International Marketing: AT&T Inc - Coursework Example

International Marketing: AT&T Inc. Executive Summary In just the time span of 27 years, AT&T Inc. has become the seventh largest company of the United States in terms of revenue generation (Sinkovics & Ghauri, pp. 163, 2009). However, like every other corporation of the US, it has felt the shocks of the recession badly. AT&T has still decided that the best way to react to these problems would be to expand and diversify its operations in terms of geographical markets rather than squeezing or limiting its operations. The board of directors is considering a couple of options, Poland or Brazil. As a responsible and concerned employee of the firm, I would like the board of directors to prefer Brazilian market rather than the Polish market. The Brazilian market offers many distinct advantages over the Polish market in terms of exchange rate, free market economy of Brazil, high population, high-expected growth rate of Brazil, technologically inferior telecom sector of Brazil compared to AT&T, high Purchasing Power Parity of Brazil and others (Martin, pp. 38, 2005). AT&T will be aiming to capture around 8-9 percent of the market share by the end of the second year and only then will it introduce itself as an internet service provider. Initially, it will only serve the major cities of Brazil like São Paulo, Rio de Janerio, Salvador, Brasilia, Fortaleza, Belo Horizonte, Curitiba and Manaus and the adjoining areas with its mobile telephone and fixed line connections. With a retail price of 100 Brazilian real, AT&T will present itself as youthful, energetic, and full of life, bubbly, fresh and innovative. Promotional activities will include TV and radio advertisements, billboards, banners, public relations activities at educational activities and others. AT&T would initially spend 20 percent of its revenue for R&D, especially during the first couple of years of its operations. A conservative analysis of AT&T’s revenue and costs in the first three years reveals that if AT&T remains successful around 2.5 million connections then it would breakeven within the first three years. However, it would then invest to expand its activities to other major cities of Brazil. Situation Analysis AT&T’s expansion is indispensable for several reasons. Firstly, the recession has hit the economy of the United States like a nightmare. Secondly, AT&T can smell that its local market is getting closer and closer towards the point of saturation (Organisation for Economic Co-operation and Development, pp. 21-28, 2008). Thirdly, multinational firms are mostly better at absorbing the shocks of any financial crisis since these recessions usually do not hit all the markets and even if they do, variations in the intensity remain considerable (Brainard & Martinez-Diaz, pp. 3-8, 2009). Taking into account all the above-mentioned facts, AT&T must decide between Brazil and Poland, as which market they want to enter. Under this heading of situation analysis, the board of directors would find out that there are several reasons as to why Brazilian market is a better option than the Polish market. PEST Analysis 1. Political Factors Brazil and the United States have had an eventful history, however, there are good times and the bad times. Both the countries have now seemed to avoid any other political tensions and have been trying to increase the volume of trade. Currently, United States is the biggest export and import partner of Brazil. However, the US is not even in the top ten countries when it comes to major import and export partners of Poland (World Bank, pp. 5-9, 2010). Despite the fact that Poland has remained a close alley of the US, United States still has strict visa requirements for the Polish citizens. Moreover, all this cooperation and support seems not to exist when it comes to trade and foreign direct investment between the two countries. In addition, the Brazilian government has been in the favor of free market economy with no or very less government intervention (Hirst & Hurrell, pp. 10-12, 96-103, 2005). 2. Economic Factors Despite the fact that Poland is the sixth largest economy in the world and Brazil is the eight largest, however, Brazil remains a favorable option considering the long run due to many reasons. Firstly, it is due to the undervalued exchange rate of Brazil. Secondly, the Brazilian economy has an annual average growth rate of 5 percent and they are hoping to gain a place in the list of five most powerful economies of the world in the decades coming ahead (World Bank, pp. 5-9, 2010). However, Poland on the other hand, is reaching its point of saturation and the lack of natural resources in Poland would decrease the Purchasing Power Parity (PPP) and thus increase the inflation significantly (Myant & Cox, pp. 325-329, 2008). Thirdly, the economic activity of the polish workforce is 59 percent (Organisation for Economic Co-operation and Development, pp. 69-78, 2010). On the other hand, Brazilian population is huge and more economically active. Fourthly, Brazil ranks ninth at the list of countries arranged by their purchasing power parity and Poland has the 20th place in the same list (World Bank, pp. 375-378, 2010). Since goods are more expensive in Brazil than in Poland, as a producer, it is another potential advantage for AT&T. 3. Social Factors Brazil is the fifth most populous country of the world however, the polish population ranks 34th on the same list. Not only has it meant that AT&T would have a large pool