International Marketing Strategy of Freitag brand - Assignment Example

?International Marketing Strategy Table of Contents Table of Contents 2 Introduction 3 Overview of the Product and Background of the Company 3 Reasons for Internationalisation 4 Process and Reasoning 4 Situational Analysis 5 Growth of Economic Potential By 2050 6 The Drivers for Doing Business in Brazil 8 Selecting the Market Entry Method and the Reasons 8 Franchising 8 Joint Venture 9 International Marketing Objectives 10 Marketing Strategy and Plan 11 SWOT Analysis of the Product 12 Adaptation v Standardisation 14 Segmentation Targeting & Positioning 14 Cross Cultural & Wider Organisational Issues 15 International Marketing Budget 15 Financial and Non-Financial Means of Measuring and Control 16 Conclusion 17 References 18 Introduction Overview of the Product and Background of the Company The brand ‘Freitag’ is quite well-known in the international arena. The inception of the brand happened back in the year 1993 in Zurich, Switzerland. It was started by two brothers named Markus and Daniel Freitag who were graphic designers. They were in the hunt for a messenger bag that had to be water-repellent, heavy-duty and a functional one in which they could take their designs being fearless of the fact that water can not spoil it. They got their inspiration from the lorries that had cheerful colours and created a messenger bag by cutting out an old tarpaulin of a truck. They used webbing emanating from car seat-belts were used and the edging was provided by the inner tube of a bicycle which was old (Freitag, n.d). This is how they turned their individual need into a successful business. Freitag has employee strength of over 120 people. The products of Freitag are now sold in more than 350 shops across the globe. The brothers have since then marketed and developed quite a lot of bags for men and as well as women. The brand has two lines of bag: The classic FUNDAMENTALS that have more than 40 models which are being continuously further developed and complemented. In September 2010 the brand introduced the FREITAG REFERENCE Line and since then it has only been launched under seasonal collections. In spite of having stores in New York, Berlin, Vienna, Davos, Cologne, Zurich and Hamburg, the bags are still made in Switzerland (Freitag, n.d). Reasons for Internationalisation It has been noticed that there are many reasons for companies to internationalise. The key reason behind internationalisation is the capacity to continue to be competitive in their related environment. The concept of internationalisation is explained as establishing business relationships associations in different countries by way of integration, penetration and extension. Integration is explained as the process of co-ordinating the diverse national networks. Penetration can be stated as growth of positions and enhanced commitments in relation to resources in networks in which the company is presently involved with. And, extension means investments with regard to networks which are new. However, an additional significant motive for deciding to globalise activities results from the fact of increasing competition from foreign participants in the domestic market. With the intention of keeping pace with those competitors who are often known to adopt aggressive policies in order to expand their share in the market, it becomes important for the local organisations to shift attention to global markets. Therefore, the above factors can be stated to be the causes for internationalisation of the brand (Ebner, 2011). And the growing popularity of Freitag bags also needs a mention which is also one of the reasons for internationalisation. Process and Reasoning The popularity of Freitag bags has been observed to increase sharply in the last two years in America. The sales in the US increased to 85% in the year 2005 and climbed another 45 percent in 2006. Although, the brand lacks an advertising campaign and has only 35 stores where the bags are carried in the country but still the popularity of Freitag bags remains unbeaten in America (Hillman, 2007). Focusing on the popularity in North America, the company plans to introduce the Freitag brand into Brazil where it is not available currently. The brand only has its presence in Europe and Asia, entering the Brazil market would mark its presence in the continent of South America. Brazil is the biggest nation in the continent, so, the successful marketing of the brand would take it to new heights and provide growth prospect. Situational Analysis Before entering into a new market, it is important to study the environment to determine the potential with regard to future investments. Therefore, a PESTEL analysis is conducted to understand the political, economic, social, technological, environmental and legal factors. Political The government of Brazil has an inclination of helping the entrepreneurs of its country in their businesses. This stimulation will help in increasing the purchasing power of the consumers. Also, the political situation of Brazil is improving and so, there are many foreign companies looking forward to invest. The government too is uplifting the international investors which will be an advantage (Ouattara & Et. Al., 2006). Economic Brazil is at present in the midst of the countries with upcoming market economy along with India, Russia and China. Thus, they are part of the BRIC (‘Brazil, Russia, India and China’) countries. Since the year 1980, the average rate of growth annually has been 2.4%. Monetary as well as fiscal policies are being currently designed to alleviate the levels of public debt, meet the targets of inflation and sustain the present account surplus. With the roaring Brazilian economy and the saturation of Western markets, the prospect to expand is good in such a promising market (Ouattara & Et. Al., 2006). Growth of Economic