Summaries from assignment one
Global marketing is the process of redefining the marketing strategies of the company to adapt to the situations in other countries. As stated by Peng (2016), global marketing is about taking commercial advantage of a country by establishing the global operational difference. The companies always judge the opportunities and similarities so that they can meet the global objectives set by the management. In this assessment, Wesfarmers’ subsidiary Coles is chosen to market in Germany. International entry modes are described along with it is necessary to recognise the potential market segments and target market in chose country. In this assessment, choice of STP strategies for Wesfarmers’ Coles is given for each of the target market segments. In addition, recommended positioning strategies for each of the target market are also provided.
In the assessment 1, external environmental analysis of Germany has been conducted where political, economic, social, technological, legal and environmental analysis has been analysed in light of the retail industry. Germany provides a stable economy as the GDP of Germany reached $4.171 trillion (Heritage.org, 2018). Political decisions of Germany ensure the bigger companies can do business effectively. Market analysis of Germany’s retail industry has been conducted. Germany has 20% of the purchasing power in Europe and the retail industry in Germany mainly shows the characteristics of Oligopoly. Competition in the retail industry in Germany shows the competitors are mainly regional companies like EDEKA, REWE, METRO and the European large retailers Aldi and Lidl are also in Germany. In the final section of assessment 1, organisational analysis has been conducted where Coles’ strengths of being in the market for more than 100 years is shown. In addition, Germany has the fourth largest GDP in the world and Germany will also provide 80 million customers to Coles. On the other side, weaknesses of Coles lie in the dispute among the stakeholders. In the European market, Coles does not have any experience.
Domestic regulation and management preferences: Before setting up the international market, the firm needs to understand which international markets are of no interest to the firm. In addition, the organisation needs to follow governments exercise in some of the degrees of control over the firms and it should conduct the business. Restrictions are changing and the firm needs to track the trade barrier.
Initial entry assessment: Initial entry assessment can be done by analysing macro-environmental factors in international markets. External environmental analysis helps to identify the most attractive foreign market. According to Shenkar, Luo & Chi (2014), expanding to the new market is an effective way to bring growth for the business and the entry assessment starts with defining the market and performing the market analysis.
Screening of a market selection
Competitive environment: The firms have to identify foreign markets and the competitors in the market. If the competitors are high in the market, both foreign and domestic, the new companies have to take the solid marketing strategies. High competition creates substantial barriers for the company.
Market responsiveness: The firm needs to understand certain activities which help in marketing efforts to gain the satisfactory market share. Market responsiveness allows marketing activities to establish product or service in the marketplace.
Internal trade-off analysis: When the firms find that the domestic market is no longer attractive and they opt to consider trade-off to meet the objectives so that they can gain the competitive advantage. Cultural similarities between the two countries will help to sell the products and the trading gets easier if the products heavily on the geographical proximity (Brannen, Piekkari & Tietze, 2017). The firms can influence technological and e-commerce advances.
Germany represents 20% of purchasing power in the continent of Europe and retail marketing of Germany has the turnover of EURO 512 billion (Junker & Wittenberg, 2017). Retail market of Germany is extremely competitive; however, the retail market of Germany shows the positive growth during 2014. Wesfarmers’ Coles chooses Germany as it provides a strategic location in the centre of Europe. Germany provides political stability and it also gives a good anchor in international relations. Germany has the largest population of the European Union and Germany has the best infrastructure among the developed European Union. Germany provides a strong manufacture basis and Germany earns one-third of the GDP from the manufacturing business. Germany has the strong export as it has the high range products with diversified clients. Germany has a highly-qualified workforce as youths are educated mostly. Germany provides the consolidated public finances and competitive taxation law that can help the foreign businesses to flourish. In World Investment Report, Germany won the 8th place in the world and Germany is the world’s 11th top economy in terms of the inflow of the business (Kundnani, 2017). Among the 190 economies, Germany is ranked 20th in the ease-of-doing-business. Most importantly, Germany provides the proactive business climate which develops the economy in last few years.
Mission statement:
Coles thinks itself to be an innovative industry leader that supplies customers with value, superior service and convenience. Wesfarmers’ Coles focuses on the customer proposition, innovation and operating excellence. Coles wants to deliver a satisfactory return to the stakeholders and it has developed unique, disciplined business and highly-focused.
