Please respond to both of these discussion posts with one reference for one and two references for the other, doesnt matter which.
Topic 3: Cinnabon found that some products they marketed here, worked in South Africa. What factors would you consider before deciding to expand abroad?
Companies at one point or another will come to a decision to decide whether going abroad is strategically beneficial to the company and its brand of product. It has to way the value of how the product is going to be perceived. It has to look at underlying factors such as cultural tastes, likes, and dislikes. This is especially important with the launch of a food product that may not fit into the region’s view on food hierarchy. A Cinnabon may be considered as a nonstaple food and that of a commodity. The value and pricing of the items would also have to reflect the social-economical structure. This can be in two ways. Number one a qualitative study can be performed to take a pulse on how Africans eat, their habits, their flavor profile, the thoughts on sweets, and their views on imported foods. Number two a quantitative analysis to see if the product sale and distribution are viable can be done effectively will help with the choice of product chains, target areas to open based on GDP, and product development based on surveys to name a few. (Kottler & Keller, 2016)
Once the company decides to take it to the next stage it needs to looks at the pros and cons of going abroad. Let’s start with the risk, as outlined in Marketing Management weighing the risk is important and can cause success or complete failure. Cinnabon may fail to look at the foreign preference of the country they are marketing to. (Kottler & Keller, 2016)
This can be managed by having a marketing team set up researchers, brand managers, chefs, and product development on the ground in Africa, working to panel tastings, visual promotion of new items, menus, and reinforced or new branding on the products that do well. Looking at how the cost of producing and distributing Cinnabon products can be affected by foreign regulation and business culture. It is important that reducing the cost of import and export is crucial to finding a pricing margin set for the region of Africa, that would produce a profit. By doing so then the cost of goods based on the quality can be set. Africans would value the product based on high quality, taste, and appeal, and will have a greater chance of achieving brand loyalty. This can be determined by looking at the product readiness by considering regional and local distributors in Africa for raw finished goods based on the Cinnabons quality control panel. (Evans, 2015)
Cinnabons’ decision on going abroad will strengthen the business allowing new exposures to the African customer. They can diversify their product and consumer-based creating less dependency on one single market.(Kottler & Keller, 2016)
The company can then used its leverage as a domestic market provider to produce and export at a lower cost based on the nations’ economic value of goods, for a profit. Reinforcing this launch into African via a mobile marketing approach can be beneficial as the rapid growth of “more than 300 million …are new subscribers”. (Kottler & Keller, 2016)
Using this explosion of use on technology is beneficial creating a broader group of potential consumers with reduced effort. At Cinnabon, I would create a quick find Application and online menu via social media advertisement with a specific product targeted to their taste to entice them to purchase and experience the full menu.
Topic 3: Cinnabon business expansion to South Africa.
South Africa is a developed market and an access point to many other regions. Doing business on foreign land is not as easy as it might be on domestic grounds. It has many challenges that must be dealt with before business even start expending. Before considering any business expansion, Cinnabon must research the market to identify its targeted market and quantify expectations. The introductory product must be according to the local’s tastes and standards, or it should have enough margin for modification to fit their specification.
Once the market research is conducted through qualitative and quantitative methods, it will be easier to analyze the market’s potential. The research will also help marketers understand if the product is “pushed” into the new market or the “product” demand is pulling it, making the targeted customer identification process easy.
Cinnabon must consider the local law. For instance: Government subsidies that are bad for global competitors make foreign business hard to thrive ( subsidized competition), shipping laws in case product is not manufactured in the country, conflicting regulation, proper infrastructure to run the business, labor laws, economic forecast, corruption, political stability, language barrier as English is not spoken in all regions. A trade agreement between SADC and the European Union enables many European products to enter South Africa duty-free or at lower rates than U.S. products (South Africa – Commercial Guide, 2020).
Understanding the local culture is important; companies need to be locally relevant. Starbucks has a localized menu of beverages particularly tailored for Chinese consumers, and KFC did the same for African markets to create relevance. Cinnabon must develop similar showcasing cultural ideas to compete in the local market and resonate well with the local community. For instance: Digicel sponsors local games like cricket, rugby, and other high-profile sports teams to be locally relevant (Kotler & Keller, 2014, pp. 221).
Some other factors to consider when entering a new market is geography, income, population, and political climate. It is also a good idea to enter a market where competitors already exist. It will allow Cinnabon to learn from the existing competitors how they are penetrating the local environment. Keeping the currency exchange difference in mind is also essential to set the price right. It should not be too high for consumers to afford or should not be too low for businesses to sustain in the market.
When entering a new market, companies usually follow one of the two strategies. 1. Waterfall approach, which lets companies enter counties gradually or in sequence, and the other is the Sprinkler approach, means entering all at once. It would be better to follow the waterfall approach and enter gradually, as it is a new culture and new product for that market, posing a high risk to the business.
McKinsey’s research shows that South Africa has a highly developed economy, and advanced infrastructure attracts more foreign businesses to the market. Consumers do not want second-rate merchandise anymore. High-quality products and brand-conscious consumers are on the rise, “belying the view that the continent is a backwater where companies can sell second-rate merchandise” (Kotler & Keller, 2014, pp. 221).
Considering the country’s political, economic, and financial stability, expanding a business to South Africa could be a good idea as long as it has strong market research, business planning, and financial planning.
According to Kevin O’Marah of Forbes magazine, Africa’s consumer economies remained “buoyant” even with the global crisis in the commodity industry, showing the stability of the region (O’Marah, 2015).
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