Potential By 2050 Source: (Ouattara & Et. Al., 2006). Social The distribution of income is tremendously uneven in Brazil. It ranges from cities such as Sao Paulo, Rio de Janerio and Brasilia which are quite rich compared to the regions in northern Brazil which are poorer. However, there is a rise in the income presently which will give rise to a fresh section of lower-middle class. This also means that the demand for consumer goods will increase. Consumerism is quite high in Brazil and has a demand for products with better quality (Ouattara & Et. Al., 2006). Technological Majority of the technologies are imported which means that Brazil is not updated in terms of technology (Ouattara & Et. Al., 2006). This implies that the demand for the Freitag bags that are made out of used recycled materials will be quite high. Environmental Environmental factor will not make much of a difference as the company will not be producing the bags in Brazil. The consciousness about the environment is on the rise, so, these bags are sure to become popular as they are environment friendly. However, the environment regulations limit the facility to start and close any business. Setting up a business can be time consuming, as it takes quite longer to obtain a license for business (McDonald & Et. Al., 2010). Legal The system of taxation is quite complex in Brazil and therefore can be a major issue in case of setting up new business in the country. The peak rate of income tax is 27.5% and the standard rate of corporation tax is 15%. However, a surcharge of 10% and contribution towards social security of 9% makes the effectual rate of corporation tax to 34% (McDonald & Et. Al., 2010). The Drivers for Doing Business in Brazil Brazil stands tenth in global economy and has a population of around 185 million. Brazil has great prospective in terms of growth and consumer market. It has a broad infrastructure and industrial base making it an economy which is spread out. The inflation has been in control for the past 10 years. The foreign investors are qualified to avail the fiscal incentives. Goodwill helps in tax deduction and most importantly the progress in the capital and debt market makes Brazil lucrative for foreign investments (Sakariya, n.d.). Selecting the Market Entry Method and the Reasons The following entry modes have been selected for the Freitag Company to enter the Brazilian market. Franchising A contract in which a franchiser sells property that is intangible, for instance brand name and persists on policies for operation of the business is identified as franchising. The market of Brazil has been positioned as the third largest in relation to franchising. This entry method will prove quite advantageous for the company. Franchising will triumph over the restrictive environment regulations that prevail in Brazil. This entry mode will restrict the possible risks and costs that are allied with starting up of a new business in Brazil. And, most importantly the franchisee will already have enough knowledge regarding the local market, which would help in promoting quality relationships with local customers as well as distributors and would also facilitate market acceptance to a huge extent (McDonald & Et. Al., 2010). Joint Venture The difference between domestic along with foreign capital was eradicated in Brazil in the year 1996. Numerous companies that are US based have adopted these methods of entry while entering the Brazilian market. A same strategy would also be suggested in this context. A strategic association among two or more than two entities or individuals, generally firms, to get occupied in a particular undertaking or project is known as joint venture (RP Emery & Associates, 2011). It is to be noted that involvement of foreign companies in case of joint ventures are restricted to 50% of the total capital of the company and to its voting stock of one third (McDonald & Et. Al., 2010). The advantages involved with implementation of this strategy are quite beneficial. This entry strategy will provide the benefit of availing the expertise and knowledge of the local partner. Hazards and costs in relation to the business get shared between both the involved parties. There is also an advantage of developing product jointly and sharing of technology. The already recognised channels of distribution, political relationships and brand name which are accessible to the other partner can be exploited to the utmost level. Also, the Brazilian import duties that are punitive can be distanced from (McDonald & Et. Al., 2010). International Marketing Objectives The objective of the company is to keep on creating bags from used recycled materials. They aim at creating environment friendly bags that are strong and useful as well. The company does not believe in expanding at a fast pace and will not compromise with the quality of the product at any cost. The Freitag brothers also believe in being flexible and creative. To sum it up, it can be said that sustainability and honesty are the main objectives of the company (Buergi & Spafford, 2010). Keeping these in mind, the international marketing objectives need to be designed. The objectives need be such so that they should be measurable, achievable, specific, time bound and realistic. The objectives of the company while entering the Brazilian market should be clearly defined and they should align with the corporate objectives of the company. The achievable objective of the brand in the Brazilian market would be to establish its particular buyer segment and also to successfully infiltrate the market. The company should advertise about its entry into the Brazilian market and also about its goods in order to create consciousness of the brand. The consciousness of the product will help the company in generating sales which is realistic. A specific time frame of around six months should be set within which the brand