Why Is Lebanon a Risky Country to Expand for the Australian Jelly Beans - Case Study Example

Jelly Beans Marketing from Australia to Lebanon Introduction This paper aims to develop an international marketing strategy for the jelly beans brand of an Australian manufacturer that is planning to expand in a new market, Lebanon. While the company has a major market share in Australia, the Lebanese market is new for the company. Besides, the product, which is a typically western candy, is a novelty in the middle Eastern market, especially in Lebanon that has a heritage in ethnic food and cuisine. The sugar and corn candy will need to be promoted in Lebanon, keeping in view the specialty of the market as well as the brand. In this paper, I will discuss the brand, analyze the external environment and the competition scenario in the new market, develop a market segmentation and target marketing plan as well as market entry and expansion strategies and marketing mix that could be used in the new market. Description of the Brand Jelly beans are a type of candy made by molding cooked sugar and corn syrup in the center with an outer shell added in a rotating drum or engrossing pan. Jelly beans are manufactured in various flavors and attractive colors. While jelly beans have traditionally been sweetened by corn syrup, the availability of corn is going down as it is one of the most genetically altered crop. Instead, many manufacturers including the one under consideration is using tapioca syrup for manufacturing jelly beans for overseas production. These are typically American Easter gift products, with annual sales of 16 billion units (Philadelphia Daily News, 2009) but are as popular in all western countries. Of late, jelly beans are getting increasingly popular in India, China and other south east Asian countries as well as in the Middle East and eastern Europe. This throws open the possibility for the manufacture of jelly beans in exotic tropical flavors like those of passion fruit, star fruit, mango and lychee nut. In Australia, the most popular flavor for jelly beans is that of the kiwi fruit. The jelly bean product, however, has become popular globally because of its popularity in America, particularly after it came to be known that President Ronald Reagan was a lover of jelly beans. External Environment Analysis Entering a new consumer goods market is a complex process. It requires a thorough analysis of the economic background as well as the social, cultural and political scenario. The external environment for a business may be analyzed through the PESTLE (political, economic, social, technological and legal) model. Political: Lebanon is a small country on a 1000km wide land between Israel and Syria along the eastern coast of the Mediterranean. The country, the capital of which is Beirut, has had a tumultuous political history in the recent times. The civil war during 1975 to 1990 seriously damaged the economy. It was only in 2005 that the Syrian army withdrew from Lebanon but even in 2006, the Israeli-Hizbullah conflict devastated the national infrastructure once again. Since then, the country has had to depend on donor countries, mostly Saudi Arabia and Kuwait, for aid to reconstruct the economy and tide over crippling debt. The new government was formed in 2008 but sporadic violence in the country has marred attempts to restructure the economy and push forward reforms (CIA). Hence, the political situation in Lebanon is not very stable and it would be a risky proposition to set up a manufacturing unit here. Economic: Political instability has made the Lebanese economy weak. The per capita income in Lebanon is only $11,000, of which services like banking and tourism contribute 75.8percent in 2008 (CIA). The banking sector alone contributes 10 percent of the GDP. However, besides a 1.1 million workforce, there are 1 million foreign workers in Lebanese. The unemployment rate is a high 9.2percent. The economy is highly indebted, with public debt being 165percent of GDP. Lebanese depends on imports, particularly for petroleum and manufactured products. Despite being located in the middle east, Lebanon does not have any oil and gas reserves as a result of which it is dependent for energy imports. Syria is its main trading partner besides importing also from developed countries like the US, China, France and Germany (CIA). Lebanon has joined the newly formed Mediterranean Union last year and the economy is expected to revive slowly. Purchasing power of consumers is low because of lack of growth of the economy. The food and drink market in Lebanon is fragmented, with mom-and-pop stores and local or Kuwaiti owned supermarkets controlling most of the retail market (researchandmarkets). Social: 95 percent of the Lebanese population are Arabic and the rest Armenians. 