Introduction
Chinese Skyland trading L.L.C is company that deals with household products and it is based in Dubai. The company was launched in 2001 and has been operational since then. It has more than two shops and one central office located in the United Arab Emirates (UAE) that oversees proper management and provision of quality services to the clients.
The company has been performing well as it has a wealth of resources, researches on the market to have more market awareness and has proper management and this has contributed to it being ranked in the top list (Skyland website para.1). This paper will discuss on how Skyland Company can select a foreign market, develop an appropriate marketing mix and the strategy to be used in entering the foreign market.
Market Identification, Screening and Selection
The international marketer will use three key steps to come with a market that Skyland Company can venture into internationally. The three steps would include market identification, thorough screening of the market and selection of the appropriate market.
Country Identification
Kenya and Pakistan have been chosen as the international potential markets for entry by Chinese Skyland Trading. Other markets in other continents have not been considered due to limitations in terms of resources available to the company. In fact, it would be very expensive and time consuming to put all markets into consideration and therefore it is advisable to settle on those markets that seem to be more attractive.
Country Screening
When screening the international markets, the marketer normally focuses on the macro-environment and the environment in which the firm will operate in and the focal points are economic factors, political factors, competitors, technological changes as well as social factors.
Operating environment focuses on accessibility of the markets, how good or bad is the infrastructure , taxes, duties and other levies that may be charged as well as the costs associated with entering the market (Syed Para 4).
Kenyan Market
The Kenyan economy has been growing tremendously through its recovery place after the 2007 post election violence. By May 2010, the gross domestic product (GDP) had grown by about 4-5%. Such growth means that at least the economy is doing well and even business transactions are being carried out in a more profitable manner.
Kenya has a highly liberalized market and this would give Skyland Company an opportunity to enter a market with fewer government interventions and restrictions such as import and export controls and licensing procedures. The country is politically stable as compared to other countries such as Pakistan and this increases the confidence of foreign investors as they are not so worried about political unrest.
Although the infrastructure system is not perfect and still requires more improvement, at least it can be said to be well developed in terms of communication, transport and security. Skyland Company would be assured of smooth communication between its offices in the UAE and the offices in Kenya.
This can be done through mobile phones or use of internet to send mails and other correspondences that may be required for proper coordination in doing business. Transport would not be a problem while both transporting the commodities from UAE to Kenya and even movement of the products within the country (Kenya) as the transport system in the country is good enough to allow market accessibility.
The emirates airline also operates within Kenya and serves as an additional advantage. However, it would be highly recommendable and viable for Skyland Company to set a manufacturing firm in the country since the manufacturing sector of Kenya is still underdeveloped and this may give the firm an opportunity to enjoy reduced production costs, as the products would be produced within and therefore no huge transportation costs involved.
Kenya is also preferred due to the low inflation rates in the country. By April 2010, the inflation rate was at 3.6%, which shows a great improvement since the year 2008 when inflation rate was so high. The exchange rate has also been stable for quite some years and this reduces the risks associated with fluctuating exchange rates.
Another major benefit of venturing into the Kenyan market is that Kenya and UAE have good relationship both in terms of business and socials organizations. This would be a great advantage since the two countries have cordial business relationships and therefore the government of Kenya would not be against importation of household goods from the UAE
Pakistan Market
One thing that makes the market to be attractive in this country is its high purchasing power. The country is ranked as the 27th largest country in relation to purchasing power thus making it a lucrative business opportunity. The gross domestic product is recommendable especially after going through the various reform processes.
By 2006, it had a gross domestic product (GDP) within a range of 6-8% which is a good indicator of growth and raises the confidence levels of the investors. However, the economy has for a long time suffered from internal political disputes and this is a big threat to foreign investors as they can never be sure of what will happen true.
Such political disputes may lead to political interest which in return may lead to loss of property through destruction, the economy may suffer a recession period which would affect businesses negatively thus making the company suffer huge losses.
Though the country has had political instability on several occasions, it has engaged into a reform process and actually the World Bank has ranked it among the top reformist countries. This improves the company’s international image and foreign investor confidence levels. If the trend continues like that.
Then Pakistan would be a viable market since opportunities for growth will be high as it will attract investors from other countries and this would be a great boost to the business industry.
Inflation rates are however still high in the economy as compared to other countries. Having a closer look at the trend in inflation rates would discourage investment in the country since generally, the inflation rates have been going up. In 2005, it was at 9%, 7% in 2006 and shot up to 25%in 2008.
The country ranked among the top 100 in terms of ease of doing business and actually was in a better position than china. This is a big plus as to why Skyland can venture in this market.
