International Sales - Term Paper Example

?International Sales Table of Contents International Sales Table of Contents 2 Introduction 3 Market Analysis 4 Gaming Industry in India 5 Market Environment Analysis 6 Political Factors 6 Economic Factors 7 Sociological Factors 7 Legal Factors 7 Technological Factors 7 Segmentation and Targeting 8 Strategy for International Expansion 8 Conclusion 11 Recommendations 11 References 13 Introduction International expansion has become the buzzword for business organizations in the twenty first century. The adoption of free trades and end of the licensing era has largely contributed to this regard. This age has often been stated by business professionals as the age of globalization. By virtue of globalization the entire landscape of the consumer market has been virtually changed with organization breaching geographical and political boundaries to gain access to markets with good market potential. The development of third world economies has provided a greater boost to the organizations to expand beyond the traditional markets of Europe and North America. International market expansion is perhaps becoming the most preferred option for business organizations to grow and expand in the current age of turbulent market condition prevailing in the market. International expansion can be carried out in many ways which includes licensing, franchising, partnerships and establishment of wholly owned subsidiaries and manufacturing units in the foreign nation. The aspect of globalization has also put up considerable challenges before organizations as the level of competition has increased beyond limits. It has therefore become essential for organizations to create operational and organizational excellence so as to successfully sustain themselves in the tough business environment. Branding and positioning have become important for organizations to segregate themselves and create a niche for themselves in the consumer markets. Local culture and sentiments also play a major role in case of multinationals expanding into new markets. This is primarily because local culture and sentiments play a major role in the purchase decision of consumers. The present study would provide an empirical analysis of the aspect of international expansion and the strategies to be formulated for the same. The study would focus upon the gaming console industry as the product to be marketed and sold in the Indian consumer market. The choice of nation assumes significance considering the fact that it s considered among the fastest growing economies of the world with a large number of potential consumers. The future chapters would be devoted towards creating a framework for the market entry strategy of the firm in the Indian consumer market. Market Analysis India represents one of the fastest growing consumer markets in the twenty first century. A research conducted by the global consultancy states that the size of the Indian consumer market is like to expand by approximately four times its present value and is likely to be the fifth biggest consumer market by the year 2025. The majority (approximately 68 percent) of this growth would take place in the urban areas. A research report conducted by Nielsen places the nation in the first slot in a survey conducted on consumer confidence. It is perhaps for this reason that the nation is witnessing increased private equity participation as well as mergers and acquisitions (IBEF, 2010). The growth of the consumer markets can also be related to the burgeoning economy of the nation. India is presently accredited as one of the fastest growing economies with high growth rates. An increased investment has enhanced the consumption levels of in the citizens of the nations as they have reported higher levels of disposable income. This has led to an increase in the demand for goods and services which reflects large scale opportunities for organizations especially those operating from the Western world. New locations are important for these organizations as the present and traditional markets of Europe and North America have been saturated and have reached a level of maturity. Moreover the competition levels are also higher. The impact of the recent economic recession was also more pronounced in the Western developed nations whose residents have reported large scale dips in the levels of disposable income which has lowered the level of competition. Further in order to spruce the excess supply firms have reported to price cuts which has triggered a severe price war among the organizations. This has taken a toll on the revenues margins of firms due to which they have been force to look for newer markets. Consumer markets like India and china offer numerous opportunities for these organizations with regards to their business motives. Video gaming console industry falls in the consumer market industry which has good market opportunities in India. According to a report published by IBEF the consumer durable industry has registered growth rates of approximately 31 percent in 2010 of which the electronics industry shows 12-13 percent growth rates. This shows considerable opportunities for the video gaming industry. Moreover this industry segment produces and markets products whose target market consumers fall in the younger age group. The age based demographics of the nation highlights the median age of the total population at 25.9 years. Considering the fact that India is the second largest populated nation of the world this aspect reveals