France as a Country of Choice for Foreign Market Analysis - Case Study Example

Executive Summary This report focuses on a France as a country of choice for foreign market analysis. This is because of the strong economical position of the country in terms of the GDP. The Purchasing Power Parity of the country is about 2.5 %. The country technology is also developed; its socio-cultural situation is conducive. The legal issues are challenging but manageable. The market mix focuses on packaging, quality improvement and strategic pricing of the company’s beer products in order to compete effectively with the existing brands like Abbaye, Desperados Beer and Kronenbourg Beer. Strategic intermediaries will be use in the market venturing process. Market segmentation of the company targets demographics of ages 18-60 (both genders) because of financial and economical strengths of this population subset. The two target market strategies that will be employed are differentiated targeting approach and niche-marketing strategy. Market positioning will focus in pricing, quality and packaging. Analysis of the pros and cons of the product portfolio are also shown in order to increase the scope of our products view. The merits are however a good indicator of a stronger brand with positive success signs. Joint venture market strategy is selected as a result of its commensurate balancing effect where the risks and the returns can be substantially attained. Table of Contents Introduction 4 Country and market analysis 5 Country Chosen and relevant market 5 Legal consideration 7 Competition consideration 7 Financial consideration 7 Technological considerations 8 Market analysis 8 Market mix 8 Product 8 Price 9 Placement 9 Promotion 10 Market segmentation 10 Market target 11 Market positioning 12 Analysis of facts gathered 13 Advantages of the product portfolio marketing in France 13 Disadvantages of the product portfolio marketing in France 14 Assessment and selection of entry strategies 15 Market entry modes 15 Exporting mode 15 Licensing mode 16 Joint Venture mode 16 Direct Investment mode 17 Greenfield site mode 17 Franchising mode 18 Recommendations 18 Conclusion 20 Works Cited 22 Appendix 24 Introduction Foreign country market entrance is a difficult and challenging task because of the risks faced by a new company as well as obstacles that are encountered. The obstacles include political, financial and even legal requirements that should be met before successful market penetrations. A foreign company has a number of options in terms of modes that it can implement to make a successful market penetration. The major market entry strategies include joint venture, licensing, exporting and direct venture among others. A foreign company has to perform a thorough trade off in order to choose the strategy that best suits the company with regard to its current business conditions. This paper presents a country and market analysis framework that seeks to propose France as a suitable country for venture as a result of a number of issues that are identified in the report. Market mix options as well as the market segmentation, market target and market position are identified in order to strengthen the rationale for the country’s choice. Different market entry options are also analyzed in order to give informed recommendation regarding the best option for the company to take. This also considers the company’s financial position as an imperative factor for the choice made. Country and market analysis Country Chosen and relevant market The country chosen as the potential market place for Sydney Breweries Limited (hypothetical name) is France. The rationale for this market choice is because of its potentiality in terms of future growth in terms of market growth. An analysis of its trends and consumer behavior will form the fundamental basis of market entry strategy and the appropriate market mix to be applied in order to ensure a successful market penetration and sustainability. Facts about France Explanation Financial consideration < 0.5 % alc.vol. per hl 0.5% - 2.8% alc.vol. Per hl / % alc. >2.8% alc.vol. Per hl / % alc. Tax on soft drinks VAT 20.6 % 20.6 % Other taxes on alcoholic drinks. Excise duties. Watch Duty Rate. Standard clearance procedure for alcoholic drinks. Demographic Trends. As one of the focus that help anticipate market growth. The population growth in France is moderate and therefore the market growth will proportionally grow. Legal Trend Underage drinking is prohibited. Compensation to a complainant due to effects that may arise from alcoholic contents. Cultural Modernized country with less attachment to ancient beliefs and also vague religious beliefs. Competition France is ranked 5th in the European Union in terms of beer making. It produces about 15 million hectolitres per year. Economic Over 64.4 Million people GDP of 19, 339.52 per head Food and drink import 20 Billion Market trends In 2008, alcohol consumption dropped by 8.2 % as a result of ban of smoking in areas considered public. Fear of changing consumption habits, only 18 million hectoliters of alcohol were consumed in 2008. Fifth largest In European union in terms of beer