International Marketing Mix Commentary for Lionel Poilane Bakery in Paris - Case Study Example

International Marketing Mix Commentary for Lionel Poilane Bakery in Paris Executive Summary In this report, the marketing mix analysis of Lionel Poilane, one of the most internationally renowned bakeries in France is done for entering into Australian market. The analysis of positioning, segmentation strategy and marketing mix strategy in the domestic market is done based on the standard marketing theories. The analysis shows a competitive advantage for the bakery in France with its unique production, distribution, promotion and pricing techniques. While analyzing the marketing mix for entering the Australian market it is obtained that Poilane needs to focus on technical innovation strategy and low price strategy. 1. Introduction According to Encyclopaedia of Business and Finance (2009), marketing mix consists of “four major areas of decision making in the marketing process like the product, price, promotion and place, that are blended to obtain the results desired by the organization”. In this report, analysis of international marketing mix strategy for Lionel Poilane Bakery in France is done with respect to entering the Australian market. 2. Company Background The Lionel Poilane industry with its headquarters in Paris, France started in 1932 .The charge of the family business was taken over by Lionel Poilane in the early 1970s(Poilane,2010 a). At present the annual sales of the company is more than $18 million, with around 150 employees and with a production of nearby 10000 loaves of bread every day. The main and original store is located on the Rue de Cherche Midi in Saint Germain des Pres while another shop is at Rue’ de Grenelle. In addition to these shops at Paris, one more branch is at London, Elizabeth street for the Lionel Poilane (Lon, 2010).The main products of the company include bakery goods like bread, cookies, books and mixed (Poilane, 2010b).The bakery is has been very famous for its retro innovation process which combine the best of old techniques with the best of new techniques to produce the bakery goods to meet the growing demand for the product (Lon, 2010). 3. Current Positioning, Segmentation strategy, and Marketing Mix Strategy in the Domestic Market 3.1. Segmentation Strategy The global bakery market is dominated by Europe according to a new report with an estimated market share of 44.23 percent in 2008 (Rano, 2008).France is the leading supplier of food products in Europe and is second to US in the international market according to this report (Figure 1) . Figure 1 European Bakery Market Source: Baking+Bisket Issue,2009 Figure 2 Consumption Volume in European Market Source: Baking+Bisket Issue, 2009 Bakery sector is reported as one of the most important sector of the food industry as a whole in Europe and in France ( Baking+Biscuit issue,2009). Table 1: Ranking in Doing Business in France 209-2010 Source: Euromoniter(2010a) In terms of doing business, however, the ranking of France is 31 out of 183 nations. Reports show that the procedures for opening and closing a business in France is more difficult when compared to that of other OECD nations(Euromoniter,2010a). 3.2. Positioning Strategy and Competitive Advantage Table 2:Baked Goods Company Shares 2004-2008 Source: Euromoniter(2010b) The above table shows that the company shares of all the branded ones have been declining from 2004 to 2008 while those of private labels have been increasing considerably in the same period. Lionel Poilane, coming under the private labelled one is one of the internationally renewed baked goods producers in France. It is reported that the company has been able to attain success through its offer of regional and premium specialities and also due to the attraction of customers to the affordable pricing here (Euromoniter, 2010b).Moreover, reports show that the only subsector to increase the value of sales was bread in 2009 while its volume showed slow decline by 1 percent in 2009.Moreover, in terms of both value and volume, the sales of baked goods are forecasted to decline between 2009 and 2010 by an annual average of 1percent(Euromoniter,2010b). The competitive analysis of the company is done by the analysis of Porters five forces that include the analysis of the following factors bargaining power of buyers, bargaining power of suppliers, threat of entry of new competitors, threat of substitutes and competitive rivalry (Pavlicek, 2008). Bargaining Power of Buyers Lionel Poilane remains one main baking goods shop in Paris