To develop a marketing Plan for expanding a product or service into a new market (Wal-Mart) - Assignment Example

?EXECUTIVE SUMMARY: The report is designed to create a marketing plan for the Wal-Mart for expanding its retail chain in the promising market of UAE.The report has involved research on the importance of low-cost retailer in the emerging market of UAE. Report justifies the Wal-Mart plan of market expansion in the Middle East sector. The analysis of consumer behavior for UAE retail industry has also discussed in the report. Competitive analysis and PEST analysis are conducted to understand the overall market conditions. Marketing strategies for targeting the customer and market entrance plan has also discussed along with the marketing mix for the UAE in the presence of UAE market environment. INTRODUCTION: This study is designed to create an appropriate marketing plan for Wal-Mart for introducing in the emerging market of UAE. Nowadays, the trend of shopping from retail stores has been very much increased. Most of the middle class and lower-middle class people prefers now to buy all the things from a single platform, this activity saves their cost and time respectively. UAE is now one of the fast growing economies in the world; Wal-Mart has realized this fact and decided to enter in the UAE market with its outstanding specialization in the industry of retail chains. This marketing plan has developed with all the market analysis that would be required for Wal-Mart to expand its market in UAE. DESCRIPTION AND JUSTIFICATION: Wal-Mart Introduction: Wal-Mart is an American multinational retail store chain; it is the largest chain of retail stores in the world with more then 3,000 stores and 2 million employees all around the world. It was founded in 1962 by Sam Walton and listed on the New York stock exchange in 1972. It operates in three sections: Wal-Mart U.S, Sam’s Club and Wal-Mart International. It has its operations in retails store, discount stores, supermarkets, hypermarkets, restaurants etc. it is working with a vision of providing highest quality to the customers in lowest possible prices. This vision creates value and satisfaction among its customers (Loria, 2009). Product Justification: Wal-Mart has expanded its market in many developed countries of the world. For example, US, UK, China, Japan, Argentina, Brazil, Canada and many more countries of the world. Wal-Mart always looks for the opportunity to expand its operation in to new emerging markets because it has a very strong financial background and have smart strategic and marketing planners. Justification of the new market: The retail industry in UAE is growing with a very fast rate from the last few years. A big portion of its population is moving towards the buying from retail stores. The retail sector in UAE is contributing a great part in the economic growth. It has been estimated that the sales of the retail sector would go up to $41.22 billion in 2015 from $31.1 billion currently (Edge Resourcing, 2013). The reason of this forecast is that people and households in UAE are now preferred to adapt the modern concept of retailing. People from different parts of the world are going to UAE with the purpose of employment and business, so this new market of migrated people has also brought up with them a modern concept of buying from retail stores and prefer retail stores over the local stores. This environment has created an opportunity for Wal-Mart to expand its operation in to this emerging market of UAE. PEST ANALYSIS: Political: UAE operates with Islamic rules and regulation, so Wal-Mart should be licensed under the federal commercial agencies law when expanding its operations in UAE. This law claims that a foreign retailer/agent of franchisee/distributor should be a UAE national. Economic: UAE is a growing economy with providing a lot of business facilities to the multinationals and act as financial hub for the foreign investments. UAE has a great earning from the oil sector and it is now focusing on the other sectors, for example: tourism industry, real state industry, and retail industry etc. Social: The major portion of the workers and citizens in UAE is Expatriate. Therefore the professionally spoken language is English in UAE. This is very helpful for Wal-Mart culture. Technological environment: The technological advancement is at its boom in UAE which could be the competitive advantage for the Wal-Mart and encourages Wal-Mart to expand its operation in the developing market of UAE. Wal-Mart is having the competitive advantage over the other chain retailers regarding the technology implementation (Basker, 2007). This technological advancement is creating the best opportunity for Wal-Mart to target the emerging UAE market. COMPETITION ANALYSIS: Competitors: Carrefour and lulu hypermarket are the two main competitors. Carrefour has got around more then 1400 branches all around the world and having 12 branches in UAE and lulu hypermarket is having more then 100 retail stores in GCC (Dubai Faqs, n.d.). Lulu hypermarket is the chain of Emke Group of companies and it has its retail store all around in Asia. Market size: It has been estimated that the retail sector in the UAE contributed 14% of its GDP, and it has been forecasted that it will grow by an average 7% between 2011 and 2015 (Dubai Trade, n.d.; Wam, 2012). This has created more attraction for the Wal-Mart to invest in this fast growing market of retail sector. Competitive advantage: 1- Wal-Mart has a very effective supply chain management process because of its continuous bulk buying from the suppliers. It has build good relationship with its suppliers and made the process effective and efficient (Lee, 2013). 