Brazil marketing plan and market entry strategy

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Executive summary

This marketing plan relates to Arnott’s Holding which operates within the Australian biscuit industry. In an effort to improve its competitive advantage, the firm’s management team has considered venturing into the international market. In its expansion strategy, the firm has identified Brazil as the optimal investment destination.

Decision to select Brazil as the favorite investment destination amongst the BRIC economies arose from the current economic growth that the country is experiencing. Over the past decade, Brazil has experienced a significant economic growth. This has led to employment creation and hence an increment in the consumers disposal income.

Despite the 2007 global economic recession, Brazil has undergone through a significant economic recovery. The country’s biscuit industry has not been fully tapped which means that there is a substantial market potential. In its initial expansion phase, Arnott’s intends to introduce its Tim Tam products to Brazil using exportation as its core market entry mode.

The marketing plan illustrates the various marketing mix strategies adopted by the firm in an effort to ensure that the products successfully penetrate the market. A budget outlining the cost of creating market awareness is also illustrated. A marketing entry program that will be used in venturing the Brazilian market is also illustrated.

Market background

In an effort to develop a high competitive advantage, the firm’s management team has incorporated the concept of internationalization in its strategic management.

Some of the countries in which the company has ventured into include Canada, England and some Asian countries such as Israel, Russia and India. Considering the competitive nature of the biscuit industry, Arnott’s management team has considered improving the firm’s competitive advantage.

Findings of a market research conducted by the firm’s marketing department on the prevailing market potential within the biscuit industry in BRIC (Brazil, Russia, India and China) economies revealed that there is a feasible market opportunity in South America. One of the South American countries that Arnott’s identified to present a feasible market opportunity is Brazil which is a member of BRIC.

The Brazilian market presents a viable market opportunity for Arnott’s to venture. Processed food products in Latin American countries account for approximately 33% of the total baked products in the market. Of this, biscuits account for approximately 14 per cent of the total amount supplied in the market. This shows that the supply for biscuits in Latin American countries is low.

This trend is replicated in Brazil. Brazil is the market leader amongst the BRIC economies with regard to the value of biscuits consumed. Despite the fact that 98 per cent of all Brazilian households consume different flavors of biscuits, the industry is undergoing a modest growth (Bharat Book Bureau, 2010, para. 1). The market growth being experienced is an indication that the Brazilian biscuits market has not been fully exploited.

Market environment

The high market potential for biscuits in Brazil is also as a result of the country’s economic growth. Currently, Brazil is experiencing a high rate of economic growth. The Brazilian government is committed at enhancing the country’s economic growth in an effort to eliminate poverty. Brazil is the largest economy within South America (Rathbone & Wheatley, 2010, para.1).

The country’s core economic sectors include manufacturing, agriculture, mining, and the services sector. Since the onset of the new millennium, Brazil’s economic growth has been on an upward trajectory. As a result, the country has been able to achieve a number of macroeconomic goals such as attaining macroeconomic stability, reduce its debt burden and increase its foreign currency reserves.

The country’s economic growth was affected by the 2007 economic recession. Due to the governments’ commitment towards ensuring that the country attains economic recovery, Brazil has managed to increase its Gross Domestic Product (GDP).

In 2010, the country’s GDP increased to $2.194 trillion from $ 2.041 in 2009. The country’s GDP- real growth rate in 2010 was estimated to be 7.5% while the per capita income was approximately $ 10,900. The country’s economic growth has made it to be considered as a net external creditor (Countries Of The World, 2011, para. 7).

Additionally, the country’s economic growth has made it to be grouped with China, Russia and India which are commonly referred to as the BRIC economies. Currently, the country is regarded as one of the fastest emerging economies.

The country’s economic growth has led into an increment in the consumers’ income and hence their purchasing power. During the 1^st decade of the 21^st century, Brazil has experienced an improvement in wealth distribution. Additionally, there has been a significant increment in investor and consumer confidence.

The country is also experiencing an increment in the size of its population. By 2010, the total population was approximately 195.4 million (Agri-Food Trade Service. 2009, para. 4). To ensure that the country experiences a significant growth in employment, Brazil has invested a substantial amount of money in the education sector. This has significantly contributed towards growth in the country’s labor force.

In 2010, its labor force was estimated to be 103.6 million. This illustrates that there is a high probability of the Anrott accessing labor more cost effectively upon venturing the Brazilian market. The graph below illustrates the country’s economic growth with regard to GDP, wealth distribution, growth in employment and the education sector.

Brazil economic growth with regard to GDP.

