View of Globalization: Market Analysis for Entry Strategy Report (Assessment)

Introduction

Globalization is driven by the market, cost, government, competition, and other factors and the motives of managers. Given the global strategic perspective, the corollary that it should be accompanied by a universal standardization is difficult to sustain as such a stance is product-oriented and in defiance of the marketing concept. It is also apparent that different nationalities buy similar products for different reasons and different versions of a product for reasons of values, custom, and preference as well as price. New products for markets in which the firm is already established might require product development strategies, while new products in new markets might require a combination of related and unrelated diversification strategies. Related diversification can be effected through vertical (backward or forward) and/or horizontal integration within the supply chain.

The Product Analysis

In marketing, the globalization process is closely connected with product image, manufacturer, and country of origin. To some extent, country of origin is a mark of quality based on certain stereotypes. For this reason, manufacturers take into consideration theories, methods, and models to analyze perspectives, opportunities, and possible threats connected with stereotypes about the country of origin and its perception on the global scale. The marketing of alcoholic products from Singapore will be based on the unique product and country image (Albaum et al., 2002).

Country of origin effects refers to the extent to which the place of manufacture influences product evaluations. The country of origin affects consumer perceptions of product quality and has a significant influence, beyond advertising and marketing techniques, on the acceptance and success of a product. The goal of global marketers is to take advantage or benefit from positive, and to neutralize negative, country of origin biases (McDonald 2002). In theory, country of origin-based stereotyping may be universal in nature; however, the degree to which it is applied and the prominence is given in the evaluation of the product varies. Alcoholic products from Singapore will influence consumer sensitivity varies by the level of consumer perception (Guy, 2003).

For alcoholic products from Singapore, the marketing mix policies implemented in Europe have to take into consideration the differences between the Western markets and the local economies in terms of demand, buying behavior, infrastructure, business practices, and technological standards. At the same time, they must also consider the strategic objectives and resources of the company concerned. The product policy is strongly influenced by the technological gap between Western industrialized nations and the former socialist countries. As a result, product policy decisions for European markets need to focus on the selection of the most appropriate products from the existing company portfolio and the adaptation requirements to the target market environment. In positioning established products in these markets, branding is an important tool. In the first years of economic transition, generally, Western brands are considered of higher quality and preferable to domestic products. More recently, however, European consumers have discovered that Western products are not necessarily better than their domestic counterparts (Fill, 1999). A resurgence of domestic pride and entrepreneurship has led to increased demand for domestic products. There has been a move from applying national safety standards for products and services towards applying European Standards to prevent the protection of national production. Increasingly, industry controls related to promotion are governed by European rather than national legislation, e.g., those with respect to tobacco sponsorship of sport, especially (Fill, 1999; see Appendix 1).

According to theoretical studies, at the very least country’s images can be formidable obstacles that can affect brand image strategy even to the point where manufacturers of foreign products should not stress their origin (McDonald, 2002). Consumers’ perceptions are affected by familiarity and availability of products together with the stereotype of the country. Country of origin will influence alcoholic products from Singapore and include perceptions of product quality. So-called national stereotypes and buyer attitudes toward particular countries of origin can affect the way in which export prices are interpreted in foreign markets. Customer reactions to price and the judgments that customers make will be conditioned by their perceptions and attitudes toward Singapore alcoholic products (Dwyer & Tanner, 2001).

The Country Analysis: France

France is selected as a target country for market penetration. France is a developed country with a stable political and economic situation. France is one of the EU countries marked by rapid growth and stable economic and social situations. PEST analysis will help to assess market conditions and opportunities for Singapore alcoholic products.

PEST analysis

Political situation: political stability and legal framework are one of the main advantages for Singapore alcoholic products in France. Economic Environment in France: The economic results show that France proposes great opportunities for the company and can be valued as a potential market for this type of store. The economic health of France is evaluated in terms of macroeconomic conditions. Statistical results show that the GDP per capita growth rate is high – $30,100 (2006) in contrast to other European countries, and it grew by about 2.3 % (2006). The inflation rate is low (2%) (France: the country profile, 2007). Demographic factors, together with measures such as disposable income per head, show that France is a potential market for the proposed type of stores. In contrast to other countries, France has the most favorable conditions because France “has the highest level of sales through food retailers in Europe” (Guy 2003). The economy is marked by stable development. Government budgets and the record of growth are the main advantages of the retail market. This proposes great opportunities for the Singapore company with little economic risk. Social/demographic factors: the unemployment rate in France is not high (9.1%), and the demographic situation did not a great influence on the retail market. Technological factors/resources: innovation in production technologies and computerized system of the supply chain is the main opportunity for Singapore alcoholic products (France: the country profile, 2007). The situation suggested that decreasing consumption in Europe and increasing competition could cause a decrease in prices. The failure was caused by the negligence of the company’s management team and the short-term marketing strategy developed for the European market. The rationale to enter France is a stable economic situation and market opportunities proposed by high-level food retailers (Regulating wine n.d.).

