Designing Brand Strategy for a Company - Essay Example

Designing Brand Strategy for a Company There are six basic strategies for entering a new market: export/import, licensing, joint venturing, franchising, consortia, and manufacturing. Generally, these represent a continuum from lowest to highest investment and concomitant risk-return potential. In choosing a particular strategy, a company constructs a fit between its internal corporate risk "comfort level" and the externally perceived risk level of the target entry market. Two companies may perceive different risks as they evaluate the same market and therefore choose different entry modes. Also, two companies may perceive the same risks in a country but still choose different strategies because of their firms' differing tolerances of risk. More specifically, the different market-entry strategies can be encapsulated as follows: Export/Import—The easiest and most common entry strategy, exporting also exposes a company to the lowest financial risk. An existing product is merely shipped to a foreign country. This strategy is very compatible with the domestic market extension outlook in international marketing. Licensing—Another relatively low-risk approach to a new market, licensing involves granting the rights and methods for production to a host country firm in return for a royalty fee. Advantages include low capital requirements and circumvention of import restrictions or foreign ownership limitations. Its advantage of lower risk is countered by lower returns. Joint Venture—A joint venture involves two companies that form a partnership under a new corporate name. Joint venturing is a low-risk market-entry strategy, which is popular among successful, large, internationally oriented businesses seeking to expand from their own maturing home markets, or seeking new sources of raw materials. Notable are the strategic advantages in reducing both political and economic risks by combining the host country firm's localized knowledge, skills, and systems with the foreign company's capital and technology. It also allows a foreign firm to operate in a market otherwise inaccessible due to trade barriers or hostility towards outsiders. Franchising—A form of licensing, franchising combines the franchisee's local knowledge, capital, and entrepreneurial energy with the franchisor's standard bundle of products, management expertise, and support systems. It is a fast-growing approach to market entry. Advantages are the low capital investment required and the speed of entry. Consortia—A group of companies joining to take advantage of one participant's location or technological expertise, consortia merge resources and thereby reduce individual risk. Manufacturing/Wholly-Owned Subsidiary—The highest-risk strategy with the highest potential return is investing capital to set up manufacturing or other operations in a foreign country. Advantages are the ability to capitalize on low-cost labour, avoiding import taxes and transportation costs, access to raw materials, and entry to other cooperative markets. The company is much more vulnerable to political instability and the resulting economic sanctions by host governments. Question # 1: Recommend, with justification, a suitable distribution method for SLTC* to enter the UK market, including an examination of the factors which would influence this choice. Response: The products which are manufactured for humans’ use will ‘reach’ them physically and also their mind, only if the organization has an efficient distribution method and perfect marketing strategies. Before the product reaches the customer, it has to a pass through a ‘maze’ of places, stores, warehouses, etc, and it is up to the organization to correct that ‘maze’ and pave the product to its eventual destination. And, the important link which ‘joins’ all the components and take the product to its eventual destination is an efficient distribution method. So, organizations could successfully enter any market and reach the intended customers after selecting a suitable and efficient distribution method. The Sri Lankan organization SLTC, short for Sri Lankan Tea Consortium, can enter the U.K. market with its own brand of tea, by distributing it to the same supermarkets (to which it was earlier distributed by the British manufacturers but under different brand names) as well as to the newer supermarkets. That is, till now the Tea from Sri Lanka under SLTC was exported in bulk quantities to the United Kingdom where it is processed by the major manufacturers into packages, and then sold in supermarkets either under national brand names such as Typhoo and PG Tips or as private label brands for the major supermarkets. Now, SLTC should package the tea by themselves, and supply it to the supermarkets, under their own brand name. This distribution method will work out for the Sri Lankan tea because of two ‘non-product related aspects’. That is, Sir Lankan tea producers decision’s to target Europe as their first export region, particularly UK appears to be a feasible and perfect choice because U. K. it is a major tea-consuming nation. In U.K. there are a visible number of