2- Wal-Mart has another competitive advantage of lower cost then competitors because of its bulk buying from the suppliers. Low cost allows Wal-Mart to sell at lower prices then competitors without compromising the quality (Lee, 2013). 3- Another important competitive advantage is the brand image of Wal-Mart and its number 1 position among all the retailers in the world (SCDigest, 2013). MARKET ANALYSIS FOR THE FIVE YEARS PERIOD: The retail sales of UAE have been forecasted to grow from an estimated Dh113.87billion ($31.01bn) to Dh151.36billion ($41.22bn) by 2015. It has been forecasted that it will grow by an average 7%. Retail industry ha played an important role in driving the economic growth of UAE it has been identified that 33% retail sales has been increased in the country in the last four years (Kapur, V. (2011; Dubai Trade, n.d.). It shows a great sign of market expansion and growth in the size of retail industry of UAE. Market statistics: Retail chain of Emke Group is leading in the retail industry of UAE with a market share of 32% (Rahman, 2013). Carrefour is competing with an 8.7% market share and other market share is divided among other local and international retail chains (Parmar, 2011). RECOMMENDATIONS: 1- Continue to offer low-price products with satisfied quality. 2- Offer more modish products and design new services for providing more convenience to the consumer. 3- Endorse young professionals who also shop at Wal-Mart. CULTURE: Culture of UAE and its features: According to the report by RNCOS (2010) it has been determined that only 20% of the population of UAE is based on its nationals and 80% is based on the people that have been shifted to UAE from different regions of the world with different purposes. The people belongs to different countries have different cultural values therefore it is very difficult to analyze various cultures in a single region. Still UAE has got its own cultural values but it is limited to the 20% of the total population. The marketers need to update their strategies by analyzing the changing trends in the consumer behavior. It is difficult to analyze the culture of several nations in a single market and made decision according to the need of each and every segment. Thus the focus of the marketers is completely on the buying behavior of consumers and customer satisfaction. The rate of urban population in UAE is more then 80% so it can be said that a major portion of the population is based on the educated people. Social media have become very much influential in the consumer decision making among UAE population. According to the research it has been found out that more then 70% of the population of UAE makes decision after reviewing the blogs or comments of people about the product or service and people search the products through websites and make decisions (RNCOS, 2012). Most of the people in UAE prefer to save the money and lives in UAE with the purpose of earning and saving money, so in this kind of environment Wal-Mart will be attractive because it offers low prices then competitor’s prices. The cost conscious behavior of the UAE population will give a great advantage to Wal-Mart to develop its market. Hofstede 5 dimensions to describe the culture of UAE: The image below shows the score of UAE regarding the Hofstede’s five cultural dimensions: (The Hofstede Centre, n.d.) These can be elaborated as follow (Castillo, 2010): Power distance: (high) because UAE has different social statuses that classify each level; for example, ruling families of sheikhs have high power. Collectivism: (high) it has strong focus on the family; for example, it is very important form them to be with family of relatives during Ramadan. Masculinity: (high) UAE nationals and Muslims their have a norm for a man to be the head of the home. Uncertainty avoidance: (moderate) UAE struggles a lot in various aspects, yet they do plan in advance. Short term orientation: (high) UAE strongly values their customs. Comparison of host country (UAE) with product country (USA): US culture is mixture of multiple cultures because a huge number of people have been migrated to US and living there for a life time. Its national language is English and it is used professionally as well. Clothing style of US varies from region and climate. On the other hand, UAE has a mixture of multiple cultures as well and English language is professionally used in UAE, so both the cultures have some similarities regarding its population diversity and belongingness from different cultures. The image below shows the comparison of both countries on the basis of the Hofstede’s five cultural dimensions: (The Hofstede Centre, n.d.) ANALYSIS OF FOREIGN AND DOMESTIC CONSUMER DISPOSITION IN UAE: Country-of-Origin: U.S.A is the