International Market Assessment, Selection, and Market Entry - Essay Example

Name: University: Instructor Date: Table of Contents Table of Contents 1 An International Market Assessment, Selection, and Market Entry Report 2 1.0 Introduction 2 2.0 Company and Product Background 2 2.1 Organisational goals and strategy 3 3.0 Comparative Country and Product Market Attractiveness 4 3.1.1 Germany Analysis 5 3.1.2 Pakistan Analysis 6 3.2 Economic factor 6 3.3 Social factors 7 3.4 Customer Trends 7 3.5 Consumer Analysis 8 3.6 Competitive Analysis 9 4.0 Germany Selection with Justification and Opportunity Statement 9 5.0 Marketing Objectives 10 5.1 Market Positioning 11 5.2 Market segmentation 11 6.0 Entry Strategy 12 6.1 Franchising 13 6.2 Exporting 14 6.3 Licensing 15 6.4 Strategic Alliances 15 7.0 Executive Summary 16 9.0 Work Cited 17 An International Market Assessment, Selection, and Market Entry Report 1.0 Introduction Basically, the resolution to go global symbolizes a vital commitment of the organisation to shift into an innovative line of business, and that is why entering into a foreign market is a process that must be taken bit by bit: getting market information, examining the information itself, as compared to the late entrants (Tan 1047). However, new entrants may as well achieve something by implementing different marketing as well as positioning strategies. Pioneers in nearly all industries, upon receiving incumbent status, are influential, but sometimes they become contented with what they have failing to notice the shifting or growing demands in the foreign market. In this regard, new market entrants can exploit gaps presented by such aging pioneers, or discover ground-breaking means to promote their services or product in the international platform (Yeheskel, Newburry and Zeira 615). Currently, there are two main ways of entering a new market: first, non-equity mode, which entails contractual and export agreements; second way is equity mode, an entails completely owned subsidiaries as well as joint venture. Basically, the market-entry method that presents the least risk level as well as the lowest control of the market is import and export. 2.0 Company and Product Background Great Wall Motors (GWM) Company Limited is a China-based automobile maker, and was instituted in 1976. The corporation is named Great Wall Motors Company subsequent to China’s Great Wall. Since 2010, the company became China's leading sport utility vehicle (SUV) maker while the cars in the year 2012 surpassed the 96,000 units mark. Statically, the company’s assets had amounted to 48.279 billion Yuan by September 30 last year (Bloomberg-Businessweek). At the moment the company owns Great Wall as well as Haval brands, covering automobile variety of pickup, passenger vehicle and SUV. With more than 30 investment subsidiaries, over 60,000 workers, four automobile manufacturing bases as well as a manufacturing capacity of more than 800,000 units, the company has created the autonomous corresponding capacity of core parts like transmission and engine. At the moment, the company is listed in major Stock Exchange across such as Shanghai and Hong Kong Stock Exchange (gwm-global.com). 2.1 Organisational goals and strategy Great Wall Motors’ Strategic plan is to serve as road map for coordinating and performing improvement, research, advertising the entire business tasks athwart the automobile industry as well as for heightening the enhancement of novel and thrilling endeavors rooted in recognition of domain in the automobile development prospect and setbacks. In this regard, GWM’s strategic plan exhibits an active or varying planning course of action and comes in with multidirectional study as well as an outline, mutually with an interconnected set of strategies and goals for achieving those goals. When the strategy was implemented, it was enforced in the veracity for examining and assessing the strategies concerning its efficiency and pleasant appearance (Gwm-global.com). GWM pursues the model of strategy that can be modernized and altered anytime when needed. According to Chen and Mujtaba (327), business strategy is just not any set tenet that any inauguration upon its establishment cannot alter: this point out that strategy can be tailored whenever desired. However, unless it is restructured or altered, every stakeholder must pursue that to accomplish the organization set goals. It is worth noting that strategy failure can take place in any business organization, but GWM by no means has ever endured strategy failure. In GWM, there is continuous supervision of the enforced strategy so as to recognize the efficiency and effectiveness of the enforced strategy. Given that GWM has disseminated management structural design, all its branch across the globe can implement and put into practice any detached strategy plan so as to level the localization pressure. GWM’s uppermost management goal has for all time been to generate the finest promising artefact for its customers. The main objective of GWM is to make use of the available wherewithal more productively and efficiently. Currently, the world is recuperating from consequences of depression and there has been a substantial alteration in the customers’ buying patterns, as a result, it inflicts a negative impact on the sales (gwm-global.com). Due to that organisation’s resource management as well as labour rates must be re-strategized after rethinking once more. Existing in the present economic trench, GWM understands the significance of utilising their available resources with caution. What’s more, maintaining customer contentment is GWM’s top precedence and thus extra concentrations is directed to quality services for consumer contentment. 