Mba, Managing Markets - Boots Plc

Boots PLC

Contents:-

Introduction to the assignment

Main topics of discussion:-

* Market entry strategies, focusing

on joint ventures/strategic alliances

* Elements of globalisation

* Marketing issues a company should consider in a global context

Conclusion

Appendices:-

* Appendix 1 - SWOT analysis of Boots PLC

* Appendix 2 - PEST analysis of Japan

Introduction

The aim of this paper is to provide a detailed and critical analysis of the market and industry factors that Boots would have considered regarding their strategy to expand into the Far-East and in particular Japan, contrasting this against other companies that have gained a foothold in their chosen market foray and developed their international business strategy and are seen as world leaders in their field.

Market Entry

Even in today's commercial and technological society that we live in, there are few products, brands or services that are truly recognised as being global in the terms of their recognition, market penetration and sales. Perhaps the most recognisable of all is Coca Cola. Boots on the other hand are more widely known in their domestic market of the United Kingdom, but have in recent times looked to expand their operations overseas, both in Europe and the Far East. Whilst Boots could not even begin to emulate the brand recognition associated with the likes of Coca Cola, their main strengths are as market leaders of certain products, like Nurofen, Strepsils etc (see appendix 1) and part of their focus in entering the Japanese Market was to sell their own branded product range.

This report will look at four mechanisms of market entry, which include:-

* Exporting to a foreign market

* Licensing another company abroad

* Entering into a Joint Venture/Strategic Alliance

* Direct Investment abroad (subsidiary)

Exporting is the marketing of and direct sale of domestically produced goods into another country. Exporting can benefit a company through (Noonan 1999, p.5):-

* increased plant utilisation

* spreading operating costs over a larger output

* reduced input costs through volume purchases

* additional profit contribution

* new markets for domestic product range

* diversification opportunities into new market sectors using domestic technology

* increased volume opportunities through modifications to existing products

* developing international brands and/or company image

* improved rate of technological progress through exposure to world markets

* opportunities to sell support services, consultancy, training, technology licensing

As exporting does not require that a product be manufactured in the target country/region, no investment needs to be made in foreign production facilities. However, exporting does require co-ordination amongst four main players:-

* An Exporter

* An Importer

* A Transport provider/Distribution Network

* Government Body/Agency

Licensing allows a company in the target country to act as a storefront for that licensor, using trademarks, patents, branding rights and production techniques in return for a fee. This affords the licensor the ability to not have to make any substantial capital investment and ultimately offers them the prospect of a very large return on investment.

However, because the licensee produces and markets the product, potential returns from any manufacturing, and marketing activities would not be realised by the licensor. There is also a danger that the licensee could in time become a competitor, through gaining experience and knowledge given to them directly by the licensor company. Disney licensed its' Japanese theme park near Tokyo, merely collecting royalties from the park rather than having an equity ownership stake. This model seems to have paid dividends, as the park has attracted more visitors than the two US parks during certain periods. (Keegan, 1998)

However we should note that the economic conditions of the time were more favourable and the Tokyo park's integration into Japanese society helped this venture become a success, but Disney used this success as a model for entry into Europe, which as we know from the Eisner Case Study, proved far less successful for a variety of reasons.

Joint ventures are another market entry method and to this end Boots announced early in 1999, their joint venture/strategic alliance with the Mitsubishi corporation to open four stores in Tokyo, Japan during 1999, with Boots being a stakeholder of 51% with the Mitsubishi Corporation having a 49% investment (www.boots.plc). Boots through their knowledge and experience in certain markets of the world felt early on that they would need local support for their entry into Japan and chose Mitsubishi as their ally. Drawing comparisons to Porter's five forces model on new entrants (www.valuebasedmanagement.com), Mitsubishi were looking to diversify their business away from traditional industries, such as metals and machinery, giving them access through Boots' product line to a market that was expected to undergo rapid growth. This alliance would afford Boots access to government contacts, the legal profession, healthcare professionals and someone to give advice on where to site their business units and to provide logistical support.