Westfarmers Company - Market Assessment as a Vital Part before Entry into Market to Determine the Companys Viability - Example

Topic: Assessment Task 3: An International Market Assessment, Selection, and Market Entry Report Name: Course: Topic Executive Summary This report looks at market analysis and entry strategy for Westfarmers Company from Australia into Russia and Italy. Both countries are endowed with marketing opportunities due to availability of the relevant infrastructure. Italy has a state of the art railway system, technology and a stable government. The same applies to Russia, which was previously a communist state. The market in Russia is promising due to the economic performance of the country and the large population. The main product that Westfarmers can put into Russian market is insurance and industrial safety equipments. Looking at the political stability, Russia has a stable government, despite some cases of ethnicity and infringement of media freedom by previous regimes. Italy is among the world largest economies. The country has a stable market due to its economic growth and infrastructure. Westfarmers can market insurance, farm inputs, industrial safety equipment and coal in the country. The main benefit of marketing in Australia is its foreign policy. The country has a foreign policy that enables ease of performing business in the country. Italy has been involved in signing of several treaties and trade agreement making it more favorable than Russia. The country is also more welcoming as compared to Russia making it easier to enter into its market. The main entry move into Italian market would be by exporting and setting up a plant in the country. For coal, industrial safety equipment and farm inputs, exporting to Italy would be better since the cost of setting up a plant is high. Westfarmers can set up an insurance firm in Italy to provide services. This will make it easier to market insurance within the country. Contents Executive Summary 2 Contents 3 Introduction 4 Company and product background 4 Comparative country and product market Attractiveness 6 Italy 6 Political environment of Italy 6 Foreign relations /trade 7 Social-cultural environment 7 Technological development, infrastructure, industrialisation, telecommunications 8 Russia 10 Political environment of Russia 10 Foreign relations/trade 10 Social-cultural environment 10 Technological development, infrastructure, industrialisation, telecommunications 11 Comparative country and product market Attractiveness 12 Product market analysis 13 Competitive analysis 14 Differentiation 15 Buyer Analysis 15 Segmentation 15 Market selection 16 Marketing objectives 16 Entry strategy 16 Conclusion 17 Introduction Before venturing into an international market, market assessment should be performed to determine the viability of the new market. This assessment is done on the market to determine acceptance of the products through analysis of the size, the growth and distribution channels that exists in the new international market. The survey should be able to give the expected appeal of the product to customers, the level of competition in the market and the marketing trends that exists. In case the market assessment gives positive results, the company is supposed to take more time and perform feasibility study. This enables the company to come up with a good marketing plan. This is the first step before entering into a new market so as to determine market size. The scope of this assessment is to look at the entry into a new market of Westfarmers which is an Australian company. The assessment will look at two possible new markets in Italy and South Africa. The report will look at company and product background, comparative country and product market attractiveness, market selection and justification, marketing objectives and entry strategy (Cavusgil, Knight & Riesenberger, 2012). Company and product background Westfarmers is an Australian based public company which has its head office in Perth Australia. The company started in 1914 as a cooperative society dealing with the provision of facilities and services to the rural Australian population. The company main objective is to deliver good returns to its shareholders. This has been the main drive toward creating a unique business culture which is highly focused. The company adheres to its main values which are integrity, boldness and openness. The company ensures that the employees are in safe working conditions and providing great and valuable services to their customers. The company main aim is to provide quality services to customers and bring satisfactory returns to its shareholders (Westfarmers limited, 2014). The company has adopted strategies that have enabled it to expand its market base since its inception. The company has over the recent years shown their interest in expanding their operations to other countries. The main strategy that the company has used is acquisition of foreign companies. The acquired companies have international operations, which have given the company gain an upper hand in exploring foreign markets. From the look of Westfarmers strategy, it is clear that the company is more inclined in expanding its market share both locally and internationally. The global trend in the company started when the previous Chief executive officer, Michael Chaney gave his plans for expansion. The chief executive officer gave the company plans in expanding their market to other countries. This initiative was implemented and the company has been able to gain a larger market share such as India and China. This is a trend that the company has followed since inception where it has expanded its market for a small company to a multinational. In the recent times, the company has sought to buy overseas assets to expand their presence. Under the leadership of the present Chief executive officer Mr. Goyder, the focus for overseas market has increased (Westfarmers limited, 