International Marketing Management of Harrods Departmental Store - Case Study Example

INTЕRNАTIОNАL МАRKЕTING МАNАGЕMЕNT Name: Course: Professor: University: City: Date: Table of Contents Abstract Charles Henry established Harrods Departmental Store in 1849. It was located in a single room with only two employees. In the preceding years, the company grew into a departmental store that offered a variety of products in the London market such as clothing, food and medicine. Although the departmental store experienced massive challenges such as the 1883 fire, the management did not drop their dreams of developing a global brand in the international market. This enthusiasm saw the business establish a banking agency and other Harrods companies. With the increasingly changing business trends, Harrods departmental store transformed its supply chain to provide luxury goods in approximately one million square feet that consists of seven floors and 330 departments. INTЕRNАTIОNАL МАRKЕTING МАNАGЕMЕNT Introduction Harrods departmental store is among the most popular up market departmental stores that are located in London. Harrods departmental store aims at ensuring that it reaches a wide geographical market as stipulated in their motto (Hines & Bruce, 2001). The business deals with designer clothing, luxury gifts and fashion accessories. A desire to increase the scope of customers and diversify to a global scale has warranted an evaluation of the business procedures as well as the risks that are imminent in case Harrods departmental store is to succeed. Employing global marketing is among the major aspects that Harrods departmental store can concentrate in it is to realize the company full commercial potential. Understanding the global market helps companies determine areas of potential investment as well as the costs of investing in certain locations. Body Section 1: Main Risks Risk Analysis. Considering that the business aims at reaching the global market in Australia, Harrods departmental store needs to take marketing serious since it will influence the survival rates of the company in the foreign and native market. For instance, once Harrods departmental store fails to understand the global market risks that have affected Australia such as the capital requirements and switching costs, it is likely to lose the domestic business to diverse competitors, who ensure that they reach out to the market through reduced costs, advanced products and vast experience. Reaching out to the global market does not involve penetrating the supply chain but an evaluation of the internal and external factors that control trade (Fletcher & Crawford, 2011). Similarly, Harrods departmental store needs to become a market that can integrate the various growth strategies that include market development, diversification, market penetration and product development. Harrods departmental store may desire to go global because of various reasons. After close evaluation of the Australian design and fashion market, the company may determine that there is higher probability of better profit performance geared through sales. Similarly, the Australian population is increasing and the need for designer and fashion clothes may be necessary (Rappaport, 2000). In this case, Harrods departmental store is likely to increase its customer base to achieve the economies of scale. The business is likely to steer competition and reduce the overdependence on the London market therefore gaining more from sales. With the vast technological advancements in terms of e-commerce and online sales, Harrods departmental store may desire to go international considering the lowered costs. With the increase in converging Australian markets, the need for an improvement in the supply sector may be wanting which is steered through communication and transportation technology. Market entry is an important aspect of attaining international globalization. Harrods departmental store may encounter a number of issues that will need attention if the company is to succeed in Australia. Among the considerable factors includes the licensing procedures that are applicable in Australia for design companies (Solomon, 2013). Once Harrods departmental store determines that the customer base in Australia is wanting, it will need to identify potential licensees who will pay constant royalties, fees or any other form of compensation. Government policies and Licensing proves to be an effective method of penetrating the international global market to stimulate sales. The Australian Business License and Information Service are responsible for the licensing services that apply to companies in different supply chains (Fletcher & Crawford, 2011). Registering indigenous companies may be strenuous but once the license goes through, any legal risk is eliminated. Issues relating to the taxation systems and procedures are highlighted in the Australian Law. In case Harrods departmental store acquires an Australian business license, they are legible for borrowing and financing. However, the risks that are associated with financing may be met with hefty consequences. If Harrods departmental store accepts licensing from financial institutions or private firms, it will gain less control over its production patterns and sales facilities (Malbon & Bishop, 