International Marketing Assignment: Foreign Market Entry of Ode to Earth
Task: International Marketing Assignment Task: Your task is to select a country and an SME. You then required to conduct a business environment audit relevant to international expansion to that country. You should conduct a PESTLE analysis for your allocated country, describe and evaluate those aspects of the environment (political, legal, economic, socio-cultural, technological, and environmental) in the potential global market that are relevant to and, have implications for, developing a marketing strategy. The purpose of this evaluation is to identify potential market opportunities for the introduction of a new product/service. You will then be required to develop or select the company’s product/service, with country of origin the UK, which you would consider has potential for expansion into this country, based on your PESTLE. You will then develop a global marketing strategy to that country, for your UK based product/service. This will include (although not exclusively):
Justifying the opportunity in the country for the product/service you will develop.
- Provide an overview of the competitive landscape for the offering you are
- developing in your allocated country. Develop and design an outline international marketing strategy. You will need to
- discuss the product and modifications (if any) to allow entry and market establishment, pricing decisions, effective promotional efforts to establish awareness and establish market presence, distribution choices and brand/name along with suggesting the key challenges to global expansion for the SME in this market. You will be required to ensure that the PESTLE and international marketing
- strategy are linked to justify your decisions and choices.
As evident herein international marketing assignment, with the falling business performance in the domestic market, firms are now willing to expand in different economies. One of the primary aims of the international business expansion of the firms lies within the business operation expansion. Underpinning the stages of the foreign market entry, through this study analysis has been made for the Ode to Earth, which is one of a kind eco living product producer from Ireland. The firm is willing to expand its business in Hungary and for this purpose, business environmental analysis of Hungary has been done considering PESTEL tool, where, political, economic, social, technological, environmental and legal aspect of the foreign market has been analysed. Considering the analysis, it can be stated there is lack of focus on the environmental development through streamlining ecofriendly product development and packaging of the same; thus, the report has found that Ode to Earth has good opportunity to expand its business in the Hungary. To achieve success in the foreign market entry, firm should consider the direct to customer sales channel and for the promotion purpose both the conventional as well as social media should be utilised. As far as risk is concerned, it has been found that the firm can face risks in market capturing if there is lack in market promotion and advertising. Additionally, if the firm fails to consider the socio-cultural perspective of the Hungary, then also it can fail as there is significant difference in socio cultural perspective between Ireland and Hungary.
With the falling business performance in the domestic market, firms are now willing to expand in different economies. One of the primaryaims of the business expansion of the business lies within the business operation expansion. As the benefit of the business expansion through the foreign market entry case of higher revenue generation, increased sales, enhanced investment scope, diversification of business, gaining economies of scale and lastly introducing new talent in workforce of the firms need to be considered. Through the enhanced operational capability, firms try to enter new prospect market underpinning the socioeconomic, geopolitical factors of the foreign country. For this purpose, business environmental audit through the PESTEL analysis is the primary need of the firms. Then there is global marketing strategy and risk analysis that influence the market entry strategy and marketing strategy of the firms too (Kahancovaet al. 2020). Underpinning the stages of the foreign market entry, through this study analysis has been made for the Ode to Earth, which is one of a kind eco living product producer from Ireland. The firm is willing to expand its business in Hungary and for this purpose, business environmental analysis of Hungary has been done considering PESTEL tool, where, political, economic, social, technological, environmental and legal aspect of the foreign market has been analysed. Next to this, underpinning the business environmental analysis, product selection for the foreign market entry on behalf of the Ode to Earth has been done and then global marketing strategy for the firm based on the finding has been demonstrated here. Lastly, through risks analysis, associated challenges of the Ode to Earth in business expansion in Hungary has been demonstrated and then underpinning all the finding conclusion has been drawn.
Business environment analysis:
Expanding business under the market uncertainty due to pandemic and falling market situation is crucial step of every firm. Failing to analyse the business environment of the foreign firm and checking whether it will suit the marketing policy of the brand is a major step towards expanding business in foreign market (Fenyyesi and Pinter 2020). When it comes to business environment decision making, then firms utilise the PESTEL analysis, which enables the firm to understand, political, economic, social, technological, environmental and legal scenario of the foreign market. Through the study in this section, PESTEL analysis has been done for the Hungarian market in order to understand the business environment of the market.
Political:Hungary's political framework is a multiparty parliamentary popular government. It arose out of the previous Soviet alliance Communist countries; after the change cycle in 1989 and 1990 into a more liberal country, Hungary is presently a stable vote-based nation (Varju 2020). Despite the fact that there are as yet difficult issues, changes keep on pushing the validity of Hungary. Hungary's questionable approaches like the media law and the progressions in the constitution as far as upright and moral guidelines (for example its enemy of gay and against fetus removal positions) brought about worldwide analysis from different nations and might prompt a further partition between the left-and right-winged gatherings in the nation.
