Example international marketing
- 1. Introduction In today's competitive environment, developing an international marketing strategy is common and used by many companies to open business perspective, remain competitive and fulfill customer needs across the globe. According to Catero and Ghauri (1999) International Marketing is the flow of a company's good to consumers in more than one nation with the objective of profit. International marketing allows enlarging the company's target and increase the number of potential customers and probable sales. Nevertheless, international marketing can be source of success or failure if wrongly managed or implemented. All products cannot be marketed on an international level, the potential demand has to be effective, the product has to provide an added value for the customer and be well marketed according to cultural, economical and many other factors. This paper will develop the implantation of an electric/hybrid car by the French manufacturer Renault in the U.S. Renault is the French leader of the car industry in France, with a turnover of €38 billion and more than 3 million car sold in 2010 , the company recently launched a new range of electric cars in France. The car market is strongly developed internationally for the production as well as for the marketing and selling process. Thanks to international marketing, 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 expensive process, especially in a competitive market such as the car market of the United States. According to the US Bureau of Transit Statistics (2004), the number of registered passenger vehicles in the US is 243,023,485. Indeed, Americans are important car consumers; the proprietorship and quality of the car are in the social standards. The social status can be defined as the type of car and model of one's and it plays an important
- 2. role in the social and professional representation. With the environmental issues such as global warming, gas emissions and limits of oil resources, car companies started developing hybrid and electronic cars. This change in product development allows providing innovative cars with an added value of gas consumption efficiency and other environmental friendly aspects. In this paper, we will assume that the French company Renault is expecting to launch its ZE electric product range in the United States. We will discuss the reactive and proactive motives to this decision, the influence of culture and its importance in international marketing. We will then study the company's international competitiveness at the macro, meso and micro level. Based on this analysis, we will propose a market entry strategy and a marketing plan. Reactive and Proactive Motives We can assume that launching of an electric car in the U.S is a business decision based on series of proactive and reactive motives that could benefit 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 several proactive motives, the first one being, the opportunity to generate profits by capturing a new market and generating additional sales. The company's growth would increase the company's market share as well as its competitiveness on a national and international perspective. Moreover, the French manufacturer can benefit from the technological competence and knowledge of French engineers and its experience. Renault and its expertise of the market and technological advancement
- 3. will help the process of implementing a product and marketing diversification on an international level. The company has already developed the product and faced technological issues: the product is today available in France. (see picture below of Renault's electric range.) Moreover, the company's success in Europe, and its market positioning of leader in France allows the company to benefit from the economy of scale to produce Electric cars destined to the U.S as the French supply chain is already developed and implemented. Reactive Motives (caused by the environment) The market opportunity of electric and hybrid cars in the US has already been adopted by Toyota, resulting in a type of competitive pressure that Renault could respond to. If the company is not responding, it is losing a market opportunity. The Japanese car manufacturer Toyota announced that one million cars were sold in the U.S in April 2011, eleven years after the Hybrid model of Toyota was introduced in the U.S. With 3 million cars sold around the world, the U.S market represents more than 30% of sales for 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 foreign market opportunity. Indeed, the American car market is strongly developed and many foreign car manufacturers are already implanted. This highly developed market can be explained by the social importance of cars, the accessibility of the driver license and the abundant and currently renewed offer. Moreover, if we assume that Renault's recent launch of electric cars is not a success as planned the company can still aboard the American market with a different approach. However, this is an assumption based on the
- 4. case of stock but it cannot be proved. In addition, we can assume that the important size of the American car market allows benefiting from different advantages. Indeed, the French car manufacturer Renault can benefit from the following experience curve effects due to the large market factors. The importance of the market will generate larger volume. - For instance, the size of the market will allow the French manufacturer to benefit of economies of scale when manufacturing products. Let's assume that many states have ordered cars, the general order quantity will be more important than an order for the French car market. 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 the number of car dealership is more much more significant. The size of the market can also strongly increase the product growth and expansion. Barriers to Exportation The above analysis allows us to determine a certain number of barriers to the exportation of the Renault ZE electric cars in the U.S. Indeed, the country's different functioning, on a political and economical perspective will set barriers to this internationalization project. From a political perspective, several barriers have to be considered when exporting cars: The American government is directly involved in the automotive industry. If we take the example of General Motors one of the top 3-car company of the U.S treasury, the government owns 33% of the company . (Brendan Moore, 2011). It allows us to assume that the
- 5. government has a certain control over American corporations. Another example supporting this statement is the investments made by the U.S Government in favor of Chrysler. Even though the government recently ended its investments, it shows that the American government is supporting national car companies . As a result, the exportation of Renault cars in the U.S might be complicated as the government has more or less a market control. We can also notice that the American government has a strong influence on the legal system and it could affect Renault in its launch. Regarding economic barriers, the situation is complex. Indeed, the Euro- Dollar rate and the fluctuations are relatively important in the beginning of 2012. First, if Renault exports its electric cars in the U.S, it will have to sell cars at a much higher price in order to make the same benefit as in France 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 to make the same profit on the car sold. This might represent a difficulty as the car market is competitive in term of prices and the company could loose potential market share if setting high prices, making cars unaffordable. Moreover, the strength of the Euro stability is reconsidered as the France recently lost its AAA rating . (Simon Kennedy and Patrick Donahue, 2012). We can also differentiate other barriers to international trade of cars. These include the shipping costs, risks and other concerns of international trade. More specifically we can distinguish some of these risk in the two following categories Tariffs: cars imported in the U.S are dutiable and it represents an additional potential cost. Renault has to be aware of these potential costs and highly informed about American standards and regulations in terms of foreign cars.
