Global Marketing and Manufacturing of Toys - Research Paper Example

Table of Contents 1. Introduction 3 2. Macro-Environment Analysis: PESTEL 4 2.1 Political Environment 4 2.2 Economic Environment 5 2.3 Social Environment 7 2.4 Technological Environment 9 2.5 Environmental Factors 10 2.6 Legal Environment 12 2.7. Opportunities and Threats for the Hamleys in USA 13 3. Market Entry Strategies 14 3.1 Export 14 3.2 Joint Ventures 15 3.3 Evaluation of the Two Strategies 15 4. Conclusion 17 References 18 1. Introduction The paper concentrates on the development of significant entry strategies for Hamleys that are solely based on manufacturing and marketing of toys. The company is a UK multinational company which was established in the year 1760 (Hamleys, 2010). The target market is determined to be the United States of America (USA) and is believed to have significant opportunities for the future growth of the company. Considering the marketing concept, it is further noted that marketing strategies of a company should be developed with due concern to the macro-economic environment of the target market along with the micro-economic factors influencing or likely to influence the company’s operation in the region. With this concern, the discussion of the paper will focus on evaluating the macro-economic environment of the USA with the implication of PESTEL model. This shall provide an insight to the market prospects and thus assist in developing advantageous strategies. 2. Macro-Environment Analysis: PESTEL 2.1 Political Environment It is of no doubt that the political factors of the USA possess a significant amount of sovereignty in the world economy. The political environment of the economy had been observed to witness inconsistency for the preceding few years. Notably, the downfall of white supremacists in the economy can be observed as a most important revolution that ever took place in the post-modern era (U.S. Department of Homeland Security, 2009). Currently, the political environment can be assumed to be steady from a general view point. However, with an in-depth perspective, conflicts can be observed in terms of fiscal challenges and the formation of effectual monetary policies (Paul, 2011). It is quite noteworthy that the economy is facing a challenge of widening fiscal deficit as an effect of the recent economic downturn. In order to prevail over the obstruction of growth the political leaders are intending to lessen the deficit amounts through budget cuts. This in turn is fuelling up conflicts and instability in the political environment of the USA (Jackson, 2011). 2.2 Economic Environment Similar to other developed economies, the US economy was also strongly affected by the recent economic downturn. Over the last consecutive years, i.e. from the pre-recessionary period to the current year, the economy has faced a highly volatile environment with declining GDP and employment rates. However, the forecasts reveal that the unemployment rate which is further likely to be affected conversely by the up-surging inflationary rates (Tilton, 2011). For instance, the current actual GDP of the economy is recorded to be 1.8% which is further identified as significantly less than the quarterly average growth rate, i.e. 3.3% (Trading Economics, 2011). Furthermore, experts state that the GDP is likely to become steady in the subsequent five years providing opportunities to the small size enterprises. The fluctuations of the economic growth can be observed from the diagram represented below (Tilton, 2011). Source: (Tilton, 2011) Another major trend of the US economic environment can be witnessed as the increase in imports. However, with a declining consumer spending rate, the opportunities are likely to be obstructed (Bureau of Economic Analysis, 2011). 2.3 Social Environment The population of the US has been recorded to grow moderately in the past few years. The last census report reveals the total population to increase by 0.87% from that of the preceding fiscal year. It is further estimated to grow moderately for the next decades. To be mentioned, the total population calculated for the year 2009 was 307,007 and is forecasted to be 439,010 by 2050. According to the report, the total population comprises of 36,487 residents aged between 5 to 13 years (U.S. Census Bureau, 2011). Racial distribution of the total population of the US also possesses a considerable significance in this context. The major races identified in the American society are whites, African American, American Indian, Alaska Native, and other Hispanic groups. However, the majority of the population is covered by the whites (U.S. Census Bureau, 2011). Another feature of the social environment of the economy is its population density which varies from one geographic region to another. The most heavily populated states of the nation can be identified as Columbia, New Jersey, Rhode Island, Massachusetts, and Connecticut (U.S. Department of Energy, 2011). The population distribution of the economy can be well observed from the chart represented below. U.S. Population, Population Density, and Rank by State, 2010 State Population Population Density (People per Square Mile) Population Density Rank District of Columbia 601,723 9,856.5 1 New Jersey 8,791,894 1,195.5 2 Rhode Island 1,052,567 1,018.1 3 Massachusetts 6,547,629 839.4 4 Connecticut 3,574,097 738.1 5 Maryland 5,773,552 594.8 6 Delaware 897,934 460.8 7 New York 19,378,102 411.2 8 Florida 18,801,310 