International Marketing Report
Marketing the product through proper strategic approach to facilitate the customers in a given area is the critical thread for any international company (Ghauri, & Cateora, 2010). The working purpose of the marketing project is to analyse AACo’s current situation, its target market in India, determine strategies for reaching potential clients and develop marketing tactics. The marketing project opens with an analysis of the company's situation analysis, including detailed Pest analysis of Indian market. Further, the report determines its major competitors in India. Hind Agro Industries Limited and ALM Industries Limited are the main competitors with the strong customer base in India. The marketing goal for AACo is to become a viable company in the beef production industry serving both upper and middle class with high quality and innovative services.
INTRODUCTION TO COMPANY
Australian Agricultural Company Ltd (AACo) is a world leading beef and agricultural products’ provider company which was founded in 1824, and continuously operating in Milton Australia since then (AACO, 2014a). AACo owns and manages an integrated system of cattle production stations, along with feedlots, farms including 18 owned cattle stations, agisted properties, 2 owned and 2 external farms located over the area of 7 million hectares in Queensland and the Northern Territory (AACO, 2012).
AACo’s wholesale beef segment produces premium quality beef and exports to more than 20 countries around the world (AACO, 2014b). Branded Beef offers highly prized Wagyu beef, and AACo is known as the world’s largest Wagyu Beef producer with almost 30,000 heads per year. AACo offers four main Wagyu Beef brands:
- Master Kobe
- Takumi Wagyu
- Kobe Cuisine
- Darling Downs Wagyu
AACo exports its Wagyu beef to more than 35 countries, including Korea’s OK Meat, the company has been supplying as a market leader for more than 10 years (AACO, 2014a). In 2012, by expanding its operations in Asia, Wagyu genetics has contributed about a quarter of AACo’s total beef sales. Now, the company is aiming to spread out its existence in Asia by entering into India Market.
ENVIRONMENTAL ANALYSIS (PEST)
POLITICAL AND LEGAL ENVIRONMENT
Political and legal environment of a country is a critical concern for the international business (David, 2007). The national regulatory environment restricts the freedom to start and operate a business with extensive federal and state regulation (David, 2013). India's weighted average tariff rate was 14.4 percent in 2005. According to report, India is a complex but growing market for imported food products. Imports were increased to US$2 billion in 2011 from 1 billion in 2008 (FEA, 2011). High tariffs and effective bans are imposed on food exporters with an established competition from domestic producers. Non-tariff barriers involve high bureaucracy, limiting licensing requirements, import taxes, export subsidies, difficult standards and certifications on products, biased sanitary and phytosanitary procedures, and restrictions and bans on few products. The import of beef was effectively banned due to their core religious beliefs (Lahiri, 2012). However, on July 24, 2013, the Government of India restructured the Directorate General of Foreign Trade's (DGFT) Import Policy 2012 to make minor changes in the Harmonized Tariff Schedule (HTS), which now states that import permit is required for import of beef items (DeBlasio, 2008).
Economic environment of any country influence the success ratio of the company (Wilson, & Gilligan, 2012). Economic environment defines and impacts the consumers and their purchase power (Haberberg, and Rieple, 2008). Global recession influenced most of the major industries and sectors of the business globally (Hussey, 2012). Similarly, India was hit by the global recession, as well. However as the economy is improving, the consumer purchasing power is improving and; thus it would have a positive impact on the sales of the company. With more employment opportunities in the country and higher consumer purchasing power, the economic environment can positively influence the company and its objectives.
The annual growth rate of GDP of India is positive and the economy has been growing. GDP growth rate decreased because of recession in 2008 and 2009, then it increased to more than 11%. However, the annual growth rate of GDP has decreased slightly after 2011 as shown in the figure below:
(Trading Economics, 2014a)
Overall, the economy is expected to improve and it provides the opportunity to the company to capitalize on the growing market.
The other important economic factor that could influence the company’s profitability is the exchange rate. Currently the Australian Dollar is purchased at 56 Indian Rupees. This was as low as 36 Indian Rupees in the year 2009. Thus it is showing that the Australian Dollar is becoming expensive for the Indians. However, the company will be importing products from Australia to India, therefore considering the current trend, the cost of imports will reduce with the passage of time as the Australian Dollar will become more expensive. The following graph presents the exchange rate trend of the last five years.
