Economic Risk and Pricing

Introduction

The questions for the module 04 part of your SLP direct you to consider marketing communication and promotional activities. This is quite an extensive section of the marketing strategy.

Excluding your title page, and any prior sections, revised as necessary, the new section of the international marketing strategy for SLP04 should be approximately three pages long.

SLP04 should begin with a revision of what you prepared for SLP01, SLP02, and SLP03 with those revised pages (sections 1 – 16) placed before you answer the following sections:

Marketing Strategy Sections for SLP04

13. Assess the CULTURAL ISSUES which your target market(s) might present in developing a promotions campaign.

14. OuTline a PROMOTIONS CAMPAIGN which takes account of the analysis conducted in the previous section, in particular dealing with:

15. COMMUNICATION OBJECTIVES. What do you want to be achieved in what time frame in terms of communicating to your potential customers?

16. What COMMUNICATIONS MEDIA should be used and will there be variations in media or message for your market segments?

17. Decide whether and what SALES PROMOTIONS you are going to use?

18. Determine whether PERSONAL SELLING will be used and if so how will this be organized, e.g. will training be required?

19. Explain the MARKET RESEARCH conducted for the Module 4 sections of the SLP.

REMINDER: SECTIONS 14-18 INCLUSIVE AS WELL AS SUBSEQUENT SECTIONS SHOULD BE INFORMED BY THE ANALYSIS OF CULTURAL ISSUES YOU REPORT IN SECTION 13.

Make sure you use section headings for each of the sections. Use the CAPITALIZED BOLD words as main headings and the non-capitalized bold words as subheadings.

Write in a succinct, organized, and professional way. DO NOT USE ESSAY FORMAT.

Please submit SLP04 by the end of this module.

SLP EXPECTATIONS

It is expected that you will explain the alternatives you considered and why you decided to make the recommendations you do. Also that you will use information from the background readings as well as any good quality sources you can find to deepen your understanding of the project and that you will cite all sources and provide a reference list at the end of the paper.

The following will be assessed in particular:

Your demonstrated understanding of the concepts and frameworks used to conduct analysis for the project. Generally formal definitions are not required as understanding can usually be demonstrated by the way you apply or interpret the concepts.
Your ability to conduct marketing analysis appropriate to the project. The sections above require a combination of description, (e.g. what will be done) and analysis (explaining why it should be done that way). Graders will place more weight on analysis than description alone.

Below is all the work from module 1 to 3.

