Table of Contents
Introduction
The concept of marketing and market are increasingly becoming more global in their scope. This fact is ignored by many managers around the globe at their peril. However, organizations are continuing to recognize the rising necessity for competitive engagement in the global markets. The unabated expansion of worldwide internet access, the globalization of consumer tastes, and the existence of a more open world economy are some of the factors that have foreseen the growth of international trade. In 2015, the value of merchandise at international level was estimated at 10.5 trillion dollars and 2.4 trillion for services (Czinkota & Ronkainen, 2007). While many people find it hard to visualize these high values, they serve to show the scale of global trade in the contemporary world. Today, the population of the global marketplace is consists of about 6.6 billion people. The population is projected to grow to ten billion people by 2015. For managers to achieve sustainable growth for their organizations in the global markets that are increasingly attacked by international players, it is necessary for them to understand the diversity and complexity of international marketing (Cavusgil, Ghauri, & Agarwal, 2002). Leaders of companies need to develop knowledge, attitudes, and skills to compete effectively with other global players. Moreover, firms should adopt effective competitive strategies that pertain to international marketing. This paper will evaluate the concept of international and global marketing on the basis of advice to the managing director of Wickedly Welsh Chocolate, a company that seeks to enter two new markets. The masterpiece will provide analyses on four critical areas: PESTEL analysis, possible competitive strategy for adoption, market entry modes, and market offering for the proposed target audience.
Brief Background of Wickedly Welsh Chocolate Company
Wickedly Welsh Chocolate was founded in 2014 by Mark Owen. The company is located in Haverfordwest, Wales, and deals in chocolate production. The business makes drinks for its visitors in cafes. Customers have the opportunity to experience hands-on chocolate demonstrations in the company premises. The products of the business are available at twenty-five stores in the local area. The company was able to cater for approximately 20,000 visitors during the eight months after its opening (Wickedly Welsh Chocolate, 2014). However, the company has been successful in the recent past, and its management is looking forward to expanding the business beyond its locality. Today, Wickedly Welsh Chocolate has a great potential to venture into international markets (Wickedly Welsh Chocolate, 2014).
PESTLE Analysis for Wickedly Welsh New Markets
PESTLE is one of the critical analytical tools that provide a framework of macro-environmental elements essential for scanning the strategic management’s environmental component. These elements include political, economic, ecological, legal, technological, and socio-cultural. According to Housing Industry Association (2011), PESTLE analysis is critical when conducting a market research or strategic analysis. It enables a business to discover the potential and understand the direction for operations in a new market as well as comprehend the dynamics of the market in terms of decline or growth.
PESTLE Analysis for Italian Market
Italy is a Republican nation located in South of Europe. It is bordered to the north by France, Slovenia, and Austria. It is the 6th most populous European country with a population of about 60.4 million people (The United States Department of Commerce, 2012). The country continues to pay a prominent role in diplomatic, cultural, and military affairs of Europe. Besides Russia, Germany, France, and the United Kingdom, Italy is also a major regional power due to its influence European economic, social, and political affairs. Furthermore, the country is a high globalized nation characterized by a high labor force and a high public education level. This makes the environment for conducting business favorable Wickedly Welsh Chocolate Company.
Political Factors
The framework politics in Italy takes place in a democratic republic, parliamentary, and multiparty system. The presidential term runs for seven years. The president is the overall overseer of the three arms of government; the judiciary, the executive, and the legislature. The legislative arm of the government operates independently of the executive and the judiciary. The elected parliament comprises of two houses: the Senate of the Republic that is composed of 315 members elected for different governmental positions and the Chamber of Deputies that consists of 630 members (The United States Department of Commerce, 2012). The current political environment is favorable for companies like Wickedly Welsh Chocolate that are willing to expand their business in the country.
Economic Factors
Italy, a capitalist economy, is not only known by its high gross domestic product, but also its well-developed infrastructure. In 2008, the country was ranked by the International Monetary Fund as the world’s seventh-biggest economy and Europe’s fourth-largest. Over the years, the country has developed from being an economy based on agriculture to an economy driven by industrialization. The current rate of unemployment (8.5%) in the country is said to be one of the lowest in the European Union. The per capita GDP of Italy at purchasing power parity is averagely equal to the EU. Italy is well-known for its competitive and industrious agricultural sector as well as innovative business sector. During the 2008-2009 recession in Europe, Italy was among the few states whose economy did not experience dramatic contraction. However, it is important to note that the country was ranked as the most corrupt nations in Europe in the latest 2010 Corruption Perception (The United States Department of Commerce, 2012).
