International Marketing - Potential Market entry Strategies for ASDA-WALMART

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University Degree Business and Administrative studies

1. Introduction

International Marketing refers to marketing carried out by companies overseas or across national borderlines. This strategy uses an extension of the techniques used in the home country of a firm/organisation.  A more formal definition of International Marketing might be:-

  1. The marketing of goods, services or ideas across national boundaries; and
  2. The marketing operations of an organisation that sells or produces within a given country when that organisation is part of or associated with an enterprise which also operates in other countries and there is some degree of control of, or influence on, that organisation’s marketing activities from outside the country in which it sells or produces.

Reasons companies go for an international Expansion:

Companies go international for a variety of reasons, but the goal is typically company growth or expansion. Whether a company hires international employees or searches for new markets abroad, an international strategy can help diversify and expand a business.

Growth

Many companies look to international markets for growth. Introducing new products internationally can expand a company's customer base, sales and revenue. For example, after Coca-Cola dominated the U.S. market, it expanded their business globally starting in 1926 to increase sales and profits.

Employees

Companies go international to find alternative sources of labour. Some companies look to international countries for lower-cost manufacturing, technology assistance and other services in order to maintain a competitive advantage

Resources

Some companies go international to locate resources that are difficult to obtain in their home markets, or that can be obtained at a better price internationally.

Ideas

Companies go international to broaden their work force and obtain new ideas. A work force comprised of different backgrounds and cultural differences can bring fresh ideas and concepts to help a company grow. For example, IBM actively recruits individuals from diverse backgrounds because it believes it's a competitive advantage that drives innovation and benefits customers.

Diversification

Some companies go international to diversify. Selling products and services in multiple countries reduces the company's exposure to possible economic and political instability in a single country

  Benefits that Organisations gain from International Development:

  • Taking advantage of international trade technology.
  • Increase in sales and profits.
  • Extend sales potential of the existing products and gain global market share
  • It helps in capturing economies of scale by sharing the knowledge gained
  • Stronger economic growth in emerging economies helps in gaining good return on investment
  • Easy to reach the international customers and grow the customer base



Potential Market entry Strategies for ASDA-WALMART

In this modern age companies like Asda-Walmart have been striving for international growth and survival in the globalized world of business competition. Asda-Walmart can choose to conduct business from home taking on competitors in the safety of its domestic market here in UK or they can decide to go to other countries operating from both domestic and foreign markets. An entry strategy is a process of deciding on the direction of a company’s international business by combining reason with empirical knowledge.

Various market entry strategies with their advantage and disadvantages:

Direct exporting

Direct exporting involves selling directly to your target customer in market. This could be from United Kingdom through the internet and regular trade visits, or by setting up a branch, office or company in the target country. Selling directly to customers prevents other businesses taking parts of your margin. However this approach requires a large commitment of financial and human resources. It takes time to make contacts and build relationships, negotiate deals, understand the market and carry out marketing.

Advantages

  • you are in control of pricing
  • you are in full control of your brand
  • you get a direct understanding of buyers' or end users' needs and an ability to customise accordingly
  • you maintain the customer relationship
  • you are able to identify possible new opportunities
  • Your customers may prefer dealing directly with the producer.

Disadvantages

  • it will take a lot of time, energy, staff resources and money
  • competitors with a local presence will be perceived as lower risk to buy from
  • after-sales commissioning and service may require local language capability
  • daily follow up of genuine leads in-market can come second to business based in UK
  • prompt troubleshooting may not be able to be done remotely and will require additional visits
  • Growth will be slower. A commitment to an in-market presence will have to be made at some stage should the business continue to grow.

Indirect exporting

Selling to or through an intermediary is a relatively cheap and straightforward way to enter a new market. Intermediaries are typically agents or distributors based in your target export market who sell your products or services to end users.

A good intermediary will have in-market experience, reputation and contacts. Using them can be a quick way to get your products and services to the end user. They will generally require a level of support in the overseas marketing and selling of your product.

Some intermediaries are based in United Kingdom. Using a United Kingdom based intermediary means you will not have to contend with international freighting and customs issues.

The disadvantages of using an intermediary are:

  • the intermediary still requires sales support
  • the intermediary takes a margin
  • you have no direct contact with the end customer
  • you will have less control over the actual final transaction
  • You don’t get to learn about the overseas market, which could slow down longer term expansion plans.

 

Joint ventures:

Joint ventures can be defined as "an enterprise in which two or more investors share ownership and control over property rights and operation". If joint ownership of capital is involved, the partnership is known as an equity joint venture.

 

Advantages

  • Sharing of risk and ability to combine the local in-depth knowledge with a foreign partner with know-how in technology or process
  • Joint financial strength and combined resources can exploit a target market more effectively.
  • May be only means of entry.
  • May be the source of supply for a third country.
  • Attractive to foreign companies with little experience in foreign ventures

 

Disadvantages

  • Can lead to a loss of control over foreign operations.
  • The interests of local partners must be accommodated, partners may have different views on expected benefits
  • Can be obstacles to the creation of global marketing and production systems.

