Opportunity Analysis Marketing for Pre-school Educational Toy In China - Essay Example

Opportunity Analysis marketing for pre-school educational toy in China Executive Summary: This Report provides an Opportunity Analysis to market apre-educational school toy in China, namely a fractions tower cube that is marketed by the Great Little Trading Company in Britain. This toy helps young children to learn fractions in a fun and innovative way, because it combines Math skills with motor skills. The objective of this Report is to assess the sales potential of this educational toy and the target market that has been selected to market this toy is China. Corporate Background: The Great Trading Company was voted the best children’s retailer in 2007 and 2008, and recently won the same title in 2009 as well.(www.gltc.co.uk). The Company takes special pains to source useful yet hard to find products, both from the U.K. and other areas, so that it supplies toys that are educational and also age appropriate, while most importantly, possessing an element of novelty. The Great Trading Company has been in business for eleven years and ensures that its toys are well tested and achieve high satisfaction levels before they are marketed. Opportunity analysis: According to Thomas Friedman, globalization is the “inexorable integration of markets, nation states and technologies…..the spread of free market capitalism to virtually every country in the world.” (Friedman, 2000, p 7-8). With globalization, most businesses are forced to compete with other businesses on a global scale. This pushes many small businesses out, because it is only the large multinational corporations with plenty of money and resources that have the means to compete effectively on a global basis. The world economy is dominated by businesses from a few developed nations, notably the United States, while the others remain at the periphery, acceding to the controls of the dominant countries and emulating them (Tomlinson, 1991, p 37; Robertson 1995). The beliefs, values, behavioral patterns and norms of the economically dominant nations are imposed upon the weaker ones (Salwen 1991), as reflected in the large scale transmission of American beliefs and capitalistic philosophy all over the globe. Such cultural domination is viewed as a particularly dangerous process because it produces a homogenization of culture in line with dominant countries such as the United States – “the fundamental concepts of a society’s national image are remodeled in the American image” (White, 1983, p 120). Consequently, globalization also impacts upon the marketing of products, where the dominant thrust has been to push the products of westernized nations upon the developing nations. Where toys are concerned, most of them are manufactured in China although they are sold in the Western nations. China has the largest population of children under 14 years of age, but although it produces 70% of the world’s toys, it accounts for only a fraction of this market. (www.china.org.cn). There is excellent market potential existing in China for marketing toys and games. The country has enjoyed high levels of economic growth in recent years and was valued at $3.2 billion in 2004, but this represents a mere 6% of the potential market because Chinese children spend just $7 a year on toys. (www.articles.castelarhost.com). Consumer behaviour and Marketing: There are two approaches to consumer behaviour in terms of marketing of a product. The first is positivism that regards the consumer behaviour discipline as an applied marketing science, while interpretivism is a post modernist approach to consumer behaviour that tends to focus on the act of consuming rather than the act of buying. The scope of interpretivism is however being constantly widened to include several non psychological facets into the complex portrait of the consumer towards a consumer society (Solomon 2006). Hunt(1983) suggests that a logical positivist approach is one of the most viable approaches to explain a phenomenon, but the disadvantages of this method is that it is difficult to isolate people from their social context and reduce them to a set of statistical variables. Applying the positivist approach to consumer behaviour, the focus would be upon the act of consumption. The existing toy market in China is largely focused upon the demographic group below six years of age and therefore leaves scope for excellent marketing prospects for toys. The positivist approach however, does not take into account the social context of marketing, which plays an important role in China. One of the important aspects to be borne in mind in marketing toys of any kind in China is that Western toys may not be able to fulfil Chinese educational requirements, because the manner of acquisition of learning skills is different among the Chinese (www.articles.castelarhost.com). For instance, language skills are acquired through writing rather through listening, as is the case in the Western educational systems, Similarly, the pedagogy involved in transfer of skills in Math are also different. As a result, Western toys must be carefully developed and selected so that they can cater to the educational needs of Chinese children. Hence, it is likely that the interprevist approach may work better in marketing toys in China, because it also takes into account the social context and the differences in the manner that Chinese consumers are likely to respond to educational toys. Brand image in marketing: Muffatto and Panizzolo (1995) propose that consumer satisfaction with a product is one of the factors designed to provide a competitive advantage and one of the best indicator’s of a firm’s future profits. Brand loyalty and repeat purchases is one of the ways in which a consumer demonstrates his or her satisfaction with the performance and quality of the