considerable opportunity for the market players of the video gaming industry (CIA, 2011). Gaming Industry in India According to a study conducted by market research agency IMRB the console based gaming industry registered revenues of approximately INR 2560 million as of 2007. The portable play stations constitute the bulk of this amount which also includes sales in the grey market. The sales figure is expected to grow by approximately 41 percent to reach levels of INR 5750 million by 2010 (IMRB, 2009, p.30). Figure 1: Consumer Behavior of Indian Gamers (Source: IMRB, 2009, p.12) The figure shows the consumer behavior of the target market audience for gaming industry organizations in India. It is clear from the figure that there is a large potential in the Indian market. It also shows certain challenges such as greater price consciousness and cultural barriers as challenges before the organizations engaged in the gaming industry. Market Environment Analysis The performance of a business organization is largely dependent upon the external environment surrounding an organization. This aspect assumes greater significance for organizations trying to enter a new market. The external environment is comprised of political, economic, sociological, legal and technological factors. Political Factors India is the world’s largest democracy which has a highly stable political environment. The nation is divided into 28 states and seven union territories whose provincial governments are also elected on a democratic basis. The administrative machinery is divided into the executive, legislative and judiciary branches. The constitution of the nation has been adopted from the tenets of the English law and has been continuously amended to meet the needs of the situation. The nation also has a strong army which ensures proper safeguards along the international borders (CIA, 2011). Economic Factors India is considered to one of the fastest growing economies of the world. The economic liberalization process initiated by the government in 1991 has resulted in a surge in the economy of the nation making it one of the most preferred destinations for investment. The trillion dollar GDP economy of the nation registered a GDP growth rate of approximately 8.3 percent as of 2010; the per capita GDP is estimated to be approximately USD 3400 as of 2010. The nation also has a steady pool of human resources having a labor force of approximately 478.3 million as of 2010 (CIA, 2011). Sociological Factors India has a large population consisting of diverse culture and people from different backgrounds. The population growth rate is estimated to be approximately 1.376 percent as of 2010 with 30 percent of the total population residing in urban areas. The rate of urbanization has been pegged at 2.4 percent on an annual basis (CIA, 2011). This represents ample opportunities for gaming console industry manufacturers to establish themselves in the market. Legal Factors India has an independent judiciary with the Supreme Court being the apex court and other lower courts like the high court and sessions’ court. The nation has accepted the jurisdiction of the International Court of Justice with certain exceptions (CIA, 2011). Technological Factors India boasts of the presence of a highly skilled human resource base. It also has leading engineering and B-schools which churn out numerous talented individuals every year. The nation has also made numerous strides in information and internet technology which is crucial for organizations engaged in the gaming console industry. Segmentation and Targeting In case of the gaming console industry the target market segment would consist of individuals in the age group of 18-35 years. The Indian market represents considerable opportunities in this age group as most of its population falls within this age group. The target market segment would most likely be a school or a college going or a high school student who normally prefers to play video games at home rather than going out to cyber cafes or gaming parlors. The individuals in the target market segment would fall in the higher income group. Initially the top metro cities in the nation would be targeted which is mainly because of the fact that internet penetration and product knowledge is higher in these cities. Thereafter the tier two cities would be targeted. The typical targeted consumer would be such that he/she has a habit of playing a minimum of one hour in a single session at a rate of approximately 3 times in a week. The targeted consumer would have a minimum experience of approximately 18 months of playing experience. And has a habit of spending approximately INR 150 per week on games. In order to target this particular market segment a promotional strategy comprising of television advertisements, setting up stalls in shopping malls and sport sponsorship events would used. The choice of media would also depend on the popularity of a particular channel of communication. Strategy for International Expansion International expansion can be carried out by an organization in the following ways namely exporting, franchising, strategic alliance, Joint ventures and opening a wholly owned subsidiary. An organization intending to expand internationally can either adopt a single strategy or a combination of the above stated strategies (Johnson & Tellis, 2005, p.5). In the context of gaming consoles in the Indian market a strategy of entering into a joint venture would be the best for the organization. Entering into a joint