Issues of International Marketing - Assignment Example

International Marketing Contents Part 1 2 Company Profile: IKEA 2 Market Entry Method of IKEA in China 2 Factors Affecting Market Entry 3 Part 2 4 Contemporary Marketing Issues 4 Opportunities and Challenges of International Marketers 7 References 10 Part 1 Company Profile: IKEA IKEA is a popular multinational organization of Sweden. The company was founded in 1943 and its registered headquarters is located in Leiden, Netherlands (IKEA Group, 2012). The company designs and sells assembled furniture for both home and corporate usage. In 2008, IKEA was estimated as the largest furniture retailing organization in the world (IKEA Group, 2014). IKEA’s business is popular worldwide because of modernized architectural design, eco-friendly manufacturing system and superior interior designing quality. Since its inception, the company has considerably expanded the scale and scope of its business internationalization process (IKEA Group, 2013). As of January 2014, IKEA owns 349 retailing outlets across 43 countries. The gross revenue was €28.506 billion in 2013 and its operating profit share was worth €4.011 billion (IKEA Group, 2013). IKEA is a private owned business organization and its founder was Ingvar Kamprad. The current CEO and chairman of the company is Peter Agnefjäll. The company manufactures more than 12000 variations of products and conducts business in all major economies of Europe, North America, Asia and Oceania (Chu, Girdhar & Sood, 2013). Due to extensive business internationalization, the scope and scale of IKEA’s business is wide. The company utilizes 1% of the global supply of wood. IKEA has expanded its internationalization process by following different types of market entry approaches (Dickson & Giglierano, 2000). In China IKEA expanded business through joint venture entry approach. Market Entry Method of IKEA in China Joint venture is a special business agreement whereby two or more business entities merge as a complete new organization or to generate new assets to the equity holding of both the companies (Campbell & Netzer, 2009). IKEA entered in the Chinese market through a joint venture agreement. The company opened its retailing outlets in prominent locations of China under this venture agreement. IKEA had entered in the Chinese market in 1998 (Harapiak, 2013). The company had selected the joint venture method for lowering the political risks associated and gaining core competencies within the dynamic furniture industry. Moreover, according to the Chinese regulations during IKEA’s entry, a foreign organization could enter only through a venture business with any native Chinese company. By forming a joint venture with a local furniture company of China, IKEA made strategic alliances with the Chinese suppliers and appropriately evaluated the market features therein (IKEA Group, 2013). The company stores were opened in busy cities of Beijing, Shanghai, Shenzhen, Guangzhou and Chengdu (Jonsson & Foss, 2011). The public authorities of China have become liberal over time and eventually IKEA was allowed to make direct investments in the country. Factors Affecting Market Entry IKEA’s entry model in China was primarily determined by the economic, political and social aspects of the country. Economic IKEA entered in the market of China so as to reap benefits of the emerging economic system. The company estimated that the furniture market of China was highly competitive in nature. DFS and Harvey’s were dominant furniture retailing companies of China (Isaksson & Suljanovic, 2006). Even so, there were infinite numbers of small scale furniture retailers. Under such circumstances, it was rational for IKEA to enter in China mainland through a joint venture. Through this approach, the company could first analyze the competitive business market of China and gain adequate experience before making any direct investments in the country (Froot, 2008). Political After 1978, the political authorities of China implemented liberal trading policies (Peng, 2013).  However in 1998, foreign companies were easily allowed to enter in the Chinese market by forming strategic business alliance with any of the local companies Harapiak, 2013). Social The individuals of China are traditional in nature. They prefer to consume locally manufactured products and services at affordable market prices. In order to successfully conduct business in China, IKEA had to implement differentiated strategy. These strategies were framed according to local taste and preference pattern of the Chinese consumers (Isaksson & Suljanovic, 2006). Hence, by forming a joint venture, IKEA took the assistance of the local Chinese business partners to evaluate the social trends therein and accordingly formulate business level strategies. Part 2 Contemporary Marketing Issues After the emergence of trade liberalism and globalism, the degree of market rivalry between the profit making concerns have considerably increased. The modern companies try to enhance their core competencies for experiencing greater profitability and brand value (Davis & Steil, 2001). The role of marketing has become indispensible in the present commercial world. Marketing of a company is a function or set of activities that communicates, creates and delivers value to the customers (Guo, Zhao & Tang, 2013). Marketing is the method through which a company enhances the utility levels of its business stakeholders. The tastes and preferences of contemporary buyers can be appropriately evaluated by a firm with the help of proper marketing initiatives. However, in the current dynamic business world, marketing issues are considerably changing. The companies are now adopting diversified means of marketing in order to enhance brand awareness and revenue in the competitive market. Type of Marketing Issue Social Marketing By implementing social marketing strategies in business, companies desire to satisfy requisites of the consumers in short run and facilitate human welfare in long run. These firms frame their marketing strategies on grounds of three primal factors, namely profit maximization; customers’ satisfaction and social or human welfare maximization (Davis & Steil, 2001). Through this strategy, the firms try to resolve the social issues prevalent. The brand value of companies involved in social marketing is high in the market. Empirical Analysis Avon implements social marketing strategy in business. Through its marketing strategies, the company tries to augment the awareness of women customers regarding breast cancer (Glazer, 2012). The firm donates a percentage of its business profit to hospitals and non-government organizations, which aim to lower the incidence of breast cancer. Not-for-Profit Marketing This marketing strategy is primarily adopted by the non-profit organizations. The organizations implement this strategy for improving brand value in the market, but not to earn higher monetary returns (Gonzalez-Alvarez & Solis-Rodriguez, 2011). Empirical Analysis The advertisements for the