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Abstract
Libratone intends to expand into Brazil introducing its two unique Zipp Speakers that use new technology. Because market entry is not an easy thing, it becomes necessary to investigate economic conditions that favor and challenge entry decision. Further, once economic conditions are determined, a marketing approach to facilitate entry and penetration is required. In this study, market conditions in relations to economic environment of Brazil are investigated. The study establishes that Brazil presents favorable macro-economic factors such as high growth economy and stubborn inflation that guarantee sustainability and profitability of the company. However, Brazil struggles with low productivity and poor infrastructure that makes it difficult to produce or manufacture products in Brazil. The company will therefore be importing the Zipp speakers, consequently experiencing importation costs. Marketing of products in Brazil is quite simple and cheap because there is massive communication infrastructure in place. The company intends to use advertising, social media, personal selling, public relations, and round-about activation to market products. In addition, market entry strategy will follow the guide of price leadership strategy that will see Libratone offer products at low prices in order to attract consumers. Libratone intends to recruit and hire a sales team that will be responsible for sales activities. The sales team will coordinate business to consumer selling activities.
Key macro-economic trends
High growth economy
Brazil has a macroeconomic framework that is strong and maintains its stability. The country has developed infrastructure projects as well as attainment of self-sufficient energy of the pre-salt reserves that are expected to increase the competitiveness of the country in the future. However, the country is expected to suffer from inflation and increase prices of commodity in the future (Market Line 2015). The economy of Brazil has an economic framework that is prudent with policies that target inflation, currency that is flexible and fiscal responsibility legislation. It is these measures that brought about stability of prices in the nation that were present in the past. Moreover, foreign investment have led to the attraction of credible policies which has made it possible for the country to be among the largest exporters of commodities globally (Market Line 2015). The ability of the country to supervise financial institutions enabled it to minimize the damage that was experienced during the global crisis.
Brazil’s stubborn Inflation
The inflation in brazil was at 8.8% as of May 2015 which was much higher than the one anticipated by the central bank of 4.5% since the fiscal policies by the government resulted in tax increase an event that led to utility bills being pushed up and aggregate prices being driven up. Even though there were some corrective measures undertaken by the government, they are not sufficient to contain the pressures of inflation. Moreover, falling wages and market of tight labor, shocks in food prices , poor growth of investment and bottlenecks in infrastructure have resulted in decrease of potential output growth of the economy and it has further fueled inflation (Market Line 2015). To add to that, there was rapid expansion of credit from banks in the public sector, continued stimulus on tax exemptions and presence of indexation mechanisms that are both formal and informal have continue to exert pressure on inflation.
Low productivity
The productivity growth in the country has been affected deeply by rise in labor costs as well as with underinvestment. As the bonus given to the population withers, new policies have to focus mostly on skills intended to boost growth (Market Line 2015). Wages in Brazil have been on the increase in the last decade and it overtook that of Taiwan and Mexico. The wage levels of the country are said to be higher than those of Mexico, Estonia, Poland, Hungary, Taiwan and Philippines, the cost of labor has steeply grown compared to labor productivity in the industrial sector. Among the factors that contributed to this is the minimum wage that was set up by the federal government. It is said to be more than in any other OECD country or even the countries in the BRIICS while leaving out Turkey (Market Line 2015).
Poor infrastructure
When it comes to infrastructure investment, Brazil still lags behind. The country’s investment in infrastructure stands at 2 percent of the GDP annually compared to 4% and 6% in India and China or Chile respectively (Market Line 2015). The general value of infrastructure in the country that is measured as infrastructure stock is slightly above 15 percent while that of India is about 60 percent and that of china is 75 percent of the GDP. Therefore, the country needs to triple its investment in infrastructure in the nest 2 decades so it can catch up with its peers (Market Line 2015). The freight cost of roads in the country is twice that of the rail and four time that of water. Bottlenecks in infrastructure are present in the all the country’s mode of transport. The lack of port capacity in the country can be derived from the fact that there were queues of truck that stretched to about 40 kilometers at the port of Santos waiting to be served in 2013. Moreover, most airports there cannot cope with the increasing traffic in the air.
Slow credit growth
Credit growth in the country has been slow despite the tight monetary position that has been picked up by the central bank. The topmost priority for the country’s central bank is to regulate inflation which is higher than it anticipated as seen earlier (Dahab 2015). Consequently the regulatory bank is planning to tighten money further. However, this is having an effect on cost of borrowing that is suffocating private investment. As of May 2015, Credit growth stood at 10.1. This slow rate of growth is a huge challenge to the nation’s economy.
