Free Marketing Essays - International Marketing Rollout Plan for the Toto Washlet
Introduction
Consider the actual case of a manufacturer that who is relatively unknown yet is the world’s leading manufacturer in its field, producing over 7 million units each year and is also the industry leader in technology, and innovation (totowashlet.com, 2005), yet is relatively unknown. Toto has been in business in excess of 80 years and manufactures the world’s most innovative toilet which was developed over twenty five years ago. Described as the lavatory that shoots back, the Toto Washlet features a retractable small nozzle that directs a stream of temperature controlled water at one’s posterior. The Toto Washlet is in use in over sixty percent of the Japanese market which consists of homes, offices, hotels, airports and train stations. The company has even developed a convenient travel model that utilizes the same water principle as its larger stationary models (totowashlet.com, 2005),
Given the foregoing, the Toto Washlet sells in excess of 100,000 units per month in its home country and just 6,500 units globally (totowashlet.com, 2005). It is obvious that in order to grow, the company will need to develop overseas markets. In spite of the innovative and award winning designs and quality manufacturing process, expansion of the company into new markets requires careful consideration in order to maximize its reputation while utilizing monetary as well as human resources effectively. Thus, the object is to develop a marketing plan that accomplishes the object of introducing the Toto Washlet into the most effective new market opportunities to achieve said end.
Toto Background Summary and International Growth Rationale
Toto presently markets its innovative product in the United States and has a state-of-the-art facility in that market to service North America (totowashlet.com, 2005). Given the companies presence in that market, Toto obviously has to look elsewhere for growth as the sales volume in the United States is not fulfilling the demands of a global presence in today’s highly competitive environment. Expansion onto the global stage is a business reality every large company faces in terms of growth (Deloitte Touche Tohmatsu, 2005). In addition, growth provides a company with (Dunlap, 2005):
1. continued sales increases needed to satisfy shareholder and stakeholder interests,
2. the platform to meet present and future competitive challenges,
3. a marketing stance to weather economic downturns in one or more markets,
4. the overall sales volume to achieve additional internal economies of scale in raw materials, equipment, and facilities, and
5. the maximization of internal operational costs.
In order to accomplish the foregoing the initial as well as ongoing facets of market expansion should provide the company with the ability to (Cateora et al, 2004):
1. seek further future growth from that market entry as a platform for further growth,
2. offer easy access to said growth opportunities,
3. consist of a consumer base that not only has the disposable income to purchase the companies high end product, but the sophistication to understand it,
4. have some similar or comparative product exposure that enables the prospective demographic target market to have an affinity for and with the company’s product as thus minimize initial market translations and cultural variables
The foregoing methodology takes into account that considerations with regard to setting up operations in foreign markets entails laws, language differences as well as cultural considerations in addition to demographic variables (Belderbos et al, 2003). Thus, the market expansion plan for Toto shall consist of strategies as well as realities that minimize risks, regulations and costs associated with foreign market entry, while utilizing a plan that maximizes sales and personnel resources.
Marketing Considerations
Broad questions areas to be considered in expanding into a foreign market are (Entrepreneur, 2005):
- Will the company’s product(s) sell in the foreign market culture?
- Are there any synergies relative to your product and the target country in terms of familiarity?
- Does the foreign market represent a comfortable transition?
- Are there any barriers of other aspects that might represent potential stumbling blocks?
The preceding broad questions give way to specifics that Toto needs to evaluate in order to accomplish the development of an expansion plan which is not only feasible, but minimizes risk, monetary resources and can be put into actualization with commensurate results represented by a relatively short time frame. The complexities and complications in carrying out a foreign market entry plan entail considerations stated by Hollensen (1999) in referring to Solberg’s (1997) contingency framework regarding the strategic choices which are a component of decisions entailing international expansion. Hollensen’s (1999) referral to Porter’s (Schenk, 2005) ‘value chain’ is an example of how expanding to a foreirn market can add value to a firm, and thus the mode(s) of entry need to be carefully plotted in order to maximize potential advantages. In equating the preceding, the following, Keegan (1995) set forth considerations in expanding globally:
1. Marketing theory and strategies
2. Foreign market analysis and selection
3. Competitive analysis
Within the preceding main developmental areas, the following considerations as well as definitive aspects need to be analyzed and employed:
Marketing Theory and Strategies
The four primary management classification categories as identified by Heenan et al (1979) in the development of international marketing strategies represent the analysis points for determination of the order in which the firm will proceed based upon its overall plan:
1. Ethnocentric
This approach focuses on a full scale subsidiary set up in the foreign market selected, making use of parent company management and/or expatriates to guide the operation and market development.The advantages are direct organizational control and familiarity with company prodecures and operations, with the draw backs being the foreign market learning curve concerning how things are done, as well as contacts, legal aspects, regulations and marketing methodologies. This is typical of a one country entry strategy.
