Strategies and Marketing Activities of Poundland in China - Essay Example

Teaching case study for international marketing Contents Introduction 3 The Company 3 The brand 4 China: Target market 5 Competitors - Sustainable Competitive Advantage 7 Distribution Channel 8 Service Element 8 E commerce 9 Advertising 10 Pricing Strategy 11 Implementation- Resources Required 12 Conclusion – Timeline 13 References 14 Usunier, J.C. and Anne, L.J., 2013. Marketing across cultures. [Online]. Available at: < http://catalogue.pearsoned.co.uk/educator/product/Marketing-Across-Cultures/9780273757733.page>. [Accesed on 01.05.2015]. 17 Teaching Note 18 Learning Objectives 18 Scope of the case 18 Summary of case 18 Recommendations 19 Questions to student 19 References for the teaching note 21 Appendix 22 Product Issues 23 Theme 2: Deciding which markets to enter Poundland in China Introduction This case study deals with the retail company Poundland and its plan to expand its business operations in the developing market of China. The company is famous for selling good quality product at a very low price. The firm wants to expand internationally for enhancing its position in the retail industry. A marketing executive Angeline Volker was given two weeks to evaluate the companies’ present business performance and competitive advantage and to create an hypothetical plan. At present the company has strong brand name. Its various strategies and marketing activities are also discussed in this case study, the explanation of the market of China is also provided. The case helps highlight different issues the company can face while establishing its business in China. The Company Angeline Volker started form studying the history of the company. She found out that Poundland is one of the famous companies in the retail industry. It is a British multinational company having its presence in most of the big countries of the world. It is a public limited company. The company was established in 1990 by Stephen Smith and Dave Dodd. The company deals with various types of products like kitchen ware, home, healthcare, gifts etc. The company sells all of its products at £ 1. The company is considered as the largest single priced retailer in UK. In 2014 the company earned revenue of 997.8 million pound. In that year the profit of the company was £ 13.9 million. The firm has around 10,020 employees who play vital role in operating the business process. The target of Poundland Company is to increase its market share and customer base. The company has expanded its business operations in many countries of the world. Now it is focusing on expanding its business in China. This country can be a big market for this company. The firm has the objective to the entire market of China. In different other countries the company is enjoying strong growth in customer acquisition and sales (Halliburton and Ziegfeld, 2009). The company expects the same business growth after expanding into China market. The brand The next issue Angeline considered to be essential was evaluating the brand of the company. Poundland is into the retail industry for a long period of time. The retail stores of Poundland sell products of different brands. The company also has products of its own. The company is famous for selling all products for £ 1. This unique pricing policy helps the brand to attract maximum number of customers. The firm promotes its brand by maintain its strong and active presence in different social media sites like facebook, twitter, pin interest etc (Agrawal, 1995). Through this social media sites the company performs different marketing activities for increasing its brand value. The brand has large number of female customers. The company has created an image of discount retailer which helps it to expand its business operations to different parts of the world (Jain, Khalil, Nhat-Hanh Le and Ming-Sung Cheng, 2012). China: Target market The next important question Angeline asked herself what perspectives the target market could offer. Poundland is planning to expand its business operations in China. The country has large number of population which attracts many foreign companies to set up their business in the developing market of China. Angeline knew that in the recent years the country has experienced great development in its economy (Fabian and Molina, 2009). Therefore, it was clear for Volker that the country can provide many opportunities, which will facilitate Poundland to develop its retail business. For the economic development, the income level of Chinese people has increased. As a result their disposable income and purchasing power have also increased. For this reasons most of the company operating efficiently in China are experiencing growth in their business. The present population of China is 1.357 billion (Efrat and Shoham, 2013). Large number of Chinese population is comprised of young people. The average annual income level of Chinese family is $2,100. The population of China covers 19.24% of world’s population. Most of the regions of this country are densely populated [See Appendix 1]. Other than Chinese people, North Korean people also reside in China. Since past few years the government of China is permitting many foreign