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... benefits of the services, a nominal fee can be collected on a monthly basis. However, this can still prove to be quite profitable, given the sheer size of these markets. However, the costs for initial promotion and establishment will have to be planned well in advance.
Expected outcome Entering a foreign market is not an easy step to implement, but it cam provide an organization with a stable and successful development in years to come. Having successfully operated in Easter Europe for some period of time, the company may consider establishing there subsidiaries in order to widen the range of goods and services it offers. We will have to open a branch or division in order for them to deal with the sales and marketing directly. This, in its turn, will allow us to get more profit than through a distributor, and enable to keep total control over marketing and sales.
Such an idea is likely to be successfully realized because the experience of work within the foreign market, under foreign legislation, with foreign currency and national culture we will have gained by that time is sure to help in future work. Pricing Strategy As it was already stated, the chosen market to target is peopled aged from 15 to 29 due to several reasons. Firstly, young customers often have poor credit quality and thats why companies providing wireless communication services have been paying little attention to this group of potential users. Companies believe youth will not use their services frequently. However, we are sure that the situation can be changed by presenting to this group of consumers a wider range of opportunities to acquire having subscribed to the service. Why they were not among the most active service users is because their needs and demands were not properly met by the providers.
Thats why one more important thing to consider is the pricing strategy which will also help to attract buyers and subscribers. Mostly in such projects subscribers have contractual agreements with their providers which require a credit check. Another option consists in purchasing a basket of data volume which involves penalties for overage and a fixed monthly fee. Hence, based on all the given facts we must develop the pricing strategy that insures competitive prices, profitableness, and no extra competitive reactions.
The first option is to establish prices like those of the competitors who provide the music download service to cell-phone users. But there seems to be one weakness in this solution: competitors have already got a number of subscribers that bring them profit, while we have to start from the very beginning. Considering a rather limited promotion campaign budget, it may be quite risky to rely only on the innovation our company brings in. First of all, even though we present a good service for the same price, the consumers aged 15 - 29 are still having poor credit quality and their financial opportunities regarding subscription will not change.
Secondly, subscribers of other providers are already used to their provider and service, and the transition to another one, even though it might be better and newer, may be quite problematic. According to Geoffrey Moore (1991) only 2 - 3 % of people are always ready to accept change and only 10 - 15 % belongs to the early adaptors who more than the majority of people are able to accept the change. Hence, it will take quite long till the majority of population adopts the change and our company gets an expected result. The second variant to consider consists is establishing a lower than competitors price.
The pricing structure would copy that of the competitors, but actual prices per unit of data would be lower and include volume discounts, and fewer hidden fees. It is a better variant, but it also requires credit cards, credit checks, pre-paid or post-paid arrangements, etc. So, if even the competitors or new subscribers decide to subscribe to the service, we will be still getting less profit due to the system of discounts. The third proposed option involves a complete revision and potential modification of the whole pricing structure.
Surely, such an approach may involve many risks, like a churn rate risk, but still it seems to be the most effective. Besides, in any industry change is inevitable and change together with innovation is actually what makes an organization develop, grow, and succeed. The first question here is whether contracts are needed. The main purpose of contracts seems to be providing a guarantee annuity stream. But industry churn rate makes 2. 0 % monthly. Surely, contracts make the company feel safer.
But on the other hand, their elimination would allow more people to use our products and service. The second question is whether to adopt a pre-paid pricing structure. On one side it would also allow more people to use the service. On the other there is a risk that they will not use it much. Besides, the pre-paid system requires development of some mechanism for the customers to add minutes to their phones. Looks quite complicated, but what should be considered is that a pre-paid system which allows customers to choose how much they have to pay in one time will give people with poorer credit quality more opportunities to use the service.
Instead of getting huge bills at the end of the month customers will be getting an opportunity to manage their costs. This is likely to attract a significant, if not the greatest, part of the potential market. Besides, if the company implements the pre-paid pricing structure the subsidies may stay equal to those of the rivals because if a customer has to choose among two services for one price he will definitely will chose the one which allows him control his spending's. As for the hidden fees, why not to include them in the general cost per unit of data?
Though on the first sight the price might seem high, any person will easily figure out that compared to all the fees and changes of another company summed up, this price is not higher. It is also extremely important to consider political and economical situation of the countries where we are going to work. Instability or uncleanness of some legislative regulations, laws and policies may cause great problems for a foreign company. However, a domestic firm may also face such problems as state policy changes, increasing taxation, and change of customers demands. In such a situation the only way to solve problems is reorientation, transformation, adjusting to newly arisen market conditions. But at the same time a company which has additional markets abroad will lose less in the same situation.
The reason for it is the fact that while the domestic office is working on the development of new profitable managing strategies, foreign subdivisions of the company are working and getting profits while a purely domestic company puts all its resources for solving the current problem and has no additional income. A company operating overseas will certainly get interest and dividends from its international investments and realize capital gains. But the fact is that the firm wont necessarily gain a positive total return, or that the return will be as strong as the return of a company making the same investment with euros, yen, or pounds. This happens because most currencies have no fixed value thats why currencies float one against another. Sometimes the dollar is stronger than other currencies, sometimes its comparatively weaker. When the dollar is strong, the company will have to spend fewer dollars in order to get a particular amount of another currency, and, when the dollar loses value; such an operation will be more expensive.
Currency futures are often used to hedge currency exchange risks. It is a futures contract which enables a company to exchange foreign currency for, for instance, dollars on some certain day in future at a price that is fixed on a last trading day. This can be profitable depending on the rising or falling exchange rate. To sum up: the most important risks that a multinational company may face are those of political instability / uncertainty and changing in foreign currency exchange rates.
As for all the other aspects, risks of domestic firms are basically similar to those of multinational ones and, hence, a decision of the company not to operate overseas may be caused only by these two mentioned above factors. Surely, political factors are not the only oneswhichdetermine the final decision of the firm. But in general political and economic stability of the target country are necessary requirements for a company to start operating in that particular country. Especially important is a profound evaluation of political risk for unstably developing countries. There are many variables which should be taken into consideration when evaluating the country's political risk. However, some of them are more important that others and are to be paid much more attention.
Bibliography Harrington, James. The five pillars of organizational excellence. Handbook of Business Strategy, Volume 6 Number 1, 2005. IPTV World Forum Eastern Europe.
Digital TV in Eastern Europe: everything to play for. Available online: < web > Accessed October 23, 2006. Moore, Geoffrey. Crossing the Chasm. Harper Collins, 1991.
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