350.6 9 Pennsylvania 12,702,379 283.9 10 Source: (U.S. Department of Energy, 2011). The culture of an economy also has a significant affect on the performance of the business sector. According to the study conducted by Geert Hofstede, the US society is fairly concerned about the power distance which depicts that the power distribution is unequal among the social participants. In terms of individualism also the society ranks high along with the feature of masculinity. Although the people intend to work individually and avoid collectivism, they tend to circumvent uncertainty to a great extent which reveals that the promotional strategies should be focussed strongly in order to attain sustainable sales revenue in the market. Conversely, the long-term orientation in the society is recorded to be low which can provide with certain opportunities as well as few challenges to the organisation. For example, better marketing prospect but high risk of employee turn-over (Geert Hofstede, 2009). 2.4 Technological Environment Technology can be recognised as a vital component of the US economy. Together with other sectors, the technological environment had also faced various challenges caused by the recent economic downturn. The obstructions witnessed by the technological factors include scarcity of resources, increased expenditure and deficit amounts. In order to eradicate these obstructions the government has decided to increase the total funding amount for the research and development sector. To be mentioned, the previously announced fund for research and development in the year 2010 was recorded to be $147.353 billion which has significantly increased by 0.2% in the current fiscal year amounting to $147.696 billion (Sargent Jr., 2011). The departments likely to be beneficial from this increase are the Department of Defence, National Institutes of Health, Department of Energy, National Aeronautics and Space Administration, and others. The programs gaining special focus in this regard are Networking and Information Technology Research and Development Program, and US Global Change Research Program (Sargent Jr., 2011). Therefore, it is quite apparent that the technological environment of the USA is quite steady and reliable for the business firm. 2.5 Environmental Factors Together with other Western countries, the USA also follows strict measures to control the environmental hazards. The major policy measures include proscription on the use of products manufactured with the ingredients collected from tropical forests, DDT and others. The overhaul of Lacey Act in the recent days has also proved to be barrier for the foreign companies to penetrate the market (Roberts, 2011). Furthermore, the strategic measures include high tax imposition on the products which are recognised to be harmful for the environment, and have been into the US legislative for decades. The government also focuses on rewarding with tax incentives to the companies that are observed to execute sustainable operations with minimum effect to the environment (Montgomery & Marcuss, 1990). 2.6 Legal Environment Trade relationship between the USA and the UK has gained considerable importance in the modern era, especially during the post-recessionary period. The interdependency of the two nations provides various opportunities to the UK exporters. For instance, UK goods are highly favoured in the US market. Moreover, the inclusion of the UK exporters in the North America Free Trade Agreement (NAFTA) rewards a broader reach to the companies. In this regard, the legal policies had been developed in favour of both the nations identifying the USA as the importer and the UK as the major exporter of goods to the US markets (Parliament, 2010). In order to promote the trade relationship between the two nations, the UK and the US has considered a memorandum presented by the Foreign & Commonwealth Office. The policy measures included tariff incentives as well as liberalised regulations to a certain extent which facilitated the trade relationship linking the two nations and proved to be a significant opportunity for the UK companies (Parliament, 2010). 2.7. Opportunities and Threats for the Hamleys in USA With reference to the above discussion, it can be stated that the macro-economic environment of the USA provides with various opportunities for the company to grow. For instance, trade liberalisation between the UK and the USA rewards minimum legal interference in the process. It also signifies the process to be cost effective to an extent. The rise of the population along with GDP rate, although, at a moderate scale can also be observed as a significant opportunity. Political support to facilitate the import and the establishment of foreign companies in the economy also acts as a significant scope for the company to penetrate the US market. Rapid technological development can also be recognised as a noteworthy opportunity for the company. The macro-economic environment simultaneously offers various challenges to the company. To be mentioned, the political aspects in addition to economic fluctuations occurring in the economy are almost certainly to prolong in the future, raises several constraints for the company. Barriers can also be observed in terms of strict environment protection rules, deficit in funding policies and others. Therefore, the strategies to be developed for the entry of the toy company should consider both the opportunities and threats existing in the target market. 