Marketing and International Business Development Specialist - Assignment Example

Part (B) The factors our team should consider in order to manage the emerging market effectively. Since May 2004 Poland became the full member of European Union, so the Polish economy was expanding. The macroeconomic data published by the Polish Central Statistical Office in recent months confirmed that the Polish economy is on a path towards a strong recovery: "In 2004 the Polish GDP grew at 5.4 % and for 2005 the government estimates growth at 4.7 %." On the first day of its EU membership important changes took place on the borders with other EU states, as goods and services not subject to excise tax will now be freely transported within the EU. In this period of political, social and economic transition in Poland, vast changes in the level and structure of many food products consumption, including alcoholic beverages, were noted. The estimated annual consumption of alcoholic beverages in Poland reached the level of 6, 5 - 6,9 litres of pure alcohol per capita, which places Poland in the 5th or 6th position among the European countries, after France, Portugal, Spain and Germany. There was a rising tendency in the consumption of strong alcoholic beverages until the end of 1980s; in mid 1990s this trend was reversed. Since then the demand for vodka has been decreasing, whereas the demand for beer and wine has been growing1 (Tabel 1). Table 1. Alcoholic beverages consumption in Poland (converted into pure alcohol) for one citizen per year Year Total consumption of alcoholic beverages Vodka consumption Wine and mead consumption Beer consumption 1980 1990 1995 1996 1997 1998 1999 2000 2001 2002 9.0 6.4 6.4 6.5 7.2 7.1 7.1 7.1 6.6 6.9 6.0 3.8 3.5 2.9 2.8 2.4 2.1 2.0 1.7 1.7 1.5 1.1 1.0 1.5 1.9 2.0 2.0 1.8 1.6 1.7 1.5 1.5 1.9 2.1 2.5 2.7 3.0 3.3 3.3 3.5 Source2: same author's calculations based on the data from Statistical Yearbooks 1990-2003 [3] "Alcohol is often characterized as unconditionally negative in the context of poverty." ("Poverty and Alcohol" - an article by Yoon Hui Kim, 2004). Yet, the same author agrees that arguments have been made for both the benefits and disadvantages of alcohol production and consumption - as an industry, alcohol production has been argued to spur economic growth and alleviate poverty, while as a commodity it has been criticized for exacerbating the conditions of impoverishment. Consequently, for poor people alcohol can have both positive and negative repercussions on economic, political, social, and health factors. Alcohol consumption can act as a financial drain for indigent households by diverting limited funds from expenditures on food, healthcare, and education. White spirits and in particular, vodka, have been on the increase since 1999. Much of the growth has been inspired by younger adults, who are either supplementing or bypassing altogether, beer and wine, in preference3. The alcohol industry is an innovative industry able to use a wide variety of marketing tools to achieve success in the market-place. The various aspects of product marketing include advertising, labeling, consumer promotion, packaging and merchandising, being an integral part of promoting different brands of consumer goods. Alcohol consumption in Poland is comparable to that in other European countries4. Buying of alcohol (frequency & amount) depends on demographic, socio-economic and psychological factors. Statistical data reveal that alcohol consumption is wide spread in Poland. In the period of the last dozen years changes in the quantity and structure of consumption were observed. The most frequently consumed alcohol is currently beer, particularly among young people. In may 2003, a research investigating "The conditions of alcohol consumption among Polish adults" published in Electronic Journal of Polish Agricultural Universities shows that older people seem to prefer wine and vodka. Apart from age, sex also influences preferences: "women more frequently than men drink all kinds of wine and flavoured vodka, "whereas beer, pure vodka and mead are drunk more often by men" (the same source). Alcohol consumption may depend also on urban share of population, educational attainment. These are demographic factors. The socio-economical factors are: labor force, unemployment, price, household income distribution, health and education expenditures. An interesting issue is that although spending on alcohol depends on income, the frequency of consumption is independent of this factor. The most frequently circumstances for the consumption of alcoholic beverages are social gatherings and family celebrations. Despite of this, a high percentage of the consumers admit to drinking alcohol without a special