International Marketing Europack

A, Critically analyse the choices outlined on page 302.

The choices are either for Europack to leave France and employ an agent or for them to stay in France and wait for the economic environment to improve.

The first choice centres on employing an agent to work on behalf of Europack. An agent as defined by Kotler et al Principles of Marketing 2001 is “A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions and does not take title to the goods”. There are two kinds of agents that Europack could possibly opt for they are manufacturing and Selling agents. A manufacturing agent is an agent that represents two or more manufacturers of complimentary goods with a written agreement being in place between the agent and the manufacturer to fix pricing, sales territory, order handling, delivery service, warranties and commission rates. A manufacturing agent is appointed by various companies to deal with different scenarios such as small businesses whom cannot afford sales staff or by large companies to enter different sales territories or areas which couldn’t economically support a sales team.

A selling agent as described by Kotler et al Principles of Marketing 2001 “ Having contractual authority to sell a manufacturers entire output. The manufacturer is either not interested in the selling function or feels unqualified. The selling agent serves as a sales department and has significant influence over prices, terms and conditions of sale”. Bert Rosenbloom Marketing Channels a Management View attempts to add clarity between the differentiation of agents “Though the basic marketing literature discusses manufacturer’ agents and selling agents as though a clear and precise distinction exists between them, in practice such a distinction is not usually made. In fact, it is quite common to use terms such as sales agent, selling agent, manufacturers’ agent, manufacturers’ representatives, reps, or export/import agents interchangeably to refer to all types of agent and wholesaler without any strict distinctions made about the degree to which they perform distribution tasks. Historical patterns of usage of in various trades is the actual basis for referring to various types of agent wholesalers rather than conceptual clarity or logic”.

With Europack considering closing the sales office in Paris it is fair to assume that the type of agent they would look to employ would be a selling agent to takeover from the closed sales office and takeover complete responsibility of sales in France. The assumption that a selling agent rather than a manufacturing agent would employed is based upon the likely function the agent would be expected to fulfil i.e. that of a sales office and the fact that there are no details as to where the manufacturers outputs are to be distributed other than within France therefore leaving the agent with Europack’s entire output in France.

To be able to assess any choice a company must be fully aware of all the benefits and disadvantages associated with making such a choice. In dealing with the advantages of employing an agent the main advantage is made in terms of cost cutting. By closing down the sales office there will be costs cut in respect to money saved on simply operating a sales office in terms of the rental of buildings, rates, utility bills, cleaning costs, postage, stationary the list is pretty much infinite in respect to all costs a office incurs. A major saving would also prove to be made in terms of staff as a employer Europack is responsible for staff salaries, bonuses, pension contributions, holiday pay and if applicable in France national health service contributions. Time savings also apply with Europack not having to spend time recruiting and retaining sales staff therefore staff cuts in the personnel and human resources at head office in Germany may be possible and in turn save the company further. David Lines et al A-Z Business Studies Handbook 2000 also cites the fact that “as agents work solely for a percentage of the sales revenue they may work harder than a salaried workforce”. This literary quote suggests a major factor that could dictate Europacks decision as it encompasses the whole idea that the management view the lack of sales success down to laziness by the sales staff and the fact that the management feel unable to motivate the sales staff. The fact the agents work for a percentage of the sales revenue indicates the higher Europacks sales revenue the greater remuneration the agents receive could be seen by the management as a way to motivate the agents along with cutting costs as salaried sales staff would receive salaries whether they created sales revenue or not.

Employing an agent in France could be beneficial in respect to there would be no problems associated with languages as the agents would speak the same language as present and prospective clients. A respected French agent would also instil confidence with the customers as they would feel more comfortable dealing with a French company than a foreign company and eliminate any xenophobia that may exist. The fact that the agent would be a French company in its self would create a feeling of security and reliability in the way the product would be perceived by the customers.

This is a preview of the whole essay

Obviously if there are distinguishable advantages to having an agent then there must also be disadvantages. A drawback in using agents was cited by David Lines et al A-Z Business studies Handbook “if a agent sells many different products, he or she may not give yours enough attention”. A company could experience this particular drawback if the agent they have employed has a large client base or insufficient staff to deal with the quota of work. Linked in with David Lines particular disadvantage is also the fact that according to Colin Gilligan and Martin Hird International Marketing Strategy and Management “ The EMC will not necessarily, for example, have the degree or depth of coverage of all the markets that the manufacturer is in and may specialise either by geographical region, product type or end user”. This could lead to problems for Europack as they would be employing an agent to not only maintain the current customer base but also hopefully increase sales, which may not be possible if the agent has problems dealing in the packaging market.

