International Marketing Strategy and Theory - Case Study Example

Introduction Specific tariff is expressed in terms of a fixed amount of money per the physical unit of the imported product. This tax is mainly intended for the restriction of imports in to a certain country. For instance, a tax of $ 200 for every single unit of the product imported in a country is a specific tariff. This type of tariff is easy to administer and collect, but it discourages imports. In addition, if the import prices rise, the specific tariffs lose some of the protective elements thus encouraging the domestic producers to lower the prices of their products (Carbaugh 2011). During economic recession, specific tariffs afford the local producers protection from foreign competition. The tax does not consider the value of the imported products but is based on the specific quantity of the imported products such as the volume or weight of the imported product (Carbaugh 2011). Specific tariffs affect the competitiveness of any company importing raw materials abroad. The tariffs will increase the prices of the products that are manufactured through use of raw materials that have been charged specific tariffs. For instance, if Coca Cola sets up operations in Myanmar and decides to import raw materials from other countries, the costs of production per unit will be high due to the specific tariffs that have been charged on the imported raw materials. Specific tariffs will be used by developing countries like Myanmar in order to protect the infant beverage industry from international competition from established players like Coca Cola and Pepsi. In addition, the Myanmar government will also benefit through increased tax revenues by charging Coca Cola specific tariffs for the imported raw materials. Unfortunately, the domestic consumers will incur suffering due to higher prices for the Coca Cola brands. Generally, in the short term, the higher prices of products due to specific tariffs on raw materials will reduce the consumption by the customers, but the government will benefit from the increased revenues. On the other hand, free trade benefits the global economy through increased competition that leads to reduction in consumer prices and a variety of innovative products in the market (Tallman 2010). Question two: Coca Cola is a beverage manufacturing multinational company that was established in 1886. The company is headquartered in Atlanta, USA, and has operations in more than 200 countries. The brand portfolio includes more than 450 brands that are consumed to close to 1.5 billion people daily across the globe. The company has attained a 90 percent customer loyalty, and about 45 percent of the global beverage market share due to quality and innovative brands. The mission of Coca Cola is to refresh the world, create value to customers and inspire moments of happiness and optimism among the customers. The vision of the company is to provide a great working environment for the employees, provide quality brands to customers, act responsibly to the communities and maximise the long term returns to the investors. Coca Cola has operated in most of the countries in Southeast Asia except North Korea, Cuba and Myanmar. Due to the recent easing of the trade embargos by the European Union and United States on Myanmar, Coca cola can now enter the market after six decades. The European Union and the United States have allowed the US Corporations and citizens to invest in Myanmar after the ruling junta turned in to a democratically elected government thus paving way for civil authority in the country. Coca Cola international business strategy is to operate a local business model in every target country; thus, Coca Cola has the opportunity of entering Myanmar. The company can sell bottled water, juices and sodas that are considered important in Myanmar. 2. Competitive position 2.1 Competitive position Coca Cola has attained a global leadership position in the soft drinks industry. The company has more than 400 brands and serves almost over 1.5 million customers daily. Coca Cola global sales revenues grew from 31 billion US dollars in 2009 to 48 billion dollars for the financial year ending December 2012. The total global gross profits increased from 20 billion as at December 2009 to about 29 billion US dollars as at December 2012. The operating income also increased from 8.5 billion US dollars to 11.2 billion US dollars during the same period. Coca Cola has attained impressive financial performance over the last few years due aggressive new product development, excellent marketing and new market entry strategies. 2.2 Opportunity for Coca cola in Myanmar There are numerous opportunities for Coca Cola that exist in Myanmar country. In order to analyse the opportunities, the paper will use the porter’s diamond of national advantage theory. According to the theory, comparative advantage of any national economy resides in the factor endowments such as abundant labour, natural resources and population size. According to the theory, advanced technology, skilled labour and abundant natural resources will enhance the competitiveness of the country. The theory outlines four determinants of national advantage that will be discussed below (Onkvisit and Shaw 2008). The first determinant is the factor conditions that include skilled labour, culture and raw materials. Myanmar is endowed with high skilled labour due to compulsory technology and also abundant raw materials such as water, coal, and oil that can be used in the beverage brewing processes. The second determinant includes the demand conditions existing in the economy. The beverage market in Myanmar is more demanding and large locally than in foreign countries. Coca Cola should put an emphasis on quality improvements and innovation in order to successfully penetrate in the market (Onkvisit and Shaw 2008). The third determining factor is firm structure rivalry and strategy. Myanmar firms have a tall hierarchy and less rivalry; thus, Coca Cola will be able to enter and gain a considerable market share easily due to its aggressive market growth strategy. The last determinant is the presence or absence of supportive industries in the country. Myanmar has several supportive companies that range from bottle manufacturing companies, advertising companies and logistic companies, which