Expansion of XYZ Telecom into the Indian Market - Case Study Example

Introduction: This is a global marketing opportunity analysis with regard to the international expansion of XYZ Telecom into the Indian market. XYZ Telecom is a UK based company and has a major presence in the country and many markets in Europe. XYZ Telecom is a service provider in mobile communications. The company provides services and hardware like handsets, communications equipment, and other accessories are form reputed brands. It has already made a successful presence in UK and European markets. The company would like to tap the huge potential of the Asian markets and plans to make its presence felt first in India. It has already made an unplanned foray into India, but is not finding the move very successful. This is despite the fact that the mobile communication market in the country is huge and the potential to grow exists especially in the larger towns (not the four big metros in the country) and semi urban areas. This report is a global marketing opportunity analysis for entering the Indian market. This is a preliminary to a full fledged marketing plan which will be prepared at a later stage. 1. PESTEL Analysis: Political Factors: The following political factors is the key concern; Current / future taxation policy to be monitored. Current and future Political supports will render a great control to the regulation of business of a country and add value to clients and other business also. Bank loan facility such as bank guarantee to be made in between employers and bankers and the bankers provide the finance on a instalment basis i.e. on the basis of work progress. Trade bodies to be complied with such as trade license to be provided by the Government bodies to start the business and the license to be renewed periodically (yearly). To be make sure, concerning the war effects and related draw back on the affected Country. Stability of political environment also another important factor. Government policy i.e. rules and regulations influence the business requirement. Government's role on marketing principles should be evaluated. Look at the Government policy on the financial end. Government view of point on cultural and religion environment to be analyzed. Economic Factors: Traders has to consider the situation of finance in the business if it is short or long term. Strength of sale i.e. is another important factor which is applicable for current and future levels of Government spending. Access of loan feasibility has to be considered. It is really a fact for doing an international marketing. You have to be particular about the interest rates as such current and future level, because the fluctuation in exchange rates has a great impact on the market now days. Due to the current global recession unemployment also badly effected at present. Price rises also another impact on the employment level per capital also to be considered the price rises how it affects the domestic product so. Tax levies and market trends is to be followed. Socio-cultural Factors: To look at the influential part of society and culture of the country on the business which varies from county to country. Another important factors are to be considered is dominant religion and the effectiveness of foreign products and services and mother tong (language) of that particular county is another factor which will have a great impacts for communicating of products in their markets. Timing is also considered as per the requirement / availability of Clients. Majority of roles of men and women to be identified. Population of that country is to be considered whether the older generations are wealthy or not. Religious customs of that particular Country and community to be respected so. Technological Factors: Current and future technology innovations is important for competitive benefit and is major guider of globalization. Fund status is concerned with by viewing technologically. The technology is deeply affected the products and services to produce more cheaply and to a prime standard of quality. Internet services and advanced mobile and telephone services offer consumer and business more innovative products. Now online services made a good deal for distribution and also technology offer companies a new way to communicate e.g. banners, CRM etc. Advanced technology to be implemented as and when required, for modernization of the global communication strategy such as media and I.T. Environment Factors: Health, Safety and fire alarm and non-pollution procedure should be strictly adhered with and it should be followed as per the Rules and Regulations of a Country Government bodies. Recycling and cleanliness of the surroundings to be considered is mandatory. Locality is the main thesis of the business and it is applicable to the kind of business running so. In point of view of the Government, media and Clients on the environment is legitimate. Legislative Factors: The current and impending legislation impact on the industry to be reviewed. Legislative factors which dealt with employment, competition and health and safety which is followed and actioned as appropriate. Future changes of legislation to be considered, such as European low changes. Business policies also look into which must be in accordance with the regulatory bodies. (Pestle Analysis-Marketing Plan. 2007). PESTEL is a strategic planning tool; it is really worth to helps you see the landscape beyond your own market. If you are going to run a business in a country, all your strategies must be adhered to PESTEL tool. Political, economical, social, technological, legal and environmental factors (PESTLE) are known as global environmental variables. These factors are likely to have major effect to the company. Tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability which are comes under political factors.India is a democratic country like UK. Compare to other nations the political stability of India is good. The stable government only can lead in front. This political stability attract to foreign investors to invest money in any country. In India most of the tax policies are very transparent. India is issued different types of tax policies which is helpful to foreign investors to invest in India. Personal income tax, corporate income tax, wealth tax, expenditure tax, gift tax, sales tax these are the major tax policies existing in India. The developing country like India makes extensive use of tax policies to vary investment decisions. In India, corporate companies are getting income tax concessions either partially or totally from the company's profit. India is an open economic country. Therefore any company can do the deal internationally. Indian economy has risen up in recent years. The growth has reflected in all the majors sectors like IT, real estate. From the beginning of 2009, Most of the developed countries like US, UK are facing the extreme financial crisis. So any banks had been