Inflation in the Indian economy could influence the consumer buying behaviour. Inflation in India is growing at a rapid pace and this can influence the consumers to buy the products. The following graph shows the trend of inflation in India:
(Trading Economics, 2014b)
SOCIAL AND CULTURAL ENVIRONMENT
As of their religion, Hinduism does not allow slaughtering cows; resulting in low consumption of red meat (Griffin, Pustay, & Liu, 2010). The fact that cow is their God strengthens the government to ban the import of meat from any country. However, this policy was based on a weak legal footing, according to Mr. Surendranath. Considering their religious sentiments, laws regarding import of meat has made flexible as consuming meat, which has been imported, does not affect any cow in India (Lahiri, 2012).
India is known as a vegetarian country, but in recent years the India’s booming middle class has raised the demand for meat with a traditionally low intake. The trend has changed especially with those who have studied abroad (non-veggies). With the increase in disposable income, the consumption level is increasing. These facts clear that India is no more a vegetarian country (Daily News, 2013). This will give a fair advantage to AACo as it will be providing hygiene product with effective pricing to its price sensitive customers.
According to Alexander, & Doherty (2009), technological advancement has made a significant impact on how businesses manage their operations today. The emerging trend is to develop technology based huge abattoirs-cum-meat processing plants, for the purpose of slaughtering buffaloes and sheep. So far, India has founded ten cutting-edge automated abattoirs-cum-meat processing plants in different states and few more are under construction (APEDA, 2013). In these environmentally friendly plants, Meat-cum-bone meal, bone chips, tallow, and further value-added products are produced by using all the slaughterhouse by-products. These plants meet all the requirements and standards of sanitary and phyto-sanitary procedures set by International Animal Health code of World Organization for Animal Health (O.I.E.)(APEDA, 2013).
Technological advancement will allow AACo to use and adapt high quality assurance program that could offer high quality and stringent standards in food safety and high quality products. This high quality products may also create barriers for entry of new entrants.
PORTER FIVE FORCES
Porter five forces an important strategic management tool that helps in analyzing the external environment of the company (Thompson, Strickland, & Gamble, 1998; Wheelen, & Hunger, 2011).
BARGAINING POWER OF THE CUSTOMERS
AACo may face moderate to high threats from customers in India. Offering beef in India is not legally allowed everywhere in India and; therefore, it could result in increasing the legal aspects of the business and thus, the bargaining power of the customers would increase.
BARGAINING POWER OF THE SUPPLIERS
AACo will be importing the products from Australia to India, and the company has already formed an alliance with different suppliers in Australia. Therefore, the company will have low threats from the suppliers.
THREATS OF NEW ENTRANTS
The industry has a large number of competitors. Moreover, entering in the industry requires less capital, therefore, there are chances of new entrants entering in the market. However, new entrants may not be promoting and branding the way AACo aims. Thus, the new entrants may cause little to moderate threat to the company.
RIVALRY AMONG COMPETITORS
The industry in which AACo is planning to enter is highly competitive. Therefore, this high level of competition will be an important factor that could influence the success of the company in the Indian market.
THREAT OF SUBSTITUTE
There are many substitutes available for the products offered by the company. Many customers in India prefer eating Chicken and vegetables. Thus, it can be said that the company faces high threats of substitute products.
The industry is highly competitive. However, the demand of beef and meat is rising in the country, and this is encouraging new competitors to enter in the market. However, there are two main competitors of the company and these competitors are:
HIND AGRO INDUSTRIES LIMITED
Hind Agro Industries Limited is one of the leading suppliers of beef in India. It is the first company in India to have Asia's one of the most innovative abattoir-cum-meat processing plant. Hind Agro Industries Limited is offering exclusive advanced services of slaughtering the animals, which have been nurtured and bred on strict principles laid down by the O.I.E. Paris. It provides a wide variety of beef products. With an edge over other competitors in the market, the company has maintained its quality and develop brand recognition for years. The company exports to more than 25 countries including East/West African countries and CIS countries (Hind Agro Industries Limited, n.d.). It made considerable investment in its active and widespread R&D operations. The company comprises of competent and skilled sales team.
However, the company has limited global presence in contrast to global leaders in the industry. Another shortcoming is that it is widely depending on the domestic market only.
ALM INDUSTRIES LIMITED
ALM Industries is the major manufacturer, supplier and exporter of high quality buffalo meat in India. It offers an extensive range of products that are processed under the most hygienic conditions of infrastructure. Various countries of East/Middle Africa, North Africa, South East Asia, Middle East, South and North America are its huge clients (ALM Industries Limited, n.d.). AML offers a wide range of services, including slaughter, freezing of boneless meat, export of meat, trading of animal hide etc with excellent quality at competitive prices.