companies to establish their business in market of China (Murray, Ju and Gao, 2012). They are creating strong impacts on Chinese people which influence them to improve or change their buying behaviour (Lu, Karpova and Fiore, 2011). The figure below shows the retail opportunities in China: Forecasted Retail Sales in China: Competitors - Sustainable Competitive Advantage Before entering the market it is necessary to learn about its competitors, thus this was the next step made by Volker. She learned that the main competitors of Poundland in international market are Tesco and Walmart. Both of these companies have large number of retail stores in different parts of the world. These companies sell various types of product at a very low price. At present the retail market of China is experiencing huge growth. Large number of Chinese people prefers one stop retail store for purchasing different types of products (Doole and Lowe, 2008). This is one of the important reasons that both Tesco and Walmart have entered in China. They are attracting Chinese customers by offering huge discounts on their various products. Other than these two companies are also some local companies which dominate the retail market of China. These local Chinese companies are Beijing Jingkelong Company Limited, Beijing Hualian Hypermarket Co, Ltd, and China Resources Enterprises etc. These companies are present in the retail industry of China for long time (Bradley, 2005). All of these companies hold strong positions in retail market of China [See Appendix 2]. Distribution Channel Angeline also evaluated the company’s distribution channel. Poundland has invested and still now investing huge amount of money in establishing and improving its distribution centres and channels. In 2005 Poundland has invested approximately £ 25 million for building a distribution centre of 300,000 sq ft. In Harlow the company has a distribution centre which is 350,000 sq ft (Keegan and Green, 2014). This distribution centre was build for replacing the distribution centres of Hertfordshire and Hoddesdon. From this distribution centre various products are distributed around 300 retail stores of Poundland which are located in nearby area. The company maintains eco friendly warehouses. Hoddesdon and Harlow are currently the major distribution centres of Poundland in UK (Usunier and Lee, 2013). The company has four cross docking facilities in UK which help it to distribute its product easily to its stores located in different location [See Appendix 4]. Service Element Studying service element was also essential for Angeline. The mobile tablet solution of Poundland is offered by box technologies in order to improve and develop the accuracy and productivity of its quality assurance process. The quality assurance team of Poundland plays a major and important role in timely delivery of the goods at store. The increase in functionality and sophistication that is provided by the new tablet based technology has offered an ideal platform or base. Box technologies have worked along with Poundland in order to develop the functionality in its operation (Oliver, 2007). The quality assurance team of Poundland has confirmed that their main objective is to perform some critical and complex task. The Motion F5 provides huge benefit for checking the quality of the goods. The tablet device that is introduced by the Box technologies has facilitated Poundland to replace different elements of the hardware. The main objective of Poundland was to provide a solution that enabled the company in controlling the quality through the use of the portable device. Java script is used for the functionality or navigation in supporting the functionality or navigation. The technology is developed in such a way that it can be properly implemented in the work place. The quality assurance team of the company is engaged in operating with a single device that captures the data mainly through the barcode scanner (Albaum and Edwin, 2011). E commerce E-commerce operation is very essential in capturing new market, thus it was the next thing for Angeline to pay attention to in preparing implementation plan. In order to develop its e-commerce operation, the company has decided to launch its own ecommerce operation (Brown, 2009). Poundland have focuses on carrying out its operations through marketing of the site, online trading and web platform for ensuring full control over the various aspects of the business that will reflect the brand image, reputation and the strategy adopted by the company. The ecommerce platform has been named as Poundworld plus that has been responsible for providing various products to its customers. Poundland was committed in supplying the stock, branding to the site and improving the product image of the site. Poundland as a retailer has focussed on its growth and development in accordance with the advancement in the technology (Cateora, John and Mary, 2009). Therefore, the company has engaged its team for the development of its site. The online shopping experience that it is providing to its customers is very easy to use. The company have improved its platform in such a way that no other online discounters that exist in the market are able to offer the same