A New School of International Management - Coursework Example

INTRODUCTION A new school of thought in the field of marketing is that customers use a product or service because they have a need, or because a basic product or service has a perceived benefit to them. (Wikepedia Online, 2006 a). This school of thought therefore leads to the development of market-focused or customer-focused organizations that do not operate in a vacuum, or force citizens to buy what is produced. They find out what potential customers would like to buy, and then manufacture the product or provide the service in accordance with research findings. Under this approach the main focus of market and product planning is therefore the consumers who form the target market which may be widespread (international) or centralized (confined to a specific geographic location. Consequently for viability, the marketing mix hinges on the 4P components: Product, Price, Promotion, and Place. (Kotler, 2003). Currently the Russian marketplace is one with great potential for international investment given its natural physical and human resources, as well as political development of the last few years. As a result this paper will focus on a market plan for entering this market with Australian gourmet wines, and the subsequent sections will address the different components of the mix as it applies to Russia. DESCRIPTION OF TARGET MARKET Russia is a large country in terms of geography and population size with almost two thirds of the population living in big cities far away from each other and surrounded by vast and little populated areas, often with poor transportation connections between these cities. Over the last decade there has been some political stability and improved standard of living with the passing of a new constitution and a selection of a new government. Notwithstanding, there continues to be widespread crime and corruption as well as deteriorated urban infrastructure. In terms of businesses, although there are retailers and suppliers, these are fragmented, and the few chain stores are not under any organized umbrella. On the socioeconomic front, whereas the greatest purchasing power of the society is concentrated among the minority who are business people living in the large cities, pricing is a very important factor to all consumers. Those with limited purchasing power are mainly older citizens who are interested in the reliability and the quality of goods, especially in the health care sector. Despite this, the leisure preferences displayed currently are sport activities and eating out at restaurants, and for shopping, they prefer large centers. The economic and financial environment of Russia is conducive to foreign investment for the following main reasons. The country has a well-educated labor force with substantial technical proficiency; and at the same time, these are underutilized because of lingering Soviet-era management practices, inefficient supply systems, a decaying infrastructure, and the slow development of innovation due to limitations concerning applied research. Also, the cultural environment has seen a shift from a socialist perspective to a more consumer-oriented attitude. For more than half a century all economic activities were under state control, and it is only now that the market is open and the consumer is free to choose. In the same breath, given the new political developments there are constant changes in the business environment and this situation could pose a challenge to investors. For example, taxes in Russia are high but some reforms are implemented in order to lessen the amount of tax paid by companies. There have also been adjustments including the regulations governing a value-added tax (VAT) and profit tax. According to these regulations no special provisions are made since January 2002 for some areas, and excessively high tariffs are imposed on several areas including motorcycles, and some food items as well as alcoholic beverages. Foreign businesses operating locally are subject to withholding tax between 10% and 20%. In addition, the high payroll taxes that employers have to pay to cover pensions, social insurance, and medical insurance, should be reduced soon. (Buy USA.gov, 2006). There is the possibility that this reduction will coincide with the approaching end of the third term for the President, and that there may be other changes leading to an upturn in the economy. POSITIONING STRATEGY According to Kotler (2003) positioning strategy refers to the strong point of any product on the market. It will be the main focus of the business since a successful good or service provider selects some aspect or aspects and focuses on this or these, relying on this strategy as the main foundation of the business. Some positioning possibilities presented by the author are related to attributes, benefits, use or application, user group, competitor, product category, and price or quality. He goes on to argue that a company must decide how many ideas to convey to its target customers, since as they increase the number of claimed benefits for their brand, they risk disbelief and loss of clear positioning. The warning is there are four positioning errors that companies should avoid and these are underpositioning, overpositioning, confused positioning, and doubtful positioning. In communicating the customer and his or her need should open the target statement. Lancaster and Massington (1997) refer to it as the competitive advantage of the business. That is, the edge you have over others and which should justify the consumer purchasing your good or service. Lamb, Hair and McDaniel (2004) take a more comprehensive position and would include this in the mission statement of the business which defines its long-term vision based on careful analysis