60 percent are Muslim while the rest are Christian. The country has a more westernized population than the typical Arab country because of the Christian influence. In the western world, there is concern about the consumption of candies increasing obesity. However, in poorer countries like Lebanon, obesity is not as big a social issue. Technological: Lebanon has underdeveloped industries hence its technological capabilities are low. However, a thriving agricultural sector could provide some opportunities for producing additional flavors for jelly beans. Legal: Lebanon has institutional weaknesses for conducting business. Red tapism and bureaucratic hurdles come in the way of business. The land registration system has collapsed because of the civil war. Competitor Analysis The global market for jelly beans is controlled by the American company, Jelly Belly Candy Company. The company has a market share of 26 percent in the American candy market but its main product is gourmet jelly beans, which contribute 85 percent of its sales. Jelly Belly beans are marketed worldwide through supermarkets like Wal Mart and Office Depot. The company has been in existence since the 1890s but changed its name to Jelly Belly in 2001. Jelly Belly beans come in traditional flavors like fruit, peanut, butter and coconut. Sales of the company are $160million and it has recently opened a plant in Thailand to take advantage of the lower cost of sugar and labor as well as to tap new markets (Murphy, 2008). Jelly Belly beans are distributed in 43 countries (Saunders, 2008). The other major global jelly bean marketer is the Irish company, Jelly Bean Factory, which exports 98 percent of its products to other European countries and the Middle East. Market Segmentation and Target Marketing A major issue for international marketing is to decide whether to adapt to local conditions or to market the standardized product. Levitt (1983) postulated that consumer preferences are not given and can be influenced by marketing strategies. Hence, while multinational companies endeavored to know about the cultures and preferences of the respective countries so that they can adapt congenially, global corporations “know the absolute need to be competitive on a worldwide basis as well as nationally and seeks constantly to drive down prices by standardizing what it sells and how it operates”. Subsequently, however, scholars have argued that mass production based on standardization of products has converged into a situation of mass customization. In the Internet age, although the immense possibilities of cultural linkages through telecommunication have brought in huge markets, marketers increasingly find it imperative to design local marketing strategies, adapting to new languages and cultures (Guillen, 2001). Customers are no longer homogonous groups, particularly for retail products. At the same time, one-to-one marketing, though used in some markets, is not feasible when a large number of customers across geographical locations and social classes are to be targeted. Market segmentation then becomes necessary in order to communicate with customers without incurring the heavy investments in sales and promotions as in one-to-one marketing. By segmenting, the marketer can group customers who have similar tastes and attitudes, and decide on which segments are to be targeted and how to position the product to each of these segments. Marketers have used various techniques to segment customers in order to decide on products and promotions of goods and service. Psychographic market segmentation “seeks to describe the human characteristics of consumers that may have bearing on their response to products, packaging, advertising and public relations efforts. Such variables may span a spectrum from self-concept and lifestyle to attitudes, interests and opinions, as well as perceptions of product attributes” (Gunter & Furnham, 1992, quoted in Pence, n.d). For deciding on the product, price and promotions for jelly beans in Lebanon, psychographic market segmentation would be suitable since this model incorporates various psychological attributes of activities, values, opinions and interests of prospective consumers. Since jelly beans are a novel product in Lebanon, it is likely to be appealing to the young and adventurous consumers. Also, the product is mainly targeted at children and young people hence customers with strong family values would be attracted to the product. The promotions should be designed to this effect. Market Entry and Expansion Strategies Many multinational companies have in the past rushed to emerging countries, that is those that are on the lower end of the global income pyramid but on the fast growth track and have a billion or so population, to tap the immense profit potentials. However, most of them have soon realized that duplicating the winning brands in the western, developed societies are not necessarily lapped up enthusiastically in these new markets. Neither do translating western marketing ideas typically, dependent on product innovation and segmentation, high margins and global brands, always work in other markets that are defined by their own uniqueness. In emerging markets, on the other hand, greater importance is given to consistency, rough segmentation, functionality of the product, low margins and adabtability to local conditions (Chattopadhyay and Dawar). Hence, as an entry strategy in Lebanon, the Australian company should concentrate on exporting the product rather than setting up a manufacturing plant in the country. Particularly because of political instability, it would be risky to begin manufacturing in Lebanon. However, consumer tastes in Lebanon are very different from that in Australia hence exporting the same product may not be successful in finding a ready market. Instead, it