MARKETING PLAN FOR SKAGEN DESIGN - Essay Example

? MARKETING PLAN FOR SKAGEN DESIGN ………………. College/ …………… ……………………. Table of Contents Table of Contents 2 Introduction 3 Skagen Design: Company Overview 3 Analysis of Internal and External Environments 5 SWOT analysis 5 Strengths and Opportunities 6 Weaknesses and Threats 6 Market Choice for Skagen Design 7 China and Business opportunities 7 Entry Modes for International Marketing 9 Export-based Entry Mode 11 Contractual Entry Modes 11 Foreign Direct Investment 12 Joint Venture as appropriate mode for Skagen Design to enter China 13 Why Joint Venture for Skagen Design? 13 Marketing Objectives of Skagen Design 14 Product Mix 16 Price mix 16 Place mix 16 Promotion Mix 17 STP strategy of Skagen Design 17 Segmentation strategy of Skagen Design 17 Targeting Strategy of Skagen Design 18 Positioning Strategy of Skagen Design 18 Conclusion 18 References 19 Introduction In today’s competitive business environment, marketers are required to develop certain strategies to help them achieve sustainable competitive advantage. Out of various marketing strategies, going global is one of the most effective strategies as it not only widens the market potential but also help the firm seize more marketing opportunities. A marketer is one who designs and creates benefit or utility that deliver the want or need-satisfying power to the customers (Boone and Kurtz, 2009, p. 5). In a global marketing perspective, marketers are to identify its customers, research in to their requirements and develop products or services accordingly so as to market them globally. This piece of research paper presents an international marketing plan for Skagen Design to help the management team in deciding about the best appropriate entry mode to launch its business in China. The report presents a detailed marketing audit of Skagen Design and investigates marketing objectives and better marketing strategies for the company in relation to its international marketing plan to China. Skagen Design: Company Overview Skagen design, started as a small business upstart in 1989 in Denmark, has now emerged to be a successful multinational company designing, making and marketing stylish Danish designed watches, sun glasses, jewels and related accessories (Zacks Equity Research, 2012). It’s co-founders Henrik and Charlotte Jorst came to USA to start their own business in 1989 by developing the idea of a business opportunity from the Danish lifestyle and philosophy and started their business by marketing well designed watches and other accessories (Skagen, 2012). This illuminates an example of how effectively a business dream can be converted to reality by exploring newer business opportunities and marketing newer ideas. As Crane (2009, p. 3) noted, a successful entrepreneur starts thinking creatively from finding a hidden marketing opportunity and develops his marketing by identifying customers’ specific requirements and by developing products accordingly. Henrik and Charlotte Jorst developed the business idea based on the marketing potential for supreme quality watches made in Danish spirit, elegant design, skillful craftsmanship, perfect technology and so on. With its mission to create a Skagen Global Community ingrained with a commitment to design impressive and unique products and to offer high valued customer services, the company has long been able to generate a positive zeal among its customers. As of very recent report, Fossil Inc is proposing to purchase Skagen Design for a total value of $236 million including 150,000 shares in Fossil Inc (Zacks Equity Research, 2012). Skagen Design ltd is manufacturing and marketing watches, sun glasses and jewels for both men and women offering its products and services through third party retailers as well as online stores. Apart from administrative offices and manufacturing plants situated in Nevada, it operates stores in Tokyo, Nagoya, Japan, Taiwan and markets it products to various countries such as Singapore, Malaysia, Australia etc. Skagen Design is strategically thinking to find most appropriate entry mode to run its business in the fastest growing economy of the world, China. Analysis of Internal and External Environments SWOT analysis The contemporary marketplace is highly dynamic and therefore changes in the marketing environment are sources of opportunities as well as threats that are to be effectively managed. A firm that intends to internationalize its operation is required to conduct an environmental scan by continually acquiring information on various factors that impact the company both internally and externally (Kerin, Hartley and Berkowitz, 2005, p. 72). A SWOT analysis is considered as an important marketing tool that is used for analyzing factors internal to the organization, namely strengths and weaknesses and external to the organization namely Opportunity and Threats (Stahl and Grigsby, 1995, p. 30). Strengths Weaknesses New watch concept, Product differentiation Advantages of corporate social responsibility Higher investment requirement for different materials Market fluctuations for luxurious products Opportunities Threats Increasing demands for luxury watches. Replacing of cosmetics and perfumes Increasing