Heinz marketing SWOT PEST and Five forces

Executive Summary

F.M.C.G. Company Heinz is the most global U.S. based food company, with a world-class portfolio
of powerful brands holding number 1 and number 2 market positions in more than 50 worldwide
markets. There are many other famous brand names in the companys portfolio besides Heinz itself,
StarKist, Ore-Ida, Plasmon, and Watties. In fact, Heinz owns more than 200 brands around the world
and makes over 5,700 varieties.

The Company was founded in 1869 by Henry J Heinz called Heinz and Noble Company. In the
1870s during the depression the company went into voluntary liquidation. The company was started
up again in 1876 by Henrys relatives John and Frederick the company was called F & J Heinz. In
1888 Henry bought the company back, in 1905 Henry bought the first Heinz British factory. British
made backed beans first came of the lines in 1928 and spaghetti followed in 1930.

We analyse Heinz using S.W.O.T., P.E.S.T. and Porters five forces.

S.W.O.T. Analysis:
Strengths; Brand names, Market Leader and Slogans and Advertising.
Weaknesses; Mature product, Production cost, and other market leaders
Opportunities; Market growth, Brand name and Consumer Feedback
Threats; Competitors and Brand loyalty

P.E.S.T Analysis:
Political Factors; Law, employee legislation and Health and Safety regulations
Economic Factors; National Economy and Labour market
Social Factors; Attitudes and Health conscious, Lifestyle changes and Population
Technological Factors; New product development, Information technology and Infrastructure
Development.

Porters five forces:
Threat of Entry, is high
Threat of Buyers, buying power is low
Power of Suppliers, is low
Threat of Substitutes, is medium
Competitive Rivalry, is medium to high

Introduction

We have carried out a study on the F.M.C.G Company Heinz. Heinz is the most global U.S based
food company, with a world-class portfolio of powerful brands holding number 1 and number 2
market positions in more than 50 worldwide markets. There are many other famous brand names in
the companys portfolio besides Heinz itself, StarKist, Ore-Ida, Plasmon, and Watties. In fact, Heinz
owns more than 200 brands around the world and makes over 5,700 varieties.

In this study we analyses the company using a S.W.O.T analysis, P.E.S.T analysis and Porters
Five Forces.

We also answered the following two questions;

1. Identify 5 characteristics that consumers look for in modern fast-moving consumer food goods.
Compare the characteristics you identify with those identified by someone else in your class.

2. Working in a small group. Brainstorm a series of ideas for the future development of Heinz
Spaghetti. Having identified the ideas, list them in order of viability.

On the information that we gathered and analyses we gave a conclusion of our findings and made
some recommendations that might be useful for Heinz to consider in theyre future businesses
planning.

SWOT Analysis

What is it?
You can use a SWOT analysis to identify and analyze the Strengths and Weaknesses of your
organization, as well as the Opportunities and Threats revealed by the information you have
gathered on the external environment.

Why use it?
To develop a plan that takes into consideration many different internal and external factors, and
maximizes the potential of the strengths and opportunities while minimizing the impact of the
weaknesses and threats.

Strength

h Brand Name; Heinz has a really good reputation for being a quality food, and has done since it
was established in 1869, the founder Henry J Heinz set out to bring quality and consistency to the
consumers homes and the brand has carried this quality on through the years.

h Market Leaders; Today Heinz is one of the worlds major global companies operating in some
200 countries, offering more than 5,700 products varieties, with No1 and No2 branded business in
more than 50 world-wide markets.

h Slogans & Advertising; Heinz has always been famous for it advertising and always on the
forefront of new and exciting advertising and promotions Heinz used different ways of adding fun
and interest. The Beanz Meanz Heinz advertising slogan is one of the most successful of all time
V it appeared for 22 years.

Weaknesses

h Mature Products: Many of Heinz products have been around for years and may be declining in
sales as a result of changing consumer tastes. I.e. the product life cycle may be in decline.

h Production Cost: Heinz has 5,700 product varieties but are only No1 and No2 branded
businesses in 50 markets worldwide. Therefore some of the products there are producing may
actually be costing them money to produce and distribute.

h Other market leaders: In the markets were Heinz is not the market leader the price of the
products may need to be determined by the price of the product that is the market leaders.

Opportunities

h Market Growth: As the market of Low fat foods and convenience foods grow Heinz needs to
make the best of this opportunities as they already have some presence in these markets.

h Brand Name: Heinz has made a creative partnership with Walkers Crisps to launch Heinz
Tomato Ketchup Flavour Crisp. As Heinz has a good reputation for good quality traditional products
they should try and look for more companies with modern products to go into partnership with in
order to bring there traditional products into the modern FMCG markets.

h Consumer Feedback: Heinz receive a lot of feedback from their customers and they use this
information to there full advantage, Heinz knows that the innovation process depends on generating
a stream of new ideas, Heinz analysis consumer feedback and buying habits to help with new
product development.

