In-Depth Market Analysis and Selection of Target Market - the United States, India and New Zealand - Case Study Example

Name: Course: Institution: Tutor: Module 3: In-Depth Market Analysis and Selection of target market 3.1 In-Depth Market Analysis In the first part of this report, three potential markets were identified. These were; the United States, India and New Zealand. The three countries are highly attractive and can offer a lucrative market for Southern Cross Telco. For instance, New Zealand is a highly developed economy with a very stable political system. Successive governments in New Zealand have advocated for close economic relationships with other countries particularly Australia, North America, Western Europe and china. This has seen New Zealand emerge as a strong economic power in the Southern Pacific (Dalziel, 2002). In addition, the government in the 1980s lifted bans on inflow of foreign direct investments. This allowed numerous foreign investors to rush to New Zealand as the new foreign investment destination. A good think for Australian companies exporting services to New Zealand is that the country shares close cultural and social ties with Australia. In both countries, English is the official language and hence it will not be difficult for Australian companies to export their services to the country. A major setback is that New Zealand’s market demographics are highly unfavourable for foreign companies willing to make massive profits. With slightly less than 5 million people, about a third of whom do not use internet or mobile services, New Zealand does seem an attractive destination for Southern Cross Telco (Dalziel, 2002). The case with India is quite different from that of New Zealand. India is a very large country, has a very large population and is rapidly industrializing. Over the last two decades, India has been modernising its economy through massive infrastructural development and reforms in the education sector. The country has progressively stabilised its legal and political systems, making it a save haven for foreign investors (Chandan & Nunnenkamp, 2006). There are specific characteristics which make India stand out as an investment destination of choice for Southern Cross Telco. First, India has more than 1 billion people. This presents a huge potential market for any foreign investor. Secondly, India is not a fully developed economy; the country is still in the Second World category since many of its people are low income earners. Moreover a large percentage of India’s people live in rural areas and have limited access to internet or mobile phone services. These are inherent weakness which Southern Cross Telco can easily exploit. Thirdly, India maintains good economic, trade and political relations with many countries both regionally and in other continents. In the recent years, India has made impressive efforts to warm its relations with China and Pakistan and hence possibilities of cross border conflicts with those countries are less likely, at least in the foreseeable future. This is an assurance to foreign investors that India’s foreign investment climate is very stable (Balasubramanyam & Sapsford, 2007). The last market is the United States of America. For over half a decade, the United States has been the world’s economic leader. The country has about 350 million and covers a vast geographical expanse with many natural resources. Since the end of the Cold War, the US government has maintained strong political and political ties with virtually every country in the world. This has allowed the US to export products and services to many countries while also importing from them. As an example, the US is Australia’s number one trading partner; this strategic relationship has persisted at least since Australia gained independence in the early 20th century (Reynolds, 2007). The US is very strong, both technologically and economically. The country’s infrastructural network is much modernised, making it easy to distribute services and products across the country (Reynolds, 2007. Its huge population offers a stable consumer base ideal for foreign investors. The US is a key member in various trade and economic partnerships such as NAFTA and WTO. Therefore, the government encourages foreign investment inflows into the country. A major setback with the United States is that most of its domestic markets are highly saturated, despite its favourable demographics. As an example, the telecommunications industry is dominated with many domestic players making it less attractive for foreign players. Again, the US’s tax regimes are not favourable for foreign investors wishing to invest in the country’s telecommunication industry. For these reasons, the US is not an ideal destination for Southern Cross Telco. 3.2 Selection of Target Market The foregoing discussion rules out possibilities of Southern Cross Telco exporting its services to either the United States or New Zealand. This naturally makes India the foreign investment destination of choice for the company. There are many compelling reasons why the company should export its services to India. First, India has a very large population but mobile phone and internet penetration still remain very low. Secondly, the government has in the recent years moved in to modernise the telecommunication industry thereby creating opportunities for foreign investors (Balasubramanyam & Sapsford, 2007). In fact, much of India’s rural population is not connected to the national internet network. This implies that Southern Cross Telco can make a good catch if it invests in the country. In equally important fact about India’s attractiveness for foreign investment is that its economy is fast developing. As such, millions of people are moving into the middle income class. This means that these people have the purchasing power to consume telecommunications services. The country’s political climate is relatively stable and this affords foreign investors the necessary peace of mind. For many years, India has been Australia’s leading trade partner. There are numerous Australian companies operating in India. Therefore, it cannot be difficult for Southern Cross Telco to operate in India, subject to observation of the country’s foreign investment laws (Basu, Nayak & Archana, 2007). Module 4: Analysis of Market Entry Strategies 4.1 Distribution Strategy Distribution strategy refers to the process of getting services or products to the potential customers. It is an important consideration that foreign investors develop sound distribution strategies to ensure that they get their products as close to their customers’ doorsteps as possible. If Southern Cross Telco decides to launch services in India, it must develop a strategy that will, allow it to not only distribute the service but also to market the services efficiently. Among the various strategies that the company can engage, the most suitable one for the Indian market is joint ventures. Joshi (2005) has defined a joint venture as a contractual agreement in which two or more businesses join forces for the purpose of executing a common undertaking. In light of this, Southern Cross Telco can form joint ventures with willing partners in India. A major benefit of distributing services through joint ventures is that the strategy will enable Southern n Cross Telco to use the partner’s distribution network. This will considerably save the company from massive capital outlay. The strategy will also allow the company to record rapid market penetration especially if it joins forces with well-established partners. 