New Products
The agricultural sector is among the most vital sectors of the Indian economy although its share has dwindled as a result of the high growth rates in the other sectors such as services and industrial sectors (The World Bank Group, 2012). Despite this decline, agriculture remains the main source of livelihood for most Indians especially those in the rural areas. Consequently, this presents a very promising business opportunity for Caterpillar, Inc. In particular, the company will capitalize on this opportunity by manufacturing and selling small tractors below 50 horsepower and economical water irrigation system, which uses collected rainwater to the Indian farmers. Only a small percentage of the usable farmland in India is equipped with the irrigation system (The momagri agency, 2008). Thus, we believe that the sales for the company’s water irrigation system will be high due to their cost-effectiveness. Both the tractors and water irrigation system are new to Caterpillar, Inc., but not to the Indian market. The company will, thus, differentiated them to gain a competitive advantage.
In an attempt to determine both the need and an existing global market for the two products, Caterpillar, Inc. utilized different methods. Ideally, the company gathered the necessary information about the need for low-cost small tractors and water irrigation system in India through conducting both primary and secondary research. The primary research methods utilized included the surveys and interviews. The company learned a great deal about the Indian farmers and their agricultural needs. Also, the company gathered the existing information about the global market and the need for the two products through the available published sources. Both the primary and secondary market research methods utilized helped the company understand the unmet needs of the Indian farmers. Besides, these methods helped the company understand the competition and the effective methods to meet the unmet needs of the Indian farmers.
The main competitor for Caterpillar, Inc. in the Indian market will be Mahindra Tractors. The company will take advantage of the weaknesses of this competitor to gain as many customers as possible and build their trust. The competitive advantage that the company will gain by offering the new products to the Indian market will be low pricing/low-cost provider. After conducting the market research, the company realized that the majority of the Indian consumers are low-income earners, thus, they cannot afford expensive products. Caterpillar, Inc. will keep competition out by being be a low-cost provider. Particularly, the company will sell its tractors and water irrigation system at pocket-friendly prices to create brand loyalty and keep the competition out.
There are various risks that are related to launching any new products/service to a global market. One of these risks is the financial risk. The new tractors and water irrigation system might fail to create adequate demand at a price, which will produce profit for Caterpillar, Inc. In essence, the price that the company will charge for these two products might fail to cover their marketing and production costs. The company will, thus, minimize the financial risk by utilizing cost reduction strategies to cut the production costs. The company will also work with the production experts to come up with the best prices for its new products. The other inherent risks linked to launching the new products/services to a global market are operational risks and technical hurdles. The launch of new small tractors and cheap water irrigation system in India will require the company to perform some technical processes. Besides, there might be problems in sourcing and transporting the necessary components. The company will minimize this risk by utilizing specialists such as technical personnel.
Customer Relationship Management (CRM)
In an attempt to track the inquiries as well as the sales of the new small tractors and water irrigation system in India, Caterpillar, Inc. will utilize Marketo Software system. In essence, this customer relationship management software will help the company create strong customer relationships and preserve them. The Marketo Software features applications that deliver a wide range of capabilities including social marketing, website personalization, budget management, marketing automation, analytics, lead nurturing, and sales insight (Software Advice, 2006-2016). Consequently, this explains why it will be a good and great fit for the company. The features mentioned above will help the company understand its client base effectively and precisely and do the necessary to gain their trust and create their loyalty.
Additionally, the Marketo Software System will be a great fit because Caterpillar, Inc. will use the marketing management, real-time personalization, marketing automation, and consumer engagement marketing features to achieve an exceptional, tailored solution for its marketing needs. The company will also easily track its campaigns and determine if they will be effective. Furthermore, the Marketo Software will offer the company strategic insights, which it will make use of to improve its performance. Moreover, the software will help the company track and report on the sales cycle. The company will also be able to nurture and score leads based on the consumer engagement and behavior, as well as demographics. What is more, the Marketo Software system will help the company conduct social media campaigns such as sweepstakes, contests, and referral campaigns, among others.
The Marketo Software will help Caterpillar, Inc. collect the data such as the farm yield and size, customer demographics, farming practices, types of equipment and technology used, and tillage practices from the Indian customers. Specifically, the company will use this information to improve the quality of products and services and grow its interactions with the Indian farmers. In essence, the information about farm yield and size, types of equipment and technology utilized, as well as farming and tillage practices will help the company manufacture appropriate tractors and water irrigation system to sell to the Indian customers. Besides, this information will help the company come up with the best services and advice to help the customers increase their yield. As a result, this will help the company create strong customer relationships. Moreover, the company will also use this information to segment its customers in India by region and profitability and reserve additional services for those who will be loyal to it.
