The region's labor force was unable to cover the needs of the construction activity, which allowed for many immigrants to come and work here in the constructions sector.
But with the new economic conditions, it is expected that the level of constructions in the region will significantly decrease. New constructions mean new customers for TOTO. Less construction means less customers for the company.
Also, given the new economic and financial circumstances, it is expected that individuals' in comes will experience a decrease. This means that they may not invest in purchasing new toilets unless they absolutely need to.
In other words, the global economic and financial conditions that are also reflected in Catalonia may affect the company's initial sales on this market. The company's estimations regarding the volume of sales may prove to be optimistic.
However, a marketing campaign and a pricing strategy in accordance with the new economic and financial requirements of the market might be able to counteract these risks, or at least to significantly diminish them.
The company's most important categories of competitors on the Catalan market include:
International manufacturers that are already present on this market
Potential American manufacturers that might take into consideration TOTO's intention of addressing this market and follow this direction
On the Catalan market, the leaders are represented by local manufacturers, even if they are small companies. Their advantages are numerous in comparison with TOTO. They benefit from local, cheaper labor force. This is reflected in the price of the products that may be significantly lower than that of TOTO's products.
Their production costs are also reduced by the fact that transportation costs are significantly lower that those in TOTO's case, given the fact that they are local producers. Also, their connections with the Catalan market are different than the connections that TOTO might be able to establish.
Also, local manufacturers are definitely favored by the customers in this market, especially during the financial and economic crisis that the region is traversing currently. Customers on the Catalan market might be determined to support the local economy by purchasing products manufactured in this region.
Being the leaders of this market, such companies will implement a leader strategy. They will benefit from the fact that their products or the brand are well-known by the customers in this region. They will afford to introduce lower prices for their products.
As mentioned above, they are well-known to local customers, which means that they do not need to invest impressive amounts of money into advertising campaigns. They will also afford to introduce a series of promotion that might help the customers decide when buying this type of products.
Another category of competitors is represented by international companies that are already present on this market. They do not benefit from the same advantages as local manufacturers, but they still hold plenty of advantages in comparison with TOTO.
They are the followers on this market and their strategy must be in accordance with their position on the market. They cannot afford to practice the same prices that local manufacturers practice because they do not benefit from the same reduced production costs.
Given the economic and financial distress that affects everyone, as mentioned above, it is expected that customers on the Catalan market might shift their purchasing interests from toilets to other items that they need more. For example, they might choose to buy furniture or electrical and electronic appliances instead.
They might also prefer to save their money in a bank instead of spending them on items like toilets for the moment. During such economic conditions, people tend to satisfy their primary and secondary needs mainly, and postpone tertiary needs until they can better afford it financially.
The pricing structure for TOTO's products on the domestic market is the following:
Aquia Dual Flush and Aquia II Dual Flush Toilet lowest price is $457
The average price is $526
The highest price is $686
In other words, for the Aquia Dual Flush and for the Aquia II Dual Flush Toilet the price starts at $457. For the Aquia III Dual Flush Toilet the price starts at $588.
These prices may not be suitable for the Catalan market. Customers' living standards in this region may be lower than that of the customers on TOTO's domestic market. Therefore, the company must adapt the pricing strategy to the financial possibilities and the economic conditions in the Catalan region.
The economic and financial crisis has already reduced the incomes of Catalan customers and it is expected that these incomes will decrease in the following period of time also.
The recommended pricing structure for the Catalan market is the following:
Starting price - €357
Average price - €426
Highest price - €686
However, these prices might still sound too much for Catalan customers given the fact that the company is not known to these customers that do not know what to expect from the company's products.
The company cannot lower the price below a certain value. The production costs must be covered. The profit obtained from commercializing these products on the Catalan market must be satisfying in order to justify the effort.
When establishing the price for its products, the company must take into consideration the entire initial investment made for opening a branch in the Catalan region. If the company reduces the prices too much, even if it will generate a certain level of profit, the investment and this market selection may prove to be unworthy of all the effort.
However, in order to gain a solid customer base from the beginning, the company can introduce a series of promotions or special offers that could attract customers easier. For example, the company could offer the following special services:
Free of charge installation
Free of charge repairing for a longer period of time
The profits generated by this business in the first period of activity must help sustain the activity in the future. Therefore, the company cannot lower its prices very much. Also, lower prices for the company's products might induce the wrong idea. Usually, low prices are associated with low quality. But this is not the case here.
Channels of Distribution
In order to ensure a better distribution of TOTO's products in the entire region of Catalonia, the company will sell its products in the following locations:
It is important that the company opens its own shops in the three important cities of the region. This will show that the company is a powerful one, with important resources, a company that cares very much about quality and presentation.
As mentioned above, the economic and financial crisis determines a reduction of prices in the real estate sector. The company could exploit this advantage when purchasing the required spaces in this region.
It is recommended that the management of each shop is a local one. Local employees are not bothered by any cultural or language barriers. Also, they are used with the local customers and know how to handle them. They also know how to handle their subordinates. This would not interfere with the control that the company must exert on its foreign locations.
Another variant is represented by commercializing the company's products in specialized stores that commercialize many brands, local and international. This would help the company reduce certain distribution costs. At the same time, the company's products could benefit from extended geographical coverage.
Like all other local or international brands, TOTO can commercialize its products in hypermarkets also. This is a good way of attracting prospective customers in the future. Customers who come in supermarkets do not just buy the things they need, but they also search for items they intend to buy in the future.
This way, they can observe novelties in the field, hey can compare prices, they can benefit from suitable information. This would help them make a better decision when they establish to buy the respective item.
A good way of introducing itself on the Catalan market consists in participating to local fairs, trades, or expositions in the field. This way, the company could gain more productive distribution deals and new customers.
The selection and recruitment of local employees must be made by a local company. Human resources represent the most important resource that the company can exploit. The success and well-functioning of the company on the Catalan market is mainly dependent on the quality of human resources that will be involved in the company's activity in this region.
The wages of the local personnel should be in accordance with the wages practiced in the region. This would be an advantage for TOTO, because wages in Catalonia are probably lower than wages in the United States.
Public Relations Campaign
The most important part of the marketing mix in the case of TOTO's entry on a new market is represented by the promotional strategy. Through this strategy,…
Sources Used in Document:
1. About TOTO (2009). TOTO USA, Inc. Retrieved April 15, 2009 from http://www.totousa.com/Default.aspx?tabid=71.
2. Catalonia (2009). Wikipedia, the free encyclopedia. Retrieved April 16, 2009 from http://en.wikipedia.org/wiki/Catalonia.
3. Demographics (2009). IDESCAT, Official Statistics Website of Catalonia. Retrieved April 17, 2009 from http://www.idescat.cat/en/.