Impact of Culture

Cultural differences will be the main threat to Singapore’s alcoholic products. France has a strong wine culture which influences its way of living and dieting. Historically, France emerged from the Enlightenment as the richest, most powerful, and most culturally advanced nation in Europe; The French, so very romantic and proud of their unique history and grandeur extending forward from Clovis, Charles Martel, and Charlemagne through Henri IV, Louis XIV, the Sun King, the stunning achievements of the Renaissance and the Enlightenment, the Revolution, the triumphs of Napoleon and foreign empire, and the achievements of French diplomacy, science, artistry, and creativity, and a wealth of natural beauty, want to feel unique and respected, which comes across to others as arrogance (Guy 2003). Cultural issues will include the impact of product design and marketing mix (advertising message and promotion activities) (see Appendix 2).

In terms of organizational behavior, the French attach a kind of aristocratic status to management, particularly in large firms; about three-quarters of managers in the two hundred largest firms come from wealthy families. Education is the primary determinant of status and management potential. Managers tend to be autocratic, aloof, detached, and distant, if not cold and snobbish, toward subordinates. Proper behavior calls for savoir-faire, formality, order, and finding one’s place in the hierarchy. Though normal social intercourse and negotiation among equals tend to be high context, managers can be quite blunt and direct with subordinates (Ulin 2002). Business relationships take on a social nature. French firms feature very tall structures and lots of supervision. They are classic bureaucracies characterized by a Taylorist attitude (the “one best way,” highly directive) toward employees, impersonal formality, elaborate hierarchical and vertical structures with much compartmentalization, functional isolation and conflict and strata that do not mix, and much political behavior such as exploiting membership in cliques and extensive written communication intended to circumvent bureaucracy and to create paper trails (Doole & Lowe, 2001).

The Market Analysis

French alcoholic market is influenced by cultural and historical traditions, socio-economic changes, and lifestyle of people. “Despite steadily declining volume sales, the wine still accounted for around half of all alcoholic drink sales during 2004, in terms of both volume and value. Drinking patterns in France are, however, changing, with sales of cheaper types of wines decreasing, while superior quality wines continue to perform relatively well” (Alcoholic Drinks in France, 2005).

SWOT analysis

SWOT analysis will help to assess marled conditions and analyze market potential for Singapore alcoholic products. With regard to the market, the situation in France is complex and needs to be thoroughly assessed by foreign companies. Frequently, demand is based on price levels and availability of products, quality, and traditions (Doole & Lowe, 2001).

Strengths

Unique product image and absence of direct competitors from Singapore is the main strength of these products. On the other hand, strong drinking culture will create enormous opportunities for the Singapore company. “This is happening to such an extent that traditional digestifs, such as cognac, are now being rebranded as aperitifs. The popularity of the “long drink” is continuing to drive sales of spirits, with sales of vodka, rum, and tequila all rising during 2004 (Alcoholic Drinks in France, 2005).

Weakness

The main weakness is a strong impact on cultural values and national wine culture. Another weakness is necessary to develop specific strategies to incorporate quality into a product, promotion, pricing, and distribution areas. Cultural differences and lack of experience in Europe will create some problems for the company. “The wine rules have shielded poorer producers from market forces and acted to hinder quality. Someone making ropey or mediocre wine can still get the AOC and thus find a market for their wines by using the AOC as a brand” (Regulating wine n.d.).

Opportunities

Favorable economic conditions in France and the arrival of new technologies propose opportunities to grow and increase market share. Favorable exchange rates and stable economic situation in the region provide new opportunities for the product/market expansion grid and a framework for the marketers to consider the balance of product offerings. The current crisis in French wine production is the main opportunity for Singapore alcohol products to enter this market. Following Barthel-Bouchier & Clough (2005):

Wine and spirits together compose France’s third-largest industry, after aeronautics and automobiles, in terms of profits generated. In recent years, however, changes in both internal and external markets have challenged France’s primacy as a producer of wine and its position, second only to Italy’s, as an exporter of wine”.

Threats

Increased competition is the main threat to Singapore’s alcoholic products. The growing imports from other countries and low price products proposed by domestic and foreign competitors become a real threat for Singapore’s alcoholic products. The threat of new entrants is another problem: new companies can reduce industry profits and specific market share for the existing products. This competition is further heightened by the presence of substitute products. “France has over 750 wine operators, many of which have limited funds, or are family run and continue to do business in the same way as they have for generations” (King, 2003).

