Export Plan: Belgia Luxury Chocolate from Belgium to Argentina

2021-07-28 05:40:08
6 pages
1628 words
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University of California, Santa Barbara
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Research paper
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Executive Summary

The purpose of this export plan is to present the strategy for exporting Belgia Luxury Chocolate, a product of Belgia Chocolate Inc., from Belgium to Argentina. Therefore, the export will enhance the competitiveness of the company by spreading the market risks to Argentina to decrease the units cost for production. Moreover, it will improve brand image through international presence and increase annual sales, which will, in turn, increase the companys profitability. Furthermore, exporting the product will assist in establishing a new customer base in Argentina, which will inform the decision to establish a subsidiary in the country in future. Belgia Chocolate Inc. was founded in 2010 in Belgium and has been operating as a private company. The most significant revenue for the company comes from the chocolate bars and candies that exists in four unique flavors and tastes. The company currently employs over 1500 people across Belgium with operating revenue of $400 million. Worth pointing out is that the firm is strategizing to expand its market to other countries through exportation. Exporting Belgia Luxury Chocolate to Argentina was based on its potential for investment. The country has an average of 44 million people with over 20 cities with highly developed infrastructure and population, and 90% of the population resides in urban areas. The annual GDP growth rate is 4.2%, the inflation rate is 20.9%, and the GDP per capita is at $10,148 with a 42.4% employment rate. The first steps before exportation are the compliance with the legal requirements in Argentina based on the 1997 Certificate of Origin and Consularization regulations. Belgia Luxury Chocolate packaging will be translated into Spanish to align with the local language. The company has selected the Hadrons Distributor as the sole contractor for distribution as well as the Freight Forwarder and the Aerolineas Argentinas Cargo for air shipment.

Table of Contents

Executive Summary 2
Introduction 4
Product and Company Description 4
Country of Destination: Argentina 5
Microeconomics 5
Industry Market Targeting and Positioning 5
Industry Competitor Analysis 6
Industry Distribution Methods 7
Destination Potential and Alternative Market 8
Strategy 9
Product 9
Pricing Strategy 10
Place and Market Entry 11
Promotional Strategy 12
Action Plan and Sales Goals 13
Management Performance Review 16
Conclusion 16
References 18

 

Introduction

Over the years the need for growth has characterized the companys strategies. While the cost of operation has been the key concern in the organization, the need to improve the profitability of the chocolate business has been part of the expansion strategy. Therefore, exportation is one of the strategies that the management adopted to enhance the performance of the firm. Belgia Chocolate Inc. is, therefore, seeking to export the Belgia Luxury Chocolate to Argentina based on several objectives as outlined below. Therefore, the export plan is meant to;

Enhance the competitiveness of the company by spreading the market risks to Argentina to decrease the units cost for production,

Improve brand image through international presence and increase annual sales, which will, in turn, increase the companys profitability, and

Using the export as the onset of establishing a new customer base in Argentina, which will inform the decision to establish a subsidiary in the country in future.

Company Description

Belgia Chocolate Inc. was founded in 2010 in Belgium and has been operating as a private company. The organization is specializing in the production of cocoa-based products where the main products are chocolate bars and the chocolate powder. However, the highest revenue emanates from the chocolate bars and candies that exists in four unique flavors and tastes. The four categories of chocolate are branded as Belgia Luxury Chocolate. The company currently employs over 1500 people across Belgium with operating revenue of $400 million. The company is currently seeking to expand its market to global scope through product exportation.

Country of Destination: Argentina

Microeconomics

The decision to export Belgia Luxury Chocolate to Argentina was based on the characteristics of the country that define its potential for investment. The country has an average of 44 million people with a low population density. Buenos Aires is the capital; however, Argentina has 20 more cities with highly developed infrastructure and population. A critical evaluation of population distribution indicates that 90% of the population resides in cities (World Population Review, 2017). Since most of the Argentines descended from the significant European ethnic groups, which affirms the luxury life tendency. On the other hand, the annual GDP growth rate is estimated at 4.2% with an inflation rate of 20.9% (Trading Economics, 2017). The GDP per capita is at $10,148 with a corresponding 42.4% employment rate. The Consumer Price Index is 121 points with import prices estimated at 116 index points per year. Moreover, the producer price changes stand at an average of 16.8% (Trading Economics, 2017). The above economic indicators show that Argentina is a favorable market for low-cost luxury products because of the degrees of stability and potential for growth. On the other hand, a company can maximize Return on Investment based on the low annual interest rates.