of benefits sought by present and potential customers, and analysis of existing and anticipated environmental conditions. They also warn against the dangers of defining a business in terms of goods and services rather than in terms of the benefits that customers seek. Such a decision leads to marketing myopia, which is a narrow and short-termed way of thinking, and could kill a market. In the Russian market, the positioning strategy for the proposed product could focus on promoting a new, healthy and affordable means of enjoyment or adding sophistication to a meal or social gathering while maintaining quality. PRODUCT STRATEGY Product strategy forms a vital part of the marketing mix, and determines the success of the business especially in this age of the crowded marketplace. Variety, quality, design, brand name, packaging, and size are just some of the aspects utilized under product strategy in order to establish a presence in this arena. (Kotler, 2003). In addition, Lamb, Hair, and McDaniel (2004) suggest that included in the market plan must be a description of the features of the product to be introduced on the market. Lancaster and Massington (1997) suggest that in addition to these, the accompanying after sale services provided by the company also form part of the product strategy. The strategy to be used to enter and sustain this market is the quality and available size of our product, attractive reusable one-liter bottles to ensure value-for-money, and an efficient delivery service at a reasonable rate to facilitate the distance between locations, and these persons who may be too old or busy to travel out to make their own purchases. The bottle size will assist in encouraging responsible drinking among youngsters as well as protecting them given their tendency to overindulge. In the case of the older persons the alcohol content of the wines will help to control the level of alcohol intake while allowing enjoyment and socializing which is conducive to a healthy lifestyle in all areas: physically, socially, and economically. DeBurca, Fletcher, and Brown (2004) point out the importance of keeping an established brand name in order to preserve a presence and also to contribute to the feeling of authenticity, thus facilitating market entry and positioning. They further suggest that conservative packaging in settings like Russia might be more effective and appealing than what may appear as wastage caused through the use of excessive amounts of paper or other such materials. Under the circumstances, the brand name in its original language would be preferable as long as its interpretation in the Russian market does not have any negative implications. In the target market, the proposed product offering could focus on promoting a new, healthy and affordable means of enjoyment or adding sophistication to a meal or social gathering. The Russian community has more faith in the authenticity of local food products as compared with the imported ones. They are of the opinion that local foods are free of preservatives. Quality must therefore be a part of the strategy, as trust must be built up among prospective consumers. Another aspect of the product could be delivery services that would help with accessibility: a feature that is extremely crucial to consumers, especially if services are reliable and pricing is competitive. It is from the central location(s) mentioned before that additional distribution to suburban and rural retailers and other domestic operational needs of the company would be organized. Transportation could be organized through an initial small fleet of vehicles which could either be owned or contracted by the company, as dictated by the initial promotions and further market research as well as market expansion and feasibility including profits, image, and customer satisfaction. There is a value-added component to the product in the sense that in addition to a consumer-driven focus, direct or indirect employment and income comes with the product, thus making the entry into the target market more feasible and welcomed by the society as a whole. This is so as quite often when countries become target markets, they are suspicious of foreign investors who offer new products with no indication of the socio-economic benefits of the entry of these entities in the countries. PRICE STRATEGY The Russian market is becoming more and more attractive for almost all industries as reforms are being undertaken in all aspects of Russian society. Although the country is still recovering from the Soviet Union era of capitalist market neglect, it has shown a tremendous increase in improving its economic, political, legal, financial and technological environment. The cultural environment has also seen a shift from socialist perspectives to a more consumer like attitude although patriotism is still deeply rooted. The prospect for the introduction of Australian gourmet product in the Russian scene is, by and large, attractive although it must be competitive with the prices of the local industry. This is quite challenging considering the high import taxes and protective tariffs imposed on foreign products. Other foreign ventures have been successful and with the improved economic environment of Russia, the probability of success for this venture is high. Customer satisfaction without excessive expense should be of importance to the company so that the customer does not feel cheated or overburdened. The customers must be convinced that prices are competitive because they are receiving good quality for money. This is important and should be communicated clearly in the language of the target market, as the cultural setting in which any market is being established must be borne in mind so that the consumer is not insulted as a result of interference during