The External Factors That Influence a Business - Adfresh Farms - Case Study Example

ADFRESH FARMS Student’s Name Course Professor’s Name University City Executive Summary AdFresh Farms an Australian business is looking to invest in Singapore market, this report provides an analysis of the foreign market entry method that should be used. The report analyzes the external factors that influence a business in a foreign market and establishes different opportunities that should be exploited, the international business objectives whose basis is to expand demand and boost profit fits into the organizations objectives and the foreign market entry method chosen is the high-intensity mode that ensures AdFresh has complete control in market participation. This mode is the form of a merger. 1.1 Introduction Adfresh Farms is an Australian family-owned business founded by Sebastian and Cyrene Torrisi in 1981. This Company decided to enter a foreign market in Singapore. The expansion program will be done through a merger with an already established brand, Fair Price, this paper will address various analysis and risk management consideration that the company must take before entering a foreign country. The analysis addresses internal and external factors, the mode of entry and finally gives recommendations based on the information if the decision is viable or not. 1.2 Company background AdFresh Farms is a family business established in Australia, and the family has been supplying herbs to the food and manufacturing industry for over 3 years. The company grows its own products and produces various puree’s. It has established itself as a reliable producer and supplier in the food industry by producing high quality herbs and consistent products all year round. AdFresh Farm products are purely grown in Australia and the farm uses state-of-the art equipments in their facility to process fresh herbs straight from harvesting in order to maintain high quality and freshness. The business employs various quality standard programs to guarantee the safety and quality of their products. The farm has been supplying various food service retail outlets in Australian for a long time and has diversified its products to include the popular Easy Cubes that are available in the freezer section of different retail outlets in the country. However, the business is looking to invest and expand to Singapore (Kwek). 1.3 The statement of scope and opportunity of the investment The opportunity to internationalize AdFresh products is under the scope of export which means that AdFresh will be trading their products from Australia to Singapore and thus abiding to the rules and regulations of Australia and Singapore during the export. The scope and opportunity of investment is based on the research conducted by the business on the international market, this provides knowledge on the target market, needs and preferences of the customers, buyers behavior, competition and much more. This information is provided by performing an internal and external analysis (Doole & Lowe 2008, p.29).  1.3.1 External analysis AdFresh must first perform the necessary research in Singapore before making any decision to invest, the research is to establish facts on the country laws, people’s culture existing retail establishments and the business environment at large. This will give AdFresh an opportunity to determine a viable investment option (Cadle, Paul & Turner 2010, p. 98).  1.3.1.1 Market analysis Singapore has thousands of stores that sell Agri-food and processed food, and these stores are supplemented by various specialty food outlets. Traditionally, consumers would shop for fresh produce in wet market stall, however the trend has changed and people are buying products from various retail stores. One of the major retail supermarkets in Singapore is NTUC Fairprice supermarket chains. The food service industry has experienced a rise in revenues due to a flood of tourists and business. Singapore has a highly industrial and trade-oriented economy, and the laws are favorable for investment because of low taxes and a high per Capita GDP. The business environment is friendly, open and not corrupt. Singapore has an open economy with practically no tariffs on most Agri-food products (International, B. P. U 2015, p. 136).  1.3.1.2 Customer analysis The consumers in this market hold preference for quality food ingredients with reasonable pricing. The government has also introduced a healthier food symbol in food product that has majorly influenced the consumer choices. Due to a busy lifestyle, consumers are looking for convenience in meal preparation and consumption, therefore, packaged food and easy-to-prepare ingredients have experienced exponential growth in the market. NTUC Cooperative is a leading grocery retailer that reaches the middle income consumers through various outlets such as Fair Price Finest (Kwek). 1.3.1.3 Technological analysis The country is reliant on agro-technology for producing and the consumption of agricultural products due to the limited arable land, and as a result there is much demand and less supply in the agricultural sector. AdFresh has the necessary technology to produce their goods and thereby, partnering with Fairprice would ensure huge profits. 1.3.1.4 Competition analysis There is stiff competition because the Lion City is renowned as a food paradise in Southeast has a range of outdoor food courts as well as hawker centers that attract the locals and visitors. There are also different companies in the same industry as AdFresh such as Lee Kum Kee and so on. However, AdFresh has a competitive advantage due to their unique products such as Easy Cubes, they also have different products from the other companies and retail price is similar (Government of Canada). 