of employees to select from but AT&T would witness high growth rates in Brazil before it gets close to the saturation point (Baskaran & Muchie, pp. 274-276, 2006). Where the Polish population is more technologically advance is aware. The Brazilians population in comparison ranks low on the same (Mühlbacher, Leihs, & Dahringer pp. 98-99, 2006). This clearly is potential benefit for AT&T. Moreover, with the economic growth and globalization Brazil is witnessing, the Brazilian people will now witness a boom in the telecom sector, however, the same has happened for Poland more than a decade ago. 4. Technological Factors The biggest telecommunication company in Brazil is Oi. It has recently purchased another blue-chip telecommunication company of Brazil named as Brasil Telecom. The Brazilian market is largely untapped despite the presence of five telecom companies. Moreover, the R&D activities are not significant enough since up to this time there is no need for this. Quite clearly, AT&T has a superior technology than these companies. Moreover, Oi has reported a Net loss of 250 million US dollars of the year 2009 (World Bank, pp. 5-9, 2010). Quite understandably, this appears to be the best time to say yes to Brazil. However, Poland on the side has technologically advanced telecom sector, AT&T’s entry in the polish market would start a technological war between the companies, and coupled with factors, it may end up creating more difficulties for AT&T (Inter-American Development Bank, Organisation for Economic Co-operation and Development, pp. 79-83, 2006). SWOT Analysis Following is the SWOT analysis of AT&T in Brazil. 1. Strengths AT&T strong brand name is its biggest strength. Despite the fact that most of its operations are limited to the United States, however, people from all over the world view it as a symbol of excellence and trust (Arestis & Saad-Filho, pp. 316-318, 2007). The second advantage of AT&T comes from its technological superiority over the other Brazilian telecom companies. Thirdly, AT&T would adopt the pricing strategy in Brazil. AT&T would jump into the market with a “more for same” marketing strategy. 2. Weaknesses AT&T’s weakness would be the lack of brand awareness and its limited target market. Moreover, being labeled as US based company; it would take time for AT&T to assimilate into the Brazilian market (McAuley, pp. 74-76, 2001). 3. Opportunities As mentioned earlier in the paper, that technologically weak telecom sector, high population and growing rates of population are major opportunities for AT&T. Moreover, the losses incurred by Oi in the year 2009 and increasing purchasing power parity of Brazil are also good signs for AT&T as a producer (United Nations Conference on Trade and Development, pp. 11-14, 59, 2007) . 4. Threats Increased competition, downwards pressure on pricing and compressed product lifecycle would be the real threats to AT&T (Almeida, pp. 176, 188, 203-204, 2008). Marketing Strategy 1. Objectives AT&T will have to set aggressive but achievable objectives for the first and the second year of its operations in Brazil. It is important to note that AT&T would initially invest only in São Paulo, Rio de Janerio, Salvador, Brasilia, Fortaleza, Belo Horizonte, Curitiba and Manaus and the adjoining areas. 1. First year objectives AT&T will try to achieve a 5 percent market share by achieving the unit sales of 1 million. AT&T will initially enter the market as a mobile telephony company and a fixed phone company. 2. Second year objectives If AT&T will achieve its target of the first year then it would aim for 8-9 percent market share by the end of the second year. In addition, it would introduce it self as broadband company or an internet service provider by the end of the third quarter of the second year. 2. Target Markets AT&T’s target customer would be the people starting from the lower middle class until the upper class. However, the youth of Brazil or younger generation would be the focus of AT&T. For the same, most of the promotional activities would take place in schools, colleges and universities of Brazil. Moreover, the company would also target the existing US based companies working in Brazil for the fixed telephone connections (Baumol & Blinder, pp. 244-248, 2008). 3. Positioning AT&T’s promotional activities would try to present it as youthful, energetic, and full of life, bubbly, fresh and innovative. Since, all these characteristics are near to the youth, therefore, it will put all its efforts targeting the youth or the people who still think that they are young at heart (Lascu, pp. 334-335, 2008). Customers would perceive that AT&T’s users are those full of energy and youthfulness. 4. Strategies 1. Pricing A Sim card of AT&T would be sold at the wholesale of 55 US dollars or 96 Brazilian real. However, the retail price would be 57 US dollars or 100 Brazilian Real. Calling rates would be identical to those of other companies; however, special packages would be a part of the offer for text messages, late night calls, and GPRS usage. Song dedication and other youth related stuff. 2. Product The product simply would be a sim card with a calling plan and a brochure that would explain all the features of the connection and other benefits. 3. Distribution Our distribution strategy would be to cover all the major stores of these cities. Moreover, during the first year efforts would remain focused to reach even all the small retail stores of these cities. Marketing Mix AT&T would launch its product in these cities by mid February 2011. These major activities would be conducted in the first five months of 2011. 