East coast fisheries in Canada were no strangers to exporting, with $2.3 billion in product, mostly lobster, going to the United States. New transportation technology was opening up an efficient way for them to reach Europe - the largest seafood market in the world.
Love That Lobster
Canada leads the world in production of lobster (20%) and in exports about 33% of the total produced. Canada has a competitive advantage because of a productive fishery on the east coast and the desirability of the lobsters there.
While many recipes make use of lobsters or lobster parts, whole live lobsters are considered a special treat. A dull green color in their natural environment, they turn bright red after being dropped into hot water and cooked. It is very expensive to ship live lobsters to many markets by air freight: top quality lobsters must be fed and kept in clean, oxygen-rich water. To reduce costs, the live lobsters are shipped on ice, which keeps them alive (barely) and yields a less desirable product.
The Maersk ocean shipping line, based in Denmark, has partnered with Aqualife AS to create a new transport system with a ship that will deliver fresh live lobster directly from Halifax, N.S., to the docks in Rotterdam, The Netherlands. Tanks on the ship have been designed to keep oxygen flowing through the water without the need for fuel-consuming pumps. This means the lobster arrive in excellent, fresh condition and the whole operation is “Green” – it is not wasting energy and has a much smaller carbon footprint than lobsters shipped by other methods.
Both companies worked with the Canadian government and fisheries representatives to ensure that the method would make sense logistically, while also being environmentally sound. In Europe, environmental issues can be larger than price in consumer decisions. Many seafood exporters have been desperate for an alternative to costly air freight and this will enable shipments of not only fresh lobster, but also snow crab, live oysters, clams and mussels.
Once on display for purchase in a restaurant or market, the lobster had to be kept in their own tank with plenty of oxygen flowing through it. This meant the establishment had to be committed to the concept and be assured they would get regular supplies. Fish for sale in markets were normally displayed on ice, so having a tank would be an extra expense for the fishmonger. In the case of restaurants, a tank with lots of tasty lobster in it would be an attraction, but again, it would take some investment and commitment to proceed.
For the consumer, the product had to be taken home usually in a bag filled with water, to be cooked. It was important to cook it as soon as possible after purchase.
The Right Market
A key concern of the Atlantic Fisheries Marketing Board was the best place to market the lobster. World lobster production is only about 250,000 metric tonnes, so they had to choose their markets wisely. They identified several types of outlets where lobster could be sold:
• Large supermarkets, stressing fresh product, could include a lobster tank at their fish counter, adding a premium delicacy to their offerings. About 70% of seafood was consumed at home, with 30% at food service outlets.
• Restaurants were always looking for new and unique offerings, and this would offer them a way to distinguish their menu. However, it would involve having a tank installed, so those with a seafood theme offered the best prospects. Also, lobster is seasonal.
• Markets selling fresh produce and fish would also be appealing. These shoppers value freshness, but they tend to be lower income groups compared with supermarket shoppers, and lobster are viewed as expensive.
Beyond the type of outlet, specific countries would need to be targeted, each with their own unique attributes:
• Spain is the largest fish-consuming country in Europe and the fish market in Madrid has the greatest diversity of seafood products in the world. Almost 15% of Spanish grocery spending is on seafood, making this a tempting market.
• France imports live lobster from the US, but the Canadian product will get a huge advantage in 2011 when French labeling requirements must outline the product’s carbon footprint. Air freight has a much larger carbon footprint than does ocean shipping. Many markets and restaurants presented opportunities here.
• The United Kingdom is famous for its 10,000 fish and chip shops, which serve mainly cod and haddock. The lobster would fit a small niche here, such as restaurants in London, where diners were more sophisticated. Growing numbers of large supermarkets focusing on fresh product also presented opportunities.
• Italy is the fifth largest seafood importer in the world and seafood consumption has risen by more than 50% over the past decade. Italians treasure freshness above all when they eat. However, lobster is not a traditional dish here and transport issues would come into play.
