Marketing EXlites in Romania - Case Study Example

Marketing EXlites in Romania Contents Executive Summary ii 1. Introduction 1 2. Product & Company Overview 2 2.1 Lighting Products 2 2.2 Current Marketing Framework 2 2.3 SWOT Analysis 3 2.3.1 Strengths 3 2.3.2 Weaknesses 3 2.3.3 Opportunities 3 2.3.4 Threats 3 3. Market & Competition Overview 4 3.1 PESTEL Analysis 4 3.1.1 Political 4 3.1.2 Economic 4 3.1.3 Social 4 3.1.4 Technological 4 3.1.5 Environmental 4 3.1.6 Legal 5 3.2 Market Analysis 5 3.2.1 Romania – Country Description 5 3.2.2 Customers 5 3.2.3 Competitors 5 4. Summary 7 5. Recommended Marketing Strategy 8 5.1 Product Positioning & Segmentation 8 5.2 Distribution 8 5.3 Pricing & Promotion 8 5.4 Program Timeline 9 6. Improvements 10 6.1 Problem 10 6.2 Solution 10 References 11 Executive Summary This report proposes Romania as a potentially valuable market for EXlites solar lighting products. EXlites’ eight-point marketing platform developed for the Australasian market serves as a good basis for entering the Romanian market, with a few minor modifications. The four classes of EXlite products – the Supalux Series of lamps, energy efficient LED lamps, Solar Lighting Plants, and Solar Bollards – have a wide array of applications, and can be applied to nearly any outdoor lighting need. Romania as a potential market for solar lighting products is practically virgin territory; there are no manufacturers or direct distributors of such products in the country, and the activities of the sole competitor, BBE LED of China, have been limited. The country has potential for solar energy, but no development or application of solar technology has been done in Romania for over 20 years. The country is best described as a developing economy; it has struggled in recent years from the twin effects of the global financial crisis and its continuing evolution from a restricted, centralised economy, but the prognosis for growth looks good. Romania has its own currency and language, but is a member of the EU and has a Western outlook in business; it is ranked 67th of 183 countries in terms of ease of doing business by The World Bank. The most effective plan for entering the Romanian market would be to engage closely with one or more of the four importers/suppliers of solar and other environmental technology products in a distributor relationship, which would eliminate many of the potential risks of entering the new market. The most promising market segment appears to be public and government customers, for whom cost-effectiveness and reliability are key concerns. 1. Introduction This report presents an assessment of Romania as a potential market for EXlites solar lighting products. A brief product overview and review of EXlites’ current marketing framework is presented first, followed by an in-depth assessment of the Romanian market environment, present competition, and potential customers and distribution partners. Based on this analysis, recommendations are made for a marketing strategy that can be deployed in this promising new market. 2. Product & Company Overview 2.1 Lighting Products EXlites has four groups of products. Solar Bollards are useful for path, driveway, and other ground lighting applications. The Supalux Series, lamps ranging in power from 24 to 72 watts, have a large number of applications as streetlights, sign lighting, landscape lights, and security lighting. Energy-efficient LED Lighting comprises LED lamps which are a money-saving, efficient alternative to conventional lighting. And finally, Solar Lighting Plants, heavy-duty portable lighting units, are suitable for mining, construction, and other applications where reliable, effective temporary lighting is needed. There is a strong market for all these products in Romania. As is discussed below, with the exception of LED lamps there are currently no competitors offering such a range of lighting products in the country. 2.2 Current Marketing Framework The current sales and marketing platform of EXlites developed for the Australasian market provides a good starting point for developing a plan for the Romanian market. The current platform has eight key points: 1. Business Development Managers – EXlites personnel – in the targeted market areas. 2. Building contacts with decision-makers and other key people in target sectors and industries to facilitate information-gathering. 3. A multi-language Google Ad campaign to build search engine visibility for the company and its products. 4. Attending trade shows relevant to the targeted market segments. 5. Sponsorship of “green” events in industries that are part of the targeted market segments. 6. Listing in procurement and supplier directories for the industries that are part of the targeted market segments. 7. Corporate Membership in Industry Associations related to the targeted market segments. 