3.0 Comparative Country and Product Market Attractiveness GWM marketers understand that products cannot be ‘all products to all customers’. Consumers have different taste, lifestyle and interests. Consequently, the revelation of the marketing concepts and the acknowledgment of consumer needs have pushed marketers to reason in terms of marketing targeting. The aimed market should contain people with same preferences and needs. Therefore, selecting target markets should be the first priority for a company during the marketing strategy. 3.1 Country Analysis 3.1.1 Germany Analysis Within the transport policy the specific issues that affects the motor industry in Germany includes subsidizing of certain transport modes and taxation of others, balancing the use between public and private transport through subsidies, promoting walking and cycling as healthy mode of transport and reducing carbon emission. According to Chen and Mujtaba (324), the transport system accounts for nearly 30% of carbon emission in Germany. With Germany being a signatory of the Kyoto protocol with a target of 12.5% carbon reduction, the government has been seeking concessions with the automobile manufactures for fuel efficient car. However the manufactures complains of the slow sales of the Hybrid cars since consumers prefers the conventional models. The level of taxation on road users has been on the increase in the recent years. The tax regimes have been targeting congestion and reduction of emission. To reduce congestion the government has introduced taxes to deter road users and rationing of the road space. The vehicle taxation system has pegged the exercise and company tax on carbon emission. This taxation system has favoured small and diesel cars. Such taxes have major impact on the choice of vehicles by road users and will obviously affect GWM. 3.1.2 Pakistan Analysis Political volatility in Pakistan is perceived to heighten opposition to the current government, mainly with regards to the mounting inflation and the astringent financial system. Even though, the government retains noteworthy support, it is improbable to give up authority soon. Basically, the government has not conceded from its nationalizations and interventions policy, as well as the risk of exclusion, expropriation, and contract dissatisfaction is soaring. Pakistan financial system remains profoundly reliant on bed linen, leather, garments, yarn, rice, l cotton cloth exports and revenues, which support financially the overpriced levels of expenditure on social programs. The rate of crime, especially for aggressive felony, is among the utmost globally, and illegal bunch of criminals are all-encompassing. Besides that, abducting is becoming a more and more serious setback while law enforcement is strained, poorly funded and often fraudulent. This will undoubtedly offer GWM a hard time to convince them to buy their product owing to the political instability in the country. 3.2 Economic factor The economic contraction occasioned by the economic crisis has reduced the demand for motor vehicle by 50% by 2009. Numerous car manufactures had to seek emergency loans from the government to sustain their operations. Furthermore, the Germany economy has become predominantly a service driven economy with the manufacturing sector posting a trade deficit year after year. This means that both Germany and Pakistan relies more on imported manufactured goods (including motor vehicles) than on the locally manufactured products. Labour cost and availability of skilled labour are also a major concern to the motor industry in Pakistan. The nature of the shortage is however a subject of debate with some claiming deficit of skilled mid level management while others citing shortage of engineers as the major problem. The labour shortage which results to the high labour cost is attributed to the lack of interest by Pakistani students on engineering courses. In addition, trained engineers opt to join the financial sector rather than the manufacturing sector. However, Hunt and Arnett (9) attribute the shortage of labour to the low wages offered by the motor vehicle industry in Pakistan as compared to Germany and other counties in Europe. 