Strategic Marketing for MTR Railway in Germany

This report discusses the strategic marketing approach for MTR Railway to enter the German market and gain competitive advantage through market analysis, entry modes, market segmentation, and targeting.

Strategic
Marketing

EXECUTIVE SUMMARY
This report summarises that every organization must develop marketing strategy in order to gain
competitive advantage. For this, MTR Railway must identify a country and analyse the market of
the specific country where they must identify the potential opportunity with the help of PESTEL
analysis. After this, company must find the suitable entry mode which is beneficial for the company
and make the capable to achieve high market share. In addition, company must apply market
segmentation and targeting concept through attracting potential customers or maximise demand of
their products & services. With the help of porter's generic strategy, organization able to gain
competitive advantage through focusing on cost leadership strategy.

Table of Contents
EXECUTIVE SUMMARY..................................................................................................................2
INTRODUCTION................................................................................................................................4
MAIN BODY.......................................................................................................................................4
1. Macro – environmental analysis (PESTEL) ...........................................................................5
2. Market Entry Modes................................................................................................................8
3. Market Segmentation and Targeting........................................................................................9
4. Porter's Generic Strategy.......................................................................................................10
CONCLUSION...................................................................................................................................11
REFERENCES...................................................................................................................................12

INTRODUCTION
Strategic marketing is the effective process which differentiate the organization from its competitors
which further helps in analysing the current and potential strength which provide better value to the
customers (Aghazadeh, 2015). With the help of strategic marketing, business able to formulate
strategy and make sure that it will be different form their competitors. Purpose of this report is to
analyse that how MTR Railways that is Mass Transit Railway (MTR) enter in a foreign market
through offering specific product & services. As a senior marketing consultant of Ashanti Marketing
Solution (AMS) Limited, has been authorized by MTR Railway.
This project report covers various topics such as recommended product for the country in order to
expand business operations with the help of PESTEL, analyse the options of entry mode and select
the best suitable for their client. In addition, it includes the market segmentation, targeting and
evaluate the potential target market for their clients and apply porter's generic strategy that how
company gain competitive advantage.
MAIN BODY
Overview of company: MTR is regarded as one of the world's leading railway operators for safety,
reliability, customer service and cost efficiency. MTR Railway is public transport company which
serve their operations in the entire Hong Kong. Its operations include in heavy railway, light rails,
bus services, metros etc. Current system includes 218.2 km of rail with 159 stations. (MTR
Corporation, 2019).
Today, from its starting base in Hong Kong, the Corporation has expanded into the Mainland of
China and taken on a range of railway-related projects and operations internationally, respectively
in Australia, U.K., Sweden. In order to maximise their operations in the world they expand their
business which further aid in maximising productivity as well as profitability. It will increase
customer base, leads to higher profit and make business able to capture huge market share in the
global level. That is why MTR Railway wanted to expand their business operations in Germany.
MTR Corporation is recognised as one of the best performing and highest quality rail operators in
the world. Our aspiration is to be a leading multinational company with a vision to connect and
grow communities with caring service.
Analysing the GDP of Spain, Italy, Germany and France, it is recommended that MTR Railway
must enter in German market with their light rails in order to reduce the congestion problem
which caused by the fast-growing economy.

Illustration 1: Growing Population of Germany, 2019.
(Source: Growing Population of Germany, 2019)
Population of Germany continuously increases which impact the economy and provide the
various opportunities to the organizations to entered in the market and take advantage of it (Word
bank report, 2019).
MTR Railway choose German market for the international expansion because Germany is the most
powerful country in the European Union (Agic and et.al., 2016). Germany has private train
operators as well so it is beneficial for MTR corporate to enter in this market segment or expand
their business in order to maximise productivity as well as profitability.
1. Macro – environmental analysis (PESTEL)
Political: This factor play significant role in order to impact profitability of MTR Railway in certain
country. MTR already operate in other countries, so they have to expose itself from different
political environment and risk (PESTEL Analysis, 2017). In order to achieve success in railway
industry they have to evaluate political factors and related systematic risk. In order to expend their
operations in Germany MTR analyse that political stability is the important factor for any business
and it will be consider as opportunity for MTR railway. It will reduce the congestion problem of the
country and make economy grow faster. Along with this, it includes various risk related to the
government rules & regulations which organization have to follow. Germany have very good
alliances with other countries such as UK, France and it will make it powerful country of European
Union which is good opportunity for the organizations to expand their business in the German
market. But before expanding their operations in the German market they have to know that labour
cost in Germany is high which impact the overall cost of manufacturing which further reduce the
profit margin of the company and it became threat for the company. Before expansion, they have to