Distribution Channels
The company will use direct channel and one level channel to distribute the tractors and water irrigation system to the Indian customers. According to Szopa & Pękała (2012), the producers who use direct distribution channel sell their products directly to the customers. The use of direct channel by the Caterpillar, Inc. will, thus, involve selling the tractors and water irrigation system directly to the consumers through face-to-face sales, mail orders, and internet sales. The direct distribution channel will be suitable to the company due to some reasons. First of all, it will increase direct contact between the company and its customers. The company will interact directly with the customers and, as a result, provide them with better services. It will be able to offer them product demonstrations and respond to any of their concerns. Besides, the company will provide the customers other services such as home delivery and explanation of products and, thus, increase their loyalty. The direct channel will also eliminate the intermediary expenditures and, thus, save the customers the price increases. Direct selling will eliminate the service costs such as training and shipping costs and, as a result, prevent the increases in prices for the products. The company will also have more control over the way the new products will be delivered, displayed, returned, and promoted.
The one level channel will involve selling the new tractors and water irrigation system to the Indian customers through an intermediary. In particular, the company will sell these products direct to the retailers who will then sell to the customers. In other words, the company will distribute its new tractors and water irrigation system through the retailers. One of the benefits that the company will gain by using this distribution channel will be the access to an additional client base devoid of investing a lot of resources in advertising. In essence, Caterpillar, Inc. will have immediate access to the potential consumers who will visit the retailers. One level distribution channel will also facilitate the increase in the sales that Caterpillar, Inc. will make in India. The company will essentially run joint marketing campaigns with its retailers and, as a result, increase its sales. What is more, the use of retailers will help the company extend its geographical reach. Specifically, Caterpillar, Inc. will easily expand its geographical operations through the retailers.
There are some factors that any company ought to consider before entering a global market. These include the regional trade agreements and alliances as well as environmental factors such as the cultural factors, economic factors, environmental factors, technological factors, legal factors, and political factors. Caterpillar, Inc. will need to take into consideration some of these factors before entering the Indian market. Regarding the regional trade agreements, the company needs to consider the nature of the trade relationships between India and other countries. The regional trade agreements between states determine the distribution of products from one country to the other. In particular, Caterpillar Company will need to consider the trading obstacles in India. In essence, the presence of these obstacles implies that the company will experience difficulties in distributing its new tractors and water irrigation systems.
Besides, Caterpillar, Inc. will need to consider the Indian cultural factors such as the demographics, consumer habits and tastes, language, and regional values. A good understanding of these factors will facilitate the success of the company in this market. The cultural factors such as language barriers as well as consumer tastes and preferences will have an adverse impact on the distribution of tractors and water irrigation system in India. The company also need to consider the currency risks before starting to operate in India. Any business that goes international experiences there risks. Thus, it will be vital for the company to consider them and take the necessary action. Moreover, the company will need to consider the requirements of doing business in India before starting its operation there.
Apart from exporting the manufactured tractors and water irrigation system to India, the company will set up a manufacturing plant there. The company will start by manufacturing the products domestically and then distribute them to the Indian warehouses. These products will then be moved to the retailers and the company’s outlets where the Indian customers will buy them. After succeeding in establishing its operations in India, the company will set up a production function there. It will acquire the necessary raw materials and components from the suppliers in both India and other countries. The manufactured products will be transported to the warehouses and then to the company’s outlets and retailers for the customers to acquire them.
The global supply chain might increase the costs of manufacturing as well as distributing the tractors and water irrigation system to India. Specifically, the currency exchange rates might increase the costs of raw materials as well as exportation of the final products. Besides, the local labor rates might be lower than the Indian labor rates and, as a result, increase the costs of manufacturing in India. Alternatively, the global supply chain might increase efficiency. The raw materials and components from the foreign countries might be cheap and, thus, improve the efficiency. The global supply chain might also delay the delivery time for the new products.
Major Pricing Strategy
The main objective for Caterpillar, Inc. is to enter the Indian market. As a result, the company will utilize penetration pricing strategy, which according to Spann, Fischer, & Tellis, (2009), is optimal. In particular, the company will initially set a low price for its products to gain and enhance its market share as well as drive the competitors such as Mahindra Tractors out. After gaining a considerable market share, the company will gradually increase the price of the two products. It is worth noting that the penetration pricing strategy will be suitable for the company because it will help it raise awareness of its existence and products and eventually capture the market share. Besides, this strategy will enhance the company’s efficiency as all the employees will endeavor to keep the costs of production low.