making. Technological Internet and gaining popularity of online transactions. Legal consideration France prohibits underage drinking of alcohol, it also provides for the beer companies to compensate people affected by alcoholic drinks that they offer. One of the major legal restrictions that have seen a decline in the alcohol consumption is the restrictive legislation called Loi Evin. Competition consideration One of the major challenges in France market is competition with other beers. There are other beers made in the country including Meteor Beer, Desperados Beer, Kronenbourg Beer and Fischer Beer. Consumers in the country are becoming more sensitive in terms of their choices, amber and Abbaye and others like high and quality beers. This has seen their rise in sales by 5-6 %. Other classic beers such as lagers lost about 18 % (Parsons 191). Cultural considerations The cultural trend in terms of beer consumption has undergone some notable changes for the past 5 to 6 years. This was especially after the enactment of regulations meant to check beer consumption in the country (de Mooij 270). Consumers are also increasingly becoming more sensitive in terms of selection of beers and especially specialized beers lile Abbaye and amber. Financial consideration Clearance of imported beers in the country is usually by means of Standard clearance procedure, other forms of taxations experienced by importers of beer to the country includes Excise duties and Watch Duty Rate. Technological considerations Internet development in France makes it conducive for online transaction, teleconferencing and telemarketing that will drastically reduce the expenses that would have been incurred. The trends at which online transaction processing is gaining popularity that pave way for almost all transactions globally to be conducted at a stationary point regardless of the time zones (Harrison and Thomas 12). Market analysis Market mix, market segmentation and target and market positioning will be considered in order to ensure a successful market launch in France. Market mix Product The company’s beer products like ales, bitters, premium lagers standard lager of our company will have to be branded in order to meet the customer’s expectation in France. Considering the changing customer trend in France, it would be essential to ensure that these products meets and even exceed the branding, quality and packaging of amber and Abbaye which are on the rise in terms of consumption as compared to other local beers. I would also recommend packaging the products with reusable bottles containers in order to emphasize savings and environment friendliness (Paul 251). Price The second component is the established pricing components from the existing products. For example at some instances providing discounts to lowering the prices to increase the market penetration. In a grocery beer can cost up to €4.00 per pack of (6x0.33ml). In a restaurant or a café one may pay almost the same amount for a beer. In our company, it would be preferred to establish a price skimming strategy where the same pack in a grocery would cost €3.99 per pack of (6x0.33ml) and thus allowing a similar drop a café or restaurant. It would also be viable to include reasonable discounts for wholesalers and discounts for early payments. Price flexibility will also be a recommended strategy considering the decline of beer in some major regions in France. This will be varied according to demand but at the same time maintaining a reasonable range from other existing beer bran ds in like Abbaye, Desperados Beer, Kronenbourg Beer and Fischer Beer (Paul 253). Placement Available distribution channels for the company’s beers include wholesalers and retailers such as groceries, restaurants and cafés. In order for our company to be effective in the French market, it would be more strategic and appropriate to consider distribution of beer products using specialized intermediaries. These specialized intermediaries will only be focused on the market segment which is as a result of the changed buying behavior in France market over the past five years. For instance, these intermediaries will ensure convenient and free delivery of products to convenient places and even homes of the target market. An inquiry on the consumers wishes will be established prior to launching this strategy that will position the company better in a competitive mark. Using more than one option of distribution channel will also increase the dissemination of the products and hence increased sales (Trout 34). Promotion Both the traditional and modern ways of marketing will be used aggressively in France. This is recommended because of the decline in alcohol consumption in the country as well as a new customer buying behavior that has led to the decline of other brands. Personal sales force will be adopted as a traditional method yet effective. These sales people will target the demographic segment with free samples of drinks and further explanation on the quality, affordability and social responsibility aspect of the new brand. This will be made in comparison with amber and Abbaye which are growing in terms of consumption. Internet marketing