Introduction
This report evaluates the strategic options for “ship in a bottle” company as it expands into the global market. In this expansion, five prospective markets (Asia, South America, Australia, Middle East, and Africa) emerge.
To establish the probabilities of succeeding in these markets, this report evaluates the product sold (through the harmonized classification code), the criteria for selecting the foreign markets, export strategy to use, export intermediaries to use, and any cultural issues that the company needs to consider (before it ventures in the foreign markets).
Comprehensively, this report shows that “ship in a bottle” company needs to consider the uniqueness of every market and formulate a customized market entry approach that complements the dynamics of every market.
Harmonized Classification Code
The harmonized classification code for “ship in a bottle” is 9706. This code falls under works of art, collectors’ pieces, and antiques. Code 9706 defines antiques that are more than a century old (Foreign Trade On-Line, 2012, p. 2). Since “ship in a bottle” is a historical nautical product, it classifies as an antique that is more than a century old.
Foreign Markets
The prospective foreign markets for “ship in a bottle” are Australia, South America, Asia, Africa, and the Middle East. These markets have a lot of potential because they offer unique market dynamics that are favorable for the introduction of the company’s product.
Australia
Some Australian communities appreciate the shipping culture and the associated value of nautical products. The Southeast coast of Queensland is one such community (Ships in Bottles, 2010). With a market that appreciates nautical products, Australia also has many unique cultural institutions that provide a ready market for the sale of culturally rich products like “ship in a bottle”.
For example, the Sydney Maritime Museum, Williamstown Maritime Museum (Victoria), New Castle Maritime Museum (New South Wales), Maritime Museum of Tasmania (Tasmania), and the Queensland Maritime Museum (Brisbane) stock such kind of products (Ships in Bottles, 2010). “Ship in a bottle” company can therefore market its products to these museums.
Middle East
Some foreign markets like the Middle East also share the same profile as Australia because some sections of the Middle East have a very rich shipping heritage. This heritage stems from past years of the Arab trade, where many Arab traders traversed the world to buy and sell goods.
However, while focusing on the Middle East market, it is important to highlight the importance of targeting areas that have a strong economic potential. Developed countries in the Middle East, such as, the United Arab Emirates (UAE) and Saudi Arabia are attractive destinations for the launch of new nautical products. Moreover, these destinations have a deep internet penetration (plus an established e-commerce industry) that support internet sales. It is easier for “ship in a bottle” company to thrive in such destinations.
Africa
By focusing on Africa as a viable market for “ship in a bottle” company, it is crucial to show that some parts of Africa share the same market profile as most sections of the Middle East. For example, many parts of North Africa share the same demographics as the Middle East. Therefore, countries such as Algeria, Libya, Egypt, Tunisia, and Eritrea share the same market profile as most Middle East countries. Therefore, the same market potential highlighted in the Middle East market also applies to Africa.
South America
South America is also another potential market for “ship in a bottle” because it is a rapidly growing market that offers immense economic potential for companies that intend to be global. Notable countries in South America, which have posed a significant economic potential include Brazil, Mexico, Chile, and Argentina. These economies are highly diverse and liberalized. Therefore, there is no significant barrier to entry for “ship in a bottle”.
Asia
Finally, “ship in a bottle” should also venture into some selected Asian markets because of their favorable demographics and immense economic potential. Asia is unique to other markets described in this report because the region has a deep cultural appreciation for history and community values (Wired, 2005).
Therefore, unlike other markets that are highly commercialized, Asia provides a culturally conscious market that appreciates products that have a deep historical value. Since “ship in a bottle” company thrives on selling culturally rich products, the Company will find Asia to be a highly lucrative market.
Direct or Indirect Exporting
Markets for Direct Exports
South America
The close proximity between North America and South America informs the decision to adopt a direct export strategy in South America. Indeed, it would be cheaper to export the company’s merchandise (directly) to this market without having to engage third parties to sell the company’s products.
By exporting the company’s products directly to its South America, “ship in a bottle” will have more control of the business, thereby increasing its chances of realizing more profits (Rao, 2008). It would be more expensive for young and emerging companies (like “ship in a bottle”) to engage the services of third parties, or build a distribution facility in South America, if it can satisfy its South American market (efficiently) by directly exporting its products to the customers.