supermarkets, and if SLTC was able to distribute to most of them, they can reach the maximum amount of customers. Particularly if they were able to distribute to the “Big 4” in the supermarket segment, they can reap in favourable benefits. “The UK supermarket sector is dominated by Tesco, Asda, Sainsbury's and Morrisons which are the only chains which operate full-scale superstores of 40,000 square feet (3,700 m²) or more” (wikipedia). Along with this step, if SLTC builds a unique and enticing brand image to its tea, it will surely get valuable visibility. That is, if they build a brand image using Sri Lanka’s exotic image and the superior quality of the tea, and also at the same time distributes the product to these supermarkets, it will get a lot of exposure, providing profits and success to SLTC. But, the role of distribution does not stop there because SLTC has to continuously promote its image and importantly supply or distribute the product to the supermarkets, without any blockages. As any market will present a mix of future opportunities, more and more organizations are realizing the importance of developing and implementing a comprehensive distribution strategy - and then linking this strategy to the overall business goal. That will pave the path for the enlargement of the customer base, because in this fast changing world, the customer will always trust an organization, which could provide quality product or service in quick time without impediments. So, SLTC will have to optimize its distribution process, making sure that the product reaches the customers, when they need it. The customer in U.K. or any other country most times keeps limited inventory of the products he/she uses, and prefers to purchase them frequently as and when required. As most of their demands are due to requirement at their end, purchase decisions may be influenced by the availability of product in the racks and this were the distribution process comes into the picture. To combat these risks and challenges, organizations around the globe are reorganizing and streamlining their distribution channels and SLTC also have to integrate these changes into its functioning, while distributing its tea to its principal supermarkets. To succeed today and also in the future, SLTC need to create strong linkages with their business partners particularly the supermarkets, by providing the tea products aptly with quality. The ever-escalating consumer requirements have made the marketplace more competitive than ever before. And although many factors now go into the product manufacturing, services to end customers will always remain the primary qualifier, and through this distribution method, SLTC can fulfil that aspect. Today’s customer, demands products and services that are on time, of right quality with right features and at the lowest cost. So, the Sri Lankan Tea producers will be afforded minimal forgiveness when they fail to satisfy these demands. Put another way, managing the distribution and thereby the supply chain with quality is not only desirable but is a strategic necessity for SLTC. (Trent 2001). Question # 2 SLTC wishes to develop a global brand for their tea starting in the UK and positioned round their Sri Lankan heritage (Country of Origin effect). Critically evaluate the issues they will face and make justified recommendations. Response: Organization is a structure with a ‘collage’ of workers doing their allocated work under the supervision of a leader. These workers will normally be apportioned into different departments for better arrangement work. Among the many departments, the marketing department’s role is omnipresent and crucial. It can only, boost an organization by adopting various strategies. With SLTC expanding their horizons and making an imprint in U.K. markets, its marketing department had to put in extra efforts to formulate strategies to reach the minds of the English customers. SLTC by using various options including advertisements can boost itself and its tea, by building a brand image for both. This building of brand image and the resultant brand association is a multi layered process. As SLTC is entering the UK market as a new and a small ‘fish’, building a strong brand could only give it the needed leverage. A strong brand image for its tea, will aid SLTC in establishing an identity for the organization in the market, and also in the development of a solid and loyal customer base. The challenge that will come for SLTC, while actualizing its brand image is that, it will be difficult for it to wean away customers who will be already using a brand. That is, as tea is a common consumable product in U.K., there are already a good number of tea manufacturers, whose product or brand had garnered good market share. These ‘home’ grown tea brands have created a strong brand association among the customers, as they were catering to their tastes for many years. So, U.K. market is already endowed with many strong brands, putting the onus on SLTC to make its presence felt, by utilizing the small window of opportunity that will be there for new entrants. “Brand loyalty is strong in the traditional (standard) tea