Marketing management Assignment PDF

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Table of Contents 1.0 Introduction................................................................................................................................2 1.1 Company Overview...............................................................................................................2 1.2 Phase in the Product Life Cycle.............................................................................................3 1.3 Company development strategy.............................................................................................3 1.4 Window of Opportunity.........................................................................................................4 2.0 The analysis of the foreign market............................................................................................4 2.1 PESTEL Analysis...................................................................................................................4 2.2 CAGE framework..................................................................................................................8 2.2.1 CAGE Analysis for Italy.....................................................................................................8 2.2.1 CAGE Analysis for Saudi Arabia..................................................................................10 2.3 12C’s framework for analyzing International Markets........................................................11 2.4 Harrell & Kiefer Model........................................................................................................15 2.4.1 Country Attractiveness..................................................................................................16 2.4.2 Company Compatibility................................................................................................17 2.4.3 Mapping the selected markets.......................................................................................19 2.5 Selection of a Foreign Market..............................................................................................19 3.0 Market Entry Modes................................................................................................................21 3. 1 Facts related to the product.................................................................................................21 3.2 Nature of the Target country (Italy).....................................................................................21 3.3 Factors related to the Company...........................................................................................21 3.4 Market Entry Mode 1...........................................................................................................21 3.5 Market Entry Mode 2...........................................................................................................22 4.0 Marketing Strategy..................................................................................................................23 4.1 Segmentation........................................................................................................................23

4.2 Targeting...............................................................................................................................24 4.3 Positioning...........................................................................................................................25 5.0 Marketing Mix.........................................................................................................................26 5.1 Product.................................................................................................................................26 5.1.2 Product Policy Decision................................................................................................26 5.1.3 Branding........................................................................................................................27 5.1.4 Packaging......................................................................................................................27 5.1.5 Labeling.........................................................................................................................27 5.2 Price.....................................................................................................................................28 5.2.1 Pricing Strategy.............................................................................................................28 5.3 Place.....................................................................................................................................29 5.3.1 Value creation chain......................................................................................................29 5.3.2 Location.........................................................................................................................29 5.3.3 International distributors...............................................................................................29 5.4 Promotion.............................................................................................................................31 5.4.1 Marketing Communication Process..............................................................................31 6.0 Conclusion...............................................................................................................................33 References......................................................................................................................................34

1.0 Introduction

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1.1 Company Overview Up Country Tea Estate (Pvt) Ltd is a domestic company which has been operating in the industry for over 35 years. Up Country Tea Estate (Pvt) Ltd has been producing some of the most uniquely delicious single estate single origin teas to come from Ceylon. Up Country Tea Estate (Pvt) Ltd operates its portfolio of different types of Black Tea, Green Tea, Herbal Tea and Fruit flavored Tea in bulk, packets and tea bags. Moreover, Company presently conforms ISO9001:2008, ISO22000:2005, and HACCP.

1.2 Phase in the Product Life Cycle A new product progresses through a sequence of stages from introduction to growth, maturity, and decline. This sequence is known as the product life cycle and is associated with changes in the marketing situation, thus impacting the marketing strategy and the marketing mix. In terms of Up Country Tea Estate (Pvt) Ltd, it is in the maturity stage in the local market due to its saturated market behaviour. Therefore, the boards of directors are looking for the international expansion in order to expand its market share and business revenue. 1.3 Company development strategy In terms of this report, Up Country Tea Estate (Pvt) Ltd is going to start a Tea operations in a foreign country which offers tea bags, packets and as well as hot/cold served tea in different flavors. Porter’s generic competitive strategies can further used to stay competitive in the global market, which are shown as below.

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Figure 12 - Cost Leadership and Market Development Strategies

Source: (Ansoff, 2007). It is proposed to follow a cost leadership strategy combined with the market development approach, which focus on broad market of foreign customers in a particular targeted country as the appropriate business strategy for initial expansion in order to stay competitive. 1.4 Window of Opportunity Due to unforeseen political and economic fluctuations in the world economy and labour issues in the domestic market, the profitability of the company has been deteriorated. Hence, the Board of Management of Up Country Tea Estate (Pvt) Ltd has decided to expand their business further by introducing Tea to international markets. The most potential foreign markets are identified to be the Italian and the Saudi Arabian market.

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2.0 The analysis of the foreign market As an international marketing consultant for Sri Lanka’s Up Country Tea Estate (Pvt) Ltd, there are several various factors needed to be considered when analyzing foreign markets. The author conducts PESTEL analysis, CAGE framework, 12Cs framework and Harrell & Kiefer model to evaluate the best suited international market to expand its horizon to in the proceeding report. 2.1 PESTEL Analysis The PESTLE analysis is used to analysis the external environmental risks faced by organizations. In this scenario, PESTEL is used to determine which country is more suitable for Serendib products to enter into. According to Hopkin (2012), the PESTLE risk classification system is advantageous because it provides a clear analysis of the issues that should be addressed within the external context.