2014). Over the last three years, the company has been fairing well. This has been witnessed by the current status where the company has been rated among the global top performing companies. The company has benefited from an increase in consumer confidence through brand awareness. This has enabled the company to make high profits, which have led to expansion of the company premises. The company has also laid out plans to expand their liquor stores and supermarkets due to increase in revenue (Westfarmers limited, 2014). Westfarmers have been involved in various products since inception. The company began by supplying services and other merchandise to the countryside population. This included the supply of wheat, livestock, skin and wool. The company later diversified to include oil, grain and fruit exporters and insurance in their business. Westfarmers has diversified and expanded its products to include coal, automotive services, chemical, energy, fertilizers, industrial safety products, liquor and supermarkets (Westfarmers, 2004). This has been through acquisition of other business such as Coles, Home improvement and office supplies. The company products are thus diversified and important in any economy. This is due to fact that these are products that are used by most of the population in a country. The target market for Westfarmers products includes industries, farmers, motor industry and homes. The company products have been performing well in the market both locally and internationally. This has been seen through the current expansion that the company has undertaken for the products market (Westfarmers limited, 2014). Westfarmers has been successful in international marketing. This has been seen through its presence in India, New Zealand and United Kingdom among other countries. The entry to these countries has been through exporting both directly and indirectly and producing in the international market. Looking at the company, Westfarmers is endowed with expertise and resources. The company has been in the market for a very long time making it able to acquire business acumen (Czinkota & Ronkainen, 2011). Comparative country and product market Attractiveness Italy Political environment of Italy Italy has a parliamentary system of government in a multiparty setting. The country uses a constitution and the prime minister has the executive powers. The country has a stable environment which is characterized by peace and harmony. According to United Nations, the country has a low level of crimes. The country had experienced a stable atmosphere in politics prior to the 2013 elections. The elections left no clear winner with the competitors being asked to form a coalition government. This is due to fact that no party had the required majority in the senate to form the government. This has been solved out and the country has political environment is stable (A'hearn & Venables, 2011). Foreign relations /trade Italy is a country that has been open to foreign relations and trade. This has been evidenced by its involvement in bilateral trade agreement as well as being a member of regional bodies. The county is credited for being among the founding members of United Nations and NATO. The country has a close relationship with Greece, France and America who are trade partners. This has been a major contributor to the peaceful coexistence of the country with its neighbors. Italy has been a major player in the Mediterranean region where it has great influence (Infoplease, 2014). The country has its embassy present in many of the countries. This shows how the country has handled foreign relations in a good way. Since inception, Italy has signed several trade treaties which have allowed economic interactions. There have been treaties on economic cooperation between Italy and San Marino in March 2009. This treaty was signed to fight against counterfeiters and protecting the IP rights. The treaty also enhanced the cooperation between the two countries in trade sector. Other treaties included the treaty that established the European Economic Community. This treaty helped to foster unity among France, Germany and Italy. The treaty helped in establishing economic and political cooperation between the countries. Italy has a strong cooperation internationally which has helped it in economic growth (Infoplease, 2014). Social-cultural environment Italians have a reputation to be very open and communicative. This is a character that is enhanced by their excessive use of body language while communicating. The use of certain gestures is considered norm when communicating. The language spoken by most of the people is Italian. A company operating in Italy has to know that Italians respect the family values. The family is highly held and the products should be in such a way that they uphold family values. One of the most valued things in Italy is the fashion, the inhabitants are very observant on the type of cloth being worn and sometime judge people by it (Infoplease, 2014). Italians are Catholics and have the highest number of catholic churches per capita in the world. The Catholic Church influence in the country is very high and most of the people have church statues. The saint’s birthdays are observed and respected. In every business or trade, there is a saint associated with it (A'hearn & Venables, 2011). Italians highly respect those whom they do business with. They mostly like working with people they know hence it is important to establish relationship before venturing into market. One of the most important things when starting business is the first impression. Italians in most cases judge people through their first impression. There is also need to make sure that the business honors its promises. Italians value meeting etiquette. Poor meeting etiquette may lead to lack of trust with business partners. Gifts in Italy are highly valued; the company entering Italy market should have a reward scheme. The gifts should use