Advanced Pet Care of Australia Pty Ltd - Example

Advanced Pet Care of Australia Pty Ltd Name Course Name and Code Instructor’s Name Date Executive summary Advanced Pet care of Australia is a modern, dynamic and highly innovative pet food manufacturing company that is committed to both health and wellbeing of companion animals a cross in Australia. Due to saturation of the national market, the company seeks to venture into foreign markets through internationalization. India presents a potential market particularly for pet food products owing to the fact that the Indian pet food market is highly untapped and increasing at extremely high rate. Consequently, the Indian external environment is conducive thus favouring huge foreign investment. The best mode of entry that Advanced Pet care of Australia Pty Ltd can use to penetrate the Indian pet food market is through Direct Foreign Investment. Venturing into this market, Advanced Pet care of Australia Pty Ltd will be able to earn high revenues while also positioning itself strategically as a universal pet care company. Table of Contents Executive summary 2 Table of Contents 3 Introduction 4 Pet Industry in India 4 Key Trends and Developments 5 Indian Pet Industry PESTLE Analysis 8 Political 8 Economical 9 Social 10 Technological 11 Legal 11 Environmental 11 Entry modes 12 Exporting 12 Licensing 12 International agents and International Distribution 13 Strategic alliances 13 Joint Ventures 14 Overseas Manufacturing or International sales Subsidiary 14 Conclusion 15 Recommendations 15 Bibliography 16 Introduction Advanced Pet care of Australia is a modern, dynamic and highly innovative pet food manufacturing company that is committed to both health and wellbeing of companion animals a cross the globe. The company uses best and high quality of Australian ingredients in manufacturing its unique range of wholly Australian pet food products including cat foods, Krunchies, AusDog and Buffet dog foods, aquaculture feeds together with a range of supplements for pets (Australian Exporters, 2010). Highly knowledgeable professionals with great understanding in relation to pet nutrition create the pet food product’s formulation. For instance, ingredients are selected with regard to their nutritional value, which are then carefully mixed, matched and balanced to deliver the nutritional benefits as ingrained in their mission statement. It is argued that the company’s products meet and exceed nutrient specifications as specified by Association of American Feed Control Officials. Advanced Pet Care of Australia was established in 1993 to nurture the health and wellbeing of companion animals in Australia. Since its inception, Advanced Pet Care of Australia has expanded its operations rapidly within the Australian pet care industry (Australian Exporters, 2010). Owing to this fact, the company is positioned to venture into international markets to maximize on its customer base while increasing its profitability. For this matter, this report seeks to discuss pet food international marketing from Australia to India, giving a detailed and comprehensive analysis of Indian Pet Care industry, various market entry modes and recommending the best entry mode that Advanced Pet Care of Australia Pty Ltd can use to penetrate the Indian Pet Care Market. Pet Industry in India Across urban areas in India there is an increased change in lifestyle; the emergence of nuclear families coupled with double income household has encouraged an integrated growth of pet ownership. Pets are highly regarded as companions and family members. Additionally, pet owners have taken an interest in their pet’s diet, health and grooming. In this regard, a gradual shift towards prepared pet food products has been evidently observed. For instance, Indian urban residents are ready and willing to spend on companion animal’s food and care products than it has ever been experienced before. This trend has spawned the entire pet industry with a gradually increasing emphasis on pet care. According to Euromonitor International Report (2010), most of the branded pet products are imported. In this respect, the Indian government’s decision to reduce import duty on pet products in 2007 provided a boost to both manufacturers and importers. However, the ban on imported pet food particularly due to avian flu outbreak in 2006 that persisted through 2007 impacted the Indian pet industry negatively. Brands from overseas were restricted from entering the Indian pet market. The leading distribution channels for pet food and pet care products within the Indian pet food market are through veterinary clinics and pet shops. Further, new distribution channels are emerging; for example, new retail outlets and supermarkets across Indian towns are now selling pet products. With regard to this fact, the influence of vets especially on consumers purchasing decision has been significantly reduced. It has been established that, in the days to come, with pets increasingly being recognized as companions and fashion accessories: pet owners are likely to spend more on pets particularly in the urban areas (Euromonitor International Report, 2010). Key Trends and Developments Traditionally, Indian pet owners relied on vets to provide with information and guidance on how to take care of their pets. The vets influence stretches beyond the realm of vaccines extending to advice with regard to pet food. In this instance, manufacturers have directed their products to vets while targeting on getting them to recommended products to pet owners. For this matter, across India vets sell pet foods while owners purchase pet foods from vets. However, with increased information on the market pet owners are familiar with different brands of pet care products and can make informed decisions and hence they have become increasingly decision makers rather than relying on vets. This trend was especially evident by decreased veterinary clinics’ share of retail values sells of pet care products. This decline shows that pet owners have been empowered to make their own decisions with regard to pet care products and pet welfare as a whole (Euromonitor International Report, 2010). Given the above facts, manufacturers and dealers in pet care products will need to communicate directly with pet owners in order to determine what