the communication process (DeBurca, Fletcher, and Brown, 2004). Lamb, Hair, and McDaniel (2004) advocate for a variety of pricing strategies including discounts for volume purchases and being price sensitive bearing in mind future price wars. According to Capital Perspectives (2006a) one of the most important factors influencing consumer selection of products is a minor decrease in prices. The target market was a closed society and economy that has just recently opened to the rest of the world in a number of areas, and the relevant nuances must be understood, respected and used to inform the content of a market plan. Therefore, the aim of this market plan is to find a creative way of providing Australian gourmet wines at reasonable and competitive prices. Such competitive prices will enable all Russian consumers to be able to afford wine as the size and variety described above will address this. There will be something for everyone regardless of buying power. PLACE STRATEGY The concept of place strategy includes the method of market selection and entry. DeBurca, Fletcher and Brown (2004) point out that there are different approaches to market selection and these have different implications for small and medium-sized as opposed to large firms. This therefore means that the focus in place strategy could either be on whether to enter a market on an incremental basis thus precluding the achievement of economies of scale, or with a simultaneous entry which allows firms to penetrate several locations at once and achieving economies of scale. The authors have indicated the advantages and disadvantages of the different approaches, suggesting that there is no clear-cut answer, but instead, each case would have to be examined on its own merit. . According to Lancaster and Massington (1997) there is also channel configuration, coverage and levels, order processing systems as well as warehousing, storage, stocking and delivery; and Lamb, Hair and McDaniel (2004) suggest certain questions that must be answered in relation to developing this strategy in the market plan. According to them the decision should be taken regarding whether the firm should try to deliver its offerings directly to customers, or through involving other organizations, as well as the possible channels through which distribution could be done more efficiently. They are also concerned with the physical distribution facilities to be used. The concerns are in terms of the type, location, accessibility and visibility. There is also the issue of whether the target market is willing and able to travel some distance to buy the product. As said before, almost two thirds of the population lives in big cities far away from each other, and surrounded by vast and little populated areas, often with poor transportation connections between these cities. Also, given that distribution and logistic costs are high and Russian consumers appreciate big centers to do their shopping, large stores will continue to become popular. In addition, one of the things that the “New Russians” prefer is to spend their free-time eating out at restaurants. These conditions augur well for any business, especially one that intends to enter the marketplace for the first time. It is also best to focus on the bigger cities where there would be a more appropriate clientele with larger buying power and interest, as well as there would be greater possibilities of networking for storage and distribution of the product, as well as most if not all other areas related to the conducting of a business venture. Large stores could be rented or bought in the popular shopping centers where other outlets are located. This would fit perfectly into the trend as all age groups and types of consumers would be in these centers for business or pleasure and would find it convenient or tempting to eat in restaurants and or shop in supermarkets and grocery stores. These restaurants would be serving the gourmet wines. Grocery stores, supermarkets, and any other valid outlets would stock the product and it would also be convenient as the source would be in close proximity, eliminating a significant portion of operation cost for these businesses. Within these centers there may also be clubs providing nighttime entertainment and they too could be a part of our market, as they would have a different clientele to serve. Their clientele could be mainly the youngsters referred to before who would need to have their drinking habit and ability monitored. Also, instead of setting up outlets in every part of the country, a single or a few strategic locations could be identified based on the set criteria and then the chain could be extended as business progresses. Property to establish sites for warehousing, administration, transportation and equipment, distribution, communication, and other aspects of the venture could be acquired through renewable contracts that allow for purchasing options. Such recommendations are made based on the status of the laws governing property rights especially as they concern patents, and brand names among other areas, and which must be borne in mind at all times, and the relevant adjustments made. PROMOTION STRATEGY Lamb, Hair and McDaniel (2004) point that to determine promotion strategy certain questions must be asked about advertising, public relations, personal selling and sales promotion. For example, it is important to determine how the typical customer finds out about the product. The question as to whether the message delivered by the company gains the attention of the target group(s) is crucial. “Does it address the wants and needs of the target market and suggests or means for satisfying wants” is another vital question to which answer must be found so that a market plan may be developed. Another criterion for