The five stages of the overseas market selection process
SMART objective:
Financial objective:
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Specific |
Coles sets the target of achieving 5% profitability |
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Measurable |
This objective can be measured by keeping the financial records of Coles’ business in Germany and the accounts department will do the work |
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Achievable |
This objective is achievable by doing the extensive marketing and opening new retail stores in Germany in different locations |
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Realistic |
This objective is realistic as it will help the organisation to grab the profit within a short period of time |
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Time-bound |
This objective is achievable within 2022 |
To gain 3% of the market share in Germany by the end of 2022
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Specific |
Gaining 3% of the market share |
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Measurable |
Coles can measure the market share by doing an annual survey in the industry or by checking the annual report published by Government each year |
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Achievable |
Coles can achieve the market share by increasing the numbers of retail stores in Germany and through strengthening the customer relationship, innovation and doing the smart hiring process |
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Realistic |
This objective is realistic as it will bring more revenue |
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Time-bound |
This objective is achievable within 2022 |
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Market Entry Strategy |
Examples |
Advantage |
Disadvantage |
Justification |
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Franchising |
McDonald’s uses a franchising business model |
Franchising will provide the benefit of reducing the risk of business failure. The business will be expanded easily using a franchising model. Franchising the business is easier and the business management will provide proper training to the franchise. The franchisee will get the benefit of making a relationship with the suppliers. |
Franchising can be a disadvantage for the business management as the franchise may not be potential. Franchise agreement has some restrictions and the franchisers need to understand this. The franchisee may go out of the business and it is also difficult to give the franchise of the business (Forsgren & Johanson, 2014). In addition, the inflexible nature of the business franchisee might restrict the ability to introduce the change of the business. The franchisee may not help to get the higher profit from the business. |
Wesfarmers’ Coles can opt to take franchisee entry strategy in Germany as franchising can provide the speed of growth of the business and Coles will have the ease of supervision of the business. In Germany, numbers of retail stores are many, franchising Coles’ stores will increase the profitability and it will help to gain market share. |
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Direct exporting |
Kiwi Importer is a New Zealand based company and it uses the direct exporting technique to sell the products in the US. Indirect exporting, the company directly sells the products to the customers without using another organisation or person. |
Direct exporting provides a high chance of making a great profit as there is no middleman and intermediary. In addition, each step of the business is entirely in the hands of the management and the total control of the business is on the management (Adeola, Boso & Adeniji, 2018). Direct export helps the organisation to identify the potential buyers in the different country along with the buying behaviour. |
Direct exporting is associated with the additional expenses and the time of the organisation. If the business is not big enough to provide a lot of effort in making sync of all the activities, the business will suffer. The business management needs to take the responsibilities to handle each step of the business and the employees do not have time to relax. The customers’ feedback and comments must be handled carefully. |
Wesfarmers’ Coles can take the strategy of direct exporting; however, they do not manufacture any products as they just assemble the products. In addition, direct exporting will improve the faster communication from the management. Coles can easily protect the trademark and copyrights of the business. Coles is the subsidiary of the large organisation Wesfarmers, therefore, it will not be tough for the management to employ large numbers of employees in doing the business in Germany. It will also help to extend the market in Germany. |
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Joint venture |
The joint venture is a popular market entry strategy. Vodafone and Telefonica agreed to share their mobile network in the UK. |
The joint venture provides access to a new market and to the new distribution networks. The joint venture also increases the capacity of the organisation and it shares the costs and risks between two companies. Moreover, joint venture provides accesses to greater resources like technology, specialised staffs and finance. |
The joint venture will be risky if the employees of the two companies cannot work together. Both the companies need to go for a similar objective (Hofer & Baba, 2018). If the partners have different objectives, then the firm will suffer. In addition, partners of the joint venture can bring different levels of expertise in the business. |
Coles can choose Joint Venture to enter Germany by selecting an existing retail company. Coles can choose existing regional retail company as part of the venture. It will provide the benefit of knowing the existing customers and the organisation can gain existing market share at the same time. Coles can use the venture partner’s customer database and they can use join forces to purchase, develop and research. |
Target market:
In Germany, primary target customers of Coles can be an urban population of Germany. The retail stores of Coles will be opened mainly near the urban sections. Therefore, urban people will be the main target who can afford to visit the retail stores of Coles.
The secondary target customers of Coles will be based on the demographic target customers, mainly the middle and upper-income category people. The middle class and upper-class people mainly visit Coles’ supermarket. Upper and middle-class family people visit supermarket for their daily needs. Single individuals or the members of the extended families visit the supermarket as they have different needs in the supermarket.
