Delineating Foreign Market Potential Essay

Question:

Discuss about the Delineating Foreign Market Potential.

Answer:

Introduction

The purpose of the report is to analyse the opportunities that a business organisation may have while expanding itself in the international market. Global marketing is one of the main aims for most managers in order to increase dominance in the business world. For the purpose of the report, Wesfarmers has been considered in order to understand its marketing strategies. The aim of the company is to expand itself and dominate the markets of Germany. Hence, the report focuses on analysing the external as well as the internal factors that may affect the expansion of the company. A proper market analysis, customer analysis and SWOT analysis are done in order to understand the opportunity of expansion. Apart from this, the report also analyses the competitors that Wesfarmers have to face after expanding its market in Germany.

Size of the market and growth rates

According to Horton & Tambe, (2015), market size is one of the most important factors that need to be considered before expansion or growth of an industry. Without a proper size of the market for a particular product, industries may find it difficult to establish and attract customers. The growth rate also determines the level of success that can be achieved if the investment is made in that market. In this case, it can be said that the size of a market, particularly for retail industries is high. This provides an opportunity for Wesfarmers to establish itself in the markets of Germany. The growth rate is significantly high as the popularity of the companies among the customers makes it a huge success in the business (Song & Chen, 2014).

Germany is a country that has a medium level of population. The rate of population in the country is about 82.67 million, which can be considered as a moderately populated country. This can provide an advantage for many companies seeking to establish itself in the German market. As stated by Coale & Hoover, (2015) the size of a population of a country consists of the demographic factor of the country. This provides an additional advantage for companies that consider demography as an important factor for business. Wesfarmers can seek this opportunity in order to increase and expand the business in the country. With the increase in the number of migrants in the country, Germany is opened to a diverse culture of people (Castles, De Haas & Miller, 2013). Thus, this can be a huge advantage for Wesfarmers as it has branches in other countries of the world. This can be a strength of the company while expanding into the market.

Mathews et al., (2016) stated that certain factors restrict the entrance of new industries in a market. These prove as market barriers that are needed to be analysed by a company. In most cases, the barriers exist due to the interference from the Government and due to the poor economic condition of a country. In some case, the technological factors can also play a key role in the restricting the entry of a company. In the case of Wesfarmers, the political situation of Germany can play a huge role in the expansion of the market in the company. The existence of a large number of local retail stores can also hinder the progress of the company. However, certain factors like the social and technological factors can act as the role of market drivers for the company. This is because Germany is a technically advanced country with a population sufficient to help in making the ventures of Wesfarmers a success (Buckley & Hashai, 2014).

Organisational analysis

Wesfarmers is a reputed retail company in Australia second only to Woolworths. Due to this reason, the company holds a high market share in the retail sector of the country. Currently, the revenue of the company is estimated to be at AUD$65.98 billion. The expense of the company is estimated to be at AUD$13.19 million. This indicates that the company spends a lot of amount in the innovation and application of strategies that can increase the profit. The current manager of the company adopts the strategy of manufacturing fresh products and sells them to the public. This accounts for the maintenance of a sustainable environment, which is an important social responsibility of the company. Other strategies include the collaboration with a company of similar items and dominating the market with the help of the company. The collaboration with Coles has helped Wesfarmers to maintain its status as the second best retail company in Australia (Wesfarmers.com.au, 2017).

In order to be successful in the market, every business needs to maintain the satisfaction of the customers. The feedback provided by the customers is important for understanding the improvements required in the business. This is an important factor for any business as customers expect the feedbacks to be taken seriously and changes are implemented based on the feedback (Jin, Ji & Gu, 2016). The buying behaviour is another factor that needs to be considered while manufacturing and distributing goods. The buying behaviour changes along with the needs and demands of the customers. In the case of Wesfarmers, establishing a market in Germany, these can be an important factor for the company as the customers are accustomed to purchasing products from local markets. Hence, implementation of technique based on customer auditing can help Wesfarmers (Refer to appendix).

Marketing Mix

Hanssens et al., (2014) stated that the analysis of the elements of the marketing mix is an important success factor for most industries. The elements are collectively referred to as the 4Ps, which was later elevated to 7Ps. In the case of Wesfarmers, the company need to ensure that the elements of the marketing mix are used strategically. A proper medium, preferably the internet, needs to be used for promoting the types of products that are sold in the company. This is because brand awareness can elevate the sale of products by a considerable margin (Huang & Sarig?ll?, 2014). The prices of the products must not deviate a lot from the market price, as customers can prefer local competitors to Wesfarmers. The place of the setting up of the company need to be made in such a way at it becomes convenient for the customers to access it.

In order to set up a company, it is necessary that the managers of an organisation make a thorough analysis of the competitors. The analysis of the strength and weakness of the competitors is required in order to develop strategies that can provide a competitive advantage for the company. Based on these strategies, customer satisfaction can be done that can help to increase the reputation of the company (Grant, 2016). Wesfarmers need to make a similar competitive analysis before entering into the German market. This is because many reputes supermarkets exist in the country that can provide tough competition to Wesfarmers. These supermarkets are renowned internationally and can restrict the growth of Wesfarmers in the country. Some of these competitors include Lidl, Aldi, Extra and Penny.

Description of major competitors

The major threat that can come to Wesfarmers is from Lidl and Aldi. Lidl is a supermarket chain that has its branches all over Europe and the United States. It operates in over 10,000 locations with annual revenue of €85.7 billion. The company is one of the oldest supermarkets operating in the country with varied products that can satisfy every demand of the customers (Lidl.com, 2017). On the other hand, Aldi is another supermarket chain company that specialises in not only food and beverages but also provides household goods. The annual revenue of the company is €53 billion and it has its branches in all over Europe. The company have existed in the German market for over 100 years and have gained a large follower of loyal customers (Aldi.com, 2017). However, the weakness of both these companies is the lack of innovative facilities for the manufacturing of products. Apart from these, other local companies also exist that pose medium or low threat to Wesfarmers.