3.3 Social factors The population demographics, cultural differenced, influence by consumers lobby group and social responsibilities are among the social factors that affects the motor industry. These factors influence the consumer’s behaviour which in turn determines what type of vehicle to purchase. There is a demographic changes occurring in Europe where the population of people aged 45 years of age and above is increasing while that of the younger people is decreasing. The demographic and social trends are likely to reduce per capita vehicle travel demand in the future. According to Kim and Hoon-Young (156), the younger people do not attach much value to vehicle ownership. The preference of gadgets over vehicle and environmental worries are among the combination of factors that prevent young people from owning cars. In addition, travel by use of automobiles is declining in Germany due to high costs, increased urbanization and availability of other travel options. Though the older generation may still attach value to vehicle ownership their influence may not have a profound impact on the future demand 3.4 Customer Trends Vaidya, Bennett and Liu (1009) posited that Automobile customer trends have an enormous impact on motor industry. This is because most customers’ desire the latest trends on the automobile world with no one willing to remain unchanged. This fast automobile changing demands has brought about change in the business culture. Therefore, the enterprise responds rapidly to the consumer needs by planning new market strategies. It is worth noting that people are exposed to different lifestyles and the new automobile trends are changing seasonally. Therefore, as a motor enterprise, GWM investors should bear the knowledge that customer’s focus is in the trends. In this regard, the enterprise should facilitate the main flow consumers to purchase the latest SUV, which match with the current trends and should be at a reasonable price. In the present scenario, motor industry, especially SUV segments have proven to be naturally volatile. This is because the new trends, which keep springing up every season, have made customers preferences to change just by a wink of an eye. In this regard, the business environment keeps going through unparallel phase of change. 3.5 Consumer Analysis Customer analysis is the evaluation and collection of information related with market trends and customer needs, through dimensioning customer satisfaction, field experiments and customer focus groups. Hunt and Arnett (14) posited that the crux of customer analysis is customers should be treated likewise. There are customers whose weight is worth gold, these customers spend a lot and are frequent buyers. Some customers can make life more miserable, they inundate the company asking about certain products, which they cannot afford, and in brief, they go for cheap things and are infrequent buyers. Tan (1049) argues that in Germany market 20% of top consumers are the lifeblood of motor enterprise and are 80% contributors of the business profit. Whilst the remaining 20% contribute nothing at the bottom line, instead they are costly than what they actually contribute. 3.6 Competitive Analysis Increased rivalry in the motor industry has led to firms utilising technological advancement with an aim of securing a competitive edge in the market. Chen and Mujtaba (329) argued that Individual firms have devised new ways in which they can set up competitive advantages that will enable them to attain market viability. Such ways include advertising and branding their products, and This will help to win the customer attention and loyalty as well as to influence their purchasing behaviour. The Germany and Pakistan motor industry is as well faced with rivalry between the domestic and foreign firms that compete for market share from different regions of the globe. These include foreign manufacturers such as Tata and Chrysler from Italy, Toyota from Japan, and local manufacturer in Germany like Volkswagen Company. According to Yeheskel, Newburry and Zeira (621), this enables individual firms to acquire tactics for developing a competitive edge. The competitive edge acquired by a company may prove big enough to meet the global scale that may set the company apart from the rest in the market. 4.0 Germany Selection with Justification and Opportunity Statement Many countries from the western European region such as Germany have abundant factor condition which is greater or almost the same level as Pakistan. This can be attributed to the notion that the extent of industrialisation in Germany is similar to that of the Pakistan, even though Western Europe industrialised earlier than Pakistan and other Asian countries. However, they have undergone the same level of development and thus have at the moment similar levels of industrialisation. This poses a big competitive challenge to major industries in both countries, especially the motor vehicle industries. However, despite the factor abundance in Pakistan, Germany motor vehicle industry still merges as the most competitive car manufacturers. Competitive advantage of Germany manufacturing