Exporting healthy drink from Austria to Canada - Term Paper Example

1. INTRODUCTION Nowadays, more and more companies are engaged in exporting activities because of intense competition, reduction in profit margins, and losing of domestic market share. Companies believe that through boundary expansion and participation in the foreign market they will have the chance to create and explore new opportunities to strengthen their competitive positions in the international market. Exporting is a good source of more disposable income because of the many consumers, increased in sales, improvements of product, growth opportunity, and market diversification. These are the reasons why several companies have chosen to position their product in the foreign market. Others also cited that they preferred to export their products in order to survive in the saturated domestic market and remained competitive. However, before a certain company considered the idea of exporting, it must have all the needed resources (strategic and financial), and more importantly is to have a higher level of commitment to compete in the international market. According to Zou, Kim, and Cavusgil, in order for companies to be successful they “need to conduct a careful assessment of their readiness to export, go through the learning process of internationalization, develop effective export marketing strategies that suit for foreign markets, and implement the strategies effectively” (2). Trading Ltd. is an Austrian based company that is very determined to introduce BioDrink in the Canadian market. The main purpose of this paper is to design the international marketing strategy of Trading Ltd. targeting the Canadians as their final consumers considering all the necessary information. 2. ASSESSMENT OF TRADING LTD. TO EXPORT To measure the readiness of the company to export BioDrink in the Canadian market, it must have all the necessary resources. Among the necessary resources are strategic and financial resources, management commitment, and human resources. “A common mistake made by some companies is to become involved in exporting without adequate preparation and assessment of their readiness to export” (Zou, Kim, and Cavusgil 9). New Customers and Markets. It would be an advantage for the exporting company to have a strong home market position before going into exporting because international market is full of competitors. Canada as the prospect overseas market is a good choice in terms of its economic stability being one of the world’s wealthiest nations. Also, the demand of beverage industry in the country is increasing and the record of exporting is high. Trading Ltd. needs to have a road map of communication on how to gain a market share because Canadian market is a huge market opportunity that is much larger compared to Austria’s domestic market. Cost Competitiveness. Through exporting, Trading Ltd. will have more opportunities to grow and develop BioDrink according to what is in demand. It will also reduce its overall costs because exporting would create wider economies of scale and scope particularly in transportation and packaging costs. Competitiveness exists in terms of the improvement in real exchange rate in the country relative to export prices and the unit of labour costs. Risk Diversification. If the resources or assets of the company are spread widely such as by having an increase in target markets and a wider range of customer base, the result is risk diversification. Although there is a greater risk in international market because of geographical distances and complexities it would be more risky for the company to just stay focused on the domestic market which in recent times is affected by economic crisis (Fisher and Fisher 2). Profitable Business Proposition. Through much larger economies of scale and scope, Trading Ltd. will likely experience an overall profitability. Aside from an increase in international sales, the future assets of the company will also experienced increasing rates because it would become more popular in the foreign market. 3. DEVELOPMENT OF EXPORT MARKETING STRATEGY “Better business practice means that the exporter must undertake considerable planning before executing an export strategy (Fisher and Fisher 5). Marketing plan is a blue print plan of export that must be incorporated within the export marketing strategy of the company. A plan is necessary to determine if Trading Ltd. has the ability and capacity to enter the foreign market after considering the formulation of export strategy, development, implementation, and monitoring of export marketing plan. A plan is not fixed and it is subject to change, thus it must be constantly reviewed and refined to consider those recent changes in the market situation. If the result of the assessment is positive, meaning the company is capable to venture internationally, and then it is time to formulate a step by step process of export marketing strategy. 