venture agreement with a local partner would be beneficial since the local partner would have a better understanding of the target market. In addition to this joint ventures also provide certain advantages like identity, limitation of liabilities which also includes risk sharing. Access to finance is also easier case of joint ventures as the presence of a local partner would help take care of the legal aspects in a particular nation (Hewitt, 2005, p.57). Distribution channel are also largely important for business organizations as it determines how a product would actually reach the end consumer. The figure below represents a model that could be used for distributing the product in the Indian market. Figure 2: Model of Distribution (Source: IMRB, 2009, p.17) Gaming portals offer a wide reach to the target market audience. Popular Indian online portals include names such as zapak.com, Yahoo etc which can be used to target the mass market audience. These sites also have high technological expertise to handle technological aspects related to the product. E-commerce sites include web pages that can help a consumer to purchase games online. This is useful considering the popularity of the internet among the Indian consumers. Retail store also serve as another important source for reaching out to the target market audience. Supermarkets and stores like planet M and Music world serve as areas which command a huge footfall and can serve as good points for reaching out to the target market audience. Certain other distribution channels include alternate channels which are also dependent on the product features of a particular game. One such example in this regard is the famous ‘Ghajini’ game which was based on a popular movie by the same title. The games were sold in various movie theatres and it helped in impulse buying by the consumers after they watched the movie (IMRB, 2009, p.17-18). In all these strategies it is important that local culture and sentiments are considered. This would help in adaptation of the product. The case assumes greater significance for the gaming industry players because the strong cultural background of the Indian consumers. Initially the product would be imported from the nearest manufacturing facility of the company which would be assembled in India and sold via the distribution channel. Presence of a local partner would aid in the process. After the initial success and achievement of breakeven point of the project the organization would try to set up its own manufacturing facility in the nation. Conclusion The study reveals considerable opportunities for the organization (engaged in the gaming industry) to grow and flourish in the Indian market. The robustness of the economy coupled with the increased levels of disposable income has revealed considerable potential for the industry players in the Indian market. In addition to this a favorable political scenario backed by a democratically elected stable government has also aided in the process. Liberalization policies that are being continuously pursued would help in generating better opportunities for international and multinational organizations to establish their presence in the Indian markets. The fact that Indian consumers are technologically oriented also has a positive effect on the sales prospects of the gaming industry players in the market. The market also represents considerable challenges in the form of enhanced competition and cultural barriers which if not handled in a proper manner could lead to disastrous consequences for the organization. Recommendations In order to make a success story in India the firm must undertake effective measure of which the most important aspect constitutes an analysis of the market as well as the consumer behavior of the target market. The firm can conduct a market research by itself or by hiring an external agency for the purpose. In addition to this the firm must be careful while selecting the local partner. This is important because the success and sustainability of the joint venture proposed for the market entry in India would depend on a large extent on the relationship between the partners of the joint venture agreement. The distribution channel must be aligned in a manner that it tends to effectively reach out to the target market audience. Promotional strategies should be such that they try to induce the targeted consumer to try the product. This is important considering that the gaming industry in India is still in its nascent stage of evolution which calls for considerable promotions. Finally local culture and sentiments must be taken care so as to take care of the local and cultural aspects which are considered to be very strong in the nation. Adopting these strategies would not only help the firm to establish itself in the market but would also generate long term sustainable advantage for the organization in the long run. References CIA. (2011). The world factbook. Retrieved February 24, 2011 from https://www.cia.gov/library/publications/the-world-factbook/geos/in.html. Hewitt, I. (2005). Joint ventures. Sweet & Maxwell. IBEF. (2010). Consumer Markets. Retrieved February 24, 2011 from http://www.ibef.org/economy/consumermarket.aspx. IMRB (2009). Report on Gaming in India. Retrieved February 25, 2011 from http://www.iamai.in/Upload/Research/GamingReport_39.pdf. Johnson, J & Tellis, G.J. (2005). Drivers of Success for Market Entry into China and India. Retrieved on November 1, 2010 from http://www-bcf.usc.edu/~tellis/ChinaIndia.pdf Read More