Toshiba Company’s Entry Plan into the Iraqi Market

Country of entry: Iraq

The Toshiba Company is a multinational organization in the electronic industry. The company has its headquarters in Tokyo and has four divisions, which are Social Infrastructure, Digital Products, Home Appliances, and Electronic Devises. Despite having been in the market for more than six decades, the company has not had any serious business activity in the Iraqi market. The proposed market of entry for the Toshiba Company in Iraq, which is located in the Middle East and has a population of more than 36 million citizens (World Bank, 2013). The demand for electronic devices and digital products in Iraq is high, as all sectors of the economy and the populations are embracing digital technology.

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Profiling Iraq Market

Geographic and historical data

Iraq has a population of 36 million citizens. The country’s capital city is called Bagdad and is the regional business hub. A democratic system governs the county. The country has a stable economy and a dynamic business environment. The majority of the citizens are youths who consist of 35% of the total population. This forms a ready market for Toshiba products (World Bank, 2013).

The political and legal environment

Iraq faces a stable political environment under a federal government. The fact that Iraq is an open economy with minimum controls makes the nation an excellent destination for the Toshiba products. Tariff liberalization in Iraq is particularly good for Toshiba products because it will reduce costs to the customer. As a legal requirement, companies in Iraq are expected by the regulatory authorities to be tax compliant. The taxes are remitted directly to the government. In the Iraq laws of commerce, a certificate of compliance for taxes is issued to a business that remits its returns accurately from which taxes are deducted (April 2010). The Toshiba Company will have to comply with the above laws. This will create an easy environment for its business activities.

Business customs and practices

Manners and customs have an impact on local business since the market is made up of Iraqi Arabs and other immigrants. The differences in mannerism, especially in talking and observance of the different holy days, may result in sharp differences between groups or simply have an impact on the choice of business partners. Therefore, Toshiba Company will have to redefine its social aspect of business in the Iraqi market to minimize the possibility of product rejection (April 2010). Besides, the Toshiba Company will have to create a flexible employee engagement model that gives its employees of Iraqi origin time to celebrate special days to ensure that the locals embrace the company as friendly.

Economic environment

The economy of Iraq operates on the free market economy module. The policies designed by the government are meant to encourage commercial enterprises within the stringent morals of the Islamic religion. Iraq is amongst the leading oil producers in the world. The recent rise in oil prices has increased government spending (World Bank, 2013). By combining the increase in government expenditure with vibrant tourism, transport, and trade, the outcome is a favorable environment to conduct digital and electronic business, such as the model of Toshiba Company. An increase in government expenditure implies that there is more money in circulation, and people can afford to buy the electronic products of the Toshiba Company.

Iraq relies heavily on imports since its industries cannot meet the market demand. The main opportunities for export trade to Iraqi include building material, petrochemical equipment, heavy machinery, electric equipment, health products, computer and support systems, and communication equipment. Since the line of business for Toshiba among the main imports into Iraq, this has created a viable business opportunity for the Japan-based electronic giant.

Socio-economic analysis

The annual average population growth rate in Iraq stands at 3.5%, and this is projected to reach 40 million in 2015. The annual average GDP growth rate is 3.5, and the population’s purchasing power stands at $15,200. Since the majority of the population in Iraq comprises of youths belonging to the age of 20-35 years, the use of the internet, mobile phones, computers, and other digital products have a significant influence on their buying and selling habits. The average Saudi market size stands at US$190 billion, which translates into 0.58 percent of the GDP of the world (World Bank, 2013).

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The tax system of Iraq does not affect personal income. The taxes imposed on profits from businesses range from 25% to 45%. Due to some attractive tax incentives such as the ten-year tax holiday for foreign investors in some parts of the economy, Toshiba Company will enjoy a very long tax break in Iraq. The main language in the Iraqi market in Arabic, followed by the Kurdish and Turkmen. Since Arabic is the national language, the marketing language and branding for the Toshiba products will have to be customized to the Arabic language as a strategy for long term product sustainability. The majority of all imports into Iraq originate from West Europe, which controls over 44% share of the Iraqi’s import market. On average, the USA supplies 18% of imports into Iraq. Japan controls 15% of Iraq’s import market (World Bank, 2013). Originating from Japan, Toshiba has the potential of quickly penetrating the Iraqi market since trade agreements between the two countries are already in place.

Possibility and feasibility of financial, distribution, and marketing partnerships

Market structure and analysis

In the Iraq electronics industry, consumers have several options to choose from since stores provide a variety of electronic products. Despite the presence of many electronic brands such as Samsung and Dell, the Iraqi electronic industry operates as an oligopoly. The industry is dominated by a few producers and retailers of electronic products. These companies control the twenty-three billion-dollar industry. Samsung has the largest market control of 14%, with the other companies sharing the rest of the market. Since Toshiba has divergent products and fairly competitive pricing mechanisms, the best and most affordable market entry strategy would be indirect selling through local distribution networks. These networks have a better understanding of the market besides proper distribution channels that can rival the activities of Samsung and Dell in the Iraqi market.

