Introduction
In the history of the German company SAP, as in a mirror, several eras of the global corporate informatization market are reflected. SAP SE produces software for organizations; the headquarters are located in Walldorf. SAP was founded by five former IBM employees (Claus Wellenreuther, Hans-Werner Hector, Klaus Chira, Dietmar Hopp and Hasso Plattner) under the name Systemanalyse und Programmentwicklung (System Analysis and Program Development). The first office of the firm was in Mannheim; in 1976, SAP GmbH was founded and the company moved to Walldorf a year later. SAP has offices on most continents, in more than 130 countries, including the USA.
The company is engaged in the development of automated control systems for such internal processes of the enterprise as accounting, trade, production, finance, personnel management, warehouse management, etc. Applications can usually be adapted to the legal context of a particular country. In addition to supplying software, the company offers services for its implementation, using its own implementation methodology. The company’s most famous product is the SAP R/3 ERP systems for large and medium-sized enterprises, developed and sold by the company since the early 1990s, created as a continuation of the RF and R/2 lines. Since the mid-2000s, the R/3 name has not been used; the core of the ERP system, created as a continuation of the line, is called SAP ERP ECC by the manufacturer (Goldston, 2019).
The largest world market players in the ERP segment are Oracle and SAP. While both are market leaders, their ERP products are surprisingly different. The SAP product was largely built in-house, while Oracle aggressively bought up competitors such as PeopleSoft and NetSuite. Oracle and SAP are so dominant that even Microsoft is using SAP instead of its own ERP product, Microsoft Dynamics. Since most industries have quite specific ERP needs, Oracle and SAP have ready-made configurations for many industries such as food, automotive and chemical, as well as vertical configurations such as sales processes (Sharma, 2020). However, there is always room for niche players who tend to target a specific vertical.
The largest market for SAP is EMEA, with revenue exceeding €12.1 billion in 2019, up 9% from a year ago. In the US, the company’s revenues rose 15% to € 9.08 billion (SAP Global Corporate Affairs, 2020). The same growth was observed in all countries of the Americas combined. In the Asia-Pacific region, SAP’s turnover in 2019 was 4.25 billion euros, which is 9% more than a year earlier (SAP Global Corporate Affairs). SAP’s 2019 net profit was €3.39 billion, down 17% from 2018 profit (SAP Global Corporate Affairs). Such an indicator of a decrease in profit is an alarming signal and testifies the need for increased attention to strategies for promoting SAP products and their possible modification in accordance with changing market conditions, as well as entering new markets.
Literature Review
The possibility of companies going beyond the boundaries of the local market can be considered as one of the options for further development and increasing competitiveness (Steenkamp, 2017). The choice of a marketing strategy is a key factor in the effective operation of companies in the context of instability in the global market. Marketing goals in international business are determined by the feasibility of entering the market of a certain country, determining the type, quantity and price of the goods being promoted, the features of the marketing exit program, the desired results, possibilities of developing an adaptive strategy for entering the international market.
In the modern world, one of the main trends in international marketing is the process of switching from a unified marketing strategy for all divisions to a thorough study of a specialized strategy for each market. The world in the last decade has been characterized as “semi-global” rather than globalized (Steenkamp, 2017). In other words, when choosing a marketing strategy, despite the trends of internationalization and globalization, one cannot ignore both the connections between countries/companies and their differences, since there are no “standard preferences” among consumers around the world.
To make the choice of the country, companies must, first of all, be guided by individual characteristics – for example, small and medium-sized enterprises may be interested in expanding into country niche markets and market segments (Kostelijk and Alsem, 2020). When choosing country markets, in addition to existing own resources, skills and competencies, the attractiveness of the market and market segments, the risks and barriers that exist at entry are also important. Taking into account the strengths and weaknesses of the enterprise, the opportunities and risks of the target market, appropriate expansion strategies are created. Taking into account the strengths and weaknesses of the company and the opportunities and risks of the target market, appropriate expansion strategies are developed.
There are three most important strategies for entering the foreign market: an export strategy, which in turn is subdivided into direct and indirect export, a joint business strategy, and a direct investment strategy. Using an export strategy, the company sells its goods all over the world without being present abroad (for example, through B2B portals on the Internet). The risks of this strategy are the low level of export earnings, lack of knowledge about the target market and consumers, inability to influence business policy in the target market. There is also low likelihood of adapting to changing demand in the target market. The advantages of this strategy are low risks in case of failure (Steenkamp, 2017).
