Strategic marketing is the process of planning, developing as well as implementing manoeuvrers that is adopted by an organisation to obtain a competitive edge in the market (Proctor, 2014). The strategic marketing plan is considered as a creative process. In order to achieve desired goals and objectives, it is very important for a firm to prepare a strategic blueprint of these objectives. The assignment below is based on Sainsbury's which was was founded in 1869 by John James Sainsbury. It is the second largest retail company in United Kingdom. The firm aims to expand its business operations in India. Along with its other diversified operations, the company is launching ethnic wear clothing for the people of the country. The report covers detailed PESTLE analysis of India, various market entry modes, market segmentation and targeting and Porter's Generic Strategy. All these measures are necessary for this firm to successfully expand its busi
Sainsbury's is one of the largest retail firms in the United Kingdom. It deals in general merchandise, food and clothing retailing. Moreover, the firm also provides financial and property investment services in the country. The firm operates different store formats like supermarkets and convenience stores. The company is currently focusing on expanding its online marketing operations which include online grocery delivery and merchandise operations. Sainsbury's plan to expand its business operations in India by establishing an exclusive ethnic product line. To achieve this successfully, analysis using various tools and techniques has been effectively made.
PESTLE Analysis is one the best tool that is used to track the external factors that affects the companies entire operations and function (Kimball, 2017). Sainbury's is going to expand its business in India. Thus, there are various factors that affects both positivity and negatively to the company in India. With the help of Pestle Analysis tool, the firm can identify various external factors which would influence the expansion of company. There are six factors in PESTLE Analysis tool which are Political, Economic, Social, Technological, Environmental and Legal. Success of Sainsbury's in expanding its business operations in India heavily depends on these factors.
Political factor include all the taxes, policies and stability of the government that influence a company (Brito and Harkiolakis, 2017). Political scenario of the country is stable and sound. The system of service, income and sales tax are well-developed in India and are imposed by the Union government. One of the biggest opportunities for Sainsbury's in India is that the government is emphasising on strengthening its political relationships with other countries. This would help in gathering support of the government to set up its business in the country. However, there are many regional political parties who are against the foreign intervention in the country. This might reduce the customers of the firm in those areas. The firm must focus on using raw materials from India itself to contribute in initiatives like 'Make in India'. Such practices might change the perspective of these political parties which can be beneficial for the ethnic product line of the firm. It would help to increase the number of customers in regional areas as well.
The economic performance of the country is included in this factor and it directly impacts on the performance and growth of company. Rate of inflation, interest, foreign exchange, pattern of economic growth are included in the economic factor. India is a developing country but it is seventh largest economy in the world by GDP. In 2018, the country was subjected to rise in GDP by 8.2% (India GDP Annual Growth Rate,2018). The country has witnessed a decline in cost of land recently. This can be an opportunity for Sainsbury's as it would reduce the expenditure of land acquisition for business operations. The country, however, has been subjected to demonetisation in November, 2016. This resulted in a massive decline in cash flow in the market. This can be a major threat for Sainsbury's as it would be difficult to conduct its daily business operations related to its ethnic product line. To overcome this, the firm could arrange funding from foreign countries as 100% FDI is allowed for retail industries. This would provide ease for the firm's operations in the country.
This factor constitutes all the social factors of the country affecting the business. India is a diversified country with 29 states and a population of more than 1.3 billion (India Population 2018,2018). Such diversified population can be a beneficial factor for the company to develop innovative clothing. General population is quite religious and is reinforcing the cultural values. There has been an ongoing demand for ethnic wear in India. This can be an opportunity for the firm and its ethnic clothing line. But the population of the country is divided in different cultural societies. Each of them has its own colour and pattern preferences. It can be a major threat for the firm in case it opts to launch a general clothing line for men and women. The firm, in order to eradicate this threat can invest in research and produce diversified ethnic wear that does not violate the cultural sentiments of the people.
This factor consists of all the technological aspects of the country. India is a developing nation which is inclining towards implementing latest technological methods in their production as well as in general use. With the government taking initiatives like “Digital India”, it surely can be a contributing factor in firm's successful expansion in the country. The firm can implement new and cost-effective technologies for production of its product and could hire skilled employees who are trained well in using these technologies. But there is a rise in the country's cyber crime. India is quite vulnerable to cyber espionage. This can be threatening for the firm's online operations as well as increases the risk of infringements in designs of company's products. This is a potential threat for the company and would hamper the creativity of the firm. To protect the innovative designs of ethnic wears, company must associate itself with a competent IT firm that could provide it with effective cyber security.
