New Mobile Phone Aimed At Global Youth Market - Case Study Example

Proposed International Marketing Plan For New Mobile Phone Aimed At Global Youth Market Executive Summary This paper aimed to fulfill the market research requirements of a telecommunications company planning to compete in the global arena for the first time with a mobile phone designed for the youth market. The main objective of the report was to analyze the international marketing prospects for the nascent firm, hereon referred to as Company-A, which is based in Western Europe but intends to manufacture the mobile phone in Malaysia for worldwide distribution. Towards that end, the report examined the globalization strategies that underpinned the success of trail-blazing companies as chronicled in the literature, with particular attention given to marketing plans devoted to the youth market and to breaking the social and cultural barriers that often get in the way of such plans. We employed the triangulation method to check the consistency of the data set in the available literature, by conducting random interviews with at least 10 cellular phone users ranging in age from 7 to 18. From the critical analysis of the relevant literature and the one-on-one interviews, we drew the conclusion that: 1) parents generally influence the youth's purchasing decisions at an early age, and young people begin to make such decisions only upon earning their own money; 2) the SWOT-and-PESTLE approach popularized in UK is useful in international marketing, 3) the youth are partial to mobile phones with state-of-the-art features, 4) branding and product differentiation are key to success, and 5) the firm must go out of its way to understand the dynamics of other cultures. 1. Introduction In assessing the potential for a successful incursion into the international market, this report examines the international marketing environment and the challenges it is likely to impose upon the resources, corporate structure and culture of a European telecommunications firm apparently embarking on business globalization for the first time. Consequently, the study covers the areas relevant to this specialized marketing activity, including the strategies appropriate for homebred firms that have decided to go international, the choice of markets that are easier and less costly to penetrate in terms of cultural barriers, and what entry modes are advisable for a certain country or region. Section 2, which is the body of the paper, also evaluates the options on whether to standardize the mobile phone primed for international marketing, or differentiate and adapt it to the characteristics of the particular target market. More important, it provides a demographic profile of the youth market as to consumer tastes and preferences, purchasing decisions, buying motivations and peer influences. To collect these data, 10 young people aged 7 to 18 who carry mobile phones around were interviewed, and asked the relevant questions. The conclusion in Section 3 and the recommendations laid out in Section 4 are based on these person-to-person interviews, as well as the critical analysis of selected literature on international marketing management. 2. Findings, Analysis & Discussion The decision of Company-A to go out of its home base in Western Europe and locate a production plant in Malaysia for the mobile phone venture is by itself a well-taken international marketing strategy. Compared to Europe, Malaysia is a lower wage area and manufacturing the mobile phone project in this part of the world would enable Company-A to cut on production costs. The firm can then sell the phone in rich markets for bigger profit (Jones, 1999). A firm is considered ripe for an international venture when it has cultivated exchange relationships with individuals or organizations beyond its national boundaries. The decision to do business overseas is usually influenced either by the domestic or global economy (Doole & Lowe, 2004). Companies might be pushed into international marketing by the general lack of opportunity in the domestic markets. Organizations might be pulled into global markets, without necessarily abandoning their domestic markets, by growing opportunities for their products or services in other countries (Borna, 1999). Firms attempting to compete on a global basis should be aware that nations differ greatly in their political, legal, economic, and cultural environments. The complexity of the international marketing environment requires a careful consideration of whether to market aboard, where to market, and what objectives to pursue. Once a firm has prepared a list of promising markets to enter, the difficult task is to collect data related to the market potential and environmental forces of each country. Conducting research in the international market is difficult because of language diversity, general distrust of outsiders, high illiteracy rates in some countries, and the prevailing local customs (Borna, 1999). In considering global marketing, an organization faces five major types of decisions. First, before expanding the firm's operations overseas, is to determine whether the firm's resources are compatible with the foreign market opportunities. If the response to this first determination is affirmative, the second consideration is the market-selection decision, that is, which foreign market or markets to enter. The third decision concerns the mode of entry and operational consideration in the attractive markets. The fourth, the marketing mix decision, considers the appropriate product, promotion, price, and distribution programs for the selected markets. Finally, the marketing organization decision determines the best way for the firm to achieve and maintain control over its international business operations (Doole & Lowe, 2004). 