Introduction
This paper develops a hypothetical international business idea and analyses the economic environment in which the business is going to be established to find out how factors like competition, production and government policies would affect the business.
Name and Nature of the Business
The business will be called En-Sync Technologies Inc. It will be based in New York with subsidiary headquarter based in West Africa particularly Ghana. The business will use the latest technology to manufacture electrical items like energy saving lamps, solar panels, power invertors and other electrical energy saving solutions. The business will also venture electronics like mobile phones, television units, television decoders and home entertainment hi-fi systems. Manufacturing will be done in Ghana where there is affordable labor. But overall management will be done from the headquarters in New York. The main objective of the business will be to provide quality energy efficient electronic and electrical products to the West African and East African market.
Market Entry Strategy
A potential market has been identified in Ghana and Kenya. Solar solutions are particularly needed in Africa where there is poor electrical power distribution and most homes cannot afford the electricity from the national grid. According to data available at http://www.state.gov/www/issues/economic/trade_reports/99_toc.html, the Ghanaian GDP expanded steadily from 1997 to 1999. This implies an increase in income of the population. Inflation has also been dropping steadily meaning the general population can be able to afford luxurious electronic items. The data also shows that imports from United States have decreased steadily over the three years. It seems like steps are being taken to reduce imports from the West. Exportation would also be expensive due to freight and insurance charges and taxes applicable to imports. Manufacturing goods in the United States and exporting them would therefore not be a wise idea. The labor force has been increasing meaning that skilled labor is available in that market that can support production at a reasonable cost. The site also states that Ghana has a relatively stable political environment conducive for business. The government has also reduced subsidy to local producers hence creating a level playing ground for both local and foreign manufactures. The government has also initiated steps to strengthen the private sector and has embarked on a privatization program. En-Sync Technologies could take advantage of these developments in the private sector. Information from http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field%28DOCID+gh0008%29 indicates that Ghanaian economy is mainly agriculture based and the manufacturing industry is still not well exploited. There is a huge potential opportunity for investment in the manufacturing sector.
Competition
African markets are not heavily industrialized so there are likely to be little local completion from the manufacturing industry. According to http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field%28DOCID+gh0008%29 , local electronics factories reportedly closed due to foreign completion leaving a gap in this sector that can easily be filled. Major competition is expected to competition is expected to come from imports especially from Asian markets. Camordy (2011) write that China dominates West African imports especially cheap electronics. China will thus be the main competitor in the Ghanaian market. Chinese products are preferred because of their low price and their unique features that serve the African needs quite well for example mobile phones with flashlights for use in the dark where electricity is unavailable. These products are however known for their low quality and lack of durability. To counter this, En-Sync will borrow from the architecture of the Chinese goods and develop electronics with features relevant to the African environment. To produce high quality products at low cost, En-Sync will rely on the cheap easily available labor in the local market. On job training will be offered to the employees to achieve the highest level of skills. European electronic imports are also available in the market but they are not preferred due to their high prices that compensate for their high quality. En-Sync will strike the balance between quality and cost to the consumers
Comparison of Alternative Markets
United States
(Local Market) United Kingdom
(Foreign Market) China
(Foreign Market)
Production Costs High Cost of labor High labor costs Affordable labor cost
Competition from similar business High competition from established similar businesses High competition from similar businesses High competition from similar businesses
Legal factors Tax incentives available Heavy taxes to foreign businesses Heavy taxes
Political environment Stable environment conducive for business Stable political environment Stable but autocratic political environment
Economic growth High per capita income High per capita income. High per- capita income