range of product with the same amount of value that is offered (Doole and Lowe, 2005). Advertising The most attractive pricing strategy adopted by Poundland is its single price point. The main purpose or the aim behind advertisement of its company is to focus its company as a unique brand that differentiates itself from others (Frank, 2012). The company have decided to tap the foreign market therefore it has focussed on its advertisement strategy in order to communicate effectively its progress in the international market. The company through its advertisement has focussed on attracting and retaining more of its customers. Poundland is offering more quantity with fewer prices on the same products as compared to the quantity that is provided by its competitors. Navigational signs have been introduced in the store for guiding the customers in selecting a particular product [See Appendix 5]. Poundland in order to attract and retain its regional customers have advertised or promoted its store through radio, direct mail and print. Poundland through its advertisement have conveyed that it is the stronger supermarket business (Gilligan and Hird, 2012). Pricing Strategy Pricing strategy plays a major and important role in developing its business regionally and also expanding its business in the international market. Therefore Poundland have focussed on reducing the price of those items that are mostly sold in the market for attracting and retaining more of its customers in order to increase its market share in China as compared to its competitors (Hollensen, 2007). Volker determined that in order to capture the new market Poundland have to adopt low pricing strategy. The most suitable pricing strategy for expanding its business in the international market is pricing below the competitors (Perksa and Hughes, 2007. Pricing strategy plays a major role since it helps the customer differentiate it from others. High and low pricing strategy is also adopted for providing new experience of shopping to its customers. The customers feel comfortable when they experience the good deal. Poundland have established its own standard for pricing its product along with the improvement in the quality and the quantity that is provided to the customers (Usunier and Anne, 2013). Implementation- Resources Required A hypothetical plan was created by Angeline Volker to be implemented in order to analyse the advantages and disadvantages in starting of the business in China. Various factors were taken into consideration for expanding its business in China (Schmidt. and Hollensen, 2006). For successfully expanding the business in China it is required to penetrate in the Chinese market. The resources required for the expansion of the business in China are required to be taken into consideration. The joint venture is required to be taken into consideration for expanding its business in china. Joint venture requires the identification and prioritization of its strategy. Poundland have maintained a developed and well maintained infrastructure for supporting its growth and development (Karen, 2013). The revenue of the company has also increased from 641.5 million pound to 880.5 million pound. The company acquired strong brand value, customer loyalty and brand recognition as compared to its customers. Poundland have decided to expand its business operation in China and therefore it has targeted to open more than 10 stores in China. Poundland have decided to enter the Chinese market with its single price strategy for expansion of its business with comparatively low cost strategy and also low risk expansion strategy (Ahmadi, 2000). Conclusion – Timeline Poundland will require approximately 1year for entering into China. The company can launch its business during the time of Chinese New Year. This festival occurs last day of the last month of Chinese calendar. At that time Chinese people do a lot of shopping. The will help the company to establish its present in the mind of its targeted customers. The company will require 6 months of time to purchase different locations for establishing its retail stores and distribution centres in China. The company has to do all legal documentations which are expected to get over within 6-7 months. After that Poundland have to design its stores, do tie ups with various agents and transportation companies. All these things will be completed within 2-3 months. Then the firm have to hire employees within one month and have to provide them training for next one month. References Agrawal, M., 1995. Review of a 40-year debate in international advertising: Practitioner and academician perspectives to the standardization/adaptation issue. International Marketing Review. 