International Marketing Strategy in Saudi Arabia for Billabong International Limited - Case Study Example

International Marketing Strategy in Saudi Arabia for Billabong International Limited Billabong is recognized in most regions in Australia and other European countries for production and sale of sports equipment despite its limited area of operation and high competition from similar industries in Australia. In order to ensure the survival of the company with reduced amount of spending, there is the need for the company to reduce costs of operation and market its products internationally to reach potential customers in these regions. There is also the need to ensure internal differences are prevented and the company must remain consistent with its operations over time. The differences should be avoided when the company enters international market. This paper provides an analysis of international business environment and the strategic planning methods for future international marketing operations in Saudi Arabia. These include the study of culture and communication factors that are regarded to affect international operations of Apparel Company Such As Billabong. It also involves a study of strategies that need to be applied to ensure success in international marketing in Saudi Arabia. This is focused on overcoming competition from similar companies such as Quicksilver and Rip Crul. This paper presents international marketing environment conditions that will be encountered by the company and the marketing strategies that need to be implemented in this region. It also provides a recommendation of strategies that need to be taken to ensure success of the company in international business in Saudi Arabia. TABLE OF CONTENTS 1. Company Overview 2 2. Industry Overview 4 3. International Marketing Strategies that should be implemented by the company in Saudi Arabia 5 3.1. Cultural Analysis in Saudi Arabia 5 3.2. Integrated Communication strategy in Saudi Arabia 8 3.3. Market Entry strategies 10 4. Conclusion 13 5. Recommendations for Implementation of the strategies 14 6. References 16 1. Company Overview Billabong is a holding company that deals in a range of apparel materials such as clothes and footwear as well as sports equipment. Other materials that are marketed and distributed by the company include accessories, eyewear suits and hard goods under the brand name of Billabong such as Von Zipper, Honolua Surf Company, Kustom, Palmers Surf, Nixon, Xcel, Sector 9 and Dakine Brands (Zou& Fu, 2011). The founder of the company is Gordon and Rena Merchant and it is headquartered in Gold Coast and Queensland. However, the operations of the company have expanded to other countries such as Japan, the USA and Europe through licensing processes and involvement with the third parties. The main source of Billabong products is manufacturers of these products and attaching logos and designs to these designs after which they are distributed to its stores and a number of its distribution centers. The total number of employees in the company is estimated to be 4500 staffs in various parts of the world while its shares are listed in the Australian Securities Market. The company remains consistent to its values and its business objective such as a commitment to protect its brands and manufacture of the right functional products and distribution of these products across a range of channels, development of professional proficiency of its employees and enhancing customer service and relationships (Vasudeva, 2006). Distribution of products of the company takes place in more than 100 countries and are found in at least 10000 doors in various parts of the world. Distribution of these products takes place through specialized board sports retailers and through the retail outlets of the company. High revenues result from owned operations that take place in Australia, North America, Japan, New Zealand and South America (Terpstra, Sarathy& Foley, 2012). Marketing and promotion of the company’s brands takes place through associations with a number of highly profile sportsmen such as professional athletes, junior athletes and major events.Despite operating in most countries in various parts of the world, the company is considering operation in Saudi Arabia due to advantages that are associated with the conditions that exist in the country. This paper presents strategies that should be applied by the company in entering international market such as the study of culture of the people in Saudi Arabia and communication strategies. This is aimed at improving competitiveness of the company in international market and increases its profitability in general. 2. Industry Overview Clothing industry is an example of an industry that has not developed internationally. This has been affected by a number of conditions that prevent the distribution and marketing of these products to other regions of the world. For instance, the dressing style among certain communities has been restricted to certain types of clothes (Srinivasan, 2011). This has prevented the possibility of exporting apparel materials into these countries from other countries. In a similar manner to any international marketing company, the marketing environment for an apparel company is measured in terms of income, resources, population, physical quality of life, infrastructure and debt. In addition, the industry is affected by the government s in the countries where it is operating in terms of trade regulations such as taxes, mandatory standards and controls on exports and imports or facilitating marketing through incentives (Plunkett, 2008). There are also laws that control marketing mix. These laws impact on the products sold internationallysuch as consumer protection laws, laws that prohibit advertising, price control laws and laws that control distribution of products.The main cultural practices that affect the use of clothing products in international market include behavioral cultures such as forms of communication, material culture such as technology and artifacts, values and beliefs of the people in various locations concerning products distributed (Peters&Wadham, 2010). There are people in certain cultures that have the desire to look beautiful, thus they have the potential to buy apparel products than people from different cultures. This has greatly affected the sales of clothing and footwear and other apparel materials distributed to various regions of the world. 