MKT550 Market Entry and STP Strategy Assessment Item 2 Answer
MKT550 GLOBAL MARKETING ASSESSMENT 2: MARKET ENTRY AND STP STRATEGY
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Bellamy Organic is an Australian organic baby food producer. The company was established in the Northern Tasmania in 2003. Bellamy Organic is now trying to enter and establish their business in the Indian market. As the demand for organic food products increases around the world, India is no different. To serve this need, Bellamy Organic can enter this market in order to extend their market presence as an MNC. With the help of a growing GDP rate despite the global economic slowdown, Indian customers have seen a rise in their commodity buying power. Therefore, this may be an attractive market and the expansion requires an effective market entry strategy as well as an STP strategy, which is discussed in this report. Additionally, a discussion has been made on the external environmental factors and their impact on the expansion of Bellamy Organics into the Indian market. A SWOT analysis has also been conducted to establish the opportunities, threats, weaknesses and strengths of the company.
Bellamy Organic is an Australian organic baby food producer. The company was established in the Northern Tasmania in 2003 (Bellamy'sOrganic, 2019). Bellamy Organic is the only organic infant food producer in Australia. During 2017 financial year reported revenue of the company was A$240.2 million with total assets of A$72.41 million (Bellamy'sOrganic, 2019). Bellamy Organic is trying to enter the Asian market and to do this company has chosen to penetrate the Indian organic baby food market.
India is a populated country, and the country has seen stable growth over the years in terms of its GDP. India's GDP growth and due to increasing demand for organic food in the market, Indian baby food market is an attractive market for Bellamy Organic to enter. According to Mehta (2018), the Indian organic food market is expected to grow over 25% in the next three years. Therefore, this is a tremendous opportunity for the company to enter this market of organic food and organic farming.
2.0 Situation Analysis
2.1 Business Environment
The business environment is the key factors that can impact any business in the market, important factors such as political, legal, economic, technological and social factors will be discussed in this segment.
2.1.1 Political and legal factors
India is a democratic republic and works within the country’s constitutional framework. India has double government system, a central government and a state government which is governed by the central government authorities. This is to provide political stability in the country. Both these governments are elected every five years through democratic elections. India and Australia share good diplomatic relations as both countries have political, economic and sporting ties. As India promotes Foreign Direct investments in the country to help its emerging economy, this will help in Bellamy to enter the Indian market.
India has major laws to protect organizations and consumers. Even though the Indian government promotes FDI and encourage business opportunities, it still has a complex process to start a business in the country. But it is not impossible for foreign business entities to enter the country's market as there are a large number of foreign companies successfully operating in the country (Czinkota et al., 2014). With the help of knowledge about the country's legal system, Bellamy can enter the market with ease as the country's welcoming nature towards FDI.
2.1.2 Economic factors
India's economy has stood better than other countries in the recent global economic slowdowns. According to the IMF, India's economy has grown by 7.3% in 2018 (Santandertrade, 2019). This was achieved due to the growing industries in the country such as manufacturing, construction and agriculture. With the help of recent positive changes in the country's goods and services tax and raising the investment cap of FDI has created a stable and improving the business climate. It is safe to assume that with the increasing trend of the country's GDP and consumer buying strength, Bellamy will be able to find a consumer market it is aiming for.
Figure 1: Economic indicators of the Indian market
(Source: Santandertrade, 2019)
2.1.3 Cultural and social factors
Socio-cultural influences on businesses are huge in India because of their diverse cultural backgrounds. As India is a huge country and poverty and education are still a problem in the country, it can impact any business in the country. To overcome this issue, Bellamy has to do research on these statistics. By identifying the different groups of people in terms of their lifestyles and living standards, Bellamy can identify its target customer segment. With the acceleration in the country's urbanization, it is unlikely to be a problem to find a customer base (Cateora, Gilly & Graham, 2011).
2.1.4 Technological factors
Technology is an integral part of any business. After independence in 1947, India had no favourable attitude towards the incorporation of the latest technology in the country. This scenario changed drastically in the early 1990s when India opened the economy for foreign investments. Due to the open economy and welcoming FDI policies, various IT MNCs entered the market (EconomicTimes, 2019). As a result, India is one of the emerging markets in terms of the technological workforce. Therefore it will benefit Bellamy in technical aspects in the country.
2.2 Environmental factors
India has the world's one of the most bio-diverse ecosystems. As India is a huge country, it has faced some of the challenges in terms of pollution over the years. According to statistics published by WHO, among the 20 most polluted cities, half of them are in India (Export, 2019). The Indian government, with the help of municipal waste management working towards more enhanced waste management. Also, Air pollution and clean drinking water is also a problem in the country. Even though the country is working to address these issues with increased awareness and effective solution to fight pollution, these environmental factors will be critical for Bellamy to establish their business in India.
