International Marketing Strategy FREITAG - Assignment Example

International Marketing Strategy FREITAG The famous hand bag manufacturer FREITAG is analysed from an international strategic marketing perspective. A marketing plan for assisting the company to make a successful foray in the markets of Brazil is put forward in the paper. TABLE OF CONTENTS 1. Introduction…………………………………………………………….4 2. Reasons for Internationalization………………………………………4 3. Processes Used for Introducing the Product in Brazil………………..6 4. Situational Analysis……………………………………………………7 5. The Competitive Situation………………………………………………8 6. Reason for Selecting the Mode of Internationalization……………….9 7. SMART…………………………………………………………………..11 8. Marketing Strategy and Plan…………………………………………...13 9. Product/ Market Analysis………………………………………………13 10. Adaptation vs. Standardization……………………………………….14 11. Segmentation, Targeting And Positioning (STP)…………………….15 12. Wider Organisational and Cross Cultural Issues……………………16 13. Implementation & Control…………………………………………….16 14. Measuring the Means of Evaluation and Control……………………17 15. References………………………………………………………………19 1. Introduction Company Background Freitag, headquartered in Zurich, Switzerland, was founded by Markus and Daniel Freitag brothers in 1993, and the company produces functional bags that are water resistant, trendy, hip products used for many purposes. Currently, the company produces 40 different types of bags at the factory located in Zurich, and employs over 100 people in various cities in different parts of the world (Zurich, Davos, Hamburg, Cologne, Vienna, New York and Berlin). The company has over 350 point of sales across the world and 7 own flagship stores. It produces more than 250,000 products in a year and the material used for producing the bags are truck tarps, inner tubes of bicycle and seatbelts. Overview of the Product The uniqueness of the handbags produced by Freitag is that it is made up of recycled material - tarpaulins, inner tubes of bicycles and seatbelt. The bag was first designed by Markus and Daniel Freitag in 1993, who were inspired by the truck tarp due to its durability. They brought an old tarpaulin and created a bag by cleaning the truck tarp in a tub and they used the inner tube of bicycle to create the edge. Seat belts were used to create the strap to facilitate the bag to be carried on the shoulders. \ Fig 1: Freitag Bags Catalogue 2. Reasons for Internationalization Sustainability and to Prevent Saturation - Emerging markets are targeted by growing companies for globalization because the market will grow further, create value and have a long term sustainability. To Explore Foreign Markets - The product was adopted by brand aware buyers and in Japan, the product could be established as a brand because Japanese consumers are curious to know about a new product. The product will be introduced in Brazil to explore a new foreign market. To sustain Internal Advantage Aboard - The handbags are unique environmental friendly products featuring a number of advantages over other bags available in market. Venturing in Brazilian market will help the company to sustain internal advantage abroad. Domestic Market is no Longer Enough to Attend Profitability Goals - The marketing strategy of Freitag bags prevent lowering prices and flooding the market with the bags because the raw material used in the production of the bags is not easy to get; Freitag is popular because it is a collector’s item and it could stay in fashion for long. To Extend the Life Cycle of Freitag Handbags – The aim of internationalization is to preserve uniqueness of the handbags and to continue long term without saturating. 3. Processes Used for Introducing the Product in Brazil MNC’s that create competitive advantage are not ready to enter market where their brand, name or propriety cannot be protected through enforceable legal mechanism (Delios & Henisz, 2000). Freitag ventured into Japanese market because Freitag brothers were aware of the taste and likeness of buyers in Japan. The Freitag products are trendy and fashionable, and the consumers in Brazil are attracted to fashionable products. In Japan, the buyers were allowed to take the bag-box home, and shops offered a unique selection of products. Freitag is not available at departmental stores or bag shops and it sell products which are provided as a piece of art. Fig 2: Marketing Strategy Map The process used for internationalization includes - Build a Brand in Brazil - Create brand awareness by organizing exhibitions, advertisements and launching history of product. Promoting the uniqueness of the bags- Recycled raw material, robustness and features Selling the concept - The product is hard to imitate and the company strategy should prevent creation of Freitag copies. The more Freitag copies are made, the less popular the product will be Reason for Introducing Freitag Bags in Brazil The product should be introduced in Brazil because The buyers are brand conscious and fashion aware. The demand for fashion based products is high in Brazil and there are hundreds of brands dominating the bags market in Brazil. The bags will attract buyers due to the uniqueness of raw material used in the making of the bags. The metro cities of Brazil are cities of opportunity and the handbags should be first promoted in the metro cities of the country. 