opportunity of electronic features ingrained with watches. Fierce competition from Calvin Clein, Coach, Gucci and other watch companies. Strengths and Opportunities Skagen design has been thriving on innovation and creative ideas. Its founders went to USA with an ambition of setting up their own business based on stylish Danish watches. It was not just an alternative to the prevailing watches, but emerged as new watch concept that has brought gradual improvements to the company. Within just five years, it has grown to be big as Magazine Inc. has considered Skagen as one of the 250 fastest growing companies. One of the major strengths of the company is that it introduces five different products a year. It not only adds to the competitive advantages due to its innovation and product differentiation, but also add to its brand image. Skagen Design is extremely concerned about Corporate Social Responsibility. As its website depicts, the company has several programs and social movements in relation or in tie with social groups or agencies such Avon Walk, SPCS, National Multiple Sclerosis Society, St. Jude Children Hospital, Truckee Meadows Community College, Junior Diabetes Research Foundation, Skagen Denmark Sample Sale in NYC, MoMA, KMPB And so on. In some countries including China, cosmetics and perfumes are reported as being replaced by luxury watches showing growing demand potential for luxury marketers. Technology is an important element in today’s market. Watches, sun glasses and jewels can be differentiated by using various technologies, and different electronic features can be added to them so that more customers can be attracted to the luxury products. Weaknesses and Threats Though product differentiation is advantageous in competitive aspect, it requires huge spending especially in case of watches, sun glasses etc since they need different material. Huge spending may be required in Research and Development for discovering and developing different designs and in different materials. Moreover, the market is highly fluctuated in case of luxury products. Market for watches, sun glasses and jewels is fiercely competitive and it seems to be a major threat to Skagen Design. Market Choice for Skagen Design International marketing should begin with understanding of what marketing is and how it can be operated for a specific company in an international context. The marketing decisions, objectives and strategies vary from firm to firm since they largely depend on the country to be chosen for international marketing. Global marketing is a multinational process of planning, coordinating, controlling and executing the marketing mix, namely product, price, place and promotion, in order to create exchanges of benefits or utility to satisfy individual as well as organizational objectives. Skagen Design therefore needs to plan strategically about country to be chosen, best appropriate entry mode to be selected and best fit of marketing mix elements to satisfy the needs of targeted customers in that particular country. China and Business opportunities Out of the four emerging economies namely Brazil, Russia, India and China, this report suggest that China will be a best option for Skagen Design to market its stylish modern watches, sun glasses and jewels. According to the very latest economic statistics, China has become the second largest economy in the world, being just behind the US. China has overtaken Japan in the second quarter of 2010 and become the second largest economy of the world. China’s economy has been valued to be $1.33 trillion whereas Japan’s economy as $1.28 trillion in the second quarter of 2010 (The New York Times, 2010). From the marketing point of view, an emerging economy will be a best option for global marketing not only for its stance as an fastest growing economy but also for that it can have significant marketing opportunities. For last four decades, China has been largely attracting the savvy business people from around the world due to its increasing market opportunities. China witnessed major economic reforms in 1970s and 1980s and the country could achieve laudable macroeconomic transformation in various industrial sectors. China’s growth of nominal income, since 1980, has been accounted in double digit growth rate. It was 24 percent growth between 198 and 1985, 24.8 percent growth by 1988 and around 30 percent growth by 1994 (Steele, 2000, p. 4). Given the large population and the growing importance to be the most superpower in worldwide economy, Chinese people have growing buying power and this explains why multinationals find China to be a better marketplace too. As DeFalco and Oxbury Research (2010, p. 195) noted, China has become the 21 century powerhouse and a magnet for foreign investments especially since its entry to World Trade Organization in 2001. Since then, it could double its share of global manufacturing output and fuel a stock market boom. From 1990s onwards, Chinese government has mainly focused on boosting the GDP growth. It was mainly because of the economic concept that high GDP growth would certainly create more employment opportunities. China could prove this within few years and caused wider opening for foreign investments (Collins and