Positioning:
Wesfarmers’ Coles follows the positioning statement of ‘serving the people better’ and it mainly focuses on the consumer proposition, operating excellence and innovation. In Germany, the positioning statement of Coles can be associated with the increased range and quality of the products functionalities. Varieties of products with lower price can attract maximum numbers of customers in Germany.
Marketing Mix:
Product: Coles is a supermarket as Coles always focuses to deliver value along with quality for the customers. Major offerings of Coles are baby products, dairy, fresh vegetables, fruits, bakery, gift cards, liquor and meat. The products are mainly top-quality and it means that the products are fresh. Coles provides special diets to the customers, Gluten-free and kosher. Coles offers low-cost pantry fillers to the customers of diverse ranges. Therefore, the product strategy will be creating a new product line.
Price: Coles can set the competitive pricing in retail stores of Germany. Germany’s retail industry is very competitive and competitive pricing will help Coles to compete with other retail giants, both regional and international players.
Place: Coles can target establishing the retail stores in mainly urban sections of Germany. At first, Coles can target to establish at least 15 retail stores in many of the famous Germany cities. Market areas can be chosen as the destinations. In addition, the distribution channel must be owned by Wesfarmers itself as it will accelerate the speed of filling the inventory and shelves of the retail stores.
Promotions: Wesfarmers is a big company and Wesfarmers can spend money on promoting Coles in Germany. Coles can be promoted through television and radio commercials. Maximum of the family persons and women watch television commercials. In addition, Coles can put advertisements in newspapers in Germany and it will attract maximum numbers of middle-class people. Coles can also shift their promotions towards the digital marketing and internet marketing. Coles is expected to spend millions in marketing so that they can grab a large market share.
Reason to choose a country
Coles can use a differentiation strategy of the products from other retail stores in the city to attract the urban population. Coles can use a differentiation strategy by following the diverse products line. The supermarket is known to stock up the diverse ranges of products and Coles needs to do this in Germany.
Low-cost leadership is fruitful strategy to attract the middle and upper-class customers. The customers will visit the Coles stores time and again if Coles will be able to take the strategy of Every-day-low pricing strategy in the city. Everyone wants to have lower cost products from the supermarket and Coles can fulfil this.
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Option |
Target Market |
Positioning Strategy |
Marketing Mix |
|
1 |
Urban population Coles can target urban population as the density of the people is much in urban area and the stores will also open in the urban area of Germany. |
Coles can do the multi-segment positioning to attract the urban customers. In multi-segment positioning, Coles can target several segments with different products. In urban area, there are various income groups, gender and economic conditional people live. |
Product: Product strategy will be product stretching as this will increase the numbers of the offers by Coles. The urban customers will get different types of products from Coles’ stores. Price: Coles can take the lower-pricing strategy so that the urban customers can opt Coles, not the other retail stores. Place: The stores need to be opened near urban areas and stores which are near the market areas will get the privilege. Promotion: Television and newspaper commercial will help to promote the stores. |
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2 |
Housewives Housewives mainly visit the supermarket to purchase their daily needs. |
Coles can take the price positioning strategy as it attracts a specific customer group that is more concerned with the pricing. |
Product: Product line strategy will be applicable for the housewives as the product line strategy will increase the numbers of ranges in the stores. Price: Everyday-low-pricing strategy will attract the housewives who visit the stores. Low pricing strategy will enable the customers to visit again at the stores. Place: The stores will be located near the market areas of the cities. The distribution channels of the stores should fulfil the inventory. Promotion: It is better to start with hoardings and billboards on the roads and Coles can start to distribute the pamphlets and leaflets to attract the eyes of the women. In addition, television advertising will enable the customers to observe the promotions. |
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3 |
Middle and upper-class people Middle and upper-class people can afford the price of the supermarket and this segment finds out the different types of products which are available in the stores. |
Coles can take the strategy of experimental positioning as it implies the relation between the sensory and cognitive stimulation of the customers. Middle and upper-class customers group will be attracted by observing these product lines. |
Product: Extensive product line will be needed to attract the middle and upper-class people in the stores. Retail stores always need to increase the product line as it needs to reach the physiological and emotional levels of the customers. Price: Coles can take the competitive pricing strategy so that the customers can get the products at competitive pricing. Place: The stores must be located near the urban and city-based areas. The place of the stores is very significant at will attract maximum customers. Promotion: Coles can take the internet and digital media to communicate with the customers. Social media and the internet always helps the company to attract large numbers of customers. Discount offers and the membership programme can also increase the customer base. |
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Preferred Strategy |
In the German retail market, Coles needs to launch a new line of exclusive branded products in the retail stores and this dramatic rebranding can help to attract the customers. Coles can take the strategy of Everyday-Low-Pricing strategy so that the customers can get the products at lower price. In addition, the stores must be located in the urban areas so that the customers can visit the stores easily. Shifting to the digital marketing will help Coles to reach large numbers of customers through television and internet. |
Franchising mode of entry will help to expand the business in no time to different parts of Germany and it will help to attract the urban people. The franchising stores generally open at urban sections. Franchising will help to target the urban people as the retail stores will open near the urban areas.
