Marketing Export Policy - Essay Example

Marketing Export Mohammed Alansari Wolverhampton 1126003 Introduction Marks and Spencer (M&S) is arguably considered to be the most famous British retailer and was founded by Michael Marks in the year 1884 with a solitary market stall in Leeds. It came to be known as Marks and Spencer after entering into an association with Thomas Spencer in 1894 (AP Worldstream, 2008). The success of the retail store lay in their emphasis on quality and promoting British products. As a way of managing their brand’s reputation, the company worked in close association with suppliers to guarantee the most elevated quality controls (Leading UK Retailer Marks & Spencer, 2011). The company currently deals in clothing, footwear, gifts, home decorations and food stuffs. It is worth noting that almost all international stores are operated under franchise except for a small number such as those in the Republic of Ireland and Hong Kong which remain under the company’s proprietorship (AP Worldstream, 2008). Foley (2014, p. 55) observed that the company’s failures may be attributed to its relaxed approach to adapt to different markets as well as stiff competition they face. As such, taking a business decision to expand their business internationally demands sound export strategy design and implementation. Such a plan must take into account the forces that Levitt talked about that have propelled the global market into a commonality (Cobweb information, 2011, p. 3) such as technological advancement which creates new commercial realities for the structuring and implementation of export strategies. In this respect, the paper highlights Marks and Spencer’s (M &S) international exportation strategy and operational considerations. It presents aspects such as the associated risks, SLEPT factors that all determine proper design, implementation and execution of the strategy. Terminologies: Demand; this is the amount of commodities that the consumers are willing and able to but at the prevailing market prices. Supply: this is the amount of commodities that the producers are willing to supply to the market at the prevailing market prices. Exports: these are the amount of products that a company produces in one country and then are being sold in another country. Imports: these are the amount of products that are brought into one country from foreign companies to be sold in the domestic country. Market Strategies: these are the methods used by a company to sell their products in a competitive market so as to survive amidst competition. Profitability index: this is the margin with which the amount of returns in an organization changes as a result of increased volume of sales. Exportation strategy A prerequisite for developing a successful exporting strategy requires that the company assess its products’ exportation potentials before embarking on actual exportation. This initial assessment is critical, especially if the company seeks to determine and reduce potential risks associated with the exportation (Bowman & Gatignonm 2010, p.43). Most importantly, it requires an assessment of the success of the product in the domestic market (Cobweb information, 2014, p. 4). Essentially, if a product from a particular company is successful in the domestic market then there is a distinct possibility that it will be successful in internationally due to similar demands (Zou & Kim, 2009, p.56). The use of models such as SLEPT or SWOT aids the analysis of potentiality that exists in the company to export successfully. By assessing the environmental factors both of the domestic and international markets; a company can ascertain its capability to perform successfully internationally by assessing the nature of the target markets, government import controls as well as the availability of foreign exchange; especially for hard currencies such the US dollar, British pound and Japanese yen (Paliwoda & Thomas 2013, p. 68). In this light, M&S’s operating environment would be assessed to determine the potential that its products have for exportation. The company’s operating environments are two-sided, namely the macro environment and the microenvironment. The macro environment involves external factors over which the company has no direct control but can manage to its advantage. Meanwhile, the microenvironment includes the internal factors that the company has direct control over and can easily manipulate (Brady, 2010, 34). Import/export tariff barriers International participation increases the goods in the domestic market that consumers can choose from. This results in suppressing the cost of local goods due to increased competition, providing an incentive for domestic companies to export their goods abroad. Under such conditions, according to Zentes et al., (2007, p. 73) a country may decide to control the imports as an attempt to influence the domestic market. The government may decide to impose tariffs on the imports. On the other hand, a country may seek to deter certain companies from participating in the local market; this is referred to as trade barrier. Brady (2010, p. 57) observed that tariffs and trade barriers are