Socio-Cultural Factors
In 2009, Italy was ranked ninth in Europe in immigration branding, third in people branding, second in the branding of culture, first in the branding of tourism, and ninth in export branding. The different social classes in the country can be categorized as the urban working class, the rural and urban petite bourgeoisie, and the white-collar middle class. Approximately 37 percent of the workforce belong to the urban working class while the rural and urban petit bourgeoisie class is about 24 percent of the working population. The bourgeoisie is a class of working population that includes self-employed people, politicians, managers, and high-class entrepreneurs.
Technological Factors
Italy is a home to many great persons who played a significant role in the development of technology. Galileo was a great Italian astronomer, mathematician, and physicist who played a vital role in the revolution of scientific technology. The early innovative scientists in Italy including Guglielmo Marconi, Enrico Fermi, and Leonardo da Vinci set the pace of technological development and adoption in the country. Today, the nation is reported to be one of the leading countries in adoption of new technologies. This will be advantageous for Wickedly Welsh Chocolate that seeks to use technological platforms like the internet to market its product.
Legal Factors
It will be necessary for Wickedly Welsh Chocolate to have knowledge about the Italian institutions that are mandated to preside over legal matters in the country. There are three institutions involved in presiding over legal issues in Italy: Justice of Peace, Tribunal, and the Court of Appeal. The Justice of Peace is a court that has jurisdiction to preside less important civil issues while the Tribunal decides on entirely civil matters with the presence of an Italian barrister representing the litigants. The Court of Appeal retries cases that have been decided by Tribunal (The United States Department of Commerce, 2012).
Ecological Factors
Italy experiences the problem of air pollution following the increasing emissions of industrial carbon dioxide. Poor land management policies, illegal building developments, and deforestation have foreseen significant erosion of mountainous regions. Consequently, this has resulted in serious disasters, such as the recent 2009 Messina mudslides, the Sarno of 1998, and the Vajont Dam flood of 1963.
PESTLE Analysis of the Australian Market
Political Environment
Just like Italy, Australia is a liberal-capitalist democracy. The national government of Australia is substantially involved in decisions that determine the fate of the country’s economy. For instance, the Parliament is mandated with a responsibility to create environmental protection laws that protect the country’s natural heritage and importation tax policies that regulate the national economy. The government also intervenes in international businesses in the country by regulating local content requirements, free-trade zones, currency controls, import quotas, subsidies, and tariffs (Dwyer et al., 2014).
Economical Environment
Dwyer et al. (2014) recognized Australia as “one of the largest capitalist economies in the world”. The growth of the Australian economy largely depends on agricultural and mining sectors. The service sector also plays a critical role in the nourishment of the country’s economy. There are many economic factors that necessitate foreign companies to venture into the Australian market. First, the market is characterized by the ease of doing business. Second, the country has in the recent past experienced continuous economic growth and contained inflation. Additionally, with little restrictions, Australia is seen as an open market with a stable and resilient financial system.
Socio-Cultural Environment
Dwyer et al. (2014) described Australia as “a collectivity of diverse peoples living in a relatively young society”. The country has no official religion. The Roman Catholics compose of about 26% of the total population while the Anglicans compose of 26.1% (Dwyer et al., 2014). Other religions compose of 12.6 percent. Australians are now more learned compared to a decade ago. Moreover, the constitution of the country allows every citizen to freely express their beliefs and cultures.
Technological Environment
Between 2010 and 2011, Australia used about 30 billion dollars in research and development (Cunningham, 2010). There are more investments made in the improvement of technological infrastructure in the recent past evident through the funding programs and government funding. Some of the Australia’s technological achievements recorded recently, include the invention of the electric drill, Xerox Photocopying, Bionic Ear, Anti Hacking Software Kernel, Lawn Movers, and refrigerator. The government has made internet access available throughout the country through a wide range of technologies. By 2010, there were 2.5 million broadband subscribers in the country (Cunningham, 2010).
