The ISM brand will remain as part of the standardization strategy to allow higher chances of brand recall. The designs and concept of the products, technologies and high quality of materials used will also be retained. However, product adaptation will be applied with respect to the elements of Culture and Legal. ISM will re-engineer the massage chairs to fit the Germans who are considerably bigger size. The language used for the packaging and user manuals will also be translated to German. ISM will also have to replace the power sockets to Euro pin.
To achieve profit minimization, ISM will apply the price skimming strategy. Leveraging on the SAFETY, ISM will charge premium pricing at the introductory phase and gradually lower the price over time. Demand for Ism’s massage chairs is price inelastic because Germany households exhibit high net-adjusted disposable income per capita. The objective of setting premium pricing is to overcome fixed and variable business costs. In terms of place, ISM will open three retail stores in Berlin and adopt the direct channel of distribution – taking absolute control over product brand image, sales and pricing.
ISM will also be applying Selective Distribution – limiting its products to be available only in certain markets. In a bid to advertise effectively in Berlin as a new entrant, ISM will retain and standardize the promotional campaigns as Asia; however adaptation will be applied to the language and choice of celebrity chosen. ISM will choose Memorials Josef Close, to promote through television immemorial and print media and maximize the reach of the customers. As part of its expansion plan, ISM will undertake two assumptions: the political situation from the Ukraine crisis has caused consumer goods bookings to fall.
Despite this, it is assumed that Berlins potential as an expansion destination will not be limited. Economically, consumer spending behavior is seen to increase with spending more than last year (Thomson Reuters 2014). There is also a propensity to buy large items such as cars and furniture. Thus, it is assumed that the ISM marketing campaigns will be expected to have better sales and results. To safeguard its overseas venture, contingency plans for epidemic and protest situations need to be put in place. Plans to allocate staff into two or three shifts can help minimize the impact of virus spreading.
Telecommunication methods as a channel for work operations would help organization to operate as well in times of epidemic. Likewise, it is crucial that organization have alternate offices or factory sites when protest occurs in the country or organization. The flexibility for staff to work from home after inventory would allow organization to operate regularly in times like such as well. 1. INTERNATIONAL ENVIRONMENT 1. SOOT Analysis Strengths Strong brand equity in Asia Strong brand equity is a major strength of ISM and it gives ISM the capacity to price higher for their products (Wong 2014).
In an independent survey by international market research firm Syncopate in 201 0 and supported by International Enterprise Singapore (IEEE Singapore), ISM was named the Most Preferred Healthy Lifestyle Brand and Preferred Massage Chair Brand in Asia. It had also won numerous awards such as “The Most Valuable Singapore Brands,” “The Strongest Singapore Brands” and ‘The Brand with Exceptional Performance. ” The brand equity of ISM is high and is evident with its usage chairs priced at a premium over its competitors’ and yet consumers are willing to fork out more to make ISM the top preferred brand.
Sustainable growth traction ISM has achieved amazing results of 5 years of record profit and 20 consecutive quarters of bottom line growth after returning to profitability in Quarter 1 of year 2009. With consistent increase in profit and revenue, Ism’s robust financial position further allow them to use their balance sheet to expand their business and increase their profits. The solid operational performance under the management’s competent executes capabilities. Product varieties and Quality ISM has a wide range of products catered to specific needs of its customers.
For example, the compact design angel is priced at an affordable price of S$1888 to tap on a new market for young families who have space constraints at home. Apart from its renowned massage chairs, ISM also has product categories such as ‘Tensioning, ‘Check & Measure’ and ‘Clean & Purify’. Besides, superior technology allows ISM constant release of innovative products to better meet the needs of their customers in ways that competitors cannot imitate. Weaknesses Manufacturing processes are outsourced
Risk could be implied and as there is no guarantee outsourcing is going to produce the quality desired with the possibility of increasing cost due to labor. Also, there is the apparent risk of sensitive information leaking to competitors due to the lack of control (Benson, Lars, and Adverbial. 2009). Often with outsourcing there are conflicts of interest and issues with confidentiality which could take away Ism’s competitive edge. Low levels of brand awareness in European market In Asia where ISM is featured as “Asia No. ” and “No 1 top of mind recall Healthy Lifestyle brand in Asia”, there is a stark difference of its brand wariness in the European market. This increases the risk Of venturing into Germany and the Europe market. Moreover, the venture may not be ready for downturn in economic cycles specific to the region or changes in consumers’ taste or any health epidemics. These risks could be detrimental to market penetration into Europe. Demand vulnerability to economic downturn Ism’s healthy lifestyle products are more exposed to reduced demand in times of downturn as they may not be considered as essential health products (Philip Capital 2014).
Ism’s products are deemed to be luxury goods and thus, demand will be affected in times of economic downturn here consumers will be more careful with their spending and buying decisions. Existing distribution through Franchising in European market For existing distribution in Europe, it is done through franchises and this mode of distribution is assumed to be ineffective. This is because the total revenue contributed from non-Asian countries makes up to only 5% of the total revenue: Extract of Revenue by Region from ISM 2014 Annual Report The small revenue contribution could be due to factors such as control and risk of failure.