product. (Bloemer and Kasper, 1995). One of the best ways to conceptualize brand loyalty is to adopt a behavioral approach and to measure observable behaviors of customers, in terms of repeat purchases, since that is a better indicator of actual customer intention as opposed to self reported intentions and declarations to purchase. The market in China demonstrates brand consciousness; according to Herman Bruns, the head of one of Germany’s leading international toy companies who are also the head of international sales, “China is very fashionable now....you have to build the brand first and that takes time”. (www.china.org.cn). Loyal customers are an asset to retail Companies because they provide higher profitability in the long term and reduce operational and advertising costs, while also provide the Company with a competitive advantage. Brand loyalty has been found to be related to demographics (Frank, 1962; Carman, 1970). Customer satisfaction is the leading criterion to determine brand quality, in terms of price, performance and quality of the product, including satisfaction with the ongoing business relationship and because it has met customer expectations. (Vavra, 1997). Customer perceptions as gleaned through the people they are associated with and the information available about the product through advertising or other channels are also likely to influence consumer buying decisions. Customer loyalty has been defined by Dick and Basu as “the relationship between the relative attitude toward an entity (brand/service/store/vendor) and patronage behaviour.” (Dick and Basu, 1994: 100). They have distinguished customer attitudes in terms of four different aspects: loyalty, latent loyalty, spurious loyalty and no loyalty. The first of these of course, is the most desirable attribute and according to Dick and Basu, it signifies a positive correlation between the customer’s relative attitude towards a product and repeated patronage of the product.(Dick and Basu 102). This suggests that customer loyalty may be governed not merely by behavioural displays but also by internal attitudes and motivational factors. These aspects are relevant in the Chinese context, because Chinese society is more collectivist and less individualistic as compared to Western societies. As a result, in China, building brand name on images may not be very successful but brand name built on identity is likely to be more enduring, since it would be built on sources like history, heritage and personality, which provides stability and durability to the brand. Chinese customers’ rely heavily on the opinions and recommendations of others; hence promotions made to Chinese customers cannot be strictly mass based, they must be focused on word of mouth advertising, stories and dialogue. (www.cicafair.com). Brand names of a product are becoming more important in China, especially in the context of the Beijing Olympics. While local brand names are becoming increasingly prominent, there is a “capacity overhang” in Chinese industry coupled with a tendency to not pay adequate attention to innovation. (www. Businessweek, 2004). Additionally, there are also more multinational companies doing business in China, with foreign products, including foreign toys, becoming more and more popular. Brand name in China has also been built up on the basis of the founder’s personality, such as for example, GOME electrical appliances, which was started by Huang Guangyu, whose net worth was at least $830 million in 2004. (Business Week, 2004). These elements would assume significance in the context of marketing educational toys on the Chinese mainland, because the growing openness of the Chinese public to foreign products is conducive to marketing educational toys. The advantages foreign toys enjoy are that (a) they can alleviate any quality concerns that parents may have and (b) they have better designs and are marketed better (www.marketavenue.cn). As incomes in China rise, parents are becoming more concerned with quality and safety issues, hence despite being more expensive they are considered worthwhile. The globalization of the world has reflected increased cultural interaction (www.businessweek.com) which is also reflected in the preference of Chinese children for foreign toys. This has however also posed a conflict, in that it is perceived to interfere with teaching Chinese children their traditions and culture; as a result, Chinese toys may need innovations in order to make them more global while still retaining characteristic Chinese elements. Li and Miniard (2006) have reported the results of two studies which suggest that advertising can help to generate trust in customer’s minds about the quality and satisfaction inherent in the advertised brand, by influencing their cognitive thinking processes. However, according to other experts, demographics no longer explain brand purchases and the old notion that products with well liked advertisements were more likely to mean successful products is no longer true. While advertisements may help in retaining an existing customer base, it is less likely to be effective in pulling in new customers (www.secure.financialmail.co.za). Within the Chinese context, the efficacy of advertising may be limited, since as mentioned earlier, Chinese rely heavily on the recommendations of others and word of mouth advertising rather than other traditional forms of advertising. Distribution: Another important aspect of marketing is distribution. Chinese markets opened in 1979 and since then, there have been infrastructure problems and legal issues associated with distribution in the country.