 

Licensing

Licensing is defined as "the method of foreign operation whereby a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how or some other skill provided by the licensor". For a big retailer like Asda-Walmart, wanting an aggressive foreign-market entry strategy, licensing is not the best option. Only when export or investment entry is not feasible do they consider it. Small manufacturers are more prone to using licensing as an entry mode since it offers a low-commitment entry mode.

 

Advantages

  • Good way to start in foreign operations and open the door to low risk manufacturing relationships.
  • Linkage of parent and receiving partner interests means both get most out of marketing effort.
  • Capital not tied up in foreign operation and
  • Options to buy into partner exist or provision to take royalties in stock.

 

Disadvantages

  • No quality control is maintained over the licensed product.
  • No control over the licensee’s volume of production or marketing strategy.
  • The licensed product’s market performance depends on the licensee.
  • Requires considerable fact finding, planning, investigation and interpretation.

 

 

Franchising

It’s a special form of licensing in which the franchiser makes a total marketing programme available. Franchising is different than conventional licensing since: the franchisor licenses a business system to an independent franchisee in a foreign country. He carries on the business under its trade name and in accordance with the franchise agreement, reproducing the products or services of the franchisor in the foreign country.

 

Advantages

  • The business is based on a proven idea saving cost on research.
  • A recognised trade name has already been established, so the business can benefit from advertising and promotion by the owner of the franchise- the “franchisor”.
  • A relationship with supplier has already been established.

 

Disadvantage

  • All profits are shared with the franchisor.
  • Other franchisees might give the brand a bad reputation.
  • The franchisor might go out of business.

 

 

 Foreign Direct Investment

Foreign Direct Investment (FDI) is the direct ownership of facilities in the target country. It usually involves the transfer of resources including its capital, technology and sometimes personnel if needed. Direct investment provides a high degree of control in the operations and the ability to better know the consumers and competitive environment.

 

Advantages

  • Greater knowledge of local market.
  • Can better apply specialized skills.
  • Minimizes knowledge spillage.
  • Can be viewed as an insider.

 

Disadvantages

  • Foreign Direct Investment has the highest risk than other entry modes.
  • Requires more resources and commitment.
  • May be difficult to manage local resources.

Entering the international market is a process which should take deep thought and careful planning. It is essential to remember that international marketing is not the same as domestic marketing. Where domestic marketing is directed exclusively in a business’s home market, international marketing reduces reliance on intermediaries and establishes direct involvement in the countries in which trade takes place. It is also necessary to be aware that international customers will frequently have different tastes, needs and customs.

Marketing is a continuous activity and so is marketing planning because you can never know enough about your customers and how to meet their needs.

 

The organisation’s success in an international field is dictated by its knowledge of the market.  Therefore the organisation’s first task is to study its potential customer base. Who are the customers? Where are they based? What factors could contribute to purchase or non-purchase of the product? 

 Thoroughly researching the potential market helps to give a clear picture of the economic, political and cultural factors that may affect selling of a product or service. It also reduces time, money and effort by reducing exposure to unknowns.

 

 

There are two main ways of collecting data for research:

Secondary data is the gathering of information from published sources and is usually the first step in analysing a foreign market. Sources of information include government publications, financial services firms, market reports, international organisations such as the UN and the internet. Secondary research helps fine-tune information needs. Depending on the source, however, secondary data can be misleading.

Primary data is needed for marketers to understand consumers’ buying behaviour in the country under investigation. Primary data should uncover significant cultural characteristics before a product is launched so that the marketing strategy is appropriate for the target market. (Dibb, Simkin, Pride, Ferrell).

The next step is to devise a marketing strategy and a marketing plan.

A Marketing Strategy is a summary of organisation’s products and position in relation to the competition. It should include the elements of product, people, place, promotion and distribution – a Marketing Mix.  Marketing Plans are the specific actions undertaken to achieve the goals of the marketing strategy.

The third step the organisation is to develop and make any necessary adjustments the products or services to meet customer needs. For example, in some markets, the taste and packaging of Coca-Cola has been adapted to suit local tastes.

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The fourth step is to set prices and terms on the product or service that would be reasonable to customers while making a profit, and distributing the product or service so that they are easily available to the customers.

The organisation must then advertise its product to its potential customers and market it in such a way as to attract and hold the customers’ interest.

Finally, because it is new on the market, the organisation must be in a position to reassure the buyer and perform any after-sale service.

 

 

3. CZECH REPUBLIC

3.1 Economic Factors

Annual GDP growth rates:

...

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International Marketing - Potential Market entry Strategies for ASDA-WALMART
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