bankrupted. But this global economical condition hardly effected to Indian Economy. India is one of the best countries in the segment of technology. India's highly efficient scientists are working on its development. In India, extremely graded institutions are there. They are producing highly talented technicians every year. In India, most of them are using mobile phones to communicate each other. Here, the communication industry is very competitive. All the companies are delivering highly advanced mobile phones with lots of features. A full PESTLE analysis can be seen in the appendix 2. Marketing information systems: Marketing information systems (MKIS) is an essential part in the success of a business organization. This is especially true in the case of a new entry into the market. One of the primary ways to access knowledge is through market research. The system by which market information through research and other methods will be the marketing information system of the organization. "Marketing research can be defined as "the systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services." (Marketing Information Systems: Marketing Research). Marketing information system on the other hand is the "set of procedures and methods for the regular, planned collection, analysis, and presentation of information for use in making marketing decisions." (Foxall 1981). Market research yields data which is analysed for the benefit of the company while MKIS is the planner system whereby the data is gathered periodically. When conducting marketing research as a part of MKIS, the following factors should be kept in mind. The reason or purpose of the research should be clearly defined. The value that the data will provide for the company should be known because the more valuable the data, the more care that is needed in the process. A proposal to conduct the research should be made with all the necessary details. The method of research (online and direct surveys, interviews) should be decided upon next. Specific details like whether data collection is qualitative (or both), interviews be direct or through telephone, surveys be direct or online etc must be established. The data collected must be analysed using scientific methods like correlation analysis and Likert scales. The company should then take informed strategic decisions based on this data. A well executed marketing research along with a good MKIS in place will provide accurate needs of the customers as well as all other relevant market information. Satisfying this need is that primary function of any marketing organization. It should be noted that in this instance, the market is an international one. The Indian market is quite different culturally when compared to the UK market. Moreover, the work and management ethics and practices will also be different. An understanding of this scenario will also be a part of the MKIS. In this regard, the Cultural Dimensions of Geert Hofstede and the GLOBE study on international cultures will be extremely useful. A proper intelligence system to analyse and make sense of all the data should also be there. "A marketing intelligence system is a set of procedures and data sources used by marketing managers to sift information from the environment that they can use in their decision making." (Marketing Information Systems: Marketing Intelligence Systems). A professional market research firm should be employed to collect the data. In the first phase, the target market will be the major cities in India. Such agencies are available in these areas. Moreover preliminary investigations have shown that the average mostly usage is more in cities than in rural areas. None of the existing companies in the country charges for incoming calls if operating within a telecom circle. A user can receive incoming calls for free if he or she stays within that circle. So the poorer sections of the population depend mainly on incoming calls for communication purposes. 3. Techniques for understanding market potential in India: Marketing managers use several techniques for understanding the potential of a new market. The above mentioned PESTEL analyses are commonly used for this purpose. Market analysis (marketing mix) using the 7 Ps of marketing can also be used (product, place, price, promotion, process, and physical evidence) Apart from this SWOT analysis and Porter's Five Forces analysis are also commonly used. SWOT analysis is an acronym for strengths, weaknesses, opportunities and threats. The first two are practically internal factors where the strengths and weaknesses of the company is analysed. This can be used to correct the weak areas and fortify the strengths. Opportunities and threats are external in nature and depend on individual markets. "Porter has identified five competitive forces that shape every industry and every market. These forces determine the intensity of competition and hence the profitability and attractiveness of an industry." (The Five Competitive Forces: Introduction. 2007). The five forces are power of supplier power, buyer power, threat of new entrants, threat of substitutes, and level of competition. (The Five Competitive Forces. 2007).The terms are quite self explanatory, but a brief review will be done here. Supplier power indicates to what extent the suppliers have control over the market in terms of pricing, supply, and other related factors. Supplier power will always be low in an open market economy. It will be high in oligopoly market. Buyer power indicates that buyers will have a lot of choice with regard to a particular product or service. In competitive and open markets, buyer power will be very high. Threat of substitutes indicates whether any other classification of product can be used in place of a particular product. An example would be the choice between posting a letter and couriering it. Both are substitutes to each other. Threat of new entrants indicates how open and attractive the market is. If the industry is highly competitive, new entrants may not be willing to enter the market. Other reasons like government policy, maturity of the market, investment and technology levels etc also are factors affecting the threat of new entrants. Level of competition need not be explained any further as it is quite clear from the term itself. Porter's five forces in the Indian market: This will be done with regard to the mobile phone industry in the country. There are a lot of companies, both national and international, operating in India and there is heavy competition between them. The country is divided into telecom sectors and is entry is controlled by a government body called the Telecom Regulatory Authority (TRAI). "The mission of Telecom Regulatory Authority of India (TRAI) is to ensure that the interests of consumers are protected and at the same time to nurture conditions for growth of telecommunications, broadcasting and cable services in a manner and at a pace which will enable India to play a leading role in the emerging global information society." (Our Mission. 