2006). The license allows the other company the opportunity to access confidential and proprietary processes that may place Harrods departmental store at a risk of competition. Similarly, issuing a license provides the licensing company the rights to all revenue and profits that belongs to Harrods departmental store. Once the licensing contract ends, Harrods departmental store may have created a competitor firm that understands most of the business practices and activities. POTTERS Model. The potter model is used to make ethical decisions regarding the business practices that Harrods departmental stores may be involved. According to the model, moral thinking should be employed while undertaking business activities while decisions should be made based on some form of reasoning (Delener, 1995). An evaluation of the four steps involved in the Potter Model will shed light on the possible alternatives that are available with little or no risk in Australia. The definition stage of the Potter box involves an illustration regarding the facts about venturing into the Australian market. Evidently, the risks involved in terms of penetrating the design and fashion industry may be numerous considering that the country is one of the globalized markets. Although this is the case, with growing potential for the industry determined by financial values, Harrods departmental store is likely to sustain the severe market conditions. Based on the marketing principles, Harrods departmental store should refer to Kant’s categorical imperative by providing quality products and implementing global policies in international marketing. Harrods departmental store has a loyalty to the licensing companies as well as the consumers. Influence on Decision Making. Any decisions made by Harrods departmental store should ensure that they consider social responsibility and maintain quality in their practices. Moreover, the company is advised to employ the decision making process by evaluating the strengths, weaknesses, opportunities and threats (SWOT) before investing in the Australian market. Creating objectives that are steered towards business continuity should be the ultimate goal and this requires consistency and innovation. Management and Risk Minimization. To handle the imminent risk that Harrods departmental store may face in pursuit of globalized marketing in Australia, they need to decide on the special licensing arrangement to cater for the different business sectors. The initial step would be to determine the contract terms in the manufacturing sector. It is highlighted in a manufacturing licensing agreement that allows a third party to produce and use Harrods departmental store products in return of constant payments. Here, the licensing firm focuses on product design and marketing to accrue maximally from the global market. To ensure management and risk minimization in the manufacturing contract, Harrods departmental store needs to determine when to license their design and fashion products (Mühlbacher, Dahringer & Leihs, 1999). This will enable them to identify how they can ensure they acquire control of production of their goods and delivery of services. Harrods departmental stores will be able to save more on the licensing agreements and retain most of the profits in manufacturing. Licensing agreements may take a different approach that is through franchising. Franchising tends to offer a company exclusive rights to the geographical properties such as land. It will offer Harrods departmental stores the opportunity to operate businesses offered by the franchiser in return of constant payments. However, they need to conform to the franchising policies and practices that apply in Australia highlighted by the Australian Competition and Consumer Commission. Risks that pertain to franchising may be approached through ensuring that Harrods departmental stores participates in marketing promotion through effective strategies, adhering to the Australian chain business policies that includes that of pricing and approaching expansion, continuity and funding with the legal requirements. In case Harrods departmental stores desire a joint venture type of business, the partners need to reach a concession and highlight it in a contract focusing on the joint policies, regulations and roles of each partner. Section 2: The Global Marketing Mix Brand and Product Decision. To counter the effects that competitors may bring to the business, Harrods departmental stores needs to build a strong brand that will take into account the products that it produces. Arguably, it is impossible for the company to introduce all its designs and fashion commodities to the market oblivious of the position that the company holds in Australia. A strong brand is identified by the financial position of a company in the international scene and the behavior of consumers towards the business (Czinkota & Ronkainen, 1998). With an aim of reaching the global market, Harrods departmental stores needs to identify a certain product that is on high demand in Australia. The product has always been the most important element in any marketing strategy. Companies that desire to attain relevance in the global market face a challenge of formulating logical brand strategies and products. Pricing Decisions. Pricing decisions are