FACTORS FORD SHOULD CONSIDER FOR THE JAPANESE MARKET
Q 1: What Economic, cultural, political-legal, or other environmental factors should ford take into consideration in exporting its cars to japan and why? What specific opportunities and threats can be extracted from the Japanese environment?
Several factors influence the spending behavior of consumers/ the factors to include the economic, cultural, political, legal, and environmental factors. Economic factors primarily influence what a customer will buy and if they can service and maintain the product without cutting too deep into their budget (Lynn, 2011). The economic factors Ford should have in mind are that the prices of gasoline in Japan are extremely high. With the Properly developed public transport, system vehicles are seen as ornaments. To make sure that the Japanese people invest in Ford automobile the vehicles exported to Japan should not be guzzlers. At the same time, the vehicle parts need to easy to find and replace without so much effort and money. Another economic factor is the stock market; the yen gaining strength over the dollar has directed many Japanese consumers to invest in foreign products. For instance, Mr. Tsuzuki says that the Mustang is relatively cheaper than most locally produced Japanese sports car.
Aside from the economic factors, culture seems to play a primary role in influencing the buying behavior of vehicles in Japan. The Japanese people prefer spacious vehicle. They say this comes in handy when going for family trips or traveling for recreation purposes. At the same time, it is useful if the Japanese family is large. With these facts in mind, it is accurate to suggest that the only way Ford can have opportunities in the market is to import more spacious vehicles suitable for the Japanese family. Besides, the inclusion of safety equipment such as the airbag will be more attractive to the Japanese middle-class consumer. Consequently, Japanese vehicles are usually for ornamental purposes. The Japanese consumers just like Mr. Tsuzuki suggest the physical appearance of the vehicle goes a long way in influencing the consumer to invest in a product. Ford should adopt a distribution strategy for its brands. Since the Japanese people are accustomed to the door-to-door marketing strategy, Ford will have to devise a better mechanism of distribution or use the door-to-door strategy. A showroom mechanism would be advantageous since the women no longer stay at home but go to work.
Ford should also take into consideration the Political-legal factors as it tries to get into the Japanese market. Japan Toyota Company has occupied the market niche for an automobile in Japan. To overcome the political barrier, Ford can offer its vehicles at a discount price. The company can also work together with Japanese motor vehicle companies to produce vehicles that most Japanese identify with (Takeuchi, Osono & Shimizu, 2008).
The Japanese consumer is attracted by the spacious nature and good physique of the vehicles. The more spacious a vehicle is, the more likely that a Japanese consumer will invest in it. The main reason for this is that the vehicles are used for family recreation trips and road trips to the countryside. Therefore, Ford can compete with the existing automobile dealers in the Japanese market by tailor-making every vehicle fits the Japanese consumer. The Japanese consumer also that, minds a lot about their safety hence the need to have each vehicle fitted with these safety airbags. The Japanese will also buy vehicles that are not only easy to maintain but are fuel-efficient. The prices of gas in Japan are relatively high and with the developed public transport system, most people would rather use the public mean instead of incurring high costs when using personal vehicles. Also, the typical Japanese consumer is accustomed to the door-to-door sale of products. Such customers are said to be loyal to a certain product and are, therefore, not easily swayed.
Q2: what features of Japanese consumer behavior have Ford to take into consideration in selling its goods to the Japanese market? What is the nature and characteristics of the competition faced by Ford in this market?
The features of consumer behavior that Ford needs to take into consideration are diverse when selling their goods to the Japanese market. They include the following:
- Culture and societal environment
Culture is very vital when understanding the behaviors and needs of a person. Throughout the life of a person, he or she will be influenced by his cultural environment, friends, and family or the society that will impart preference, values, and common behaviors that exist in their culture. As a brand, Ford Motors need to understand and take into account the inherent cultural factors in the Japanese market for them to adapt their products and their marketing strategy (Szmigin & Piacentini, 2015). These will play a significant role in the behavior, habits, perception, and expectations of consumers. For example, in Japan, the culture of inviting someone to your home does not exist in their local customs. They prefer to do business with business partners and friends in a restaurant. Therefore, the salespeople of Ford need to take this into account when they need to meet their potential clients (Velayudhan, 2007).