2. Polycentric
This methodology utilizes management recruited from the host country and as such the firm’s procedural mode tends to take on the characteristics of that country. The advantages are the familiarity the local management has in contacts, legal aspects, regulations and marketing methodologies. The preceding is usually consistent with a one country market entry strategy.
3. Regiocentric
This expansion theory views the plan from a broader perspective seeking to inculcate operations on a multiple country basis, thus seeking management with broader expertise that the host country to accomplish this end and frequently entails a multiple market entry strategy.
4. Geocentric
This method identifies a multiple market entry platform whereby more than one country is targeted for immediate entry and represents the most complex as well as costly strategy to implement.
Given the limited resources of Toto in terms of company size, management, resources and the lack of an established international base of operations, the methodology seemingly best suited to the firm would entail the utilization of the ethnocentric model in that it is best suited to the marketing methodology which will be employed. Such was utilized in setting up operations in the United States, however, once the initial base of foreign operations has been established the firm should seek to utilize the regiocentric model. The ethnocentric model permits a high level of direct headquarters control as it utilizes management familiar with home office and corporate operations as well as the ongoing relationships that have been previousely established thus lending itself to a lesser degree of policy and theory translations with respect to the implementation and follow through of the initial plan.
Strategically, the enthocentric plan will also permit a fast track market entry plan to be utilized whereby the company will set up a branch office staged with business to business sales personnel hired from the host country, but overseen and directed by Toto management placed within the country. This allows for market familiarity regarding selling techniques, contacts, and other aspects thus lessening the learning curve. By starting with business to business sales, the company benefits by (Keegan, 1995, pp 348-368):
1. Reducing the lead time needed to establish consumer awareness and local distribution points as well as a more complex manufacturing facility or shipping methodology to supply units in a timely manner.
2. Permits the company to establish a limited run assembly facility for business application units limited to a small product line offering thus offering lower initial facility set up costs and circumvention of finished goods tariffs through assembly in the host country. The foregoing also circumvents trade barriers. An examination of this area did not find any restrictions or trade barriers relating to the unfinished shipment of toilet fixtures into the United Kingdom from the United States (U.S. International Trade Commission, 2000)
3. Permits for the establishment of immediate sales to supply units in bulk quantities which provides the company with sufficient lead time to assemble and ship the components for assembly via sea transport which represents the least costly mode and entails approximately three weeks port to port time.
4. Results in an immediate sales influx to support ongoing operations and fund further market entry operations with regard to the expansion of the manufacturing facility to full scale operations, gradual introduction of extended product lines, host country staffing recruitment and policies as well as preparations for consumer market sales and support logistics (Keegan, 1995, pp, 534-552):
Foreign Market Analysis and Selection
The European Union represents the largest trading zone globally as represented by the EU’s total population of 456.8 million in 2004, which will increase to in excess of 500 million with the addition of more nations in 2007 (wikipedia, 2005). This represents a prime region for Toto to enter in terms of size as well as economic affordability whereby the region’s markets have the dempographic characteristics to purchase the company’s products, a prime consideration as stated by Kiefer et al (2005). An important factor in the selection of Europe is the 67.2% of the total population of 456.8 million are between the ages of 15 and 64, representing 306,624,084 individuals (wikipedia, 2005). Within the European Union the United Kingdom has been selected as the initial point of entry, due to the following:
1. Population total of 60.1 million, which ties he United Kingdom with France as the top two countries in total population (Wikipedia, 2005),
2. A low unemployment rate of 6.7% (ukdemographics, 2005)
3. Is composed of a population whereby 81.5% speak English (ukdemographics, 2005)
4. The 1996 per capita income in terms of purchasing power parity U.S. dollars was $20,400 (ukdemographics, 2005)
5. A favorable exchange rate in that the U.S. Dollar is $1.75 to the British pound, making imports less expensive in terms of added shipping and related add on costs (National Statistics, 2005)
6. Lack of definitive trade barriers with respect to the importation of unfinished products (U.S. International Trade Commission, 2000)
