Report market sells product internationally - Essay Example

?Report market sells product internationally Table of Contents Table of Contents 2 Executive Summary 4 Introduction 4 Background 5 Aim 5 Scope 5 Country Information 5 Geographies 5 Governments 6 Economic 6 Legal 7 Cultures 7 Disadvantage and Advantage 8 Market Segment 9 Legal 9 Culture 9 Competitive 9 Financial Environment 10 Marketing Mix 10 Product 11 Price 11 Promotion 12 Place 12 Market Positioning 12 Market Promotion tools 13 Entry modes 14 The born global entry model 16 Evaluations 17 Recommendations 17 References 19 Annexure 21 Executive Summary In the age of globalisation market players are essentially trying to reach out to profitable market segments. The present study would analyse the business prospects of setting up a new business venture comprising of beer as a product in the UK market. The choice of the market assumes significance considering the economic growth and disposable level of the individuals. The business report would include a strategic analysis of UK as an investment destination for a new player in the beer industry. The report contains a section that analyses the macroeconomic and other aspect of UK including political, legal, economical and cultural aspects. The report would also include an analysis of the market segments and the beer market in the nation. The report would also showcase the market entry strategies and a specific product mix for the new market and would also include an analysis of the integrated marketing communication and other market strategies for entering the market successfully. Finally a set of plausible recommendations would be prepared that would be framed on the basis of the study conducted in the course of research. Introduction The present era of business environment is largely stated by various circles as the age of turbulence and intense competition. The entry of globalisation has made the world turn into a boundary less structure with firms expanding beyond political and geographic boundaries to reach out to new markets. This has also triggered a wave of competition among the organizations to establish their organizations in the market. The present study would deal with the international expansion of a beer company in the UK market. The choice of the market assumes significance considering the presence of a strong demand and favourable future opportunities in the nation. Background According to a report published by Nielsen the total beer industry in UK is valued at 3.48 billion pounds with volumes expected to be around 18.7 million hl. This shows a considerable scope for business in the market. However the market is also characterised by intense levels of competition as the market is dotted with a large number of players with highly established brand image and formidable brand positioning (Nielsen, 2009, p.6). Aim The main aim of this study would be to frame a business report that would try to uncover the business potential of UK as a beer market. The report would try to analyse the business market of the nation and would frame up a market entry plan that would also include formulating a product mix specifically designed for the UK market. The report would also cover the aspect of positioning and integrated marketing communication as well as an entry strategy for the company in the UK market. Scope The business report would analyse the business attractiveness of a new market in the context of the beer market in UK. The report would analyse the appropriateness in choosing the UK market as a destination for investment for foreign market players in the beer industry. Country Information Geographies UK is one of the most developed economies of the world with its importance being that of one of the pioneer nations of the industrial revolution. Geographically the nation is located in Western Europe with a total area of 243,610 square kilometres. The nation has a long coastline in the Atlantic Ocean that serves as its sea link with the USA. London the capital city of the nation is also known as the commercial and financial hubs of the world with large number of financial organizations based in the city (CIA, 2011). Governments UK has a democratically elected government that is headed by the queen who is advised by the Prime Minister and his council of ministers. The nation’s laws are based on the principles of common law and statute. The nation has an unparallel history of having a democratically elected government. The legislations are made by the parliament or the House of Commons and the House of Lords whose leading party has the executive powers. The parliament of the nation has representations from the entire nation that are engaged in law making and other governmental functions. The entire administrative machinery of the government is divided into executive, legislature and the judiciary that together help in the smooth running of the nation and its economy (US Department of State, 2011). Economic UK is one of the most economically developed nations with a huge economy that has proved its consistency over the past history. Some of the key economic indicators largely help in stressing its position as a leading investment destination. The country’s currency is one of the most valued currencies of the world and is also used as international currency. The GDP in terms of the officially established exchange