1.4 Market entry AdFresh has a better opportunity to penetrate the Singapore market and maintain their presence by partnering with the major Fairprice Finest supermarkets to stock their products. This is because most consumers in Singapore have turned to retail store for most of their food products and Fairprice reaches across consumers in different classes. AdFresh must also identify and select an experienced distributor capable of distributing goods from Australia to Singapore. The distribution channels available for food products are dominated by supermarkets and convenience stores all under NTUC Fairprice cooperative. This reduces cost for AdFresh because the cooperative have their own warehousing facilities that are used to store and repack goods. There are a number of regulatory bodies concerned with food regulations, and AdFresh must acquire the necessary documentations and certification particularly for exporting fresh produce (Government of Canada). 1.5 International Marketing Objectives The most important reason for entering a new market is the prospective demand, the Singapore market has a niche that AdFresh can fill by supplying its fresh farm products. The different objectives for entering a foreign market should be used to create strategies and performance goals (Brady p.321). By merging with Fairprice as the local distributor, AdFresh has direct control of the products. The objectives should minimize risks as well as costs. The long-term financial objective is profit maximization. Some other objectives adopted by Adfresh that drive investment and performance measurement decisions must include scaling economies and getting market leverage, this means AdFresh must use the replication strategy in internalization whereby it will emphasize on the original strategies but with a little local adaptations. This means that the business will be selling the same popular brand but with certain modifications suited for the Singapore market. In order to achieve the objectives set, AdFresh Company must retain a bit of control so that it can enter the market with fairly high-intensity modes like a merger (Reddy 2014, p. 265). 1.6 Market Entry Strategy Market entry is classified into low-intensity modes and high-intensity modes, the two are distinguished based on risk and control. Low-intensity modes minimize risk but also reduce control and as a result the business is cut off from making vital decisions. Low-intensity modes means the contracting party using a local distributor does not invest in the country market in any form. However, using the high-intensity modes the contracting party is invested and has control over the distribution of their products. This control is through market participation and programs like advertising and so on as well as distribution, this mode are a trade-off between the two contracting parties (Carkenord 2009), p. 227).  Another consideration in market entry strategies involves the distinction between a financial risk and a marketing risk. The low-intensity modes minimize the financial risk and as a result low control over the business strategy and this way there is maximization of the marketing risk because the partner in the local market makes most decisions without consulting the contracting party (Arnold 2004, p.222). AdFresh must adopt a high-intensity strategy that minimizes the market risk and increases control over the business through commitment. Some of the high risk market participation modes include joint ventures, strategic alliances and mergers among others (Yesilyurt 2012, p.50). 1.7 Foreign Market Entry Strategy The foreign market entry modes also known as participation strategy are differentiated by the degree of risk presented, business control and resources commitment required and the proposed return on investment. International markets provide opportunities to boost the sales of an existing product. A foreign market has two major entry modes that are the equity that consist of joint ventures and wholly owned subsidiaries and the non-equity modes where one business has control over the other. There is the hierarchal mode also known as the investment mode, this mode gives the firm complete control to the entry in the foreign market. Firms use this mode through mergers, acquisitions and Greenfield strategy (Wang 2009, p.243). 1.8 The viable mode of entry into the chosen market The suggested approach for the AdFresh business venture is a merger with Fairprice. A merger brings together a domestic and foreign company merge together for international business. This method has various advantages like it is less time consuming, there is an instant grab in the market share of the two businesses, and the business can rely on the existing goodwill of the other business (Winter, p.81). 1.9 Conclusion AdFresh Farm decision to enter the Singapore market through a merger is a viable option because, Singapore has a diverse customer base comprising of the locals and tourist, the food industry has a niche that the business can fully exploit and research has shown that AdFresh has unique products that are fairly priced for the international market. Therefore, the business should move forward with the merger in order to fulfill the set goals and objectives. Reference List Arnold, D. (2004). The mirage of global markets: How globalizing companies can succeed as markets localize. Upper Saddle River (New Jersey: Prentice Hall. Cadle, J., Paul, D., & Turner, P. (2010). Business analysis techniques: 72 essential tools for success. London: British Computer Society. Carkenord, B. A. (2009). Seven steps to mastering business analysis. Ft. Lauderdale, Fla: J. Ross Pub. Doole, I., & Lowe, R. (2008). International marketing strategy: Analysis, development and implementation. London: Cengage Learning. Government of Canada, (2014). Market Overview - Singapore. Agriculture and Agri-Food Canada, Global Analysis Report. [online] Canada: Market Access Secretariat. 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