Key factors

ITALY

SAUDI ARABIA

POLITICAL Political Stability

Italian market is a stable market Despite few external burdens, the as

the

country

has

been stability of the country is presumed to

maintaining a stability average be strong compared with the last few value of 0.50 points from 2011 Government effectiveness

decades.

to 2016. Italian government has taken The

country’s

government

has

appropriate measures to ensure regulated laws to protect the country proper quality of public and with legal justice and is measured to civil

services

by

avoiding

have achieved effectiveness of 0.23

political pressures in the nation. points in 2016. Foreign Agreement

(0.38 points in 2016). Italy has been a part of the Saudi Arabia’s foreign policy states European Union since 1958 and

that the security and stability of the

it last held the EU Presidency in

region is the responsibility of the 5

Long-term political risk

2016. Political risks such as wars,

states of the region. Long term risks such as revolutions

foreign exchange shortages and and arbitrary government actions natural disasters in Italy were have a low impact of 3 as computed

Taxes on goods and services

determined to be very low (1) in

in 2016.

2016. Compared to 1970s, tax rates in

Currently, no local, regional, property

Italy have declined to 23.38%.

or other sales taxes are imposed in Saudi Arabia.

ECONOMICAL

Gross Domestic Product

Italy’s GDP is $1.86 trillion $748.4 billion is the GDP with a 4%

Inflation rate

annual change computed in 2016. (nominal) in 2016. 1.22% is the current inflation Inflation rate in Saudi Arabia is

Human Development

rate in Italy. Considers factors

such

knowledge

improved

and

2.18%. as Human development reached 0.84 points in 2016.

standards of living. Average value of HD reached 0.87 Disposable Income

points in 2016. Disposable Personal Income in

As of 2012, Saudi Arabia surpassed

Italy is increased to 286208 global average of disposable income

Unemployment rate

EUR Million in the third quarter

recording a figure of $7500 but is

of 2016.

expected but is expected to drop at

12.5%

is

6% between 2012 and 2017. recorded Unemployment rate at 5.6%

the

unemployment rate in Italy. SOCIAL

Population

The

current

population

of Italy is 59,799,396. Demographics

32,742,664 is the total population of Saudi Arabia.

Studies observed that all Italian Majority of youngsters and elderly citizens of different genders and people in Saudi Arabia prefer Ceylon age groups are Ceylon tea tea more than coffee. 6

Education

lovers. The literacy rate in Italy is

94.47% is the literacy rate.

99.07%

TECHNOLOGICAL

Research & Development

Italy's

domestic As

gross

the

R&D

industry

is

expenditure on Research and underdeveloped, 43% of the market is Development

in

2016

was

nearly 22, 3 billion euro. It has

attributed to spending on foreign R&D services in 2016.

increased by 6.2% compared to Social media presence

2013. The average number of Internet 69.62% is the average number of users

in

Facebook

Italy

is

71.33%.

penetration

Internet users in Saudi Arabia.

in

Italy is 38.42% ECOLOGICAL Environmental Laws

Italy imposes strict regulations

Saudi

Arabia’s

environmental

for the disposal of waste water legislation sets out vast prohibitions and has national targets for of pollution and contamination of air, reduction of greenhouse gas land and

water, with

particular

emissions, renewable energy reference to parties involved in services, industry or other economic

efficiency. Climatic conditions

activities. Temperatures vary widely in in Saudi Arabia has a desert climate the north, centre and south of

with extreme heat during the day and

Italy. Although, Italy does not

very low annual rainfall.

produce

tea,

the

Mediterranean outstanding

mild

climate for

is

growing

varieties of aromatic herbs used as

both

herbal

teas

and 7

flavouring tea

Employment Laws

Several provisions and Law no.

Open-ended

300/1970

subject to 60 days’ termination notice

“Statuto

dei

contracts

are

now

Lavoratori”) protect employees for employees who are paid on a Taxation

monthly basis. against discrimination. The corporate tax (IRES) rate in The corporate tax rate in Saudi

Agreements

Arabia is 20%. Italy is 27.5%. Italy and Sri Lanka had a Sri Lanka has signed bilateral Double bilateral

Tariffs

agreement

on

the

Tax Avoidance Agreements with 38

countries including Saudi Arabia. avoidance of double taxation. The standard rate for tariff is The most common rate for imports is 22% and may increase to 24% 5% with 20% levied on commodities including domestic substitutes.

