Example international marketing


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Example international marketing

  1. 1. IntroductionIn todays competitive environment, developing an internationalmarketing strategy is common and used by many companies to openbusiness perspective, remain competitive and fulfill customer needs acrossthe globe. According to Catero and Ghauri (1999) International Marketingis the flow of a companys good to consumers in more than one nationwith the objective of profit. International marketing allows enlarging thecompanys target and increase the number of potential customers andprobable sales. Nevertheless, international marketing can be source ofsuccess or failure if wrongly managed or implemented.All products cannot be marketed on an international level, the potentialdemand has to be effective, the product has to provide an added value forthe customer and be well marketed according to cultural, economical andmany other factors. This paper will develop the implantation of anelectric/hybrid car by the French manufacturer Renault in the U.S. Renaultis the French leader of the car industry in France, with a turnover of €38billion and more than 3 million car sold in 2010 , the company recentlylaunched a new range of electric cars in France.The car market is strongly developed internationally for the production aswell as for the marketing and selling process. Thanks to internationalmarketing, several brands have developed a brand strong recognition,increased market shares and it benefited the company. However,implementing an international marketing strategy is a long and expensiveprocess, especially in a competitive market such as the car market of theUnited States. According to the US Bureau of Transit Statistics (2004), thenumber of registered passenger vehicles in the US is 243,023,485.Indeed, Americans are important car consumers; the proprietorship andquality of the car are in the social standards. The social status can bedefined as the type of car and model of ones and it plays an important
  2. 2. role in the social and professional representation. With the environmentalissues such as global warming, gas emissions and limits of oil resources,car companies started developing hybrid and electronic cars. This changein product development allows providing innovative cars with an addedvalue of gas consumption efficiency and other environmental friendlyaspects.In this paper, we will assume that the French company Renault isexpecting to launch its ZE electric product range in the United States. Wewill discuss the reactive and proactive motives to this decision, theinfluence of culture and its importance in international marketing. We willthen study the companys international competitiveness at the macro,meso and micro level. Based on this analysis, we will propose a marketentry strategy and a marketing plan.Reactive and Proactive MotivesWe can assume that launching of an electric car in the U.S is a businessdecision based on series of proactive and reactive motives that couldbenefit the company and make the product a success abroad.Proactive Motives (firm initiated)The launch of the French manufactured electric car in the U.S has severalproactive motives, the first one being, the opportunity to generate profitsby capturing a new market and generating additional sales. Thecompanys growth would increase the companys market share as well asits competitiveness on a national and international perspective.Moreover, the French manufacturer can benefit from the technologicalcompetence and knowledge of French engineers and its experience.Renault and its expertise of the market and technological advancement
  3. 3. will help the process of implementing a product and marketingdiversification on an international level. The company has alreadydeveloped the product and faced technological issues: the product is todayavailable in France. (see picture below of Renaults electric range.)Moreover, the companys success in Europe, and its market positioning ofleader in France allows the company to benefit from the economy of scaleto produce Electric cars destined to the U.S as the French supply chain isalready developed and implemented.Reactive Motives (caused by the environment)The market opportunity of electric and hybrid cars in the US has alreadybeen adopted by Toyota, resulting in a type of competitive pressure thatRenault could respond to. If the company is not responding, it is losing amarket opportunity. The Japanese car manufacturer Toyota announcedthat one million cars were sold in the U.S in April 2011, eleven years afterthe Hybrid model of Toyota was introduced in the U.S. With 3 million carssold around the world, the U.S market represents more than 30% of salesfor the Toyota Prius. As a consequence of the above example of Toyota,we can easily deduce that launching a hybrid car in the U.S is a foreignmarket opportunity. Indeed, the American car market is stronglydeveloped and many foreign car manufacturers are already implanted.This highly developed market can be explained by the social importance ofcars, the accessibility of the driver license and the abundant and currentlyrenewed offer.Moreover, if we assume that Renaults recent launch of electric cars is nota success as planned the company can still aboard the American marketwith a different approach. However, this is an assumption based on the