rate is about 2.247 trillion dollars with a growth rate of 1.3 percent annually as of the year 2010. The GDP per capita stands at 34800 US dollars in 2010 making it 37th in the ranking all over the world (refer Annexure 1). This also shows considerable opportunities for business organizations to sell their products in the UK consumer market. Only 14 percent of the population is below the poverty line that also represents good scope for the business organizations to establish their venture in the nation. The unemployment rate of the country is 7.8 percent as of 2010 with the majority of the workforce being engaged in the services sector (CIA, 2011). In terms of Human Development Index UK has a better ranking of 26 with a score of 0.84 in the year 2010 that is higher than the average score of the OECD group of nations. This shows opportunities for organizations to invest in the nation given the high spending capacity of the individuals (Australian Government, 2011, p.1). Legal UK has a well defined an independent judiciary to settle out disputes emerging in the nation. The courts are also empowered to protect the fundamental rights of the citizens of the country. The Supreme Court has the appellate jurisdiction that is also the highest court of appeal. The country also has other lower courts and district courts to settle out legal disputes. UK has also accepted the jurisdiction of the International Court of Justice with certain exceptions and reservations (CIA, 2011). Cultures UK is a cosmopolitan nation that has the presence of many ethnic groups and diversities. The nation is the home to a large number of migrants who come to the nation in the search of better opportunities considering the economic might of the nation. The median age of the population is 40 years with a healthy gender balance. Most of the nation and its populated areas are urbanised to the scale of 80 percent making it an attractive market for beer industry players to establish their presence in the state (CIA, 2011). Disadvantage and Advantage Research conducted by Nielsen clearly state that the slump in the beer industry in the last year is set to be balanced with a favourable season coming up this year with sales forecast appearing to be in a healthy mood. The sales of beer products are also expected to grow in all the categories including cans as well as bottles and in the different product categories. This shows considerable market opportunities for a new player to establish its presence in the UK alcoholic drinks market (refer annexure 2 and 3). The growth in the market is also expected to reduce the negative growth that was observed in the last year with the economy showing signs of recovery and the consumer spending pattern towards an increased margin over the next year (Canmakers, 2010, p.2). In addition to this the population in UK have a good affinity towards beer with the product having the largest market share among the alcoholic drinks being sold in the country. It is also established that the target market in UK have a greater affinity to spend their disposable income towards alcoholic products like beer as compared to other recreational and entertainment items. This can be very well stated from the findings of a report that states that Britons on an average spend a good amount in pubs and other such places. The fact that beer is the most popular alcoholic drink further acts as an impetus to the market players trying to enter the market in UK (Institute of Alcohol Studies, n.d., p.4). In addition to the large scale advantages the UK market also has certain disadvantages of which the main issue that emerges is the fact that there is a huge competition in the market with almost all the leading brand s being present in the market in a big way. The market is presently being led by Stella Artois followed by Foster’s and Carling that are the market leaders in the product category. This high intensity of competition along with the one percent slump in sales compared to last year can emerge as a cause of worry for a new investor eying the UK beer market (Nielsen, 2009, p.1-6). Market Segment The beer industry in general consists of stouts, ales, bitters as well as alcoholic and non alcoholic brands. The new market player would specifically target the alcoholic segment including the lager and ales market in UK. The upcoming world cup as well as the London Olympics slated in the coming year that is expected to boosts the consumption of beer. Legal The target market segment for beer would include individuals over the age group of 18 years considering that the product would not be directed to the minors considering the social and health related effects of an alcoholic drink like beer. Culture UK has a highly cosmopolitan cultural background with diverse cultural groups. The target market for the beer would not include religious and ethnic groups that have a social and cultural sentiments associated with alcoholic products. This would help in creating a socially viable and a responsible face of the organization towards the target market audience. Competitive The total market in UK would be segmented under three categories namely light, domestic and imported segments. The product for the light segment would include products with low alcohol content and would be directed at individuals having inclination for products with low content and percentage