occasion. But, in my opinion, the most important factor determining the choice of a new kind of alcohol is taste, this being a psychological factor. Other psychological factors are: life expectancy, dependency ratio on alcoholic drinks and possibility of substitution with other products (the last one could be mentioned as an economical factor, as well). "More than ever, consumers need the right information to make the right decision. Otherwise, it could cost money. In today's marketplace, good information is good consumer protection." ( says Industry Canada's Office of Consumer Affairs). Part (C) Three market entry strategy options our organization should contemplate to secure their position as a significant international organization. The transformation of the economic system, the liberalization of the legal possibilities of setting up companies and regulation on liquidation procedures resulted in enormous rise in the business activity. Poland is considered the most attractive investment location in Central Eastern Europe, according to the A.T. Kearney Annual Confidence Index for 2003. The surveyed CEOs, CFOs and other top executives of Global 1000 companies find Poland third after China and Russia as the most attractive investment destination. In deciding to increase capital involvement in Poland, foreign investors took into consideration the macroeconomic situation, the level of economic development and the progress of reforms, Poland's membership in OECD, GATT, WTO, NATO and European Union. Also important factor is Poland's creditworthiness in the international arena. Firms have a number of options for entering a foreign market other than direct, cross-border sales. The most important are Direct investment, Joint-venturing, Licensing. These are not the only options - a 'strategic alliance' with a foreign partner is an increasingly common choice in some industries, but they are the most adopted choices. A firm's choice of an entry strategy is not usually strictly constrained. Firms do not usually choose one strategy because the alternative strategies are not viable. Rather, the choice of a trade, investment or licensing foreign market entry strategy depends on an assessment of the best value for the firm among the range entry options. A brief summary of them follows: 1.Licensing. The advantages of licensing consist of : jumping border barriers, protecting a trademark from cancellation or compulsory acquisition for non-use, allowing a firm to amortize research costs and providing high marginal returns, avoiding most of the risks associated with direct investment including exchange risks, the requirement to develop in-country support facilities and to adapt the firm's own procedures to the foreign market. And the disadvantages consists of being the least profitable option; implying intellectual property risks; adding a "quasi - uncontrollable" licensee performance (for example, poor management of quality can damage brand reputation in other license territories). 2.Foreign direct investment. Advantages: provides the scale economies and efficiencies of production across several markets, allowing vertical integration of production where different stages of production take advantage of the comparative advantage of different economies such as the supply of labor or raw materials. Although licensing adds an 'uncontrollable', FDI allows firms to internalize the ownership and exploitation benefits and to maintain close control while locating close to the customer base ("the benefit of a 'direct presence' in the foreign market", as it is sometimes described). It also ensures firm can extract full value from technology ownership. "Poland does not have any general screening mechanism for entry and establishment of businesses by foreign firms. Authorization requirements and foreign equity limits do exist for a limited number of sectors. The Law on Economic Activity requires a permit from the Treasury Ministry for certain major capital transactions, or lease of assets, with a state-owned enterprise". (Country Commercial Guides, National Technical Information Service). The disadvantages of this option are that this entry strategy has the highest capital and management costs and that the largest array of 'uncontrollables' affect the foreign direct investor including currency and exchange risks, performance requirement risks, discriminatory tax or licensing requirements. 