and at present the Poilane’s exports include more than half a million loaves a year to venders and private customers in 50 nations through Fedex. Among the private customers are the celebrities Robert De Niro, Steven Spielberg and Lauren Bacall and the other customers include Cafes, sand witch shops and supermarkets. Even the famous three star French chefs like Alain Ducasse serve more than 500 metric tons of bakery goods from Poilane every year to their customers.Most of them have very good opinion about the bakery goods due to their retro innovation technique which is the specialty of the Poilane bakery good. Hence this force works in favour of Poilane(Lon,2010). Bargaining Power of Suppliers There are over 150 employees in Poilane who have built strong relationship with the company. Hence this force also works in its favour (Lon, 2010). Threat of Entry of New Competitors The threat of entry of competitors is limited since they are special due to their refusal to make French baguettes (Kwintessential, 2010). Moreover, as shown earlier, opening a business in France is very difficult when compared to other OECD nations. Threat of Substitues Threat of substitutes is also limited due to its special production process based on a closely guarded family secret which is accepted by customers all over the world (Kwintessential, 2010). Competitive Rivalry Though there are many competitors for Poilane in France, Poliane remains one of the internationally renowned bakeries in France with customers in 50 nations and having excellent and reputable delivery services (Kwintessential, 2010; Lon, 2010). The above analysis shows that Poilane is in a competitive advantageous position in the domestic market. 3.3. Marketing Mix Strategy Production The unique production process of Poilane bread includes bread made from wheat grown only on farms using sustainable techniques with sea salt. The bread remains fresh even for seven days due to its baking for more than one hour in wood burning ovens. Hence the product is accepted to be tangible and durable (Poilane, 2010c). Price The Poilane adopts market penetration as the pricing strategy to attract many customers. Promotion Poilane uses internet marketing techniques for promotion and also through twitter and face book (Poilane 2010 d; Kapalan,2006). Placement The bakery uses vertical marketing system as the distribution channel, which needs the producers, wholesalers and retailers to work together for avoiding conflicts(Farese etal,1991; Boone etal,1992) .Thus the company, cafes, sandwitch shops ,supermarkets , the restaurant chefs and the private customers work together in the domestic market for distributing Poilane products(Poilane,2010e). Process The bakery has excellent international express delivery services through which within 48 hours of baking, will deliver their products (Kwintessential, 2010). Through Fedex the company distributes products to nearly 50 nations all over the world. Moreover the company distributes the products to vendors and private customers. People The people employed in the company are very customer friendly. For those who do not know French, there are people who can translate(Kaplan,2006). Physical Evidence The Poilane has a clean friendly environment (Kaplan,2006). 4. Analysis of the Australian Market for the Product 4.1. Target Market The ranking of Australia is 9th out f 183 nations in terms of ease in doing business due to its business friendly policies and strong regulatory framework (table 3).In terms of starting a business the ranking of Australia is 3 while that of closing a business, it is 14(Euromoniter,2010c). Table 3: Ease of Doing a Business in Australia 2009-2010 Source:Euromonite(2010c) In Australia the baking industry is reported to be very complex with highly concentrated industry structure at the corporate level and highly fragmented SMEs in all the three main product sectors (Australian Government, 2003). Table 4: Sales of Baked Goods by Subsector:%Volume Growth2004-2009 Source: Euro Monitor(2010d) Table 4: Sales of Baked Goods by Subsector:%Value Growth2004-2009 Source: Euro Monitor (2010d) The above tables show that the baked goods sector maintained steady value growth of 3 percent and volume growth of 2.7 percent in 2004-09 period. The sales growth has been due to the fact that the credit crunch caused by the economic crisis forced the consumers to cut down dining out at restaurants and other food service outlets which made baked goods as the most favourite alternative (Euromonitor, 2010d). Figure 3 shows the bread sector as the main