Legal Environment
From Dwyer’s et al. (2014) view, understanding a country’s regulatory obligations is fundamental for foreign businesses. Regulations are meant to see that integrity prevails in the market, sufficient protection for the business players, and fair competition. The procedure for opening up business in Australia has been made simple by the flexible business laws. Being a member of the WHO, Australia has adopted the not-to-raise tariff above the agreed level, a policy that binds all the members of WHO. Foreign businesses must abide by the government regulations and apply for permits.
Ecological Environment
Australia is one of the world’s most biologically diverse countries. A large portion of animals and plants in the large island continent are found nowhere else. However, on a negative note, the country continues to experience global warming effects just like many regions in the world. This has not only affected tourism in the nation but also affected the land through droughts and widespread fires (Dwyer et al., 2014).
Competitive Strategy
Competitive strategy is essential in examining the way an organization can effectively compete in strengthening its position in the market. According to Porter (2008), “any such strategy must occur in the context of rules of the game for socially desirable competitive behavior, established by ethical standards and through public policy”. One of the competitive strategies in marketing is the segmentation, targeting, and positioning (STP) model. In the consideration of Wickedly Welsh Chocolate entry into the Italian and Australian markets, STP model will be essential. The model is a strategic approach used in the contemporary marketing.
Segmentation
As evidenced by the extensive variety of products on the shelves of a supermarket, different consumers have different interests and desires. The variation in desires stems out of the diverse benefits and needs of the customers. Wickedly Welsh Chocolate must be aware of this fact. Segmentation is one of the marketing strategies that the company should use to serve the needs of the targeted consumers in both the Italian and Australian markets. According to Junker, Piersma, and den Poel (2004 p18), “Segmentation is the process of subdividing a market into distinct subsets of customers who behave in the same way or have similar needs.” The process is based on a particular-product factor where the requirements of customers are reflected by their differences or responsiveness to the variables of marketing, such as loyalty, preference, or purchase behavior.
In the case of Wickedly Welsh Chocolate, the major target consumers are the children and college youths. The company needs to provide a higher value to these groups of consumers by creating a marketing mix that addresses their concerns, for instance, the taste of the chocolate. The critical segmentation base of concern for the company should be the demographic segmentation. The market division is done on the ground of demographic variables like family life cycle, income, and age. There is variance in wants and needs across age groups. Chocolate is a product that is tremendously attractive to children above four years and youths between 15 and 25 years. Wedel & Kamakura (2012) argued that marketers will be more certain about their target market by segmenting the market on the basis of age, and, therefore, leading to better efficiency and productivity.
Target Market
After evaluation of the segments identified, it will be important for the firm to adopt an suitable targeting strategy. There are three strategies of target marketing that can be utilized by the case study company in both the Italian market and the Australian market: concentrated marketing, differentiated marketing, and undifferentiated marketing. From a closer outlook, concentrated marketing will be more favorable for the company in Italy where there exist large competitors. This kind of target marketing strategy focuses on niche marketing. It allows the company an opportunity to compete with existing big businesses by focusing its limited resources on meeting the needs of the niches (Shani & Chalasani, 2013). Wickedly Welsh Chocolate can fine-tune its chocolate products and prices so that it can serve the interests of a carefully identified segment. Shani & Chalasani (2013) found out that the profitability of concentrated marketing is high for small companies that seek to venture into foreign markets.
Differentiated target marketing strategy involves aiming at two or more divisions of markets with varying marketing designs and mixes. For the case study, this strategy is not favorable for implementation in any of the two identified markets because it increases the cost of doing business. Planning for separate marketing segments requires extra channel management, promotion, sales analysis, forecasting, and marketing research. Alternatively, Wickedly Welsh Chocolate can make use of the undifferentiated marketing in the Australian market, an emerging market in the world. The strategy is analogous to mass marketing where same marketing mix is used for a wide-ranging segment of potential customers. Undifferentiated marketing is associated with advantages like greater profitability, lower production costs, and greater sales volume (Jonker, Piersma, & den Poel, 2004).
Positioning
Kotler et al. (2015 p38) referred to market positioning as “the point where the bundle of attributes joins to form one concept which aims at capturing the essence of that which the target audience seeks in the product category.” In other words, it is the process of organizing for a product to fill in a desirable, distinctive, and a clear space, in light to existing competition, in the mind of a buyer targeted (Kotler et al. 2015). The Wickedly Welsh can choose to integrate its positioning strategies in the new markets by integrating the marketing mix consisting of four variables: distribution, price, promotion, and product. Positioning the product implies that the company can separate its chocolate product from its competitors based on benefits, features, or attributes. For instance, Wickedly Welsh Chocolate produces chocolate with flavanols that reduce risks of diabetes. Positioning by price/quality means that the company can decide to place a high price for its product to define its quality. This ensures that the firm is at per with other competitors. In Italy, Wickedly Welsh Chocolate will face a threat from big competitors, such as Ferrero, Nestle Italiana, and Lindt & Sprungli. In Australia, potential competitors, include Mars and Mondelez.