3. Joint Venture. It is a partnership formed by two or more individuals for the purpose of pursuing a shared business plan. It can be also described as the pooling of resources and expertise by two or more businesses to achieve a particular goal, the risks and rewards of the enterprise being also shared. The partners could agree a contract setting out the terms and conditions of how it will work. Alternatively, might want to set up a separate joint venture business, possibly a new company. A joint venture company like this can be a very flexible option - the partners each own shares in the company, and agree how it should be managed. Possible disadvantages of choosing this option consist of: partnering with another business can be complex and it takes time and effort to build the right relationship; Success in a joint venture depends on thorough research and analysis of aims and objectives. This should be followed up with effective communication of the business plan to everyone involved. The reasons behind the formation of a joint venture include business expansion, development of new products or moving into new markets, particularly overseas. In my opinion, this is the best option for entering a foreign market. The ideal partner in a joint venture is one that has resources, skills and assets that complement our own. Customers and suppliers with whom we already have long-standing relationships are a natural place to start our search. In spite of this, an existing relationship is no guarantee of success. A partnering relationship stretches beyond an ordinary contractual relationship. The way our partner behaves, and their reputation, could affect us. We should consider whether their brand and attitudes suit us. An example could be the fact that we believe in excellent customer service, but we have problems working with another business that focuses on cost-cutting. Their approach could make it difficult for us to maintain our level of quality. So, if we don't already know the people we'll be working with, we should carry out basic checks. In my opinion, Joint Venture is the best option for entering a foreign market. It can bring to our business more resources, greater capacity, increased technical expertise, established distribution channels. A strategy that we can choose is to agree to co-operate in a limited and specific way. For example, we have a business with an Irish alcoholic beverage new product and might want to sell it through a larger company's distribution network. In our situation, a successful joint venture can offer access to new markets and distribution networks; increase capacity; sharing of risks with a partner; access to specialised staff and technology. Also, a joint venture can be very flexible (it can have a limited life span and only cover part of what we do, thus limiting both our commitment and the business' exposure)5. In order to create a joint venture it is best to have a written agreement that sets out all the details. This must cover: the structure of the joint venture (whether it will be a separate business in its own right); what the objectives of the joint venture are; what financial contributions you will each make; whether we will transfer any assets or employees to the joint venture; ownership of intellectual property created by the joint venture; management and control (responsibilities and processes to be followed); how liabilities, profits and losses are shared; how any disputes between the partners will be resolved; how the joint venture can be brought to an end and what will happen. The parts may also need other agreements (such as: a confidentialy agreement to protect any commercial secrets they disclose). The multilateral trading system cannot eliminate the risks associated with different foreign market entry strategies but it can equalize the risks associated with the different entry strategies. If the risks are similar, firms can make a choice of foreign market entry strategy based on factors over which they exercise more direct control - product type, unit price, intellectual property content, target consumer profiles, business plans, availability of capital. This provides more certainty for firms, allowing better market access planning and more predictable growth paths. Sources: 1. Natalie Enders, Marketing & International Business Development Specialist - http://www.sologig.com/employer/profiles/view.phpid=140343 2.http://www.heinekeninternational.com/content/live/files/downloads/InvestorRelations/Full%20Annual%20Report_tcm4-12793.pdf - Heineken Annual Report 2004 3. Philip Kotler, Marketing Management: Millennium Edition (10th Edition) 4.http://www.amazon.com/exec/obidos/tg/stores/detail/- /ebooks/B00081WKXG/reviews/104-4192440-8882339#b00081wkxg2300 5. Alain Gervaix, Assessing the optimal conditions for the effective distribution and promotion of international non-durable consumer products to commercial enterprises, institutional customers and governments 6. Annette Kihl, The winning marketing strategies of the 1990s. A study of branded food manufactures in Europe 7. Carmen Beatriz