Estimating Market Size and Timing of Entry - Assignment Example

Global Marketing Questions Name: Unit: Course: Supervisor: Date of submission: Question 1 Introduction The global business has been shaped by technological developments that have made the world a real global village. One technological development that has remained a great marvel for global marketers is the internet. The internet has had great influence on the international business in terms of both supply and demand and the ease of accessing the products (Saeed 2008, p.7). The internet has revolutionalised the communication channel affecting both the small and multinational firms across the globe; it has become the ultimate meeting point to market goods and services. The great contribution the internet has made in the global marketing place cannot be ignored; however, there have been challenges especially to the small exporting firms (Venkatesh & Meyer 200, p. 128). The following is a discussion of how internet is shaping the global marketing activities and the challenges. Internet The internet has reshaped the marketing activities. It has provided two great benefits to the firms engaged in global marketing. The internet has become the gateway to the international markets. Through connectivity, firms are meeting over the internet, where they display their goods online. This is unlike the traditional marketing where distances had to be travelled to study or meet new clients. This has made global marketing to be cheaper, efficient and enhanced the accessibility as the global market is just a click away in an office comfort (Venkatesh & Meyer 2009, p.129) Over the years, small firms intending to enter the international markets have experienced challenges that relate to how they get information and the right contacts for potential customers; with the internet this challenge has been eliminated. This is a scale which has ensured that large scale firms and the small scale firms have equal chances in term of reaching customers. The internet has done away with the geographical and time zone barriers which slowed marketing activities in the international arena (Saeed 2008, p. 21). Challenges faced by small exporting firms due to internet Although the internet has reshaped the global marketing opportunities and provided an equal opportunity to both small and large firms in accessing the global customers; there are challenges which the small exporting firms have faced due to internet. The small exporting firms have had to deal with the issue of cyber crimes. Unlike the big firms that have well developed systems to avoid cyber attacks, the small firms have fallen prey of cyber attacks which interfere with their export activities (Venkatesh & Meyer 2009, p. 131). International markets are based on effective communication, the small firms exporting goods and services have had the challenge of language barriers, cultural barriers and infrastructural barriers. For instance, the small firms have no capacity to have many websites that have different languages and as a result they end up relying on one language which limits their ability to reach many international clients (Saeed 2008, p.17). A good internet marketing internet requires good computers and broadband that can be relied on. The small firms have challenge of funds to have good networks that efficiently support their marketing. Conclusion The internet has thus made communication easier, cheaper and faster compared to the traditional communication tools such as media, use of catologs and distribution channels that are far slower and expensive. In addition, the internet provides a platform in which many customers all over the world can access. This has deflated the competitive advantage that used to be enjoyed by large firms who had means to reach many customers. However, there still exist challenges that relate to capacity by small firms. The challenges are not faced by multinationals and hence they maintain a competitive edge over the small firms despite of the equal opportunity the internet has provided. Question 2 Introduction Exchange rates form an important component of international business; the exchange rates are required to facilitate international trade in the purchase and sell of products. Exchange rates keep on changing as they are influenced by various economic factors (Hein 2007, p124). Just like the normal changes in price of goods is dictated by demand and supply, so are the exchange rates. A high exchange will affect both export and import businesses. Positive impacts The value of exchange rate influences the demand for both imports and export. For example, the appreciation of the Australian Dollar leads to high exchange rate which results to imports becoming cheaper. This is an advantage to importers. It makes the products being imported to be cheaper on the local market which ensures that many Australians can easily afford the imported product. This increases diversity of products in the market and shapes the competition (Hein 2007, p.128). For an economy that is reliant on imports, a high exchange rate thus makes importation cheaper. However, this can result to imbalance of trade. Negative impacts As noted by Hein (2007, p.124) the exchange rate affects the demand for either exports or imports. The appreciation of the Australian dollar leads to exports being expensive. Export trade earns a country the foreign currency and is crucial for strong economy. Expensive export trade translates to negatively affecting the exporters and ends up creating more leakages from the flow of income. This shifts the balance of trade in favour of importers and hence the country ends up losing more of its foreign reserves to the importation. The country products become expensive on the