Introduction
Several essential factors require careful considerations to ensure the success of business for companies that wish to explore a new territory, which creates the necessity of a good marketing plan. The plan entails studying the territory, exploring its possibilities, and developing or modifying products appropriately to suit the market’s needs. Siemens, an American company, wishes to explore the Saudi Arabian market and the following are some of the essentials aspects the company needs to evaluate carefully.
Effect on marketing activities
For any company that plans to venture into a new territory, it is vital to consider some important elements including the marketing strategy and the receptiveness of the environment to new products or services. Marketing can sometimes be a complex affair as various variables come into play, most of the time simultaneously.
One of the main environmental variables that would affect marketing of goods and services for Siemens in Saudi Arabia would be culture. The official religion in Saudi Arabia is Islam and as such, it naturally dictates the cultural practices for most of the population in the region. Some aspects of Islamic culture are worth considering when developing the marketing strategy.
For instance, Islamic culture requires that men provide for the women financially while the women reciprocate by taking care of the household (Long 67). The result is that men form the majority of business owners in the region. Therefore, it would be wise for the company to consider advertising that mostly appeals to the male population concerning products and services as they dictate most of the businesses in the region.
The company may also want to develop products and services for women that allow them access from the comfort of their homes. A good example is the use of Siemens’ investment services and financial solutions (Siemens Para.7). Such services allow women to involve themselves with income generating activities without breaching their culture to the benefit of the corporation.
Islamic culture also limits women from engaging in the acquisition of property. However, by using investment vehicles such as mutual funds, it is possible for the company to enable the women in the country to benefit from investment activities involving property, without having them directly involved in the transactions.
This move would be both empowering and economically sound as it generates income for a large percentage of the population without breaching the cultural dynamics and causing a hostile environment for the company. Another variable that the company ought to consider is the economic environment of the region. Saudi Arabia has a 10.9% unemployment rate according to a survey by Heritage Foundation in 2013.
The survey also reveals that foreign direct investments stand at $ 16.4 billion and that the total population in the country is twenty eight billion (Heritage Foundation Para.13). Based on these findings, Siemens has a good chance of productivity as the population provides a ready market that is large enough to produce substantial gain. The foreign direct investment statistics also provide a good marker for success in the region.
The unemployment percentage means that the company has a vacuum to fill in the economy, which depends on how good the company’s management is on market research. Providing employment opportunities through the establishment of business in the country would be a welcome move for the government, assuming that it is currently working on reducing the unemployment level in the region.
Although there are many attractive facts about the country, there are also some facts that form a negative opinion of the place, thus it is important for the company to balance the merits and demerits before forming a conclusive opinion about setting up business in the country.
For instance, the survey by Heritage Foundation indicates that the government has had a bad record regarding transparency of its operations, especially in relation to property ownership. The survey rates property rights at 40% with a similar percentage in investment freedom.
The fact that the region has been under a ruling class of elite individuals since the inception of the state makes legal and political functions to overlap, thus creating a good environment for corruption. The ruling elite control policies on investment and property ownership, hence making it difficult to predict the outcome of investments in the region.
Strategic planning
In a bid to obtain actionable information, the management of the company needs to apply the use of specialists in conducting extensive surveys of the region. This move is essential for the formulation of concrete strategies that are productive for the company in the end. For instance, with regard to the company’s positioning strategy, the company should conduct surveys to get clear numbers on the products and services the region needs and the actual amount that it needs thus enabling the company calculate input costs and possible output gains.
One of the most cost effective ways for conducting surveys is through the application of online tools such as social media. According to a report by the European Travel Commission on 29 June 2013, various surveys by the Arab Advisor Group between 2010 and 2012 indicate that there are thirteen million Internet users in Saudi Arabia out of the total twenty eight million and that 54.6% of all mobile handsets consist of smart phones.
The report further indicates that 39% of Internet users bought and paid for products online in 2010 and that 58% of all goods bought online in 2011 consisted of electronic products followed closely by software at 50% (European Travel Commission Para.8).
These statistics show that using the Internet to conduct surveys for the company is a viable option; especially considering the number of Internet users in the country and the percentage also includes women, who would ordinarily be difficult to reach by most other personal means due to cultural restrictions. The Internet application for surveys is also cost-effective as opposed to face-to-face interviews, and is seemingly less intrusive in nature.
However, it would also be advisable to conduct fieldwork for comparison between online results and groundwork surveys. The essence is to provide objectivity to information regarding market accessibility and need for products and services for the users. Siemens possesses a competitive advantage over other foreign companies in the region and ought to apply the same to its advantage.
Years of experience have enabled the company to develop links worldwide and make the name a reliable brand thus increasing chances of acceptability of its products in new markets. Most consumers prefer goods and services from companies they are familiar with as opposed to startup corporations due to trust issues.
Considering the current state of the economy in most countries, consumers prefer options that are less likely to result in a waste of money unless such options are substantially cheap, to the disadvantage of the production company.
The size of the company is another advantage as it enables the company to obtain substantial investments and produce goods at a scale that matches the populations need with little need for help from others in the industry. The quality of products and services is also better if such goods and services come from a company that can afford to produce them without a need for shortcut options.
Apart from being beneficial for production costs, the size of the company will also benefit the company with regard to mitigating tax charges. By supplying a large amount of goods and services, the company is in a position to make enough profits to cover its expenses including taxes and leave enough for other projects the company may have such as expansion.
Taxation is usually a tricky issue for smaller companies as it necessitates the hiking of prices of goods and services so that the entire cost shifts to the consumers. The result is that the goods and services become unaffordable for consumers or unattractive in comparison to similar goods in the market.