often created to protect local industries in their infancy by reducing competition. Imported goods may threaten the growth of domestic industries, resulting in a high rate of unemployment. Pradhan (2009, p. 543) observed that tariffs and trade barriers are imposed to protect consumers from products that are dangerous. Some of the most commonly used tariffs and trade barriers include specific and ad valorem tariffs, licenses, import quotas and voluntary export restraints. SLEPT analysis SLEPT analysis is used to determine the suitability of the external environment in which the company operates. SLEPT is an acronym of social factors (S); legal and legislative factors (L); economic factors (E); policy factors (P) and technological factors (T). These are discussed below in the case of M&S. a. Social factors These refer to forces within society such as family, friends, neighbours and the media that affect people’s attitudes, interests, and opinions. Thy shape behaviour and the purchasing behaviours of people (Piercy, 2014, p. 111). In retrospect, the economic recession of 2008-2009 unequivocally influenced the practices of consumers in the sense that family units were impelled to look for lower value items (Pradhan, 2009, p. 538). Economic concerns also forced clients to consider carefully before purchasing and thus resulted in retailers introducing promotions and discounts as methods geared towards enticing them to spend. Consequently, consumers widened their store choices so that they could select quality items for less money. Furthermore, environmental and climate changes also affect the sustainability of consumers’ purchasing power and their preferences (Burns, 2007, p. 55). b. Legal factors These are laws that stipulate the legislation regarding how employees should be treated in terms of health and safety within the company’s operating environment (Brady, 2010, p. 41). These legal factors lay the legislative frameworks of an organization to operate in. Paliwoda and Thomas (2013, p. 71) observed that legislation can impose considerable hindrances on business operations by placing onerous responsibilities on the organization. Conversely, they may create market positive conditions. Economic factors As noted by Campbell, Edgar and Stonehouse (2011, p. 67), economic conditions set both national and global interest rates and fiscal policy. The economic climate dictates how consumers, suppliers, and other company stakeholders behave within a geographic region (Bowman & Gatignon 2010, p. 63). For instance, the economic recession is likely to bring about increased unemployment, lower spending power, and reduced stakeholder confidence. Meanwhile, an economic boom would result in lower unemployment, greater spending power, and improved stakeholder confidence. For a business such as M&S to be successful, it must always review the impact of economic conditions on their competitors and respond accordingly so as to benefit (Zentes, et al., 2007, p. 89). It must be noted that in the contemporary business world, business organizations are greatly affected by global economies, not only by their home country. In reference to this, Pradhan (2009, p. 538) noted that the credit crisis that originated in the US directly contributed to the credit crunch witnessed in the UK in 2007/08. In the same breath, Brady (2010, 34) noted that M & S is a globally active company and must be acquainted with the economic climate across all borders so as to ensure that they employ suitable strategies that seek to promote and protect its business interests throughout varying economic conditions around the world. c. Political factors Political factors include legislation i.e. the minimum wage or discriminatory laws; voluntary codes and practices, market regulations, trade agreements, tariffs or restrictions, tax levies and tax breaks; type of government regimes e.g. communist, democratic, dictatorship (Levitt, 2002, p. 81). These factors can either create advantages and opportunities for the organization or conversely they can also place obligations and duties on business organizations’ operations within their areas of the jurisdiction (Brady, 2010, 34). In the case of international businesses such as M&S, any sign of non-conformance with the legislative obligations of the host nation may lead to the imposition of penalties such as fines, adverse publicity, trade bans or even imprisonment. d. Technological factors Recent technological advancements in retailing methods have seen e-commerce influence how consumers make their purchases. As a technological strategy, M&S conveyed new tills and point of sale software to accelerate consumer exchange and thereby improvement time management (Zou & Kim, 2009, p. 98). The company also increased their trading and organization frameworks by putting resources into frameworks and infrastructure to ensure that goods produced overseas are easily transported to market without having to pass through the UK. The strong network of technological infrastructure enabled the company to reduce export costs and speed up distribution (Levitt, 2002, p. 86). Online continues to present a good opportunity for retailers