Abercrombie and Fitch: Expanding into the European Market - Assignment Example

Abercrombie & Fitch: Expanding into European Markets Affiliation QUESTION ONE Abercrombie & Fitch brand gets known for its American-style, trendy, casual and cool. Thus, the firm is supposed to have an appropriate strategy in order to market its product across the European markets and also increase its markets segments. As a result, the company has had diverse strategies to maximize its market share. For instance, it has had successful promotions in Singapore due to its occurrence in conflicts and context culture. The company managed to trigger the individual’s emotions and created a unique experience that helped the firm to link with its customers. Thus, the strategy helped them in building up the company’s image around Singapore. Usunier and Lee (2009) defines marketing strategy as a long-term strategy that aims at attaining a sustainable competitive advantage. It comprises long-lasting and basic activities found in the field of marketing dealing with company’s strategic initial situation analysis along with a selection, evaluation, and formulation of marketed-oriented strategies. Thus, the main goal for marketing strategies of a company is to contribute to its goals and objectives. In this case, A&F should focus on segmentation and targeting. Usually, marketing segmentation is done at the customer level though in this case of A&F it will be done on country level. The decision on marketing should be done or discussed on common countries aspects as Doole and & Lowe (2008) suggests. The strategy aims at ensuring the firm avoids overload of data. Country segmentation involves levels of climate type, terrain similarities, and geographical and based neighboring countries’ beliefs. It is important to do so because every marketing effort leads to decisions on how and who to serve through diverse marketing mix parts. In this case, the company should, therefore, have an entry strategy to other foreign segments. First, the company should aim at licensing and franchising method. A&F should allow other companies or people to use its trademarks and expertise that have accumulated. Moreover, the foreign manufacturer can also make use of low-quality ingredients to manufacture that brand basing on the premium contents on home country. It increases A&F’s markets and also minimizes the importing expenses. Therefore, the contract manufacturing strategy helps in satisfying the customers of other countries (Alden, Steenkamp & Batra, 2006). Second, another segmentation strategy is customization. The firm experiences times that they have to make alternative decisions in its marketing process to international markets. Therefore, the firm can decide to customize its products in other segments (Lim, Actio, & Rusetski, 2006). As a result, the company will bring about a unique product pin every segment, due to diverse customer’s preference in every country. Thus, the company should ensure good understanding in every customer preference in every country and provide the unique products they demand (Kotabe & Helsen, 2008). Marketing targeting gets then done after segmentation of the company’s market. The company should consider having three different targeting strategies. They comprise; multi-segment targeting and concentrated targeting. In multi-segmentation, the firm is supposed to focus on two or more market segments that gets defined and targets in developing a market strategy from them. Concentrated targeting will involve focusing on choosing a specific market niche that the company will focus its marketing efforts that it targets (Keegan, 2000). Multi-segmentation targeting will benefit the company more compared to because it comprises many countries/segments; thus, it is more appropriate for the firm. It will require the company to increase its promotional strategies along with market research (Hollensen, 2007). QUESTION TWO Adaption is a must-modification of the domestic target market-dictated product standards that have both intangible and tangible attributes to make the product appropriate for foreign environment conditions. It is interchangeably referred to as customization. Customization modification being meant for the product attributes making it culturally and economically appropriate for foreign consumers. Thus, the key difference between the two terms is that adaptation is mandatory while customization is discretionary. According to Medina and Duffy (1998), standardization is the extending process and effective appliance of the domestic target-market-dictated products standards with intangible and tangible attributes to foreign markets. The international market nature is turning out to be homogeneous; thus allowing the firm to adapt standardization strategy worldwide. In my opinion, the firm should tradeoff both standardization and adaptation as Kotler and Armstrong (2008) proposed that firms should act locally and think globally. The firm should make the main decision on joining the international markets with the current firm’s product or make important changes to the products. The changes get done based on the requirements of foreign markets (Cavusgil, Zou and Naidu, 1993). Therefore, in this case, product adaptation is appropriate in A&F firm due to diverse customers’ wants and needs. Adaptation impacts the physical attributes due to its focus on environmental conditions of the diverse markets. It enhances the customer’s satisfaction of their needs, assist in having a competitive advantage, leads to differentiation of product and adhere to marketing concept. On the other hand, standardization assist in work specialization, gives the firm a global brand image, leads to scaling economy and rides down the experience curve. Thus, it is evident that both policies are important in marketing strategies of the company. Standardization can be the best solution on serving the marketplace in the world as the world is turning to homogenous (Craig, 2000). Homogenous has turned the world into a global village; thus the advancement and progress prefers the homogenized commonality. On the contrary, researchers suggest that even though globalization has influenced the world, significance segments differences in