4.2 Exchange Rate Strategy It is critical that foreign investors develop sound exchange rate strategies so as to avoid pitfalls of currency instabilities. For Southern Cross Telco, chances are that it will conduct its businesses in the Indian currency (rupee) if it exports its services to India. Therefore, it is ideal that the company sets its prices in rupees. This will help it avoid adverse impacts arising from fluctuations of the value of the rupee. As an example, the value of the Australian dollar plummeted drastically against US dollar during the global financial crisis of late 2000s. However, India’s rupee was not affected as much as the Australian dollar. Consequently, Australian businesses operating in India were not as much affected as their counterparts in Australia. In order to circumvent the potential exchange rate risks, Southern Cross Telco must develop appropriate financial tools and techniques that can be used to that effect. Some of these tools include the currency options. Currency option is a financial risk management technique which entails the right to sell a specified amount of currency at an agreed exchange rate. Southern Cross Telco can use this strategy to avoid frequent currency fluctuations (Benjamin, 2006). 4.3 Marketing Strategy Any new business venture requires extensive marketing in order to attract the attention of potential customers. It is imperative that Southern Cross Telco develops an enabling marketing strategy that can facilitate rapid market penetration of its business. The starting point is for the company to design a brand name that can quickly capture the attention of its customers. Secondly, the company can create marketing campaigns and slogans that explicitly describe its business offerings. The company can communicate its services to potential customer trough adverts in both the print and electronic media (Joshi, 2005). The company can also employ promotions, exhibitions and trade shows to display its products and services. In the recent years, the internet has emerged as a major medium of marketing. Accordingly, the company can create online presence through social sites, corporate website and online communities. These present opportunities for the company to popularise itself and attract a large number of customers. A key issue about the Indian market is that most consumers are price-sensitive. This is the case considering that India is still a low income economy that is making efforts to modernise itself. For this reason, Southern Cross Telco should emphasise affordable prices in its marketing campaigns. 4.4 Cultural Strategy Research studies have identified various cultural differences between India and Australia, which can potentially impact on foreign investments between the two countries. As an example, while Australia is a predominantly Christian country, most of India’s people follow the teachings of Hindu. There is however a notable minority of Muslim communities in India. In light of this consideration, it is critical that Southern Cross develops a cultural strategy that will make its business to be appreciated by the people of India. One such strategy is to develop practices that are compatible with the traditional Hindu teachings. Another important strategy is to offer services in languages that are understood by most people. Although English is the official language in India, Hindu is widely spoken by most people. There are 17 other languages that are specific to each territory. Being sensitive to the language will enable the company to attract a large number of customers especially from rural areas. This among other things means that the company’s products should be promoted in the local languages depending on the region where the company sets its business (Shumate & Conner, 2010). 4.5 Corporate Social Responsibility Strategy The success of foreign investments greatly depends on how companies align their businesses strategies with prevailing social responsibilities and obligations. More often than not, business organizations are called upon to contribute to social issues such as helping vulnerable members of the society. In India, businesses are informally required to contribute to philanthropic needs and to help provide shelter and food to the disabled. Businesses are also required to observe environmental conservation. All these are important aspects of corporate social responsibility which Southern Cross will be faced with in its Indian operations. It is important that the company contributes corporate social responsibility as a way of not only reaching out to the society but also as a strategy of creating a good corporate image (Shumat & Conner, 2010). 4.6 Conclusion Southern Cross Telco has immense opportunities to enhance the scope of its business and increase revenue if it considers exporting services. While it can export it services to New Zealand and the United States, these two markets do not look as attractive as the Indian market. India has favourable demographic characteristics, is a fast growing economy and has low barriers to entry. Therefore, Southern Cross can expect to gain immensely if it exports its services to this country. References Balasubramanyam, V. and Sapsford, D 2007, “Does India need a lot moreFDI”, Economic and Political Weekly, pp.1549-1555. Basu, P., Nayak, N and Archana, H 2007, “Foreign Direct Investment in India: Emerging Horizon”, Indian Economic Review, Vol. XXXXII. No.2, pp. 255-266. Benjamin, J 2006, The Future of Money, Princeton University Press Chandan, C. and Nunnenkamp, P 2006, Economic Reforms, FDI and its Economic Effects in India, viewed 25th Sept. 2012 from www.iipmthinktank.com/publications/archieve Dalziel, P 2002, New Zealand's Economic Reforms: An assessment". Review of Political Economy, 14(1), p. 31–45. Joshi, R 2005, International Marketing, Oxford University Press, New Delhi. Reynolds, P 2007, Entrepreneurship in the United States", Springer. Shumate, M and Conner, A 2010, "The symbiotic sustainability model: Conceptualizing NGO- corporate alliance communication", Journal of Communication, 60(3), p. 577–609. Read More