A problem that can occur when dealing with an agent is that Europack could lose control over the sale of its goods in terms of having a lack of control in respect that they cannot control the customer base the market penetration or sales volumes. Alongside losing control of the customer base could also mean that Europack becomes stagnant and unaware what the customer wants and needs along with the current market trends and market demands. This in essence has the possibility that Europack are unable to develop and produce the products the market demands which leads to loss of customers and competitors gaining Europacks market share.

An important part of Europacks sales strategy obviously links around customer retention with one company responsible for 60% of Rohr’s business and five responsible for 80% along with Frisch, which has one company responsible for 15% of sales and five companies that represent 62% of sales. The small customer base of both producers is also a factor that means customer retention is important with Rohr having only 24 customer accounts and Frisch having some 79 customers. The importance of customer retention may not be a priority to an agent, as agents don’t make money from after sales service but from the initial sale. The fact is if agents failed to retain the existing customers this could lead to catastrophic consequences for Europack.

By involving an agent there maybe problems in terms of the pricing strategy that the agent employs for instance if the agent devalues or under-prices product sales revenue could be lost whereas over-pricing could lead to Europack being priced out of the market. Linked into the idea of pricing is selling the company name or brand to prospective customers in terms of the company’s image, reliability and quality products a failure to promote the company name to its full potential could affect the future sales revenue. However a most important issue that has to be considered is the issue of an agent breaking its association with Europack and working with a rival producer. With the inside information that an agent would posses regarding Europacks operation an association with a rival leader could lead to Europack losing customers and in turn market share.

The question thus has to be asked, will an agent provide significant advantages to Europacks business to justify an agent replacing the sales teams or are the disadvantages of employing an agent along with the risks involved to great. Europack must evaluate any agent thoroughly in terms of experience, expertise and reputability before they even consider employment.

The second choice available is for Europack to stay in France and wait for the economic environment to improve. The economic environment can be described as “Factors that affect consumer buying power and spending patterns” Kotler et al Principles of Marketing. In terms of its relevance and significance to a company Bert Rosenbloom Marketing Channels a Marketing View writes, “The economy is probably the most obvious and pervasive category of environmental variables affecting all members of the marketing channel. Hardly a day goes by without the state of the economy drawing notice of consumers and executives in manufacturing, wholesaling and retailing firms. All of these parties must pay careful attention to what is happening in the economy. From a manufacturers raising capital for long-term investment to a consumer’s buying a pound of coffee in a super market, all are affected by economic variables. The above quote is relevant in that it indicates everyone is affected by the economy so the affects of the economy will not just be apparent on Europack but the sector as a whole.

The decision to stay or leave France obviously needs careful consideration as to the benefits and disadvantages the option poses. The possible benefits for Europack to stay and wait for the economic environment to improve include the possibility that the economic environment will in time improve and Europack will have a established presence in France that is able to service increased consumer demand. Staying in France also shows Europacks long-term commitment to the French market thus building confidence amongst its customers, which is a contributory factor to customer retention. The issue of customer retention is a vital issue to Europack with its small customer base and over reliance on key customers for large percentages of its business so any moves that help towards customer retention are significant to the business.

A major benefit in terms of remaining in France through the poor economic period is highlighted by Dave Hall Business Studies 1999 “ Those firms which survive during a recession may benefit from a reduction in competition, as there rivals go out of business. This should put them in a position to gain a greater share of the market, especially when the economy picks up again”. Linked in with surviving through a difficult economic period are factors, which may contribute towards Europacks survival. Europack could spend time reviewing the structure of the sales subsidiary and the way in which it operates and communicates with head office. Time could also be spent replacing dysfunctional staff and recruiting experienced sales staff this maybe could be done by headhunting top industry performers. Training of the sales staff could also be carried out in order for them to function how head office wishes and to establish improved communication links with head office. The review of the sales staff, improved communication channels and recruitment/training of staff could also lead to improvements in staff morale. As staff morale has been blamed as a major factor in the sales teams failures any improvement would be welcomed by Europack, as motivated staff are more likely to improve sales figures.

The most significant factor that could dictate Europacks decision to stay in France is the introduction of the Euro as fluctuations between the Franc and the Deutschmark would no longer affect profitability. In the past two years the Deutschmark being stronger than the Franc has been a factor in Europacks performance, which has seen profits depreciate due to exchange rate fluctuations this with the Euro in circulation, is a problem of the past.

