Ajmal International Trading Company - Essay Example

International business term paper Selection of a business in the consumer products industry Ajmal international trading company is a consumer products manufacturing company based in the United Arab Emirates. The company mainly deals in the manufacture and sale of perfumes and fragrances for both and women. This project will discuss the international expansion process and strategies of this company, Ajmal International in the market of the People’s Republic of China and that of Turkey with new cosmetics products along with perfumes and cosmetics. Currently, Ajmal International deals in one category of consumer goods which is fragrances. However, the company can diversify its business in the arena of makeup and other cosmetic products. Since, the use of cosmetic products is very common in the market of China; therefore, Ajmal International can enter into this market with the aim of expanding and growing its business in other ancillary areas of the consumer goods industry. Also, the company can enter into the business of herbal cosmetics products in Turkey because the consumers in Turkey show a high preference towards the use of natural and herbal skin care products and make up products (Root 401). 2. Resources and capabilities analysis Ajmal international is a well equipped business in the GCC as viewed from the perspective of resources and capabilities. The financial profitability of the company and the market penetration capabilities of the business can be identified as key resources for the business that it can use in its international business expansion (Slywotzky and Hoban 441). As per the Resource Based View (RBV) of a company, the basic determinants of the success of a company in a new market are its international market entry strategies and the availability of firm specific resources, assets and capabilities. The VRIO analysis of the company, Ajmal International can be done to evaluate the resources and capabilities of the company which it can use in the international expansion process (Elmuti and Kathawala 78-80). It can be identified that Ajmal International has specific physical and human resources that it can use for setting up a successful business in the cosmetics market of China. The organizational resources of the company, especially the efficient sales force of the team can be used as an important asset for creating valuable strategies in the international business of the company. The skills related to the use of open innovation techniques in the company are found to be useful resources that can be used by the cosmetics company to create competitive advantage in the Chinese consumer goods market. The resources of Ajmal International score low in imitative factor of the resources because these resources and capabilities can be easily replicated by other competitor companies (Campbell and Reuer 30-34). The value of the operational resources is very high which compensates for the lack of rarity of the same. The strategic assets and resources of the company are highly valuable and specialized. This makes them value adding resources for the business. The physical resources are rare because the company is very selective in the use of human and physical resources. All types of resources in Ajmal International are deployed towards the innovation of products which may help the company to easily position itself in a differentiated manner in the new market. The cosmetics industry in Turkey is a growing industry which has multiple opportunities in different segments. However, a number of international brands like Christian Dior, Chanel, Estee lauder; L’Oreal Paris, Yves Saint Laurent etc. have already captured a significant part of the market share. As such, it can be advised that Ajmal international aims at the low to middle income customer segment of the country so that it can create a differentiated position for itself in the selected target segment. The company can use the cost leadership strategy in order to penetrate the intensely concentrated and dynamic cosmetics market of Turkey (Byrne and Popoff 150). The entry barriers in the medium end consumer market for cosmetics are low in the cosmetics sector of Turkey. These income groups of consumers in the country prefer to use cosmetics and skin care products that are prepared by the use of natural and herbal ingredients and that are easily accessible in terms of distribution and affordable in terms of price. The human resources of the company are likely to be the most useful resources for conducting the business in Turkey. This is because; this market segment is somewhat similar to the markets in the GCC. Therefore, the company can employ its existing human resources as well as recruit some domestic people to ensure that they can sell their products in a more efficient manner through local communication prowess and through a wide understanding of the demand and supply requirements of the domestic and international consumer goods sector. 3. The key competitors in China and Turkey China- The main competitors of Ajmal International in the Chinese market would be the local cosmetics companies and the low priced brand segments of the international cosmetics companies like L’Oreal Paris, Yves Saint Laurent, and Chanel etc. The high end products of these companies are not the direct competitors of Ajmal International. Nevertheless, these multinational companies have developed product portfolios which are marketed through the use of penetrative pricing strategies with the aim of capturing the growing medium income group segment of China. Turkey- The segment in the Turkey consumer goods market in which Ajmal International is planning to introduce their skin care and cosmetic products is concentrated with a number of regional cosmetics and make up product manufacturers. These companies have extensive knowledge about the local markets and customers. Additionally, they have the experience of operating in the domestic market segments. Some main multinational cosmetics and skin care manufacturing companies like Revlon, Mac, Chambor and L’Oreal Paris are already present in Turkey. These multinational companies have extensive physical, human and financial resources that they can use to boost their low priced product brands in this market. Ajmal International has to continue focusing on the strategy of cost leadership in a comparatively smaller target segment market so as to penetrate the market efficiently. Since, the resources of the company are lesser as compared to the multinationals and the knowledge of the company are less as compared to that of the local competitions, therefore, Ajmal International has to leverage on its product development capabilities, innovation and pricing strategies to create a profitable position for itself in the market (Yip 64-66). 