University of Greenwich ASSIGNMENT SUBMISSION COVER SHEET SUBJECT CODE
: BUSI 1602
SUBJECT TITLE
: Global Business and Sustainability
ASSIG!ET TI TITLE
: "e "e#le$tion "e "e%o&t
'"OG"A!!E
: !BA OUG Inte&national Business
SEGi ID
: SC()L(000*+2,1
UOG ID
: 000-1-**+
LECTU"E".S LECTU"E ".S A!E
: !&/ i$y i$y
LEA"IG CET"E
: SEGi COLLEGE )UALA LU!'U"
SUB!ISSIO SUB!ISSI O DAT DATE
: 2**2016 2**201 6
Contents Introduction...................................................................................................... 2 Country Analysis and Entry Decision................................................................2 Currency exchange rates................................................................................. 3 World Toothpaste Market.................................................................................. 4 roduct !anage!ent....................................................................................... 4 roduction........................................................................................................ " Distri#ution...................................................................................................... $ ricing.............................................................................................................. % ro!otion......................................................................................................... & 'e(erences....................................................................................................... & Appendix.......................................................................................................... )
Introduction In *)24+ a ,.-./ased !ultinational consu!er products co!pany kno0n as Allstar #rand is esta#lish 0hich produce and sells all kind o( ethical phar!aceuticals+ 1TC oerthecounter or nonprescription drugs+ and consu!er product. Allstar #rand is a 5r! 0ith 6&.) #illion and a#le co!petes 0ith all kind 5r!s+ #ased on 0hich type o( the product its !arket #elongs. I hae #een appointed as a country !anage #ase in 7atin A!erica. Due to !ost o( our #usiness in ,nited -tate+ operations #ase in Europe as 0ell as our Asia alliance are doing a ery good progress. /ut the !arkets had #egun to saturated as !ore and !ore co!petitor is co!ing in. the #usiness li(e cycle is reaching a stage 3+ 0here is it in the 8red ocean9. The #usiness started to aging slo0ly and gro0 o( population is in slo0 progress as 0ell. 1n the other hand+ i!proing our #usiness in A!erica is too slo0 co!pare 0ith outsider. :ence in order to i!proe our situation 0e need to open up another ne0 #usiness channel to increase our stock price. There(ore. I hae #een gien a !ission to archie+ 0hich is to open up a !arket presence in 7atin A!erica. 7atin A!erica !arket 0ill #e analysis and 0ill decide 0hich countries 0ill #e penetrate 5st and su#se;uently in *< years= ti!e. The chosen countries are as (ollo0> Argentina+ /ra?il+ Chile+ Mexico+ eru+ and @ene?uela. Allstar #rand ai! is at least to hae * production (acilities in one o( the countries and sho0 a positie result in !arket share and pro5t as 0ell as Alllstar /rands appear in all $ countries 0ithin *< years= ti!e.
Country Analysis and Entry Decision 7atin A!erica+ population in the region is "< percent larger co!pare to ,nited -tates and Canada. It is 0ell kno0n 0ith the political issues and lots o( econo!y pro#le!+ such as high ination rate+ lo0 gro0th and not 0illing to take the tough econo!ic actions to sole these pro#le!. -panish is the !aBorities= language #eing used across Mexico and Central and -outh A!erica+ except (or /ra?il 0here they (re;uently use ortuguese as their daily use language. -o!e population in -outh A!erica een speak !ore than one language. In recent years+ there hae #een !any trade enhance!ent hae #een take into action. -uch as+ ATA agree!ent #et0een Mexico and ,nited -tates and Canada. /ecause o( this agree!ent+ it hae i!proe the #usiness opportunity #et0een this 3 countries. It has sho0n the great opportunity (or outsider to esta#lish production in Mexico #y taking the adantage o( lo0 la#our costs and (airly sea!less access to the ,nited -tates and Canadians !arket. As (or ME'C1-,' agree!ent it proides so!e linkages #et0een the -outh A!erican countries o( Argentina+ /ra?il+ Chile+ araguay+ and ,ruguay+ Including association agree!ents 0ith /oliia. /eside the agree!ent !ention #e(ore+ there are seeral agree!ent also exist to increase and ease the #usiness opportunity #et0een countries.
/y using the internet source (ro! CIA site the ta#le #elo0 co!pare the econo!ic and social characteristics o( ,nited -tates !arket and the six !arkets is take into consideration as 0ell. Ta#le * and 2 #elo0 co!pare econo!ic and social characteristics o( ,nited -tates !arket and the six !arkets under consideration.
Ta#le * Market Co!parison on /asic Econo!ic Characteristics
Ta#le 2
Market Co!parison on /asic -ocial Characteristics
Currency exchange rates /y haing dierence in alue o( currencies !ay cause us diFcult to !ake lots o( 5nal decision. It !ight aect our (ollo0ing data analysis too. In Allstar=s corporate oFce+ 0e hae to conert the cost and reenue into ,-6 (or the purpose o( exchange rate uctuation as it 0ill aect consolidated reports directly. 1n the other hand+ local currency 0ill #e used (or pricing and #udget. -o+ 0e hae to !anage in the local currency and culture. /ut stay (ocus on the exchange rate changes. Ta#le 3 sho0s the current exchange rate.