Threats

h Competitors: Are always a threat to any company. Heinz has many product lines and therefor
there are many Companies that may cause a threat to Heinz. E.g. Bachelors and HP Sauces.

h Brand Loyalty: As there are some many different brands in the same product lines, there is a
great choice of variety and variance in prices available to the consumer. Therefore brand loyalty is
not as common these days as in previous years.

P.E.S.T Analysis

What is it?

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is
an acronym for the Political, Economic, Social, and Technological factors of the external macro-
environment.

Why use it?
Such external factors usually are beyond the firm's control and sometimes present themselves as
threats. However, changes in the external environment also create new opportunities. As a company
had no control over these factors, it should understands and be able to anticipate and take
advantage off changes within their environment.

Political Factors

h Heinz will at all times comply with the law. It will be normal practice to comply with Government
guidelines and relevant codes of practice in labeling and advertising.

h All employers are required to conform to the now mandatory workweek and to comply with the
wage legislation- minimum wages and overtime.

h Heinz had to make all the necessary changes to comply with the Industrial Health & Safety
Regulations.

Economic Factors

h The state of National Economy V The sales of many of Heinz products may fluctuate depending
on the rise and fall of our economy: High disposable income more money to spend on luxury items
i.e. meat products. Low disposable income less money to spend purchase of necessary items only
i.e. pasta, beans, and potatoes.

h The labour market V When there is a tight labour market it is a sellers market for employees and
causes a wage increase, thus Heinz would find it hard to recruit employees and would incur high
wage expenses. When there is a loose labour market it buyers market for employers and cause a
wage decrease, thus Heinz would find it relatively easy to employ staff at a low wage rate.

Social Factors

h Attitudes & Health Consciousness V People have become more health and weight conscious,
Heinz have moved to meet these changes in consumer attitudes i.e. Low V Fat Range, organic
versions of some of there icon brands, Heinz's Company Nutrition Team will be able to discuss
complex dietary needs or answer specific questions on product ingredients.

h Lifestyle Changes V Many of todays consumers do not want to spend time cooking due to
hectic lifestyles, so Heinz have created products that can be effortlessly cooked, in convenient
packaging that can be eaten from the microwave, and products that can be eaten on the move.

h Population/ Age Distribution V Heinz have many products in traditional markets which are well
known to the older generation in our population, Heinz have joined forces with companies that have
products in the more modern markets to attract the younger generation of our population i.e.
Walkers to create a new and unique flavoured crisp Heinz Tomato Ketchup Flavour.

Technological Factors

h New Product Development V Heinz knows that the innovation process depends on gathering a
stream of new ideas from various sources e.g. customer feedback, market research and employees.
By encouraging these new ideas, Heinz can also focus on those, which meet consumer needs and
are practical for the market place.

h Information Technology V Heinzs likes to keep up with fast moving technology. Heinz
relaunched their salad cream in 2001. A new web site has been created to compliment the brand
repositioning as well as television advertisements thus providing a mix of communication routes to
meet new technology demands.

h Infrastructure Technological Developments V During the past number of years there have vast
changes in infrastructure and Heinz needed to change their transport procedures to meet these
developments. Heinz makes 1.5 million cans of baked beans every day and the same number of
soups. Heinz uses enough tomatoes to fill an Olympic size swimming pool. This will give you some
idea of the amount of goods that need to be transported to and from Heinz factories.

Porters Five Forces
What is it?
Force Field Analysis is a technique based on the premise that change is a result of a struggle
between forces of resistance (forces that impede change) and driving forces (forces that favor
change). By using Force Field Analysis, you can learn which course of action will be the best one to
implement because it will have the most driving forces and the least resistant forces.
Five forces look at five key areas namely the threat of entry, the power of buyers, the power of
suppliers, the threat of substitutes, and competitive rivalry.

Why use it?
To determine the best course of action to take.

Threat of Entry

Entry Barriers are low and Exit Barriers are low so firms can easily enter and leave the industry.
Entry Barriers are low as raw materials are easily accessible, and there are no government policies
prohibiting entry into the market. Exit Barriers are low so poor performing companies can easily exit.

Threat of Buyers

The power of buyers is the impact that customers have on a producing industry. Buying power is low
as Heinz products are very evenly distributed between large players in the market and small
distributors. Heinz products are easily purchased by the buyer.

Power of Suppliers

A producing industry requires raw materials - labour, components, and other supplies. This
requirement leads to buyer-supplier relationships between the industry and the firms that provide it
the raw materials used to create products. The power of suppliers to Heinz is low because they do
not depend on any particular supplier i.e. raw materials are easily obtained. Many of Heinz suppliers
may depend more on Heinz than Heinz depends on them i.e. Heinz use enough tomatoes a day to
fill an Olympic sized swimming pool.