  4. 4. case of stock but it cannot be proved.In addition, we can assume that the important size of the American carmarket allows benefiting from different advantages. Indeed, the Frenchcar manufacturer Renault can benefit from the following experience curveeffects due to the large market factors. The importance of the market willgenerate larger volume.- For instance, the size of the market will allow the Frenchmanufacturer to benefit of economies of scale when manufacturingproducts. Lets assume that many states have ordered cars, the generalorder quantity will be more important than an order for the French carmarket. We can assume that the car piece are standardized- On the other hand, the distribution conditions (costs, availability,margin etc.) are more advantageous in the U.S, simply because thenumber of car dealership is more much more significant. The size of themarket can also strongly increase the product growth and expansion.Barriers to ExportationThe above analysis allows us to determine a certain number of barriers tothe exportation of the Renault ZE electric cars in the U.S. Indeed, thecountrys different functioning, on a political and economical perspectivewill set barriers to this internationalization project.From a political perspective, several barriers have to be considered whenexporting cars: The American government is directly involved in theautomotive industry. If we take the example of General Motors one of thetop 3-car company of the U.S treasury, the government owns 33% of thecompany . (Brendan Moore, 2011). It allows us to assume that the
  5. 5. government has a certain control over American corporations. Anotherexample supporting this statement is the investments made by the U.SGovernment in favor of Chrysler. Even though the government recentlyended its investments, it shows that the American government issupporting national car companies . As a result, the exportation of Renaultcars in the U.S might be complicated as the government has more or lessa market control. We can also notice that the American government has astrong influence on the legal system and it could affect Renault in itslaunch.Regarding economic barriers, the situation is complex. Indeed, the Euro-Dollar rate and the fluctuations are relatively important in the beginning of2012. First, if Renault exports its electric cars in the U.S, it will have tosell cars at a much higher price in order to make the same benefit as inFrance as €1 equals $1.26 . If we take an example of Renault selling a car€10,000 in France, the company will have to sell it for $12,667 in order tomake the same profit on the car sold. This might represent a difficulty asthe car market is competitive in term of prices and the company couldloose potential market share if setting high prices, making carsunaffordable. Moreover, the strength of the Euro stability is reconsideredas the France recently lost its AAA rating . (Simon Kennedy and PatrickDonahue, 2012).We can also differentiate other barriers to international trade of cars.These include the shipping costs, risks and other concerns of internationaltrade. More specifically we can distinguish some of these risk in the twofollowing categoriesTariffs: cars imported in the U.S are dutiable and it represents anadditional potential cost. Renault has to be aware of these potential costsand highly informed about American standards and regulations in terms offoreign cars.
  6. 6. Non-Tariffs: The American government has specific regulations that aredifferent from France standards. Agencies such as EPA (EnvironmentProtection Agency) and DOT (Department of Transportation) provideinformation about requirements of the U.S Customs Service. Theseagencies provide information about "safety standards, bumperstandards, and air pollution control (emission) standards." (Foreign-Born, 2010). The above agencies also require some administrative formsto be completed, making the administrative process longer.The Influence of CultureHofstedes modelAccording to Hofstede (1980), different cultures have different perceptionsand interpretations of things. Hofstedes model of national cultureseparates five different aspects:- Power Distance: we can consider that some inequality can beconsidered between French and Americans. In physical and educationalterms, both cultures have different values and principles. Even though thepoliteness is strongly present in the U.S, a certain distance has to berespected.- Uncertainty Avoidance is much more present in the U.S as it is inFrance. In the U.S, rules, norms and laws are strongly approved andrespected whereas in France, people often disagree an uncertainty is morefrequent. In the U.S, avoiding uncertainty results in strong planificationand coordianation. This aspect might cause some culturalmisunderstanding and tensions between both cultures.
