Introduction
The purpose of this paper is to present the ideal entry strategy for the Nabeel Perfumes Company based in the UAE that wants to enter and penetrate the German market. From preliminary research, it is apparent that the unique Neebel perfume has huge demand in the German market. The external factors such as political stability, free market, and very low corruption levels are favorable for the entry of the product in the German market.
Besides, there are very few competitors since the Nebeel perfume will target Germans of Arabic descent. The product is unique, considering ittar, oudh, and bakhoor ingredients that are currently absent in the German market. The proposed marketing mix will involve entry pricing, franchise to ease distribution, marketing the product as the first of its kind, and focusing on customers with Arabic descent. The Nabeel Perfumes will use localization strategy to penetrate the market in the shortest time possible and win the trust of the clients.
Company Background
Overview
The Nabeel Perfumes is a company based in the UAE that manufactures unique French perfumes going by the name Chris Adams. The company has its headquarters in Sharjah Airport International Free Zone. The company has been in the market since 1969, when it was founded by Asghar Ali. The motto of the company is, Be Daring, Be First, Be Different.
Current products, markets, facilities
The company has a single manufacturing facility within the Sharjah Airport International Free Zone from which its products are exported to other regions and countries. At present, the company has managed to penetrate Kuwait, United Kingdom, and Saudi Arabia. In the year 2014, the company was able to open more than 30 new retail stores across the globe. The product traded by the company is French perfume, which comes in different varieties such as occidental and oriental fragrances. The perfumes have active ingredients such as oudh, Uttar, and bakhoor.
Country and Market Analysis
External factors
Political stability
The German political system is very stable and predictable. The country has strong and well functioning democratic institutions, which guarantee free and fair election processes. In the last three decades, the country has not had any serious case of political upheaval. This factor is ranked at 7/10 because it provides the free-market environment for the Neebel perfume.
Free market system
The German business market operates as a free and liberalized economics zone with very minimal government interference. Once a company has gotten a license to operate in the market, it is easy to penetrate to all regions. This factor is ranked 6/10. The free market system will protect the Neebel perfume from double taxation since the company will have the opportunity of operating in a level playing grounds as the local companies (Kotler, 2007). This factor is ranked 8/10 because the free market system will determine the success and how much the product can penetrate the market.
Corruption level
Corruption level is very low in Germany, and the government has stringent laws to minimize its impact on the local economy. There are strong institutions that are mandated with the role of curtailing corruption. At present, Germany was ranked at position six globally for having very low corruption rates. Besides, the laws in Germany define corruption as a capital offense. This factor was ranked at 4/10 because the low corruption level will create an ideal business environment in the short-term and long-term (Brown, 2009).
Customer/competitor factors
Product availability to meet customer needs
Since the proposed Neebel perfume will target a focused market, there are very few other products in the German market that can rival it. At present, there is no company that incorporates the ingredients that the Neebel perfume promises to offer. The product promises value such as high quality and attractive smell. This factor is ranked as 7/10 because the inexistence of other rival products offering the same benefits as promised by Neebel perfume presents a wide market within different regions in Germany. Besides, the uniqueness of the Neebel perfume will become its selling point in the dynamic German market (Cantwell & Narula, 2009).
Level of existing competition
There is very little competition for the exotic Neebel perfume, which incorporates unique UAE ingredients in the German market. The only competitors are renowned brands like BOSS, Nickele, and celebrity brands. This factor is ranked at 3/10 because the effect of the competition will be very minimal due to the uniqueness of the Neebel perfume within the German market.
Efficiency/value of existing competitors
The existing competitors have focused on marketing strategies, very competitive pricing, and excellent packaging to appeal to customers within the German market. For instance, the Hugo BOSS brand is colorfully packed and relatively affordable. This trend is similar across other brands. In addition, the existing brands have been in the market for a very long time and can afford to offer low prices due to the benefit from economies of scale. This factor is ranked at 4/10 because the Neebel perfume will have to fight for a market place with existing perfume giant brands (Olsen & Skallerud, 2011).
Industry and business-related factors
Trade barriers
The free market system has eliminated trade barriers in the German market. As long as a company operates within the law and practices ethical business activities, there is no need to worry in the German market. This factor is ranked at 2/10. This factor will not affect the Neebel perfume because it will enter the German market as a duly registered company that observes the German laws on business.
