Asian Brand Strategy: How Asia Builds Strong Brands - Admission/Application Essay Example

? Case Study and Analysis Executive summary of Global marketing Global marketing can be defined as the strategy to achieve one or more of four major categories of potential globalization benefits. These are enhanced customer preference, cost reduction, improved quality of programs and products and increased competitive advantage on a global basis. It makes the thinking beyond the level of importing and exporting. Importing and exporting constitutes very smaller portion of international business despite the wide attention of media. It is expected that globalization can be promoted through more internet commerce, more free trade, schools and communities, more networking of businesses and more advanced technologies. Global marketing refers to marketing activities by companies that emphasize on the following:- Standardization of marketing programs across different countries with respect to promotional mix, product offering, channel structure and price can increase opportunities for brands, transfer of products and other ideas across subsidiaries and help to address the emergence of global customers. Coordination across markets refers to reduction in cost inefficiencies and duplication of efforts among their regional and national subsidiaries. Global integration involves participation in major world markets to gain competitive leverage and effective integration of competitive campaigns of firm across these markets to subsidize operation in some market with resources generated in others and responding to competitive attacks in one market by counterattacking in others. Global marketing does not refer to development of products anywhere on a global basis. The climate, economic geography and culture affect the way in which the products are developed by companies and demanded by consumers. The availability of both natural and human resources is a major determinant of industry location. Needs of consumers are equally important in determining the industry location. It is impossible for the executives of domestic companies to consider their domestic market and domestic competition alone. If they fail to look beyond their national boundaries, they can lose marketing opportunities to competitors. The international expansion has always been considered as a strategy after domestic marketing. It is reactive to increased domestic competition and decline in domestic sales. Global marketing does not imply that companies should market the same product in same way around the world with the convergence of world markets. Rather, it is the willingness of company to adopt a global perspective instead of region by region or country by country perspective to develop a marketing strategy for profit and growth. Global marketers should be willing to exploit their local advantages for opportunities of global marketing. The e-commerce proliferation on internet can accelerate the global marketing opportunities. Case of Wal-Mart’s entry into Japan The world’s largest retailer, Wal-Mart entered Japan in the year 2002. Replicating the usual foreign entry strategy, Wal-Mart purchased 6.1% stake in Seiyu, the wholly owned Japanese subsidiary retailer of Wal-Mart. Seiyu was the fifth largest retail store in Japan in terms of revenue during that time. Wal-Mart gradually took the control of the Japanese giant from its previous owner, Saison Group which was one of the most successful conglomerates in Japan. It also purchased the remaining shares of Seiyu in 2008. Wal-Mart as an organization Wal-Mart was founded by Sam Walton in 1962 to get deals from suppliers, earning profits through volume and passing savings to his customers. Everyday low pricing or EDLP was the one competitive element differentiating Wal-Mart from its competitors. For successful execution of everyday low pricing, Wal-Mart ran a business of “best price, no deal” where there will be no allowances, no mark-downs and no promotional money. Less than one percent of sales were spent by the company on advertising which was dramatically less than its main competitors who spent up to six or seven percent. It is these savings which Wal-Mart passes to its customers through low prices. Sharing of electronic information was a key initiative taken by Wal-Mart. It has used interchange of electronic data since 1980s to facilitate communication with suppliers. A state-of-the-art supply chain and retail distribution system was also developed by Wal-Mart called Retail Link. Wal-Mart also made innovation in their retail formats. It transformed itself from the discount department store format to combining groceries with other departments becoming the largest grocery retailer in the world. The store managers of Wal-Mart were entitled with the responsibility to monitor local competitors. They also had the authority of rolling back the prices if any other retailer was selling at a discount. All these factors of Wal-Mart like its pricing policies, Retail Link, inventory management system and relationship with supplier provided extremely high rate of productivity to Wal-Mart. The