Barina Line Product Diversification Proposal - Term Paper Example

Barina line product diversification proposal. Name: Tutor: Institution: Date: Executive summary. GM Heldon Company has been in operation for more than 50 Years. The company is a subsidiary company in Australian for a US company. Currently the company operates in Australia with headquarters in Melbourne. The company serves both international and local customers. In addition to that, the company used to operate locally but the products were not performing well in the market, hence they started exporting products to different areas. Currently the company is opting to diversify its products internationally and it target India as it has emerging economy. It is therefore anticipated that there is very high demand of automobiles in the country. The paper therefore outline on how product diversification for India could be achieved by analyzing the targeted market, identifying the niche and using the best marketing mix to enhance product performance in the market. Given the fact that the company has not been selling products in India, the company is also required to identify international environmental forces, mode of entry, entry strategies in relation to how they could be analyzed and utilized effectively to enhance achievement of the organizations objective as the company aims at selling its products to India in from 2014-2017. It is predicted that the strategy will lead to increase in profit margin. Table of Contents 1Background 4 2International and domestic marketing environment analysis. 5 2.1PEST Analysis. 6 1Legal environment 7 2Political environment 7 3Economic factors 8 4Technological factors 8 2.2.SWOT Analysis. 9 1Weaknesses 9 1Opportunities and threats 9 3Estimated market size and gap analysis 10 4Expected sales and market share analysis 11 5Market entry mode analysis and strategies. 11 1Market entry strategies 12 6International market mix elements. 14 7Time frame 17 Buckley, P 2003 the changing global context of international business, Palgrave Macmillan, New york. 18 Dewan, J & Sudarshan, M 2010, International marketing management, Discovery publishing house. 18 Doole, I., Lowe, R 2005, International marketing strategy: analysis, development and implementation 18 Grant, R 1987, Multinationality and performance among british manufacturing companies. Journal of international business studies,18(1),79-89. 18 Hill, C 2001, international business competing in the global market place, Irwin McGraw-hill, New York. 18 Hough, J & Neuland, E 2000, Global business environment and startegies: managing for global competitive advantage, Oxford, Capetown. 18 Kim, W & Hwang, P 1992 ‘Global strategy and multinational entry mode chaoice’, Journalof international business studies, 23(1): 29-54. 18 Kotler, P 2000, Marketing management, New Jersey, Prentice hall. 18 Lymbersky, C 2008, Market entry strategies, Management laboratory press, Hamburg. 18 Sanlay, R 2001, International management: a strategic perspective, New Jersey, Prenticehall.. 18 1 Background Barina line products have been in the market for the past few years. Barina line has different brands of products, which include barina Sparks, barina classic, and Barina. Barinas line products are compact and small cars, which have different transmissions, which include manual, automatic, semi- automatic, and CTV. All the products ranges at different prices depending on the body make style and transmission type. There are varieties of small and compact cars in GM Holden Company and the products are very cheap to maintain. The company has been improving and enhancing their products to improve their market position in the local market with an aim of selling abroad. The products have powerful engine, cruiser control and allay wheels. In addition to that, it has ESC standards and ANCAP safety. Compact cars in the company especially in all-new barina line products stands out against other products in the market. Company products are subject to improvements as compact and small cars have improvements, which makes it stand out as a very crucial and competitive product. The compact cars are good looking and of variety and with unique features. The product repairing cost is very low with barina line products being rated as the cheapest products to repair and has maximum car safety. The company has been exporting Barina line products in different places in the world especially middle east which is a major export region of the GM Heldon Company, which has enhanced the company’s performance. 2 International and domestic marketing environment analysis. Marketing environment analysis is very crucial especially for companies, which want to start international marketing. Companies move internationally as a way of increasing their growth strategy. In regions like Australia local market is limited leading to challenge related to growth, therefore large companies prefer diversifying internationally to increase geographical size of the market. Holden Company is Australia has therefore considered a need to enter international market. The company aims at enhancing its products market in china as a way of increasing the sales volume (Dewan, 2010). Prior to that international marketing analysis will be necessary to enhance the way the company will undertake its international marketing considering limiting environmental factors. International marketing diversification will require clear understanding of the complexities and implications of the India market as far as compact and small cars market is concerned. It is also necessary to have detailed information on different international marketing environment variables by understanding how a particular variable could affect international company marketing activities. 2.1 PEST Analysis. 