Schütte & Ciarlante (1998) defined social classes as groups that are ranked by a form of social hierarchy or are more or less homogenous. People in the same social class have similar lifestyles, values, behaviors, and interests. According to East, Vanhuele & Wright (2013), generally, people assume three groupings of social classes, and they include upper, middle, and lower classes. People from various social classes tend to have different consumption patterns and desires. The disparities result from the difference in their power of purchasing. Therefore, when Ford is offering its products in the Japanese market, they need to consider the social class. They need to provide cars that are affordable to the people in the middle class, other products that are affordable to the upper class and the social class according to their purchasing powers
c) Membership groups and reference groups
These are social groups to which an individual belongs and eventually will influence him. According to O’Dell & Pajunen (1997), these membership groups are normally related to leisure, hobbies, work, residence places, age, and social origin. As much as the level of influence may vary, it is observed that there are common trends of consumption among the same group members. The understanding of Ford Motors f the specific features (lifestyle, values, mindset) of each group will allow it to target better their messages for advertising
This is the most influencing factor to a person since it forms the socialization environment of a person and will shape their personalities and help in acquiring values. Moreover, families play a significant role in developing opinions and attitudes of different subjects such as the perception of brands of products, consumer habits. Therefore, Ford Motors need to ensure that their brands are seen as a family brand for it to become a consumer habit for the children, young adults, and parents when they grow up (Szmigin & Piacentini, 2015).
e) Age and the way of life
A consumer at age 70 or 20 does not purchase the same products or services because their values, lifestyles, activities, the environment, consumer habits, and hobbies evolve throughout their lives. Moreover, the factors that influence the process of buying decisions may also change. For instance, the youths at the age of 25 years may be influenced by the social value of Ford Vehicles in his or her decision (Velayudhan, 2007). Similarly, the individual’s life cycles will also influence their values, lifestyles, and behavior of buying depending on whether the individual is about children, in a relationship, or is single. Furthermore, the kind of city and region of the country where individual life will also play significant roles such as the countryside, small town or a large city. For this reason, Ford Motors must identify, measure, understand and analyze personal factors, criteria influencing their customer’s shopping behavior are for them to adapt.
f) Revenue and purchasing power
An individual’s purchasing power will have a decisive influence on their purchasing decisions and behaviors based on their capital and income. Purchasing power affects what they can afford, the level of importance of price, and perspective on money in his purchasing decisions. Therefore, Ford Motors need to offer different products according to different categories of purchasing power (Schütte & Ciarlante, 1998).
Ford Motors face more competition in the Japanese market from the local vehicle manufacturer and also other external entrants into the market. The nature of competition in the Japanese automobile industry can be described as a perfect competition. According to Economics Online (2015), perfect competition according to Economics Online (2015) is where the market competition is at its highest level possible. The characteristics of this competition according to East, Vanhuele & Wright (2013) include:
1. The existence of perfect knowledge with no time lags or failure in the information. There is freely available knowledge to the market participants which implies that there is minimal risk-taking
2. It is assumed that the consumers and producers make rational decisions since they have the perfect knowledge to maximize their self-interest. The producers look at ways of maximizing their profits while consumers on how to maximize their utility
3. No entry barriers or exist out of the market
4. Each input unit like the labor units is also homogenous
5. Firms produce identical, homogeneous, output units that are not branded
6. No single company can influence the market conditions or market price
7. Existence f a large number of companies in the market
8. No need for regulation by the government except only in making the market more competitive
9. The companies can only make abnormal profits in a short time, but make normal profits in the long run
10. It is assumed that there are no externalities, which implies no external benefits or costs
Q3: what possible criteria did Ford use in selecting Japan as a market for its cars? What were the possible target segments for Ford in the Japanese market? How did Ford position Mustang in this market?
The possible criteria Ford used in selecting Japan as a market for its cars is by applying Porter’s five forces model. This model is used in analyzing five competitive forces shaping every industry and also is significant in determining the weaknesses and strengths of an industry (Kogan & National Bureau of Economic Research, 2009). This model assumes that five vital forces help in determining competitive power and they include:
Supplier power: this assesses how easy or difficult for the suppliers to drive up their prices. The supplier power is driven by the supplier’s number, their strength and control over an industry, and the cost of changing from one supplier to the other (Amir et al, 2003).
