Executive Summary
Best Buy is a leader in consumer electronics operating in the USA and Canada. Its innovative products are the best for the wide target audience. International expansion (and market entry to Italy) will help Best Buy to obtain a strong market position and sustain strong growth. To penetrate the European market research should be made. The research should be based on primary and secondary data analysis.
The preliminary results show that Europe proposes great opportunities for the company and can be valued as a potential market for this type of product. The strategy includes the determination of the basic long-term goals concern the conceptualization of coherent and attainable strategic objectives. The marketing plan includes the main aspect of market penetration and market analysis. The research suggests that the real value of strategic planning may be more in the future orientation of the planning process itself than in any resulting written strategic plan. The research also includes an analysis of the financial data.
Introduction
The internationalization of companies is happening at an ever-growing pace. In the past 20 years, companies have distorted their direction from domestic to international; they have shifted from multi-domestic marketing to international marketing. The appearance of the international and international market has been enthused by the speedy enlargement and mixing of countries; the configuration of local trading blocs; the formation of market economies; and advances in manufacture and communications technologies. Today, international marketing is proving to be of ever-increasing importance to companies of all sizes, their customers, and national economies. Worldwide, most companies are now selling to, using materials or equipment from, or competing with products from other nations.
Best Buy is a leading American specialty retailer of consumer electronics. For many companies, like Best Buy (Botan. 1992). European market provides additional profits and is all that enable some companies to make any profits at all (Fill, 1999). European consumers are not familiar with the Best Buy brand but they are familiar with main home electronics brands and products. National and regional economic health and growth have become increasingly dependent upon export sales as an engine of growth and as a source of the foreign exchange necessary for the import of goods and services. Italian market represents great opportunities for Best Buy to expand its international activities and enter the European market.
Business Overview & Overall Marketing Plan
Market Analysis
The Mediterranean and southern European countries are vastly different from their northern counterparts. Spain, Italy, Greece, and Portugal have both a history and geography that set lifestyles apart from the rest of Europe. Demographic forecasts indicate that the retail needs of these countries are and will be quite different from those in the north. A fall in birth rates has led to a decline in population throughout Europe.
Although the southern countries have experienced a decline, the rate of decline is much slower than in the north (Botan. 1992). The southern European countries are projected to be above the European average of 1.7% increase in population. Social changes such as increased labor force participation by women will also affect the demand for consumer goods. The south European countries have lagged behind the north in women’s entry into the labor force. In postindustrial societies, the increase in service and part-time employment encourages additional female worker participation (Best Buy Home Page 2008; Shafer, 2006).
In Italy, the scale of operations in retailing is very small. There is approximately one retail store for every fourteen households in the country. A survey by political scientist Gabriella Calvi found that 20% of Italians scarcely bought anything, rejecting or never entering the consumer society, while the next largest group, 15%, never stopped buying and showing off. Most people did their shopping at the first store they came across and did not compare prices. Italy has five major chain stores. Two of the chains operate both food and non-food stores, La Rinascente and Standa. La Rinascente operated department stores, variety stores, supermarkets, hypermarkets, DIY, furniture, and appliance stores.
Variety stores, supermarkets, and hypermarkets are part of the Standa line. The other three chain stores, Esselunga, Pam, and GS are supermarkets Concessioni is a selective distribution system used in Italy that is similar to franchising, yet is not included in the franchising statistics. Concession is based on a specific contractual formula stipulated in Italian Law; they are common in car dealerships and retail gasoline sales. Italian law used to stipulate that a store could be open only a maximum of 44 hours per week. This was changed in 1987 and the rules have become more flexible. Stores must close for half a day during the week. They must open by 9 A.M. and close by 9 P.M (Best Buy Home Page 2008).