Economical:Hungary's monetary climate has worked on throughout the last years and is presently portrayed by opportunity of exchange, property rights, business opportunity, and opportunity of ventures. There is a continuous advancement into an open economy and a progressive change towards Western European nations. For example, it takes about a normal of four days to start another business, though the Organization for Economic Co-Operation and Development (OECD) normal is around 14 days (marketresearchreports.com 2021). The public authority's monetary approaches support homegrown utilization and the development of organizations in the nation.
Hungary is an individual from a few global associations which are contributing variables to help its worldwide business development.The Budapest Stock Exchange offers freedoms to raise capital and fills in as a stage to exchange monetary instruments; in any case, monetary danger factors are apparent. The nation encounters a high unpredictability in its money, the Forint, and subsequently the Forint was one of most noticeably terrible performing monetary standards in 2011 (marketresearchreports.com 2021). Social: Culturally and socially, Hungary is a developed nation where women have special status in social development. Ethnic gatherings in Hungary include Magyar, Romany, German, Serb, Slovak, Romanian, though the ethnic Hungarians (Magyar) representing right around 90 %. Freedom of religion is there, whereby the Roman Catholics are the greatest gathering.
Different Religions, for example, Calvinist, Lutheran, Greek Catholic, Jewish and others address simply a little offer (USDS) (marketresearchreports.com 2021). Socioeconomics with respect to age show, that the nation's maturing populace is a reason for stress, which is for the most part because of diminished rates of birth; this outcomes in a decreased labour force and at the reality to a drop-in government income because of a misfortune in personal assessments.
Technological: technologically Hungary is a deprived economy as it lacks in case of research and development. There are only 200 firms who are positively engaged with the research and development program making Hungary one of the technologically backward country in the EU region (marketresearchreports.com 2021). In case of the technological development from the environmental perspective it can be seen that there is very limited development during the last few decades in Hungary (marketresearchreports.com 2021). One of the main reasons of the same is lack of government initiative towards driving the economy in technological prosperity.
Environmental:Environmentally Hungary has its own set of problems. For example, the country due to lack in research and development has failed to produce technologies that can reduce carbon footprint of the nation. Moreover, there is severe lack in the sold waste management and water body treatment issue is also there. People of Hungary are not very aware regarding the ecofriendly products and its packaging.
Legal: Hungary is a legally open country and the foreign business are always welcomed here. However, as the legal structure of Hungary is balanced with the EU standard, hence it has certain stringent laws that restricts the foreign firms to open business without prior approval from the local authorities. Moreover, legally Hungary pose no threat to the new businesses and as political interference in business is limited, hence legal interference is also limited with business.
Selection of product for expanding business in new market:
Underpinning the business environmental analysis of the Hungary it can be seen that the country is a mid-sized economy located in the central Europe. Due to the lack of research and development project innovation activities in the states is very limited and it has aggravated the environmental issue of the state to a great extent. Issue of water body is a major environmental problem in the state and apart from this waste management is also poor at Hungary. Though the Hungary follows the environmental standards set by the EU, however, due to lack of innovation and technical knowhow, there are only 7% consumers who focus on eco friendliness of product while purchasing (statista.com 2021). Moreover, as per the figure 1, it can be seen that, most of the people prefer to purchase products that have friendly packaging even is that is not ecofriendly. Apart from this, figure 1 also demonstrates that only 11% of the people are interested to consider packaging that are recyclable (statistia.com 2021).
Figure 1: Consumer preference regarding environment and packaging of products
Source: (Statista.com 2021)
Figure 2, demonstrates that the asper eco innovation scoreboard, Hungary is far behind the EU standard. Hungary is 30% below the EU average in terms of eco innovation demonstrating the country badly needs products which are eco friendly and has good packaging that can be recycled (ec.europa.eu 2021).
Figure 2: Eco innovation scoreboard in EU region
Source: (ec.europa.eu 2021)
Considering this, it can be stated that Ode to Earth has much amount of scope of business success with its product line up. As of now, Ode to Earth sells bath and beauty products, kid product, gift items, household products and travel items and most interestingly all of them are made through the ecofriendly raw materials, and the packaging of the products are also recyclable. This make the whole product line up of the Ode to Earth suitable for business expansion in Hungary.
Expanding with the ecofriendly line up will allow the firm to capture the foreign market easily as there is high amount of need of these types of products which are ecofriendly and has good packaging.
