Innocent Drinks Global Marketing - Case Study Example

Innocent Drinks Global Marketing The number and size of companies operating in a global marketing perspective has increased in the recent past. However, many of them have tried to enter into the international market in vain. Hundreds have closed down their international market operations soon after launching their penetration. This paper provides a global marketing plan for Innocent Drinks, which can be applied by many companies with the objective of operating in an international market. The literature addresses issues such as entry strategies, PESTLE analysis, and international operational management strategies. Choosing the mode of entry of an organization is a crucial function of an international marketing manager. A poorly selected market entry will always let fail all the other aspects of marketing, despite how appropriate and effective they can be. In selecting a market entry strategy, there are five key factors to consider. These factors include the company’s characteristics, market size, government regulation, competitive environment, risks in the market, and infrastructure (Cateora & Graham 2010). There are three main marketing entry strategies including direct exporting, indirect exporting, and production in a foreign country. Direct exporting is an entry strategy where a company directly performs exporting functions without delegating. Such a company establishes a fully functional exporting department with units such as market contact, market research, distribution and pricing, among others. This is a risky a marketing entry strategy, but most effective in increasing sales, enhancing control, and first hand market information. This mode of entry is appropriate to companies with sufficient financial and human resources. In addition, the size of the market should be sufficient to promote large scale production, which enhances efficiency. Government policies such as the quota system, tariffs and restrictive importation, may hinder the application of direct exporting. To successfully implement direct exporting strategy, Innocent Drinks Company may adopt either, or a combination of four may ways. First, the company may send sales representatives in the foreign market. These representatives will act on behalf of the company in establishing contacts and negotiating sales contracts. Secondly, the company can select local representative to negotiate on its behalf and contact customers in the local market. Thirdly, independent local distributors, who buy goods from the company and sell them in their local market, can effectively be applied. Lastly, Innocent Drinks can establish fully owned subsidiary in a foreign market, to control over its operation in the market. Indirect exporting This strategy is considered to be of the lowest risk as compared to others. This is the simplest entry strategy into the international market. In this case, the company’s participation in the international market is limited. There are three means through which a company can undertake indirect export entry strategy. First, a company may sell it products in a local market to another company, which resells the products in a foreign market through exportation (Cateora & Graham 2010). The producing company does not in any way participate in the international marketing. Secondly, a company can approach an international company with operational offices and units in the global market. The international company through its distributors undertakes marketing functions in the foreign market. Thirdly, a company may select an export management company located within the local market as the producing company. The producing company concentrates on production of goods and services, while the export management company undertakes exportation function independently. Production in the foreign market, which is also known as direct investment, involves an establishment of fully function production facility in the foreign market. This is the most risky and expensive mode of foreign market entry. There are two key ways of establishing a production unit in a foreign market. First, a company can make direct acquisition or a merger in the local market. Secondly, the company develops its own production project from scratch. This mode of entry is appropriate when a government supports local production, when custom charges and quotas are not competitive, and transportation of costs are high. Some enticing factors include the size and attractiveness of the market, low construction and manufacturing costs, along with government support. As a result of limitation of resources, government policies, risk involved, size of the market and a company’s marketing objective, the three entry strategies may not appropriate. There are other entry strategies including licensing, joint venture, franchising and contract manufacturing, among others. Indirect exporting entry strategy is the most appropriate global marketing entry for Innocent Drinks products. There are for main reasons behind this argument. First, Innocent company should take time to learn how its products perform in the international market, before venturing into the same fully. Starting an indirect marketing gives the company an opportunity to analyze which market is more profitable, and which have the lesser demand for its products. Secondly, indirect export marketing is the cheapest of all. The company does not spend time and resources on foreign marketing activities (Kotler & Keller 2011). On the other hand, I would prefer direct marketing to Innocent Drinks than indirect marketing. Direct marketing provides a platform for understanding global market. Despite the risk and cost involved, the returns are far much higher than indirect marketing. In case of financial constraints, Innocent