Marketing of Coffee from Strauss Coffee Company, Brazil to Ethiopia - Literature review Example

Marketing of coffee from Strauss Coffee Company, Brazil to Ethiopia Introduction Brazil is the world’s largest producer of coffee (Jarvis, 2003). The country exports coffee to its main competitors including Vietnam, Indonesia, India and Colombia. According to Brazil Trade Business Group (2011), Ethiopia is the only big producer that does not import coffee from Brazil. Since coffee is a global commodity and a chief foreign earner in most developing countries, it is important that the countries expand their markets further and reach out to more international markets (Feleke and Walters, 2005). In this paper, a discussion on international marketing shall be done that shall specifically target marketing of coffee from Strauss Coffee Company to Ethiopia. This will involve discussion on the market selection and an environmental analysis. In addition, the paper shall device a marketing mix strategy for marketing the coffee in Ethiopia. This paper shall also develop a foreign market entry strategy for the coffee to be suitably sold in Ethiopia. Market Selection Ethiopia does not import its coffee from Brazil (Brazil Trade Business Group, 2011). The country is undisputedly the birthplace of Arabica coffee. Its high population gives it place in one of the leading markets in Africa. Since the inception of the government of Ethiopia, it has worked to implement a growth and transformation plan that envisions a growth domestic product of about 14.9 % (Doing Business in Ethiopia, 2012). The environment in Ethiopia is therefore getting laid for business. In addition, the people’s culture of using coffee has been in existence since time immemorial. The government has also opened up a privatization and public supervising agency that is open to foreign involvement. This gives foreign bodies an opportunity to invest in the country and sell their products. In addition, the government has developed more than 200 electronic services that will enable online trading and quick communication between the two countries. According to Goodwin (2012), Ethiopia is taken to be the birthplace of coffee both as a plant and a culture. About 12 million people are known to embrace the culture through farming activities or through picking of coffee and this demonstrate the depth of the coffee culture in the country. In fact, coffee plays such a key role in Ethiopia that it has been linked to many expressions that deal with life relationships and even food. There is a common saying in Ethiopia that says “Buna dabo naw”, translating to “coffee is our bread”. Another common saying that encourages the consumption of coffee is “Buna Tetu”, translating to “drink coffee”. The culture has gone so deep that in some instances, coffee is used to express someone’s life. For instance, coffee can be used in an expression like “I don’t have someone to take coffee with”. This means that the person does not have friends they can trust and confide in. The use of coffee in the social setup has spread the importance of coffee to the Ethiopian culture. Not only do the Ethiopians participate in coffee farming but they also consume coffee in large amounts. Therefore, there is no doubt on the consumption of coffee in the Ethiopian market (Goodwin, 2012). Various legal issues exist in exporting coffee to Ethiopia. The bureaucracy involved gives the government of Ethiopia a controlling hand in many activities regarding importation. However, the government still encourages foreign trading and this has made Ethiopia to be an attractive place for foreign investment and for exportation of goods. In addition, the prospect of imported coffee also presents an opportunity for the locals to explore their coffee further and this increases the quality of coffee that they produce. The regulations also encourage competitive trading since the introduction of free marketing in the country. Even despite the control that the government still has over most economic activities in the country, there is room for development of the foreign trading in coffee with the Brazilian company, Strauss Coffee Company (Dunning, 2011). However, the government of Ethiopia is in a slow process of reforming the economy and liberating the country. This presents a challenge to the marketing plan. Further, the economic landscape in Ethiopia is dominated by the government and sate owned enterprises. According to a report by Doing Business in Ethiopia, (2012), foreign financial services in Ethiopia have been prohibited and the regulatory environment in Ethiopia is still underdeveloped. This has resulted in a weak and limited financial sector in the country. The process of government paperwork in Ethiopia is complicated and they consume a lot of time. The process of customs clearance is also reported to be slow in the country and imported goods are at times taxed at accredited values rather than invoice values. The report by Doing Business in Ethiopia, (2012) also noted another key challenge: the government of Ethiopia’s de facto prerequisite that imports should be transported by Ethiopian shipping lines, which are state owned. This will severely increase the costs of transportation and cause delays. The shipping lines also require that payment is made in foreign currency for them to offer their services. These factors are poised to be the main threats to the process of marketing in Ethiopia. One important strategy that will help in entering into the Ethiopian market will be the analysis of the Ethiopian market. For instance, the analysis demonstrates that the market in Ethiopia can accept coffee from a foreign source, provided it is given in the right price and right quantity (GFA Consulting Group, 2006). It is worth noting that the coffee from Ethiopia will bring a lot of competition to the imported