Introduction
The current economic climate is characterized by stiff competition, which threatens the survival of many companies. Given that retail is a low-margin business, many companies consider entering the global market to improve profitability. Entering a new business market has always been disastrous but can also be rewarding in case of success. Business competition, especially with local sellers, is dynamic and unpredictable. A firm’s success largely depends on its strategic choices and competitiveness- resources and capabilities, vis-à-vis rival companies. With the right strategic choices, new market entrants can acquire a competitive advantage. This paper presents an international marketing plan that will help Norrona exploit the market opportunity presented by a foreign market – South Africa.
Company Analysis
Norrona is a Norwegian company that specializes in outdoor clothing, equipment, and sports gear. Its customer population mainly comprises cross-country adventurers, bikers, mountaineers, surfers, explorers, and skiers. The company structure is a divisional structure based on products; it supports three major product lines- Norrona Retail, Norrona Sports AS, and Travel Adventure. Travel Adventure line focuses on providing “traveling” services to customers. Each division (product line) has five departments: design and development, finance, research, marketing and sales, and supply chain. The departments are hierarchical; the CEO heads the company, followed by directors in charge of the departments, and finally, the general employees.
The company’s sports line sells leather straps, cotton clothing, canvas backpacks, and technical garments designed to meet customer’s needs. Norrona Sports AS line has over 100 employees working in the five departments, 28, 104 workers working with their manufacturers, and 21 suppliers sourced from eight countries. Company activities such as clothes’ design, fabric choices, marketing, and sales are in-house while production is outsourced. The suppliers provide raw materials while the manufacturers make the garment, equipment, backpacks, etc. The Norrona Retail line was established as part of the company’s distribution strategy. The company has three retail stores in Stockholm, Sweden and ten stores in Norway, and two in the United States. The retail line is responsible for marketing its products to gear outlets, clothing stores, and resorts.
Target Country
Norrona should consider South Africa as a market opportunity to boost its sales and improve its competitive edge. South Africa should be considered as a new market segment for various reasons. First, it is one of the major tourist destinations, providing the company a potential market for their newly-introduced travel adventure services. South Africa received 16.44 million tourists in 2018 alone. This figure has steadily increased for the last five years and is anticipated to reach 19.6 million by 2023. As previously mentioned, tourist resorts are Norrona’s key customers of interest. Norrona sells its products to resorts that offer outdoor activities as part of their travel experience packages. Because South Africa has the largest number of branded hotels in Africa, its market value to Norrona increases.
Mountain climbing, diving, surfing, mountain biking, river rafting, and hiking are major outdoor activities in the country. With over 100 registered paragliding and hang-gliding service providers, opportunities in aerobatics, skydiving, and microlight flights are massive. Although some outdoor clothing such as jackets/tops, T-shirts and shirts, wetsuits, and pants are available in the country, products designed for skiing/snowboarding, mountaineering, and surfing are not available. Additionally, the outdoor products sold in South Africa are available through third-party retailers. The company should consider opening a local retail store and introducing its travel adventure packages in South Africa to boost revenues. Due to the popularity of outdoor activities in the country, South Africa presents a valuable market opportunity that can be exploited.
Strategic Plan
Entry Strategy
A company entering a new market should compete aggressively to get a strong market foothold. Succeeding in a new market is challenging and lays many risks. Retailers entering new markets are likely to fail as they are to succeed; even giant retailers like Walmart have failed in their attempts to expand into foreign markets. Furthermore, researchers argue that multinational companies (MNC) perform better in their home markets than foreign markets. The authors note that most MNCs usually fail in foreign markets and postulate that the failure is caused by ‘institutional voids’ and the competitive advantage owned by local sellers. Market entry barriers include fragmented markets, new entrants’ inability to meet customers’ needs and expectations, and cultural differences.
Often, the existing market players have a competitive advantage over new entrants due to their intimate knowledge of the local market. Domestic players are familiar with local talent and capital markets, which allows them to cost-effectively serve their customers and put competitive pressure on new entrants. In contrast, new entrants cannot afford the luxury of preferential customer selection. They have to implement effective strategies to exploit each customer segment in the surrounding areas to grow into serious competitors in the new market.
While investing in a foreign market is risky, avoiding it is equally destructive. Studies indicate that firms that avoid investing in emerging markets might not survive the business environment for long. However, new market entrants can attain a competitive edge in the foreign market with effective strategies. The effective entry strategies include differentiation, strategic timing, and tapping into the institutional voids. Norrona can use these strategies to gain a foothold in the South African market:
Entry Strategy 1: Differentiation
Differentiation is a strategy that involves introducing a unique and distinct product or service to increase competitive advantage. South Africa has over 300 branded companies that offer outdoor clothing. Of the 300 brands, only about 50 specialize in apparel designed for outdoor adventures. Competition from 50 domestic brands is a challenge but not impossible to differentiate. What will make Norrona products different from the local competitors is that its products are specialized for outdoor activities popular among tourists.
The incumbent brands mostly sell apparel for hiking, camping, off-road, watersport, and safety equipment and gadgets. On the other hand, Norrona products are designed specifically for cross-country adventurers, bikers, mountaineers, surfers, explorers, and skiers. Because no domestic brand has designed products for this specific population, Norrona can carve its market niche. The company should pursue a high-end differentiation strategy by creating a brand image that advertises its differentiating features. Instead of identifying as an outdoor clothing retailer, Norrona should identify itself as a specialist in apparel for cross-country adventurers, bikers, mountaineers, surfers, explorers, and skiers. The production strategy should focus on product performance and top-notch quality.
Entry Strategy 2: Timing
Timing is critical when deciding to make a strategic move. A company can either be a first-mover, a fast-follower, or a late mover. Given that no company in South Africa has invested in apparel for the aforementioned outdoor activities, Norrona can adopt the first-mover strategy. First movers are companies that are always first to introduce new products into the market. Being a pioneer accrues many advantages, including creating a strong brand image and reputation, securing cost-advantage, and getting protection from patents and copyrights. Additionally, a first-mover has the opportunity to set the standards in the industry, giving it an edge over its competitors.
However, it is worth noting that being a first-mover does not guarantee market success or competitive advantage. Differences in tastes and preferences across cultures can affect a company’s performance in a foreign market. A product or strategy deemed attractive in the home market may not be as attractive in another country. First-mover must have competent financial and human capabilities, large-scale production, effective distribution, and marketing capabilities to become a market leader consistently. First movers cannot sustain their market position in areas where technology advances are key success drivers. Unless a company has strong research and development (R&D) and design capabilities, it can retain its market position in the long-run.
Fortunately, as previously mentioned, Norrona has five major departments where R&D and design are among them. The company should plan to invest in these activities to acquire a strong foothold in the foreign market. It must continuously combine its product features with customer value and reasonable cost/revenue/profit to be successful. Otherwise, the fast-followers and slow movers with substantial resources in the industry can overtake it.
Entry Strategy 3: Tapping into the Institutional Voids
Tapping into institutional voids can help a company overcome institutional barriers such as tariffs, cultural differences, and bureaucratic barriers. Institutional voids refer to the regulatory systems’ weaknesses, local culture, and contract-enforcing mechanisms in emerging markets. A company must consider how the political, social, and justice system will affect its business operations. Does the local government guarantee property rights? Does it have restrictions on foreign investment? Does the product market allow efficient R&D and flow of product information? What is the status of physical and technical infrastructure in the country?
Once a company has addressed these concerns, including the labor and capital market, it can adjust its business model to meet the local demand and live up to the expectation of its customers, stakeholders, and investors. The business model should be restructured to fit the local market demands, but its core value propositions should always remain unchanged for long-term business success. A company can achieve this long-term success through creating customized offerings, take advantage of low-cost labor, use leadership or management talent to maintain growth, and use cutting-edge technology. Facing the institutional barriers head-on increases a company’s success chances.
Segmentation, Targeting, and Positioning Decisions
Segmentation Strategies
Geographic Segmentation
Geographic segmentation involves categorizing customers based on geographical units such as cities, regions, or neighborhoods. The surfing culture in South Africa is becoming popular due to its great beaches and good waves. These features make the country one of the top surfing destinations in Africa. In the geographical segment, Norrona should target locations with beaches or shorelines. The company should also consider main cities such as Durban as a target population. Durban city hosts several internationally recognized beach sports, including surfing events, canoe marathons, Giant’s Cup Trail Run, and the Karkloof classic MTB. The Giant’s Cup Trail Run is an annual 5-day trailing that involves running and hiking through the Maloti Drakensberg Park foothill. The event provides a market opportunity for the company’s hiking and mountaineering apparel and gears. On the other hand, the Karkloof classic MTB event is a major attraction for cyclists in the country.
The geographic segment will include regions popularly known for sports tourism. The company can then distribute the products based on these geographic segments. For example, the company can supply mountaineering apparel to Maloti, an area where mountaineering and hiking are common. The cyclists’ apparel and gears can be supplied to Karkloof, a major attraction for cyclists. The surfing equipment and gear can be distributed to numerous beach fronts and nautical tourist destinations.
Psychographic Segmentation
In the psychographic segment, potential customers are categorized based on their personality and values. People can belong to the same demographic group but have different preferences, values, and lifestyle choices. In a world where customer-centeredness is considered the epitome of success, customizing business practices to fit customer’s preferences is crucial. The key psychographic variables Norrona should consider factors, including social classes, income, and lifestyle. Based on lifestyle, the potential customers can be grouped into price-conscious customers, safety seekers (prefer product quality over price), and affluent and luxurious customers (value the experience rather than pricing).
Behavioral Segmentation
Understanding heterogeneity in individual preferences can help Norrona comprehend the factors that influence their customers’ behaviors. Norrona can divide its potential customers based on their attitudes, user status, brand loyalty, outdoor activity routine (frequency of product use), their response and readiness to accept their products, and purchase behaviors (for instance, self-treating, ‘spend to impress,’ and selective extravagance).
Targeting Decisions
An effective strategic market plan flows from a mission statement to analyzing and selecting the most profitable market and then to formulating a specific marketing mix and positioning goal for each product. Targeting strategies include differentiation, undifferentiating, and concentration. As previously mentioned, new market entrants need to exploit each customer segment to be competitive. Therefore, the differentiated marketing strategy is the most appropriate for Norrona, given its maturity stage in the market. Differentiated marketing involves developing a unique product offering and strategic plan for each market segment. Although costly, this marketing strategy will help the company to meet its customer’s expectations.
Positioning Decisions
New entrants need to launch effective strategies to gain strong market positions where their presence is minimal or non-existent. Having a strong positioning strategy can help a company differentiate its value propositions from rival companies. The positioning strategy should deliver the brand’s marketing claims and promises and be strong enough to preempt and neutralize competition. Depending on the market segment, Norrona can position itself as a low-cost provider, a safety-conscious company, or a specialist in gear for sports tourism. A strong market position can strengthen the brand’s image and influence customer’s perceptions of its market position vis-à-vis competitors.
Analysis of Potential Market Competitors
The major competitors in South Africa’s market include the outdoor warehouse store, Mountain Mail Order, and Cape Union Mart. The biggest threat is the outdoor warehouse company, South Africa’s largest retailer in outdoor equipment and apparel. Most of their products are low-priced (R100 to R500). The highest apparel price ranges from R1500 to a little over R7000. Its value proposition is that it offers low-priced and quality products. It sells apparel and equipment for hiking, open road, and open-air recreation. Strengths include a high search engine visibility and a strong market position. Its weakness is susceptibility to product quality weaknesses because it sources products from different brands. Since its products come from different brands, the company has little control over the products’ design and quality.
Mountain Mail Order is an online store that sells apparel and equipment for camping & hiking, skiing, trail running, and climbing. The company has a weak value proposition: its brand is only known for the list of products it sells. The price range is higher than the outdoor warehouse – products range from R200 to R1500. It has a weak search engine visibility and susceptible to product quality weaknesses because it sources its products from different brands. Its core strength is that it has a strong market position: it has been in operation since 1974.
Cape Union Mart is an online and in-store retailer that sells camping and hiking, trail running, mountain biking, and snow sports products. Its biggest threat is that it has similar products listing to Norrona and has strong online visibility. Its main weakness is that it is highly-priced compared to its counterparts: the average apparel price is R500. Its value proposition is that it is a ‘one-stop destination,’ which describes a business where customers can find most of what they need from the store.
Marketing Plan
Product Strategy Image, Personality, and Identity
Deciding what products to offer is an important task that requires a deep understanding of customer’s wants and needs. Product strategies involve focusing on the product’s anatomy, including its attributes, branding, design, packaging, and labeling. Creative product attributes such as packaging choices, names, and design can create a positive image in a customer’s mind. Brands deliver added value to products, influencing a customer’s loyalty to the company. The company should strive to create a brand image that offers functional, emotional, and psychological benefits to customers.
Norrona should use a logo that communicates its values and goals. For example, if the company chooses to advertise as a safety-conscious company, it must use a logo that depicts safety. It can also select logo symbols that its target customers can relate to within the marketplace. For example, using the Karkloof falls as a logo can connect with the country’s cyclists who frequent the area for annual cycling events. Selecting the right product design, including colorful clothes or those that resonate with nature, can communicate the brand’s personality. The product design should incorporate features that define the character or image Norrona wants to be associated with within the market.
Norrona has a competitive advantage over its competitors, given that its product design is done in-house. Unlike its competitors who co-retail – sell retail products for other brands – Norrona designs its products. This way, the company has more control over the production process. Norrona should use long-lasting, safe, and comfortable fabrics to increase the functional component of their products. The product’s quality and functionality can create emotional commitment and influence buyers’ perception of their products.
Because Norrona sells a range of products, it should use the BCG matrix to determine which products are worth investing in, especially in the new market. BCG matrix classifies business portfolios into four categories divided into two main axes: the growth rate and the relative market share. The matrix can improve marketing decision-making efficiency and promote strategic planning based on product performance. The growth rate and the relative market share axes can reveal the likelihood of a given product to be profitable in terms of the cash the product generates and the cash required to support it.
Promotion Strategy
Advertising
Promotional approaches have four main goals: to differentiate, remind or reassure customers, inform or create awareness, and persuade customers. Studies indicate that promotion affects international performance by influencing price standardization. Norrona has three main promotional goals: to develop brand awareness, to develop relationships and distribution networks, and to persuade customers to buy its products. Advertising can help the company reach a wider audience, which quickly raises its brand awareness. The classical conditioning and repetitive nature of the promotional campaigns enhance memory retention of the promotional message. The company can use advertising techniques such as emotional appeal, promotional advertising (i.e., giving customers free product samples), sharing appealing statistics and data, and endorsements.
Through advertising, the company can also increase its brand equity. Brand equity refers to the value customers place on a brand rather than its products. While products can be imitated, brand equity cannot because it is intangible. Researchers recommend using the brand extension strategy to increase brand equity. Brand extension is a strategy that involves introducing a new product into the market through another brand that has a strong market presence. Brand extension strategy has a direct influence on a company’s brand equity. Given that consumers tend to be wary and mistrustful of new brands and products, Norrona can use the endorsement technique as part of their brand extension strategy to reduce possible mistrust among retailers, distributors, and consumers.
Direct Marketing
Direct marketing is a promotional strategy that involves profiling customers and creating highly-personalized and targeted messages for their customers. This strategy is relational, highly interactive, and flexible and can deliver personal messages to the target audience. The company’s marketing strategist can use emails, social media, and direct mails to reach the target audience. A common technique is sharing product reviews and customer experiences on the social media platform.
Price Strategy
Price wars are a form an offensive strategy designed to draw customers away from competing companies. Unless rival companies respond with their price cuts, low prices for equally good products can lead to a good market share. However, blindly following price cuts can be ill-advised considering their devastating effects on a company’s profitability. Companies can respond to price wars through selective pricing strategies, retaliatory price cuts, and non-price strategies. A company’s pricing strategy will be determined by the marketing objectives, marketing mix, production costs, and organizational considerations. Competition, business macro-environment, and market demand are external factors that can also affect a firm’s pricing decisions. On one hand, low prices can help a company survive by increasing its demand. On the other hand, high prices can improve product quality perception, increasing business profitability.
The selective pricing strategies include discount and allowance pricing such as offering bundled prices, price promotions, loyalty programs, cash discounts, and quantity discounts. The company can also use a non-price strategy to fight price wars. The non-price strategies include developing innovative products, warning customers of the risks of price cuts, and appealing to distributors to consider the current pricing situation. Given that Norrona’s primary goal is to penetrate the market, it should consider being a low-cost provider. Low prices can help a company quickly penetrate the market. However, the company should also consider the psychology of prices when making its pricing decisions. Often, customers associate high prices with quality and low prices with poor quality. For this reason, the company should price its products within a reasonable range.
Distribution Strategy
The core drivers of a customer’s purchasing behavior are prices and the production and distribution strategy. A distribution network refers to a group of organizations or individuals that direct a product’s flow from the producer to the supplier to the end-user- the customer. A distribution network’s primary goal is to ensure that customers receive the right quantity of the right product at the right time. The major distribution channels include retailers, wholesalers, distributors, agents, and franchisees.
An effective distribution strategy involves selecting the right channel, deciding the distribution intensity, and integrating the channel with core business activities. Norrona can either decide to partner with distribution companies or directly serve its customers through its channel. Norrona can choose one of the following distribution channels:
- Producer ………………………………………………………………………………….Customer
- Producer ……………………………………………………………. Retailer ………Customer
- Producer …………………………….. Wholesaler………………Retailer ……Customer
- Producer ………….. Agent…………Wholesaler……………..Retailer ……Customer
If the company chooses to work with external distributors, it should select the distributors that can develop a market instead of those with few customer contacts. The company should always obtain the financial and market data from the distributors to guide their strategic decisions. Norrona should strive to create long-term relationships with the distributors and retain control over the marketing strategy.
The company should also adopt selective distribution, which will allow it to distribute products to specific locations. As already stated, Norrona’s target population can be geographically segmented based on their preferred outdoor activity. A selective distribution strategy will allow the company to select prices that target a specific market segment, providing a more personalized shopping experience. In selective distribution, products are shipped to selected outlets/stores in different locations. A vertical marketing system (VMS) can help the company to optimize its distribution strategy. Through VMS, the producers, wholesalers, and retailers can work as a single, unified, and streamlined group created to meet each customer’s individual needs.
Conclusion
Norrona can pursue competitive advantage in the South African market by being a best-cost/low-cost provider, offering valuable differentiating product features, and having strong internal resources and capabilities. The company’s main strengths include an active R&D department and control over their products’ design. These strengths can help the company to differentiate itself from the local competitors. Control over the production process and creation of product designs gives the company a distinct competency in producing top-performing products for the market. Norrona’s major weakness is its weak brand image and market position compared to its competitors. However, with the proposed marketing mix, the company can develop into a main outdoor apparel retailer in the South African market.
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