cultural, political and socio-economic still exists. The existence of diverse economic and socio-cultures conditions in Europe results in inefficient and ineffective service to the entire world to a single marketing policy. Thus, the company should opt for using both policies. The two policies, adaptation, and standardization, have limitations and advantages associated with marketing in international markets (Leelapanyaler & Ghauri, 2007). Some of the elements of market mix can be more standardized compared to the other as Gary et al., (2009) argues. Researchers argue that products should get standardized to aim at gaining scale economies, brand name and brand message. But also, these marketing mix elements may be adapted to packaging, product pricing, sales promotion and distribution. Thus, this shows the need to balance the two policies to succeed in the international markets (Levitt, 1983). Therefore, the company should adapt both policies. The adaptation policy will ensure improvement in their consumer’s satisfaction, differentiate its products, adhering to the market concept and assist the firm in gaining a competitive advantage. On the other hand, standardization policy will have the responsibility of work specialization, enhancing the company’s’ brand image, leading to scale economy and riding down the experience curve. Thus, as Rangan and Bell (2006) emphasizes, the company will have to balance both policies to achieve a better marketing strategy. It is because both policies are important in making marketing decisions. QUESTION THREE Differentiation strategy is the process of developing services and products that are unique in their industry. For instance, the U&A company develop unique products for USA and European market. Thus, differentiation tends to differentiate the markets using the technology, customer services, product features or design. As a result, it focuses on attracting consumers with unique requirements in the competition and makes the customers pay the premium prices willingly. In addition, the strategy aims at providing great profit margins due to the development of the brand loyalty among the consumers (Thomas & Timothy, 2005). Even though the strategy is profitable, it attracts some principal risks that can minimize the company’s marketing processes. First, the company can have the risk of cannibalization. Thus, the differentiation policy risks the company’s products against cannibalization. Customer tends to avoid purchasing more expensive products due to the designing diverse products variations that are similar. It is because the customer can acquire the products at a lower price or a mini-version. As a result, if the firm decides to fine in its targeting, it develops various products that aim to satisfy its market when fewer products may also satisfy its customers (Jeannet & Hennessey, 2004). Second, the company is likely to experience inconsistency. Thus, the company will face the greatest challenge of differentiated marketing in creating a theme and brand reputation that is consistent. Moreover, branding bets based on installing unique, positive associations with the firm’s brand over time. Thus, differentiated marketing can lead to fragmented statements that the firm never conveys a clear brand image. But A&F can overcome this risk by stressing on innovative leadership and cutting-edge technology so as to have a unified background theme of their products (Masaaki, 2005). Third, the firm may risk having a high make share due to the differentiation strategy. It is as a result of the need for exclusive perception in order to have a successful differentiation. Moreover, not every consumer is able or willing to purchase the unique products at higher prices. The strategy may also make the customers lose interest towards the unique features. Thus, fewer customers will lead to less market share in the European and USA markets. The company may get forced to cab the prices due to low-cost competitors and to result in brand loyalty erosion. Forth, customer’s affordability ability is a major risk that can face the company. It is because the strategy makes the company emphasize on having product and service quality as their major propositions. Most of the time, the companies lack low-cost options; thus, they compete against organizations that may offer lower price points, and some try to copycat the product that may undercut the market. Therefore, the consumer will end up purchasing the products with low-cost, and the company will have a risk of losing customers and not getting sold (Dow, 2006). Lastly, differentiation is a costly way; thus it can have the company incur more costs. The costs will result due to the unique designing of the products offering and marketing customization to every group of customers. It is due to diverse product variations and versions requirements on significant research, design time, and development that cost more than in a single product. Other costs will also get incurred when the company is presenting distinctive messages in the markets (Ryans, 2003). Therefore, the company should take good measures to ensure that the company does not have the risks if it decides to use the differentiation strategy in its marketing process. QUESTION FOUR A&F Company should aim at selling more of its services and products in the international market. As a result, the company should consider expanding its distribution channels across the European countries. A distribution channel is a route the company’s services and products reach the customer. The main aim of increasing the distribution markets is to increase the number of its customers across the market; hence increasing the market share as David (2000) argues. Therefore, the company’s methods of marketing and advertising, in order to maximize its sales, should not get overlooked. The most effective way to have more consumers will be through new distribution channels development that can reach even the untapped market. Distribution gets also termed as placement. It is among the four “P” of marketing; placement, product, price, and promotion. A&F will have to give online and sales opportunities, develop reseller relationships, add retail locations (franchise or/and corporate) and create