Market Research Activity Planning - Term Paper Example

Case Study: International Marketing

Table of Contents

1.0 Introduction3

2.0Market Research activity planning4

3.0Selection of target audience5

4.0Promotional strategy6

5.0Pricing strategy7

6.0 Distribution strategy10

7.0Strategies for challenging competition11

8.0Consideration of other factors14

9.0 Conclusion14

Reference List16

• 1.0 Introduction

International marketing is an area of study, where marketing approaches to deal with more than one markets located in different countries are discussed and analysed. Zacks Motors, a Tokyo headquartered international automobile manufacturing company, is planning to launch their new global product, Zacks ZUV200, a compact Sports Utility Vehicle (SUV) in India and Sri Lankan market and is currently thinking about a marketing strategy to enter these two markets. Zacks Motors is a leading manufacturer of passenger cars, which aims to deliver highest quality products to its customers that offers great value and has presence in multiple global markets such as Asia, Europe, and United States etc. The company was established in 1965 and since then, has been able to establish its presence in multiple international markets including its own market in Japan.

ZUV200 is an absolutely new product that has been developed keeping in mind the increased demand for compact SUV cars in Indian and Sri Lankan markets. Though the company has plans to launch the vehicle with 70% localization of parts, it slowly will increase its localization components to 100% to keep the costs down. Also, it plans to manufacture the product from its new plant that was set up in Chennai, India and distribute it through retailers across the major markets of the country. The product will then be exported to the Sri Lankan market from its Chennai plant. As this is for the first time the Zacks Motors will be entering Indian and Sri Lankan market, it is also planning to set up its authorized service centres, which will be required to service the cars once it has been launched successfully. The company controls approximately 13% market share of the global car market and will be aiming to achieve 10% market share of compact SUV sales in both Indian and Sri Lankan Market. The current size of the compact SUV segment is approximately 12,000 and 8,000 units a month in Indian and Sri Lankan market respectively and is growing at an increasing rate of 10% every year (Luthra, et al., 2011). The company will initially be planning to grab a market share of about 10% in both the markets, thereby will be aiming at selling approximately 80 and 120 units in a single month in the Sri Lankan and Indian markets respectively. However, the product will be first launched in Indian markets and then will subsequently be introduced in Sri Lankan markets later.

Figure 1: Body Style Distribution Market Share wise

(Source: Luthra, et al., 2011)

• Market Research activity planning

As this will be the first compact SUV the company will be introducing, a thorough market research needs to be conducted. The aim of the company will be to target young working professionals from major metro cities of the countries. In India, the selected markets will be six major cities namely, Delhi, Mumbai, Bangalore, Hyderabad, Chennai and Kolkata. In Sri Lanka, the product will be initially available in Colombo. The product ZUV200 represents youth and has all modern features such as a powerful 1.5 litre diesel engines which delivers about 112 BHP of power, auto folding mirrors, auto and projector headlamps, automatic climate controls, Bluetooth enable integrated music system, cruise control, big 16” alloy wheels etc to name a few. For the purpose of doing the market research, secondary data published in various industry sources (such as auto journals etc) will be used. The compact SUV segment is a newly formed segment and currently only few players are present. However, there will be intense competition in the coming days as more and more players are planning to enter the market (Kumaraswamy, Mudambi, Saranga and Tripathy, 2012). In order to counter competition, the company is planning to develop after sales service centres along with a strong promotional strategy. As the product has already received strong responses from customers and media during its display in various auto shows, the company is hopeful that with the right promotion strategy, it will be able to mark its footprints in the Indian and Sri Lankan markets.

• Selection of target audience

As the product has been developed keeping in mind young energetic individuals who are passionate about their lifestyle and want to own a vehicle that will convey a message about their social status to the peer groups, hence aspiring young working professionals within the age group of 25-35 will be the target audience. The company plans to keep the cost of their product down by having 70% localized parts, which will be manufactured by the authorized vendor of the company and will be assembled in the Chennai plant. It will be very important for the company to design the right promotional strategy to create a buzz in the market amongst young people. The timing of launching the product will also be very important along with promotional strategy (Chaudhuri and Holbrook, 2001). The research has shown that it is a dream for many young Indian professionals to own a car that will represent their social status and speak about the lifestyle they are following (Vargo and Lusch 2004). Hence, the company has developed this product with all modern features and also a powerful engine has been developed so that the young buyer can have a great ownership experience.