Conversely, it lacks in advance technology/machineries to slaughter the animals. Also, the company has less focus on the domestic market as it widely meets the requirements of other countries by exporting 90% of products.
OPPORTUNITIES AND THREATS FOR AACO
Despite of the strong competition in Indian Market, AACo has an edge in some areas. The enhancing consumption level of beef in India has increased the demand of beef, resulting in opening wide doors for AACo to enter the market and compete. As of their religious belief, the intention to avoid slaughtering the cows of the country compel the Indian people to buy beef from international companies, which have boosted the prospective of international companies. India is one of the most emerging retail markets in the world, with 1.2 billion people, which can be knocked for growth. Also, FDI in retail allows international brands to develop its market. AACo has an opportunity to obtain strategic acquisition and global tie-ups to enhance its market presence.
These competitors have threatened the entry of AACo as they are already strong domestic players with the strong customer base in the existing market. Climatic change is another factor that international companies are reluctant to cope up with. Competitors can make aggressive price war create barriers to entry.
It is critical to analyse the customers properly (Fill, 2009). The company can formulate strategies accordingly by analysing and segmenting the customers (Kotler, and Keller, 2009). The customers are segmented on the basis of social class so that the products, AACo is offering should justify the variables people carry along while being a part of a particular social class. India has reported an increase in beef consumption due to the major growth in their upper class and middle class. This shift has changed the trend of consumption. For AACo, the target will be potential families of the Upper-middle class and Upper class.
Various researchers have suggested different approaches to define a middle class segment. According to the National Council for Applied Economic Research (NCAER), Indian middle class are those families whose income range from Rs. 2,00,000 - Rs.10,00,000 ($4,000-$21,000) and consists of small to medium size business man, middle management, Low ranking government officers, some minor property owners etc (Mukherjee and Satija, 2012).
(Mukherjee and Satija, 2012)
With this radical incremental rate in the middle class segment, in India, there will be 583 million Indians in the middle class by 2025, which will be equivalent to 41% share of middle class in the total population in 2025 (Mukherjee and Satija, 2012).
In upper class, people have a higher income level and belong to the uppermost paying profession-families, such as businessman, property-owner and people from top management of the company. They are less sensitive to price as cost does not seem to be a matter of concern. However, they do not compromise on the desires and quality of products. The upper class segment is growing in India, which opens up the doors for international businesses to target them efficiently. AACo can straightforwardly target the upper class, meet their quality standards by providing them the best hygienic beef in the market. The people of this class usually consume beef daily; this seems to be the most budding market for AACo to target.
The market segmentation is based on four variables. They are:
- Geographic variables
- Demographics variables
- Psychographic variables
- Behavioural variables
- Country: India
- Size/Population: Upper Class and Upper-Middle class of India.
- Density: Urban
- Income: Family income 200,000+
- Gender: Both male and female
- Age: Young children (4-12 years old), students (13-25 years old), working people (above 25)
- Social class: Upper middle, upper class and elite class.
- Life styles: People who want premium quality-hygienic beef. The company will mainly target the working women, health conscious families, career moms, young students and chefs. They are mostly highly educated and have significant money in their accounts and are willing to pay for the quality food. They are beef lovers unlike other people in the country and desire to have premium hygiene beef as of their extremely health conscious nature. Even people who are not beef lovers, they tend to buy quality hygiene beef.
- Occasion: Beef consumption
- Benefits: Quality, Service, Economy, Convenience, Hygiene
- User Status: First Time and Potential customers
- Attitude towards product: Beef consumption is an increasing trend in upper and middle class of India. International brand’s beef will satisfy them more as it does not involve slaughtering of Indian cows.
COMPETITIVE POSITIONING STRATEGY
As AACo is targeting the market with intense competition, which is ranked as the world’s largest meat exporter, the company has to enter the market with the horizontal integration strategy to seek possession of or increased control over a company’s competitors. It is easier to win costumers’ confidence and manipulate the market if the product is different from competitors.
