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Globalization can be defined as a means of advancing reliance by forming associations or integration within the people, companies, states or zones. These associations have impacted economic growth through progressiveexchange of commodities, services, skills, innovation, investments and populations (Beerkens, 2006).
Minimum barriers to trade and investment, reduced transport expenses and reduced costs of information technology are key elements that have contributed to an increase in globalization (Doole and Lowe, 2008). In order to experience economic growth firms should apply external business venturing strategies, develop their communication systems and improve organizational capacity. On the other hand organizations that are yet to adopt these strategies have not experienced as much financial gains (Levitt, 1983).
Economic trends within international market contribute towards development and formation of alliances and partnerships amongst companies. Such alliances require detailed agreement between partners and also provision of quality products and services capable of meeting competitive standards within target markets (Levitt, 1983).
Such trends drives company’s towards restructuring their strategies such as supply concepts and practices capable of addressing complex market demands. This makes integration across supply chains one of the main challenges facing general operations of companies within target markets. However, common customer needs across markets creates some level of uncertainty to firms since it decreases sales potential of a company’s product or services within such markets (Doole and Lowe, 2008).
The case study discusses ‘Indesit Company’ which is a home appliances based venture started in 1975 after firms such as Electrolux, Bosch-Siemens and Whirlpool had already established their market in such similar trade. However the company did a remarkable job to catch up with its competitors. The firm was able to enter the market successfully and expand throughout Western Europe.
Products and services should be dispatched to various market segments based on consumer needs. Success of any business venture within global market environment is determined by the level of satisfaction consumers are able to obtain from products supplied. Other ways of maximizing company’s customer base involves formation of partnerships and alliances which enables organizations to concentrate on their businesses as well as exploring new business avenues.
This company was formed at a time when it was manufacturing a range of domestic appliances and owned oversees locations in Western European Markets. However, Vittorio soon acknowledged that the business locality disfavored his idea of innovative managerial practices and adoption of technology. He had to rely on external concepts to grow his business. He had received advanced skills in work ethics from his father and also acquired the latest means of production from his suppliers and consultants.
The firm developed progressively while facing the challenges of internationalization. Surprisingly they even survived the prevailing strong competition within the industry and still achieved growth that earned them their current position in the market. However, the company would later be challenged to either progress its mission to be Europe’s largest home appliances firm or to join in the global trade.
They were also faced with the issue of analyzing the dilemma surrounding implementation of appropriate global business strategies, considering that some of their direct competitors already had a major global presence. The market risks within the global domain as described in this context could be posed by factors such as fluctuations in currency and political instability within some regions such as Middle East.
After various acquisitions, Indesit had established its presence in most of Europe with an exception of Germany and Turkey. There was also poor performance in the Scandinavian zone. Even while trying to consider the option of going Global and that of maintaining their European Base, management through leadership of Milani could not ignore the absence of Indesit from Germany.
The fact that there was no presence of Indesit in Germany was an advantage to its biggest competitor that enjoyed uninterrupted business in its domestic market. Whereas the biggest consumer of domestic appliances is United Kingdom, Germany had the largest population in Western Europe. The major challenge of Germany was that it was a super aggressive market that had the presence of well-established companies like Carrefour that catered for clients with a desire for German quality products.
The market situation in Germany was defined as “a black hole” by the strategy director of Indesit Company, Giuseppi Salvucci. This was because of the impenetrable state of the market for foreign firms. He also included the Scandinavian and Turkish market in this category as it had little or no presence of Indesit.
The best remedy for the German challenge would be to purchase a highly rated German brand. This is clearly evident from the market penetration strategy adopted by its competitor like Whirlpool. According to Beamish and Lupton (2009), companies stand a good chance of exploring other sales avenues, gaining expertise, acquiring new abilities and assets by practicing joint ventures. However it may prove difficult to administer the joint ventures owing to the ownership structure that may involve more than one institution.
This could be used as a scope for Indesit expansion in Germany and a probable solution for the Scandinavian market as well.In the case of Turkey, initially the market growth played to the advantage of Indesit’s rapid progression, however, the growth and market presence of the local leading brand Arcelik was of no match to fast moving Indesit, since Arcelik was domestic market leader in home appliances products within Turkish market.
In order to gain competitive strength in Turkey, Indesit would need tomake crucial marketing investments and probably the purchase of a domestic competitor with a reputable brand in order to connect with the local people (Doole and Lowe, 2008).
