Clamms Seafood Australia - Market Entry Strategy in the Japanese Market - Case Study Example

International Market Assessment Name: Course: Tutor: Institution: Date: Executive Summary This market assessment report develops a review on the available alternatives for Clamms Seafood Australia internationalization need. As such, the report seeks to evaluate and decide which between the Chinese and Japanese market offers the ideal and increased return on investment rates to the venture. As such, the assessment conducts an organizational analysis evaluating its products, served markets and potential for internationalization that illustrates the venture’s ability and potential to successfully internalize in any of the markets selected. Moreover, a macro economic factors evaluation through a PESTLE, product market analysis, competitor analysis, and a buyer’s analysis on both China and Japan, demonstrate Japan as the most ideal venture market. Therefore, the report based on the markets growth stage in the product lifecycle, its economic, infrastructural support, and the consumers’ rational buying behaviour recommends the subsidiary market entry strategy approach. Conclusively, the report asserts that an adoption of the recommended market entry strategy in the Japanese market will create the venture market relevance and the ultimate required industry competitive edge similar to the domestic industry players. Table of Contents Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Company Analysis 4 2.1 Objectives and Corporate Strategy 5 2.2 Products and Services 5 2.3 Target Consumer Market 6 2.4 Organizational Resources 7 3.0 Market Assessment 7 3.1 Japan 8 3.1.1 PESTLE Analysis 8 3.1.2 Product Market Analysis 9 3.1.3 Competitor Analysis 10 3.1.4 Buyer Analysis 11 3.2 China 11 3.2.1 PESTLE Analysis 11 3.2.2 Product Market Analysis 13 3.2.3 Competitor Analysis 14 3.2.4 Buyer Analysis 14 4.0 Market Selection 15 4.1 Growth Industry Stage 15 4.2 Consumers Rationality 16 4.3 Developed Economy 16 5.0 Entry Strategy 17 References 19 Appendices 22 Appendix 1: China Economic Development Chart 22 Appendix 2: Japan GDP Chart 23 1.0 Introduction Globalization has served as a major influence on international industries operational approaches and strategies. In this regard, with increased globalization and a growing technology industry has influenced and facilitated the need for organisations to venture and diversify their operations from the traditional domestic markets to other international and foreign markets. However, as Shi (2003, p.361) argued, the process of internationalization is not only involving, but also expensive, with a majority of internationalization organisations registering market diversification failures. As such, the authors argued on the need for organizations to develop comprehensive internationalization strategies (Gillespie and Hennessey, 2011, p.23). As such, this involves the development of comprehensive market evaluation, needs, and opportunities and matching such factors with the organizational internal capabilities and industry needs. In line with these arguments, this report offers a market assessment for the Clamms Seafood venture willing to expand operations from the domestic Australian market to either the Japanese or Chinese markets, whichever offers the best investment opportunity. As such, the report offers an evaluation of the organizational product base and the respective target markets macro economic factors. Finally, the report, based on the product reviews and market macro economic factors, selects the most suitable market, as well as the ideal market entry approach. 2.0 Company Analysis The first step in developing an appropriate and relevant marketing strategy, it is imperative to evaluate the existing internal conditions, evaluating the resources and the subsequent market capabilities. As such, this marketing report assessment report section offers a strategic review of the organizational internal systems. As such, this section evaluates the organizational objectives and strategies and how each facilitates the achievement of the proposed market venture. Moreover, the section evaluates the organizational products and services, past performances, the venture target consumer base, as well as the available resources to actualize the proposed marketing venture. As such, the section findings will be evaluated against the target foreign market needs, to establish which of the two markets has a greater synergy with the available internal organizational resources for increased foreign venture success rates. 2.1 Objectives and Corporate Strategy The organization has a strategic objective of expanding its supplies ventures. In this regard, one of the strategic objectives of the venture is to increase its current market base to absolute market dominance. Although the venture currently has established a market reputation for the supply of fresh and frozen Sea foods to restaurants and chefs in the market, it seeks to expand its services beyond Victoria to other States within Australia through increased quality and standards. In addition, the venture has a strategic objective to internalize and expand its market base in the international markets in the region. In this regard, through its export brand the Yabby Blue, the venture seeks to expand and exert its influence into the international market base (“Clamms Seafood Australia”, 2015, ‘About Us”). Therefore, the need to diversify and increase the organizational consumer base serves as the key organizational corporate strategy and objective. 