contributor to the total manufacturing in baking industry. Figure3: Turnover in Australian Baking Industry Source: Australian Government(2008) Moreover reports show the baking industry mainly supplying to domestic market and only small amount of sales from exports though it has increased over time (Figure 4) Figure4: Australian Baking Products Exports Source: Australian Government (2008 Table 5 and figure 5 show the consumption patterns of people in Australia .They show the plant bread and the supermarket breads as the most favourite ones for consumers till 2003 while a growing shift in consumer habits has seen towards retailing like cafes and restaurants in recent years due to the demand for more convenient, healthier meal options (Australian Government,2008). The trend towards healthier meal options has been due to the fact that obesity has become a serious issue in Australia .It has increased from 44 percent of adults in 1995 to 53 percent adults in 2005 and is likely to continue overtaking USA in this respect (EuroMonitor, 2010e).This has shifted the consumer preferences towards healthier meal options. In addition recent reports show huge increase in the proportion of older people in Australia from 2.2 million to 2.8 million with an increase of 23.8 percentage(EuroMonitor,2010). Table 5: Channels of Distribution Volume and Value of Bread Production by Category: 2003 Source: Australian Government (2003) Figure 5: Bread Production Channel Sales Growth Source: Australian Government(2008) Figure 6 shows the volatility in Consumer Price Index (CPI) for different food products including bread and other baked goods between 2007 and 2008.This shows high price fluctuations in the baked goods market in Australia between 2007 and 2008. Figure 6 Source: Australian Government(2008) 4.2. Competitors Analysis Table 6:Baked Goods :Company Shares Source:EuroMonitor(2010d) Table 7:Baked Goods Brand Shares 2005-08 Source: Euro Monitor (2010d) The above tables show that artisanal manufacturers dominate sales growth while the packaged goods manufactures faced heavy competition from the private labelled one sin terms of value shares, prices and product differentiation. It is reported that private labelled ones have been offering many premium ones than the standard white bread. Among the private labelled ones, Coles and Wool Worth remained the top ones in the review period (EuroMonitor, 2010). The main challenges facing the bakery sector in Australia include overcapacity, high industry concentration, low barriers to entry, high price dependence and sensitivity, low loyalty, high distribution costs and low geographic spread (Australian Government, 2003). 5. Recommended Adaptation and Standardization of the Target segment, Positioning, and Marketing Mix strategy when entering the Australian market 5.1.Market Entry Strategies The above analysis shows that in Australia the baked goods sector has become a most popular item whose sales growth in value and volume is likely to increase in the coming years. This has been mainly due to the credit crunch caused by the economic crisis which has made the baked goods a most popular food item. Healthier food items have great demand there due to the rapidly rising obesity issue here. Moreover, the products targeting the old consumers have a ready market there. E marketing will be the readily acceptable promotion strategy there since these old consumers are less mobile than the young consumers. The barriers to entry are relatively low in Australia while the threat of competitive rivalry is high there. Consumers are looking for products with affordable prices due to the economic downturn and the highly volatile prices there. Since in the Australian market due to the shift in consumer preferences towards healthy fibre diets, Poilane needs to adopt product differentiation as the main marketing strategy while entering Australian market. Due to the highly volatile prices in the Australian market Poilane needs to adopt the market penetration strategy while entering the Australian market. Moreover due to the increased preference for retailing rather than plant bakeries in Australia, the distribution channel needs to be a vertical distribution system. The promotion strategies need to be the e marketing techniques since the Australian consumers are mainly old consumers who are internet savvy and are less able to visit the retailers than the young customers. The market entry strategies for Lionel Poilane to enter Australian market need to be technical innovation strategy and low price strategy. This is because of the high demand for healthier food products and the products with affordable prices in Australian market. Aggressive exporting needs to be the form of operation for Lionel Poilane in Australian Market. This is because the firm needs to have clearly defined price, production, distribution and promotion strategies to enter the Australian baked foods market due to the highly competitive landscape there. 