evaluate these factors and formulate their strategies accordingly. Increase in the inflation rate also
affect which continuously increase from 2016.
Economic: This factor include the inflation rate, saving rate, interest rate etc. at the time of entering
in the German market they have to evaluate all these factors and make their strategies accordingly.
Half of the market share of public transport carry out average 4 million passage every day
(Banerjee, 2017). MTR have strong financial performance in their host country which make them
capable to entered in Germany and expand their business operations. Fiscal or monetary policy
impact the financial market structure of the company. MTR have high employment rate which
impact the company to hire talented & skilful people which is an opportunity for the business. They
must be careful about building marketing strategy because expansion in the new country also have
lots of threats such as new customers, working environment, different economic policies etc.
Illustration 2: Economic or political impact on Germany, 2019.
(Source: Economic or political impact on Germany, 2019)
In case of Germany, Brexit is the opportunity for them and on the other side it is one of the
threat for UK country. Germany market is the opportunity for the MTR railway because of
renewable energy. Through reducing dependency of fossil fuels will further reduce the cost and save
the environment as well. Large organizations allow the smaller businesses to capture the market
first so its become opportunity for MTR corporation. Due to competitive market they accept the
trade which reduce the unemployment rate of the country which mention in the table.
Social: There are various factors which impact the MTR railways to enter in German market such
as demographic trend, attitude of individual, health & safety etc. Germany has over 82 million
population which is second most populous country in the Europe. So, it an opportunity for MTR
Railway to expand their operations in the Germany. Life expectancy also very high which means
there are enough passenger to target which is profitable for the company. Along with this, Germany
is the lowest birth rate country in the work and all the factors will affect the MTR company so

organization must formulate their marketing strategy accordingly. One of the biggest threat for the
MTR Railway is that Germany people have high standard of living and they have full freedom to
shape their lives. There are some major threats such as old population, low birth-rates, low
purchasing power, falling wages, and expensive lifestyle for MTR corporation.
Technological: Germany is leading car manufacturing nation where most of the organization related
to this sector. There is very less scope for the public transport which is a big opportunity for the
MTR Railway to expand their operations (Chernev, 2018). It will further increase the employment
and IT market share of Germany around 14%. Basically, Germany is the suitable market for MTR
to expand their business operations and increase their reach globally. Germany is the 5th best
technology advanced country in the world which is great opportunity for MTR to expand their
business but it is also the threat because it encourage more people to take part in the market which
increase the competition as well. German government spend around 3 billion Euro on research &
development of artificial intelligence by 2025. It will invested in order to reduce the gap between
German and other countries regarding software led innovations. It became threat for MTR company
because it will motivate other organizations to entered in this segment which generate huge
competition
Environmental: Tourism is the major factor which impact the Germany because it contributes
around 4.5% to the national GDP. If MTR introduce light trains in the tourist area or their nearby
locality. It will be very beneficial for the MTR as well as tourist to move one place to another place.
According to one survey, around 37.5 visitors recorded in 2017 who come to visit German culture,
history, cities, town, mountains, festivals etc. Basically, German is the most dynamic culture so it is
profitable for MTR railways to expand their business in the German market which is big
opportunity (Edvardsson and et.al, 2014). As well as, existing competitors are threat for the
company because there are private railway operators which increase the competition. So, MTR have
to develop their strategy which differentiate their services to the others,
Legal: It is the major factor which need to evaluate by the organizations at the time of expanding
their business in the foreign market. Most of the regulars are same which other countries follow for
trade and there are employment contract issues to the German employees. Minimum wage rate of
employees in Germany around € 9.19 per hour which is expected to increase 2020 (Felix,
Rauschnabel and Hinsch, 2017). It is the threat for MTR company because it is not common to have
25 to 30 days of holiday per year for every employee in Germany. So before entering in the German
market MTR must evaluate all the factors and formulate strategy accordingly. Germany offer highly
competitive tax system which is lower than 30% and it will reduce the burden of company to pay
more that is opportunity for MTR company. Through analysing all the opportunities and threats,