4. Situational Analysis Situational Analysis of the Socio-Cultural Environment Brazil is a fifth populous country and recent government policies have promoted access of consumer products to middleclass buyers. Similar to Japan, the buyers are brand conscious, but there is a great disparity in distribution of wealth. The northern and north-eastern regions are mostly underdeveloped parts and commercial activities are mostly restricted to south and southeast regions. More than 10 million population lives in metropolitan cities close to Sao Paula and Rio de Janeiro. Brazil has a free market and it is a democracy, having established institutions which provide a business friendly environment. It has the established transportation and distribution network for promoting and sale of products in various states of the country. It is a growing country and it is working to enter a number of bilateral agreements. The relationship with the country is mostly based on technological licensing agreements and trade in services. Suitable Models and Concepts To develop a connection with the customer, the bags should be promoted as environmental friendly products. The products designed should be customized and personalized to meet the new demands of the buyers. The best way to connect to costumer is through creatively. Consumers in Brazil are attracted towards unique advertisements through TV, radio, internet, or advertisements on print media will help in creating a brand opinion. The market structure is called the Value chain (Porter, 1985). 5. The Competitive Situation, Justification for Using the Market Entry Method Selected Brazil provides great opportunities to fashion based luxury products. There are three ways of the changing the structure of a market and handling the competitive situations are- Deconstruction Approach - Eliminating the lead players of the market. Construction Approach - Building the new set of players. Functional Modification Approach – Building a new or modified set of players in market. Theory of Firm – Organizational behaviour is the decisive factor for entrance and market strategies. Uppsala Model for Internationalization Freitag can follow the Uppsala Model for internationalization to enter the new market of Brazil. In the Uppsala model of internationalization – the stage of international expansion starts within regular exportation. Freitag should open stores in the metro cities of Brazil, and the cultural and economic status of the cities will promote the brand. The metro cities Rio De Janeiro and Sao Paulo are biggest cities where 10 million buyers are ready to spend on fashionable products. In the city of Sao Paulo, there are more than 71 shopping malls and these malls sell some of the leading international brands. Sale is accomplished through agents and sales managers. The company should invest sequentially as the organisation acquires more knowledge related to market preferences and internationalization. A foreign subsidiary should be established in the last stage and a production unit or joint venture or license should be acquired abroad. 6. Reason for Selecting the Mode of Internationalization Reduce Competitive Pressure in Existing Market - The method selected for internationalization helps in reducing competitive pressure in existing market, overproduction, declining sales and preventing market saturation. Location - Most of the leading cities in Brazil are located close to coasts or major seaports and hence, it eases the process of distribution in a new market. Environmental Friendly - The global industries are getting environment conscious and the demand for environmental friendly products is high. People in Brazil buy products made from jute, cotton or bio plastics and reusable items, instead of using plastic bags or bags made from processed leather. Lifestyle/Fashion Based Product for Brazilians - Brazilian search for perfect branded items and women are fashion conscious. They love to buy pretty bags designed in vivid designs and colours. Brazilian men and women have an outdoor lifestyle and they would love to buy durable bags which are perfect for carrying laptops and office files. The organization’s culture is seen as the key strategic source in defining the uniqueness and coordinating the several parts to get common goals (Conner, 1991; Fiol, 1991). Fig 3: Product Life cycle 7. SMART International Marketing Objectives Situation- Brazil is an emerging market which requires a strategic approach where informal economy and relationships are grounded on social and on legal contracts(de Soto, 2000).The developing world requires a different model and globalizations is the new trend, while global players are becoming more and more aware of the social and environmental impact of their work.