Ta#le 3 Current Exchange 'ate
World Toothpaste Market /ase on the report #y Glodal Industry Analysts+ Inc. it says that the glo#al toothpaste !arket to reach ,-6 *2.$ #illion #y 2<*" and it could reach up to ,-6*4.< #illion #y 2<2<. The largest !arket (or toothpaste is o0n #y /ra?il+ 0hich is "&3 per capita consu!ption in gra!s+ ,nited -tates co!e in second 0ith "3) per capita consu!ption in gra!s. There are !ultiple type o( toothpaste aaila#le in the !arket+ 0e are a#le to categori?e it in (e0 category such as> • • • •
-i?e 2"g+ %"g+ *"
/ase on the chart #elo0+ it is the data collected (ro! the country !anager tea!s #y using surey and research !ethod. Through the analysis 0e are a#le to deter!ine 0hich country to penetrate * st and the (ollo0ing country. :o0eer+ #ased on the chart 0e 0ere una#le to deter!ine 0hen and ho0 0e should penetrate the 7atin A!erica Market. There(ore 0e need to use Ta#le *+ 2 and 3 as our (urther re(erence and help us deter!ine the period o( entry (or each country and #y understanding the !ethod re;uire to do #usiness in 7atin A!erica !arket.
roduct !anage!ent The key assets o( Allstar /rands is Alls!ile. In the ,nited -tates+ it is one o( the !ost 0ellkno0n co!pany=s #rands. Their production is #ased on ,nited -tates and Ger!any+ !ainly (ocus on European and ,nited -tates !arkets. :ence+ stock keeping units -H,s are produce in large nu!#er. 3 line extension hae #een deeloped to oerco!e the slo0 !arket gro0th in ,nited -tates and reduce co!petitor !arket shares. Each extension line hae
their o0n target custo!er and #ene5ts. :ence+ there is total o( 24 -H,s o( Alls!ile in the ,nited -tates !arket>
The existing -H,s (or!ulation 0ill #e used (or !arket entry in 7atin A!erica+ country !anager 0ill decide 0hich type o( toothpaste 0ill #e used in chosen country. /asically all 4 type o( the 24 -H,s 0ill sell those countries as a introduction o( Allstar #rands. A(ter that 0e 0ill do so!e reie0 o( the per(or!ance then only 0e inest !ore resources into it. In order to #uild custo!er relationship !ore easily+ it is necessary to produce our packaging in others language such as -panish and ortuguese to suit the local culture. /y using the li!ited nu!#er o( -H,s to enter the 7atin A!erica !arket at the 5rst stage and (ollo0 #y expansion in the !arket 0ill sho0 as #elo0> •
•
er(or!ance such as gro0th rate o( the product and the !arket penetration 0ill #e reie0 (ro! ti!e to ti!e. i( the reie0 is positie+ !ore -H,- 0ill #e added into the 5rst stage. 1nce 0e hae a one !arket entry success+ 0e can use the si!ilar !ethod to penetrate other countries. It can #e using the sa!e product as introduced in stage one+ #ut totally dierent -H,s.
roduction To !anu(acture and delier toothpaste is surprisingly easy. roduction can #e done in any location around the 0orld and shipped to the any0here. 1n the other hand+ it 0ould not #e a pro#le! to !anu(acture at local+ i( the co!pany hae its o0n (acility at local. We can directly purchase toothpaste (ro! the parent 5r! #ase in ,nited -tates as 0ell (or a short ter! source o( capacity+ #ut the oerall costs 0ill #e slightly higher than locally !anu(acture. 1ther than that+ the ,nited -tates sho0 a pro!ise that it hae a trust0orthy productie capa#ility and an oerall sta#le currency. :aing a production in locally is another !ethod to hae toothpaste. :o0eer+ it needs ti!e and !oney to #uilding a plant as 0ell as gro0ing its
si?e. 1nce it achiee the signi5cant olu!e the cost per unit should #e lo0er 0ith a local production.
