Global Markets & Entry strategies

Keywords: Britvic Entry to China, Internationalization, Analytical Research Situation Analysis, Global Market Screening, Entry Strategy and Market Plan, Internationalization model, International business assignment writing services

Introduction

Mikler (2015) stated that companies start the business locally and upon their success they expand in their home market. However, for large number of successful companies after certain point home market become saturated and stagnated to achieve further growth. Therefore, companies started to explore new markets and opportunities to expand their horizons in order to achieve growth and increase profitability. The business growth and expansion is the motivation behind internationalization.

Majocchi, Mayrhofer and Camps (2016) added that internationalization is concerned with the development of an international profile of a business. It is stated as structural expansion and complexity, and company needs more resources in order to support its global operations. In addition, company’s international success depends upon the range of factors such as comparative or absolute advantage as well as the availability of resources and opportunities.

Nevertheless, Cavusgil et al (2014) contended that internationalization does not mean a company should establish a fully own subsidiary. At last, not least, internationalization could base on equity and non-equity methods. The equity method involves capital investment in the foreign operations whereas in case of non-equity firm do no commit large capital investment.

In this report, personal reflections are provided on the analytical research carried out for Britvic. Moreover, company readiness for internationalization, market screening, challenges surround to entry strategy, export-import strategy as well as performance is evaluated.

Company Profile – Britvic

Britvic (LON: BIVC) is UK based soft drinks producer which offer wide range juice drinks, sodas, ice tea, energy drinks, as well as mineral water. The product portfolio of the company is based on range brands such as Tango, Robinson, and fruit shoots. The company is leading soft drink producer in the Europe and has operations in France and Ireland. Moreover, in relation to the internationalization of the company, it sells products in France named as Fruite, Sicilia and Teisseire. In addition, in Ireland, range of brands offered by the company is MiWadi, Club and Ballygowan. Company has pursued organic growth strategy and internationalization is managed through export, franchisee and licensing (Britvic, 2016).

Personal Reflection on Analytical Research – Britvic’s

SECTION 1- Company Situation Analysis

The situation analysis has helped to identify the problems faced by the company. Furthermore, with the help of situation analysis company problems were analyzed. The range of steps involved to understand the operations, performance and product portfolio, as well as strategy of the company. In the light of situation analysis, it was evident that The Company has achieved tremendous growth in UK. The company is ranked as # 1 in the UK along with it sells it product in Ireland and France (Britvic, 2016).

Moreover, understanding the company’s strategies has helped to highlight current operational methodologies of the company. The financial data has helped to interpret the profitability and income structure of the company. The strategy is a course of action to achieve the specific outcome. The production strategy of Company is producing in the UK then exporting to US. The company has its four manufacturing facilities based in the UK and its largest distribution center is based in Leeds.

Company head office is based in the UK where most of matter relevant to subsidiary and operation are managed. In addition, the company has built a strategic alliance with PEPSICO to manufacturing and distribute it products. The global operations of the company are based on the Ireland and France where it has number of local soft drink brands (Britvic, 2016).

The analytical research has highlighted the previous internationalization experience of Britvic.  For international operations, company purse ‘Turnkey operations’ in France and Ireland which helps to reduce cost and develop local brand according to local consumer taste. At last, not least, company source its raw material from local supplier and engage in responsible social practices (Britvic , 2015).  Nevertheless, company sells its products to US through franchisee and exporting arrangement. The Company has achieved tremendous growth over the year which has resulted in saturation in the UK market (Tamer, 2009; Britvic, 2015)

The product life cycle analysis has helped to understand marketing and product development. Britvic has wide range of products which include tango, J²0, fruit shoots as well as it produces products on the local taste and preference of local market. Product life is an important concept to managing the marketing for a company. The product life cycle is based on four stages which are an introduction, growth, maturity, and decline (Grieves, 2016).

The company product analysis shows that company products are in the mature phase. Moreover, the company believes in continuous product development and has introduced range new products over the year. In the light of Ansoff matrix, company focus on product development. Furthermore, fruit shoot and Robinson are classified as ‘Cash cow’ in the BCG matrix (Daft, 2015).

The SWOT analysis is defined as structural tool for planning based on identifying the strategic position of the company. The SWOT stands for strengths, weakness, opportunities and threats. Britvic strength includes strong brand reputation, resources and expertise, wide product range as well as ability to develop the product according to the need of the local market.

Moreover, company manufacturing costs, over-concentration of revenues as well as a low level of investment in research and development represent major problems for long-term growth and sustainability. In addition, the company for a company exists in the emerging markets where there is a soft demand for product and services.

At last, not least, growing competition, decreasing demand for soft drinks as well as cultural difference represent major challenge for company (Snelling, 2012).

Company Rational for internationalization

The situation analysis represent that the company has strength and abilities along with previous positive experience for internationalization which make ideal situation enter the new markets. Therefore, taking advantage from new market could provide the company an opportunity to achieve growth and further expansion.