Direct exporting can target the customers who belong to the middle and upper class of the society. Direct exporting does not include other management or other organisations in the process of entering; all the requirements are done by the company itself. Therefore, direct exporting is associated with the middle and upper class of the society.
Joint venture leads to make the partnership with other company. In addition, the partnership leads to offer various types of products and it will help to attract the housewives and professional women to the stores.
- In order to target the urban population, Coles can do the multi-segment positioning to attract the urban customers.
- To target the housewives and professional women, Coles can take the price positioning strategy.
- In order to target the middle and upper-class people, Coles can take the strategy of experimental positioning.
Coles can focus on the broad target with lower cost in Germany retail industry; therefore, they need to take the strategy of ‘cost leadership’. The source of cost advantage depends on the structure of the industry (Firat, Ozaltin Turker & Metin, 2014). In the retail industry, preferential access to the products, technology and economies of scale helps to lower the price in the market. In addition, Coles can also take the generic strategy of differentiation with the broader target. In the retail industry, differentiation is associated with creating extensive product line.
In Germany, supermarket industry is full of powerful players, Aldi Sud has 1880 discounter stores, Aldi Nord has 2298 stores in Germany, Edeka has 5858 stores in Germany, REWE has 3300 supermarket stores and Lidl has 3301 stores in Germany (German-way.com, 2018). In this competitive nature of the industry, Coles can take the strategy of Joint Venture as it will grow the business faster, generate the greater business and increase the productivity of the business. Coles can make partnership with Kaiser’s, a supermarket chain in Germany owned by Tanglemann Group. By putting effort in Joint Venture, Coles will have the market share of Kaiser which already has more than 26 supermarket stores in Germany, mainly in urban areas. Coles will also have the new insights and expertise of doing business in Germany from Kaiser’s and Kaiser’s can also provide the better resources like staffs and technology to Coles. Kaiser’s and Coles can open equity joint venture in Germany by establishing autonomous joint venture; however, the major characteristics are joint responsibilities and allocation of risks to both companies.
Objectives
The primary target market of Coles in Germany will be urban population who are living near the urban areas.
The secondary target market of Coles will be the middle and upper-class people with decent economic condition who can afford the products offered by Coles.
Coles will take experimental positioning strategy where with the help of Wesfarmers, Coles will try to store various kinds of different ranges products will be stored in Coles supermarket. Experimental positioning will help Coles to offer different products which are unlike to other retail owners.
Product: Coles offers bakery products, fresh fruits and vegetables, dairy products, baby products, deli, gift cards, liquor and meat. Coles can take the strategy of product line stretching in Germany market. As stated by Antkiewicz et al., (2014), product line stretching is an expanding strategy where the new products are launched in the same product line; however, beyond the current product range. Coles needs to add new product range to the existing products in the stores of Germany as it will give extra competitive advantage.
Price: In Germany, Coles will take the strategy of competitive pricing where Coles will set the price of the products at the same level as the competitors. In Germany, many similar discount and supermarket stores are there and Coles will bring the prices of the products in local equilibrium. As a new company in Germany, competitive pricing will help to control the competition by preventing to lose the market.
Place: Most of the stores of Coles will be situated near the urban areas. The distribution channels of Coles will be controlled all by Wesfarmers itself. This will make fulfil the inventory of stores faster.
Promotions: Coles in Germany will do newspaper, television and magazine advertising to reach large numbers of customers. In addition, social media and internet marketing will help to reach the young generation and professionals. Most importantly, Coles will take the strategy of ‘discount’ marketing and merchandising.
Coles is a subsidiary of Wesfarmers and it will be a joint venture with Kaiser’s. Therefore, making a partnership with Kaiser’s, Coles will use the cost leadership strategy to grab the market faster. Cost leadership helps the business to have the profitability and it will lead the business towards higher profit margin. Cost leadership increases the market share to increase customer demand (Alamdari & Fagan, 2017). Coles’ cost leadership will help it to compete with other existing international and local competitors.
Alternative market entry strategies
Reference List
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