MTR able to formulate strategy and implemented in well manner which further helps in increasing
demand as well as profitability.
2. Market Entry Modes
It is a strategy which is used by any organization in order to enter in new market. Basically,
it is used to enter in foreign market where company have to formulate some strategy which include
huge risk as well as resources in terms of investments (Felzensztein, Brodt and Gimmon, 2014).
Location is just a place which organization must fix through analysing all the aspects of their
decisions. There is various way to enter in new market but some of them discussed below:
Joint venture: It is one of the options for MTR railway where they start partnership with the
existing company of Germany. Joint venture includes based on two different parties which can be
from different countries (Joint Venture, 2019). There is various advantage such as cost of operations
will reduce due to sharing, reduce risk, increase investment which needed the most etc. It has some
disadvantage because it is international joint venture so it will generate social or cultural
differences. With the help of joint venture, organization can compensate their international market
experience.
Foreign direct investment (FDI): It is another option to enter into new market by MTR Railway. It
is the process where multinational organizations invest in the foreign country and engage with
different activities which increase their returns. German has positive attitude towards Foreign Direct
Investment (FDI) which has some advantage such as FDI used as market entry strategy for
investors, provide local economic benefits, increase in foreign income etc. Some disadvantages are,
it will reduce the domestic investments, increase risk, affect currency exchange rate etc.
Merger & Acquisition: It is a consolidation of organizations where merger means combination of
two companies and acquiring means one company take over another company. It is one of the
suitable options for MTR railway to enter into foreign market. M&A is the most usable entry mode
in the foreign market (Hunt, 2015). It has various advantages such as increase the economies of
scale, more profitable way, get benefits through merging with other company and adopt new
management as well. Some disadvantages are, increasing marketing share will lead the monopoly
power & high price of products & services.
From the above discussion, all the options for MTR Railway but most suitable entry mode is merger
& acquisition where MTR merge with the domestic rail company of Germany. It will help the
organization to expand their business with the knowledge of international culture, history or value.
It is the most suitable option in competitive viewpoint for the MTR corporation.
German is open market where import and export does not have such strict regulation. There
are combined value of export or import is about 86.3 % of GDP. They implement various non tariff
trade barriers which include the product specific regulations etc. Effective regulatory framework

facilitates the entrepreneurial activity where government implement minimum hourly wage and it
introduced in 2015. Federal corporate tax is about 15.8% which can exceed up to 30%. MTR
railway get these information with the help of PESTEL analysis which make them capable to
understand the opportunity as well as threat for the country.
MTR Railway can merge with the existing company of German which make them able to
understand the culture, value or trend of the market. Able to get customers and entered in the market
where they have prior knowledge.
3. Market Segmentation and Targeting
Marketing Segmentation: It is the process of dividing market into subgroups where organization
categorise the potential customers on the basis of different characteristics. It is very important factor
which helps the organization to segment their group or build strategy according to the requirements.
There are four types of marketing segment some of them discussed below:
 Geographic segmentation: Customer target on the basis of geographical area where people
have common interest, values, preferences vary according to the cities, states, region and
country. MTR corporation can segment the market on the basis of geographic area which
help the manager top formulate strategy accordingly.
 Demographic segmentation: Segment the market on the basis of age, education, gender,
family size, occupation, income etc. It is the most usable market segmentation among the all
because it helps the organization to understand the requirement of customer regarding any
product (Josephson, Johnson and Mariadoss, 2016). Need will be categorised based on age,
interest, income etc. MTR Railway can select this segment to target the market accordingly.
 Psycho- graphic segmentation: In this market, organisations focus on intrinsic traits where
individual have different value, interest, attitude, subconscious motivation, lifestyle etc. In
order to understand their customers, they have to focus on customers through survey
process, interview and case studies. In context of MTR Railways, organization can adopt
this segment through focusing customers lifestyle and needs.
 Behavioural segmentation: It is almost similar to the psychological market segment but
their organization focus on customer reaction that how they will make decision at the time
of purchasing goods or services. Organization analyse the entire market and formulate their
strategies accordingly. Brand loyalty is the best suitable example of behavioural
segmentation (Miles and et.al., 2015). MTR corporation can target their customers
according to it so management have to done research regarding customer's expectation.
From the above mention market segmentation, MTR Railway target the geographic
segmentation where they provide transport service in the cities as well as states. Along with this,
company also targeting customer based on demographic segment. Basically, company focus on