Threat of Substitutes

In Porter's model, substitute products refer to products in other industries. A close substitute product
constrains the ability of firms in an industry to raise prices. The threat of substitute to Heinz is
medium made up of a contribution of high and low factor. Products with a high threat of substitute to
Heinz are other products that are quick and convenient these products compete with Heinz on price
i.e. Own Brands, Homestead and Tesco. E.g. Substituting Bean for Spaghetti. Low threat to Heinz is
that Heinz all ready has a large product mix with products already in the markets that would be
considered as a substitute. When the consumer is more quality conscious than price conscious
Heinz products will nearly always out sell the cheaper product i.e. Heinz long established good
quality brand name.

Competitive Rivalry

This force describes the intensity of competitors between existing players (Companies) in an
Industry.
Competitive Rivalry to Heinz is medium to high. There is a threat of substitute products not only from
the Heinz label itself i.e. substituting Heinz beans for Heinz spaghetti but also from other competing
brands e.g. Bachelors and Tesco, however supplier and buyers in the market do not attempt to
control i.e. number of competitors is high in the market but however product differentiation is low
between competitors.

History of Heinz

Heinz began in the USA, with an American boy, barely one third of a hectare of land, and a horse
and cart. Heinz as a company was established in 1869.

Henry J Heinz was an industrious young lad at the age of 15 he took the first step into
convenience foods. By bottling horseradish in clear glass jars Henry Heinz was clearly different
to other manufacturers who bottled their goods in coloured glass jars to hide the cheap fillers used to
add to the ingredients. Here was a product you could trust, because you could see exactly what you
were getting, Henry believed in offering quality products to consumers.

In 1869 he set up a brick-making and food business with a friend, L C Noble. But then trouble struck
even, Heinz and Noble Company could not ride out the depression of the 1870s and the company
went into voluntary liquidation.

Henry J Heinz however persuaded his brother John and cousin Frederick to put up the money he
needed to start again. In 1876 Henry became the manager of F & J Heinz Company, in 1888, Henry
bought out his relatives and the company H J Heinz the company was born.

In 1886 Henry made his first trip to Europe, the world famous grocery store in Piccadilly, London
stocked seven varieties of his products. In 1905, he bought the first British factory; a pickle
manufacturer called Batty and Company for the Heinz business. British-made backed beans first
came off the line in 1928 and spaghetti followed in 1930.

Even back in the 1800s, Heinz was famous for its advertising. The late 1950s saw the arrival of
commercial television and the early Heinz commercials quickly established the superior quality of
Heinzs products.

Always on the forefront of new and exciting advertising and promotions Heinz used different ways of
adding fun and interest. In 1961, a groundbreaking promotion was organised, giving away 27 mini
minors to 57 lucky Heinz soup fans. Britain had never seen a prize competition quite like it.

Now a days Heinz is the most global U.S based food company, with a world-class portfolio of
powerful brands holding number 1 and number 2 market positions in more than 50 world-wide
markets. There are many other famous brand names in the companys portfolio besides Heinz itself,
StarKist, Ore-Ida, Plasmon, and Watties. In fact, Heinz owns more than 200 brands around the world
and makes over 5,700 varieties.

Case Study Questions

Question 1.

Identify 5 characteristics that consumers look for in modern fast-moving consumer food goods.
Compare the characteristics you identify with those identified by someone else in your class.

h Price is important to student A, while brand and reputation is more important to student B than
price

h Quality is important for both students, Student A; a cheap product with good value and for
student B; a quality product for the price paid.

h Taste is important for student A, while for student B a quick and convenient product is important.

h Student A the most quantity for the cheapest price and for Student B packaging is important, that
the product looks modern and attractive.

h What the product contains is important for both students but in different ways, Student A wants
the product to be good for them and not to contain artificial ingredients but for Student B the source
of the product and where the raw materials came from is important.

Student A. May be the type of person who looks for value for money and is not to interested in
modern day marketing, but more interest in a good quality natural product at the cheapest possible
price available.

Student B. May be the type of person who has a very busy life style, likes popular modern products
and is willing to pay the going price for such a product. Also the source of origin is a very modern
day concept in food products, with the awareness of BSE in Beef and chicken been feed artificial
foods.

Question 2.

Working in a small group. Brainstorm a series of ideas for the future development of Heinz
Spaghetti. Having identified the ideas, list them in order of viability.

h Microwaveable pot; Take the spaghetti out of the can and put it in a microwaveable pot so people
can have it as a quick and convenient snack.

h Full Meal; Make the spaghetti a full meal that is quick, convenient and easy to cook but still a
nutritious filling evening meal. E.g. Spaghetti with Chicken pieces and Basil.

h Recipes; Design recipes for meals that contain Spaghetti that the consumer can cook, possibly 4
recipes and put one recipe on the label on the back of each can, so that the consumer can cook their
own meals that contain spaghetti.

h Lunch Meals; Make a spaghetti product that can be eaten cold, E.g. Spaghetti with peppers and
in the packaging include a small plastic fork

Conclusion

In conclusion to the study we carried out on Heinz we found that:

h Heinz relies heavily on their good brand name and reputation, good quality products and a long
established company.

h The market that Heinz competes in is very competitive and has many rivalry bands all aiming to
be top of the market.

h Heinz is a large company with over 200 brands, it also has a large product mix with 5,700
varieties of products.

h Heinz main competitors are own brand products that sell their products at a very low price. E.g.
Tesco and Homestead.

h Heinz pay a lot of attention to the change in consumer habits and change their traditional
products to suit the every changing consumer needs and wants. E.g. Microwave able packaging for
theyre traditional baked beans.