2.1.1 Social and cultural environment. Cultural and social environment impact on the international market is very extensive. Culture, religion, and social issues all impact individuals perception towards a product affecting the buying pattern behavior. Social cultural environment analysis will therefore assist in enhancing determination of how the prospective customers from international market are different from the customers from the local market, hence determining the potential of successful product diversification. Better understanding of the social cultural environment enhances market success. Some people may be preferring compact and small cars from barina product line while other don’t, therefore social and cultural environment will be analyzed effectively to ensure that before diversification to India the peoples culture and way of living is well understood for effective success. Language difference which could impact product market in relation to the name of a product as one has to first find out the meaning of the product name using the targeted country language as some products might have names which could drive customers away (Doole, 2005). Demographic factors like populations and population’s distributions impact the size of the targeted market and the location of business. Therefore, for effectively diversification it will be necessary considering the social/cultural environment. 1 Legal environment Legal factors like international law and domestic laws affect the process of diversifying products internationally. Local domestic laws pertaining to entering international market limits company’s ability to diversify their products internationally. The laws restricting entry to international market are viewed to make sure that the company adheres appropriately as required. International laws are to ensure that there is no barrier, which could limit the company’s ability to market its products internationally. International laws related to patent rights, treaties, agreements, international monetary fund and world trade organizations should be adhered to effectively hence they should always be considered for effective international diversification. 2 Political environment It involves international or national political factors, which could affect operations and decision making in an organization. Politics therefore influence international marketing in essence of whether one has to invest in a certain region and how one could develop market. Government decisions towards business and eventually changing of the marketing regulations could influence international marketing negatively. The government may restrict level of investment, choice of local dealers as well as percentage of ownership. Therefore, there will be assessment of how government of India will affect the process of marketing our products in India and assess further on how it could influence our company’s performance. 3 Economic factors Different levels of economic development in different regions put pressure on companies especially in developing marketing strategies across the international market. Divergent economic levels of development make it difficult to make a still strategy especially in pricing. India is among the emerging regions, which are becoming economically powerful with very high demand of products ranging from automobiles to cellphones. This is an indication of the international market opportunities in the region. International marketing involve transaction which requires currency exchange therefore it will be necessary considering how currency risk would impact the sales proceeds after diversifying our products to India. It will also be appropriate to identify the best currency to use in the company’s transactions. In addition to that, there need be consideration of the countries’ GDP, level of employment, inflation level and customer’s income as this will assist in predicting the expected market share as well as prospecting the market size. 4 Technological factors Technology has advanced enhancing and ensuring production of high quality products in the market. Holden Company has been utilizing the advanced technology possible. Moving to the international market it will be necessary for the company to identify the level of the technology in India and how it will be crucial in our firm and whether it is adequate in production and in enhancing our products to cater for the customers need. There will also be identification and communication on how internet issues are perceived in India. Effective technological changes will therefore guarantee adequate success in our products. Hence, level of technology will determine the competitive edge of local companies in the region. 2.2. SWOT Analysis. 2.2.1Strengths Holden Company has been in operation for several years and has professional staffs that are expertise in manufacturing and marketing of the Barina Compact and Small car products. Add on that the Company has been offering high quality products manufactured under new technology as the company embraces the use of advanced technology. The company products are unique and competitive in the local market. The company has adequate finances, which will enhance its diversifications internationally. 1 Weaknesses The company products though unique, are not differentiated. The location of our business possess is not strategically okay which makes the company not to produce as required. On the other hand, the company has bad reputation especially when customers refer to the Barina car products as expensive to maintain. 1 Opportunities and threats The company has an opportunity of entering into an international business as its unique products are recognized internationally. In addition to that, the company has products, which are very competitive. The company has also embraced the use of internet, which has improved its market share in the market. The company has been experiencing threats from competitors and new market entrants. There has also been a price war where by each automobile industry prices its products on lower price than ours making it difficult for the company to adjust, though the company has been striving to do away with the price war and increased level of competition. 