– Marketing Problems
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Currently, the scope of business of the GAZ is limited to Russia only. It is an automotive manufacturer of Russia. The vehicles are exported to Central Asian countries as well as Europe but the company has no production facility outside of the Russia. Therefore, this company is not known by the customers in the international markets due to large players. The market is dominated by automotive giants like Toyota, Mercedes, Ford, Volkswagen and General Motors. It will pose a problem for the company to attract customers as the competition is very high (Demirbag, Mirza, 2000).
Comparative Cost Theory
In international marketing the comparative cost theory has a great role. According to this theory, it is stated that if two countries want to have trade in between them then the cost advantage of the commodity should be kept in between the trade. The exports should be followed by the cost advantage and the imports has been followed by the cost disadvantage. The theory is given by the an economist namely David Richard. The theory also stated that the trade is only possible between two countries when one of them has a cost advantage on the other. (Demirbag, Mirza, 2000).
The theory has been applied in the arguments of the given details in the preceeding discussion. The GAZ has to implement the cost advantage while trading internationally. It is the only way to enhance the profits of the company. It can be done by implementing following:
The GAZ has no dedicated market research teams or R&D. The company is familiar with the market of Russia but international expansion will lead to diverse need identification. The company has to work on the market research. The better the management understands the customer needs and expectations more are the sales. In this way the GAZ could have the competitive advantage of the cost and it can earn more profits. (Dunning, 2012).
The question of whether company will be opening its own production facility in the international markets or it will export the manufactured vehicles from the existing facility is very vital for international operations. If the company manufactures its products in the current facility and then export those to target markets then a channel problems will arise. The products will not be able to win the trust of the customers due to limited or no aftersales services. Moreover, the availability of spare parts will not be frequent. However, if company arranges the facility of spare parts, it will not be cost effective to export locally manufactured spare parts to the target markets. It will increase the price of the spare parts and maintenance. In this way, the GAZ products will not be able to compete in highly competitive environments. In this way the GAZ could have the competitive advantage of the cost and it can earn more profits. Therefore, for efficiently operating among competition, it is better to arrange production sites in target markets or arrange efficient dealers’ network through local partners (Gibbs, 2012).
The company will have to stick to strict quality standards and quality controls to sustain affectively in competitive markets. The issues of quality and service as witnessed in the past will bring no success in the international markets. It is better to partner with international players for spare parts and after sales services as the company is currently doing for local operations. It will help the company to win the trust among the international customers. It will also help in reducing the costs. The company will only be successful if it meets quality standards and bring technological breakthrough in their products (Demirbag, Mirza, 2000).
In international expansion it is very important to define the target customers and then understanding those customers. The customers of the GAZ in Russia are middle sized businesses. Moreover, access to finance in local market is also easy. The conditions might be different in the international market. The light trucks of the GAZ sell in the local market because of the price factor. The prices are affordable and the company has an extensive dealer network as well as ample supply of spare parts. The vehicles are best suited to the local road conditions as well. All these conditions will be different in the international market. Therefore, the management needs to define the target market very carefully. After defining target market, the company should come up with strong positioning strategy. If the products are not positioned properly, they will not be able to generate expected response. The GAZ should position its products as cost effective, reliable products with extensive distribution and after sales network.
The GAZ is currently catering to the needs of Russian customers only. For international expansion, they will have to invest heavily on the advertising campaigns. It will increase the cost at start, but it is necessary as well (Dunning, 2012).
– PESTEL Analysis
PESTEL analysis is also referred as environmental scanning. It is very important for planning purposes in international expansion. The GAZ has partnered with a local Turkish automotive dealer to expand the scope of its business to the Turkish market. The PESTEL analysis will be specifically based on the Turkish market (Kayumi, 2014).
The political system in the country supports liberalism. The political heads favor liberal and free trade as well, and it is supported through policy framework. Due to this fact, international companies are constantly turning towards Turkish economy as a result of the favor of the government. This will increase the competition for the GAZ products as there are few entry barriers for new entrants. There are different international players already operating in the market. The competition is high and it will be tough to sustain the growth in new market. However, the legal system of the country is well organized. It has an established system of jurisdiction and courts. It will favor the business of the GAZ as the legislation is proper and will prevent frauds or malpractices (Sturgeon, Memedovic, Van Biesebroeck, Gereffi, 2009).
