Key environmental factors that may affect Nespresso’s entry of East European and Chinese markets, and their business implications
There are a number of environmental factors that should be considered in the planning process and these must have unifying influence that can enable the marketer to develop standardized plans. Economically, Nestle uses Swiss francs of which in case of depreciation of the currencies within the target region, the conversion results into smaller number of francs resulting into less revenue for Nespresso (Kravis et al, 1975).
There is decline in large market segment due to corporate trusts formed in these regions that tend to limit the level of competition. The rising growth of demographics outside the region presents greater challenge to available opportunities within Europe. There are increasing rate of consumption of Nespresso products within these markets that offer good compensation for the slow rate of growth, experienced in other markets (Keegan & Green, 2002).
There are improvements within international markets due to new development in technological sector within the market. There are so many changes occurring within the market leading to opportunities as well as difficulties, this call for periodic review in international market strategies and activities. Close relationship should exist between the management, marketing strategies, company policies and marketing plan implementation.
The social and cultural practices of the people in Eastern Europe and China are quite different and this may affect the sale of Nespresso in these regions. Differences exist in religion and social livelihood which affects the demand for the product and buying patterns. Consumers’ beliefs affect the branding nature of Nespresso and its standardization. The market in Eastern Europe has aversion to the use of Coffee products. Nespresso has also to deal with the language barrier within the Chinese market and some of the countries in the Eastern Europe.
This means that the marketing strategy has to consider employing the natives from these countries who are very familiar with their own cultures. Advertising approach has to change in order to link the product with the culture. Operations in different countries demands lots of considerations, there’s a big cultural gap between China and the western countries which makes it difficult for the penetration of western firms. There are a number of cultural perceptions on western products in China; they perceive that these products bring some form of westernization in their tastes, religion and ethnicity (Keegan & Green, 2002).
These regions are highly populated presenting good market base for Nespresso products; this is mostly within China. However, the population in Eastern Europe is expected to decline. There is high possibility of huge urban growth within these regions leading to growth in similarity on consumer needs. The constant changes in legal systems may affect Nespressos marketing strategy especially in the area of advertisement. There exists certain form of media restrictions and the level of accepted creative appeals within these regions. The legal environment has got much contribution towards acceptance of products within the domestic markets. The laws affect the market mix of Nespresso in terms of products, price, sales promotion activities and distribution (Keegan & Green, 2002).
Opportunities and challenges for Nespresso in East European and Chinese markets in managing customer relationships and sales through the Internet. Advantages and disadvantages of such an approach
The low entry costs of the internet leads to better promotion of Nespresso amongst consumers within these markets. The low costs enable Nespresso to lower the costs of reaching international customers and at the same time reduces the international advertising costs. This provides an easy and efficient channel of attracting and serving huge customer base. The ability to market goods and services through the internet in these regions makes it easier in providing customers with sufficient information enabling them to source for their choice Nespresso products (Regibeau & Rockett, 1996).
The easy access enables standardization of prices across these regions since the consumers can access prices of products from different countries and has got the ability to buy range of products from the internet. The internet further enables Nespresso to deal directly with customers without passing through the intermediaries. However, one of the disadvantages arises from the cost of servicing damaged goods which might prove costly than the income generated from new sales through the internet. The firm is vulnerable to loosing valuable information and at times assets because of the fraudulent activities going on within the internet. Internet has made appropriate knowledge application in management of critical issues in terms of complex database system (Regibeau & Rockett, 1996).
More informal communication comes into place and knowledge concerning the Nespresso largely depends on the relationship links formed between the company and the consumers in these regions. Therefore, display of high context characteristics is necessary for the business to succeed in these regions. Several businesses, like Nespresso, have established relationships with their suppliers, customers and other stakeholders through the use of internet. Consequently, the use of the internet makes interactions to become more personalized.
For instance, the supply to one particular retailer for some duration of time creates chances of making communications to be less task-oriented. Additionally, many businessmen in China and Eastern Europe are known for the astute abilities of forging networks with other businesses which is an important characteristic of high context cultures. This makes it tricky for Nespresso to fit easily into such cultures. Several policies and procedures within these regions require much time to learn, these include dietary laws and language expressions which makes it a bit difficult for the establishment of foreign Nespresso employees (Choi & Thum, 1998).
Applying the Nespresso Club concept developed for the markets of the Eastern Europe and China
International marketing can be defined as the process where a company focuses and strategizes on investing its resources within the world market. This is often faced by certain challenges and threats which either drives or restrains the processes involved. The challenges are experienced since marketing practices vary from country to country which requires marketers to think beyond regional boundaries (Keegan & Green, 2002.).
The application of the club concept in these regions may rhyme well with the distinctive orientations that underline international organizations management strategies. These include orientation by home country, host country orientation, regional orientation and the world orientation. However, the club concept developed for western countries could further be modified to suit the marketing culture within these regions. This makes it easy for Nespresso to apply its global strategy and economically utilize its resources (Terpstra, 1987).
Nespresso will have high chances of getting large market through the use of Club concept. This is because in these regions greater percentage of the people are technologically experienced hence find it easy to use the internet. The use of the club will also enable make it easier for communication between the company and the customers. The consumers will have easy access to company profile enabling them to make quick order of the kind of the capsules whenever they want. For instance, the use of Nespresso through the internet requires minimal operating costs as compared to other means and methods. Also, the use of Club concept does not require too much use of infrastructure.
This is ideal for Eastern European nations that may possess questionable communication infrastructures. The deployment of the product is also quite easy hence it can be used even in remote locations of these target markets. If a nation only considers the qualities of Nespresso products then it would definitely encourage more of its supply to satisfy the increasing needs of the population. Nespresso products would offer them the appropriate qualities needed in order to enrich their lives (Levitt, 1983).
On the other hand, if the manufacturer considers the business environment then there may be a need to be a bit more cautious. Some Eastern European nations are bogged down by immense levels of bureaucracy so it becomes very difficult to start up a business with foreign roots. Furthermore, other governments are known for their involvement in the affairs of their host nations (Daniels et al., 2004). At the end of it all, the manufacturer will need to consider his target markets very carefully.
If the chosen countries are growing at a stable rate then they may be feasible (Kravis et al, 1975). Nespresso should move to these regions in readiness to invest in substantial marketing for the capsule products using the available technology that could even suit those in rural regions. The Company will need to demonstrate to consumers that its products can fulfil certain functions other than other competing products within the market.
Usually, similar marketing, production and human resource strategies are adopted in any new branch set up by the respective company. Sometimes this can work well for a firm if the destination country and the home country have similar cultures, management values and corporate values (Kotler, 1984). For instance, if a beauty products manufacturer were selling the same products in China and the United Kingdom, management may lose a lot, if it chooses to market the product in the same way as the UK. Nepresso should adapt marketing strategy where managers are obtained from target countries, China and Eastern Europe. This is because it is assumed that only the locals can fully understand themselves so they should be in charge.
This strategy has been revealed to be very effective because multinationals like Nespresso appear to believe that local touch makes their target markets relate to them. However, this strategy may backfire if the target country lacks the required management abilities to handle business. Nespresso should therefore be wise about where it chooses to apply its styles because the success of these marketing strategies depends on the degree of difference or similarity between the target nation and the country of origin (Schneider, 1996). Head office positions should be managed by experienced members from the head quarter. Nonetheless, host countries should be granted autonomy over subsidiary and regional decision making. In such circumstances, locals as well as members of the headquarters both contributes towards business strategies within the scope of their own guarded principles (Leroy, 2004).
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