Proposed Market Entry Strategy Essay

1. Executive Summary The use of air conditioning is widespread since it does not only provide appropriate room temperature for electrical equipments that make internet and telecommunication works but also provide comfortable atmosphere for cooling rooms in a houses, trade centers, office buildings and many others. The situation reveals that air conditioning equipments have vital roles in society. However, the use of air conditioning devices is associated with high costs since they consume large power of electrical current. Under such circumstances, the development of efficient cooling and purifying devices become the next stage in the air cooling and purifying development. One of air purifying and cooling products available in the market is EnerVent ®, which developed by Northridge Enterprise. The company understands that to win customers’ hearts, there are four key features that EnerVent ® should possess; they are true Fresh air delivery, low costs and low heating air conditioning in compact design, high quality of air purifiers that are not merely circulating the same air in a room, and capability to eliminate harmful gases, mold, and germs. Concerning the issue, this paper has elaborated several issues concerning the market entry strategy for EnerVent ® including target markets, market potential, competitive market analysis, marketing objectives, marketing mix strategy (product, place, promotion, and place) 2. Introduction 2.1. Development of Air Conditioning and Purifying Products Nowadays, the discussion over the benefits of the sophisticated information technology including computers and telecommunications on business and communication is an endless topic in seminars or exhibitions. However, in order to work properly, such equipments need low-temperature in order to prevent overheating so that the use of high-power air conditioning is vast in the equipment rooms. In addition to the use of air conditioning devices for cooling rooms, they also provide comfortable atmosphere for cooling rooms in a houses, trade centers, office buildings and many others. The situation reveals that air conditioning equipments have vital roles in society. This makes sense since the use of air conditioning is widespread and easily found in almost every place that provide comfortable atmosphere. According to ARI CoolNet, air conditioning has several functional benefits as following: ï‚ § Providing personal comfort ï‚ § Improving productivity in the workplace where it relates to the comfortable place the air conditioning provides ï‚ § Increasing good medical and health services ï‚ § Helping vendors to preserve fresh and frozen foods like seafood, frozen potatoes, sausage an many others ï‚ § Protecting electrical equipment from excessive heating Since the use of air conditioning, previously called as manufactured air, is vital in day-to-day activities, it becomes a significant invention in human history. However, recent air conditioning or ventilation products do not end in the development of fancy casing or cooler temperature but also in several values added features. For example, the invention of Plasma cluster technology, which is capable of killing 99-percent bacterium and viruses including Aviation flue viruses, becomes the Sharps’ competitive advantage that generate revenue for the Japanese company’s air conditioning and cooling products including refrigerators, chillers, air conditioner, air purifiers, to name a few. However, the use of air conditioning products is associated with high costs since they consume large power of electrical current. Under such circumstances, the development of efficient cooling and purifying devices become the next stage in the air cooling and purifying development. 2.2. EnerVent ® Products EnerVent ® is manufactured to fulfill the need for efficient ventilation system that has several features including compact design (small) and lightweight compared to existing whole house and individual room air conditioning system. The EnerVent ® has favorable tagline that clearly target particular customers as following: There is nothing like fresh air from open windows on a Spring day. Yet high heating and air conditioning costs keep homes sealed tight to save money. Harmful odors, gases, mold, and germs stay in. Even quality air purifiers can only clean and circulate the same air. The EnerVent ® system offers the best of both worlds, bringing in and circulating out up to 12 true air exchanges daily without a significant energy penalty† The EnerVent ® jargon suggests that there are four features that the company concerns when developing EnerVent ®; they are Fresh air delivery, low costs and low heating air conditioning in compact design, high quality of air purifiers that are not merely circulating the same air in a room, and capability to eliminate harmful gases, mold, and germs. Concerning the size, Figure 1 shows example of several air conditioning designs that appear to be ‘usual’, large, and ‘compact’ design. (a) GMG (b) Delonghi Figure 1 Several Design of Existing Air Conditioning System Source: OK CHINA INDUSTRIAL LTD, 2007 In addition to size, competition in air conditioning system evolves into the provision of fresh air that circulate the true fresh air from the outside instead circulating