Drinks management should approach a financial institution for funding. In addition, application of direct marketing offers the company with an alternative to control the market operations. Global marketing environment is complex and change every now and then. It is, therefore, immensely significant to analyze environmental factors, which may affect Innocent Drinks marketing in the global market. PESTEL analysis is a global marketing model, recently introduced by marketing scholars to assist in understanding global market environment. The analysis has six components, which assist marketers planning to enter into international marketing in understanding factors within the market, which may affect its operation. These components include political, economic, social, technological, and environmental (Read, 2000). Political factors, which are also referred to government policies, affect international marketing through intervention strategies. These policies differ from one country to the other, and hence it is essential for Innocent Drinks marketers to understand them before entering into an international market. Government policies determine the type of goods and services traded with the economy in terms of what is imported to the country, exported or produced, and distributed in the market. In addition, government policies affect business operational environment in a country, including the infrastructure and other aids to trade. The type of economy advocated by a government, affects how business organizations operate. For example, in a capitalist country, the law of demand and supply dictates on demand, supply, and prices of goods and services (Nunn 2005, pp. 139-149). This is as opposed in socialism or a communist system in the economy, where the government interferes with these essential components in the market. Before establishing operation into any foreign market, Innocent Drinks management team should analyze critically what government policies can affect its operation in their target market. For example, operating in many of European countries takes place in a democratic, capitalist market, with little or no government intervention. In communist countries, the government controls most of economic and commercial activities; an organization operating in this market should be ready and willing to adhere to strict rules and regulations from the government, concerning production, distribution and price charges, among other aspects (Lee & Carter 2010). In this case, it is important to understand food and substance government policies, which may impact production and distribution of innocent drinks. Economic factors including interest rates, taxation, economic growth and development, inflation and exchange rate, are crucial in international marketing (Euromonitor, 2011). These factors differ from one country to the other, and as such, adaptation strategies should differ accordingly. High interest rate increases the cost of acquiring capital, as well as production of goods and services. Operating in a country with low interest rate is preferable as a company can easily acquire capital through borrowing, and produce goods and services at low cost levels. This is reflected on prices of goods and services, making them affordable to consumers. When a currency of a country is strong, exporting becomes less profitable, while employees demand for high wage rates (Doole & Lowe 2008). As a result, the cost of production rises. On the other hand, this situation leads to an accelerated economic growth, hence increased demand for goods and services. In this case, it becomes favorable to produce and sell goods in a local market than exporting. Social factors are influential in determining the success of a company in a market. These factors differ from one community to the other. Operating in an international market exposes an organization to differentiated social factors. As a result, such an organization should learn how to operate in each of social set ups. Some of these factors include demography and cultural factors. Demography includes factors such as population size, age distribution, gender equation and income status, among others. Cultural factors including taboos, believes and practices, which are also influential in international marketing (Kotabe & Helsen 2004). Innocent drinks management team should take time to analyze these social factors to establish whether their company can adopt them, and how will they affect their marketing objectives. In this case, appropriate and acceptable marketing strategies, which fit within the cultural guidelines, should be adopted. With the growing population, growth rate in Asia Austria and Africa, assures Innocent Drinks a ready market in those continents in future. Young and middle age people constitutes of the largest fraction in many countries. This group of people like after job, holiday and weekends leisure meetings, where soft drinks and snacks are key components. Innocent Drinks can take advantage of this social group to prosper in its international marketing. The world of technology keeps on changing from time to time. These changes differ from one country to the other, depending on the level of economic and innovativeness of the people. In some countries, particularly in Africa, labor incentive techniques dominate in many organizations. In European states, capital incentive technology where machine does the highest fraction of the job dominates. Innocent Drinks should take advantage of its technology knowhow when operating in Europe to produce drinks at low costs. This can be particularly appropriate in developing countries, where the company will offer is products at far much lower prices than its competitors. The price leadership assures the company bigger market share than