Strategic Market Analysis: ABC Private Ltd's Entry into London, UK

This report provides a strategic marketing analysis for ABC Private Ltd, a USA-based beverage company, considering expanding its business into London, UK, focusing on coffee products. It employs PESTLE analysis to assess the external environment, revealing supportive economic, technological, and social conditions with opportunities outweighing threats. The report recommends a joint venture as the optimal market entry strategy due to its lower cost and higher control, targeting middle-class working professionals who value price and quality. Effective communication strategies include local and mass media advertising. The study suggests a differentiation strategy to achieve a competitive advantage, emphasizing the importance of adapting to the UK's legal and environmental regulations for successful business operations. Desklib offers a wealth of similar documents and study resources for students.

STRATEGIC MARKETING

Executive summary
As per the findings in this study, the external business environment in London, UK is
supportive to the foreign organizations. This report aims to recommend a product/ service to
ABC Private Ltd by supporting it through the analysis of PESTLE, market entry strategies,
market segmentation, and competitive strategies.
The PESTLE analysis has indicted that if ABC Private Limited expands its business in
London, UK, there will be several benefits or opportunities and the opportunities will be
higher than the threats. The economic, technological, and social environments will be
supportive. In this regard, it will be beneficial for ABC Private Ltd. to launch their coffee
items in London.
While analysing the different market entry strategies, the study-identified joint venture will
be the right strategic choice for the company because this will involve low cost and higher
control over the business.
The Analysis of the market segmentation reveals that The UK Coffee market is highly
differentiated through highly customised consumer groups with diverse needs and
preferences. For, ABC Private Ltd. the potential segment will be the middle class working
professionals who are price and quality conscious.
In order to communicate with the consumer groups, it will be effective for ABC Private Ltd.
to invest in local advertisements as well as mass media advertisements to target the selected
consumer segment.
Porter’s Generic strategy is simultaneously essential to ensure the success of the organisation.
However, it is highly dependent upon the nature of market and the type of the product.Based
on all of the above, it is clear that the Differentiation strategy is the right competitive
advantage strategy for ABC Private Ltd.
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Table of contents
Introduction................................................................................................................................4
PESTLE analysis........................................................................................................................5
Market entry options..................................................................................................................7
Market segmentation..................................................................................................................9
Porter’s generic strategy...........................................................................................................11
Conclusion................................................................................................................................13
Reference list............................................................................................................................14
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Introduction
Globalization has made business expansion easier for the companies. Nowadays, companies
are growing by expanding their business in different foreign countries. This report will
discuss about the business expansion of such a company – ABC Private Limited, which is a
USA based beverage producing and retailing company. The primary aim of this report is to
recommend the foreign market, where ABC Private Limited can expand business
successfully and at the same time, the report will recommend the product that can bring
success to ABC in the foreign market.
In order to recommend the best options, the study will analyse the external market of the
foreign country with the help of PESTLE analysis tool. After that, the report will suggest the
best market entry strategy or option to the company and then it will discuss about market
segmentation, targeting, and position strategies for the business.
UK is one of the advanced economies in the recent era and so, the study will suggest ABC
Private Limited to expand the business in this market only. However, in order to identify and
understand the actual suitability, here, different analytical tools will be used. On the other
hand, as the company is currently dealing with beverage items, the study will suggest
selecting the coffee items as the key product for expanding business in the market of London,
UK.
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PESTLE analysis
PESTLE is one of the most efficient tools that are available to the business houses for
analysing the external environment of the business. As this particular tool analyses the
business environment from different perspectives, decision-making becomes easier for the
companies. Here, the PESTLE analysis has been done on the market of London, UK to
understand the external business environment for ABC Private Limited. The analysis is
shown in the following table:
Factors Current scenario
Political One year back, the political scenario in London, UK was not at all
stable due to the post effects of vote for Brexit. However, as the
government of United Kingdom is very careful about the
maintenance of economic and financial condition of the country,
it has tried to improve the political environment (Wyllie, 2017).
At present UK is politically stable, which is good for any business
expansion. The major benefit of expanding the foreign businesses
in this country is that the government is supportive to the foreign
businesses. However, there is a threat also because in 2019, the
final Brexit decision will be taken, which may affect the business
environment again.