5.2.Adaptation/Standardization Marketing Mix Product$Service Variety of demonstrated superior products with high nutritional value focusing old customers. Premium products other than white bread. Price Low and affordable prices attracting consumers. Allowances for old customers Promotion Adverstisng and Emarketing Placement Vertical distribution channel with low distribution costs People Customer friendly people Process High quality delivery services reaching consumers Physical evidence Clean friendly environment References Australian Government (2003): “The Australian Baking Industry: A Profile”, Department of Agriculture, Forestry and Fishery, Government of Australia. Australian Government (2008): “Food Statistics 2008” , Department of Agriculture, Forestry and Fishery, Government of Australia Baking+Biscuit Issue (2009): “Measuring the Crisis”, www.bakeryandsnacks.com/.../Conference-to-explore-challenges-in-112.8bn-EU-bakery-market, Accessed September 23 2010. Boone, Louise E., and Kurtz, David L. (1992). “Contemporary Marketing”, 7th ed. New York, NY: Dryen/Harcourt Brace. Churchill, G A., and Peter, Paul J. (1995). “Marketing: Creating Value for Customers”. Boston MA: Irwin. Encyclopedia of Business and Finance(2010): “Marketing Mix”, http://www.enotes.com/business-finance-encyclopedia/marketing-mix, Accessed September 23 2010. EuroMonitor(2010a): “Business Environment France”,EuroMonitor International,30 March 2010. EuroMonitor(2010b): “Baked Goods:France”,EuroMonitor International,30 March 2010. EuroMonitor(2010c): “Business Environment:Australia ”,EuroMonitor International,30 March 2010. EuroMonitor(2010d): “Baked Goods:Australia”, EuroMonitor International,30 March 2010 Farese, Lois, Kimbrell, Grady, and Woloszyk, Carl (1991). Marketing Essentials. Mission Hills, CA: Glencoe/McGraw-Hill. Kaplan S L(2006): “Good bread is back : a contemporary history of French bread, the way it is made, and the people who make it”, Durham, Duke University Press. Kwintessential, (2010) : “Poilane Bakery Paris France”, http://www.kwintessential.co.uk/articles/article/France/Poilane-Bakery-Paris-France/607, Accessed September 23 2010. Lon,EL(2010): “The Poilane Bakery Rises to the Top”, http://www.luxecoliving.com/luxeco-food/the-poilane-bakery-rises-to-the-top/, Pavlicek J (2008): “Definition of the Company Strategy”, Proceedings of the World Congress on Engineering 2008, Vol III, WCE 2008, July 2 - 4, 2008, London, U.K. Poilane(2010a): “Our History”, http://www.poilane.fr/pages/en/company_univers_histoire.php, Accessed September 23 2010. Poilane(2010b) : “Bakery Goods”, http://www.poilane.fr/pages/en/company_produits.php?catID=2, Accessed September 23 2010. Poilane(2010c): “Our Approach”, http://www.poilane.fr/pages/en/company_univers_demarche.php, Accessed September 23 2010. Poilan (2010 d): “Whats new”, http://www.poilane.fr/pages/en/company_edito.php,Accessed September 23 2010. Poilane (2010e): “Retailers”, http://www.poilane.fr/pages/en/company_boutiques_revendeurs.php, Accessed September 23 2010. Porter E M (1980): “Competitive Strategy: Techniques for Analyzing Industries and Competitors”, New York: Wiley. Rano, L(2008): “Europe Dominates Global Bakery Products Market ,Report”, www.bakeryandsnacks.com/Markets/Europe-dominates-global-bakery-products-market-report, Accessed September 23 2010. Semenik, Richard J., and Bamossy, Gary J. (1995). “Principles of Marketing: A Global Perspective”, 2d ed. Cincinnati, OH: South-Western. Appendix 1 Porters Five Forces Michael E.Porter has developed the model of the Five Competitive Forces Porter in his book Competitive Strategy: Techniques for Analyzing Industries and Competitors“in 1980. This model has become a major tool for analyzing the strategic decisions of an organization since that time. Porter’s five-factor model for competitive environment includes the analysis of the following factors bargaining power of buyers, bargaining power of suppliers, threat of entry of new competitors, threat of substitutes and competitive rivalry(Pavlicek,2008). These factors are considered since they are the determinants of the intensity of competition and the profitability of the industry. ) Read More