competitors. Technology can also be used in marketing functions such as contacting customers, advertising, and undertaking transactions (Christensen, 1997). Innocent Drinks should enhance the use of computer and the internet to perform some of these essential marketing components. Weather and climatic changes affects operations in many industries, in an economy. For example, tourism, farming and transport, among others, are adversely affected by unfavorable conditions such extremely hot and cold seasons. These factors are referred as environmental factors in international marketing. Innocent Drinks should be aware of environment changes in its global marketing expansion. Some seasons such as winter, reduce outdoor activities, and hence the company sales may reduce drastically. It is, therefore, important for the company’s marketing team to understand these weather changes, in an effort to prepare in advance to avoid large production during low selling seasons, along with panicking of the drinks going bad. On the other hand, the company should take advantage of favorable weather conditions in their international markets to optimize their sales, and hence profits. This will assist in covering losses and low profits during the adverse environmental conditions. In addition, innocent drink should uphold environmental sensitive operations in its production and distribution of its products. Observing carbon and eco-friendly practices are significant as the world calls for environment sensitive organization. Innocent company should embrace this concept in its production and packaging processes. The container used should be easily recycled to reduce their environmental effects through damping. This can be viewed as a corporate social responsibility of the company. Marketing mix Marketing mix is a marketing tool used in establishing an appropriate combination of elements for effective marketing of a product. There are four main elements in a marketing mix including the product, price, place, and promotion (Joshi 2005). An outstanding marketing mix assures a company of competitive advantage over it competitors. It is, therefore, essential for a company to undertake marketing research before establishing a marketing mix. In the case of Innocent Drinks, the marketing mix should incorporate the four elements comprehensively when undertaking global marketing. The product Innocent marketing team should ensure that their product meets what the customers expect. This can be enhanced through the production of the right product to ensure that customers’ attain total satisfaction. The company’s products constituting soft drinks, such as juices, should be of high quality. Quality in this case can be enhanced through the right combination of ingredients used in their production. In this case, healthy products can be of great influence bearing in mind that they form part of nutrition for customers. Producing an acceptable product is the starting point for a successful company. Innocent Drinks has already established an acceptable product in the global market, and hence stands at a strong ground to succeed. In addition, the company should ensure that the quantity supplied is sufficient to meet the quantity demanded by customers. This forms part of developing a pool of loyal customers. A part from quality, quality and safety, Innocent Drinks should look for strategies to differentiate their products. These strategies may include packaging, safety, and eco-friendly product. Attractive packaging with differentiated features assists customers to recognize product at ease. This strategy is immensely applicable in food and beverage market, where products are similar. Safety is an essential factor to incorporate in Innocent Drinking. The products are meant for human consumption, and hence it is essential to observe safety measures such as observation of expiry dates, and application of appropriate conservatives. Eco and green friendly products are highly acceptable and demanded in a global market. It is, therefore, essential for Innocent Drinks to observe this essential factor for a competitive edge over it competitors (Vlad & Yevgeniy 2010). In addition, Innocent Drinks can undertaking product line expansion can be instrumental in global marketing. In this case, products with the same purpose ought to reach large market coverage. For example, Innocent drinks can package its products in different sizes to cater for large and small scale consumers. In addition, the juices can be grouped into flavors. This will attract customer with different flavor preferences. Price Pricing is another essential element in a marketing mix, which determines how competitive a company will be in a given market. Consumers are always sensitive to the price charged on a given product. It is, therefore, significant for Innocent Company to put into consideration all the factors affecting price on a commodity before settling into a given amount. A price should always cover the cost of production and a given profit margin. Price leadership is one of effective marketing strategies applied by successful marketers. This is the situation when an organization sells its products at low prices than all its competitors. This strategy is applicable in a situation where there are similar products in the market serving the same purpose. Innocent Drinks may not mainly focus on this strategy; it products have already been accepted in the market as a result of their high quality, safety, and differential techniques. There are two price strategies which Innocent Drinks can apply in its global marketing, including geographical pricing and price discounts (Banting & Ross 2010, pp.1-11). Geographic pricing strategy is based on the fact that production and distribution costs differ from one region to the other. In this