Marketing Strategies of Daewoo Car Company - Case Study Example

Daewoo Car Company The name Daewoo means Great Universe in Korea and Daewoo Car Company was reported to be the chief South Korean multinational company in early years. It was formed as Daewoo Industrial in 22nd march 1967 as but it was later broken by the administration of South Korea in the year 1999. Indeed in the year 2006 Kim Woo-jung who is the pioneer of Daewoo Car Company was jailed on charges of swindle or fraud and misappropriation. Daewoo Car Company is a manufacturing and comprehensive service multinational and it was reported to be outstanding in intensifying its worldwide market through mutual business enterprises globally. Daewoo was among the companies that gained from Korean administration financial support through discounted credit founded on probable export proceeds. Daewoo Company originally manufactured blue-collar garments and cloth production that offered high proceeds limits. The company was boosted by the availability of willing labor force. Because of globalization at one time rivalry from foreign firms began eating into competitive advantage of Korean firms. The administration reacted to this transformation by focusing its endeavors on both electrical and mechanical production, shipbuilding, building, and military programs. Therefore Daewoo was obligated by the Korean government to venture in shipbuilding industry and later the company performed well in its undertakings. It later extended its production to that of machine apparatus, security products, aerospace welfare, and mechanization. Ultimately, it started to manufacture helicopters and aircrafts which were sold at lower prices as compared to those from the U.S. It later extended its activities to that of automotive business and was considered to be the best and biggest exporter of cars around the globe. Fall of Daewoo Car Company There are several reasons that resulted to poor performance of Daewoo Car Company as discussed below. Government interference through government guiding principles that was applied in Korea became a problem to the company. The government guard businesses or conglomerate, offering them enormous financial assistance and support, unrestricted discounted loans, and safeguarding them against alien rivalry. Nevertheless, the cost for such protection to those companies was full allegiance to the administration of the day. Conglomerate run by the government was obligated to acquire businesses without seeking consent from them. The administration was persistently reported to be concerned in managing of various businesses and subdued their inventiveness. Labor force market also impacted the success of Daewoo Car Company. The conventional labor ethic that assisted Korea arrived at financially viable success endangered the activities of the company as employees started more and more violent disapprovals to what they termed as injustice through working for a lot of hours and peanuts remuneration. Daewoo Company shipbuilding in the process experienced grave loss owing to employees need for compensation increase Globalization too impacted the performance of Daewoo Car Company; working in a international market proved to be challenging and demanding for the company because it had to face stiff competition from other car companies. However, the main issue was that of constant demands to the government of Korea to embrace the concept of free and open trade. That implied that the local firm’s protection was compromised because all firms in a global economy are given equal opportunities in the market place. Over the recent past, there has been stringent trade regulations forced by both European Economic Community and North American Free Trade Agreement (NAFTA). The other factor is that of product superiority in Korean businesses particularly car companies where Korean products especially car products e.g. spare parts was viewed as that of poor quality thus tainting the image of Daewoo Car Company. Daewoo Car Company continue to exist to this date regardless of insolvency under fresh brand name (DE) implying Daewoo Electronics, however, several other branches are now autonomous while others have since collapsed Marketing Strategies For every firm to succeed including Daewoo Car Company, efficient and effective marketing strategies that match the company’s mission statement and vision should be employed. In business context marketing strategy is effectual if it creates part of central element of corporate plan; clearly define the relationship of the company with its customers, potential forecast and rivals in the market place for accomplishment. It should to a degree be a derivative from general corporate approaches, business mission, and mutual objectives. In essence such marketing strategies should go in line with company’s mission account. (Hoyer, 2001) In the recent past, trading has become increasingly global in some way because of the need to gather and increase the company’s financial base. Advancement in technology including communication efficiency and better international relations has contributed to the promotion of international trade. Competition has however become a great challenge to the success of international trade but most companies are rising to the challenge. To achieve greater investments and better market opportunities in the international market, it is necessary that primary and secondary market research is done, market analysis, country analysis, product analysis to ensure that information regarding the country, competitors and possible challenges are obtained in advance It is therefore important to identify different approaches to global business management which can be employed in a business setting of management across cultures and across a diverse workforce in a global setting. Globalization is also now vividly evident because of the way people migrate from one country to another without much difficulty, for example different countries have relaxed their stringent traveling rules to allow ample time for business activities to be undertaken. It is also critical to look into how respective managers can maximize the practical applications of these approaches to Multi-National Companies (MNCs) such as Daewoo Car Company. Any company may invest in another country and there are different approaches that a manager can employ depending