3.1 Identifying the Target Market Part of formulating an effective marketing strategy is the identification of target market. It would be easier for Trading Ltd. to dominate the Canadian market if it had conducted international market research activities like targeting, segmentation, and positioning. Through these activities, the characteristics and opportunities that exist in the Canadian market will be clearly identified and the gathered information will be useful in making decisions. Market Research. The new target market is Canada and through the help of the food, beverage and consumer product operator of the country, BioDrink will be promoted to the final consumers (“Food and Beverage”). Although BioDrink is not a basic necessity for the Canadians, it will not affect the volume of consumption nor the amount of disposable income from the consumers. In fact, there is an increased of 6% in the disposable income of energy drinks which are considered as non-essential (“The Canadian”). The healthier is the economy of the country the more it becomes more attractive to foreign investors especially that Canada’s current value of sales is increasing. Aside from Canada’s economic growth, Canadians are now migrating away from carbonated soft drinks that consequently give way to BioDrink under the category of energy drinks. Competition in the beverage industry of the country is not so intense because currently there are only three foreign-based subsidiaries of beverage manufacturers. Also, Austria and Canada are into bilateral trade agreement that made Austria the second largest supplier in the Canadian market. Therefore, it would be more favourable for Trading Ltd. to export BioDrink in Canada. Segmentation. With the help of the consolidated information from market research, it is now time to segment the target market. Energy drinks are more appealing to the Canadian males under the age bracket of 15-39 making them the traditional consumer base with 65% market share; however, it would be an advantage if the product would have a wider range of consumers. Because of the many promotional activities, the demographics are starting to change and the product has started to capture a very broad variety of consumers in the Canadian market (Davis). In fact, “energy drinks with high sugar levels are more popular among children and women, while energy drinks with strong taste and flavor are more preferred by male consumers” (“Energy Drinks Market”). Positioning. BioDrink will be positioned at an affordable price targeting the youth population. Its positioned will give focused on the youth market considering that it is 30% of the world’s population. Most of the companies nowadays are paying higher attention to the young generation and made them the premier global market segment. Furthermore, to ease the entry into the Canadian market, Trading Ltd. can also consider a strategic alliance with the successful companies in Canada. 3.2 Developing Export Marketing Strategies (Marketing Mix Strategies) It is a fact that international marketing is a more complicated set of process compared to domestic marketing. Every country has different culture, needs, and tastes preferences and these differences must be fully understood and identified by the exporters. Success will be determined if the company was able to address each of these differences by applying the 4 P’s of marketing mix strategies: product, price, promotion, and place. Product. The name of the product is BioDrink, under the category of energy drink. This product is considered to be competitive because it has been projected that it will lead the beverage industry of Canada in terms of volume consumption and growth in disposable income (“Market Brief”). Trading Ltd. will be using the product adaptation strategy to cater the different preferences of consumers. Energy drinks in Canada are regulated by the Natural Health Product (NHP), and without their approval a product will not be distributed to the market. They are the responsible organization that will review the quality and safety of every energy drink that will enter in the Canadian market. For this reason, the ingredients of BioDrink will be modified and will be aligned with NHP’s regulation. They are very strict in the amount of caffeine and vitamins of every energy drink because they are regulating the consumption of these ingredients particularly to their children and pregnant women. Price. Setting a strategic price is one of the most important marketing strategies in exporting. This is where production and delivery costs are being examined that must compensate with the competition and market demand of a certain place. It is important that in setting up a realistic export price, the competitors pricing must be taken into consideration. And because Trading Ltd. is not the first company that offered energy drinks in Canada, it is more appropriate to undercut its going price instead of matching with those of the competitors to easily gain a market share. This strategy is called penetration pricing wherein the affordable price will surely attract the young market and by class for the fitness and sports enthusiasts. Place. Trading Ltd. will be using the indirect-marketing channels (wholesaler and retailer) in distributing BioDrinks to the final consumers in Canada. Research has shown that there is a high demand and realistic profits of energy drinks in a convenience store than in the supermarket (Davis). This means that it is more appropriate for Trading Ltd. to negotiate in a convenience store before considering other distributional channel. Promotion. There should be an aggressive marketing campaign for BioDrink so that it can easily gain a market share in the Canadian market. Social networks and high-profile ads stating BioDrinks’ benefits are among the campaigns that are appropriate for the youth market. Trading Ltd. needs to consider the growing market of energy drinks as well as its competitors that is why it should align its promotional activities with the action sports and stuff that are enticing to the young generation which at the same is unique and standardized (Morrissey). 