Introduction
This paper intends to analyze the case study of Curtis Automotive Hoists. The paper intends to evaluate which among the growth opportunities of European market entry and further U.S. market expansion have merits in terms of commercial and attractiveness. The paper will also discuss what market research/market information the company requires to support its decision over which new growth opportunity to pursue. Furthermore the paper will discuss the implications of a decision to enter European market particularly the advantages and disadvantages of each of the three European market entry options under consideration and what can be the best option to choose. Lastly the paper intends to discuss the relative attractions of the entry method into Europe and the operational implications of the market entry method given a situation wherein direct exporting is used as an alternative to the three market entry options.
Summary of the case
Mr. Mark Curtis the president of Curtis Automotive Hoist (CAH) asked Mr. Pierre Gagnon the company’s marketing manager to prepare a feasibility report on entering the European market. The said report contained the opportunities in the European Union and the entry options available. Mr. Curtis wants the company to grow more by deciding on whether to expand the United States (U.S.) market or enter the European market. If the company decides on expanding the U.S. market they can be assured that the said market has unrealized potential and they can gain more profit from it. Additionally the U.S. market was 10 times the size of the Canadian market and through the market the goals of the company can be achieved. On the other hand if the company decides on entering the European market the company can be assured that more service stations will be used for fixing more cars thus their products will be purchased more by these service stations. The company can also be assured that there is limited competition in Europe and there is no dominant manufacturer that can give them problems.
CAH was a company that manufactured and marketed Curtis lift a revolutionary automotive hoist that was different from other hoist since it has a scissor lift and safety locking mechanism that allowed the hoist to be raised to any level and locked in place. The scissor lift offered easy access for the mechanic to work on the raised vehicle, the hoist was easy to maintain because it had no chains or pulleys and was fully hydraulic. The hoist also had alignment turn plates which mean that mechanics can accurately and easily perform wheel alignment jobs. In less than a day the lift can be installed in the garage or any place the service station wants it to be placed. Mr. Curtis constantly made improvements to the product and he continuously adds more safety feature to it. Safety was an important factor in the automotive hoist market, if hoist malfunction it may result to serious accident. CAH sells their products to independent service stations and garages specializing in wheel alignment in Quebec and Ontario in Canada. Mr. Gagnon eventually used distributors to sell the hoist to a wider geographic market in Canada. After a few years Mr. Gagnon signed an agreement with large automotive wholesaler to represent CAH in the U.S. market. The hoists are purchased usually by automotive outlet that serviced or repaired cars including new car dealers, used car dealers, specialty shops, chains, and independent garages. These firms that purchased hoists were part of an industry called the automotive aftermarket. This industry was involved in supplying parts and service for new and used cars. The company has sixteen competitors that included 4 Canadian and 12 U.S. firms. The company has two competitors that manufactured scissor lifts namely AHV lifts and Mete lift. Three types of distribution system were used by CAH namely a company direct sales force, Canadian distributors and a U.S. automotive wholesaler.
Merits of both opportunities in terms of commercial attractiveness (First Question)
The opportunity to expand the U.S. market has merits in terms of commercial attractiveness that include wider and more territories to occupy, more products to sell, more chance to overcome the main competitors and more chances to improve the product. To expand the U.S. market means that the company has a wider territory/ scope to occupy, the company has more places to introduce and sell their products. Since different states of U.S. has different data on the number of vehicles and the number of service centres that will cater to these vehicles needs, the company can have chances to introduce and sell products to more service centres than their competitors. To expand the U.S. market means that more products can be sold not only in one place but in many territories not occupied by the competitors. Since the U. S. market has a lot of potential to be a strong territory and be a permanent market they can have greater chances of selling the products they have to service centres that needs the products they manufacture and they can counter any competitors that want to invade the territory they are selling in. To expand the U.S. markets means that the company can have greater chances of overcoming competitors, they can overcome their competitors by putting up permanent or strong territories in uncharted sales territories and gaining more sales. The more strong territories and sales they have the greater their status can increase against competitors. To expand the U.S. markets means that the company can have more chances to improve the company’s product. Within the sales territories the company can ascertain what each territory needs, how the product can be adjusted to the demands of a certain territory, what are the problems/ weakness of the products, and what can be done to improve the product. The more territories the company has more feedback and opinion can be given on the product thus the hoist can be improved more to compete with the company’s rival and sell more.
