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Country Profile and Business Plan for Spain

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Country Profile and Business Plan for Spain
07.08.2020
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Spain Economic Environment

Economic system. Spain is a country with the market economy, which is the 16th largest worldwide. The countrys membership of European Union significantly stimulates the development and the growth of its economic system. However, in 2014, Spain experienced the serious downturn, which resulted in high inflation, the growth of unemployment, and the decrease of production (CIA, 2016). In a year, the European Commission required the country to decrease its borrowing rate, which resulted in stabilization of economic situation and growth of production.

In addition, Spain is the third most traveled country in the world. Specifically, around 65 million international tourists come to Spain every year (Euromonitor, 2016). Regarding the countrys merchandise trade, it accounted for 45% in 2015. The ratio is on the incremental rise since 1990. Lastly, the trade in service is 55% since the same year (World Bank, 2016). In 2015, the balance of payment in Spain was $12 trillion. The country started reporting a positive balance of payments in 2013, which is a sign that it started recovering from the economic stagnation (The World Bank, 2016). Therefore, the improving economic conditions suggest that the country should attract FDI and international business ventures.

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Trade agreements. Being a member of European Union, Spain greatly benefits from its agreement concerning free movement of products. Moreover, the country is an active participant of European Free Trade Association, World Trade Organization, and has signed the General Agreement on Trade and Tariffs in 1969 (World Trade Organization, 2016). All the mentioned facts make the state a key player in the international trade market.

The international expansion of Spain has completed the stage of domestic market establishment, export sales, and expansion of foreign trade. Due to a range of trade agreements, the multinational corporations established in Spain have access to international consumer market through direct investments and franchising (Varghese, 2015). Thus, the current stage of market development in the country is the investment abroad. It is necessary to notice that this stage is double-sided as the country invests in foreign markets and accepts FDI. However, it serves as a positive factor for the organizations planning to enter Spanish market.

Major multinational companies. The country is the home to 28 multinational corporations, the majority of which operate in the energy sector (Repsol, CEPSA), retail industry (Natra), and automobile manufacturing (Advanced Design Tramontana, CIE Automobile, Ebro Truck).

Statistics. Considering the statistics, GDP per capita shows a stable growth in the last three years: $33,700 in 2013, $34,200 in 2014, and $35,200 in 2015 (CIA, 2016). In 2014, the total population of the country numbered nearly 48 million people. Citizens of age 25-54 years comprise over 45% of the total number, which is a good sign, as this category of people possesses the highest disposable income and purchasing power. Furthermore, the urban population of Spain is significantly higher than rural and takes nearly 78% (Index Mundi, 2016). The countrys current external debt is $2278 trillion; however, it significantly decreased in comparison to previous years by $200 million (CIA, 2016). Additionally, Spain has significant literary rate; specifically, 98% of the population can read and write (IndexMundi, 2016). Regarding the degrees, 65% of Spanish citizens have upper secondary or high education (Organization of Economic Development and Cooperation, 2016). The factor significantly decreases the peoples chances for unemployment. Lastly, the minimum wage in Spain in 2016 numbered 764 euro per month, which showed an increase by 20 euro comparing to 2015 (Trading Economics, 2016). Overall, all the above-mentioned statistics depict Spain as a well-developed country with favorable conditions for businesses development.

Political, Legal and Regulatory Environments

Political risk. Spain has a wide range of the equality and anti-discrimination laws. Thus, the citizens have the complete freedom to participate in any activity they are able and willing to do. The government of Spain is the guarantee of the constitutional rights and freedoms. The country is a democracy meaning that the government is granted the power to establish laws and regulations by the citizens. Concerning the legal system, it is positioned as fair and unbiased to resolve any disputes. The Spaniards have the freedom of movement around the country. Furthermore, the Constitution defines the influence of the judicial and executive branches. If the organizations do not break the law, the state does not have the right to intervene in their business operations. Therefore, the political risk for entering the Spanish market is minimal. The political system in Spain is similar to other European countries, so Build-A-Bear can utilize the same management approach in Spain.

Law. The legal system in Spain is civil law, which is based on the codes of Roman law. The country actively participates in numerous international law agreements. Recently, Spain has experienced the increase in corruption, which significantly affected the countrys legal and financial stability. The international organizations entering Spain expected the developed country to exercise control over the officials engaged in corrupt practices. However, the perception index proves that the majority of Spanish institutions are deeply affected by the phenomenon (Berechet, 2015). Moreover, the legal framework of property rights in Spain needs additional work as the guidelines are loose, which, in turn, decreases the FDI interest. Lastly, the taxation in the country complies with the EU requirements; specifically, the businesses established in Spain pay 25% income taxes. However, the newly created companies can enjoy a discounted rate of 15% during the first few years of their operations (Taxation, 2016). Such policy encourages multinational corporations to run their businesses exactly in Spain.

