Export Feasibility Analysis of a Consumer Item to a Foreign Country - Essay Example

Export Feasibility Analysis of a Consumer Item to a Foreign Country Introduction: The LavaSoft Corporation has developed a new cellular phone “Potez”, incorporating state-of- the art features including the capability to store and listen to music with a large storage capacity. The company is considering entering the market in Poland and using the base to expand its activities to Europe. To ensure that the decision to start activities in Poland is the right one, the company attempts to study the feasibility of this move. Market Conditions: Poland in central Europe has a population of thirty eight million and is politically stable and is a member of the European Union. Social conditions are harmonious and legal conditions are also satisfactory. The economic conditions and the economic growth of Poland in 2004, with strong support from the European Union provide assurance that Poland will continue to see an economic upswing. More importantly is the comforting aspect that Poland will see an additional investment of $17.5 billion to improve the telecommunication infrastructure. The lower penetration of cellular phones provides the potential of a large market base. (Telecommunications. Poland). Export Barriers: There are no barriers to exports from the United States of America to Poland. There is however a drop in exports from the United States of America to Poland. The domestic production of telecommunication products is deficient and Poland depends on imports. In 1999 $124 million worth of telecommunication equipment was imported from the United States of America, but in 2000 these exports dropped by thirty five percent because of increasing competition from Western European countries. (Telecommunications. Poland). Competition: Competition in the field of cellular communications is fierce and it is this competitive activity that has seen the growth in the use of mobile phones in Poland. (Poland: Telecoms and Technology Background). Indirect Competition: Indirect competition comes from fixed line telephones and the status of the fixed line infrastructure in Poland is the driving force behind the growth of use of mobile phones and the penetration that is seen in Poland. Though Poland is in the front of the countries in the central European region from the point of view of service revenue, the fixed line penetration is just the opposite. The inference that can be easily made from this is that demand far outstrips supply and this situation has developed from the monopoly of TPSA till 2003. Though the situation has changed since then, indirect competition does not seem a stumbling block for the growth in the use of mobile phones in Poland. (Poland: Telecoms and Technology Background). Direct Competition: This is the area of fierce competition that has seen an increase in the potential and penetration in cellular communications in Poland. Market Size and Market Penetration The market size is estimated at around thirty eight million and the market penetration estimated at a little over thirty nine percent with the 15,100,000 mobile phone subscribers in Poland. (Largest Mobile Phone Companies). The sales of mobile around the world in 2004 was estimated to be six hundred and seventy million and expected to grow at sixteen percent in 2005. (Gartner Says Mobile Phone Sales Will Exceed One Billion in 2009). An analysis of the data available for the period 2001 to 2003, shows that the growth rate of mobile phones in Poland was at the same rate as that in the world market, with the number of subscribers increasing from ten million in 2001 to 11.5 million in 2002 and 13.2 million in 2003. (Kowalska, Maria. Telecommunications. Poland). Customer Behavior: The customer behavior for mobile phones tends towards those of their counterparts in Western Europe, with acceptance of advances in technology. However, value for money should also be there and clarity of voice communication. (culture). Competition Activities: The three major players are Nokia and Ericsson, from Europe and Motorola from the United States of America. Nokia has attempted to cover all bases as far as the target market is concerned and Motorola has followed suit. There are lower end models to suit the budgets at the entry level and progressing upwards to the middle segments of the market and finally top end models that offer a variety of features to make a smart phone. Ericsson has concentrated on the higher end of the target market, with a range of higher end models offering more features, wherein it attempts to offer features as a marketing strategy instead of price. The problem for Nokia is that it has found that the desire for more features in gaining in popularity, except in mass consumption markets of developing countries like India. This has led to a fall in its market share and hence the reason for spreading its products to meet the requirements of all segments of the market. A look at the range of products offered by Nokia shows this product strategy of theirs in keeping with their slogan "Innovations for billions of lifestyles”. The products offered by Nokia start at the lower end with Nokia 1100, 2300 and 3310. These are basic models