  7. 7. - Individualism is present in the US culture, whereas in France, theculture can be considered as group oriented or community. The socialstatus and person is considered and rewarded in the U.S, while in France,groups and communities are favored.- Masculinity is strongly present in the U.S, especially in the businessenvironment where success, salary, cars, watch and social representationmatter a lot. Masculinity is less present in France, where talking aboutincome is often perceived as rude. Moreover, the feminine role of womenin business is being defended and increasing in France (unions).- Time perspective is completely different in the French and Americanculture. Indeed, the American culture is focused on the future and oftenprojecting on future project, forecasts and expansion. On the other hand,the cultural and historical background of France is part of the nation prideand French often refer to the past as a reference. Protectionism of thehistorical French culture and protocol is strongly implemented andinstalled in the French values, making it more "past oriented".This perspective might cause some issues when discussing future plans,Americans can be perceived as too confident and optimistic, whereasFrench might be focused on analysis based on the past.Halls communication contextAccording to Halls communication context, the French culture can beconsidered as a high context culture whereas the American culture as alow-context culture. As a result, many cultural factors differ between bothcultures, leading to potential cultural clashes. Elements such as time,money, relationships, business, communication, beliefs, values and normsconstitute strong cultural differences. For example, it is common measureto develop relationship at work in France and being 5 minutes late istolerated. In the U.S, business relations are based on deals and
  8. 8. achievements, and punctuality has a major importance in business affairs.These two examples highlight the cultural differences that might lead tocultural misunderstanding and inefficient business relationships.If we take the case of Renault launching its electronic cars in the U.S, thebusiness relationships might be complicated and create barriers tosuccess. Being aware of these cultural differences will smooth the processof conducting international business, whatever the company or situation.The Customer-oriented cultureThe American culture is oriented on customer service and its quality.Indeed, companies view customer relationship management (CRM) as away to develop customer loyalty and improve customer service. As aconsequence, the approach of personal selling is very different from oneculture to another. In France, personal selling is much more impersonaland sellers are only here if the customer requires any information. In theU.S, we fall under the impression that the seller is here to guide thecustomer through the brand, its product or services and convince him ofthe companys products. Personal selling in the U.S will oriented oncommunication and customer attention, whereas in France, the customerfirst makes his own opinion of the product, and then the communicationwill go from the customer to the seller. In the U.S, the communication ismore like a dialogue and starts from the seller to the customer. Frenchseller are convinced that if the product does not meet the customersexpectations, then he will not be likely to buy it. In the U.S, even thoughthe product does not meet the customers expectations, the seller will tryto convince the customer with commitment and defend its product/brand.As a consequence, a French customer in the U.S will feel stalked whereasthe American customer in France will feel abandoned. Renault needs to
  9. 9. focus on these aspects if implementing a distribution center, a license orany type of sales that could involve a customer.Company International CompetitivenessNow that we have stated the motives and barriers to launch of the electriccars of Renault in the U.S, it is relevant to examine the firmscompetitiveness on three perspectives:Macro Level: National Analysis –> Porters DiamondRenaults national strategy, success and competitiveness have a majorinfluence on its internationalization.Factor condition include Renaults important infrastructure in France andabroad. Headquarters are based in Paris, France and this is whereimportant decisions are made. Renault uses external resources andoutsources its production. However, the assembling and manufacturing ismade in France and European countries, to keep control over the qualityof products.Demand conditions involve the size of the French demand Renault facesand its nature. In terms of electric cars, Renaults positioning is to offer arange composed of four cars. Two small cars designed for cities and urbanrides, one berlin car and one utility car. Renault targets all type ofconsumers, and offer a relatively wide range of products, as none of thecompetition offers 4 different electric models. Renaults offer is affordableand its targets environmental friendly consumers aged 20 to 60.Renaults is the French leader in the car French car industry. This situationgives the company credibility in terms of products. As stated before, thecompany also benefits from its experience, and it has budgets to invest in