has to capture the market and the consumers in Brazil to harvest profit from it in the coming years. The company should make plans of promoting the brand in a way to easily attract the consumers. This would get the people tempted and initiate buying of the manufactured goods through which the company is sure to cover the costs of the new product in a short span which makes it measurable. The SMART objectives will also help the company to become a major player in the Brazilian market in a short span of time. Source: (Learn Marketing, n.d.). Marketing Strategy and Plan The company Frietag believes in maintaining a long-term relationship with its customers and does not aim at rapid expansion plans as the company focuses on ensuring quality rather than launching new products as much as possible. The combination of the values of trend consciousness and sustainability are the reasons behind the success of the brand. The company insists on keeping its manufacturing unit at Zurich in order to ensure and keep a check on the standards of quality. Moreover, the company has Swiss roots and it was in the city of Zurich where the brand was first developed. The personal story of the Freitag brothers has turned the company into a reliable and authentic brand. The company has always guarded its image and never relied on advertising plans for promoting their image but instead appointed specialists who were responsible for sales, marketing and distribution. The company keep themselves surrounded with people with similar skills and ideals that compliment their own and who strikes the drum about the philosophy of Frietag with their heart and soul. Freitag has been the permanent component of the image of Zurich (Brechbuhl, 2011). While creating a marketing plan, it is to be kept in consideration that advertisements should not be the priority. From the above corporate objectives, it is clear that the brand stresses on sustainability and quality. Thus, the company should carefully assess and select its distribution and channel partners who would respect the values and meet the criteria of the company. Although the company does not believe in advertising, while entering a new market such as Brazil, it is essential for the company to advertise about its brand or else the people will not become aware of such a brand in their country. The company should organise events to create the consciousness of the brand. The bags of Freitag are prepared out of recycled materials, thus there needs to be a proper explanation of product to the intended consumers at the initial stage. And, as the product is environment friendly, so, there is prospect for the brand to be a success in the market because of the rising consciousness about environment (Brechbuhl, 2011). Lastly, Brazil has a market for quality products and is high on consumerism. Thus, this aspect also needs to be considered while preparing the marketing plan (Ouattara & Et. Al., 2006). SWOT Analysis of the Product A SWOT analysis is very valuable for a business to recognise the features where they need to develop and the ways in which the business can grow in a given market. This analysis is particularly helpful for companies having plans of internationalisation. The brand Freitag operates in Zurich, Switzerland and is planning to branch out in Brazil (Collins, n.d.). Strength The popularity of the Freitag brand in Switzerland, England, Japan and the US is already a major strength. The brand is quite popular in these countries because of its utility, designs and quality. The most important factor is the fact that the bag is prepared out of recycled materials which makes it a big hit among the environment conscious people. The company is quite particular about the quality of the manufactured goods and so, it still manufactures its product from Zurich in order to keep a check on the quality (Brechbuhl, 2011). Weakness The company does not stress on advertising the products (Brechbuhl, 2011). The brand is quite popular in the above mentioned countries and proper advertising of the brand will add more value to it and increase the revenue of the company as well. Advertising the brand will create consciousness about the product in the new market which would help in luring people. Opportunities Brazil, being a part of the BRIC countries, has strong development prospects with regard to foreign companies to enter and look at the opportunities in the new market. The market of Brazil is emerging rapidly. Entering the Brazil market would provide a strategic advantage, as it would become easy for the company to enter other countries of Latin America. The economy of Brazil is vibrant and secure. The huge population would serve as a strong opportunity for growth. Brazil is high on consumerism and has a demand for high quality products (Ouattara & Et. Al., 2006). Threats Threat will be the resistance of people towards the new product (Itim International, 2009). Brazilian people do not respond to change easily, so, the company needs to educate the people to a great extent about the product and also the complex legal issues of the country. Adaptation v Standardisation It has been observed that products prepared by Freitag need certain adjustments to be made while going into the international market. Few products get away with certain small adjustments, but few calls for major amendments. The changes generally affect the measurement units, packaging, product features and constituents, labelling, brand names and logos to a less extent and instructions of usage (Nordstrand & Ohman, 2005). Segmentation Targeting & Positioning The bags of Freitag, being environment friendly and prepared out of recycled material, are quite popular among the environment conscious people. The company should target all age groups, but should emphasise more on the young age group. It should focus on the working class segment for its products. The