Marketing Business Plan

I have chosen to do my marketing plan on water filtration systems in Mexico City, Mexico. I have spent some time in Mexico and believe that this is something they need dearly. While bottled water is available for purchase at any given store, I believe that a market exists for filtration systems that are installed directly within the home. Water filtration systems provide a wide scope of market coverage for different customer segments. High-end customer segments may want hardwired systems installed, while low-end customer segments may want filters that attach to faucets. I also believe that the individual house hold is an underserved or untapped market. Water is something that we use every day and the importance of clean drinking water is something that extends to every customer base. In resort towns like Cancun, people come from all over the world and are not accustom to the water quality in Mexico. Resorts already understand the importance of clean drinking water.
We intend to branch out into the market of Mexico City, Mexico. Mexico is located directly south of the United States on the North American continent. The country of Mexico has numerous ports on both the Pacific and Atlantic oceans. Some of the largest ports are Altamira (Atlantic), Lazaro Cardenas, and Manzanillo (Pacific). The current population of Mexico is estimated at 123,799,215 as of July 1, 2014. Since 1955 the population growth has ranged anywhere from 1.20% to 3.28%. The population growth trend has been steadily declining, since the high of 3.28% in 1960. While the percentage has gone down, the population has still increased by 1 million plus each year.
Mexico City is located in the south central area of Mexico. While transportation of goods through the US/Mexico border is available, some consideration must be given to ports located on the east or west coast due Mexico City’s proximity. While the city’s population is estimated at 9 million people as of 2013, the metropolitan area is estimated to contain over 21 million people. As the city and metropolitan area are listed as the most densely populated area of Mexico, a good percentage of the countries expected population growth should be contained within the target market.
Annual household income Mexico is project at just under $12,000 US as of 2012. The lower amount was attributed to the global economic slowdown. Prior to the global economic slowdown, average income was over $13,400 US. With the current global economic uptick being experience, a corresponding increase in annual household income should be felt in Mexico. Finally, the current economic study was done on the country and not specifically on Mexico City. A larger annual household income in the metropolitan area should be expected. Mexico’s political system consists of a federal presidential representative democratic republic. The Mexican government is represented and divided into three branches: executive, legislative and judicial. The politics are dominated by the three political parties: National Action Party (PAN), the Party of the Democratic Revolution (PRD), and the Institutional Revolution Party (PRI). Mexico has a political agreement on economic policy, namely the North America Free Trade Agreement. This agreement has strengthened Mexico’s economy by providing its people with more job opportunities and better incomes. NAFTA has brought several multinational companies to the region, which are investing in Mexico’s people and economy. NAFTA enables Mexico to be partners with the world’s largest economies, mainly the United States. This agreement removes all trading deterrents, such as tariffs and government subsidies. Mexico has tripled it trade with the US and Canada since NAFTA. Additionally, Mexico offers significant opportunities with most of the Latin America because of similar trade agreements.
The following SWOT analysis has been prepared for reference concerning the considered water filtration expansion of production and distribution, into Mexico.
Strengths:
* Proximity to the U.S * Young Workforce * Manufacturing plants are being built * Cheaper Cost of production/labor
Weaknesses:
* Regulatory inexperience * A raging drug war * The president’s approval ratings dropping * Lack of confidence
Opportunities:
* Potential economic growth with untapped oil and gas deposits * Growing middle class * Future foreign investment expected
Threats:
* Potential of U.S economy slowdown * Dangerous living and working conditions * Mexican government corruption * Drug Cartels
Describe goals of your marketing and preliminary plan how to obtain them: The market for water filtration systems affects many households, and within them is a wide range of purity needs. My goal is to provide an affordable and money saving water filtration system for the average income household. Providing a system at a reasonable cost will save customers money in the long term when compared to what they are spending on bottled water. My first plan is to do a market analysis to find out what percentage of households need it, could use it, and would buy it. I plan on doing this by surveys, door to door, with part-time help, telemarketing, emails, and postcards. This will give me an idea for what the size of the need is. This would give the business data needed for cost, how many, and market value. Based on the results of our market analysis, we will then consider our options for both production and distribution from our plant in the United States or construction of a new production facility in Mexico. While it should be relatively simple to put together a cost analysis for production and distribution cost from the United States, equally comparing the information will require more time spent on researching what is available in Mexico. Some consideration should be given to quantitative items and intangible aspects of both countries. We also have to consider the cost to move our products from the US and the difference of paying our employees in the United States than in Mexico. Items to consider are incentives provided by the Mexican government for potential new investment in Mexico, by foreign companies. Not only will I need to look at the federal level, but also at the state level as well. Mexican states may be competing more vigorously than others to obtain foreign investment dollars. While centrally locating a production facility may seem to be the easy answer, we must evaluate any cost benefit provided by states that are on or near the country’s borders. This then brings up the need to research Mexico’s infrastructure and how easily our products can be moved around the country.
