a minimum hence becomes a no frills low price for a product such as the wines from this company
Other pricing methods are: (Cinchona, & Ronkainen, 2005); price skimming, psychological pricing, product line pricing, optional product price, captive product pricing etc.
The terms of access of Henser Inc. products in the French market pricing depends on factors such as the current tax rates in France and the overall demand rate.
Functional strategies are developed within every department of the company to increase its international sales margins and production. The Henser Inc. marketing department can for example prepare an individual strategy that will meet the overall company objectives. Other strategies under this include; new product development strategies, legal strategies, financial strategies etc which can also be set up as autonomous strategic business units is responsible for all of its operations but answerable to the company.
Encirclement strategies for conquering the competitors in France
This strategy is also called the envelopment strategy and is a more subtle, gentle, broader and a bit non-offensive but harmful way of attacking the competitor. Normally, this kind of attack is undertaken in two ways (Cinchona, 2005). One, introduction of a broader range of products that are similar to the competitor’s products and each of these products will get a share of the same market the competitor is. In the long run, the competitor will be demoralized, weakened and discouraged leading to a state of siege of the competitor. This first method will ensure that full scale confrontation is avoided between the attacker and the target competitor. Secondly, the encirclement can also be based on market niches rather than the products themselves. In this case, the market share is liberated from the target competitor via the expansion of market niches that surround it.
Porter generic strategies
These are strategies relying on the dimensions of the strategic scope meaning the market penetration and strategic strength referring to the firms or sustainable competitive advantage such as cost leadership, product differentiation and market segmentation which are required to meet the challenges of the competition (Cinchona, 2005). These strategies include; growth strategies, innovative strategies, among others. Although they are believed to be the best in the market so far, they are yet to be applied by most companies because of the costs involved in their implementation
Licensing and franchising
Franchising is about the application of economic endeavours in the area of product and services from the manufacturing, supply, processing, distribution and marketing. The company can be able to subcontract services from one company to be able to ease expenditures. On the other hand, licensing is not a standard document but depends on the parties involved; it can change in terms of how it is structured. It is a document to show the commitment of each and every member of the party. Both franchise and licenses are legal vehicles which are used to conduct businesses among different parties hence able to protect themselves from the any legal suits or disagreements (Knight, 2007).
P.E.S.T analysis has been used by Henser to analyze their external business environment. The simple analysis involves understanding the organization’s political, economic, social and technological environments with reference to those who do business with the company (Kotare M and Helena K., 2004).
Political-political factors may have a direct and indirect effect on the performance of the company. Some of the decisions made by the federal government of the U.S have impacted negatively on the operations of Henser. Take for example legal suits brought against in 2001 and the decision to minimize the production and marketing of high performance computers to countries believed to be a threat to U.S security. This have had huge implications to the company
Economical- every business is affected by economic factors. Fiscal policy rates, interest arte policy, currency exchange rates, consumer factors, etc. It is possible that the U.S climate of the economy dictates how the consumer behaves in the society. If an economy is booming, recessing or recovering, the confidence of the consumer will automatically change.
Social factors-Forces within the society such as media, family and friends have affected the way Henser has sold its products. Most of the customers have been mislead to believe that products made from America are of high quality. This means that companies such as Henser have benefited heavily. Social factors affect our attitude, opinions and interests on the way we view products from certain companies.
Technological factors- The way Henser operates its business has changed as technology changes. The internet for example, has assisted companies such as Henser to meet new markets and extend its global outreach. It has had a profound impact on the marketing mix strategies of many organizations. Business should keep in touch with changing technology and modernization in this ever changing world (Kotare M and Helena K., 2004).
Online marketing also referred to as E-commerce is based on the technology of internet and the usage of personal computers. In earlier days companies used power full computers to computerize millions of transactions carried out every day. Through internet Branches of the same company can develop networks, through which they could keep up to date with business progress and could improve service provision to customers. E-marketing is relatively a new advancement in the field of marketing even then there are many business and customers who have switched from traditional to online marketing. The reason being quite obvious, the convenience and flexibility it provides cannot be ignored. Flexibility of time, place, human resources and consists involved. As internet globalizes this world and in the same rate online marketing is becoming global.