Competition
La Rinascente is Italy’s biggest and most diversified retailing company. The Rinascente group is embarking on a massive investment plan. They will spend L2,070 billion to remodel twenty-three UPIM outlets and to convert them into stores with the names of La Rinascente, Bricolage, Trony, and Super Store. Sixty-four percent of the investment will be in the south of Italy; the objective is the modernization of the commercial network and the doubling of the sales volume (Marketing Mix N.d.)
In Europe, competition is fiercely influenced by several internal and external factors. Michael Porter contends that a corporation is most concerned with the intensity of competition within its industry. “The collective strength of these forces,” he contends, “determines the ultimate profit potential in the industry, where profit potential is measured in terms of long-run return on invested capital” (Porter, 1985, p. 58).
In his book “Competitive Advantage” Porter identifies five forces that drive competition within an industry. For Best Buy, the ability of a firm to use its resources and capabilities to develop a competitive advantage through distinctive competencies does not mean it will be able to sustain it. Two basic characteristics determine the sustainability of a firm’s distinctive competencies: durability and imitability (Drejer, 2002).
Statement of Purpose and Business Identification
Statement of Purpose
Mission
The mission of the company is to penetrate the Italian market and maintain a stable market position in this region. The mission has made it clear that the Italian market is in the relatively unexploited sector that the company sees its clearest opportunity for innovation and penetration.
Goals
The main goal of the company is to get and keep a European and Italian customers. Also, it is aimed to achieve competitive advantage and sustainable competition creating value for their customers, select markets where they can excel, and present a moving target to their competitors by continually improving their position. Three of the most important factors are innovation, quality, and inventory reduction (Drejer, 2002).
The Purpose
Be is one of the most highly rated companies for stability and success, the company offers a unique product mix of home and consumer electronics to everyone. It is an advantage is that consumer electronics can meet the requirement of a wide audience. The high quality of the product is the main criterion. The purpose is to provide customers with high-quality products at a reasonable price using successful management techniques and new ways of effective marketing from both ethical and financial perspectives.
Business Identification
The consumer electronics market is marked by increasing capital markets activity over the past 5 years. It is estimated that average annual returns are anticipated to exceed 13 percent over the next 10 years, with investment alternatives performing at single-digit growth rates (approximately 7 percent to 9 percent). This approach is based on Best Buy’s superior understanding of the problem solved by the product, the benefits it offers, and issues it addresses. As consumers become more concerned about price, mobility and quality consumer electronics is the best choice for this target group (Drejer, 2002).
The Marketing Plan – an Appraisal and Analysis
Target Audience
Segmenting decisions can be complicated by the fact that national income figures, such as those cited for Italy are averages. Age segmentation will involve young people between the ages of 18 – 28, and young families who value good products and low cost. These people by their shared interest in fashion, music, and a youthful lifestyle, exhibit consumption behavior that is remarkably consistent across borders. Young consumers may not yet have conformed to cultural norms. Gender segmentation will have a great influence on a marketing campaign, but it is predicted that the majority of consumers will be males.
Psychographic segmentation will help to group people in terms of their attitudes, values, and lifestyles. The majority of the target audience is stylish young people who admire fashionable cars and lifestyles. They will feel the new model is tailored according to their needs and wants. Income segmentation: the car market consists of those who are willing and able to buy. The buyers belong to upper, middle, and low class families. Taking into account standards of living in Italy, they will offer 0% interest for five years or the option (Fill, 1999; Porter 2004).
Potential buyers are diverse in character. They represent $175 billion in annual buying power and about $1000 per week in disposable income. These customers expect to find unique products, regardless of the price and proposition. This target group can be characterized as skeptical consumers who are health conscious. Most of them are looking for a toy chest of automotive accessories including interior lighting, taillight dress-up kits, carbon-fiber shift knobs, and sports mufflers (Griffin and Mcarthur 1997).
The new model will be positioned as a unique car that promises mobility and social freedom. Personalization, innovation, and technology will be the core of positioning strategy. The buyer perception of the benefit-generating attribute will be based on unique design and stylish image appealing to a wide target audience. Social mobility and personalization will be the main attributes of the positioning strategy. A unique image of the car and a sense of belonging to the new generation will appeal to potential consumers (Best Buy Home Page 2008).