  10. 10. research and development and marketing. Renault currently uses animportant TV campaign supporting the launch of its ZE range. In France,Renault cars are considered as reliable and affordable. In addition, thecompany already competes with its direct competitors Toyota (with thePrius), BMW, Volkswagen and other brands launching hybrid or electriccars. American car companies such as Chrysler, Ford and GMC have a lessimportant market impact in France and do not offer any comparableproduct on the same segment as Renaults ZE range. This analysis allowsus to affirm that Renaults national position and efficiency allows it toenvisage exporting its products to the U.S.Meso Level: Competition analysis of the car industry → Porters five forcesThreats of new entrants are relatively low as the market requires highinvestments, and targets a large population. Renaults main competitorsare major car manufacturer and brands. However, the threat can beconsidered to arrive from Asia, where several companies work of electricprototypes. The threat of new entrants is relatively average be has to beconsidered and watched. Moreover, new entrants can here be consideredas major manufacturers launching a new electric/hybrid range; in thatcase, new entrants are dangerous and competitive on every level(technology, price, distribution).Threat of substitute products is low as the product is considered asinnovative and many researches are still made on electric and hybrid cars.Substitute products such as public transportation, electric bikes andmotorcycles do not represent an important part of the market and cannotbe considered as a threat.Bargaining power of Suppliers is average as car corporations purchaseimportant quantities and suppliers have built long-term relationships withmajor brands. However, the main issue is to meet order deliveries and
  11. 11. handle new development of technologies. In the case of a supplier beingqualified to provide high technology equipment, the bargaining power ofthe supplier can increase.Bargaining power of buyers is the main threat of the car market. Indeed,on an international or national perspective, buyers have a large choice ofproducts, creating a highly competitive market. Moreover, todayscustomer expectations are high in terms of technologies and modernity.The technologic evolution forces car manufacturer to constantly come upwith innovative product and solutions. End customers have a relativelystrong bargaining power as the used-car market is currently booming andcustomers are budget-minded. As a result, we can observe the price ofnew vehicles strongly decreasing and companies offer new financingmethods adapted to the customer buying power. If Renault decides toexport is products to the U.S, but to a distributor, the bargaining power ofthe distributor will be high, as he will take a major risk by offering aproduct that is not present on the market.The above analysis of Porters 5 forces model allows us to affirm that theinternational car market is highly competitive and that currentmanufacturers are in an intense rivalry to find the best innovation ofelectric/hybrid cars and conquest the most customers or distributors. Thediversity of the market and economic conditions allow buyers to have animportant bargaining power, pushing companies to provide innovative andcustomer oriented products. From Renaults perspective, entering thenational market of France with its electric cars is justified as it has aposition of leader and has a high market share. On ther other hand,exporting its ZE range of products in the U.S might be a more difficultchallenge. The competitive environment is intense, and the acceptation ofthe brand and its products by customers can be compromised.
  12. 12. Renaults position on the international market could lead to horizontalcollaboration and related diversification. An alliance for instance, couldhelp Renault gain credibility of the market and apply its technologicknowledge for a new market.Micro Level: Value Chain AnalysisRenaults value chain is well implanted and efficient in France, and itsstructure is part of its success. Renault strongly invests in research anddevelopment in order to provide constant innovations. The production ismainly outsourced, but the assembly is made in France and over Europeas specified earlier. Renault has important marketing budgets and usesadvertisement as a competitive tool. Regarding sales and service, Renaultowns its own car dealership in France, and some other have theexclusivity to sell Renault cars. This way, the company has a maximumimpact in the market and controls its sales and customer service in officialdealerships.In the U.S, the company would have to review is marketing and salesprocess of the value chain. Indeed, Renault has no presence in theAmerican market and car companies have different approach of marketingand sales in the U.S. (cf customer service) marketing techniques are thecore solution to generate sales as well as customer retention andcustomer service. Customer relationship management is much moreevolved in the U.S than it is in France.In order to best deal with these differences, Renault should establish astrong competitive analysis on competitors, a behavior analysis oncustomers and an in-depth bench-marking about American marketingstrategies. This way Renault will benefit from the U.S market knowledgeaccumulated in research marketing and combine it with its national skillsof leader and develop a potential sustainable competitive advantage. More
  13. 13. precisely, the competitive benchmarking should be conducted from twoperspectives. First, an analysis of each step of the competitions valuechain in order to distinguish the competition core competences. This willallow Renault to understand the competition strengths in terms ofproduction and supply. The second benchmarking perspective should beconducted on customers, their expectations and behavior. This benchmarkwill allow Renault to understand the customer mind-set and its perceivedvalue. As a result, Renault will be able to adapt its upstream anddownstream strategy in order to compete with American carmanufacturers and offer an adapted value proposition to the market.The macro, meso and micro analysis of the market and correlated with thecase of Renault exporting its products in the U.S allows us to state thatkey success factors for the American car market result in:- Research & Development: Innovative products, aiming to gaincompetitive advantage.- Supply Chain Management: Competitive prices due to reduction ofcosts linked to the supply chain management and efficiency.- Diversification Strategy: Based on alliances and horizontalcollaboration.- Understanding of the market: Based on marketing researchincluding: customers, competition, target culture and behavior.- Brand Recognition and positioning: Brand image has a strongimportance in the US, it can be implemented and emphasized usingadvertising and communication.Market Entry Strategy