There was a strong need to indulge in some kind of cooperation. It was still the opinion of Indesit’s director that the transformations being experienced in the market called for adaptation of a global business consideration. The company would then start an examination of the Chinese and Indian market to diversify their consumer base and increase global presence. Indesit acquired a dishwasher plant in China that earned them first-hand information about the Chinese market (Doole and Lowe, 2008).
Diagnosing Industry Globalization Potential
It is important for companies to organize their market channels and structures based on principles of globalization for success to be realized.
In such a case it is necessary for companies to consider consumer needs both in local and international markets and utilize appropriate and effective channels capable of satisfying such needs. Several paradigms influences operations of channel structures some of which include; system flow paradigm, views on product categorization, relationship paradigm and use of power (Rosenbloom and Larsen, 2008).
System flow paradigm represents processes and activities taking place within organizations in global markets. Such organizations and institutions operate under wholesalers, sales agents and retailers and form the necessary link channel between producers and consumers which is an important aspect within global marketing.
The success of marketing strategies such as brand positioning depends on level of coordination and management of available channels of distribution. However, introduction of new technologies such as internet have improved levels of operations making it possible for consumers to transact business direct with producers without involving any intermediaries.
Divergent view on product categories is also another factor which incorporates different perceptions accorded to particular goods by manufacturers and consumers. In this case, producers focus on efficiencies involved during production processes while consumers focus on the benefits that can be derived from using same products.
Relationship Paradigm refers to associations existing amongst those involved in global business transactions. In such partnerships there are various effects such as conflict of goals, objectives and opinions amongst the suppliers, retailers and consumers. Such conflicts create some difficulties in the normal operations within distribution channels (Rosenbloom, 2007).
In the year 2007, Western Europe markets were experiencing plenty of growth and there was also an increase in the number of bulk traders, which refers to companies dealing with manufacture and distribution of products in large quantities. As a matter of fact some of the small franchises were transforming themselves in order to achieve an international status.
Firms like Wal-Mart and Carrefour had a presence in the United States, Europe respectively and also in Asia and all traded in appliances. The approach of the appliance franchises had an authoritative effect on the market and changed market trends. Clients encountered comparable packages that had relatively similar items or functions.
Sales persons were depended upon to guide the clients to the available goods that would deliver beneficial transaction to both the vendor and sales person. While this remained to be the case, there appeared to be a shift in the European market in 2007. The demolition of the Berlin wall which was a considerate economic barrier between the West and East Germany extended the German market scope from Lisbon to Moscow.
Having been the initial occupant of the said markets, Indesit had a first mover advantage thereby benefitting from its outstanding market stake. As a result of these expansions the management considered to effectively restructure its business practices to enable different roles by different groups or divisions.
One group was focused on the struggle between established contenders in Western Europe and the other was to advance aggressively to encounter the potentials of Russian and former Soviet Union Markets. The approach was later to tailor by Marco Milani to offer discrete services. This divisional approach helped them effectively focus on the competitive challenges of each region of operation and expansion.
Moreover, various strategies such as market research are implemented in the process of diagnosing industry globalization potential. The company modified its strategies for the purposes of providing separate organizations for Italy and United Kingdom. There is significant difference between mature and emerging markets depending on relative strength of various distribution channels such as wholesalers and retailers (Levitt, 1983).
However, developing markets presents opportunities for development of strong brands based on the nature of product and the distribution channels used. For instance, Europe presents one of the largest markets for industrial goods hence accounted for over thirty percent of total global market share.
The second largest market for industrial goods was Asia also with market share of over 30%, followed with United States at approximately 22% and other markets of the world in combination providing up-to over 13%. However, market for home appliances as produced by Indesit was identified to be highly competitive in China despite the market being dominated by domestic brands.
Building Global Market Participation
There is necessity for companies to build their global marketing participation through integration of supply chain processes and creation of workable marketing strategies within each specified market environments. Such strategies require effective means through which costs of operations are reduced while improving customer service levels.
Indesit Company faced problems in increasing scale and internalization due to its expansive operations within highly volatile global business environment. However, application of standardized technology within dynamic supply chain planning processes could assist in building quality supply chain operations and ensuring efficiency across entire supply chain (Lovins et al., 1999).
At the same time implementation of Enterprise Resource Planning systems, movement of information across organizations and the overall implication of standardization of business processes determine the extent to which Indesit could engage in supply chain integration. This is enabled through incorporation of automation and streamlining of various planning, scheduling and execution processes at wholesale and retailing levels within supply chain.