(Soros , 2002) Message What needs to be considered to enter the market - What are the globalization trends in the current industry/sector? What are core competencies of the business model? What are the characteristics of the Brazilian markets and what strategy should be deployed in the selected country? Generally, the buyer makes a list of qualified vendors to submit bids with specifications to attract maximum competition (Corey, 1978; Spekman, 1988). Audience Perfection and beauty is important for Brazilian customers. Hence the products designed should be beautiful and perfect. In internationalization, change agents can be internal or external, and internal change agents includes change management, new management etc., while external change agents are domestic distributors, chamber of commerce, government agencies. The main aim of any business is to create satisfied customers (Drucker, 1954; Levitt, 1960). Response To internationalize and for investment, the company should have skills and advantages over competitors to justify direct investment. International expansion requires understanding of reflexes, localization, opportunities and viabilities. Firms internationalize to get profit advantage through unique products, technological advantages and economies of scale Market transactions connect the firm to its customers and other firms (Johnston and Lawrence, 1998). The response of internationalization is to develop the revenue forecast, the marketing plan and evaluation of various entry modes. Tools Identify the Core Competencies - SWOT analysis, VRIO framework and ownership specific advantages can be used. Interviews and Feedbacks - Conduct interviews and get feedbacks from online customers to assess how good the company is as compared to local players. 8. Marketing Strategy and Plan The marketing strategy should be able to develop the overall reflection of competency of the product in terms of customer’s need. The marketing strategy should enable the firm to develop a mission, a distinctive competency and value propositions which will help the company to make it clear what the firm will do and will not do as per the corporate objectives. Freitag should try to create satisfied customers and create a brand. Market plan should be designed on the basis of revenue forecast and external environmental analysis. The objectives of internationalized marketing can be any of the following - 1. Redefining Marketing Role - Defining strategies determined by positive feedback and network effects. 2. Reverse Existing Custom Preferences- Geographical segmentations should be considered for sales and also to reduce risks. 3. Break and Create Customer’s Habits - Environmental control perpetuates habits and marketing plans can be designed to create customer’s choice and habits. The factors defining the strategies at corporate level are - Location Ownership specific condition Internationalization advantages Relationship of strategic planning at corporate level and marketing strategies - 1. Map Possible Ways of Entry – Map the possible ways of entry and identify the local partners. The key responsibility of the centre is to develop and maintain the core competencies to be able to successfully compete with global marketplace (Prahlad and Hamel, 1990). 2. Build Strategic Alliance – The company can get into strategic alliance with Brazilian brands but it should be careful as some studies have depicted modest success rates for strategic alliance which involves firms of different countries and cultures (Bleeke & Earnst, 1991; Harrigan, 1986). Mainly the customers should become partners and the firms should try to maintain long term, commitments through service, quality and innovation (Anderson and Narus, 1991). For example - IBM had strategic alliance with Apple which helped to restructure the business (Carey & Coy, 1991). 3. Technology - Use technological integration and specifications to promote the products. The company is internet based organization and commercialization of World Wide Web has enabled firms to get connected through internet (Aldridge, 1995). Internet, online media as well as social media marketing should be used for marketing and promotion of products as it provides low cost communication. The main business uses of internet are communication using emails, corporate logistics, MUDS, MOOS and chat. Internet can be used for competitive advantage and it helps in improving corporate image, improving custom relationship with investor, increasing visibility, cost reduction, market expansion and opening up new prospects (Sterne, 1995). 