Source: Financial Times. Web.

Marketing issues

Over the past decade, there has been a significant transformation within the food industry. Consumers in Brazil are increasingly changing their consumption behavior with regard to food products. This change has arisen from an increment in the number of diseases that are being associated with bad eating habits. As a result, they are shifting to consumption of healthy and nutritional food products.

Brazilians are also being concerned about food safety and variety. Additionally, the recent economic recession has made most Brazilians to be more concerned with increasing their earnings. The resultant effect is that they are experiencing time pressure. In order to deal with this challenge, the consumers are seeking various ways through which they can attain convenience in their consumption process.

These market trends present an opportunity for Arnott to market its Tim Tams products. For example, their health concern will enable the customers to accept Tim Tams due to their associated health benefits. Additionally, Tim Tams have a high nutritional value. For example, they contain a high level of calories which means that the consumers will gain more energy upon consuming them.

Regulatory issues

The Brazilian government is committed at ensuring that its citizens are safe with regard to consumption of food products. This is evidenced by the strict food safety requirements and standards that firms within this industry are required to adhere to.

To ensure compliance, an effective supervisory mechanism been developed. Failure to comply with the set standards and requirements may result into legal actions. These regulations are applicable to both locally produced and imported food products. With regard to imports, the government ensures that all imports meet the set safety standards.

Arnott’s Biscuits Holding

Arnott’s Biscuits Holding is a private limited company that operates within the Australian biscuit industry. The company operates as a subsidiary firm of Campbell Soup Company which is a US based company. In its operation, the firm deals with production of three main product categories. These include chocolate biscuits, sweet biscuits and crackers.

Over the past decades that it has been in operation in Australia, Arnott’s Biscuit Holding has been very successful. One of the factors that have contributed to the firm’s success is its effectiveness in producing high quality products. As a result, the firm has been able to develop a considerable level of customer loyalty.

Additionally, the firm’s success also emanates from the fact that it has developed an effective manufacturing capability. This has greatly enhanced its ability to produce large quantities of biscuits more effectively and efficiently. The resultant effect is that the firm has effectively been able to meet its local demand.

Its manufacturing capability means that it can also be able to produce enough biscuits and other bakery products for the global market. These factors have significantly enhanced the firm’s financial strength.

This is evidenced by the fact that the firm has managed to improve its sales revenue which amounts to $1.2 billion annually. Such an amount of sales revenue is relatively high compared to other firms in the industry. In its domestic market, Arnott’s has managed to position itself as the market leader.

Competitive analysis

The competitive environment in Brazil biscuit industry is relatively high. Some of the major firms within the industry include M Dias Branco, Zabet, Richester Fortaleza, Adria, Basilia and Isabela. These companies have been in operation within the Brazilian market for a considerable duration. As a result, they have attained substantial market recognition and an optimal market position.

Upon venturing the Brazilian market, Arnotts will face intense competition from M Dias Branco which is the largest industry player. In 2010, M Dias Branco was ranked as the market leader within the Brazilian biscuit industry.

Over the years it has been in operation, M Dias Branco has managed to develop a substantial brand loyalty amongst the customers. Additionally, the firm has also developed an efficient distribution network within the country (EuroMonitor International, 2010, para. 9).

SWOT analysis

Strengths

Arnott’s manufacturing capability will enable it to produce sufficient Tim Tams to meet the demand for biscuits in Brazil.
The firm’s strength in anticipating market trends will enhance its probability of succeeding in the Brazilian market.
The firm is very effective in developing high quality products. Through its effectiveness in new product development, Arnott’s will be able to develop a new Tim Tam product to suit the Brazilian market.

Weaknesses

The firm will experience a challenge in its effort to obtain market feedback. This will limit its ability to improve its Tim Tam products.
Brazilians are price sensitive in their buying process. Arnott’s products are not competitively priced. If the firm does not adopt a competitive pricing strategy when marketing its Tim Tam products to Brazil, there is a high probability of the products gaining low market acceptance.

Opportunities

The high rate of economic growth in Brazil presents Arnott’s with an opportunity to increase its sales revenue.
The current trend whereby women are experiencing an increment in their disposable income and hence their purchasing power means that the firm will be able to increase its sales revenue.
The rise in the degree of health consciousness with regard to food products amongst the consumers presents a feasible business opportunity to the firm. This arises from the fact that the firm can exploit this trend by developing a new product that suits the customer’s needs.

Threats

The firm will face a threat arising from intense competition by other industry players.
Change in Brazilians taste and preferences with regard to biscuits may adversely affect the long term success of Tim Tams in Brazil.