Buyer power: this assesses how easy it is for the buyers of the products to drive up down prices. This is also driven by the number of buyers in the market, the cost of the changing from the products a company offers to its competitors. Few powerful buyers imply a company will dictate the terms (Amir et al, 2003).
Rivalry in competition: this depends on the capability and number of competitors. A company with many competitors who offer quality products and services is more likely to have little power since buyers and suppliers will go to the competitors for better deals (Amir et al, 2003).
The threat of substitution: this is driven by the customers’ ability to find other ways of getting similar products. Easy substitution weakens the power of the seller
The threat of new entry: this is affected by the other companies’ abilities to enter the same market. If the cost of entry is little, there us few scales, or the company has little protection for its products, then new entrants can enter easily and quickly and this weakens the position in the market. On the other hand, durable and strong entry barriers preserve favorable positions of a company (Amir et al, 2003).
Market segmentation refers to aggregating prospective buyers into categories that have common needs and will also similarly respond to a marketing action (Cahill, 2006). Possible target segments of Ford include:
Geographic segmentation: these will be segmented according to geographical variables such as regions within Japan such as plain and hilly areas. Another variable is the size of a metropolitan area like towns and cities. Population density will also be factored
Demographic segmentation: this variable will be segmented according to gender, age, family sizes, income, generations, education, occupation, and family life cycles (single, in a relationship, and married with children) (Wedel & Kamakura, 2000).
Psychographic segmentation: this will be grouped according to their lifestyles. For instance, interest, activities, opinions, values, and attitudes
Behavioral segmentation: this will be based on the actual behaviors of customers towards the Ford products. Some variables of behaviors include; usage rate, benefits sought, user status, brand loyalty, occasion (events and holidays that stimulate purchase), and readiness to buy (Hsu, 2010).
Ford positioned Mustang in the Japanese market in the high-profile niche market. This falls under psychographic segmentation since Mustang is left-handed, and vehicles in Japan are made right-handed. Moreover, Ford positioned Mustang against the Nissan Z cars and Toyota Supra cards. Mustang targets clients who purchase based on their lifestyles that are dictated by interest, activities, opinions, values, and attitudes. The car offers safety features like anti-lock brakes, airbags that are costly in Japanese cars. Moreover, it is cool, big, and durable. Mustang was also positioned for the demographic segmentation since it is favorable for customers with families since it’s big and can accommodate many people. Additionally, it is cheap compared to the locally manufactured vehicles
Q4: which specific method did Ford use to enter the Japanese market? What are the possible advantages and disadvantages encountered by Ford Using this method? What other entry methods to Japan would you suggest to Ford and why?
Ford Motors used direct export as a specific method of entering the Japanese market. With this method, a company produces its goods in their home country and then sells them to their overseas customers (Bennett, 1998). For example, Ford Motors used direct exporting to sell their cars either through the distributors who gained ownership or by using overseas agents who get commissions. In this scenario, Ford Company shifts its focus majorly on distribution. Similarly, using this method, Ford could export their automobiles using their subsidiary in Japan by sending their marketing experts to organize for their new car brands in the Japanese markets (Business Teacher, 2015).
Possible advantages encountered by Fording using direct export method is related to the contract to manufacture. Ford Motors has been able to benefit from not investing in plants and not worrying about their plant investments especially when there is political instability (Lymbersky, 2010).
The disadvantage of the direct export method is that first,t the potential profits accrued from manufacturing will go to their partner who is a local instead of the main company. Another disadvantage is the difficulty in finding a production partner who is trustworthy and satisfactory in the Japanese market since that person needs to be trustworthy and reliable for them not to cheat Ford Motors. Lastly, another disadvantage is that Ford might face the possible problem of quality control because production is out of their main company (Business Teacher, 2015).
Other entry methods that Ford could use in entering the Japanese market include the following:
Indirect export: this is when a company sells its products to a third party in a foreign market who then sells it locally
Licensing: This is another less risky method. Using the licensing method, the licensor grants a company in a foreign market a licensee of producing the same product also to using the same brand name. In return, the main company will earn royalty payments from its sale (Learn Marketing, 2015).
Franchising: using the franchising method, a company puts will assemble the ingredients that made them successful in their home markets and then franchised the package to an investor overseas. The holder of the franchise may help in providing marketing and training on the products and services.