on the factors that the respective organizations are considering, for example; the cost of entering the new market, existing policies in the country of choice, the rate of technology, foreign currency exchange rate control systems among others. (Hill, 2005) According to John Tomlinson in globalization and culture he argues that, globalization lies at the heart of modern culture and cultural practices lies at the heart of globalization. He says that business globalization has led firms that operate and invest in a global scale to transform patterns of trade and shape the interactions between them for example through mergers. Under this case Daewoo Car Company should create subsidiaries and invest in all continents and the following strategies of entering the market can be suitable; The first approach to be considered is that of exporting and depends on a number of factors that includes the following; the available resources that a firm is capable of spending, the size of the company, if the company posses any past export experience and expertise or it is trying it for the first time, conditions of conducting business in the selected abroad market and products nature for example if the products are perishable or durable. Under exporting there are two methods namely; direct exporting and indirect exporting. Direct exporting involves the producer of the products or services dealing directly with a buyer in the foreign country and often regarded as the difficult method of entry because the owner or the exporter of the product is entirely responsible for the business undertaking for example researching the suitable market for the products and establishing the suitable distribution channels to be used. Therefore this method requires much attention in terms of management and the resources to be used in the entire exporting process. It is also arguably the best method because the exporter may benefit from reaping maximum profits and may enjoy long-term growth thus the company can maintain its base in those countries. Under direct exporting I may choose to use modes such as agents and distributors, domestic sales representatives, overseas sales office or subsidiary. Such methods have various advantages that will help Daewoo Car Company exploit the host markets, for example agents and distributors are familiar with the market, there are existing business contacts and sales people are always dedicated to the customers thus can boost business activities in these host countries for example UK, Africa, Australia and China among other nations where Daewoo Car Company products can prosper. (Kotare and Helena, 2004) Under indirect exporting an exporter can access foreign market free from risks of doing it directly. It involves the use of independent organizations within the exporter’s domestic markets. It can be done through various ways, for example, a domestic based export merchants, who take the title of the goods and sells them in those countries abroad, domestic based export agents who sell and market the goods on behalf of the exporter and co-operative organizations who act on behalf of the producers. Daewoo Car Company can prefer the use of one of the above methods of entry because of the following advantages; communication is very much easy because the exporting company is domestically based and the risks of investing are much lower than coming up with full market in the host country. This approach might be cumbersome to undertake because the cost of getting links with agents thus taking long time to establish a market. An example here is that to export product to various countries, identify merchants and agents to market Daewoo Car Company products. Another approach of entering the new market and it will help in opening of branches in many countries is a method of entry called relationship based partnership and comprises of the following; Joint venture partnership whereby it can be defined as a partnership created by one or more companies with a view to carry out a business together. They contribute equally to the business and agree to share any profits in a certain percent in the course of the business. Such a business is referred to as equity joint venture and it is favorable because there is sharing of risk and loses. There is also contract joint venture which involves creation of new firms in which foreign and local investors share ownership and control. (Mark, 2001) Generally joint ventures are common where government conditions demand so in order to ensure control, nationalism and reduced re-patriation of profits. It will be an ideal situation because Daewoo Car Company is still young and recovering from financial problems and wish to exploit other markets for their products since it require fewer resources. However, it has potential problems and includes sharing of profits, employment issues, market coverage and decision making due to different long-term interest in partners. Another relationship based partnership that Daewoo Car Company can use is licensing method of entry, whereby they can be termed as contracts in which a foreign licensor provides a local license with access to know-how in exchange for financial compensation. Daewoo Car Company can prefer to use this method because it presents an opportunity to entering markets that may have been otherwise closed to exports and also it will not require the company to have substantial capital investments in the host market horizon that is in foreign countries of investment. However, Daewoo Car Company may be faced with problems like loosing production control of the company’s products. Also still under relationship based partnership I will suggest that Daewoo Car Company consider franchising as a method of entry. Franchising involves one partner called franchisor licensing trademarks and established methods of entry to a party called a franchisee in swap for a recurring compensation. A good example that illustrates this method is that of Daewoo Car Company selling its cars together with the rights to use its trademark and name to other independent automobile dealers. I can recommend this method of entry to Daewoo Car Company because it is easy to start the business abroad, there is room for rapid expansion, there is stable offering of the same products for a long time and therefore will attract customers and most of the time franchisors offer training