(Powers, 2001). Some of the problems have been (a) inadequate transport infrastructure with monopolistic practices (b) fragmented distribution system (c) local protectionism (d) lack of professional third parties and bureaucratic interference. As Powers (2001) points out however, many foreign firms have managed to cope with these distribution difficulties in China by setting up national distribution channels, although they are unable to take advantage of economies of scale. Many foreign retailers now buy products using automatic software replenishment software either direct from the manufacturer or from a third party who must provide high levels of service at low margins in exchange for high sales volumes. (Powers, 2001). A foreign company could choose to use third party distributors or alternatively, to open their own stores to compete directly in the Chinese market. Through this method, companies can strengthen their advantage in the local markets, because they completely eliminate the middlemen, while price conscious consumers are also attracted to such stores. Another alternative is franchising, where the knowledge of the European manufacturer can be combined with the marketing expertise of the local retailer. This provides the opportunity for foreign sellers to enter the Chinese market in a cost effective manner, without incurring high costs. Lastly, direct marketing is a third option which a retailer may choose to sell products within China, which is also the cheapest, although access to the market would be limited as compared to stores and franchises which also allow the potential to reach the rural Chinese customer as well. Conclusions: On the basis of the literature review above, the following primary findings may be noted: (a) Globalization has produced a marked impact upon the cultural aspects of most cultures, producing a transmission of Western culture on to developing countries like China (b) Customer loyalty and repeat purchases can be a function of brand loyalty and can enhance profits for a Company by reducing advertising costs and generating revenues (c) Brand identity that is fashioned on the basis of reputation rather than image is likely to be more successful in the Chinese context because Chinese society relies heavily on word of mouth recommendations. In the case of marketing the proposed educational toy in China, the recommended strategy is to start with a flagship shop in a boom town like Beijing, Shanghai or Guangzhou and using the radiation effect of such a metropolis, to diffuse sales throughout the country. The flagship shop makes the concept and power of the European brand visible and attracts Chinese licensees through word of mouth. This could then be combined with franchising, which is very attractive to the Chinese because most of them want to be self-employed and are therefore interested in a license that enables them to develop a business. They are eager for their own company and a career as an entrepreneur. Self-employed franchisees are usually more motivated, committed and customer-oriented than employed mangers – a fact that is important in the highly competitive Chinese market. The Appendix attached to this Report sets out the detailed recommendation plan for the establishment of marketing outlets and the achievement of objectives. Financial performance and Risk: The business plan proposes to first open a flagship store to attract licensees and thereafter move into franchising. This offers a cost effective way to enter the Chinese market, while also building brand identity and reputation. Rather than relying on expensive advertising, the flagship store will serve as the means of promotion, while the word of mouth among licensees will serve to effectively promote the product and establish brand identity. The financial risks posed through this approach are lower, because the franchising option would require Chinese partners to make some financial investments in order to gain a franchise and capitalize on the brand identity of the product, especially among the Chinese baby boomers. It would also provide them an incentive to work hard at promoting the product, in order to recover their investments and to make a profit. This approach also avoids the problems of using middlemen such as distributors and can provide a wider range of access into the local Chinese markets as well. References: Bloemer J.M.M., Kasper, H.P.P, 1995. “The complex relationship between consumer satisfaction and brand loyalty”. Journal of Economic and Psychology, Vol. 16 pp. 311-329 “Brand Communications in China”, http://www.cicafair.com/TradeNews/ViewTradeInfo.aspx?InfoId=18; “Brand management in China”, http://www.cicafair.com/TradeNews/ViewTradeInfo.aspx?InfoId=23; Brand Loyalty [online] available at: http://secure.financialmail.co.za/adfocus/marketing/view.htm Business Week, 2004. “China’s power brands:”, http://www.businessweek.com/magazine/content/04_45/b3907003.htm; Carman, J.M, 1970. “Correlates of brand loyalty: Some positive results.” Journal of Marketing Research, 3: 67-68 Dick, A.S. and Basu, K, 1994. “Customer loyalty: Towards an integrated conceptual framework.” Journal of the Academy of Marketing Science, 22(2): 99-113 “Foreign toys favoured by Chinese children”, http://www.marketavenue.cn/upload/articles/ARTICLES_1359.htm; Fractions tower cubes. http://www.gltc.co.uk/fcp/product/-/schooloffer/Fractions-Tower-Cubes/1423; Frank, R.E., 1962. “Branc Choice as a Productibility Process.” Journal of Business, (January): 43-44 Friedman, Thomas L, 2000. The Lexus and the Olive Tree New York: Anchor Books Hunt, Shelby D., (1993) “Objectivity in Marketing Theory and Research,” Journal of Marketing, 57 (April), 76-91. “International toy makers try to solve China market puzzle”, http://www.china.org.cn/english/BAT/77046.htm; Li, Fuan and Miniard, Paul M, 2006. “On the potential for advertising to facilitate trust in the advertised brand.” Journal of Advertising, 35(4): 101-113 “Market Information: China’s toys and games”, http://articles.castelarhost.com/china_toys_games_market_information.htm; Muffatto and Panizzolo, 1995. “A