Prado, International business and national disaster risk 8. Jan De Vries, Country risk and the evaluation of offshore projects : the cost of capital for foreign direct investment 9. Marketing Intelligence and Planning (Volume 18, Issue 5, 2000), Strategic Marketing in Emerging Markets. Guest Editor: George T. Haley 10. seminar with George T. Haley on Investing in International Markets.Emerging Markets and Areas, May 2000 (Quote.com) 11. Steve Pennone, Management of the access to the market : channel, power&information, technologies in the 1990s. 12. Sylvie Jeannot, Trends in the private label market and their implications for national brands and service companies dealing with them 13. Thierry Cornille, Ways to reduce tax in an international environment : corporation taxes and deferred taxes 14. Carole Besson, Ethical Issues in International Marketing : Developing and testing a teaching module 15. http://topics.developmentgateway.org 16. http://www.pensions-institute.org/workingpapers/wp0308.pdf 17. http://www.asia-pacific.com/mip.htm 18. Joan Peterson, David Peterson, S.V.Medaris, Eat Smart in Poland: How to Decipher the Menu, Know the Market Foods & Embark on a Tasting Adventure (Eat Smart Series, No. 5) (Eat Smart, No 5) 19. Beth Holmgren, Rewriting Capitalism: Literature and Market in Late Tsarist Russia and the Kingdom of Poland ( Series in Russian and East European Studies) 20. Richard J., Jr. Hunter, Leo V. Ryan, The Polish experiment in democracy and a free market: its importance for Eastern and Central Europe. An article from: Mid-Atlantic Journal of Business. (December 1, 1992) 21. Prime Food pioneers the Polish meat market with Cryovac food packaging. (Packing & Equipment): An article from: Food Trade Review. (Digital, December 1, 2004) 22. Inc Global Advertising Strategies, Health Insurance on the Polish, Russian and Romanian Markets in the US 23. Mike Ingham, Women on the Polish Labour Market (Paperback - May 1, 2001) 24. Inc. Global Advertising Strategies, Money Transfer Services on the Polish, Russian and Romanian Markets in the US, (Digital - July 23, 2002) 25. Scott Simpson, Travellers Krakow 26. Sara Lepro, Diamonds in the rough: two former Henkel execs polish product ideas into market gems.(Products)(IdeaStream Consumer Products LLC) : An article from: Inside Business, (Digital - February 1, 2005) 27. Grzegorz W. Koodko (Editor) (September 30, 2005), The Polish Miracle: Lessons for the Emerging Markets (Transition and Development) 28. Unemployment Depresses Polish Sales: An article from: Market Europe (Digital, November 1, 2002) 29. English language newsletter. News, analyses of the Polish market www.pmrpublications.com 30. www.SourceTool.com 31. Polish Private Spending to Rebound in 2004: An Article from: Market Europe (Digital - August 1, 2003) 32. Inc. Global Advertising Strategies, The Demand on Life/Disability Insurance by the Polish, Russian, Romanian Markets in the USA (Digital - June 25, 2002) 33. Aleksandra Grzymala-KazLowska, From ethnic cooperation to in-group competition: undocumented Polish workers in Brussels. : An article from: Journal of Ethnic and Migration Studies 34. Zbigniew Bochniarz, State enterprises and market-oriented reforms: A comparative study of Polish and Soviet laws on state enterprises (Working papers in international studies) 35. Elzbieta Czarny, From the plan to the market: The Polish experience, 1990-1991 (Economic and social policy) 36. Slobodan Mitric, From monopoly to market: Road taken by Polish urban mass transport companies 37. Christiane Tewes, M&A and Privatisations in Poland. Key success factors of cross-border acquisitions into the Polish market (November 29, 2001) 38. Ingrid Leiprecht, Sectoral adjustment in the Polish labour market 1992-1995: A microeconometric analysis with special reference to agricultural employment 39. Witold Walkowiak, The directions of ownership reform and capital market development in the Polish economy 40. Zbigniew Bochniarz, State enterprises and market-oriented reforms: A comparative study of Polish and Soviet laws on state enterprises (Working papers in international studies) 41. Slobodan Mitric, From monopoly to market: Road taken by Polish urban mass transport companies 42. Jzef Misala, Competitiveness of Polish products on the market ot the European communities (Diskussion papers / Foreign Trade Research Institute) 43. Mass Market Paperback - March 22, 1985, 30 Polonaises by Polish Comp 44. Elaine J. Shaw, The View from Three Windows (Mass Market Paperback), December 15, 1993) 45. An article from: Glass: Transition in the Polish glass industry: the transition from a centrally controlled to a free market economy exerted a profound influence on the Polish ... On Poland) (Digital - November 1, 2004) Read More