the right colors in wrapping and should also be of certain type. This is because different colors and gifts have different meanings and occasions in the country (Infoplease, 2014). Technological development, infrastructure, industrialisation, telecommunications Italy is one of the most developed countries in Europe. This is seen in the country’s infrastructure, industrialisation and telecommunication status. The country has state of art airports which has the capacity to handle more than 25 million passengers every year to 60 countries. The country has also a great infrastructure in ship. This helps in handling the containers along the Mediterranean. The country waterway averages at 1500 miles which are used commercially. This system acts as an important means of transportation in the country (A'hearn & Venables, 2011). The road network in Italy is highly developed and always upgraded and improved. This is to cater for the transportation since most of the goods in Italy are transported through roads. Another means of transport in the country is railway. The country uses a highly developed railway system which transverses more than 12,000 miles. The train system in the country is highly efficient and is the cheapest system in Europe. The country has been in a bid to develop high speed train systems to improve more on railway infrastructure (Infoplease, 2014). The high economic growth of the county has made it an important area to perform business. The county has few natural resources such as oil and coal and depends on exports. The county power system is reliable which makes it possible to set up industries. The county has been undergoing internet revolution with more than 10 million Italian being able to access internet. The mobile phone reach is also very high in the country with most of the Italians being able to access them (Infoplease, 2014). The county has a total land area of 72.6 million acres under farming. The government has put efforts to encourage agriculture in the country though the results have not been high. The county also has high imports of animal products such as meat. The country land is highly suitable for agricultural crops such as vegetables and cereals. Crops grown in the country include wheat, barley, olives and rice among others (A'hearn & Venables, 2011). Russia Political environment of Russia Russia is a country with a multi-ethnic society. The country has a federal type of government. The country has both regional and central governments with each type of government having its power. The leadership of Vladimir Putin made the central government more powerful. The constitution comes from a combination of the Russian, French and German systems. The president is tasked with appointing the prime minister who heads the government through the legislature. The country has a consolidated power. The country has experienced some upheavals during the Putin era. This was through the killing of journalists who were against his government. The current government is stable and the country enjoys a peaceful coexistence. The county is secure with few cases of violence (Orlov, 2011). Foreign relations/trade The country view on foreign policy is based on mutual benefits between the involved countries. The country partnership with other European countries has been excellent through foreign relations. There was European Union and Russia agreement that has been governing the country’s political and economic relations. The European Union is the most active trading partner with Russia. The mutual trade has been rejuvenated since 2010 and the country has experienced positive growth. The country is endowed with resources such as oil, coal and gas. The country is a member of the world trade organisation (Keillor, 2011). Social-cultural environment Russia is a multicultural society, but has been affected by the Geopolitical conditions. This is due to the fact that the country is situated between Europe and Asia. The county populations have absorbed the cultures as well as the lifestyle of Asia and Europe. The power distance culture is experienced in the country where the population, mostly prefers leaders who are strong and authority is highly regarded (Keillor, 2011). The Russian culture has a low uncertainty in that there is greater job security. The collectiveness culture is also very highly regarded in the country. This is due to the country communism past. The individual needs are less important as compared to the collective needs. The country is also oriented in human relations and quality of life (Heritage Foundation, 2014). One of the most important cultures in Russia is time orientation. The country has been able to transform from their old cultures which has led to institutional change. The country culture favors personal relations more than business relation. This leads to a situation where one is expected to grow the personal relationship bond so as to succeed in business relations. The country main religion is orthodox. The religious holiday in the country are mostly determined by the Orthodox Church. There are still other faiths such as Judaism, Islam and Catholic. The social class is being determined by wealthy as opposed to the time when hierarchy determined the class. There is still some ethnicity in some parts of Russia (Heritage Foundation, 2014). Technological development, infrastructure, industrialisation, telecommunications Russia has been experiencing high rate of economic growth over the recent years. The country endowment with natural resources has enabled it to have a great leap in the growth of its economy. There has been demand for innovation and successful business. There has also been rapid development in the information technology sector (Heritage Foundation, 2014). The country ICT sector is highly developed. This has been demonstrated in the recent survey that has shown that ICT sector in the country represent more than 8 percent of the country GDP. The country ICT