Another strategy is joint business strategy, that is, the variant of partnership between the manufacturer’s enterprise and representatives of the local market. Typically, this definition includes types of cooperation associated with licensing, contract manufacturing, contract management, and the creation of joint ventures (Schlegelmilch, 2016). Another common strategy for entering foreign markets is the strategy of selling through sales representatives. The goods are sold in the target market by specialized foreign sales representatives on a commission basis. The advantages of this strategy are that the risk of failure lies with the agents; there is ability to penetrate a number of target markets without knowledge of country specifics. There is no need for personal contact; capital costs are very low (Schlegelmilch, 2016). However, there is little control and management capabilities in the target market due to lack of integration; coordination with the agent is only market-based, the basis is the commission agreement.
Any form of cooperation is characterized by the relationship associated with certain conditions prevailing at the time of the start of the internationalization campaign. As a rule, the main criterion for choosing any of the strategies presented is the legislation of the state concerning the attitude towards foreign companies (Steenkamp, 2017). However, it does not have to be limited to only one strategy, when an enterprise entering a new market. A large number of factors, in particular, the financial condition of the enterprise, have a significant impact on the feasibility of using a particular strategy. In international marketing, one can use both an individual marketing strategy for each country and a general marketing strategy for all, but then the product proposal must be unique. The most striking example of success in the second case is Apple, where product differentiation is carried out only by price – as was the case with the iPhone 5s model and its cheaper counterpart iPhone 5c. At the same time, the general sales strategy is based on such human weaknesses as the joy of owning a product, belonging to the “chosen one.”
A brand, being a means of distinguishing goods or groups of goods, allows its owner to monopolize position in the market. A brand requires constant investments not only of material resources for its advertising, but also the improvement of images and styles aimed at creating a positive consumer response. In turn, it is impossible without constant attention to ensuring the quality of the product. The strength of a brand lies primarily in the brevity and constancy of its constituent elements of a trademark or service mark. As a rule, brands based on designations that do not have legal protection as a trademark or other type of legal protection are weaker.
The weakening of the brand is directly related to the decline in its popularity. Many examples show that it is not always capital investments that shape brand development. A drop in brand popularity occurs primarily when a product or service represented by a brand becomes less attractive to consumers, but there may be other reasons for this, for example: a decrease in the quality of a product or service; unsuccessful advertising and marketing activities; loss of a leading position due to the disclosure of some know-how; the rapid development of technologies that fundamentally change the relevant market sector; changes in the cultural preferences of consumers and the customs of the use of goods; more successful or unfair actions of competitors.
Brand weakening reduces demand for a product or service, so, in each case, there can be a countless number of possible recommendations to counteract such weakening. However, first of all, the management of the company should analyze the reasons for the weakening of the brand, with the involvement of specialists – psychologists, marketers, lawyers, patent specialists and production representatives, developers of products offered under the analyzed brand. In special cases, it is possible to invite outside experts to study the situation in more detail. The main thing is not to forget that even the most popular brand requires constant support.
In turn, modern concepts of marketing in the IT market can be systematized by groups of approaches to the study of this market. The first approach of this group defines the IT market as a kind of industrial market. The information and communications technology (ICT) industrial sector, which includes telecommunications services, electronic equipment, computing and software, plays an important and growing role in the global economy. Today, the total volume of the global IT market exceeds two trillion US dollars (CompTIA, 2020). The most dynamic segment of the global IT market is software, which has grown more than 6% annually over the past few years. More than half of the total volume of the segment is formed by various categories of applications, the rest is accounted for by system software and development tools. The fastest growing category of collaboration apps, especially in-house social networking and file sharing solutions, is growing more than 20% annually (CompTIA, 2020). The category of solutions for database management and analytics is also dynamically developing with an annual growth of more than 8% (CompTIA, 2020). Demand continues to be strong for enterprise resource and customer relationship management (CRM), as well as security solutions. These trends are very positive for SAP, especially in the developing Chinese market.