that offer voice communication and SMS facilities. The 6000 series offers mid segment solutions and then we move into the 7000 series which is their art-deco collection giving users various options in features. Then as we move into the 8000 series we tend to their top end products. The N series of products of Nokia ranging from N70 to the N90 and 91 are classic smart phones offering varying features, including multi-media. The N 70 offers classic smart phone features, while the N90 offers shooting features and the N91, music features. However, Nokia, like all the other mobile phone manufacturers, dependant on the service providers for the features of their mobile hand sets really being useful to their users. Therefore Nokia maintains a close relationship with the service providers and offers network solutions, just as Motorola does, to improve the technology of the service providers and thus the features offered. In Poland, Nokia attempts close relations with the three major service providers Polkomtel Plus, Centertel and PTC-Era. (Murtazin, Eldar and Mitina, Maria. Nokia Connection or a new companys strategy on the terminal market). Nokia believes that the mobile phone market worldwide would be to the tune of 780 million units in 2005 and expects its market share to grow at a rate faster than the growth of the market. This attempt at garnering greater market share is based on the increasing mobile users in the developing world, of which Poland is one, where it has a strong market presence. Nokia also believes that the market in the developed world would be for mobile phones that offer better value in terms of features, services and cameras. (Quarterly and Annual Information). The customers for mobile phones in Poland have shown an acceptance for feature driven mobile handsets in keeping with their neighbors in Developed Western Europe. Recommendations: The recommendation is that LavaSoft Corporation should consider launching its new mobile phone “Potez” in Poland. This recommendation is based on the analysis of the market and its conditions including competition and competitor activities in Poland. The market is conducive to the entry of this technology driven product as can be seen from the customer behavior in Poland, as it tends to ape its Western Europe counterparts. Market size is reasonable and the penetration rate as it stands, still offers scope for competition. The market condition is reasonable and there are no entry barriers except for the fact that European companies do have an edge, as Poland lies in the European Union. Competition is stiff and yet to be wary with a product that offers advanced features like small size, large memory and Mp3 capabilities that are a rarity is to lack confidence in the product itself and if it does not sell in Poland there are very few other markets that offer the possibility. In a competitive market, price would be a significant factor and yet at the top end of a market the price need not be that low that profit worries set in. It is in the lower segment of the market that price needs to be a worrying factor as the competition is the hottest in this segment. There are however two other areas of concern and the first is the expansion plans for the product into other parts of Europe. Poland is one of the nine countries that have received a warning from The European Commission for breaking Telecom Laws and hence any expansion from Poland into other parts of Europe will have to be in keeping with the Telecom Laws of the European Commission. (Reppert-Bismarck, von Juliane. (EU Warns Nine Member States Over Breaking Telecom Laws). Technology driven products have the habit of getting obsolete soon and so product development would be required to keep the momentum of market enlargement for the venture of entering Poland to remain successful. Conclusion: Finally, on applying the Boston Consulting Group Matrix to the product in the market of Poland, there is no doubt that the product enters the market as a question mark, with a low market share in a high growth market. Yet product development through technological innovations and prudent market strategies forecast the movement of this product into the stars domain and so let’s reach for the stars. Works Cited “culture”. Polska. 9 Nov. 2009. . “Gartner Says Mobile Phone Sales Will Exceed One Billion in 2009”. Gartner. Press Releases. 2005. 9 Nov. 2005. . Kowalska, Maria. “Telecommunications. Poland”. 9 Nov. 2005. . “Largest Mobile Phone Companies”. FunSMS.net. 9 Nov. 2005. . Murtazin, Eldar and Mitina, Maria. “Nokia Connection or a new companys strategy on the terminal market”. 15 June. 2005. mobile.review. 9 Nov. 2005. . “Poland: Telecoms and Technology Background”. FROM THE ECONOMIST INTELLIGENCE UNIT. Doing ebusiness in Poland. Global Technology Forum. 9 Nov. 2005. . “Quarterly and Annual Information”. NOKIA. Connecting People. 20 Oct. 2005. 9 Nov. 2005. . Reppert-Bismarck, von Juliane. “EU Warns Nine Member States Over Breaking Telecom Laws”. Dow Jones Newswires. Oct 12. 2005. Cell phones in Poland. cellular-news. 9 Nov. 2005. . “Telecommunications. Poland”. Mission Statement. IT and Telecommunications Trade Mission to Poland, Czech Republic and Hungary. 2002. 9 Nov. 2005. . Read More