Introduction
The telecommunication industry in New Zealand is characterized by numerous small firms. The firms are operating in a small domestic market and are poorly funded. Consequently, the chances of growth are limited.
Magic Pulse being one of the firms in the industry is considering internationalization as its growth strategy. This paper analyzes Magic Pulse’s internationalization strategy. It focuses on the markets that the firm should join and the entry mode that should be adopted by the firm.
Internationalization of Magic Pulse
Mr. Murphy should internationalize magic Pulse. This is because the SWOT analysis (in the appendix) reveals that the firm’s growth in the domestic market is limited by the threat of new entrants, threat of substitute products and high competitive rivalry.
Besides, the firm is weak financially. Internationalization will give it an opportunity to expand its market share thereby increasing revenue. It will also enable the firm to enjoy economies of scale as it expands its operations.
Markets to Join
Australia
Magic Pulse should join the Australian market due to the following reasons. It will be cheap to join Australian market due to its close proximity to New Zealand and lack of travel barriers. This will not only reduce travelling costs, but will also enable Mr. Murphy to manage the firm in the domestic market.
Similar legal requirements between New Zealand and Australia will help in reducing the cost and time required to establish the firm in Australia. Thus Mr. Murphy will be able to recover the cost of expansion within a short timeframe. The high growth in Australia’s hair dressing and beauty industry will ensure steady growth in demand for Magic Pulse’s product.
Besides, the Australian hair dressing industry has a large number of firms. This increases the chances of selling more units of Magic Pulse’s products. Since the hair dressing industry is at its maturity stage, firms are likely to focus on product differentiation and improving the quality of their customer services. Consequently, they are likely to resort to kitomba to improve the quality of their customer services.
United Kingdom
The suitability of UK can be explained as follows. Since the legal requirements in UK are similar to those in New Zealand, MR. Murphy will find it easy and cheap to comply with the law. The UK market is likely to facilitate high growth since it has needs that are yet to be satisfied. Most salons are keeping records relating to their sales transactions, appointments and stock.
Thus they are likely to purchase kitomba to help them keep their records efficiently and to manage their appointments effectively. For example, those who use manual records are likely to find kitomba a better alternative for managing appointments. The UK hair dressing industry is also large and has been recoding steady growth. Thus Magic Pulse is likely to achieve a steady demand for its products.
The demand in the hair dressing industry depends on the performance of UK’s economy. This means that the demand is high when the economy is experiencing robust growth.
Currently, the economy of UK is experiencing a steady growth of 3.2% with inflation rate expected to fall to 2.7% by the end of 2011. Thus more firms are likely to join the industry as the demand for hair dressing services increases. This will translate into high demand for Magic Pulse’s products in the UK market.
Market Entry Mode
Table 4 in the appendix indicates that the franchise model has the highest score. This means that it is the most suitable market entry mode that should be pursued by Magic Pulse. The choice of franchise model is based on the firm’s growth objectives, strategic capabilities as indicated by the SWOT analysis and the market conditions in UK and Australia. This can be explained as follows.
Franchising is a business model whereby a firm uses existing firms in a market to distribute its products instead of establishing its own stores or sales offices. Thus Magic Pulse will partner with existing firms in UK and Australia to distribute its product. Given the firm’s limited financial capabilities, partnering with existing firms will enable it to save the cost of establishing sales offices in foreign markets.
As a partner in the franchise, Mr. Murphy will still be able to have control over operations and marketing. He can achieve this by setting the benchmarks to be used by the franchisee to distribute his products. Besides, he will still be able to get feedback from the market either directly from the customers or through the franchisees.
Since Magic Pulse has limited human resources, the franchise will enable it use the staff of its partners to facilitate its operations in the foreign markets. This will further lower the cost of joining the new markets. The franchise model will also enable Magic Pulse to reduce the time required to establish itself in the new markets.
Since its partners will be existing businesses, Magic Pulse will be able to start distributing its products in the new markets immediately. Consequently, the return on investment will be realized within a short period of time.
By reducing the cost of joining and operating in the new markets, the franchise model is likely to facilitate high profits. Thus the franchise model will not only lower the cost of internationalization but will also facilitate high profits.
Marketing Challenges
Magic Pulse is likely to face two main marketing challenges namely, establishing brand equity and developing its marketing mix. The challenges to be faced in developing the marketing mix are as follows. First, the firm will experience difficulty in pricing its product especially in UK. The UK telecommunication industry is completely deregulated.
Thus it is characterized by intense competition which has led to a significant reduction in consumer prices. As firms lower their prices to encourage purchases, small firms like Magic Pulse might not be able to sustain very low prices and might be driven out of business.
Second, Magic Pulse will experience difficulty in differentiating its product. Unlike the New Zealand market, the UK market is characterized by a large number of IT firms which offer products that are similar to Kitomba. Besides, most of UK IT firms have adequate financial resources to differentiate their products through advertisements.