The IT market is viewed as a hyper-growing high-tech market that requires a special marketing strategy. International marketing of high-tech products has its own characteristics. Experts attribute the change in the corporate IP paradigm to the main market trends, which is primarily associated with the active spread of the cloud computing model. As part of these changes, IT services are becoming more external, typed, accessible; as a result, the traditional monopoly of the IT service on the purchase of IT products is lost. In addition, the model of sustainable customer loyalty in relation to the solution provider is becoming less relevant. Moreover, customer loyalty within the framework of such projects is practically zero (in the event of even minor dissatisfaction with the functionality or service of the product, the customer goes to another provider). In general, the cloud model is the path to the IT “out of the box” model, leading to a significant reduction in IT costs per seat (Hall, 2017). The second important trend in the b2b market of IT products is a change in the situation in terms of marketing channels: traditional ones (exhibitions, seminars, industry press) work poorly, and new ones (and primarily social media) are still being formed, and, therefore, companies so far are forced to use old channels.
The last crucial factor that should be mentioned is a change in the behavior model of corporate clients, or rather, b2b market now, to some extent, is characterized by the consumption model of b2c market, which is much more volatile and competitive. Any corporate resource begins to value one-click access, the ability to order services from the catalog, the availability of special programs and discounts, direct and quick access to expertise, the ability to evaluate a solution provider based on independent ratings, consumer reviews, i.e., based on community opinions, and other parameters inherent in requests to the IT system presented by a private client (Hall, 2017). In the new conditions, the marketing service should focus on socializing the business, increasing its openness, as well as striving to develop not only its own business, but also the market as a whole (Hall, 2017). In terms of socialization, it is necessary to ensure a constant presence of the company in social media (including through blogging of company executives), cooperation of companies within professional communities in order to develop standards and promote them in the market. To ensure business openness, it is necessary, first of all, to focus on the availability of the company’s website from any device at any time, on the possibility of chat with key specialists, the availability of the main speakers – the leaders of the company, as well as, in general, on the convenience and ease of communication with customers (Steenkamp, 2017). The above activity of the marketing service should lead to changes in the methodology for assessing customer satisfaction and loyalty programs, as well as an audit of marketing staffs and budgets.
Thus, in order for a company offering IT services to create and develop competitive advantages, an integrated approach to the use of the most effective marketing technologies focused on the characteristics of this market is required. At the same time, marketing technologies mean the optimal product, price, sales, and communication policy, as a result of which maximum customer satisfaction is achieved, as well as the competitiveness of the service provider in the market (Steenkamp, 2017). A correctly formulated marketing strategy, created on the basis of an analysis of the market and the internal potential of the enterprise, allows avoiding the obstacles that await the organization in the near future, and most importantly, to find the direction of its further development that will enable the enterprise to achieve the set targets with the least resources and minimal risks.
Background Analysis
New product promotion is a laborious process that requires careful analysis. However, not all innovations are successfully implemented in the market environment. Over 90% of new products fail in the promotion process. An example is the 51st version of the popular Angry Birds game, which never really started to be in demand, unlike the 52nd release. The main problem of many companies is a lack of patience – managers consider that the product produced should immediately bring a predictable effect. However, when the result is long in coming, the product is transferred to the unsuccessful status and discontinued. This does not take into account the likelihood that the promotion is able to bring an effect over time.
It is also a mistake to apply “compromise” as the basis of the new proposal. Achieving a compromise is typical in situations when simultaneously a number of specialists are engaged in the development. Thus, in order to reach a consensus, a new product has properties that do not have an ultimate goal to meet the needs of a specific target group, but rather represent characteristics of each participant in the market process. Such a product has a vague framework of perception among customers, and is not able to meet specific needs.
SAP offers about 347 products from the Intelligent Enterprise portfolio. These include ERP and cloud solutions, as well as Qualtrics customer management software, supply chain and product lifecycle management, analytics, IoT and AI tools. This list is very long, which leads to confusion for customers. The company shows them the new solutions that need to be implemented, but does not explain the reasons why customers need to invest in them. “Big,” “difficult,” and “expensive” are the words that most people think of when they hear about SAP. The company is trying to get rid of this reputation, but so far without success.