Some of the intangible aspects that deserve our attention center on the country’s government and current living conditions. Problems that may arise from government corruption must be fully considered before we make any type of financial commitment. While we may be saving costs by producing the goods in country, will those saving be negated by local and federal issues as a direct result of socially acceptable corruption? Also, will our employees and assets be safe considering local and regional violence that might happen due to drug trafficking? Will drug cartels attempt to influence or harm employees? Is it safer to handle our own distribution and routes, or is it better to outsource this portion of the business to local vendors that might have more experience in navigating any potential cartel involvement in the area?
In your marketing plan - is there an importance of strategic alliances, any alternative market entries what distribution channels affect your marketing, would you use middleman and why personal sales or distributors?
The importance of strategic alliances cannot be overlooked when considering operating within a new market and foreign country. FEMSA Foundation should be sought out as a strategic alliance partner in this proposed business expansion. FEMSA Foundation focuses on the many different areas of human need and sustainability, with an emphasis on water conservation and sanitation. A strategic alliance with FEMSA could benefit the company in many different ways.
Since FEMSA has been operating within Mexico and Central America, they have an understanding for how business is done. Having pre-developed relationships with members of local and federal government should cut down on delays during the expansion’s start up process. FEMSA may also be able to assist with distribution issues. Alliance with FEMSA will also allow for inter-communication and involvement with the other FEMSA alliance partners. This may provide volume related discounts or pre-negotiated rates with local and regional distribution vendors.
Concerning marketing and distribution, I believe the best opportunity lies with using already established chain stores and/or local vendors. While the profit margin may be greater directly selling to the public, so will be the risk. Established vendors and chain stores already have the infrastructure in place and a built in customer base. Simply placing our products in store should result in immediate sales. Consideration should be given for incentive programs geared toward the sales volume realized by each vendor. This should result in better product placement versus any competitor’s product. Smaller, local vendors may allow this more than chain stores. Chain store locations will have corporate standards that may limit our availability to manipulate things like product placement.
Marketing should be handled by a local firm within the target market. While our marketing strategies have worked well in the states, what works here may not have the desired effect in Mexico. A local marketing company will already understand what is needed for success, and how best to reach our target market. All methods of communication should be considered; television, radio, print and internet.
The target market should span the upper, middle and lower class markets. Marketing different applications for water purification will allow us to capture the entire spectrum of consumer. For the higher end consumer, a hard wired water filtration system should be shown as the best option for volume and quality of water. Higher end consumers want convenience of use and a low inconvenience factor in terms of maintenance. Marketing should focus on 1 year maintenance, as the filters will be designed so that replacement is only needed once a year. A faucet mounted system should be marketed to the middle income class, focusing on the ease of installation and reasonability of expense. Replacement filters will be available for this system and should last between 4-6 months. Lower income option should focus on pitcher designed water filtration, which replacement filtration cartridges that can be purchased and installed at their leisure for a nominal cost. This allows them to enter the market for a reasonable price, with maintenance only needed every 2 months.
How do you plan to advertise? Any promotions? Mind the cost. Use of a local advertising firm should be strongly considered, as they will have a better idea of which mode of media advertising is best received by the citizens of Mexico City. All mediums should be considered. Newspaper, direct mail, television, web based and outside media should be used as methods to put our product in front of potential customers. Newspaper advertising should be concentrated on Sunday papers, typically one of the most read days of the newspaper. While the paper will be flush with advertisements, very few will have any relation to our product. Competing with other advertisements will be offset by the fact that print advertising is relatively inexpensive. Direct mailing should also be considered as a way of putting our information in front of the customer. While television could be considered as an easy answer to the advertising question, it also could be considered one of the most expensive. We should steer clear of prime time advertising and focus more on late morning and early afternoon time slots. As the cultural make up of Mexico City typically has the husband working outside the home and the wife taking care of the home, we should focus on advertising to the wife. Outside or billboard media should also be focused toward the wife, showing children drinking clean water and placed near suburban areas or highly populated urban areas. When considering web based advertising, the top search engine optimization companies in Mexico should be consulted for advice. VJG Interactive is listed as the top ranked company in Mexico, while Sonar Media SC is listed as specifically located within Mexico City. While both companies offer services for search engine optimization, VJG Interactive offers web based development while Sonar Media SC offers social media marketing emphasis. When considering between web based marketing and social media marketing, our main focus for the immediate time frame should be directed at social media marketing. This will allow our marketing focus to be directed toward the potential customers on their media devises without waiting from them to search out our products and services. In the long term focus, consideration should be given to the cost of services provided by each firm. Sonar is listed as having a mid-range price structure while VJG is shown to be on the low-range. Once market foot hold is obtained, switching firms should be given thought or at least used as a negotiating tactic with Sonar Media SC. Considering the promotion aspect of sales, incentives should be in place for all income markets. If at all possible, we should avoid discounting the products price in favor of offering finance options. Making the purchase of our purification systems easier to afford will drive the sales. We may also increase the purchase of higher end, hard wired purification systems by extending the time frame in which the system can be paid in full.
What role could duties, foreign exchange fluctuation, transportation cost, delivery terms play on final price of your product/ service? Are there any legal issues, licenses or economic barriers?
