International Marketing for Global Competitiveness - Almarai Company in the UAE - Case Study Example

Name: Professor: Course: Date: International Marketing for Global Competitiveness Introduction This report is aimed at analyzing strategies that have been used and those that can be used by businesses to take advantage of the global market. Some of the best strategies that can and have been used to enter a particular market in a foreign country and the local country will be discussed based on Almarai Company in the UAE. It is one of the largest dairy companies in the region with a large market share. Some of the strategies that it has applied have seen it grow significantly over the years. Having somewhat conquered the home dairy market, the company strategists need to analyze foreign dairy markets; looking at factors such as incentives offered by host countries to make expansion into such markets attractive, advantages of investing in the foreign market, the mode of entry into the market and much more(Doole & Robin 57). Organizations that have succeeded in foreign markets such as McDonald's in the United States have used approaches such as franchising as a mode of entry having understood their strengths such as the brand and the service provided. Closer home, Almarai has a few strengths it can bank on in the advent to newer foreign markets, and this can be used to provide a competitive advantage. Almarai company, as mentioned before, is one of the leading dairy company in Saudi Arabia and is one of the world’s biggest dairy company that is vertically integrated with a solid reputation and a clear vision. Embedded in the vision of the organization is the providence of not only quality but also nutritious food and drinks. These go a long way in enriching their customer's daily lives. The company took advantage of the rapid growth of the local domestic market in the past and decided to transform the regions traditional dairy industry. Almarai products include beverages and foods. Its dairy products are some of the leading revenue generators in the company and include fresh dairy products that account for more than forty percent of the company’s revenues and operations, Long Life products, juices, and yogurts. In the food sector, Almarai offers cheeses, butter, cream and ghee products. The company derives its strengths from a great vertical integration process that sees it rear its cows and provide its milk. It also has vehicles that transport both the raw materials such as fodder and milk to the company's producing plant and at the same time have long haul trucks that enhance delivery of their products to markets in time. The company has utilized a Just-in-time technique in the management of inventory that has allowed it to minimize wastes via removing stock that is not needed while at the same time curbing operational delays. This has seen the company provide required services and at the same time has enhanced the benefits of adding value to operational process on a day to day basis. The company is also very competitive in the home market and controls a large percentage of the market in Saudi Arabia. Competition among other manufacturers remains stiff using techniques such as pricing competition regionally, competition from European organizations that export milk to the region and much more. The company has however maintained its leadership position in the region controlling sixty-eight percent of the total market share volume in the fresh milk category and its yogurt brand accounting for an upward of sixty-six percent of the market share. Almarai is based in Saudi Arabia, and being one of the largest dairy companies, it is hard to imagine that such a feat can be attained in an arid region. Over fifty years ago, the region's milk came from camels and goats and utilized traditional storage methods for a very perishable commodity. Almarai has transformed the landscape via providing fresh milk for both the domestic and regional markets while at the same time showing to be a competitor for the organizations that imported powdered and condensed milk in the region. The country is ruled by kings and is a monarchy and is organized along Islamic law but is also dependent on foreign markets because oil exports account for the majority of its revenues. The official spoken and written language used in the region is Arabic but also English is employed in both communication and trade transactions, and this also implies that the main religion of the region is Islam. The region has a population of 31.4 million and a %1.7 trillion GDP with a 3.4% growth rate. Expanding to the UAE is important for this company because it will raise the revenues in the company following some competition and also the market for fresh dairy products remains as a lucrative endeavor in the desert region. The social implications and cultural considerations are few in the region mostly because they both share the same culture and there is no language barrier between the two economies. The market is fairly lucrative because both its geographic and cultural proximity to Saudi Arabia provides an advantage to Almarai. The political stability and good relations between the two regions also serves Almarai fairly good advantages at exploiting the market in the foreign region. The market for dairy products and food is an existing one in the region with The National Food Products company being the leading food and dairy product manufacturing firm in the UAE. This presents both an opportunity and competition in the same vein depending on the strategy used for market entry. The mode of entry into the market may include direct whereby the company directly or indirectly exports its products to the host market. Another method is the intermediate mode of entry that involves joint ventures, production via contracts, franchising, licensing and management contracts. This mode represents the transfer of knowledge and skills to a new country. Contract manufacturing seems like a lucrative option since it entails outsourcing to experts with specialized production units and technology. The benefits of this mode are that there is enhanced interaction with regional market, control can be exerted easily, and it is a highly flexible mode with low risks and costs. Franchising, on