• Promotional strategy

The product will be targeted to the young segment, hence colourful and attractive advertisements, both in the form of television commercial and newspaper advertisements are required to be designed (Olson, Slater and Hult, 2005). The company will appoint leading advertisement agencies of the countries to develop those advertisements. The primary target of the advertisements will be to create brand awareness amongst the Indian and Sri Lankan customers. The company’s marketing department will be in talks with the potential advertising agencies for the purpose of short listing the best one suitable for the launch. The final decision regarding the selection will be taken based on the experience and price quotations of the agencies. Also, every competing agency will be asked to provide a presentation regarding the launch and the final one will be selected on the basis of the best presentation in terms of conveying the message to the target audience (Bergkvist and Rossiter, 2007). Once the selection has been made, detailed product briefing will be given and accordingly three to four layouts of the proposed advertisements will be asked to prepare. Two most attractive layouts will be selected for the purpose and will eventually be released through media. Along with the TV and newspaper advertisements, various other strategies such as promotional events like displaying the car at the shopping malls and conducting small campaigns such as quiz contests on the spot to lure the potential customers. This will also help in lead generation in terms of collecting phone numbers of the customers and maintaining databases (Krasnikov and Jayachandran, 2008). Finally, the customers will be contacted via phone calls and will be offered test drives to have an initial feel of the product. Also, tie up with the financiers such as banks and financial companies will also need to be done, as they can also participate and encourage the consumers to buy the product. Some portion of the promotional event cost can be shared between the financial company, the local dealer and the company itself. In addition to the promotional events, the company will also be looking at sponsoring national level sports events to create brand awareness (Noble, Sinha and Kumar, 2002). As sports events are generally associated with Indian and Sri Lankan young population (Tiwari and Herstatt, 2012), to establish a strong brand, the company should sponsor some of the major sports events of the countries. Another important factor while developing promotional strategy will be evaluating a strategy for designing the company’s website and develop a social media strategy as well. Research has shown that, more and more customers in today’s market scenario are moving towards digital advertising platform for buying a product (Tellis, Prabhu and Chandy, 2009). The next diagram (Figure 2) will explain the percentage of customer’s who visit the company website or any other associated platform (including social media) before making the purchase decision of a car:

Figure 2: Percentage of customers who does research before buying a car

(Source: (Tellis, Prabhu and Chandy, 2009)

The above diagram clearly explains the need for a thoughtfully designed website to penetrate the growing automobile market in India and Sri Lanka.

• Pricing strategy

The pricing strategy for the product will be very important as it is new to Indian and Sri Lankan markets. The company has taken into consideration prices of the existing products competing in the markets from established manufacturers. To challenge the competitors, the company is planning to launch the product at much lower price. Thus, the company is aiming at following a market penetration strategy for gaining market share (Gu, Hung and Tse, 2008). The initial pricing will be called introductory pricing and will be advertised in the market as limited period offer. Depending upon the response from the customers post the launch, the company will decide later whether price will be increased or not. Both Indian and Sri Lankan markets are price sensitive and thereby adopting correct pricing strategy will determine the volume of sales. However, the company should keep in mind the production capacity of the existing plants and should decide the pricing accordingly so that the customers do not face long waiting period to get the product delivered. Also, the pricing needs to be designed in such way that it could cover the manufacturing and promotional costs. However, the company should not be thinking about profitability and needs to keep the margin low as this is the first product and the objective will be to create brand awareness rather than increase profits.