Contracting: This is another market entry method overseas that involves ideas exchange. The company that manufactures the product will contract out the production of its products to another company to produce on their behalf. This method is beneficial since it saves the company from exporting their finished products to the foreign markets (Learn Marketing, 2015).
Joint ventures: this method is where two companies come together to form an organization that operates in a host country. This is beneficial in sharing risks in entering new markets. The two companies also share expertise and knowledge to help in the company’s development, and also the profits will be shared
Manufacturing abroad: this is where the company makes the ultimate decision to establish a plant to manufacture its products abroad. This is also advantageous to the manufacturer since the host government may give the company some advantages in tax to attract more inward investments and also create employment in their country (Learn Marketing, 2015).
Q5: what adjustments has Ford made on each of the elements of its marketing mix in exporting to the Japanese market and why? What market strategy recommendations would you make to Ford Motors to help it to be successful in this market?
A marketing mix can be defined as a combination of several factors that are given priority by the company when introducing a product into the market. The choice of the marketing mix is highly dependent on understanding consumer behavior and prioritizing what is important to the consumers of the product, in this case, Ford Motors. There are several adjustments that Ford made on each of the elements of its marketing mix in exporting to the Japanese market, and reasons why it made the adjustments
The first concern in the marketing mix is the product itself. The product that Ford Motors planned for was to please the needs of a specific target. The product is the first concern of the company. Lamb et al (2008) stated that through focused group discussions and surveys, the company can understand the expectations of the consumer’s concern Ford Motors and, therefore, plan to meet such expectations. This means that consumers should be involved in the development of the product, which Ford Motors managed to do successfully. The adjustments Ford made on products in Japan include the introduction of Mustang, which is left-handed despite the fact cars in Japan are right-handed. This adjustment was made to target high profile niche market. Other adjustments of Mustang include the addition of safety features like anti-lock brakes and airbags which are costly in Japanese cars. Moreover, Ford introduced the Probe, Laser, and Mondeo, which are right-handed vehicles to compete in the compact sedan market.
Perhaps the most important factor in the marketing of any product is the price. The price of a product could be too high that it is unreachable for the consumers or too low that it does not seem quality enough. The research must be completed at the right price for the product. Ford Motors used the Market penetration pricing system, where the price of the Ford Motorswase set slightly lower to attract consumers and, therefore, penetrate a market already saturated with many vehicles. It is important to note that the Mustang is a luxury product, and therefore if the pricing is too high, it will be ignored by a majority of consumers. With the current global trends, pricing should be just right, (Lodato 2008). For example, the Mustang, which Mr. Tsuzuki bought cost about 2.3 million yen or about $22,000, This was about $7,000 lower compared to the Japanese sports car price. Moreover, Ford is pricing its word cars at $2000 to $3000 below compared to the Nissan Altima or Honda Accord versions
Since the Mustang is a new product in the market, promotion of the same is vital. Aggressive advertising with the right message will leave many of the consumers with the desire to purchase the product. To create such a desire, the company requires engaging the consumer through the right channels. Some consumers, a majority of them, in fact, are not aware of the product, where it is found, and what it can do for them. The promotion part of the marketing mix covers all this information (Lamb et al 2008). The adjustments that Ford Motors made on promotion include a multimillion-dollar ad campaign to position Fords products as fun family cars
Place and distribution
Finally, Ford Motors is concerned with the distribution of the product. It is not enough to make sure consumers have heard and knew about the product; Ford Motors must also ensure that the consumers can get access to Ford Motors. All channels of distribution should be exhaustively explored to make sure that the company’s potential customers can get the product whenever they need or want it (Lamb et al 2008). The adjustments that Ford has made for this include signing up additional 1000 dealers by the year 2000 to supplement their existing 286 Autorama dealers. Moreover, Ford enticed one of the Nissan dealers to offer Ford products to its dealerships
The market strategy recommendations I would make to Ford to help it be successful include the following:
1. Partner with allies in the same or different industries to push their marketing campaigns
2. Embracecontentd generated from the users of their products. This can be done by the consumers sharing their personal stories, exchanging idea,s or even surveys
3. Ford can also collaborate with the industry influencers
4. Ford should also help its customers in solving their problems with their cars. For instance, being available and able to repair their cars when they develop problems, offering solutions, listening to the community o even partnering with local dealers to offer services to their clients
5. Experiment with other platforms and channels to promote their brand (Bennett, 1998).
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