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Part 1 Analysis

CASE STUDY

Tokai Guitars
director of Tokai, and agreed a deal to import the companys guitars once more into the UK. This started as a small operation and the products began to trickle into the UK. Shortly afterwards Nick Crane approached Bob Murdoch, who had 25 years experience in the music wholesale and retail business. Bob Murdoch saw the potential of these instruments on the European market and became a partner in Tokai UK in early 2002. The company began by working from a small garage, but over the subsequent 18 months turnover increased by 200 per cent and they are now selling into Ireland, Italy and Spain. They had a huge market in Germany but, as we will see later, have now pulled out of the market. Tokai UK now operates from premises on an industrial estate at Dinnington, South Yorkshire. Nick Crane left the company to follow other interests in Spain; Bob Murdoch bought out his partner and now has overall control of Tokai UK and plans to launch Tokai across the panEuropean market. Objectives Bob Murdochs objectives for Tokai UK are:
s s

History of Tokai and birth of Tokai UK The Tokai Company was founded in 1947 in Hamamatsu, Japan and produced all forms of musical instruments, including a large range of pianos. Tokai instruments first appeared in the UK in the early 1980s when they were imported by a company called Bluesuede Music. At that time the two biggest names in electric guitars were those produced by the American companies Fender and Gibson, who both produced high quality electric guitars but at a price that was prohibitive for the average amateur guitarist. Tokai competed against Fender, with products that replicated the Fender quality and also closely resembled their guitars but for half the price. Not surprisingly the Tokai product stood alone in the marketplace and competed with Fender by making quality instruments available to customers who couldnt afford a genuine Fender or Gibson guitar. Tokais biggest seller at the time was the ST50 which resembled the famous Fender Stratocaster. However, Fender issued writs against Tokai which forced them to change the designs so as to not infringe Fenders copyright. Imports continued on for a further three years and Bluesuede Music did remarkably well with the product, using sales agents out on the road selling guitars to retailers. Unfortunately, in the mid-eighties one of the partners left Bluesuede owing the company and Tokai a lot of money. At that point Bluesuede had to stop the import of Tokai guitars. At the beginning of 2002 Nick Crane, a British entrepreneur, went to Japan to see Mr Shohei Adachi, the managing

To expand the business across the European Union. To develop new guitar models with Tokai Japan to meet the needs of the European market. To expand the dealer network across Europe. To develop a pricing strategy across the European markets which will help them generate the revenues to improve quality but still remain a competitively priced product.

s s

Tokai product range and policy Tokai guitars are mainly produced in Japan. The factory employs 60 people and guitars are produced in several formats. Some guitars are also produced in Korea but are of lower quality and do not feature in the Tokai UK portfolio. Tokai offer a wide range of electric guitars within their product portfolio, catering for every genre and playing style. Within their range is the AST50, supplied in a single model which was the top-selling model during the early-80s venture into the UK. This is supported by the ATE55, supplied in two models plus a left-hand version. Both of these models are Fender-type guitars. However, today the Loverock model in one of its many forms has taken over as best seller and currently outsells the AST50 by some 5 to 1. The Loverock is a Gibson Les Paulstyle guitar and extremely popular amongst rock guitarists. Tokai UK supply this model in five variations plus left-hand version.

Source: Tokai Guitars

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Chapter 1 An introduction to international marketing

Tokai also produce bass guitars and semi-acoustic electric guitars. The semi-acoustic ES model is produced in two model variants. An innovative guitar produced by Tokai is the Talbo aluminium-bodied guitar, which produces a quite unique sound. However, perhaps this was a little ahead of its time and has not proved to be a good seller in the European market. The Talbo is also supplied in a wooden version with a hollow maple body. The range consists of three aluminiumbodied instruments and two wooden-bodied instruments. Tokai UK has also designed two new models of electric guitar which were unveiled at the Frankfurt Music Exhibition, the Tsunami (big wave) and the Loverock 2, a double cutaway version of the standard Loverock. Response to the new models has been very good, especially towards the Loverock 2, with the next three months production of this model all presold. Tokai UK are also working in conjunction with Trevor Wilkinson, of Wilkinson tremolos and guitar bridges, to produce new models and to strive to improve the quality of existing models. This demonstrates the companys commitment to design, innovation and quality. The custom shop in Japan also manufactures two semi-acoustic guitars, the ALS320 and the UES320, in very small numbers, essentially to special order. These represent the ultimate in Tokai quality for the enthusiast. Pricing Tokai is facing a dilemma as to how to achieve a consistent pricing policy for their products across the European market. In the UK, Tokai prices for electric guitars range at RRP from 399 to 800 approx. These prices compare very favourably to competitors products of similar quality. Gibson prices start at around the 800 mark and Fender start at 409 for the Mexican product. The exceptions are the custom shop ALS320 at 1800 and the UES320 at 2500. This represents prices that attract buyers but still allow retailers to make reasonable profits on the instruments. Of course discounting exists, but would come off the retailers margin. Tokai UK maintain this policy is better for dealers as it gives them a feeling of allegiance to Tokai UK, and causes the dealers to feel honour bound to react quickly to any problems customers might have, no matter how small. Tokai UK are also unique in that they do not charge a premium for left-handed guitars; they feel that it is wrong to discriminate against a customer simply because he/she happens to be left-handed. All other companies charge a premium. Distribution Tokai UK distributes its instruments throughout the UK and Ireland, and also to a limited number of outlets in Spain and

