IBMs Marketing Mix in Germany - Case Study Example

Overview

The tremendous growth of information technology industry in the last decade has foreseen increased competition among key global players including IBM and entry of other small business enterprises. Every business in the industry looks forward to make exploit the wide gap in the market following a rise in demand of technology across the globe. IBM is among the organizations that seek to expand its business in established and emerging markets. The company has revealed significant interests in exploiting the German market and has developed a new marketing mix for the target market in Germany. This paper will develop a new marketing strategy for IBM in Germany through an effective marketing. Furthermore, the article will examine some of the strategic challenges that IBM will face in the course of exploiting the target market in Germany.

Competitive Analysis

It is reported that Germany is one of the leading drivers of economy in Europe. Worldwide, the country pose as a great influence in global economy. It accounts for the share of trade in Europe. These conditions have attracted many companies especially in the information technology industry in Germany with an intension to adventure in the vast market. According to Friedrich (2011) Germany is Europe’s largest software market and has remarkably resisted the global economic crisis in the recent past. The annual growth rate of Germany’s software market between 2010 and 2014 has been recorded to be at 6.3% (Friedrich, 2011).

Oracle, Microsoft, IBM, and SAP, a German-based largest software companies have practically expressed their interests in the adventure for Germany’s information technology market. Additionally, the presence of highly specialized and dynamic small and medium-sized entrepreneurs in the country including the renowned Mittelstand means that the industry is highly competitive. Foreign competitors like Microsoft and IBM need to create a strategic entry to the German market to become dominant. It is not ‘a walk in the park’ since the present competition from the established SMEs in the country prove to be dire threats to the new entries (Troillet, 2016).

Industry Analysis

Compared to its European neighbors, Germany’s economy stood still throughout the 2010 economic crisis because of its diversified nature. The information technology industry is said to be one of the essential catalysts in making German economy remain resurgent. Several segments in the industry including mobile data services, online games, and outsourcing services recorded positive growth rates when a downturn was experienced. In terms of the volume of revenue base, Germany enjoys 20% of total European Union’s market. A turnover of 128 billion euros was recorded in Germany in 2009. Globally, the German information technology industry is ranked fourth after China, Japan, and the USA. The industry demands 5.3% whereas China, Japan, and the US demand 7.1%, 8.8%, and 27.8% respectively (Troillet, 2016). In the near future, German IT industry is forecasted to grow in market value. As Troillet identifies, the IT industry remains to be the largest contributor to German’s economic growth (Troillet, 2016).

Market Analysis

The German IT market is attractive for IBM following the demographic figures of 82 million inhabitants and over 30 million households (Boeing, 2013). These households are reported to receive three to four direct mail on average per week. The life expectancy in Germany is approximately 80 years. The densely populated country has made life comfortable for most people. Since most people are employed in the country with good salaries, it is easier to afford luxurious life. Technology has been vastly adopted my most Germans to keep their lives comfortable. This means that almost all German inhabitants are potential buyers of IBM’s communication technologies ranging from computers and software. However, IBM will be primarily targeting manufacturing agents, supermarket chains, engineering firms, new-end users, and distributors. The imminent aim of the company to reach these businesses will be to furnish them with advanced technological tools consequently upgrading their systems for remarkable prosperity in their respective industries (Boeing, 2013).

From the industry analysis, it is evident that there exists opportunities in the German market for IBM. On an account of value, the German IT market claims an estimated 15% of the total European market. UK and France follow distantly in the second and third positions in the market. According to the European Information Technology Observatory, the German IT market revenue grew by 5.7% to 19 billion euros in 2014. The trend in market growth is expected continue to 2019 (Deacon, 2003).

The increasing digitalization of different industries, businesses, and life with advancements in various technological fields like cloud computing and big data, has further increased opportunities for IBM in the German IT market. It is important to note that there is an increasing potential security risks following the technological advancements in different sectors. The risks range from computer viruses and worms to hacking. Therefore, this means that IBM will remain relevant in its business because the demand for solutions, such as signature verification, virus scanners, encryption, and firewalls is high in the market (Deacon, 2003).

The Pricing Strategy

Harmon (2012) argues that “No tool in the marketing toolbox can increase sales or destroy demand more quickly than pricing strategy” (Harmon, 2012).The decision in pricing in the new German market is a critical decision for IBM especially considering the fact the company is just launching new products in the country. Following the nature of the German IT market, the Value-based pricing strategy will be appropriate for IBM. This strategy ensure the company of long-term benefits. It is majorly based on understanding how the company product alternatives are valued by the customers and how they arrive at prices or will to pay.