exactly is required and provide it accordingly. However, it is difficult to target pet healthcare products together with dietary supplements directly to pet owners, in this respect manufacturers and dealers in pet care products must promote their pet food brands through various media while also increasing their distribution to reach to pet shops, supermarkets, and other food stores. Additionally, manufacturers and dealers in pet care products must ensure that pet product outlets offer pet accessories and grooming products and services. Indian pet owners favour freshly cooked over prepared pet food; they give their pets homemade foods while offering pet foods as snacks. With this regard, the diet of pets is a combination of both homemade foods and prepared foods (Euromonitor International Report, 2010). However, most pet owners are gradually changing their perception the homemade pet food is healthier and nutritious than prepared pet foods. This is mainly because manufacturers and vets advocate for prepared foods. Consequently, manufacturers have aggressively targeted vets with their products while using nutritional professionals to recommend prepared pet food to pet owners. The frequent pet food import bans has affected the availability of the latter in India given the fact that there are only a handful of manufacturers of pet care products in India whose focus is on dog treats and mixers like biscuits. The only manufacturers in India are Vinky’s India Ltd and Tetragon Chemie Pvt Ltd. The only multinational that has domestic production facilities is Ellem India. In this regard, economy brands are often available during the bans while premium and mid-priced pet food brands suffer, as they are mainly imported (Euromonitor International Report, 2010). With regard to irregular availability of brands, the creation of brand loyalty among pet owners is difficult. Accordingly, irregular availability of imported brands has negatively impacted the development of pet food in India. Given these obstacles, pet manufacturers that intend to do business within India must shift the production of their brands to India. The Indian pet care market is young and rapidly growing but highly untapped owing to the fact that there are few players participating actively in it. Currently, pet food imports constitute approximately 40% of the total pet food market in India with the US companies being the dominant suppliers (Euromonitor International Report, 2010). The average annual growth rate of the Indian pet food market is between 11-15%. Consumption of branded pet foods is highly concentrated in urban centres and major cities and a substantial demand for branded dog foods is significantly and wholly generated from urban population, which is the target segment for marketing and promotional incentives. Studies have revealed that India has a large number of pet dogs and cats. For instance, the affluent section of the population comprising of more than 350 million middleclass provides a major target segment for pet food products. The vast majority of pet owners in India are high-income households; dogs are the most popular pets comprising of 55% of the Indian Pet population (Euromonitor International Report, 2010). In this regard, the Indian pet food market predominantly caters to dog food products, which take approximately 80% followed by cat foods comprising of 15% of the total market (Euromonitor International Report, 2010). Other market segments include aquarium fish food, bird food, and foods for rabbits and guinea pigs account for the rest. Indian Pet Industry PESTLE Analysis PESTLE analysis of any business environment is designed to analyze the external macro environment in which the business operates. These factors are always beyond the management or influence of the business although they are very important that the business be aware particularly when doing product development, business of strategy planning. These factors are mainly political, economical, social, technological, legal and environmental. Political This entails government policies defining the degree to which the government can intervene in the economy. Political decisions made by governments are likely to impact many significant areas for business like education, workforce, health of the nation, and the quality of the infrastructure of the economy. India as a nation is universally regarded as the biggest democracy having a federal republic type of government (Carl & Anuja, 2005). The political situation in India is stable owing to the fact that the Indian National Congress has led its political history. Currently, India has a coalition government. The political factors that affect the business environment include: Taxation policy: India has a well established tax structure with three tiers federal structure: the Union Government, the State Governments and the Urban and Rural Local Bodies. The power to levy taxes and duties are distributed across the three government tiers in accordance with the Indian constitution provisions (Carl & Anuja, 2005). Privatization: in order to minimize political interference in the management of enterprising thus leading to increased efficiency and overall business productivity. In this regard, many government companies are currently being privatized to reduce the many problems associated with public companies (Carl & Anuja, 2005). Deregulation: the Indian government has formulated legislations that allow foreign companies to undertake their business operations without any interference. International Trade regulations: the current Indian trade regulations are flexible thus allowing foreign trade (Carl & Anuja, 2005). Government Stability: For the past ten years, Indian government has been stable thus making a favourable environment to do business by attracting foreign investment. International Stability: India is a peaceful country with no international conflicts thus, it is certain that potential foreign investors are attracted to invest. Economical This comprises of interest rates, taxation changes, economic growth, inflation and exchange rates. Economic changes can expose business organizations to major economical impacts. For instance, higher interest rates reduce investment rates due to high costs of borrowing. Strong currency may lead to difficulties in exporting