Due to Magic Pulse’s limited financial resources, it will find it difficult to inform the potential customers about the uniqueness of its product. Thus even if its software is upgraded regularly, it will not help in differentiating it if the customers are not informed of the upgrades. Third, Magic Pulse will experience difficulty in distributing its product.
The difficulty is attributed to the challenge of finding a reliable franchisee who can distribute the products effectively. While potential franchisee can be readily available, agreements on how to share profits and distribution costs might be difficult to achieve.
Besides, Mr. Murphy can not have full control over the distribution channel since the franchisees are responsible for the management of their businesses. Consequently, he might not be in a position to fully implement his distribution strategies.
Finally, the firm will experience difficulty in facilitating its promotional activities due to lack of enough funds. Due to the large size of both UK and Australian market, the firm will be forced to use mass media to facilitate its promotional activities. The firm will fail to improve its brand equity if it will not be able to fund its promotional initiatives.
How to Differentiate Kitomba
Product differentiation involves emphasizing the perceived high quality of a given product. This means that the marketer must highlight the key features of his or her product in order to distinguish it from its competitors. Mr. Murphy has succeeded in developing a product that is superior to its competitors in the market.
However, he needs to communicate the superior qualities of his products to the market in order to achieve product differentiation. This means that he must shift his product differentiation initiatives from software upgrades to sales promotional activities such as advertising. Due to its financial constrains, the firm is using direct marketing, word of mouth and few advertisements to market its product.
However, these strategies are not effective in highly competitive markets since they can not reach a large number of people. In response to this challenge, Mr. Murphy can resort to social network marketing to differentiate its product. The social networks such as twitter are not only cheap to use, but can also reach a large number of people.
This will give him an excellent opportunity to highlight the superior qualities of his product thereby positioning it as the best in the market. Engaging customers in conversations through the social networks will also enable him to understand their preferences easily. Consequently, he will be able to improve his product accordingly.
Alternative Growth Strategies
Apart from internationalization, Magic Pulse can consider the following options to achieve high growth. First, the firm can target new industries. Most firms within the service industry require effective software packages to help them manage their records and operations. Besides, their employees need a software package to help them manage their busy schedules.
Thus instead of targeting only the mechanics and the hair dressers, Mr. Murphy can also target other markets within the service industry. For example, the cab or taxi industry is associated with busy schedules. Thus taxi firms are likely to purchase kitomba to help their staff manage their schedules and also to manage other aspects of their businesses such as billing.
Second, the firm can introduce new products for different markets and industries. This will involve developing tailor made application software packages for different industries. For example, the firm can develop retail management or point of sales software packages and sell them to firms in the retail industry. Developing such products will be easy since they are similar to kitomba.
The firm can also improve its product portfolio by distributing software packages developed by other firms in various markets. Increasing the product portfolio will not only increase revenue, but will also help in eliminating the risk of being driven out of business should kitomba become absolute in the market.
Finally, Mr. Murphy can change the model of his business from a firm involved in developing text message marketing solutions to a full flagged marketing agency. While the firm will still be involved in the development of marketing software packages such as kitomba, it will also introduce other marketing services.
The new marketing services can include conducting marketing or market research, designing adverts and helping companies to implement their sales campaigns or launching new products. With fifteen years of experience in various marketing roles, Mr. Murphy should be in position to develop and market the above marketing services.
By widening the scope of his business, Mr. Murphy will be able realize high revenue. Besides, he will be able to cushion the software segment of the business from the effects of intense competition. This is because he will be able to use profits from the marketing segment to boost the software segment.
Conclusion
Magic Pulse should be internationalized in order to improve its growth rate. It should particularly join the UK and Australian markets. This is because these markets are relatively cheap to join and are large in size. Due to the firm’s financial constrains, the franchise model will be the best strategy to use when joining the new markets.
The main marketing challenges the firm is likely to face include pricing and improving brand equality. Apart from internationalization, the firm can achieve growth by increasing its product portfolio and diversifying its investments.
SWOT Analysis
The strengths of the firm include the following. First, it has been able to maintain a low cost structure which will enable it to maintain low prices. Second, it is able to respond rapidly to changes in the market. Finally, it has been able to produce superior product that meets the expectation of customers.
The weaknesses of the firm are as follows. First, it is financially weak and depends on only one product. Second, the company has not been able to implement effective marketing through mass media. Finally, it has inadequate human resources thus limiting its growth.
The opportunities available to the firm include the following. The firm is likely to increase its sales if it joins the foreign markets such as UK which are large. It also has the opportunity to expand with the help of government funding.
The threats likely to affect the growth of the firm in a negative manner are as follows. There are very many substitute products in the market. The competition is intense in all markets targeted by the firm. The threat of new entrants is also high since the technology used to develop the product is not complex. Consequently, the firm can easily lose its market share.
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