International Trade - Brand Manuka Honey - Research Paper Example

? International Trade Contents Executive Summary 3 Company Overview 3 SWOT Analysis 5 Market Analysis 7 Market Entry Strategy 11 Product Promotion and Marketing Techniques 12 Estimated Costs 14 Conclusion 15 Appendix 16 Works Cited 18 Executive Summary The project deals with a well renowned brand Manuka Honey which is known for its natural products with innovative features applied to them. Manuka Honey is based in New Zealand and with its best flora and fauna the company expertises in natural health care products made out of honey. The project deals with the SWOT analysis, namely, the strength and weakness along with the opportunities and threats of the company. A market analysis is conducted upon Saudi Arabia to measure the political, economical, social factors which might influence the marketing strategy of Manuka Health. After careful investigation, the company plans to enter the Saudi Arabia market with the help of franchising strategy, as the franchising strategy is one of the most used modes of international expansion being more flexible in operation. Manuka Honey will promote its product through trade shows, store location and through the media, mainly print media and television. After the company has marked its presence it is going to further expand into other cities of Saudi Arabia and, finally, plans to expand globally. Company Overview Manuka Health is a pioneer in the development of innovative and natural products by utilising the unique properties of bioactive compounds which are found in New Zealand. The company works with research centres based in the USA, UK, Australia, Germany, Japan and New Zealand, which helps to reveal the efficacy of the company’s product. Manuka Honey is dedicated to manufacture, as well as marketing of a quality range of innovative natural healthcare products in order to improve the health and the quality of life of people across the globe. Manuka believes in nature and science, as its tagline says “Given by nature. Proven by Science”. Manuka continues to be the leader in the health care industry and with its innovative products it has benefited the customers in many different ways. Manuka manufactures, develops and also markets its own products and ensures that the company remains in control of quality at every step of the way. The company has set a standard and all the honey needs to meet a certain level of quality and safety in order to ensure that the level of bioactive compounds is maintained well. Manuka Health operation is certified for using organic in the process of organic honey; it is raw but at the same time no added chemicals are being used during the process and hot water is used to clean the plants. Manuka Health is committed to utilize the most sustainable business practice, through which it is possible to minimize the impact on the environment (Manuka Health). Manuka health comprises of various products and categories which are stated below: Manuka Honey and its products comprise of MGO 550+, 400+, 250+, 100+ and 30+ Manuka Honey; BIO30 New Zealand Propolis: product consists of tablets, capsules, liquid and Tincture. Functional Food: Manuka Honey and Green Tea, honey with green tea extract, with Bee Venom, Manuka Honey and Activaloe gel and fresh royal jelly. Bioactive supplement: Bee Pollen Capsules and Granules, MGO 400+ Manuka Honey and Colostrum, green lipped mussel oil, and Royal jelly Capsules. Winter Wellness: Manuka honey kids Syrup, Honey syrup, Propolis and Manuka Honey throat spray, BIO 30 New Zealand Propolis peppermint Suckles, Honey suckles and Lemon Suckles. Personal care: Soap, body lotion, hand and nail cream, lip balm, toothpaste and Manuka oil and with tea tree oil. New Zealand Gourmet: Honey, Shortbread, Tawari honey, Wild Flower Honey, Southern Clover Honey, kamahi Honey, Rewarewa Honey and honey blend. Wound Care: wound dressing, wound gel and breast pads with Manuka Honey (Manuka Health, 2012). SWOT Analysis Strengths Extensive range of natural New Zealand origin products: MGO™ Manuka Honey, Propolis, Royal Jelly, Bee Venom, Bee Pollen and other natural New Zealand products. Manuka Health greatest strength lies in its 100% pure and highest quality health care products in New Zealand. Manuka Health is supported by scientific research and the products of Manuka health ensure a healthy life and well being. Manuka Health’s documentary, Out of the Wild had won a Stevie Award in 2010 in the International Business Award. Manuka Health products have a strong presence in the local market providing it with an advantage of entering into new markets. The company is world leader in producing Manuka honey and distributing it worldwide. Manuka health offers global business and plans to exports its honey to Saudi Arabia. Weakness • High cost of advertising campaign to raise the awareness about the benefits of the Manuka