as it causes price increases in terms of foreign currency. Further, inflation provokes higher wage demands from worker due to the increased cost of living. Increased national income growth boosts demand (Carl & Anuja, 2005). India has alleviated from economic problems through good economic policies; for instance, the country initiated rapid economic growth to raise living standards while reducing unemployment rates and poverty as a whole. In addition, to become a self-reliant country, the government set strong industrial base with emphasis on heavy and basic industries. The country is also focused towards reducing economic inequalities by adopting a socialistic pattern of development that is based on equality while preventing exploitation. In essence, the economic factors are improving continuously; for instance, the Purchasing power parity was approximately 3.965 trillion US dollars in 2009 being 6% growth (Carl & Anuja, 2005). Currently the Indian economy is strong; it was not heavily affected by the recession as compared to other western countries. Social Researchers established that social trends within a given country have strong impact on the demand of products and the availability and willingness of individuals to work. The Indian population is ageing which has culminated into increased costs for firms that are committed to pension payments. Consequently, other firms are recruiting older employees specifically to tap into this growing labour pool (Rajagopal, 2004). India is the second most populated nation in the world with estimated population of 1.1 billion people (Carl & Anuja, 2005). Technological New technologies are the basis for creating new products and process. For instance, increased technological innovations have made online shopping possible, bar coding, and computer aided designs that have substantially contributed to the way business is done across the globe. Technological advancements have culminated into reduced costs, improved quality thus leading to innovation. The Indian economic platform is technologically sound; heavy technological infrastructures for bandwidth are available (Carl & Anuja, 2005). Most cities and urban centres have been covered by optical fibre. The country has reliable service providers in IT sector. The country is a big market in mobile sectors with more than five operators. Legal Legal environments in which a firm operates can affect it significantly. Over the past recent years, there have been vast significant legal changes that highly impacted business operating within the Indian economy. For instance, the introduction of the discrimination and disability discrimination legislation, the government’s decision to increase the minimum wage with greater requirements to recycle are some of the recent laws. Changes in legal requirements within any country can affect the firm’s cost and demand (Carl & Anuja, 2005). Environmental These environmental factors like weather and climate affect business operations of a given company. Climate changes due to global warming coupled with greater awareness of this particular external factor is a significant factor for the firm to consider. The extended desire to protect the environment is vastly affecting many industries across the globe. Consequently, the general move towards environmental friendly products and process is affecting demand patterns while creating new business opportunities. Industrialization and urbanization has resulted into the deterioration of India’s air quality. Concerning this, the government has stiffer and strict environmental laws governing industrial operations to protect her people and the environment at large. These laws are aimed at controlling pollution problems, planning permission, waste disposal, noise control, and environmental pressure groups (Carl & Anuja, 2005). Entry modes The mode of internationalization is the channel through which an organization uses to gain entry into a new international market. Any firm seeking to enter a foreign market is compelled to make a strategic decision as to which entry mode to use (Sanjeev & Sridhar, 2006). The following are the most common entry modes that a company going global can use. Exporting In this regard, there are two approaches to exporting to foreign nations: direct exporting where an organization commits to market its products overseas on its won behalf. Direct exporting gives the firm greater control overt product brands and operations overseas. Indirect Exporting is where the exporting company contracts an agency fro the host country that handles its product brands and operations on its behalf into an overseas market. Examples of indirect exporting include piggybacking, export management houses, Consortia, and trading companies (Sanjeev & Sridhar, 2006). Licensing This is where the business firm charges a fee or loyalty for the use of its technology, brand and expertise. Modes of licensing include Franchising, which involves the organization (franchiser) providing branding, concepts, expertise, and other facets that are needed to operate in an overseas market to the franchisee. In franchising, the management is controlled by the franchiser. Secondly, Turkey contracts, which are major strategies to establish large plants. They involve training and development of employees where skills are needed. After handing over, the mother company does not own the plant (Sanjeev & Sridhar, 2006). International agents and International Distribution This is where the organization seeking to venture into international marketing contract agents. In this regard, agents are individuals or firms that are contracted to your business who are tasked with marketing its products on it behalf in a particular overseas country. The agents rarely take the ownership of the products while more often are paid commission on good sold. Any organization intending to globalize must make sure that their contracts allow them to regain direct product control of products. Agents in these regard are expensive to recruit and maintain. In addition, they can represent the company’s competitors (Sanjeev & Sridhar, 2006). Distributors are more or less the same as agents with the only difference being that distributors take ownership of products. Owing to this, they have an incentive to market products and make profits from