Marketing in an International Perspective
International Marketing Strategy
Froland
Executive Summary
This report is to set up an internal marketing strategy for Froland in the UK market. In the background sector, a brief of company’s background knowledge and business environment in host country are revealed.
The target market evaluation is mainly based on PEST analysis.
Political Factors
- The free trade policy protects running business in different country.
- Food safety and emission control laws are different from host country.
- More detailed label is required in the UK market.
Economic Factors
- Frozen potato products market is growing year by year.
- Associated industry- fast food industry is also growing.
Socio-cultural Factors
- It is a social tendency to healthy food.
- Potato chip is an indispensable part of normal life.
Technological Factors
- The cost of operating in the UK is higher than it in the Netherlands.
- Refrigerators are required during processes of transport and storage.
In the product positioning part, there are assessments of main competitors and different distribution channels.
The next sector unfolds market segmentation. The target customer in retail industry is described as football match audience, families, middle income and time intensive. Compared to those in food service industry, customers are price sensitive.
Based on evaluations of business environment and market segmentation, the marketing entry strategy for Froland is direct export model, which requires establishing a sale office in the UK to operate in the market.
Product management is to make products adapting to international market. 4P’s model and other launching details are discussed in this part.
Product
- Identify customer’s need.
- Colourful, attractive and football related package in different size for retailers, and simplified package in larger size for food services.
- Manufacturer’s own brand
Price
- The same price as its main competitor in supermarket
- Comparatively low price in food service
Place
- First is south and east England
- Then is northern Ireland and northern Scotland
Promotion
- Mass media advertising and promotion are used to raise brand awareness and generate brand loyalty in retail market
- Direct marketing communication is to create and sustain relationship with customers
Other Launching Details
- Launching will begin from May.
- Sales volume, market share, brand awareness and customer’s satisfactory are indicators used to evaluate market performance.
- Brand loyalty is an obstacle to launch a new product.
The expected results of Froland’s international marketing strategy is capturing market share, creating brand awareness in retail industry and making an entrance of food service industry.
Background
Potato chips are one of the UK’s most popular snacks. Every year nearly 550,000 tonnes of potatoes are used to produce potato chips, with a retail value of over �2 billion (ESA, 2010).
Froland Company Ltd is a subsidiary of Aviko, which is established to sale frozen potato products in the Netherlands and other countries. The Netherlands is the largest frozen potato products exporter around the world, exported above 90 percent to the UK, Germany and France, nearly 97% of which directly went to fast food and retail industry. Aviko is the largest producers of frozen potato products in Netherland and even the whole world, with a 24 percent market share in European market (KBS, 2010). The company has built a complete manufacturing chain of its products, from raw materials processing to finished product delivery, and serves across the world. In the year 2009, they accelerated their international activities, and planned to expand to the UK market.
Target Market Profile
During the last two years, frozen potato products sold in retail industry increased by 25% in value and 5% in volume. Considering the economic recession happened at the very time, these figures would be more enjoyable in the coming year. In order to evaluate factors in the UK market, PEST analysis is used in next sector:
Exporting within Euro Union is protected by free trade policy. This will significantly simplify the exporting process, and cut down the cost. On the other hand, food safety policies and emission control are also different from the market in host country, which may require more strict producing control and different package design. At last, the UK government requires every origin of raw material from each product should be labelled on the package (ESA, 2010).
As mentioned before, the frozen potato product market was growing in the last two years. Every year the UK farmer grow 550 thousand tonnes of potatoes for making potato chips, compared to 150 thousand tonnes are imported from other countries (ESA, 2010). In addition, the fast food market in the UK increased by 5.2 percent in 2008 to reach a value of �1.7 billion (Datamonitor, 2009). As an associate market, a growth in fast food industry would also accelerate frozen potato products market. Meanwhile, the stable economy environment in the UK also protects business from any sort of risk.
More and more people realize the influence from consuming junk food nowadays hence younger people were eating fewer potato products. However, the temptation of its taste and convenience cannot be resisted. Potato chip already becomes a part of people’s life. On the other hand, the public interests on sports event may stimulate snack food production.