more production facilities. The methods will get achieved through understanding the consumer’s requirements or preferences and also their cultures (Orly, Beechler, Taylor & Boyacigiller, 2007). Distribution results of many benefits to the firm. The company will have more customers. It is as a result of channel expansion that makes the company contact more company with needs, and the customers will get to be aware of the product existence. Therefore, the firm gains more customers due to maximization of market segments. The increased awareness of the products makes the brand get recognized across the channels. For the company to expand its distribution channels, it has to create awareness in the new targets and channels so as to have the customers familiar with their products (Keegan & Green, 2011). As a result, as there is increased brand recognition, due to the maximization of distribution channels that creates more awareness. The firm will maximize its profits. As it gets more customers aware of their products and services, there will be more customers purchasing their goods. Thus, the increase of purchase results to increase of profits that get gained due to increase of revenue in the firm (Johansson, 2000). Therefore, expansion of distribution channels will assist A&F to increase its profits due to increased sales and revenues. The method also reduces risks of marketing. Due to diverse expansion of the distribution channels, the firm will be able to have their risks get distributed to the diverse channels distribution. The risks include; losing market share and customers (Ghauri & Cateora, 2010).. The risks can make the company collapse if they get not shared by different channels of distribution. Therefore, distribution channels are significant because they distribute the risks in that if the firm lose market share in one channel, it can still have market share in other channels and continue to gain its profits. Lastly, the distribution channels will help A&F minimize its per-unit production costs. Often manufacturers have their costs minimized through volume purchasing, production assembly line and concentrating operations. Thus, the company will have to construct company-owned distribution centers in the channels they have identified and ship the products in large volumes to reduce costs. Thus, volume purchasing in the different channels will cut down their costs including inventory costs since most of the products will be stored and avoid having products to store. Thus, reducing the per-unit production costs. Therefore, A&F should consider expanding their distribution channels so as to have its brand get more awareness and also increase its market share, revenue, and profit. QUESTION FIVE In marketing, communication is significant in the market mix as it aims at persuading and informing the target market to purchase and use the company’s products or services (Koekemoer 2004). Therefore, it is responsible for ensuring that consumers get aware of the firm’s products and services and plays a main role in defining the market success along with profitability. Communication and marketing promotion get considered to have similar meaning by many researchers, but Hall (1990) makes a clear difference between the two terms. He argues that the communication is an encompassing concept that comprises communication via each or any marketing mixing elements. On the other hand, he explains that promotion as the general aspect of marketing that the Department of promotion management deals with explicitly. Therefore, when A&F is formulating the communication policy, it should consider certain elements. The elements comprise; sales promotion, the internet, advertising, directs marketing, personal selling, and sponsorship. Sales promotion element is a marketing promotion material along with activities blend designed to strengthen the marketers’ sales force efforts. The promotions comprise feature advertising, price cuts, coupons and displays or/and a combination of these. Thus, A&F should consider the sales promotion element to improve its product awareness to its customers. Moreover, it will help the firm to induce its intermediaries in selling and stocking their marketers’ product offering and persuade customers in purchasing products within a given time. Currently, internet is a very important element in marketing communication. The element is neither a selling nor a mass medium, but it is a communication vessel that develops online relationships (Hofstede, Hofstede & Minkov, 2010). Moreover, this element is significant in providing an opportunity for the customers and suppliers to give their feedbacks. The main sources of internet include discussion forums and emails. Advertising is a way of making the company’s product get known; thus, it is a means of informing potential and existing consumers about a product (Ghauri & Cateora, 2014). Hence, the purpose of adverts is to influence potential consumers to respond favorably to the firm’s offerings. In this case, A&F should consider the element due to its key role turning to be the brand-building. It builds the company through conveying information, establishing identity and building awareness. Direct marketing element comprises of interactive marketing system that use of advertising media to influence transactions in every area and measurable responses. It inspires an immediate behavior modification that makes the behavior get recorded, tracked, stored and analyzed in a database for future use and retrieval. The sources of direct marketing sources that the company can use may comprise database marketing, direct mail, television shopping, print media and telemarketing (Parker, 2001). Personal selling element defines a person-to-person process that makes the seller learn about the potential buyer wants and tend to satisfy them through offerings goods that are suitable and make a sale. Since it is personal by direct personal with the purchaser, it will be effective it A&F integrate it with other communication elements. Sponsorship is a communication element that refers to the alignment of the company’s brand with an activity aiming to examine the company’s commercial potential. 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