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In a today's world, for any firm, the marketing department has to do a lot more compare to previous years as current trend of marketing is not limited to customer satisfaction but long term customer relationship, to know customer needs in advance along with global market. The firm has to decide a marketing strategy which make them successful nationally and internationally as well.
There are variety of marketing strategies as suggested by many legend marketing gurus like Philip Kotler, Thomas Nagle, Wroe Alderson, P.T barnum and in books as well like International marketing by Cateora and guary, they are exporting. Licensing, franchising, joint venture, acquiring, etc. The knowledge of product profile has to be there to match with market strategy in fact it depends on one other by mean any firm has to relate both of them accordingly in order to be successful in its market field. There is a commonly held belief that there is no single market entry strategy which is appropriate in all circumstances means firm has to decide what kind of marketing strategy it should choose to enter in the market after a detail study of market in which it is going to enter. This is because the selection of wrong market prove to be an obstacle in success of that firm even it has the best product and even successful one in other market, for example if McDonald opened a branch in India then, the cheese burger which is successful in UK,USA, and nearly in all countries will fail as it contains beef, that's why its always important to know the appropriate market for appropriate product along with obvious strategy to succeed.
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There are lots of things to know before deciding a right marketing strategy. The list includes financial resource, product life cycle, product itself as a guidance, setting target customer and country, effective creation of marketing mix, formation of market plan..etc. The key elements in formation of successful marketing strategy is to know customer needs and potential of competitors. The strategy formulation is also based on consumer behaviour for example the Japanese customer are hard to please than any other country customers. The example supporting this statement: the product called sprinkle powder for babies by Johnson and Johnson is very famous among many countries but not in Japan because of its pores-top which cause sprinkle of powder on the floor on use of it.
The firm has to look upon the barriers in the way to enter in market along with firm's own resources, public policy. Now the firm has to form a distinguish market strategy than competitors to enter in an international market. There are various kind of market entry strategies to enter in a global market, they are divided in to three distinct category, like, exporting, contractual, and equity.
This form is most traditional and well known to enter in a foreign market. It can be defined as marketing of goods produced in one country to another. Direct Export: This involves selling of product/service direct to the customers in targeted market through local representative or distributors. The sales representative promotes the company's product and product will reach to the end user through the route of wholesaler-retailer-end user.
Indirect Export: Here, the product reach to the end user through intermediaries like agents, trading companies where they will get commission on sales in return. There is existence of export management companies who is responsible to export product on behalf of Indirect exporters, also provide promotional advice, arranging shipping & documentation. There is a export trading companies which provide an additional services related to clients export like distribution and storage facilities , investment, countertrade. Countertrade is in action mostly with countries which are lack in currency- reserve.
This involves licensing & franchising.
Licensing: It is mode of entry strategy where one company gives a right in form of a license to use its own-possessed intangible property for a specific period of time. This property can be patent, formulae, designs, trademarks, brand names. This form is quite common among the manufacturing departments where company gives their patent technology in return of royalty-payments.
Franchising: This form is famous among service sector industries like hotel where company gives assistance like guidance in finance along with its intangible property to other company for a specific period of time in exchange of compensation by mean fees or royalties.
It is strategic alliances where two companies bind to achieve corporate objectives which is beneficial for both organisations. It's a kind of contract which can be short/medium or long term and it is not only established between
two companies but even between a company and suppliers or buyers or competitors. This involves joint ventures & wholly owned subsidiary.
Joint ventures: In this strategy two companies joined and form a separate company to achieve their goal. The form of a joint venture can be forward backward integration, buy back and multi- stage. Here the power or authority is equally distributed between companies.
Wholly owned subsidiary: In this strategy the facility or power is fully owned by a single parent company through foreign direct investment. This is to be done by purchasing an existing facility by developing a totally new green field investment.