3. International Marketing Strategies that should be implemented by the company in Saudi Arabia 3.1. Cultural Analysis in Saudi Arabia During marketing of its products to Saudi Arabia, Billabong will need to understand consumer cultures in this country. The main elements of culture that will need to be understood include material culture. This will include the techniques they use during production of their goods and the level of demand in these countries (Paul &Kapoor, 2008). Marketing process will then be designed based on the level of demand and techniques used to produce apparel materials in these countries. For instance, if marketing is done in Saudi Arabia, there will be the need to understand their dressing cultures such as the types of clothing materials they prefer and the design. This will assist in marketing the types of clothes that are highly demanded in those countries to ensure sales are improved during marketing process. Marketing team from Billabong International Limited will also need to understand social institutions in Saudi Arabia and methods of relating to each other (Nargundkar, 2008). This will provide marketers with the competence to relate with potential customers in these countries and win their trust in goods produced by the company. As a result, marketing will be enhanced through improved sales of products to customers. Furthermore, religious beliefs of people in Saudi Arabia will need to be understood specifically with regards to the types of apparel products recommended by various religions such as Islam (Mühlbacher, Dahringer&Leihs, 2006). Their beliefs with regards to particular types of clothing materials and impacts on the value systems will need to be analyzed so that the right products are marketed in the regions. Cultural analysis will also involve the study of aesthetics studies such as forms of music, dance and cultural activities in various regions in Saudi Arabia. This will assist in development of products that can be used in these events and marketing them in the regions (Loftus, 2013). In addition, it will assist in marketing ready made products that can be used in these events such as costumes that can be used during performances in these cultural activities. Collective elements of social activities will be determined so that products used during those events can be brought to potential customers. In addition, marketing will also be channeled to specific groups that perform particular cultural activities and have the potential to buy products that can be used during such events (Kleindl, 2007). In addition, marketers will need to study the language used by particular group of people in various locations where there are potential customers for the products sold by the company. This will include the study of what they consider the best methods of communication and relating with each other so that they are attracted to products of marketers. For instance, it will be necessary to determine rules that dictate what is considered right or wrong in Saudi Arabia or what is considered acceptable or unacceptable. Other cultural considerations that must be observed during international marketing process in Saudi Arabia will include the study of values of the people in this country. Values that will be observed include the perception of the people with regards to security, health, wisdom, being well-respected and their sense of belonging (Joshi, 2005). It will also include a study of their perception of methods of enjoying life, respect and ethics. Marketing will then be organized in a manner which ensures these values by upholding them while introducing products to customers in international regions. Adaptation to Saudi Arabian culture will require affirmative acceptance, not simply tolerance of another culture. For instance, some cultures will have to be conformed to while others will not be necessary to conformed to but will enhance relationships (Jain, 2001). On the other hand, there are certain cultures that will need to be avoided as a foreigner in Saudi Arabia. However, objective judgment will need to be made to ensure the goals of marketing are achieved irrespective of the nature of the culture in which marketing is done provided cultural practices in those regions are not violated. Marketers for various products of Billabong will come across situations where they will be involved in international negotiations to ensure they agree on terms of trade between Saudi Arabian authorities and their needs are met. Thus, it will be necessary to ensure they prepare adequately for negotiation process (Guppy, 2012). This will involve the use of culturally sensitive language and use the services of interpreters, tasks and other negotiation team members. The first stage of negotiation will be the pre-negotiation stage where negotiating teams will be identified and the contexts of negotiation will be determined. During the open negotiation process, trust building will be done and a common understanding will be developed for the topics of negotiation. In the bargaining stage, the main activity will be application of the strategy developed in the initial stages and consideration of the speed of the negotiation process (Getz,Carlsen& Morrison, 2004). The people involved in the negotiation process have to bargain with the view of reaching an agreement. Making of concessions should be progressive and during the post-negotiation stage, the other party needs to be given a concession as an indication that the right decision has been made. The atmosphere for negotiation should be that of mutual orientation, a feeling of trust and empathy for the other party and the extent to which the parties are open to each other. Cultural adjustments should be made by the sellers in order to become accustomed to the culture of the people in operating country. 