Consequently, with the help of analytical research company position and suitability for internationalization is established and evaluated.

SECTION 2 -Global Market Screening

Rationalize for choice of markets for screening

The number of markets selected was based on geographical and economic conditions. As Britvic operation are concentrated in Europe and US, i.e. emerging market in Asia were chosen. This helps the company to expand into new markets and take advantage of from developed economies. The countries such as Malaysia and Singapore have good economics condition along with strong infrastructure.

On the other hand, china has emerged as strong market along increased GDP per capita. Therefore, these markets represent huge demand for company product, growth as well as expansion (Steers, Sanchez-Runde and Nardon, 2015).

The global market screening was useful in order to determine the suitability and business potential in various markets. The step carried out was to analyze the potential of various markets. The range of different markets was analyzed such as Malaysia, Singapore, South Korea as well as china. The global screening process helps to analyze a range of factors in each of potential market.

At this level, a range of macro variables was identified to analyze the business potential. For example, comparison of taxation rate in possible target countries. The taxation rate in Singapore was very 18% compare to the higher rate of 39% in the Malaysia. The macro analysis indicates tremendous growth in china compares to other countries (Dwivedi, 2015).

The analytical research shows that range of macroeconomic variables such as population, demand, taxation and infrastructures in the possible target market. The market screening has helped to develop an overview of the market. This has helped to make a comparison of all possible target markets in terms of the range of factors such as population, demand, and supply. For example, Singapore market shows a consumption amount of $3 billion along with favorable attitude toward the foreign investment.

In addition, South Korea market showed a decline of 2%, as well as Malaysia, had a good market for fruit shots. At last, not least, china markets a large potential of $15 million along with a range of suitable macroeconomic variables. At last, the not least, micro analysis shows 24% of the population in china were under the age of 14 (Hein and Stockhammer, 2016).

SECTION 3 — In Depth Market Analysis

This section was involved carrying out detail analysis on the company target market. After conducting detail micro and macro analysis helped to narrow down the market to two potential markets. This stage eliminated the countries where potential demand or social problems. The detailed profile of potential markets which Singapore and china.

The range of factors was carrying PESTLE analysis for two possible potential countries. This stage helped to develop possible sales in the particular country as well as possible share in the country. At last, not least, in-depth analysis showed china as suitable market to enter (cook, alston and Raia, 2015).

Competitive landscape and distribution channel

The in-depth analysis shows helped to develop the competitive landscape for the company. This stage highlighted the competitor for the company in the target market. In depth analysis, helped to manage to identify possible distribution channels in the target country. The distribution of products plays an important role in the availability of the product for the consumer. The range of distribution was established which was wholesaler-retail-consumer. Moreover, this has highlighted the potential competitors in the target country market (Gunasekaran, Krishnadevarajan and Lawrence, 2015).

Rational for market selection – china

The country selected to enter was china after conducted in-depth analysis. The market was selected based on number of number of factors such as country sales potential, competition in the market, social factors, Currency, GDP, tax rates, CPI as well as political conditions. In addition, china has a large population as well as it is classified as emerging market.

Emerging market are new economies which are developing at much faster rate and presently remarked rate business opportunity. Emerging markets has resulted in increased demand for the product. The soft drink market in the china is execrating a strong growth for the coming years. The target market shows an annual growth rate of 15% on year-on-year basis (Euromonitor International, 2015).

SECTION 4 -Entry Strategy and Market Plan

This section helped to analyse the entry condition and strategy in the Chinese market. The analysis from earlier section provides strong ground to develop marketing, as well as an entry strategy. Situation analysis provided an overview of current practices of the company whereas in-depth analysis helped to understand social, economic and political factors in the market.

During this phase, a range of alternative strategies such as joint venture, wholly owned subsidiary and potential other options were evaluated. Based on potential benefit offered as well as current strategic priorities of the company, Joint venture as ‘Turnkey operation’ option was selected. This will help the company to reduce the cost as well as reduce the risk of the new market (Leeman, 2016).

In addition, this option was useful for the country it will avoid the imports taxation and tariff. Based on current practices, it was agreed product name will be adapted according to the Chinese market. The marketing communication establish based on the cultural requirement. The pricing strategy selected was market skimming based on the strong brand of the product (Doole and Lowe, 2015).

The promotional objectives were to increase awareness and create a presence in the market. In addition, to successfully achieve growth in coming years four P of marketing were developed. The four selected were based on brand value (price skimming), promotion (awareness), creating an alliance with a local restaurant (promotion) as well as demand for the product (hohnson and bade, 2015).

Specific challenges for strategy

The potential problems and challenges for the company involve cultural, financial, management and product risk.  For example, in case of joint venture, there might be control risk over the operation of company. The cultural issues in marketing as well as organisational management would not major problems for the company. Another issue would product acceptability in the Chinese market (Steers, Sanchez-Runde and Nardon, 2016).

