Global Marketing - Product Choiceand Market Entry Strategies - Assignment Example

? Global Marketing Table of Contents Introduction 3 Product Choice 4 The decision to internationalise 4 Market entry strategies 7 Conclusion and Recommendations 9 References 11 Introduction Internationalization can be defined as the process through which a company looks to target international customers by making the products and services available to the customers. Although the basic principles of marketing remain the same, international marketing is a lot more complex than the domestic marketing as the companies entering international market(s) have to deal with international regulations and cultural differences. However, with great risks come greater chances of success too. Today the global economy is as turbulent as it gets. The economies of the western developed nations are still felling the wrath of the economic down turn of 2008. Therefore a lot of companies belonging to countries like U.K. or U.S. are looking to set up business in the emerging economies which includes the brics and mitsk countries such as India, China, Mexico, Brazil etc. (Ghauri and Cateora, 2010, p. 141). The present study has been done in lieu to analyze the internationalization process of a product which is actually not present in a targeted or host nations. Such circumstances would provide scope for a thorough understanding about the fundamental yet extremely aspect of setting up a business in an international market. During the course of the study various important concepts related to the international marketing such as the market attractiveness analysis, analysis of potential threats and opportunities and threats, evaluation and selection of appropriate market entry strategy, market segmentation, targeting and positioning has been discussed. Product Choice As per the pre-defined project criteria the company to be discussed has been chosen as Innocent Drinks. The company was founded in 1999 by Adam Balon, Richard Reed and Jon Wright. All of them were Cambridge University graduates. The main product produced by the company includes crushed fruits, vegetables and juices. The fruit juices provided by the company are mainly known as smoothies who are usually provided to the customers in small bottles and big cartoons. The ingredients used include apple, topical, mango, apple, berry, and other vegetables such as carrots, ginger, etc. In 2009, the company announced the decision to sell 10-20% of stake to the soft drinks giants Coca-Cola. On February of 2013 coca-cola increased the stake to 90%. The decision to internationalise Coca-cola becoming the majority stake holder provided a lot of opportunity for the company to global. The company already has international presence in the form of countries such as Ireland, France, Germany, Norway, Sweden, etc. However, the company does not have any significant presence in Latin America and U.S. Deciding which market to enter While deciding the appropriate choice of the markets come to mind including North American, Latin American countries and also Asian Countries. Among these Asian countries would most definitely be an interesting choice. But it has to be said that while entering the Asian market two diverse factors would be the extreme geographical and cultural differences. Also although the hot and humid conditions of countries like India looks to be tailor made for the launch of such products; idea gets eliminated on the count that the product is already present in India. Hence the next choice to look forward would be the Latin American nation. Among these the top two contenders would be Mexico. Despite of the recent economic downturn the country has witnessed a steady growth in the GDP since 2010 till present by 5.5%. The GDP per capita happens to be $15,782 at the end of the last fiscal year. According to a research conducted by just-drinks, the Mexican soft drinks industry grew by 3.7% in the last year and is expected to reach a value of $15.18bn by 2014. From 2008 to 2012 there also happens to be a steady growth in the disposable income of the people in Mexico. The demand for beverages in the country also seemed to quite high as the same research showed that the each person in the country drank over 600 hundred bottles. Another key factor for entering the Mexican market would be the dominance of Coca-Cola who happens to hold a 90% stake in the company. Coke holds a market share of over 60% in the country followed by the long time rivals Pepsi. Despite of being the market leader in Mexico quite often Coke has to deal with a criticism that the company lacks diversification as compared to other key competitors such as Pepsi. Hence the launch of the smoothies would most definitely be a way to go for diversification. Another major factor to enter the Mexican market would be the growing concerns for health among the people (around the globe including Mexico). There have been instances when the carbonates have come under fire in various countries causing negative publicity. However, due to the healthy ingredients used to develop the smoothies would be not only a way to go for diversification but also to position itself as a health conscious brand. Hence all these factors make Mexico eligible for the launch of innocent smoothies. (Henry, 2008, p. 89). Now, the next market to be targeted would be the North-American market. The most obvious choice would be to enter to U.S. market to get the required vantage point. Although, U.S. happens to be the country of origin for soft drinks as both Pepsi and Coke started the business in the U.S market, things have not been that bright in the U.S. market. Over past years the consumption of soft drinks has gone down readily. The sales were down in during the holiday seasons also. If industry analysts are to be believed this may also be a sign of future things to come. Also in due to the fall in demand the companies have increased the prices of the soft drinks aggressively. According to a research there was a further damping in the demand of the products due to the increase in the prices. However, this may not be an effect of one factor but rather a combination of several factors. Prior to the economic downturn people of U.S, used to have a relatively healthy disposable income. But that has changed due the economic downturn. Add to that the people of U.S, have become very much health conscious and the soft drinks are not being perceived as a healthy product. Also the various negative publicities have also not helped to improve the perception of the people. The negative publicities have also effected the perception of the government and the social bodies towards the carbonated soft drinks industry. Although, there seems to be a lot of threat that need to be considered while entering the U.S. market, there are some positives also. (Brown, 2009, p. 209). Despite of the dip in demand for the soft drinks, there still lays demand for healthy drinks especially for the kids. The parents were never really comfortable in offering soft drinks to the kids. Hence the launch of innocent smoothies can attract a lot of attention among the parents. However, the recent the dip in sales and the change in perception of the people is a serious threat indeed has to be analyzed carefully. Therefore it is suggested that instead of targeting the whole market the products should be