Demand and Pricing

The nature of home demand conditions for the firm’s or industry’s products and services is important because it determines the rate and nature of improvement and innovation by the firms in the nation. These are the factors that either train firms for competition or that fail to adequately prepare them to compete in the marketplace. “France has witnessed a steady decline in alcohol consumption for some years, so a decline in both value and volume sales looks almost inevitable over the 2004-2009 period” (Alcoholic Drinks in France, 2005). In spite of unfavorable forecasts, France has the highest rate of alcohol consumption in Europe (Doole & Lowe, 2001). The relationship between a company’s prices and the costs and prices of its competitors is an important element of marketing strategy. Usually, customers purchase many different products and services and rarely familiarize themselves with all the details of each item’s design, production, and delivery. Instead, their value judgments about the product are influenced by an analysis of basic product benefits, including weight, size, or taste (Bridgewater & Egan 2002). Also, there are “proposals by the French to introduce yet another tier of regulations on top of the existing AOCs, with the goal of creating exceptional AOCs, AOCEs, a grand set of new rules for the very best wine regions, in the expectation that this will raise the standing of French wine and solve the many problems it currently faces” (Regulating Wine n.d.). These judgments can also be significantly affected by packaging, advertising, sales and service personnel, the sales environment, brand names, price promotions, price reductions, and a variety of other factors under management’s control. Following Ulin (2002): Independent wine producers began and remained divided in their opinions. Those who were in favor looked forward to the renown that would be brought to their region by an internationally known label. Others were furious that this outsider could presume to teach them how to make quality wine” (p. 692).

Market Entry Strategy

Joint-venture

Joint-venture can be used by the company to enter the market. The central feature of a joint venture is that ownership and control are shared. Also, this approach is more profitable in the long run than other approaches. For the Singapore-based company, local partners will do better than native businesses. As with other aspects of marketing communication, a key issue is whether pro­motion efforts should be directed by headquarters or left to local country managers.

Ansoff’s Approach to Analysis

With Ansoff’s approach, firms are likely to favor expansion strategies using related developments rather than to follow higher risk diversification strategies. Firms prefer to apply their established expertise within new markets rather than diversify into new activities within new markets (Albaum et al. 2002). However, as the market becomes more competitive, with profit margins under pressure, some market leaders may diversify their interests along the value chain, despite the higher associated risk. For the Singapore-based company, it is possible to use strategies that develop their existing products and services, that is, penetration and/or market development strategies. Within existing markets, market penetration is usually favored in place of withdrawal from the market or consolidation of operations, as it will pose the least risk, e.g., the firm may look for more customers within an existing market. Nevertheless, as price competition increases together with the associated reduced profit margins, the market penetration option may become less attractive. Then the firm may be obliged to consider new product development or other diversification strategies (Albaum et al. 2002).

Acquisition

Historical data, economic analyses, and reports show that ‘acquisition of a local partner’ is the best strategy for a Singapore-based Company to enter France. This strategy is effective and advantageous because there are no specific regulations governing the goals and structures of the industry, there is no constitutional restrictions or legislative mandate that restricts acquisition. The main strength of acquisition strategies is that they improve company’s position on the market; they are customer-oriented and help the comapny to expend internationally (Albaum et al, 2002). The management team takes into consideration that direct Investment involves sev­eral distinct forms. Ranging from a sales/marketing subsidiary through to a fully operational manufacturing unit producing the same products as the domestic plant, investment includes product specific manufacturing units, plants producing components and facilities which simply assemble products in the end-user market (McDonald, 2002).

At the very beginning the strengths of local partner acquisition include high potential to growth and profitability of the company, and professional management team, customer loyalty and excellent service. It is targeted at the customers, which buy discounted and unpackaged goods from manufactures at extremely low prices. Acquisition helps to save millions of dollars on advertising and market penetration (McDonald, 2002). The Singapore Company will succeed in redu­cing costs in the next few years of the decade by international acquisition strategies. The main weaknesses of local partner acquisition include negative attitude of foreign competitors and strict government regulations restricted foreign ownership in some countries. Changes in legislation and international regulations can weaken the global presence and limits its acquisition plans. For instance, the end of 1990s was marked by the changes on the European market which altered many of the parameters of competition and thus enforced a period of reassessment and adaptation (Bridgewater & Egan, 2002; Regulating wine n.d.).

The Singapore Company will follow focused market entry strategy based on aggressive advertising and promotion campaigns. Focused entry strategy is something that the company is ‘geared for’. For The Singapore Company, ‘Made in Singapore’ alcoholic products could be viewed as being its own special niche, and on this basis the company dominated the market in most countries, though national requirements varied. Focused strategy implies potentially better prices, high quality, but lower volumes (Albaum et al, 2002). Numerous niches could be identified which neither the company not its competi­tors had yet addressed; but the necessary product development and distribution strategies would take time and tie up limited resources.

