The following is the 1st paper then followed by paper #2
I only have the bulk of the paper and not the face or reference sections listed. This will give the idea of what I am working from.
Paper #1:
Product Offering
The global market has many opportunities for business to offer new products and expand their consumer base in the world marketplace. Numerous countries offer expansion in the global market. A business must methodically perform market research to launch a new product successfully into the global market. The product selected for this assignment is fair-trade cotton clothing marketed by Tesco, PLC of the United Kingdom (UK). The purpose of this assignment is to begin a product launch by selecting a product and country, evaluating market need and growth for the product, perform a SWOT analysis, analyze the competition and define the product offering and product identification. Justification of the product chosen will also be evaluated.
Market Needs
The fair-trade market for cotton clothing is gaining popularity. 66 percent of those surveyed by Fraser Consultancy, a communications research and strategy company, are expected to buy more fair-trade products over the next several years. The fair-trade mark on products certifies “disadvantage producers in developing countries are getting a decent price for their goods” (Murray, 2006). As consumers become economic and environmentally friendly, the market for fair-trade cotton clothing is expected to increase significantly. Tesco, PLC is committed to providing consumers quality products at affordable prices. In addition, currently, clothing sales are up 11% in central Europe (Tesco, 2009).
Market Growth
In the global market, environmentally and socially conscious business practices are a goal of most organizations. Consumers and businesses have a social responsibility to buy products that are beneficial to the world and support sustainable production. “The sales of Fair-trade certified products have been growing on an average of almost 40% per year in the last five years. In 2008, Fair-trade certified sales amounted to approximately €2.9 billion worldwide, a 22% year-to-year increase (Fairtrade Labeling, 2009).” Global sales over the last four years have tripled and many producer organizations have become certified. Because of strong consumer support, Fair-trade products have gained significant ground in growing market share in countries in which Fair-trade products are sold. “In some national markets Fair-trade accounts for between 20-50% of market share in certainproducts (Fairtrade Labeling, 2009).” With these growth trends, and the company’s current standing as the fourth largest value clothing company in the world, the combination should offer vast opportunity to market the socially conscious clothing line (Marketwatch, 2009).
SWOT Analysis
A SWOT analysis consists of evaluating a company’s strengths, weaknesses, opportunities, and threats. For Tesco, the SWOT analysis is as follows:
Strengths
Market Leader: Tesco, PLC is a leader in the UK grocery retail market. This assists the organization to enhance its market position (Tesco, PLC, 2009).
Market share: Tesco, PLC holds a number one position in terms of its market share in the grocery retail industry of UK (Ball, 2009).
Robust brand image: Brand image of the company is strong and is fostered by its quality products. It assists the company to increase customer shopping at the existing stores.
Diversified business: The Company has a diversified business across the countries that assist it to create competitive advantage (Constantinides, 2006).
Weaknesses
Highly dependent on UK market: Tesco is highly dependent on the UK market for the revenue generated and growth that is not viable for its future.
Weak inventory turnover. In 2007, Tesco reported a weak turnover ratio. This decline means the company does not have an effective inventory management system and may be forced to sale goods at a discount (Tesco, 2007, p. 7).
Weak returns. Over the last few years, Tesco has reported a weakening return on investments and equity. These diminished returns affect investor confidence in the company and may inhibit its growth (Tesco, 2007, p. 7).
Opportunities
Non-food and private label retail sector: The non-food and private label retail sector has had strong growth in the last few years and this is an opportunity for Tesco to enhance its market share.
Other international markets: Tesco has opportunities to enter other international markets. Recently, Tesco has purchased stores in central Europe and Southeast Asia (Tesco, 2007, p. 8).
Threats
Low price supermarket: Low price discounting supermarket stores are increasing their participation in the retail market. This will pose a challenge to the company’s profitability (Tesco, 2009).
Economic conditions: In 2006, the minimum wage in the UK increased and 58% of Tesco employees are in the UK. This will affect the financial margins and profitability of Tesco (Tesco, 2007, p. 9).
Intense competition: Competition is intense in the grocery retail market in the UK and this will pose a threat to the product launch plan of Tesco.
Competition
Currently, Fair-trade cotton products only account for a small percentage of the UK market. Tesco can be a trendsetter and leader, by developing unique ways to reach a broader market. At this time, more than 1,000 cotton products that carry the Fair-trade mark. Because of the changing taste and preferences of target groups, rival firms are adopting innovative modes to capture the market. Competitors to Tesco PLC like ASDA, Marks and Spencer, Group Limited, Topship, Monsoon and Next House of Fraserur, use competitive strategies to enhance their market share (Fantastic Fairtrade facts, 2008). Competitors often adopt price-cutting strategies to increase sales. In the grocery retail market, the extent of competition is higher and Tesco must consider this and take steps to ensure the success of the product launch.