Looking at the foreign exchange rate, rupee has been quite stable as compared to other countries although there are times it had an extreme of 80 in 2008. However, during the previous years it ranged between 58-60. The infrastructure system is also well developed in terms of roads, Communication network and security.
The analysis of the two markets leaves Kenya to be the potential market for the company. The cordial business relationships enjoyed by Kenya and UAE would benefit the company in that Kenyans would favour their products as compared to those of competitors.
Kenyans have been going to Dubai to shop there and through market research; the company can be able to tailor the products to meet the needs and wants of Kenyans. They can gather information on Kenyans preferences and be able to custom make the products.
Selection
Country selection involves looking at the business strengths and how well a country is attractive and then integrating the in order to come up with a decision on the country to enter. Bearing in mind that the Arab emirates have an airline in Kenya, this makes Kenyan market a geographical accessible location as compared to Pakistan.
The political stability is also strength as compared to that of Pakistan and stability in the exchange rates. In this case, Kenya will be the foreign market of choice since the analysis shows that it is more attractive than Pakistan.
The Marketing Mix Strategy
According to Paul (56), the marketing mix strategy involves paying keen attention to the 4p’s of marketing which are product, price, place and promotion. Penetrating the international markets requires the marketer to understand that he might be forced to change some aspects of the national marketing mix as the needs of the foreign customers may vary and the external environment may be varied.
The firm needs to know the product to be launched in the international market. It is the duty of the firm to do research on how they want to present the product to the international market, for instance, whether as it is or there would be need to differentiate the market in order to serve the market effectively.
They also need to make sure that the product is socially responsible. For example, the materials used to package household goods can be designed in a way that even after they have been used, they can be disposed off in an environmental friendly way or they can be used to serve other purposes.
There are various reasons that could force the firm to do alterations to the product such as economic reasons. The foreign market may have a number of potential customers with low income and this may require the products to be altered so that they can be availed at a more affordable costs.
Other reasons for product alterations that must be put into consideration would include legal reasons, cultural reasons, the costs of altering the products that would require a cost benefit analysis, whether to concentrate on one product line or to extend the product lines in order to enjoy economies of scale and also the product life cycle trend in the foreign market.
Pricing is another element of the marketing mixes that Skyland Company should put into consideration when designing the marketing mix strategy. It is a very unique component since it is the only element that generates revenue to the firm while all the others are costs to the firm.
The firm must be very careful on the pricing strategy since it determines whether the firm will make profits or losses. When setting international prices, the firm must know that setting international prices is not as easy as setting national prices. Therefore, the following must be put into consideration.
First, the marketer should look at the market diversity which will guide on the pricing strategy to apply in terms of a cost plus strategy, skimming strategy or penetration strategy (Paul 56).
Secondly, Skyland Company must understand how the government regulates or controls prices in the foreign market. This does not imply that all governments engage in price control measures, but where it applies, the marketer should know whether there are price bands and the policies guiding competitive pricing. Thirdly, the firm must know how stable the currency is in terms of exchange rate and inflation.
If the currency is associated with a lot of volatility, pricing must be set in a way such changes in currency would be absorbed. For example, if payments are received in foreign currencies, then when converted to the currencies used by the company, they yield a lower value; the company should strategize on how to overcome such hurdles.
In some countries, customers are used to fixed prices while in others prices are set on the basis that they are negotiable. The company needs to understand such norms and know the best way to set their prices either as fixed prices or as variable prices where customers are given a chance to bargain and reach on an agreeable price.
Dominant retailers may be so powerful in a way they are able to influence prices. If such a case exists, the company needs to know how to deal with such situations and set prices that are flexible.
Promotion refers to creating awareness in the market about a company’s product. It is a very important marketing mix element as it acts as the bridge between the company and the customer as it serves to educate, inform and also entertain the target persons to whom it is directed to.
Promotion can take various forms such as personal selling, publicity, advertising, publicity and sales promotion. When designing an international promotion strategy, the firm must take into consideration various factors such as the push and pull mix.
The pull mix refers to those aspects and factors that are in support of the firm’s promotion strategy or said in simpler terms that favor the promotion strategy. Such factors would include costs that will be charged by the media incases advertising through the media is done.
The firm must also understand how customers in the foreign countries perceive sources of information, for instance, are there some information sources that are considered to be more reliable than others are.
The foreign government may also have recommended ways in which advertising should be carried out within the country; the company must therefore ensure that the advertising companies are within the limits of the rules and regulations governing advertising in the hosts’ country.
There could also be some push factors such as when there are restrictions on advertising and when the products take a considerable amount of the customers’ income and there are substitutes that are cheaper than the company’s product.
One of the biggest challenges of advertising in a foreign country would be the language, that is, if the two countries do not have a common language that can be understood by the potential customers, then the firm would be forced to get a translator who will translate the message to the customers.