3.2. Integrated Communication strategy in Saudi Arabia Billabong will need to use a number of communication strategies to market its products to various consumers and potential customers in Saudi Arabia. These will involve the use of the right form of communication based on the existing conditions in target areas of operations (Fishel& Gardner, 2012). It will also include the hiring of services of PR organizations and outstanding personalities in various fields of advertisement such as famous sports personalities to market its products. For instance, marketing sports facilities and equipment will require collaboration with sports personnel such as famous sportsmen to advertise the products. This can be facilitated by seeking the participation of famous sports personalities in Saudi Arabia such as football players or cricket players. This will create a positive attitude towards the products because potential customers in Saudi Arabia will associate the products with a famous sportsman they admire. In addition, a number of other means of communication will be used to advertise products of the company such as the use of radio advertisement (Derdak&Simley, 1988). This may be important for use in remote areas that are not served by other means of communication such as television. The company can engage in radio programs that explains its products to consumers and target customers. This will be focused on gaining the loyalty of people in remote areas in Saudi Arabia regarding popularity of products of Billabong International Limited. Another form of communication that can be useful is the use of conferences sponsored by the company. In these conferences, people in target markets will be informed about the products of the company and the benefits that result from use of these products (Czinkota&Ronkainen, 2013). This will enable building relationships and presence among people in Saudi Arabia on the apparel and other goods sold by the company. Another form of advertisement that can be useful for Billabong in Saudi Arabia is the use of television advertisement. Most regions in Saudi Arabia are served with communication facilities such as televisions and most household are able to get the advertisements through television. This enables reaching of a large number of audiences when they watch the products on TV (Zou& Fu, 2011). It also gives them the idea of what the products look like as well as provides an explanation of the nature of the products and the significance when used. However, there will be the need to budget for advertisement costs related to advertisement through television. The use of social media such as websites and the internet will also provide avenues for reaching most customers and target marketsin Saudi Arabia (Vasudeva, 2006). This will be useful for products that are targeted towards the youth such as sports equipment and casual clothes that are latest in fashion. This is because most youths in Saudi Arabia use social media for communication and interaction purposes. For instance, the use of social media such as Facebook, Twitter and Google create a platform where goods can be displayed and potential customers are able to see them. These posts should be accompanied by descriptions such as their prices, terms of service and methods of collecting them from distributors. The company can also make use of the print media such as magazines and billboards advertisement in respective towns in Saudi Arabia where it has interest in operating. These forms of communication can be displayed in major streets in towns and consumers who have the demand for the products are able to see them and look for places where the goods are sold. They can then obtain the goods from the outlets (Terpstra, Sarathy& Foley, 2012). These forms of communication are most efficient when the company needs to focus on particular groups of people while minimizing costs of advertisement in respective countries where they intend to market their products. The print media will also be useful when senior citizens in Saudi Arabia where the company needs to operate and will provide additional information such as description of goods and locations where the goods can be obtained (Srinivasan, 2011). The use of billboards has been regarded as the most recent form of advertisement that has shifted consumer perception positively towards products advertised through them. For instance, it has been possible to post products major business districts and contacts have been generated to a significant level. The use of magazines can also be significant for the company in that it results into the possibility of many people getting a copy of the product advertisement and is less costly in comparison with other forms of communication. 3.3. Market Entry strategies Before Billabong enters Saudi Arabian markets, one of the considerations that need to be made involves identification of the current competitors and the structure of global industry such as government regulations in the country with regards to the possibility of entry. The company also needs to determine if profitability will be increased as a result of entry into Saudi Arabia and the amount of resources available to assist in entry into the new areas of operation (Plunkett, 2008). The strategy used by the current competitors also needs to be determined so that the company can develop strategies for remaining competitive in the apparel industry in Saudi Arabia. Billabong may opt to use incremental approach of entry into Saudi Arabian markets. The main pros of this mode of entry is that it will be possible to gain experience at a measured pace and few resources will be used while there will be less risks in terms of exposure (Peters&Wadham, 2010). The disadvantage of this approach is that there will be high competition and high possibility of leapfrogging by competitors. The main steps that should be followed during market entry process include compliance with domestic