Currency considerations

The current Iraqi dinar currency’s stability and its minimal fluctuations will auger well with Toshiba’s business profit-making objective. The recent research on economic projection confirms that Iraq has a stable exchange rate on the balance of payments echelon. Besides, the economy also accepts the US dollar, which is more stable and has a global image. The performance of the Iraqi dinar against the Japanese yen was very erroneous over the last five years. It would not be prudent for Toshiba Company to trade in the Iraqi dinar (World Bank, 2013) directly. To survive the currency fluctuation, the Toshiba Company should trade exclusively on the US dollar.

e-Commerce

Several traditional channels are used actively to sell electronic products and services in Iraq. However, most of these channels are expensive due to the large fees they charge as a result of high operational costs in the Iraqi market. Due to the entry of technological advancement, the internet has been the most common means of online selling among the targeted customer segments. More than 59% of Iraqi families have access to the internet and are literate in its use (April 2010). Therefore, Toshiba products may be sold online since the targeted customer segments are active users of the internet in the Iraqi market. The most appropriate e-commerce platform for the Toshiba Company would be direct selling through its current global online shop.

Impact of regional and global trade integration

The Iraqi Standards Organization (ISO) sets the standards for imports to interested companies or countries. The ISO ensures that all business standards are met before permitting a go-ahead for importation as part of the ground rule for regional trade integration. Also, the standardized quality assurance guidelines set by this organization alongside its partners are communicated to the interested importer and penalties for business misconduct. The standards addressed include authenticity of the markings, calibration, testing, inspection, and identification through sampling the goods imported before being released into the market (April 2010). Therefore, the problem of counterfeiting would not affect the business activities of Toshiba in the Iraqi market.

The potential volume of trade

As indicated in the 2013 report on the performance of the electronic industry in Iraq, more than 5 million units were sold in different regions of Iraq (World Bank, 2013). Since Toshiba Company has a strong financial arm and proper distribution channel, the company has the potential of selling at least 200,000 units in the first year of operation since the target entry plan is to control at least 10% of the market share. Through product diversification, vigorous marketing, and systematic product customization, Toshiba Company is likely to triple the units sold within two years of operation since the market is very expansive.

The marketing mix components

Product

Toshiba business will utilize its expertise and innovative capabilities to ensure the development and sale of advanced electronic products that offer varied choices for customers. The brand positioning will be attained through increasing the presence of the business in the company website and other social networking sites.

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Price

As earlier indicated, Toshiba faces stiff competition from various businesses offering perfect alternative electronic products in the Iraqi market. The high-quality and low-price strategy should be applied in the case of Toshiba, particularly to outperform the competitors in the Iraqi market.

Place

Offering the Toshiba products in the right place and time will create the right place strategy for the business. In other words, clients are supposed to get the products when they are in need and at the most convenient place (Winchester, 2006). Since the Iraqi market is dynamic, with relatively poor infrastructure, the Toshiba Company should adopt the business to customer contact strategy to deal with its customers directly.

Promotion

The Toshiba Company should be more active in its promotional undertakings in the highly stratified Iraqi market. The promotion techniques which the business may utilize include advertising, public relations, personal selling, and sales promotions to appeal to the Iraqis.

Key cultural dimensions affecting the marketing operations

In the social dimension of the evaluation of the Iraqi market, the Toshiba Company must tailor its products to suit the accepted cultural norms. Comprehensively, it would be necessary to establish how conversant the people of Iraq are to technological advancements constantly changing across the global arena. Research has it that Iraq, though very populous, has a high percentage of the literate in its population (April 2010). Iraq has a high number of literate young who would-be users of the Toshiba products. The company could take this up as a business opportunity. The provision of patent and trademark rights in Iraq has helped eliminate the chances of fraudulent attempts on a company’s product to ensure that the company is not disadvantaged. Toshiba could take up this as an assurance of the protection to be offered to their products against illegal dealers through the registration process is very expensive in time and cost (Henry, 2010).

Justification of the market entry proposal

Financial Stability and Returns Projection

A comprehensive analysis of the financial reports released by the company of the year 2014 indicates that Toshiba registered a profit of 3,670 million dollars (Toshiba, 2014). Projecting, if Toshiba invests in Iraq, an estimated rise of revenue collection of up to 15% could be registered. It is undeniable that the investment costs will be high, and this may, in turn, be felt on the calculations of the final profit. However, this could be in the short term. With an overtime focusing, this trend might capsize in the years after the second and third years of business in Iraq. The potential Iraqi domestic market share command of Toshiba is around 10% at the end of the first year of a successful entry in the Iraq market. Factually, this is a large market share that may trigger profitability (April 2010).