process-based view for customer satisfaction”. International Journal of Quality & Reliability Management, 12(2): 154-169 Powers, Patrick, 2001. “Distribution in China: The end of the beginning”, The China Business Review, http://www.chinabusinessreview.com/public/0107/powers.html; Robertson, R, 1995. "Theory, Specificity, Change: Emulation, Selective Incorporation and Modernization." In Bruno Grancelli (ed.), Social Change and Modernization: Lessons from Eastern Europe, pp 213-231 Salwen, M. B, 1991 .Cultural imperialism: a media effects approach., Critical Studies in Mass Communication, 8, pp 29-38. Solomon, M. et al 3rd Ed, 2006. “Consumer Behaviour: European perspective” Prentice-Hall. Tomlinson, J., 1991. Cultural Imperialism: A Critical Introduction, Baltimore, MD: The Johns Hopkins University Press. Vavra, T.G., 1997. “Improving your measure of Customer satisfaction: A guide to creating, conducting, Analyzing and reporting Customer satisfaction measurement.” WI: American Society for Quality. APPENDIX Environmental Strategy Recommendation: Objective MAMIR is committed to enhancing the educational opportunities for children, families, and the dedicated professionals who serve them. The brand of “ YAYA” will provide programs, product and environments that enrich childrens development, promote respect for children, and celebrate the joy of childhood. It will support families in balancing their personal and professional lives while achieving fulfillment in their parenting roles will elevating the education profession through development and implementation of curriculum and training resources that promote excellence and honor the art of teaching. MaMir also provides a promising investment opportunity to franchisee partner. Marketing strategy The International division of MAMIR plans to expand the business through franchise in province capital cities in the middle and west China and at the same time the company plans to enter the main cities (Shanghai, Guangzhou, Nanjing, HangZhou) ))0 in China’s eastern coast area markets through establishing own Kids Learning Center (KLC). Choice of product positioning MiMar will establish and provide platform to provide the early learning center’s service and business opportunities to company’s business partners. The international business’ developments were organized divided by three types of business activities. Standards and Licenses: High-Quality Early Learning Settings and Highly Skilled Early Learning Professionals License Establish a new approach to license early learning centers. Establish a new teacher license within the context of the birth to age 8 developmental that recognizes the specialized preparation and knowledge needed to work with children from birth through third grade. Create a professional development system that supports an explicit expectation that all early learning personnel will extend and deepen their knowledge and skills throughout their careers. KLCs Services: Kids Learning Program and Other services Early Learning programs set-up to meet the market demand, children and parents will enjoy the games and exercised which to helpful to children’s intelligence and emotional development. Integration with current early learning hardware and software products, these products are provided from agency of famous brand such as “Hao Hai Zi “, “Pigeon” and others. Children personality testing and tailor-made program consultant. Public Relation: Involved Parents and Families and Ready Communities In order to meet its goal of growing international sales, MAMIR will continue to build relationships with local partners in areas where it cannot open the direct KLCs due to governmental regulations or other restrictions. Since the market is targeted in China, we shall be aware of the cultural sensitivity and made it one of our strengths to develop our business. MaMir will continue to identify and ally with related attractive strategic partners who have country & specific expertise in the skilled early learning professionals, local communities and related government committee, early learning hardware and software providers. As a fact, the early learning standards, early learning program standards, early childhood professional standards were not well established in China. By consolidating the MAMIR’s management expertise and resources and the resources from strategic partners, MAMIR would provide the products and service solution to meet above standards to provide service and products to market demand: Focus on the needs of the whole child Promote the availability of consistently higher quality early learning settings Offer families more information, resources and decision-making opportunities Promote performance and fiscal accountability. Make parent and family education resources and programs available to all families, friends and neighbor caregivers. Give parents opportunities to participate in governance and programmatic decision-making. Publishing, Seminars, On-line services could be adopted to consolidate the company’s position. Our customers: a).Parents, grandparents, relatives, family friends,....of the children ( 0-7 y.o.) b).Opinion Leaders (OPL) Audience:  -Decision Makers (DM) from University or other educational units, who are responsible for education of early learning professionals  -Officials and decision makers from governmental structure unit (ex. the Chief of educational committee/department of City Government of Shaghai c) Distributors and other Strategic Partners: - Distributors will open their own learning centers with our support or would deliver our products to the existing centers, not specially dedicated for early learning process. - Strategic partners are companies, who use franchising chains with anagogic model of learning process.... Business mode of market entry In 2009, MaMir will focus the market of Guang Zhou City in South China, 2 