Heinz knows how to use their advantage and disadvantages to their best possible potential and to
capitalise on all opportunities. This is what makes Heinz the most global U.S based food company,
with a world-class portfolio of powerful brands holding number 1 and number 2 market positions in
more than 50 worldwide markets.

Recommendation

Heinz has 5,700 varieties of products but is only No1 and No2 in 50 markets. Heinz should take a
good look at their product mix and the products that are not selling well. They should research why
these products are not selling well and come up with some ideas to improve the sales of the
products, if the ideas are not viable they should consider discontinuing some of the products. As
they may be actually costing Heinz more money to produce than the profit they make from the sales
of the product.

INTUNES IN BRAZIL
THE ITUNES ONLINE MUSIC STORE FEASIBILITY STUDY


TABLE OF CONTENTS

TITLE PAGE 1
TABLE OF CONTENTS 2
INTRODUCTION 3
MACRO ENVIRONMENTAL FACTORS 7
MARKETING MIX 5
HOFSTEDE MODEL ANALYSIS 6
BEHAVIORIAL IMPLICAITONS 7
CONCLUSION 8

INTRODUCTION

The landscape of music industry sales has changed within the last 5 years with the changing
technology innovations of computers and the dependency on the Internet. The issue of competition
has leveled out due to the ability of services ands products being marketed globally using the
Internet. Most importantly, the distance between "buyer" and "seller" has shrunk. Therefore, the
"buyer" has gotten more choices and quality when it comes to music. Issues still do exist in the
music sales industry. As technology has changed from the 8-track, to cassette tape, to CD, and now,
to the music download, the industry has dealt with the issue of piracy. While it is easier to sit down
and download music illegally on your computer (with the ramifications of criminal recourse), there
are services currently out there that provide legal alternatives for customers to download their
favorite music from the Internet. The objective of this study is to determine the feasibility of
introducing and selling the iTunes Music Store (iTMS) in Brazil. Macro environmental factors will be
analyzed, the marketing matrix will be put into perspective and the Hofstede data will be put into
detail.
The iTunes Music Store is an online music service run by Apple Computer through its iTunes
computer application. Opened on April 28, 2003, the Store proved the practicality of online music
sales. As of February 2006, the Store had sold over 1 billion songs, or more than 80% of worldwide
online music sales. Downloaded files come with restrictions on their use (as stated above to combat
online music download piracy), enforced by FairPlay, Apple's version of digital rights management.
Debuting on April 28, 2003, the iTunes Music Store was the first online music store to gain
widespread media attention. Unlike previous services such as Rhapsody and MusicNet, Apple's
store allows the user to purchase songs and transfer them easily to the iPod through iTunes. The
iPod remains the only digital music player that works with the iTunes Music Store, although some
other digital music players work with iTunes (as well as Motorola cell phones). The store began after
Apple initiated deals with all four major record labels, EMI, Sony BMG (which at the time was still the
separate Sony Music Entertainment and BMG), Universal and Warner Bros. Music by more than 600
independent label artists were later added. The total offering includes more than 2,000,000 songs,
including exclusive tracks from more than 20 artists. Each song can be downloaded for 99 US cents.
Free 30-second previews are available of every song. Most albums are priced at 9.99 US dollars,
although some longer-than-average albums cost more, and others less. The user can burn
downloaded songs to an unlimited number of compact discs, and specific playlists up to seven discs.
Currently, the iTMS, is available to consumer whose billing address is in Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Greece, Republic of Ireland, Italy, Japan,
Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, and
United States. On June 15, 2004, the iTunes Music Store was launched in France, Germany, and
the United Kingdom. Songs were priced at 99 Euro cents ( 0.99) for France and Germany, and 79
pence (0.79) for the United Kingdom. According to an Apple Press Release, the European iTunes
Music Stores sold a combined total of 800,000 songs in one week, with 450,000 of those songs sold
in the UK. On October 26, 2004, nine more countries were added to the iTunes Music Store in a
large EU store expansion: Austria, Belgium, Finland, Greece, Italy, Luxembourg, the Netherlands,
Portugal, and Spain. This extended availability to all countries in the Euro-zone except for the
Republic of Ireland, where the iTMS became available on January 6, 2005. These countries also pay
0.99 for songs, and all these stores share the same catalog and are available only in English. The
French, German, American, and British stores are localized for their respective countries and have
different catalogs. On December 3, 2004 the British Office of Fair Trading referred the iTunes Music
Store to the European Commission because it prevents consumers in one EU country from buying
music from stores in other EU countries, in violation of EU free-trade legislation (the immediate
cause of the referral was because the 0.99 price charged in the Euro-zone equates to 68 pence in
sterling, rather than the 79 pence actually charged there). The iTunes Music Store was launched in
Canada on December 3, 2004 (where Canadian customers pay $0.99 (CDN) per song). In May
2005, the iTunes Music Store was launched in Norway, Sweden, Switzerland and Denmark, after
about two weeks of speculation about these countries (and Australia) receiving the store. A major
crowning achievement was in August 4, 2005, where Apple officially launched the iTunes Music
Store in Japan on, with 1 million songs available, and 90% of songs are priced at 150 yen. This
marked the first time the iTMS was introduced outside the US and Europe). In the next four days
after the store had sold one million songs (which out paced that of the U.S. store). This opening to
the world's second largest music market, where iPod controls about 30% market share, came after a
long delay. In addition, Apple failed to have one set price for singles. Pundits have speculated that
this may indicate the introduction of new price structure to the rest of the stores in future, in favor of
record labels who would like to see higher prices for new songs. The iTunes Music Store was
launched in Australia on October 25, 2005, where Individual songs were priced at AUD$1.69 per
track, and album prices varied but are generally priced at $16.99. The recent release of video-
capable iPods also saw the store launch with music videos and short films by Pixar available for
$3.39 each, although TV episodes are not currently available. Stores in the Coles Myer retail chain
sell iTunes Music Cards in denominations of $20, $50 and $100. Access was inadvertently given to
some people in New Zealand, too. Failed negotiations with the Sony BMG label (which had delayed
the launch of the Australian iTMS significantly) meant that none of that label's artists were available
at the time of launch. Sony music was later added starting on January 17, 2006.