company was not only growing its number of stores but at the same time, its sales per store were also growing. International expansion of Wal-Mart The global expansion activity of Wal-Mart began in 1990s which was met with protest, enthusiasm and outright rejection across foreign markets. The company’s international operations in the market of Canada and Mexico have been successful while its operation in the market of Germany and Indonesia failed and its operation in the market of United Kingdom is the struggling one. It had also its operation in Brazil, China, Nicaragua, Honduras, Guatemala, El Salvador, India, Argentina and exited South Korea. It examined a potential move into Russia. Source: Kotabe and Helsen, 2010 Seiyu before Wal-Mart In 1956, Seiyu was founded as an arm of supermarket which is privately owned by Seibu Distribution Companies which was later renamed as Saison Group. The company became a business in chain store by developing the retail strategy of self-service department stores and offering food and household items at a discount. Seiyu holding more than 80 units in greater Tokyo diversified its operations and public with its listing on Tokyo Stock Exchange. It established Family Mart Company which was highly successful and became the third largest store chain in Japan. With the booming Japanese economy and ascending to higher quality of goods and services by the Japanese consumers during 1980s, the low quality store brands and the low prices of Seiyu were no longer acceptable to the Japanese consumers. To meet this shift in consumer preference, Seiyu improved the quality of its private label foodstuffs and its supermarket brands. It also pursued investment in non retailing ventures and overseas expansion. Wal-Mart in Japan During May 2002, a 6.1 percent stake was purchased by Wal-Mart in the Japanese retailer, Seiyu which operated more than 400 retail units across Japan. Seiyu, whose focus was on the verticals of grocery and apparel, became a wholly owned subsidiary of Wal-Mart in 2008. Wal-Mart continued its operation in Japan under the brand name of Seiyu. Wal-Mart invested over $3 billion in the chain stores of Seiyu. The financial struggle of Seiyu during the period 2002-2007 has been depicted below. Source: Euro monitors International, no date. The first pilot superstore in Japan was opened by Seiyu in April 2004. To enhance its inventory management and distribution, Seiyu installed the computer system of Wal-Mart called Retail Link in many of its stores. Wal-Mart noticed the need to reduce headcounts in its operation in Japan so it persuaded the management of Seiyu to lay off 25 percent of staff of headquarters. It resulted in negative publicity of company and an annual loss of more than triple of its projection during the year. During the end of 2004, a 38 percent of controlling stake was owned by Wal-Mart in the company. Again, in 2005, Seiyu incurred heavy loss and CEO of Seiyu resigned and again Wal-Mart raised its ownership to 42 percent. Wal-Mart built a US style distribution centre in 2006 to improve its distribution. This gave positive sales of individual stores of Seiyu but it reported a huge loss by the end of 2006 and Wal-Mart made a boost of 54 percent of share in Seiyu. Wal-Mart implemented the SMART system in 2007 in many of its stores in Japan to capture the demand of consumers and to meet their needs better. This made an increase in sales of products of Seiyu but again, it incurred a huge loss by the end of year. Between 2002 and 2007, there has been a rapid growth in the relationship between Seiyu and Wal-Mart. In spite of integrating more systems and policies into the subsidiary and taking more control of the company, still Wal-Mart failed to gain profit from its operations. The retail and consumer environment in Japan Japan, being the second largest economy in world, is a highly attractive market to retailers due to its high population and in terms of per capita income of world, it is one of the highest one. The retail culture of Japanese differs from that of other developed nations. Japan has strong and close-knit supplier webs which is difficult to be penetrated by the foreign companies. This creates difficulty to retailers like Wal-Mart to reduce the costs to pass on discounts to customers. A major stumbling block in cutting costs was the matter that consumers of Japan purchase more fresh produce than shoppers elsewhere. This creates difficulty in lowering costs as most of the fisheries and farms in Japan are small. Family run operations offer better deals on smaller orders rather than on larger orders. This made an increase in the number of small suppliers which created difficulty to large companies to increase efficiencies by cutting costs. Need for local customization was another aspect of Japanese market. The successful customization of merchandise offerings in order to meet the different needs of Japanese customers in different regions requires the companies to establish relationship with different small local suppliers in each region which creates complex distribution network for international companies