Honey, with an emphasis on the results of many researches carried by many universities and research centres in New Zealand, Germany and Japan. • The major honey exporting regions comprise of East Asia, Mercosur, NAFTA and EU and with respect to countries the largest exporters are Argentina and China which export 17% of honey followed by Mexico, Spain, Hungary, Germany and Indonesia. New Zealand accounts to only 3% of the world honey exporters. • Exporting to Saudi Arabia can be challenging due to the rules and regulations and legal procedure which needs to be followed. Opportunities • The company deals in honey and honey products, which itself is a big opportunity as honey is one of the products that is natural and helps in curing diseases. The unique properties of Manuka Honey helps in curing conditions, such as stomach ulcer, infection, and cough cold, as well as fever. The demand for its product is quite high not only in New Zealand but also globally. This provides an opportunity for the company to export its honey in other parts of the world. • Saudi Arabia experiences a high rate of consumption in terms of honey. About 5000 metric tons of honey is consumed by a population of 20 million of Arabs every year. Thus, the opportunity for Manuka health’s product to export is huge and if utilised properly it could become the number one exporter of honey products which are beneficial to health. • Imports dominate the Saudi Arabia honey market. As per statics of Saudi Arabia, the country produces about 90 tons of honey per year out of which only 2% to 4% is consumed. Thus, the chances for supplying honey to New Zealand are quite high and can yield good response from the consumers of Saudi Arabia. Threats • Major threats for Manuka Health are from other countries which have been regarded as the top most regions and countries in exporting honey to Saudi Arabia. • With any global uncertainty the export business might get affected causing threat to the Manuka health and its export policies with regards to Saudi Arabia. Market Analysis Political: Saudi Arabia has is one of the few countries where functional Monarchy is prevalent. Saudi Arabia is ruled by the kind who is selected by the royal family before being approved by Ulema, the religious council. The King of Saudi Arabia is supported by a Council of Ministers and the Consultative Council, also known as Shura. The Kingdom of Saudi Arabia does not have any recognized political parties and elections are rarely conducted in the country. There have been occasional instances of elections for electing municipalities. The defining constitution of the country is Holy Quran and the country is governed by the basis of Sharia, the Islamic law (US Department of State). The country has traditionally enjoyed a stable government, and has not experienced coups which have traditionally plagued neighbouring countries like Iran, Iraq and Egypt. However, the surrounding MENA (Middle East and North Africa) region has witnessed a major wave of uprisings in the last year. Neighbouring countries like Libya and Egypt has seen decade old dictatorships being overturned and being replaced by makeshift governing structures. Yet another neighbour, Syria, is witnessing a massive unrest where the population is trying to unseat the ruling head of the government. While the Kingdom of Saudi Arabia seems to be insulated from these uprisings, the stability of overall political environment is indeed hampered. Saudi Arabia has traditionally offered very limited representation and suffrage to women and citizens of minorities groups. While women have been only recently allowed to vote in municipality elections, there is a lot of oppression towards women. Despite considerable international pressure the government has done little precious towards giving more autonomy to women and other underrepresented sections of the society. This has resulted in a strained society and may lead to disruptions later (US Department of State II). Another potential factor that may destabilize the political calmness of Saudi Arabia is that of migrant workers. Migrant workers constitute more than 27% of the Saudi Arabian population and primarily consist of unskilled labourers from ASEAN countries like Philippines, Indonesia, Bangladesh and India. These migrants, though being a critical part of the society, have traditionally been the oppressed ones. Though there has been no history of a coordinate action among the immigrant workforce, the probability of a social movement by the immigrant population may not be ruled out (Kapiszewski 7). Over all, the political factors in the country of Saudi Arabia offer a potentially conducive and stable market for exporting Manuka honey and related products from New Zealand. Economic Saudi Arabia is world’s one of the largest producers and exports of crude oil and also has one of the largest proven reserves of crude petroleum. High petroleum