universities can be regarded as not-for-profit marketing initiatives. The universities commercialize their brand name in the market for attracting larger number of students. Cause Linked Marketing This marketing strategy is jointly implemented by a non-profit organization and a profit making company. It is adopted for both monetary and non-monetary causes. The benefits accrued are experienced by both the participating organizations (Davis & Steil, 2001). Empirical Analysis The non-profit organization of World Wildlife Fund, along with profit making concern of Coca Cola, has jointly organized a program including new environmental goals (The Coca-Cola Company, 2013). The program aims to improve the environmental sustainability of earth and minimize the global water resource depletion. Such an initiative has helped to improve the brand value and revenue of Coca Cola, thereby protecting the natural resources to an extent. Sports Marketing The marketing activities of a company related to sports are known as sports marketing. Sports marketing strategy is implemented by companies for two primary reasons (Davis & Steil, 2001). Firms often commercialize their non-sports items in the crowded sports events. Also, companies selling sports accessories can promote their products through this strategy. Empirical Analysis Advertisements of Master Card or commercialization of Nike’s sports shows in a World Cup football match is an example of sports marketing strategy. Guerrilla Marketing Through this approach of marketing, a company attempts to popularize product or service offered in an attractive and unforgettable manner. This is because the marketing activities are targeted at a wide range of customers who reside in remote locations. Through guerrilla market strategy, companies promote their products and services to a large clientele at limited cost price (Davis & Steil, 2001). Empirical Analysis Visual advertisement of a company made on a sailing ship is a type of guerrilla marketing initiative. Such an advertisement will be observed by individuals in locations, where the ship would sail. Viral Marketing When the marketing activities of a company are conducted through speedy means of communication, the strategy is known as viral marketing approach. Empirical Analysis Marketing activities of companies over the social media or conventional word-of-mouth promotional strategies adopted are examples of viral marketing initiatives. The above illustrated marketing strategies are the contemporary marketing issues. Presently, the multinational organizations implement such new strategies in business for sustaining their market position (Davis & Steil, 2001). Opportunities and Challenges of International Marketers The various contemporary styles of marketing have generated certain opportunities as well as problems for the multinational organizations. Social Marketing Opportunities Through social marketing, multinational companies can considerably improve their brand values in the market. A company’s brand value is enhanced when the stakeholders perceive it as socially responsible. Consumers often judge quality of the products or services traded in terms of the company’s brand worth (Kupritz, 1998). So, social marketing helps to improve the aggregate sales or profitability of a multinational company on grounds of market goodwill. Challenges Consumers often perceive that social commitments made by the companies through social marketing activities conducted are often not transparent and reliable. Such circumstances lead to fall in a company’s brand value, which renders the marketing initiative ineffective (Davis & Steil, 2001). Not-for-profit Marketing Opportunities Opportunities Such marketing activities provide limited financial returns, but have numerous intrinsic values. The non-profit organizations primarily work for social motives. Marketing initiatives of these firms contribute towards enhancing net social welfare of the society. Although the returns are not measurable, the companies often experience outstanding benefits from such conduct. Challenges Not-for-profit marketing initiatives of the non-profit organizations usually prove to be an expensive marketing strategy. Furthermore, it is difficult for the companies to quantitatively assess probability of success in such commercialization process. The burn out levels of the marketers in such companies is often high, as they need to constantly frame ways to raise funds for financing such marketing activities (Davis & Steil, 2001). Caused Linked Marketing Opportunities Caused linked marketing helps to augment the social responsibility of a non-profit organization, thereby improving its brand value. Increased sales can be experienced with the essence of improved brand status. On the other hand, such non-profit organizations can raise funds for their professional purposes through such marketing strategies (Firtz, 2014). Challenges During such marketing activities, the joint organizations often face problems pertaining to mutual operational process. The social value of a non-profit organization often declines after merging activities conducted with that of a profit making concern (Firtz, 2014). Sports Marketing Opportunities The companies are able to commercialize their brand name, products and services to a large number of individuals. The returns from sports advertisements are higher than economic costs involved. A company can considerably improve its business scale and scope through sports marketing initiative (Kaplan & Norton, 2013). Challenges The events for sports advertisement are often cost prohibitive for many mid-sized and small profit making companies. The returns obtained from these events are difficult to estimate. Guerrilla Marketing Opportunities Guerrilla marketing strategy is less expensive compared to the conventional marketing means. Hence, this marketing strategy is undertaken by the small, mid-sized as well as large corporate firms. This strategy facilitates promotion of products and services offered to a large number of buyers at relatively low cost (Davis & Steil, 2001). Challenges It is challenging to quantitatively estimate the benefits or returns obtained from guerrilla marketing. Relative to the traditional means of marketing, greater number of intangible resources are required for guerrilla marketing. The gestation period of such marketing investments are very long (Davis & Steil, 2001). Viral Marketing Opportunities Companies are able to market their products with high credibility, greater reach, improved efficiency and low costs through a viral marketing approach. The firms are also able to make constant promotional adjustments under this strategy. It requires internet for reaching out to the mass effectively and rapidly (Davis & Steil, 2001). Challenges The initial investment in viral marketing is high. These marketing actions mostly take place over the internet. Technical default in the internet system can hamper true intensions of these marketing initiatives. 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