and consumers increasingly rely on websites to order and transact overseas from the comforts of regional zones. According to Brady (2010, p. 42), technological advancements have resulted in a society that expects instant results, and this has increased the rate of information exchange forcing businesses to make changes within the operating environment. The Internet revolution has had a profound impact on the marketing mix strategy for M&S because consumers can now shop whenever they want from anywhere on the globe (Ibp Usa, 2014). Owing to the fast pace of technological revolution, companies dealing with direct consumables must continuously adjust and evolve with changing consumer purchase behaviour, habits, and expectations. These factors in their different ways affect the performance of any business organization. For internationally operating business companies such as M&S, these factors must be critically assessed and evaluated before embarking on export business. Proper evaluation of these environmental factors is key to minimizing risks in the exportation businesses. Doole and Lowe (2008, p. 67) observed that this external business environment is constantly changing, demanding simultaneous adjustments on the part of the company that operates in the international market so as to always remain ahead of the competition. As such, SLEPT analysis helps a business to establish exportation strategies like the case of M&S. In reference to the lack of proper environmental adjustment, M&S incurred losses in various geographical regions. For the success of the business, the company had to take advantage of the diverse market outreach but this demanded a reciprocated response and adjustment (Pradhan, 2009, p. 546). The adjustment of localization strategies was seen as the only promising end for the business to perform well overseas. The dwindling number of Chinese stores is the result of either inadequate adjustment policies taken by M&S to satisfy the local market or tightening competition by the likes of Next Plc. Which came as a wake-up call to the company to revisit its exportation strategies. Making the export decision Risk analysis of exporting to the final country Having assessed the potential of the company’s product in terms of exportation, there are other facets that require evaluation by the local producer/exporter before making a final decision regarding exportation. Apart from assessing the market potential of the target countries, it is advisable that the company should also adequately evaluate the potential risks associated with the exportation (Dar, 2013, p. 31). Aware of the risks involved in the business, the company can thus implement in-house risk management systems to deal with corporate risks from both the domestic and export market fronts (Brady, 2010, p. 47) The risks affecting exportation include: political risk, currency exchange risk, transfer risk, credit risk, non-performance risk, transport risk, legal risk and risk of fraud (Fomby, 2008, p. 107). In the context of international business participation, it is paramount that the exporter/producer takes precautionary measures in order to ensure the welfare of their interests. This is because these risk variables somehow affect the consumers’ ability to pay for the products being transacted (Jeannet & Hennessey, 2014, p. 67). This affirms what Grinsven (2009, p. 128) stated that business dealings involving consumers in other countries present an array of complexities to deal with before establishing a market trial in that country in the first place. According to Pradhan (2009, p. 547), knowledge of the associated risks with regards to exportation to the international market helps companies to determine the various approaches to mitigating these risks. Among the above-highlighted risks, there are three common or prevalent risks that impact on exportation. These are country/political risk, which refers to the potential threat that some government actions could have on the export business such as market share, authority or ability to operate (Fomby, 2008, p. 113). Additionally, the political climate; i.e. instability may result in default on payments, exchange transfer blockages, nationalization or confiscation of property, etc. (McGarvey & Hannon, 2014, p. 87). As such, it is important to assess the political climate of the target export market before commencing on exportation. Another consideration is a legal risk that indicates overseas markets usually differ in respect of their local laws. Local laws affect various areas of exportation in terms of export procedures, taxation, employment policies, currency dealings, property rights, agency/distributorship and the protection of intellectual property (Richter, 2012, p. 161). Like any other business, international companies such as M&S are geared towards making profits and therefore credit and financing risk are areas of concern for evaluation. These risks include the possibilities that the consumer may default on payment, or the consumer’s intended business may fail (Sharan, 2012, p. 269). This will demand that the exporting company take precautionary measures to protect itself from