sector, but less so in newer sectors (see 2 above). The market is competitive with a number of strong established brands, but again the new sectors have led to some opportunities for new and speciality brands to enter these market sectors” (case scenario). So, if SLTC has a strong marketing strategy, it can enter the market and utilize the above mentioned opportunities that will be available for new and speciality brands. The main aspect, SLTC should incorporate in their marketing strategy is the presentation of its exotic nature. That is, as Sri Lanka is a small, some what isolated island in the Indian Ocean, SLTC can attach this exoticism to its tea and promote the tea on those lines. This will be a feasible choice because SLTC wants to promote its tea and develop it, into a global brand starting with UK. So, to intrude or break the hold of traditional brands of U.K., SLTC’s only feasible option is to advertise its tea’s exotic character. Then, advertise all the other special features of their tea, like how “hand picking allows the quality of the tea to be maintained as only the freshest leaf tips are picked” (case scenario). So, if these positive or favourable aspects are incorporated into SLTC’s marketing strategies and are made to reach the intended customers through advertisements, packaging (particularly information on the tea packs) and other promotions, SLTC’s tea can make a good imprint in the U.K. market. Particularly, if SLTC can was able to bring out or advertise their features or ingredients or specialities, which their competitors don’t have, it could have a major impact because customers everywhere choose a product over the other, mainly by comparing the products. This is because ‘customers perceive them as having value over and above that of the ‘equivalent’ commodity or in excess of the sum of the price of the product’s or service’s constituent parts. This being the case, SLTC through the marketing strategy of providing key details, ingredients, etc, could surely build a unique brand image for it, and thereby entice the customer to its brand of tea. The other challenge for SLTC in this branding process will come, when its existing competitors mount their own marketing campaign, and also when more new competitors enter the market. The other issue is, the customers’ tastes and preferences for any particular product will not stay stable, and will continuously change (with few or many exceptions) and this could also happen and hamper SLTC’s tea. So, in that competitive and changing environment, SLTC after a short burst of success could become a non-entity. “There is cut throat competition in the market, many brands enter the market and with a short run success they become obsolete. This is because consumer tastes are changing fast due to the influence of cultural, psychological and global trends and hence they are less loyal” (Waheed). In that situation, SLTC had to strengthen their brands or their already established brand image into a more secure brand image. That is, for an organization to compete in the longer run in both the domestic and importantly in global market, for SLTC the UK market, the marketing department of the organization including SLTC has to create and manage stronger and secure brands. So, a strong brand image for SLTC’s tea will become a vital factor to create a loyal customer base in U.K. and that would pose a formidable defence in the competitive market. According to Aaker (2004), successfully understanding and managing a brand portfolio can be the key to both the development of a winning business strategy, and its successful implementation. Questions # 3 Recommend a contractible screening process to help the company to choose 2 further European markets into which to export SLTC’s teas. Response: The main issue that will crop up for organizations, entering foreign markets as SLTC is trying to do, is to understand, assimilate and cater to the new market, culture, working environment, etc. Unison of Sri Lankan tea producers under the consortium of SLTC with an urge to usher their organization into a successful path, will be a successful endeavour, if the unified producers show undaunted and unabated conduct. And, if all the producers of the consortium conduct this way, SLTC will have a ubiquitous presence all over the world including in the European markets. Ubiquitous presence is the key because after achieving favourable success in U.K., SLTC’s aim is to spread to more European countries. To get a stronghold in any country, understanding that country’s market, culture, competitors, government policies etc, is an important task to accomplish. After understanding those vital aspects and doing the contractible screening process based on Terpstra & Sarathy’s contractible 2-stage screening model only, the SLTC can formulate the apt strategies to make a successful entry. The analysis of the Market potential in a specific country forms the starting point of the contractible screening process because based on its results only, SLTC can make a move. The analysis should find out, how the people of that country view tea consumption, including the approximate number