Executive Summary
The purpose of this report is to evaluate and show insight as to how my chosen SME, Dynasystems, can expand into Colombia in order to increase their competitive position and their market share. A PESTLE of Colombia will aid in conducting market research showing the opportunity for the security and defence industry within the country. A marketing strategy will be carried out, indicating the place, product, promotion and price of my chosen SME, whilst evaluating how this strategy will be implemented into the Colombian market, taking into consideration laws & regulations, competitors and cultural aspects.
Introduction
The UK SME that I have chosen to develop the outline international marketing strategy to Colombia is Dynasystems. Dynasystems is a global company that produces a wide range of Blast & Ballistic mitigation products and systems. With 114 employees and over 15 years of experience supporting defence and commercial markets, Dynasystems has developed a high level of expertise in the security, architecture and engineering industries. Dynasystems builds on improving perimeter security to ensure personnel, assets and operations are protected against blast, ballistic and hostile vehicle effects. The company is already international providing products and services to companies all over the world such as the UK, Afghanistan, Dubai, Egypt, Iraq, Kuwait, USA and many more.
Dynasystems products include Blast Resistant Watch Towers, Entry-Control Systems (guard booths, bollards, barriers and turnstiles), Protective Walling Systems, Ballistic Windows, Blast Resistant Structures and Universal Construction Systems. The company’s government clients include International Home Offices, transportation departments (airports and rail hubs) communications departments and
Blue Light services (police, fire) (Dynasystems, 2018).
Market Research
Opportunity for this Industry
The need for security in today’s world which is full of terrorism and crime is extremely high as we don’t know when an attack or explosion is going to happen. Therefore the need to protect critical infrastructure such as embassies, police buildings or power plants in order to prevent as much damage happening to people and assets is of high importance. According to (GardaWorld, 2017), there was a police memo reportedly leaked to a Colombian media outlet, the country’s largest paramilitary and drug trafficking group, the Gaitanista Self-Defence Forces of Colombia (AGC), could be planning to carry out terrorist attacks\q in major Colombian cities, including Bogotá and Medellín. According to the memo, the group could perpetrate bombings or assassinations, likely targeting political or police/military targets. In addition to this, drug trafficking and organised criminal gangs are undermining the business climate in Colombia (Coface, 2018).
As you can see below, there are numerous opportunities for potential clients within Colombia with police buildings and embassies all over the city of Bogota. These are targets for terrorism and will need high-end security in order to protect assets and personnel, therefore Dynasystems has a lot of potential for growth in this country as there are many organisations that could possibly need their assistance in protecting critical infrastructure.
(Intelligent Protection International Limited, 2018).
The Colombian Government need to implement high levels of security in such terrorist targets which include government or police headquarters in order to minimise any damage to critical infrastructure and people if an attack was to try and be carried out. The products that Dynasystems could supply in order to prevent serious damage cause by attacks would be entry-control systems such as barriers and bollards. This will prevent acts of terrorism such as ramming vehicles into buildings.
Research from a PESTLE that was carried out on Colombia, shows that monetary freedom has increased from 63.7 points in 1995 to 77 points in 2017, with the graph below showing that inflation rates and price control within the country is that of a satisfactory level, because of this operating within the Columbia’s market should pose no significant threat from these factors, and the only real cause for concern is their legal system and bribery.
(Department for International Trade, 2015).
A key political event expected to improve the conditions for Dynasystems doing business in Colombia is the approval of the peace agreement signed with the guerrilla group Fuerzas Armadas Revolucionarias de Colombia (FARC). The agreement is expected to put an end to the five-decade internal conflict, leading to major changes in regions historically controlled by the FARC guerrillas, and welcoming foreign and domestic investors with tax benefits (Practical Law, 2017).
English is currently the second most spoken language in Colombia. Increasingly important trade links have increased the demand for English language training. The British Council in Colombia also has the largest teaching centre in South America which shows that a language barrier between the UK and Colombia will not be an issue for communication purposes.
Laws and Regulations
Dynasystems will have to export raw materials and machinery from the UK to Colombia in order to carry out certain projects. The tax importation of goods into Colombia is typically subjected to customs duties ranging from 5% to 35% of the cost, insurance and freight (CIF) value of the goods, and to VAT at 19% of the CIF value of the import plus custom duties (Practical Law, 2017).
A reliable distributor is crucial to entering the Colombian market. The Colombian law does not require foreign firms to secure local representation for private sector sales. However, Colombians will always prefer to deal with companies that have a local representative to ensure access to after-sales services. The one exception is for sales to the government, which does require foreign bidders to have legal representation in Colombia. Payments are usually in Colombian pesos at the exchange rate of the day of payment, and companies can pay vendors and distributors directly. Representatives or distributors work with loans and letters of credit and other financial guarantees (Export.Gov, 2017).
The regulatory agency overseeing security equipment is the Superintendent of Industry and Commerce, a government entity that controls and regulates all the activities of the industries and commerce in general. The Tariffs and Taxes Administration (Direccion de Impuestos y Aduanas Nacionales-DIAN) is another government institution in charge of controlling imports and exports, and enforcing regulations (Export.Gov, 2017).
Competitors and the Current Market
The competitors that Dynasystems may face are companies from countries such as the USA, South Korea, China and Germany which all compete in the Colombian market in order to gain business with private and government organisations. Using their local representatives as proxy, they engage in bids for small and large projects. An example of a competitor of Dynasystems exporting into Colombia is ‘Automatic Systems’ which specialise in the automation of secure entrance control, designs and manufactures pedestrian, vehicle and passenger access systems. This company has supplied and installed entry-control systems within Colombia which makes them a rival and a threat to Dynasystems.