is also another promotional mechanism that will be adopted in order to foster awareness to the target market. From the year 2008 to the year 2010, internet usage in France has increased by about 10%, from 58.1 % to 68.1 % in a population that is estimated to be about 64 million people (Paul 251). These statistics reveals a strategic importance of the internet as marketing tool also considering that the target demographic of ages 18-60 who form the prime target are the majority of internet users. More so, internet marketing is much cheaper and lower than the traditional methods of marketing but by far more effective. Market segmentation The market subset which will be targeted in France is demographics of ages ranging from 18-60. These groups of people both male and female form the prime consumers of alcohol beverages. They are both financially stronger and at a legal age of consuming alcohol. The advantage gained from narrowing to these groups of people is the reduction in marketing expenses and also improved cash flow as a result of increased sales. Another imperative consideration in this target market is the need understand the changing trend of beer consumption in France after the enactment of restrictive legislation as well as prohibiting of smoking in public places. Another consideration in addressing the target market is the change of beer brand consumption as evident by the drop of Heineken consumption because of its lack of clarity as compared to amber and Abbaye. The French market is also sensitive to social esteem and brand perception. In order to win the target market upon entry, our company will work on positioning of the product as well as improvement of quality in order to stand out in a crowded market. The price will also vary depending in the demographic social setting and regard to pricing (Paul 251). Market target Because of the statistical decline of beer consumption (recently in 2010 by about 1.7%), the preferred market targets approaches are differentiated targeting approach and niche-marketing strategy. Differentiated targeting approach will utilize the different strategies to target different segments; this will be implemented by marketing brands like Premium lager, specialty beers and standard lager to demographics of about 30-60 years because of their financial muscle. Ales, stouts and bitters will be targeted to younger demographics from ages 18-29. Niche-marketing strategy will be focused on segments identified with more financial power and higher beer consumption rates. Areas like Paris, Marseille and Lyon will be the target of this strategy because of the large population and financial capability (Trout 34). Market positioning Positioning is an imperative strategy that will be critical in determining the success of our product in France. Some basic elements of market positioning that will be enhancing in the market are as follows. The Prices This is an essential factor of considerations, since our company has a portfolio of a number of products, pricing will be varied with respect to the geographic location and competitors prices and the income levels of people in the location. Another consideration will be to price some of our products perceived as “of class” high quality higher in order to target customers who are quality and brand driven. Premium lager, specialty beers and standard lager are beers that will be prices higher than €4.00 in the market. Other brands that are perceived to be average like ales, stouts and bitters will be priced lower than €4.00. Quality Our company should ensure quality control measures for all of our products including backing the quality claims with customer friendly guarantees and even return policies in the case of defects. This will enhance the positioning of our products in the French market. Packaging Different brands of beers will also be packaged in a desired way that portrays the intended message to the audience. This will ensure that the brand is unique and stands among other local and foreign products. Positioning will also aim at creating a lasting memory about the brand in the consumers mind through its promotional strategies. Analysis of facts gathered Advantages of the product portfolio marketing in France The product portfolio of our company is of high quality, the company also has a variety of products such as Premium lager, specialty beers, standard lager, ales, stouts and bitters. As a result of a larger product portfolio, segmentation and positioning can be easily improved to meet the expectations of the French market. Another advantage of our product portfolio is the ability to vary pricing of different products according to their positioning in market mix. This allows attracting different segments using differentiated and niche-marketing strategy. The validity of information collected such as the internet data showing usage of internet increase in France is also another merit to our product portfolio. This is because the statistics reveals that internet usage is on the increase as the population increases, the current usage is about 68.9 % which is also an important statistical finding in terms of considering online marketing of our