Most of the factors analyzed in the table above tend to favor alternative markets except competition that is relatively low in Ghana En-Sync’s market of choice. The company’s strategy is to focus on fast growth and increase market share as fast as possible. That cannot be achieved where production costs are high and competitors are well established hence an African market like Ghana and Kenya were the best choices for En-Sync Plc.
Customer analysis
The company will target to sell its products to customers in Kenya. The market will be segmented after thorough customer analysis has been done. The company will have its headquarters in New York, manufacturing will be carried out in Ghana and the products will be sold in Ghana, USA and Kenya. Dibb & Simkin (1997) noted that customers of various products exhibit heterogeneity in their product requirements and buying behavior. Segmentation of the market in Kenya will involve designing segments made up of customers with similar buying patterns.
Since the products will potentially be bought by a large number of consumers the only viable segmentation strategy will be geographical segmentation of the market. Geographic segmentation is used where customers who live in a certain region share some related wants and needs which differ from customers in different areas (Martin, 2011). Products such as mobile phones with flashlights, solar panels, energy saving lamps, power invertors and other electrical energy saving solutions will be sold in areas with low electricity penetration and in low middle income areas. This is because such areas have low electricity prevalence. The segmentation will be as follows;
• The first segment will comprise; Lower Eastern; lower middle income areas in cities and parts of coastal areas- products to target such areas will include mobile phones with flash lights, solar panels, energy saving lamps, power invertors and other electrical energy saving solutions. Price will be pocket friendly because the purchasing power is low.
• The second segment will be customers who reside in upper middle income and upper class areas. These are such estates as Runda, Muthaiga, Kitsuru, Lavington, Nyali in Mombasa, Milimani in Kisumu etc. in Kenya. Products that will be sold in those areas include; mobile phones, television units, television decoders and home entertainment hi-fi systems. The pricing will be at a premium because the purchasing power is very high.
Marketing mix variables of price, place, product and promotion will be designed to ensure customer preferences and tastes are prioritized in each segment and enable the company to be competitive and sustainable. Promotion activities will be designed to suit each segment. The size of the market is estimated to be about US$ 5 billion.
Market Entry Mode
The preferred market entry mode will be distributorship. This mode of market entry will involve identifying the right distributor because the company’s image and integrity will depend on the perception the target consumers have on the image and integrity the distributor (Sherrie, 1999). According to Sherrie (1999) the distributor will be responsible for promotion and marketing of En Sync Plc.’s products in the various segments in the entire country. This mode will offer En Sync Plc. control over quality and price(Sherrie, 1999). En Sync Plc. will not need to assign more resources to the Kenyan market as would have been the case in a joint venture.
The general objectives or goals of your business
The general objective will be to achieve a minimum of 10% of the market share in the first year and target a growth in market share of at least 20% each year for the next 5 years. This translates to a targeted sales figure of US$ 500 million in the first year and a growth of 20% in sales each year for the next 5 years.
Market research conducted
Market research was conducted to determine whether there is a sufficient market for the products that will be produced by the company in the Kenyan market. This was done because lack of sufficient knowledge about a foreign market a company intends to enter is the main reason why firms fail in the international marketplace (Czinkota & Ronkainen 1994). The method used to do the research was by collecting intelligent information on the market and customers through the use of secondary research. Information was collected from trade journals, CIA intelligence sources, information from the Kenyan commercial attaché in the Kenyan Embassy in Washington, travel magazines and other research works, which was retrieved from http://search.proquest.com. The data was used to segment the market, to identify the best distributor and determine pricing strategies for the different segments to be targeted.
En-Sync Plc has therefore chosen the Kenyan market due to favorable government policies, relatively stable political environment, manageable completion and low production costs. The nature of the company’s products is also best suited for the African market that is solar products can easily move in developing countries compared to first world markets.
Culture and distribution
Distribution of products takes place through channels. The channels that are going to be used in ensuring that the products reach consumers are through intermediaries. The choice of the intermediaries is important in ensuring that the image and the integrity of the company are maintained (Shang et al 2009). The perception that the consumers have on the intermediaries or the distributors will play a fundamental role in the sale of the products (Kotler, 2009). Apart from distributing these products, they will have the responsibility of marketing products to customers through sales promotion and other advertisement modes. The company will have the authority to control over the quality and the price of the products in the market. Having authority to control price ensure that the intermediaries does not exploit the customers by charging them higher prices. Therefore, it will ensure that the prices of the products remain original.
Cultural background
In selecting the intermediaries, the cultural background will be considered. People have different cultures and languages. Therefore, to ensure that products are well received in the market, the intermediaries will have to come from various regions where the products are to be distributed. These intermediaries have a good understanding of the geographic locations as well as understand the needs of the customers. Furthermore, because, of the familiarity, customers will be free to interact with them and buy these products.
Location
The products will be distributed in the entire regions of Kenya where there is no electricity. They will also be distributed in areas where there is power for emergency use incases of power failure. The intermediaries will come from all regions to ensure that all customers are reached (Kotler, 2009). However, the first segment of the products will be distributed in lower eastern among low income people residing in coastal areas and the second segment will be in areas such as Runda and Muthaiga that have people from upper middle income. The products will be distributed throughout the year, to cater for the new customers that crop up on daily a basis. Continued supply will also instill confidence in the customers about the company and this will create loyalty among the customers. Agents will be used to ensure that products reach the consumers. The agents have no right of ownership and therefore, act on behalf of the producer. Products will be ordered through the agents who will relay the information to the producer.
Variation in distribution
The distribution of the products will be categorized into segments, to target specific markets. The customers have different needs, they come from different geographic locations and therefore, for effective distribution, they will be put into segments. To ensure that customers are well-understood, psychographic segmentation will be used. Consumers will be divided according to their personality, social class, lifestyles and values (Goldstein, 2007). For instance, customers that come from higher social class will be supplied with products that are of high value and which cost high compared to those from low social class. Therefore, there will be variations in the distribution of products to various target markets.
Competitive reaction
It is expected to encounter challenges when conducting a business. Other companies also sell products that the company deals in. Chinese products are highly distributed in the market. Therefore, it will be a challenge in getting distributors to distribute the company’s products. These distributors already in existence will come up with various strategies to counteract our products (Kotler, 2009). Some of the strategies they may use are to carryout extensive sales promotion and marketing in the markets that they are already established to ensure that we do not get enough market share. They will also aspire to expand their areas of jurisdiction to mitigate the loss that they will face as some of the customers will resort to purchasing our products (Xia, Xiao & Zhang, 2013). Therefore, this will be a challenge to our products. The best strategies to counter these behaviors of our competitor’s distributors are to increase the level of marketing programs and to use price strategies to sell our products. Furthermore, quality of the products will help the distributors to have a competitive edge over their competitors.
Market research
Market research is integral in every stage of conducting business. It is through marketing that, the markets and the needs of the customers are identified. The research also helps in planning and ensuring that appropriate strategies are adopted to ensure that the organization has a competitive edge (Moore & Pareek, 2009). Marketing research at this stage will seek to identify the appropriate distributors that have the competence to ensure that the company achieves its set objectives. Identification of the right distributors is an important step in ensuring that products are well-marketed and distributed to target audiences in the right time and in right quantity. Secondly, marketing research will seek to identify the areas where there is a prime market to be able to assign the distributors regions that they can sell the company’s products. The research will provide sufficient information about the appropriate distribution channels to help the company make appropriate decisions.
Conclusion
Distribution is a key stage in marketing. Products must be distributed to customers for the company to realize its objectives. Using appropriate strategies in distribution is essential to ensuring that indeed the aims and objectives of the company are realized.

