Overseas Market Entry Actions - China Yurun Food Group - Case Study Example

Student’s Name: Instructor’s Name: Course Name and Code: Institution: Date of Submission: Overseas Market Entry Actions Introduction The increasing level of competition and the presence of saturated markets are highly responsible for the international expansion strategy that companies are adopting in attempt to gain competitive advantage. The success of such an approach is however dependent on the strategies used for market entry into the international market, marketing strategies and how well the company is organized in the process of entering the new market. In essence, it is imperative for the company to choose the best alternatives among strategy choices in order to enhance success. This report therefore consists of a plan for China Yurun Food Group to enter into a new international market (the Australian market). It considers the market entry strategy to be used, the marketing strategy and the proposed organizational structure. Overview of the organization China Yurun Food Group Limited (Yurun Food) has for a long time been considered a leading meat product manufacturer in China and with great potential to excel. The company which has almost 100 subsidiaries located in over 25 provinces was listed in the Hong Kong Stock Exchange Market on October 3, 2005 thus giving the company an opportunity to access overseas capital (Yurun Goup, 2010). Yurun Group has managed to keep at the top of competition and its flagship brand Yurun was actually awarded the “China Top Brand Product”. The company’s main products include low temperature meat products (LTMP), chilled and frozen pork products (China Yurun Food Group Limited, 2010). The company has a competitive advantage in the Chinese market; a factor attributed to the fact that Yurun Group was a pioneer in LTMP in China. In this respect, 60 percent of meat supply to the star hotels is attributed to the company. As the level of competition in the contemporary business world continues to rise, it has become highly important for the company to consider international market expansion in order to maximize profitability and growth potential. It is for this reason that this plan to enter the Australian market is designed. This will constitute of expansion into a new market; given that it is that the company seeks to venture in Australia. Market entry strategy The market entry strategy that would be best suited for China Yurun Food Group Limited to enter the Australia would be through licensing. Licensing is a market entry strategy in which the parent company allows foreign firms, under an international licensing agreement, to exclusively or non-exclusively the company’s product over a specific duration of time in a particular market (Lymbersky, 2008). The parent company thus gives limited rights to the licensee including trademarks, patents, technology and managerial skills among others in order to promote the manufacture of a similar product that the company makes in the host country (Tielmann, 2010). This is done in exchange for a fee in the form of technical fees, time payments and royalty payments that are calculated as a fraction of the sales. There is a strong justification for the use of licensing as the market entry mode for Yurun Food Group (Tielmann, 2010). This concerns the nature of the product s that the company specializes in and it is possible to identify that it would be easier to have the foods processed in Australia as opposed to exporting the products from China to Australia. Furthermore, this would save costs associated with long periods of refrigeration as the products are being exported to the target market. There are other advantages that are associated with choosing licensing as the entry mode for Yurun Food Group into the Australian market, which are discussed as follows: Licensing provides a highly convenient method of entry that is low in costs because the licensees will generally fund their own operations (Tielmann, 2011). This denotes that Yurun Food Group will incur minimal expenses in its attempt to enter the Australian market. It is also notable that the marketing costs are greatly reduced because the licensee plays a great role in marketing the product. Secondly, licensing will b convenient to Yurun Food Group because it will take advantage of the marketing channels and market share of the licensees (Lymbersky, 2008). Accordingly, the company will be able to reach out to new markets more easily and at lower costs as opposed to setting up new channels on its own through other entry strategies such as exporting. The use of licensing will guarantee quick expansion with little capital investment and minimal risk. As noted by Lymbersky (2008), the licensee often bears most of the costs in setting up the company’s market in the host country. Lastly, Yurun Food Group would benefit significantly from different factors such as low political risk since the licensees to be used will be 100% Australian; advancement through research and development done by the licensee; and possibility of future investment in the country, having set a background with the initial products stocked by licensees (Lymbersky, 2008; Tielmann, 2010). Marketing strategy Entering a new market is considered a highly challenging endeavor for any company hence the need to take proactive measures aimed at ensuring a smooth entry. This denotes the need for effective marketing strategies to ensure that the entry of fat Face in China Yurun Food is successful (Parker, 2005; Groucutt, 2005). In order to effectively penetrate the Australian market, Yurun Foods will make use of the pricing and promotional strategies. These are two of the 4Ps of marketing which include product, price, place, promotion as described below (Aswathappa, 2006). i) Pricing strategies        Yurun Food Group’s main objective as it enters the Australian market is to become a favorite brand and consequently capture a significant market share in the Australian market. This however may not be achieved if there is no distinguishing factor between Yurun Food Group’s products and other competing brands in the country (Hollensen, 2011). It is for this reason that pricing strategies have been selected as the best option to enhance the achievement of this objective. One of the main ways of achieving this will be through lowering their prices and offering products at an introductory price. The introductory price will be lower than the normal profit margin gained by the company but good enough to attract customers to purchase Yurun Food products. Wessels (2000) notes that customers’ buying decisions are significantly influenced by the prices of goods and that lower prices, more often than not, will catch the attention of the customer who may end up buying the product. During the first six months in Australia, Yurun Food