of alcohol. Imported segment would include premium quality products and would be targeted at individuals having a higher disposable income. This premium priced product would have imported products that would be rich in quality aspects. In addition to this the third segment i.e., domestic would include customised products that would have a blend and mixture of local tastes and flavours. This would be in tune with the strategy of thinking globally and acting locally that would help in attracting local customers. Moreover it would help the new company establish a good connect with the local customers that would help in creating a favourable image of the brand in the minds of the target market customers. Financial Environment The new venture would have a considerable requirement for funds primarily for establishing its presence that includes fees for licensing as well as marketing communication and advertising expenses. Most of the funding requirements would be sourced from the reserves and surplus from the existing venture. In addition the organization would also seek financial assistance from banks and financial institutions to generate funds for the new venture. The company would try to achieve a break even by three years following which a second round of expansion of market penetration would be carried out. This would help the firm to reach out to the unexplored markets considering that in the initial phase only top cities would be targeted and depending upon the course of business in the first phase a second phase of expansion would be carried out. Marketing Mix Marketing mix is the set of activities under the control of the firm which helps the company to implement strategies and blend according to the need of the target market. This blending procedure depends on the category of products from the company and the market in which the company is serving or offering its product. These marketing mix elements can be classified into four different categories which is needed to be resolved by the company to enter into the new market. The four marketing mix are also known as the 4P’s of marketing namely Product, Price, Promotion and Place (Lao, 2001, p. 147). Product The product is the physical instrument which is offered to the market by the company. These products may sometimes include some additional activities like service along with the product. In beer market product is primarily referred to the different kinds of beers which are offered by the company to the market. These physical manufactured goods of the company are packed in bottles and cans of different sizes with different quantity. This is one of the primary requirements which are needed to be very good to succeed at UK as there are already many players in the market. The product offered by the company is of very good quality and the company always takes care of the quality standard which can be a major advantage of the firm. Fresh taste due to good quality and available in different sizes and packages can have good potential for the firm to grab the beer market at UK. Price Price is a vital element which is needed to be evaluated very carefully by the company. It is the attractive part for most of the consumers to buy the product in a competitive environment. Many players like Heineken, Becks, Nastro Azzurro and many more are already offering beer in the market with premium quality. To enter the market the company should take the cost advantage strategy with low price of the products to grab the initial market share. Promotion Product promotion can be done in various ways. But before positioning the company should first understand the target market and then design promotional tools to reach to the customers. The company should promote about its presence internationally to gain the trust of the customers and should reach the customers through advertisements at pubs, restaurants and liquor shops in the region. Sponsor on several events like fashion show and sports events will help the company to reach large number of customers by focusing on having beer at their leisure time. Celebrity endorsement can also influence consumers to try a new product in the market. Place Product availability is very important to make a strong presence in the market. Convenience of buying the product at any place can increase sales of the company to great extent. With more presence at pubs, restaurants and bottle shops people will be able to try the products if they are influenced by the promotional activities. The company should take care of the logistic system to reach to every corner of UK to offer its different products for the customers. Market Positioning After choosing the target market the company should design the positioning strategy of how to reach the mind of the customers. How the product is defined by the customer is important for the company for successful entry into the market. Thus positioning of the product in the mind of the customers is determined by the marketer with suitable positioning strategy to influence the consumers to perceive as the company wants. Positioning is not creating a new product only but to place the product in the mind of the customers (Kotler, 2008, p. 304). The strong taste of the beer can be positioned at UK market especially for adults who are regular drinkers and the smooth lager beer can be positioned in the mind of the consumers as