At the same time, SAP is rapidly expanding its presence in China. The company is looking for new partnership opportunities in this country. In 2018, SAP developed its cloud solutions for organizations on the Alibaba Cloud platform, a division of the Chinese e-commerce giant. As part of the collaboration, the two companies have announced that they will jointly innovate and commercialize their products (Deloitte, 2020). Cloud services in 2018 remained a prominent segment in the ERP market, but on-premises solutions are not disappearing anywhere – especially for operational solutions and use cases related to confidential data or a high level of regulatory regulation, which is very important for China. In addition, while the US-China trade war has ended well-established supply chains, especially for global businesses in China, the time is ripe for innovative marketing strategies and significant market share gains.
Today, IT businesses are increasingly scaled to the Chinese market, encouraged by its size and ability to pay. Localizing a website or product for China is not difficult, but when it comes to promoting and earning income, Western marketers often face challenges and frustrations. Marketing in China is not too difficult if to study its features in advance. Since 2003, the Golden Shield (Chinese Firewall) has been operating here. This means that any IT product should be hosted on Chinese servers for fast upload or download. In addition, it must pass the Chinese Internet censorship check. Instead of straightforward email marketing tools, in Google, Facebook, YouTube, Twitter, Instagram and TikTok, advertising in SMS, Baidu, Wechat, Youku, Weibo and Douyin work here. There is nothing complicated about them, they are just different. WeChat is used by over 1 billion monthly users, with a daily audience of 700 million. It has it all – WeChat Pay, communities, official brand pages, chatbots, apps, and even own search engine Sogou (Hu, Chen, and Yang, 2016). At the same time, despite the billion-dollar audience, there are many pitfalls in it: the difficult path of registration and verification of an official account, a high threshold for advertising entry, and huge competition between brands. However, the main thing is that WeChat is not an advertising, but a social tool. Before investing money and resources in an official account, content strategy and advertising, one should start from small – promotional articles in communities relevant to business and target audience with promotional QR codes for landing pages or mobile applications.
At the same time, the need for the formation of an international marketing strategy arises for companies, regardless of the size of the business and the fact of presence in the foreign market. This is due to the fact that any organization in the context of globalization is forced to compete with foreign counterparts at the local level. Consequently, the decision to enter foreign markets is most often the result of the influence of external factors, rather than solely the organization’s own initiative to improve its financial performance. These factors include the following (Schlegelmilch, 2016):
- Saturation of the domestic market and the possibility of doing business outside national borders with greater profit;
- High competition in the domestic market from global companies;
- Narrowing of the national market, the emergence of a need to expand the consumer base in order to ensure economies of scale;
- The need to minimize risk by reducing dependence on a particular market;
- The need for international customer service.
Thus, the development and implementation of an international marketing strategy allows for the long-term survival of the company under the pressure of fierce global competition through differentiation of the brand of products and services, reducing the cost of production by increasing sales and economies of scale, gaining important strategic positions, etc. From the point of view of the algorithm, the formation of an international marketing strategy does not differ significantly from the classical scheme of strategic planning by Kotler. An exception is the need for a more complex strategic analysis due to a greater degree of uncertainty, which is caused by the specifics of the international marketing environment.
According to this model, the strategic planning process begins at the corporate level and the stage of formulating the mission and purpose of the organization. The formulated mission subsequently determines the auxiliary goals and focus of the company. This is followed by decisions regarding the portfolio of lines of business and products most suitable for the company, and the support needed for specific lines of business and products. Finally, each of the business units develops detailed marketing and other strategies that will help achieve the company’s core goals. The core possible strategies include differentiation, cost leadership, and focus.
- The differentiation strategy assumes that the company develops a marketing mix in such a way that the company’s products and services differ significantly from competitive products and services in the eyes of consumers. This is achieved by demonstrating certain characteristics such as quality, reliability, uniqueness, practicality, and so on. Provided that customers are successfully informed about their competitive advantages, the company has the right to set a higher price for its product or service and thereby avoid price competition from less significant brands.
- According to the cost leadership strategy, the company achieves its competitive advantage, namely a relatively low price, by regularly reducing production and distribution costs, operating with lower profit margins, manufacturing from less expensive materials and using less expensive complements. This strategy involves advertising low prices for goods or services and distribution channels, which will keep the retail price low.
- A focusing strategy requires focusing efforts on specific segments of the consumer market or specific areas of the geographic market. A focusing strategy is achieved through the quality awareness of target markets about their products or services.