There are many types of firm in the market like large/medium/small sized, manufacturing, service based firms etc. and to grow your business the choice of right firm is equally important. The firm size is characteristically depend upon the financial assets and legal system of the country. It is observed that the countries with more development, strong financial assets &efficient judicial system have large firms compare to developing nations. The firm size is irrelative to the human capital of nation. In the EU a system is used to define the type of firms it also takes in to account a business's turnover rate and its balance sheet though its not similar to USA but according to this a firm with 500 or more employees with a big R&D department is defined as large firm. A business who employees fewer than 250 employee is called as medium sized while when number is fewer than 50 is called small and if 10 then it is micro business. There are lots of thing to describe a large firm but, averagely we can assume that a firm facing a large market called large firm. The firm particularly involved in manufacturing a product nothing than that is particularly defined as a manufacturing firm while firm that are relating to public service like Hotel. Medical-trust, etc. Can be grouped under a roof of service based industries.
The firm can be identified on a base of its ownerships. They are as follows:
1)Sole trader/ proprietorship: this type of firm is owned by a single person and that person has unlimited liability.
2)Partnership: this firm is owned by more than 2 number of person and that number is extended maximum up to 20. They have limited liability as well.
3)Private limited company: this type of firm is owned by a different share holders. It may be owned by a family/friends with a limited number of issued shares & liability.
4)Public limited company: this is also owned by shareholders but the difference with private limited is it must have at least £50,00 of capital when established and share can be owned by general public. This has got limited liability like private limited company.
5)A firm with unlimited liability: Here there is a legal obligation on the owner to pay all debts of the business. An owner has to give up his/her personal possession to pay the debts.
6)A firm with limited liability: The difference in this firm compare to a firm with unlimited liability is, here the shareholders are only responsible to pay the debts of business according to their possessed share value.
There are different types of strategies useful for different type of organisation. Since, the formation of the World trade organization and International monetary fund and World Bank, the idea of being global for business become relatively easy. The study shows that the multinational corporation tries to enter in a global market with a strategy different to small firms or medium sized firms. The multinational corporation uses merging or direct acquisition to get entry in a new market which is commonly known as direct foreign investment. This is because that involves relative low risk and enable the organisations particularly the large one to take full advantage of their economy of scale and that country as well in which they are going to enter.
The firm particularly large firms sometime may use an entry mode called sequential market entry that includes the establishment or acquisition of concerns in niche markets related to the parent company's product lines in the new country of operation along with foreign direct investment.
The Sony Corporation in 1972 when established a small assembly plant in San Diego(USA) at that time it has used that the strategy called sequential market entry and for the 2 years after the establishment of the plant the production in that plant is confined to Television, the parent company's leading product line. In 1974 it has expanded its product line to formation of magnetic tape plant in Dothan, Alabama and of audio equipment in Delano, Pennsylvania.
The example of Nestle the world's biggest marketer of infant formula, powdered milk, coffee etc. It ranked second in ice-cream, and compete Raston Purina in cereals. It has taken a long-term strategy which can be summarised in think, plan, decentralise, stick to what you know, and adapt to local taste. This kind of strategy may not be at all useful to other company. It has implemented this strategy in North Korea where the products for which nestle is famous for are not famous in that area rather they were selling at super markets in Beverly Hills, California. The nestle bouillon cubes were sold by Nigerian woman along with tomatoes and onions. This kind of market entry strategy is very uncommon but it works for nestle because it relies on local ingredients and market products that consumer can afford.
There are many types of market risks (especially related to business). They are as follows. The strategic risk arises from: merger and acquisition, changes in customer demands and in industry itself, also in research and development. The compliance risk means the risk that involves with changes in laws and regulation of the existing country. The financial risk involves the changes in financial structure of the firm along with daily financial operations and cash flow changes. The operational risk comes from the operational and administrative procedure of the firm like recruitment, supply chain, IT system, accounting control, board procedure, internal rules and policies. The business is also affected by environmental risks like natural disaster. The business is also get affected by systematic risk like economic and political risks which cannot be diversified. The economic risk involves non acceptance from customers, insolvency of the buyer, risk of protracted default that is failure to pay the amount before due date, economic crisis etc. The political risk includes renewal of export- import licenses, war risks, political polices surrender etc.