international market. This implies that a stronger Australian dollar reduces the competitive advantage of the product in international market in terms of pricing. When the Australian dollar appreciates against other major world currencies, the services that are depended on foreigners are likely to experience drop in the number of customers. For intense, a high exchange rate in Australia hurts the tourism sector as tourists shun the country and opt for cheaper destinations (Yap 2011, p.4). It is worth noting that the tourism sector depends mainly on the domestic tourists. An increase in exchange rate gives the domestic tourists an opportunity to travel out due to the confidence of the strong dollar. In general, a high exchange rate translates to increased cost of tourists traveling to Australia and creates a negative effect on country’s tourism industry, as the domestic tourists are motivated by strong dollar to travel to other destinations (Yap 2011, p.6). Conclusion Exchange rates affect imports and exports. An exchange rate that allows more imports results to economic growth as it implies that output is high from factories and services which translates to creation of employment. It also means that there is inflow of funds from other countries and acts as stimulus to consumer spending. However, imports drag economy as there is outflow of money from the country as they represent money being paid to foreign companies. Therefore, high exchange rate will influence the economy of a country either positively or negatively. Question 3 Introduction International marketing between countries is affected by many factors. These factors include the political, legal and the normal business forces that dictate demand and supply (Blanchard 2007, p. 71). Indonesia and Australia have for a long time enjoyed bilateral relationships, the relationships have seen partnerships in business, education, defense and security. Indonesian economy has been intensifying and growing significantly. The Australian trade with Indonesia has been growing. In 2012, the investment by Australia grew by 35.5% to hit $6.7 billion while the Indonesian investment reached $600 million in the same year (http://www.dfat.gov.au/geo/indonesia/indonesia_brief.html). Despite of the strong bilateral relations between these countries and the subsequent trade, there are political and legal issues that affect trade between the two countries both positively and negatively. Political issues Changes in political regimes Since 1998, after the over overthrow of the authoritarian rule of Suharto, the country has been on the path of democratization which has seen changes in regimes. The changes in regimes have resulted in changing policies on international business engagements which could affect international business. For instance, political tensions have remained to be high in Indonesia which has seen over four regimes since 1998. Wealth disparity Despite of the remarkable economic growths, there has been discontentment among the citizens due to the wealth disparity. There has been struggle for control of resources; the majority of wealth in Indonesia is controlled by very few people (Blanchard 2007, p. 73). Indonesia has over 300 ethnic groups and varying religious affiliations with Muslims being the majority. For instance, the Muslims account for over 80% of the population; however most of the wealth is held by ethnic group of Chinese origin. This has been a source of political tension due to dissatisfaction by majority. Legal issues The legal issues are normally depended on the government regimes and its economic policies. Trade policies have been changing as the Indonesian regimes change. Since 1998, Indonesia has had four presidents; the policies have seen increases in tariffs and there trade barriers that have affected the Australian Exports. As a result, Australia has continued to encourage Indonesia to have liberalized trade through good economic policies (Blanchard 2007, p. 69). Indonesian has imposed tariffs and quarantine measures to horticulture. These measures are likely to affect the export business between the two countries. The Indonesian government has also imposed new strict rules and regulations that affect importation of range of products most of which are from Australia. The regulations touch on importation of fruits, manufactured goods, meat and live animals. The trade between the two countries has also been affected by lack of a legal framework to address investments that will lead to mutual benefits, economic cooperation, intellectual property, competition and means to settle disputes that arise in the course of trade. Conclusion There have been proposals to have Regional Comprehensive Economic Partnership (RECEP) aimed at having regional free trade agreements. The RECEP is a proposal that is geared at solving the disputes that are associated with political and legal issues affecting tariffs and general trade between Indonesia and regional traders which include Australia. The legal issues that specifically affect the two countries have seen the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) negotiations that have been ongoing since 2012 and expected to expand trade, investment and economic cooperation relationships between the two countries. Question 4 Introduction The international business is greatly affected by culture. The international marketers need to be extremely careful that they do not underestimate the impact culture can have on the consumer behaviour. The development of the understanding, embracing tolerance and cultural differences acceptance are very important if success in the international market is to be achieved (Hanks 2013, p.2). This implies that the international marketers need to consider cultural