Taking into account the peculiarities of the quality and cost of products and services of SAP, the most optimal strategies are differentiation and focusing, in the form of convergence of these two strategies. Alliances with local businesses are also promising – thus, last year, SAP and Chinese internet giant Alibaba announced a collaboration in the cloud computing market. Under the terms of the agreement, SAP S/4HANA Cloud and SAP Cloud Platform solutions became available in the cloud infrastructure of Alibaba Cloud (SAP Global Corporate Affairs, 2020). The strategic partnership between the two companies enables the integration of SaaS (software as a service), PaaS (platform as a service) and IaaS (infrastructure as a service) products. Alibaba and SAP also announced joint development of solutions for the Chinese market. These products will meet the unique needs of Chinese businesses to help accelerate their digital transformation. In addition, the partners agreed to develop innovative solutions in the field of the Internet of Things, artificial intelligence, and enterprise-class Big Data.
The trade war between Washington and Beijing has led to a reorientation of trade flows, with companies moving their manufacturing facilities from China to other parts of the world such as Southeast Asia. Importers from the United States and China are also looking for supplies from alternative countries that are not subject to prohibitive tariffs. In addition, as companies consider moving their supply chains to Southeast Asia, small and medium-sized enterprises in the region will use more technology in their day-to-day operations, which could create tremendous opportunities for the market of corporate IT solutions.
In implementing these strategies, mergers and acquisitions, as well as joint ventures seem expedient, as it will allow minimizing legal risks and, to a significant extent, will raise the value of SAP products for Chinese customers, due to their national specifics of customer preferences which are discussed below in this paper. Only about a quarter of Fortune 200 members rely solely on organic growth to operate in China (Prange, 2016). Experience in arranging M&A deals and setting up joint ventures helps them win a place in the sun from Chinese competitors, and this is not accidentally.
China is as difficult for global corporations as it is important for them. The PRC’s economy creates opportunities for scale-up operations that no other country can match. China has already become the number one market for many product categories, including cars, home appliances, and mobile phones. It is also becoming the main source of growth in margins for multinational companies (MNCs). According to a study by the American Chamber of Commerce in China, the rate of return of 68% of MNEs working in the PRC is comparable to or higher than the world average (Prange, 2016). However, as Groupe SEB, Carlsberg, and many other corporations have seen, it is not easy to win in China relying solely on our own strengths (PwC, 2013). The competition here is fierce than ever: a new generation of Chinese companies – national champions – are quickly setting the standard for cheap and budget goods. Foreign companies have to match or they will fail, and with such pressure from competitors, this must be achieved in a very short time.
Joint ventures and mergers and acquisitions (M&A) have always been the means to success in China, and in industries closed to foreign capital, such as banking and insurance, they still have no alternative. In these sectors, this approach allows not only to operate in the Chinese market, but also gives access to large contracts of the Chinese government. Recently, however, the process of joint ventures and M&A transactions has become much more intense outside the closed sectors (Prange, 2016). Increasingly, these transactions have a transformative impact on corporations, giving them access to the early stages of the production cycle, research and development, intellectual property, sharing of key corporate opportunities and other means of promotion in the PRC.
Marketing Strategies, Brand Management & New Product Development
The study of the marketing environment has the following objectives:
- creating an important database of changes in the business area;
- prior warning from management about what might happen in the market;
- promoting data and research findings to key decision-makers.
While PESTLE analysis is used to determine the factors of the macro-environment that can affect the company, the most common research method is SWOT analysis, since it allows combining the analysis of the environment with the analysis of the characteristics of the company itself, namely:
- Research of directions of the enterprise functioning;
- Resource research;
- Investigation of the possibilities of implementing the pros and cons of the organization;
- Revealing the goals and objectives of the organization;
- Analysis of the macro-environment to highlight the opportunities and dangers that come from it.
The mission of SWOT analysis is to identify and investigate the strengths and weaknesses of the organization, as well as the opportunities and dangers of the macro-environment. Understanding strengths enables to effectively take advantage of market opportunities and avoid its dangers. Knowing the weaknesses makes it possible to design protection in a timely manner, as well as draw up a plan of operation to reduce the costs of threats.
The general component of the SWOT analysis, on which the activity of the marketing strategy of the enterprise is based, is considered to be a matrix of strengths and weaknesses, opportunities and threats. The essence of the SWOT matrix is that it makes it possible, due to various combinations of strengths and weaknesses, opportunities and threats, to create a rational marketing strategy of the enterprise based on the factors of the market environment. According to the SWOT matrix, there are 4 types of strategies:
- Using the strengths of the enterprise to implement marketing opportunities (the most desirable strategy)
- Using the strengths of the enterprise to neutralize marketing threats.