of people who drink tea. Through this analysis, the population who consumes tea should be cornered in. To further analyze this aspect, the culture of the country should also be focused because a country’s culture will only define many aspects of the target group. And according to the Terpstra and Sarathy Cultural Framework, the marketing managers of any organization including SLTC have to assess the cultural nature of the market particularly eight cultural categories - Language, Religion, Values and Attitudes, Education, Social Organizations, Technology and Material Culture, Law and Politics and Aesthetics (marketingteacher.com). As SLTC concentrates on the food segment, the food habits of the people, including tea consumption will have to be analyzed. Even though, tea is a common beverage consumed all over the world, in some countries and cultures, coffee will have a greater prominence over tea. In those cases, SLTC had to think twice before entering the market. Favourably, if tea is consumed, then the drinking patterns including the timing of tea consumption, quantity of tea consumed, the flavours which entice them, etc, should also be analyzed. So, if these details are charted out, SLTC will have fair idea about the market they are going to target. After this market analysis, SLTC should then concentrate on competitor analysis. As the markets of the European countries, to which SLTC is planning to enter, will be saddled with a good number of tea manufacturers and competitors, SLTC should first understand theirs pros and cons, including their manufacturing process, marketing strategies, quality, price, market share, etc, etc. When this screening process is done, SLTC will get a fair idea about the competition they have beat to emerge successfully. So, keeping all these aspects of the competitors’ analysis in mind, the management of SLTC have to formulate the strategies accordingly. As SLTC’s manufacturing process happens in Sri Lanka, they have to just formulate strategies to optimize their distribution and also focus on their branding strategy. After the market potential and the profile of the competitors are analyzed, SLTC have to focus on finding the feasible and optimal distribution strategy. For that, SLTC had to again analyze its competitor’s distribution method, and plan accordingly. But, whatever be case, it would be feasible for SLTC to check whether the strategy of distributing through supermarkets, as done in U.K., will also work in the other European countries. The other issue which SLTC has to analyze before making its entry is how the respective European governments are acting towards foreign companies. That is, they have to find out whether the government policies favour them or obstruct them. Because, some countries favour foreign companies, while some other European countries with policies restrict foreign investments. “Europe has promoted foreign entry as well as the formation of international strategic alliances with non-European partners. Still, in all countries of the EU, and even more in emerging and developing economies, obstacles and market distortions persist, as foreign investors are denied effective market presence” (National Research Council). So, when the organization has enough opportunities, like in the case of SLTC, it can set targets and formulate various marketing strategies to achieve those targets. Every organization survival and success hinges on the success of its product, in this case the tea. So, both the product and the services are the ‘keys’ for any organization, and that ‘key’ will only opens the door of success or profit. So, for an organization to enter and survive in a competitive market, and to increase its profits in an optimum manner, perfect management strategies including marketing strategies have to be formulated and implemented. To a large extent, the choice of entry strategy depends on the level of perceived risk. As a result, risk assessment is of critical importance in choosing an entry strategy. Recently, several models have been used to assess the risk associated with entering the former Soviet Union and the countries of Eastern Europe. References Aaker, D. A 2004, Brand Portfolio Strategy: Creating Relevance, Differentiation, Energy, Leverage, and Clarity, Free Press. Avraham Shama and Shane Gellenihien, "Comparing the Soviet Union and Eastern Europe," in Avraham Shama, ed., Perestroika: A Comparative Perspective (New York, NV: Praeger, 1992). Ch. 7. marketingteacher.com, International Marketing and Culture, viewed February 27 2008, accessed from: http://www.marketingteacher.com/Lessons/lesson_international_marketing_culture.htm National Research Council 1996, Conflict and Cooperation in National Competition for High-technology, National Academies Philip, R. Cateora, International Marketing (Boston, MA: Irwin, 1993), pp. 325-334. Terpstra, V. and Sarathy, R. 2000, International Marketing, 8th Edition, Dryden Press. Trent, R. J. 2001, Applying TQM to SCM. Supply Chain Management Review, May-June Waheed, A. K. Designing Brand Strategy, viewed February 27 2008, accessed from: http://www.expresstextile.com/20051115/regulars01.shtml Read More