elements that will dispel any negative attitudes towards their products. The consideration should touch on the design, promotion and distribution systems that are employed in the foreign markets. Elements of culture The elements of culture include beliefs, values, symbols, religion, language and the thought process. Culture has a persuasive nature that can lead to acceptance of or rejection of a product. Marketers, who assume this persuasive nature, are likely to fail despite of the superiority the product may have. Many countries are not willing to let off their culture due to foreign influence. According to Bird and Stevens (2003, p.399) people react in a way that is generally accepted in the society, this is because human being are culturally responsive to the environment. The cultural differences have been an issue that international marketers have to deal with and must take measures that adjust to the cultures they are not attuned to but have to market to them. Culture determines the frames of reference that apply in a given society; therefore, the international marketers when dealing with the unfamiliar markets should evaluate the potential of market based on culture because buying judgments are normally derived from experiences that take into acculturative process (Ricks 2009, pp. 43-51). The reference frames dictate the unconscious responses; a reference frame that is acceptable in one culture may be unacceptable in another culture (Bird and Stevens 2003, p.401). This implies that markets have to study meaning to avoid overlooking the significance of behaviours that are specific to given culture. For example, marketers from European countries should understand that white s a symbol used for mourning in some Asian countries unlike its meaning in western world where it is a symbol of celebration like in wedding. The differences should be learned to avoid misunderstanding that may lead to failure of acceptance of product. Religion and language are important elements of culture that all the international marketers need to put into consideration before launching a product. In designing of promotion and advertising programs, marketers need to use language that is understood by the target market. In addition, religious factors should be keenly studied to avoid conflicts that relate to religion. For instance, marketers dealing with food products need to consider the acceptable food ingredients of the target customer. In a Muslim culture, food that may have pork as an ingredient will cause religious protests while in Christian world, such may not be a big issue (Ricks 2009, p. 46). Cultural issues Culture cannot be quantified; international marketers should avoid measuring the markets against fixed values and assumptions that may be in their countries of origin. Hanks (2013, p. 2) compared cultural conditioning to an iceberg in which a nine-tenth of the iceberg cannot be established. This comparison means that in the study of different people, their religious convictions and other elements of culture, the international marketers need not to assume some aspects of culture. For instance, religion is a sensitive touchstone to any culture, the mishandling of religious iconography can affect the image of a brand and consequently failure in market penetration. Language issues Language matters in advertising, promotion and selection of brand name. A brand name may be in a language that depicts quality and reliability in one language but the same language for brand name may be very different in another language. The marketers thus need to consider the brand names while entering new markets. The advertising and promotion language should also be sensitive to the host culture (Ricks 2009, p.49). Products that have failed due to cultural influences Failure to have comprehensive culture study and understanding has resulted to failure in products that otherwise could have succeeded if the elements of culture were keenly taken into consideration. In Iran, an Iranian company that manufactures razors used the brand name “Tiz” which in Persia means “sharp”. This brand name was aimed at illustrating the quality of the product and was used as a marketing name to influence the potential customers. The company ventured in international market and was exporting the same product under the brand name to Qatar. The language variations were not keenly studied by the marketers, In Qatar, “tiz” is an Arabic slang for “buttocks”. This was offensive for the Qatar residents and hence the sales of razors failed in Qatar. The company incurred a lot of losses that were incurred in entering the market (Hanks 2013, p. 1). Coca-Cola a leading chain store has also failed in India due to social and cultural issues. The company failed to put into consideration strategies to penetrate the market, the promotion strategies such as the advertisement were not welcomed by the larger Indian community despite of India being a good market for soft drinks. In addition the company did not take into consideration the social factors such as water conservation which are important for Indians and hence the protests (Hanks 2013, p.2). This has seen Coca-Cola perform dismally compared to other international markets. Conclusion Despite of the globalization that has brought the perception of world as a liberalized global village, culture still plays a crucial role in the international marketing. Marketers must put into consideration the issue of culture in all aspects of their products if they are to gain acceptance in the different countries. The marketers can by studying and understanding the reference frames for the markets they want to venture in. Question 5 Introduction Market assessment is very important, marketers use market assessment to study how