Market entry strategy

Market entry strategy refers to a plan that a firm uses in an effort to venture into a new market. For a firm to be successful in the foreign market, it must incorporate an effective market entry strategy. In an effort to increase its profitability, the firm’s management team has identified a market opportunity in Brazil. Currently, Brazil’s confectionary industry is experiencing a modest growth.

By venturing into the market and undertaking comprehensive marketing, Arnott expects to achieve a significant increment in its sales revenue and hence its profitability. In its initial internationalization phase, Arnotts intends to introduce Tim Tam which is one of its chocolate biscuits products into the Brazilian market.

It is projected that the chocolate coated biscuit market niche in Brazil will experience an increment in demand with a margin of 63% by 2014. This translates into sales revenue of approximately $ 509. Arnotts’ management team has projected that Tim Tams’ market share will grow with a margin of 5% within the 1^st year.

Mode of market entry

Exportation

There are various modes of market entry that a firm can use. McDonald and Burton (2002, p.235) are of the opinion that when determining the mode of market entry to use when venturing the foreign market, firm’s management teams should evaluate the degree of risk and opportunity associated with each mode of entry. In venturing the Brazil market, Arnott’s should incorporate exportation as its core market entry strategy.

Currently, the firm’s management team does not have sufficient knowledge regarding the country’s political and economic dynamics. As a result, the degree of risk cannot be determined with a high level of confidence.

Despite the high rate of economic growth and increment in investors and consumers confidence being experienced in Brazil, Arnott’s management team should consider using exportation as its initial market entry strategy.

Use of exportation as its market entry strategy will also be cost effective to the firm. This arises from the fact the firm will only be required to use a minimal amount of money to ensure effective product adaptation and market penetration. With regard to Arnott’s Tim Tams, the cost of product adaptation will entail repackaging the biscuits to reflect the desires of the Brazilian customers.

Other costs that the firm will incur include distribution costs, import tariffs and transportation cost. However, these costs will be minimal compared to the benefit that the firm will attain. Use of exportation as its strategy to introduce Tim Tams into the Brazilian market will give Arnott’s a high level of flexibility. This arises from the fact that ease of exit for example as a result of political and economic crisis in Brazil will be relatively high.

Target market

Target marketing is a critical component in ensuring that a product succeeds upon introduction in the market (Porter, 1980, p.35). By venturing the Brazilian market, Arnottt core target market is composed of women. This arises from realization of the fact that women are the largest consumer of confectionary products.

Additionally, the firm’s marketing department realized that women play a great role in making a decision regarding the purchase of food products within every household. In the Latin American countries, there is a trend where by women are increasingly being employed. A research by International Labor Organization (ILO) revealed that 53% of women in Latin American countries are employed.

As a result, their purchasing power is increasing (Nielsen, 2009, para. 7). This means that there is a high probability of the women changing their behavior by increasing their consumption of confectionaries which is an opportunity for Arnottts.

Marketing strategy

Product strategy

In its operation, Arnott’s have appreciated the importance of product diversification in a firm’s effort to satisfy market demand. As a result, the firm produces a wide range of chocolate coated biscuits. In its domestic market, Arnott’s markets a variety of Tim Tam products.

Some of these include Tim Tam Original, Tim Tam Double Coat, Tim Tam White, Tim Tam Classic Dark, Tim Tam Crush Honeycomb, Tim Tam Original Value Pack, Tim Tam Original Individually Wrapped and Tim Tam Chewy Caramel.

In its initial phase of introducing Tim Tam into the Brazilian market, Arnott’s will supply four varieties of Tim Tams which include Tim Tam Original, Tim Tam Classic Dark, Tim Tam Double Coat and Tim Tam Crush Honeycomb. The objective of introducing these four varieties is to ensure that customers are not confused when making choices from the many varieties of Tim Tams.

In order to understand the Brazilians preference with regard to confectionaries, the firm conducted a comprehensive consumer market research. The findings of the research revealed that Brazilians prefer healthy and nutritious confectionaries.

Based on this market finding, there is a high probability of the firm’s Double and Original Tim Tams gaining a significant market acceptance since they are milk coated chocolates. Additionally, Tim Tam Dark will also penetrate the market effectively due to the associated health benefits. To effectively penetrate the Brazilian market, the firm will effectively package and label the Tim Tams to fit the Brazilian market.

Pricing strategy

Considering the fact that the Brazilian confectionary market is saturated, the firm will use penetration pricing strategy. This will entail setting the price of Tam Tams at a relatively lower price compared to the competing products. For example, the price point of Tim Tam Original will be set at $1.37.