fully owned learning center and 20 franchises will set up as community based. Meanwhile, one focus for MaMir’s Marketing Department will be partnering with Guang Zhou Primary Education Bureau and South China Teaching University to develop the training course which is to qualify for pre-school teachers. Training program and teaching approach will be introduced in 10 selected primary schools as a trial. President Dr. Elanna S. Yalow, as President, herself will visit the Guang Zhou Primary Education Bureau and South China Teaching University, her team from academic institution will assist to establish the standard for the pre-school education industry with professional research. The objective is to build relationships with local partners to make “YAYA” as unique brand for pre-school education product. It will be barrier for other children educational product to expand the market. From 2010, MaMir will enter Shanghai and copy the mode of business of Guang Zhou. , By 2015, company will establish 1000 KLCs (fully owned + franchises) in cities in Eastern China of Changhai, Guangzhou, Benging, Nanjing, NangZhou. Sales Forecast The average annual revenue of a franchises learning center will be RMB3,000,000 with the investment of RMB1,500,000. Headquarters Singapore will be considered as headquarter for its business-friendly bankruptcy and labor laws, its low and quick-to-file taxes, and its generally high-tech approach to everything. This year, reforms in two sectors - starting a business and dealing with construction permits - helped the city-state hold its place at number one city for business in Asia. A new company can now be set up in four days thanks to improvements in Singapores electronic business registration service. Singapores newly streamlined construction-permit application process, also online, has reduced waiting times to 38 days, the third fastest time in the world. Whats more, once theyve filed their paperwork, builders in Singapore can receive regular e-mail or text-message updates on the status of their applications. In other areas, Singapore continues to come in on top, with some of the worlds strongest laws protecting investors, lenders and borrowers; lowest import and export costs (less than $500 per container); and the fastest time to resolve commercial disputes in the world: 150 days. Organizational structure Government Relationship Function: Coordinate and affiliate with National Education Bureau and City primary school education Bureau to promote KLC standards and get the license, the aim is that partial of our professional product will be authorized the appointed process in prior to school from baby garden. Research & Development Function: This function play important role in our business and they deliver and strengthen one of our core competency- professionalism. The team will work with western/local children education expertise to introduce advanced western early learning product and mindset to China, and to integrate the western and eastern solutions to meet the market needs. Besides all of the researching and development, the R&D function will also be responsible for the internal training of internal professionals in EL. Duties: Research and develop our product including personality testing, training program designing, Provide technical support to Business Development functions for marketing promotion Provide customer service support; Train and certify internal teacher and consultant Operation Function: Manage the chain learning centers, franchises store, as well as administrate of the web site. Business Development Function: Develop and manage day today marketing program and promotion activities to build the reputation of branding as well as the market analysis. Centralized Function: Include HR and Fin function to support the business and evaluate the P&L for every operation and division. Attachment is the Organizational Chart: Franchisee module Eligibility of franchisee partner: Love children and enjoy the early learning and education Certain ability of investment Sense of marketing and business agility Experience in market promotion and Good management skills Cost of franchisee partner: Franchise Fee (one time event): 200, 000 – 300, 000 , Monthly management Fee : 8% of monthly revenue Other information Estimated investment for franchisee: RMB1500,000-2500,000 Process of franchisee Step 1 : Application Approval Stage Preliminary consultation MIMAR Singapore; provides general information concerning company background and franchisee eligibility     “Request for Consideration” submission Candidate provides preliminary personal and financial information     Consideration approval MIMAR Singapore   12~16weeks prior to center opening Business plan submission Candidate/ MIMAR Singapore;     Discovery day & business viability study Candidate/ MIMAR Singapore;     Franchise agreement signing Franchisee/ MIMAR Singapore; Franchise Fee RMB 200,000 (Flag Store: 300,000)     Step 2 :Pre- Center Opening Stage Center Director training (1 person) at MIMAR Singapore 50% equipment & props - 1st payment 50% (RMB200, 000) ~12 weeks prior to center opening Equipment ordering Franchise/MIMAR Singapore   ~12 weeks prior to center opening Premise location confirmation and lease signing MIMAR Singapore approval   ~10 weeks prior to center opening Business license application Franchisee   ~10 weeks prior to center opening (1-3 month) Premise renovation Franchisee 50% equipment & props – final payment50% ~8-10 weeks prior to center opening Instructor training (2-4 persons) at MIMAR Singapore Home Office   ~8-10 weeks prior to center opening Marketing & pre-sales campaign Franchisee/ MIMAR Singapore   ~2-3 weeks prior to center opening     Step 3 Post-Center Opening Stage Business commencement MIMAR Singapore offers on-going business management consultation and corporate brand marketing support Read More