One of the most important aspects in the selection of the United Kingdom is the common language, English, which permits ease of translation for advertising, sales and other materials as well as a similar culture and close national ties between the two countries, both policially and economically. In addition, the similarilies between the two countries are represented by the following:
1. 67.0% of the U.S. population is between the ages of 15 and 64 (Wikipedia, 2005)
2. 4.9% unemployment rate compares favorably with the United Kingdom (Wikipedia, 2005)
3. East coast headquarters location of Toto in Morrow, Georgia offers access to major sea port shipping points (totowashlet.com, 2005)
The preceding point to synergies in terms of administrative and operational efficiencies that ease the problems of market entry for Toto into the U.K.. The foregoing does not take into account demographic profiles for Toto’s home country, Japan, as the administration will utilize American speaking personnel in the United Kingdom, however it is important to note that the United Kingdom and Japan have historical relations that predate those of the United States as well as a reputation for producing quality products. One important variable is that Europe is familiar with the use of bidets, which is a bathroom hygiene component that is not well known in the United States. The highly familiarity with this type of hygiene component not only in the U.K., but throughout Europe is a market plus in terms of product understanding on a business as well as consumer level.
As the Toto line of products represents a high end item, the initial cost outlay to establish manufacturing facilities is a sizeable investment. As such the company needs to establish and identify a representative pre- entry sale market to meet initial amortized overhead costs. It is well known that consumer market sales represent a one by one selling proposition, so the beginning foundation of the Toto international marketing plan will seek to utilize the product’s inherent strengths as the basis for fulfilment of the indicated market entry objective. The utilization of a business platform works in favour of the company’s strengths and creates the foundation for consumer market entry built upon awareness generated from the preceding as well as financed by initial business sales. The foregoing establishes the foundation:
1. For consumers to try the product rather than it to be sold to them. This represents a stronger marketing proposition.
2. It establishes a natural P.R. base of activity that can utilize the reach and frequency of the broadcast and print media to support the consumer marketing campaign
3. It establishes actual use outlets whereby potential customers can seek out and try the product without visiting a sales facility.
Given the foregoing, the marketing and advertising campaign will utilize the business sales launch as its platform. The foregoing will be accomplished by the company seeking sales in the following segments, which was the strategy successfully employed in the U.S. market:
1. High end hotels
2. office buildings
3. Gyms and spas
4. airports and transportation hubs
5. luxury end new home construction
6. luxury end condo and resorts
7. exclusive clubs, such as tennis, golf, etc.
8. sporting facilities
The preceding business sales opportunities offer the benefit of utilizing the company’s monetary, staffing and material resources to immediate best use, as well as entailing a smaller specialized sales force that can prospect companies with the budgetary means to order numerous products on a cost effective basis.
Competitive Analysis
Toto’s 80 year history as an innovator in the field of bathroom hygiene is unmatched globally, and the Toto Washlet has been in production and refinement for over 25 years (totowashlet.com, 2005). The company’s SWOT analysis provides a detailed look at the company and its products in equating is relative positioning in terms of competitive variables:
1. Strengths
- 80 year history in the bathroom hygiene industry
- 25 year Toto Washlet history
- Innovative features and design, consisting of a controlled stream of temperature controlled water directed at one’s backside.
- High product quality and reliability as evidenced by the example of the product’s installation in the $1.5 billion Venetian Resort, Hotel and Casino in Las Vegas Nevada installed 3,100 Toto products in their facility and reports that it only had a problem with one unit. New construction projects generally project that 8 to 10% of same fixture items have to be replaced almost immediately. (TotoUSA, 2005)
- Reduction in water costs is a selling feature the product has versus standard toilet units in that even though the product utilizes a jet of water in addition to its flush function, the product still produces water savings of 40 percent. The preceding figures where reported by 423 unit The Towers of Chestnut Hill in Newton, MA, near Boston. (TotoUSA, 2005)
- Saving in maintenance costs as evidenced by a retrofit at Houston’s Bush Airport, the Toto flush valves provided significant maintenance cost savings over the prior product. (TotoUSA, 2005)
- Ease of retrofit to Standard toilet mixtures through an adjustment nozzle
2. Weaknesses
- Lack of a high volume sales base and revenues as the company sells on average just 100,000 units per month in its home country and just 6,500 units globally (totowashlet.com, 2005).