crucial points of concern to companies that desire to reach the global market. Often, most companies place little or no consideration to the pricing decisions while trying to venture in new and demanding markets. To ensure that the business succeeds in all its processes and steps, Harrods departmental stores as a marketer needs to utilize most of its financial tools and retrieve its financial records that will prove relevant in building a base for setting the prices of their goods in Australia (Blythe, 2006). The pricing concepts are applied during the pricing decision step that involves market skimming, market penetration, captive pricing, ethnocentric pricing and adaptive or polycentric pricing. Employing such concepts may offer Harrods departmental stores the opportunity to select worthy and desirable prices that may attract the Australian market while generating substantial amounts of profits. Market skimming is a pricing strategy that enables companies exploits markets willing to pay a premium price for the delivery and production of a specific product. In this case, the demand of the goods is used to determine the highest prices that consumers are likely to pay (Valenzuela-Abaca, 2013). For instance, Harrods departmental stores can focus on producing leather and cotton designs that tend to attract a massive population in Australia. In this case, consumers are likely to purchase the products despite the high initial costs. This strategy may be used by a company to derive the sunk costs that were incurred in penetrating the competitive market. Once the initial consumers of the leather products are satisfied, Harrods departmental stores my lower the price of the product to attract more consumers. The concept that applies here is that consumers are oblivious that the prices are high although they have dropped. Market penetration pricing is a strategy that is used by most unpopular brands that intends to lower the price of the products below the market price to attain maximum sales and attract more consumers. In this case, Harrods departmental stores can use penetration pricing for most of its products that are found in the market such as designer handbags for women and designer wallets for men. The assumption in this case is that Australian consumers will switch to the new brand as Market penetration pricing exploits the economies of scale. Although penetration pricing may be risky, it helps to achieve diffusion and adoption of the foreign brand, creates goodwill among the consumers, and establishes cost control and reduced pressures in the initial period and acts as a barrier to competitor entry as noted in the Porter’s 5-forces analysis (Onkvisit & Shaw, 2004). Captive pricing works with the concept of complementary products. For instance, mobile phones are sold with accessories which if eliminated may warrant the consumer to incur extra costs. Harrods departmental stores may take advantage of captive pricing to sell kitchen utensils, electrical households and children accessories. In this case, the company may offer initially low prices for the core product and set higher prices on captive products. Although selling the captive products may be met with a challenge, it is possible to make profit from the sale of core products (Nargundkar, 2008). Captive pricing needs to be set strategically as it involves close evaluation of the past and future economic aspects. Therefore, the company needs to identify a list of captive products and classify them based on the type, determine the period that will dictate the pricing stages, identify thee location to set specific captive decision strategies and highlight any considerations on the goods and services with exceptions. Extension or ethnocentric pricing involves setting constant prices for goods and services regardless of the country or market. Global companies have been encouraged to pursue Ethnocentric Pricing considering that there are no competitive or market conditions required for the implementation (Nargundkar, 2008). In this case, Harrods departmental stores only needs to sensitize the Australian market of the normal application in prices of goods and services. Although it may seem adaptable, this form of pricing does not achieve competitive advantage for Harrods departmental stores. Adaptation pricing used by dominating companies such as IKEA allows subsidiaries and managers and independent distributors to set the prices that they feel is appropriate. Harrods departmental stores may apply such pricing for commodities that have customization possibilities such as children toys. Global Marketing Channels and Physical Distribution. The Harrods departmental stores management is tasked with the role of designing a global marketing channel that will incorporate physical distribution aspects to reach the increasing amounts of consumers. Designing the global market channels involves more than identifying the suppliers, transporters and producers since it incorporates elements in the international level (Waters, 2003). Harrods departmental stores may choose to use direct selling in Australia, selling through intermediaries, dual distribution and reverse channels. To achieve distribution, Harrods departmental stores may use the power of the internet and new media to identify a suitable marketing model. Global