case, a company can decide to charge the same price in all regions, charge according to zones, and depending on freight charges. The price discounts strategy involves charging prices depending on timing, quantity and mode of payment by customers. There are five price discounts applied in international marketing including cash, quantity, seasonal, functional, and invoice discounting. Place To meet the market demand and expected sales, Innocent Drinks should ensure that its products are at the right place and at the right time. This implies that products should be at a point most convenient to customers when they require them. This is achieved through the distribution channels, as well as logistic strategies. The target market and group acts as a guide to place element of the marketing mix. Location of production units, warehouses, outlets and distribution channels, embraces and influences the effectiveness place element of marketing (Johnson, Scholes & Whittington 2010). Location of production units far from the market and sales units, may affect the effectiveness of marketing strategies, particularly when transportation systems fail. Products do not reach the customers’ at the most convenient time and place, and hence they may lose their utility. Innocents’ distribution strategy should comprise of three components including retail outlets, wholesale shops, and distribution centers. In the retail outlets, consumers purchase the products for consumption. In the wholesale shops, retailers purchase the products in large quantity and resell to final consumers in small consumable units. Distribution centers assists in feeding the wholesale and retail shops in the market. These strategies are put in place with the aim of ensuring that Innocent Drinks’ products reach the market at the right time, place, and at the right quantity. Promotion mix Promotional strategy assists in accelerating the rate of marketing objectives achievement. Three key promotional mix strategies include advertising, public relation and sales promotion (Brassington 2000). Advertisement is a common method of promotion, which involves the application of television, radio, internet, newspapers and magazines, among others. The success of an advertisement mix applied is dependent on three factors including the reach, frequency, and message. Reach determines the number of people in the target group reached by the advertisement. Frequency represents the number of times an individual in the target group is exposed to the advertisement message. An attractive message in an advert captures the attention of the target group, and develops their desire to learn more about the product. International televisions and the internet can be effective promotional strategies in the case of Innocent Drinks during its international market operation. Most people can now access international televisions, and hence it would be effective to place adverts in them. It covers large group of both the target and non target groups as a result of its mass coverage nature. In addition, internet marketing, particularly through social networks such as facebook, twitter, Netgo, and MySpace, can bring a difference in the marketing strategy (Broda & Weinstein 2006, pp. 85-541). This strategy can easily capture the young and middle aged target group, which constitutes of the highest portion of word population. In the recent few decades, international corporations have started the application of public relations as a promotional strategy. This strategy is mostly carried out by companies CEOs and public relations mangers. For example, CEOs have been giving public speeches to different groups on various aspects affecting their lives. The advantage of this entails opportunities to say some things about their company and its products. Lastly, Innocent Drinks should participate in trade fairs and exhibition in countries where they have established operations. This gives the consumers and potential business partners an opportunity to make some inquires concerning the company and its products. This may assist in boosting business operations and sales volumes through awareness building. Organizational structure Organizational structure refers to a design adopted by a company to define the lines of authority and management. It establishes how organizational decisions are made, and who are responsible. An international management organizational structure establishes the design on how global marketing activities are managed in an organization. There are three structures applied in international marketing management, including global marketing structure, regional structure, and hybrid structure. Global management structure Global management structure is usually applied by companies with few products. This structure is headed by a CEO, who takes charge of major functions of the organization. He controls operations of products and their line, and his offices are located at the headquarters, probably, in the company’s motherland. From the head office, the CEO makes decisions over all other operations in the international market. In other words, he or she dominates the whole company and its operations, irrespective of their location. The company’s functions including human resource, production, marketing, and research and development, are controlled from a central point. There are three advantages of application of global structure in managing international marketing. First, it enhances scale of operation. With control from a central point, cost of operation reduces, which saves millions of dollars to an organization. Secondly, the global operation reduces redundancy in that only essential function are recognized and funded by the organization. Thirdly, this structure enhances standardization of policies, procedure and practices, throughout