The opportunity to enter the European Market has merits in terms of commercial attractiveness that include newer territories to conquer, lesser competitors, bigger sales output, and employment opportunities for more people. Entering the European market means that the company can occupy newer territories and through this they can establish a strong territory that exclusively caters to the needs of the territories service centre without any threat from competitors. Entering the European market means that there are lesser to no competitors for the company thus they can have a higher sales output in the market. The company can also have no worries of threats from competitors thus the improvement of the product can be the one given focus. Entering the European market means that the company can have bigger sales output since there are no competitors and larger territories. Entering the European market means that more people can be employed by the company, this not only benefits Europe’s economy but it gives the company a positive image to its consumers thus triggering more service centres to purchase their products. Hiring more employees can give the company a chance to find a person that will help the company improve its status and achieve its objectives.
Market research can use to support its decision (Second Question)
Market Research or Primary market research is the only means of answering very specific questions relating to actual and potential customers and/or products. It is very different from secondary market research, which uses mainly data already available to answer whole-market level questions. Market or opinion research firms, such as Market & Opinion Research International, Ltd (MORI), Mar plan, IRN, SGA, NOP Market Research Ltd., Euro monitor, Data monitor or Research Surveys of Great Britain (RGB), charge large sums for the labour-intensive design, sampling, surveying, and statistical analysis necessary for reliable results. Most British firms guarantee standards by membership of the British Market Research Association, whose Quality Charter lays down minimum service standards of the Market Research Quality Standards Association. Most market research is commissioned by a specific client for a specific purpose, the results never likely to be available to anyone else. Market researchers refer to this as the consultancy side of their operations; as opposed to syndicated or multi-client studies which they have themselves initiated. Market Research is work carried out in the course of marketing research, either by a business organization itself or by specialist from an external consultancy, to assess the likely market for a given product or the effects of past or prospective advertising of that product on consumers. Depending on the kind of information required, the research may use either quantitative methodology, with survey research on large numbers of people, or qualitative methodology, with depth interviews of individuals and families and group interviews of 5-10 people in a face-to- face group.
The international business of the company is still in its early stages and a correct decision on which growth opportunity to pursue is vital for the company. The market research can help in supporting the decision the company will make. The company to have lesser expenses can just have a market research by themselves. They can use quantitative methodology, with survey research on large numbers of people/companies to identify the marketing trends and problems in the European market. Through the research method the company can identify what service centres in Europe want or desire, what these service centres expect from hoists they will purchase, how these service centres deal with manufacturers, and what problems hoist manufacturers encounter towards service centres. Through surveys CAH can get the ideas of customers on how they want their cars to be handled, what safety feature should a hoist have, and what features of a hoist make them come to a service centre. Through the surveys CAH can get the ideas of vehicle mechanics on how they can be assured of safety while working on the vehicle, how they can have ease and comfort while working on a vehicle, and suggest what innovations can be done to the hoist so that they can reach parts of a vehicle that is hard to reach. The gathered information can not only support the decision on what growth opportunity to pursue but can assist in making relative changes to the hoist. The information gathered can help in knowing the weaknesses of the hoist and why some service centres don’t avail it.
Advantages and Disadvantages of the market entry options (Third Question)
Assuming CAH decides on European market entry, the three market entry options that can be used include Licensing, Joint venture, and Direct investment. The advantages of licensing includes easier entry of CAH into the new market, CAH can gain an understanding of the prospected market through the other company who wants to enter a licensing agreement, more parts of the European market can be reached. Licensing agreement helps CAH to have an easier entry to the new market, since the company who wants to avail a licensing agreement has a name in the market it can assist CAH to penetrate the European market with less problems. The company may achieve a satisfying sales output because their product is sold by a known company in that market. Licensing can help CAH gain understanding of the prospected market, they can be given information about the market by the other company or they can observe the trends that the other company experience. Licensing can help CAH reach more parts of the market. The company who acquired license can introduce and sell products to other parts of the market that can’t be easily reached. If more parts of the European market is reached this result to increase of profit for the company. The disadvantages of licensing includes the other company might take advantage; lesser effort might be exerted on selling the product; and problems/complains regarding the product might not be given proper action. Licensing might lead CAH to be taken advantage of by the other company. The other company might seek to control the operation and they might claim all the glory in the product if it is praised. Licensing might make the products be given less focus and effort in selling; since the other companies might be selling other products they may give lesser selling effort and attention to the hoist. Licensing might make problems/complains be given inappropriate action. Since the proper venue to air complains over a certain product cannot be easily reached appropriate solutions to a problem cannot be done.