2005). TRAI allows several companies to operate both land and mobile telephony in each circle and there is quite a heavy competition within each circle. Supplier power is low in such a case. With regard to suppliers of handsets and accessories, there exists a large number. This is advantageous to any service provider since products can be had at competitive prices. Here also, supplier power is low. Due to this fact, the choice of customers is high resulting in high levels of buyer power. There is not threat of substitutes until satellite telephony becomes popular. Hence threat of substitutes is low or does not exist. Threat of new entrants is moderate since the market is regulated. It depends on the policies of the TRAI to decide on the company and also the numbers of companies within a circle. Competitive rivalry within each circle is high even though entry of new companies is regulated. Each company has also to pay high licensing fees to the government. Even so competitive rivalry is high. A company can also get license to operate in more than one telecom circle. But there is a huge potential within each circle and the country as a whole. The five metros in the country are saturated and it is better to concentrate on other cities and larger towns within the country. Except for the four metros, a telecom circle in most cases covers a whole state within the country, the market is huge. The technology available in the country is also of a high level and new advances in mobile telephony can be incorporated without much difficulty. There is also a 'value added services' industry (caller tunes, ring tones, mobile phone games etc) which can be made use of by the company. Major international players like Vodafone and Virgin along with competent national companies operate in the market. 4. Critical appraisal of the marketing plan: Entry into a new market is a risky for any company. It is more so when entering into an international one that is different culturally and economically. Many other factors other than a normal study (expanding within the national markets or into similar markets). A detailed marketing plan has to be prepared. It will be done in this case after this global marketing opportunity analysis report has been studied by the management of XYZ Telecom. The marketing plan will have the following structure. Introduction: A brief introduction of the company, and its expansion plans into the Indian Telecom sector will be given here. Market analysis: The analysis of the market using the following techniques namely, PESTEL analysis, Porter's five forces, and marketing mix (7 Ps) will be done. Situation analysis: This will be done mainly be a SWOT analysis. Marketing strategy: Once all the above information is available, it will be possible to develop a marketing strategy. Sales forecast: It is necessary to develop a target for the market and this will be done by developing a sales forecast. Budgeting: The expenses and the possible revenue has to be forecast and hence and expense and income budgeting will be done here. It will be dependent on the marketing strategy and the resources available with the company. Market research: A proposal to appoint a professional market research firm in the country will also be provided with the suggestions of the names of established companies in the country. Understanding cultural and work related diversity: This will done using the Hofstede Cultural Dimensions and the GLOBE study on international culture. A proposal to include training in diversity management for company staff deputed to work in India will also be included. Recommendations and conclusion: The marketing plan will come up with a set of recommendations and conclusion for the approval of the management. APPENDIX Full PESTLE analysis: Political: Stable democracy Wide range of taxes - Sales tax, income tax, excise duties, import duties, corporate income tax, wealth tax - Hence highly taxed Open economy in communications sector with regulatory authority in control. Allows foreign participation through licensing. Economic: High growth economy High percentage of middle class population - nearly 50% who can easily afford handsets High level of competition High growth in communications and related industries Low to medium inflation General economic growth is conducive to development of telecom Availability of affordable handsets and user plans, prepaid and post paid options are common Wide disparity in income of low income and middle/high income Corruption exists in politics and other areas. Varied, high in some areas and low in others Social: High level of social and cultural diversity Literacy is low, but not a barrier to using mobile phones Majority of population is young and middle aged. Family ties high, need for communication is also high Highly receptive to innovative marketing gimmicks like caller tunes, ring tones, MMS, games, multimedia etc Prone to social, religious, and political conflicts Technical: Technology and support is not a problem Large pool of engineering and technical personnel Good in areas like customer support and front office which can be outsourced Adoption of new technology is dependent on government policies Currently GSM and CDMA technology used Legal: Strong legal system with Supreme Court as chief guardian But prone to delays in dispensing of justice There are accusations of corruption in judiciary especially in lower courts Diverse laws on a wide range of areas including corporate, personal laws, taxes, environment, intellectual property etc. Intellectual property protection record is poor Environmental: Laws exist, but is widely ignored in many areas Disposal of old handsets and accessories may cause problems Awareness of environmental issues rising especially among the literate sections of the population Climate is tropical with very little of extremes except in some areas Bibliography FOXALL, Gordon R. (1981). Strategic Marketing Management. [online]. Taylor and Francis. P.48. Last accessed 16 March 2009 at: http://books.google.co.in/booksid=ABwOAAAAQAAJ&pg=PA47&lpg=PA47&dq=MKIS+(MIS)+is+a+set+of+procedures+and+methods+for+the+regular,+planned+collection,+analysis+and+presentation+of+information+for+use+in+marketing+decisions&source=bl&ots=_rYgj1Z-N6&sig=I4uiFatO-U4qn1_6hRwpdtjIZI8&hl=en&ei=QDa7SaK3FNW4kAX50ZidCA&sa=X&oi=book_result&resnum=4&ct=result#PPA48,M1 Marketing Information Systems: Marketing Intelligence Systems. [online]. FAO Corporate Document Repository. Last accessed 16 March 2009 at: http://www.fao.org/docrep/w3241e/w3241e0a.htm Marketing Information Systems: Marketing Research. [online]. American Marketing Association. Last accessed 16 March 2009 at: http://www.marketingteacher.com/powerpoint/c.MKIS%20and%20MR%203.ppt Our Mission. (2005). [online]. Telecom Regulatory Authority of India. 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