successful planning promotion is to verify that the effort effectively informs, persuades, educates, and reminds customers about the product. The right media must be selected; they must be cost-effective and contribute positively to the image of the company. Appropriate arrangements must be in place for addressing queries and general public relations issues. DeBurca, Fletcher, and Brown (2004) remind us that promotions must also be sensitive to the culture of the new market as the wrong message may be conveyed. The work in this area should then be left to a local partner if there is one, or some skilled or trained person chosen for the area whose knowledge of the culture is good. This type of intervention will ensure that professional, ethical and appropriate advertising is done. Capital Perspectives (2006a) points out that aggressive advertising and promotion are two of the most important factors influencing consumer selection of products. Also commercials should be humorous, interesting, bright, and beautiful, combining image and product qualities. (Capital Perspectives 2006b) The colorful and sparkling advertisements will promote wine as being good for your health, equating the imagery of the sparkle of the wines as being synonymous to youth and wealth, thus playing upon the psyche of the consumer and encouraging shopping among all sectors of the buying public as everyone consciously or unconsciously seeks to maintain youth and achieve wealth and status. Given the preceding, the product could be promoted as being good for your health. This should appeal to the older consumers who tend to be more health conscious, eat selectively, and are more prepared to spend money to acquire anything that promotes and sustains life. For the younger consumer, health issues and longevity may or may not be priority, but either way it would help as even curiosity could determine consumer habits. The image of “sparkling “ wine could be played upon in these bright, humorous commercials, and should emphasize the concept or image of youthfulness, happiness, and energy, as well as class and sophistication to maintain what older consumers would have achieved and younger ones are aiming for. The television and billboards would be appropriate media, allowing for the audio and the visual effects of advertising, working on the psyche of consumers. Evenings and nights when most persons are not busy and families are together would be appropriate times for advertising. At time allowances would be made for advertising to be done at all hours of the day since workers’ attention could be drawn to something that caters to relaxation after a hard day. CONCLUSION Given the foregoing observations it may be concluded that the time for entering the Russian marketplace is right for several reasons and on certain grounds. That is, the description of the target market highlighted certain conditions that have direct or indirect implications for business investments and sustainability. With almost two thirds of the population living in big cities far away from each other and surrounded by vast and little populated areas, often with poor transportation connections between these cities, there could be a challenge. However, if the society is more consumer-oriented than before and there is limited innovation provided by the domestic industries, this is a perfect market opportunity for a foreign investor with the proposed mix. Also, if there is an inefficient supply system because of archaic soviet management practices, then without much adjustment current first world practices can be applied to this new market, adding to the cost-effectiveness of the venture. Factors such as a decaying urban infrastructure and widespread crime and corruption contribute to depreciation in property value and make acquisition much easier for the investor, both in terms of availability and cost. A paucity of government funding, research and innovation limits the level and nature of competition for the investor. The Russian scene will take some time to be properly settled, thus making it easier and more feasible or profitable for a foreign investor to position in the market. Moreover, this is not a crowded marketplace, so promotion should not require too much in terms of what it takes to surpass an existing competitor. It could therefore be recommended that the target market be explored although with some level of caution. REFERENCE LIST: BuyUSA Online (2006). Doing Business In Russia: A Country Commercial Guide for U.S. Companies – 2006. Retrieved Dec. 18, 2006 from http://www.buyusa.gov/russia/en/ccg.html Capital Perspective (2006a). The consumption behaviors of Russians. Retrieved December18, 2006 from http://www.capitalperspective.ru/russia/business/export/consumption-behaviors-russia.htm Capital Perspective (2006b). Marketing Products in Russia. Retrieved December, 18, 2006 from http://www.capitalperspective.ru/russia/business/export/marketing-products-russia.htm David, Chelly (2006). The Russian Market. Blackwell Publishing: London DeBurca, Fletcher, and Brown, (2004) International Marketing; An SME Perspective. Prentice Hall: Sydney. Kotler, Phillip (2003). Marketing Management. (11th Ed.) Pearson Education: New Jersey. Lamb, Charles W. Jr., Hair, Joseph F. Jr., and McDaniel, Carl. Marketing Thomson South Western: Australia. Lancaster, Geoffery A. and Massington, Lester. Essentials of Marketing: Test and Cases (2nd Ed.) McGraw-Hill: London. Ministry of Trade and Ministry (2006). New Knowledge and Competence for Technology and Innovation Policies ProACT Research Programme 2001–2005. Libria Oy: Helsinki Wikipedia Online (2006a). Info on Marketing. Retrieved December, 18, 2006 from www.wikipedia.org Wikipedia Online (2006b). Info on Russia. Retrieved December, 18, 2006 from www.wikipedia.org Read More