export revenues coupled with low population numbers make Saudi Arabia citizens among the richest in the world with high per capita GDP and disposable income. The last few years have witnessed a major spurt in the prices of crude petroleum which in turn has resulted in higher export earnings of the country and the country is poised to achieve a healthy GDP growth rate of about 5%. It is expected that the per capita GDP will increase from about $20,700 in 2007 to more than $33,500 by 2020. One of the potential destabilizing factors was the almost absolute dependence on crude old as a source of national income. However, over the last decade, the Saudi Arabian government has consciously tried to bring in more balance in the economy by developing other sectors. As a result, Saudi Arabia has growing service sector comprising of financial, tourism and other retail based companies. Saudi Arabia and the Gulf region is increasingly viewed as a popular tourism destination and is increasingly attracting tourists from all over the world, especially the US and other Western countries. Manufacturing, specifically petroleum refining, has also witnessed a major growth rate and is one of this sector is one of the largest employment providers in the country (Ministry Of Economy and Planning). The country also ranks favourably in a lot of other business/financial parameters. The Kingdom of Saudi Arabia has been ranked among the top 10 rewarding tax systems in the world and also on ease of paying taxes (SAGIA). The high GDP and disposable income level of the citizens of Saudi Arabia makes it a lucrative destination for exporting Manuka honey products to Saudi Arabia. Manuka honey is a high quality and a rare kind of honey that attracts premium pricing and Saudi Arabia is the right kind of market it should target. Social Honey is a very integral part of the social-religious fabric of Saudi Arabia. Honey is used in a number of ways, as a sweetening agent and medicine, in Saudi Arabia. The Holy Quran also has reference to the medicinal properties of honey. This makes honey a natural part of daily lives of a Saudi Arabian citizen. In addition, only about 2-3% of the annual national requirement of honey is produced in the country and as much as 97% is imported with Australia being the main exporter (Shenouda). According to the census of 2007, the population of Saudi Arabia is about 24 million and the per capita GDP was about USD 13,500. The population is growing at a steady rate of 2.3% and as much as 70% of this population is aged at less than 30 years. This represents a growing, vibrant and a young society that is open to accepting new food and medicinal products. Also, with western cultures have been having more influence among Saudi nationals thereby making the society more amenable to new products. The young and vibrant Saudi consumer is also becoming aware about healthy living and, hence, is willing to consume products that are natural and healthy (Mousa). Technology Manuka honey has long been appreciated as a honey with high medicinal property and unique tests and has enjoyed high consumer demand. However, this has also led to inferior quality honey being labelled as Manuka Honey. The University of Waikato has designed a rating system to rate the quality of honey. Any dilution of this rating system will adversely affect the demand of authentic New Zealand produced Manuka honey. Manuka Honey provides unique quality and naturally obtained honey, and is unlikely to change its technology in future. There is a little probability of artificial honey replacing Manuka Honey, or inferior honey from Southeast Asia being processed to make a cheaper replacement for Manuka Honey (The University of Waikato). Market Entry Strategy Manuka Heath would export its product to Saudi Arabia as the demands for its product are quite high in Saudi Arabia and products made out of honey are mostly preferred by the people of Saudi Arabia. Thus exporting its products needs to follow certain rules and regulating of the country and the whole responsibility lies on the Manuka Health so it would opt for franchise strategy. Franchising is a special form of licensing where the franchiser makes the total marketing, program which includes the brand name, products, logo, and mode of operation (Gillespie, Jeannet, and Hennessey). Manuka Health would adopt the franchise strategy during the process of its expansion in Saudi Arabia. The company product will be brought under one roof, one brand name of Manuka Health. All the products will be available in the stores of Manuka Health. The company will adopt a similar strategy as that of GNC stores where the products will be made available under one roof. The company will go with its strength which is good quality of products with innovative features that will benefit the customers in long run. The company plans to open its franchisee store first in Saudi