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Social and Cultural Environments

High/low context culture. The cultural context defines the communication patterns, especially, in the formal setting. In this regard, Spain belongs to the high context cultures. The Spanish normally communicate using verbal and non-verbal elements. Moreover, the representatives of this culture attempt to create good relationship while communicating; thus, they try to avoid harsh words and open criticism. Interestingly, the communicators often need to read between the lines to decode the message. The Spaniards appreciate relationship and cooperation more than winning a debate. They are also likely to avoid open disputes and conflicts (Griffith, 2011). Such cultural context commonly influences business communication as different approaches may challenge the decision-making. Finally, the Spanish might face certain difficulties in accepting the low context culture, which may appear rude, direct, and overly formal.

Hofstedes cultural typology. Geert Hofstede developed a framework for defining a culture based on five major elements. This set of rules indicates the influence of social and cultural peculiarities on the behavior of people. Thus, concerning power distance, the Spanish rank at 75, which is defined as the average; it means that the hierarchy of authority in Spain is accepted, and the employees conform to subordination. Regarding the issue of individualism, the country occupies the average at 51. This number suggests that the culture is on the verge between collectivism and individualism. Therefore, the motivation of the employees and some control over their activities create the perfect balance for the business. As to the femininity dimension, Spain is the culture that values care, family virtues, and sympathy. Another dimension is avoidance of uncertainty, which defines the citizens compliance with the rules and the degree of life structure. The high score of 86 suggests that the Spaniards prefer rules and clear boundaries of their activities. In addition, the nation does not take stress and turmoil easy. Finally, the countrys orientation score is 19, which implies that citizens do not plan anything far ahead, but rather prefer short-term goals (The Hoftede Center, 2016).

Religion. Spain is single-religious country; specifically, 97% of the population belong to Roman Catholic Church (Index Mundi, 2016). The country is the home for a variety of Catholic relics and holy places and has a name of the mystical center of the Church (Faith Journeys, 2016). The latter fact attracts a vast quantity of international tourists every year.

Dietary preferences. In Spain, the food has the cultural connotation as the Spanish symbolically associate their meals with the tradition. However, the new trend of healthy eating has entered Spain recently. Consequently, the sales of fresh products increased. In addition, the Spaniards like to cook at home, but they are also not reluctant to go out. The return to the tradition in response to the increased industrialization has been a popular trend in the country. According to Medina (2005), Spanish people cherish their cuisine and like to share their food with the tourists.

Family relationshipThe family is extremely important to the Spanish. Both close family and distant relatives have a very high value in Spain. Interestingly, the in-laws are also considered extremely close, and family is often just as much of a choice as it is an obligation. Consequently, the social structure in Spain comes predominantly from the family structures.

Language. The official language of Spain is Spanish. Around 72% of the citizens speak Spanish. The rest 28% speak other languages, including English, Arab, German, and French (CIA, 2016).

Rationales of Target Country Selection

According to World Tourism Organization, Spain is the third most traveled country in the world. Particularly, around 65 million international tourists visit Spanish resorts, cultural heritage places, and religious locations every year. Since Build-A-Bear is a well-known name, the sales of toys can also increase because of the tourist inflow in the country. The tourist expenditures increase every year and currently reach the point of over $30 million (United Nations Conference on Trade and Development, 2002).

The size of the Spanish market is over 40 million people, who have above average income. Therefore, the total market to tap into is about 50 million people. As the minimum wage in the country is over 700 euro and the average salary is above 2000 euro, Spain is a great place to sell average-priced merchandise. Thus, the largest percentage of the country can pay $10-25 per stuffed animal. Moreover, as the Spanish culture cherishes tradition, old values, and family relationship, any family-oriented business is likely to be treated well there. Additionally, the high femininity score in Spain creates the opportunity for the business to capitalize on family values and close relationship. Spanish people strive for high quality of life and comfort purchases. The aforementioned section proves that Build-A-Bear is feasible merchandise that can find a large niche in the Spanish market. The consumers values, culture, income, and lifestyle match the product selection of Build-A-Bear. Thus, the corporation should venture into franchising the operations in Spain. Finally, the country has a developed infrastructure in logistics management (trucks, sea, and air freight) and an access to the newest technologies (Euromonitor, 2016). In short, Spain is the highly developed country that has the necessary amenities to open a successful merchandise business.

International Business Plan

Company Review. The current plan defines the entry approach for Build-A-Bear into the Spanish market. The company manufactures custom-made children merchandise such as stuffed animals. The corporation has been growing internationally in the recent years, and Spain presents additional opportunity for spreading the business. Build-A-Bear is a company for parents and their children, who love to try new things and want their demands met.