Block, 2007, p. 30). Now, China has grown to become the most successful host country for thousands of large fortune 500 multinationals such as HP, Apple inc, Microsoft, Dell, Nestle, Cadbury and so on. As far as Skagen Design is concerned, it manufactures and markets luxury watches, sun glasses and jewels and therefore the country it chooses for international marketing must be a good marketplace for luxury products. Chevalier and Lu (2011) opinioned that China is becoming for every luxury businesses the centre of their Asian Development. According to recent reports by China Daily (2010), luxury watches in China are replacing cosmetics and perfumes. May be the first time in history, watches in China getting higher lead in luxury markets and it is reported that watches led the luxury market accounting for nearly 30 percent of total sales in luxury sector. It was accounted as 20 billion Yuan equaling to 3.15 billion US dollars in 2010. Watches and jewelry are accounted only about 20 percent of global luxury market (China Daily, 2010), but in China, the recent sales record of luxury watches have exceeded that level and it will positively attract luxury businesses to Chinese markets. Ciancio and Olof-Ors (2012) reported in Reuters that demands for luxury watches and other items in China has surpassed that of US. Since 2004, it is the first time an online survey has observed that demands for luxury watches in China has outshined that demand for the same in Japan, US and other countries. In short, Skagen Design will find China as a better choice for its international marketing not only because of that China is second largest economy and it thus impacts the buying power of its people, but also that the demand for luxury items, especially of luxury watches, in China has risen dramatically in recent years to overtake the demand for same in US and other major economies. Entry Modes for International Marketing Entry mode in international marketing refers to an organizational arrangement that a business will be able to use it for entering in to a foreign country and utilize its products, human skills, technology, management and other relevant information in a foreign country (Wagner, 2009, p. 3). There are different modes of entry to a country and all of these modes are of critical importance in international marketing, since they are closely aligned with varying levels of resource commitment, risk exposure, business control, profit and revenue concerns etc. Choosing a specific entry mode depends on various firm and market related factors such as firm’s organizational goal, business nature, size and scope of the products or services the firm markets, demand and supply of its goods or services within the market etc (Pan and Tse, 2000). As Wagner (2009) noted, choice of an appropriate entry mode depends on many factors including business performance, survival, growth and competitive advantage etc and all these factors greatly influence the effectiveness of the entry mode to be chosen for a company. The three basic models of entry modes are trade related or export based, contractual and foreign direct investment related. Choice of a specific entry mode may impact the degrees of resource commitment, anticipated returns, resource control and risks involved etc (Shenkar and Luo, 2004, p. 274). Fig.1 details various entry mode options for a country to decide on entry modes in to a country. All these entry modes are briefly detailed below and the most appropriate one for Skagen Design to enter China will be explained and justified. Export-based Entry Mode Exporting is selling goods or services to other country and it is a common mode of entry to a country by which a firm directly or indirectly markets its goods or services abroad. By using exporting for entry, firms gain advantages of effective business operation and sufficient information about foreign markets and economic-related variables. Exporting can be done either directly to foreign customers or through buyers or agents or export intermediaries. Direct exporting normally is executed through the channel of a department or someone within the firm itself. In contrast, indirect exporting is more advantageous to the company since it doesn’t require huge spending or special expertise for exporting (Ball, McCulloch and Frantz, 2005, p. 431). Contractual Entry Modes Contractual entry mode occurs when there a contractual relationship between the firm and another in the host country. Contractual entry modes include contract manufacturing, international licensing, international franchising and joint. Contract manufacturing without investing in manufacturing and plant facilities is considered by many firms since it is advantageous to them. But many other firms select contract manufacturing by subcontracting part of production or assembling etc (Ball, McCulloch and Frantz, 2005, p. 438). Foreign Direct Investment Foreign Direct Investment in recent years has dramatically grown as a major form of capital transfer between countries in international marketing and it has played highly crucial role in the growth of emerging economies. Foreign Direct Investments (FDI) is actual transfer of the organizational knowledge of a firm from one country to another