for free that is always not offered to individuals setting up their businesses. Mowery and Rosenberg, 1989) Strategic alliance method of entry can also be employed under relationship based partnership in going international which involves formal partnership between two or more parties to undertake a common business with the view of attaining same objective but the parties involved always remains independent to each other. Business resources to be shared may include common distribution, channel, knowledge, products or expertise. Daewoo Car Company can prefer this method because of the following advantages; there are low research and development costs, getting access to partner’s capital, new markets for the products of the company and quick time in marketing the products, there is sharing of distribution channels and tapping the other partners advanced technology and intellectual property among others. An example here is the Daewoo Car Company reaching an agreement with any manufacturers of automobile products to market and distribute their products on their behalf. (Lovelock, 2006) Another approach that Daewoo should consider before opening subsidiaries in foreign countries is referred to as direct investment method of entry. Directing investments entails setting up manufacturing facilities although it requires heavy capital and management dedication. It can also be carried out through acquisition and this involves purchasing of already existing foreign investments that will include existing experience workforce, management structures, local knowledge and the existing contacts in the market and the government. Although direct investment method is expensive and difficult to start should it succeed Daewoo Car Company will enjoy good returns and will establish strong market base in its new market. An example here is that Daewoo Car Company will open subsidiaries in many countries. This will be a viable project since Daewoo Car Company will have to explore new markets in all continents and thus broaden the market share as well as make profits for the company and also establish a long-term economic market. After choosing the best marketing strategy for exploring markets all over the world the management of Daewoo Car Company should decide whether to compete across the entire market or in particular segments. The management of any company including that of Daewoo Car Company must identify the way in which it will cope with other companies and what it perceives as a basis for competitive advantage. The business strategy adopted by a firm is essentially a method for creating and sustaining a justifiable position in a particular market. Usually a firms profit depends on the nature of the strategy and on the inherent profitability of the industry in which it operates. Any company may perform poorly in a profitable industry if it employs unsuitable marketing strategies. A business competitive strategy requires the company to make a decision whether to compete across the entire market or only in certain segments of the industry and also whether to compete through low costs and prices or through offering differentiated product change. Daewoo Car Company has chosen to adopt the strategy of competing in particular market as they have focused in many foreign countries and not all countries. (Cox and Blake, 1991) This has proved to be successful as it does not require a lot of funds. Decisions regarding to employees, operations management, and the marketing decisions should be constantly revised by the management of the company in order to match international standards that will foster success in a global environment. For example, employees should be trained to cope with new changes like introduction in technology, marketing strategies developed ensures fair competition in the industry, and the products of the Daewoo car Company should be developed and designed to meet required international standards. Conclusion International Business management practice is the greatest concept that must be understood clearly by all managers and Chief Executives Officers of MNC’s including Daewoo Car Company before going global. It is the process of applying management concepts and techniques in multinational environment so that firms can become and remain international in scope. This process is influenced by new technologies, improved communication and transportation systems. It involves identifying the suitable approaches to going global and understanding all the advantages and disadvantages of each approach before going global in any business undertaking. For any firm to know that it is on the right path of attaining the set objectives organizational effectiveness concept should be clearly emphasized in order to know the position of the firm in that particular industry. Organizational effectiveness can be defined as the extent to which an organization has achieved its set objectives. Daewoo Car Company organizational effectiveness is reported to be good and it is argued that the main reason to its success is because of the measures taken by the entire management in response to changes in modern world of business. For any organization including Daewoo Car Company to be effective, human resource is very crucial asset that requires much attention in an organization. (Baker, 2000) Reference Baker, M. (2000): Marketing Management and Strategy, 3rd Edition: London. Macmillan Business. Pp 45-65 Cox, H. & Blake, B. (1991): Managing cultural diversity: implications for organizational competitiveness. Academy of Management Executive Vol. 5. Pp 23-87 Dale, M. (2006): The Art of Marketing: Developing Management Skills, Vol. 3, Crest Publishing House, New Delhi. Pp 54-98 Hill C. (2005). Global business today, 4th Edition, New York: McGraw/Irwin. Pp 21-27 Hoyer. S (2001): HRM concepts, Practices and Strategies- 4th European Edition. Houghton Mifflin, Boston. Pp 54-98 Kotare M and Helena K., (2004): Global Marketing Management, 3rd Edition, New York. Pp 87 Lovelock, J. (2006): Services Marketing, People, Technology, and Strategy. New York, Prentice Hall. Pp 32-65 Mark, D. (2001): Human Resource Management and organizational performance; 3rd Edition of the Institute of Management, Washington, U.S. Pp 54-87 Mowery, D. C and Rosenberg, N. (1989): Technology and the Pursuit of Economic Growth, Cambridge: Cambridge University Press. Pp 76-79 Read More