MACRO ENVIROMENTAL FACTORS

Macro environmental factors include all factors that can influence an organization, but that are out of
direct control. A company does not generally influence any laws (although it is accepted that they
could lobby or be part of a trade organization). It is continuously changing, and the company needs
to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization
means that there is always the threat of substitute products and new entrants. The wider
environment is also ever changing, and the marketer needs to compensate for changes in culture,
politics, economics and technology. Examples are:
- Economy - Effects of inflation, business cycles, employment trends, retail and commercial activity,
construction activity and availability of capital.
- Demographics - Effects of trends in size, age distribution, education, diversity, income and
geographic distribution of the population.
- Social and cultural factors - Changes in consumer values and lifestyles that affect the purchasing
behavior of the target market.
- Politics/law - Effects of regulation and legislation.
- Technology - Changes in technology affecting not only products and services but their delivery.
- Natural environment - Ecological or other natural concerns--flooding, earthquakes, pollution, etc.--
that may affect the organization's markets or operations.
This way to analyze whether convergence or divergence exists in Brazil is to do a PEST analysis. A
PEST analysis is an examination of the external macro-environment that affects all firms. P.E.S.T. is
an acronym for the Political, Economic, Social, and Technological factors of the external macro-
environment. As stated above, such external factors usually are beyond the firm's control and
sometimes present themselves as threats. For this reason, some say that "pest" is an appropriate
term for these factors. However, changes in the external environment also create new opportunities
and the letters sometimes are rearranged to construct the more optimistic term of STEP analysis.
Many macro-environmental factors are country-specific. Yet, the number of macro-environmental
factors is virtually unlimited. In practice, the firm must prioritize and monitor those factors that
influence its industry. Even so, it may be difficult to forecast future trends with an acceptable level of
accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of
uncertainty in important macro-environmental variables.
(Insert Pest Analysis Here)