the same air. This feature is significantly important since people have great concerns over the raising pollution because of industrial plants discard smoke, the forest fire, bad air-refreshing systems in a house, etc. Generally, air pollution in the U.S., to be precise, and other industrial countries is because acid rain in both the U.S. and Canada in which the US becomes a country that emits a large amount of carbon dioxide as the result of fossil fuels burning; limited resources of natural fresh water, water pollution due to pesticides and fertilizers (â€Å"Air pollution from other countries drifts into USA†, 2005). Concerning the capability of eliminating odor, EnerVent ® also present attractive features since the product is capable of eliminating harmful odors, gases, mold, and germs. In the market, this feature is best represented by Sharp’s Plasma cluster product as shown in the Figure 2. (a) Sharp FU40SEK (b) Sharp FU-S40TA Figure 2 Sharp Air Purifier with Plasma cluster technology Source: Callde, 2007; Pantipmarket, 2007 3. Target Markets Since EnerVent ® has particular characteristics that present the â€Å"true† fresh air to either â€Å"whole houses† and â€Å"individual room†, therefore, the target market for EnerVent ® is as following: ï‚ § Brand of Products : – True fresh air like one from open windows on a Spring day – Eliminate harmful odors, gases, mold, and germs stay in – Low energy consumption ï‚ § Customers’ Preferences : People who concern about the need for fresh air in a room that has capability to eliminate harmful materials at low operation costs ï‚ § Ages : above 25 (this is the age where people use their rational reasons when buying a product). This is important since home electronic industry are fulfilled with advertising that trick customers ï‚ § Income Levels : above $2,500 per month (considering that the price of air Purifying is above $100, see Figure 3) Figure 3 Air Purifier Source: Bizrate, 2007 4. Market Potential and Sales Forecast The market potential for air purifiers from EnerVent ® is people who concerns about the People who concern about the need for fresh air in a room that has capability to eliminate harmful materials at low operation costs. The description suggests that EnerVent ® target both high-end customers since they are more concern about complete features regardless the price and low-end customers since they concern about low-operational costs despite high ownership costs. For high end customers, they realize that air pollution is more influencing the children than adult. All of U.S. researchers open their study about finding the polluted air impact at the children. It is believed that air pollution make the children lung become smaller. This evidence assures that air pollution own the chronic impact. In addition, this impact will be permanent at all of the children until they become adult (â€Å"Air Pollution Might Affect Lung Development in Children, Study Finds†, 2004). Bad air quality give the negative impact to the environmental quality and the financial loss because of the air pollution is not small. Because financially, air pollution will improve the cost, which must be become the responsibility of society. It can be in the form of medical expense for pain suffered, decreasing of the work productivity as an effect of air pollution, and decreasing of the prosperity life. Due to the fact that air pollution may provide unfavorable condition for an entire family; therefore, Northridge Enterprise has wide market potential to sell EnerVent ®, the true air purifier. To be specific the market potential for EnerVent ® is as following: 4.1. Middle and High Class market, Offices and Buildings There are many considerations in the minds of consumers when they are buying air conditioning product. In most parts of the world, air conditioning is the consumption of middle and high-class families, buildings and offices. For these people, cost is not the prime factor of consideration. It is quality that concerns them the most. In the light of this consideration, the Enervent will only gain small portion of the market in this segment because there are many air conditioning products which have better features and higher capacity to regulate air in larger offices. The Enervent on the other hand, can only regulate air in a limited space because it does not have the capability of producing cool air as a regular air conditioning machine. There are however, mid and high class households and small offices that prefer to use air purifier because they like the natural atmosphere of their houses and offices. These are generally smaller establishments or places which have plenty, but small to medium-sized rooms. This represents an opportunity for Enervent to enter the medium and high class households, buildings and offices. The opportunity however, is very small compare to the entire market of air conditioning equipment in the medium and high class market. 