launched on regional basis. In the words of marketing niche target market segment should be chosen geographically. The ideal market to be chosen could the East Coast market due to several factors. The east coast mainly includes the region starting from NYC, New Jersey, Florida, etc. All these cities happen to major business hubs of the country; especially NY. Also the climate of the east coast region is primarily humid and hot which could be ideal for a product like the smoothies. Also this can potentially act as a pilot strategy by which the company can assess and understand the buying behaviour and perception of the people towards the products. And if things do not look good the company can actually exit he market. Also if the things do go as planned the company can actually use the hub and spoke model to expand the business in which the premium cities can be used as hub and then the businesses can be expanded around the cities (Czinzota, Ronkainen, Moffett, Marinova & Marinov, 2009, pp. 423-429). Market entry strategies One o the most important decisions to be made after the selection of the host or target market are to select the mode of entry. Some of the proposed mode of entry could be exporting, incensing, franchising, strategic alliances and joint ventures. In case of exporting the companies produce the goods in the home country and then try to make the products available to the foreign market. In case of licensing one domestic company allows the international firm to use the intellectual property rights, trademarks, copyrights, etc. Licensing provides rapid market penetration opportunity and reduces risks. But the degree of quality may get reduced as the guest company has to rely on the host company in case of product quality and consistency. Therefore the degree of control could be questioned. Franchising is more relevant in case of service sector and hence may not be an ideal option in this case. In case of franchising the domestic firm which is known as franchiser provides IPR to the international firm known as the franchisee. Another option could be the use of strategic alliances. It is cooperation between two firms to achieve common strategic goals. Due to increased competition companies are looking to using strategic alliances allot more. This helps the international company to share the market risk with the domestic firm and also reduces the distribution cost. But conflict and differences in opinion can also occur. When a firm looks for complete market control it mainly looks for JV. JV is very useful as it can provide market entry to high tariff markets. Also the guest firm can use the core strengths of the local firm such as the distribution channel/ also the social, economic, political risks get reduced. But just like strategic alliance differences and conflicts can also be a problem to be faced during JV. Based on the above explanation it seems that strategic alliance could be best way to enter the markets; both USA and Mexico. Because already Coke has 90% stake in the company. Add to that Coke is in very strong position in Mexico and U.S. in 2003 with an objective to enter the Mexico market Coke acquired Pan-American Beverages. It was followed by a JV with the largest bottle manufacturers in the world in the form of Fomento Economico Mexicano SA de CV (or FEMSA). (Feick, Roth, Deighan and James, 2003, p. 201). In the deal FEMSA had a majority stake while Coke had a minority stake. This helped Coke to become the market leader in Mexico as FEMSA started marketing and distributed the coke trade mark products through the distribution channel of FEMSA itself in and outside of Mexico. Hence, as Coke already has vast majority stake in the company the innocent smoothies can be manufactured by FEMSA and marketed and distributed as it is technically a coke product. This will increase market penetration and would reduce risk. United States happen to be the country of origin of Coke and hence Coke has a well established distribution network. Hence a strategic alliance would help the firm to use the depth of the distribution network of Coca-Cola. It would mostly include selling through organized retail stores as well as through the digital medium. Segmentation, targeting and positioning It is needless to say that the primary target segment would be kids. However, from a marketing perspective it needs to be said that the main basis of segmentation would be demographics and the main factor to be considered would be age. But it is to be kept in mind that kids would not make the final purchase or decider. Hence the parents are also to be treated as the target market segment. Hence based on this the people belonging to the middle income group and conscious about ht ehelth of the children are to be targeted. The target market strategy to be adopted should concentrate as only one market segemtn is being targeted. Using the concept of user based positioning the product should be positioned in the market as a product which is healthy, notorious and yet tasty in nature as all the factors are of equal importance when it comes to the target group i.e. kids. Conclusion and Recommendations Innocent Drinks a U.K. was founded in 1999 by Adam Balon, Richard Reed and Jon Wright. The main product produced by the company includes crushed fruits, vegetables and juices. In 2009, the company announced the decision to sell 10-20% of stake to the soft drinks giants Coca-Cola. On February of 2013 coca-cola increased the stake to 90%. Keeping the economic fluctuations and strong international presence of Coke in mind the company has decided to enter the international market. Based on the environmental factors such as (market demand, climate, economic growth, social factors) the countries chose as the host country has been U.S. (east Coast) and Mexico. Coke already has a strong presence in Mexico due to the joint venture with the largest bottle manufacturers in the world Fomento Economico Mexicano SA de CV (or FEMSA).FEMSA sells the coke products through the distribution channel of FEMSA in and outside the other Latin American nations. Hence the same model can be used to promote and sell the innocent smoothies. United States happen to be the country of origin of Coke and hence Coke has a well established distribution network. Therefore the strong distribution network of Coke can be used to market the products in USA also. This would increase the rate of market penetration and reduce the degree of risk. The primary target segment would be kids. The main basis of segmentation would be demographics and the main factor to be considered would be age Concentrated or focused target marketing strategy should be adopted. Based on user based positioning the product should be positioned in the market as a product which is healthy, notorious and yet tasty in nature. References Ghauri, P. and Cateora, P. 2010. International Marketing, 3rd Edition. London: McGraw-Hill, Feick, L., Roth, M., Deighan, M. and James, S. 2003. Country Manager: The International Marketing Simulation. Charlottesville, Virginia: Interpretive Software Inc. Czinzota, M., Ronkainen, I., Moffett, M., Marinova, S. & Marinov, M. 2009. International business (European edition). John Wiley: UK. Henry, A. 2008. Understanding Strategic Management. Oxford University Press: UK Brown, L. 2009. Marketing and Distribution Research. Ronald Press Company: US. Read More