Australia
The similarities between Australian economic and cultural dynamics with America inform the decision to adopt a direct export strategy for the Australian market. Even though there may be some slight differences in the business practices of both countries, it is crucial to highlight the cultural similarities between both markets as a key decision-maker in the adoption of a direct export strategy.
More so, the cultural similarities between America and Australia manifest because “ship in a bottle” largely thrives on the cultural appreciation of the product. Because both countries share same cultural dynamics, it will be easier to export the product as it is, without making any significant modifications on the company’s marketing and production strategies (Rao, 2008).
Markets for Indirect Export Strategy
Asia
Exporting to the Asian market poses many risks to “ship in a bottle.” These risks stem from the differences in culture and community dynamics between western and Asian markets. For example, Wired (2005) says, Americans and Asians see the world in different lenses (p. 1).
Therefore, while Americans may be fascinated by the physical attributes of a product, Asian consumers may be more inclined to understand the contextual richness of a product. To this extent, since the company’s strategies appeal to a western market, it may be wise to involve the services of a third party (export trading company, or an export management company) to sell the company’s products in the market. This strategy is important because an intermediary from Asia has a better understanding of the market.
Africa and the Middle East
Africa and the Middle East also mirror the same differences that the Asian market has with western markets. By the nature of their business practices and cultural dynamics, Middle East and Africa have unique economic and cultural differences that pose a threat to the generalization of product categories across these markets. Moreover, the Middle East has a different business style that largely differs from western business practices.
It is difficult to ignore such economic differences while trying to introduce a new product into such markets. It will therefore be crucial to seek the services of an intermediary to sell the company’s products to these markets. Like the Asian intermediaries, the Middle East and African intermediaries have a better knowledge of the market, business practices, and opportunities existing in their markets. They are therefore in a better position to sell “ship in a bottle” merchandise in their markets.
Intermediaries to use
In the markets identified for indirect exporting, “ship in a bottle” should use agents, instead of distributors. Agents are the best intermediary to use because they campaign for the product, as opposed to merely distributing it (Brown, 2005, p. 343). In most of the markets described above, the main motivation for pursuing the indirect export strategy is to overcome market differences between the exporting country and the host nations.
Differences in market demographics and business styles also contribute to this problem. Agents are better suited to overcome these challenges because they are in direct connection with the customers (and have a firmer understanding of their needs as well) (Brown, 2005. This knowledge is critical for companies that intend to penetrate foreign markets because it is difficult to understand the prevailing market dynamics in foreign countries, especially if a company has not operated there before.
Distributors are not the right people to use in these markets because unlike agents, they do not campaign for their products. Instead, they just buy the products from their respective companies and sell them in their local markets. Furthermore, they do not persuade or identify customer needs; instead, they just avail the products to the markets. “Ship in a bottle” does not need such services because it needs an intermediary who would negotiate with buyers to buy the company’s products. Only agents provide this service.
Indeed, Fred had experienced the need to build personal rapport with his customers (when he hired new assistants to help in the company’s operations). While learning new phone etiquettes, and how customers wanted to be treated, Fred also discovered the need for customers to feel secure.
He understood that there was a need to have a deeper connection with the customers, as opposed to having a non-personal communication strategy with his customers. This is why he refused to have an impersonal processing system on the company’s website. Agents nurture a human connection with the customers the same way Fred prefers.
Cultural Matters
Cultural issues are important in international trade because they define the behavioral characteristics of a society. These behavioral characteristics are important in international trade because they underlie buyer behavior and the systematic procedures of doing business in the respective countries.
Among all the markets highlighted in this study (Australia, Middle East, Africa, South America and Asia), cultural understanding is pivotal to the success of “ship in a bottle”. Some of the important cultural issues to look out for (in these markets) include
Language
One cultural factor that is important in international trade is language. More so, language problems may significantly hinder the efficiency of negotiations. Therefore, language barriers may affect payments and similar financial transactions. In the context of “ship in a bottle” case study, the South American market needs a careful cultural understanding because most of the people do not speak English. Instead, most of the inhabitants speak Spanish.