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Market Entry Methods for Wickedly Welsh Chocolate
Kotler et al. (2015) asserted that international marketing and expansion not only demands an intensive market situation analysis, but also a careful selection of an appropriate choice of strategy of market entry. There are varied choices of entry for businesses wishing to venture into new markets, including investment in fully-owned stores, setting up joint ventures, and appointment of franchisees. The choice of entry strategy is largely informed by internal and external considerations like the distance of the target market or existing production capacity. Many organizations face the challenge of selecting the best entry strategy because of these internal and external factors that affect the decision-making process.
The Wickedly Welsh Chocolate should use the direct export strategy in entering the Italian market because of proximity factor. The company’s factory is located in the same continent with the target market. The exports can be supported by strong local distribution and marketing facilities. However, the firm should aim at establishing production facilities in the country in the long run following the high competitive landscape observed in the confectionary industry. This will enable the business to not only become more competitive in terms of prices and costs but also customize and adapt its products in accordance with the preference of the locals (Ekeledo & Sivakumar, 2004). In the implementation of this strategy, the company can decide to set up its facilities or enter into partnerships with local producers and manufacturers. In the case of the Australian market, entering into a joint venture with local manufacturers would be more appropriate for the firm. This is because companies experience difficulties in controlling and managing set facilities in foreign countries due to the calls for detailed cultural and environmental knowledge about the target market (Zahra, Ireland, & Hitt, 2000).
The adoption of the partnership strategy by entering into a joint venture with the local organizations foresees the delegation of responsibilities and management control is made easy. The costs of investments are also shared. Wickedly Welsh Chocolate will be in a position to take advantage of the local organizations’ knowledge about local cultural and social conditions. However, the firm must be in constant collaboration with its local partners and guided by the spirit of giving and take. A mutual understanding is also inevitable in this scenario.
Recommendations on Marketing Offering and Conclusion
The foregoing research on environmental and market conditions in Italy and Australia shows a potential growth for the confectionary industry. There is a need for Wickedly Welsh Chocolate to capitalize this opportunity by choosing an appropriate competitive strategy. In the strategy, the firm must determine what it has to offer to the two markets. The business should focus on four major integrated marketing mix variables: promotion, place, product, and price.
The chocolate made by Wickedly Welsh Chocolate comes in many forms, including bar form. The bar is covered with cream and filled with a smooth covering of chocolate. The firm’s product is also enjoyed in liquid form that is served in the business’s cafes and shops. What will make the chocolate made by the company more unique in the two markets is the fact that it contains high levels of cocoa flavanols that reduce risk factors for diabetes and dementia. It also reduced blood pressure. Moreover, the firm can manipulate its product to serve the interest of the customers. For instance, the company has produced its chocolate in the form of rugby balls likened by its consumers in Wales.
It will be important for the company to produce its chocolates in standardized sizes and weights. These are factors that will highly define the price of the product. Additionally, it will be important for the business to research about the market trends in the two markets before deciding on its pricing strategy. For 100 grams of a bar chocolate in Italy, the company should sell its chocolate at about 6.2 dollars while in Australia a 100-gram chocolate bar should go for about 4.8 dollars. After labeling the commodity at a competitive price, the firm should find out how to distribute the product to the consumers widely and rapidly. The Wickedly Welsh Chocolate product should be displayed at the largest part of supermarkets’ sections of confectionary. This will increase the chances of being chosen by consumers. Lastly, the firm needs to promote its product to boost its demand in the foreign markets. The business should utilize almost all forms of mass media available in the country, including newspapers, magazines, internet, television, and radio (Belch & Belch, 2003). Since most of the targeted consumers are tech savvy, the business should utilize the internet platform extensively to reach out to them. Effective implementation of the discussed competitive strategies, including the PESTEL analysis, STP model, appropriate market entry modes, and integrated marketing mix will result in great success for Wickedly Welsh Chocolate global expansion.
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