Group will sell their products at a discount of 15 percent as an introductory offer. Once the company is well settled and the customers have identified with the brand and proved the company’s ability to supply high quality products, the company can then revert back to normal prices and thus gain the much desired profits. It is important to consider the income level of the country when setting the price as well as the prices of related products in the market before making the introductory and normal price. In Australia for example, the company is expected to make a significant level of income because income level in the country is expected to be higher than in China and so is the demand. It is notable that while the introductory offer will cost the company significantly, the eventual profitability attained once the products are well rooted in the Australian market is expected to counteract this cost. The losses incurred through the introductory price therefore can only be considered to be a start-up cost. ii) Promotional strategies Promotion is often considered unavoidable in marketing because even in the presence of a product or service, customers may not buy the product unless they are duly informed about the features and availability of the product (Hollensen, 2011; Bradley, 2005). This denotes that the company will spend a significant amount of resources in marketing the product. As a new brand in the market, Yurin Foods will require extensive advertising aimed at promoting awareness of the product among customers as well as providing details of the pricing and where to find the products. Given that Yurin Food Group will make use of licensing as the market entry strategy, it is notable that the costs of promotion will be highly subsidized because the licensees are expected to fund promotion to a significant level in order to maximize their sales and profits (Tielmann, 2010). The main promotional tool that will be used for advertising Yurun Food Group is traditional media advertising. This will involve the distribution of advertising messages to television and radio and newspapers; which are considered effective in reaching out to a significant portion of the customer population. The company will also make use of billboards, which are expected to be effective if they are strategically and conspicuously placed. The company’s products will be advertised as high quality products and proper display will be required to make a visual impression on the customers. The advertisements will also inform customers of the low prices that they are bound to enjoy when purchasing Yurun Food Group products. Promotional strategies aimed at attracting customers will also involve giving out free samples and issuing shopping vouchers to regular customers. The company could introduce a reward scheme where for every pack purchased, the customer is given an opportunity to participate in a draw where shopping vouchers will be won. This will involve selecting one lucky winner every week by conducting draws. This would encourage customers to buy the company’s products and as noted by Dibb and Lyndon (2004), customers are likely to be enticed by gifts and low prices. The final promotional strategy that the company will utilize is internet marketing. It is notable that the importance of internet marketing in the modern business world has increased significantly due to the increasing access to the internet among customers. Li & Bernoff (2008) notes that as technological inventions continue to be unleashed, the internet remains one of the most important developments in information technology especially to business due to its ability to reach out many customers over the internet. Statistics in Australia indicate that the country had 9.1 million internet subscribers who were using it actively (eGovernment Resource Centre, Australia, 2011). Further, the country which is identified with high use of social media has an approximate of over 9 million users using the Facebook social network (Cowling, 2010). These statistics indicate that the use of internet marketing and particularly social media marketing would play a significant role in increasing the market share for the company’s products. Yurun Food Products will advertise its products using the internet and will also offer customers an opportunity to purchase products online through their website and those of the licensees in the country. The company will also seek to utilize popular social networking sites to reach out to customers such as Facebook, Twitter and LinkedIn among others. As noted by Kaplan & Haenlein (2010), the relevance of social networks in enhancing market share cannot be undermined; given the popularity of these networks among potential customers due to increased access to the internet. Proposed Organizational Structure The Yurun Foods Group is expected to have an upper hand in the relationship with licensees through providing the technological knowhow required in processing the food products. Further, the company will participate in enhancing market share through conducting promotions. The licensees will be directly responsible for ensuring that the company’s products are sold in the Australian market; for which they will receive stipends based on the percentage of sales made. A direct link between the HQ and subsidiary will ensure that the company keeps in touch with the performance of the products in the new markets. Since the companies involved will have their own independent management systems, Yurin Food Group will have little influence on whether they adopt centralization or decentralization. Conclusion The success of China Yurun Food Group Limited in the Australian market is expected if the strategy outlined herein is utilized. It can be established that the Australian market is highly viable and that the most relevant factor is to ensure that the best entry method into the market is established. The use of licensing will be highly effective because it will reduce the costs of entry to a significant level due to the various advantages identified with this strategy. In order to enhance efficiency in acquiring market share, the company will utilize the pricing and promotional strategies because they are significantly important in increasing the company’s sales. The proposed direct influence of the HQ on the subsidiary will ensure that while the licensees are concerned wholly with the sale of products, the Yurun Food Group has a significant level of control on the production and marketing procedures. This is expected to enhance the company’s position in case a future decision to invest in the country directly is made. Reference List Aswathappa, A 2006, International Business, Tata McGraw-Hill, New York. Bradley, F 2005, International Marketing Strategy (5th Ed), Prentice Hall, Harlow. 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