products in the country given that the target demographics are also the majority users of the internet. The favoring economical muscle of the country with a Gross Domestic Product per capita of about US$43, 491 and a GDP Purchasing Power Parity (PPP) of 2.5 % demonstrates the financial status of the country as a potential market for our varied product portfolio. Being Europe second largest economy also shows that the market potential of the region is positive. Apart from the strong economical muscle, the region is also stable in terms of political climate. France has not witnessed major issues arising from political difference, more so the political climate of the country does not interfere with international businesses in a negative way. Disadvantages of the product portfolio marketing in France The changing trend in the French market is a major obstacle in the development of marketing strategies in the region. Notably the legal legislations specifically Loi Evin which aims at reducing or checking alcohol consumption in the country is a major barrier to our market portfolio. Other restrictive measures that curb smoking in public places including drinking bars are also reducing alcohol consumption rates because smoking goes hand in hand with drinking. This has contributed to the decline of alcohol consumption in France for the past five years. Another notable disadvantage to our product portfolio is the statistics which reveals a decline in alcohol consumption in most areas in France which has led to a cumulative decline of about 1.7 % in the country. Some statistics also reveals that the beer consumption in the country is not expected to pick up in the near future. Another notable blow to our product portfolio in France is the changing trends or social cultures of the market where most consumers are biased in their consumption. In essence majority of the beer consumers prefer amber and Abbaye and other specialty beer products which are mostly imported. The change in consumer behaviour may this affect the establishment of a sustainable product portfolio in the region. The rate of taxation and other duties that are paid by international companies is also another major obstacle when seeking market penetration in France. Excise duties, Watch Duty Rate, Standard clearance procedure for alcoholic drinks are the major barriers of our product in the region. This will lead to increase of cost of production and hence cutting on the profits of the company considering the skimming pricing strategy in our market mix which is to be adopted when making market penetration in the country. The existing and established brands such as Desperados Beer, Kronenbourg Beer and Fischer Beer will provide stiff competition to our product portfolio in the region. More so considering that consumers are increasingly selective in terms of their consumption brands which put amber and Abbaye and other specialty brands above other imported brands such as Heineken is a major disadvantage to our product portfolio. Assessment and selection of entry strategies Market entry modes There are five major market entry modes that are available for the company to use in making its market entrance to France. Exporting mode Exporting is one mode in which our company can use to make market entry in France. Typically exporting is a traditional way of making market penetration as it involves direct sales of domestically produced goods in an outside country. It alleviates the need for the goods to be produced in the target country. This creates an advantage because the there is no foreign investment in the country and thus narrowing the cost to marketing expenses only. Some key players that will be required in this mode of market entry includes the exporter, the importer, the transport provides and the government. The demerit of this means is the reliability of the importer and the perception of a foreign product in the target country. The response of the target market will thus determine the availability of the importer. Licensing mode Licensing is another mode of entry at the disposal of our company, licensing usually involves seeking license permit in the target market to use the property of the licensor. This usually involves intangible properties such as patents, trademarks, and even techniques of production. By paying a fee to the licensor, the licensee is able to use the rights which are provided by the intangible property or the production technique if the payments are paid to that effect. The merit of this mode of entry is the capacity provided to use the rights to the advantage of our company. After paying the license fee, the company can go ahead and produce its products in the market and also take advantage of the already established local brands names to make an easy entry into the market (Leibsohn 13). The profits made as a result of the manufacture and sales of our beer products will not be lost to the licensor since the payment of the fee is the only requirement. The demerit of this option is the possible failure of the decline in the fame of the trademark adopted in the market and hence leading to a market decline. Joint Venture mode Another imperative entry