Business core competencies
The German market is open to businesses that observe healthy competition, respect human rights, and promote equality in employment. This factor is ranked at 2/10 because it will not affect the Neebel perfume. Basically, the Neebel perfume intends to enter the German market with the above conditions as part of its business framework management (Olsen & Skallerud, 2011).
Cost of establishment
In order to enter the German market, a company has to pay taxes for registration and another tax for operations. It is estimated that the Neebel perfume will have to part with about ten thousand pounds as licensing fees and other logistical support by the local authority. This factor is ranked at 8/10 since the Neebel perfume needs seed capital of at least forty thousand pounds to make sound and sustainable entry into the German market.
Transport costs
The transport costs in the German market are relatively low due to first class infrastructural investments by the government. This factor is ranked at 6/10 since the good infrastructure will facilitate quick and sustainable entry into the German market.
Marketing Mix and Staffing Policy
Marketing mix for the company
- Place: The product will be launched in Berlin and rolled out to other regions.
- Price: The Neebel perfume will use market entry pricing and special discounts.
- Product: Multiple products will be created from the Neebel perfume to target different customers.
- Promotion: Social media, local media, and billboards will be placed strategically across the targeted regions.
HRM staffing policy the company should use
The Neebel perfume will adopt affirmative action policy to employee both genders in equal ratio. The Neebel Perfume Company will employ Germans or those living in Germany as a strategy for long-term market sustainability, as a result of brand acceptance by the locals (Olsen & Skallerud, 2011).
Market Entry Strategy
Potential suitability of six entry modes
Licensing
This strategy will involve acquiring license directly from the government and establishing a business, especially the perfume manufacturing facility in Germany. This strategy is capital intensive and might take a lot of time before the business sense of relocation becomes visible.
Franchising
This strategy involves recruiting another business and giving it rights over partial ownership and sales as an independent entity. In the case of the Neebel perfume, this strategy will involve engagement of local distributors as partial owners of the Neebel perfume brand (Kotler, 2007).
Wholly owned subsidiaries
This strategy is similar to franchising except that the Neebel perfume will give all the rights to the subsidiaries to operate as an entity that is detached from the mother company (Cheverton, 2009).
Joint venture
This strategy will involve Neebel Perfume negotiating with another company to enter the market as a subsidiary of each other. This approach is ideal when the capital requirement is massive in the backdrop of an extensive period of business before breakeven. In the case of the Neebel perfume, this alternative will mean locating a potential company that might be interested in entering the same market (Brown, 2009).
Strategic alliance
Strategic alliance involves partnering with a local company to help in the distribution and maintenance of the created market. This strategy is ideal in minimizing potential risks as a result of market failure due to limited research about the new market.
Direct imports
The Neebel Perfume Company may opt for adopting the direct import for the Neebel perfume into the market and selling on their own. This strategy is tiresome, especially in a new market since there is little information available on the business dynamics that might compromise the entry strategy.
Recommend the best entry mode
Strategic alliance
The Neebel perfume should adopt the strategic alliance as the ideal entry mode to minimize the risk of rejection since the company has very little knowledge of the dynamics within the German market. This strategy will guarantee smooth integration and product acceptance, especially when the alliance is forged with an existing local partner that has an already existing distribution channel and network. In the end, the Neebel perfume will gain from reduced or share risks in the event of entry failure (Hammond, 2006).
Strategy for international business operations
Localization
The Neebel perfume will adopt the localization strategy by integrating local factors of production such as labor and marketing force to win acceptance of the Germans. The localization strategy will be dynamic, focused, and multifaceted to create the ideal work environment (Olsen & Skallerud, 2011). The Neebel perfume will endeavor to have diversified production units and controls that are tuned to reflect the German culture for ease of market penetration.
References
Brown, C. (2009). Factors which influence customer buying decision. Web.
Cantwell, J., & Narula, R. (2009). International business and the Eclectic Paradigm: Developing the OLI framework. New York, NY: Routledge.
Cheverton, P. (2009). Key marketing skills: strategies, tools, and techniques for marketing success. London, UK: Kogan Page.
Hammond, K. (2006). Market segmentation for competitive brands. European Journal of Marketing, 30(12), 39-49.
Kotler, P. (2007). Marketing management: Analysis, planning, implementation and control. New Jersey: Prentice-Hall, Englewood Cliffs.
Olsen, S., & Skallerud, K. (2011). Retail attributes’ differential effects on utilitarian versus hedonic shopping value. Journal of Consumer Marketing, 28(7), 532-539.