Other market factors had to be considered as well. One was the love of animals in many parts of Europe, especially the UK, and animal rights activists, who claimed you could hear the lobster scream when they were dropped in the hot water, could protest where lobster is sold.
You’ve been asked to help the Atlantic Fisheries Marketing Board make the decision about where and how to enter the European market for fresh lobster.
- According to Transparency International, some European countries are more corrupt than others. In these countries, officials might suggest that facilitation payments or bribes will avoid certain market entry barriers. Discuss what steps a company should take in researching and preparing to enter one of these corrupt countries.
- For an organization to get involved in a global business in a corrupt nation, it has to consider some of the strategies so that the business is not affected. Firstly, the company has to research through case studies as well as read the literature materials to know about that country operates. This can be done by merging with the government or other companies to study such risks in the market. The government can come up with the regulatory measures that can help prevent corrupt deals.
- The company should not work independently as it needs the government’s intervention, through the regulation that can lead to more administrative measures, which can help to reduce the corrupt deals in the nations.
- There should be transparency through the government channels, this is done through the internet and all the business deals through the internet have to be saved before release so that those based on corruption to be eliminated, though through the internet this deal can be tracked to reduce the corrupt deals
- The European Union is very diverse. Some countries are fast-paced markets, while others are relationship-based markets. Select three countries for each of these types of market and, support your assertion using facts and evidence found through outside research. Develop an A-List for the best prospective markets and a B-List of countries that should not be entered at this time.
- The above table consists of the nations that are involved in the global business and the ones that are least involved. In column A the nations are ready and open for the trading partners by providing a favorable environment for the well being of global trade. They also have the requirements that are the desire for the trading partners, they are corrupt free zone, and secure enough for investment.
- Those from list B are the nations that do not have an interest in participating in the international trade. They do not have the interest to know about the other nation’s interests and culture, they do not know how making their relationship in other sectors except on some business basics
- When developing a new market, it is very important to understand the details of the target market. Choose one A-List country and one B-List country and, following the first four steps listed under Details of the Target Market on page 221, provide the details of those country markets.
- The best method is through the use of direct market entry, especially when dealing with Spain and UK. This can be the best option as the nations do not have to grow through many channels in order to reach their potential buyers in the target nation. The process of production can be well monitored and managed by the country. The chances of corrupt deals can be reduced. The channels through which the foodstuffs are transported will also be shortened hence keeping the manufactured food fresh and healthy.
- Choosing a market-entry option is critical to success. Based on your knowledge of the countries you selected in Q2 and Q3, choose a market-entry method and support it with reference to the case and course materials.
- The best method of establishing the relationship with the trading nation is through research of the culture, and learning the language from both nations so that the nation can be able to know the preference of the customers. The cultural issue is very important as every nation has a different culture and language difference which can lead to barriers during trading.
- The business owners should also have detailed information on the client's preference through research as well as online market research and literature.
- Therefore, in order for Spain to get involved with the UK, for fish, the two nations should know each other well as well as learn a language they will help them while communicating.
- The nations should also create a good relationship with one another by sharing ideas during business conferences
- The Atlantic Fisheries Marketing Board is developing a comprehensive market entry plan. Describe the key elements of this approach and discuss how doing business this way could avoid many of the problems faced by smaller companies when entering international markets.
- The company has to get full information about the market, the culture, the language, their preference, and the company should as well carry out the research in the member country so that they can have genuine and updated information. This information can be obtained from the websites, social cites, business databases, representatives from the government to attend meetings and conferences.
- Most of the problems encountered by the small companies are that they do not carry out enough research. They do not have enough capital, hence they cannot be self-sustainable. They also do not establish long term relationships before entering into the global market therefore they are not well recognized
- The company can follow the following steps before selecting the market.
- Carry out statistics about the market
- Identify the most competitive markets around
- Look for the upcoming markets
- Target the most competing markets
- Watch out and evaluate the market trends
- Identify the sources of competition
- Carry out market analysis and the channels of distribution
- Identify the challenges and obstacles from the foreign markets such as language and culture.
- Evaluate the government motivations
- Choose at least one or two markets