At the same time the industrial marketplace is reformed through intensive inter-firm communications across regions, this is made possible through Integrated Marketing Communication Mix (IMC). These assisted in creation of efficient international markets through trade links. Moreover, incorporation of enterprise information infrastructure and intensive use of social media led to application of variety of supply chain optimization technologies.
IMC comprises of business processes capable of providing companies with necessary assistance in the process of building and reinforcing their relationships through communication. Efficient communication between companies, customers and stakeholders involves various aspects extending beyond application of traditional marketing communication tools such as use of word of mouth.
This is the reason as to why multinational firms prefer the use of IMC within their business and marketing operations which enables them to reach targeted international market segments effectively within shortest time possible. IMC ensures that consumers receive up-dated and adequate information concerning company’s products and services within the market (Lindgreen and Finn, 2005).
Designing Global Products and Services
Indesit Company started with designing Europe’s home appliances and at the same time focused in building modern, progressive enterprise through massive investment in modern technology. The company saw the need to tackle issues with products and services within Germany which included quality of products, improvement in sourcing and design efficiencies, re-balancing manufacturing locations and at the same time upgrading the company’s brand image.
Indesit Company identified home appliance industry as one of the key turning points within the second industrial revolution. These included manufacturing of products such as refrigerators, electric and gas stoves, washing machines which marked significant point in the economic development of the company.
Success of designed products and services within the market is fully dependent on process of naming and branding. Indesit Company made the process part of its regular activities done by marketing department within regions of operation. The naming of their products, services is aligned towards fulfilling some level of uniqueness including the market position of products.
Branding a Company using globally recognized name makes it easier for consumers to identify with the specific category of their products and services (Doole and Lowe, 2008). The company has also considered presenting products in a language that can easily identify with global market environment.
Indesit utilized the art of brand positioning for the purposes of solving marketing problems within Germany. This was done through acquisition of well-regarded German brand. Every region demanded unique product characteristics and delivery processes. However, Indesit brand became the core brand of the company and operated alongside four other brands such as Hotpoint, Scholtes, Stinol and Cannon.
Since the knowledge about the brand plays an important role, major marketing investments were required to increase brand awareness. Also acquisition of locally based strong brand could be utilized in order to penetrate emerging markets with such new products and services. Home appliances required meaningful names structured from incorporation of such elements as color, symbol, and logotype (Larson and Lush, 1992).
The success of Indesit’s brand can be attributed to the nature of brand language which comprises various communication elements. The strategy used by the company in branding their products and services within various European and Scandinavia regions involves verbal and visual components.
The company’s nature on brand evolution aims at being attractive to various consumer categories as well as multiple cultures. This ultimately represents the best means of breaking existing communication barriers within market environment (Larson and Lush, 1992).
Locating Global Activities
The company kept on pushing forward and moving into other nations within former USSR. Most likely, its competitive advantage resulted into more profitable activities. According to Hopwood, Mellor and O’Brien (2005), the structure of industry associated with Indesit Company contributes towards the provision of innovative opportunities.
Due to favorable structural attributes within the global market where Indesit operates, the firm has the capability of capturing significant market share. Structural attributes of the company within market includes factors such as, ease of entry to the market and the level of bargaining power (Hopwood et al., 2005).
Resource-based view of the company considers the presence of many firms within the industry and therefore prefers dealing with diversified products having direct effect on the varying performance of the company. Therefore, firms that are operating based on high standards of marketing strategies benefits from such competitive advantages (Sharma and Vredenbrug, 1998). Market segmentation presents companies with the opportunity of satisfying specific consumer needs and desires.
Some organizations implement successful marketing strategies which enables them take advantage of globalization hence gaining competitive advantage. Such strategies should encompass appropriate allocation of company’s resources enabling profit maximization within international market. However, nature of entry into emerging markets applied by multinationals determines to a large extent its impact on consumers and level of market penetration.
Some markets are better penetrated through formation of joint ventures and alliances with domestic organizations. The situation could clearly be identified within Brazilian market where Electrolux and Bosch enjoyed larger percentage of the market. Such situations vary amongst countries. For instance, market for home appliances seems intensely concentrated within Latin America region, despite contributing significant amount of return on capital compared to other regions within global market.
Creating Global Marketing
One of the most important aspects in global marketing is the development of global brands having same characteristics in all markets. Nature of global branding plays an important role in advancing company products since it contributes towards creation of company’s economies of scale and at the same time gives the company competitive global image. Large economies of scale at times prove profitable in the process of ascertaining and reducing operational costs within the marketplace (Alden et al, 1999).