The business is affected by many cultural factors particularly when it tries to expand globally. The department which is specifically affected by culture of host country is marketing. The culture is totally different in many countries. The best example for difference in culture is UAE AND EU. The difference in culture as it affects the marketing department the advertise becomes totally different. For example a company produces undergarments can advertise it fully at public places in EU but in UAE it is totally banned over there as in UAE culture is like a male should not exposes his part of thigh. There are many other cultural factors like economic class difference, demand of the people, behaviour pattern of the people according to their culture etc. The geographical distance specifics the same thing mean the way people think behave live and work and it is also affected by their religious beliefs. For example the people in the Europe say France the people are habituated to eat fish and chips while in country like India it is not famous as they are affected by their religion and most of the people are vegetarian.
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The franchising is defined as "Business format franchising is the granting of a license by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis." In a simple mean it is to give right to a person to carry out some commercial activities under the agreement signed by both p[arties that is franchisor and franchisee.
The idea of franchising aroused in America a long before according to a belief this idea was initiated by Albert Singer, a founder of the sewing machine. In the year of 1851, he came up with a foundation of Singer Sewing Machine Company and started to give franchising to persons to distribute his machine on contract base that is an initiative of Franchising. There is also an existence of International franchising association (IFA) to regulate the work of franchising and this IFA works along with US federal congress and Federal trade commission to improve the industrial relations.
The Business Format Franchise (BFF) is sometime called as second generation in the world of franchising. This concept of BFF gives a separate and sure method of doing business from the outset with the franchisor where the both parties get benefited from the agreement and develop business at a peak growth rate with limited risk. This particular form is in relation with the franchisee that are associated with British Franchise Association. Here, the franchisee receives a full proof plan and initial investment from the franchisor that is already tested and approved while in return to this the franchisor receives initial payment from the franchisee to cover the intellectual property that is being transferred, cost involved, and also a percentage of franchisee's turnover for its continuous involvement in relation to management. According to statics published in 2005 in UK the risk of losing initial investment is higher for businesses opens without franchising and the survival rate is very low. According to data, out of ten, seven businesses were closing down with loss of initial investment. So, the highest attraction for businesses to do a franchising is "LIMITED RISK". As the format is structured by professional management staff the franchisee straight away gets profitable plan with realistic financial forecasts. There is one more advantage to franchisee is no experience is needed to start a business as full training is provided by franchisor. This step is also proves beneficial to the franchisor in mean a franchisor can select a committed, self-motivated, sales & marketing experienced franchisee than simply select experienced one from wide population of so-called enable franchisee.
The franchising is quite famous business in USA where half of retailing businesses are created from franchising rather than simply start doing itself and this concept is spreading worldwide very fast as it involves no or limited risk with sure profit.
There are lot of advantages of Franchising that makes it the most famous marketing strategy to enter in a new market and work as a best factor in motivation of employees. The advantages can be summarised as follows. The franchisee get a) proven idea of doing business which enable it to become successful b) a kind of total support from franchisor in form of training, use of brand name & trade mark, promotion, advertising support, financial support, managerial support etc. c) exclusive rights in your territory by mean your territory is limited to you only. d) Establishment of relationship with suppliers.
These are the benefits which motivate businesses to take franchisee of a familiar and famous franchisor. The franchisor also takes care while choosing franchising. The franchisor will choose only those who have very good knowledge about locality, local culture. So, the franchisor can get the advantage of it. The countries that can get the maximum advantage of it are developing countries like India where the technology and intellectual property are higher and even the transfer of it can give maximum benefit to both the parties.