sector has been regarded as the main contributor to the country growth. Russia has been aggressive in the innovative strategy which has enabled communication and scientific research (Heritage Foundation, 2014). The Russian infrastructure is well developed with railway and road networks. The country has more than 1 million kilometers of railway line and a well distributed electrical network. The country has engaged with international developers to upgrade the infrastructure. The country is highly industrialized. This is due to fact that the country was a super power prior to collapse of communism. The country’s industrialization started a long time ago and is at par with most of the western countries. Agriculture is practiced in the country. This used to be the main source of country trade prior to industrialisation. Crops grown include wheat (Heritage Foundation, 2014). Comparative country and product market Attractiveness Italy, Australia and Russia have stable governments, though Russia had some upheavals earlier. This condition enables the business to thrive well in these countries. The countries have open foreign policies that allow the trade to be carried out more easily. Italy foreign policy is more open compared to Russian. Looking at the social cultural issues in the three countries, there are both similarities and differences. The open and communicative culture in Italy is also experienced in Australia. The religion in Australia is predominantly Christian as in Italy, which has catholic as the main religion. Russian religion is slightly different from the Australia. This is due to fact that Russian orthodox dominates most of the country (Heritage Foundation, 2014). Looking at infrastructural development, Russia and Italy are all well developed infrastructure. This is at par with Australian infrastructure in terms of technology and roads. There is also a great similarity in the country economies. Russia economy has been doing well and can be comparable to Australia. The same case applies to Italy, whose economy is comparable to Australia. Looking at industrialization, both Russia and Italy have made great strides and established large industries (Orlov, 2011). Looking at Russia, the political environment is not as stable as in Italy. This is due to fact that there is ethnicity in some parts of Russia. The social culture of Italy is more welcoming as compared to Russia. There is also ease of marketing the products in Italy due to the fact that Australia and Russia has same religion and almost similar etiquettes. The market entry to Italy is easier due to their foreign policy. Italy has been involved in signing many trade treaties which makes it favorable for trading. Westfarmers can enter into the market through exporting or producing in the country (Orlov, 2011). Product market analysis Both Italian and Russian markets have a great demand for home wares and furnishings, industrial safety, insurance, chemicals, energy and fertilizers. This is due to fact that both countries economy is growing at a high rate. The market for these products is growing due to the economy needs. The population needs for insurance services has been rising. This was experienced especially after the financial crisis where most people and industries sought insurance services. The Westfarmers products cover different market segments in economy. The industrial safety sector looks mainly on the industrial safety gear. This segment is growing due to increase in the industries. The insurance sector in Westfarmers is another sector that is distinct. The market for insurance is also growing at a very high rate (Westfarmers limited, 2014). The farming sector in Italy is another market that is expanding. The need for chemicals and fertilizers for the sector is high as more effort is put on quality in farming. Looking at the Westfarmers products, the Italy and Russian market are at the right phase compared to the products lifecycle. The Italian market relies on import of chemicals, fertilizers and coal while Russian is major importers of farm inputs. The insurance sector has both local and international players in both countries. The fertilizer is supplied by local companies but there is still room for importing in both countries. The major players in fertilizer and chemical sectors in Italy are Fertplan Srl, Demetra Italia and Ski Biosynthesis. The country imports coal from United States, South Africa and Indonesia. Russia has its own coal (A'hearn & Venables, 2011). Marketing in Italy and Russia is mostly by designing the products and utilising the internet. This is due to fact that most of the country population has access to the internet (Heritage Foundation, 2014). Competitive analysis The products from Westfarmers face competition from competitors in the Italy and Russia. The industrial safety is the least affected by competition since there are few companies dealing with it as compared to others in both countries. The most competitive market in Italy is the farm inputs such as fertilizers and chemicals. The main competitors in the farm inputs sector in Italy are Fertplan Srl, Demetra Italia and Ski Biosynthesis. These companies provide chemicals and fertilizers as with Westfarmers. The coal industry is mostly dominated by South Africa and United States. Russia is endowed with natural resources and has coal mines, making it hard to market coal in the country. The competitors’ main advantage is the fact that they have been in the market for a long time hence establishing relationship. Coal is imported depending on demand in Italy since they do not have enough resources for coal. The farm input competitors are mostly based in Italy while the Coal competitors are foreign. Russia is a major importer of farm inputs. There are few companies that compete in farm inputs sector in Russia. The insurance sector main competitors in Italy are Alleanza Assicurazion, Assicurazioni Generali and Azimut Holding. These companies are mostly