Application of unique global brand assists in development of company’s image hence making it easier use of specific advertising strategy acceptable internationally. Such procedures enables the company to reduce overall operational costs. At the same time, global brands are known of their ability to deliver quality products hence are considered trustworthy. However, before a brand attracts consumers within the global market there should be strong local support from domestic market based on quality delivery.
However, research done on global advertisement revealed that success of an advertising campaign within domestic market may sometimes not necessarily deliver the same results within international market segments. Such results calls for extensive research on the level of effectiveness such advertising methods can deliver in some regions before company’s product and services are dispatched to such markets such differences are based on culture and beliefs.
The company requires intensive advertising and promotion of its brand known as “Indesit”. Other brands included are; Hotpoint, Scholtes, Stinol and Cannon. However, the company at some point decided to drop all other brands and focused in marketing them under a single brand i.e. Indesit. Such oorganizations as Indesit use different promotional techniques to move their products and services into the market for the purposes of gaining stability within the market.
The aim is to stimulate demand for a product and increase the sales volumes within the market (Magretta, 2002). Towards understanding the role promotions play in placing and positioning products in the market, Indesit Company attempts to analyse the impact of other companies on their product promotion techniques and the influence on market position of such products in the global market.
Such marketing research is influenced by the knowledge that companies ideally use competitive promotional techniques for the purposes of gaining competitive advantage in the global market (Doole and Lowe, 2008).
A typical example is where Indesit Company attempted to create awareness of its large pool of products through sponsorship activities and also partnering with companies that are already established within domestic target markets. Other strategy used involved investing a large portion of its profits in the past by sponsoring various activities.
Making Global Competitive Moves
Indesit Company faced some radical changes in order to conform to the nature of competition within global market. Major causes of such competition included application of modern technology and tension within global markets. Such occurrences have made the company to adjust and modify various aspects within its mode of operations for the purposes of satisfying consumer demand. Indesit adjusted its operational costs in order to cater for final pricing of its commodities within the market.
Various market segments have different expectations some of which include; quality, affordable prices of commodities, nature of delivery, desire for customized services as well as flexibility amongst other factors (Rosenbloom and Larsen, 2008). Such considerations have ensured adequate changes within business strategies for the company.
Indesit Company has undergone tremendous changes aimed at strengthening its presence within the global market such as strengthening its brand image through use of one umbrella brand name.
Some of the changes aimed at increasing its competitive moves which included initiating and implementing appropriate communication mix and business models within various emerging markets. Such model incorporates different reporting structures enabling substituent companies and regions to communicate efficiently with company headquarters.
Application of such business strategy enables the company to specialize in supplying various forms of home appliances and at the same time making use of decentralization of their activities (Doole and Lowe, 2008). This has well been utilized through formation of alliances and Joint Ventures with other companies (Beamish and Lupton, 2009). Moreover, the marketing strategies applied by the company have ensured efficient delivery of products to consumers.
Conclusion
Various challenges within the market made Indesit Company to significantly consider prices of products and services. This is since related products from other competitors were on the rise. This had a direct impact on the companies’ profit margins. However, most of the senior managers are recorded as continually tackling supply chain issues based on operational matters rather than strategic.
Product and service supplies are recorded as having increased operational costs experienced across board. Pressure exerted on the company products justifies their demand from consumers. This represents some level of wake-up call for the entire business based on increased costs incurred at the backbone of the business. Integration of all elements within supply chain is identified as most critical for the purposes of enabling sustainability as well as organic growth for the entire business.
References
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Beerkens, E. (2006). Globalisation: Definitions and Perspectives. Web.
Doole, I., & Lowe, R. (2008). International Marketing Strategy – Analysis, Development and Implementation. Web.
Hopwood, B., Mellor, M., & O’Brien, G. (2005).Sustainable Development: Mapping Different Approaches.Sustainable Development, (13): 38-52.
Larson, P. D. &Lusch, R. F. (1992). Functional integration in marketing channels: A Determinant of product quality and total cost, Journal of MarketingChannels, 2(1)1-28.
Levitt, T. (1983). The globalization of markets. Harvard Business Review, (6): 92-102
Lovins, A., Lovins, H., &Hawken, P. (1999).A road-map for Natural Capitalism. Harvard Business Review, 77(3): 145-158.
Magretta, J. (2002). Why business models matter. Harvard Business Review, 22 (80):86-92.
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Sharma, S. & Vredenbrug, H. (1998). Proactive corporate environmental strategy and The development of competitively valuable organizational capabilities. Strategic management journal, (19): 729-753.
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