Distribution through franchising loses control over the business (Advantages and Challenges Of Franchising 2007). While the franchiser does set out rules within the franchise agreement as to how the franchised business should be operated, the franchiser does not manage the business. The franchisee can run the business as deemed fit as long as it does not break any contractual issues Another disadvantage is the risk of failure. Not all businesses are suited to become franchise businesses and success of the franchise is not guaranteed.
The franchiser cannot control whether a franchise’s business is going to fail; it can only provide guidance and support. If a number of franchises fail it can hurt the core business. Opportunities Rising economic growth Described as a haven during the Euro crisis, Germany has recorded growth of 0. 8 percent in the first quarter of the year and is the only country doing well ahead of Europeans 2 other largest economies: France and Italy. (Economist, 2014) Along with the economic growth, there is also a rise in domestic demand with both businesses and households spending more.
European union-Singapore Free Trade Agreement (SUBSET) The European Union-Singapore Free Trade Agreement (SUBSET) is Singapore major economic partner, accounting for 11 percent of the nation’s total trade. Singapore and the European Union successfully concluded negotiations for the SUBSET on 16 December 2012. (SUBSET 201 1) The SUBSET would come into effect once the FAT is approved by the European Council and ratified by the European Parliament. Based upon the Ell-South Korea PTA, which took almost two years to enter into force upon conclusion, it is anticipated that the SAFETY will be operational from January 2015. European Union – Singapore Free Trade Agreement (SUBSET) concluded 2013) This free trade agreement covers all European Logion (ELK) Member States, which means Singapore impasses such as ISM are able to gain easier access to markets in all the 28 EX. Member States. This would result in economic integration where larger mass markets for ISM are created. The FAT abolishes all custom duties and non-tariff barriers for products from Singapore for five years starting 2013, till 2018.
Non-tariff barriers such as compliance to standards – Consumer electronics and telecommunication products that conform to relevant Singapore or EX. standards can be sold in the respective markets without additional testing or certification requirements. This reduces business costs ND products’ time-to-market, benefiting just-in-time production. (ELICITS 201 1) The reads Intense Competition There are several competitors established in the Germany market prior to Ism’s entry. One officio is Bearer; the brand originates from Elm, Germany and carries over 120 products.
Bearer’s strengths is the ability to expand its product line with its strong focus on internal research and development together with targeted analysis of future markets. (Bearer 2014) The Germany-based Corporation also channels its massage chairs through a certified and authorized distributor, Laxly which carries a number of leading rand’s like Panasonic, Sandy and Bearer. On top of this, Laxly also provides rental of massage chairs for events, exhibitions and also health centers. (Laxly 2014) Indirect competition from e-businesses also poses a threat to ISM. Online shopping sites such as eBay. Mom and the Alabama Group is easily accessible by the German consumer market. Lack of labor supply in Germany Germany’s birth rate has been below the replacement rate (of around 2. 1 ) since the start of the sass. Although there is about 400,000 people a year of net migration, there seem to be a lack in labor supplier that could potentially e affecting productivity growth and thus economic growth. (Economist 2014) Counterfeit/Look-awake Products There are counterfeit or look-alike products that serve similar purpose which are already in Berlins market, mainly from Alabama Group.
With counterfeit products in the market, there is a need for ISM to accelerate its pace of product innovation, since the shelf-life of its new products is likely to be abruptly shortened by imitations. (Credit Guise 2014) Product Re-engineer Ism’s market position in Asia markets is strong and their massage chairs are engineered to fit the size of Asians. Around 63% of the Asians fall in the lately range of Body Mass Index (IBM) at around 18. 5 to 24. 9. (NASH 2014) Asians are known to have smaller frames than Europeans in average. Rivals 2014) Hence, Ism’s products may not fit a German comfortably because the average IBM of a German is around 27. 1 . (Bond 2014) Germans are also categorized in the top 10 of the amount of obesity people among all the countries. (Veggies 2014) Therefore, there will be a need to re-engineer products to suit the European market and this would mean incurring higher costs. 1. 2 Mode of Entry ISM corresponds to the market-seeking task and will be using a wholly wend subsidiary (WOOS) as the mode of entry in Berlin. WOOS suggest that the organization hold 100 percent of the foreign entity.
ISM will also establish WOOS via Greenfield venture. The organization will move into the new international market by setting up an absolutely new operation and legal entity. One advantage of the wholly-owned subsidiary is that ISM will have strong control of 100 percentage ownership. With that, ISM is able to its own strategic plan and manage the subsidiary in its desired way (Bass 2014). In addition, organization does not need to bear the risk of losing its nominative advantage and know-how by selling these to another party. Therefore, it gives ISM more power of control and less risk.