Arabia, in cities such as Riyadh, Jeddah and Dammam, during its first years of operation. In the franchisee process Manuka Health would need to perform market research to evaluate the future market for its products. One of the potential franchiser is Fawaz Alhokair, one of the well known retailers in Saudi Arabia. The company originally was developed as retail fashion industry but gradually diversified into food and other large format retails. The group focuses on social responsibility and sustainability. Manuka can form a franchisee with Fawaz Alhokair Group as one part of the business is food and entertainment. The food sector along with entertainment is one of the fastest growing consumer markets in Saudi Arabia. The company has added 11 new international brands under its brand and thus it can become Manuka perspective franchisee (Fawaz Alhokair). Product Promotion and Marketing Techniques The promotional and the marketing techniques will help promote the brand, Manuka Honey products to generate awareness in Saudi Arabia and other cities in Saudi Arabia. Thus it is necessary for the company to conduct promotional activities across Saudi Arabia so that Manuka Honey is able to generate the desired respond and its products become a success in the franchisee country. While conducting the promotional activities it is necessary for Manuka honey to become a part of the Saudi culture as both the cultures are totally different from each other. Thus it is necessary to adapt to the culture. Marketing and promotional techniques which will be carried out by Manuka Honey would include trade show, store location and media outlets. Each of these techniques would be used by the company to promote the Manuka Honey in parts of Saudi Arabia. Trade Shows Trade Shows have proved to be one of the most effective ways to market a product to the target customers and also to thousands of people who have the potential to become the customers of a product or a brand. The advantage of hosting or participating in trade shows is that within a couple of days the brand is able to create awareness among thousands of people and at minimal costs. Saudi Arabia hosts a number of trade shows which Manuka Honey participates in. The first trade show that Manuka Honey would participate in and would not only aim at advertising the products but also generating ideas of new and creative ways of marketing and production, as well as trying to make contacts in the Saudi health care market. Manuka Honey would participate in the trade show of Saudi Medicare (Trade Key). Apart from the above exhibition, the company will also hold its exhibition with Saudi Horeca, which hosts one of the biggest annual hospitality exhibitions over the past two years in Saudi Arabia (Saudi Horeca). This exhibition would enable the exhibitors to launch new products in the show where the forum would consist of potential clients from across the world. The show would give the exhibitors an opportunity to network with the entire health sector and health related industries. Manuka Honey will be able to promote its production and induce more franchisee options. The trade show will be held in Riyadh in May 2012. The four days’ exhibition, from 6 May 2012 to 9 May 2012 would allow the company to get to know about the market and who can be their potential customers and in the same time has the opportunity to showcase its products and the health benefits. Store Location With the help of store location Manuka Honey can portray its existence. The company plans to set up a store in the high traffic area to attract customers. Manuka Honey will be able to get the recognition. The cost incurred will be high but will be beneficial in the long run. The company plans to set up a store in the north side of the Riyadh city which is called “Olaya District” which is the commercial heart of the city, and it hosts important events and is surrounded with sites and famous local landmarks with accommodation, entertainment, dining and shopping options. In the next stage the company plans to expand into cities, such as Jeddah and Dammam. And, finally, for the third stages expand to the other cities in Saudi Arabia and neighbour countries (GCC countries), such as United Arab Emirates, Kuwait, Qatar, and Bahrain. Media Outlets The media outlets are important for Manuka and with proper use of the media it would determine the success of the company. Manuka Honey will opt for the print media and television. Print media includes newspaper, magazines and others. Manuka Honey would advertise its brand and products in newspapers, issue article with benefits regarding the use of Manuka Honey in some health magazines and promoting the brand and its products. About 80% of the population is assumed to read newspaper so advertising about its product through print media will prove to be beneficial. The television has always played an important role in promoting a