The current market size of the Safety and Security within Colombia is estimated at £1.5 billion, with it growing approximately at around 4-5% per year. This shows the growing interest that the country has within this industry and their need and demand for it. Therefore the opportunity for Dynasystems to do business here is extremely high.
Before Dynasystems looks into doing business with Colombia, they need to be made aware of the cultural aspects within the country. Spanish is the main language spoken in Colombia, and while many people in the country do speak English, it is important for UK companies to engage a local interpreter to accompany them to meetings so that there are no obdurate language barriers.
The Export Communications Review provides companies with impartial and objective advice on language and cultural issues, in order to help them develop an effective communications strategy, thus improving their competitiveness in existing and future export markets (International Trade, 2017).
Barriers of Expanding into Colombia
The problems with developing a business from the UK that is going to work in Colombia is trade barriers that could be in place. Colombia has a trade agreement in place with EFTA but with Brexit happening this trade agreement may not be in place anymore for UK companies but this also depends on what policies the UK keeps in place with the EU, “The economic consequences of leaving the EU will depend on what policies the UK adopts following Brexit” (Dhingra et al 2016).
International Marketing Strategy Aimed at Achieving the Set Objectives
In March 2013, NATO (North Atlantic Treaty Organisation) Allies agreed to a tailored approach to develop co-operation with Colombia in areas of common interest. NATO and Colombia have concluded a partnership agreement with a view to strengthening dialogue and cooperation to address shared security challenges. Despite geographical distance, co-operation has been developing progressively since 2013 in a number of areas including military education and training, maritime security, good governance and building integrity (NATO, 2017). This agreement means that Dynasystems, a UK based company, working with Colombia will be made easier as the UK has agreements with NATO and they can use this platform as a way of promoting and advertising jobs that need done. Therefore if Colombia have a security job that needs done, they can advertise it through NATO and UK companies such as Dynasystems will be able to bid on these certain projects.
As Colombia is a member of the United Nations, therefore this aids in promoting international co-operation between the UK and themselves. On 26 September 2017, the United Nations Verification Mission in Colombia started its activities, immediately upon the conclusion of the mandate of the first UN Mission in Colombia (United Nations, 2017). The United Nations is another platform which creates awareness of security and defence jobs that need undertaken, therefore Dynasystems can use UN platforms such as their website to search up these opportunities and get involved in winning contracts and working with Colombia.
Summary of Marketing Strategy – 4 P’s
Place
Dynasystems is a UK based company which operates globally. The company has operated in countries such as Afghanistan, Iraq, Dubai, Egypt, USA, Kuwait and Canada, with hopes of expanding into Colombia. There are many opportunities for Dynasystems to sell their products and systems within Colombia, with potential clients all over Bogota, including embassies, police stations and oil and gas companies.
Product
Dynasystems operates within the defence and security industry, selling and installing blast resistant systems. This includes the likes of entry control systems, blast proof towers, walls and structures in order to ensure high quality perimeter security.
Promotion
Due to the nature of this industry, Dynasystems cannot promote and advertise their products traditional ways such as social media, however they use Government platforms such as the NATO and UN websites to become a vendor and search for potential clients looking their business. As well as this, Dynasystems do also have their own website in which they promote themselves on whilst giving out limited information about their products and systems.
Price
Dynasystems has a competitive strategy when it comes to pricing their products, which varies from each project. The price that they give out to customers includes many aspects of the project which include insurance, how many days the field team are working for, transportation and freight costs from the UK, the product and systems themselves and the installation process.
SWOT of Dynasystems Expanding into Colombia
Strengths
- There will always be a need for security in every country, therefore a global market.
- Has worked successfully for many global countries therefore there should not be many problems arising expanding into Colombia.
- Links with NATO and the UN which also have links with Colombia.
Weaknesses
- No current legal representatives within Colombia.
- Long distance for meetings and time difference for online and telephone communication.
Opportunities
- Problematic security situation in Colombia due to drug trafficking, therefore this brings potential opportunities for business with Dynasystems.
- Rise in world terrorism means governments want to increase security for many government buildings such as embassies.
Threats
- In terms of legal threats, Colombia ranks similarly to Peru and far below Chile at 53.6 out of 100. Colombia’s weak legal system presents some threat to foreign companies such as Dynasystems. The domestic conflict between left-wing rebels and right-wing paramilitary groups throughout the 20th century weakened the rule of law in Colombia and promoted the perception of government corruption.
- Threat from competitors which already operate within the security and defence industry in Colombia such as ‘Automatic Systems’ which has undertaken many projects over the past several years.
Conclusion
To conclude and taking into consideration Colombia’s current business culture, the likelihood of Dynasystems expanding into the country is high due to the nature of the global political environment. Terrorism is at a high risk within Colombia due to paramilitary & drug trafficking groups and also Islamic terrorism groups which have recently been carrying out attacks all over the world. Therefore the need for perimeter security is at an all-time high and governments are wanting to protect their people, assets and critical infrastructure. However, there are many aspects to take into consideration before Dynasystems decides to expand into Colombia such as if they can deal with gaining legal representation within the country and overcoming long distance barriers which may affect communication and slow down how fast jobs get done. Altogether, taking everything into account, even though there are many political risks involved in expanding into Colombia, the opportunities have outweighed them. Further, Dynasystems should investigate further and consider setting up contracts with Colombia.
30.4.2018