make the country attractive for Coca Cola. Analysis Myanmar market is attractive to Coca Cola. Myanmar is the largest country by geographical coverage in Southeast Asia. The country borders on other attractive economies such as China, Thailand, India and Bangladesh. The diversity in culture plays a key role in the history, demographics and politics of the country. In order to analyse the attractiveness of the market, we shall conduct a PESTLE analysis of the Myanmar country. The political environment of Myanmar after long decades of military rule is currently stable. The current government is committed to encouraging stability in the economy. The Myanmar government has implemented progressive economic policies and reduced the trade barriers with other countries. The economic environment refers to the factors that influence the purchasing power of consumers, the changes in interest rate, exchange rate and economic growth rate of the country. Myanmar is endowed with both natural and labour resources like oil (Allen 2008). The country is leading rice exportation economy. The country has currently experienced a 3 percent economic growth due to low inflation and stable exchange rate which makes it favorable for Coca Cola entry strategies. The social environment is favorable for multinational companies like the country has diversity of religions and ethnic backgrounds. The country has a high literacy rate due to compulsory elementary school education. The technological environment influences the development of new products, the marketing strategies and the competitiveness of a country (Onkvisit and Shaw 2008). Myanmar is advanced in terms of technology since the country is connected with cellular mobile network, numerous television stations that can be useful in marketing and advanced manufacturing systems that can be utilized in the design of Coca Cola brands in the market. The ecological environment is suitable for Coca Cola operations. The country is rich in natural resources such as clean water and air. There are also minimal legislation on clean manufacturing and natural resource utilization in the country. The legal environment is also suitable for Coca Cola. The labour rules, immigration requirements and business registration requirements are not stringent. The corporations are also required to pay only annual taxes while the excise duty and custom duties are designed to encourage foreign direct investment in the country (Walker 2003). Market entry strategy Market entry strategy refers to the modes which a company utilizes in order to attain market presence in a particular market segment. Market entry strategy requires a careful analysis of the factors that affect the success of the product in the international market including the trade barriers, competition and export subsidies. Coca Cola has numerous market strategies that it can utilize in order to enter Myanmar market (Tallman 2010). Exportation is the first market strategy that Coca Cola can utilize to sell the company products in Myanmar market. Coca Cola will have to use either direct or indirect exportation strategies. Direct exportation strategies will involve establishing own sales representatives in the market and ensuring that import distributors facilitate the smooth flow of Coca Cola products in restaurants and chain stores in Myanmar market (Henry 2008). However, due to the unfamiliarity with the market, Coca Cola can select to use import agents such as Export trading management companies and export merchants that will be tasked with ensuring the Coca Cola brands penetrate in the market. Indirect exportation will reduce the market risk but is disadvantageous since it may lead to low market penetration, loss of control of the marketing function and low sales revenues (Onkvisit and Shaw 2008). The second entry strategy that Coca Cola can utilize is forming alliances with other beverage manufacturing companies in Myanmar. Strategic business alliance and ventures will result to sharing of technology and marketing resources thus enhancing the penetration of Coca Cola in the market. However, this strategy may lead to unhealthy competition in the future and reduce the ability of Coca Cola to localize its products in the market (Tielmann 2010). Another market entry strategy that Coca Cola can utilize is licensing. Coca Cola can agree to permit other beverage manufacturing companies in Myanmar to use the trade market, and technical knowhow in manufacturing Coca Cola products. This strategy is less risky and ensures that capital in not committed in foreign operations. However, the licensee may turn to a competitor in the future or cancel the license agreement. The last strategy that can be utilized to enter the market is foreign direct investment. Coca Cola can set up a brewing factory in Myanmar though it will require heavy financial investment in machinery and brewing equipment. The foreign manufacturing strategy is more risky, especially for new markets like Myanmar (Root 1998). Conclusion Coca Cola has the necessary financial resources and skilled power in order to enter the Myanmar market. The company has attained considerable market share and customer loyalty due to innovative brands that are health conscious. The political environment, social environment and economic environment of Myanmar will support the entry of Coca Cola in Myanmar market. Due to the unique nature of Myanmar country, the best entry strategy for Coca Cola is to form joint ventures especially with the government agencies and also pursue franchises with other established companies in the country in order to reduce any risks that may be occasioned by unforeseen future uncertainty. Reference list: Allen, M. 2008. Analysis of organisational environment. London: Select Knowledge Limited. Carbaugh, R.J. 2011. International economics. Mason: Cengage Learning. Henry, A. 2008. Understanding strategic management. Oxford: Oxford University Press. Onkvisit, S and Shaw, J. 2008. International marketing: strategy and theory. London: Routledge. Root, F.R. 1998. Entry strategies for international markets. London: Wiley. Tallman, S. 2010. Global strategy. London: John Wiley. Tielmann, V. 2010. Market entry strategies: international marketing management. Munchen: Verlag. Walker, G. 2003. Modern competitive strategy. Boston: McGraw-Hill. Read More