Market size. As defined in the first part of the report, over 45% of the Spaniards are 25-54 years old. They are likely to have children of different age. Thus, the total market size for Build-A-Bear in Spain is about 20 million people.

Key factors. The first key factor for the company in Spain is the family values. The business can effectively capitalize on the Spanish appreciation of children. Therefore, Build-A-Bear should sustain the brand image of the family-oriented company that gives precious experiences and unique gifts. The second key factor for the company is the pricing approach. As the merchandise is famous for its availability for different income groups, Spanish market should see the same price brackets. The cost of goods sold should be calculated carefully to determine the market entry strategy. The third key factor is the EU regulations for childrens merchandise. Build-A-Bear should review the standards to be approved for the business in Spain. The inventory used in manufacturing the toys should be allergy-free and pathogen-free and approved by the majority of countries.

Competitor review. The toys market in Spain is highly competitive, which is caused by the fact that the European Union allows easy transportation of goods and services throughout its territory. Currently, the top sellers in the children market in Spain are imported LEGO toys. Their main competitive advantage is the strong brand name, which is synonymous to construction toys and excellent coverage. In addition, Babie and Ninja Turtles toys are manufactured by the local business Mattel Espana, which major competitive advantage is the name of the national manufacturer. Moreover, the indirect competition comes from Nintendo and its online games. As modern children tend to spend much time in the virtual world, they may opt for the digital game instead of the stuffed animal. However, Spain cherishes tradition, which can become an opportunity for rediscovering Spanish childrens market for Build-A-Bear.

Brand and Product Review

Brief history. Maxine Clark started the company as a side project. She could not find the perfect stuffed animal for her friend and decided to build it herself. Until 2013, Clark was the CEO of the company with 400 stores worldwide.

Present status.Build-A-Bear Corporation operates over 400 workshops across the globe. It has parent-owned locations in the United States, the United Kingdom, and Canada. Nearly 100 stores are located in Latin America, Europe, and Asia. Significantly, the majority of the companys international locations have franchise entrance approach (Build-A-Bear, 2016).

Strengths and weaknesses. The major companys strength is the customer orientation. Specifically, the business actively uses pure marketing concept and down-to-up demand approach. It always aims to satisfy the customers, which leads to their return visits. Secondly, the company is innovative and modernized on the regular basis. Thirdly, Build-A-Bear is a market leader in the stuffed animals industry as it was the first business that offered customized toys.

The biggest weakness of the companys strategy is the low marketing effort. To increase public awareness, Build-A-Bear has to elaborate on the advertising campaigns. In addition, the process of creating a customized product is time-consuming. Consequently, some buyers may opt for an already-made toy to save time.

Current communication campaign. The recent development of Build-A-Bear Corporation is approaching the market through digital applications. For instance, the new SMM program allows the users to choose a stuffed animal, dress it and play with it via gadgets (Johnson, 2013). The approach shows that the corporation attempts to meet the standards of the digital age. Moreover, the strategy contributes to the development of word-of-mouth phenomena. Thus, more users play the game, become interested in the stuffed toys, and, most importantly, increase incoming sales.

Target Market

The first target market is males and females of the age of 24-26. They are men or women, who are students, actively involved in social life and usually aware of new products introduced in the market. They may also be partly employed or cover full expenses. In addition, they are most likely to be in a causal relationship. They would like to purchase a customized stuffed animal as a present for nephews, nieces, or close friends. Finally, they do not mind purchasing the animal for oneself.

The second target market is women and men of the age of 25-35, who are married and have children. They are employed and earn above average income, which they are willing to spend on entertainment and leisure. In addition, they have many networks and communicate with people of different age groups (friends, relatives, coworkers, and neighbors). Lastly, they are active and open to new experiences. Because children are the target users of Build-A-Bear products, the mentioned segment presents the major interest for the company. Thus, parents with above average income are likely to opt for the toys with slightly higher prices.

Entry Strategy

Build-A-Bear has been venturing into foreign markets with two entry strategies. The United States, the United Kingdom, and Canada have the owned enterprises under the parent umbrella of Build-A-Bear Corporation. The European, Asian and Latin American markets open the workshops in the franchise. Therefore, the strategy of entry to Spanish market should be franchising. Because sub-franchising is not allowed in Spain, the corporate governance requires the franchisee to cover the entire country. The start-up capital varies from $5 million to $12 million (Build-A-Bear, 2016). Thus, the corporate management should actively search for the interested franchisee to enter the Spanish market. The rationale is that the corporation has effectively utilized the franchising strategy in other European markets, including Germany and France.