Marketing mix
Introduction
This marketing mix plan provides information on appropriate mix of marketing activities that Libratone will undertake to penetrate and establish market in Brazil. Justification for the recommended ingredients that capture and promote Libratone unique selling points is provided. In the section below, the four P’s of marketing are explained:
Product: Libratone offers tangible product that is unique. The unique offering is speakers that use Libratone App to stream music. Unlike the common speakers placed in corners, Libratone speakers use intelligent streaming and paring technology, allowing users to place the speakers at the center. They disperse sound in every direction achieving 360o FullRooomTM technology. Libratone offers Libratone Zipp and Bratone Zipp Mini products. Users can pair up multiple speakers to create immersive listening experience.
Price: it is noteworthy that price decisions affect profit margins, demand, supply, and marketing strategy. Nonetheless, price leadership strategy in an economy where consumer spending on luxury goods is low may be an appropriate move. In order to attract customers and penetrate the Brazilian market, a low cost entry strategy is advisable (Pavlou, & Stewart 2015). In addition, after conducting market analysis, it is evident that a segment of Brazilians is into luxury materials while the gross income and disposable income for the general population remains low. As such, the market does not constitute of majority high-end customers. To make the products sell, price leadership strategy will be applied.
Promotion: Various promotion strategies are appropriate for market entry and penetration. One of the recommended promotion strategies is advertising. Advertising through print and social media is strategic for the fact that majority of the young potential consumer access either social media or print media. As per definition, promotion refers to the act of disseminating relevant information to consumers while at the same time differentiating the product from the rest (Pavlou, & Stewart 2015). Advertising in this context will involve presenting information on Brazil top accessed magazines, newspapers, brochures, and electronic circulations. In addition, Libratone will advertise it products on social media (Facebook, Twitter, Google Hangouts, and Instagram). Further, Libratone will engage in public relations. This refers to sending public relations agents to customers directly to convince them to purchase Libratone products. Personal selling will also be utilized in promoting Libratone products. The company will hire sales representatives who will engage customers presenting them with products and explaining to customers the unique features of Libratone products. Another avenue that the company intends to utilize is search engine marketing, whereby, customers using the internet will receive prompts and search results that direct customers to pages and sites that sell or provide more information on Libratone products (Pavlou, & Stewart 2015). Finally, the company intends to set up road shows that promote its products. The road show promotion will involve display and testing of the products, giving customers a unique experience of the products.
Place: locations where the company intends to sell or erect point of sale is important for success of the business. Strategic positioning is always recommendable. By this, it is recommendable to locate a shop in busy streets where many people are, such that it becomes easy for many customers to spot the business (Pavlou, & Stewart 2015). For instance, Libratone intends to have an online store on social media where customers from Brazil can purchase and have the products delivered on time. In addition, Libratone will strategically position outlets in busy streets of cities, where customers have a clear and direct access to the stores. The advantage of having stores is customers will have access to products and can attest to the functionalities and features of the products.
Marketing Plan budget
Product and price do not require a budget. However, they require marketing research that costs the company researching fees. An estimated budget for marketing research is $700. Promotion activities will run on a budget. Promotion budget is thus:
Advertising on print media: $2000
Advertising on social media: $4000
Public relations costs $3500
Personal selling $2000
Sales representatives: $3000
Road shows $2000
Total = $17200
Organization
The report suggest that Libratone begins with a single store in Brazil before opening up branches. The single store will be independent of other business and will be an independent entry as opposed to franchising. The recommended location for the initial store is the capital city of Brazil, which has the largest number of people residing in Brazil. In addition, capital city is recommendable as strategic location because spending habits of people promotes consumption of luxury goods. Once established, the company will recruit a sales taskforce responsible for selling. The company will offer training to the sales taskforce, covering features of the products and unique selling points of Libratone products. Recruitment and selection of the taskforce will follow a structured requirements procedure that stipulates requirements of candidates and respective skills. Candidates must have prior knowledge in marketing. Compensation of the taskforce is outlined in the marketing mix plan.
Reference list
Dahab, S., 2015. Internationalization Strategy Of Relance To Brazil (Doctoral dissertation, NOVA School of Business and Economics).
Market Line, 2015. Brazil: In-depth PESTEL insights. [Online] Available at: <www.marketline.com> [Accessed 19 May 2015].
Pavlou, P.A. and Stewart, D.W., 2015. Interactive Advertising: A New Conceptual Framework Towards Integrating Elements of the Marketing Mix. In New Meanings for Marketing in a New Millennium (pp. 218-222). Springer International Publishing.