MARKETING MIX

The marketing mix approach to marketing is a model of creating and executing marketing strategies.
It specifies the "mixing" of various factors in such a way that both organizational and consumer
(target markets) objectives are attained. When applying the model for marketing mix, marketers
must consider their target market (in this case, Brazil). They must understand the wants and needs
(Maslow described four categories of human needs, named as conative needs, cognitive needs,
aesthetic needs and neurotic needs) of the market (in which the customer is buying music) then use
these mix elements in constructing an appropriate marketing strategies and plans that will satisfy
these wants. The mix must also meet or exceed the objectives of the organization. In some cases, a
separate marketing mix is usually crafted for each product offering or for each market segment,
depending on the organizational structure of the firm. In this case, it is important for a savvy,
internet-based market to be in place to be successful (so one marketing mix should be feasible).
Marketing decisions generally fall into four controllable categories (subject to internal and external
environmental constraints), product, price, placement, and promotion.
The product side of the marketing mix refers to the tangible (or physical) products as well as
services. In marketing, a product is anything that can be offered to a market that might satisfy a want
or need. The overall goal is the complete bundle of benefits or satisfactions that buyers perceive
they will obtain if they purchase the product. It is the sum of all physical, psychological, symbolic,
and service attributes. Some things to consider when it comes to product decisions are brand name,
functionality, quality, packaging, etc. In this case, Apple is looking to market there Itunes online
music store to Brazil. Itunes offers music and videos (television shows, music videos) a la carte
downloaded from Apples servers to the customer's computer via an internet link. There are three
aspects to any product (or service in this case). The first would be core benefits. Does a consumer
get in-use, psychological, or problem reducing benefit? The core benefit that Apple is affording it's
customers is music. The main thing (problem reduction) going for the online store compared the
common compact disc is that you can go online, 24 hours a day, 7 days a week, from the
convenience of your home and buy music. The second aspect is tangible service. Does the service
have a quality or style to it? Just by research alone, Apple derives approximately 40% of its revenue
yearly from its Itunes Online Music store and Ipod portable music player. There is a certain positive
brand name when Apple is associated with music. The third aspect is augmented services (i.e.
installation, delivery, maintenance). A good portion of this doesn't apply, for the exception of
maintenance. The online store will suspend a download if your internet connection goes down and
resume later.
Pricing is the process of applying prices to purchase and sales orders, based on certain factors.
These factors are fixed amount, quantity break, promotion or sales campaign, specific vendor quote,
etc. The selection of a price for a service (Apples case of a la carte pricing for a song for example)
should have three things working for it; the price should achieve the financial goals of the firm. Does
the price, in the end, bring the company profitability? The next criterion is affordability. By setting a
price, will your customer's use your service and buy the music? Lastly, does the price support a
product's positioning and be consistent with other variables in the marketing mix (does your
placement dictate a high price). From the marketers point of view, an efficient price is a price that is
very close to the maximum that customers are prepared to pay. In economic terms, it is a price that
shifts most of the consumer surplus to the producer. To determine the price of a download, you first
need to verify the current price in US terms. Currently, the price of a music download in the US is
$.99. Considering the conversion between the US dollar and the Brazilian Real is: 1 Brazil real =
0.468121 U.S. Dollars. Thus, the price would be about 2.11 Real. The next step in the process is to
identify whether or not a consumer in Brazil would pay that much for a download. One comparison
that can be made is the purchase of compact discs. Let us say that the price of a compact disc is
US$15 in Brazil. If we consider the fact that median household income is about eight times higher in
the USA than in Brazil, the comparable price would be US$15 x 8 = US$120 per compact disc in the
USA. Now, it would certainly be difficult to imagine how anyone in the USA would pay such a high
price, one that is completely out of line with the costs of production. Furthermore, the remarkable
thing is that all of the recorded music producers felt that it was necessary to have keep their prices at
this same level. Taken into consideration, it would be a lot harder for consumers to purchase
compact discs at this price, so then we would need to consider the single download price to be a
sufficient legal way of acquiring music.
Placement is about getting the products to the customer. Some examples of placement decisions
are distribution channels, market coverage, inventory management, and order processing. With
comparison to other main stay distributors of compact discs, the Itunes Online Music store comes to
you at your home. This makes it a better convenience for many people. The store can extend out to
a wider range of music lovers and can sell at a price that people can afford. The main question
would be does Brazil has the amount of computer users at home to be able to have access to the
online store? In a survey as early as last year in Brazil only about 10 per cent of the population (170
million people) has home computers. Yet, Brazil's President, Luiz Inacio da Silva, is keen to bridge
what he perceives to be a huge technology gap between Brazil and more advanced economies. This
needs in tune with whether or not Apple perceives an investment into the biggest economy in South
America feasible with only a small percentage of homes having computers.
Promotion represents the various aspects of the marketing communication. This is the
communication of information about the product with the goal of generating a positive customer
response. Some promotional decisions include strategy (weather or not to use push or pull,
advertising, and sales. A promotional plan can have a wide range of objectives, including: sales
increases, new product acceptance, creation of brand equity, positioning, competitive retaliations, or
creation of a corporate image. Promotion in Brazil can not only span the computer user initiative
(which could be a potential hindrance), but also in paper print, television, and radio. It would be on
the same range as other music initiatives (compact discs in brick and mortar buildings).

HOFSTEDE MODEL ANALYSIS

The information in the table below describes the Hofstede Country scores for Brazil and the United
States:

Figure 1: Hofstede Dimensions for Brazil

Figure 2: Hofstede Dimensions for the United States
Country Abbreviation GNP/cap PDI IDV MAS UAI LTO
Brazil Bra 3,060 69 38 49 76 65
United States USA 34,870 40 91 62 46 29

Table 1: Hofstede Dimensions summarized for the USA and Brazil

Figure 3: Side by Side comparison of the USA and Brazil
Brazil is similar to many Latin American countries when analyzing Hofstede's Dimensions (see
Figure 4 below):