The initial costs related to promotion and lower pricing could be recovered over a long period of time (Atuahene-Gima, and Murray 2007). Once the brand is established in the markets, the company will plan to introduce other products in different segments such as Sedan or Hatchback. As initially the company will be importing 30% of the parts from its Tokyo plant, it should take into consideration the exchange rate between Indian Rupee and Japanese Yen. The exchange rate will be crucial factors in fixing the price of the product (Okada, 2004). However, once the Chennai plant becomes fully operational and the company successfully gains market share, the company will aim at 100% localization of the parts which will mean there will not be any further exchange rate implications. This type of strategy will ensure that without even increasing the price of the product, the company will be able to increase its profit margins in future by localizing the product components. Also, as India is a low cost manufacturing base, the company will have plans to increase the production capacity of the Chennai plant or develop new plants in other areas of the country to support its global markets in addition to the Sri Lankan market. It will also be important for the company to pass the emission standard tests that were set up by local governments of both the countries. This will give the company an opportunity to promote its product saying that, it produces environment friendly vehicles that emits less poisonous gas. However, this technology is expensive and thereby will increase the product price.

• 6.0 Distribution strategy

Forming and setting up proper distribution channel will be of utmost importance for the company to reach its end consumers (Medlock and Soligo, 2002). As this is for the first time the company will be entering into both Indian and Sri Lankan markets, taking help of a distribution company that is already present in the market and knows the market very well will be considered advantageous. Therefore, tie up will a local distributor will be required.

The company will be planning to set up its own exclusive showrooms as well. The exclusive showrooms will be designed as per brand communication strategy of the product. A separate branding campaign will be designed to provide customers of exclusive showrooms a premium experience. For example, the customers who will be visiting the exclusive showrooms will be given a product demonstration using latest technologies such as tablets or ipad, so that the young individual can believe that it is a premium product they will be buying. Trained sales personnel will be recruited from the industry to communicate with customer starting from their query resolution to assisting in the purchase process. They will be in touch with the customers once the product is sold and communicate regarding the product experience. The sales representatives will also guide the customers into right direction about the service intervals of their vehicles. The aim of the company will be to provide a single point of contact, who will be taking care of the customer’s vehicle right from the purchase till its servicing or insurance renewal needs. This will ensure that customer will not have to go through several points of contacts and will be able to access all necessary services at one go.

This distribution strategy will ensure a premium ownership experience for the customers. Also, the exclusive showrooms will provide a faster response in comparison with the local distributors whenever a query regarding the product comes in. However, setting up this exclusive dealership network will be of higher cost for the company and this should be accounted for in the product pricing. Thereby, to keep the distribution costs at minimum level, a mix of local distributor and exclusive dealership strategy will be implemented. The next figure (Figure 3) will help in understanding the advantage of wide distributor network in the Indian automobile sector.

Figure 3: Indian Automobile Sector

(Source: Kumaraswamy, et al., 2012)

• Strategies for challenging competition

Even though the compact sports utility vehicle segment in India and Sri Lanka is growing at a very fast pace and there is still scope of capturing market share by the new entrants, it is expected that once the product is launched, there will be strong responses from the competitors. It can be in the form of reducing prices or launching better and newer products than what is available in the existing market. Hence, the company should have alternative plans in place so that it can react quickly to market changes. The company should keep its margins in such a way so that it can further reduce the product price or offer additional accessories whenever competitor revises its prices or introduces new version of the product. A wide range of versions of the car should be made available to cover the market from corner to corner. This will mean the consumer who is considering a lower priced hatchback purchase should also be attracted by a lower priced version of the product. Similarly, the customer who is considering a higher segment product purchase can be attracted by offering high end features in the higher end versions of the product, which may not otherwise be available from a higher segment vehicle. For example, an entry level luxury segment sedan may not have features such as anti lock breaking (ABS) or electronic break force distribution system (EBD) or projector headlamps that will be available on the high end versions of the ZUV200. Thus, a customer who is thinking about buying a vehicle which is high priced but not rich in terms of feature list may end up buying a high end ZUV200, as it will be perceived by the consumer as better value proposition. A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis about the automobile industry has been prepared to understand the challenges in a better way:

• Strengths
• Size of the market is substantially big
• Manufacturing units gets assistance from local governments
• Low cost of labour

• Weaknesses
• Poor infrastructure
• Complex tax regulations
• Research and development activities are not up to standards
• Worker related issues

• Opportunities
• Excise duty cut for cars less than 4 meters in length
• Overall market is in a growth phase
• Rising level of income