All the legal rules and regulations that affect a business are considered in this factor. The legal structure of India is very effective. With various regulations about age, discrimination and employment, it would help the firm to develop a proper framework to conduct its business practices ethically and as per law (Czinkota and Skuba, 2014). Such ethical practices would be beneficial for the firm's new product line as people tend to favour companies that follow the legal structure properly. It would contribute in enhancing the brand image of the firm in India. As mentioned above, cost of land is down. However, the legal procedure and paper work for acquiring land is very complex. Such complexity would delay in the process of production of the firm and would add to unnecessary cost. Sainsbury's must hire an efficient legal team to handle such complex issues so that it could smoothly expand its business in India.
This factor undertakes environment issues that have an impact on companies. In India, developments are being made to improve environmental conditions. The government has imposed various regulations regarding the waste emissions from industries. Such regulations must be followed by Sainsbury's to produce their ethnic product line. The biggest opportunity of Sainsbury's is that its ethnic wear is purely cotton-made. Since the firm is in support of preserving wildlife and other natural resources, there will not be any use of leather or any other material that could possibly be harmful for wildlife. This aspect would enhance its customers in India as wildlife is highly valued in the country. However, rigid rules about waste emissions might hamper the production of the company and might degrade the quality of products as well. To regulate the production, the firm must install machineries and equipment that are technologically advanced and emits least amount of waste so that the firm could go environmental friendly. This step would help it gain a competitive advantage over its enemies who use standard methods and technologies in production.
Market Entry Modes
To enter a foreign market, it is necessary that firms adopt market entry mode that best serves their purpose (Gubik and Karajz, 2014). To enter Indian markets, Sainsbury's must consider following modes to successfully expand its business in the country.
These modes are mentioned below:
It refers to an arrangement made between two companies, where one gives permission to another to manufacture its products in exchange of a fixed amount (Eriksson and et. al., 2015). Sainsbury's could give limited resources or rights to an Indian company to produce its ethnic wear. But for a firm like Sainsbury's, this decision would not be so profitable in Indian market. The main reason would be that despite of launching a product that has an ongoing demand, the income received by the firm will be much lower than the other entry modes available for the company. Another crucial issue for the company is that it would lose control over the operations for production and distribution of its ethnic product line. The licensee firm might degrade the quality of the product or might adopt inefficient marketing strategies which would fail to create an impact on the customers.
This refers to a business project where two or more companies invest some amount to conduct their business operations together (Klijn and et. al., 2014). In India, generally foreign companies enter as a joint ventures with a motive to capture a large market share. For Sainsbury's, joint ventures might not prove to be much profitable. This is because there are high chances for conflicts of interests. The partners of Sainsbury's might have different agendas and different goals related to joint ventures. Moreover, there are chances where the required support is not provided by the partners which would definitely affect the quality of firm's ethnic product line. Another reason that could hinder the production is different and inferior management practices of the partners. In case Sainsbury's associate with inferior firms, it would definitely result in addition to cost and ineffective production.
With increase of online users in India as well as the world, businesses could easily provide their products and services to their customers. In India, the daily routine of majority of population includes usage of internet. Online business in India is on a boom. Major companies have availed its benefits in their countries. However for a company like Sainsbury's, entry in Indian market via internet will be a weaker option. It would add to the shipping and cargo cost of the firm. Competition from firm's like Amazon and Flipkart is presumably high. Moreover in ethnic wear, the process gets complex when improper size gets delivered to customers. Moreover, there is a continuous risk of the products getting damaged while being exported. Such complexities will not be beneficial for a firm like Sainsbury's who want to sustain and expand its operations in India market.
Under this system, the parent companies hand over their business operations to semi-independent businesses. It is a licensed privilege provided by franchisors along with assistance in training, organising, merchandising, managing and marketing in return for a fixed amount or fee (Nijmeijer, Fabbricotti and Huijsman, 2014). There are many established franchises in India that have earned significant profits over years. Sainsbury's could use this entry mode to enter Indian market. This is because these agreements are longer and the firm could effectively support the franchisee in running the business the way it is supposed to be run. Political risk in franchise is lower than any other modes. This can be beneficial for the firm's ethnic product line even at times of political instability. Sainsbury's would require to conduct effective research before selling its franchise. Effective firms would help in retaining the quality of the product. Moreover the marketing strategies used by the franchisees would also be according to Sainsbury's. This could be beneficial for its new product in the long term.
Market Segmentation And Targeting
Any organisation, to successfully expand its operations in a country, must differentiate its customers to effectively develop a target market. Choosing an effective target market would allow the firm to maximise its profits by channelising its strategies towards selling the products to these customers. India is a vast country and it is not necessary that each individual responds favourably to Sainsbury's ethnic product line. Therefore, to enhance its profitability in the market, the firm must choose its target market effectively.
This refers to dividing the customers on the basis of segments, where each segment is based on different characteristics (Venter, Wright and Dibb, 2015). The segments used by Sainsbury's to sell its ethnic product line are mentioned below:
- Geographical: This segmentation differentiate customers on the basis of their geographical location. Since the firm wants to sell its ethnic product line in Indian markets, the geographical segment would be urban areas of India.