in 2017. Table 1- PESTEL Analysis

Source: Author's work based on (TheGlobalEconomy.com, 2016), (The-saudi.net, 2017), (Worldometers.info, 2017), (BusinessCulture, 2014) , (Istat.it, 2016), (Lawyersitaly.eu, 2015), (Ratetea.com, 2014), (Italy - Employment & Labour Law 2016 - ICLG - International Comparative Legal Guides, 2016) , (Srilankaembassyrome.org, n.d.), (Tradecommissioner.gc.ca, 2016), (Tradingeconomics.com, 2017) ,(Austrade.gov.au, 2017), (Gov.uk, n.d.) (Investsrilanka.com, 2016), (Euromonitor.com, 2016), (Weatheronline.co.uk, 2017), (Saudilegal.com, 2016), (Lexology.com, 2016)

2.2 CAGE framework “The CAGE framework is an acronym for four broad components of distance: cultural, administrative, geographic and economic. These four components often intertwine” (Ghemawat, 2007). The author conducts CAGE model for Italy and Saudi Arabia.

2.2.1 CAGE Analysis for Italy ➢ Different languages such as Spanish, French, and English are used to communicate with different citizens. ➢ Food is a means for establishing and maintaining ties among family and 8

CULTURAL DISTANCE

➢ Bilateral Trade agreement between Sri Lanka and Italy. ➢ The EU Parliament consists of 73 from Italy. ➢ Politically stabilized environment ➢ Italian government welcomes other foreign and domestic markets to establish and integrate.

friends in Italy. ➢ Italians prefer face-to-face contact, so it is vital to spend time in Italy developing interactive relationships. ➢ Italians prefer doing business with people they know and trust.

ADMINISTRATIVE & POLITICAL DISTANCE

➢ Italy is 4:30 hours behind of Sri Lanka.

GEOGRAPHIC DISTANCE

➢ Quality of roads reached 4.42 points out of a maximum of 7 in 2015. ➢ Human resource policies in organizations in Italy are aimed at acquiring necessary skills and inducing proper behaviour in the workplace. ➢ Consumer spending in Italy is 237220.60 EUR million. ➢ Tax on personal income is 11.3% of GDP

➢ The distance from Italy to Sri Lanka is 7620km and is 10 hour flight journey. ➢ Climate in Italy is predominantly Mediterranean, Alpine in north, hot and dry in south. ➢ Population is 59,799,396

ECONOMIC & WEALTH DISTANCE

Table 2- CAGE Analysis for Italy

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Source: Author's work based on (Everyculture.com, 2017) (Commisceo-global.com, 2016) (European Union, 2017), (Camuffo and Costa, 1993) , (Tradingeconomics.com, 2017) (OECD, 2016) , (TheGlobalEconomy.com, 2016)

2.2.1 CAGE Analysis for Saudi Arabia

CULTURAL DISTANCE

➢ Business operations are hierarchical. Decisions are made by the highestranking person. ➢ Every fourth Saudi under 30 is unemployed. Youth unemployment was a major factor in the outbreak of pro-democracy protests in the Middle East in 2011.

GEOGRAPHIC DISTANCE

Consumer spending is 259378 SAR Million in 2015. Personal income tax has been 0 from 2004 to present.

➢ Saudi Arabia roads quality computed to be 5.01 points in average.

➢ Language barriers since the use of foreign languages are very low. Arabic, Urdu and English and the main spoken languages. ➢ Saudis prefer to work with trusted parties and will spend a great deal of time on the getting-to-know-you part of relationship building. ➢ Men and women would not greet each other in public. ➢ Business cards are given to everyone you meet.

ADMINISTRATIVE & POLITICAL DISTANCE

➢ Population is 32,742,664 ➢ Sri Lanka is 2 hours and 30 minutes ahead of Saudi Arabia. ➢ 4,191 km is the distance from Saudi Arabia to Sri Lanka ➢ Weather is harsh, dry desert with great temperature extremes.

ECONOMIC & WEALTH DISTANCE 10

➢ Property rights index for Saudi Arabia has declined over the years from 90 points to 40 points. Table 3-CAGE Analysis for Saudi Arabia Source: Author's work based on (Commisceo-global.com, 2016), (Manfreda, 2016), (Tradingeconomics.com, 2017), (TheGlobalEconomy.com, 2016), (Business Insider, 2015)

2.3 12C’s framework for analyzing International Markets

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Figure 3- 12C’s framework Source: (International Marketing, 2012)

12Cs

Country

ITALY

● Italy is the 5th most visited country in the world, welcoming some 46 million foreign visitors annually. ● Italy is ranked 8th among the world according to Nominal GDP. ● The country is estimated to have 5 to 12 times more laws than France or Germany.

SAUDI ARABIA

● Saudi Arabia is the 13th largest country in the world, and the second-largest in the Arab world. ● Saudi Arabia is th positioned 20 among the world according to Nominal GDP. ● No political elections. The country is governed by the Islamic law.

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Culture

● The Italians invented the viol, violin, cello and piano. ● Italians have retained a strong attachment to their native...