4.2. Medium and Lower Income Families Air conditioning needs are not the sole demands of medium and high-class establishments. In the modern realm where people’s desire for quality has been considerably enhanced, the need for air conditioning spreads to the low income families and offices. This represents a better opportunity for Enervent to gain larger portion of the market. This is true because for low income families and low-budget offices, the cost of having a full fledged air conditioning system can be quite overwhelming. In previous times, they generally switch to air purifier products because they are cheaper and do not consume too much electricity. However, the presence of the Enervent creates new and better alternative. These people could gain better quality than average air purifiers and pay cheaper costs than the average air conditioner products (Ward, 2007). 4.3. The market for Air Regulator Machines The rapid development of economy in various regions of the world generated massive demands for air conditioning products. In some markets, the air conditioning products are displaying a rapid increase, like the Indian market and Saudi Arabian. They are potential markets because of their geographic conditions and their economic development. On the other hand, there are also markets that displayed declining tendencies in the air conditioning market development because of the over-crowded markets, like China. In Europe, United States and most of the Asian countries displayed stable or otherwise mild development in the air conditioning market (Wind of Change, 2006). The product is, on the other hand, a revolutionary product filling a niche between the high cost air conditioning equipment and the simple air purifier machine. In a sense it has similar but different markets than those of the air conditioner products. Because of the revolutionary nature of the industry, and the contributions from low income, middle and high class markets elaborated above, I believe that the product will take over approximately 5-10% of the air conditioning market in the end of the first year. Furthermore, being the sole producer of Enervent, then the sales number of the company will be similar to that percentage. For instance, if the US air conditioning market is worth US$ 1 billion annually, then Enervent will generate a sales number of US$ 50-100 million. 5. Competitive Market Analysis The air conditioning industry is a global industry. Most of the modern countries plus several of the developing countries witnessed rapid growth of their air national air conditioning industry. In Saudi Arabia for example, demands for air conditioners is the highest in the world. Analysts have stated that the Saudi Arabian market has become a unique investment opportunities for foreign investors. Although not exactly alike, similar rate of growth can be witnessed in India and other developing countries (Saudi Aircon, 2007). Despite the rapid growth of the industry, Enervent cannot expect to gain the full benefit of the market development. The direct competitor of Enervent is air conditioning itself. Despite their significantly higher prices, they have larger capacity of regulating temperature and the condition of large rooms. Modern air conditioning is also equipped with various features that do not exist in Enervent, like self cleaning device, etc. Furthermore, air conditioning has a better and more widespread reputation that Enervent, which is a new and unpopular product. The competitive advantages of Enervent against the direct competitor are price and efficiency. The product is considerably cheaper, lighter and more far more electricity efficient than the average air conditioning machine. Indirect competitor of Enervent is the cheaper and simpler air purifier. The low cost and electricity efficient device is also quite popular as alternative of air conditioners. They generate significantly less cost than the average air conditioner, but cannot act as a temperature regulator. Many considered that the air purifier and the air conditioner market is not the same. Nevertheless, they are the same. Air purifier is an indirect competitor of both the air conditioner market and Enervent. Enervent has the advantage of temperature control with similarly low cost and efficient electricity compare to the air purifier. In addition to the analysis above, there are also other factors in the air conditioner industry that generates opportunities for Enervent to grow, they are: †¢ The emerging new styles of offices In the modern world, people are not satisfied having the same offices as other companies. In order to facilitate such a need for creative office design. The trend toward more stylish offices generates more complicated buildings with less ventilation. Pursuing efficiency, more employees are stationed in smaller rooms. These conditions generated the need for larger capacities of air conditioning. This is logical because managers have realized that poor air quality in the workplace could result in lack of productivity and worse, sickness (Cunningham, 1986). The necessity for more air conditioning system generates more demands of air conditioning machines. However, because companies are constantly searching for ways to enhance efficiency, their attention turn toward products which can deliver similar performance in air conditioning with less prices and more electricity efficient performance. This leads to opportunities for the newly designed Enervent, an air conditioning machine which are significantly cheaper and much more electricity efficient (Piercy, 1982). †¢ New Competitors The highly competitive environment is created by various factors. For one, the amount of players within the industry also plays a great role in shaping the competitive atmosphere. In the air conditioning market, Far Eastern manufacturers have improved their manufacturing capabilities by cooperating with Japanese producers. The new entrants are expected to influence the European market aggressively by means of targeting an established distributor. These new entrants have significantly lower price structures, thus allowing them to deliver cheaper prices to consumers. This leads to harder and more competitive atmosphere in the industry of both air conditioning machines and air purifier machines. In a sense, this also influences Enerven as an alternative between the two products. 