- Demographical: It is one of the widest and the simplest segmentation used by companies to differentiate their customers. Sainsburys' could use demographical segmentation to differentiate its customers based on various variables such as gender, age, family, income, occupation, etc. Sainsbury's plans to divide the market on the basis of age, gender and income of the customers.
- Psycho-graphical: This segment focuses on lifestyles of customers, their interest, their activities and even their opinions. It also takes buying behaviour of customers into account (Weinstein and Cahill, 2014). The firm wants to sell its ethnic product line to customers who are buy ethnic wear regularly and who prefer buying quality products even if its available on a high price.
- Behavioural: This segment is used by companies to divide customers on the basis of behaviour, decision-making pattern and usage. India is a place where multiple festivals are celebrated. This segmentation could be very beneficial for the firm at the time of festivals.
The most crucial step of business expansion is choosing the target market upon which the firm channelises its efforts. The success of Sainsbury's in expanding its business in India heavily depends on choosing the appropriate target market. It is crucial for Sainsbury's as it is entering a new market and effective market targeting would allow the firm to communicate directly to the potential customers. It would also allow the firm to develop loyal customers and build long term customer relationships (Tanner and Raymond, 2015). The target market for the ethnic product line of Sainsbury's would be the urban areas of north and south India, with women, men and children of age more than 3 and less than 60 would be the target customers. In addition to this, the firm would target customers with income level more than 20,000 INR and who are loyal customers of ethnic wear in the country. Urban areas generate higher income that rural areas in India. Moreover, people in urban areas tend to wear more ethnic clothings during festivals. However, after the firm has established itself successfully in the country, the firm could penetrate markets of east and south India as well. Due to popularity of the firm in future, more customers from different parts of the nation would want to buy the firm's products. Establishing itself in these markets would require minimum promotional strategies which would be beneficial for the firm in long run.
Porter's Generic Strategy
This model was developed by Michael Porter in 1980 and describes how competitive advantage could be gained by a company in its chosen market. There are three concepts used in this model, Cost Leadership, Cost Differentiation and Focus which are described below:
This strategy focuses on capturing the market by reducing the cost of the products. Sainsbury's could either keep the price lower than all its competitors, or ensure a wider market at average price. In whichever case, the aim of company must be to appeal price-sensitive and cost-conscious customers (Alamdari and Fagan, 2017). However, for its ethnic product line, cost leadership would not be appropriate as it won't provide the firm with customer loyalty. They would shift their preferences to some other firm if it provides similar products at lower price. Moreover, this strategy would also build negative perception about the quality of the firm's ethnic wear. The outcome of this strategy would not be so beneficial for Sainsbury's.
Companies adopting this strategy focus only on niche markets. It analysis the market properly and identify unique needs of its customers. This sets a base for development of the new product. Focus strategies could be on the basis of cost or differentiation. However, it is not suitable for Sainsbury's ethnic product line because the firm is targeting a wide market with presence of strong competitors. Along with this, the firm is targeting customers that focus on quality rather than the price. Focus strategy could not fit the strategic plans of the company.
The aim of Sainsbury's by this strategy must be to differentiate its ethnic wear from that of its competitors. It maybe on the basis of the designs, or the technology used or on the basis of its durability. Effective marketing is very important if the firm adopts this strategy.
Sainsbury's is using efficient technology to develop its ethnic product line in the highest quality possible. The fabric doesn't shrink even after multiple washes and stains and dust could easily be removed from the cloth. Moreover, its creative team is developing designs where it best serve the purpose of wearing an ethnic wear. It is also aiming to use aggressive marketing strategies to attract its customers. Moreover, the firm possesses agility in its development processes which is essential for a dynamic business environment like that of India. Thus, differentiation is the most appropriate strategy for the firm to establish itself in India and gain a competitive advantage over its competitors in the country (D. Banker, Mashruwala and Tripathy, 2014).
Thus, it is concluded from the report that strategic marketing is very essential for companies that plan to establish itself in foreign markets. The political, economical, social, technological, legal and environmental factors of a country heavily impacts the functions of the organisation in that nation. Franchising can be an effective market entry mode to enter foreign markets. Ineffective entry modes would unnecessary add to the cost as well as inappropriate establishment of the company in that country. Market Segmentation and targeting are contributing factors to a company's success if used properly. For companies selling quality ethnic wear, urban areas with population of age more than 3 and less than 60 would be a competent target market. This is because income rates in urban areas are high and people tend to wear ethnic clothes at times of festivals and religious gatherings. Lastly, the firm must use differentiation as a generic strategy if the firm deals in products with unique feature. This would help to gain maximum attention of customers and increase its profitability in the market.
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