Mkt310 | Marketing Communications | Assessment Answers

Ajax Alarms is a medium-sized U.S. firm that sells alarm clocks. It subcontracts the production of its clocks to a Korean firm, which manufacturers them based on Ajax designs and specifications and then ships the clocks directly to the Ajax warehouse in Kansas. Ajax markets and distributes the clocks throughout the U.S. and Canada. The clocks themselves are brightly colored novelty items. For example one of the firm's biggest sellers is a plastic rooster that crows in the morning. Last year Ajax reported profits of $5 million on total revenues slightly more than $50 million.

Ajax managers have determined that the firm has few growth opportunities in the U.S. and Canada and so must enter new markets if it is to continue to expand. The managers have decided to start by selling in Mexico. They have hired you, and internationally famous marketing consultant, to advise them.

Outline a marketing plan for Ajax. Ajax wants you to consider product policy, pricing, promotion, and distribution issues. In developing your marketing plan, consider standardization versus customization pricing, legal forces, cultural influences, economic factors, and brand name questions. Note specific areas where you can make recommendations to your client with rationale. If you feel you lack information in an area, identify the factors that must be addressed by Ajax in that area. For example, if you cannot recommend a pricing policy, describe the information that Ajax needs to acquire and evaluate when making that decision.

Ajax Alarms is a medium sized the US-based firm and it subcontracts the production of its clocks to a Korean firm. The Korean firm produces Ajax Design based production and sends the products to the warehouse in Kansas (Ajax.systems, 2018). Ajax Alarms also provides wireless solutions in order to meet the needs of modern times. Ajax Alarms has few growth opportunities in Canada and in the US; therefore, the managers of Ajax are thinking to expand the business in Mexico. The managers of Ajax have decided to start selling the products in Mexico. The purpose of this paper to provide a business plan to Ajax by explaining the external environment of Mexico and delineating the marketing strategy to Ajax what they are going to take in Mexico.

External business environment 

Legal forces

Mexico legal system is different in many ways as the US follows the common laws and Mexico follows the civil law tradition. Therefore, the business organizations may face penalty which is ostensibly pre-determined. For the foreign companies, civil law codes are difficult to understand and Ajax Alarms needs to take help from Mexico based in-country attorney. NAFTA (North America Free Trade Agreement) does not allow the US attorney to work in Mexico (Otero, 2018). In Mexico, foreign companies are responsible for creating any damage by accidents. In Mexico, Ajax Alarms has to gain recognition from the federal and local governments and the company has to take approval from the Ministry of Foreign Relations and National Commissions of Foreign Investment.

Cultural influences

In Mexico, commercial deals extend to beyond the contract and oral deals are also kept as honored. Respect and trust are an intrinsic part of the business transaction and in Mexico; the business persons use to call the people to their homes. Mexicans welcome the people at home and they are warm. Mexicans feel comfortable in the distance between two people more than the US living people. In America, the business meetings have to start at a proper time and Mexicans have a less strict perception of the time. In Mexico, the people believe in hierarchical society and in Mexico; the companies believe in inherent inequalities, subordinates listen what other said and centralization is popular. As stated by Donelson & Esparza (2016), Mexico believes in collectivist society and it is manifest of the long-term commitment to the extended family.

Economic factors

The Mexican economy is 15^th largest and the GDP of Mexico touched the figure of $1.149 trillion in the year 2017. GDP growth of the Mexican economy was 2.0% in the year 2017 and GDP per capita of Mexico is $9,304 (Smith, 2018). The inflation rate in Mexico is 2.5% at present and the unemployment rate in Mexico is 3.44% which is degrading with time (McWilliams, Meier & Garcia, 2016). The World Bank published a report where Mexico ranks 49^th in Ease-of-doing-business. From the utility products; Mexican economy got the GDP of $276360 in the year 2017. In Mexico, the average household net-adjusted disposable income per capita is $13,891 and it is much lower than the OECD average of $30,500 (Worldatlas.com, 2018). Therefore, the people in Mexico do not have the large amount to spend on security and household utilities.

Standardization versus customization

As stated by Qizhang & Goh (2015), the organizations expand their businesses into the international market and the organizations adopt the international marketing strategies. Standardization of goods means the mass production, uniform quality of the products, assembly line and production focus, on the other side, customized goods are associated with varied according to the needs of the customers and these are produced with market focus. Ajax Alarms will take the standardizations strategy which means Ajax Alarms will the same level of quality products in Mexico market as this strategy will enhance the brand loyalty of the customers. Ajax Alarms will also use the strategy of standardization in case of pricing; therefore, the organisation is going to sell the products in Mexico at almost the same price. Standardization in the global market will increase consistency with the customers and it will also increase the lower costs of the organisation.