SECTION 5 – Rationale for the internationalization model

Export-import strategies

Exporting involves ranges of complexities such as export regulations, H.S codes, tariffs, licensing issues, languages as well as product certification. Some other issues surrounded with exports are freight forwards as well as transporters to complete the transaction. At last, not least, payments method involved with exports is key area to address.

Therefore, it is importance of export plan is to identify goals, constraints and facts in order to devise and implement an effective export-import strategy. Moreover, export planning helps to set the objectives and efficiency planning for resources. There are two method involve with exporting which are direct and indirect exporting (Seyoum, 2013).

Indirect Exporting

Tamer (2015) stated that indirect export involves using the agent or intermediaries to export firm product overseas. The agent act as representative for the company and use their own network to market company product. Companies use indirect exporting when it is not cost effective to directly export product. There are range of companies which provide services for indirect export and using a group of service provider such as export broker and merchant, a trading and commission house is involved in product exporting.

Direct Exporting

In case of direct exporting, a manufacturer sells its producer located in the foreign land. In case of Britvic foreign operation, it will use direct method of exporting. An export manager is hired to manage the export function of an organization. A department is set up to manage the logistic, credit and advertising function for the company. Britvic is forming a joint venture in china, i.e. it has a full partner to handle the various function in china. However, it needs an effective effort department in the UK to manage the exports. The export sales subsidiary in china will handle the operations of Brtivic (Hohnson and Bade, 2014).

Direct Exporting Vs. Indirect Exporting

Direct Exporting

Indirect Exporting

·      Set-up cost are higher

·      Better knowledge and market understanding

·      Higher credit risk

·      Set-up costs are lower

·      Failure to understand foreign market

·      Lower credit risk

Risk attached to import and export

The number problems associated with import-export such as reliability of supplier, payment from the customers, quality of products, legal issues, and demand and product availability. The one factor is currency floatation because exchange rate increase the amount paid or decrease the value of goods exported. The product demand is another country issue because if company export too much and unable to sell the products, then stock may become redundant. The legal matter such as rules and regulations, product H.S codes, duties and tariff and customer laws could result in potential problems for the company (Snelling, 2016).

Document required for operation

Shipment and Trade

The exports are managed based on the incoterms 2010. The incoterms are abbreviated for international commercial terms. (Export.gov, 2014) The intercom define number of transport and other relevant regulation relevant to export and import procedure.

Airway Transport

By Sea

EXW: Ex-work

CPT: Carriage paid to

CIP: Carriage and insurance

FOB: freight on Board

CFR: Cost and Freight

CIF: Cost, Freight and Insurance

DocumentCertificates
commercial invoiceName of Product
packing listCountry of Origin
Bill of lading/Airway BillNet Content
Certificate of OriginInformation of Importer
License and InsuranceSpecification
Intercoms

Duties and Taxes

A duty and taxes are levied by the government on the value of product imported along with freight and insurances. The duties and taxes are varied according to country to country and are charged in addition to the tariff. There are certain products which are much higher rates of duties such as luxury items whereas other items such as solar panels might have zero import duty and tariff. The procedure involves in determining the duty is start with H.S code. The H.S code specified the percentage of duty on certain product. Once the code determine, schedules are used to identify the rate and tariff applied to product. Therefore one duty is calculated then it is added to value of product to determine the other taxes (Seyoum, 2015).

FTA’s – Free Trade Agreements

Free trade agreement (FTA’s) is used by the government to facilitate the exporters of their countries. For example, US have FTA agreements with wide range of countries which them its exporter to sell their products in the international market. Similarly, EU have agreement with different to facilitate the exports. However, in case of Britvic it is not like any free trade agreement would be available to export fruit juices and soda drinks (Mikler, 2015).

Method of Payment

Goldstein (2017) stated that there are number of different ways which could be used to make payment in the international trade. The first could be cash in advance and it is useful to avoid credit risk by the exporter. The range of method available in advance case is wire transfer or credit. This method is useful when there is small payment are to be made by the supplier. Next method of payment is Letter of credit. This is most common and wide accepted method of payment across the globe. There are different types of Letter of credit (LC) available according to need and suitability of buyer and seller. The diagram sum the risk attached to payments.

Payment Methods in Export and Import

Conclusion

The market analytic research has shown that company can successfully launch in new market. The situation analysis has helped to understand the current situation of the company in terms of revenues, resources and operation in present markets. This stage helped to develop rationalizes for internationalization.

The next two stages involved were market screening and in-depth market analysis for potential markets where company could launch its business. This stage helped understand macro and micro variables in the potential along social, financial and economic opportunities present in the market. The next section helped to developed marketing and distribution plans based on situation and market analysis. This helped the company to align its objectives and strategy.

The selected entry market was based on number of factors such as population, market demand and political stability. Britvic will continue its current practices to launch its products through joint venture. At last, not least, export import strategies and relevant factor were discussed to ensure efficient export operation to china.

 

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