Strategic Issues That BHP Would Have to Address in the Export Market Expansion Project - Case Study Example

Report on the strategic issues that BHP would have to address in this export market expansion project All companies involved in production of either goods or services always encounter difficulties in penetrating specific places to increase material base and thus acquire markets (Proctor, 2000, p.5). In order to overcome these challenges, there is need for step progression and in this case BHP needs improvement. Being a mining company headquartered in Australia, the giant has difficulties in market expansion especially of its goods and needs strategic decisions on expansion of its products and services. To begin with, there are large and unexplored resources in third world countries. These resources have not been identified and as a result, many companies in the mining industry have shown no interest in them. There is need for BHP to invest in resource detection technologies and discover these resources for industrial expansion. Secondly, it should employ demographical price discrimination in its expansion to low income earning areas especially third world countries. Production/Service BHP is a company whose investment base is wide in the Asian and the European peninsula and has already practiced market concentration in Australia and European regions. Although the company is not specialized in one product, it emphasizes dealing in mining of aluminum, mainly in Australia and the European regions, with its products mainly including aluminum products, iron ore to petroleum products and others resulting from the same industry. There is thus great need for expansion through strategic diversification of its products and services in order to experience industrial growth. Exploration of other mining products such as mining of precious metals will add to its industrial list and greatly increase its annual revenue thus its profitability. Diversification and exploration of new ventures will greatly help the company in creating opportunities for its expansion hence continual growth in its revenue. This will also lead to augment of clientele base and thus its market expanse and cause a reflection of its perception. Marketing Marketing is usually considered one of the hardest departments in any organization since it is responsible for organizational image as perceived by the general public (Proctor, 2000, p.8). Full internationalization of multinational companies lays emphasis on effective marketing strategies. Successful marketing has previously been involved with awareness campaigns of new and existing products. But product differentiation has been largely associated with fast and effective marketing strategies. Since the BHP Company is already expansive in its products and services, differentiation might seem impossible given the direct lines of a variety of products and services. As such, the company needs to create public image regarding specific products through sub-naming processes. Product differentiation increases product familiarity and thus pushes the sales over the shelves. This way, expansive approaches are easily achieved since market orientation has already been done through direct association of a product and the company in the consumer market. This creates the required awareness, needed by BHP, into new market territories (Drummond, Ensor & Ashford, 2007, p.56). Quantitative techniques in marketing Marketing has been described by various sources as the backbone of any industry. It creates the awareness of industrial activities and the need for consumers to use business products. In other words, industrial image is usually shaped by its marketing strategies. Marketing strategies involve the use of unique and rare techniques or paths towards achieving industrial awareness as widely as possible. When there has been enough convincing that industrial products are basic for the consumer, clientele confidence is boosted and dependency on the available products increases. There are therefore ways of achieving this status whereby customer confidence has reached a climax such that clientele knowledge of the product is unquestionable. In marketing concepts, this is possible through application of quantitative techniques and this can be done in more than three ways. Statistical causes To begin with, according to Hoehn, Langenfeld, Meschi, and Waverman (1999, p.37) prices could trend on statistical causes. In order to understand how this could affect BHP’s international expansion, a price correlation approach will prove sufficient in determining the possibility of two products or two different demographical areas being in the same economic market. The presence of associative knowledge of products and areas existing in the same economic market is imperative in market understanding for a market expansion project. This is greatly determinant in product launches in new various locations and prediction of their successes before the real launch. This approach considers different characteristic of a product and the likelihood of the product prospering in a given new market. It centers on what the actual causes of a price are in a given market and will thus determine whether issues like price fixing are dominant in these new regions or simply the changes in prices of a given product have just been dictated by change in technologies and change in quality (Stone & McCall, 2004, p.98). Secondly, in strategic expansion, there is need for understanding of the would-be new rate of adjustment. This can be achieved by use of adjustment speed tests which would show rate of adjustment should BHP come to a decision of making an expansion. Centering on product price stabilities over a given duration, that is, after experiencing some shock, the rate of returning back to normal is the rate of adjustment that BHP can use in its expansion strategy. This could prove very helpful predicting future after-shake recoveries and thus greatly influence market entry. Despite its drawbacks that results from sensitivities in rates of observation, this test accurately predicts product and price readjustment after major market shakes (Hoehn, Langenfeld, Meschi & Waverman, 1999, p.45). Another test that could be useful in rate-calculation on market expansion by BHP is causality test. This test is purely reliant on prices of commodities whereby it seeks to find out whether prices of given products are caused by a given series or if they reciprocally determine each other. This test has gained a lot of success in the recent years as has been used by companies which have made internationalization moves. Summing the prices from a given value to value one, this test is very theoretical and thus doesn’t require any form of assumptions. Although it has been associated with drawbacks such invalidation of the F-test, this test is greatly accurate in market expansion determination and in this regard, BHP could use it. Demand analysis. Since market expansion would lead to price disparities, BHP could use this analysis in determination of the demand of its products in new market entries. On the same note, employment of residual demand analysis which specifies the level of sales attained by any firm by use of functionality of the price they charge could prove very helpful in making expansion decisions. This method of prediction becomes very useful when complemented with critical loss analysis. There is a likelihood that there will be market power and thus BHP and similar companies could undergo losses in sales should unilateral price rising occur. There could either be profits or losses due to reduced sales resulting from this decision (Hoehn, Langenfeld, Meschi & Waverman, 1999, p.57). Thirdly, import penetration tests are vital for analyzing antitrust calculation such as whether foreign producers are capable of upsetting efforts by domestic producers in price rising (Stone & McCall, 2004, p.138). This could be used by BHP in determination of foreign market penetration through estimation of country imports, effects and challenges that could rise from foreign market penetration. Estimation of import analysis is vital in determination of strategic market expansion by BHP. Furthermore, awareness of clientele through survey analysis in trying to understand product prices, demand and supply and customer perception is imperative in BHPs decision on internationalization. As in any form of data collection, survey analysis has been described as one of the most expensive methods of data collection in market understanding. BHP being a multinational company would definitely afford employing this method in new market understanding (Hoehn, Langenfeld, Meschi & Waverman, 1999, p.68). Understanding models of competition. As proposed by Bain, there is a direct association of the influence of participants in market performance as evident in their market conduct (Kaynak, 2002, p.44). Market concentration has thought to greatly affect market performance through related tags such as price. Competitive concerns are usually raised in such a markets when higher concentration is directly associated with higher prices in the region. In this analysis, BHP would try to find out if marginal costs are constant. Also, in its attempt to make expansive decisions, BHP should make an endeavor of understanding differentiated market products that do not present perfect substitutions for other products. This is helpful in determining specific regions to expand to and the differentiated products to bring into these regions. Merging with other companies in cost and risk reduction after understanding differentiated products in specific markets is also important in making fast and efficient expansive moves (Kaynak, 2002, p.46). BHP will thus greatly benefit from undertaking decisions of these features. References Drummond, G., Ensor, J. & Ashford, R. 2007. Strategic Marketing: Planning and Control. London: Elsevier Ltd. Hoehn, T., Langenfeld, J., Meschi, M. & Waverman, L. 1999. Quantitative techniques in competition analysis. London: LECG Ltd. Kaynak, E. 2002. Strategic global marketing: Issues and trends. Binghamton: Haworth press. Proctor, T. 2000. Strategic marketing: an introduction. New York: Routledge. Stone, M. A. & McCall, J. B. 2004. International strategic marketing: A European perspective. New York: Routledge. Read More