2.2 Products and Services The organization provides fish products. In this case, it has specialized in the provision and availing of respective related products such as frozen fish, meat products, frozen foods and finger foods. As such, the provision of these products in the Australian market has increased due to the availability of the large supply base in the Australian market where there are numerous fisheries with the availability of the largest coastline in the market. Moreover, the venture offers serve to chefs and restaurants. In this regard, besides delivering the fresh fish products, the organization provides training services to the respective chefs to improve on their products and food quality and standards. Moreover, in the recent past the venture has expanded its product base to include healthy beef and chicken meat products such as the Tasmanian red meat, Ionica Chemical and Hormone Free Chicken and Ducks, Game Meats and Small goods among others (“Clamms Seafood Australia”, 2015, “Products”). Therefore, this has served as an additional tool to increase the organizational competitiveness and relevance in the food industry, through diversifying and creating a broad consumer base. 2.3 Target Consumer Market The venture has a wide base consumer target group. On one hand, the organization seeks to capture the growing Australian restaurant industry, which has registered a growing trend in the last decade, with further industry outlooks demonstrating the likelihood for a growing market economy, thus providing the opportunity for an increasing consumer base in the market in the future. Moreover, the venture products have expanded to incorporate the growing health concerns in the Australian market. As such, this includes the growing concerns on red meat and protein consumption with its increased link to the rise of lifestyle disease such as obesity and high blood pressure among others. As such, the need to consume alternative meat products such as white meat has expanded the Australian market base from the traditional fish lovers, to a growing nutrition conscious population base in the market. 2.4 Organizational Resources As already discussed in the above analysis, it is apparent that the venture has a wide range of resources that support and facilitate its expansion and development onto the international platform. On one hand, the venture has the key tangible asset base on the export brand, Yabby Blue and the acquired exportation experience, offers the venture the required market knowledge to spread and expand onto the desired foreign markets into the future. On the other hand, the venture has an intangible asset based, pegged on its reputation in the Victoria region. In this regard, the domestic market base dominance and reputation offers the required market financial base as well as the required market goodwill for the venture operations in the foreign markets. 3.0 Market Assessment In order to develop a strategic marketing and internationalization strategy for the venture, it is imperative to evaluate and establish the existing market conditions in the respective target foreign markets, namely Japan and China (Bourguignon, Bussolo and Silva, 2008, p.63). As such, this report offers a strategic evaluation of the macro-economic factors in the respective markets to establish the most strategic market base of the evaluated two markets. In this regard, this report section offers a focus on the external market environment through a Political, economic, social, technology, environmental, and legal (PESTEL) analysis, product market analysis, competitor analysis, and the buyers’ analysis respectively. As such, the section is divided into two sub-sections, namely the Japan and China sub-sections respectively. 3.1 Japan Japan is recognized as one of the largest economies in the Asian region, having emerged as a developed economy with its developed automobile industry. This sub-section offers an evaluation on the Japanese market macro economic factors that determine its attractiveness as a market destination for the Clamms Seafood Australia Company. 3.1.1 PESTLE Analysis An economic analysis on the Japanese market, establishing a strong Japanese Yen that is classified as the third most traded currency after the US dollar and the Euro currencies. In this regard, this develops an economic forecast in which an economic outlook projects a developing economy, with potential for increased earnings. As such, a review by the IMF (2007) established that a strong Japanese Yen against the Australian dollar implies the probability for increased earnings in the foreign market as compared to the Australian domestic market. This implies that the exportation of the organizational products from Australia to Japan will facilitate increased organizational earnings that in the domestic market. Moreover, a political analysis on the Japanese market establishes that the free market trade policy adopted by the Japanese market makes the venture expansion into the region feasible though the existing positive political good will. Similarly, the growing technology developments will facilitate the preservation as well as in the efficient and timely distribution of the organizational products to the target Japanese target consumer and market segments. Ellington (2009, p.139) stated that the fish food industry is largely supplied directly by fish farmers across Japan from whom respective fish food producers restaurants acquire and purchase fresh fish from. However, a Japanese market social factors evaluation establishes a declining market base. In this case, Ito (2010) noted that the slow economic development rates have led to declining social standard with an increasing unemployment rate at 5.3% in 2010. Thus, this unlike in the Australian market that has registered a rising earnings base in the last decade, indicate that population base will have minimal ability to consume the proposed venture products if introduced into the market. Further, an environmental analysis establishes that unlike Australia that has a large water base, the Japanese region lacks a similar environmental merit, thus reducing the fish supply bases in the market. 