Marketing Communications Decisions. Advertising in the global market involves the use of models, appeals, methods and messages to reach out to the Australian consumers. The initial steps that Harrods departmental stores may take are to identify whether the brand has the ability to alter the perception of the consumers in Australia regarding the fashion and design industry. The company may use its public relation ties to plan global marketing strategies and communicate the nature of products with the public (Waters, 2003). To achieve marketing through communication, Harrods departmental stores may use sales promotion and personal selling to introduce new products and stress on the importance of the company to Australian community. It gives the consumers a first hand experience to the products provided by the company. Section 3: International Brand Building Process International branding may appear as a rather recent advancement in the business industry owing to the diversity big corporations may have employed. The barriers to international and free trade has reduced as most countries desire to exploit the increasingly needy market. A measure of concern that has often risen for countries that intend to expand in the global market is the relevance of its brand among consumers. Businesses that understand the modern orientation in business consider the brand as a reputation. It is the perspective that consumers have regarding the business. The initial interaction between Harrods departmental stores and the Australian market determines how the consumers will respond to entry. Attaining international business branding may be achieved using advertising media, face-to-face interaction and direct contact with the products and services. Once a Harrods departmental store builds an identical international brand, people are likely to pay more for the products and services. Concept of Brand Building Process. If Harrods departmental stores tries to expand globally, the objectives of the business does not change. However, they need to ensure that the products and services align to the requirements of the market if it is to build a popular brand. Similarly, the branding process needs to meet the cultural expectations of the consumers in Australia to cover the ignored market points. The steps that apply while building a strong brand internationally may take the effort and expertise at different levels of management to render Harrods departmental stores effective. The initial steps would include determining the brand target audience (Lee et al. 2015). In this case, Harrods departmental stores can concentrate on the population needs in Australia for the men, women, youth and children. Aligning the mission statements and messages in the marketing strategies will prove effective in connecting to the consumers. In the identification phase, Harrods departmental stores needs to understand the market trends and the probability of potential competitors. Figure 1: The concept of brand building process (Keller, 1993). Secondly, Harrods departmental stores needs to examine whether they can survive and deliver in the international market. This is important since it ascertains the company access to production and distribution rights. It ensures that Harrods departmental stores will avail their products consistently in the market (Kapferer, 2012). As a step towards continuity and innovation, the company can identify and decide on any line extensions. Through assured delivery, consumers are likely to brand the business as competent and consistent. To attain brand recognition in Australia, Harrods departmental stores needs to re-examine the business in terms of product names and classifications. In case the business desires to sell more, it needs to be sensitive about the culture of the consumers by ensuring that the name contains relevance in the market. For instance, the brands Gucci and Burberry have developed identity among Australians. Harrods departmental stores can focus on selling and distributing design products in the same supply chain in order to build a candid brand. Harrods departmental stores logo may be unidentified in Australia and transforming the look is part of the international brand building process for personality. Reviewing an existing logo may suffice to ensure that they align with the desires of the Australians and do not conflict in cultures. Once they communicate the nature of business through the logo, Harrods departmental stores can focus on creating brand knowledge though promotion services and face-to-face sensitization (Kapoor & Kulshretha, 2012). This may be done through consultations regarding branding firms. If consumers identify a product by the logo representing it, they are likely to concentrate more and strive to exploit other products. For instance, companies such as Apple and Coca-Cola have built unique logos that build their branding image among consumers globally. A brand image is built by the type of associations that a company has. If Harrods departmental stores desire to succeed in the international scene, they are obliged to associate business activities with candid brands in the design and clothing industry. Such associations may include popular licensing corporations in Australia, suppliers, transport and distribution companies as