Focus strategy: This strategy stress on providing products and services that are according to the needs and demands of a specific group of customers. AACo Ltd can concentrate on a group of customers through focus strategy; by considering above geographic, psychographic, demographic and behavioural variables on product-line segments to serve a well-defined but narrowed market better than competitors who are serving a broader market. Here, the focus of AACo has narrowed down to upper class and upper-middle class only to serve the branded Wagyu premium quality beef. Elite class and upper class should be targeted by using focus strategy as they are ready to pay any amount for quality and hygienic product.
Differentiation strategy: This strategy focuses on providing products and services which is considered as unique industry wide, and target the customers who are relatively less sensitive to price. AACo emphasizes on promoting premium quality beef as opposed to cutting price. Working women, young students, chefs should be targeted by using differentiation strategy to offer them unique product, for example, supreme quality, infection-tested and healthy products.
MARKETING MIX STRATEGIES
AACo’s branded beef segment produces the premium quality beef while committed to maintaining the highest levels of food safety. Wagyu Beef is one of its huge brands mainly known for its succulence, tenderness and flavours. AACo is the world class production leader of Wagyu beef, which is the highly prized Japanese beef and is produced with the consistency and supreme quality. Wagyu beef brands are divided into four major brands, including, Master Kobe, Takumi Wagyu, Kobe Cuisine and Darling Downs Wagyu. The company needs to promote its brand. The branding campaign or promotion should be formulated keeping the consumer psychology as well as the branding psychology in mind.
The market is growing in India, hence taking an appropriate distribution channel is a critical step. AACo has focused on distribution to various countries through retailing this seems to be the best way to follow in India, as well. Some supermarkets in India are the leading stores where people from middle and high class are targeted. They are Metro Cash & Carry, Hyper City, Lulu Hypermarket, Star Bazaar, D-Mart, Total Hypermarket and many more. It is also important for AACo to form alliance with different suppliers and channels to make the overall transportation process smooth. In addition to this, the company must create some storage area and warehouse where it could store the products for sometime if needed. The company will be importing products from Australia, and the management needs to calculate the time required in transition and transportation from Australia to India.
Setting the price of a product, depending on benefits it offers to consumers is a value based pricing. As, AACo is producing high quality and valuable Wagyu beef, it must take advantage of value based pricing.
For elite class, setting premium pricing of a product is the best strategy as they are happy to pay more, and this is the point where company can maximize its profits. Elite class is more health conscious and looks for the best quality in the product without thinking about prices they pay.
For young students and working women, prices should be based on value the product offers. They are more willing to pay for readymade or less time consuming products without compromising on quality.
For chefs, as they have to maintain their quality level in food offered in five star hotels, they will buy the hygienic and high quality product at a competitive price.
In any case, the prices of Wagyu product will relatively be higher than others in the market. However, it is important for the company to identify and calculate the cost and then set a profit margin and then charge price accordingly. Therefore, the company should use cost plus marginal profit strategy.
Promotion strategies differ according to market as the company is targeting (Kotler, Armstrong, Wong, and Saunders, 2008). Keeping the budget of 1 million, AACo can give recognition to its new product ‘Wagyu’ in India by following means:
- Newspaper and Magazines
Company is targeting the upper and elite class, and people belonging from this class are more into reading out newspapers or magazines. Publish ads into the fashion magazines and newspaper can be helpful. This targeted market is more potential and responds quickly.
- Television and billboard Advertisement
Billboard and television advertisement bombardment are the best way to retain in people’s mind.
Launch Wagyu’s official website by keeping in view everything from colour themes to the relevant informative content, so that when the customers open it they stick around for long.
- Social media marketing
The company also needs to create and start a social media marketing campaign. There are a large number of consumers that use social media (Chaffey et al., 2008). Therefore, a proper and well prepared social media marketing plan will help the company in attracting and engaging the consumers from different parts of India (Hazlett, 2010).
People of the company have an important role in the success of the organization (Lovelock, and Gummesson, 2004). People are basically the employees of the company. The company will make sure that the employees of the company are satisfied and; therefore, the management will pay different incentives to keep them motivated. In addition to this, company will train its people so that they can offer quality services to consumers in India. This will help the company in improving the customer satisfaction level and in making more long term customers (Lovelock, and Wirtz, 2011).
The integrated marketing plan has been developed for AACo’s branded beef product “Wagyu” which is aiming to expand its operations in India. As India is now known as the world’s largest beef production market, it presents many significant opportunities for international beef companies to grow as well as potential threats in the form of strong competition in the market. AACo is itself a world leader in beef production market, by maintaining its premium quality and brand recognition it can win the market share of 3-5% in India.
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