Reason for Seeking New Markets
Members of the European Union are feeling the impact of China’s growing economic power. The Chinese market is expanding. However, European companies are still struggling to discover the competitive advantage necessary to earn a profit. There are several reasons why European brands are unable to compete in the international market. First, most of the companies were created using the brick and mortar store framework. High inventory levels burdened European business organizations. Stores are filled with unsold items. In other words, most European companies like Lilybird Digital were late in embracing the principles of Internet marketing and e-commerce revolution.
Root Cause of Current Problems
Less than 40% of available products are accessible online. The company continues to invest in traditional store formats creating significant losses due to high operating costs. It was also pride that drove corporate leaders to establish stores in high-end commercial areas. Customers did not experience high-quality customer service. As a result, the failure to establish an efficient after sales service added to the operating costs.
Things would have been different if the company made the decision to open branches in China. When corporate leaders decided to enter the Chinese market, they made the mistake of establishing large “showcase” retail outlets. The best course of action was to establish small stores with low operating costs. The more prudent strategy was to start small and grow organically. The company failed to understand the lack of brand loyalty among Chinese customers. This insight would have been helpful in developing a business model that provides high quality and low-cost products.
Strategic Solutions
Lilybird Digital must develop effective marketing strategies such as: product strategy; pricing strategy; promotion strategy; and product distribution (Gitman & Daniel 2009). The centrepiece of the new business model and marketing strategy is online marketing. Lilybird Digital must attempt to pattern its business model on Amazon.com. There are two major reasons. First, Chinese consumers are not concerned about brand loyalty. However, they want to have easy access to the products online. Second, using the business model of Amazon.com, the company can reduce its operating costs (Byers, 2007).
Lilybird’s Digital online store must be patterned after Amazon.com’s online bookstore (Byers, 2007). In the case of Amazon.com’s online bookstore, the company does not need to keep a large inventory of books. The items for sale are viewed in an online catalogue. The customer orders online through that catalogue. The company orders the books from the supplier only after a purchase was made. Therefore, there is no need to allot warehousing space for books. Books that were ordered were sent to the customer’s preferred delivery address.
Applying the new strategy will enable the company to save a great deal of money because of low-inventory levels and reduced rental costs for the buildings. Nevertheless, the company must invest in efficient and reliable customer support facility. The company must train customer-service personnel that are competent in answering customer queries regarding the products sold online.
Lilybird must promote its products. The company must separate itself from other companies selling the same type of products. However, it is not prudent to spend a significant amount of money through conventional advertising frameworks. At the same time, the company can reach a greater number of new customers by developing promotion strategies that enables the customers to interact with the store’s website. The best way to accomplish this is through the use of social media.
Popular social networking sites like Facebook and YouTube attracts people from all walks of life (Caraccilo, 2001). Social networking sites enable people to interact in a profound manner. Therefore, there is greater opportunities for people to talk about Lilybird Digital’s products. With regards to the use of social networking sites, the company should consider creating a YouTube channel. The company should also consider developing an Android or iPhone app that would allow people to buy items from Lilybird Digital using their mobile phones.
Social media platforms like YouTube and Facebook are catalysts that will lead to greater customer participation (Campesato & Nilson, 2011). The company must create relevant videos regarding some of the products available online. It is a creative way of presenting advertising content. The company must create customer-specific promos using Facebook. The company must create a Facebook page. Company promos are coursed through the said Facebook page. An example of a limited offer promo is a 30% discount on certain items. However, only the followers listed in the Facebook page have access to the said promo. The company can also invite Twitter followers to a special event. The event is announced on Twitter. Therefore, a significant amount of social media interaction is expected. This will increase awareness about the company.
Conclusion
Lilybird Digital must embrace e-commerce in order to increase its market share in China. The company should not rely on traditional store formats in order to generate revenue. More importantly, the store sizes must be reduced in order to lower operating costs. The main focus is the creation of an online store with a strong after sales service. The main reason for this strategy is based on the realization that Chinese consumers demonstrated very little interest when it comes to brand loyalty. The most important thing for them is high-quality products sold at low prices. In order to lower prices, the company must abandon the brick-and-mortar store concept. The online store strategy enables the company to reduce inventory levels. At the same time, the online store will enable the company to increase its makret share, because a greater number of people will have access to the virtual store as compared to a traditional store. In order to increaes the probability of success, the company must also invest in non-traditional advertising, such as, the use of social media platforms to promote their products.
References
Byers, A 2007, Jeff Bezos: the founder of Amazon.com. The Rosen Publishing Group, New York, New York.
Campesato, O & Nilson, K 2011, Web 2.0 fundamentals. Jones and Bartlett’s, Boston.
Caraccilo, D 200, E-tailing: careers selling over the web. The Rosen Publishing Group, New York.
Gitman, L & McDaniel, C 2009, The Future of business: the essentials. Cengage Learning, Ohio.