8A !aBor trade o is #et0een lo0er per unit !anu(acturing costs (ro! plants operating at high capacity ersus lo0er shipping costs #y producing in or close to sered !arkets. A second trade o can inole decreasing production costs 0ith higher olu!e ersus increasing duties+ taxes+ and taris #ecause o( #order crossings.9 Interpretie -o(t0are+ Inc. 2<<&+ p. *$ We need to #e ery caution 0hen !aking a production decision+ else it 0ill aect the !arket entry o0 and cause diFculty in (ollo0ing expansion in 7atin A!erica !arket. 8or exa!ple+ a plant sering Bust one country !ay not achiee lo0 C1G- due to relatiely lo0 olu!e. /ut 0hen the plant #egins producing (or a second 7atin A!erican !arket+ higher olu!e and capacity utili?ation !ay yield lo0er C1G- that are reali?ed in the initial and the ne0 !arkets.9 Interpretie -o(t0are+ Inc. 2<<&+ p. *$
Distri#ution In !ost o( the retails outlet in ,nited -tates sale do!estic toothpaste. 8Grocery stores e.g. Hroger+ drug stores e.g. 'ite Aid+ !ass !erchandisers e.g. WalMart+ conenience stores e.g. %**+ and other outlets 0arehouse clu#s+ etc. all sell toothpaste. /y (ocusing on !ost o( the type o( !eans that !any national accounts hae #een distri#uted directly #y Allstar. Indeed+ arious retail accounts consist o( approxi!ately %< percent o( Alls!ile olu!e. There are still+ ho0eer+ a nu!#er o( s!aller local or regional stores that re;uire the use o( an indirect channel ia 0holesalers. 9 Interpretie -o(t0are+ Inc. 2<<&+ p. *% In igure 2 sho0 the isual illustration o( direct ersus indirect distri#ution. igure *> Distri#ution -tructure Direct s. Through Wholesaler Indirect
!anu(actu re
!anu(actu re
direct
0holesal er
retailer custo!e r
retailer
custo!e r
Dierent country hae their o0n type o( retailer 0hich 0ill keep their toothpaste in stock. In ,nited -tates+ 0e noticed that there are less type o( retailer 0ho is selling toothpaste in ,nited -tates co!pare to the rest o( the 0orld. /esides that+ as there are !ore retailer Boining up to (or! an
international alliance. It cause the !arket around the 0orld to #eco!e less saturated co!pare to ,nited -tates. This is ho0 the !arket should deelop+ 0hile the old (ashion (a!ily #ase retailing re!ain unchanged. In 7atin A!erica+ the distri#ution channels can #e categori?es as> old (ashion+ sel(sere+ and hyper!arket. Due to the traditional channel is s!all+ !aBorities o( the stores and !arket are sere #y 0holesaler+ not #y !anu(acturer. Conenience store and grocery store are consider as a sel( sere category 0hich is a #it !ore adance store 0here the consu!er 0ere a#le to help the!seles out 0ith purchasing. /ut it only has a narro0 line o( !erchandise. Een though so!e o( the! are reginal chain+ #ut !ostly are o0ned #y locally. ,sually large city hae hyper!arkets and this is a ne0 distri#ution channel. or!ally it a#le to store all its goods and directly get the ite!s (ro! the !anu(acturer. or exa!ple+ WalMart and Carre(our are one o( those 0ho allied 0ith glo#al distri#utor or o0ned #y (oreign hyper!arket chains. roduct turnoer+ slotting allo0ances+ sale (orce support+ and adertising support are ery crucial (or the #rands to !oe+ together 0ith distri#ution o( shel( space and positioning. :yper!arket and chain sel(serers #elongs to allo0ance and turnoer. As (or old(ashion stores and independent sel(sere (ocus to sales (orce support.
ricing When !anu(acturer deter!ine the M'-+ product cost and !arket conditions 0ill need to #e consider. To set a !anu(acturer=s suggested retail price M-' is #ased on (ollo0ing> • • • •
-i?e Deliery syste! Texture or!ulation
Although retailers hae the right to oer the 5nal price set in the store+ ho0eer !any choose to (ollo0 the M-' respect(ully. *"3< percent o( the M-' 0ill #e gien out #y !anu(acturer=s #ase on olu!e purchased and 0hich channel is chosen. Manu(acturer 0ill calculate the per unit reenue using M-' *discount. In dierent country they hae their o0n pricing ter!s and agree!ent. /y agree!ent+ M-' and ;uantity discounts are set #y !anu(acturers in 7atin A!erica. When setting the price+ there are (e0 thing in a country need to #e consider. • • •
rice sensitiity Market co!petition Cost
urther!ore+ i( the price dierence #et0een country !arket is to #ig (ar the sa!e #rand. It can cause the product alteration through unauthori?ed dealer and the !arket price change (ro! higher to lo0er.
ro!otion A !arketing strategy in consu!er product consist o( t0o !aBor part+ consu!er and trade pro!otion. 7ots o( eent planned #y trade pro!otion to !aintain custo!er interest to0ards a #rand. -lotting allo0ance and coop adertising is the general type o( trade pro!otion. Type o( pro!otion -lotting allo0ance
urpose • • • •
Coop adertising
• • •
,sed #y 0eaker #rands :elp ensure shel( space As discounts (ro! M-' Aect gross !argin /rand (eature in channel=s adertising Expenses included in pro!otion #udget Aect net contri#ution
There are (e0 types o( nor!al pro!otion !ethod to attract consu!er such as giing out so!e (ree tester+ discount coupon or oucher and pointo( purchase display. 7ike coop adertising+ these expenses are include (or as part o( the pro!otion #udget and it 0ill cause changes in the net contri#ution.
'e(erences ITE''ETI@E -1TWA'E+ IC. 2<<&. Country Manager: The International Marketing Simulation. JonlineK. 7ast accessed 22 April 2<*$ at> http>LL000.c#pp.uaa.alaska.eduLa(e(Lc!grstudent2
Appendix