Product Offering and Definition
Fair-trade cotton clothing is made from the cotton produced ethically and in a sustainable manner (Tesco, PLC, 2009). Fair-trade aides in making sure small-scale cotton farmers, who are more vulnerable, get a better trade deal. Tesco, PLC designs different Fair-trade clothing like baby clothes, ladies clothes, menswear, children’s wear, cotton bags and school uniforms. These products are designed using innovative attributes to add distinctiveness in the product offerings. Some of Tesco’s current brands of Fair-trade cotton clothing are Cherokee, Stone Bay, Florence and Fred, and Green Baby for Tesco.
To add value to the product offerings, iconic style is executed in the designing. Tesco currently has 14 different markets in addition to the online market. Tesco needs to help grow the market of Fair-trade cotton clothing by launching stylish apparel that appeal to younger and more fashion-geared customers. The product lines need to be more appealing, affordable, and more accessible to larger markets. The pricing strategy for these products will be value-added that will attract the concern of the target group (Goi, 2009).
Product Identification
Tesco, PLC will launch a Fair-trade cotton clothing line. The company currently offers individual Fair-trade cotton products but does so in addition to mostly non-Fair-trade items. The venture will be a full line of cotton clothing for adult males and females as well as children. The clothing line will include fashion forward designs to appeal to the youth and hip young adults as well as practical items such as school uniforms to appeal to parents and caregivers. The products will be moderately priced and affordable. The idea is to provide a highly fashionable, socially responsible clothing line at a reasonable cost.
Conclusion
The United Kingdom is ideal for Tesco, PLC to launch its full line of Fair-trade cotton clothing. Socio-conscious products are increasing in demand and Tesco will be capable of maintaining a competitive edge with the Fair-trade cotton clothing line. Diversification in the food retail market in addition to competitive prices and price reduction strategies will increase Tesco’s current market share and ensure that Tesco maintains its status as a leader in the global marketplace.
Paper 2
Channel and Pricing Strategies
In the global market, channel and pricing strategies must be thoroughly investigated for an organization to make the most appropriate marketing decisions. Tesco, PLC is an international retailer based in the United Kingdom (UK). Tesco will expand its international market to Germany with its line of fair-trade cotton clothing. The purpose of this channel and pricing strategy is to develop these strategies in the domestic and international markets. This will include justification for the chosen international market, selection and justification of an appropriate channel in both markets, pricing strategies for both markets and the implications of the environmental factors on the organization’s choices for the domestic and international markets.
Justification of International Market
Currently 70 % of Tesco’s market is located within the UK and consists primarily of food related items. Over the past several years Tesco’s marketing strategy is to increase it’s foreign and non-food market. Part of Tesco’s strategic plan is to expand into other markets so that it increases its market share internationally (Tesco, 2009). Tesco will expand its market into Germany. Currently, central Europe has 11% increase in clothing products and Tesco had a 6% increase to £12.5 billion in non-food sales in 2009 with a £3.8 billion being an increase in the international market (Tesco, 2009). In 2007, Germany’s women’s wear market was $28 billion while the menswear market was $14.8 billion (“Clothing”, 2009). From 1995 to 2002, Germany had an increase in imported clothing of 17% (Keenan, n.d.). The German trend for increased imports and the market can sustain Tesco’s fair-trade cotton clothing line and be profitable for the company.
Channel Strategy
In an effort to create a market in Germany and also to make our already existing international and domestic markets more accessible, Tesco, PLC needs to determine the appropriate channel strategy that will make our cotton line widely available. Choosing appropriate marketing channels will allow us the opportunity to earn a greater return by increasing investment in our main business ventures (Kotler & Keller, 2007). We are readily aware of several issues that come with global marketing like cultural and political issues. Currently we are doing well in retailing the fair trade cotton brands in our current markets, however using intermediaries will help to expand the cotton brand in the market faster and more cost efficiently.
A push strategy would be the most appropriate for our cotton brand line. This strategy will allow our company to utilize our sales force and trade promotion funds to induce intermediaries to carry, promote and sell fair trade cotton products (Kotler & Keller, 2007). At this time the fair trade cotton brand has a low market with competition slowly rising. Customers have several different brand choices, so we need to ensure that the benefits of our products are well understood. Emphasis should be made on the aid of local farmers and a 100% natural product that eco-friendly.