regulations regarding exportation activities in Saudi Arabia. This will be followed by assessment of the country of operation by establishing potential customers for the products and the level of demand in the country. The company will then need to determine the competitiveness of the environment by identifying potential competitors in selected regions (Paul &Kapoor, 2008). For instance, clothes and apparel distributing companies in Saudi Arabia will be potential competitors for Billabong in the country. This should be followed by assessing market responsiveness such as the ability of customers to purchase the products of the company. This assists in developing a strategy for marketing the products to target customers in international markets. Finally, the company needs to conduct internal trade-off analysis. In this analysis, the company needs to identify areas where expense will be incurred and expertise required before the goals of marketing can be accomplished (Nargundkar, 2008). The company also needs to assess the political conditions in Saudi Arabia. Trade barriers in this country such as the level of tariffs, regulation and market place barriers should be determined and markets that should be avoided need to be determined as the weaknesses of these markets that prevent entry into them. There are a number of entry modes that the company can use during entry into Saudi Arabia (Mühlbacher, Dahringer&Leihs, 2006). The most appropriate entry mode that can be used by the company is export based entry method. In this method, a number of export modes can be used. These include indirect exporting where agencies in home country are used to get the products to the target markets in Saudi Arabia. In this method, export agents can also be used and paid commission on the goods they receive from the company. Another form of export strategy is the use of services of export merchants whose role is buying goods from the manufacturer and exporting them. Another form of exportation process is direct exporting. In this approach, products are sold directly overseas to the final users or a regional distributor is identified in the overseas market to sell the products on behalf of the company (Loftus, 2013). In order to benefit from this mode of exportation, the company needs to establish its own export sales organization, get involved in planning and management of exports and commit greater amounts of resources in accomplishing these tasks. The advantage of direct export is that the company is able to have control over the conditions under which the products are sold. Export process can also be achieved by establishing by establishing sales office in Saudi Arabia and assigning employees into these offices to sell the products on behalf of the home office (Kleindl, 2007). This ensures the company has a greater control over the products in the market such as promotional programs. Another form of export-based mode of entry is licensing. In this mode of entry, an upfront fee is earned for the transfer of know-how and a royalty in connection to the amount produced and sold in markets in Saudi Arabia. This enables overseas party to use brand of the firm legally, its technical innovations and corporate image. Franchising is also another export based entry mode that can be used by Billabong when entering Saudi Arabia during its international marketing process (Joshi, 2005). In this method, the franchiser or seller gives the franchisee or the overseas buyer the right to conduct business in a specific manner under the name of the company in return for royalty payment made in the form of percentage of sales. 4. Conclusion Due to increased globalization of the world economy, firms are forced to operate internationally in scope. Billabong International Limited is an example of a company that needs to operate internationally. This is because there are similar companies that produce the same products and there is high competition for customers in Australia. In addition, there are many regions in Saudi Arabia where prospective customers exist but have not been reached. Thus international marketing ensures these regions are reached and sales volumes of the company are improved. Conversely, there is greater rationalization of industries in various parts of the world and expansion of existing multinational corporations and increased complexity. However, little studies have been done to create large and complex organizations. This study provides guidelines on methods through which international corporations can be managed by conducting international marketing activities efficiently. The other focus of this study was to determine environmental conditions that affect marketing in international corporations by developing marketing strategies that study the existing conditions in international markets and creating marketing strategies that result into improved attitude towards products of the company. The first study involves a study of cultural conditions which can affect business activities in Saudi Arabia and a proposal of methods by which these factors can be understood and implemented to create good marketing conditions for Billabong International Limited products. The second study involves a review of integrated communication strategies that need to be applied in marketing apparel products of the company such as clothes. The main forms of communication that have been identified include the use of TVs, radios, PR approaches, agents and posters. These forms of advertisement are regarded as methods through which communication of the products of the company can be made to prospective customers in Saudi Arabia when the company starts its operations in the country. The third strategy for international marketing that this paper investigates involves the entry strategy that needs to be implemented in Saudi Arabia. The main strategies of entry investigated include direct export method such as franchising and licensing methods. The findings of the marketing strategies are then recommended to be implemented by the management of the company to ensure it remains competitive in a similar manner to other competitors in the industry. 