8. Subscriptions to applicable buying groups and tender advisory companies, in order to be notified of bid and sales opportunities. This current framework can be applied, with some minor revisions, in the new Romanian market as discussed below. 2.3 SWOT Analysis 2.3.1 Strengths Because there is already a competitor (BBE LED) making minor inroads in the Romanian market, EXlites has an advantage in being able to provide customers a direct comparison. EXlites’ main strengths are its extensive and adaptable product range, the more highly detailed technical and testing information it provides for its products, and a far superior warranty. 2.3.2 Weaknesses Although they are not serious obstacles, the language barrier – English is spoken by very few people in Romania – and the nine-hour time difference between Australia and Romania would require extra effort in organisation and communications to avoid misunderstandings. There is also a considerable physical distance between the two countries; Bucharest is a little more than 15,000 kilometres from Sydney, so this could be a disadvantage in moving products, parts, or people quickly. 2.3.3 Opportunities After a three-year period from 2008 through 2010 of economic contraction due to the global financial crisis, measures to correct Romania’s economy are finally bearing fruit, and the economy is expected to grow beginning in 2011. This suggests business growth and investment will increase as well. That experience with economic struggles may also mean that potential customers will be attracted by money-saving features of EXlites lighting. Finally, the fact that there are no manufacturers of solar lighting in Romania nor any direct distributors or manufacturers’ representatives means that the country is very nearly a ‘virgin’ market. 2.3.4 Threats The main threats to EXlites potential success in the Romanian market appear to be the competition presented by the Chinese firm BBE LED, which has already entered the market and is discussed in more detail below, and difficulties that may arise from currency exchange. Although a member of the EU, Romania has not switched its currency over to the Euro; its currency, the Lei, has steadily declined in value against the US dollar over the past five years. (CIA World Factbook, 2011) 3. Market & Competition Overview 3.1 PESTEL Analysis 3.1.1 Political Romania is a relatively recent addition to the European Union, and its status is still partly probationary although it is a party to major trade groups such as the WTO and the European Free Trade Agreement. Although the country is seeking to open its markets and economy as rapidly as possible, Romania’s long history of centralisation under a repressive Communist regime left the country in a poorer starting position than most of its neighbours, and the process of liberalisation has been long and slow. (Austrade, 2011) 3.1.2 Economic Romania has suffered from the global economic crisis, and its GDP contracted significantly in 2008-2010. A combination of financial assistance and strict budget measures, however, has helped the country get its finances under control, and it is expected to enjoy a growing economy from 2011 onwards. (CIA World Factbook, 2011) 3.1.3 Social Romanians are accustomed to Western business practises; however, the official language is Romanian (spoken by 91% of the people), with a minority who speak Hungarian. Thus, there is a language barrier that would have to be overcome. (Austrade, 2011; CIA World Factbook, 2011) 3.1.4 Technological Industry in Romania is described as being somewhat outdated, a consequence of the lack of development during the centralised Communist period. (CIA World Factbook, 2011) Development in solar technology of any kind has been virtually non-existent for the past 20 years or more. (EBRD, 2010) One challenge to introducing solar lighting products is the relatively low cost of electricity in Romania; among EU member states, Romania ranks 3rd-lowest in residential electric prices, and 6th-lowest for commercial/industrial electric rates. (Europe’s Energy Portal, 2011) 3.1.5 Environmental The general environment for solar energy in Romania is considered moderate (EBRD, 2010), but the recent installation of a few solar lighting projects indicates an interest in the technology. The most significant of these is the recent plan for solar street lights in the city of Bucharest, although this was characterised as more a cost-saving initiative rather than an environmental one. (Popescu, 2011) 3.1.6 Legal Romania ranks 72nd out of 183 countries in the 2012 “Ease of Doing Business” rankings produced by The World Bank, which represents a decline in the country’s standing of seven places from its 2011 rank. One potential area of concern is that in the “Trading Across Borders” category, the