Translation becomes a problem since after translation the message may lose its original meaning and be interpreted in a totally different way.
Another issue in translation is that direct translation may lead to a misunderstanding since same words may have different meanings. The situation becomes worse when words that were intended to send an informative message are interpreted to be obscene.
Place refers to delivery of products to the customers at the right place at the right time. In simpler terms, the products must be availed to the customers when they are needed by the customers. The firm must therefore design international delivery strategies that would be used to deliver the products to the customers in an efficient way.
When designing a distribution channel, the firm must consider costs and benefits that will accrue. The distribution channel should also be efficient and in line with technology in the country. If the company choose to use intermediaries, they should assess their financial strength, its capability to handle the job in terms of resources and how their ability to relate well with the customers.
It is also in the best interest of the company to know the working hours in the country and be able to fit within the system. Analyzing the situating of infrastructural development in terms of transportation, communication, security and how well the financial sector is developed is also very important.
It the transport system is poor within the foreign market, the firm might face a challenge in terms of timely delivery of products to clients. Communication network should be good to allow smooth flow of information.
Foreign Market Entry Strategy
Market entry strategy refers to how the company intends to venture in the market as there are various options and the firm is at liberty to choose on the strategy that suits the firm best.
At this point, the firm has already identified the market that it wants to venture and has done a thorough research on the macro and microenvironment factors that the firm would be exposed to. Therefore, the firm clearly understands or at least has an insight of what would constitute its strengths, weaknesses, opportunities and threats in the foreign markets.
Before the firm decides on the entry strategy to use, it should do an analysis of the financial risk that would be involved or what it would be risking and also the degree of market control that the firm expects to gain by entering the market. More often than not, firms would like to gain market control at zero financial risk; however, in practical terms it is not possible to have such a situation.
There must be a trade-off between the two and this poses a challenge to the firm (Clemes 31). For a firm to have market control, it should be in a position to assess response to the program, be continually informed about the trend of changes in customer tastes and preferences, be proactive instead of reactive to changes in the macro environment and finally, be able to design and implement a marketing mix that will serve the customers needs in a satisfactorily manner while retaining profitability.
Prior to making a decision on the most appropriate strategy, the firm must first understand the available market entry strategies in order to make an informed decision. The firm can choose to enter through direct marketing strategy, joint venturing strategy or export strategy (Clemes 31).
Direct marketing strategy is also known as foreign direct investment (FDI). In FDI, the firm establishes itself in the foreign market and has resources transferred to the hosts’ country. Some of the resources that are transferred include the human resources, capital and technology being used by the firm at the moment.
The firm can as well acquire or purchase some of these resources in the foreign country without having to transfer them from the home country.
FDI may take two forms in that the company can acquire another firm or organization that is already in place, and on the other hand, it can set up a new firm in the country.
This strategy helps the firm gain a high degree of market control in terms of having customers and competitiveness in the market although it involves a very high financial risk to the organization. Joint venturing entails franchising, contracting either production or management and licensing.
This entry strategy is associated with medium financial risk and the degree of market control can be termed to be medium. Finally but equally important is the export entry strategy, this involves selling and marketing of products produced locally to foreign markets. The factors of production are fully owned and located in the domestic market. The level of financial risk involved is low and degree of market control is low (Anon para.4).
Based on the above foreign market entry strategies, direct marketing strategy would be recommended for Skyland company since from earlier discussion, the target market (Kenya) is lowly industrialized and especially in the manufacture of household goods.
Though the strategy involves a high level of risk, the firm would gain greater market control. The mutual business relationships enjoyed by the two companies (United Arab Emirates and Kenya) would also be another justification for direct marketing.
Conclusion
International marketing is a lengthy process that requires adequate time for the company to research and select on the market(s) to venture in. market selection requires identification of various markets, screening them and then selecting the most attractive market that matches company resources. The marketer should the developed an appropriate marketing mix strategy in terms of product, price, place and promotion.
The marketing mix strategy should meet and satisfy the customers needs in a satisfactorily manner. Foreign market entry strategy should be chosen after a thorough analysis of the external and internal environments of the target foreign market. The firm can choose to either explore market directly or enter into a joint venture.
Works Cited
Anon. Foreign Market Entry Modes. 2010. Web.
Clemes, Michael. New Zealand Case Studies in Strategic Marketing. KY, Cengage Learning Australia. 2002. Web.
Paul, Justin. International Marketing: Text and Cases. Delhi, McGraw-Hill. 1966. Web.
“Skyland website.” Skyland website. 2010. Web.
Syed, Rahman. International market selection process: an investigation of the relevance of business operating environment. 2006. Web.