2.3 Market analysis
It is an important task to do a background check on the market in question. In organic food market organization should be aware of the demand, growing patterns.
2.3.1 Definition of Product market
The consciousnesses for natural and healthy foods are growing in India, and the new food safety legislation is also in effect through governing authority FSSAI (Fssai, 2019). It is a good opportunity for Bellamy to introduce their organic product.
2.3.2 Market outlook and size
India has less than 0.2% in $100 billion global organic food market (Mehta, 2018). On the other hand, India has $300 billion annual food consumption, so with the growing demand for organic food, it is going to be a lucrative market for Bellamy to venture into.
2.3.3 Market characteristics
It is important to understand the target audience since they comprise educated people who are aware of the importance of organic food (Cateora et al., 2012). Therefore it will be beneficial for marketing the product in India as the customers prioritize healthy food than the price. So it is important to know the potential buyer.
2.3.4 Behaviour of the target market
As the potential customers of the organic food products are already aware of its importance and price is not a constraint for them (Keegan & Green, 2013). It will be easier for Bellamy with the marketing of its products in the country.
2.4 Competitive analysis
As per the reports of Mehta (2018), India's organic food market is expected to grow by 23% by 2023; it is natural that more and more companies will invest in the organic business market. Due to this major organic food product companies like Organic India Pvt. Ltd., EcoFarms Ltd. are entering the market. So it is a viable option for Bellamy Organic to enter the market while it is still growing to cement its market presence in the country. Early introduction in the market will help Bellamy with the creation of a loyal customer base.
2.5 Organisational analysis
2.5.1 Current and past experiences
Established in 2003, Bellamy Organic has a huge experience in the organic food market. Bellamy was the first company to introduce organically certified baby food in Australia (Bellamy'sOrganic, 2019). Also, at present, Bellamy has a long-range of products from infant food, toddler milk to breakfasts, so it is safe to assume Bellamy has good market knowledge and experience.
2.5.2 Technical capabilities
Bellamy's Organic has good expertise in technical aspects, given they have a long-range of products line up and certifications from various organizations. Therefore there is no doubt on the technical capabilities in food processing and packaging.
2.5.3 Technological Knowledge and skills
Bellamy's products are exported to various countries because of their goodwill in producing high-quality food products. Due to the company's technological knowledge and skills in organic food processing company was able to create its product markets outside of Australia.
2.5.4 Relationship with market
As Bellamy already has global recognition in countries such as China, Malaysia, Vietnam and New Zealand, it is clear that they have a good market relation in the organic food market.
2.5.5 Financial capability and company profile
Bellamy began to export its products to China in 2008, and since then, the company has seen a growing demand for their products and which in terms has helped the company financially (Bellamy'sOrganic, 2019). The company reportedly had a growth rate of 70% p.a. during the period of 2008 – 2013 (Bellamy'sOrganic, 2019). Bellamy has plans to enter large consumer markets such as India, US and UK.
2.5.6 Business culture and philosophy
Bellamy is committed to producing certified organic and nutritious food products. Their mission is to keep producing 100% pure organic products without the use of any artificial preservatives or pesticides and colours (Bellamy'sOrganic, 2019).
3.0 SWOT analysis
SWOT is a technique involving strategic planning to identify organizational Strengths, Weaknesses, Opportunities and Threats. Here SWOT is used to analyse the same about Bellamy Organic.
3.1 Strengths and Weakness
- Bellamy has a high-quality premium product line up and brand awareness among the customers.
- Patents and Intellectual Property rights have enabled them to achieve high standard organic products (Euromonitor, 2019)
- Fund donations to needful causes, a donation in charities has also helped Bellamy with its reputation in Environmental and Social Responsibility reputation (Bellamy Organic, 2018)
- Strong distribution channels in Australia and abroad
- Strong social presence through multiple platforms such as Facebook, Twitter, as is necessary for extensive marketing (Kotabe et al., 2014)
- Weak financial statement in the year of 2017, profitability was not sufficient enough during this year
- Promotional costs and marketing costs are just 4% of their revenue.
- Dependency on just supermarket promotions can lead to the push strategy to drive sales
- Pricing variation in every scale is required to make it affordable for all.
3.2 Opportunities and Threats
- At present the Asian market has a huge demand for organic foods, so targeting a market like China and India can lead to the big growth opportunity for Bellamy (Euromonitor, 2019)
- Recent investments by Norges Bank can be helpful to explore the newer markets (Hemphill, 2018)
- Certification from the EU can be helpful to enter the UK market
- Much larger competitors like Nestle and Heinz
- Threats from homegrown Amul in India in the baby food market
- Need to develop improved supply channels to meet the requirements in other countries.
- Need to address the packaging and transportation channels as product contamination while transport can lead to a serious effect on brand identity.