4. Advertisements / Merchandising - Create brand recognition through cross culture advertisements / merchandising. The aim should be to promote customer orientation by advocating customer’s point of value as compared to the marketing concepts (Anderson , 1982) Psychic distance is sum of different factors interfering in flow of information between two different geographical regions (Vahlne & Weidersheim, 1973) and psychic distance is maintained initially as the process in learning to understand the cultural, language and managerial environment. 9. Product/ Market Analysis Product / Market Analysis - Freitag bags are highly durable fashionable products made from reusable material which helps it to promote as a luxury product. The bag is bought by fashion conscious buyers and environmentalists as well by people who need a robust bag to carry their laptops but there are many established handbag brands in Brazilian market such as - Getulio Bolsas – The brand has dominated Brazilian market since 1970 and it continues to produce handbags and leather goods. Novica – It provides leather based handbags which unites more than 2000 artists from across the world to create designer products. Basically Brazil – Basically Brazil is based in Rio de Janeiro and the company manufactures fashion based products which includes handbags and belts. Bottega Veneta Bags – The luxury brand is famous for its quality and even the demand for its replica is very high. The brand is famous with the rich class. The country also has many stores of world level luxury brands such as Louis Vuitton, Cartier Handbags, Prada Handbags, Raffithy handbags and Nordstrom. To establish as a brand the company will have to face mainly two problems - Inflation and government regulations, and the barrier to internationalization (psychological and operational). Psychological barrier include lack of commitment (in short term perspective, fear). Organization’s barriers are limited resources, lack of knowledge of the market, etc. Operational barriers are language problems and delays in getting payment. Product barriers are foreign market differences and problems in identifying and selecting the market. Fig 4: Change in Customers with Technology Maturing 10. Adaptation vs. Standardization The global cooperates adjust prices and practices as per the local market needs but the current product may not be adapted as per the local needs because it is made from unique products. Globalization is at hand (Levitt, 1983). In the current scenario, Freitag should get a list of agents and distributors through internet to identify the critical surviving factor in the selected market to design the strategies Everyone in the firm should be charged to develop and deliver for the firm (Webster, 1988).. As per Halo model (Johansson et al., 1985) and the Summary Construct Model (Min Han, 1990), the influence of country of origin applies, in case the buyers are unfamiliar with products. When the consumer is not aware of the product, they perceive about the quality of product through the country’s image (Min Han, 1990.) 11. Segmentation, Targeting And Positioning (STP) Segmentation The buyers of the bags are - Fashion conscious youngsters living in the metro cities, Young men who love to carry robust bags made form reusable material. Targeting The marketing strategy should target – People who want to buy unique branded items. Women who want to get trendy new styles in handbags. According to Kotler(1994), only sustainable strategy is the strategy of differentiation. The bags constructed are different and unique in the following way - It is uniquely made from environmental friendly products and it is very difficult to replicate the products. The product was successfully marketed in Japan, although the bags looked old. Positioning Brazil has high uncertainly avoidance as compared to other developing economies and the local market has the strong desire to have well documented KPIs. The positioning strategy should include Customer target, segmentation study and competition targets (Brooksbank, 1994). Wider organisational and cross cultural issues (consumer behaviour) Cultural dimension can be measured through UAI (Uncertainly avoidance), universalism versus particularism and performance orientation. 12. Wider Organisational and Cross Cultural Issues The product should be assessed as per cultural positioning – how many men are interested in buying the brand and the traditional roles. Brazil is not like Japan in terms of consumer reliability and hence, the company cannot allow the buyers to take the bags home to see its features. In certain countries, buyers consider the advertisements promoting the desirability of products (Batra et al., 1984). In Brazil, customers feel insecure with new brands but in the current case, the country of origin is Switzerland and hence, the product may be accepted because the impression of Swiss product is generally good. The marketing factors based on cross cultural issues should survey the market to understand the language – to prevent translation inaccuracy , the marketing message should be clear, the cultural issues should be resolved to get the factors included in the animation, drawing and photographs for advertisements , the content and the brand advertisements should be able to convey the meaning effectively. Internet is the best method to promote products to prevent cross cultural issues. 