Economic From the economic point of view, London, UK is one of the best
options available to ABC Private Limited. It is because London is
the main financial centre of the country. The GDP growth rate in
this area is high and at the same time, the availability of educated
and skilled labour is high in this area (Österle, 2017). Moreover,
arranging external funds is easier in London. Hence, this area can
be considered as perfect for foreign business expansion.
Social Analyzing the social scenario in London, UK, it can be stated that
the people in this area are supportive to the foreign items. The
level of foreign acceptance is high in London. Moreover, the
people in this area like or prefer to spend their times at the coffee
shops. The demand for high quality coffee items is high in the
societies of London (Van Wormer and Besthorn, 2017). However,
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the major threat is that the people in this area are very specific
about the quality of product because they have several alternative
options and they have enough buying capacity.
Technological Technologically UK is always developed. The country, especially
London has strong technological infrastructure, which is very
useful for every organization at this area. The foreign companies
find business expansion easier due to the availability of advanced
technological base (Tisdell and Maitra, 2018). However, the
technology in London is costly enough, which is a major barrier
to the companies.
Legal Strict legal structure has helped London controlling foreign and
nationalized businesses easily. There are certain rules that every
organization needs to maintain while operating business in this
country. Some of the rules are –Health and Safety Act 1974,
Equality Act 2010 and Data Protection Act 1998. Apart from that,
in order to operate business in this country, the companies need to
maintain UK GAAP and UK Codes of Conducts (Cao et al.,
2018). This legal system helps to manage the business easily in
this country.
Environmental The UK government is very concerned about the protection of
ecological environment. The government has introduced the
Climate Change Act 2008 in order to restrict the operations of the
companies from environmental perspectives. Maintaining the
ecological balance is essential in UK (Van Wormer and Besthorn,
2017). If the company can maintain it properly, it may get full
support from the government and the society.
Considering the above analysis of the external environment in London, UK, the following
opportunities and threats has been identified, that ABC Private Limited may face while
operating business in London, UK:
Opportunities:
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 Support from the government is high, which will help to expand business in this
country
 Economy is strong, which will help to get skilled labour and help to develop strong
customer base.
 Acceptance level of the society is high and the people prefer to spend time at the
coffee shops, which has created high demand for the foreign coffee producing
companies like, ABC Private Limited.
 There is advanced technological infrastructure, which will make business process
easier.
 Strong legal structure will make the business operations systematic.
Threats:
 There is high threat of losing business after the final decision of Brexit
 There is high threat from the existing large organizations within the industry
 The company will face threat if the policies of the company are not developed as per
the legal guidelines of the country.
Market entry options
In order to expand business in the foreign market, the most important decision that the
management of ABC Private Limited will require to take is regarding the mode of market
entry. There are several strategic options available for entering into the market of London,
UK. However, here, mainly three options have discussed which are as follows:
Joint venture – This is very popular market entry mode in the business world. There are
several large organizations in the international market, which have successfully expanded
their businesses through joint venture. If the management of ABC Private Limited decides to
expand business through joint venture, they need to find the most suitable option
(organization) with which the joint venture can be done. The benefits and limitations of this
mode of market entry are as follows:
Benefits:
 If the company adopts the joint venture strategy, it will be able to get access to better
resources in London, UK (Watson et al., 2017).
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 Joint venture is for temporary basis, which means the company may exit from this
agreement at any time.
Limitations:
 In joint venture, the level of flexibility is restricted by the foreign government, which
is a major limitation in the strategy.
 In the case of joint venture, there is huge threat of cultural clash between the two
companies (Luoma et al., 2018).
Acquisition – This is another market entry option available to ABC Private Limited. In this
strategy, the company will require acquiring any local company in London, UK in the same
industry. The benefits and limitations of this option are as follows:
Benefits:
 This is one of the strategic option through which the company can easily and quickly
expand its business in the foreign country (Sartor and Beamish, 2018).
 This strategy is very useful for avoiding the entry barriers in the foreign country.
Limitations:
 This market entry strategy involves high cost of business acquisition (Dinu, 2018)
 In this study, the high managerial focus on acquisition sometimes affects the internal
business process of the company.