- No manufacturing or distribution facilities in Europe.
- Lack of general international knowledge of the product on a consumer and business level
- Relative high cost of the units starting at $170 through $1,500 (totowashlet.com, 2005).
- Small size of the company in terms of sales and unit volume
3. Opportunities
- Innovative nature of the product offering utilization savings in water costs as well as superior hygiene benefits
- European market familiarity with bidets, which are a similar bathroom hygiene product in use in Europe for decades
- European cultural standards that value workmanship and sophistication
- Size of the European Union, the world’s number one trading block and the common language of the United Kingdom as the initial base of operations
- Immediate sales foundation in the United Kingdom with unassembled point of entry to defray initial market costs
- Staging of the company in the United Kingdom as a prelude to sales other European countries
4. Threats
- Lower cost copying by competitors, at a quality and reliability sacrifice.
- Low sales and revenue strength of the company that limits a multiple market entry strategy due to costs and complexities
- Lack of European manufacturing facilities
- Lack of working familiarity in the varied European Union markets, along with the cultural, procedural and distribution channel nuances
The biggest threat that Toto faces is entry by rival companies utilizing versions of their innovative design. The company does not have the luxury of patent protection in that its unique design is over 25 years. Varied patents might be available for engineering innovations, but the main product remains unprotected thus permitting competitive copying and introduction of lower cost models to steal market share. In addition, the company faces competition from better financed competitors.
Conclusion
Toto’s innovative Washlet has suffered from a slow growth strategy that belies the competitive nature of globalization and the threats such represents in terms of smaller sized companies with superior products. The international expansion plan seeks to overcome this shortcoming through a fast start sales methodology the company can employ quickly. Through the establishment of a sales office directed first at securing high volume business orders the company can effectively:
1. Enter the new market generating immediate sales
2. Accomplish the foregoing with acceptable risk in terms of capital expenditures and staffing
3. Utilize unfinished product part shipments to circumvent tariff and trade barrier costs and regulations
4. Fulfil orders to businesses in volume with acceptable lead times for delivery that can utilize lower cost sea shipping methodologies
5. Establish a familiarity base with consumers via business use of the product and the accompanying Public Relations activities
6. Permit the company time to prepare and establish its consumer sales network through the employment of the foregoing methodologies
7. Establish a European base of operations in a country with familiar or similar customs, language, traditions and favourable dollar to pound relationship to mitigate product costs
8. Stave off potential competitive threats through a fast building sales generation strategy that immediately establishes awareness within the European Union as a result of a business first placement methodology that can serve as the template for entry into France, Germany, Spain, Italy, The Netherlands, Belgium and other countries.
The weaknesses shown in Toto’s slow international expansion platform needs to be addressed through an innovative program that utilizes the company’s strengths to mask as well as overcome its weaknesses. The market expansion method thus selected was devised in consideration of the points addressed herein and crafted to best fit the limited financial and personnel resources while taking advantage of the product’s strengths and market opportunities as demonstrated through U.S. market testimonials. The foregoing approach sets the stage for consumer market introduction which first attacks the high end demographic profile, which will have the most exposure to the product through the pre-consumer launch business base sales placements. The platform for the consumer advertising and marketing campaign shall thus be reinforced through:
1. Extensive P.R. activities comprised of news broadcast announcements and press releases regarding the installation of Toto in the indicated business facilities
2. Limited, yet creative advertising prints ads to support the P.R. campaign through placements in high end demographic magazines, sports and home decoration publications
3. Employment of interior decorators to bolster high end luxury home and remodel placements
The plan offers simplicity, immediacy, low risk, immediate sales generation from the business entry mode and fits the limited financial and personnel resources allowing the company to grow internally with the plan as sales are generated. The Toto Washlet represents one of those unique products which actually have a benefit attached to its use, in this instance this attribute will serve the company well in its entry into new markets.
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