attractive a given market segment is. Through market assessment, special market dynamics in a given industry can be understood. It is through the market assessment that strengths, opportunities, weaknesses and threats are understood. The assessment is important in the design of strategies that help in marketing a given product (Ghemawat 2020, p.4). There are different types of market size assessment that can be carried out before entering a market. Methods of market assessments The assessment of market sizes markets and subsequent estimation of the potential normally brings a significant challenge that many firms have been grappling to meet. Keegan (2005, p. 12) stated that assessment should be based on close analysis of the product and the target market. The following are some methods used in market assessment: Connect rate analysis, use of data sources and gap analysis. Using the connect rate analysis, the potential of the market is analysed by identifying the number of units of related products that can be sold. This involves finding the number of potential customers in a given population. The use of data sources as method of market assessment relies on finding the data available on the specified field of interest and depends on prior industry analysis that have been carried. This assessment can be conducted from the internet, as the internet provides a lot of information which can easily be accessed. The gap analysis entails identifying the opportunities that exist in a given market (Ghemawat 2010, p.7). Importing ‘Made in China’ mobile phone covers In importation of mobile phones covers made in china, the method that can be used for assessment will entail gap analysis method. The gap analysis helps in determining the potential customers who may need to purchase the product. Through gap analysis, the importer will establish the demand that may exist in the Australian market. The gap assessment incorporates the standards that are important for the product entering the market. Countries have different standards for different products, therefore the size of the market is greatly influenced by standards adopted by the country verses those where the product was manufactured. The product specifications compared with those already in the market will determine if there exists a gap that can be exploited by importations (Ghemawat 2010, p.9). Specialist tire repair and car service centres The Assessment can be done through the use of data sources. The data sources will entail studying how related services have been accepted in the market in the past. The market assessment will also explore the feasibility of the business in relation to access to labor pool of people who are specialist in the car servicing. The assessment data sources will also help in forecasting the future direction of the car services. This is depended on the life cycle of the market and the receptiveness of the community on such services (Keegan 2005, p.11). Importing ‘Mahindra’ brand SUV (sport utility vehicle) from India Connect rate assessment can be used to assess the market for Mahindra brand of vehicles. Connect rate assessment relates to market forecasting and it is normally done depending on the current trends (Ghemawat 2010, p.9). The demand of sport motor vehicles is usually depended on the preference and social class. A prevailing preference of a given model in country will influence the type of car that is likely to be accepted. Therefore, the size of the market for the car will be depended on current perceptions of the cars in the market. This will help in determination if Mahindra sport cars will be accepted in the market. A textbook for international marketing students In assessing the size of market for a textbook for international marketing students, the assessment method will rely on data sources that give the number of the international students and countries of origin. This will help in determining the market segment one is dealing with by identifying the nature of the market (Keegan 2005, p. 13). The data sources will identify the potential students who can buy the textbook and will help in determination of the distribution system and costs to be involved in reaching the buyer. References Australian Government Department of Foreign Affairs and Trade: Advancing The Interest of Australia and Australian Internationally. http://www.dfat.gov.au/geo/indonesia/indonesia_brief.html accessed 11/8/2014. Bird, A. and Stevens, M. 2003. Toward an emerging global culture and the effects of globalisation on obsolescing national cultures. Journal of International Management, 6 (1), pp. 395–407. Blanchard. K.2007. Indonesia: The Political, Legal, and Regulatory Environments of Global Marketing. North Central University, 69-74 Ghemawat, P. 2010. Assessing Market Potential: Estimating Market Size and Timing of Entry. Harvard Business Review 1(1), pp. 4-9 Hanks, G. 2013. Company failure due to cultural mistakes. New York: Demand Media. Heim, J. J. 2007. Does a strong dollar increase demand for both domestic and imported goods? Journal of International Business and Economics, 5 (3), p. 121-137. Keegan, W. 2005. Global Marketing Management. Boston: Harvard Business School Press, pp. 9-14. Ricks, D. 2009. Blunders in International Business. Cambridge, Mass.: Blackwell Publishers, pp.43-51. Saeed, S. 2008. The Internet and International Marketing: Is there a fit? Journal of Interactive Marketing, 12(4), pp. 5–21. Venkatesh, S. and Meyer. J. 2009. The Internet and international marketing. London: Sage, pp. 127-139. Yap, G. 2011. Examining the effects of exchange rates on Australian Domestic tourism demand: A panel generalized least squares approach. Perth, Australia: International Congress on Modelling and Simulation, pp. 3-7 Read More