them. Strategic alliances This term describes different relationships between companies that market products internationally. In some instances, the relationship is between competing firms. Examples of joint venture include shared manufacturing, Research and Development (R&D) arrangements, distribution alliances, and marketing agreements. Strategic alliances are non-equity based on the agreement for instance the firms remain independent and separate (Sanjeev & Sridhar, 2006). Joint Ventures This type of market entry tends to be based on equity where a new company is formed with respective parties owning a proportion of the new business. The reasons to why companies establish joint ventures in order to enter new international markets are; access to technology, core competencies or management skills; to gain entry to foreign market, for example, companies wishing to venture into Indian market must source local Indian partners. Lastly, access to distribution channels, manufacturing and R & D are some of the common joint ventures (Sanjeev & Sridhar, 2006). Overseas Manufacturing or International sales Subsidiary This type of entry involves a company diversifying its manufacturing operations into an overseas country. For instance, the company’s only option is to own an overseas manufacturing plant as in the organization invests in the plant, machinery, and labour in the foreign country’s market. This kind of entry is also referred to as Direct Foreign Investment (FDI). In this case, the mother organization can build a new manufacturing plant or it might acquire already existing businesses that has suitable plant in order manufacture products for the new market. For instance, the company could assemble products in the new plant. The main advantage of DFI is that, particularly manufacturing products and service to meet the needs of local customers (Sanjeev & Sridhar, 2006) localize the company. As aforementioned, any business organization seeking to enter a foreign market is compelled to make a strategic decision as to which entry mode to use. According to the normative theory, the choice of a foreign market entry mode should be based on trade-offs between risks and returns. In this perspective, a firm is supposed to choose the entry mode that offers highest risk adjusted return on investment, resource availability, and need for control (Sanjeev & Sridhar, 2006). The choice of an entry mode is also determined by ownership advantage of the firm, location advantage, and internationalization advantages of integrating transactions within the firm. In respect to these facts, the best entry mode for Advanced Pet Care of Australia Pty Ltd to Indian Pet care market is through Direct Foreign Investment rather overseas manufacturing. Conclusion Advanced Pet care of Australia is a modern, dynamic and highly innovative pet food manufacturing company that is committed to both health and wellbeing of companion animals a cross the globe. The company was established in 1993 to nurture the health and wellbeing of companion animals in Australia. The company has been expanding its operations rapidly within the Australian pet care industry. With these increased operations, the company should venture onto foreign markets to maximize on its revenues and to acquire a universal position. India is preferably the best foreign country for the company to invest in due to its large population with highly untapped market. Manufacturing overseas is the best option, as it will give the company an upper hand to minimize on its cost of operations while maximizing its income. Recommendations i. India has a stable political and economic environment, which encourages foreign investment thus Advanced Pet Care of Australia Pty Ltd will have an easy way into the Indian pet food market. However, the company must come up with good environmental policies in order to be fully accepted ii. Advanced Pet Care of Australia Pty Ltd has advanced technology, superior expertise in pet products, and assets hence can earn high returns in the Indian pet food market. The company has the power to manufacture differentiated products; manufacturing overseas will give the company an added advantage to cut on operational costs while also having ownership advantage. Consequently, the firm has the power to compete with host country firms and thus it is bound to gain tremendous competitive advantage. iii. The best option for penetrating into the Indian pet food market is through relocating manufacturing operations since export regulations are tough owing to the avian flu threat. iv. The Advanced Pet Care of Australia Pty Ltd will also benefit fro location advantage, India has the second largest population in the world with the affluent section of the population comprising of more than 350 million middleclass providing a major target segment for pet food products. Advanced Pet Care of Australia Pty Ltd can readily exploit this available market. There is high market potential in India: manufacturing within India will provide Advanced Pet Care of Australia Pty Ltd with greater long term profitability particularly because the pet food market in India is young and growing at a rapid rate. Bibliography Australian Exporters. 2010. Advanced Pet Care of Australia Pty Ltd. Retrieved on 6/1/2012, from; http://www.australianexporters.net/companyID7416.htm Carl J. D. and Anuja, U. 2005. India and the knowledge economy: leveraging strengths and opportunities. New York: World Bank Publications Euromonitor International Report. 2010. Pet Industry in India and China. Retrieved on 6/1/2012, from http://www.scribd.com/doc/17781154/Pet-Industry-in-India Lawrence S. W., Gabriel R. G. B., and Bent P. 2007. Foreign operation methods: theory, analysis, strategy. New York: Edward Elgar Publishing. Marcela, M., and Miles I. 2002. Internationalization, technology, and services. New York; Edward Elgar Publishing. Mary, P.L., and Richard S.L. 2001. Opportunities in animal and pet care careers. Shanghai: Mc-Graw Hill Professional Rajagopal, D. C. 2004. The graying of India: population ageing in the context of Asia. London: Sage Sanjeev, A., and Sridhar, N. R. 2006. Choice of Foreign Market Entry mode: Impact of Ownership, Location, and Internationalization Factors. Retrieved on 6/1/2012, from http://aib.msu.edu/awards/23_1_92_1.pdf Read More