How does international expansion fit into the firm’s strategic planning process? By that I mean, in what context does it come up and get decided that a firm will attempt an international expansion project?Is an international expansion project a short term project or a long-term project?
Investing or venturing into the international market involves critical analysis of the internal and external environment in which the company operates. Usually, the company will decide to venture internationally due to a saturated market or fierce competition in the current country of operation. The demand for the company’s products may have diminished as a result of an economic crisis thus the company will target foreign markets to sustain its sales. In other words, the firms expand internationally to seek new customers for its products. For example, the current Euro zone crisis led to low demand in Europe and many companies extended their businesses to emerging markets where demand was high. A company may also venture into the international market to enhance the cost-effectiveness of its operations especially for manufacturing companies that will benefit from low costs of production in developing world. Global expansion is a long term project as it involves demanding logistics to be successful. Thorough research must be undertaken to ensure that the expansion will create value for shareholders. Furthermore, the company must correctly estimate the cost of entering the targeted market as well as comprehending the business practices, culture and norms. The company also has to understand the existing laws that govern businesses/business ethics in the target market. The level of competition and the competitive advantage of the competitors must be properly assessed to ensure a successful international expansion strategy.
Using the concepts related to economic development, discuss the demand to both industrial and consumer products for a country as it moves from being underdeveloped economically to being fully developed economically.Which type of product requires the greater degree of adaptation, the industrial product or the consumer product? Explain your answer.
As the economy progresses from being underdeveloped (subsistence economy where agriculture is dominant with low levels of income and low standards of living) to being developed (modern industrialized economy), there is an increased demand for industrial products and consumer durables. The economy undergoes structural change with increased labor and capital productivity through mechanization and specialization. As the industrialization process increases, local industries will demand more intermediary products to make finished products. There will be more industrial products produced to meet both the local and international demand. Usually, underdeveloped economies have low demand for industrial products and industries concentrate on production of consumables that are in high demand. In general, consumer products require a greater adaption than industrial products. Varying cultural practices and beliefs across the world demands the tailoring of consumer products to meet the demands of specific markets. Moreover, customers have different economic powers therefore a company must offer different products depending on the income levels. On the other hand, industrial products such as transistors and microchips are sold unaltered, and only cosmetic changes are required such as printing the user manual in a language understood by the target market.
Briefly, describe the pros and cons of each strategy. Next, briefly describe the types of factors that might compel a firm to adapt its offerings. Finally, briefly discuss the elements of the marketing mix that are most likely to be adapted and why.
Standardization strategy entails the marketing of a product using a standardized marketing mix in every targeted market. Since the company market standard brands across the world, standardization’s main advantage is costs saving. The company benefits from economies of scale in production and marketing. The benefits are passed to the consumers in terms of low prices further enhancing the company’s competitive advantage. Standardization disadvantage is that it is the product-oriented instead of being customer oriented. Customers have diverse tastes and preferences that must be taken into account when marketing. Adaptive strategy takes into account the lack of homogenization in the global market. Adaptive strategy is expensive as the company has to employ diverse tactics depending on customer needs. Heterogeneity among countries, level of economic development and government and trade restrictions will compel a firm to adapt its offerings. Price and product are most likely to be adapted. Prices will vary depending on the quality of the product offered. High quality goods will attract premium prices and likely to target the middle and upper class. Goods for the low income earners will be offered at low prices and likely to be of lower quality.
Briefly, describe what is meant by “total product”.Of the various elements of the “total product”, which are more likely to be adapted? Explain your answer by giving an example.
Total product concept argues that the product not only entails the physical product on display but also encompasses the services and benefits offered together with it. A total product has three elements: core; expected; and augmented product. Expected and augmented product can be adapted to increase a product’s appeal to its target consumer. Apple has designed the iPhone for communication purposes (core product). Its quality level, design, features and styling increases its market appeal (expected product). iPhone customers are offered warranties and iOS updates (augmented product).