• Threats
• Intense level of competition
• Increasing production costs
• Environmental hazards (flood, earthquake etc)

The company should also consider introducing a face lifted version once the product gets matured in the market, to boost further sales. However, the timing of introducing the face lifted version may vary depending on the market conditions and customer responses. All these factors are required to be considered keeping in mind the poor response in sales numbers. However, the company is hopeful about the new product and believes that it will help in achieving its global targets as well. Once the ZUV200 product becomes successful, it will also introduce additional models in the existing markets using existing distribution channels. One important aspect in this regard will be setting up proper after sales service stations that will be able to maintain its standards in terms of servicing premium compact cars. After sales service network is considered as a distinguishing factor in the passenger car industry. A potential car buyer considers after sales as one of the deciding factors before making the final decisions. Thus, additional efforts are needed to be put up in this aspect. In the past, it has been observed that manufacturers have failed, despite having strong product, only because of poor after sales service networks. Also, parts availability becomes an issue in case of after sales service is concerned. All these aspects are very important in terms of making a product success or failure. In case a product does provide good after sales support, it generates a bad word of mouth and makes customers stay away from the showrooms. Hence, setting up good after sales service network is as important as developing marketing strategy for the product. The company should tie up with local vendors to make its after sales support stronger as it is the vendors who will be responsible for supplying the spare parts.

Setting up tie ups with financial institutions such as finance companies will be an integral part of the overall marketing strategy (Vorhies and Morgan, 2005). There has been evidence in the past that when a customer approached a financial institution for financing the vehicle of choice, banks has been able to influence customer’s decision in favour of a particular manufacturer by giving attractive deals. Thus, setting up proper business relationship with financial institutions will be an important part of strategy to counter competition. Giving higher margins to financial institutions may help in achieving a better market share when the vehicles are financed. Another important strategy for launching this product will be its standardization product strategy between Indian and Sri Lankan markets. The product will first be launched in India, following the successful launch the same product will be made available in the Sri Lankan market. As a result of standardization of the same product in two markets, the company will be able keep the product cost down and spend the amount in additional amount in promotional expenses. Also, the company will follow similar pricing and promotional strategies in both the markets and thereby will be able to keep the expenses down to a minimum level.

• Consideration of other factors

Other than product, price, promotion and place, there will be other factors as well which needs to be considered. The transportation of the vehicles from factory to showrooms needs to done in such a manner, that it reaches the consumer in minimum period of time. The company will not want to keep a high inventory level at the plant or the stockyard; hence a smooth distribution system will be required for efficient operation. As the market is highly competitive, maintaining high inventory may result in huge losses in case a much better product comes in the market. Thus, care should be taken in this respect. In addition to the inventory management, the company will initially be planning to bring company’s high level engineers from Tokyo to ensure the quality of the product and setting up the manufacturing base. Also, local skilled people will be hired from the existing market and will be trained by the expert engineers from Tokyo. Through this, it can be ensured that the workers get trained by the best industry experts. Also, the sales personnel who will be directly dealing with the customers are required to be hired from the competitors, so that the experienced people who are already aware about the existing market gets selected. However, people only working in company’s showroom will be taken in company’s direct payroll and the rest of them will recruited by the dealers.

• 9.0 Conclusion

Zacks Motors is very hopeful about launching its newly developed compact sports utility vehicle (SUV) in Indian and Sri Lankan markets. The company has spent substantial efforts in developing this new market. The challenge for the company now is to launch this product successfully and establish its presence in these two new markets. While both Indian and Sri Lankan automobile markets are considered very lucrative in terms of size and growth potential, careful steps need to be taken when promoting and launching the vehicle. The success of this vehicle will determine the company’s future in these two markets and are expected contribute significantly in the group company’s bottom line. After the launch of the existing product, the company should also plan to increase its presence by launching new products in other segments (hatch back, sedan, multi utility vehicle etc) as well and thereby increase its overall market share. However, it should also keep in mind the challenges in terms of competition, regulation changes, environmental hazards etc and react accordingly to maintain its presence in these two markets.

• Reference List

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