Abercrombie & Fitch Marketing Strategies - Case Study Example

Abercrombie & Fitch: Expanding into European Markets Affiliation Question One Abercrombie & Fitch (A&F) brand gets well appreciated for its American-style, mostly described as casual, cool and trendy. The company has to have an appropriate strategy to market its products in Europe and expand its market segments. Thus, A&F has had a couple strategies to increase its market share. The company had promotions in Singapore that had great success due to its occurrence in conflicts and context of culture. A&F triggered the emotions of people and developed a special experience that assisted the company to link to its customers. Thus, the campaign helped in building up its brand image in Singapore. Marketing strategy refers to increasing of sales goal and achieving a competitive advantage that is sustainable (Usunier & Lee, 2009). It includes both long-term and basic activities in the marketing field that deal with company’s strategic initial situation analysis and the evaluation, selection, and formulation of marketed-oriented strategies. Therefore, marketing strategies contribute to the company’s goal and its marketing objectives. The marketing strategies that A&F focus include segmentation, and targeting. Marketing segmentation gets usually done at the level of customer. However, in the case of A&F the countries should be seen as the segments. The company should have their decision focused on common countries aspects (Doole & Lowe, 2008). This strategy ensures that the company avoids information overload. The level of country segmentation should get conducted on levels such as geographical, based neighboring countries’ beliefs, climate type, and terrain similarities), demographics or income. Segmentation is important since it’s the marketing cornerstone. It is because almost every marketing effort links to decisions about who to serve or the implementation of position through various marketing mix parts. Based on the segmentation, the company should have an entry strategy to other foreign segments (Alden, Steenkamp & Batra, 2006). Hence, A&F should consider franchising and licensing method. Thus, it should allow other organization or individual to use its accumulated expertise and trademarks. In addition, a foreign manufacturer can use low-quality ingredients to manufacture the brand based on the premium contents in home country. When the product gets manufactured in another country, it will expand its markets and reduce the importing expenses to the segments. Thus, due to the contract manufacturing, customers from other segments get satisfied (Kotabe & Helsen, 2008). Though, the disadvantage to this is that the company may be training a potential competitor. The other strategy is customization. Firms do face alternatives decision in marketing their products to international markets. Thus, the A&F should involve customization, whereby the company introduces unique product in every country. It is because every customer’s preferences differ in every country. Therefore, the company should study every country preferences and provide the specific products according to every customer’s preference of every country segment. After the company segments its market on different classes and groups, it needs to select its target. One strategy will not suit a very consumer groups; thus it is important to develop certain strategies for its targets (Lim, Actio, & Rusetski, 2006). The three general strategies that the company should consider in selecting a target market includes; concentrated targeting, undifferentiated targeting, and multi-segment targeting. In undifferentiated targeting, the firm views the market as a single group having no individual segments, thus using the single marketing strategy. The concentrated targeting focuses on choosing a certain market niche that the marketing efforts get targeted. Lastly, the multi-segment targeting involves focus on two or more defined market segments and aims at developing marketing strategy from them (Keegan, 2000). In the case of A&F, the company needs to adopt the multi-segment targeting strategy because it involves many countries/segments. This strategy results in many benefits though it is costly (Hollensen, 2007). It requires increased promotional strategies and market research. Question Two According to Medina and Duffy (1998), standardization refers to the process of extending along with effective appliance of domestic target-market-dictated products standards intangible or/and tangible attributes to market in the foreign markets. Cavusgil, Zou and Naidu (1993) argues that international market nature is becoming homogenous, and its homogenization allows the firms to adapt to standardization strategy worldwide. Adaptation is the mandatory modification of the domestic target market-dictated product standards both intangible and tangible attributes so as to make the product suitable to the foreign environment conditions. Adaptation is interchangeably referred to as adaptation because Customization modification gets meant for the product attributes to make it culturally and economically suitable for the foreign customers. The main difference between the two terms is that one is discretionary and the other mandatory. Kotler and Armstrong (2008) argue that companies should adopt the policy “Think globally and act locally”. Firms should tradeoff between adaptation and standardization. Even though, both influence either indirectly or directly on the firms’ international business operations. According to Craig (2000), the company should make a key decision on whether to join the foreign markets with the current product of the firm or make significant changes to the products. The changes get made according to the foreign market requirements; thus, product adaptation will be preferable, in this case, where there are necessary differences in customers’ wants and needs. Adaptation affects mainly the physical attributes of a strategy due to its focus on the conditions of the environment of diverse markets. The adaptation improves the customers’ satisfaction of their needs and wants, leads to differentiation of product, assist in gaining competitive advantage and adhere to marketing concept. In the case of A&F Company, the standardization policy can be the best solution on serving global marketplace as the world in becoming homogeneous. According to Levitt (1983), international marketing standardization strategy means practicing similar marketing activities worldwide. He argues that, globalization has made the world into a global village. Thus, the progress and advancement prefers the homogenized commonality (Leelapanyaler & Ghauri, 2007). The standardization policy will boost further the A&F marketing strategies. The policy assist in work specialization, rides down the experience curve, leads to