industry is mainly influenced by factors such as highly skilled labour force, workforce shortage, and availability of raw materials. The Germany motor Industry has shortage in skilled workforce in various industrial sectors. This shortage in workforce has contributed greatly to increased automation processes in the industry. In this respect, the Motor vehicle manufacturing industry among other major industries in Germany, has been able to carry out their production activities effectively and at low cost, with minimum wastage of resources. As a result, the manufacturers operates on the economies of the scale, unlike the competitors, hence they gain a competitive advantage. In Pakistan on the other hand, they produce their motor vehicles using human labour and thus incur high production cost. This hinder them from acquiring the competitive advantage over Germany motor vehicle manufacturing industry. For this reason, germany offers the best market opportunity for GWM due to its political stability, and conducive enviroment to franchise unlike Pakistan which is full of political votality and instability. Furthermore, Pakistan is perceived by US as a strong hold for Taliban Militia, thus, the risk of terrorism is higher than in Germany. 5.0 Marketing Objectives Different customers have different needs. Therefore, it will be impossible to satisfy all consumers by treating them alike. According to Hunt and Arnett (16), market segmentation involves recognition of market parts, which are distinctive from one another. In this regard, segmentation allows the organization to satisfy potential customer’s needs competently. The primary objective of segmentation should be to win and maintain the customers in, which the firm wants to serve. Nevertheless, customers segment themselves bearing no clue on how firms fragment their markets. Most customers as observed by Hunt and Arnett (18), when selecting between competing products, they prefer selecting products that satisfy their needs excellently than any other. Therefore, to win market share GWM should ensure that their products meet the needs of the customers. Basically, the international market can be too big for GWM to satisfy the needs of the customers. 5.1 Market Positioning According to Yeheskel, Newburry and Zeira (617) market positioning involves targeting the customers, and learning their purchasing behavior. Poor location and lack of personality, to the consumers is lack of inward pull. Therefore, a coherent market positioning can foster strengths, becomes conductive to the competitors and circumvent weakness. GWM through its operating strengths should manage to identify change in customers’ demands, thus it is flexible to reposition, depending on the customer change. As a result, its ability will enhance market adaptability and discovering of new opportunities in the market. The company can select the targeted customers through subdivision of the market scale and developing latent force. 5.2 Market segmentation According to Hunt and Arnett (13), the purpose of market segmenting is to permit the sales programme to focus on the smaller groups of prospects that most likely purchase the apparels. Segmentation drives the business into maximum profits. Basically, the key factor to prosperity for most businesses in the present market place is discovering subtle differences to offer a business a cutting edge. Businesses that aim speciality markets efficiently promote its products and services as compared to a business aiming at an average customer. An opportunity in marketing heightens when customers and groups with different needs are segmented. Nevertheless, market can be segmented using a variety of factors, which include demographic bases, geographical bases, behavioural bases and psychographic bases. In addition, the business should analyse the needs of different segments before deciding their own recess. To be efficient in market segmentation the company should bear the following in mind, the segmented markets should be open to the enterprise, and each segmented parts must be large to furnish a solid base for the customers. In addition, the business should be in a position to separate the segmented group from the marketing plan. 6.0 Entry Strategy It is apparent that in global competitive setting, the capacity to create an international organisational competence is the fundamental element that can assist GWM become accustomed to the transitions in the active setting. While the hasty pace of globalization continues to make the conventional methods of performing business extraneous, it is imperative for business managers to have an international state of mind to be successful. While the hasty pace of globalization continues to make the conventional methods of performing business extraneous, it is imperative for GWM managers to have an international state of mind to be successful. Apparently, business globalization has brought about the materialization of international strategic management (Tan1047). Undeniably, an integration of foreign business as well as strategic management will give rise to strategies for international collaboration, but there are barriers erected across the road. However, the setbacks brought about these barriers can be handled by joint ventures anchored in joint benefits of the parties drawn in. What’s more, suitable effectual communication remains to be the fundamental factor for international strategies given that what is suitable and valuable in one culture may possibly be unproductive and inappropriate to the other. 