3.1.2 Product Market Analysis Japan has a population base of around 126 million with a majority living in the urban areas. In this case, rural-urban migration has been a growing trend in the Japanese market. Moreover, the market is experiencing a changing cultural orientation from the traditional Japanese rice as the staple food, to other foods such as fish foods. Therefore, this illustrates that the fish food products industry is at its growth stage. Thus, this is an indication that the demand for fish and fish products is likely to expand and grow into the future. Therefore, this indicates that venturing into this market would offer the organization an additional opportunity to increase its product life cycle (Alexander, 2013, p.35). Currently, the fish food industry in the Australian market is approaching its maturity stage, and thus reducing consumer base increment as well as low profit margins. On the contrary, the growth stage in the Japanese market indicates that the venture will acquire an increasing consumer base as well as rising profit margins upon the ventures involvement. Critical evaluation of the Japanese FIs industry establishes that despite the growing trend towards fish consumption, the fish industry has faced challenges on the effects of radioactivity on the aquatic life since the Fukoshima radioactive effects incidence. The effects of the radioactive effects in the Japanese market led to a radioactive effect on all the aquatic life leading to their poisonous nature making them inedible. Therefore, Craft (2013) stated that since then, the Japanese market established a mechanism in which, prior to the authorization for consumption, the department of fisheries sent out the fish to Onjuku test lab for testing and validation. Therefore, this has reduced the reliability of the domestic fish supplies, which form a large supply base in the Japanese fish industry. As such, reviews in the lab have established that besides the Fukoshima region fish that have the radioactive effects, the rest of the region’s fish across Japan are safe, thus increasing the fish industry possibility. 3.1.3 Competitor Analysis An evaluation of the Japanese fish industry as discussed above demonstrates that the industry is at its growth stage in the market. As such, this indicates that there are few industries based suppliers. In particular, the industry is largely supplied by the domestic suppliers governed by the department of fisheries established by the Japanese government. In this case, this illustrates a low competition base, a virtue that increases the ventures investment success possibility. As such, the low industry supply, especially a deficiency of foreign supplies in the market offers the venture an increased opportunity to acquire a substantial market base in the Japanese fish industry. 3.1.4 Buyer Analysis The key target consumer base for the venture in the Japanese market will be the rising urban dweller population. In this case, the growing number of urban dwellers seeks to establish new and alternative food products rather than the traditional rice staple food. In this case, the venture will target the key restaurants, ranging from the three stars to five star restaurants as their business partners. Moreover, an evaluation of the Japanese consumers buying and decision making process establishes that the consumer buying process is coordinated and rational. As such, Smith (2003, p.96) stated that the Japanese society experiences minimal impulse buying and thus requires conviction and reason to purchase a product. Therefore, this illustrates that the venture will be forced to develop informative marketing approaches in the market to earn its supplied products an increased consumer base. In this regard, the organizational fish products quality and its domestic market reputation and brand image will boost its overall ability to convince and influence the market base. 3.2 China 3.2.1 PESTLE Analysis Since the 1982 introduction of the New Chinese State constitution, the government has strived to develop and retain a favourable trading environment. As such, this explains the rapid growth and development in the nation over the last two decades. As such, politically, the nation has developed relevant policies supporting foreign investment in the region, thus creating a free market environment, similar to the Australian market. However, unlike the Australian and Japanese markets that have a free trade policy, the market has developed ownership requirements in which investment in select industries requires the attainment of the set minimum local domestic shares ownership of the international venture (“Australian Government” 2015). Therefore, in investing in the region, the venture should prepare to offload a substantial amount of its shares to the Chinese domestic investors, implied shared profits, thus making it a less favourable investment destination. On the other hand, an economic growth analysis on China established that an average of the economy growth rate since 1998 to2014 averaged at 9.08% as opposed to the 2014 Australian economic growth rate at 2.70%. This implies a positive growth representing a rising disposable income earnings and a per capita value indicating an industry’s ability to demand more products in the future. Further, a social analysis on China by The Economist (2012) revealed that China has a large population as of the year 2012; the nation had a population base of over a billion people and an annual population growth rate of 0.5%. As