However, before carrying out the pricing strategy, it is vital to consider reduction of products’ prices upon the entry into the German market. Lower prices of hardware products and software services will attract attention from customers. Buyers will prefer the cheap and quality products and services from IBM, a new entry, over the pioneer organizations’ higher priced products. After the company secures a recognized position in the market, a value-based pricing strategy is introduced with a main purpose of achieving profit and meet cover costs. With the execution of the strategy, IBM will looking to price the products and services in accordance with the value requirements of the customer. The primary objective of using value-based pricing strategy in the German market is to ensure more profitable pricing for IBM while still capturing more value (Sullivan, 2005).

For cloud services, pay-as-you-go model will be more favorable. Application providers and other IBM clients will have to pay for the company’s software, including IBM DB2 and WebSphere Application Server as they use it on a monthly basis. This will be less costly to the users hence luring them to prefer the company’s IBM’s cloud services other than those provided by the local SMEs (Gohring, 2011).

Product

In a marketing mix, development of a product especially in a foreign country is mostly marred with several challenges. Cultural differences and customer preferences are the two factors that should be considered when developing a product in a new market (Baker, 2012). Germany is a country that is largely characterized by unique cultural practices including punctuality, privacy, and industriousness. Germans embrace time management with increased emphasis. It is also important to note that the population of Germany incorporates citizens with different racial backgrounds. Since IBM will be engage buyers and suppliers from different cultures, it becomes vital to integrate inclusive measures in the marketing strategy (Thompson, 2015).

I presume that by avoiding being regarded as an ethnocentric firm, IBM will manage to beat the negative notions fostered by the locals in regard to cultural sensitivity. There is need for IBM employs to be aware of the cultural differences among locals and learn the German language. In fact, German employees working for the company are the most favorable to be deployed in the country to market and promote the products. Additionally, IBM need to apply more efforts into becoming a polycentric organization in the new environment. Methods of conducting business and company policies need to be adjusted so that the company will appropriately fit in the country. Employing the nationals in the company in a bid to utilize their industrious culture will be productive for IBM (Thomson, 2010).

To be in a position to beat the challenges associated with differing customer preferences among the customers, I presume that IBM will ensure quality products and services for the clients. This will help in winning their loyalty. Innovation of technologies like the IBM Customer Experience Suite will also be important in the company’s effort to adapt to the customer preferences. The IBM Customer Experience Suite is a kind of software that enables the company to build brand loyalty and anticipate customer needs including packaging requirements, colors, and product lines. Due to the diversity of clients in the country, instructions and guidelines in websites and product manuals will be typed in different common languages used in the country like German.

Place

The best location chosen for IBM business in Germany is in a town known as Ehningen close to Stuttgart. The operations of the company will be centrally conducted in a building found along the Deustschland Street, block 2897 west. This location is strategic for IBM’s business because it is at the center of many surrounding business buildings including the Commerzbank Tower. Most of the surrounding buildings host offices for large organizations in the country. According to the survey conducted by the marketing team, 85% of offices in the surrounding buildings embrace the use of technology in communication. IBM being the only neighboring company to the commercial buildings in Innestadt district, it will enjoy the monopoly hence marking a favorable platform to begin marketing the business in the country.

The vast and complex nature of the IBM’s operations requires an effective and efficient management of distribution and chain of supply. The selected location in Innestadt district will be the center of the company’s products and service distributions. However, the company will contract several retailers and distributors in the district and across the country to spread the products and services. Company’s supply managers, most of whom are of German origin, will facilitate the coordination of process of distribution across the country in accordance to the demand of the products. The mode of entry into the German market that will be used by IBM will be through licensing. This is a cheap way of reaching new markets by the parent company which are not easily accessible by exports (Kalyanaram, 2010).

Promotion

Since the company is making an entry into the German market, it will be necessary to increase awareness of the company’s products and services across the country. Media will form a primary platform to market the products on a national scale. Advertisements through national televisions and radio stations will be ideal. Additionally, the effect of advertising the company’s products on social media cannot be foregone. Social media elements, such as Facebook, Twitter, and Whatsapp will be used in promoting or increasing awareness about the company’s entry into the market. Billboards will be placed in the streets to further spread the message about IBM’s products (IBM, 2014).

Conclusion

The fact that the information technology industry is adversely growing globally means that there exists immense opportunities for global players like IBM and new entries in the business. Germany in the recent past has proved to be a strong market not only in Europe, but also across the world. IBM require a strategic marketing plan incorporating integrative marketing mix to effectively exploit the vast German market. As a consumer in Germany, and need IBM’s cloud service for business, I will anticipate to see several impressing approaches used by the company to convince me. This is because there exists a stiff competition in the German IT industry. First and foremost, I would like to have detailed information about the cloud service offered by the company through the media or any other platform. Secondly, I will consider the pricing of the service and obtain information from first-time users of the cloud service to know about their experience. Quality will also be part of my considerations. My experience in buying IBM’s cloud service reflects the marketing mix of the company as analyzed in the marketing plan.