5. Recommendations for Implementation of the strategies During the process of planning for international market entry by the Billabong International Limited, managers of the company will need to examine the environment in which the company competes, determine threats, opportunities and threats likely to be faced and services required to be offered in order to maintain viability of their company internationally (Jain, 2001). Since the company needs to operate in Saudi Arabia, there are certain recommendations that need to be implemented by the company during its operation in the country. There are a number of inputs that will need to be used during international marketing process. These include resources such as materials, management professionals and network connections. The planning process needs to involve planning for methods of entry at the company level and business level. Planning should also be done at the marketing levels. The company also needs to assess the environment in which it operates such as the home country conditions such as barriers to trade, tariffs and government regulations in the countries of operation. Generally, the process of conducting international marketing process by Billabong International Limited needs to start by analyzing the situation (Guppy, 2012). This involves determining marketing conditions in Australia and establishing whether it is necessary to conduct the business abroad or not. The second step that needs to be implemented is to evaluate the alternative marketing strategies. In this process, Saudi Arabia needs to be investigated in terms of the level of demand for products and services of the company such as foot wear, apparel and clothes. Regions in the country where there are high demand for these products should be selected for creation of international branches of the company. The third phase of internationalization involves setting marketing strategies that need to be used to reach prospective customers in these countries (Getz,Carlsen& Morrison, 2004). This paper has identified a number of strategies of entry that need to be applied during entry into international operations in Saudi Arabia. They include export-based entry methods such as franchises and licensing. A number of integrated communication methods have also been suggested to enable communication with the people in Saudi Arabia. They include the use of media facilities such as the internet, radio communication, the use of posters such as billboard and the use of newspapers during communication processes. The next phase of internationalization of operations involves evaluation of activities of the company such as establishment of the capability of the suggested strategies in meeting the needs of the company and achieving the set goals of the company (Fishel& Gardner, 2012). Methods of internationalization that are costly to use should be avoided. In addition, methods of advertisement that require expensive human skills such as the use of technology should be avoided. This ensures costs of conducting the business is reduced as much as possible. The next phase of internationalization of the company should involve implementation. This can be done by using the right communication methods when marketing is done in Saudi Arabia. The company also needs to employ qualified professionals to market its products to these international customers. The entry strategy used should be based on the nature of the region of operation and the ability of the people involved in marketing process to use the suggested marketing approaches. It is also recommended that the marketers should not interfere with the cultural conditions that exist in Saudi Arabia. For instance, most people in Saudi Arabia are Muslims and it is not recommended that products sold do not interfere with their beliefs towards dressing codes Finally, it is recommended that the strategy should be monitored to determine if it is efficient in marketing products of the company internationally. Areas of weakness should be determined and alternative methods of marketing identified. By implementing these recommendations when the company starts its operation in Saudi Arabia, it will be possible to attain success in marketing its apparel and clothing products in the country. 6. References Czinkota, M. R., &Ronkainen, I. A. 2013. International marketing.Mason, OH, South-Western Cengage Learning. Derdak, T., &Simley, J. 1988.International directory of company histories. London, St. James Press. Fishel, C. M., & Gardner, B. 2012.LogoLounge, master library.Volume 4, Volume 4. Gloucester, Mass, Rockport. Getz, D., Carlsen, J., & Morrison, A. J. 2004.The family business in tourism and hospitality.Wallingford, Oxon, UK, CABI Pub. Guppy, D. 2012.The 36 Strategies of the Chinese for Financial Traders.Hoboken, John Wiley & Sons. Jain, S. C. 2001. International marketing.Cincinnati, Ohio, South-Western. Joshi, R. M. 2005. International marketing.New Delhi [u.a.], OUP India. Kleindl, B. 2007.International marketing.Mason, Ohio, Thomson Higher Education. Loftus, J. 2013. Understanding Australian accounting standards.Milton, Qld, John Wiley and Sons. Mühlbacher, H., Dahringer, L., &Leihs, H. 2006. International marketing: a global perspective. London, Thomson Learning. Nargundkar, R. 2008. International Marketing.New Delhi, Excel Books. Paul, J., &Kapoor, R. 2008. International marketing: text and cases. New Delhi, Tata McGraw-Hill. Peters, A., &Wadham, A. 2010.Dingo Dog and the billabong storm.Swindon, Child's Play. Plunkett, J. W. 2008. Plunkett's retail industry almanac 2009 the only comprehensive guide to the retail industry. Houston, Tex, Plunkett Research Ltd. Srinivasan, R. 2011. International marketing. New Delhi, PHI Learning. Terpstra, V., Sarathy, R., & Foley, J. 2012.International marketing. [Naperville, Ill.], Naper Publishing Group. Vasudeva, P. K. 2006. International marketing.New Delhi, Excel Books. Zou, S., & Fu, H. 2011.International marketing: emerging markets. Bingley, Emerald Jai. Read More