those area which comes under the tourist place so they provide transport facilities as well as
targeting those people who like to travel places. So, they further required transportation facilities
and those organizations as well who need logistic services. MTR Railways cover the rush area
where people use transportation to move on place to another place. So, company provide them
facility according to the requirement of geographic or individual need.
Targeting: Selection of potential customers which help the organizations to achieve their business
goals & objectives through maximising productivity as well as profitability. Targeting strategy
include the market segmentation and determiner the customers whom organization going to offer in
each segment. An organization offer multiple products according to the requirement of customers,
so they target consumers accordingly (Štefko, Kiráľová and Mudrík, 2015). In context of MTR
corporation, company target those people who required transportation services. Along with this,
MTR introduce light trains for short distance so they help the passengers to move one place to
another with affordable rates. They also offer other transportation services to the residential people
for family trip and all that where large number of people include so they provide bus services. Also
provide logistic services to the commercial properties and nearby its station.
4. Porter's Generic Strategy
This strategy provides the competitive advantage which is totally depend upon the organization that
how they will take advantage through choosing effective market scope (Porter's Generic Strategy,
2019). There are three strategies which required to analyse and understand that how it will
beneficial for their company in order to maximise productivity as well as profitability. It is
beneficial in providing competitive advance in the market. MTR Railways done this competitive
analysis in order to maximise their market scope. Porter's Generic Strategy will discuss below:
Cost leadership strategy: This strategy used to gain competitive advantage where organization set
lower cost for their products in order to increase demand of capture market share. There are two
way to achieve competitive advantage, first is to increase profit through reducing product cost and
charge the nominal price based on average industry price. Second way is to increase market share
through charging low prices of their goods & services and still making reasonable profit due to low
cost which increase the demand of products. Organization have to focus on those factors which can
reduce the cost but make sure that demand also increases otherwise business enable to recover their
manufacturing cost and fail to get competitive advantage by using this strategy. So in order to
reduce cost, they have to take some necessary steps such as business have to invest in technology
which reduce the cost, use effective logistic services which reduce the transportation cost and use
low cost base such as cheap labour, low quality material and reduce other facilities which increase
the product cost. By using all the necessary steps company can reduce their cost in order to

maximise market share and profit margin as well. MTR corporation can adopt this strategy and
maximise profitability as well as market share.
Differentiation: This strategy includes the product differentiation from its competitors, so before
implementing this strategy business have to evaluate their competitors in the market as well as what
kind of products they offer in the market. Along with this, business have to analyse their
competitor's strategies and evaluate that how it will work or how it will provide benefit to the
company. In context of MTR corporation, before entering in the German market they have to find
their competitors or scope in the German market (Varadarajan, 2015). MTR can follow this strategy
or gain comparative advantage. It is very risky and complicated to follow this strategy in the market
where they enter for the first time. It can be success when organization done high level research
about consumer's demand & needs. They have to develop their strategy with the help of research
findings. Organization need to provide high quality work and effective sales & marketing strategy.
Focus Strategy: Company follow this strategy where they focus on the niche market. Company
must focus either cost leadership strategy or differentiation and have to formulate strategy
accordingly. By using this market strategy, they must focus on one and give their efforts in order to
achieve business gaols & objectives. It is also recommended that, MTR must focus on one strategy
which provide them competitive advantage.
From the above discusses strategy, MTR Railway follow the cost leadership strategy where
they provide transportation service on affordable price range which further helps in increasing their
customer base as well as market share in the Germany. Along with this, make them capable to
increase customer base those become loyal after sometimes of they provide quality service.
CONCLUSION
From the above discussion it has been concluded that strategic marketing required by every
organization in order to achieve competitive advantage. With the help of PESTEL analysis
organization able to under the factors which impact the business at the time of entering in the
foreign market for the expansion. In order to select best market entry mode, organization have to
analyse entire market along with advantage or disadvantage or every entry mode. After analysing
entry options, they have to segment the market and after this targeting customers as per the
requirement of market of consumer's demand & needs. In addition, with the help of porter's generic
strategy organization able to gain competitive advantage which help business to expand their reach
in international market and increase profitability through implementing any strategy as per the
suitability.

REFERENCES
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Online
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<http://www.mtr.com.hk/en/customer/tourist/index.php>
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<https://www.howandwhat.net/pestel-analysis-germany/>
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