Case Study Aol: Lost in Translation
AOL’s Assault on Latin America Hits Snags in Brazil Identify the controllable and uncontrollable elements that AOL encountered in entering the Brazilian Market! When entering a foreign market, as AOL entered the Brazilian Market, certain rules and regulations have to be followed. In case of AOL the controllable and uncontrollable elements are playing a significant role. The main problem of AOL’s strategy in Brazil was the insufficient research about typical country terms and condition.
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Controllable elements, such as product, price, promotion and the channels of distribution have to be adapted to the target market. AOL (America Online) is market leader in the American domestic market in providing fast and reliable Internet Services. The company implemented their product and services successfully in the US and wanted to use the same strategy to enter foreign markets. The management was hoping to achieve the same popularity, success, and revenues in the foreign market in this case Brazil, as they achieved in the domestic US market.
The company ignored the differences in market structure; therefore they implemented the same strategy as AOL’s did in their domestic American market. The company has to adapt their product price to the country’s specific environment, so that the new consumers are willing to pay the price. Furthermore they have to think about a new marketing strategy to optimize the process of distribution. Based on these facts, AOL should choose a different strategy to encounter the foreign Brazilian market and adjust the controllable elements as described earlier to the consumer’s needs and wants.
There are three product strategies that can be used to enter a foreign market: • Straight Extension: Market the same product as in their domestic American market. Same product means that there is no change or adaptation to the foreign market. • Product Adaptation: which means The Company is adapting their product to the terms, conditions, and culture of the foreign market. • Product Innovation: A new product is developed, specifically for the foreign market. AOL has chosen the straight extension way, to enter the Brazilian market.
The strategy cracked at the point that they assumed their highly successful US product would be a fast selling item in Brazil too, but that proved to be one of their main mistakes. Instead of the straight extension strategy, they should have employed the product adaptation; to meet the cultural differences and consumer needs. AOL with his product “America online” created a success story for their domestic US market. Having success in the domestic US market, does not automatically apply for success in foreign market business strategies.
Before encountering foreign markets as Latin America, Asia or Africa, companies who are in the global business arena (in our case AOL) should have researched the foreign cultural differences first, before choosing an entering strategy. The correct implementation of cultural differences is often the key for success in foreign markets strategies. If a business strategy works out in the USA, it doesn’t mean automatically that the same strategy will be successful in the Latin American market such as Brazil, Argentina and Mexico. Another difficulty in the Latin market to be taken into account is language.
AOL entered the Latin market in Spanish although in one of the main countries, Brazil, Portuguese is the national language. To avoid those mistakes, a company should create a product and a message adjusted to every single country. As a result of the Brazilian green way marketing, the Brazilians consumers where unimpressed of AOL’s ad slogan; “We’re the biggest, cause we’re the best. ” By using this slogan AOL introduced itself too aggressively, thereby also underestimating their local Brazilian competitors. And so it was bound to happen, that Universo Online (UOL) a local competitor got 760,000 subscribers, compared to AOL’s 130. 00. Beside this mistake, America Online has made more mistakes; another example is music they offered on a program disc, where the allocated URL belonged to a competitor. All mistakes could have been avoided with better research and preparation. AOL should try to anticipate these mistakes in the future, by adjusting their marketing approaches to different countries and their cultures. AOL should realize that its American approach is perceived in many other countries as too aggressive, thereby offending not only local competitors but also national consumers.
AOL also has to adjust its prices to specific market standards that take the average national income into consideration. In case of Brazil, AOL offered its product at the same price – and quality as in the US, without considering national incomes. In summary, AOL failed to meet the necessary controllable elements of the foreign Brazilian target market. One opportunity to analyze a new market place is to conduct a SWOT Analyses. A SWOT-Analysis gives a company an overview and the chance to find out strengths, weaknesses, opportunities and threads in a foreign market.
By conducting a SWOT Analysis, a company will be able to find out whether its product will have interested costumers and will provide the company with value information about the market that can be used in the construction of a successful marketing strategy. AOL didn’t realize the importance of these market requirements. A company can only be successful on a new market when it defines the needs and expectations of natives and offers a product that answers those needs and expectations. AOL simply “overestimated the draw of its blue-chip brand”, which led to similar problems in Germany, Japan, France and Canada.
Furthermore AOL underestimated the strength of its local competitors, who are backed by well-financed phone companies or media groups. AOL should also realize that their competitors aren? t willing to give up some market share and will do a lot to keep their customers. 3. Identify other problems the firm may encounter in the future and discuss potential solutions. Identifying windows of opportunities and possible problems should be the benchmark for every company when entering new foreign markets. For AOL, foreign markets always have been critical for their international growth.
Everywhere they have tried to enter a new foreign market; they always have encountered problems with their strategy. A clear example is Brazil where AOL tried to establish their Internet service. AOL missed some of the essential opportunities, timing of entry, resource commitments, and creative responses. AOL in the future should reconsider their marketing strategy when entering international markets. Being a global player in the business arena of ISP’s, AOL should “come-see-conquer” already in the planning period before launching their service and technologies in new markets.
As an established ISP company they cannot afford these big missteps they have made in the past. Their international marketing strategies should be a reflection of cultural differences, and they should focus on finding strong local partners and possible useful joint ventures. In the past they have made big cultural mistakes because they inaccurate information about culture or sometimes they even had wrong partners, like the Cisnero Group in Brazil. If they want to be successful in the future, they should analyze their mistakes that were mostly the result of arrogance and bad management, and learn from them.
AOL is a very strong brand name and could have big potential in foreign markets they decide to enter, but they have to learn to pay more attention to cultural adjustment of their product and its message. For a long-lasting success in the future, AOL should get more familiar with the cultural differences of new markets, find strong local partners, get local demographics and knowledge and start with the right language. If AOL would follow all these criteria a growth beyond American borders would be a success. ———————– [pic]