defaults by establishing reliable methods of payments. Furthermore, the company should be able to protect itself from currency fluctuations because participation in international trade exposes the producer/exporter to foreign exchange risks (Fomby, 2008, p. 115). Risk management strategies These entail well-structured steps which when taken in sequence may aid better decision-making by providing more in-depth insight into the associated risks and the adverse impact of the business. Risk management strategies enable the company to have accountability for losses incurred owing to exportation taken care of (Sehgal, 2009, p. 67). To this end, Pradhan (2009, p. 568) observed that risk management is the process of identifying, assessing, controlling or minimizing various business risks that may result in significant financial loss if not adequately addressed. Risk management strategies enable the exporting company to undertake strategic planning, clearly define insurance needs as well as enable compliance with regulatory requirements in export markets. Moreover, these strategies also allow the exporter to be well informed before making a decision on exportation business (Segal, 2011, p. 45). Adoption of effective risk management enables the company to manage its risk and processes while improving its safety, quality production and overall business performance (Sharan, 2012, p. 267). Figure 1 in the Appendix summarizes the various strategies for minimizing and managing risks associated with exportation. Suggested supply chain solutions Supply chain solutions encompass the various steps that a producing company uses to get its goods or services to consumers within the stipulated timeframe. This is crucial for any organization, especially one that participates in global markets, because such companies must always strive to optimize the supply chain as this would translate into lower expenses for the company (Hofmann & Belin, 2011, p. 98). The success of an international company such as M&S depends on its partnership with supply chain solution companies that have demonstrated their ability to execute various transactions reliably. These supply solutions are granted by freight forwarders who are responsible for transportation by all means of transport for all types of cargo from one country to another. Freight forwarders transport cargo on behalf of shippers, exporters, importers, buyers and sales agents, etc. (Cobweb information, 2014, p. 1). Implications for the marketing mix Implementation of various marketing strategies can help improve business organizations in terms of profitability. This is because marketing strategies help the company to focus on a particular export target market segment that clearly define what products would attract more customers.(Brady, 2010, p. 51). That is to say, such emphasis assists the company’s management to eliminate any marginal operations that do not directly contribute to either the growth of a business or promote its interests. Bowman and Gatignon (2010, p. 76) define the marketing mix as the various actions that a company may use to promote its brand or product in the market. These initially included the 4 Ps: price, product, promotion, and place; but today may include packaging, positioning, people and/or politics. Meeting consumers’ demands is one of the main implications of the marketing strategies. This is central to the successful operation of any company participating in international trade. (Hofmann & Belin, 2011, p. 194). Furthermore, product design and promotions must also reflect the consumers demand and the current market structures. In this light, Richter (2012, p. 167) stated that instead of the company convincing customers about its products, it should offer suitable products that consumers desires and also promote the various product features that are in high demand. In other words, the customers’ taste and preference dictate the company’s products and product design (Bowman and Gatignon 2010, p. 78). The international prices can also greatly influence the marketing mix as if the prices keep fluctuating; it affects the amount of exports both negatively and positively. Favourable international prices will improve the profitability index of the organization and vive versa. The place of making the sale in the marketing is also very vital in the marketing mix as during international trade, the products should be easily accessible to the target group so as to improve efficiency (Doole & Lowe 2008, p. 66). Under marketing mix, the organization must ensure that the place for the trade is accessible to the clients and the products are available in record time to avoid delay as this will also attract more clients to the organization’s products thereby increasing the demand. As such, the marketing mix has a significant impact and implication for the success or failure of the business during international trade (Segal, 2011, p. 48). List of References AP Worldstream (2008), “British retailer Marks & Spencer posts sales drop,” Retrieved April 27, 2015, from http://www.highbeam.com/doc/1A1-D93I86I82.html Food Weekly News (2011), “Leading UK Retailer Marks & Spencer