References
1999 Country Reports on Economic Policy and Trade Practices. Released by the Bureau of Economic and Business Affairs U.S. Department of State, March 2000. Retrieved from
http://www.state.gov/www/issues/economic/trade_reports/99_toc.html
Czinkota, M. R., & Ronkainen, I. A. (1994). Market Research For Your Export Operations: Part I – using secondary sources of research. International Trade Forum, (3), 22-22. Retrieved from http://search.proquest.com/docview/231372260?accountid=45049

Dibb, S., & Simkin, L. (1997). A Program For Implementing Market Segmentation. The Journal of Business & Industrial Marketing, 12(1), 51-65. Retrieved from http://search.proquest.com/docview/222021802?accountid=45049

Ghana. Economy. http://lcweb2.loc.gov/cgi-bin/query/r?frd/cstdy:@field%28DOCID+gh0008%29
Goldstein, D. (2007). What is Customer Segmentation? Mind of Marketing.net, New York, NY.
Kotler, K. (2009). Marketing Management, Pearson Education Australia: Frenchs Forest.

Martin, G. (2011). The Importance of Marketing Segmentation. American Journal of Business Education, 4(6), 15-18. Retrieved from http://search.proquest.com/docview/874269598?accountid=45049

Moore, K., & Pareek, N. (2009). Marketing: The Basics, In: The Basics. Edition: 2nd ed.
Padraig Carmody (2011). The New Scramble for Africa Retrieved from
http://books.google.co.ke/books?id=qIIbFiBOJbEC&pg=PA87&dq=chinese+imports+in+west+africa&hl=en&sa=X&ei=qJIPUdeNG8XprQfy3YGQBA&ved=0CFkQ6AEwBg
Sherrie, E. Z. (1999). Choosing a Market Entry Strategy. World Trade, 12(5), 40-46. Retrieved from http://search.proquest.com/docview/228337756?accountid=45049

Shang, J et al. (2009). Distribution Network Redesign for Marketing Competitiveness, Journal of Marketing, 73(2):146-163.
Xia, Y., Xiao, T., & Zhang, G. (2013). Distribution Channel Strategies for a Manufacturer with Complementary Products Distribution Channel Strategies for a Manufacturer with Complementary Products, Decision Sciences, 44(1):39-56