The Overseas Marketing Strategy for Small and Medium-sized Chinese Enterprises

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1 The Overseas Marketing Strategy for Small and Medium-sized Chinese Enterprises LIU Baiyu School of Foreign Studies, Shandong Institute of Business & Technology, P. R. China, Abstract: The marketing strategy is considered as one of the most important factors for small and medium-sized Chinese enterprises to enter into the overseas markets. Due to the limited experienced overseas marketers, financial capabilities and R & D, management should plan the strategy more carefully, especially in the key areas such as which products to market, which price to set, which channel to choose and which promotion to select. Keywords: Marketing strategy, small and medium-sized enterprise, product, price, distribution, promotion 1 Introduction Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals. [1] Marketing strategy means a marketing plan or method for achieving profitability and growth over a long period of time. Overseas scholars such as Philip Kotler, Jeff Madura, Charles W. Lamb, Joseph F. Hair, Louis Boone, David Kurtz, and Chinese professors such as Ji Baocheng, Hu Zhengming, Chao Gangling all agree that the marketing strategy for small and medium-sized enterprises to enter into the world market should focus on four marketing elements: product, price, distribution and promotion. Most companies are marketing accordingly, but only a few successfully. Through the study of some of the successful and failure cases, the author finds out that some of the companies are marketing the same way as the big companies, which are quite different in terms of overseas experience, financial capability, management and R & D. For example, Western markets, high valued products and big customers are normally considered as the richest resources for big enterprises, but not for small and medium-sized enterprises. They should make the marketing strategy based on their own advantages while avoiding the disadvantages. 2 Types of Marketing Strategy Small and medium-sized enterprises should, first of all, know the types of marketing strategy. Marketing strategy can be divided into four types: product strategy, pricing strategy, distribution strategy and promotion strategy. Examples of marketing decisions include the product decision by Kodak to design a miniature video camera, the pricing decision by Ford to price its new model Mustang, the distribution decision by Nike on how to distribute its running shoes across various outlets around the world, and the promotion decision by American Airlines to use television advertising when promoting its airline services. [2] 2.1 Product strategy A product is the bundle of physical, service, and symbolic attributes designed to enhance buyers want satisfaction. Product strategy involves considerably more than just producing a good or service and focuses on benefits. It includes decisions about package design, brand names, trademarks, warranties, product image, new-product development and customer service. [3] Products don t stay in the market forever; they have a limited life. Product life cycle must be considered 331

2 when making product strategy. Normally, a product goes through a series of four stages: introduction, growth, maturity and decline. Product marketing passes through distinct stage with different challenges, opportunities and problems. In introduction stage, sales are low and costs are high per customer, so the strategy is to create product awareness and trial. In growth, sales are rapidly rising and the profits are substantially improved. The strategy is to maximize market share. In maturity stage, the sales are peak, costs are low and the profits are very high. The strategy is to maximize profit. In the decline stage, the costs are low, but the profits are decreasing. The strategy is to reduce the expenditure. 2.2 Pricing strategy In the four elements of marketing mix, price is the only one that produces revenue; the other three produce costs. Price is also one of the most flexible elements: it can be changed quickly, unlike product features and channel commitments. A firm must set a price for the first time when it develops a new product, introduces its regular product into a new distribution channel or geographical area, and enters bids on new contract work. Price is also a key element used to support a product s quality positioning. In making a pricing strategy, a marker must follow a six-step procedure: selecting the pricing objective; determining demand; estimating costs; analyzing competitors costs, prices, and offers; selecting a pricing method, and selecting the final price. [4] 2.3 Distribution strategy A marketing distribution is a business structure of interdependent organizations which reaches form the point of product origin to the consumer. Products move through marketing channels via physical distribution. Physical distribution has five distinct subsystems: warehousing, materials handling and packaging, inventory control, order processing, and transportation. Distribution strategy should be made on the basis of economies of scale. Producers achieve economies of scale through the use of specialization, which breaks down a complex task into smaller, simpler ones and thus creates greater efficiency and lower average production costs. Marketing distribution can also attain economies of scale through specialization, which distribution members can do some things more efficiently than producers because they have built good relationships with their customers. [5] 2.4 Promotion strategy Promotion means any of the various techniques used to create a positive image of a seller s product in the minds of potential buyers. It includes such areas as advertising, personal selling, public relations, and discounts. Of which, advertising is considered as the most powerful promotion strategy. Advertising is a form of sponsored public notice that seeks to inform, persuade, and otherwise modify consumer attitudes toward a product, with the object of triggering an eventual purchase. [6] The tools for promotion are consumer promotion, trade promotion and sales-force promotion. Consumer promotion refers to samples, coupons, cash refund, prices off and free trials. Trade promotion refers to advertising and free goods. Sales-force promotion refers to trade shows, contest for sales reps, and specialty advertising. 3 Typical Wrong Marketing Strategies After knowing the major types of marketing strategy, marketers from small and medium-sized firms should then learn the typical failure cases made by many other companies, from which they could learn more and try to avoid these mistakes. 3.1 Product strategy Many small and medium-sized firms export goods or service because of the saturation and declining interest of domestic market as well as share enlargement and stable profit of foreign markets. They don t 332