such, this indicates a growing population in which demand for food will increase with increase food security challenges as the local resources are depleted, creating a viable market base for the proposed venture expansion and supply base. Nevertheless, lower technology costs as compared to the Australian and Japanese markets offer a foreign venturing challenge in the market. In this regard, the low cost of technology development implies that the cost of processing, storing and freezing fish by the local traders and supplies would be lower as compared to the Clamms Seafood Australia processing and packaging in the Australian market supplied through its export brand discussed above. In addition, an environmental concerns analysis establishes that the majority of the Chinese land is currently under economically productive use. Therefore, this implies that there lacks enough environmentally friendly space and sufficient land to establish additional organizational and supplies, fisheries in the Chinese market, as well as the risk of extinction of a majority of the fish species due to the high Chinese consumer base in the future. 3.2.2 Product Market Analysis The Chinese market has been primarily focused on the Agricultural Sector as the key source of food in the society. As such, this can be evidenced by the diverse and numerous Chinese government initiatives through which to promote and increase Agricultural industry productivity for increased food security in the region. As such, it is no surprise that the fish industry has gained increased market recognition and acceptance in the market. As such, efforts by the government led to the reported 2006 32.9 million tonnes fish harvests in the region, thus accounting for a large food proportion in the market (Welsh, 2012). Therefore, this illustrates that similar to Australia, the fish industry is at its maturity stage where the market is fully aware of the existing fish products and the subsequent climaxing of the industry demand. Essentially, as already discussed, the agriculture industry falls under the protected industries in China and thus it is majorly dominated by local domestic investors. Therefore, there are few foreigners supplying the Chinese fish and in general the Agriculture industry. Mainly, the respective industry fish farmers sell their fresh fish directly to the existing restaurants that in turn manufacture fish products as well as preserve the fresh fish availed. Therefore, the existing market gap through which the venture can penetrate into the Chinese market would be through serving as an intermediary through which the farmers can sell the products to the venture and in turn process and refine the products prior to reselling them to the respective restaurants in the market. Through such an approach, the venture will add value to the fish products and as such serve as an additional unique component in the market. 3.2.3 Competitor Analysis A competitor analysis in the market establishes the existence of indirect domestic competition. In this case, the direct link and the relationship between the consumers and the fish farmers create a competition in that it is imperatively hard for the venture to introduce its product in the market. As such, the high government investments in supporting and empowering the farmers create their capabilities to actively supply their products to the respective restaurants and fish product suppliers and consumers without the role and support of the intermediaries (Muscolino, 2009, p.117). Therefore, venturing into this market will require high capital investments through which to acquire a substantial fish farmers supply base as well as a reasonable consumer base to break even its operations. 3.2.4 Buyer Analysis A strategic analysis of the Chinese market, buying behaviours establishes that the current consumers’ buy and decision making model approaches have changed from the traditional Chinese markets. On one hand, Yeung (2007, p.188) stated that the consumer base is characterized with a loyal consumer base, in which the Guanxi relationships, create brand loyalty and thus the introduction and acceptance of a new brand is imperatively hard in the market. Moreover, the consumer base seeks to a value for their money and thus spends time in evaluating the value and benefits of consuming a given product. As such, this value offers the Clamms Seafood Australia an added opportunity to increase and acquire the market base through its high value market products in the industry. 4.0 Market Selection A critical evaluation of both the discussed Japanese and Chinese markets, it is apparent that each of the markets presents a share of its opportunities and challenges of the proposed venture investment. In this regard, while as the presented opportunities serve as attractive to the market success possibility, the threats serve as a hindrance and deterrent to such venture internationalization success. In this case, based on this analysis, the report concludes that the Japanese market offers the Clamms Seafood Australia venture an increased opportunity to expand the venture market performance and success in its internationalization process both in the present and into the future. This report section offers a justification analysis citing the reasons as to why investing in the Japanese market will provide the venture with an increased success opportunity 4.1 Growth Industry Stage One of the strategic evaluation reviews on the Japanese market establishes that the industry is gradually changing and thus accepting alternative foods in the market as a tool through which to increase the industry food security (Kimura, 2011, p.466). Therefore, the growth stage in the product life cycle as compared to the Australian and Chinese markets indicate that the venture will have an increased product sales lifespan in Japan than in the other two markets. Moreover, the venture will acquire increased profits in the market through the reduced competition threats in the market as the demand is rising in the market as more people migrate from the rural to the urban migration. 