coffee. However, high quality coffee from Brazil will be able to lure the natives into consuming the imported coffee. Coffee quality can be categorized into three categories of quality, viz: exemplary quality, premium quality and mainstream quality. The main category of coffee in the Ethiopian market is the mainstream quality. By bringing in the exemplary and the premium quality coffee, the market for coffee in Ethiopia shall be made more competitive (International Trade Center, 2011). Besides, the price of coffee will be made to compete favorably, relative to the quality of the coffee that is imported. Marketing Mix Strategy To properly configure the offer of the coffee to suit the Ethiopian market, a conceptual framework has to be laid that will guide in the decision making. This concept shall be laid as the marketing mix. The concept has been considered by Goi (2009) as a necessary and powerful tool since it helps in making marketing easy and allows marketing to be separated from other activities of the company. Proper use of the concept is also known to enhance the company’s competitive edge in the market. Therefore, Strauss Coffee Company will seek to deploy the marketing mix to assist in telling the work of the marketing manager and instill the philosophy of marketing in the company. The product plan The objective of Strauss Coffee Company is to ensure that the coffee is streamlined into the market in Ethiopia. Therefore, the product has to be used as the main way of achieving this. The product cycle of coffee in Ethiopia suggests the need to import coffee since the coffee that has been in the country has been so used to by the people that there is need for something different in the market. Therefore, at the introduction stage of the coffee, the market will greatly appreciate the competition that will be offered by the imported coffee. This is because the coffee will come in different tests of quality and will provide an attractive prospect to the market. The growth might be limited by the competition faced but the product’s quality is seen as being critical to the growth of imported coffee in the market. The coffee will therefore sail through to the maturity and saturation stages until the product is seen to decline. Strauss Coffee Company intends to continually review the product in terms of quality to ensure that it is continually developed and it lasts long in the market. Although it is expected that other local companies will try to bring in coffee with similar quality, the already established competitive edge will help the coffee to still sell. Pricing plan The competition from local coffee is expected to be a tough issue to handle. In fact, the key challenge will be to get a balance between price and quality so as attract the locals into consuming imported coffee especially on the price issue. The price for coffee will therefore have to one that will attract the locals and at the same time sustain the company. According to Yahoo Shopping (2012), the price of coffee ranges between $7 to $50 for bags weighing half pounds. The price offered by Strauss Coffee Company will have to match the existing price relative to the quality of coffee. In addition, the price of coffee shall be reviewed quarterly so as to ensure a proper pricing plan is achieved (Diagana et al, 2006, pp 53). By doing this, Strauss Coffee Company’s goal is to ensure that it holds a competitive edge in the market while offering quality coffee at great prices for the consumers and the company. Promotion The new product in the market will no doubt require modes of communication for the consumers to get information on its availability and its value to them. Through the Ethiopian televisions, the internet and the print press, Strauss Coffee Company will advertise the new coffee to the Ethiopian market. Since the company is targeting to establish the product in the market and to establish a cordial relationship with the customers, it will avoid use of traditional methods of advertising and use the modern methods (Diagana et al, 2006, pp 53). This will work appropriately in Ethiopia since the government has been pushing to promote use of the internet, it will boost the communication mode majorly (Doing Business in Ethiopia, 2012). Besides, the company shall use an interactive website to ensure that customers get what they wish to have. According to Diagana et al (2006), use of corporate charitable sponsorships can also be a good interactive communications plan. This will enhance the interaction of the company with customers and will also serve to reach out to the prospective consumers who do not have access to the internet. This interaction will give the consumers the opportunity to present their opinion on what they like and also help the company in deciding what they can improve on the product. Place The location of the market is supposed to be favorable to the product. Borden (1999) stated that the selected location for the product has to be convenient to the consumers in terms of access. This is related to the distribution of the product to the consumers. The physical location of the distribution store and the company website will be used in reaching out to consumers. For instance, the consumers will have the opportunity to make orders online and have the product delivered to them. Hunger and Wheelen (2003) stated that a pull strategy can be used to the consumers to create the demand for the coffee. Therefore, the company shall take the product to the consumers through promotions so as to create the pull. In addition, the company website shall also be used to retain customers and to give them the opportunity to decide their purchasing power by using their computer. Branding Due to the high competition in the coffee market in Ethiopia, a branding plan will have to be established. The source of the product will be identified and the