Furthermore, the organization will have 100 percent of profits in its WOOS (Binomial 2014). 2. SELECTED MARKETING STRATEGY 2. 1 Marketing Objectives to be achieved by 31 December 2015 Marketing Objective 1 – Market Share To achieve 10% of market share and convert competitors ‘customers to ISM’S. Marketing Objective 2 – Sales To achieve profit of S$2 million in the America/Africa/Europe/Middle East/ Oceania region, increasing its revenue percentage from 5% to 7% for the region. Marketing Objective 3 – Pricing To achieve profit minimization by applying price skimming strategy.
Marketing Objective 4 – Placing To open three physical outlets in Berlin by 31 December 2015. Marketing Objective 5 – Promotion To achieve 80% of Ism’s brand awareness by organizing at least 2 arrowheads per month where potential customers can try and test out the luxury massage chairs. To achieve 20% of purchase intention for ISM massage chairs 2. 2 Target Market The target market in Berlin is age group of 25 to 64 years old which makes up to 65% of the city’s total population. Target income level will be 5,000 euros, Geiger than the average income level of 3,400 euros. Salary Explorer 2014) They are identified by Roy Morgan valve segment as the Visible Achievement (Roy Morgan Research 2014). Despite being successful, they retain traditional values about home, work and society. The family is very important to this segment and they place great emphasis on providing their families with a high quality environment. Therefore it is ideal that Ism’s products would appeal to this segment of the target market as they can afford to buy the best of everything and they look for quality. 2. 3 Marketing Mix 2. 3. 1 Product
The core benefit that Ism’s products offer is relaxation. Customers who purchase Ism’s massage chairs seek to relax and relieve to achieve relaxation. The actual product of Ism’s products are the designs of the massage chairs – they are consistently updated to blend in to the fast-moving and latest trend, of which these innovations still maintain its high quality materials. Augmented product offered by ISM is on-site repair and installation, warranty and free delivery service to be provided as a complete package to boost the overall experience consumers have in ISM.
ISM will be positioned as a luxury massage chair and gain market share wrought premium pricing. ISM has a wide range of specialty home health care products which has very strong brand image. Consumers have good considerations before purchasing and does not make frequent purchases for Ism’s products. In the initial phase of venturing into Berlin, Germany, ISM will introduce a key product, the Leninist. The remaining range of products will be introduced at later phases, depending on consumers’ response in the introductory phase.
The competitive advantages of ISM are Strong brand equity and Innovation. ISM is the market leader of Healthy Lifestyle Products in Asia. ISM munched the World’s 1st Human AD Massage Chair in 2010; divine (which was then improved to Leninist in 2013). divine is equipped with the latest technology; with Apple/Android’s application to go with the massage chair. With that mentioned, it emphasizes on the latest technology matched up with the latest trend of utilizing applications with the current lifestyle of consumers. This enables consistent updates and services for the consumers.
Standardization ISM is an established brand name in Asia and hence, the brand name itself is a strong marketing strategy that will be retained and used in Berlin. Innovative designs such as the bright colors concept and ergonomically designed chairs with the latest technology are to be brought in to Berlin as well. Emphasis on the latest technology will be replicated in Berlin too. High quality materials and lifestyle massage technology and programs of the products pertaining to the health benefits and relaxation are what differentiates ISM from other brands.
Adaptation Element of Culture: Size and Language The Leninist will be re-engineered to adapt to Berlin (and ultimately the European market) to have a bigger seat space and surface to fit a German comfortably. It has been indicated in researches that Germans are bigger in size as compared to Asians. The language used on the packaging will also be translated to German. Instruction manuals and staffs in physical storefronts and helpline are to be in both English and German as well.
Element of Legal: Power sockets Asia uses both US and UK pin whereas the regular wall socket in Berlin is Euro plugs. Hence, the power plug sockets are to be changed to Euro plug sockets. 23. 2 pricing To achieve profit minimization, ISM will apply the price skimming strategy. During the introductory phase of ISM Leninist, a relatively high price will be et when the product first enters Berlin, Germany. The high price is aimed at customers who desire the product and are willing to pay.
ISM is able to charge high price due to European Union Singapore Free Trade Agreement (SUBSET). After the introductory phase and periods of monitoring, the price will be gradually lowered over time to bring in larger numbers of buyers. ISM, being a Singapore company, will enjoy positive country of effect which will affect the pricing strategy. With the SUBSET, all products originating from Singapore that conform to relevant Singapore or EX. standards can be sold in he respective markets without additional testing or certification requirements.
Without additional costs of having to send the products of testing or certification, ISM can keep its prices competitive. Due to the nature of Ism’s massage chairs being luxury products, they are thus price inelastic. This means that demand will not differ significantly with changes in price. This is because the target market (age 25-64 years old) for the Leninist massage chair exhibits high household net-adjusted disposable income per capita. This refers to the amount of money that a household earns annually after taxes and transfers, equating to money available for spending on goods and services.