1.1. The Global Youth Market Chen-yu & Seock (2002) studied adolescents and what motivates them to make purchases. They found that friends had the most influence on each other at this age. This is probably because they are breaking away from their parents, and they have more freedom to make their own decisions. Teens usually do not yet know what they want or who they are, so they look for outside influences to help them in their decision making, which could be filled by their parents and peers. Pre-adolescents or children between the ages of 8 and 12 are an important group as potential consumers (Meyer & Anderson, 2000) because it is at this age bracket that they start thinking about and noticing consumer products. However, their buying decisions are usually influenced by their need to identify with peer groups. As children, they look to their parents for guidance, but as they grow older, the parent's influence over what children want diminishes. They want to fit in with their peers, so their parent's opinions become less important because it is important to them that they fit in with their peer group (Chen-yu & Seock, 2002; Lascu & zinkhan, 1999). This jibes with the person-to-person interviews conducted for this report, which indicate that before age 15, the children let their parents decide on the brand and model of cellphone that they should have. It happens that for such needs, the parents go for the cheapest models a long as these can be used to check on their whereabouts. From age 16 onwards, the young people start to bend to peer pressure, which dictates that they should have the latest cellphone models with such state-of-the-art features as a megapixel camera, a TV outfunction, a bluetooth printing/pictBridge, an FM radio and video player. 1.2. Branding Two personality templates have been identified as likely to influence the quality and duration of a consumer-brand relationship. The first refers to "sincere" personalities whose characteristics are nurturance, warmth, family orientation and traditionalism. These personalities gravitate toward products with a homey image like Hallmark, Coke and Ford and thus make up the market being pursued by companies seeking to project a warmer, more caring and considerate corporate image. The other personality type has to do with "excitement," which invokes qualities of energy and youthfulness. Exciting personalities, from the brand perspective, are those characterized by unique and irreverent advertising, atypical brand logos and hip language (Dev & Shultz, 2004). A few examples of these brands are Yahoo!, Virgin and MTV, which cater to the youth market. A branding strategy that is gaining popularity in international marketing is called dual adaptation, which involves altering both the product and the communication methods. The classic example comes from National Cash Register, which manufactured a crank-operated cash register and promoted it to businesses in less developed countries. When products cannot be sold as they are, product invention strategy may be used. Ford and other automakers have sold completely different makes of cars in Europe than the ones they sell in the United States. Brewing companies have also sold alcohol-free beer in countries where sales of alcoholic beverages are prohibited (Tait, 2004). When it comes to advertising, It is difficult to standardize its content and message across countries because of variations in economic, social, and political environments. Companies, however, can use one message everywhere, varying only the language or color. Marlboro and Camel cigarettes, for example, essentially use the same message in their international promotion programs Doole & Lowe, 2004). 1.3. Marketing Implications The SWOT and PESTLE approach to international marketing is worth consideration. SWOT analysis takes note of the firm's strengths and weaknesses, opportunities and threats, while the PESTLE strategy considers the economic, socio-cultural, environmental, technological and political and legal factors in the target markets. Without a SWOT-and-PESTLE analyis in an international marketing plan, multinational companies may find it difficult to adopt a standardized pricing strategy across countries because they have to deal with fluctuating exchange rates, differences among countries in transportation costs, governmental tax policies, and controls (such as dumping and price callings). On the matter of pricing, a firm can choose between the adaptive/polycentric and invention/geocentric pricing policies. Under adaptive/polucentric policy, local management establishes whatever price it deems appropriate at any particular time depending on local conditions. As for invention/geocentric pricing, it neither sets a single worldwide price nor relinquishes total control over prices to local management but recognizes both the importance of local factors and the firm's market objectives. 1.4. Product Launch A product intended for the international market needs to be launched individually at the target countries instead of holding it in one place. For example, the product launch will have less impact on consumers in Singapore, Thailand, the Philippines and other Asian countries if it was held in Hong Kong in the hope that the launching activities will radiate to those other places (Borna, 1999). In the case of Company-A, it might be tempted to launch its new mobile phone in its Western European headquarters. Two major types of international alternatives are available to a domestic producer. The first is the use of domestic middlemen who provide marketing services from their domestic base. If this arrangement is chosen, there are several domestic middlemen available from which the companies may choose. Export management companies, manufacturers, export agents, trading companies, and complementary marketers are possible alternatives. If a company is unwilling to deal with domestic middlemen, it may decide to deal directly with middlemen in foreign countries. This alternative shortens the channel of distribution, thereby bringing the manufacturer closer to the market. The main drawback of this alternative is that foreign middlemen are some distance away and, therefore, more difficult to control than domestic ones. 1.5. Entry Modes The export entry mode is either indirect or direct. With indirect exporting a company may use domestic or international intermediaries, such as domestic-based export merchants or agents, trading companies, brokers, local wholesalers, and retailers. Indirect exporting is perhaps the lowest risk type of international marketing. The main drawback of indirect marketing, especially through domestic-based export merchants, is that the company