- 6. Non-Tariffs: The American government has specific regulations that are different from France standards. Agencies such as EPA (Environment Protection Agency) and DOT (Department of Transportation) provide information about requirements of the U.S Customs Service. These agencies provide information about "safety standards, bumper standards, and air pollution control (emission) standards." (Foreign- Born, 2010). The above agencies also require some administrative forms to be completed, making the administrative process longer. The Influence of Culture Hofstede's model According to Hofstede (1980), different cultures have different perceptions and interpretations of things. Hofstede's model of national culture separates five different aspects: - Power Distance: we can consider that some inequality can be considered between French and Americans. In physical and educational terms, both cultures have different values and principles. Even though the politeness is strongly present in the U.S, a certain distance has to be respected. - Uncertainty Avoidance is much more present in the U.S as it is in France. In the U.S, rules, norms and laws are strongly approved and respected whereas in France, people often disagree an uncertainty is more frequent. In the U.S, avoiding uncertainty results in strong planification and coordianation. This aspect might cause some cultural misunderstanding and tensions between both cultures.
- 7. - Individualism is present in the US culture, whereas in France, the culture can be considered as group oriented or community. The social status 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 business environment where success, salary, cars, watch and social representation matter a lot. Masculinity is less present in France, where talking about income is often perceived as rude. Moreover, the feminine role of women in business is being defended and increasing in France (unions). - Time perspective is completely different in the French and American culture. Indeed, the American culture is focused on the future and often projecting on future project, forecasts and expansion. On the other hand, the cultural and historical background of France is part of the nation pride and French often refer to the past as a reference. Protectionism of the historical French culture and protocol is strongly implemented and installed 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, whereas French might be focused on analysis based on the past. Hall's communication context According to Hall's communication context, the French culture can be considered as a high context culture whereas the American culture as a low-context culture. As a result, many cultural factors differ between both cultures, leading to potential cultural clashes. Elements such as time, money, relationships, business, communication, beliefs, values and norms constitute strong cultural differences. For example, it is common measure to develop relationship at work in France and being 5 minutes late is tolerated. In the U.S, business relations are based on deals and
- 8. achievements, and punctuality has a major importance in business affairs. These two examples highlight the cultural differences that might lead to cultural misunderstanding and inefficient business relationships. If we take the case of Renault launching its electronic cars in the U.S, the business relationships might be complicated and create barriers to success. Being aware of these cultural differences will smooth the process of conducting international business, whatever the company or situation. The Customer-oriented culture The American culture is oriented on customer service and its quality. Indeed, companies view customer relationship management (CRM) as a way to develop customer loyalty and improve customer service. As a consequence, the approach of personal selling is very different from one culture to another. In France, personal selling is much more impersonal and sellers are only here if the customer requires any information. In the U.S, we fall under the impression that the seller is here to guide the customer through the brand, its product or services and convince him of the company's products. Personal selling in the U.S will oriented on communication and customer attention, whereas in France, the customer first makes his own opinion of the product, and then the communication will go from the customer to the seller. In the U.S, the communication is more like a dialogue and starts from the seller to the customer. French seller are convinced that if the product does not meet the customer's expectations, then he will not be likely to buy it. In the U.S, even though the product does not meet the customer's expectations, the seller will try to convince the customer with commitment and defend its product/brand. As a consequence, a French customer in the U.S will feel stalked whereas the American customer in France will feel abandoned. Renault needs to
- 9. focus on these aspects if implementing a distribution center, a license or any type of sales that could involve a customer. Company International Competitiveness Now that we have stated the motives and barriers to launch of the electric cars of Renault in the U.S, it is relevant to examine the firm's competitiveness on three perspectives: Macro Level: National Analysis –> Porter's Diamond Renault's national strategy, success and competitiveness have a major influence on its internationalization. Factor condition include Renault's important infrastructure in France and abroad. Headquarters are based in Paris, France and this is where important decisions are made. Renault uses external resources and outsources its production. However, the assembling and manufacturing is made in France and European countries, to keep control over the quality of products. Demand conditions involve the size of the French demand Renault faces and its nature. In terms of electric cars, Renault's positioning is to offer a range composed of four cars. Two small cars designed for cities and urban rides, one berlin car and one utility car. Renault targets all type of consumers, and offer a relatively wide range of products, as none of the competition offers 4 different electric models. Renault's offer is affordable and its targets environmental friendly consumers aged 20 to 60. Renault's is the French leader in the car French car industry. This situation gives the company credibility in terms of products. As stated before, the company also benefits from its experience, and it has budgets to invest in