well as the necessary legal agencies. Such associations prove effective while attempting to penetrate the international market by speeding up the licensing process and working to meet any deadlines. Similarly, they prove efficient while strengthening the brand during tough economic conditions that assures consumers of the integrity of the company (Keller, 1993). A business that creates association experiences smooth procedures in business practices. It assures the consumers of business continuity. Risks that may be imminent in penetrating the global Australian market may be countered by involving brand associates. Section 4: The Social and Cultural Customer Cultures. Australia is one of the most diversified countries that consist of populations from different cultures. Therefore, penetrating the Australian market may prove to be a challenge for Harrods departmental stores since the company will need to identify the inbuilt cultures to know what goods and services to provide. About 25% of the Australian population consists of people born in the overseas and therefore, it is likely that the population has developed a strong attachment to the dominating and advanced businesses such as Kmart and Target. To determine the customer cultures in Australia, Harrods departmental stores needs to build a population data framework that will group information for exploitation. Understanding the customer cultures creates an avenue to determine the customer needs that will be relevant in steering the supply of goods and services in Australia (Moran & Keane, 2010). Consumer cultures in Australia may be grouped according to age, location, traditions, attitudes, and behavior and income levels. Harrods departmental stores may acquire most of the Australian consumers if they focus on the age brackets. In this case, most of the population may consist of young people who display high affinity for products. Once the company identifies this as a predominant cultural aspect, they are likely to concentrate on the manufacture and delivery of such products. The design and fashion industry in Australia is steered by an extraordinary range of textiles. In terms of cloth and color, Australians exhibit high attraction for Chinese and Japanese silks and Egyptian cotton (Clancy, 2004). Especially the women who have worn such garments over the years argue that the combination of silk and fabrics are unique. Similarly, the Australian culture values the cloth type and color, garment types, fashion designs and installations as well as headwear and millinery. In the global marketing planning process, Harrods departmental stores can ensure that they concentrate on delivering commodities that align to the developed culture of the Australians in order to match up to the competition. Cross Cultural Analysis. The cross-cultural analysis in Australia proves relevant in reaching a variety of consumers with a certain product. Cultural factors have often prevented global companies from success as they may fail to understand the community (Clancy, 2004). The importance of cross-cultural analysis is seen in how companies such as Harrods departmental stores behave in the international market. Cross-cultural factors often act as invisible barriers to international communication that prevents companies from understanding the needs and wants of the target market. Cross-cultural analysis helps to identify the relevant issues in Australia such as the free trade policies, the standardization as well as localization decisions, brand effectiveness and popularity, advertising and consumer behavior. As the global international market accepts the right to culture in business, most managers fail to stress on the importance of cross-cultural analysis. As Australia incorporates a culture identity, Harrods departmental stores will need to understand that modern markets have become cross-cultural. Culture influences business communication and firms may act as representatives of change for a certain culture. Cross-cultural analysis may take three approaches that include its effect on consumer behavior. For instance, cultures such as Japan and China accept gifts after any business transaction. However, in Australia, it is considered inappropriate to offer gifts that will be associated with bribery. Bribery is punishable according to the Australian Law. Cross-cultural analysis also affects advertising in terms of language. The media available in Australia influences the buying habits and consumption methods. In attaining the international market, Harrods departmental store will need to identify the predominant media channels across different cultures that will enable them reach a diverse market. Culture analysis helps in identifying cultures that can change such as gender identity, fashion trends and design preferences among Australian consumers. Cultural Differences. Cultural differences in Australia owe to the allowances that have been granted in the constitution for immigrants and refugees. The rich cultural traditions of the initial inhabitants create a national identity in the country that may warrant different approach by global companies such as Harrods departmental store (El-Gohary, 2013). Understanding the cultural differences in Australia sheds light on the values, traditions and nature of the consumers. For