The economy of the country is on the path of growth. It is a positive sign that the purchasing power of the people is growing and they are able to spend more. The major source of this growth is international investments in the country. However, the economic deficit for the country is on upward trend in the recent years. It is the biggest challenge for the economy as well. The import market has increased value in the recent years due to raised prices. Therefore, the economy is susceptible to the global financial doubt. Therefore, there is a risk in the international expansion as in case of financial crisis, the company will have to relocate (Kayumi, 2014).
The population of the country is growing. The youth is the major part of the population of Turkey. Almost half of the population is below 30 years of age. The specialization of the GAZ is its light trucks that are purchased by the small to medium sized business. The target market will have fewer businesses as compared to the local market. The population is growing; therefore, the company will have to be dynamic in designs and the technology (Demirbag, Mirza, 2000).
The technological advancement in the country is up to the mark. Turkey has shown double digit growth in IT in the last decade. This is an opportunity for the GAZ as well as a threat. The bright side is that company can get benefit from this technological advancement. However, this advancement will pose difficulties for the company as well. The company will have to be more innovative in technology for its products to get success in the Turkish market. Another drawback is that the spending of Turkey on R&D is less than one percent. Therefore, the company will have to spend more on R&D on its own (Dunning, 2012).
Turkey is blessed with biodiversity and seasonal variations. However, global warming and pollution is a growing concern of Turkish people. The level of pollutants is increasing, and the state is now taking actions to control pollution. For this purpose, they have drawn regulations as well. The GAZ will have to meet these regulations for the protection of the Turkish biodiversity (Tureyan, 2014).
– Recommended Market Instruments
Expanding the Market Development
It is very important to know the customer in a better way. For this purpose, the company should invest heavily on expanding the market development. They should know their customers better. The company should partner with the local research firms to know about the customer expectations. It will help in the product development according to the needs and expectations of the local consumers (Jain, 1989).
In the entry phase, the company should invest on the advertisements. They should follow the marketing orientation that a good product needs dedicated marketing efforts to sell. The company is new to the market and should be promoted through different media so that people know about its products. The company should also use the names of the local partners in the advertisements (with prior permission) to build trust among the customers (Dunning, 2012).
The post purchase behavior of customers is very important to understand, the customers never want to be forgotten by the company once they purchase the product. It is very important that company maintains efficient after sales services for the success of international expansion. It is possible only through the local partner. Moreover, the company should invest on the dealers network and service centers. Dedicated service teams and 24 hour hotline will be a cherry on the cake (Gibbs, 2012).
The culture of Russia and that of the international markets is altogether different. There will be different cultural barriers in the international expansion. The culture of Turkey is not broad and resists change as compared to the culture of the Russia. Therefore, the company will have to anticipate this thing carefully in each and every marketing aspect ranging from advertising to planning and execution. For example, there are religious differences in both countries. It will pose problems among the mindsets. The festivities of both these countries are different. The festivals, language, culture, values and norms have an impact on the marketing activities. It is very important to know these differences and plan accordingly to anticipate these differences (Demirbag, Mirza, 2000).
– Demirbag, M., & Mirza, H. (2000). Factors affecting international joint venture success: an empirical analysis of foreign–local partner relationships and performance in joint ventures in Turkey. International Business Review, 9(1), 1-35.
– Dunning, J. H. (2012). International Production and the Multinational Enterprise (RLE International Business) (Vol. 12). Routledge.
– Gibbs, N. (2012). Andersson revives Russia’s GAZ. Automotive News, 87(6533).
– Jain, S. C. (1989). Standardization of international marketing strategy: some research hypotheses. The Journal of Marketing, 70-79.
– Kayumi, B. (2014). PESTEL Analysis for Turkey.
– Rugman, A. M., & Collinson, S. (2009). International business. Pearson Education.
– Sturgeon, T. J., Memedovic, O., Van Biesebroeck, J., & Gereffi, G. (2009). Globalization of the automotive industry: main features and trends. International Journal of Technological Learning, Innovation and Development, 2(1), 7-24.
– Türeyen, H. (2014). Country Analysis of Turkey.