This creates a language barrier for “ship in a bottle” because the company is English background. For example, the literal translation of the word “mañana” (in Spanish) means tomorrow, but in business terms, “mañana” simply means “not today” (British Chambers of Commerce 2012). This contradiction could be problematic for “ship in a bottle” because there would be many misunderstandings between sellers and buyers, if the seller does not understand the language context of the people.
Language problems are however not only constrained within the South American market, the Asian market also has unique language dynamics that “Ship in a bottle” needs to understand. Specifically, most Asians have a strong need to save face, even in the wake of bad business.
For example, Wired (2005) says that it is rare to see Asians decline something (openly) because it is impolite to do so (in the Asian culture). The main problem surfacing in this context is how a supplier would know when to make shipments, or if a buyer is willing to stock the company’s products if they cannot say “no”. Comprehensively, it will help “ship in a bottle” to understand the contextual language differences of its Asian and South American markets if it intends to succeed in these markets.
Religion
Religion is a very important cultural issue to consider in international business. In many countries, there is a crossover between religion and business law. For example, in America, there is a crossover between business law and religion because both secular and religious holidays affect product offerings, sales, and the distribution strategies of different companies (British Chambers of Commerce 2012).
The same would be true for Australia where religious holidays, such as, Easter and Christmas have a significant bearing on company sales and distribution strategies. Albeit “ship in a bottle” may enjoy the similarities between some of its prospective markets with America, the same is not true in some markets like the Middle East.
Indeed, in some Middle East countries, Sharia law defines public and private life. The same is especially profound for business practices because Sharia law often outlaws earning interest in financial products, or trading in financial risks (British Chambers of Commerce 2012).
Islamic laws also prohibit investments in business practices that contravene Islamic principles. For example, Islamic law prohibits people against investing in companies that promote pornography, sell alcohol, pork, and such like goods. Such prohibitions may limit the scope of activities that “ship in a bottle” intends to do in the Middle East and Africa.
Corruption
Broadly, corruption is a social evil. Many countries suffer under this social ill. Often, the high prevalence of corruption in any country limits the expansion of foreign investments. For “ship in a bottle”, it is crucial to understand the prevalence of corruption in some of its prospective markets (notably, Asia, Africa, and the Middle East). In some of these markets, the level of corruption is high. For example, India has among the highest rates of corruption in the world (British Chambers of Commerce 2012).
Therefore, as “ship in a bottle” considers venturing into such markets, it needs to be wary of the potential risk of having to bribe public officials to obtain certain services. Ordinarily, such practices add to the cost of doing business and as the British Chambers of Commerce (2012) affirms, any business manager needs to be wary of such costs.
Pricing Strategies
“Ship in a bottle’s” pricing strategy is two faced – wholesale and retail. As Learn Marketing (2012) explains, arriving at a wholesale price is not a difficult issue if the company knows the retail price. Moreover, according to “ship in a bottle’s” research, many retailers would ordinarily want at least a 50% mark-up (Foley, 2004, p. 10).
However, since “ship in a bottle” would be in business with different types of retailers (in different markets), it is better to adopt a flexible pricing strategy that suits the needs of every market. Therefore, each market will have a special pricing strategy.
Middle East and Africa
In the Middle East and Africa, “ship in a bottle” should pursue a penetration market strategy because most of these markets are not properly developed.
Therefore, while the company may expect to face stiff competition in some developed markets that have a deeper appreciation for nautical products, “ship in a bottle” should first try to embrace a penetrative market strategy in the Middle East and Africa to develop a strong market share. On establishment of this market share, the company may increase its price accordingly (Learn Marketing, 2012).
Australia
One main attraction for starting “ship in a bottle” company was the minimal competition for “ship in a bottle” products in America. However, because of the indirect competition since 50-plus wholesalers and retailers engaged in the sale and manufacture of nautical products, the company had to identify competitive strategies for gaining a successful entry into the market (Foley, 2004).
Since Australia is a developed market that appreciates nautical products, “ship in a bottle” should expect a fair amount of competition from incumbent traders. In fact, the company should expect the same level of competition in Australia as it did in America. Therefore, the Australian pricing strategy should be competitive. In other words, the company should price its products very close (or slightly less expensive) to the competitors’.