largest economy of the world and it is exporting a huge amount of quality goods and services all around the world. The quality standards in the production companies of U.S are very high so they produce high quality products/services. U.S is maintaining high quality standards for very long time. U.S has a respectable image among all the countries of the world. This reputation of U.S will give a great support to Wal-Mart in expanding its operations in UAE. UAE is importing so many quality products and services from U.S, so consumers of UAE will prefer to buy the Wal-Mart products because of its quality and low prices. Consumer Ethnocentrism: The 80% of the population of UAE is based on the foreigners and UAE is not producing good enough to meet the demand of the people (RNCOS, 2010). So there is strong need of imported goods to fulfill the demand of the people in the country, therefore it is difficult for the UAE nationals to completely depend on the consumption of local goods and services. Consumer Disidentification: The 80% of the population of UAE is based on the foreigners so the majority of the population prefers to use the foreign goods and services instead of local goods (RNCOS, 2010). This has increased the demand of the foreign goods in the local market of UAE. The consumers in UAE usually prefer the well-known international brands. In these prevailing circumstances introduction of Wal-Mart in UAE will be very beneficial. Consumer Animosity: People from many countries are living in UAE and UAE has good trade relationship with US. Most of the countries of the world have got good trade relationship with U.S therefore the multiple countries population will prefer to use U.S products and services because of its value offering. But still there are some countries are having problems with US and they are living in UAE as well so they might not prefer to use the US products and services because of conflicts between the countries. Consumer Affinity: U.S has a credibility of producing and supplying the best quality goods in the market. Nearly all the big scale producers are competing in the international market and have a brand image of quality producers. Wal-Mart has an outstanding brand image in the global market of retail industry and it is maintaining its market leader position for a long time. A great portion of consumer of retail stores has now become loyal with the Wal-Mart brand because of its superior quality in low prices. Wal-Mart while introducing in UAE have the strong advantage of a positive brand image in the target market because of its global successful presence. MARKET SEGMENTATION, TARGET MARKETING AND POSITIONING: Segmentation Strategy of Wal-Mart: The segmentation of Wal-Mart is focuses on three measure parameters that classify the major portion of the Wal-Mart’s market. Wal-Mart will continue to segmentize the UAE market on the basis of these three segments that are (SCDigest, 2007): Brand Aspirationals: The people that belong to lower income group they are fixated on brand names like KitchenAid etc. Price sensitive Affluent: Wal-Mart also offers high quality products and deals for wealthier people of UAE as well. Value-Price shoppers: Those people who like low prices who can’t afford much more, the people include third class citizens, for example people from India or Indonesia living in UAE with the purpose of earning and doing low level jobs. Target Marketing: Wal-Mart will target all the market segments that are lower-middle class, middle class and upper middle class in UAE. It can be said that its target market is every person or company looking for commodities at an affordable prices in a well-located location. Both rural and urban areas population will be targeted by Wal-Mart. Wal-Mart is competing with a main focus on cost-conscious customers of UAE. Target market of Wal-Mart can also be define with a perception that all the blue collar people in the world who are looking forward for quality goods in affordable prices. In the consideration of all these factors the UAE will be a huge market for the Wal-Mart in the long run. Market Positioning: Wal-Mart market positioning is defined by it self as, “Expect more. Pay Less” and “Save Money. Live Better,” Wal-Mart retailer is competing with the “low-cost” positioning strategy. In this strategy Wal-Mart offers lower prices then competitors to all the customers and gets the competitive advantage. Wal-Mart is offering good quality products to its customers in lower prices then other retail stores (King Media, 2012). MARKET ENTRANCE OR EXPANSION STRATEGY OF WAL-MART IN UAE: Market expansion strategy of Wal-Mart in UAE will be acquisition strategy. Wal-Mart will acquire an existing retail store to enter in the UAE market. The market expansion with the acquisition in the UAE market has the following advantages and advantages: Advantages Disadvantages It will quickly access the business resources in UAE and skills the needs of business A very high cost will be involved in buying more then 50% shares of the existing retailer of UAE Acquisition will overcome the most of the barriers to enter in the UAE market The existing retailer of UAE could have upset customers The existing retailer of UAE which will be acquired