Franchising – This is another mode of market entry in which the company grants the other
foreign organization for using its trade name of trademark for selling or dealing with its
products and services. The benefits and limitations of this strategic option are as follows:
Benefits:
 In this method the risk of business failure is low
 In this strategic option he cost level is lower than the other market entry strategies
(Inaba, 2017)
Limitations:
 The control over the business in the foreign country get reduced with this strategic
choice
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 There is a threat of bad reputation due to the low performance standard of the
franchise (Ahi et al., 2017).
Considering the above three strategies of market entry, it can be stated that the joint venture
will be the most suitable choice for ABC Private Limited to enter into the market of London,
UK. In this strategy, the company will not require spending higher amount o money like, in
acquisition and at the same time, management of ABC Private Limited will have control over
the business.
Market segmentation
Market segmentation is the process of subdividing the consumer market into smaller groups
with similar characteristics. This makes it easy for marketers to identify the consumer
segment that their product may appeal. As per Hooker (2017), the London consumer market
for Coffee already highly diverse. It has also been analysed that the sheer number of Coffee
outlets on the streets of London has saturated the existing market. The existing coffee market
of London is subdivided in terms of Demographic, Psychographic, and Behavioural
segmentation.
Analysis of visiting customers from Starbucks, Dunking and high street coffee shops reveal
that the customers are primarily segmented in terms of the socio-economic stature. This
means Age, income, and profession plays are crucial role. However, it has been pointed out
that these demographic segmentations help to position the brand and the product. This means
that Coffee is not loathed by the English people, instead there are loyalty segment in this
market. For example, in Dunkin’ Donuts, both the white-collar and the Blue-collar
professionals visit but their preference is focussed upon different types of coffee items. In
case of Starbucks, the White Collar professionals are more frequent than the rest. This means
that the market segmentation is crucial to define the product type as well as brand(Cross, et
al., 2015). The advantage is that there is more scope for diversification of products. However,
the disadvantage lies in the fact that with increased diversification, complexity may increase
and confuse the consumers(Josephs, 2017). Further, it will also be difficult for the marketer
to identify and the target the right customers.
The psychographic segmentation is highly elaborative in the Coffee market of London. Since
coffee is a critical part of the lifestyle of the English, the different product type becomes
differentially appealing to different consumer groups. For example, a consumer groups who
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wishes to kill time by sending disposable income on Coffee(Dunkin Donuts, 2017). They are
the most un-loyal consumers. Targeting these consumers has no long-term value because they
are likely to choose a brand, which is convenient to them(Yu, et al., 2015). The high profile
business officials on the other hand demands class and ambience apart from the quality coffee
items. This means that the value proposition of the product should be highly customisable
and exclusive to attract these customers(Carvalho, et al., 2015). This is essentially a niche
category, which may not be targeted by a new organisation. The other segment is the one who
starts their day with a specific brew of coffee that is exclusive to a coffee shop. They are
generally highly loyal to the preferred shop and are less likely to churn out. Hence, every
brand aims to gain a share of this customer segment.
The laptop campers are those who prefer to sit in the coffee shop and spend hours of time
doing their professional duties while having a cup of coffee. This group generally prefer
lighter brew of coffee. The advantage of this segment is that these consumers form a steady
flow of business (Armstrong, et al., 2015) because the ambience and internal environment is
more important and critical along with the brew itself(Dunkin Donuts, 2017). The
disadvantage is that their frequency is highly low. Finally, the daily middle class of office
goes are those who prefers daily coffee, which is consistent over the days and prefers
relationship with in the seller. These consumers prefer budget and yet high quality(Carvalho,
et al., 2015).