The variety of products and services would allow Siemens to shift the taxation costs to consumers without placing the weight of the entire cost on one specific product or service. For instance, the company produces electronic goods while providing infrastructural services and engineering labor. The division of the tax charges amongst the three options reduces the tax burden on each of the products and services, thus enabling the company to provide the same at affordable prices for consumers.
Timing and mode of entry
In order to ensure favorable reception for products and services, it is important for any company to consider the timing of the launch and the mode of entry into the new market. For instance, had Siemens tried to penetrate the Saudi Arabian market in 2001 or 2002 after the September 11 bombings and subsequent deployment of the U.S army to Iraq, its chances of success would have been dismal.
The fact that the company had nothing to do with any of these events and that its products and services had no connection to the events would have been irrelevant as the situation would have depended largely on the relationship between the two countries and the perception the Saudi Arabian citizens had of the United States.
However, as most of the countries in the world are trying to mitigate the residual effects of the 2007-2009 global financial crisis, most governments, including that of Saudi Arabia, have resulted to attracting foreign investment to improve revenue and cater for growing populations.
Having the United States as one of the biggest consumers of oil and gas in the world, which mainly comes from Saudi Arabia, trade relations between American companies and the Saudi Arabian government are likely to be civil. The Saudi Arabian government and the American government have also been partners in eliminating the terrorism menace for their mutual benefit, an element that could be advantageous for the company in terms of trade relations.
The company also needs to take advantage of the fact that the country currently has a high unemployment rate and the population growth strains its facilities. Considering the fact that Siemens is a leading supplier of infrastructural solutions, the company’s services and products related to infrastructure development are likely to gain acceptance from the government and private investors in the country.
A comparison between the current population, its growth rate, and the land area gives clear indications that there is a vacuum in the infrastructure market and Siemens would be wise to take advantage of the opportunity by being proactive in providing a solution to the government. Although the country has oil and natural gases, electricity production is a task for other players in the energy field.
Siemens stands a good chance at selling sustainable electricity generation and maintenance solutions that cater for the current population as well as future growth as through the construction of functional, energy sufficient buildings. A good example of such a building is The Crystal project in London, a building that is functional and energy sufficient without compromising on the esthetic quality that ensures the area maintains its beauty.
The company’s mode of entry has to be effective and cost effective to ensure that the company does not lose resources that it would otherwise apply in other areas. A progressive entry strategy is the surest way of attaining the best results while maintaining a failsafe incase the venture proves not viable.
The use of the Internet for the introduction of some of the products after surveys is a good way to test the market’s receptiveness without having to incur tax costs and other costs that come with the establishment of a subsidiary. Once the company’s management is convinced that the country holds great potential for productivity, it would be wise to form affiliations with companies dealing in similar goods and services for distribution.
The benefit of this strategy is that it enables the market to test the products that the company offers while keeping the company’s costs low. A rise in demand would then be an indicator the company should open a subsidiary or subsidiaries, which depends on the goods and services the market demands.
Marketing mix
A marketing mix is essential in securing the success of a business in a new market. The basic concept is the application of 4 Ps, which include price, place, product and promotion (Keegan and Green 62). When introducing its products and services to Saudi Arabia, Siemens has to ensure that the geographical location or place suits the needs of the company.
For instance, when opening a subsidiary of services involving oil related solutions, it would be prudent to ensure that the service station is within close proximity of the oil station. This aspect is important for efficiency purposes for the client and the company alike. It ensures that service delivery is efficient and effective while maintaining good prices and high quality.
The price the company sets for goods and services determines the consumption trends for the market (Keegan and Green 80). Setting prices that are higher than the competition causes the products to be unattractive to consumers while settling for a price much lower than the competition reduces the company’s potential for making profits.
The company has to strike a balance between the two considerations by incorporating its expenses and the profit margin into calculations on expected output in profits. Depending on the climate of the market, the company may also offer attractive packages such as discounts, on various products as incentives for consumers to buy more of those products.
This strategy is mainly effective for products that have less demand than others do and those whose profits largely depend on the quantity bought. Another way that the company can improve sales through pricing is by integrating several products and services to create packages that seem attractive and affordable.
For instance, the company may consider integrating the sale of electrical appliances with services for their maintenance, thus ensuring their engineers get work and the product sales remain high. In promoting the company’s products, Siemens should consider methods that are attractive to consumers, are cost effective, and are innovative and different from other producers of similar products in the market.
For instance, considering the culture in the country, it would be inappropriate to apply the use of sexually provocative advertisements, even though in most cases sex sells. Using an advertisement method that bears many similarities with a competitor in the same field dulls the perception of the audience and reduces the attention they pay to the company’s products.
Therefore, it essential to maintain innovation coupled with ensuring that the company curves a niche for its products in a new market with similar products. Lastly, the company has to ensure that its products stand out from the competition through branding and packaging. Using brand names that are hard to remember makes it difficult to sell such products.
On the other hand, using names that seem boring makes the products easily forgettable. The company has to ensure that its products have names that are catchy and appropriate for the consumers. Attractive packaging in unique ways ensures the products stand out at their points of sale, and thus create an advantage over similar products from competitors.
Conclusion
The above considerations will enable the company make the right marketing decisions for the benefits of the company and consumers in the target market while maintaining productivity. The company should also explore other options in terms of geographical locations for new markets to ensure that the end market is the most productive one for the company’s sake.
Works Cited
European Travel Commission: Saudi Arabia-New Media Trend Watch Long Haul 2013. Web.
Heritage Foundation: 2013 Index of Economic Freedom 2013. Web.
Keegan, Warren, and Mark Green. Global Marketing, New Jersey: Prentice Hall, 2011. Print.
Long, David. Culture and Customs of Saudi Arabia (Culture and Customs of the Middle East), Connecticut: Greenwood Publishing, 2005. Print.
Siemens: Siemens Saudi Arabia 2013. Web.