holding limited experience in this area of operation. The tastes and preferences of Japanese customers for retail products are also different as compared to the customers of Asia and other developed countries. They consider high price as synonymous to high quality products so they have an affinity for luxury products. The consumers of Japan are ready to pay premium prices to avail the quality products. In terms of standards in quality, they are the most stringent. The supermarkets of Japan imposed strict check on the quality of all incoming grocery products as the consumers would not purchase those food products having stains or marks on them. The food products of Japan are packed individually as the appearance of product plays a vital role in purchasing decision of customers. The Japanese consumers are ready to pay huge money to purchase good brands and as such, they purchased around 40 percent of luxury goods of the world annually. The high-end branded products are considered by them as the status symbols. They refrain to purchase the unbranded or products having private label on them. As a result, when Japanese consumers read “Everyday Low Prices”, they refrain themselves to buy those products as they consider those products of poor quality. Another aspect of Japanese consumers differentiating them from rest of the world is their purchasing habit of products in small quantities. This is because of the limited space in many homes of Japan. Moreover, they tend to purchase fresh groceries and small quantities of household products at regular intervals than purchasing large quantities of products and stocking them for a longer time period. This kind of consumer culture in Japan and its competitive landscape depicts the dynamics of retailing sector in Japan and posed challenges for Wal-Mart in this market. Wal-Mart takes over On 25th April, 2008, Wal-Mart raised its stake in Seiyu to 100 percent in spite of the matter that the company was yet to turn annual profit. The remaining stake in Seiyu Ltd. was acquired by Wal-Mart for $875 million approximately and so it made Seiyu Ltd. a full-fledged subsidiary. Wal-Mart operated Seiyu with much flexibility in varieties of activities including logistics, merchandising and distribution. Wal-Mart invested around $3 billion in Seiyu venture. But due to the realization of continuous losses since its initial investment in the company, Wal-Mart decided to close around 20 outlets and cut six of its workforce to trim its losses in the year 2008. In terms of revenue, Seiyu is now the fifth largest retail store of Japan with operation in Tokyo, Kita-Ku and having around 393 stores under its flagship. Between 2002 and 2007, Wal-Mart enjoyed strong financial results and dominant market position in United States and other countries but its investment in Japan proved ill equipped for success for survival in the Japanese market. Bibliography Kotabe, M. and Helsen, K. (2010). Global Marketing Management. 5th edition. USA: John Wiley and Sons, Inc. Dunning, J. (2003). Making Globalization Good: The Moral Challenges of Global Capitalism. New York: Oxford University Press. Merchant, H. (2008). Competing in Emerging Markets. New York: Routledge. Roll, M. (2006). Asian Brand Strategy: How Asia Builds Strong Brands. New York: Palgrave Macmillan. Stiglitz, J. (2003). Globalization and Its Discontents. New York: W.W. Norton & Co. Mahajan, V. and Kamini, B. (2006). The 86 Percent Solution: How to Succeed in the Biggest Market Opportunity of the Next 50 years. New Jersey: Wharton School Publishing. Prahalad, C. (2004). The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. United States: Wharton School Publishing. Tetreault, M. and Robert, A. (2004). Gods, Guns, and Globalization: Religious Radicalism and International Political Economy. London: Lynne Rienner Publishers. Lee, K. and Carter, S. (2012). Global Marketing Management. 3rd edition. United Kingdom: Oxford University Press. Janavaras, B. (1998). The Global Marketing Management System. 2nd edition. Boston: Addison- Wesley. Keegan, W. and Bhargava, N. (2002). Global Marketing Management. 7th edition. New Jersey: Pearson Education, Inc. Quelch, J. and Bartlett, C. (2006). Global Marketing Management: A Case Book. 5th edition. United States: Thomson/ South-Western. Toyne, B. And Walters, P. (1989). Global Marketing Management: A Strategic Perspective. Boston: Allyn & Bacon. Buzzell, R., Quelch, J. and Bartlett, C. (1995). Global Marketing Management: Cases and Readings. 3rd edition. Boston: Addison-Wesley Publishing Company. Patty, C. and Vredenburg, H. (1969). Readings in global marketing management. United States: Appleton-Century-Crofts. Carter, S. (1997). Global Agricultural Marketing Management. Rome: Food And Agriculture Organization Of The United Nations. Kashani, K. (1992). Managing global marketing: cases and text. Boston: PWS-Kent Pub. Ramaswamy, V. and Namakumari, S. (2009). Marketing Management: Global Perspective Indian Context. 4th edition. India: Macmillan Publishers India Ltd. Keegan, W. and Green, M. (2012). Global Marketing. 7th edition. New Jersey: Prentice Hall. Read More