4. Market entry strategies The international expansion of a company into a new market with a new product is a difficult strategic management activity which needs to be planned and implemented carefully in order to ensure initial and continued success there. The most important part of the expansionary activity of a company in a new market is generally the choice of the entry mode. The international market entry process of a company in the two countries should be devised according to the requirements and existing factors for success in the business environment of these markets (Kale and Broll 102-104). The market entry modes considered by Ajmal International for the sale of their cosmetics and skin care products in the two countries, China and Turkey are likely to be significantly different because of the distinct market and the consumer characteristics existing in these two regions. China- For launching its products in the Chinese consumer goods market, Ajmal International can consider market entry strategies like exporting because exporting is a foreign market entry mode which involves less risk. Since the products will be produced in the home country, UAE, where the company already has its operations, therefore the costs and additional risks associated with the production in the foreign markets can be controlled. This market entry mode would ensure that the potential risks related to starting up an operational business in a completely new business environment are reduced. However, Ajmal International may face the disadvantage of this entry mode which is that they would not have a direct control over the implementation of the marketing strategies. Turkey- Ajmal International can consider the contractual entry mode for launching its products in the foreign market of Turkey. For this purpose, it can use the most common contractual entry mode which is a licensing arrangement. This can be considered to be a feasible market entry strategy because it would enable the company to earn revenue on products that would be developed in the home country and therefore, lesser use of capital investment would be required. Licensing would involve the sale of the products through the use of a domestic company in Turkey. This would subsequently mean that Ajmal International can leverage on the local marketing knowledge and the existing distribution channels and customer base of the domestic company. 5. Marketing mix (4 Ps) to be used in the two countries Ajmal International should start to diversify its business by starting the sales and marketing of cosmetic products in both Turkey and China. However, the marketing strategies and the marketing mix that are to be used in the two regions for launching the new range of products have to be different. This is because; these two markets and their consumer groups have opposite characteristics. The consumer bases in these two markets display differentiated features in terms of mindsets, expectations and requirements (Barney and Stafford 101-104). As such, the company has to devise two different sets of marketing strategies in order to use them in each of the two selected markets of China and Turkey. The marketing mix that should be used by Ajmal international to launch a new range of skin care and make up products in both China and Turkey are explained as follows. Product Turkey- Ajmal International will have a huge opportunity in Turkey as the disposable income of people here is relatively high and they like to spend on branded items. The main products that Ajmal International can expect to tap the market with would be Sun Screen Lotion, Facial Kits, Bleach and other related cosmetics of daily use. Ajmal International already has a relatively good market for perfumes in some international markets. The company can leverage on its existing brand image to position itself as a cosmetics brand of the Middle East. Turkey being a country of the Eurasian region, products which have a British feel would be more acceptable within the customers. The weather of the country experiences extreme temperature conditions. With these kinds of weather conditions, it becomes almost a necessity to use a sunscreen lotion regularly during the summer season. Other daily use cosmetic items like eyeliner, lipstick etc. will have enough customers among the Muslim ladies who are relatively more beauty conscious and of fair complexion. A variety of beauty products like Facial kits and bleach will also be successful here as the users of these will be enough for Ajmal International to successfully leave its mark as the beauty products brand. China- The preferences of the Chinese consumers for cosmetics and skin care products are different from that of the customers in the western countries. Also, the weather of China is different from that of GCC and Turkey because it has a tropical Asian climate. As such, Ajmal International would have to launch products that cater to the exclusive beauty requirements of the Chinese consumers. Products like fairness cream and bleach would not be suitable for the Chinese consumers because they are naturally fair and show very less fetish for using skin care products with fairness properties. Instead products that have the properties of making the skin healthy, young and fresh would be more useful in this market. Ajmal International should first start tapping the beauty products market with the products which will definitely be successful here and after these products get absorbed, it should foray into other cosmetic products which has a significantly low market size and has to be penetrated into the Chinese market with specially formulated strategies. Place Turkey- Ajmal International is already an established brand of perfumes in the GCC market. Its perfumes are generally sold at supermarkets and malls. Foraying in the market of Turkey with beauty products should initially be done in the same way. This is because the consumer groups in Turkey have similar preferences like those in the home country of Ajmal International. Ajmal International should launch its cosmetics and beauty products along with its range of perfumes so that it can use the existing brand name of its perfumes to sell its products in the foreign market. It is relatively easy to influence the customers to buy the products of a brand that they are familiar with. Therefore, it would be easier to attract customers through the established product range of perfumes. The people who would come to buy Ajmal International perfumes would see the beauty products launched by the brand. If they love Ajmal International perfumes, then they would definitely give the beauty products a try and it would help Ajmal International pitch its new products to the existing customers and hence the existing customers of Ajmal International perfumes would also buy Ajmal International beauty products. After successfully penetrating the market of existing customers, word-of-mouth would play its part in further spreading the word about Ajmal International beauty products. But Ajmal International would want a faster and bigger market share and cannot