The strengths and opportunities convey that Bellamy can establish a strong market position in India. But as there are serious threats in terms of competitors, Bellamy has to find an affordable price point while maintaining their revenues. Based on this SWOT analysis, Bellamy can penetrate the Indian market and eventually create a strong market presence.
4.0 Market entry and STP strategy
Bellamy Organic produces organic food products, mainly focus on high standard organic baby foods and toddler milk. Bellamy is producing international standard products, and thus they have a demand for their products in several countries such as China, Vietnam, and New Zealand. With their products being well regarded globally, they plan to enter new markets. Due to the huge economy and strong demand for organic food in India, they are committed to entering the market. To do so, they need a proper market entry strategy.
4.2 Recommended market strategy
To discuss the proper market entry strategy Segmentation, Targeting and Positioning (STP) model is followed,
Segmentation of market
A huge economy like India consists of millions of potential customers, and this is why a growing organization like Bellamy Organic wants to enter the market to cement their position in the global market as a market leader in their specialization. But as every human being is unique, their needs are unique too. Therefore, to meet the customer's needs, every organization has to divide their potential customer bases with their need. This is what market segmentation is, identifying the people's needs, their priorities, and what they want and delivering to those needs (Czinkota et al., 2014). Bellamy needs to do the same if they want to enter the Indian market; given the market size and the huge potential customer base, this is going to be an extensive work. There are several ways to segment a target market, such as:
Demographic – This consists of attributes such as age, gender, income, profession, and so on, Bellamy can breakdown the demographics of the target market by any of these criteria.
Geographic – India is a huge country in terms of its geological presence, and as India, a diverse country, segmentation on the basis of geographical locations may help to understand the market demand in different parts of the country.
Psychographics – This includes the people's lifestyle, their values, and personalities. By conducting surveys around the country can help to gather these data (Czinkota et al., 2014).
Behavioural – Customer behaviour is also an important segment, Bellamy needs to find out customer loyalty to certain food products brand already available in the country, and they need to market their product in a manner to counter those loyal customers to switch to Bellamy's products. It has been identified that Amul may be an intensive competitor for the brand as it well promoted. Thus, considering a joint venture with the brand may prove effective as the market entry strategy for Bellamy Organics.
From the analysis, it can be aid that demographic segmentation will be futile for the Bellamy because it will help to segment the market according to age, income, profession. By demographic segmentation, Bellamy will able to target and set their price as per the buying power of the consumers.
Targeting the potential market
After performing the market, segmentation organization needs to find the value of these segments. Assuming Bellamy Organic has Indian market segmentation data, they now have to look at those data to find profitability from those each segment. To evaluate the found segment, Bellamy can use some of the following criteria:
Segment Size – After successful and thorough market segmentation Bellamy will be able to see potential customer bases as per different segmentation methods. Then they can identify the large market and then they can target this market with their product and promotions.
The difference – A measurable difference in terms of size or numbers must be present between segments.
Cost – Now to target this market, Bellamy has to create enough promotion to make those potential customers aware of their product. This can include advertising, discounted introductory prices.
Accessibility –These targeted segments must receive the marketing message; Bellamy's marketing team needs to ensure that the product information reaches potential customers to create demand for their organic products.
Focus on product diversity – High potential segments can have a need for a different product or maybe their financial standpoint is different, so Bellamy needs to introduce various price points and diverse products in order to reach this masses.
Product positioning is the last element in the STP method. In this stage, the company has segmented the market and found their potential customer base; now they have to offer a product to those potential customers based on their needs (Keegan & Green, 2013). Therefore, after the extensive research of market Bellamy Organic has to develop a Unique Selling Proposition (USP) for its products, each product to target a particular segment. Bellamy can go with premium food products or can offer more pocket-friendly products, or they can offer both in the market.
Bellamy has to determine the best position for their product offering. To do so, they have to identify the USP and understand how those each segment perceived the product and brand. Then with the help of these data, Bellamy should look at the needs of each segment. Now offering products as per the needs of those segments will create the value proposition for the products (Kotabe et al., 2014). When the product has a value proposition, customers will keep buying those products and this way, Bellamy can eventually develop a loyal customer base and a brand value in the country.
The Indian market has a huge potential for organic food products; therefore, Bellamy Organic wishes to enter the market. Entering this new market may be challenging for Bellamy, but to achieve their goals and to be a renowned brand worldwide, they have to overcome those challenges. This study will be helpful for the company to create a market entry strategy.
It has been evident from the report that the Australian company Bellamy Organics has a potentially effective market entry strategy and may have success in the Indian market due to the rise in consciousness over food habits in the country. However, it has been evident that the presence of Amul as a major competitor for Bellamy Organics may be used as a market entry strategy, by considering a joint venture with the brand.