This will enable a large number of customers to purchase. However, as the Tim Tams gain a high market acceptance and brand loyalty, Arnott’s will increase the price with a small margin.

Promotion strategy

Creating sufficient market awareness regarding a product is paramount in an effort to ensure that it succeeds (Rogers, 2001, p.27). In an effort to ensure that a large number of Brazilians is aware of the existence of Tim Tams in the market, Arnott’s will incorporate the concept of Integrated Marketing Communication (IMC).

According to Shimp (2010, p.9), IMC involves using a wide range of marketing communication methods. The resultant effect is that a firm is able to attain a high value. The marketing communication methods that Arnott’s will integrate include advertising, sales promotion, public relations and organizing events.

In its advertising strategy, the firm will use both traditional and emerging marketing communication tools. The traditional mediums that the firm will use include billboards, television, radio and print media. The marketing department will ensure that the advertisement is well designed. In its domestic market, Arnott’s has been successful in conducting advertising.

Considering the high degree of uniformity in consumer behavior, the firm will use some of its domestic adverts in the Brazilian market. One of the adverts that the firm will consider transferring to Brazil relates to that of a male genie and a group of women craving for a packet of Tim Tams.

This will play a critical role in positioning the Tim Tams as high quality products that one should consider purchasing. Use of print media, billboards and radio will play a critical role in enhancing market awareness.

To reach a large number of customers, Arnott’s will also integrate online marketing which will be conducted through the firm’s website. The company will publish its website link in major local dailies and magazines to enable potential customers to access the website easily.

Comprehensive information regarding the Tim Tams will be posted on the firm’s website. To enhance its online marketing, Arnott’s will also integrate emerging marking communication tools. To achieve this, the firm will consider the main social networking tools which include You Tube, Face Book and Blogs.

Distribution strategy

To ensure that the Tim Tams are accessible by a large number of customers, the firm will use a comprehensive distribution channel. The company use local distributors who will be located at Brasilia City which will serve as the entry point for the Tim Tams exports.

In the initial phase, the firm will conduct distribution of Tim Tams within Brasilia City so as to minimize distribution cost and to understand the reception of Tim Tams within the market. If the market responds positively, an aggressive market distribution will be undertaken.

This will entail distributing Tim Tams to supermarkets, convenience stores, specialist food shops, hypermarkets and grocery shops located in different parts of Brazil. The objective will be to ensure that Tim Tams command a substantial shelf space within various stores.

To influence the customers in their purchasing patterns within the supermarkets, the firm will ensure that Tim Tams are effectively positioned. This will be attained by placing them on special product displays and within the range of the eye level on the shelves.

Budget

In order to gain a comprehensive understanding of Brazilian market, Arnott’s will conduct a market research. The research will focus on the consumers and the competitors. The firm will be committed at ensuring that there is a sufficient market awareness regarding its products. To achieve this, the firm has allocated $1,000,000 in its marketing budget to cater for the associated cost. The chart below illustrates how this money will be allocated.

Item	Amount in $
Cost of market research	300,000
Cost of promotion	700,000
Total cost	1,000, 000

Marketing entry program

Arnott’s intends to introduce its Tim Tam products in Brazil during the course of 2012. In an effort to ensure that its products successfully penetrate the Brazilian market, Arnott’s management team has developed a comprehensive market entry program.

The program outlines the various activities that the firm will undertake and the time period within which they will be undertaken. The chart below outlines the core activities that the firm will undertake.

The core activities that the Arnott will undertake.

Reference List

Agri-Food Trade Service. 2009. The Brazilian consumer behavior, attitudes and perceptions toward food products. Web.

Bharat Book Bureau. 2010. Biscuits in Brazil. Web.

Countries Of The World. 2011. Brazil economy 2011. Web.

EuroMonitor International. 2010. Biscuits in Brazil. Web.

McDonald, F., & Burton, F., 2002. International business. London: Thomson Learning.

Nielsen. 2009. Latin American women increase purchasing power. Web.

Porter, M., 1980. Industry structure and competitive strategy: Keys to profitability. New York: The Free Press.

Rathbone, P., & Wheatley, J., 2010. Brazil: Great expectations. Web.

Rogers, S., 2001. Marketing strategies, tactics and techniques: A handbook for practitioners. Westport, Conn: Quorum Books.

Shimp, T., 2010. Advertising, promotion and other aspects of integrated marketing communications. Mason, Ohio: South Western Cengage Learning.

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