mode that our company can adopt in the use of strategic joint venture, this method has a number of advantages including; technology sharing, risk/reward sharing, sharing the development of the product as well as meeting the requirements of the government regulations. The other merits of this method of entry include convergence of partner strategic goals while competitive goals are diverged. This strategy is especially favorable in market where there are larger market leaders and hence the need to leverage on a collective effort to ensure that the small partners mergers to increase their market power and resources. More so, converged partners are able to acquire exceptional proprietary skills form each other in order to fill market gaps with innovative strategies and products. Notably our company will have to clearly consider control, length of the agreement, technology, pricing, and capability of local firms, resources and even the intentions of the government. This will be essential in ensuring that the company optimizes its joint venture (Leibsohn 13). There is however some demerits of this method, some are mistrust on the level of openness in proprietary knowledge, inadequate support from the parent company and even how to terminate the relationship when need arise. Direct Investment mode Direct investment is another mode that can be adopted by our company; this mode will require a direct ownership of production facilities in our target market. This mode of entry will demand resources transfer such as technology, capital and even personnel to the foreign market. There are two options of direct investment; one is acquiring an existing entity while the other one is establishing a new one (Leibsohn 13). The merit of this means is the full control of the operations and the ability to know the customers and even the competitive environment. The demerit of this mode is that it demands resources as well as higher level of commitment. Greenfield site mode This is still a new form of market entry but as well effective choice for our company. In this mode of entry the company will need to establish a new operation in the foreign market. This method of entry has been successfully used by Australian companies like Westfield shopping malls and Village Road show cinemas. The advantage of this method is the reduction of costs, customer and duties (Leibsohn 13). It eliminates delays; ensure uniform quality of products and also providing the firm an ability to adapt to the local requirements the region. Some demerits of this method includes slower rate of entry, increased risks exposure, politics risks and potential low price as a result of low wage in the region. Franchising mode Franchising as a mode of foreign entry can be of great significance. In this mode the franchisor gives the franchisee the rights to distribute products in a foreign country. This is usually done using franchisor’s brand and also system with a fee. Franchising can adopt a more complex process which specifies a preferred business format to the franchisee and elaborate on how the franchisee is expected to carry on the business process and also ensure similar customer experience throughout the entire network (Leibsohn 13).. This is evident in the management of McDonalds. The merit of this method is its ability to foster rapid market expansion by optimizing on franchisor’s intellectual property rights. The other gain of this mechanism is the capital and zeal of the operators of a network. The demerit of this method is the loss of company identity, poor development of the company’s brand because it is usually overshadowed by the franchisor’s brand adopted. Recommendations There are several factors that our company needs to consider in order to determine the best method of market entry in the selected market country (France). These factors include; ownership advantage, how will the decision to choose a market entry option affect the ownership of the business? How will the location (the target market) influence the business? Is the market performance in the target country a factor worth considering when selecting an entry mode? Does the company desire to share or maintain its control in the target market? Are the resources of the company (especially financial resources) adequate to sustain a direct market venture or other forms of cost sharing market entry mode will be required. These factors form the basis of our decision making process considering the number of options available for the company to adopt while making its entrance to the target market (Jain 233). A summary analysis of three major preferred methods of entry will provide further insight to the decision making process which considers the financial position of our company. A direct market entry mode will result in high investment which will lead to high risk/returns as well as higher degree of control to the venture. A joint venture mode of entry will involve fewer investments hence providing a commensurate return, risk and control. Licensing provides low investment mode as a well as low risk/returns but the least in terms of firm control (Osland 153). With the consideration of the above analysis, since