4.2 Consumers Rationality In addition, an evaluation of the consumer behaviour in the Japanese market serves as an additional incentive and justification as to why the venture should internationalize onto the Japanese market. In this regard, the evaluation established that the consumers are rational and as such oriented and objective towards the realization of a good value for their money (McCreery, 2000, p.23). As such, this implies that the market consumer base acceptance of brands and their subsequent retention of brand loyalty, unlike the Chinese market that is based on relationships, are based on the virtues of value creation. Therefore, international brands have the opportunity to increase their market brands in the industry. As such, based on this market condition, the venture will increase its brand reputation in that it has retained high industry standards as well as reputation to influence consumers into rational buying. 4.3 Developed Economy Lastly, a final justification of the reasons for selecting the Japanese market is based on the existing industry market conditions. As such, the industry, being one of the most developed and grown in the Asian market has developed and supportive infrastructures such as the aids of trade. In this regard, this increases venture operations and management efficiency in the Japanese market, a tool imperative in the development and reduction of the overall organizational production costs. Therefore, upon venturing into the Japanese market. The organization will reduce its production costs, a tool likely to facilitate a reduction of the product prices, making them affordable and increasingly competitive with the domestic market products. Thus, this will in turn increase the organizational revenue gains in the long run period. Thus, based on the discussed above justification factors in the Japanese market, it is apparent that the market is the most ideal and suitable for investment as compared to the Chinese competing market both in the short and long run periods. 5.0 Entry Strategy One of the strategic needs and rationale for a marketing plan is the appropriate determination and execution of a market entry strategy. In this regard, although an organization could successfully identify the target international market, a wrong market entry strategy could lead to the ultimate failure of such an internationalization process. Therefore, as Gekonge (2014, p.168) argued, in order to develop a suitable and market relevant internationalization strategy, it is imperative to evaluate the existing legal, economic and market competition conditions on the target market, as different conditions require varied market entry strategies. An evaluation of the Japanese market illustrates that the industry has favourable legal regulations and a thriving economy. Therefore, this requires a direct venture involvement through the setting up of a venture subsidiary. A subsidiary as Benjamin (2006, p.50) classified it, is a business unit in which, although operating under the parent company strategic policies and goals, have their unique operational strategies. Thus, the proposed venture in the Japanese market will develop its own market related operational decisions as a tool to ensure market relevance and coordination. One of the strategic approach through which the proposed approach will operate is the development of a new supply base in the Japanese market. As such, besides the importation of Australian Unique fish types into the market, the venture will establish domestic supplies for the locally available fish types (Ming, Ferry, Parton and Matanda, 2014, p.87). Consequently, this will ensure a relationship developed with the existing consumer base, create an increased acceptance probability as well as promote production cost reduction. In addition, the venture will establish a processing and preservation facility in the industry. Therefore, beside the acquisition of the fist operational capital and the retention of the strategic parent company goals, the venture will retain its own brand identity in the Japanese market, allowing it to acquire and apply standards and local industry practices in the long run period. References Australian Government, 2015, Invest in Australia, Australian Trade Commission. [Online] Available at [Accessed January 27, 2015]. Clamms Seafood Australia, 2015, About Us. Author. [Online] Available at < http://www.clamms.com.au/about_wholesale_supplying>.[Accessed January 27, 2015]. Clamms Seafood Australia, 2015, Products. Author. 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International Monetary Fund, August 2007, Japan: Staa Evaluation Rerport, Author. [Online] Available at [Accessed January 27, 2015]. Ito, A., July 30, 2010, Japan Unemployment Rate Unexpectedly Increased to Seven-Month High in June, Bloomberg. [Online] Available at [Accessed January 27, 2015]. The Economist, April 21, 2012, China’s Achilles heel, Author. [Online] Available at [Accessed January 27, 2015]. Welsh, J., October 23, 2012, The Disgusting Truth About Fish And Shrimp From Asian Farms, Business Insider. [Online] Available at [Accessed January 27, 2015]. Craft, L., December 18, 2013, Inside Japan's battle to prove fish is safe after Fukushima nuclear disaster, CBS News. [Online] Available at [Accessed January 27, 2015]. Appendices Appendix 1: China Economic Development Chart Appendix 2: Japan GDP Chart Read More