country (Zhang, Zhang and Liu, 2007, p. 752).. In FDI, risk dissemination is relatively low but control and resource commitment are comparatively high (Wagner, 2009, 4). According to Economists, lending and investment in FDI will be diversified because there will be free flow of capital and resources across national borders (Razin and Sadka, 2007, p. 1). FDI related mode of entry involves investing of property ownership, assets, projects, business and innovations in the host country. Strategic alliances and management contracts along with wholly owned subsidiaries are considered as FDI related entry modes. Wholly Owned subsidiary is a company that either Takes the ownership in a foreign subsidiary and starts from the beginning by establishing ne manufacturing plant, or Acquires a prevailing firm by purchasing its distributor so as to obtain distribution networks (Ball, McCulloch and Frantz, 2005, p. 434). In strategic alliances, a particular company may form collaboration of strategic alliance with customers, suppliers or competitors so as to easily adapt to market changes and face global competition. But in Management Contract, a company provides managerial techniques and strategies in some part of the major functional areas to another company (Ball, McCulloch and Frantz, 2005, p. 438). Joint Venture as appropriate mode for Skagen Design to enter China China has become one of the leading host country for FDI through a number of entry modes such as joint venture, wholly owned foreign subsidiary, joint venture, umbrella companies, licensing and so on (Luo, 2000, p. 67). FDI for now doubt has significantly played pivotal role in the economic growth of China in recent years. Among various modes of FDI related entry, international Joint Venture will be an appropriate strategic approach for Skagen to enter Chinese luxury markets. International Joint Venture is collaboration between a foreign firm and a firm in the host country for more than a transitory period and are agreed to share assets, risks, technology, know-how, resources and so on (Czinkota and Ronkainen, 2007, p. 300). As Roos (2010, p. 7.1) noted, Joint Venture between a Chinese company and a foreign company has been very prevalent in Chinese market since 1980s and the economy has gradually opened up to foreign investments. Among various FDI modes, Joint Venture has been a cornerstone of China’s strategy to attract and control foreign investments. In today’s China’s marketing contexts, Joint Venture between Chinese and foreign companies seems to be a more powerful strategy since China becomes a rigorously competitive marketplace. Why Joint Venture for Skagen Design? Following factors explain why Joint Venture is substantially an appropriate mode of entry for Skagen Design to enter Chinese market. Skagen Design is manufacturing and marketing watches, sun glasses and jewels that are luxurious and can establish a market of its own only if its products can meet customers’ luxury requirements. Joint Venture facility in China can be utilized for secretly manufacturing and Skagen’s own products and market them as its own 9Roos, 2010, p. 7.2). Joint venture in China is used as vehicle for securing higher profits from international operation (Campbell and Netzer, 2009, p. 25). Joint Venture can contribute to rapid sales growth with increased economic results, since the local company has deep knowledge about markets and customer-specific requirements. Prompt technology transfer will be an advantage. Joint Venture can create better relationship between Skagen design and its partnering firm as well as government and local authorities (Czinkota, Ilkka A. Ronkainen, 2007, p. 301) Joint Venture can pool resources and lead to better outcome for each partner than if they work individually (Czinkota and Ronkainen, 2007, p. 301). More specifically, Joint Venture is more effective way of FDI in China since it offers a way of getting around the high Chinese tariffs and thus allows the company gain competitive price advantages over imports (Cateora and Graham, 2007, p. 330). Marketing Objectives of Skagen Design As Armstrong and Kotler (2005, p. 42) stressed, planning a market activity should begin with identifying and evaluating the marketing objectives. As mentioned earlier, Skagen Design is thriving to create a Skagen Global Community with greater emphasis on commitment to design impressive and unique products of watches, Jewels and sun glasses by offering high valued customer services. Skagen is thinking to expand its international business to more emerging countries and establish a very strong brand equity across nations. The major marketing objectives are listed below: To continually provide supreme quality watches, jewels and sun glasses to customers with high valued services. To establish a different watch concept following the fashion trend. Find highly qualified people to enable them to be useful and beneficial for customer services. Introduce products differently from those prevailing in the market and use product differentiation as a marketing strategy to achieve competitive advantage. Being a company giving motive to corporate social responsibility, Skagen Design proposes to work for society’s wellbeing. Marketing Mix of Skagen