Marketing strategy

Product policy

Ajax Alarms can take the strategy of setting the uniform characteristics of the products which they generally sell in the US and Canada. Standardization of the goods provided in different markets can be useful for Ajax Alarms as it permits the organisation to have uniform suppliers. Ajax Alarms can take the strategy of product line-stretching as an expansion strategy where the new products are launched in the same product line by just adding some different features in the same product. Ajax Alarms stretches upmarket for higher margin or higher growth through product-line stretching strategy. Ajax Alarms will proceed with an improved product line creating new products like professional security systems. Ajax Alarms continues to grow in technological design and engineering innovation.

Pricing

Ajax Alarms can take the strategy of premium pricing which is involved in setting the price of the product higher than the existing products in the market. Premium pricing strategy makes an assumption in the market that the products have higher values (Nagle & Muller, 2017). Premium pricing strategy is also called skim pricing as it is an attempt to make the price top of the market. The customers assume that the products will provide the best quality in the market and it will automatically gain the brand image to assure the products will have better offerings than competitors. Premium pricing strategy will help Ajax to have the better profit margin from the sold products and Ajax will have the increased visibility. Ajax Company will automatically set itself as one of the quality alarms and security system sellers in Mexico. 

Promotion

Ajax needs to promote its entering Mexico through social media advertising as it is the easiest way to promote the business among the customers. Ajax has its official pages on Facebook and Twitter. On Facebook and Twitter, Ajax needs to share short videos and images which must contain the new products and services. Ajax needs to advertise on Facebook and Twitter targeting only Mexico based customers.

Ajax can use print media strategy where they can advertise using the wide-circulated newspapers in Mexico and in the magazines. The language of the advertisement in the newspapers like Reforma, El Norte and Milenio and La Jornada will be in English.

Ajax can use the strategy of discount pricing as it will help to sell more products at very fast paced. On the advertisements in newspapers, Ajax can take the strategy of sharing discounts and customer success stories. 

Distribution system

In Mexico, Ajax will sell the products in the open market and to the retail stores. Ajax will have small offices in three regions of Mexico. From these three offices; Ajax will control the distributions. From the US, Ajax will export the products to Mexico. In Mexico, Ajax Alarms will use a chain of intermediaries through which the Ajax products move to be made available for purchase by the consumers. Indirect channel distribution involves in product passing through additional steps. Through export, the products will be reached to the wholesalers and the wholesalers will deliver the products to the retailers. The retailers would sell the products to consumers. Indirect distribution provides a smaller profit margin and the retailers carry the multiple products (Ding, 2017).

Recommendations

Ajax management must have a good tax consultant in Mexico as paying taxes in Mexico is not an easy process. Tax-paying in Mexico takes almost more than 240 hours of business time per year. Tax legislation in Mexico is critical and complexity level of tax-paying can be reduced through taking help of tax consultant.

In Mexico, registering the business and policy is a difficult and arduous task. In OECD countries; it is taken almost 22 days on average to register the property and business. Ajax must take help of the lawyer to deal with obtaining the certificate. Lawyer and attorney can help Ajax to do the business following the regulation.

Indirect distribution process will be followed by Ajax; however, to reach all the selected markets in Mexico; Ajax management must hire the right set of people. Ajax will take the strategy of Exporting to enter Mexico and getting the inventory under control can help the management to distribute the products. 

Conclusion

It has been noted that doing business in Mexico is that business itself is a lot less straightforward.  Whereas Ajax management trained in the American corporate culture might often want to delve straight to the point when making business arrangements, meeting potential clients, or presenting new ideas, Mexican businessmen will almost never begin to talk business unless they have gotten at least a feel for the person they are sitting down with. In fact, many Mexican businessmen consider blunt brevity to be a grave issue when meeting with other potential clients or investors. Ajax Alarms can take the product-line stretching and premium pricing in order to enter Mexico.

[Calculations of Financial assumptions are shown in excel]

Reference List

Ajax Alarms. (2018). Retrieved from: https://ajax.systems/about/ [8^th Oct 2018]

Ding, X. (2017). Modeling and Quantitative Analysis of the Impact of Direct vs. Indirect Distribution in the Performance of a Supply Network. Management & Engineering, (27), 45.

Donelson, A. J., & Esparza, A. X. (2016). The Colonias Reader: Economy, Housing and Public Health in US-Mexico Border Colonias. University of Arizona Press.

McWilliams, C., Meier, M. S., & García, A. M. (2016). North from Mexico: The Spanish-Speaking People of the United States: The Spanish-Speaking People of the United States. ABC-CLIO.

Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably. Abingdon: Routledge.

Otero, G. (2018). Neoliberal reform and politics in Mexico: An overview. In Neoliberalism Revisited (pp. 1-25). Abingdon: Routledge.

Qizhang, L., & Goh, M. (2015). Standardization and Customization. In TA-Q-BIN (pp. 149-165). Springer, Singapore.

Smith, P. H. (2015). Labyrinths of power: political recruitment in twentieth-century Mexico. Princeton University Press.

World Atlas. (2018). Retrieved from: https://www.worldatlas.com/articles/the-economy-of-mexico.html [8th Oct 2018]