Considering the fully equipped plant in the Netherlands and the costly human resource, manufacturing in the UK mainland would not be a consideration. For the purpose of supplying steadily, the company should rent warehouses near launching area. At last, the transporting process should be also taken into account. Refrigerator vehicles which to chill products raise the cost and emission during transportation.
Product Positioning
According to data collected from Tesco, the Mccain is absolutely the leader of this market with a share of more than 60 percent (see appendix 1). The private label products take the second position. Each brand has their competitive advantages. For example, the Mccain products are more costly than private label products hence target on premium market. And the latter provides price sensitive group with a lower cost. With the support of retailer and its agreement with provider, the cost of private label is unwisely to compete with. Obviously, due to brand loyalty and the comparatively low cost, entering retail industry is harder than usual. Based on the data, above one third of Tesco’s customer purchase frozen potato products, and the market share of Tesco is 30.6% of the UK market in 2009 (Finch, 2009), the neglect of this market is also unaffordable.
Another distribution channel is food service. As an essential cuisine on any fast food restaurant’s menu, the potential of this market is unimaginable huge. The market share of McDonalds in 2009 is 44% of UK adults, besides customers in KFC, Burger King, Subway and so on, an approximate market value is �1.5 billion (ESA, 2010). The coming football World Cup 2010 also boosts the consumption of snacks. According to a research, in 2002 9.1 million people watched live football match on TV in a bar or a pub compared to 8.7 million of those watched in stadium (Canterbury Christ Church University, 2007).
Launching products mainly in food service industry accompanied with retail market will guarantee market share of Froland in the UK.
Segmentation
Customers of food service and supermarket should be considered separately. First, the target consumer group in food service industry is categorised as time intensive, tasty, brand careless and middle income. As the best choice of snacks during a sports event, football fans are also chosen as a target customer group. A customer in a restaurant won’t pay much attention on which brand of potato chips they are eating. Considering the business model is B2B, concerns about cost, stable supply and food safety are more important to a pub or a restaurant. Second, according to data from Tesco customers in supermarket are young and old families with middle income (see appendix 2). As a quality product targeting on premium market, brand loyalty should be taken into account.
Marketing Entry Strategy
Many factors should be evaluated before choosing marketing entry model. To begin with, the product of Froland is less distinct with local brand, are less complex, the processes of manufacturing are almost well-known, the free trade policy within Euro Union, the need of flexibility, the intensity of competition, and the high cost of producing in the UK, are the factors which lead the decision to export model. On the contrary, the large business scale of company with sufficient international trading experience, lower political risk, and hardly distinct culture might result in foreign direct investment model.
By comparison, direct export model is suitable to Froland. A sale office in the UK will take responsibility for marketing decision on the basis of evaluating local environment. This helps Froland to control operations in foreign market, and reduce the pressure from its competitors. Once the performance is far from expected, alternations would less costly.
Product Management
The marketing tool is used to make the product being sold properly. 4P’s model contains product, price, place and promotion.
4P’s Model
Customer need Consumers in retail industry would concern brand, price, and packaging of merchandise. By contrast, restaurant or bar in food service industry, would care about price and stable supply.
Package According to data, kids choice significantly affect the final decision of purchasing (see appendix 3). In order to meet the taste of children and football fans, the package would be colourful, attractive, and football related. For example, the chromatic mascot of World Cup 2010 or a cartoon of football stars will definitely draw a child’s attention. The products sold into food service industry will be packaged in simple plastic bags or cartons in order to cut down cost. On the other hand, it can be seen from dunnhumby data, the first two favourable package sizes are more than 2Kg and between 1Kg and 1.5Kg (see appendix 4). The products sold in retailers would be 2Kg and 1Kg accordingly. Meanwhile the package size for food service will under the consideration of the storage and delivery convenience for different business scale, which will be 2Kg, 5Kg and 10Kg.
Brand In order to create brand loyalty, the product in retail industry will use manufacturer’s own brand.
Compared to the price of main competitor in retail market, a higher price would lead to lower sales volume hence change the initial target market to up-middle income group. However a lower price might in result of losing product’s quality image. A compromise is the same price as Mccain products. For instance, the Mccain Oven chips and Mccain Homefries are �1.33 and �1.09 per kilogram respectively, Froland may set up its price exactly the same as Mccain’s.