Global marketing strategy:
Opportunity of chosen product in Hungary:
Ode to Earth is one of its kind firms that promote reduction of usage of plastic and plastic made items in our daily life. In Hungary, there is critical lack in companies that provide similar kind of service. As per the ec.europa.eu (2021), there are only 240 companies in Hungary that annually publish environmental service report. Besides, as per the same source, Hungary lacks in case of research and development in case of the environmental programs. Consumer awareness regarding the environmental impact of plastic and plastic made products are very limited as can be seen from figure 1. This demonstrates that the Ode to Earth has high opportunity in Hungarian market.
Owing to lack of the firms that produce similar kind of goods and services as Ode to Earth, the firm through foreign expansion in the Hungarian market will not face tough competition. Although there are some brands in Hungary like Ecco Verde, Care to Beauty, A.D. Trade BT who sells almost identical products, however, their packaging and raw material is neither not fully natural nor recyclable (marketresearchreports.com 2021). Thus, through developing business in the Hungarian market. Ode to Earth can develop its own niche market where the consumers are aware of the environment and while purchasing focus on environmental impact. As per the figure 1, it can be seen that 7% of the population are aware of importance of environment while purchasing product and this demonstrates that, Ode to Earth can easily capture this market of 7% Hungarian population (ec.europa.eu 2021).
Competitive market scenario in Hungary:
Hungary is a midsized EU economy which has very limited number of firms, however, 99.86% of the business are SMEs. With 53rd rank of ease of doing business and 1st rank of cross-country trade in EU region, Hungary is one of the largest markets for the international trading. With the development of the various international firms in the Hungary, over the last few decades, it has become industrial hub of EU. However, the country lags in case of the environmental laws as per he EU standards.
Considering the market situation, it can be seen that Hungary has moderate competitive and rivalry in the market, however, when it comes to ecofriendly product line up, then the economy has very limited competition (Malovicset al. 2019). Lack of the firms who produce ecofriendly product identical to Ode to Earth is next to none. Besides, there is no such brand in Hungary that focus on making recyclable packaging allowing Ode to Earth to be one of its kind firm that promote plastic free product and packaging. Hence, in the Hungary, Ode to Earth will have very limited competition.
International marketing strategy:
When it comes to developing business in foreign market, then international marketing strategy is a crucial step towards expanding business. Through the international marketing strategy, firm can develop, product, price, promotion and pricing strategy in order to enter new market. Moreover, through the distribution channel analysis and key challenge analysis, firm can analyse the market and develop marketing strategy to bring in success with business expansion in foreign market.
Product and requirement of modification for market entry:
As far as PESTEL analysis is concerned, then it can be seen that both the Hungary and Ireland have identical socio-economic situation. Both the country lies within low to medium income group, however, culturally Ireland and Hungary have much difference. Hungarian culture is much motivated by Romanian and Greek culture and the people of the state is of conservative type. Hungarian society respects the women and women empowerment to a great extent and thus the society has specific laws for respecting women. Underpinning the same, Ode to Earth can have great success in the Hungarian market as the firm is run and owned by the female leadership. As far as product line up is concerned, it can be mentioned that the product line present with the Ode to Earth is suitable for the persona and requirement of the Hungary (Czyzewskiet al. 2020). As the firm lacks in case of social and environmental development, thus the ecofriendly product line up will suit the need of the Hungarian market. Hence, no change needs to be made to the product line up of Ode to Earth; however, to meet the cultural expectation, firm need to provide more female and household product offering so that consumer can have loyalty towards brand.
Pricing decision for market entry:
Pricing decision plays a crucial role in international market entry strategy as it leads the firm towards capturing prospect customers. Through the effective pricing strategy, Ode to Earth can capture greater number of customers as it will provide higher amount of consumer surplus to the consumers compared to close substitutes of the product from the brand. As far as market situation is concerned, then it can be stated that both the Ireland and Hungary has identical market situation allowing Ode to Earth to continue with its existing price range. Both the Ireland and Hungary operates with Euro as their currency, thus keeping the price of the products in Hungarian market identical to the Ireland market will allow the firm to capture new market in foreign country (Kiralyet al. 2017). However, brand need to provide promotion offers and coupons to its loyal consumers in order to keep them loyal and enjoy the product line up from the brand.
Promotional efforts for market entry:
Promotion is a crucial part of every firm be it in local market or in foreign market; as it allows the firm to capture attention of the consumers. Promotional practices can be done in two approaches, which are conventional method and the other one is social media. In conventional media, print and paper media as well as television is utilised to promote the brand and make brand awareness among the consumer; whereas through the social media channel same task is done through advertising regarding the brand in social media channels(Varju 2020). Social media publishing is a cost effective and time saving medium of promoting brand and it can capture attention of larger amount of consumer compared to conventional method of promotion.