The penetration pricing strategy will also help the company succeed in driving out the competition. It will discourage the business rivals from entering the Indian market. The Indian consumers will prefer the products offered by Caterpillar, Inc. rather than those provided by its competitors. Moreover, the penetration pricing strategy will cause fast diffusion as well as the adoption of the new products in the Indian market. Despite selling these products at low prices, the company will ensure their quality. Furthermore, the penetration pricing strategy will create customer referrals. In fact, it will create goodwill among the customers. Apart from attracting the Indian customers, the penetration pricing strategy will help Caterpillar, Inc. appeal to a wider education, occupation, and income demographic audience. As a result, this will facilitate the future growth of the company.
Caterpillar, Inc. will incur some costs in manufacturing as well as launching the new low-cost tractors and water irrigation system in India. The manufacturing costs will include the material costs, direct labor costs, and overhead costs. During the launch of the products, the company will incur the costs such as marketing costs, equipment maintenance costs, facility costs, and salary expenditures. In setting the prices for the new products, the company will consider the quality and characteristics of the Indian customers. These consumers will accept the prices set for the new products since they will be lower than those charged by the competitors. The main business rival in India, Mahindra Tractors charges higher prices for its tractors and water irrigation system compared to the company. It does this because it is already established in the Indian market. For this reason, the penetration pricing strategy will help the Caterpillar, Inc. drive away this competitor.
Promotional Strategy
Caterpillar, Inc. will use a mix of public relations, advertising, sales promotion, and personal selling to promote the new tractors and water irrigation system to the Indian customers. The goals of the company will be to attract the Indian consumers and persuade them to learn more about the new products, make itself known to the public, as well as create a positive image and goodwill. It will make use of both the mass media and social media channels to make sure that it will reach as many potential consumers as possible. The two mass media channels that the company will utilize include the radio and television. These channels will be ideal mediums for promoting the new products in India. The majority of the target customers in India are rural dwellers. Besides, the majority of them are adults. Consequently, it is supposed that a large number of the Indian consumers possess either a radio or television. The two mass media channels will help the company reach as many Indian farmers as possible. Regarding the social media channels, the company will use Facebook and Twitter to promote the new products. These channels will be effective because the majority of Indians possess smartphones.
As already mentioned, the promotional strategy for the company will include sales promotion. In particular, the promotional activities that the company will utilize will include sweepstakes and contests. These activities will be cost effective for the company. Thus, it will not need to invest vast resources in promoting the new products. The two promotional activities will increase the engagement of the company and its customers and, as a consequence, facilitate the creation of strong, long-lasting relationships. Different sales promotions, for instance, contests, free gifts, and sweepstakes are fun to take part in and watch (Chandon, Wansink, & Laurent, 2000). Consequently, the two promotional activities will also help Caterpillar, Inc. build and increase its client base. Moreover, the two promotional activities will empower the customers market the company. The clients will share the company’s contests through the social media, thus, marketing the company.
Furthermore, both contests and sweepstakes promotional activities will lead to increased advertisement readership as well as impact. The two promotional activities will encourage customers to visit the company’s websites. The free prizes will make the audience read the sweepstakes advertisements. Also, the contests will attract the attention of the audience, thus, increase the readership of the company’s ads. The company will get some insights into how the potential clients think, their tastes and preferences, and how they view the products through the sweepstakes. Consequently, these promotional activities will offer the company valuable market research. Lastly, both the contests and sweepstakes will facilitate the increase in the sales made by Caterpillar, Inc. in India.
References
Spann, M., Fischer, M., & Tellis, G. J. (2009). Skimming or penetration? Strategic dynamic pricing for new products. Marketing Science, 34(2), 235-249.
Chandon, P., Wansink, B., & Laurent, G. (2000). A benefit congruency framework of sales promotion effectiveness. Journal of marketing, 64(4), 65-81.
Szopa, P., & Pękała, W. (2012). Distribution channels and their roles in the enterprise. Polish Journal of Management Studies, 6, 143-150.
Software Advice. (2006-2016). Marketo Marketing Automation Software Reviews & Pricing. Retrieved March 4, 2016, from http://www.softwareadvice.com/crm/marketo-profile/?layout=var_g1
The momagri agency. (2008, January 14). Agriculture in India: Both Weak and Strong. Retrieved from http://www.momagri.org/UK/focus-on-issues/Agriculture-in-India-Both-Weak-and-Strong_249.html#
The World Bank Group. (2012, March 17). India: Issues and Priorities for Agriculture. Retrieved from www.worldbank.org/en/news/feature/2012/05/17/india-agriculture-issues-priorities