Marketing Objective

Market Share. The following chart presents the projections for gaining market share in Spain. The percentage is derived based on the historic average of 15% market growth (Build-A-Bear, 2016). The number of the customers is based on the total target population of 20 million people (see Table 1).

Table 1

Market Share Projections for 2017-2019

Year

Market share percentage

Market share number of customers

2017

10%

2,000,000 customers

2018

25%

2,300,000 customers

2019

40%

3,220,000 customers

Sales. The sales projections are based on the average price per stuffed animal ($25) and the average number of the customers. The net sales calculation factors in the returning customer rate of 10% (See Table 2).

Table 2

Projected Net Sales Based on Market Share

Year

Average price per piece

Returning customers (10%)

Total number of customers

Net sales

2017

$25

0

2,000,000

$50 million

2018

$25

200,000

2,500,000

$62,500 thousand

2019

$25

250,000

3,470,000

$86,750 thousand

Return on Investment. The return on investment in the case of Build-A-Bear Corporation entering the Spanish market requires simple ROI formula. It is calculated as the amount of total financial gain divided by total investment. Thus, the initial financial capital needed to franchise the operations in Spain is $12 million. Moreover, the projected net sales for the first year of business (2017) reach $50 million. In 2017, ROI is expected to be 4.1, which is significantly higher than the average business venture (Wolff-Mann, 2015). Therefore, with the expected returns, the company can find the franchise by the end of 2016.

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Standardization or Adaptation

Build-A-Bear Corporation has been a successful business since its inception. Particularly, it has the stable market and the income growth of around 15% worldwide (Build-A-Bear, 2016). The companys strategy of entering the markets abroad includes franchising with the clearly defined contract. Therefore, the applicable approach of Build-A-Bear in Spain is the standardization due to the contractual and legal agreement with the parent company.

Brand Identity

The brand name is considered rather strong because it is self-explanatory. Build-A-Bear Corporation implies that the customer is to assemble the teddy bears. The companys logo repeats its name and presents a cute picture of a stuffed bear. The variety of bright colors in the image aims to create the association with the toys from the childhood.

Product Design and Package

The company offers its customer to participate in the creation of their stuffed animal (Build-A-Bear, 2016). The buyer selects the type of stuffed animal, the stuffing, the colors, the dresses, and the packaging. There are over 30 options for the animals as well as numerous dresses, accessories, and additional personal items such as motorcycles and purses (Build-A-Bear, 2016). Finally, Build-A-Bear Company presents the pre-packaged gift sets and the gift cards for its customers.

Advertising

The advertising in Spain should concentrate on family values and include the image of the extended family in the advertising campaign. The latter one also should involve online presence through Google AdWords, billboard ads in the big cities, and visual materials near the toy stores and childrens cafes. Specifically, the first year advertisement plan should concentrate on presenting the image of average families with children and their unusual excitement of the purchased toy. The media should cover the entire country, as the online presence of the company does not define the borders. In essence, media coverage aims to build awareness, raise interest, and attract attention to Build-A-Bear products.

Communication Objective

Building the brand awareness among the potential customers is the key goal for the first year marketing campaign of the company. Build-A-Bear has a recognized name in many countries primarily due to its excellent consumer relationship management. However, this success might not repeat in Spain as the countrys market is new for the company and has its own peculiarities. Therefore, introduction of the brand to the Spanish public is the first communication objective. The second aim is spreading the advertisement all over the country. Through its online presence, Build-A-Bear should attack the major cities of Spain such as Madrid, Barcelona, Seville, and Valencia. The third communication objective is to create the word-of-mouth marketing. As Spanish culture is very open and sharing, WOM is the best approach to increase the sales. The customers will recommend the product to their friends and family, which will increase customer inflow and net sales.

Budget

The most expensive element of the marketing budget is an advertisement. The company is entering the new market, which requires creating buzz to attract consumer attention. Therefore, the planned advertisements include the billboards in the major Spanish municipalities, online commercials, organization of family events, and sponsorship of childrens creative competitions. Public relations also entail participating in the national events and holidays, which require significant financial contributions. Finally, the companys sales promotions include birthday discounts, quantity discounts, and special shopping offers (See Table 3).

Table 3

Projected Budget Allocation for Marketing Activities

Promotion Activity

2017

2018

2019

Advertising

$3 million

$5 million

$7 million

Public relations

$500 thousand

$1 million

$1 million

Sales promotion

$800 thousand

$1,2 million

$1,5 million

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Creative Concept

The creative concept for the campaign needs to be adapted from the general Build-A-Bear slogan Make your own animal as it can cause confusion among the Spanish citizens, who appreciate animal welfare programs (World Animal Protection, 2015). Thus, the project proposes the updated slogan Be the creator of your toy. The slogan is self-explanatory, does not have negative animal-related connotations, and includes the active word.

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