Focuses on Allocation and Replenishment Initiatives with Extension of JDA Software Investment,” Bowman, D. & Gatignon H. (2010), Market Response and Marketing Mix Models: Trends and Research Opportunities, Now Publishers Inc. Brady, D.L. (2010), Essentials of International Marketing, Sharpe, M.E. Burns, P. (2007), Entrepreneurship and Small Business (2nd ed.), Palgrave, Basingstoke England Campbell, D., Edgar, D., & Stonehouse, G. (2011), Business Strategy: An Introduction, Palgrave Macmillan Cobweb information (2011), An Introduction of Exporting for the first time, No. 128, The Watermark Cobweb information (2014), Freight Forwarder, No. 329, The Watermark Dar, M. (2013), Operational Risk Management, Risk Management Approaches, and Risk Mitigation Techniques: Challenges Faced By Islamic Financial Services, IOSR Journal of Business and Management Doole, I. & Lowe, R. (2008), International Marketing Strategy: Analysis, Development, and Implementation, Cengage Learning EMEA Foley, J. (2014), The global Entrepreneur: Taking your business international (2nd ed.), Jamric Press International, New York Fomby, T. (2008), Econometrics and Risk Management, Emerald, Bingley Grinsven, J. (2009), Improving Operational Risk Management (2nd rev. ed.), IOS Press, Amsterdam Hofmann, E. & Belin, O. (2011), Supply Chain Finance Solutions: Relevance - Propositions - Market Value, Springer Science & Business Media Ibp Usa, USA International Business Publications, (2014), Exporting Products and Services from the US Guide - Strategic and Practical Information, Intl Business Publications Jeannet, J. & Hennessey, H. (2014), Global Marketing Strategies (6th ed), Houghton Mifflin, Boston (Mass.) Levitt, T. (2002), The Globalization of Markets, The McKinsey Quarterly, EBSCO Publishing McGarvey, B., & Hannon, B. (2014), Dynamic Modeling for Business Management an Introduction, Springer, New York Paliwoda, S. & Thomas, M. (2013), International Marketing, Routledge Piercy, N. (2014), Export Strategy: Markets and Competition (RLE Marketing), Routledge Pradhan (2009), Retailing Management: Text and Cases, Tata McGraw-Hill Education Richter, T. (2012), International Marketing Mix Management: Theoretical Framework, Contingency Factors and Empirical Findings from World-Markets, Logos Verlag Berlin GmbH Rushton, A. & Walker, S. (2007), International Logistics and Supply Chain Outsourcing: From Local to Global, Kogan Page Publishers Segal, S. (2011), The Corporate Value Of Enterprise Risk Management The Next Step In Business Management, Wiley, Hoboken, N.J. Sehgal, V. (2009), Enterprise Supply Chain Management: Integrating Best in Class Processes, John Wiley & Sons Sharan, V. (2012), International Financial Management, PHI Learning Pvt Ltd. Zentes, J., Morschett, D., & Schramm-Klein, H. (2007), Strategic Retail Management: Text and International Cases, Springer Science & Business Media Zou, S. & Kim, D. (2009), Export Marketing Strategy: Tactics and Skills That Work, Business Expert Press APPENDIX Table 1: Summary of SLEPT analysis (Pradhan, 2009, p. 538; Brady, 2010, 41) Political: Economic: Government type and stability. Freedom of press, rule of law and levels of bureaucracy and corruption. Regulation and de-regulation trends. Social and employment legislation. Tax policy, and trade and tariff controls. Environmental and consumer-protection legislation. Likely changes in the political environment. Stage of business cycle. Current and projected economic growth, inflation and interest rates. Unemployment and labor supply. Labor costs. Levels of disposable income and income distribution. Impact of globalization. Likely impact of technological or other change on the economy. Likely changes in the economic environment. Socio-Cultural Technological Environment: Population growth rate and age profile. Population health, education and social mobility, and attitudes to these. Population employment patterns, job market freedom and attitudes to work. Press attitudes, public opinion, social attitudes and social taboos. Lifestyle choices and attitudes to these. Socio-cultural changes. Impact of emerging technologies. Impact of Internet, reduction in communications costs and increased remote working. Research & Development activity. Impact of technology transfer. Figure 1: Summary of risk management (adapted from Sharan, 2012, p. 277) Figure 2: Summarized winning framework of market entry for international companies as Adapted from Pradhan (2009, p. 543). This figure illustrates how a domestic company may successful implement and executes its exportation strategies especially in regards to creating a huge market effect in a target country. Figure 3: Exportation Strategy Summary (adopted from Zou & Kim, 2009, p.73) Note: The success of the exportation by a company solely depends on its adequate assessment of the trading environment and target markets. That is to say, the company’s position must be aligned to the achievement of mass following in terms of market share for their products so as to competitively stand against global competitors in the international stage. Simply put, the assessment involves adequate scrutiny of the SLEPT analysis. Read More