- 10. research and development and marketing. Renault currently uses an important TV campaign supporting the launch of its ZE range. In France, Renault cars are considered as reliable and affordable. In addition, the company already competes with its direct competitors Toyota (with the Prius), BMW, Volkswagen and other brands launching hybrid or electric cars. American car companies such as Chrysler, Ford and GMC have a less important market impact in France and do not offer any comparable product on the same segment as Renault's ZE range. This analysis allows us to affirm that Renault's national position and efficiency allows it to envisage exporting its products to the U.S. Meso Level: Competition analysis of the car industry → Porter's five forces Threats of new entrants are relatively low as the market requires high investments, and targets a large population. Renault's main competitors are major car manufacturer and brands. However, the threat can be considered to arrive from Asia, where several companies work of electric prototypes. The threat of new entrants is relatively average be has to be considered and watched. Moreover, new entrants can here be considered as major manufacturers launching a new electric/hybrid range; in that case, new entrants are dangerous and competitive on every level (technology, price, distribution). Threat of substitute products is low as the product is considered as innovative and many researches are still made on electric and hybrid cars. Substitute products such as public transportation, electric bikes and motorcycles do not represent an important part of the market and cannot be considered as a threat. Bargaining power of Suppliers is average as car corporations purchase important quantities and suppliers have built long-term relationships with major brands. However, the main issue is to meet order deliveries and
- 11. handle new development of technologies. In the case of a supplier being qualified to provide high technology equipment, the bargaining power of the 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 of products, creating a highly competitive market. Moreover, today's customer expectations are high in terms of technologies and modernity. The technologic evolution forces car manufacturer to constantly come up with innovative product and solutions. End customers have a relatively strong bargaining power as the used-car market is currently booming and customers are budget-minded. As a result, we can observe the price of new vehicles strongly decreasing and companies offer new financing methods adapted to the customer buying power. If Renault decides to export is products to the U.S, but to a distributor, the bargaining power of the distributor will be high, as he will take a major risk by offering a product that is not present on the market. The above analysis of Porter's 5 forces model allows us to affirm that the international car market is highly competitive and that current manufacturers are in an intense rivalry to find the best innovation of electric/hybrid cars and conquest the most customers or distributors. The diversity of the market and economic conditions allow buyers to have an important bargaining power, pushing companies to provide innovative and customer oriented products. From Renault's perspective, entering the national market of France with its electric cars is justified as it has a position 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 difficult challenge. The competitive environment is intense, and the acceptation of the brand and its products by customers can be compromised.
- 12. Renault's position on the international market could lead to horizontal collaboration and related diversification. An alliance for instance, could help Renault gain credibility of the market and apply its technologic knowledge for a new market. Micro Level: Value Chain Analysis Renault's value chain is well implanted and efficient in France, and its structure is part of its success. Renault strongly invests in research and development in order to provide constant innovations. The production is mainly outsourced, but the assembly is made in France and over Europe as specified earlier. Renault has important marketing budgets and uses advertisement as a competitive tool. Regarding sales and service, Renault owns its own car dealership in France, and some other have the exclusivity to sell Renault cars. This way, the company has a maximum impact in the market and controls its sales and customer service in official dealerships. In the U.S, the company would have to review is marketing and sales process of the value chain. Indeed, Renault has no presence in the American market and car companies have different approach of marketing and sales in the U.S. (cf customer service) marketing techniques are the core solution to generate sales as well as customer retention and customer service. Customer relationship management is much more evolved in the U.S than it is in France. In order to best deal with these differences, Renault should establish a strong competitive analysis on competitors, a behavior analysis on customers and an in-depth bench-marking about American marketing strategies. This way Renault will benefit from the U.S market knowledge accumulated in research marketing and combine it with its national skills of leader and develop a potential sustainable competitive advantage. More