Intended Strategies
When a product is standardized it becomes established for minimum quality and features, competition shifts to a greater emphasis on cost and service. Consumer electronics marketing strategies are the broad approaches intend to adopt in the longer term to achieve its marketing objectives by its marketing policies. The new strategy will take into account increased competition. The blend of controllable marketing variables required producing the response wanted in the target market. The mix includes new products, prices, promotion, packaging, advertising, field sales, and distribution. Internet services and Internet providers are another potential areas for Best Buy. The management goals will be to penetrate all European countries in three years and double sales volumes in 4 years (Griffin and Mcarthur 1997).
Pricing
The market skimming pricing strategy will be part of a deliberate attempt to reach a market segment that is willing to pay a premium price for a particular product. Companies that seek competitive advantage by positioning their products in the premium segment frequently use market skimming. The skimming pricing strategy is appropriate in the introductory phase of the product life cycle when both production capacity and competition are limited. By setting a deliberately high price, demand is limited to innovators and early adopters who are willing and able to pay the price (Hollensen, 2007).
The core strategy of Best Buy will be based on value propositions and product differentiation is well developed. The main strength of this strategy is clear identification of the product advantages and potential target audience. This strategy will result in a plan that can assist the company in selecting and positioning the product. Product differentiation strategy will help to create an entry barrier for other companies and creates a unique market proposition.
This strategy makes sense because of a product’s perceived uniqueness. Differentiation should be achieved as a result of unique product attributes and effective marketing communications. In the case of Best Buy, product differentiation and brand loyalty increase for would-be industry entrants who would be required to make substantial investments in R&D or advertising (Hollensen, 2007). As with the selling philosophy and relationship strategy, Best Buy must include comprehension of the target market’s characteristics and the fact that prevailing needs and wants may mandate products that are different than those offered in the home country.
As the first marketing tactic element, differentiation should create a truly different and unique product for customers. Best Buy not only has to be perceived differently by customers (positioning), it has to be different in content, context, and infrastructure (differentiation). In addition to differentiation strategy, product positioning will help to establish trustworthiness, confidence, and competence for customers (Jacoby et al 1998).
If Best Buy has those elements, customers will then have the “being” of the company within their minds. It is about earning customers’ trust to make them willingly follow Best Buy. Because customers cannot be managed, they have to be led. To successfully lead customers (Simonies, 2008). Best Buy has to have credibility. So positioning is not just about persuading and creating an image in the consumers’ minds, it is about earning consumers’ trust and loyalty. The positioning strategy should support differentiation strategy to widen product potential market. It will help to occupy the consumers’ minds with unique offerings and will lead the customers’ credibly (Griffith et al 2000).
Marketing Plan
Product
Peculiarity of Best Buy stores is that they propose a wide range of products available for diverse customer audiences.
Advertisements
In the local and national press, radio and TV, off-the-page advertising, direct mail, a catalog selling, posters, billboards, signs, and gifts. Internet advertising: web banners and website. It will help to control product perceptions and feelings toward the brand in real-time (Hollensen, 2007).
Promotion
TV programs and press clubs, newsletters, press releases. Press conferences will help to inform potential clients about recent developments and innovations, about the future directions and strategy of the company. Newsletters will inform all clients about recent changes and innovations applied by the company. This information will help to create an image as a unique brand. Online promotion: online community. Since business is not, as usual, the promotional plans of the firm should be somewhat similar to a contingency plan. This contingency plan is designed to maintain the proactive orientation of the firm.
Channels of distribution
Marketing organizations and direct agents. Agents will be representatives who act on behalf of the exporter. The agents will be paid based on commission. It is expected that in two years the company will create its distribution system (Jacoby et al 1998).