3 Estimated market size and gap analysis Supply and demand analysis will be conducted to identify whether there will be existence of the market imbalance due to product diversification. Due to diversification, the market size is expected to increase hence, increasing the gap, which exist between quantity of barina line products demanded, and amount supply at certain period. Though planning market share growth could be a bit difficult due to technological changes, change in patterns of demand, economic uncertainties, and continued change of competitors’ strategies the company is expected to increase its market size after diversifying internationally in India. India is anticipated to be a country with emerging economy, which has higher demand in automobiles therefore the company, will be in a position to capture market 30% of the market size between 2014 and 2017. Holden export to other regions like New Zealand for the past years have been success therefore it is anticipated that diversifying barina line products internationally will increase company’s profitability. On the other hand there will be increased gap between the quantity supplied and quantity demanded due to increase in potential customers as demand will be higher than supply hence the company will have to increase productivity reduce the gap for it to continue existing in the market. Gap analysis will be identified to uncover and identify opportunities related to sales and identify the right market segment, which is underserved. The organization therefore makes decisions based on the predicted information to ensure that all potential and upcoming customers’ needs are met. 4 Expected sales and market share analysis Barina line products have been performing well in the Holden Company. The company sales have been increasing since the company started marketing its products internationally. In the past, the company local market was performing poorly due to increased level of competition from other local and international company. In august 2012, the company reported 1225 sold units and 10.9 per cent light car segment share. Enhancing our productivity and diversifying our products in India it will lead to increased level of units sold as India market share is projected to be 30 per cent by the end of 2014-2017 periods. Increase in market share will therefore lead to increased sales hence expected sale of compact and small car is 1000units per year in India. The company will put the required strategies to ensure that the company objective is met, and by 2017, the company will have achieved extensive growth in barina line of products. 5 Market entry mode analysis and strategies. Internationally companies are achieving and experiencing competition from global and local markets, which are composed of new emerging investors due to improvement in technology. Competitive complexity is identified because of international companies sourcing components from global regions and internationally. International environment put pressure on the management of international market than it could be experienced when operating domestically (Buckley, 2003). 5.1. Market entry mode analysis. Entering international business require proper planning and clear identification of the best entry mode which could be used effectively in enhancing organizations objectives. In diversifying barina, product line in India then strategy and mode employed should always offer best results at the end of the projected period. Therefore, for the international marketing to be effective entry mode should also be one, which aims at reducing cost, enhancing sales hence increasing the product performance in the market. Choice of an entry mode is very crucial when a company decides to sell its products internationally. The company will therefore decide to diversify its products internationally by exporting to the targeted country. As the company has not been selling its product to India, it can decide to start selling the products either through dealers or through selling direct to the customers. On the other hand, the company will decide to enter into ventures with the automobile company’s in a host company. Joint venture is whereby, one subsidiary could be serving two companies but one of the company mother plants is located outside the subsidiary country of operation (Grant, 1987). Contrary the company can decide to employ Greenfield mode, which will involve setting up a new plant in the targeted country hence have a completely owned subsidiary. In addition to that, company can decide to offer license or franchise to a certain firm in the targeted country, which could be marketing or manufacturing the organizations property on its behalf. 1 Market entry strategies Market entry strategy is a way through which a company could enter through a certain specific mode. Having decided on the specific mode the company will therefore choose, strategies based on the mode identified. Different strategies are more effective in some modes and less effective in others hence it can be difficult achieving the organizational objectives. Therefore having set the company’s objective it is necessary to identify and come up with the strategies that the organization could use in achieving the targeted objectives of diversifying compact and small car products in India. Strategies will be chosen on base of how it will enhance and help the company in segmenting and targeting the international market. Strategies framed in such a way that they will help the organization in taking advantage of the opportunities globally and meeting involved challenges (Lymbersky, 2008). Strategies adapted will depend on the degree they have in enhancing achievement of the organizational objectives. First, the company will opt for diversification of the products through product differentiation this is where by the company will have to offer differential and unique products to the targeted customers. The product should always be produced in such a way that the targeted market perceives it as different from the competitors’ products (Sanlay, 2001). The product should be different from the competitors product in price, quality and technology used should current as this assures customers quality product. Unique features will therefore enable the organizational product to standout hence could be offered at prices higher than competitors’ price hence increasing the profits (Kotler, 2000). As with the products and services the company will also ensure that, the associated staffs are unique and the company reputation remains good always. On the other hand, the company will conduct a research to survey and identify potential customers in the area. The research will assist the company in identifying the customers’ perception hence making the congruent choice. On the other hand the company enter international market by first creating brand awareness through promotion as this will assist in reaching several customers which could not be identified under normal circumstances. In addition to that, the company could make entry to international market by first identifying the best market niche and segment. Offering competitive prices to customers will be form of strategy which Holden company opts to use to ensure effective success in international diversification. Price as an element of marketing mix should always be considered to ensure that the company does not offer their commodity at very high price chasing all the prospective customers away (Hough and Neuland, 2000). The company will therefore ensure that it offers their product at prices that are lower than their competitors’ price. The company will ensure that it remains to be the cost leaders by producing products at reduced cost by embracing the best technology possible. Low production cost results to higher profits and is associated with good process engineering making sure that products are manufactured easily. Lastly, the company will enter international market by creating union with host government to enhance trust. With enhanced trust, customers will be free as trust is very crucial especial when marketing highly valued products. 