scaling economy and gives the company a global brand image. On the contrary, other researchers argue that even though globalization has had an impact on the world, there is still a significant difference in the political, cultural and socio-economic of the segments. In Europe, there are diverse sub-cultures and economic conditions so the entire world cannot be efficiently and effectively served using a single marketing strategy. Therefore, the company will have to use both policies in the European market. Both adaptation and standardization strategy have their disadvantages and disadvantages. Some of the marketing mix elements can be more standardized unlike the other (Gary, et al., 2009). According to one of the researchers view, product should be standardized so as to gain economies of scale, brand message, and brand name. On the other hand, these marketing mix elements can be adapted such as product pricing, packaging, distribution channel and sales promotion. Therefore, it is also advisable to balance between adaptation and standardization in order to gain success in international markets. In this case, A&F Company will be mandated to balance the two policies to gain more success. The adaptation policy will improve the customers’ satisfaction, differentiate the product, assist in gaining competitive advantage and adhere to marketing concept. While the standardization policy will be in charge of work specialization, riding down the experience curve, leading to scale economy and giving the company a global brand image. Therefore, the company will not choose between the two policies but will have to balance them both to have a successful marketing strategy (Rangan & Bell, 2006). Question Three Differentiation strategy creates a service or products that get considered as unique in their industry. In this case, the U&A Company develops a unique product for the European market and USA. This strategy attempts to differentiate the markets on the basis of product features or design, customer services, distribution, technology or other elements. It aims at attracting customers that have unique offering that meets their wants better compared to the competition. Also, the unique offering will willingly make the customers pay a premium price. The strategy intends to develop brand loyalty among the customers; thus providing great profit margins (Thomas & Timothy, 2005). This process attracts diverse principal risks that can hinder the marketing process. First, the firm may not achieve high market share with the strategy. It is because successful differentiation needs exclusivity perception, and not all customers are willing or able to pay the higher prices of the unique products. As a result, if the customers are few, their market share in USA and European market will be less. It may result in customers losing interest with the unique features or due to low-cost competitors that cab manage to undercut the prices, eroding the brand loyalty (Jeannet & Hennessey, 2004). Second, the process may incur the company more costs (Masaaki, 2005). Designing of the unique product offering and then having it customized in marketing to every customer group is a costly endeavor. It is because creating multiple variations or versions of products requires significant research, development and design time and costs more than compared to a single product. Other costs are likely to face the company in the process of presenting distinctive messages that will sell the product to USA and European markets. Third, there is likely to have an inconsistency risk. The greatest challenge that A&F will face upon differentiated marketing is creating a consistent theme and reputation for their brand (Dow, 2006). Branding gets majored on installing specific, positive associations with the company brand over time. Therefore, differentiated marketing can result in such fragmented messages that the company never conveys a clear image of their brand. The company can overcome this risk be emphasizing on innovative leadership and cutting-edge technology to aim in unifying the background theme of all its products. Fourth, customer affordability ability can pose a risk to the company. Companies that use the differentiated marketing strategy emphasize on product and service quality as their key propositions. Often, the companies do not have low-cost options meaning that they compete against firms that can offer lower price points (Ryans, 2003). In addition, some struggle to copycat the product that can undercut the market. Thus, the customer end up buying the low-cost products and the A&F’s products may have a risk of, not to get sold and lose their customers. Lastly, cannibalization is a great risk upon differentiation policy on the company. Differentiation method risks the company in cannibalizing its products. If the company designs and market to diverse products variations that are similar, it prevents the customers from purchasing more expensive products. It is because they can acquire a lower-cost option or a mini-version. In essence, if the company gets to fine in its targeting, it creates multiple products aiming to satisfy its marketplace when fewer products can also give satisfaction to its customers. The situation also contributes towards cost advantages. Therefore, company should have good measures to ensure that their customers get satisfied and maintain their marketplace in the international market. The company should also minimize the costs that are incurred during the conduction of the policy to have the company not to experience great loss. The company should also maintain its brand image and consistency and avoid cannibalizing their products. Hence, differentiation may not be an appropriate strategy in the case A&F due to its international operations. Question Four Every business aims at selling more its services and products no matter how small or large it is. Therefore, the A&R Company should consider expanding its distribution channels in the countries of Europe and live out its exclusive distribution policy. The company expands its distribution market to get more additional customers (David, 2000). Increase of sales in the existing markets through marketing and advertising strategies should not get overlooked. However, the way that is most effective to gain more customers is to develop new distribution channels that can reach the untapped market. A Distribution Channel gets defined as the route that services and products take to reach the consumer. The company will attain this by adding the retail locations (franchise or/and corporate), establishing more facilities of production, developing reseller relationships and giving online sales opportunities. These methods get achieved through understanding the consumer’s’ preferences along with their cultures. Distribution, in other words, placement, is among the four