Pricing and Foreign Entry Strategies for Airsec Company into India - Assignment Example

Task 1 Company overview

Airsec Limited is a UK-based Company that specializes in Hi-Tech security and surveillance systems. It offers surveillance services through its infra-red camera based drones capable of detecting motions, capturing thermal images, communicating through WIFI to programmed numbers as well as capturing videos. Also, the product is capable of sending warning signals to the customers and security agencies on a real time basis something that is helpful to law enforcers. In other words, it's a product for law enforcers and domestic customers concerned with their privacy and security of their residences. The best part is that one drone can cover an entire 400 meters squared area making it also suitable for low-income individuals living in a community. The total cost of 3400 pounds can be shared amongst them.

Current State of the Company and the Product

Currently, the company has many domestic customers in the UK and makes acceptable level of profits. There has been a desire to expand to international market given its success in the UK with preference being India because of its past good relation with the UK. Additionally, India has a rapidly growing economy and a big population that will provide a market for the product. This will help to supplement the profits that have been increasing at a decreasing rate in the recent past. The company has witnessed a decreasing trend in its profitability in the local UK's market.

Vision

To be the preferred international choice for quality surveillance security options for governments and private customers.

Mission

To offer high quality but customer friendly surveillance security technology to ensure the safety of our customers.

Mission Statement

In our daily businesses of safety, we have established ourselves as a company that sticks to certain agreed values that define us and how we interact with stakeholders in general. We intend to be the preferred global provider of advanced security solutions by encouraging community involvement in our operations.

Core values

Community: We work with the local communities through sponsorship programs for various activities. On the same note, we also work with the local police to ensure the security of our customer's residences but also other areas within the 400 square meter area.

Safety: The Company champions safety not only to customers but also internally by ensuring the working environment is safe for all the staffs and the visitors. Externally, our product contributes to a reduction in crime rate in areas covered.

Professionalism and integrity: The Company upholds a high degree of professionalism in its operations, a fact that can be seen from the way our employees conduct themselves in and outside the company. Our customers come first, and services are offered with a lot of professionalism with staffs of high integrity.

Quality: The Company positions itself as a high quality, customer-oriented company whose product is a reflection of the value customers pays for.

Objectives

• To be the preferred choice for advanced security systems in the UK by December 2017.
• To increase our Sales Revenue in the UK by 10% by 2018
• To allocate 1.5% of our annual profits towards community development every year for the next three years.
• To enter Indian Market by January 2017, acquire over 40% of the market and break even by December 2019.

Task 2 Pricing Strategies

According to Marios and Constantine (2001), a multinational corporation may decide to either standardize its prices for the products abroad or adopt a different pricing policy depending on factors like economic environment, legal environment, distribution infrastructure, customer characteristics and behavior, and stage of the product in its life cycle (Marios and Constantine, 2001). Similarly, Jurate and Gabriele (2010) also agree on the factors above. However, according to them, the objectives of setting prices is to achieve satisfactory profits, sales, price wars avoidance meet customer requirements among many others (Jurate and Gabriele, 2010).

On the same note, Proth, and Dolgui (2010) price strategy extends beyond just adjusting prices to also taking advantage of the seasonality of demand, customers purchasing behavior or preferences and the nature of the good in question (Proth and Dolgui, 2010). Low price strategy involves setting prices at low levels expecting that customers will rush to purchase the product. Such a strategy may not always be worthwhile since a competitor may come up with prices lower than the company's present rate thus taking away customers (Kotler and Keller, 2012).

High price strategy, on the other hand, involves setting high prices for the products and maintaining the prices despite the product life cycle or the characteristic of the market (Proth and Dolgui, 2010). Examples of a company that has used high prices and still have high customer loyalty are Mercedes and Apple Company. However, it is also argued that high price strategy also depends on the company image and the customers' perceived quality of products (Proth and Dolgui, 2010). Adjustable strategies according to Proth and Dolgui (2010) may include the following; Discount strategy, price skimming, price discrimination, penetration, product bundle pricing, premium pricing and optional product pricing (Roth, 2007).

For Airsec's product, possible pricing strategies include but not limited to; skimming, penetration, discount and premium pricing just to mention a few. The latter applies to unique products with high quality but in small quantities just like the UAV. Such products may be a luxury but help to recoup large profits although it’s likely to attract competition. Used by companies with profit maximization objectives. Penetration pricing, on the other hand, is commonly used when gaining entry into a new market and include pricing product low to attract and grow customers. Once the desired level is reached, the prices are raised. Discount pricing includes selling a given product at a reduced price for a definite period. This strategy aims to mobilize sales in big volumes to compensate for the lost revenue from the reduced prices.

Price skimming involves setting high prices at the beginning then reducing this price with time. It is a way of recouping the huge cost incurred in developing the product (Jurate and Gabriele, 2010).

Margin pricing is a pricing strategy used mainly by foreign companies in export business. They price their products low to facilitate the sale of the products which are produced using marginal costing based only on variable costs. They argue that provided, the company has reached the break-even point, there is no need for the plant to stay idle since fixed costs will be incurred regardless. For this matter, it is advisable to continue producing even if the products will sell at low prices. Besides, this way, it would be easier to outdo competitors in the foreign market (Stöttinger, 2001). Destruction or Predatory Pricing, which involve Setting a price that will push competitors out of the market, Market Pricing which entails charging similar price as competitors and finally price war which involves continuously and persistently reducing prices with an aim of outdoing the main competitors (David, 2003; Jurate & Gabriele, 2010).