South America
South America is a very interesting market for “ship in a bottle” because unlike other markets described above, the potential for success and failure in this market is almost equal. The close proximity between America and South America however poses a strong advantage to the company, especially regarding its direct export strategy. However, the cultural barriers and the high level of market segmentation in South America pose mixed results for the introduction of “ship in a bottle” products.
From these market uncertainties (plus the adoption of a direct export strategy), it is crucial for “ship in a bottle” to adopt the cost-based pricing model. This model ensures the company recovers its cost of production and distribution as the main objective. Establishing the company’s mark-up comes later. This way, the company may weigh its options on the market (in the short term) and decide to change its pricing strategy later (Learn Marketing, 2012).
Legal, Tax, Accounting, and Logistical Matters
There are few major accounting, tax, and logistical matters to consider for the expansion of “ship in a bottle” company. However, there are significant legal issues to consider in this trade. For example, “ship in a bottle” is subject to international and local laws that characterize its prospective markets/countries.
These legal considerations center on the protection of local industries against unfair trade practices from foreign goods. Therefore, while “ship in a bottle” may want to expand its markets beyond the US, it should be ready to comply with local and international trade laws.
The company has experienced such legal considerations in the past. For example, when the company tried to clear its first inventory shipment, it had to wait for custom clearance. In other words, the company had to sign a compliance form to comply with the country’s laws of imports and regulations.
Therefore, contrary to Fred’s expectation that the process of clearing his first shipment would be swift, it proved not only to be a tedious process, but also an expensive one (Foley, 2004). It is difficult to evaluate the import laws of every market described in this report, but every country has their laws that need compliance. “Ship in a bottle” company needs to be wary of these import laws.
B-2-B and Internet Sales
Business-to-business (B2B) relationships should be cultivated as the company continues to expand into new markets. More importantly, the company should cultivate these relationships with the new foreign market intermediaries. Furthermore, since the company intends to be global, it needs to develop a deeper understanding with its suppliers that they would meet the new market demands Internet sales also outline another strategic area that the company needs to grow.
So far, the company has demonstrated that it can achieve significant success on its online sales platform. Indeed, from the success experienced at the gift shows, the company enjoyed a high internet traffic and positive feedback from its online platform (Foley, 2004). It is crucial for the company to maintain this momentum by exploring new avenues for expanding its online outreach.
This need prompted the identification of the selected markets described above. In other words, the prospective markets described in this paper project a significant level of internet penetration. Therefore, it would be equally beneficial for “ship in a bottle” to pursue its online sales strategy as a complementary strategy (to the proposed strategies outlined in this report). This way, the company will be in a better position to exploit virtual and “real” sales opportunities.
Conclusion
Australia, South America, Middle East, Africa, and Asia provide a lucrative set of new markets that “ship in a bottle” may exploit. Albeit these markets provide unique economic, cultural, and political dynamics, they also pose new opportunities for growth in their unique ways. Nonetheless, as “ship in a bottle” embarks on its global expansion strategy, it needs to be wary of the cultural, competitive, and legal challenges of operating globally.
The company may avoid most of these challenges by adopting smart strategies. For example, using agents to circumnavigate market knowledge gaps outline a smart strategy of increasing the company’s prospect of succeeding in these markets. Comprehensively, based on the uniqueness of every market described in this report, it is crucial for “ship in a bottle” to adopt customized strategies to exploit existing opportunities and minimize the threats of every prospective market.
References
British Chambers of Commerce. (2012). International Trade Manual. London: Routledge.
Brown, R. (2005). Emerging Companies Guide: A Resource for Professionals and Entrepreneurs. New York: American Bar Association.
Foley, J. (2004). The Global Entrepreneur: Taking Your Business International. New York: JAMRIC Press INTL.
Foreign Trade On-Line. (2012). Harmonized System Codes (HS Code). Web.
Learn Marketing. (2012). Pricing Strategies. Web.
Rao, S. (2008). Indirect Exporting. Web.
Ships in Bottles. (2010). Web.
Wired, A. (2005). A real difference between Asians and Americans. Web.