rely solely on word-of-mouth strategy. So to ensure better visibility and awareness among the consumers, the company can set up kiosks and demos at malls, supermarkets, beauty salons etc. This would give Ajmal International the required exposure in the market as a beauty products seller. China- Ajmal International can tie up with beauty salons as exclusive products supplier ranging from shampoos, make-up to facial kits and bleach. This would help the company to gain the trust of many consumers who would visit these salons and see that even big salons are using Ajmal International products. These customers of salons would then try to find the Ajmal International products in the retail market and would be happy with the feeling that it would give them the professional salon kind of look and feel. Later when all these strategies have been executed and Ajmal International becomes a well known brand among the people, it can consider setting up stand-alone exclusive shops or boutiques. Price Turkey– Ajmal International has to carefully determine its pricing strategy for the consumer goods market of Turkey because in Turkey, there are a number of beauty products brands and many of them are internationally well established. The already established brands can ask for a relatively high price for their products which the people are also ready to pay. But Ajmal International cannot compete with brands from the first day. It has to specifically perform a segmentation of its products and determine the needs of that segment, the disposable income, the price they buy other beauty products at and the premium they are ready to pay. After this segmentation is done, Ajmal International can launch its beauty products keeping in mind their disposable income levels and targeting the customers of that segment of the market. China- Ajmal International should use the penetrative and competitive pricing strategy while launching its new product range in the Chinese market. Ajmal International cannot price its products like the other luxury beauty products brands and also cannot expect to tap in the customers of those brands. It has to carefully identify its competitors, study the market pricing they have set and then carefully determine a pricing which would challenge its competitors as well as tap in the customers of its rival brands (Terpstra and Maurice 212-214). Since, the company is aiming to penetrate the low to medium group of customers; therefore, it has to keep the prices of the products at an accessible range by keeping in mind the purchasing power and disposable income level of the target customer group in the country. Promotion Turkey - Ajmal International’s promotion should be devised keeping in mind the culturally rich and observant people of the Eurasian region. People of European and Asian countries are very much culturally inclined and love things associated with their culture. Ajmal International is a well known brand in the Gulf countries which would give it an upper edge in associating with the rich image of the Gulf region. Promotion should be done in a way such that the people can associate with Ajmal International as their own brand and not something foreign or international but at the same time being and complying with the international quality standards. Since, the people of Turkey are culturally sensitive people and at the same time are much attracted to high quality and brand image, therefore, Ajmal International should focus on promoting its products as high quality and rich feel products. The company should use both the traditional promotional strategies like advertisements in print and visual media, celebrity endorsement, billboards and innovative ways of promotion like blogging, social media sites, digital marketing, mobile marketing, Google Adwords etc. to reach the maximum number of potential customers within a short span of time. China- China has a lot of international beauty products brands promoting its products all over the country. But the promotion style of all these brands is westernized. Ajmal International should promote its products cleverly blending the international standards and culture well in all types of its promotions which would enable Ajmal International to win the trust of the people and associate with it as a brand which belongs to the same roots as they do giving it and emotional advantage (Burdon and Bhall 42-51). At the same time, the company has to ensure that the brand value of the company is being leveraged on so as to create a positive impression among the target customer groups. 6. Differences and similarities in the marketing strategies for the two countries Thus, it can be identified that there are similarities as well as differences in the marketing strategies that have been formulated for the international expansion of Ajmal International into the market of China and the market of Turkey. While the promotion and distribution features can be similar in the two countries, the marketing factors related to product quality and pricing of the company have to be distinct. The cultural sensitivity and uniqueness of the target consumer base in each of the markets should be considered in the promotional processes including the designing of advertisements, campaigns etc. Also, the preferences of the customers, the weather, lifestyles and certain other social and cultural aspects would have a direct impact on the marketing strategies devised by the company. The pricing strategies of the business should be based on the income levels of the target segment, the purchasing power and other consumer behavior patterns. Therefore, a competitive pricing strategy is selected for Turkey while a penetrative pricing strategy is selected for marketing the same products in China. The distribution of products can be overlapping in both countries. Distribution channels like retail houses, beauty salons, spas and shopping malls can be accessed in both China and Turkey. Also, the overall management of the marketing strategies of the company is carefully designed for each of the countries. The launch of the new products would be comparatively easier in the consumer goods segment of Turkey because there are a lesser number of international and domestic competitors for Ajmal International in this sector. To conclude, it can be identified that, to enter the lesser untapped market of Turkey and the intensely competitive market of China, Ajmal International has to consider the development of unique and relevant marketing strategies by considering the available resources and capabilities of the business as discussed in the previous sections. Works cited Barney, Jay, and William Stafford. Strategic Management and Competitive Advantage: Concepts. New Jersey: Pearson Education, 2009. Print. 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International Marketing, 8th ed. Chicago: Dryden Press, 2001. Print. Yip, Gwen. Total Global Strategy, London: Prentice-Hall, 2012. Print. Read More