one most relevant to EXlites’ entering the Romanian market, the country declined 23 places from its 2011 ranking. In comparing the two years’ surveys, however, it appears the reason for this is an increase in the documentation required for importing and exporting, which may indicate a more reliable and regulated business atmosphere. (The World Bank, 2011) 3.2 Market Analysis 3.2.1 Romania – Country Description Romania is classified by the World Bank as an upper-middle income country, with a population of approximately 21.5 million and a per capita GNI of 7,840 USD, and ranking 72nd of 183 countries in the Doing Business 2012 report. (The World Bank, 2011) Trade between Australia and Romania is relatively minor, with Romania being the destination of about A$13 million in Australian exports each year. (Austrade, 2011) In terms of solar energy, Romania is described as having moderate solar potential throughout the entire country, with the most productive areas being located in the southern part of Romania and along its Black Sea coast. The market for solar applications is significant, but development and use of solar energy has been virtually absent since about 1990, at least until very recently as described below. (EBRD, 2010) 3.2.2 Customers Romania offers a good mix of potential customers. Industries include manufacturing – mainly equipment, auto parts and assembly, textiles, footwear, and construction materials – mining, and petroleum processing. (CIA World Factbook, 2011) As clues to the potential customer market for solar lighting products, present customers of similar systems include a “production company” in the Transylvanian town of Deva (approximately 300 kilometres northwest of Bucharest), and the city of Bucharest, which embarked on a plan to replace some of its street lighting with solar lamps beginning in June 2011. (BBE, 2011; Popescu, 2011) Currently, there are four wholesale firms listed as importers and suppliers of solar lighting products in Romania: AMGOREX Ltd and S.C. M.S.T.C. Srl, which are both located in Bucharest, LP Electric Systems Srl in Alba Iulia, and Solartec Solarsystems Srl located in Satu Mare. (Sources Guides, 2011) 3.2.3 Competitors The only direct competitor in the Romanian market at this time is Shenzhen Bang-Bell Electronics Co., Ltd. (BBE), a manufacturer of LED lamps founded in 1998 and located in Shenzhen, China. The company specialises in LED lighting in particular, but does offer several models of solar and solar/wind hybrid lighting products. Two models of single-lamp, solar-only streetlights are offered, which are differentiated by number of batteries (one or two) and height (6 or 7 metres). BBE has three models of solar/wind hybrid streetlights; one two-lamp model, and two single-lamp models which differ in the size of the attached wind turbine (400W or 800W). BBE products are not distributed directly in Romania, but handled by a number of non-exclusive distributors in other countries; the nearest of these to the Romanian market are two located in Poland, and one in Slovenia. (BBE, 2011) 4. Summary EXlites’ present marketing framework for its four classes of products will be a useful starting point for developing a marketing plan for Romania. As a new market, Romania is an attractive proposition. It is emerging from a lengthy economic downturn, is working rapidly to expand its economy, and as a member of the EU is oriented towards integrating its markets with the West. Although solar energy applications of any kind are still virtually non-existent in Romania, customers there have already shown some interest, which BBE of Shenzhen, China, a manufacturer of LED lighting, has been able to take advantage of. EXlites’ products are, however, far superior in quality and variety, and the company can approach Romanian customers with confidence that it is presenting a much better alternative. Challenges to be overcome include language barriers and distance, and the effects of foreign exchange will have to be taken into careful account. These challenges, or that posed by the existing competition are, however, far outweighed by the attractiveness of the Romanian market. In the following section, recommendations for a marketing strategy for EXlites in Romania are outlined. 5. Recommended Marketing Strategy 5.1 Product Positioning & Segmentation EXlites as a brand should be presented as an “every need” lighting solution, because the variety and adaptability of the product range is far better than what is offered by the competition. The most promising market segment to target appears to be municipal or other government-related customers, such as cities, towns, schools, and other facilities. Because the recent economic downturn forced the government to implement strict austerity measures, cost-effectiveness is still and attractive feature to these customers despite the country’s low electric costs, as signalled by the recent Bucharest street-lighting project. (Popescu, 2011) 5.2 Distribution The best mode for distribution, as well as for learning the market and networking with key Romanian contacts, would be to engage one or more of the existing importers/suppliers of solar lighting and other environmental products listed in Section 3.2.2 as distributors. This would provide EXlites a close relationship with experienced sellers in the Romanian market, and would reduce the risks of market entry. 