- 13. precisely, the competitive benchmarking should be conducted from two perspectives. First, an analysis of each step of the competitions value chain in order to distinguish the competition core competences. This will allow Renault to understand the competition strengths in terms of production and supply. The second benchmarking perspective should be conducted on customers, their expectations and behavior. This benchmark will allow Renault to understand the customer mind-set and its perceived value. As a result, Renault will be able to adapt its upstream and downstream strategy in order to compete with American car manufacturers and offer an adapted value proposition to the market. The macro, meso and micro analysis of the market and correlated with the case of Renault exporting its products in the U.S allows us to state that key success factors for the American car market result in: - Research & Development: Innovative products, aiming to gain competitive advantage. - Supply Chain Management: Competitive prices due to reduction of costs linked to the supply chain management and efficiency. - Diversification Strategy: Based on alliances and horizontal collaboration. - Understanding of the market: Based on marketing research including: customers, competition, target culture and behavior. - Brand Recognition and positioning: Brand image has a strong importance in the US, it can be implemented and emphasized using advertising and communication. Market Entry Strategy
- 14. Now that we have a clear idea of Renault's business structure, its ability to compete in the U.S and its situation in France, we can establish propositions regarding the type of entry mode that should be considered. We could argue that considering exportation as a market entry strategy is a valid option. Indeed, if Renault decides to limit its investment in this project by exporting its products, it will allow the company to analyze customer reaction and limit expenses and implication. Exporting a limited number of Renault's ZE would be a way to test the market reactivity and determine a future strategy. However, as we determined the market competitiveness as intense, this strategy could rapidly be inefficient. As stated above, developing horizontal collaborations will benefit Renault when entering the American market with its new electric cars. Renault brings the technology and models to the U.S and the American corporation helps to introduce, market and distribute the models. This is why we can state that Renault should establish a joint venture with an American car manufacturer. This type of alliance will also help the company to be accepted by the competition, the government, and most importantly, customers. Using the joint venture strategy will also allow Renault to keep a minimum of control upon its products. Moreover, Renault has a good experience in joint ventures with Joint Venture as it developed an alliance with Nissan in 2009. What about Acquisition? Renault could consider acquisition as an entry strategy but it would be risky for the following reasons:
- 15. The market could disapprove this act and reject the brand and its products. Americans tend to favor American brands and consumer American products. If the acquisition of an American brand by a French corporation is wrongly perceived, it can quickly lead to a boycott from customer. The government who supports national corporations could also slow the process and maximize barriers to the acquisition. Besides, the acquisition usually involves heavy investment that could affect the company's health if not successful. One major issue is also Renault's corporate values and image. If entering the market with an acquisition, it might not be adapted to Renault's mission and vision. It would lead to internal confusion and misperception for employees and customers. This strategy of acquisition is not the best way of smoothly entering the American car market. International Product Lifecycle The international product lifecycle is different from the traditional product lifecycle. The IPLC (International Product Life Cycle) is unstable compared to the usual product lifecycle. The IPLC is considered from a macroeconomic perspective that views the product past national boundaries. The curve is influenced by countries where the product is exported, innovating countries leading to a second (launch, growth, maturity decline) curve in other countries. Based on Renault's case of launching Renault's 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 in France. In a few years, we could consider another growth curve starting at the level of the first maturity curve. This second growth would be explained by the success of the ZE cars in the U.S, while the French market is already reaching the maturity.
- 16. However, the PLC of electric cars can strongly vary, as it is an innovation that is needed today and still will be over the next years. The particularity of this product and the long-term investment of companies in electric and hybrid technology will strongly influence the PLC curve and hopefully highlight the beginning phases. Conclusion As a general conclusion, we can argue that the analysis conducted with this paper on the French manufacturer launching its electric cars in the U.S market allows us to establish a marketing plan for this project. As a consequence, in the following statements, we assume that Renault chooses to internationalize its products using a Joint Venture. Before entering in the details of the marketing plan, it is also relevant to notice that Renault should pay particular attention to the control of this project. Indeed, loosing control of one of the four P's could result in a direct failure. In order to limit these risk, Renault can require regular feedbacks and set up monitoring in order to keep a maximum of control over its international marketing strategy. Indeed, the constant following of the activity and the regular updates are mandatory for this type of internationalization. Renault's products should be innovative and affordable. Based on its relationship with an American corporation, products should be perceived as qualitative, affordable and innovative in terms of electric technology. Regarding, the pricing strategy, Renault should adapt an alignment strategy in order to be competitive and remain accessible with the current economic situation described earlier. In terms of promotion, the marketing and communication plays a decisive role in the U.S. If the marketing campaign succeeds in convincing Americans of the quality of the product
- 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 will help 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. Marketing research should be combined with national expertise to allow Renault to set the right distribution and selling strategy. If Renault succeeds in implementing its electric cars in the U.S, it opens doors to the other international perspectives, leading to brighter opportunities.