6.1 Franchising Franchising is an excellent market entry strategy, which is akin to licensing apart from the fact that the company offering franchising services directly takes part in the control and development of the marketing plan. In this regard, the franchising system is a system wherein franchisees (semi-autonomous business owners) reimburse royalties as well as fees to franchiser (parent company). Contrary to licensing, agreements based on franchising appears to be more tenacious prompting the franchisor to provide a less subtle resources and rights package which normally consists of: tools, decision-making systems, primary trainings, operation manual, consists of things likes trade secrets and intellectual property, franchising on its part it is restricted to operating experience and trademarks of the company (Pehrsson 759). International franchising will enable GWM gain such as low cost and political risk and permits concurrent growth into various countries across the world. In addition, partners who are wisely chosen bring management capabilities and fiscal investment to the host country. One method of franchising that GWM can use is through product distribution franchises, whereby the franchisor (GWM) licenses its logo as well as trademark to the franchisees, but on average fails to offer them with the whole system for business operation. This type of franchising is widely notable among the automobile dealers, soft drink distributors, as well as gas stations. A number of well-known product distribution franchises entails: Ford motor Company. Even though product distribution franchising presents the biggest proportion of whole retail sales, nearly all franchises offered nowadays are business format franchises. Franchising is the best market entry strategy that can be used by GWM; however, other methods appropriate are briefly discussed below. 6.2 Exporting Exporting is a market entry strategy, and can be defined as a process of selling the company’s products or services to a foreign country. Basically, exporting can be categorized as either indirect or direct. For indirect export, goods are distributed overseas by specific agents and GWM does not have any unique activity related with foreign market, since the sale overseas is perceived as the local one. For such reasons, Chen and Mujtaba (325) posit that it is hard to state that indirect export is a global-based strategy. Based on direct exporting, the company happens to directly participate in promoting its services and products in international markets. According to Pehrsson (761), the export symbolizes the simplest method for penetrating into international markets. Organization’s participation in export functions is distinct, as we are speaking with regards to active exporters (when exporting is instigated by the supplier, who has an export plan as well as an appropriate business plan) or passive exporters (when carrying out a business overseas is stimulated by the high demand on the international market, indicating that the business is instigated mainly by the importer). In essence, the export activities determinants are knowledge and improbability influences; strategic effects; and firm-specific as well as behavioural effects. Skills and knowledge concerning the exporting behaviour may possibly be owned or accrued by the business organisation in due course. I concur with Tan (1052) assertion that knowledge plays a fundamental role in exporting, as company’s participation in foreign markets is mostly a steady process. All through the early days of exporting, concentrate more on foreign market, whereas augmented participation in international market facilitates diversification to various markets. Importantly, as the export knowledge of GWM heightens, the ambiguity factor reduces, and this knowledge permits the recognition of existing business opportunities. 