3 classify the product and try to export all the products they produce. They don t know that international market is quite different from domestic market. Even in domestic markets, a product or service could do well in one area and may fail in another area 100 kilometers away. When marketing worldwide, the difference is even more dramatic. For example, when selling TV, the government requires the safety certificate CCC(China Compulsory Certification) in China, UL(Underwriter Laboratory Inc.) in USA, CSA(Canadian Standards Association) in Canada, CE in Europe and GS in Germany. 3.2 Pricing strategy The common mistake made by many small and medium-sized firms is low price for export. They believe that all consumers have limited amounts of money and the low price becomes the most powerful factor in buying decision. That s true in one reason, but research shows that buyer s perception of product quality is closely related to its price. For many consumers, low price means low quality. So some consumers like to pay more for foods that are labeled natural, even when cheaper alternatives are readily available. 3.3 Distribution strategy A typical distribution channel for export is: producer exporter importer wholesaler retailer consumer. Some small and medium-sized markers think that the chain is too long and thus increases the cost of the product. So they try to get rid of the marketing intermediary and sell the goods directly to the retailer. That sounds good in theory and works in some degree. But in most cases it doesn t go well. The reason is that marketing middlemen perform many functions that producers can not do themselves such as creating utility, providing additional service like sorting and grading bulk goods, warehousing and transportation. 3.4 Promotion strategy Promotion is one of the most effective ways to export goods. Advertising alone in international market increases by more than 10 percent per year. The United States spends more than US$100 billion each year on global advertising. Many marketers in small and medium-sized enterprises believe that promotion is just a matter of spending money. They ignore the language challenge, culture challenge, regulation challenge, media challenge and consumer habits challenge. Thus their promotions often fail. For example, smiles are an expression of business and cultural traditions. American businesspeople are always smiling while the Japanese are always serious. Products advertised with smiling faces or humor may produce the wrong reaction in Japan. 4 The Right Marketing Strategies According to the marketing mix, small and medium-sized enterprises should make the marketing strategy based on their own advantages while avoiding the disadvantages. The disadvantages are less experienced overseas marketers, limited financial capabilities and relative small or even no R & D team. The advantages are quick to make decisions, fast to seize opportunities and more efficient to small orders. 4.1 Product strategy At the heart of a great brand is a great product, which in turn is a key element in the market offering. A product is anything that can be offered to a market to satisfy a want or need, including physical goods, services, experiences, events, places, properties, organizations, information, and ideas. The customer will judge the offering by three basic elements: product features and qualities, services mix and quality, and price appropriateness. [7] Based on above definition, marketers from small and medium-sized enterprises should make the following product strategy: product differentiation and product classification. Product differentiation is the creation of a feature or image that makes a product differ 333

4 enough from existing products to attract consumers. Product classification is useful for marketers to attract specific customers. Traditionally, products are classified for ultimate consumers: convenience products, shopping products and specialty products. Each product classification is associated with different marketing strategy. 4.2 Pricing strategy Pricing means what a firm gets in exchange for its products. Because pricing has a direct impact on revenues, it is extremely important. Though most firms price products to maximize current profits, the right pricing should focus on other objectives such as pricing survival, maximum market share, maximizing market skimming and product-quality leadership. A firm has three options for pricing existing products: pricing above prevailing market prices for similar products; pricing below market prices; pricing at or near market prices. The first option takes the advantage of the common assumption that higher price means higher quality. The second option works if a firm offers a product or acceptable quality while keeping costs below those of higher-priced competitors. [8] 4.3 Distribution strategy Distribution strategy deals with the marketing activities and institutions involved in getting the right goods or service to the firm s customers. Distribution decisions involve mode of transportation, warehousing, inventory control, order processing, and selection of marketing channels. [3] There are two kinds of goods: consumer goods and business goods. For consumer goods, there are four distribution channels: producer consumer; producer retailer consumer; producer wholesaler retailer consumer; producer agent wholesaler retailer consumer. For business goods, there are also four distribution channels: producer business user; producer agent business user; producer wholesaler business user; producer agent wholesaler business user. So it is enough to say that no one channel suits every product. Marketers should make the distribution strategy according to their specific goods and different marketing purposes. 4.4 Promotion strategy There are four kind of promotion: advertising, personal selling, sales promotion and public relations. The advantages for each kind accordingly are reaching large consumer audience, producing immediate buyer response, attracting attention and creating awareness and creating a positive attitude about the company. The disadvantages are respectively are limited value for closing sales, high cost per contact, non-personal appeal and difficult to measure effectiveness. For small and medium-sized enterprises, depending on different objectives, it s more effective to advertise in trade magazines, visit customers, discount for new customers and use the policy of word of mouth for promotional strategy. 5 Conclusion Marketing strategy mix consists of four elements: product, price, distribution and promotion. Different kinds of firms use different strategy depending on its marketing resources. For mall and medium-sized Chinese enterprises, it s not wise to market high valued products, having low price, direct selling channel and advertise heavily. It s more effective to have product differentiation and classification, set quality-valued price, use intermediary for distribution and word of mouth for promotion. Author in brief LIU Baiyu, Professor of Business English. Research fields: study for international business. 334

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