Ethical and corporate responsibility stance as a marketing strategy
Corporate responsibility is the obligations that consider the interests of all customers, employees and shareholders, communities and other ecological considerations in the majority of all their operations in the company. This obligation will extend beyond their legal obligations to factors such as profits and dividends. But it should also consider immediate and long-term social, cultural and environmental consequences of their operations (Knight, 2007). Today’s heightened role of businesses in the society has been enhanced by increased sensitivity and awareness of urgent ethical and environmental issues. These issues include.
Improper treatment of workers
Faulty production that inconveniences or endangers customers
As part of international commitment to conduct business with integrity and comply all applicable laws, the company strives to maintain a strict code of conduct that will see its social responsibility in France increase through the following; fund raising, community assistance, project funding etc. ethical behaviour is an individual responsibility regardless of position or location, it will reflect the highest ethical standard expected of employees, directors and all people bound by it (Fletcher, R & Brown, L., 2005)
Achieving and maintaining competitive advantage
To maintain a competitive advantage in French market, the following need to be taken into account;
a) Frequent monitoring of other competitors
b) Product quality improvement as long as the market demands
c) Social support and community projects such as providing scholarships to poor students
d) Proper management
e) Employing mostly French nationals to market products without compromising on skills and knowledge (Hill, 2005)
Product branding is a key factor in determining the selling trends in that country. In France for example, Henser Inc. can adjust its branch name and rename it after a populous French personality to increase perceived value of the customer towards the product. A good brand name should be; legally protect-able, easily pronounced, easily remembered, easy to recognize and to attract attention from everybody (Hill, 2005). There are different kinds of brands that can be applied by Henser Inc. These are;
Suitable strategies for Henser Inc.
a) Joint ventures
Joint ventures are forms of market entry that allows for technology sharing and joint product development. The main advantage of joint ventures is to get proper political connections that will allow for favours to be achieved. It is usually suitable when; the market power, resources and size of the partner is small compared to the industry leaders. If Henser Inc can merge or have a joint venture with any company which is still junior in Africa and then boosts its market power, it will be able to meet the demands in that particular region (Lovelock, 2006). The main issues that are usually sorted out during the discussions for joint venture are; agreement periods, pricing methods, ownership and control, local firm capabilities and technology transfer.
b) Foreign direct investment (FDI)
FDI is the direct ownership of processing, manufacturing or assembling facilities in a target country by a mother company. The company such as Henser Inc. can transfer resources to developing country which has a good customer base and then set up branches in any other regions or areas of the country. The resources include; technology, personnel and capital (Foster, & Harris, 2005). The company will be able utilize the resources in the target country including in the human resources, manufacturing equipment among others. The company can also acquire existing companies which are not particularly getting enough sales from the domestic markets. It is also possible for the company to set up its own company and start manufacturing the products directly
Nowadays, it is possible to use e-business through the internet for distribution purposes especially when dealing with international businesses. Digital strategies are changing the way distribution channels for companies are established and therefore Henser Inc. is able to use the hi-tech communication channels to monitor progresses for the companies both in Holland and other branches. The company can also employ other market entry modes which include franchising and licensing. It will be possible to also adopt foreign direct investments and joint ventures which will make possible for Henser Inc. to gather enough market information quickly and familiarise themselves with the laws, regulations and needs of the customers in the target market.
Henser Inc. need to employ good marketing strategies in addition to the other market entry strategies such as the direct methods to realise its success Being a company that was just born the other day and it has gone ahead to compete with companies such as HP and others. It combines both direct and indirect methods of exporting to reach the international markets such as in France. Currently, the company employs the following market entry strategies; porter generic strategies, ethical and corporate responsibility stance as a marketing strategy, Internet marketing strategies to market the products in France. Suitable strategies for Henser Inc. to adopt in order to improve its market share potential in France are; Joint ventures, Foreign direct investment (FDI), Licensing and Franchising.
Henser Inc. Through its domestic and international marketing approaches has been able to meet its objectives especially when it comes to competitive ventures. Henser Inc. have had an obligation to further propel the company forward thus able to create and maintain a healthy marketing culture within itself if it sticks to the above proposed marketing roles and strategies. The moist important of them, is to use internet marketing where the company can try to meet the larger French population. If the current communication advances, complex marketing techniques, and growth in the digital marketing procedures are anything to go by, it is absolutely mandatory for every marketer to adopt electronic marketing as a market entry technique in a new country.
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