relinquishes most of its international marketing activities to the merchants. Companies eventually may decide to handle their own export activities. With direct exporting a company also has several options. For example, it may establish a domestic-based export department or division to handle export activities. The company may also establish an overseas sales branch. Finally, the company may use foreign-based distributors who buy and sell the goods on behalf of the company. In direct exporting, the investment level and risk factors are somewhat greater, but so is the potential return. Contractual entry modes include licensing, turnkey construction contracts, and management contracts. Foreign licensing is a simple way of getting involved in international marketing. In licensing arrangements, a firm offers the right to use its intangible assets (manufacturing process, trade secrets, patents, company name, trademarks, or other items of value) to a licensee in exchange for royalties or some other form of payment. The licensor gains entry at little risk; the licensee gains production expertise or a well-known product or brand name. The major drawbacks of licensing are: (1) it is less flexible than exporting; (2) the firm has less control over a licensee than over its own exporting or manufacturing abroad; and (3) if sales are higher than expected, the licensor's profits are limited by the licensing agreement. A turnkey construction contract is a mode of entry that requires that the contractor make the project operational before releasing it to the owner. Management contracts give a company the right to manage the day-to-day operations of a local company. Here the domestic firm supplies the management know-how to a foreign company that supplies the capital. Investment entry modes include sole ownership and joint ventures. Sole ownership investment entry strategy involves setting up a production subsidiary in a foreign country. Joint ventures involve a joint-owner-ship arrangement between a US company, for example, and one in the host country to produce and market goods in a foreign market. The ultimate form of international involvement is direct ownership of foreign-based assembly or manufacturing facilities. If a company wants full control (and profits), it may choose this mode of entry. Companies new to international operations would be well advised to avoid this scale of participation because direct investment entails the highest risk. Among potential risks a firm may face are currency devaluation, worsening markets, or expropriation. Conclusion International marketing has become increasingly important to US firms. At the same time, global markets are becoming riskier because of fluctuating exchange rates, unstable governments, high product-communication adaptation costs, and several other factors. Therefore, the first step in considering expanding to the overseas markets is to understand the international marketing environment. Second, the firm should clearly define its objective for international operations. Third, in considering which foreign markets to target, a firm must analyze each country's physical, legal, economic, political, cultural, and competitive environments. Once the target market or markets are selected, the firm has to decide how to enter the target market. Companies must next decide on the extent to which their product, price, promotion, and distribution should be adapted to each country. Finally, the firm must develop an effective organization for pursuing international marketing. Recommendations Originality and differentiation are the modern imperatives of marketing, which seem to run counter to the traditional concept of marketing as consisting mainly of budgeting, managing promotions, pricing, targeting specific markets, etc. Aside from promotion and pricing, the four P's of traditional marketing include people and product as well but the last two items are concerned only with such things as marketing reach and packaging. Little attention is given to creativity and efforts to make the product appear new and different to consumers. Tait, B. (2004) points to a pooled study of two American research firms on how well brands are differentiated in 46 product-service categories. It was found that the leading brands in 40 of the categories were becoming less and less differentiated in the minds of customers. This was said to account for the failure of most products in the survey list, which ran up to 80 percent of the total. The study traced the phenomenon to the erosion in value of the marketing department, with the attention of CEOs and top managers fastened more on cost-cutting measures than on product creativity and brand differentiations. It might be a good idea to have the mobile phone fitted with such state-of-the-art features as megapixel camera, TV outfunction, bluetooth printing/pictBridge, FM radio, video player. References 1. Aaker, D. & Jacobson, R., 2001, The Value Relevance of Brand Attitude in High-Tech Markets, Journal of Marketing Research 38 (4). 2. Balmer, J., 2001, Corporate Identity, Branding and Marketing, European Journal of Marketing 35. 3. Borna, S., 1999, International Marketing, 2nd ed., Encyclopedia of Business. 4. Chen-yu, J. & Seock, G., 2002, Adolescents' Purchase Motivations, Information Sources and Selection Criteria, Family and Consumer Sciences Research Journal 31 (1). 5. Dev, C. & Schultz, D., 2004, Customer-Focused Marketing, Journal of the American Marketing Association. 6. Doole, I. & Lowe, R., 2004, International Marketing Strategy, 4th ed., Thomson Learning. 7. Jones, M., 1999, The Internationalization of Small High-Technology Firms, Journal of Marketing 7 (4). 8. Lascu, D. & Zinkhian, G., 2002, Consumer Conformity: Reviews and Applications for Marketing Theory and Practice, Journal of Marketing Theory and Practice 7 (3). 9. Meyer, D. & Anderson, H., 2000, Pre-Adolescents and Purchasing: Conformity to Parents and Peers in the Consumer Socialization Process, Journal of Social Behavior and Personality 15 (2). 10. Tait, B., 2004, How Marketing Science Undermines Brands, Falton Brand Consulting, October 2004. 11. Zaltzman, G., 2003, How Customers Think: Essential Insights into the Mind of the Market, Harvard Business School Press. Read More