should focus on traditional flavors like fruits rather than the modern artificial flavors that many of the jelly bean manufacturers in the US, Europe and Australia are producing. As an entry strategy, the company should tie up with Kuwaiti supermarkets to stock packaged jelly beans. International Marketing Mix In international marketing, a major concern is whether to design advertising campaigns by keeping in mind a homogenous set of customers across cultures or to incorporate the cultural elements of the society that the product is marketing in. According to this view, standard advertising campaigns will need to be decoded by each culture. Woods et al (2005, cited in Dahl, 2000) found that there are significant differences in the purchasing decisions for the same product in markets in the U.S., Quebec and Korea. Hence, the standardized marketing and advertising strategy bears the risk of not being comprehensible to some customers, to which the message may not have any “psychological triggers”. Usually, consumer goods, particularly the non-durable variety like food, are thought to be culture bound while industrial goods and those that require high technology like Information Technology and Communication are though to be standardized. However, more recent research shows that even in IT, culture does play a role in marketing strategies (Hermeking). Internet has become a channel of communication, like television, radio or print advertising, hence the cultural attitude towards Internet consumption greatly affects marketing strategies (Hermeking). In early 2000, Internet use was far higher in North America, followed by Europe and then Asia Pacific. The diffusion of Internet depends on both technology access as well as economic development. Hermeking found a strong correlation between Hermestde’s cultural dimension of Individualism and Uncertainty Avoidance with internet use. Lebanon is a typical Asian culture and has low internet use. Hence, internet can be used less in Lebanon than in Australia as a marketing channel than television, radio or print. In the “high-context” cultures like France and Japan, advertisers usually create psychological triggers through pictures and entertainment while direct and rational messages are preferred in “low context” cultures like the USA and Germany. The preferred medium of advertising is also widely different across cultures, based on consumption of different media. However, there are also differences in media consumption – print, television and new media – within each culture. While consumption of print media is higher in western Europe and Asia, that of television is higher in the US (Hermeking). Conclusion Lebanon is a risky country to expand for the Australian jelly beans manufacturer hence it should tread carefully. Since the customer base is different - a majority of Lebanese customers being Arab Muslims while the Australian company’s home customers are Christian white population – marketing of jelly beans, which is a traditional Easter candy, should be carefully done. The market segmentation should focus on the 40pc Christian population and the western educated young Arabs. However, the promotion strategy should use psychological trigger factors that are not explicitly Christian. Instead, the product as well as the promotion should be adapted to global conditions. The main marketing mix would be television, print and radio as internet use is not as prevalent in Lebanon as in Australia. Reference Philadelphia Daily News (2009) Who’s Top in Easter Candies, http://article.wn.com/view/2009/03/26/Whos_tops_in_Easter_candy_DN_unofficial_tasters_compare_bunn/ Murphy, Kate (2008) Not Just Another Jelly Bean, New York Times, June 26, http://www.nytimes.com/2008/06/26/business/smallbusiness/26sbiz.html CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/le.html Research and markets (2009) Lebanon Food and Drink Report, 2009, http://www.ibtimes.com/pr/articles/78972/20090312/research-and-markets-lebanon-food-and-drink-report-2009-supermarkets-are-set-to-continue-to-dominate.htm Saunders, Jessica (2008) Jelly Belly prepares to open first overseas plant as demand sweetens, East Bay Business Times, July 27, http://thailandtonight.blogspot.com/2008/07/jelly-belly-candy-to-open-rayong.html Guillén, M.F. (2001)“Is Globalization Civilizing, Descructive or Feeble?  A Critique of Five Key Debates in the Social Science Literature.”  In Annual Review of Sociology, Vol. 27.  Also available at http://www-management.wharton.upenn.edu/guillen/  Hermeking, Marc, Culture and Internet Consumption: Contributions from Cross-Cultural Marketing and Advertising Research, http://jcmc.indiana.edu/vol11/issue1/hermeking.html Gunter, B. & Furnham, A. (1992). Consumer Profiles: An Introduction to Psychographics. Routledge: New York. Pence, Amber, Psychographics, http://frontpage.wiu.edu/~mfjtd/psychographics.htm Dahl, Stephan (2000) Cultural Values in Beer Advertising: A look at beer commercials from the UK, the Netherlands and Germany, Presented at the Research Day, July Intercultural Research Group - University of Luton http://www.stephweb.com/capstone/beer.shtml Chattopadhyay, Amitava and Niraj Dawar, Rethinking Marketing Programs for Emerging Markets, IQ, The INSEAD Quarterly, retrieved from http://www.insead.edu/inspire/issue_012/article1b.html Read More