- Reducing the weak aspects of the enterprise through the use of marketing opportunities.
- Reducing enterprise weaknesses and predictable marketing threats.
SWOT analysis is at the heart of strategic planning. Its results enable the organization to intelligently and effectively leverage its internal strengths and/or the distinctive advantages of its strategy. In the event that the firm does not have strong distinctive advantages, the potential strengths of the organization can be analyzed and used to achieve marketing goals. SWOT analysis also involves assessing the weaknesses of the organization and the threats that the external environment presents. Their analysis allows understanding how internal weaknesses and threats of the external environment affect competition and the market position of the firm, as well as answer the question of whether they can be adjusted based on strategic considerations. In addition, a SWOT analysis provides insight into which resources a firm can best use to generate the best opportunities. Finally, the SWOT analysis identifies the threats that are most critical to the organization. As a result, a company can take a number of strategic actions to protect itself from the risks of positioning new product or entering new markets.
Despite the wide recognition of SWOT analysis as one of the best methods of analytical processing and research, successfully applied in various fields of science, it is not without certain drawbacks. The main one is that SWOT analysis belongs to the group of instructive-descriptive models of strategic analysis, which are capable of reflecting only general goals and factors, and not specific measures to achieve them (Gurel, 2017). Often, a SWOT analysis is limited to a simple listing of factors without identifying the main and secondary ones, as well as without a detailed analysis of the relationship between them. However, this is the only basis to start reviewing and assessing possible alternatives, a foundation for any further models and calculations, as it allows choosing strategic direction.
In turn, after conducting a SWOT analysis, the next step is to develop a business portfolio to enter the relevant market, for which one can use the BCG Matrix – one of the most famous business management tools. The BCG model is a fairly well-known business portfolio optimization tool that considers the following issues:
- Portfolio balance.
- Achievement of a specific market position as a formulated goal for a specific business in a given strategic perspective.
- The attractiveness of the products in the portfolio in terms of profitability or growth rate.
- Revealing in what specific areas of activity should investments or incomes be directed in this strategic period
- Level of alignment with other businesses in terms of creating synergies.
It is also known as the ‘market share – growth rate matrix,’ as it represents a mapping of the position of a particular business in a strategic space. The matrix represents the intersection of the axes, where the horizontal axis corresponds to the relative market share. It is calculated as the ratio of own sales to sales of the strongest competitor or the three strongest competitors, depending on the degree of concentration in a particular market. The vertical axis corresponds to the growth rate of the market. Accordingly, the product goes through four stages of development:
- Entering the market (product – “problem”). This product is also called “Question Marks;”
- Growth (Products – Stars);
- Maturity (Products – Cash cow);
- Recession (Product – Dog).
Below, there are SWOT-analysis and BCG matrix for SAP for entering Chinese market. In fact, the BCG matrix represents many instruments in one chart. This allows the matrix to be used quickly and easily to identify areas for further in-depth analysis. At the same time, relative market share is not necessarily a good indicator of a competitive position. Product life cycle reliability is also twofold. The assumption that growing markets imply lower costs of securing market share has not been supported by scientific research. Industrial growth is not necessarily an indicator of the attractiveness of a given industry. There is no clear relationship between growth and profitability across all industries. The assumption that emerging markets offer firms the easiest and most efficient route to market share is also dubious. However, in combination with SWOT analysis, it can be helpful in defining strategy for markets expansion.
Fig. 1. SWOT analysis for SAP.
*This matrix id drawn up for the nearest future of 1-2 years.
According to the Keller model, building a strong brand consists of a series of stages, each of which depends on the successful implementation of the previous one:
- Ensuring brand identification by buyers, as well as brand association in their minds with a certain class of goods or with their needs;
- Customer awareness of brand value (through strategic linking of tangible and intangible brand associations);
- Shaping the appropriate reaction of buyers to the identification and meaning of the brand;
- Transformation of the reaction to the brand into a strong, active, loyal attitude of buyers to a particular brand.