the target market is not well known in terms of its sustainability given the changing trends of customer behavior and the statistical decline of beer consumption by about 1.7 % in the year 2010. It would be sounder for our company to opt for joint venture entry mode. The rationale for this statement is also backed by the financial sustainability need of the company in the event of unsuccessful foreign market entry. Joint venture will alleviate the problem of direct investment that will develop despite giving our company higher control and ownership but in the end bring higher risks of financial losses as a result of resource allocation and centralized decision making which may be based on assumptions or poor understanding of the foreign market (Osland 153). Joint venture is thus the preferred method of entry as a result of its low commitment of financial resources, higher degree of proprietary knowledge contribution, diverse ideas on product improvement and market venture as well as sharing of cost and risks that may occur in the market failure. Other essential benefits in this mode includes the technology that will be acquired as well as the meeting all the regulations of the government as compared to when the venture is made by a sole venture. More so, the strategic partners will be critical in promoting a common brand that will effectively compete with the market leaders such as amber and Abbaye and other specialty beers. Our company will also ensure to carry out thorough investigations on different partners in order to minimize risks associated with joint venture such as mistrust and openness of the partners (Jain 231). The performance of these partners in the target market (France) will be considered in order to reduce the expenses needed for the marketing process through taking advantage of the already established brand names, trademarks and other essential patents and intellectual property rights that enhances competitiveness of the company. Conclusion This report has analyzed France has a country of choice for foreign market analysis. France has been selected because of its strong economical position; its GDP is about US$43, 491. The Purchasing Power Parity of the country is also about 2.5 %. The technological infrastructure in France is also developed as revealed by statistics that shows a growth of 10 % in a span of two years, and is about 68.9 % in the year 2010. This statistical finding provides a basis of enhancing online promotional strategy of our company’s aspect in the market mix. As also noted in the analysis, customer behavior in France has also undergone some changes with customers preferring specialty beers and other brands such as Abbaye as opposed to other local and even imported brands such as Heineken. The target market has also been identified to be a demographics of ages 18-60 in both genders, this is because of their legal age of drinking beer, their economical strength as well as because they are a majority in the entire 64 million population. The target segments are also indentified as major cities such as Paris, Lyon and Marseille. Differentiated targeting approach and niche-marketing strategy are the key strategies to be used in the region. The advantages and disadvantages of the product portfolio are also discussed in order to demonstrate the strengths and the weaknesses of the adopted strategies. Notable the preferred mode of entry to the selected region is through joint venture because of the financial advantages, low risks, expected high returns, advantage of proprietary knowledge and also less market strategy worries. Works Cited de Mooij, Marieke. Consumer Behavior and Culture: Consequences for Global Marketing and Advertising. Michigan: SAGE, 2010. 270-279. Harrison Richard and Thomas Michael. “Identity in Online Communities: Social Networking Sites and Language Learning.” International Journal of Emerging Technologies and Society, 7.2 (2009) : 12-17. Jain, Subhash. Handbook of research in international marketing. New Jersey, NY : Edward Elgar Publishing,2003. PP 231-239. Leibsohn, David L and University of Michigan. Foreign market development as well as entry: An empirical analysis of two fast-food chains. Michigan: ProQuest, 2007.PP. 12-32. Osland, Gregory and Taylor, Charles. “Electing international modes of entry and expansion.” Selecting international modes of entry and expansion", Marketing Intelligence & Planning, 19. 3 (2001): 153 – 161. Parsons Elizabeth and Maclaran Pauline. Contemporary Issues in Marketing and Consumer Behaviour. London: Butterworth-Heinemann, 2009. 191-194. Paul, Geoffrey. Consumer Behavior in Action: Real-Life Applications for Marketing Managers. London: M.E. Sharpe, 2010. 250-256. Trout, Ries. Market segmentation and positioning. New York, NY: SAGE, 2006. PP. 23-50. Appendix Internet Usage and Population Statistics: YEAR Users Population % Pop. Usage Source 2000 8,500,000 58,879,000 14.4 % ITU 2004 24,848,009 60,293,927 41.2 % Nielsen Net//ratings 2006 30,837,595 61,350,009 50.3 % Nielsen Net//ratings 2007 32,925,953 61,350,009 53.7 % Nielsen Net//ratings 2008 36,153,327 62,177,676 58.1 % Nielsen Net//ratings 2010 44,625,300 64,768,389 68.9 % Read More