Industry Market Targeting and Positioning

In Argentina, the chocolate companies are targeting individual below 28 years. Based on the age structure of the population, children below 14 years old account for 24% of the population while persons between 15 and 24 years form 15% of the 44 million people. Those between 25 and 54 years of age are estimated to be 39% while the rest are above 55 years (Index Mundi, 2016). Therefore, it implies that the targeted population is about 65% of the total population. Worth pointing out is that the 65% is also targeted by the current local chocolate producers as well as the importers and potential entrants. However, Belgia Luxury Chocolate seeks to present the brand as the best market alternative for the customers. The company will capitalize on the unique product taste and market price to attain the desired positioning. In this case, Belgia Luxury Chocolate will stand out as the certified, re-balanced, and tooth-friendly chocolate in Argentinas confectionaries industry. The firm seeks to control an onset 15% market share and focus on advancing this percentage on a quarterly basis through strategic brand imaging and sales promotion.

Industry Competitor Analysis

Several companies have already dominated the confectionaries industry in Argentina, and some are controlling a significant market percentage. The potential in the market is another factor that is attracting more investors and contributing to the high growth rate. It is estimated that the current number of firms in Argentina specializing in chocolate and cocoa delicacies stands at 125. However, the market control and annual chocolate sales indicate that the primary competitors are Havanna, Nestle, Ferrero, Kraft Suchard, Arcor, and Cadbury (Ministry of Economy and Production Argentina, 2005). Arcor is the most significant company in Argentina controlling over 50% of the total chocolate annual sales. The other firms share the remaining 50% where Havanna, Nestle, Ferrero, and Cadbury have 12%, 10%, 9%, and 7% respectively while Kraft Suchard enjoys 4% (Euromonitor International, 2017). The other emerging producers control an estimated 8% of the market share, which is always unstable based on the high rate of new entrants and acquisitions by large firms. Arcor enjoys the market control because of the variety of products and economies of scale. The global advantage is another element that defines the success of Arcor in Argentina. Nestle and Ferrero enjoy significant market control because of the multinational existence and territorial advantage. The high population in the country has enabled the key companies to accumulate revenue from significant sales. Although the market is competitive, the success of the new firms depends on the strategic approach to marketing, distribution channel effectiveness, the level of product quality, and sustainability of the cost of operation. Such a scenario indicates that Belgia Luxury Chocolate has a significant market potential in Argentina.

Figure 1: Competitors Market Share (Source: Euromonitor International, 2017)

Industry Distribution Methods

Chocolate brands in Argentina are retail-based products, and the distribution channel depends on the decision and structure of the company. However, the market has similar distribution trends across major large-scale producers. Once the products have been manufactured, they are distributed to the retail outlets, which include groceries retailers such as hypermarkets, discounters, supermarkets, confectionery specialists, forecourt outlets, and convenience stores (Euromonitor International, 2017). Non-store retailers also form part of the distribution channel in Argentina, which include home-shopping, internet retailing, direct selling, and vending. The number and nature of intermediaries affect the price of the products and define the market risks. However, the inclusion of home-shopping and internet retailing has seen companies like Arcor, Havanna, and Nestle take advantage of direct market profitability. Worth pointing out is that the dominant distribution channel incorporates the use of grocery retailers where the company becomes the primary supplier through agents especially for international firms (Euromonitor International, 2017). However, for local companies operating regional distribution outlets and vending has become a dominant approach. Since retailers are cautious about the operation expenses, the distribution costs such as transportation and importation remain the responsibility of the parent company or the agent.

Destination Potential and Alternative Market

Several factors contribute to the potential of Belgia Chocolate in Argentina. A critical evaluation of the confectionery market in the country indicates that firms encountered a decline in sales. However, the last three quarters has indicated a positive trend in annual sales. The high population of over 65% being below 29 years is another factor that affirms the profitability of chocolate in the country. The distribution channel is advanced with multiple participants willing to share the cost of distribution. Capitalizing on such an advantage increases the profit margin. On the other hand, the limited number of large-scale producers is another critical component that guarantees growth since a new company in the market could use the acquisition strategy to increase its competitiveness.

Although exporting Belgia Luxury Chocolate to Argentina is a significant move to market expansion, Turkey is another market alternative that the product has a high potential. The economic growth in the country is more than 4% with a large young population, which favors chocolate sales. The country has a low chocolate consumption rate, and therefore limited firms have ventured into the market. The milk-based options are the dominant version, but there is a growing market shift indicating an increase in the demand for dark chocola...

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