Economic Market Climate

The inflation rates in Iraq are at a minimum, and the currency management authorities are confident that the rates are not the only minute but also manageable. Thus, it will not have a substantial macro effect on the market demand pillars. Thus, Toshiba’s revenues are projected to increase if it opts to invest in the economy of Iraq. The availability of the market for Toshiba Company in the populous Iraqi market is a positive factor to be integrated into the marketing plan. A rational investor would seize this as an investment opportunity. Consequently, Toshiba stands to gain in Iraq as profits made in the host country are repatriated in the mother country (World Bank, 2013).

Potential risks and appropriate mitigation

Language barrier

The Japanese language is not compatible with the Arabic language used in the Iraqi market. Toshiba may face the challenge of the language barrier, especially when it opts for a direct selling strategy. To turn this risk into an opportunity, Toshiba should use marketers and other personnel of Iraqi origin to ensure that the penetration strategy does not face challenges of language barriers.

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Regulatory risks

There are several regulatory requirements in the Iraqi market. For instance, business registration, labor laws, and importation rules are very stringent and costly to adhere to, especially for a foreign-based company such as Toshiba (April 2010). As part of the risk mitigation, the Toshiba Company should ensure that it follows all the regulation laws since this is a risk that the company has to operate with.

Taxation risks

The double tax regime for foreign companies in the Iraqi market is a serious operational risk to the Toshiba Company. The company can minimize this risk by negotiating with the Iraqi authority through partnership in community projects to get tax breaks (World Bank, 2013). Besides, Toshiba has to increase its revenues by increasing sales volumes to maintain profitability after taxation.

Potential benefits of market entry into Iraq and maximization strategy

Expansion of global market share

Toshiba’s business mission is to be the global leader in the provision of affordable, convenient, and quality electronic products within a sustainable business environment. Therefore, expansion into the Iraqi market will increase company visibility and revenues in the global electronic market. To maximize this benefit, the company should establish an extensive local distribution and supply chain to reach all regions of Iraq.

Increase in global revenues

Through expansion into the Iraqi market, Toshiba has the potential to increase its global revenues as a positioning strategy to enable it to survive competition from other global brands. To maximize this benefit in the Iraqi market, Toshiba has to balance the elements of intangibility, inseparability, and heterogeneity in the 4Ps of its market mix, due to the improved product visibility in Iraq.

Maintaining the global business leadership position

The expansion into the Iraqi market will help the business to maintain its business leadership position as a provider of diverse electronic products. To maximize this benefit, the company should roll out an expansive online and offline marketing strategy within the Iraqi market. As a result, the demand for the company’s products and services will continue to grow since the objective of this expansion strategy is to attract and retain customers who want affordable and high-quality electronic products in the Iraqi market.

Proposed operational strategies

Fitting within the dynamics of the Iraqi market

To increase credibility and maintain product acceptance, the Toshiba Company’s business channel will encompass processes and features that flawlessly facilitate a healthy lifetime relationship between the business and its client. The company should consider using the Arabic language in product branding and market. The company should also consider hiring personnel within Iraq to win the trust of the highly stratified Iraqi society. Lastly, the company’s business model should be integrated within the dominant Islamic culture through the use of friendly language and Islamic symbols on product branding (Winchester, 2006).

Fostering competitive advantage

To sustain business operations in the Iraqi market, Toshiba’s business platform should be modified through the introduction of services such as premium customer experience, compact support for the community, and competitive prices for loyal customers. For instance, the Customer-to-Customer platform proposed may create and successfully implement the marketing strategy to ensure customer loyalty and market expansion (Farris, Bendle, Pfeifer, & Rebstein, 2010). The company’s product multi-branding as a positioning strategy may enable it to survive the competition. For instance, the online shopping platform may be tailed to address individual customer needs. To support this strategy, Toshiba should integrate attractive reward plans for its loyal customers in the form of shopping points that are redeemable, seasonal discounts, and annual rewards.

References

April, F. (2010). Iraq the People. New York, NY: Crabtree Publishing Company.

Farris, P., Bendle, N., Pfeifer, P., & Rebstein, D. (2010). Marketing metrics: The definitive guide to measuring marketing performance. Alabama, AL: FT Press.

Henry M., C. M. (2010). Globalization and the Politics of Development in the Middle East. London, UK: Cambridge University Press.

Toshiba. (2014). Inside Toshiba. Web.

Winchester, M. (2006). Positive and negative brand beliefs and brand defection/uptake. European Journal of Marketing, 42(6), 553-570.

World Bank. (2013). Doing business 2008: comparing regulation in 178 economies. New York, NY: World Bank Publications.

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