known name of the product, coffee, will be used to enhance its acceptance by the Ethiopian market. The brand will be used across all the distribution stores of the company and the company website shall also have the brand name on it. The graphics on the brand will have to be made in a manner that directly presents coffee as the product. This will present a firsthand understanding on the product (Diagana et al, 2006). The strategies stated above are meant to promote the promotion of the coffee into the new market. The market in Ethiopia has an already established coffee culture. It is therefore upon Strauss Coffee Company to ensure that it properly infiltrates imported coffee to the Ethiopian market. Foreign Market Entry Strategy According to Gha (2009), a company that decides to go international has to devise ways of getting into the foreign market. It also has to analyze the degree of marketing that shall be done and the commitment that the company shall make in marketing. Therefore, Strauss Coffee Company will use indirect foreign marketing to reach out to the market in Ethiopia. Through this strategy, the company will not cultivate its customers actively beyond the national boundaries of Brazil. However, the products will get to the customers in foreign markets. This strategy involves carrying of the products abroad by other firms. Strauss Coffee Company will not have to engage in the international marketing. These products may be made to reach the foreign customers through domestic distributors or wholesalers who will do the selling on their own. In addition, the company will have less control over the market and the risk level is low (Lambin, 2007). Lambin (2007) suggested a number of methods that can be used for indirect exporting. One of the methods is to handle foreign sales through a foreign sales organization. The others include use of an export management company and use of international trading companies. Strauss Coffee Company will use international trading companies. This is because Ethiopia is a member of various international organizations including the International Coffee Organization. Such trading companies have a large size of market coverage and they have reliability in terms of credit and the amount of information that they have. This makes them active distributors of the coffee that is produced. However, this method has a drawback: the trading companies may carry competing products and the products of the company may not receive the attention that they require. The commitment of the companies in making sales is weak and the international know-how is limited. Despite this, the company is ready to embark on extra marketing online that will make establishment of its brand and this will give it an edge in terms of customer preference. This type of marketing will help the company to open up new markets without necessarily requiring any special expertise or any special investments. In addition, the trading company will help Strauss Coffee Company in establishing its product in the Ethiopian market since the companies already have the links in Ethiopia. Besides, Ethiopia requires that imports be done through Ethiopian nationals that are registered by the government as distribution or import agents. This method will therefore be the most suitable in this case. Conclusion International marketing has its own challenges in terms of getting to the new market and establishing the new product to the already existent market. Such a challenge is even stronger in the case of the Ethiopian market because the people in Ethiopia have their own coffee and it would require some smart effort to get them into using the new imported product. On the positive, this culture can be used to the advantage of the product. Since the people already know the use of coffee, there is little need to convince them to use coffee. In stead, they will have to be convinced to use the quality of coffee that is produced by Strauss Coffee Company and at a price that is favourable to them. Works Cited Borden H. Neil. The Concept of the Marketing Mix. Harvard Business School, USA. 1999. Brazil Trade Business Group. Even the large producers already import coffee from Brazil. Retrieved on December 31st 2012 from: http://brazil-trade-business.blogspot.com/2011/03/even-large-producers-already-import.html. 2011. Doing Business in Ethiopia. Country Commercial Guide for U.S. Companies. USA. 2012. Dunning Rebecca. Starbucks vs. Ethiopia Corporate Strategy and Ethical Sourcing in the Coffee Industry, Duke University. 2011. Diagana et al. Strategic Plan for Great Cups Coffee Company. Solution 7. 2006. Feleke T. Shiferaw and Walters M. Lurleen. Allocation of Global Import Demand for Coffee among the World’s Largest Economies: Implications for Developing Countries. University of Florida. 2005. GFA Consulting Group. Marketing Strategies. German Technical Cooperation, Germany. 2006. Gha, International Market Entry Strategies. UK. 2009. Goi Lee Chai. A Review of Marketing Mix: 4Ps or More? International Journal of Marketing studies, Vol. 1 No. 1, Sarawak, Malaysia. 2009. Goodwin Lindsey. Ethiopian coffee culture. Retrieved on January 2nd 2013, from : http://coffeetea.about.com/od/historyculture/a/Ethiopian-Coffee-Culture.htm. 2012. Hunger, J. D. & Wheelen, T. L. Essentials of strategic management (3rd ed.). Upper Saddle River, NJ: Prentice Hall. 2003. International Trade Center. The coffee exporter’s guide. Switzerland. 2011. Jarvis S. Lovell. How Brazil Transferred Billions to Foreign Coffee Importers: The International Coffee Agreement, Rent Seeking and Export Tax Rebate. University of California. 2003. Lambin Jean-Jacques. Entry Strategies in Foreign Markets, Palgrave Macmillan. Australia. 2007. Yahoo Shopping. Ethiopia Coffee. Retrieved on January 2nd 2013 from: http://shopping.yahoo.com/coffee/ethiopia--coffee-type/. 2012. Read More