especially for the young people who just want to taste or just for experience along with the enjoyment of free time time or watching sports. The upcoming London Olympics can have provided great platform for the company to launch its product and position the beer in the market especially in the mind of the teenagers as a complementary to their leisure time. This can give an impression of a good companion for the consumers in their spare time for repetitive buying process. Market Promotion tools The promotional tools are few combinations of mix which are used by the company to reach to the customer base to offer their products and services. There are few types of promotional mixes namely personal selling, advertising, sales promotion, public relations and direct marketing which are used by the company either individually or can also be used in combination with each other for the promotional purpose (Trehan & Trehan, 2010, p. 45). For entering into the new market the company should involve into strong promotional practice to reach the customer base at a faster rate and grab the market share. Since beer is not allowed to sell personally over the world without licence thus the promotional tool should only be concentrated towards advertisements, sales promotion and public relations. Sales promotion at pubs and restaurants through discount offer on price for the product can attract many customers to try the new product in the market. Advertisement will pay a vital role in reaching the customers. The company should publish posters for the pubs and restaurants and the liquor shops to be in front of the row while purchasing the product. The company should also indulge into celebrity endorsement for making people believe the good quality of the product. Public relation through several activities on events like organizing fashion show or sponsorship for sports events will also make people aware of the product and the company. Entry modes 11.1 Export-based entries For entering into the UK market the company should follow the export based entry method through which the company will be able to send their product from the domestic market to international market by going through several channels of entry which can be described as follows- 11.1.1 Indirect exports In indirect export method helps the company to reach the international market with much less investment into the marketing activities but the company should also take care of the process of selecting the vendors at UK as the firm will have much less control on the market of operation (Pierobon, n.d.). The company will have to export the buyers of the new market who in turn will sell the products to the end users. Thus if the reseller is not chosen after proper evaluation it will be difficult to grab the market due to inefficiency of the reseller at UK. 11.1.2 Direct exporting Direct exporting can also be done by the company to increase sales along with indirect channel. Direct exporting will help to sell products directly to the customers facilitated by internet technology (New Zealand Trade & Enterprise, n.d.). Online presence of the company can aid in the process placing order directly to the company by accessing the available products and then the company can export the products to the customers without the help of any third party. This strategy will help to reach a larger customer mass and increase sales for the firm to great extent. 11.1.3 Establish sales office in foreign market Though establishing sales office at UK will be a costly approach towards market expansion strategy but this process is very effective in gaining customer trust in a new market. The presence of the company’s office will help to reach the customers directly and proper monitoring of the market is also possible through this strategy. The company will be able to understand the requirement of any improvement in any particular sector as the company representative will be able to supervise the process of expansion at UK. Adding to it the buyers will also be able to directly contact with the company for any kind of assistance regarding the marketing process in the market. 11.1.4 Licensing To reduce the cost of export which in turn will affect the end users through the pricing policy from the firm, company may involve in the act of licensing their activities to another capable firm in the target market to produce or market the product (Burrone, n.d. p. 1). In this method the company will give permission to another firm at UK to take certain operations of the firm to sell products in the market. If the company license any domestic firm to look after the marketing of the product at UK it will help to reach customer in a more controlled way than indirect export channel as well as in a more systematic manner as the domestic firm have the understanding of the market which can be effective in the marketing process. 