  14. 14. Now that we have a clear idea of Renaults business structure, its ability tocompete in the U.S and its situation in France, we can establishpropositions regarding the type of entry mode that should be considered.We could argue that considering exportation as a market entry strategy isa valid option. Indeed, if Renault decides to limit its investment in thisproject by exporting its products, it will allow the company to analyzecustomer reaction and limit expenses and implication. Exporting a limitednumber of Renaults ZE would be a way to test the market reactivity anddetermine a future strategy. However, as we determined the marketcompetitiveness as intense, this strategy could rapidly be inefficient.As stated above, developing horizontal collaborations will benefit Renaultwhen entering the American market with its new electric cars. Renaultbrings the technology and models to the U.S and the Americancorporation helps to introduce, market and distribute the models. This iswhy we can state that Renault should establish a joint venture with anAmerican car manufacturer. This type of alliance will also help thecompany to be accepted by the competition, the government, and mostimportantly, customers. Using the joint venture strategy will also allowRenault to keep a minimum of control upon its products.Moreover, Renault has a good experience in joint ventures with JointVenture as it developed an alliance with Nissan in 2009.What about Acquisition?Renault could consider acquisition as an entry strategy but it would berisky for the following reasons:
  15. 15. The market could disapprove this act and reject the brand and itsproducts. Americans tend to favor American brands and consumerAmerican products. If the acquisition of an American brand by a Frenchcorporation is wrongly perceived, it can quickly lead to a boycott fromcustomer. The government who supports national corporations could alsoslow the process and maximize barriers to the acquisition.Besides, the acquisition usually involves heavy investment that couldaffect the companys health if not successful. One major issue is alsoRenaults corporate values and image. If entering the market with anacquisition, it might not be adapted to Renaults mission and vision. Itwould lead to internal confusion and misperception for employees andcustomers. This strategy of acquisition is not the best way of smoothlyentering the American car market.International Product LifecycleThe international product lifecycle is different from the traditional productlifecycle. The IPLC (International Product Life Cycle) is unstable comparedto the usual product lifecycle. The IPLC is considered from amacroeconomic perspective that views the product past nationalboundaries. The curve is influenced by countries where the product isexported, innovating countries leading to a second (launch, growth,maturity decline) curve in other countries.Based on Renaults case of launching Renaults ZE electric cars in the U.S,the IPLC could have two growth curves; one in France and one in the U.S.The product is new on the market and it still at an early growth stage inFrance. In a few years, we could consider another growth curve starting atthe level of the first maturity curve. This second growth would beexplained by the success of the ZE cars in the U.S, while the Frenchmarket is already reaching the maturity.
  16. 16. However, the PLC of electric cars can strongly vary, as it is an innovationthat is needed today and still will be over the next years. The particularityof this product and the long-term investment of companies in electric andhybrid technology will strongly influence the PLC curve and hopefullyhighlight the beginning phases.ConclusionAs a general conclusion, we can argue that the analysis conducted withthis paper on the French manufacturer launching its electric cars in theU.S market allows us to establish a marketing plan for this project. As aconsequence, in the following statements, we assume that Renaultchooses to internationalize its products using a Joint Venture.Before entering in the details of the marketing plan, it is also relevant tonotice that Renault should pay particular attention to the control of thisproject. Indeed, loosing control of one of the four Ps could result in adirect failure. In order to limit these risk, Renault can require regularfeedbacks and set up monitoring in order to keep a maximum of controlover its international marketing strategy. Indeed, the constant following ofthe activity and the regular updates are mandatory for this type ofinternationalization.Renaults products should be innovative and affordable. Based on itsrelationship with an American corporation, products should be perceivedas qualitative, affordable and innovative in terms of electric technology.Regarding, the pricing strategy, Renault should adapt an alignmentstrategy in order to be competitive and remain accessible with the currenteconomic situation described earlier. In terms of promotion, the marketingand communication plays a decisive role in the U.S. If the marketingcampaign succeeds in convincing Americans of the quality of the product
  17. 17. and its functionality, it will be a significative step forward for the company.For the promotion, the expertise and knowledge of the American firm willhelp the French company to penetrate the U.S market. Last but not least,the place of distribution, as well as the selling process is vital. Marketingresearch should be combined with national expertise to allow Renault toset the right distribution and selling strategy. If Renault succeeds inimplementing its electric cars in the U.S, it opens doors to the otherinternational perspectives, leading to brighter opportunities.