Modes of entry
Will influence the price that consumers will pay. Policies concerning channels are related to production decisions. In the first place, the location of the production base (or sourcing) is the first channel decision that has to be made. Second, fluctuations in production may be reduced by the proper selection of such channels. Greater production stability tends to eliminate or reduce problems of inventory control that face all the channel members. Modes of entry will be based on a marketing organization as the main representative in Italy. This company will have a sole right for this brand in its national market (Hollensen, 2007).
Marketing Budget
The budget will be used as checks on the actual results of a business. Deviations from predetermined plans are seen by comparing actual and budgeted performances and costs. The subsequent analysis of the differences or variances and the action taken will be a vital part of the control mechanism. The budget will include production; stocks; costs – broken down into production, administration, selling, and distribution; capital expenditure, including research and development; cash; credit – debtors and creditors; purchasing, master forecast, incorporating forecast of profit and loss and balance sheet. An integral part of the budgetary control will be the recognition that performances and costs can be traced to the people concerned (Best Buy. Home Page 2008; Kyler, 2006).
Implementation and Control
- August 1st – Start creating advertising campaigns and the internet website for consumers.
- September 1st- Production of the new vehicle begins.
- September 15th – national and local advertising and promotion campaigns.
- October 1st – the first vehicles will be distributed out to the different dealerships.
- October 8th- Internet promotions will begin for individuals who are looking to purchase their vehicle online.
- October 15th- Special promotions will start for the new vehicle at dealerships.
Special attention will be devoted to the milestones (each month) which determine whether or not sales are being met.
Evaluation / Recommendations & Way Forward
More narrowly, the function of research within a company is to provide the informational and analytical inputs necessary for effective planning of future foreign market marketing activity, control of international marketing operations in the present, and evaluation of results. Three programs will be involved:
- customer feedback input,
- customer satisfaction surveys,
- total quality control.
So-called worldwide relationship surveys are run about every 12 months. These surveys include some product questions but ask how satisfied the customer is with the company as a whole and how Hewlett-Packard rates against its competition. Also, the company will monitor the revenues versus the costs of manufacturing and exporting the vehicles (Griffith et al 2000).
Review Monthly reviews will be used as an indication of future growth. Sales reviews in each geographical region: will help to review sales patterns and buyers’ behaviors. National reviews of overall sales and the budget will indicate whether or not the company is on track (Marketing Plan Outline 2008).
In the marketplace where there are so many different firms, an enterprise cannot automatically establish its identity. The deliberate action to accomplish this identity cannot be too sporadic. Companies, typically, tend to advertise or promote when the economy is in an upswing, and they cut down advertising and promotion in times of economic slow-down. However, they must continue with their total promotional program and make only a few adjustments at the periphery as the economic conditions change or competitive conditions necessitate. Accelerating promotional activity may not be quite adequate to counteract the turbulence. The firm needs to be more proactive within the constraints of a promotional plan that is guided by the promotional objectives. This is why in Exhibit 8-1 the promotional objectives are shown as the first step.
Implementation Plans & Budget
Financial data shows that Best Buy will be profitable and will receive high revenue a year (see Appendixes 1,2, 3). In addition, it will be possible to open 100 stores in the next year, and 200 stores in two years after successful market activity. The appraisal of almost any investment project in the real world will involve the making of a great number of estimates. For example, the outlay required to undertake the project, its life, the annual cash inflows, and outflows it will generate, the scrap value it will have, and even the correct rate of discount to reduce the cash flows to present values.
Estimates will be made for all these factors and the project will then be appraised by calculating an expected net present value. Balance sheet, break-even analysis, P& L show that European expansion will be successful for Best Buy. If this NPV is positive then the appraisal is in favor of acceptance. But, in terms of downside risk, the decision-maker is also interested in how sensitive the advice is to changes in the estimates made about the project. In other words, he is likely to be interested in the margin of error that there can be in the estimates made about the individual components of the project (i.e., outlay, life, etc.) before the advice that the appraisal gives (in this case to accept) becomes incorrect.