Ps” of marketing; price, promotion, product, and placement. Gaining new customers by distribution channels expansion will have various benefits to the company. First, the company will gain more customers. It is because as the company is expanding its channels it contacts more customers, and more consumers get to be aware of the existence of the product. Thus, the company will gain more customers due to increase of market segments. Secondly, the firm will increase its profits. Since more customers are getting aware of their products and services, more customers purchase their goods. Increase of purchase increases the profits gained due to increase in revenue in the company. Thus, distribution increases the company sales that contribute to more profits and revenues. The per-unit production costs also get minimized. Manufacturers minimize their costs by volume purchasing, concentrating operations and assembly line of production. As a result, handling and shipping become more expensive when they are needed to ship goods and services in long distances. Therefore, to reduce the inventory costs, the company will have to set up a company-owned distribution centers in other segments or countries. Thus, the process will reduce the per-unit production costs. The brand also gets more recognition across the channels. It is as a result of increased awareness. In order for the company to expand their distribution channels, they create awareness in the new channels and targets to make their products familiar to their customers. Thus, during this process, many consumers get to know the brand; hence increasing its recognition in the market (Orly, Beechler, Taylor & Boyacigiller, 2007). The company will also be able to reduce the market risks. Following the expansion to various channels, the company will be able to distribute the risks to the various channels of distribution. Risks such as getting losses or losing market share can make the company decline in its services (Keegan & Green, 2011). Therefore, the distribution channels will distribute the risks such that if the company loses market share in one channel, still the other channels will have a good market share. The main critical strategy that the company should practice is evaluating the potential markets through comparing the company attributes to those of the target market (Johansson, 2000). The company should begin by examining the current customer base of the company and the common interest and characteristics. Characteristics such as ethnicity, gender, age, income, occupation, and education, while interests include hobbies, behaviors, values, leisure, attitudes and media choices (Ghauri & Cateora, 2010). The company should be sure to examine the data that links the customers to its services and products. Once it identifies who the firm is targeting, the next step is to find those markets with greater concentration of the potential consumers. Therefore, expansion of distribution channels is important to the company due to its increase in revenue and market share, it will also help A&R to increase its brand image awareness. Question Five Communication in marketing represents the fourth P in the market mix that is used to persuade and inform the target audience to use or buy a firms’ service or product. It ensures that consumers are aware of the products of the firm and plays a major role in determining market success and profitability (Koekemoer 2004). Even though, marketing promotion and communication get regarded as containing similar meaning in various literatures, Hall (1990) makes a clear distinction between the two concepts. He explains promotion as the general marketing aspect that promotion management explicitly deals. On the other hand, communication is a more encompassing term that comprises communication via all or any of the marketing mixing elements. Thus, representing the collection of every element in the marketing mix of every organization that facilitates exchanges through establishing shared meaning with customers of the firm. Thus, during the formulation of communication policy, A&R should take into consideration certain elements. The elements include; advertising, sponsorship, sales promotion, personal selling, direct marketing, the internet, and MPR. Koekemoer (2004: 65) defines advertising as “a means of making known what we intend to sell or to purchase, a means of informing potential and existing customers about a product. More the purpose of advertising is to induce potential customers to respond favorably to the offerings of a firm”. Thus, the firm should take into consideration on the element because its primary role has turned out to be brand-building through conveying information, building awareness and establishing an identity. The sales promotion element refers to as the marketing communication material and activities blend designed to intensify the marketers’ sales force efforts. The sales promotions include coupons, price cuts, feature advertising and displays or/and a combination of these (Hofstede, Hofstede & Minkov, 2010). Thus, it is important to the company to consider the element due to its awareness creation. Also, it assists in inducing the intermediaries to sell and stock the marketer’s product offering, or/and persuade consumers to purchase the product within the specified period. The direct marketing element refers to an interactive marketing system that makes use of advertising media to effect transactions in any area and measurable responses (Levy, 2008). This communication element stimulates an immediate behavior modification in a way that the behavior can get recorded, analyzed, tracked and stored in a database for future use and retrieval. The company can use direct mail, database marketing, radio, television shopping, print media and telemarketing (Ghauri & Cateora, 2014). Personal selling is a communication element that defines a person-to-person process that the seller learns about the potential buyer’s needs and tries to satisfy them through offering suitable goods and making a sale. Thus, it is extremely personal by direct contact with the buyer. In order to be effective, A&R should integrate the element with other marketing communication mix elements. Sponsorship element refers to the brand alignment with an activity so as to examine the commercial potential developed by the Association. Therefore, the element positively influences the company’s brand image or/and sales amongst the target market of the sponsors so as to attain the corporate and marketing objectives. This element is impersonal and focuses on the sponsoring of the image of the firm. The internet is an important new marketing communication element. Parker (2001)argues that it is not a selling or a mass medium but a communication link that develops online relationships. 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