based in the country. In Russia, the main insurance competitors are Alliance, AIG Russia, Apostle and Asko insurance company (Zou, Kim & Cavusgil, 2009). Differentiation Westfarmers Company have an advantage in that it has more revenue base as compared to others. This is due to fact that the company has diversified operations which enables it to operate within profit margin. The company has also been able to extend its operations in other European countries which can enable it to have a smooth entry into the market (Czinkota & Ronkainen, 2011). Buyer Analysis Westfarmers products have different market segments hence different buyers. In the coal market, the buyers are coal plants in Italy. The major coal plants started to increase their imports from 2006. The consumption of imported coal by the plants has been on increase having a high demand. The insurance demand in Russia and Italy has been positive with clients ranging from individuals to companies (Czinkota & Ronkainen, 2011). The major buyers of farm inputs are farmers in Russia and Italy; Italy is a major exporter of agricultural products. The country is a world top wine producer having a 22 percent share in the wine market. This shows how agriculture is important to the country (Zou, Kim & Cavusgil, 2009). Segmentation Segmenting the Westfarmers market in Italy or Russia requires grouping of the clients with common interest. Westfarmers can use mass marketing and offer the same market mix to insurance and farm inputs market. Through this, the company will be able to realize the benefits of economies of scale. The coal marketing in Italy requires using target marketing. This will ensure that the company is able to identify the different customers’ need since there are diverse coal plants in Italy. The Italian market can also be segmented using demographic basis. This is due to the fact that the country has high respect for social class (Zou, Kim & Cavusgil, 2009). Market selection Westfarmers Company is more suited to the Italian market as compared to the Russian market. This is due to the economic growth, foreign policy and political stability in Italy. Italy has also been involved in signing several treaties that has helped in strengthening their foreign relations and trade. Italian is more welcoming and the country has a high potential for the Westfarmers business. The major competitors in the Italian market are weaker as compared to Westfarmers. This is due to fact that Westfarmers have been in business for a long time and have diversified operations (Zou, Kim & Cavusgil, 2009). Marketing objectives Westfarmers can be able to achieve success in the insurance market. This is due to fact that the market is growing at a very high rate in the country. In the long run, Westfarmers insurance will be able to cater for most of the population in Italy. The market for coal is not great, but with time the company can be able to attain a large market. The major players have been in the market for a long time, hence to attain a large market share, it requires time. The same applies for the farm inputs due to competition from local companies (Keillor, 2011). The company should aim for large scale marketing. This is due to fact that the products being offered by the company are in demand in the country. The Main target markets for the products are farmers, industries and plants. Westfarmers will need to create a close relationship with the country’s population to enhance marketing. Entry strategy Westfarmers can enter into the Italian market through exporting and setting up production in the country. The coal market can be better carried out through exporting as the country has low coal deposits and depends on imports. Setting up a coal plant in Italy may lead to the company incurring high costs due to lack of deposits in the country. Coal plants are also costly to start. Insurance sector can be expanded to operate in Italy. This is due to fact that the cost of setting it up is low and its presence in the country will make it easier to market. The company can export industrial safety equipment to the country before setting up a company there. This will enable the company to access the reception of their products. The same case applies to the farm inputs. Exporting farm inputs to Italy will enable Westfarmers to study the reception of their products in the country. This is also due to fact that farm inputs face competition from the local companies (MüHlbacher, Leihs & Dahringer, 2006). Conclusion Market assessment is a vital part before entry into market to determine viability. Westfarmers being a global company can benefit by properly evaluating the business opportunities in new markets before entering so as to determine the entry strategy. Looking at Russia and Italy, both countries have well developed infrastructure and political systems. The fact that Italy has a better developed foreign policy makes it more attractive to start business than Russia. This combined with Italy involvement in signing trade agreement and treaties makes it a better market for Westfarmers to venture than Russia. Italians market offers more opportunities for Westfarmers and is less competitive compared to Russia. The main entry strategy that should be used by Westfarmers should be exporting and manufacturing internationally. For coal, farm inputs and industrial safety equipments, exporting would be more appropriate. The company should set up an insurance firm in the country since it is easier and less costly. References A'hearn, B & Venables, A 2011, Internal geography and external trade: regional disparities in Italy, 1861-2011, London, Centre for Economic Policy Research. Cavusgil, S. T., Knight, G. A. & Riesenberger, J. R 2012, International business: the new realities, Upper Saddle River, N.J., Prentice Hall/Pearson. Czinkota, M & Ronkainen, I 2011, The Future of Global Business a Reade, Hoboken, Taylor & Francis. 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