Mexico has provided an effective trade environment for trade between countries, which will prove useful in the current planned expansion and future expansions. Since 1985, Mexico has moved away from the import-substitution approach started in the 1940’s to a more liberalized approach to trade restrictions. Along with becoming a member of NAFTA, Mexico has lowered tariffs and licensing requirements to stimulate trade. Future plans for production within Mexico will open up further trade possibilities with Latin American countries, the European Union and Israel. This is achieved by taking advantage of previously negotiated trade policies between Mexico and the previously mentioned entities.
The Mexican Peso has seen very little fluctuation over the last 5 years, and what fluctuation has occurred has been in favor of the US dollar. With the dollar becoming stronger against the peso, now would be a good time to consider any capital investments in Mexico City. Should the peso increase in strength against the dollar, it would lower our purchasing power for goods and services in Mexico. However, considering the past history of the peso vs dollar, it is not expected that the peso will increase in strength against the dollar. This issue would prove important when considering the transportation costs of our goods, even though transportation throughout Mexico is considered relatively inexpensive. Since the main focus of our expansion and target market is located within the Mexico City metro area, our transportation costs will be lower than if we try to expand to the entire country. Once the market area is saturated, consideration can then be given to expanding to more sparsely populated areas of Mexico.
The retail pricing for different levels of entry into the market, should not be effected greatly by the Mexico City market. It is expected that the current US pricing should models should be consistent due to the lack of tariffs and duties, population density of Mexico City, fairly stable exchange rate and transportation infrastructure. Entry level filtration systems such as faucet mounted filter should run around 230 pesos, or $15 US. Mid-level products such as pitchers should run around 530 pesos, or $35 US. High end whole house system could run anywhere from 7,600 to 15,000 pesos, or $500 to $1,000 US.
No legal or licensing issues are known at this time. With Mexico’s participation in NAFTA, a large amount of bureaucratic obstacles have already been removed. From and economic stand point, economic issues may prove to be the most problematic hurdle. Attention should be paid to the amount of discretionary income the population of Mexico has available for what might be considered a luxury item. If water is already pumped to your home, some might question the need to spend more money on making it pure. Concentration on the healthful benefits of purified water should be a main driving focus during marketing planning sessions. With the initial market expansion primarily focusing on the most densely populated area of Mexico, we may sidestep this economic issue all together during this initial expansion phase. The citizens with the most discretionary income are most likely going to live in the Mexico City metro area. By focusing our marketing on Mexico City and those with the ability to purchase out product, it will give us the ability to gain market share and establish a foot hold within Mexico. Once this is achieved, further consideration can take place towards expanding to less populated areas of Mexico.
Who will be your sales force and why? How culture, values, negotiation styles can impact your marketing and choice of salesforce based on your budget show your forecast sales and return of investment, coming profit.
I plan to use expatriates as my sales force. Mexico has long been popular with those who live north of the border. Mexico boasts one of the strongest economies in Latin America and also has a very strong trade agreement with the US. The capital, Mexico City, is growing at an impressive rate and now boasts excellent opportunities for all budding entrepreneurs. There is however, a big gap between the rich and poor and a fine line between survival and poverty. However, in terms of international business, the country is ranked second highest out of all the Latin countries in terms of high income. The cost of living in Mexico is also very cheap, which means that many expats living here can enjoy a lavish lifestyle.
Business opportunities are plenty in Mexico as it is still largely a developing country and for those people with savings or who are financially secure enough to invest, now is a very good time. It is necessary to have the required visa and work permits before entering Mexico to live and work. The reason for using expatriates is because they have a sense of how American business works. I think that it gives you the best of both worlds. They would be required to be fluent in Spanish and be willing to live in Mexico for long extended amounts of time. I realize that it is sometimes hard for their families, so I would prefer for the families to live there too.
When moving to Mexico as an expatriate here are some things to think about: 1. The rental market in Mexico is generally unregulated. This means that landlords can raise rents at a moment’s notice and tenants have to pay up or leave. 2. There will often be both a Spanish and an English version of all contracts. However, in the event of a dispute, only the Spanish one will be recognized by law. This means that you should always have the Spanish version checked before signing it. 3. In Mexico agricultural lands that are owned by the local community are often offered for sale. If you are living in Mexico and are considering purchasing these lands you should always check the legal status as you may risk losing the land at a later date. 4. Mexico has a value added tax system and 15% tax is included in the price displayed. If your are a business owner you may experience difficulties writing this off against revenue as, in order to do so, you are required to get a "Factura" (an official receipt). Many small businesses are not prepared to provide these as it highlights their revenue to the authorities. You therefore need to be prepared to pay additional taxes on your earnings unless you can purchase from larger stores and businesses. 5. If you plan on entering Mexico as a resident or temporary resident you should be aware that you are only permitted to bring in household effects on a duty free basis once in your lifetime. You therefore need to plan what you bring into the country when you first arrive very carefully. 6. One thing that all expats should know is that bills which are issued before 1993 are worthless. Never accept anything dated before 1993.

References
Morrison and Conaway, Terri and Wayne (2006). Kiss, Bow, or Shake Hands 2nd Edition.
Wikipedia. Retrieved December, 2015, www.wikipedia.org