product, thus the company would also run creative and health related commercials on three main stations, initially during the prime time. Channels like MBC group will run its commercial as it is one of the channels which have the highest viewers in Saudi Arabia. In addition the channel has its station MBC 1 which conducts programs named Green Apple which talks about nutrition, health and beauty thus Manuka Honey will be able to promote it through the channel. Estimated Costs The total cost which will be borne by the franchisee during one year, without taking into consideration the labour, royalty travelling expenses, financing cost, legal and operating cost is estimated to be $1,249,150. The estimate cost will help the company spend accordingly and invest as and when needed. Cost Estimates Purchase of Franchisee (est) $425,000 Franchisee Fee $30,000 Building ($400*250sq. m) $100,000 Furniture & Fixtures $50,000 Administrative Cost ($5200/mth) $62400 Advertising & Marketing ($30000/p. m) $360,000 Property Cost ($500*250sq. m) $125,000 Import duties Initial product Stock $50,000 National property Tax (1%) $4250 Local property Tax (10%) $42500 Estimated Total $1,249,150 The national property tax is assumed to be at 1% and the local property tax is taken as per the information gathered which is 10% in case of commercial rents and 5% on residential rents (Property Tax International Limited, 2008). Conclusion Manuka Honey with its plans to expand into Saudi Arabia has stepped into the mode of international expansion and with the success of its products in its home grounds, New Zealand the company aims to achieve the desired result within its years of operation. It plans to break even in the second years of its operation and utilise the revenue in opening franchisee in other parts of the country. Manuka Honey would first open in Saudi Arabia under the same brand name and then expand into other cities, such as Riyadh, Jeddah and Dammam. The promotional events will be conducted in all the above mentioned cities. Manuka Honey is known for its quality and innovation and the company will try to maintain the brand name and image of being natural with scientific proven products. Appendix Timeline March 2012: Attend International Franchise Expo Contact the franchisees April 2012: Manuka executives fly to Saudi Arabia, recruit potential franchisee Contact interested business man for the trade show Collect franchisee forms which are filled in the websites May 2012: Contact the interested parties for franchisee June 2012: Executive meets with the perspective franchisee in Saudi Arabia Review meetings with the franchisee July 2012: Announce franchisee decision for its new outlets of Manuka honey. Meet Again with the franchisee to reach the final decision. August 2012: Work with Saudi Arabia bank to work with funding. September 2012: Attend the marketing and sales promotion trade show in Saudi Arabia Do site selection research and meet with the Arabian government October 2012: Attend the Saudi Horeca trade show and showcase its products. November 2012: Finalise the site selection and announce a decision Contact the franchisee Contact other potential franchisee December 2012: Finalise marketing plan Television commercial is aired Finalise the other marketing strategies, finish up the outlet, and hire staffs. January 2012: The Manuka outlet opens in the middle of January Works Cited Fawaz Alhokair. “Food & Entertainment.” 2012. Business Sector. Web. 9 Apr. 2012. < http://www.fawazalhokair.com/index.php?option=com_content&view=article&id=52&Itemid=54> Gillespie, K. Jeannet, J., and D. H., Hennesse. Global Marketing. Cengage Learning. 2010. Print. Property Tax International Limited. “Local Property Tax.” 2008. DUBAI PROPERTY TAX OVERVIEW FOR NON-RESIDENTS. Web. 5 Apr. 2012. Kapiszewski, A. “Arabs vs. Asians. De-Arabization of the Labour Market.” 2006. ARAB VERSUS ASIAN MIGRANT WORKERS IN THE GCC COUNTRIES. Web. Ministry of Economy and Planning. “The Saudi Economy in Figures.” 2011. Kingdom of Saudi Arabia. Web. Mousa, H. “Consumer Awareness.” 2009. Saudi Diet Food Market. Web. SAGIA. “The Hard Facts.” 2012. Why Saudi Arabia. Web. Shenouda, R. “Imports Dominate Market.” 2004. Saudi Arabia’s Taste for Honey. The University of Waikato. “What’s Special about Active Manuka Honey?” n. d. Waikato Honey Research Unit. US Department of State. “Government and Political Conditions.” 2011. Background Note: Saudi Arabia. 26 Feb. 2012. Web. < http://www.state.gov/r/pa/ei/bgn/3584.htm > US Department of State II. “Bureau of Democracy, Human Rights, and Labour.” 2011. 2010 Human Rights Report: Saudi Arabia. Web. Manuka Health. Who We Are. 2012. Web. 05 Apr. 2012. Trade Key. “Saudi Medicare.” 2012. Trade Show. Web. 5 Apr. 2012. < http://tradeshow.tradekey.com/saudi-arabia-c184.htm> Saudi Horeca. “About Horeca.” 2012. Horeca Saudi Arabia 2012. 7 April, 2012 < http://www.saudihoreca.com/> Read More