by Wal-Mart will provide the existing market research that includes consumer taste and preferences Wal-Mart could face the incompatibility of management approaches, structures and culture of organization It directly reduces the competition by acquiring one of the competitors retail store Acquisitions have a high rate of failure therefore it will be risky in UAE market as well. The retailer of UAE is retaining a large number of customers so it would greatly support Wal-Mart Clash of cultures will be a high risk factor while the expansion in the UAE market Global Market Expansion Strategy for the Next Five Years Period: Wal-Mart will be looking forward for the mergers and acquisitions with the local retailers of the targeted countries because Wal-Mart got a great success in market expansion by the joint ventures and acquisitions with local retail chains. Wal-Mart will conduct a more deep analysis of the consumer taste and preferences in all the target markets. Wal-Mart is looking forward to expand its chain with the lower-cost or price strategy in to the emerging markets of the world where the major portion of the population is based on the lower-middle class and middle class category. Justification of Marketing Strategy: Wal-Mart will expand with the acquisition strategy because it has a great past record of successful expansion with acquisition strategy. For example, Wal-Mart acquired Woolco’s 122 stores in 1992 in Canada and acquired 232 stores of ASDA in 1999 in U.K. both the acquisitions had achieved a great success and still succeeding with outstanding growth. The people in UAE belong to diversified cultures and have different tastes and preferences so there is a strong need of market analysis and that market information will be provided by the existing retailer of UAE. STRATEGIC RECOMMENDATION: Strategic recommendation includes the elements of marketing mix in the international market. Product: Wal-Mart is offering a wide range of products or it can be said that it is offering all kind of products from a single platform. It has made its own set of standards therefore it has few chances of implementing product adaptation strategy in some products. Wal-Mart offers standardize products in all the target markets of the world. Price: Wal-Mart is operating for a long time with its lower-cost strategy. A Low price is the key competitive advantage for Wal-Mart in competing with all the competitors in the world. Wal-Mart offers the standard prices in all the markets of the world. Place: The placement strategy of Wal-Mart throughout the world is to directly sell the products to the final consumer by the retail stores. It has its own distribution centers in the world that supplies the products to its stores. Wal-Mart discourages to involve the whole seller and distributor in distribution of products. The elimination of whole seller and local retailer saves a great portion of cost. It will remain continue its strategy in UAE of offering its products directly to the final consumer. Promotion: Wal-Mart promotes itself everywhere in the world with an image of a leading retailer in the world. Wal-Mart will make its promotion with the emphasize on its low price offerings among all the competitors because many people shifting to UAE are falling in the middle class and lower-middle class category, so all the promotions will be made by highlighting the low prices and good quality. CONCLUSION: The marketing plan has been designed by considering all the factors that can be influential in market expansion of Wal-Mart in UAE. All the recommendations in every section of the report have been developed after conducting a deep market research and analysis of the UAE retail industry. Secondary data has been used throughout the course of project. All the data used in this plan is research based and analysis is done to provide authentic recommendations. Wal-Mart should enter UAE with the help of the merger and acquisition of any local retailer. At the same time the company should work on the strategies of adaptation and glocalization in order to make sure that all elements are designed keeping in view the different needs and preferences or the local customers. References Basker, E. (2007). The Causes and Consequences of Wal-Mart’s Growth. Available from http://econ.missouri.edu/working-papers/2006/wp0611_basker.pdf [Accessed 27 July 2013] Castillo, C. (2010). Hofstede’s dimensions of culture in the UAE. Available from http://christinecastillo.blogspot.com/2010/12/hofstedes-dimensions-of-culture-in-uae.html [Accessed 27 July 2013] Dubai Faqs. (n.d.). Supermarkets and grocery shopping in Dubai. Available from http://www.dubaifaqs.com/supermarkets-in-dubai.php [Accessed 27 July 2013] Dubai Trade. (n.d.). New Dubai projects, GDP growth to spur retail activity. Available from http://www.dubaitrade.ae/media-centre/uae-news/1028-new-dubai-projects-gdp-growth-to-spur-retail-activity [Accessed 27 July 2013] Edge Resourcing. (2013). 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New Dubai projects, GDP growth to spur retail activity. Available from http://www.emirates247.com/business/economy-finance/new-dubai-projects-gdp-growth-to-spur-retail-activity-2012-12-22-1.488235 [Accessed 27 July 2013] Read More