the other hand, involves giving the rights of using product name packaging format, design, management systems to a foreign organization at an agreed fee. Licensing involves exchanging manufacturing or other rights to a separate company at an agreed fee, and this may cover the patent of a process or product, technical support, trade mark use and much more. Strategic alliances, on the other hand, represents equity partnership between partners and this is advantageous in that it can speed up market entry to the host country while at the same time operational costs and production costs can be shared. Another mode of entry that can be used is acquisition, and this offers many advantages because it involves taking over a foreign company in entirety. This avails to the incoming company distribution channels that were being used, the existing labor, local contacts, established brands and managerial experience. It, however, has a certain disadvantages such as being the most expensive option and a high-risk venture. (Doole & Robin 155) Direct entry methods seem like a good option but doing so in a market with a clearly established leader, National Food Product company, would lead such fierce competition that is unfavorable to the incoming organization. The risks involved in such a set up involve creating new distribution and supply chains, marketing strategies that will create awareness for the incoming product and even high costs of products due to probably the high expenses incurred in availing the product in the host country. The company, however, does not require repackaging because Almarai is an established brand. Management contracts, on the other hand, does not ultimately fall in line with the company’s existing vision. Franchising is not a viable option for Almarai because it utilizes a vertical integration system that would be difficult to build in the host country due to challenges that exist in setting up a similar structure. It is also quite expensive and would require investments that may be hard to recoup in the short term because it requires a considerable amount of time before it will establish itself in the market for profitability. Direct acquisition is also another costly mode of entry that is not viable at the moment because it would lead to siphoning off of profits to acquire a company and the logistics involved require even more funding (Kavoossi 128). The most viable option for entry into the UAE market is via a joint venture as this is an inexpensive and very productive way of entering a foreign market. A joint venture with UAE’s leading food and beverage manufacturer can lead to a very successful entry into the market because this would enable the company to utilize both the supply and distribution channels being used by the company in the host country. A joint venture is also attractive because it means the operational costs and marketing and advertising would be significantly reduced since the leading company would introduce their products, and since it is an established brand, trust would be established quite fast. Operational costs would also be reduced because the largest company has systems in place that can be used by the new company hence the need for setting up in the host country would be minimal (Kavoossi 216). The price of the product would also be favorable because a joint venture removes the cost implications put forward through promotion, advertising, negotiating for and obtaining supply and distribution channels, navigating the foreign practices in the company and much more. Promotion of a product is also important, and through coming together with an existing company, the costs that would be incurred for promotional services are reduced greatly. The company would also market its core product without the need for adaptation because it is a leading product in its home country and thus would also be marketed under the same brand. Direct distribution modes would also be employed in distribution since it involves taking advantage of the already existing systems and at rates that would lead to competitive pricing. The existing company would also use its diverse marketing and advertising strategies in introducing the new product, and this would generate a positive response from the base of consumers that it has already captured. Conclusion After careful analysis of the UAE market, we have realized that for a company to be competitive globally, it needs to expand into international markets. Marketing internationally requires the use of the proper strategy. The lack of or ineffective use of the proper strategy could lead to massive losses by a company because promotion and at times different branding is required in new markets because of cultural differences and at times religious. In our case study, it has been shown that the proper market entry strategy is key because it determines both the market share that can be attained by the new company and also the short term and long term revenue generating properties of the new market. Correct pricing, packaging of the product to suit the new market and also promotion play key functions in the success or failure of a company in a host country. It has been seen that using joint venture is one of the best ways to realize the company's objectives in a foreign market. This mode of entry as discussed shows that it is easier to integrate into a new foreign market using this strategy while at the same time preserving the objectives of the company. This requires providing very few elements to the value chain since it utilizes the existing structures. Work Cited Top of Form Top of Form Top of Form Doole, Isobel, and Robin Lowe. International Marketing Strategy: Analysis, Development and Implementation. London: Cengage Learning, 2008. Print. Top of Form Kavoossi, Masoud. The Globalization of Business and the Middle East: Opportunities and Constraints. Westport, Conn. [u.a.: Quorum, 2000. Print. Bottom of Form Bottom of Form Top of Form Fernando, A C. Corporate Governance: Principles, Policies and Practices. New Delhi: Pearson Education, 2009. Print. Bottom of Form Top of Form Ranchhod, Ashok, Claire Gauzente, and Julie Tinson. Marketing Strategies: A Twenty-First Century Approach. Harlow: FT/Prentice Hall, 2004. Print. Bottom of Form Read More