11.1.5 Franchising The expansion strategy can also be adapted through franchising technique. In this technique the company will support entrepreneurs of the target country for establishing business and using the products and brand of the company on agreement for certain period of time. In exchange the company will not only earn from the sale of the products but also monetary considerations for the agreement of franchising with the company. The born global entry model The born global company is referred to those who are into internationalization from the beginning of their business process due to globalization and their survival in the competitive environment (Susman, 2007, p. 231). Through it’s a very risky strategy for a new product from the company as the firm don’t have any experience of the product in the new international market but this can help the company to explore international market with good prospect for the product than in domestic market. This strategy can be implemented by the company to enter into UK market and many more markets before expanding its business in domestic market as the growth prospect at UK market is very promising. For implementing the born global model the company should have a very strong position and very efficient business model with high confidence to succeed in international market. Evaluations UK seems to a very promising market for the company to expand the business process. According to the Neilson report on beer industry it can be perceived that entering into the beer market can have a great prospect for the company to increase their sale from the expansion plan. But on the contrary due to highly established domestic players in the target market the company will face strong competition to successfully implement strategy at UK. Geographically, economically and the government of the country also seems to be very favourable for the business expansion of beer market. The urbanized cultural background of the country with strong economic condition shows a very attractive market for the company to establish business at UK. The greater affinity to spend disposable income on alcoholic beverages and the present situation with many upcoming events like Olympic and other sports events to be organized at the region can be a very good prospect for any new players to enter the market to accompany people in their leisure time. On the contrary to all these prospects there are many players in the market with established brand name which be very difficult to cope with to enter the new market as they have already gained the trust from the market thus the company need to implement strategies very tactfully to grab UK market. Recommendations To establish a strong base in the UK market it is needed to understand the market beforehand very carefully. Before investing into the expansion plan the company need evaluate the location with much more detailed research on the location and its players’ statistics to understand the prospect of the business establishment in the long run. The pricing and product mix should also be evaluated very carefully to differentiate itself from the other players of the market like offering small cans of beer or large bottle which are not available with others. Pricing should be very competitive with the market otherwise it will be very difficult to penetrate the new market for a new player where there are already many players with strong brand name already established. And for efficient supply of products in the international market the company should take all the export based entries at the initial stage for aggressive penetration at UK market. References Australian Government. (2011). Country Profile-United Kingdom. [Pdf]. Available at: http://www.immi.gov.au/media/statistics/country-profiles/_pdf/united-kingdom.pdf. [Accessed on September 02, 2011]. Canmakers. (2010). UK Market Report 2010. [Pdf]. Available at: http://www.canmakers.co.uk/wordpress/wp-content/uploads/2011/01/UKMarketReport2010.pdf. [Accessed on September 02, 2011]. CIA. (2011). The World Factbook. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/uk.html. [Accessed on September 02, 2011]. Institute of Alcohol Studies. (No date). Economic Costs and Benefits. [Pdf]. Available at: http://www.ias.org.uk/resources/factsheets/economic_costs_benefits.pdf. [Accessed on September 02, 2011]. Nielsen. (2009). Beer Report 2009. [Pdf]. Available at: http://hub.wrnewmedia.co.uk/pdflibrary/OLN/OLN-Beer-Report-2009.pdf. [Accessed on September 02, 2011]. US Department of State. (2011). Background Note: United Kingdom. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/3846.htm#gov. [Accessed on September 02, 2011]. Lao, F. (2001). Marketing Management. Rex Bookstore, Inc. Kotler, P. (2008). Marketing For Hospitality and Tourism, 4/E. Pearson Education India. Trehan, M. & Trehan, R. (2010). Advertising and Sales Management. FK Publications. Pierobon. (No date). Indirect Exporting. [Online]. Available at: http://www.pierobon.org/export/ch3/indirect.htm. [Accessed on September 03, 2011]. New Zealand Trade & Enterprise. (No date). Direct and indirect exporting. [Online]. Available at: http://www.nzte.govt.nz/develop-knowledge-expertise/export-guide/ways-of-entering-a-new-market/pages/direct-and-indirect-exporting.aspx. [Accessed on September 03, 2011]. Burrone, E. (No date). Intellectual property rights, Part 5: Licensing and Franchising. [Pdf]. Available at: http://www.cbi.eu/download/actualiteit/Licensing_and_Franchising.pdf. [Accessed on Septembet 03, 2011]. Susman, G. (2007). Small and medium-sized enterprises and the global economy. Edward Elgar Publishing. Annexure Annexure 1: Key Macro Economic Indicators for UK (Source: Australian Government, 2011, p.8) Annexure 2: Drinks Market in UK (Source: Canmakers, 2010, p.2) Annexure 3: Drinks Market in UK (Category Wise) (Source: Canmakers, 2010, p.2) Read More