Based on the analysis of the competitors, the products of Wesfarmers can be analysed. One of the biggest advantages that Wesfarmers hold is the fact that the company manufacturers fresh produce. The fruits and vegetables manufactured by the company are freshly grown and sold in the market. Hence, the freshness of the level of food can add to an advantage for the company. Apart from this, Wesfarmers also indulge in selling safety equipment, chemicals and fertilisers (Morschett, Schramm-Klein & Zentes, 2015). Hence, the variety of items sold by the company provides an advantage to it over its competitors.

Positioning map of competitors

In the light of the analysis of the competitors, a position map can be drawn in order to identify the possibilities of success for Wesfarmers. Positioning map determines the level of threat that exists in a market and the level in which a company is prepared to mitigate the threat (Punia, Garg & Garg, 2014).

From the analysis of the map, it can be said that Wesfarmers have to compete with Aldi and Lidl in terms of quality of product and the services provided by the company. The use of innovative techniques and application of a technological approach can help the company to mitigate the threats from these companies. Other local supermarkets pose a low threat for Wesfarmers. This is largely due to the lack of revenue generating ability and improper strategy. Hence, the marketing opportunity for Wesfarmers can be attributed to a minimum threat.

Macro environment

Political

The political aspect of Germany provides free entry and exit from the business market. Government interventions do not prove much hindrance.

Economical

Germany is a country with vast economic wealth (Ozturk, Joiner & Cavusgil, 2015). Hence, Wesfarmers can capitalise the economic conditions of the country.

Social

The diverse population can allow Wesfarmers to manufacture and sell a variety of goods to its customers.

Technological

The advancement of technology in the country can help in the production of innovative items. This can greatly increase the popularity of the company.

Demographic

The demographic versatility of Germany can provide Wesfarmers with an opportunity to exploit the country. Thereby, the satisfaction and trusts of the customers can be gained.

Natural environment

With the manufacturing of sustainable items, Wesfarmers can ensure that the natural environment of Germany will not be affected.

Table 1: PESTEL Analysis

(Created by author)

Porter five forces model

ELEMENT

LEVEL OF THREAT

Threat of new entrants

High

Threat of buyers

High

Threat of Substitutes

Medium

Threat of suppliers

Medium

Threat from existing rivals

Medium

Table 2: Porter’s Five-force analysis

(Created by author)

From the analysis, it can be seen that Wesfarmers received a high threat from new entrants. This is mainly because the German Government does not pose many restrictions to the entry of new markets (Alfalla-Luque, Marin-Garcia & Medina-Lopez, 2015). Apart from this, the threat from buyers is high because a large number of similar industries exist from where the buyers can purchase its goods. Despite this, the threat of suppliers, substitutes and rival threat is less. This is mainly because of the fact that apart from Aldi and Lidl, the other super markets lack the proper managerial strategy to gain a competitive advantage. This can provide Wesfarmers with an opportunity to establish a firm foothold in the market.

The value chain analysis helps in formulating strategies in order to monitor the internal activities of an organisation (Mudambi & Puck, 2016). This is done in order to identify the activities that are of more priority than that of less importance. Based on this analysis, the managers make rectifications and specify the activities that need more focus. The improvement helps to increase the competitive advantage of the company and develop a reputation in the market. In the case of Wesfarmers, the internal analysis can help it to identify the required activities that are needed to be done. This can help the company to sort out the activities that are required for success in Germany. Apart from this, the required action needed to be taken on employees can also be based on value chain analysis.

The BCG matrix helps to analyse four essential factors that are necessary for making a proper marketing analysis. If a company have high market share in an industry that has a slow growth rate the cash amount generated is more for such companies. Similarly, if a company has a high market share in a high moving industry then the organisation can increase its domination. Apart from this, other forms of companies also exist that either has a low market share in a high growth company or is a charitable fund (Whitehead, 2015). Based on the analysis of the market of Germany, it can be said that since the market has a high growth rate, it is important for Wesfarmers to ensure that the market share is high. With the threat from competitors, it is important that such a strategy is maintained and developed by Wesfarmers. Based on this a SWOT analysis can be determined that can summarise the internal factors of Wesfarmers.

SWOT Analysis

Strength

· Emphasis on the development of community

· Encourages sustainable growth

· Have a variety of products for different professions

Weakness

· Low presence in the retail market

· Have limited resources

· Need acquisition support for dominance

Opportunity

· Growth and expansion

· Improve the service quality by following the benchmark strategy

· Loyalty of customers

Threat

· Threat from local competitors

· External factors that restrict the entrance in Germany

· Lack of trust of the customers

Table 3: SWOT analysis

(Created by author)

According to Bull et al. (2016), SWOT analysis is performed in order to understand the internal factors that exist in a company. From the SWOT analysis of Wesfarmers, it can be seen that despite its continuous community service and sustainable growth of products, the company may face major threats from the existing supermarket companies in Germany. The lack of resources and the dependence of support from other companies can provide a disadvantage for Wesfarmers. However, with the opportunity to increase its reputation and gain the trust of the customers, Wesfarmers can improve its production techniques.

Conclusion

Thus, it can be concluded that in order to establish itself in the markets of Germany Wesfarmers need to formulate an advanced technique that can help it to gain a competitive advantage from Aldi and Lidl. The entry to the market does not have many restrictions, which makes it even a threat for the company. However, with the existing policy and ability to improvise, the company can establish itself in the markets of Germany and become a dominating supermarket chain in the country. Hence, the opportunity for expansion is good for the company and it can mitigate any threat that comes in the way.

References

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