instance, certain products may not be prohibited in Australia such as the sale of wild animals and tusks. In terms of welcoming foreigners into the country, Australia has a culture of allowing them a right to experience various freedoms as well as ensuring equality. The Australian way of life as highlighted in ancient history encompasses fairness and compassion in the different economic sectors. Such cultures tend to attract foreign investment and global companies to penetrate the needy market. Indigenous communities form a large percentage of the Australian market. Communities such as the Aboriginal and Torres were among the initial inhabitants. Their way and mode of life was controlled by the traditions and ancestral teachings. Their attitudes, beliefs and values were shaped over generations that would have made it hard to incorporate the modern lifestyle. However, the developments in business, marketing and technology have slowly led to the alienation of such communities although they still exist. In the remote regions, land was controlled by the indigenous people, which have now revolutionized to provide for the need of development. Harrods departmental store can attain this market though striving to change their culture and introducing incentives such as watches and hats to make life easier. Attitudes towards the global company may change with time and the indigenous people may begin using more products. How to Pass Cultural Differences. The differences in culture may be approached differently if Harrods departmental store is to succeed in Australia. Being a low-context culture country, Australia is capable of providing Harrods departmental store with the necessary consumers and profits. Although deals are made with much less information about the character, background, and values of the participants, Harrods departmental store may use this as an avenue for deriving sales. The market is less homogenous and more diversified with the ability to accommodate the variety of products Harrods departmental store is willing to offer. Through ensuring constant communication and offering relevant background information, Harrods departmental store may succeed in penetrating the Australian market. Conclusion Harrods departmental store has the ability to penetrate the Australian global market. However, the company needs to ensure that it evaluates the risks that are imminent to the business, identify the marketing mix that will apply to penetrate the vast consumer market, develop strategic international brand building processes and ensure they meet the international marketing management standards. Risk analysis for global marketing proves viable while designing mitigating strategies to ensure smooth adaptation into the Australian market. The global marketing mix will assist the company to avoid risks pertaining to reduced sales. The international brand building process ensures that Harrods departmental store builds a strong brand that is competent and reliable. The social and cultural aspects ensure that Harrods departmental store does not conflict any aspects of the diverse Australian community, which may result to business failure. References Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Top of Form Blythe, J. (2006). Principles & practice of marketing. London: Thomson. Clancy, L. (2004). Culture and customs of Australia. Westport, Conn: Greenwood Press. Czinkota, M. R., & Ronkainen, I. A. (1998). 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Lee, A., Yao, J., Mizerski, R., & Lambert, C. (2015). The Strategy of Global Branding and Brand Equity. New York, NY : Routledge. Malbon, J., & Bishop, B. (2006). Australian export: A guide to law and practice. Cambridge: Cambridge University Press. Moran, A., & Keane, M. (2010). Cultural adaptation. London: Routledge. Mühlbacher, H., Dahringer, L., & Leihs, H. (1999). International marketing: A global perspective. London: International Thomson Business Press. Nargundkar, R. (2008). International Marketing. New Delhi: Excel Books. Onkvisit, S., & Shaw, J. J. (2004). International marketing: Analysis and strategy. New York: Routledge. Rappaport, E. D. (2000). Shopping for pleasure: Women in the making of London's West End. Princeton, NJ: Princeton University Press. Solomon, M. R. (2013). Marketing 2: Real people, real choices. Frenchs Forest, N.S.W: Pearson Australia. Valenzuela-Abaca, F.-R. (2013). Marketing: A snapshot. Frenchs Forest, N.S.W: Pearson. Waters, C. D. J. (2003). Global logistics and distribution planning: Strategies for management. London: Kogan Page. Appendix Other companies that may be offering design and fashion goods and services in London apart from Harrods departmental store include Harvey Nicholas and Selfridges to Liberty. These companies stock variety of goods such as footwear, furnishing, clothing and cosmetics. Most of these departmental stores operate restaurants, cafes and entertainment spots. Personal shopper services are also gaining popularity such as Debenhams, Fenwick of Bond Street and Fortnum & Mason.Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Bottom of Form Top of FormTop of FormToTop of FormTop of FormTop of FormTop of FormTop of Form Top of Form Top of Form Top of Form Top of Form Bottom of Form Bottom of For Bottom of Bottom of Bottom of Form Bottom Read More