Through considering the social and conventional method of the brand promotion Ode to Earth can create good brand awareness among the people of foreign country. Through conventional media, Ode to Earth can capture attention of the conventional population, whereas through the social media publication, Ode to Earth can capture attention of the youths. Two-way promotion will allow the Ode to Earth to capture attention of the Hungarian population. Next to this, allowing price discount and promoting brand contribution towards woman empowerment of the deprived women around the world can make good brand promotion in Hungary.
Place of existence for market entry:
Ode to Earth is expected to expand its business in Hungarian market, where the population is 10 million and land size of the country is only 93030 sq. km (marketresearchreports.com 2021). With only 8 major cities namely, Budapest, Debrecen, Szeged, Miskolc, Pécs, Gy?r, Nyíregyháza, Kecskemét, Hungary is a mid-sized EU country (marketresearchreports.com 2021). Most of the people are low to middle income earner and the livelihood standard is moderate as per EU standard. Thus, when the Ode to Earth expands its business to the Hungary, then it should firstly open its outlets in the eight major cities mentioned above. Then it should move to rural areas where the population is low and consumer preference for the ecofriendly products is also low (Nagy 2019). As far as place of existence for market entry for Ode to Earth is concerned, then the firm should focus on the urban areas firstly as the consumers here are educated and prefer considering ecofriendly products due to law imposed by EU. Moreover, Ode to Earth should consider opening dedicated website for the Hungary so that the country specific product line up can be introduced. Allowing online place for the merchandise will allow Ode to Earth to capture higher amount of consumer and enable it to enter new market through limited investment.
As the market entry strategy in international business expansion firms opt for joint venture, wholly owned subsidiaries, exporting or licensing practice. Among all the alternative joint venture is considered to a great extent as it allows the foreign firm to rely on market knowledge of the local firm and the local firm depends upon the technical knowledge of the foreign firms. However, there is risks associated with it as in market failure situation joint venture fails to operate and if there is lack of interest of the local firm to do business, then the foreign firm faces loss as well (Hann 2018). Thus, for the best option to perform the business through foreign market entry for the Ode to Earth is considering wholly owned subsidiary. Through this strategy, managerial and marketing control as well as business operation control lies with the foreign firm. Moreover, through considering the direct to customer sales channel, Ode to Earth can sale their product to the customer in Hungary directly allowing better consumer surplus. Product offering as well as price discount can become available through the direct to customer sales channel allowing better customer service.
Moreover, as the firm operates as per its understanding of the market, pricing decision and marketing decision lies with the Ode to Earth allowing the firm better flexibility in the strategic decision making (Toplisek 2020).
Key challenges in global expansion strategy:
Entering into new market is always a complex endeavour as it need information regarding the socio economic, geopolitical, cultural and technical information regarding the foreign market. As the information regarding the foreign market is not readily available, thus lack of effort to know the required information can lead to potential risks that can lead to devastating impact on the business performance (Szalai and Svensson 2018). For the Ode to Earth, risks are there for business expansion in Hungarian market. Though the Hungary is a goods option to expand the business of Ode to Earth due to lack of availability of ecofriendly products in the market, however, if the Ode to Earth fails to make sufficient marketing regarding their presence, it can face low customer number. Moreover, socio cultural perspective of Hungary is highly different from the Ireland; thus, Ode to Earth need to focus on parameters like focusing on employing women in their stores, maintaining Greek and roman culture so that social acceptance of the product is enhanced (Balcerzak 2017). If Ode to Earth fails to consider the various cultural and social obligations of the Hungary, then the products from the firm can be socially rejected leading to fall in business and shutting down in subsequent timeframe.
Considering the above analysis, it can be stated that the Hungary is a technologically deprived, mid-sized European nation that lacks in case of eco innovation standard set by EU. There is lack of focus on the environmental development through streamlining ecofriendly product development and packaging of the same; thus, the report has found that Ode to Earth has good opportunity to expand its business in the Hungary. Ode to Earth is anecofriendly product maker situated in Ireland has good packaging that can be recycled and utilise natural ingredient to produce their product making earth free from plastic and plastic made products. As the product line up, it has been found that the whole product line up of Ode to Earth need to be considered for the foreign market entry as it will allow better diversification of business in new market. To achieve success in the foreign market entry, firm should consider the direct to customer sales channel and for the promotion purpose both the conventional as well as social media should be utilised. As far as risk is concerned, it has been found that the firm can face risks in market capturing if there is lack in market promotion and advertising. Additionally, if the firm fails to consider the socio-cultural perspective of the Hungary, then also it can fail as there is significant difference in socio cultural perspective between Ireland and Hungary. To conclude it can be stated that Ode to Earth should expand its business in Hungary so as to enhance its business operation and capture the ecofriendly product’s niche market in the central EU region.
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