Figure 4: Hofstede Dimensions for Latin American Countries
The Hofstede Dimensions are noted as the Power Distance Index (PDI), Individualism (IDV),
Masculinity (MAS), Uncertainty Avoidance Index (UAI), and Long-Term Orientation (LTO). The best
way to identify chances of success of the Itunes online music store is to compare dimensions for
where the store is already profitable: the US.
The Power Distance Index (PDI) focuses on the degree of equality, or inequality, between people in
the country's society. A High Power Distance ranking indicates that inequalities of power and wealth
have been allowed to grow within the society. These societies are more likely to follow a caste
system that does not allow significant upward mobility of its citizens. A Low Power Distance ranking
indicates the society de-emphasizes the differences between citizen's power and wealth. In these
societies equality and opportunity for everyone is stressed. Brazil scores a 69 for PDI with respect to
40 for the USA (This is indicative of a greater equality between societal levels, including government,
organizations, and even within families. This orientation reinforces a cooperative interaction across
power levels and creates a more stable cultural environment). There is a significant comparison to
dependency here. People will side to a tendency on relationships with friends and family, while in the
USA; there is a focus on independence. In the case of the online music store, people in Brazil might
weigh more on decision making on other people rather than themselves (as people in the USA
would make their own decisions about the store).
Individualism (IDV) focuses on the degree the society reinforces individual or collective achievement
and interpersonal relationships. A High Individualism ranking indicates that individuality and
individual rights are paramount within the society. Individuals in these societies may tend to form a
larger number of looser relationships. A Low Individualism ranking typifies societies of a more
collectivist nature with close ties between individuals. These cultures reinforce extended families and
collectives where everyone takes responsibility for fellow members of their group. Brazil has a
slightly higher Individualism (IDV) rank of 38 compared to the average Latin population score of 21
(see figures 1 and 4). However, virtually all the Latin countries are considered to be Collectivist
societies as compared to Individualist cultures. This is manifest in a close long-term commitment to
the member 'group', be that a family, extended family, or extended relationships. Loyalty in a
collectivist culture is paramount, and over-rides most other societal rules. There is a major difference
between the USA and Brazil with respect to individualism. The high Individualism (IDV) ranking for
the United States indicates a society with a more individualistic attitude and relatively loose bonds
with others. The populace is more self-reliant and looks out for themselves and their close family
members. This shows more of a individualistic nature towards products. Most of Apples products,
from the online store the iPod, would be considered trendy, and thus something that would be
accepted. In Brazil, the online store would be more socially accepted on a national scale to be
successful. The issue with the derivation on change would be the main sticking point.
Masculinity (MAS) focuses on the degree the society reinforces, or does not reinforce, the traditional
masculine work role model of male achievement, control, and power. A High Masculinity ranking
indicates the country experiences a high degree of gender differentiation. In these cultures, males
dominate a significant portion of the society and power structure, with females being controlled by
male domination. A Low Masculinity ranking indicates the country has a low level of differentiation
and discrimination between genders. In these cultures, females are treated equally to males in all
aspects of the society. There is a moderate difference between the scores of Brazil (49) and the
United States (62). With respect to the USA, the country experiences a higher degree of gender
differentiation of roles. The male dominates a significant portion of the society and power structure.
This situation generates a female population that becomes more assertive and competitive, with
women shifting toward the male role model and away from their female role. This would discriminate
more between cultures particularly with respect to values relating to winning, success, and status
(which using considerably in advertising and marketing). The advertising of the music store would
have to be toned down a notch with respect to how it's done in the USA (to pertain more to the
feminist side of the country).
Uncertainty Avoidance Index (UAI) focuses on the level of tolerance for uncertainty and ambiguity
within the society - i.e. unstructured situations. A High Uncertainty Avoidance ranking indicates the
country has a low tolerance for uncertainty and ambiguity. This creates a rule-oriented society that
institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty. A Low
Uncertainty Avoidance ranking indicates the country has less concern about ambiguity and
uncertainty and has more tolerance for a variety of opinions. This is reflected in a society that is less
rule-oriented, more readily accepts change, and takes more and greater risks. Brazil's highest
Hofstede Dimension is Uncertainty Avoidance (UAI) is 76, indicating the society's low level of
tolerance for uncertainty. In an effort to minimize or reduce this level of uncertainty, strict rules, laws,
policies, and regulations are adopted and implemented. The ultimate goal of this population is to
control everything in order to eliminate or avoid the unexpected. As a result of this high Uncertainty
Avoidance characteristic, the society does not readily accept change and is very risk adverse. This
compares to the USA with a score of 46. The low ranking in the Uncertainty Avoidance Dimension is
indicative of a society that has fewer rules and does not attempt to control all outcomes and results.
It also has a greater level of tolerance for a variety of ideas, thoughts, and beliefs. Brazil would of all
likelihood have an issue with an acceptance of a new product. The swaying factor would be global
convergence with an acceptance of technology to balance a culture of uncertainty avoidance.
Long-Term Orientation (LTO) focuses on the degree the society embraces, or does not embrace,
long-term devotion to traditional, forward thinking values. High Long-Term Orientation ranking
indicates the country prescribes to the values of long-term commitments and respect for tradition.
This is thought to support a strong work ethic where long-term rewards are expected as a result of
today's hard work. However, business may take longer to develop in this society, particularly for an
"outsider". A Low Long-Term Orientation ranking indicates the country does not reinforce the
concept of long-term, traditional orientation. In this culture, change can occur more rapidly as long-
term traditions and commitments do not become impediments to change. Brazil (with a score of 65)
direct comparison to the United States (score of 29) shows a potential boundary for acceptance of a
new product.