6 International market mix elements. With current globalization trend it will be necessary for the organization to diversify its barina line products internationally to remain being competitive in the market otherwise the company will be chased out of the market. Increased globalizations and local competition pressure could lead to poor performance in the market. Entering globally therefore, it requires consideration of the elements of market mix termed as international marketing mix when making decisions concerning marketing products internationally (Hill, 2001). Major decision required in having international product diversification success is the consideration of the product mix. Developing adequately and effectively marketing mix guarantees organization success in meeting the targeted customers’ needs and objectives of the organization hence improving the organizations performance. After a company comes up with an idea of marketing internationally it should always consider adapting or standardizing the market mix (Kim and Hwang, 1992). Different marketing mix will therefore be used in diversifying barina line products in India. First, there will be consideration of the 4Ps of market that include price, place, promotion, and product. Before diversifying internationally the organization will have to identify the exact market for its product, the benefits a potential customer expect from such a product, how the company has to position its product in the market and lastly how the product stands out from the competitor product. The company will therefore ensure that it produces commodities, which are of very high quality, different from competitors’ products and made to meet the clients need without incurring high usage cost. Barina line product will be produced, to ensure that it will minimize the cost associated with the Automobile maintenance and operation by ensuring that the motor vehicles spare parts are readily available and at affordable and reasonable cost. There will also be improvements and developments of new models to ensure that customers actual, augmented and core values derived from the products are achieved maximum. This will enable the organizations’ product to increase its customer base and market share. Promotion passes the information related to the product to the new user. Extensively promoting the commodity will lead to increased number of potential customers aware of the product existence hence it could be anticipated with increase in sales value in future. The promotion cost should always be controlled to ensure that the organization get maximum profits. Sales promotion will be done through advertisement, public relations, direct sales, and sales promotion. The value attached to a product determines whether the product will be sold in the market or not. Different pricing modes could be used in pricing the commodity depending on the products state and growth level of the company. Penetrative pricing is whereby a product is valued at price less than competitors’ price to capture a certain portion of market share after introducing new products. On the other hand, economy-pricing commodities are valued at prices other than the cost price. Holden has employed psychological pricing method mostly used in Automobile industry, in Barina line products, which is useful in pricing commodities after diversifying internationally. Barina line products will be sold through dealers or direct to customers to avoid price adjustments that occur due to involvement of several businesspersons in the distribution chain. The company will ensure that products are taken at the right place and to the targeted customers at the right time. Lastly, the company will offer support services to the customers especially after sales services, customer care, information and data processing services, and aid assistance. The company estimates that its prices will be slightly higher than the current prices at mother firm and the product price will be estimated depending on the type of entry mode an organization decides to adopt after analysis. Product anticipated budget. Product Barina line units manufacturing cost per unit $23,000 units per year 10,000 Selling price. $26,000 projected cost between 2014-2017) $920,000,000 projected sales between 2014-2017) $1,040,000,000 7 Time frame The international product diversification is required to put forward between 2014 and 2017 where by the company is expecting to have achieved its target through the marketing entry mode which will prove being effective in enhancing the organizational goals of expanding the market size. References   Buckley, P 2003 the changing global context of international business, Palgrave Macmillan, New york. Dewan, J & Sudarshan, M 2010, International marketing management, Discovery publishing house. Doole, I., Lowe, R 2005, International marketing strategy: analysis, development and implementation Grant, R 1987, Multinationality and performance among british manufacturing companies. Journal of international business studies,18(1),79-89. Hill, C 2001, international business competing in the global market place, Irwin McGraw-hill, New York. Hough, J & Neuland, E 2000, Global business environment and startegies: managing for global competitive advantage, Oxford, Capetown. Kim, W & Hwang, P 1992 ‘Global strategy and multinational entry mode chaoice’, Journalof international business studies, 23(1): 29-54. Kotler, P 2000, Marketing management, New Jersey, Prentice hall. Lymbersky, C 2008, Market entry strategies, Management laboratory press, Hamburg. Sanlay, R 2001, International management: a strategic perspective, New Jersey, Prenticehall.. Read More