Using the market research, the Singapore company can navigate the new business environment and adapt new products for existing markets. The advantage of product originality will allow the Singapore company to create a strong brand image. Brand loyalty will also be important factor in increasing the costs for customers of switching the products of competitors. Using mar­ket development strategy, the Singapore company will capture a larger share of a market for current products through market saturation and market penetration (Albaum et al, 2002). Taking into consideration cosmetics market, it is not enough to operate only on a national market. “If deeper penetration into the same target market, for example, is required, then vertical advertising in the media that reach the same target market will be sought” (McDonald, 2002, p. 98). For new products, the company can use advertising on commercial television and press. The Internet could help to reach wider target audience and can be used as a promotion tool.

Low cost of the products can help the company to achieve better differentiation in market segments. Tech­niques used here include: temporary price reductions; extra value offers, including offers relating to future purchase; premium offers (incentives), including free mail-in premiums, banded free gifts. Often a critical determinant to estimating demand is the availability of information. The obtaining of such information can be extremely difficult and costly in many countries, particularly developing countries (McDonald, 2002). Focusers may be able to achieve better differentiation or lower cost in market segments, but they may also lose to broadly targeted competitors when the segment’s uniqueness fades or demand dis­appears. Channels of distribution: marketing organizations and direct agents. Agents will be representatives who act on behalf of the exporter. The agents will be paid on the basis of commission. It is expected that in two years the company will create its own distribution system.

The budget will be used as checks on the actual results of a business. Deviations from predetermined plans are seen by comparing actual and bud­geted performances and costs. The subsequent analysis of the differences or variances and the action taken will be a vital part of the control mechanism. The budget will include: production; stocks; costs – broken down into production, administration, selling and distribu­tion; capital expenditure, including research and development; cash; credit – debtors and creditors; purchasing, master forecast, incorporating forecast of profit and loss and balance sheet.

Targeting

The new business model will change target audience and traditional demographic of alcoholic products in Singapore. This change is caused by the nature of product itself and its characteristics. The main focus will be on young, low and middle class buyers who follow modern life style and innovations. In spite of limited number of buyers, target market is diverse in character. This target group can be characterized as the skeptical consumers (Fill, 1999). Some of the buyers can be brand loyal while others can buy Singapore alcoholic products for the first time. The buyer perception of benefit-generating attribute will be based on unique stylish image appealing to a wide target audience. In contrast to traditional customer groups, this target market value quality and unique style. For these products, positioning is very important element of “successful performance because it occupies the consumers’ minds with the product offer­ings. Retail positioning is crucial helping to establish confidence, trustworthiness and competence for customers” (Fill 1999, p. 36). If the products have a strong retail positioning on the market, customers will then have the being of the products within their minds. The most important is to define the retailers’ identity and per­sonality. Through the store image the retailers can force customers to buy their products (Fletcher & Brown, 2005).

Organizational Issues

As a company’s international business grows, the complexity of coordinating and directing this activity extends beyond the scope of a single person. Pressure is created to assemble a staff that will take responsibility for coordination and direction of the growing international activities of the organization. Eventually, this pressure leads to the creation of the international division. The executive in charge of the international division typically has a direct reporting relationship to corporate staff and thus ranks at the same level as the executives in charge of finance, marketing, operations, and other functional areas. For Singapore alcohol products, it will be crucial to adopt French cultural traditions and ways of doing business (Albaum et al, 2002). Top management’s commitment to global operations has increased enough to justify an organizational unit headed by a senior manager. An international division is frequently formed when the firm has recognized the need for internal specialists to deal with the special demands of global operations (Bridgewater & Egan, 2002).

Recommendations

The new business environment requires careful analysis of target audience and their buying behavior. France is the best European country for Singapore alcohol products influenced by strong cultural traditions of alcohol consumption. For the company, flexibility is the most important marketing requirement, which is essential for the expansion of opportunities, and plays an important role in making and breaking the competitive positioning on the foreign market. Thus the standards aim to give customers an assurance that the quality of goods and services supplied to them meets their requirements, by spec­ifying and regulating all the procedures which contribute to or affect quality. The objectives for market entry are to initiate co-operative marketing with medical centers and hospitals in the big cities around the country. Therefore, the use of information gathered needs to be treated with great sensitivity and considered in the light of cultural norms and acceptance. It can be difficult to enter this competitive segment, but strong brand image and quality of products, marketing development and unique advertising message will help the company to enter this new market environment. To remain competitive, it should take into account buyers preferences and demands and cultural differences which affect both a product image and advertising appeal.

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