13. Implementation & Control The annual international marketing budget will have the means and plans within the resources of firm to allocate resources for different competitive elements. The company will have to contact the local newspapers and print media to promote it in newspapers, TV and radio. Freitag will have to contact reliable distributors and business associates to enter into new partnerships to promote the brand. Internet can be used to meet new business partners and to get customer’s feedback. Relationship marketing and just-in-time manufacturing is possible through effective communication on internet with foreign customers, agents, distributors etc. (Axelsson and Easton, 1991). The annual internationalization and marketing budget will include the expenses of hiring the sales representative, marketing manager for the region and professional staff to handle the work. The budget will include the resource allocation for setting up a local office in Brazil. The marketing budget will include percent of projected sales, past sales, per unit sales, seasonal allocations and project cash flow. Market behaviour can be changed by changing the mind set of customers or buyers. Generally, an industry evolves through the changes in role and functions performed by different players of the industry (Alderson, 1957). The content of annual budget for setting up and promoting a new office will be - Gross sales $5500 Budget for annual marketing sales $1000 Yellow pages $50 Sales letter mailing $40 Clerical helps $150 Advertisements in local print media $150 Advertisement in electronic media $180 Brochure design and copywriting $100 Brochure printing $120 Business exhibitions / promotional events $300 Purchase of new software $250 ------------------------------------------------------- Total --- $6940 14. Measuring the Means of Evaluation and Control The means of internationalization can be measured through– Gross foreign revenue Revenue from subsidiaries divided by total revenues Valuation of permanent assets created outside the country of origin Number of years of experience since the first subsidiary was set up in another country Number of employees with the company Value chain activities executed in international market Number of stocks held and the place / market where the company is listed Dispersion of market (the number of regions where the company is present and is involved in trade.) 15. References Alderson, W (1957) Marketing behavior and executive action. Homewood, IL: Irwin Andersson, U., Forsgren, M. and Holm, U. (2002) ‘The strategic impact of external networks: subsidiary performance and competence development in the multinational corporation’, Strategic Management Journal 23(11): 979–996. Axelsson, Björn and Geoffrey Easton. eds. (1991) Industrial Networks. A New View ofReality. London: Routledge. Brooksbank, Roger. [1994]. “The Anatomy of Marketing Positioning Strategy.” Marketing Intelligence & Planning 12. Cooper, R.G. and Kleinschmidt, E.J. (1985), “The impact of export strategy on export sales performance”, Journal of International Business Studies, Spring, pp. 37-55. Conner, K. R. (1991). A historical comparison of resource-based theory and five schools of thought within industrial economics. Journal of Management, 17: 121-154. Delios, A. and Henisz, W.J. (2000) ‘‘Japanese firms’ investment strategies in emerging economies’, Academy of Management Journal 43(3): 305–323. de Soto, H. (2000) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else, Basic Books: New York. Fiol, C. M. (1991) Managing culture as a competitive resource. Journal of Management, 17: 191-211. Johansson et al., (1985) Assessing the Impact of Counter of Origin on Product Evaluation: A New Methodological Perspective. Journal of marketing research. 22:388-396. Levitt, B. & March, J. G. (1988) Organizational Learning, Annual Review of Sociology, 14(1): 319-340. Levitt, T. (1983) “The Globalization of Markets”, Harvard Business Review, (May-June), pp. 92-102. Porter, M.E. (1990) The Competitive Advantage of Nations, Free Press, New York, NY. Porter, M.E. and Miller, V.E. (1985) “How information gives you competitive advantage”, Harvard Business Review, July-August. Sterne, J. (1995) World Wide Web Marketing: Integrating the Internet into Your Marketing Strategy, John Wiley, New York, NY, http://www. targeting.com Change in Customers with Technology Maturing Marketing Strategy Map Read More