product will catch the eye of the young age group because of its colourful designs, originality and the message of environment friendliness that the bag carries. The brand has products such as bags that have unisex designs, wallet, iPod covers and laptop covers that are of great utility. These products are likely to attract the working class as utility matters to them most than just designs (Brechbuhl, 2011). The positioning of the brand should be made in such a way where the product should be projected as a valued one. The consumers should feel a certain value attached to the brand while purchasing it. The consumers should associate a special degree of value with the brand given its environment friendly message. Cross Cultural & Wider Organisational Issues According to the Dutch researcher Geert Hofstede, the dimension that ranks highest in Switzerland is Masculinity (MAS). This Masculinity Index is an indication of greater polarisation among the values of men and women in Switzerland. This implies a strong differentiation in gender which means that the male population is confident and competitive than the female population. Whereas, in Brazil the dimension of Uncertainty Avoidance (UAI) is the highest, implying that the society’s level of tolerance is low for uncertainty. This means that change is not easily accepted by the society. Thus, any foreign company entering the Brazilian market should keep this in mind and put enough effort to educate the people about its products so that the new product is received in the society (Itim International, 2009). International Marketing Budget Marketing Strategies Expenses in Euro (€) Events 7974.18 Press Release 6379.79 Sales Promotion 29505.10 Total 43859.07 The marketing budget has been shown above. As the company stresses less on advertisements and more on events so, a certain budget has been allocated towards events, press release which is needed for people awareness and product promotion. Financial and Non-Financial Means of Measuring and Control Financial measures are usually derived or are linked directly to the accounts chart and can be found in the balance sheet or profit & loss statement of a company for instance cash available and levels of inventory. Non financial related measures are those that are not observed in the account chart, for instance achievement on customer satisfaction and measures of product quality (Kellen, 2003). The financial measures can be controlled by generating good revenue or profits and the non financial measures can be controlled by ensuring good quality of the product and also by customer feedback. Conclusion The entire study provides a complete picture of the whole process of launching the brand Freitag in the Brazilian market. The above study signifies the importance of having a proper strategy of marketing in an international market such as Brazilian market with the best suited entry methods. It also focuses on the other factors that need to be taken care of and those that contributes towards the successful launch of the brand in the new market. The complete process has been planned after performing strategic management tools such as PESTEL analysis and SWOT analysis. The cultural factors have also been taken into consideration. It would be recommendable to suggest that even for a popular brand such as Freitag, the process has to be analysed minutely because a small mistake or loopholes in planning might result in a huge loss. References Brechbuhl, R., 2011. Freitag-The Designer Bag With a Conscience. News. [Online] Available at: https://responsibility.creditsuisse.com/app/article/index.cfm?fuseaction=OpenArticle&aoid=220125&coid=64291&lang=EN [Accessed July 28, 2011]. Buergi, T. & Spafford, M., 2010. Freitag: Designing A Brand From Nothing But Waste. Home. [Online] Available at: http://www.ecch.com/educators/products/view?id=95335 [Accessed July 27, 2011]. Collins, C., No Date. SWOT Analysis. Scribd. [Online] Available at: http://www.scribd.com/doc/56974829/Assignment-3-SWOT-Analysis-Brazil [Accessed July 28, 2011]. Ebner, H., 2011. Reasons for the Internationalisation Process of Companies. GRIN Verlag. Freitag, No Date. The History of the Unique Freitag Bag. About Freitag. [Online] Available at: http://www.freitag.ch/shop/FREITAG/page/History_page/detail.jsf;jsessionid=11851C59BF36714F11BAD3B2AC5D7D8C [Accessed July 27, 2011]. Hillman, B., 2007. In Recycled Candy Wrappers, Designers See The Makings Of A Handbag. Columbia News Service. [Online] Available at: http://jscms.jrn.columbia.edu/cns/2007-03-13/hillman-recycledhandbags.html [Accessed July 27, 2011]. Itim International, 2009. Hofstede Scores. Geert Hofstede. [Online] Available at: http://www.geert-hofstede.com/ [Accessed July 28, 2011]. Kellen, V., 2003. Business Performance Measurement. DePaul University, Chicago. [Online] Available at: http://www.kellen.net/bpm.htm [Accessed July 28, 2011]. McDonald, R. & Et. Al., 2010. Analysis of Brazil. Scribd. [Online] Available at: http://www.scribd.com/doc/53650078/Global-Business-Assignment-V1-1 [Accessed July 27, 2010]. Nordstrand, T. & Ohman, M., 2005. Standardization vs. Adaptation of the Marketing Program for International Markets. Lulea University of Technology. [Online] Available at: http://epubl.ltu.se/1404-5508/2005/120/LTU-SHU-EX-05120-SE.pdf [Accessed July 28, 2011]. Ouattara, A. & Et. Al., 2006. Starbucks Brazil. International University in Geneva. [Online] Available at: http://pierre.benain.free.fr/MBA698%20Starbucks%20in%20Brazil%20Report.pdf [Accessed July 27, 2011]. RP Emery & Associates, 2011. Advantages & Disadvantage of a Joint Venture. Home. [Online] Available at: http://www.rpemery.com/articles/advantages_and_disadvantages_jv.htm [Accessed July 27, 2011]. Sakariya, S., No Date. Country Analysis Brazil. Scribd. [Online] Available at: http://www.scribd.com/doc/28796465/Country-Analysis-Brazil [Accessed July 27, 2011]. Read More