5.3 Pricing & Promotion Pricing should be calculated in RON, and accommodation for fluctuations in the exchange rate between the Romanian currency and the Australian dollar accounted for. Because EXlites is able to present better features and benefits than the directly competing BBE products – of which there are only two – price-matching with the competition should not be a serious concern, except perhaps for those specific BBE models. In terms of promotion, the first and easiest step to undertake is to add Romanian to the list of languages to be included in the multi-lingual website and online ad campaigns. EXlites should also attend the following trade shows that will be held in Romania in the coming year (eventseye.com, 2011): ROMENVIROTEC – SEP International Exhibition of Equipment and Technologies for Environment Protection, 28 February through 2 March. CONSTRUCT EXPO – ANTREPRENOR International exhibition of architecture, technologies, equipment, installations, tools, fittings and materials for construction, 29 March through 1 April. ENREG ENERGIA REGENERABILA Euro regional energy trade fair in the border triangle: Romania, Hungary and Serbia, 25 April through 27 April. BIFE-TIMB International Fair for Furniture, Wooden Products, Furniture Fittings, Interior Decorations; Forest Exploitation and Wood Processing, 5 September through 9 September. EXPO SECURITY International Exhibition for Security, Police, Alarm, Civil, Fire & Disasters Protection, 26 September through 29 September. EEE International fair for energy, electronics, electrotechnical, automation and equipment for oil and natural gas, 17 October through 20 October. 5.4 Program Timeline 1-2 Months: Launch website and ad campaign online; subscribe to procurement and trade listings in Romania; develop distributor presentation 3-6 Months: Finalize distributor agreement; conduct distributor training & orientation; conduct sales presentations in-country as opportunity permits (trade shows, requests for bids, etc.) 6+ Months: Begin shipping product. 6. Improvements 6.1 Problem As was noted above, one challenge that faces EXlites in marketing solar lighting in Romania is the country’s low cost of electricity; while cost is still a stated concern for customers such as municipalities, it may not be a serious concern for other customers. 6.2 Solution Consider what need EXlites products actually fill for the customer: while for some customers, perhaps many customers, the environmental feature of solar power may be a key selling point, the actual need that is being filled is for a light. Focusing on the versatility and quality of EXlites products renders the “form of delivery of the need” less important. (Grant, 2008) This then makes the environmentally-friendly solar power feature, and the cost savings it provides, pure added value to the product. Customers want effective, reliable, and aesthetically-pleasing lights; by showing them that EXlites provides all that and cost-saving, environmentally-responsible solar power, there will be very few customers who will be able to find a reason not to buy them. References Austrade 2011, Romania Profile. Australian Government – Austrade, viewed 22 October 2011, . BBE 2011. Shenzhen Bang-Bell Electronics, Ltd., viewed 21 October 2011, . CIA World Factbook 2011, Romania. Central Intelligence Agency, Washington, viewed 21 October 2011, . European Bank of Reconstruction and Development (EBRD) 2010, Romania Country Profile. EBRD Renewable Development Initiative, viewed 22 October 2011, . Europe’s Energy Portal 2011. Brussels – Europe’s Energy Portal, viewed 22 October 2011, . eventseye.com 2011, Trade Shows in Romania 2011-2012, EventsEye, viewed 23 October 2011, . EXlites 2011, Sustainable Solar Lighting, viewed 18 October 2011, . Grant, J. 2008, “Green marketing”. Strategic Direction, 24(6): 25-27. Popescu, I. 2011, “New solar lighting system in Bucharest to cut public lighting costs by 30%”. Romania Business Insider, 13 June 2011, viewed 20 October 2011, . Sources Guides 2011, Solar Lighting System Businesses in Romania. Momentum Technologies LLC, viewed 20 October 2011, . The World Bank 2011, Ease of Doing Business in Romania. The World Bank Group/International Finance Corporation, viewed 22 October 2011, . Read More