Italy. In Germany, Tokai was taken to court by Gibson Guitars for breach of copyright and so had to pull out of the market. However, Tokai won the court action; copyright was not seen to have been breached and Tokai were able to prove they had a strong brand identity in their own right and were not trading on the Gibson name, even if they were selling guitars of a similar style. However, the fear of legal action and the potential financial costs involved has meant Tokai has not gone back into the German market as they have decided they prefer to follow opportunities in more profitable markets that do not have such a threat of legal action. When Tokai UK was founded in 2001 the company started with 15 active accounts that would buy from every shipment. To date, the company has 60 active accounts and a further 25 accounts buying from every third shipment. The accounts are shops across their European markets ranging from the very large multi-outlet music mega stores, through the middle of the road large one-off music shops, to the very small owner-operator music shops. Tokai UK prefer the middle of the road shops because they feel the brand gets greater exposure and sales attention from these types of outlets. The brand can tend to get lost amongst the vast range of products stocked by the mega stores. Because of the commitment to quality given by Tokai the dealers tend to reciprocate by paying invoices on time and handling customer problems quickly and efficiently. However, Tokai UK does want to grow and expand its network over the forthcoming years. Promotion Tokai UK do advertise in the specialist media aimed at guitar enthusiasts such as Guitar magazine etc. Their major exposure to the trade is not surprisingly via exhibitions. They exhibit at major exhibitions such as the NEC Birmingham UK, which is the major music exhibition for the trade in the UK. They will continue to exhibit at the Frankfurt exhibition and plan to launch new models there. They also plan to exhibit at numerous other trade fairs across Europe in the forthcoming years, but plan to concentrate on the smaller, more intimate ones. They hope to take orders from these and expand their dealer network. They produce a full-colour catalogue for dealers and customers. They have produced a Web site (www.tokaiguitars.co.uk) for the benefit of dealers and end customers. Also, numerous Tokai enthusiast Web sites exist, consisting of chat rooms where enthusiasts can exchange anecdotes or just chat about guitars in general and Tokai in particular, and there are Web forums for Tokai players where views can be sought or exchanged.

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Part 1 Analysis

The future Tokai UKs expressed aim is to expand over the next few years but keeping to the ethos of maintaining quality. The major inhibiting factor to the growth of Tokai UK is the level of production possible at the factory in Hamamatsu. There appears to be little scope to expand into Europe in a big way unless the factory expands, as demand for the product remains unfulfilled in the UK.

Questions

1 Identify the strengths and weaknesses of Tokai UKs

international strategy.

2 What are the key issues they need to address if they

are to succeed in the European market?

3 Suggest methods by which Tokai UK could expand into

the European market.
Source: Peter Lancaster, Senior Lecturer, Sheffield Hallam University

DISCUSSION QUESTIONS
1 What are the major environmental influences which impact on international marketing? Show how they can affect international marketing strategies. 2 Using examples, examine the reasons why marketing strategies fail in international markets. 3 Identify three major global pressure groups. Examine how they have influenced the international marketing strategies of particular firms. 4 What skills and abilities are necessary requirements for an effective international marketing manager? Justify your choices. 5 Evaluate the impact and opportunities of e-business development for a service organisation. What are the potential dangers of e-business?

REFERENCES
Dicken, P (2003) Global Shift: Reshaping the Global Economic Map in the 21st Century, . 4th edn, Sage Publications. Doole, I. (2000) How SMEs Learn to Compete Effectively on International Markets, Ph.D. El-Kahal, S. (1994) Introduction to International Business, McGraw-Hill. Haliburton, C. (1997) Reconciling global marketing and one to one marketing A global individualism response, in Doole, I. and Lowe, R. (eds), International Marketing Strategy Contemporary Readings, ITP . Hamel, G. and Prahalad, C.K. (1996) Competing for the Future, Harvard Business School Press. Hamill, J. (1997) The Internet and International Marketing, International Marketing Review, 14 (5). Herbig, P and Hale, B. (1997) Internet, the challenge of the 20th Century, Electronic . Networking Applications and Policy, 7 (2): 95100. Hofstede, G. (2000) Cultural consequences, 3rd edn, Sage Publications. Jain, S.C. (2001) International Marketing, 6th edn, Southwestern. Ohmae, K. (1994) The Borderless World: power and strategy in the interlinked economy, HarperCollins. Perlmutter, M.V (1995) Becoming globally civilised, Managing across culture, Mastering . Management Part 6, Financial Times, 1 December. Porter, M.E. (1986) Competition in Global Industries, Harvard Business School Press. Quelch, J.A. and Klein, L.R. (1996) Internet and International Marketing, Sloane Management Review, Spring. Rugimbana, R. and Nwankwo, S. (2003) Cross Cultural Marketing, Thomson Learning. Terpstra, V and Sarathy, R. (2002) International Marketing, Dryden Press. . Wilson, R. and Gilligan, C. (2003) Strategic Marketing Management: planning implementation and control, 3rd edn, Butterworth-Heinemann.