6. Marketing Objectives The hardest mission of a marketer in getting the product accepted and recognized within the local environment. The Enervent is a new product with revolutionary technology. Its first year in the market should be the year of promotion and market penetration. Therefore the marketing objectives should be: †¢ Establish presence in local environment There are various factors that could influence how a product will result revenues and profits within its market. Each local environment has different preferences of how products should be. It is important for Enervent to win the hearts of local society by collaborating with local culture and traditions. The failure to achieve that will create poor and undeveloped sales performance. Thus, one of the most important and early marketing objective should be how to generate connection with local markets (Korey, 1986). †¢ Discover new channel of distributions and marketing In the first year of marketing, new products should be brought throughout the markets using various channels and means of transportations. Getting to know the local infrastructure and how will it affect the business is very much important. Thus, discovering new channel of promotion and distribution is also an important objective (Koney, 1986) †¢ Create a distinction Establishing presence and discovering new channels are usually not enough to get the product running and generate revenues and profits. The product needs features or appearance that will differentiate it from other products. This activity is called brand designing (Keegan, 1989). 7. Marketing Mix In the following chapter I will use existing information to make an assessment of how Enervent should be sold. This assessment is important because it determines the shape of the business offering toward consumers. Re-designing the business offerings has been the core purpose of performing a marketing mix analysis. In terms of Enervent, the following is suggested: 7.1. Product Positioning Strategy Enervent should be well promoted to reflect capabilities of the new and revolutionary product. As implied in previous chapters, the product should be advertised as a brilliant alternative to air conditioning and air purifier. It is the combination of both worlds which brings the best of them. The product can also be advertised as the new revolution in air conditioning. The advertising campaign would have to generate the image that Enervent is the next generation of low cost, low energy air conditioning (Keegan, 1989). As mentioned in previous chapter, the product has different opportunities in different segments of the market. Therefore, there is a need to perform different emphasize on different segments of the market. In the medium to high-class households, buildings and offices, the company should focus on promoting the product as a smart replacement of the average air conditioning system because of its air temperature management capabilities and its low cost and energy efficient nature. This would attract those customers which prefer to maintain the naturality of their environments as mentioned before. On the other hand, in the low-income households and offices, the product should be promoted as the new generation of air conditioning. The product should be promoted as the new and brilliant evolution toward environmental friendliness and quality preservation. Because the company is forecasted to generate more sales in this segment, this characteristic of product positioning (as a revolutionary new generation of air conditioning) should be the main scenario of marketing. Other processes within the product positioning activities which require attention includes: paying attention to manufacturing specifications, labeling and packaging to represent the target market we are aiming and the position of our product. The product must also be tested first before it enters the market. Analysts also suggested that the product should be matched with its surrounding environment, whether in times of sale or distribution. For instance, products that travel through the road should contain different specifications and equipments to products that travel through air (Keegan, 1989). 