12(1), pp. 26-48. Ahmadi, R., 2000. Parallel Imports: Challenges from Unauthorized Distribution Channels. [Online].Available at: http://search.ebscohost.com.ezproxy.brighton.ac.uk/login.aspx?direct=true&db=buh&AN=3623821&site=ehost-live. [Accesed on 01.05.2015]. Albaum, G. and Duerr, E., 2011. International Marketing & Export Management (7th Edition). London: Prentice Hal. Albaum, G.S. and Edwin, D., 2011. International marketing and export management. [Online].Available at: https://patchdismade.files.wordpress.com/.. [Accesed on 01.05.2015]. Bradley, F., 2005. International Marketing Strategy. London: Financial Times/Prentice Hall. Brown, M., 2009. Global brands. Research World, 1(1), pp. 10-25. Cateora, P.R., John, G.L. and Mary, G.C.,2009. International marketing. [Pdf]. Available at: < https://lemdoeundaloem.files.wordpress.com/2014/03/international-marketing-15th-ed.pdf >. [Accesed on 01.05.2015]. Doole, I and Lowe, R., 2008. International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning EMEA. Doole, I. and Lowe, R. 2005. Strategic Marketing Decisions in Global Markets. London: Thomson Learning. Efrat, K. and Shoham, A., 2013. The interaction between environment and strategic orientation in born globals’ choice of entry mode. International Marketing Review. 30(6), pp. 536-558. Fabian, A. P. F. and Molina, H., 2009. Understanding decisions to internationalize by small and medium-sized firms located in an emerging market. Management International Review. 49(5), pp. 537-563. Frank, B., 2012. International marketing strategy. [Online].Available at: < http://www.pearson.ch/1471/9780273686880/International-Marketing-Strategy.aspx>. [Accesed on 01.05.2015]. Gilligan, C., and Hird, M., 2012. International Marketing: Strategy and Management. London: Croom Helm. Global Brand Survey., 2008, Millward Brown, Marketing Research. [Online].Available at: < https://www.ama.org/Documents/MRSpring09Hollis.pdf>. [Accesed on 01.05.2015]. Halliburton, C. and Ziegfeld, A., 2009. How do major European companies communicate their corporate identity across countries?-An empirical investigation of corporate internet communications. Journal of Marketing Management. 25(9-10), pp. 909-925. Hofstede, G., 1980. Motivation, leadership, and organization: do American theories apply abroad?. Organizational dynamics. 9(1), pp. 42-63. Hollensen, S., 2007. Global Marketing: A Decision-Oriented Approach (4th Edition). [Online].Available at: < http://www.amazon.com/Global-Marketing-Decision-Oriented-Approach-Edition/dp/0273706780>. [Accesed on 01.05.2015]. Karen, V. B., 2013. Global Success Depends on Local Freedom. [Online].Available at:http://search.ebscohost.com.ezproxy.brighton.ac.uk/login.aspx?direct=true&db=buh&AN=87690154&site=ehost-live . [Accesed on 01.05.2015]. Keegan, W. and Green, M. K., 2014. Global Marketing. New York: Pearson Education Limited. Keegan, W. and Schlegelmilch, B.B., 2001. Global Marketing Management: A European Perspective. London: Financial Times Prentice Hal. Lu, Y., Karpova, E. E. and Fiore, A. M., 2011. Factors influencing international fashion retailers' entry mode choice. Journal of Fashion Marketing and Management: An International Journal. 15(1), pp. 58-75. Murray, J. Y., Ju, M. and Gao, G. Y., 2012. Foreign market entry timing revisited: trade-off between market share performance and firm survival. Journal of International Marketing. 20(3), pp. 50-64. Oliver, S., 2007. Corporate communication. London: Kogan Page. Perksa, K.J. and Hughes, M. 2007. Entrepreneurial decision-making in internationalization: propositions from mid-size firms. [Pdf]. Available at: < http://ftp.demec.ufpr.br/disciplinas/TP720/Gest%E3o%20de%20MN%B4s%20Trim%202%20-%202010%20-%20PPGEP/Entrepreneurial....pdf>. Accesed on 01.05.2015]. Schmidt, M.J. and Hollensen, S. 2006. Marketing Research: An International Approach. Harlow: Prentice Hall/Financial Times. Usunier, C.J and Lee. A.J., 2013. Marketing Across Culture. London: Prentice Hal. Usunier, J.C. and Anne, L.J., 2013. Marketing across cultures. [Online]. Available at: < http://catalogue.pearsoned.co.uk/educator/product/Marketing-Across-Cultures/9780273757733.page>. [Accesed on 01.05.2015]. Teaching Note Learning Objectives 1. Students will become aware of the Challenges Poundland will face while entering into new market. 2. Students will get to know about the pricing and distribution system of the company. 3. Student will gain knowledge about international marketing and will be able to give suggestion regarding the business expansion of Poundland in targeted market. 4. Students will get to know the importance of market research for entering into a new market. Scope of the case This case must highlight the way a firm can acquire different types of customer in various market segments, using Poundland Company as an example. The case must be written in such a way which will be suitable for International business course. This case must highlight the target market for Poundland for expanding its business operations. This case must provide information to student regarding various things which will affect the business operation of Poundland in China. Summary of case Poundland is presently doing good business in UK and many other countries of the world. Present the company is trying to expand its business operation in China. For this reason the company is analysing different factors which will influence its business operations in China. In this case study the present situation of the company and the market of China is highlighted. Based these the company is trying to make effective plans of its expansion in China. Recommendations Retail market of China is growing at a faster rate. So Poundland must expand its business in China. Poundland needs to emphasis more on its business expansion strategies for developing effective business plans. Chinese customers are very sensitive about price. Therefore the company needs to make attractive offers to gain Chinese customers. Poundland have to understand the legal rules and regulation of China for doing its business properly. Questions to student 1. How Poundland can attract customers in China? Poundland can give different promotional offers to Chinese customers after establishing their retail stores in China. Chinese people are price sensitive and they prefer discounts. So by giving various promotional offers the company will be able to attract large number of customers. 