1. January A promotional campaign worth 0.5 million dollars would start off with the start of New Year. Banners on all major streets of these cities and TV and radio advertisements on all major channels would present a teaser relating the change of the year with an even more pleasing change. Towards the end of the month, the same sources will reveal AT&T’s entrance in the market. 2. February The activities would accelerate the pace with AT&T promotional teams visiting some shopping malls, gyms and educational institutions to present a review of the product to its customers. Till the mid of the month, product would enter the market 3. March Expanding the distribution channels would remain in focus along side with the continuation of all the multimedia campaigns. 4. April Advertisements will now remains limited to only entertainment and youth channels. Activities in educational institutions would witness acceleration in pace as new forms of promotional activities will take place. 5. May A new wave of adverting campaigns will appear on entertainment channels and radio stations with famous Brazilian supermodels and celebrities will endorse the product. Besides, some advertisements will appear thanking the Brazilian people for such a wonderful response and warm welcome. Marketing research AT&T will initially spend 20 percent of its total revenue towards research, so that it can identify points of improvement, customer perceptions, expectations and changing needs. However, after the first couple of years the budget would be become the 20 percent of the total profits. Financial Projections Creating financial projections for a cellular company is always difficult due the presence of many elements like operating revenue, fixed revenue, operating costs and fixed costs and others (Grigoriou, pp. 256-259, 2003). However, it is clear that AT&T would have to invest 5 billion US dollars to set up a strong network in these mentioned cities. On the other hand, the revenue that AT&T would be expected to generate over the period of three years, from the sale and usage of the product is around 3000 US dollars per connection. Nevertheless, the cost associated with per unit would be around 1000 US dollars. Therefore, with these calculations, the company expects that even sales of 2.5 million connections would lead to a breakeven (Czinkota & Ronkainen, pp. 401, 2007). However, after that, the company would have to expand its network to other cities and invest more. Implementation and Control As mentioned earlier that a significant amount of the budget would be spend on marketing research to closely monitor the performance of the company, customer satisfaction levels and areas of improvement. In addition, the quality department of the company would keep a close eye on the monthly expenses and sales and would ring the bell if anything expected continues for an elongated period of time (Frucht, pp. 246, 2005). References Almeida, Jorge T. (2008). Brazil in focus: economic, political and social issues. Nova Publishers. Arestis, Philip, & Saad-Filho, Alfredo. (2007). Political economy of Brazil: recent economic performance. Palgrave Macmillan. Baskaran, Angathevar, & Muchie, Mammo. (2006). Bridging the digital divide: innovation systems for ICT in Brazil, China, India, Thailand and Southern Africa. Adonis & Abbey Publishers Ltd. Baumol, William J., & Blinder, Alan S. (2008). Economics: Principles and Policy. Cengage Learning. Brainard, Lael, & Martinez-Diaz, Leonardo. (2009). Brazil as an economic superpower? understanding Brazil's changing role in the global economy. Brookings Institution Press. Czinkota, Michael R., & Ronkainen, Ilkka A. (2007). International marketing. Cengage Learning. Frucht, Richard C. (2005). Eastern Europe: an introduction to the people, lands, and culture. ABC-CLIO. Grigoriou, Nicholas. (2003). International marketing: a practical approach. McGraw-Hill Australia. Hirst, Mónica, & Hurrell, Andrew. (2005). The United States and Brazil: a long road of unmet expectations. Routledge. Inter-American Development Bank, Organisation for Economic Co-operation and Development. (2006). Competition law and policy in Latin America: peer reviews of Argentina, Brazil, Chile, Mexico and Peru. OECD Publishing. Lascu, Dana-Nicoleta. (2008). International Marketing. Cengage Learning. Martin, Dick. (2005). Tough calls: AT&T and the hard lessons learned from the telecom wars. AMACOM Div American Mgmt Assn. McAuley, Andrew. (2001). International marketing: consuming globally, thinking locally. Wiley. Mühlbacher, Hans, Leihs, Helmuth, & Dahringer, Lee. (2006). International marketing: a global perspective. Thomson Learning. Myant, Martin R., & Cox, Terry. (2008). Reinventing Poland: economic and political transformation and evolving national identity. Routledge. Organisation for Economic Co-operation and Development. (2008). Brazil: strengthening governance for growth. OECD Publishing. Organisation for Economic Co-operation and Development. (2010). OECD Economic Outlook, Volume 2010, Issue 1. OECD Publishing. Sinkovics, Rudolf R., & Ghauri, Pervez N. (2009). New Challenges to International Marketing. Emerald Group Publishing. United Nations Conference on Trade and Development. (2007). World Investment Report 2007: Transition Corporations, Extractive Industries and Development. United Nations Publications. World Bank. (2010). 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