the organization. This enhances uniform operations, product standards, and services, making human resources flexible work in various countries effective, which enhance mobility. There are two disadvantages of global management structure. First, international market experience differentiated market environment, and hence standardized procedure, products and control, may not be effective. Secondly, centralized decision making may lead into vague choices, attributable to the lack of deep understanding of customers and circumstances at the ground. Regional structure Regional structure, also known as geographical international marketing structure, emphasizes on geographical modified strategies in managing marketing. In this case, an international organization is divided into regions, where management structures and management strategies differ based on local circumstances. For example, a multinational company may divide its market into European, North America, South American, Asia, and Africa regions. In each of the regions, there are independent management and decision making units. Managers in these regions make decisions independently, free from head offices influences. The head office intervenes only when necessary, to assist the regional management to establish. There are three advantages of geographic organizational management structure. First, a regional management will enhance understanding of local customer and situations. Managers can make a decision concerning strategies from a well informed ground, making it effective to manage the market. Secondly, human resource management and policies formulation are based on local employees’ needs and legal requirements (Matusz 1996, pp.71-84). Thirdly, it enhances quick decision making process, thus enhancing adaptation in cases of emergency and drastic change in local environment. However, this management structure is characterized with lack of uniformity, duplication of functions, and non-realization of economic of scale. Hybrid structure A hybrid management structure is also referred as matrix management structure. In this structure, a company may utilize two or more perspectives including products, geography, and function. This structure observes that two or more regions may have direct control from one office, depending on characteristics and circumstances at hand. However, regions are allowed to make distinct decisions and apply differentiated strategies to ensure they effectively undertake marketing depending on local conditions. This operational management strategy enhances efficiency in managing products and other essential factors in a logical manner. Customers and product issues can be easily managed, with supports from a strong management level (Romalis 2004, pp. 67-97). This management structure reduces the level of redundancy and duplication of functions as experienced in regional structures. It also enhances realization of economies of scale. In addition, with the application of regional aspect of this strategy, locally effective strategies are enhanced. However, the matrix management structure is complex to develop and implement. It also may be confusing to operational staff as a result of orders coming from different superiors. Regional management structure is most appropriate for Innocent drinks. There are three reasons behind this argument. First, being new in the international marketing, it is essential for the company to understand the market characteristics. It calls, for application of a strategy, which enhances quick learning understanding the market. Secondly, different regions have differentiated characteristic, which required different strategies (Snodgrass 2002, pp. 118–121). Regional marketing structure will enhance application of this concept. Thirdly, it is an easy structure to establish and manage than in the matrix and global structures of operational management. In conclusion, global marketing is far much complicated than local or regional marketing. It is, therefore, significant to establish effective marketing strategies to enhance achievement of marketing strategies. In exploiting global market, an organization can apply one or combination of entry strategies. Some of available and commonly used strategies include direct exportation, indirect exportation, establishing fully controlled production unit, franchising and licensing, among others. It is recommended for marketing managers to undertake marketing analysis before undertaking marketing in a global market. PESTEL analysis is significant in assisting managers to establish appropriate strategies, which fits differentiated market characteristics. Marketing mix elements such as the price, product, place, and promotion, should be appropriately established to attract as many customers as possible, for the purpose of gaining a competitive edge in the market. Innocent Drinks should ensure that all of these essential factors are effectively observed in its desire to exploit the global market. List of References Banting, P & Ross, RE 2010, “The marketing mix: A Canadian perspective,” Journal of the Academy of Marketing Science, Vol. 1, No.1, pp.1-11. Brassington, F 2000, The Sole ideology of promotion, Second Edition, Prentice Hall, Harlow. Broda, C & Weinstein, DE 2006, “All round impact global village and the Gains from Variety,” Quarterly Journal of Economics, Vol. 121, No. 2, pp. 541-85. Cateora, P & Graham, J 2010, International Marketing, McGraw-Hill, New York. Christensen, CM 1997, The innovator's dilemma: when new technologies cause great firms to fail, Harvard Business School Press, Boston. Doole, I, & Lowe, R, 2008, International Marketing Strategy. Analysis, development and implementation. Mason, Ohio: South-Western Cengage Learning. 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