Channel Flow
Our goal as a company is to make the cotton brand easily and widely accessible in the most time efficient manner available. Our channel flow will be from the company to the customer providing a forward flow and pushing the low price, quality and eco friendly qualities of our products. Tesco, PLC fair trade cotton lines are already established on the web, so the product is already easily accessible, allowing the consumer to have self serve options in which they can enjoy lower costs.
Channel Levels
Our channel levels should remain minimal in order to make it easier to remain in control and to allow us to find information about end users. One- level marketing would be sufficient enough to allow interaction between the manufacturer and retailer and the retailer and the consumer in our domestic market; however we need to consider a whole channel view into distribution with our global markets. Implementing a selective distribution strategyrather than exclusive or intensive strategy, will allow usto gain adequate market coverage with more control and less cost than intensive distribution (Kotler & Keller, 2007). Tesco, PLC can just choose a moderate amount of intermediaries who are willing to carry cotton brand products (Kotler & Keller, 2007).
It is important for our fair-trade cotton clothing brands, remain in our brand name. Tesco also and wants to remain in control of the purchases and sales in lieu of the intermediaries being able to negotiate their product purchasing from us. Our company just needs assistance of facilitators to distribute our product internationally. Tesco will ensure that each channel member has an opportunity to be profitable and will be treated with respect.
Pricing Strategies for Entering the Markets
In both domestic and international market, the pricing strategy of the company should be based on the competitor’s price. At the time of deciding prices of the products in both domestic (UK) and international market (Germany), Tesco should evaluate the market and consumer’s income level to decide the prices of the product. It should not be too high and too low. High prices would be unable to attract the consumers and low prices would not give enough profits to the company (Stewart & McAuley, 2000). The company should use cost based pricing strategy [cost+ (definite profit) = price of the products]. This is appropriate for the firm because it would give the sufficient benefit to the company and the consumer would not feel that company is charging high prices. The profit margin should be low in starting to retain a wide range of customers for long term (Kerin, Hartely, Berkowitz & Redelius, 2006).
Currently, Tesco has domestic as well as fourteen other international markets that we channel through, and this means dealing with several different pricing issues and currency fluctuation risks. With Germany becoming our fifteenth market, we must ensure that we avoid issues with price escalations, transfer price, dumping and the gray market. We will employ setting our price according to cost, based in each country, this would mean that we will use a standard markup of costs everywhere. The mark-up will not include any transfer prices, where we charge another unit in the company for goods shipped to foreign subsidiaries (Kotler & Keller, 2007). We will ensure that the correct price is set according to the appropriate German income tax rate and tariff duties.
With our price strategy, there are risks that our intermediaries in the low-price countries will purchase and re-ship to high-price countries to gain a larger profit. To avoid those risks as much as possible, and to ensure that we would have already gained our profit at initial sale with the intermediaries; we would employ our pricing strategy to include policing our distributors by raising the prices to our lower-cost distributors (Kotler & Keller, 2007).
Tesco, PLC will ensure that we have a near standard price, to our domestic company. We want to win the German market, but we will ensure that we don’t get charged with dumping, which occurs when a company charges either less that its costs or less than it charges in its home market (Kotler & Keller, 2006). Our consumers will be able to see that our prices are generally low and affordable universal.
Implications of Changing Environmental Factors
Before entering into the new market, the firm should evaluate the various environmental factors, because they are directly or indirectly affects the performance of the company. These factors also help the company to increase the profitability as well as prevent obstacles in the growth of the firm. The significant environmental factors are government, political, economical, social, and technological.
Government, Political or Governing Bodies:
Major Legal Entities:
Germany is a democratic country in which the government is the Parliament. Germany has two types of the control systems such as supervisory board and board of directors. The major legal entities in Germany are Government Corporation, Limited Liability, Non-stock Corporation, Stock Corporation, License permitting, Partnership, not-for-profit Corporation, voluntary associations, franchising, etc. (Wessing, 2004).
Influence on Organizational Choice:
Variety of legal entities in Germany influences the behavior of Tesco to enter in the new foreign market. As Tesco is entering in the new market for earning profits, the best legal entity for the firm would be the license permission (Kerin, Hartely, Berkowitz & Redelius, 2006). Apart from this the firm can use limited liability options and franchisee options. With the license, the firm can easily implement the direct channel strategy in the country and establish its string presence without any help (Berry, 2008).
Risk Factors: