Narsee Monjee College of Commerce and Economics S.Y.

BMS Division - B

International Marketing Launch any product in any country Product Chosen: Watches Company: Aristocracy Watch Co. Country: U.S.A

Presented By:

Rahul Bhagat 62 Noopur Dhruv 69

Ritu Jhaveri 85

S.Y.BMS B Narsee Monjee College

International Marketing Group 5 Aashay Samant 95 Vishal Zaveri 109

Overview: Trade is increasingly global in scope today. There are several reasons for this. One significant reason is technologicalbecause of improved transportation and communication opportunities today, trade is now more practical. Thus, consumers and businesses now have access to the very best products from many different countries. Increasingly rapid technology lifecycles also increases the competition among countries as to who can produce the newest in technology. In part to accommodate these realities, countries in the last several decades have taken increasing steps to promote global trade through agreements such as the General Treaty on Trade and Tariffs, and trade organizations such as the World Trade Organization (WTO), North American Free Trade Agreement (NAFTA), and the European Union (EU). Several trends in international logistics have become evident over the last two decades. On the economic side, exchange rates have ceased to be as significant a factor as they were previously because more demanding product specifications have made it difficult for firms to switch suppliers, at least for relatively specialized products. On the other hand, for commodities (such as steel), which are made around the World, over-capacity often exists for a variety of reasons (e.g., some countries such as Russia and Brazil are currently experiencing bad economic periods with a resultant shrinkage in domestic demand) and since different suppliers products can easily be substituted for those of others, price pressure becomes intense. Note that in very capital intensive industries, firms may be forced to sell at a price not much higher than the variable costs of production, which may lead to charges of "dumping" in foreign markets. Additional trends include improved infrastructure (roads, airports, and other transportation facilities as well as communications opportunities) and a subsequent move toward global manufacturing to take advantage of areas of lower labor cost as well as economies of scale. Finally, because of increased recognition of the importance of quality and cost effective procurement, purchasing managers have assumed a greater role. Advantages & Disadvantages of Going Global: There may be several reasons why a company goes international. The company may be responding to a demand it discovers in another location. It might see its competitors going to that location. Rules and regulations may be too harsh in home country and working environment may be more favourable overseas. Cheaper production costs may force it to set shop in another country. It may sometimes be better to launch operations in a country before your competitor does. The government
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International Marketing Group 5

of that country may be providing incentives etc. Saturation of home markets may also force a company to seek out new markets. There are also some disadvantages to international expansion. Companies face a multiplicity of political, economic, legal, social and cultural environments. There are complex interactions between a company and its host countries because of national sovereignties, widely disparate economic and social conditions, and other factors. Geographical distance, cultural and national differences, variations in business practices, and other differences make communication difficult between the MNE and its subsidiaries. Economic, marketing and other information required for strategic planning varies in availability, depth and reliability between countries. Differences in industrial structure and business practices make analysis of future competition difficult to undertake. Regional economic integration and the activities of institutions such as ASEAN, SAARC and EU may confront the company.

S.Y.BMS B Narsee Monjee College

International Marketing Group 5

Introduction Aristocracy Watches' is a start-up watch producer and distribution company. Its strategy is to serve the upscale niche markets of the watch industry. The idea was to make watches that would be seen as style and fashion accessories rather than just utilitarian devices. We found that it was not safe even at the bottom of the pyramid. The grey market with cheap Chinese imports and the unorganized sector had cornered a sizable chunk of the low-end market. It will capitalize on the Swiss engineering and manufacturing used to build the watches. There are many untapped potential markets within this industry that desire high-quality, stylish goods, but do not think they can afford them or do not know where to purchase them. It is the firm's intention to build and export its products to the United States and to make Aristocracy Watches the number one selling European watch in the Western U.S.A. To do this the company's long-term goals are to achieve a 20% market share in the U.S, build brand image and brand equity through marketing, achieve a sustainable 55% profit margin, and eventually produce luxury watches in addition to the initial, moderately-priced line. The Company Aristocracy Watches will be a privately-held international corporation. Production will take place in Switzerland and sales and marketing are focused on the United States, for the short-term future. The Swiss factory will be located at Zurich. The Greater Zurich Area is Switzerlands economic center and home to a vast number of international companies. The success of the Greater Zrich Economic Area as one of the most important in the world is due to many factors: The very low tax rate and the possibility for foreign companies and private persons to optimize their tax burden by personalized tax agreement with the Tax Authorities is surely one of the key points. Having a factory in this area will help to reduce the burden of taxes and hence achieve a quicker break-even. The factory
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International Marketing Group 5

will be 1,000 square meters and should be large enough for the first three years of the company's growth. The watches will be shipped to and distributed from our warehouse at 343 Palm Avenue in Los Angeles, California. The watches will be initially sold in upscale watch stores in Los Angeles and San Francisco. Aristocracy's sales force will consist of franchisers and two freelancing sales representatives. The Products The initial product line will be elegant analog watches with sporting characteristics, able to be used to depths of 100 meters under water. The company plans to release two versions, the "sport" watch and the "night" watch. The "sport" watch will be made of a durable steel and hard rubber combination that will provide both style and durability. The strap would be made of steel. The "night" watch will be all black including the face with minimal white writing for the numbers on the face and will feature white hands as well. The strap would be made of leather. Aristocracy Watches will be built to last a lifetime - battery replacement every ten years will be the only necessary maintenance, therefore customers will see the inherent value in the watches The pricing strategy will be to initially undercut our main competitors by 10%, using a market penetration strategy. Then, pricing will be adjusted to be directly competitive with the other major competitors. The price per watch is expected to be around $600$1200. A luxury watch is the current main focus for a future product. Other future products could include alarm clocks, wall clocks, and clocks for luxury automobiles built in Europe. Objectives: To make Aristocracy Watches the number one selling European watch. To eventually produce luxury watches in addition to the moderately priced line. To achieve a 55% profit margin. To achieve a 20% market share in the U.S.

S.Y.BMS B Narsee Monjee College

International Marketing Group 5

Mission: Aristocracy Watches is a watch company that produces wrist watches for sale in the United States - initially in California. The company will build its image as a quality watch first, and then will begin selling higher profit, luxury watches. Keys To Success: To succeed Aristocracy Watches must: Build and sell high quality products. Achieve 100% customer satisfaction. Build brand image and brand equity through marketing. Comparative Analysis: Aristocracy Watches will have the following sustainable competitive advantages: Swiss technology, experience, proficiency, and reputation. High quality at a moderate price. Elegant and ergonomic styling. Devoted Swiss work force. American marketing skills. The Market Entry into the high-end watch industry comes as a propious time. Over the past two years, the purchase of mid-level and high-level European watches has increased by 50 percent in the U.S. and this trend is expected to continue. One of the most important recent trends is that potential watch buyers are willing to spend higher amounts on watches because of the enhanced image appeal. Therefore, a company that can build a substantial brand image in this industry gains a significant competitive advantage. It is the aim of Aristocracy to capitalize on its high quality and reasonable price while pursuing the innovative styles necessary for brand building. The watch industry, particularly the upscale markets, is growing faster than ever. Potential watch buyers are willing to spend moderate to high amounts on watches

S.Y.BMS B Narsee Monjee College

International Marketing Group 5

because they can make the customer look good - and hence feel good about themselves. In addition, the upscale niche market that Aristocracy Watches has targeted is competitive because of the competitors and the discerning consumers it serves. However, the competition is based more on quality than price unlike the discount market. Watches and machinery represent about 42% of the total Swiss export value. (By themselves, the world-famous Swiss watches account for 8% of exports and command 50% of the world market.) The upscale watch industry is currently in a growth period, so now is an ideal time for entry. U.S Market Analysis: Consumers' heightened fashion sense, together with a globally more hectic pace of life, has increased demand for the faithful wristwatch. Valued at $6 billion+ in 2001, the U.S. watch market provides lots of opportunities for shrewd players. Yet this intensely retail-driven scene is complicated by a maze of outlet types (including the Internet), licensing arrangements, and what seems like a million brands. Current total U.S. population (284,800,000) is from the U.S. Census Bureau, and is based on current growth rates applied to the 2005 Census figures.
Total population Total population White Black or African American American Indian and Alaska Native Asian Native Hawaiian and other Pacific Islander Some other race Two or more races Hispanic or Latino 281,421,906 211,460,626 34,658,190 2,475,956 10,242,998 398,835 15,359,073 6,826,228 35,305,818 % of population 100.0% 75.1 12.3 0.9 3.6 0.1% 5.5 2.4 12.5

S.Y.BMS B Narsee Monjee College

International Marketing Group 5

Age structure: 0-14 years: 20.2% (male 31,152,050/female 29,777,438) 15-64 years: 67.2% (male 100,995,752/female 101,365,035) 65 years and over: 12.6% (male 15,858,477/female 21,991,195) (2007 est.)

Cultural Environment

Language barriers: All the marketing and advertising has to be done in English since this language is spoken by all Americans. Cultural barriers: Subtle cultural differences may make an ad that tested well in one country unsuitable in anothere.g., an ad that featured a man walking in to join his wife in the bathroom was considered an inappropriate invasion in Japan. Symbolism often differs between cultures, and humor, which is based on the contrast to peoples experiences, tends not to travel well. Values also tend to differ between culturesin the U.S. and Australia, excelling above the group is often desirable, while in Japan, "The nail that sticks out gets hammered down." In the U.S., "The early bird gets the worm" while in China " The first bird in the flock gets shot down." So, as for the Aristocracy watches, the marketing strategy will be to stand out. Local attitudes toward advertising: People in some countries are more receptive to advertising than others. Advertising is accepted as a fact of life in the U.S. Media infrastructure: Cable TV is not well developed in some countries and regions, and not all media in all countries accept advertising. U.S. has a very powerful media structure. Consumer media habits also differ dramatically; newspapers appear to have a higher reach than television and radio in parts of Latin America. Advertising regulation: Countries often have arbitrary rules on what can be advertised and what can be claimed. Comparative advertising is banned almost everywhere. However in U.S. this is allowed.

Some cultural dimensions of U.S. compared to other countries

Directness vs. indirectness: U.S. advertising tends to emphasize directly why someone would benefit from buying the product. Gender roles: A study found that women in U.S. advertising tended to be shown in more traditional roles in the U.S. than in Europe or Australia.

S.Y.BMS B Narsee Monjee College

International Marketing Group 5

Explicitness: Americans tend to allow for considerably less explicit advertisements, considering sexual overtones, than Europeans.

Sophistication: Europeans, particularly the French, demand considerably more sophistication than Americans who may react more favorably to emotional appeals e.g., an ad showing a mentally retarded young man succeeding in a job at McDonalds was very favorably received in the U.S. but was booed at the Cannes film festival in France. Popular vs. traditional culture: U.S. ads tend to employ contemporary, popular culture, often including current music while those in more traditional cultures tend to refer more to classical culture. Individualism vs. collectivism: To what extent do people believe in individual responsibility and reward rather than having these measures aimed at the larger group? The U.S., Britain, and the Netherlands rate toward individualism Power distance: To what extent is there a strong separation of individuals based on rank? Power distance tends to be particularly high in Arab countries and some Latin American ones, while it is more modest in Northern Europe and the U.S. Masculinity vs. femininity involves a somewhat more nebulous concept. "Masculine" values involve competition and "conquering" nature by means such as large construction projects, while "feminine" values involve harmony and environmental protection. The U.S. is close to the middle, slightly toward the masculine side.

Uncertainty avoidance involves the extent to which a "structured" situation with clear rules is preferred to a more ambiguous one; in general, countries with lower uncertainty avoidance tend to be more tolerant of risk. Few countries are very low in any absolute sense, but relatively speaking, Britain and Hong Kong are lower, and the U.S. is in the lower range of the distribution.

High vs. low context cultures: In some cultures, "what you see is what you get" the speaker is expected to make his or her points clear and limit ambiguity. This is the case in the U.S.if you have something on your mind, you are expected to say it directly, subject to some reasonable standards of diplomacy.

S.Y.BMS B Narsee Monjee College

International Marketing Group 5

Economic Environment
The economy of the United States has the world's largest gross domestic product (GDP), $3.21 trillion in 2006. It is a mixed economy where corporations and other private firms make the majority of microeconomic decisions while being regulated by the government. The US economy also maintains a high level of productivity (GDP per capita), although it is not the world's highest. The U.S. economy has maintained a reasonably high overall GDP growth rate, a low unemployment rate, and high levels of research and capital investment. Major economic concerns in the United Sates include national debt, external debt, and entitlement liabilities for retiring baby boomers that have already begun entering the Social Security system, consumer debt, a low savings rate, and a large current account deficit. The statistics shown below give us a view of how economically stable the U.S environment is. In December 2005, per capita real disposable personal income (at a seasonally adjusted annual rate) increased $89. Previously it was $27, currently it is $27,640 (December 2005).Median household income was $46,326 in 2005, up 1.1 percent from 2004 after adjusting for inflation. This is the first annual increase in real median household income since 1999. Since 1967, the first year for which household income statistics are available, real median household income was up 30.9 percent. Total number of employed was Previously- 152,784 February 2007 (thousands) Total number of persons unemployed previously 6,865 February 2007 (thousands) currently it is 6,724 (thousands) in March 2007.

Social Environment
The capitalist class constitutes the top 1% of the total population of the USA. This includes top-level executives, high-rung politicians, actors & celebrities heirs with high income and other high net-worth individual. The income of this group usually lies in the bracket of $500,000+ per year. This class is further divided into the Superrich and the rich which constitute 0.1 and 0.9% respectively. The next class includes the upper-middle class which constitute 15% of the total population. These are highly educated, most commonly salaried, professionals and middle management with large work autonomy with household incomes varying from the high 5-figure range to commonly above $100,000

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International Marketing Group 5

These are the targets for the company. As it can be seen, there is a huge potential market of people with the ability to pay for a luxury watch product like Aristocracy.

Political Environment
The political relations between a firms country of headquarters (or other significant operations) and another one may, through no fault of the firms, become a major issue. For example, oil companies which invested in Iraq or Libya became victims of these countries misconduct that led to bans on trade. Similarly, American firms may be disliked in parts of Latin America or Iran where the U.S. either had a colonial history or supported unpopular leaders such as the former shah. India and U.S. have always had a healthy trade relationship. Similarly, the US does not have any political issues with Switzerland and has a healthy trade relationship with the country.

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S.Y.BMS B Narsee Monjee College

International Marketing Group 5

Target Market and Market Segmentation The market segmentation is divided into the leading target markets. The division reflects the differences in marketing strategy that will be used to target each different market. The "Trendsetters" who enjoy being the first on their block to have a new, "chic" and "hip" product. The "Followers" who follow trends and buy products that everyone else has. Older adults who simply have good taste and a sense of style. Wealthier college students. Still fashionable senior citizens.
Market Analysis Potential Customers Trendsetters Followers Older Adults Others Total Growth 5% 2% 5% 4% 4.15% 2002 100,000 50,000 25,000 20,000 195,000 2003 105,000 51,000 26,250 20,800 203,050 2004 110,250 52,020 27,563 21,632 211,465 2005 115,763 53,060 28,941 22,497 220,261 2006 121,551 54,121 30,388 23,397 229,457

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S.Y.BMS B Narsee Monjee College Market Analysis (Pie)

International Marketing Group 5

Competition Our main competitor is Swiss Army Watches. Our next closest competitor is DKNY. Both of these firms have strong brand equity, but there is room in this market for a new company as brand loyalty is not high on potential consumers' reasons for purchasing. Industry Analysis The watch industry, particularly the upscale markets, is growing faster than ever. Potential watch buyers are willing to spend moderate to high amounts on watches because they can make the customer look good - and hence feel good about themselves. In addition, Aristocracy Watches will be built to last a lifetime - battery replacement every ten years will be the only necessary maintenance, therefore customers will see the inherent value in the watches. Buying Patterns Consumers often only buy a new watch every 5 to 10 years, yet they purchase them often as gifts. Therefore, advertising will be increased during the Christmas holiday season. Entry strategy Aristocracy Watches will manufacture their watches using Swiss craftsmanship and engineering, using raw materials imported from India. In the U.S. market we will be using franchising and we will be using it to sell our products through their franchisee

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International Marketing Group 5

outlets. Aristocracy watches will be sold in upscale stores in the USA and especially in areas like L.A. and San Francisco. Price Mix Our pricing strategy is very straight forward. After considering our expenses that we will have to incur and on the basis of break-even point, we have decided to price our watches. The pricing strategy will be to initially undercut our main competitors by 10%, using a market penetration strategy. Then, pricing will be adjusted to be directly competitive with the other major competitors. The price per watch is expected to be around $600-$1000. The intended retail outlets are full price and full service, therefore Aristocracy will not need to use an extreme price penetration strategy to gain a foothold in the market. Sourcing Aristocracy Watches will only sell watches produced at its Switzerland factory, therefore additional sourcing of watches will not be necessary. However, the sourcing of parts for the manufacturing of the watches will play a constant role in the firm's profitability. Initially, most parts will be sourced from India, as the exchange rate is very beneficial for those purchasing with Swiss Francs. Promotion Mix The upscale niche market that Aristocracy Watches has targeted is competitive because of the competitors and the discerning consumers it serves. The company will use advertising, public relations, and sales programs to make the public aware of the watches. 1. Advertisements and public relations pieces in local newspapers - particularly The Los Angeles Times and The San Francisco Chronicle. 2. Full-color brochures will be distributed at the various outlets where the watches are sold. Promotion will be initially spearheaded by public relations because of its low cost, and then through advertising once the company begins to increase cash flow to an acceptable figure. Outlets that achieve the highest figures in sales will receive 2% discounts in order to encourage increasing sales.

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International Marketing Group 5

Place Mix We are entering the U.S. by export and franchising, so there will be a few shops in some upscale malls, which sell the products. Also the company plans to set up a website where people can place orders online and they will receive their product with the other channel that we will be using in future i.e. exports. They have to pay the price of the watch as well the shipping charges.

Financial Considerations The company's start up costs will be ~$226,000. Owners equity will be provide $171,000, $30,000 will consist of short-term borrowing, and the rest will be long-term loans. The majority of the start-up costs will consist of rent, research and development, initial inventory, and a strong cash account. The Break-even Analysis shows Aristocracy Watches will be able to make a steady profit by the second year. The break-even point is only $12,000 per month, while projected sales are three to five (or more) times that figure. Startup Costs Start-up Requirements Start-up Expenses Legal Stationery etc. Brochures Consultants Insurance Rent Research and Development

$20,000 $500 $3,000 $10,000 $10,000 $20,000 $10,000

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International Marketing Group 5

Expensed Equipment Other Total Start-up Expenses (1) Start-up Assets Needed Cash Balance on Starting Date Start-up Inventory Other Current Assets Total Current Assets (a) Long-term Assets (b) Total Assets (a & b) (2) Total Requirements (1 & 2) Funding Investment Investor 1 Investor 2 Other Total Investment Current Liabilities Accounts Payable Current Borrowing Other Current Liabilities Current Liabilities (3) Long-term Liabilities (4) Total Liabilities (3 & 4) (i) Loss at Start-up Total Capital (e) Total Capital and Liabilities (e & i)

$10,000 $7,500 $91,000

$70,000 $25,000 $5,000 $100,000 $35,000 $135,000 $226,000

$100,000 $71,000 $0 $171,000

$5,000 $30,000 $0 $35,000 $20,000 $55,000 ($91,000) $80,000 $135,000

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International Marketing Group 5

Sales Forecast The following table and chart show our present sales forecast. Sales Forecast Sales Sales Other Total Sales Direct Cost of Sales Sales Other Subtotal Direct Cost of Sales FY 2008 $1,066,000 $0 $1,066,000 FY 2008 $410,000 $0 $410,000 FY 2009 $1,307,000 $0 $1,307,000 FY 2009 $500,000 $0 $500,000 FY 2010 $1,515,000 $0 $1,515,000 FY 2010 $610,000 $0 $610,000

Break-even Analysis

Break-even Analysis Break-even Analysis: Monthly Units Break-even

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S.Y.BMS B Narsee Monjee College Monthly Revenue Break-even Assumptions: Average Per-Unit Revenue Average Per-Unit Variable Cost Estimated Monthly Fixed Cost

International Marketing Group 5 $20,400

$170.00 $70.00 $12,000

Packaging and Labeling Packing:Everything we use in packaging would be recycleable and the package itself would be be such that it would be reuseable.This is in line with our cause to same environment and with our Go Green Campaign The product is carefully placed in recycleable polythene bags, this polythene bag is carefully packed in cardboard boxes. Packaging:These boxes are wrapped in hard plastic sheets this makes them safe from damage in transit. The wrapped goods are now ready to be packed in containers. As such it serves the three purpose of packaging i.e. protection, preservation and presentation. The hard plastic we use would be within the permissible limits and in line with the ISO 14001 norms. Labeling:Labeling would be done after taking care of the legal norms regarding labeling. Labeling is an important aspect. The US labeling laws require the manufacturing date, the batch number, country of origin (if not made in the USA) and the price to be put along with the name of the manufacturer. Instead of labeling, the watches will come with a law label which is a tag that is attached to most electronic items in the US having all the required information

Product Life Cycle (PLC)

Our product would be initially being at the introduction stage but within 2 years we expect to reach the growth stage. So we would be creating a very dynamic company with heavy investments in R&D. We would be constantly upgrading our products and bringing in new features and design so that our sales never decline but keep increasing. Moreover as the U.S market saturates we would divert our concentration to the currently developing markets of Asia and Latin America.

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International Marketing Group 5

Conclusion:
We have covered all the aspects of international marketing. The database and research required about the host country, the entry strategies, market evaluation, the 4 ps and the break even analysis have been examined and scrutinized thoroughly by us. This project has truly taught us a lot about what a company goes through when it wants to expand internationally

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International Marketing Group 5

Bibliography: Books: Clark, Simon. Marx, Marginalism, and Modern Sociology: from Adam Smith to Max Weber. London: The Macmillan Press, 1982 Kotler, Philip. Marketing Management. New Jersey: Prentice-Hall Inc , 2001 Silbiger, Steven A. The10-Day MBA. London: Piatkus, 2005 Wernick, Andrew. Promotional Culture: Advertising, Ideology and Symbolic Expression (Theory, Culture & Society). London: Sage Publications Ltd, 1991

Websites: http://en.wikipedia.org/wiki/Main_Page http://www.thetimes100.co.uk/index.php http://www.marketing-guru.com/ http://www.census.gov/ http://www.unu.edu/

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