Along with advantages to keeping operations in France there are inevitably disadvantages. A major factor that would be the fact that a poor economic environment or recession can last for a number of years as David Hall et al Business Studies 1999 states “ in the early 1990’s the UK suffered a recession and a falling demand for goods and services. This resulted in a considerable hardship for many firms – approximately 73,000 individuals and companies were forced out of business in 1992. By 1997 this had fallen to 40,000 as trading conditions had improved”. The fact that a poor economic environment can last a number of years could mean that the period of poor economic conditions is too much for Europack to withstand.

Linked with why Europack could struggle in a long-term poor economic environment is the issue of confidence as David Hall et al Business Studies 1999 states “There tends to be a general lack of confidence amongst businesses during a recession. This can lead to investment projects being cancelled and orders being lost. Some businesses will not only for the period of the recession itself, but also in the longer term. It may also lead to a loss of profitability and competitiveness.” The fact that orders could be lost by Europack could be a determining factor in any choice because as stated earlier in the text Europack rely heavily on a small customer base and repeat business is vital.

Interest rate rises could also be a cause to move from France as an increase in interest rates on borrowings would result in capital costing more and orders being cancelled as business struggles to cope with the rise in payments on outstanding debts, however the government in France could step in and drop interest rates in a bid to halt the recession and increase consumer spending.

Leaving France could also prove costly in terms of redundancies and outstanding contracts on premises etc and if the economic environment were to improve Europack wouldn’t be in a position to capitalise. Any re-entry into France could also prove costly and difficult to re-establish the company image, as consumers are fickle and would remember the company closing down in France. Closing down any company doesn’t instil confidence and show reliability to potential companies as if they have closed down once they could do it again as soon as the economic climate dropped and leave customers without a supplier.

In making any decision some form of research should be carried out and the most likely research method in this instance would be PEST analysis. PEST analysis which is defined by David Lines et al The A-Z Business Studies Handbook 2000 “ Political, economic, social and technological analysis. A systematic means of analysing the external factors that may present opportunities or threats to a business”. Though no method of research is a hundred percent accurate and can deduce exactly when an economy is going to rise or dip though the GDP and GNP tables are often fairly reliable sources information. I.e. as GDP and GNP rise usually the economy rises with them.

B, Describe and evaluate a suitable marketing programme that Europack could adopt.

Europack should concentrate on all the positive factors of the business and build upon and expand these. Europack has a small customer base, which it is imperative to retain as the basis for the business. The first and perhaps key marketing strategy to be carried out should be a satisfaction survey amongst all the customer base the objective of this being to create customer loyalty as described by David Lines et al A-Z Business Studies 2000 “ customer loyalty implies such positive purchaser attitudes as to ensure a high rate of repeat purchase. This could be achieved through the quality of the product or service, the level of sales and/or after-sales care, or from the power and attraction of the product image.” The creation of customer loyalty leads to customer retention.

The retention of customers is particularly important in the case of Rohr as one customer accounts for 60% of the entire sales revenue and with a total customer base of twenty-four companies they are susceptible to desertion to rival companies. Frisch has a slightly larger customer base with 79 customers but is still susceptible to desertion that could prove costly. The customer satisfaction survey should be carried out face to face with customers and should provide interaction on all levels to find out what ways customer service can be improved along with anything else that the client wants to discuss as the priority of Europack must be to take the feedback from the customers and act upon it in a proactive manner to ensure retention of key customers.

The marketing technique that Europack should employ is relationship marketing, which involves the creating, maintaining and enhancing strong relationships with customers and other stakeholders. Increasingly, marketing is moving away from focus on individual transactions and towards a focus on building value laden relationships and marketing networks. Relationship marketing is geared towards the long-term. The goal would be for Europack to deliver long-term value to customers, which can be measured by long-term customer satisfaction. The key to relationship marketing is all a companies departments working in unison with marketing to fulfil a customers needs. Europack also needs to create and sustain relationships at many levels such as economic, social, technical and legal which would lead to customer loyalty.

There are five defined levels of relationship marketing, which distinguishes the relationship between the consumer and the producer. The level of relationship is dependant on the type of business and number of customers buying the product for instance Europack with a limited number of customers and high margins should apply a partner relationship. A partner relationship is defined as “The company works continuously with the customer and the other customers to deliver better value” as stated by Kotler et al Principles of Marketing.