3. Market Entry Strategies Market entry strategies are identified to be most crucial for the company. It is due to the fact that these strategies will not only direct the operations of the company, but also facilitate its foothold in the target market, i.e. the USA. Considering the findings of the PESTEL analysis, two strategies shall be beneficial for the company to enter the US market. With focus to liberalised and politically supported trade reforms the company can initiate to export its products to the US consumers. On the similar context, the company can also focus on joint ventures with one of the competitive toy marketing companies in the target market. 3.1 Export Export can be highly beneficial in marketing the products to the US consumers in this case. With a liberated trade reform between the two nations, (i.e. the UK, the home country of the Hamleys and the US, the host country) the company shall be able to gain the opportunity of low cost trade along with tax and tariff incentives. Moreover, the company is likely to be safe from the competitive market in the US to an extent. Export can also facilitate the reduction in the total amount of investment required to expand a business on a transnational basis. In this regard, the company should emphasise on the distribution of the product through retail and wholesaling units of the target market. 3.2 Joint Ventures Joint ventures can also provide various benefits to the company. As it can be evidently witnessed from the findings of the PESTEL analysis, the US traders are facing a downturn in the market and are still at their recovery stage. In this situation, beginning a joint venture with the UK based company shall prove to be beneficial for both the companies. For instance, it shall reduce the operation cost of the US based company with increased capital investment from Hamleys. Simultaneously, the strategy shall benefit Hamleys to face the competition in the market with minimum interference of legal issues. Moreover, it shall eradicate the risks associated with the entry of a company in a foreign environment, such as currency fluctuations, legal barriers, social and cultural risks and others. 3.3 Evaluation of the Two Strategies In both the cases there are few opportunities which are likely to support the strategic decision of Hamleys to enter the US market. However, there are also few threats associated with the strategies. To be mentioned, export functions can certainly eradicate the legal and foreign trade risks to certain extent, but shall give rise to the risks in terms of social and cultural barriers. Merely exporting the products to the target market shall create a constraint in gaining an in-depth understanding to the social and cultural risks as well as the operational risks associated with the toy marketing in the target area. Furthermore, export oriented entry strategies shall prohibit the company from undertaking aggressive competitive strategies and thus create a constraint on the future prospect of Hamleys in the USA. On the similar context, entering the target market through joint venture shall probably give rise to the constraints in terms of lessened sovereignty in the target market. It shall also hamper the brand awareness in the target market to a large extent. Although, the initiative can reduce the trade barriers and future risks associated with the entry, it can eventually give rise to the challenges in terms of legal interferences. In the initial stage the strategy can also prove to be time consuming and costly which shall in turn minimise the efficiency of the entry strategy. In a nutshell, the disadvantages of joint venture strategy can be recognised as less effective in comparison to the constraints raised by the export oriented strategies. With the virtues of liberalised trade reforms and legal barriers, it shall therefore be highly beneficial to adopt joint venture strategies to enter the market. 4. Conclusion It is a fact that market entry strategies of a company largely depend on the micro-economic environment of the industry. It not only signifies the level of competition to be faced by the company while entering the target market but also provides with in depth knowledge of the future prospect of the market. To be illustrated, a better insight to the toy industry of the USA shall provide the company with a more reliable decision on entering the market through joint ventures. It shall provide an in sight on the competitive strategies such as pricing, product and promotional aspects which also plays a crucial role on determining the competitive stance of the company in a foreign market. References Bureau of Economic Analysis, 2011. GDP Growth Slows In The First Quarter. U.S. Department of Commerce. [Online] Available at: http://www.bea.gov/newsreleases/national/gdp/gdphighlights.pdf [Accessed May 25, 2011]. Geert Hofstede, 2009. Geert Hofstede™ Cultural Dimensions. United States. [Online] Available at: http://www.geert-hofstede.com/hofstede_united_states.shtml [Accessed May 25, 2011]. Hamleys, 2010. Hamleys History. Hamleys Toys. [Online] Available at: http://www.hamleys.com/HAMLEYS_HISTORY_|_Hamleys_Toys/HAMLEYS_HISTORY,default,pg.html [Accessed May 27, 2011]. Jackson, D., 2011. Obama and the Budget: A 2012 Political Issue. USA Today. [Online] Available at: http://goldnews.bullionvault.com/US_011020114 [Accessed May 25, 2011]. Montgomery, W. 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