Since Airsec doesn't have any serious competitor in the UK, it should consider maintaining premium prices and high-quality products in the UK. In other words, since the Company is still growing, it may not be able to support high volume production, thus charging a premium for UK's customers while maintaining highest quality may work to build good company image, a desirable thing for winning customer loyalty. Apple Company succeeded using the same strategy in its domestic market and so can Airsec since both are in Tech industry (Arruda-Filho, et al., 2010)

However, in India, locals are known to prefer quality products at low prices. Since Airsec needs to increase revenue and sales to compensate for the declining revenue in the UK, the best pricing strategy should be a combination of price discrimination where the government may be charged a premium, but domestic customers charged using penetration strategy. While these strategies are implemented, quality should be maintained to position the company as the best brand. Unlike Government, which may require many functionalities, domestic customers only need the basic functionalities few functionalities hence the applicability of penetration to lock out any potential competitor and increase revenues and sales.

Task 3 Employee Benchmarking

Airsec Company believes that the quality and drive of its workforce is the determinant of its future success or failure. For this matter, it puts a lot of effort in making sure that it recruits the best and then ensures they are treated well as associates rather than the traditional workers. It is because of this that its employees currently numbering 120 are constantly challenging their ability to do better than previously. As is the practice of most companies, Airsec too conducts employee benchmarking annually not to point out weaknesses of weaker employees but to find the cause of their weaknesses. Based on the success of best achievers, weaker ones are encouraged to adopt the strategies used by best performers to improve their performance.

The company is in the process of recruiting 50 more employees and even more shortly as we plan to expand our business to India. Our penetration pricing strategy in India dictate that more products are produced and sold to compensate for the reduced prices. More production will mean more employees and hence the intention to hire more of them. Below board level, the categories of staff are managerial and administrative, research, professional engineers, software engineers, shop-floor assembly workers and miscellaneous categories including; delivery drivers, maintenance workers, cleaners.

Our benchmarking was initially based on the industry-wide standards complimented by trade journals on similar industries. However, presently we benchmark best on internal sources specifically our best performing employees. For example, sales and marketing team are benchmarked based on the previous set goals. Subsequent sales achievement figures are compiled per team and summed up for the whole year when the overall performance will be compared against the preset targets (Lu, et al., 1994).

Since they work in a team of three, we compile performance indicator information for each group through our quality assurance section on a monthly basis, then calculate the figures based on the variables and then compare them. The highest or best performance is set as the benchmark to compare other groups the following year with incentives being given for those who surpass the benchmark. This is uniquely set for each department because of the difference in job descriptions and roles. This, therefore, means that each section has its benchmarking parameters which can be qualitative or quantitative. The main reason is to inculcate a culture of progressive improvement in individual performance thereby increasing the overall company's effectiveness and competitiveness (Lu, et al., 1994).

The result from benchmarking is used to determine the training needs of the poor performers. On the same note, their problems are noted, and data on the same gathered for the future course of action. The incentives given to best performers include; giving bonuses and promotions as appraisal techniques to motivate them. This ensures that benchmarking serves a purpose not just done for formality (Kotler and Keller, 2012).

Task 4 Challenges likely to be Experienced Doing Business in India

India is one of the fast developing economies and with the biggest population in the world. It was reluctant to opening its doors to foreign companies until in the 1990s when it joined the world by entering the global trade. Since then, companies are competing to capture the huge market but often fail because of poor strategies yet India is made up of a unique population thus posing a challenge to corporations to understand this market first before venturing into it.

It is reported that Indian market prefers high-quality products but due to their low per capita income, they want the same at a low price. This brings the challenge to the foreign companies to adopt a strategy that would allow them to develop cheap but quality products to serve the Many Indians who are also reported to develop loyalty to companies with good image based on perceived qualities of their products. Airsec will have to tailor make the drones by only incorporating the functionalities needed by such domestic customers and which will bring down the cost of total production. Moreover, elimination of distribution channels is another way that will make it easier to reduce prices of the products to the ultimate consumer without feeling severely hurt.

Additionally, India is known for the diversity of cultures brought about by the presence of over seven major religions and six ethnic groups. Each religion and ethnic groups have their ethical concerns regarding such technology. A public education and awareness should be done with each group to ensure there is no misconception about the product which may hurt business. Another challenge is the presence of different regulations with each state which may mean what is legal in one state may be illegal in another. Similarly, intellectual property rights protection is a real problem. Airsec needs to follow the right legal channels to ensure their IP is protected from counterfeiting. This may, however, be threatened by another challenge of bureaucracy. In India, there is no one-stop center for clearing everything that concerns foreign business trade. Certain procedures are followed which are long and time-consuming. Other challenges like weather extremes and land acquisition problems are minor as they can be handled by reputable agents and Indian workers. For the case of tariffs, there is always a way around it. If the country charges high tariffs on imports, then probably strategic alliances will eliminate this cost. Besides, it is argued that strategic alliances work better than even mergers in India (Vimal, et al., 2012; Rajan, et al., 2012). Finally, just like any country, there are strict regulatory standards for products entering the country. This, however, is not a threat given the quality rating of Airsec' products.

Task Five

The risks associated with the malfunction of the UAV software can be divided into two; the one associated with third parties and the one associated with the company itself. Third parties stand the risk of getting injured by accidents caused by drivers distracted by the drone. Such accidents can be fatal and thereby cause unintended harm to the public. To the company, it runs the risk of losing important clients from the revelation that the product is faulty and the risk of being sued by third parties who may be delayed from accidents caused by distraction by the drone.

The impact is that the company may lose revenues from distrustful customers and suffer losses from legal proceedings initiated against the company. This spoils company image thereby affecting the marketability of its products (Jurate and Gabriele, 2010).

For this matter, the staffs charged with the malfunctioning component of the machine should recall the drones or remotely update the software that corrects the malfunction. Future subsequent production should thoroughly be tested and tried under different environments to ensure accuracy and win back customer trust.