2. How the company will manage its distribution channel in China? Poundland have to select prosperous location in China from where it can reach its different retail stores easily. After selection the company has to buy that place for establishing its distribution centre. Poundland has to take permission from Chinese government for doing these activities. The company also has to make contracts with transportation companies for delivering products to its retail stores. 3. What kind of store Poundland needs to have in China? Poundland needs to have both online and physical retail store in China. This will help the company to gain maximum customers. Internet users in China are increasing day by day. Therefore online presence will help the company to reach many customers. Moreover the competitor retail companies have online and physical stores in China. So to compete with them Poundland also needs to have these two types of stores. References for the teaching note Hollensen, S., 2013. Global Marketing: A Decision-oriented Approach. New York: Pearson Education Limited. Jain, M., Khalil, S., Nhat-Hanh Le, A. and Ming-Sung Cheng, J., 2012., The glocalisation of channels of distribution: A case study. Management Decision. 50(3), pp.521-538. Jean, P.J. and Hubert, H., 2004., Global marketing strategies. Boston: Houghton Mifflin. Appendix Appendix 1: Target market: As per Hofstede theory, power distance is strong in China. Inequality level is high among Chinese people. The society of china believes in Collectivism. Chinese people are more concerned about fulfilling group objectives rather than personal objectives. Masculinity is high in this country. The society is mainly driven by male people. Chinese people do not fear to face uncertain situation. Therefore uncertainty avoidance is low in China. The society of China maintains strong connection with its past culture for overcoming present and future situations. So long term orientation is high in China (Hofstede, 1980). Indulgence level is low in China which means Chinese people control their desires to a large extent. All of these dimensions are superficial level to judge a country. For experiencing the practical market scenario a company needs to enter the market and observe its business environment. Appendix 2: Sustainable Competitive Advantage: The pricing strategy of Poundland provides competitive advantage to the company against all of its competitors. Poundland sells all of its products at a very low price by giving huge discounts. For this reason the company has won the award of Discounted Retailer of the Year in 2011 (Jean and Hubert, 2004). The firm has prices various goods of top quality and top brands at a price of £ 1. Along with this the company gives different remarkable offers and discount everyday on various products. The supply chain management system of Poundland helps it to have competitive advantage. The company use JDA software to manage single price point for its 3000 products (Keegan and Schlegelmilch, 2001). This software helps the firm to perform its business operations more efficiently than other retail companies. Appendix 3: Product Issues Poundland is famous for maintain product quality and price. But once the company had faced problem related to the packaging of Kit Kat. This product is owned by Nestle. But for selling this product in the retail stores Poundland had designed the packet for Kit Kat. The company charged extra fees from Nestle for packaging Kit Kat. This was perceived negatively by the customers of Poundland (Albaum and Duerr, 2011). As a result the sale of Kit Kat was decreased in the retail stores of Poundland. Appendix 4: Distribution: For establishing distribution channel in China a company needs to follow the legal rules and regulations of China. The company needs to have proper trade licence issued by Chinese government for distributing its products to different stores. The company have to maintain fair transaction with the suppliers. Proper legal agreement should be made for that (Hollensen, 2013). As a foreign company Poundland has to follow PRC regulation for establishing its distribution system in China. Appendix 5: Advertising: Due to the increase in the popularity of Poundland that is made in the newspapers, magazines and various activity campaigns, it have been observed that the grocery sales of the company have increased by 56% of which 20% in case of its household products and 26% in beauty and healthy products. This will provide an opportunity for the company to grow and retain its new and potential customers (Global Brand Survey, 2008). Read More