BEHAVIORAL IMPLICATIONS
BRAND PERSONALITY TRAITS, EMOTIONS IN ADVERTISING AND COMMUNICATION AND
CULTURE
Marketers seek to develop or align the expectations comprising the brand experience through
branding, so that a brand carries the "promise" that a product or service has a certain quality or
characteristic which make it special or unique. A brand image may be developed by attributing a
"personality" to or associating an "image" with a product or service, whereby the personality or
image is "branded" into the consciousness of consumers. Brand Personality is defined to be the
attribution of human personality traits (seriousness, warmth, imagination, etc.) to a brand as a way to
achieve differentiation. This is usually done through long-term above-the-line advertising and
appropriate packaging and graphics. These traits inform brand behavior through both prepared
communication/packaging, etc., and through the people who represent the brand - its employees.
What makes the Itunes Online Music store a unique instance with respect to other services or
products because of the technology factor. Through changes from other innovations (i.e. the
cassette to the CD), the consumers in Brazil has shown a convergence nature. Younger groups
have related to the image of the music store (with many older generations resistant to change). This
can be conceived as youthful attribution to brand personality.
A common tread into what and how consumers brand and differentiate products would be the use of
emotion. Thus, marketing and advertising will play on these emotion in advertising to sway people
toward a product. The problem with this is the interpretation of what emotions a consumer might feel
about said product. For example if the product is being marketed in Japan and it's supposed to
convey a feeling of comfort in a time of need, the ability to play on the emotions of a consumer to
buy the product or invest in a service might be misconstrued do to the way the advertising is pitched.
This brings up the idea of rational vs. emotional advertising. This choice depends on the nature of
the product and the type of relationship that consumers have with it. Overall, the desired consumer
end result will depend on how you pitch the advertisement.
What ties brand personality traits and emotions is how you communicate. The concept behind this
can be conveyed through the classic communications model. Researchers have developed a model
that depicts the relationships among the various factors that influence the effectiveness of
persuasive communications. The figure below depicts the process:

Figure 5: The Communication Process
The communications model specifies that a number of elements are necessary for communication to
be achieved. The components are as follows:
Source: An individual or character who is delivering the message.
Message: Content and execution of the message itself.
Receivers: Interpret the message.
Feedback: Information going from receiver to source (or marketer behind source).
Much of the behavioral implications that might be taken into consideration can be breaking do was to
who will be the source of the message (Man, woman, child, celebrity, athlete). As the message is
constructed, should the message emphasize negative consequences, show a direct comparison with
competition or present a fantasy? When speaking about what media will transmit the message, what
would the Itunes Music Store use? Print ad, television, door-to-door, Web site (through a computer
which is the most obvious)? Yet, most importantly, what are the characteristics of the target market?
Are they young, old, frustrated, status-oriented? As this all intertwines together, you can see how
your product can use emotional targeted advertising to achieve a certain brand in the eyes of the
consumer. Much of the foreign markets (as even compared to the US) see the Itunes and Itunes
related products as something hip, young and cool with visions of people in the early twenties
walking around in the own little world listening to their iPod with the music they downloaded from the
iTunes Music Store. While a French student is walking around in Paris, a group of teenage
Japanese girls are downloading new tunes from their favorite band.

CONCLUSION

The report can be summed up by making one strict comparison to determine if this service would be
feasible. As stated before, the store is currently available in Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Greece, Republic of Ireland, Italy, Japan, Luxembourg, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom, and United States.
The GNP/cap on average for all the countries on this list span from the low end of $10,000 to the
high end of $34,000 (statistics on Luxembourg were unavailable). The GNP/cap of Brazil is three
times less the low end. This can coincide in line with the pricing model being a concern. While
adapting the general pricing to the Real, the common household makes 8 times less then the US
household. Another potential roadblock is the percentage of homes noted in the report that do have
computers. With only 10% of homes in Brazil having computers, the extent of the market via home
based consumers will be a major concern. While this might be dire situation, recommendations to
the marketing manager might look to 5 years from now where technology and GNP/cap could
change the outlook on whether to market the service. With the comments made within the last year
by the president to embrace technology, the country shouldn't be too behind in getting into the
stream of the things with the rest of the world. Besides that, Brazil is the biggest economy in South
American, so it would be a logical place to start.