Through behavioural segmentation, the Coffee market of London is subdivided in terms of
Purchase frequency, Benefit-sought, Loyalty status, and attitude. Consumers with high
purchase frequency are those who have inculcated Coffee items in their daily lives. They tend
to be more loyal to a product rather than the brand. Benefit focussed consumers are either
quality conscious, product diversification or price conscious. Loyalty status reflects whether
the consumers are loyal to a product or a brand. If a consumer is loyal to a product, then they
will seek out the same product from different brands. If a consumer is brand loyal then he or
she will seek out the products from the same brand. Attitude reflects the consciousness or
feelings for the product or brand. It has been argued that the advantage of behavioural
segmentation of the London coffee market is that it allows the marketers to fine-tune the
customer groups(Pyo, 2015). For example, from the psychographic segmentation, the white-
collar groups are generally brand conscious, quality conscious and clearly seek out quality
over convenience(Carvalho, et al., 2015). On the other hand, the flying consumers seek out
convenience over quality and are generally not loyal to a particular brand(Josephs, 2017).
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For ABS Private Limited, they are the new entrants to an already saturated Coffee market.
This means that the organisation will have easy access to the consumers who are less loyal
and may seek out quality or price. In order to be differentiated, the organisation can have
different offering for quality seekers or price seekers. Further, the demographics of the
consumers have to be chosen such that the niche group is not targeted(Cross, et al., 2015).
The main reason is the competition in the niche group is already highly competitive. Hence,
as per the demographics, the middle economic class people who are working professional
will be targeted. The reason is they will require coffee items from their office location on
daily basis. According to the psychographic segmentation, the Laptop campers and daily-
working professionals will be targeted. The reason is that both these segments will provide
the long-term value for the organisation. According to the behavioural segmentation, the
quality as well as the price conscious customers will be targeted. This will provide a wide
portfolio of customer groups for the organisation.
The positioning of the products and the brand will be critical towards attracting these
consumers. Since the primary chunk of the customer-group will represent the middle class
and working professionals, the effective strategy is to position the brand as convenient, fast
customer service and flexible purchase process. The communication medium will be mass
media and local posters to the nearby offices(Cross, et al., 2015). This will create an efficient
awareness campaign that is cost effective.
Porter’s generic strategy
The porter’s generic strategy defines the competitive advantage required by an organisation
to enter into a new market or to sustain in the long term. The competitive advantage is
primary based on the scope of the target market in terms of volume and the cost or
differentiation advantage (depicted in the picture below).
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Porter’s Generic Strategy
(Source: Created by Author)
If the target market is narrow or niche, then there can be either focus on cost or product
differentiation. However, if the market size is large, then the nature and perception of the
product will determine whether the organisation shall go for Cost Leadership or
Differentiation.
The Cost Leadership is hence the strategy where the organisation aims to produce the product
at the lowest possible cost. The aim is to decrease the price of the product. Hence, the Price is
the competitive advantage for the organisation. The products in this case are generally
generic and happen under mass production. Differentiation is the strategy where the
organisation will strive to be unique than that of the market competitors(Lotayif, 2015). The
products have to be positioned uniquely to cater to the unique needs of a particular customer
segment. Highly level of customisation is possible during the selling of product or during the
service delivery. The Cost focus and differentiation focus are those strategies that are similar
to the cost leadership and differentiation but operating in narrow consumer market.
In the case of ABC Company, the target consumer group is specialised and large. The
consumers have special needs of convenience, diversification of products and value-added
service. The reason is that there are numerous brew and types of coffee items available in the
market. If the organisation has to survive, then they will have to provide different brew and
variety of coffee products that may be appealing to the consumers. This means, the products
existing in the market are highly customised. Hence, the effective strategy will be
Differentiation strategy. According to this strategy, the organisation will have to incorporate
unique selling techniques and business processes, which can provide high level of flexibility
as well as wider portfolio of products. However, Cost leadership behaviour will have to be
adopted to increase the competitive advantage. The price conscious consumers will typically
search for economy products, which can be obtained through mass supplies and production.
Hence, the cost leadership characteristics will also have to be taken as a secondary strategy
and be used in the value delivery process(Moon, et al., 2014).
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Conclusion
This report effectively conducts the analysis of the macro environment and suggests the
possible product, which can be easily sold in the London Consumer market. The possible
products or product group is Coffee Items. This report also identifies the critical strategies
that ABC can use to enter into the London market. The analysis of the market segmentation
points out that segmentation will be key for ABC. This report also suggests the potential
segments that can be targeted. Finally, this report also implements the porter’s generic
strategies and identifies differentiation as the effective strategy for entry.
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