6.3 Licensing Another noteworthy market entry strategy is licensing, which can allow GWM to enter an international market with less or no risk. Essentially, the global licensing companies the licensee copyrights, trademark rights, or exclusive rights on products and processes. In response, the licensee should create the products of the licensor, promote these products in his allocated country and reimburse the licensor charge and percentages normally connected to products sales volume (Tan1051). This form of accord is usually hailed by international public authorities given that it comes in with technology. International licensing entails the contracting of market know-how and knowledge and occurs when a business organisation offers, for a specific fee-royalty, know-how required by another business organisation so as to run a business internationally. Chen and Mujtaba (328) outline elements involved in licensing a company that desires to go international: operations know-how, a brand name, access to exclusive rights, technology for production process, and trade secrets. Fundamentally, licensing may possibly be eye-catching when host nations limit foreign direct investment (FDI) or imports, or the time when the market is undersized and technology feedback prospects are far above the ground. Benefits of licensing include easy access to the perceived complicated markets and low resources commitment as well as low risk on capital. Other benefits include details pertaining to the performance of the product and competitor behaviour in various markets is obtained cheaply and enhanced service and delivery levels in the markets locally. 6.4 Strategic Alliances Strategic alliance presents an excellent market entry strategy, and is an idiom utilized to portray a diversity of supportive agreements flanked by various companies, like joint research, minority equity contribution, and formal joint ventures. Fundamentally, the contemporary form of strategic alliances is turning out to be trendier and has three unique attributes: they are often flanked by business organisation in more industrialized countries; they concentrate mainly on generating novel technologies and products instead of distributing accessible ones; and finally, they are usually just generated for temporary durations. According to Tan (1054), technology exchange remains to be the main goal for numerous strategic alliances, given that technological modernisms are rooted in interdisciplinary progresses making it hard for a single company to have the essential capabilities or wherewithal to carry out its own efficient research and development (R&D) efforts. In addition, this is braced by more myopic life cycles of the product and the desire for various firms to remain competitive during such innovation. Pehrsson (764) holds the opinion that the utmost drawback of strategic alliances is competitive partnership risk, given that a number of strategic alliances engage companies that are in ferocious competition outside the explicit alliance scope. As a result, it generates the risk that some of the alliance associates will attempt to exploit the alliance to generate a competitive advantage over the other. 7.0 Executive Summary As the increased competition in the industry has enabled the industry to become better adapted to the declining demand patterns, the study seeks to understand how a market entry strategy will enable the industry to gain a competitive advantage over other industries in other regions of the globe. The study seeks to prepare a comparative international market assessment with selection of a market and development of appropriate entry strategy. This will be achieved by a critical analysis of company and product background, comparative country and product market attractiveness, market selection, marketing objectives, and entry strategies. The study outline a number of market entry strategies that can be used by GWM, however, franchising offers the best entry strategy for GWM in Germany, which is the selected country. 9.0 Work Cited Bloomberg-Businessweek. Great Wall Motor Company Ltd. Announces Unaudited Consolidated Earnings Results for the Year Ended 31 December 2013. 24 January 2014. 7 February 2014. . Chen, Lisa Y and Bahaudin Mujtaba. "The Choice of Entry Mode Strategies and Decisions for International Market Expansion." Journal of American Academy of Business, Cambridge 10.2 (2007): 322-337. gwm-global.com. Company Overview . 2013. 7 February 2014. . Hunt, Shelby D and Dennis B Arnett. "Market Segmentation Strategy, Competitive Advantage, and Public Policy: Grounding Segmentation Strategy in Resource-Advantage Theory." Australasian Marketing Journa 12.1 (2004): 7-25. Kim, Taehyun and Lee Hoon-Young. "External validity of market segmentation methods." European Journal of Marketing 45.1/2 (2011): 153-169. Pehrsson, Anders. "Strategy competence: a successful approach to international market entry." Management Decision 42.5/6 (2004): 758-768. Tan, Danchi. "Foreign market entry strategies and post-entry growth: Acquisitions vs greenfield investments." Journal of International Business Studies 40.6 (2009): 1046-1063. Vaidya, Kirit, David Bennett and Xiaming Liu. "Is China's manufacturing sector becoming more high-tech?: Evidence on shifts in comparative advantage, 1987-2005." Journal of Manufacturing Technology Management 18.8 (2007): 1000-1021. Yeheskel, Orly, William Newburry and Yoram Zeira. "Significant differences in the pre- and post-incorporation stages of equity international joint ventures (IJVs) and international acquisitions (IAs), and their impacts on effectiveness." International Business Review 13.5 (2004): 613-636. Read More