The advantages of Joint venture include both companies can use the strengths of both companies, problems can be solved by more people, and ideas can come from more people. Through joint venture both companies can use each other strengths to reach their goals. CAH can use the other companies experience and knowledge in the European market while the other market can use CAH’s innovative products and introduce and sell it in Europe. Through joint venture the problems they encounter can be solved by more people, adding the experiences and knowledge of more people tends to help in effectively and easily solving the problem. Through joint venture ideas can come from more people. More people can assist in making the product/ both companies better. The disadvantages of Joint venture include division of profit, more problems might be encountered, and both companies might both loose their identity from consumers. Through joint venture profit will be divided, this might not be good for both companies since their main goal is to acquire profit. Both companies have to divide their profits as part of them joining together, the company who contributed more to the venture can be sometimes the one who benefited less from the deal. Through joint venture more problems might be encountered. In joint profit the problem can come from two companies not just one. Through joint venture the identities of both companies to their respective consumers might be lost. Some consumers might be more familiar with the old identity of the company and not a new identity of joint venture; this may lead to consumers buying to competitors. If this happens both companies lose profits.
The advantages of direct investment includes sole acquisition of profit, chance to experience first had the problems that can be encountered on a new market, more focus can be given to selling the product, and the design of the product and the way it is manufactured is according to the standards set by CAH. Direct investment gives the company sole acquisition of the profit. It does not have to share profit, it will not be taken advantage of, and credit for the product can be solely claimed by the company. Direct investment gives the company a chance to experience the problems on the new market, through this experience changes can be implemented for a better product and company. Direct investment tends to make the product be given more focus and attention; more of the products can be introduced and sold to clients. Direct investment makes sure that the product is designed and made according to the standards set by the company; no specification is added or removed from the product. It also helps prevent safety problems to occur due to wrong manufacturing of the product.
The disadvantages of direct investment include the company solely solving a problem, bigger expenses will be made, and difficulty of entry in the new market. If the company engages in direct investment they must solely solve a problem. CAH may not have encountered such problems and may take some time to solve the problem. If the company engages in direct investment they might have to spend more, the company might have a higher rate of expense but if the direct investment is properly run profits will replace all those expenses. If the company engages in direct investment they will have difficulty in entering the new market. The company might not be familiar with the environment and not be initially accepted by the consumers but in a later time they can adjust to the new market. The option that can greatly benefit the company is the Direct Investment, although more expenditure can be acquired by the company its future result can compensate for it. In direct investment the company has full control over the operations in a foreign market. Problems can be given direct and proper attention and all the glory achieved can be acquired by the company.
Exporting to Europe (Fourth Question)
A. Relative attractions
An alternative to the three entry market option is direct exporting to Europe. Direct exporting can ensure that no specification of the product is tampered thus the consumer is ensured that the hoist is of good standard, CAH can acquire all the profits of the sales in Europe, competitive advantage can be achieved since no other known company is direct exporting their products to Europe, and the number of products that are needed are the only ones that will be made and exported to Europe.
B. Operational Implications
In direct exporting a separate division has to be made so that production will not be halted, the separate division will focus on creating products to be exported. This means more employees, machinery, site of operation, and other things will be needed. Thus expenses can be made by the company. A separate group of employees has to be formed to ensure that products are exported well, and no problems occur during and after shipment. If problems occur they must solve it. Speed of operation has to be doubled so that products to be exported will reach Europe in time. Products to be exported will be well accounted and according to the demand in Europe.
Credit:ivythesis.typepad.com
0 comments:
Post a Comment