Keller presents a brand’s consumer capital as a logical model of six blocks that connect the brand to customers: salience, performance, imagery, judgments, feelings, resonance. In order to build brand equity, it is important to put each block in its place and then reach the peak of the pyramid. The concept of brand description is identified with the totality of those impressions and consumer associations evoked by the brand. For the Chinese market, judgments represent the bottom of the pyramid, followed by feelings, and performance preceding the top.
In the Chinese market, some psychological and sociological factors are of significant importance for positioning a product. In particular, one can operate only with modern style, ultra-fashionable images, which are increasingly penetrating all layers of Chinese society. The consumer gradually becomes accustomed to the transnational language of branding and consumer culture, he also globalizes and gets used to universal codes and meanings of consumption. However, with the seemingly democratic advertising market in China, one should be careful. To successfully promote a brand, it is necessary to understand local specifics. For example, people in China tend to trust word of mouth more than conventional advertising. In addition, when choosing a brand, the Chinese tend to be guided by the opinion of people who are authoritative for them – opinion leaders.
The standard approach to writing advertising texts will not work here – only text cannot be enough here, even if to point out that the company has many international awards. The Chinese audience will be strongly influenced by a photo with a prominent official, such as a high-ranking official from the Ministry of Science and Technology. Also, positioning the product as expensive and luxury will not work. A brand is very important, but it cannot be promoted as a “brand for the elite” (Hu, Chen, and Yang, 2016). This approach is under an informal ban and will not bring the desired result.
It should be noted that, despite the fact that PR is often perceived as an optional part of business expenses, it plays an important role in delivering key information about the company to target audiences. PR solves the problems of establishing contacts with external stakeholders, providing information support to the organization’s activities in foreign markets and positioning the company as respecting local customs and traditions. Secondly, it forms the image, taking on all the work on the perception of the company, including the information field that surrounds it. This includes anti-crisis measures when it is necessary to protect or correct a shaken reputation. Given the Chinese specifics, PR is essential for the successful promotion of a brand in this country.
The people of China are some of the world’s most active social media users. According to a McKinsey study, 95% of internet users in this country have social media accounts. 91% have used social media at least once in the last six months. By comparison, in the United States, the figure is 67% (Hu, Chen and Yang, 2016). Thus, the main communication channel for promoting the SAP brand should be social networks, professional communities, opinion leaders in the IT industry, organizing events like conferences for business representatives, as well as participation in exhibitions and, if there is a legislative opportunity, participation in tenders held by the government of China. It is advisable to carry out all these activities, as already mentioned above, within the framework of focusing and differentiation strategies for SAP products, taking into account the BCG matrix, compiled on the basis of trends in the Chinese market for ERP systems. Strategic alliances with local partners also appear to be beneficial both to enhance brand value in the eyes of Chinese consumers and to minimize potential legal risks.
Moreover, Hofstede cultural dimensions values should be taken into account for Chinese market. In particular, Chinese B2B customers are ready to change their plan at any time, require additional functional that was not negotiated before, and so on. Thus, in fact, a kind of Agile approach should be applied for promoting SAP products in Chinese corporate sector. However, opinion leaders mentioned above could mitigate this factor of uncertainty.
Thus, taking into account strengths and weaknesses of the new product development process in SAP, the strategy of focusing, based on M&A deals and joint ventures creation should be applied. The ERP proposed by SAP is characterized by flexibility and scalability, as well as the possibility of being customized in frames of Agile approach. However, SAP company should address the issue of the current lack of consideration of national features in understanding intra-firm interaction, communication, and the culture of excellence. SAP company should clearly formulate the value of its ERP products namely for Chinese corporate customers.
Recommendations & Conclusion
The scope of this study of SAP branding opportunities for the Chinese market does not allow the use of Hofstede’s cultural measurement tools to analyze the prospects for entering the Chinese market. However, the study of the behavioral features of Chinese consumers, trends in the Chinese market for IT solutions for business, especially ERP systems, as well as the advantages and disadvantages of SAP products and services made it possible to conclude that it is advisable to apply a differentiation strategy and focusing on the ERP segment of business solutions as well as cloud services in partnership with local companies like AliBaba. The main advertising efforts should be focused on social networks, as well as establishing interactions with opinion leaders and, if the legislative opportunity exists, participating in public-private partnership programs, which will significantly increase Chinese consumers’ loyalty to the SAP brand.
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