Design Skagen design takes an integrative approach to its marketing mix elements namely product, price, place and promotion. As Wilson and Gilligan (2005, p. 536) pointed out, an integrated approach to marketing mix will certainly be highly effective strategy as it can help achieve highest marketing synergy. Product Mix Skagen’s products are designed and developed considering Danish spirit of philosophy and stylish as well as elegant designs. Since majority of its products represent luxury market, each and every aspect to its design, style, size, weight, color, use friendliness, convenience, materials used, speed, accuracy etc will be extreme importance to its values. Since the management is putting efforts to introduce five different products a year, it can help the company keep on updating its products as well as services throughout its markets. Price mix Price is a sensitive element in marketing mix, because a small mistake of decrease or increase while fixing the price can cause significant impacts on its tradability. Skagens’ products are moderately priced and they are worth the price in all of its different markets. Place mix Skagen distributes its watches and other products through third party sellers and its own online stores. Skagen has gradually entered different markets such as Syngapore, Japan, Germany, Philippines etc and started distributing its products through third party sellers. Last years, Skagen Asia Pacific has launched its online store for distributing products to countries like Australia, Singapore and Hong Kong. Promotion Mix Promotion and brand communication are always critically important elements to an effective marketing. As far as Skagen is concerned, it has used national wide advertising and TV Shows for promoting its brand and boosting the sales across different countries. Integrated Marketing Communication will be a more effective and result-giving strategy for the company so that it can keep greater consistency in brand communication. With Integrated marketing Communication, Skagen will be able to use a mix of different communication techniques such as advertising, sales promotion, public relation, event advertising and thus to widen its popularity among wider numbers of customers. STP strategy of Skagen Design STP, acronym for Segmentation, Targeting and positioning strategy, refers to a marketing strategy in which the marketer has strategically decided on segmenting its customers, targeting them with more appropriate techniques and positioning the brand name in their minds. Segmentation strategy of Skagen Design Segmentation is a critically important marketing dimension that is considered as a strategic framework for identifying right customers of the company. it is related to finding who are a company’s main customers (Bygrave and Zacharakis (2010, p. 170). Skagen is representing luxury market and therefore it targets middle and upper class men and women who can afford to spend more on newer items coming to the market. in each country it markets, especially in China that it proposes to launch its business, more than 20 percent of middle and upper class population are trendy to spend on newer items such as electronic watch, luxury sun glass etc. An important segment of its total market is middle class women who are beauty conscious and are likely to spend huge amounts on jewels. The main segmentation strategy of Skagen Design is savvy people who can afford a lot to spent on jewels, watches and other luxury items. Targeting Strategy of Skagen Design A marketer is able to satisfy its customers by meeting the needs and wants of its people if it can effectively target a specific group by designing, developing and implementing a specific marketing mix composition (Lamb, Hair and McDaniel, 2008, p. 220). Skagen is targeting the big savvy middle class men and women by designing and developing stylish Danish model watches, using highly valued materials and technology. Positioning Strategy of Skagen Design Positioning refers to how a pproduct or brand is positioned in customers’ mind. It is related to the perception and thoughts that customers do have about a product or brand and they retrieve their [perception when they hear, listen to or see the product or its image or brand name etc (Hiebing, Hiebing and Cooper, 2004, p. 145). As far as Skagen is concerned, the company seeks to create a touch of stylish Danish watches made in elegant models and with latest technology. In order to be well positioned, the company may utilize its integrated marketing communication technique so as to keep on updating its customers about Skagen and its products. Conclusion This piece of report has presented a brief international marketing plan for Skagen Design and examined conceptual frameworks related to international entry modes in relation to Skagen’s business. This report suggested that China will be a better option for Skagen to internationalize its markets and Joint venture will be most appropriate mode of FDI for the company since it adds grater advantages to the company. This report has detailed marketing objectives, marketing mix and STP strategies of Skagen design by explaining relevant literatures to it. 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