The management advice is that the decision given by the NPV calculation s insensitive to changes in most of the estimated variables. However, if the revenues were the fall by 10% of their estimated value the original decision advice would turn out to be incorrect (Marketing Plan Outline 2008). Hence it may be worthwhile to re-examine the estimates of annual revenues to see if the company’s confidence in their accuracy can be improved. Break-even analysis suggests that the company will have to increase its price level by 5% a year to remain competitive in the market. Projected income for the next two years shows that Best Buy sales will not increase substantially, but Best Buy will sustain a strong market position in Italy (Griffith et al 2000; Marketing N.d.).
Conclusion
The advantage of product originality will allow Best Buy to create a strong international brand image. Brand loyalty will also be an important factor in increasing the costs for customers of switching the products of new competitors. Using an international market development strategy, best Buy will capture a larger share of a market for current products through market saturation and market penetration. Taking into consideration the rapidly changing environment and customers’ expectations it is not enough to operate only on a national market.
Global marketing will help Staples substantially increase the level of sales. marketing plans are heavily dependent on consumer or buyer feedback, which in turn is dependent on the limited perception and experiences of the consumers or buyers. Too often these consumers or buyers are unable to articulate their needs or want in terms of a futuristic perspective. Latent needs and desires that may identify futuristic product possibilities are rarely identified by most survey research methods currently in use. It is a special type of consumer that can articulate these possibilities, and special research efforts are needed to find these people and draw out their ideas.
Unfortunately, businesses are not quite so flexible. Many firms take the orientation of business as usual. This implies that, once certain plans and financial decisions are made, business continues as usual. The necessary flexibility and proactive behavior are not built into promotional plans. Furthermore, it is assumed that business conditions are not likely to change significantly and that the best approach is to implement the plans as they were originally devised. This type of conservative and traditional point of view makes it impossible for the firm to cope with turbulence. The case of Best Buy shows that firms can behave this way because they are big and powerful.
Therefore, they reinforce the survival of the fattest. However, one must realize that by not being proactive and not attempting to counteract turbulence business is likely to lose money in both the present and future. There are two critical reasons for this: business is never as usual and best-kept secrets never win.
Bibliography
Best Buy. Home Page. (2008). Web.
Botan. C. (1992). “International Public Relations: Critique and refomulation”, Public Relations Review 19 (2), pp. 150-151.
Drejer, A. (2002), Strategic Management and Core Competencies: Theory and Application. Quorum Books.
Fill, C. (1999), Marketing Communication: Contexts, Contents, and Strategies 2 eds. Upper Saddle River, NJ: Prentice Hall.
Griffin, T., Mcarthur, D.N. (1997). A Marketing Management View of Integrated Marketing Communications. Journal of Advertising Research,37 (1), p. 19.
Griffith, D. A., Hu, M. Y. and Ryans, J. K. Jr. (2000). “Process standardization across intra- and intercultural relationships”. International Business Studies, 31, pp. 303-24.
Hollensen, S. (2007), Global Marketing: A Decision-Oriented Approach. Financial Times/ Prentice Hall; 4 edition.
Jacoby, J., Johar, G.V., Morrin, M. (1998), Consumer Behavior: A Quandrennium. Annual Review of Psychology, 49 ((1), p. 34-37.
Kyler, B. (2006) The Definition of Marketing. Has It?. Web.
Marketing Plan Outline (2008). Web.
Marketing. (N.d.). Web.
Marketing Mix. (N.d.) Web.
Porter M.E. (2004). Five Forces. Web.
Simonies, D. (2008), Italy. Lonely Planet; 8 edition.
Shafer, J. (2006). Not Just Another Column About Blogging. Slate. Web.
Appendixes
Appendix 1 P&L account for the 1st year.
Appendix 2 Cash Flow Statement.
Appendix 3 Balance sheet for 2008, 2009 (in million $),
Reference: Crawford 2003.