The importance of using relationship marketing is to unite the customers and business to work towards providing the best service possible. In the eventuality of a poor economic climate the strength and in depth relationships that Europack will have forged with their clients should mean that a recession would have a limited affect on the company’s profits. Europack could adopt one of the three customer value added approaches to develop customer bonds they are financial value which could be likened to a reward scheme i.e. buy one get one free promotions etc. The second value added approach social benefits whereby Europack learns a customers needs and wants, then individualising and personalising their products and services. The third method of adding value which would be particularly useful for Europack is to add structural ties which could be to provide there customers with computer linkages to improve order efficiency etc. The methods and strategies discussed are all dedicated to creating a basis for Europak to build upon because the facts are both companies Frisch and Rohr do have a solid customer base with Frisch having the total business of fifty of its seventy nine clients and Rohr having ten of its twenty four clients entire business and by building relationships with value added benefits to the consumer business should theoretically increase.

In terms of actually selling the product its in the best interest both financially and socially if Europack continue to have there own sales subsidiary in France, however the sales subsidiary needs to undergo radical change if results and the confidence of head office are to be gained. The sales subsidiary needs to be split with a section responsible for Frisch and a separate section responsible for Rohr this would create a clear structure and allow staff to specialise in there own sites produce.

A matrix structure should also be implemented within the sales subsidiary to create proficiency and improved communication channels. A matrix structure would combine functional specialisation within Europack with structures built around products, projects or programmes. The grid, which would result from the grouping of the structures, would have a two-way flow of authority and responsibility. Within the functional element, the flow is vertically down the line from the superior to the subordinate, which would create stability and certainty to the employees within each department. The fact that the flow of communication is downward from superior (head office) to subordinate (sales staff) would allow the head office the control that they deemed was lacking previously. There would also be horizontal lines of communication open to sales or project manager who would have responsibility to oversee internal operations. The matrix system would provide a structure in which all employees have a designated superior to report to and a clear channel of communication back to head office.

As well as introducing a matrix structure into the sales subsidiary needs to be reorganised in respect to staff with staff who are under performing being dispersed with and only the best calibre of employee being kept. Recruitment also needs to be focused upon with bilingual French and German sales professionals being actively recruited to the sales team so that they can interact in French to the customers and German to the management thus again eradicating language barriers and improving service. The sales team also need to adopt a continuous training programme so staff have an in depth product and market knowledge with relationship managers being allocated to each of the main customers to deal with all orders, after sales and any problems which may arise.

A clear aspect of the marketing programme must also be to develop business in new markets and increase sales revenue. Though Frisch and Rohr have both gained growth in terms of new markets entered over the past four years this is still an area which needs to provide growth as Rohr only achieved five percent growth in new markets during the last four years a figure which needs to be improved however Frisch achieved twenty six percent growth which is a healthy growth.

Europack should implement the idea of market segmentation to allow the business to decide and evaluate possible areas to target. Market segmentation is defined as “ dividing a market into distinct groups of buyers with different needs characteristics or behaviour, who might require separate products or marketing mixes” Kotler et al Principles of Marketing 2001. The implementation of using market segmentation techniques would allow Europack to identify bases for segmenting the market and develop profiles for the resulting segments. After the segments are identified Europack must develop a measure of how attractive a market segment is and select a target segment. In order to enter any new markets however Europack needs to develop positioning for each target market along with a marketing mix. The clear benefits that segmenting markets would provide to Europack is the fact that it is targeting its products only at consumers that they can serve best. By being flexible Europack could gain entry into new market segments if they are prepared to adapt products, prices and programmes to defined segments. However the clearest advantage to Europack of using market segmentation is the fact that in such a competitive sector it is important to find market segments with few competitors thus creating competition and entry into a new segment that in turn increases Europacks growth and increases sales revenue.

As Europack is already involved in niche markets with Frisch future targeting of niche markets should also be encouraged as niche marketing can be developed from segment marketing as niche marketing by definition is “Adapting to a company’s offerings to more closely match the needs of one or more sub segments where there is often little competition”. As defined by Kotler et al Principles of Marketing 1999. The area of segmentation and niche marketing are vital if Europack are to expand into other markets and increase market share in a highly competitive environment. The aim of Europack must be to become the come that all its competition uses as the industry benchmark.

In essence the marketing programme that Europack should adopt starts by building solid foundations in terms of creating a loyal customer base from which to develop from. The idea of introducing a matrix structure within in the sales team is to alleviate all communication problems and allow head office the control they desire. As well as creating the matrix system staff issues are dealt with by replacing under performing staff and introducing continuous training thus dealing with the issues of staff moral to an extent though the Europacks HRM department should produce a plan centred on issues of staff moral. The last part of the marketing programme is aimed at ways of creating growth and with the stiff competition Europak faces in a highly competitive arena they have little choice but to enter market segments and niche markets where the competition is limited. The aims of the marketing programme for Europack are to create a business that could withstand a economic decline and start to grow as stagnant and declining sales revenue are not acceptable to any business.

Word count 4326