3.3 Marketing Communication Tools The different communication tools that Trading Ltd. will have to consider is selling, advertising, direct marketing, and public relations. It needs to use the pull, push, and profile strategies so that it can easily increase BioDrink’s awareness and sales in Canada. Like many other companies, it would be better for Trading Ltd. to use the digital marketing activity and online selling in terms of advertising. With the use of the company’s website, potential customers will just browse the website and have all the information about the product. Aside from using the internet, media, promotional leaflets, and brochures can also help in widening the publicity of BioDrinks in Canada. 3.4. Other Marketing Strategies Redesign BioDrink. The brand must be redesigned internationally. The best-selling energy drink should be redesigned in a unique and credible brand compared to its competitors. The brand should also be reinvented to have new looks just like by having new packaging and new taste preferences. Like many other popular energy drinks, BioDrink will be marketed in Canada with a packaging made available in a recyclable aluminum cans with a label design that will catch the attention of younger generation, and fitness or sports enthusiasts. Market Entry Strategy. It would be more appropriate for Trading Ltd. to cooperate with the export management companies (EMCs) or export houses to have an ease of entry into foreign market (Phillips, Doole, and Lowe, 249). Through these specialists companies it would be easy for Trading Ltd. to market BioDrink in Canada as well as the taking of orders from foreign buyers, and in terms of distribution. Aside from maintaining an international sales, the overall export costs particularly the transportation will be decreased because the shipments of goods are in bulk. This strategy has also disadvantages, that is why the company needs to properly pick-up a more suitable EMC. 4. SOURCES OF ADVICE In terms of exporting, companies in Austria can refer to The Austrian Trade Union Federation (OGB), a government agency that represents every industry in terms of sourcing goods and investment (“Background Note”). The bilateral economic relationship between Austria and Canada is a good sign and favourable to Trading Ltd. in terms of entering the Canadian market with ease. The export activities of these two countries are increasing because the North American Free Trade Agreement (NAFTA) has further improved the trade agreements between them (“Trade with Austria”). Through the shift-share analysis, it has been determined that Canada’s import of beverages since 2004 to 2007 is increasing with a value of 3049.5 (“Canada”). This only shows that Canada is a good export country of beverages. 5. CONCLUSION Before a certain company decided to enter the foreign market, it must have all the needed resources and more importantly is its readiness. Exporting is a continuous process and the export plan and strategy are all subject to change because situations in the foreign market are constantly changing. After considering the many marketing strategies, there is a big chance for BioDrink to be successful in the Canadian market. With a complete export plan and effective strategies, Trading Ltd. is confident to gain a market share in the Canadian market. Works Cited “Background Note: Austria.” U.S. Department of State. U.S. Department of State, 9 Nov. 2010. Web. 6 Dec. 2010. . “Canada.” United Nations: International Merchandise Trade Statistics. United Nations, n.d. Web. 7 Dec. 2010. . Davis, Nadine. “Studies Show Age Demographic for Energy Drink Consumers Widening.” Energy Drink Sale. Energy Drink Sale, 2010. Web. 7 Dec. 2010. . “Energy Drinks Market.” ResearchWikis. ResearchWikis, n.d. Web. 7 Dec. 2010. . Fisher, Simon, and Damian Fisher. Export Best Practice: Commercial and Legal Aspects. Leichhardt, NSW: The Federation Press, 1998. Print. “Food And Beverage Manufacturers Support Canada’s Three-Pronged Approach To Reduce Sodium Intake.” CNW. CNW, 29 July 2010. Web. 6 Dec. 2010. . “Market Brief: The Canadian Energy Drink Market.” Agriculture and Agri-Food Canada. Agriculture and Agri-Food Canada, April 2008. Web. 6 Dec. 2010. . Morrissey, Janet. “Younger Generation Favoring Energy Drinks Over Coffee.” Yahoo! News. Yahoo! Inc., 17 Nov. 2010. Web. 7 Dec. 2010. . Phillips, Chris, Isobel Doole, and Robin Lowe. International Marketing Strategy: Analysis, Development, and Implementation. London: Routledge, 1994. Print. “The Canadian Soft Drink Industry.” Agriculture and Agri-Food Canada. Agriculture and Agri-Food Canada, 8 April 2009. Web. 6 Dec. 2010. . “Trade with Austria.” Foreign Affairs and International Trade Canada. Foreign Affairs and International Trade Canada, Dec. 2008. Web. 7 Dec. 2010. . Zou, Shaomaing, Daekwan Kim, and Tamer Cavusgil. Export Marketing Strategy: Tactics and Skills that Work. New York, NY: Business expert Press, 2009. Print. Read More