7.2. Pricing Strategy In marketing mix, price is considered as one of the factor that contributes to the total value of product offering. Despite the high quality of the product, if the pricing strategy does no reflect value (which means the value gained from the purchase is greater than the value of money sacrificed for the purchase), then customers would not be appealed to the product. Price has been the most important consideration in buying air conditioner machines for years. Because of the highly advanced technology and the power needed to perform the task of regulating air throughout the surrounding environment, the average air conditioners cost quite a fortune. In terms of Enervent, I propose a new set of pricing considerations which emphasis on acknowledgement of the segments in which the product will be marketed. In other words, the pricing strategy should reflect discounts, bonuses, price competitiveness, etc. Nevertheless, managers cannot ignore the importance of having a valuable product. The psycography of customers sometimes generates new understanding over the behavior of consumers. For one, consumer often mistaken quality with price. Often we find that if we charge higher, people would buy the product more. Managers in charge of the pricing strategy must have considerable sensitiveness toward the behavior of his/her customers. 7.3. Distribution strategy Distribution is also a factor in marketing and selling products. Companies must have provided their officers with sufficient funding in order to prevent lack of funding in the delivery process. Often, the assignment on distribution is in line with order processing stages. In a sense, distribution is an inseparable part of order processing and the process is not over until the products are delivered successfully to customers. In terms of exporting the Enervent, managers of the distribution process should prepare all the necessary export preparation and documentation. Often shipments failed because of the lack of diligence in preparing the required documentation (Basche, 1971). Distribution management includes managing the cost of distribution. In we are to export Enervent as a part of our central operations, than it is important for us to assign the distribution cost to the recipient instead of to our own cost structure. Forwarding freight is crucial in distribution management. Managers of distribution process must also pay attention to other supporting issues like insurance and arbitration. The lack consideration of these small factors could generate problems in later days. In distributing the Enervent, we must also consider the fact that inventory support is crucial for distribution process. Inventory management and warehousing strategies must be accounted to the nature of the product to prevent losses or diminished product quality. 7.4. Promotional activities In terms of advertising and promotion, we have discussed the need to represent Enervent in different ways for different market segments. On the other hand, if reality forces us to choose, we must choose to represent the largest demands on the market. In the Enevernet case, this means promoting the product as the new generation of air conditioning. Promotions can be performed through ‘indirect forms’, like literature, direct mail, etc. There are also a more direct form of promotion which includes exhibitions and trade shows. Often, the presence of a good sales force is also influential to promotional activities. In marketing Enervent, managerial abilities to motivate sales forces are important to promotional activities. This is important considering the product is new in the market. Another way of motivating the promotional activities is by using agents. External agents who receive commissions are generally more motivated to do their job because of the compensation strategy. Reference †Air Pollution Might Affect Lung Development in Children, Study Finds.† 2004. Retrieved May 9, 2007 from http://www.californiahealthline.org/index.cfm?Action=dspItem&itemID=105505 ARI CoolNet. â€Å"Air Conditioning: Improving the Way We Live.† Retrieved May 9, 2007 from http://www.ari.org/consumer/history/history-ac.html Basche, J.R. Jr. â€Å"Export Marketing Services and Costs†. 1971. New York: The Conference Board, p4. Cunningham, M.T. â€Å"Strategies for International Industrial Marketing†. 1986. In D.W. Turnbull and J.P. Valla (eds.) Croom Helm p 9. Delonghi.  « Delonghi Portable Air Conditioners – Delonghi Portable Air Conditioning.  » 2007. Retrieved May 7, from http://www.delonghi-portable-air-conditioners.co.uk/images/3176.jpg Korey, G. â€Å"Multilateral Perspectives in International Marketing Dynamics†. 1986. European Journal of Marketing, Vol. 20, No. 7, pp 34-42 Keegan, W.J. â€Å"Global Marketing Management.† 1989. Prentice Hall International Editions. OK CHINA INDUSTRIAL LTD. â€Å"Wholesale Air conditioner.† 2007. Retrieved May 7, 2007 from http://www.sz-wholesale.com/shenzhen_China_products/Air-conditioner_1.htm Piercy, N. â€Å"Company Internationalisation: Active and Reactive Exporting†. 1982. European Journal of Marketing, Vol. 15, No. 3, pp 26-40. Saudi Aircon 2007. 2007. Riyadh Exhibitions. Retrieved May 9, 2007 from http://www.recexpo.com/recweb/show_overview.asp?id=79 â€Å"US Market for Air Conditioning.† Worldwide Market Intelligence. Retrieved May 9, 2007 from www.bsria.co.uk/documents/pdf/misc/17200 leaflet.pdf Ward, Susan. â€Å"How to Find and Master a Niche Market.† 2007. Retrieved May 9, 2007 from http://marketing.about.com/od/careersinmarketing/l/aa060303a.htm â€Å"Wind of change in air-conditioning market.† 2006. China Economic Net. Retrieved May 9, 2007 from http://www.chinadaily.com.cn/english/doc/2005-04/27/content_437865.htm