Naturally, price is the weapon used to compete in food service industry. With the large business scale in host country and comparatively lower cost of resource, this weapon is powerful. However for the reason of product character, price of frozen potato products may different year by year. Any unpredictable factor such as weather may significantly influence the harvest, together with the fluctuation of operation cost, the final price of products may show instability (Lati, 2009). The last thing a restaurant or a pub would like to see is the unsteadiness. The Advantage of Froland, their growers are selected from all over Europe. This effectively helps the company reduce the risk hence offers a competitive price with lower fluctuation.
According to data from Tesco, the best performances are generated from northern Ireland and northern Scotland, followed by London, southern and east England (see appendix 5). Begin with south and east part, this region covers three areas mentioned above. Under the consideration of making rational use of resources, the first launching area will concentrate on London, southern and east England. For one reason, focusing on one area will decrease transportation cost and storage cost. For another, south and east England is geographic nearer to product origin, which helps a further reduce of transportation cost. What’s more, as the second step of entering the UK market, northern Ireland and northern Scotland will be a further target area. After evaluating sales performance of the initial stage, an extension to this area will perfectly target on the most leading market.
The marketing communication process will divided into two parts. The first one is focus on retail industry. Depending on the requirement of creating brand awareness and loyalty, mass media advertising such as TV or radio is the best choice. Launching promotion is also established to attract the first purchase. In order to penetrate new distribution channel and encourage repeat purchase, promotions are limited to buying allowances and merchandise allowances, which mean a refund will be entitled to retailers in return for distinct performance and extra goods are provided free to final customers.
Another one is target on food service, which will use personal selling. Unlike other marketing communication tools, direct marketing is less concentrate on brand awareness but more focus on creating and sustaining a relationship with customers. Using telemarketing and direct mail will significantly and effectively influence the choice of restaurant owners (Varey, 2002).
Other Launching Details
Expected Results
The international marketing strategy is made for Froland entering the UK market. During the first year after launch, the market share in supermarket would be around 10%. After the procedure of building brand loyalty, the second year will be a significant period. Maintaining product supply and quality will lead to stable consumption. For food service industry, the initial objective in the first year is to stabilize private small business, including small bars, private restaurants and snack bar in stadium. Further extension will focus on different geographic area and larger fast food chain corporations.
References
Canterbury Christ Church University (2007) New research on football spectating habits. March 2007. UK: Canterbury Christ Church University.
Dunnhumby (2010) Froland. London: Dunnhumby, pp.2-5.
Datamonitor (2009) Fast Food in the United Kingdom. August 2009. UK: Datamonitor.
ESA. The European Snacks Association (2010) Europe snack industry statistics. London: ESA, p.1.
ESA. The European Snacks Association (2010) From potato to packet: History- how it started in Europe. [WWW] ESA. Available from: http://www.esa.org.uk/education/english/history/index-hist.htm [Accessed 07/04/10].
ESA. The European Snacks Association (2010) Provisions on mandatory country of origin labelling for processed food. London: ESA, p.1.
Finch.J, (2009) Tesco increases market share. [WWW] Gurdian.co.uk. Available from: http://www.guardian.co.uk/business/2009/nov/10/tesco-waitrose-win-market-share [Accessed 07/04/10]
KBS. Kent Business School (2010) Case study: Froland. Canterbury: KBS, p1.
Lati.A (2009) Fast food outlets feel the heat as high potato prices hurt sales. [WWW] Business Daily. Available from: http://www.businessdailyafrica.com/Company%20Industry/-/539550/599812/-/view/printVersion/-/yadqlm/-/index.html [Accessed 08/04/10]
Lin.B.H, Lucier.G, Allshouse.J and Scott. L (2001) Fast food growth boosts frozen potato consumption [WWW] Food Review. Available from: http://findarticles.com/p/articles/mi_m3765/is_1_24/ai_80517258/?tag=content;col1 [Accessed 07/04/10].
Research and Markets (2009) Restaurant Market Report Plus 2009. Uk: Research and Markets.
Richard J. Varey (2002) Marketing Communication: principles and practice. London and New York: Taylor & Francis Group.
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