How to Build a Successful B2C International Business
Agenda • Introduction - Consumer and Foodservice Categories • Keys to a Successful B2C International Business
Macro Situation There has been unprecedented growth in the world economy. Markets like China, Mexico, India, Brazil and Indonesia are rapidly expanding and fueling much of this growth. • This growth is no longer being fueled exclusively by exports or high commodity prices, but by internal consumption. • Disposable income and consumer spending are growing. • International consumer and retail sectors are growing. Particularly the modern supermarket trade. • There is a higher exposure and better access to new and innovative products.
Consumer and Foodservice Categories • The consumer and foodservice categories are growing and reaching a level of sophistication unseen until only a few years ago. • Advances in technology, distribution systems and communications are facilitating distribution expansions in existing and new channels. • Consumer behavior is rapidly changing in parallel to continuous trends towards increases in disposable income and improvements in standards of living.
Improvements in Standards of Living • It is estimated that China’s middle class is 300 million people. This is equivalent to the entire population of the United States. • About 25% of the country’s population, or about 50% of its urban population, is considered Middle Class. • In the past decade, the middle class in Latin America grew 50%. This now represents 30% of the population. • This growth is due to economic growth and job creation. • To maintain these gains, there is a pressing need to enact policy reforms within the labor, tax and social security sectors. Source: World Bank
•People are shopping, traveling and eating out a lot more. •Retail and foodservice channels are booming. •There are a lot more consumers and they are demanding a lot more products and services.
The Key to Build a Successful International Business is to Think Beyond Export! And embrace the concept of Discard the idea of Business Development Export which means just to send goods which includes the set of tasks and to a foreign country or overseas processes aimed at developing territory. and implementing growth opportunities.
1. Think Beyond Export Export vs. International Business Development International Export Business Development Tasks & Processes Strategy Shipments / Strategic Sales Planning Opportunistic Sustainable
2. Conduct a Company Assessment and a Business Analysis • The assessment and analysis of the company and the business helps zero-in on the vision and the key priorities to draw the initial directional statements. A. Determine the company's readiness and commitment to expand internationally. B. Evaluate the product's international potential. C. Conduct a general competitive analysis and find the industry's global trends and growth potential. Conduct a general competitive analysis.
2.1. Make the Commitment • International business takes time, effort, resources, and returns are not always immediate. • International business needs a strong commitment to be successful. • Commitment from management is needed, but it is not enough. Commitment is required from all members in the organization: Manufacturing, logistics, finance, customer service and domestic sales.
2.2. Readiness You will have to assess your company's strengths and weaknesses in detail: • International expertise • Human resources • Production resources • Capacity • Ability and flexibility to adapt products • Domestic market success • Financial and capital resources
3. Develop and Follow a Proper Business Plan It is important to have a structured and carefully researched plan in place. •Develop an international plan. •Incorporate it into the company's overall plan. •Develop a plan for each individual market or region.
4. Thoroughly Research The Markets • Do not rely exclusively on secondary sources of information, like economic indicators, statistical data, internet research or generic market research. •Visit different channels of • Do primary and in-market research: distribution • Interview prospective partners •Check your category • Talk to consumers •Check other brands and categories managed by the distributor or prospective • Travel to the markets distributor. • Do store checks • Take notes and collect specific and detailed information.
•Learn and know as much as possible about every international market you intend to enter. •Learn about the channels of distribution, the category, the competitors, their products and their prices. •Learn about your prospective partners, their reputation, and their strengths and weaknesses.
5. Define and Prioritize Target Markets • Identify market types: • Strategic , Primary , Secondary and Opportunistic . Market Selection Type Profile Investment Approach Examples Large pop (>50mm) Significant level of High GDP investment Local office (or sales rep) Mexico Strategic Developed Categories Brand and promo support Or local distributor Brazil Developed Trade Market research Direct for PL China Global Retailers present High involvement Mid size pop (>10mm) Saudi Arabia High GDP Moderate investment Local distributor (w or w/o South Africa Primary Developed Categories Brand and promo support regional sales rep) Argentina Developed Trade Mid level of involvement Direct for Walmart Taiwan / Korea Global Retailers present UAE Smaller pop (<10mm) Secondary Low GDP Caribbean Low complexity Local distributor (w or w/o Central America Minimal investment regional sales rep) Other ME No direct brand support US exporters Other Asia Profitable opportunities Direct for Walmart Africa Opportunistic Non-proactive approach Low complexity
5. Define and Prioritize Target Markets • Assign priorities to markets, countries and clusters through a Tier system. • Prioritize based on market type (Strategic, Primary, Secondary and Opportunistic). But also based on: • Trade development • Barriers of entry • Resources needed to launch and maintain the business • And other category related variables (competition, category development). • Build launch plans and schedules based on the Tier system. • Identify and assemble market clusters based on geographic, cultural, language and demographic similarities to build synergies, efficiencies and critical mass.
6. Find the Right Partner • Finding the right business partner in each country is the number one rule for success. Be sure to check your potential distributor's: • Size • Financial situation • Influence and reputation • Access to the trade • Experience in your category • Brand portfolio
7. Develop a Clear and Specific International Strategy •The basic four “P’s” of marketing (product, price, promotion and place) perfectly apply to international business. •But international marketing is not the same as domestic marketing. It is important to acknowledge and understand and address these differences:
Differences • Lower Disposable Incomes • Cultural Differences • Different Tastes and Needs and Wants • Long Supply Chains • Complicated Pricing Models • Different Channels of Distribution
8. Distribution Channels • The trade in most international markets is ' modernizing ': • Both, international chains like Walmart and Carrefour, and local chains like Soriana in Mexico and Panda in Saudi Arabia, continue to expand. • The traditional channels of distribution, in the form of wholesalers, mom-&-pop stores or food carts, are still very prevalent in Latin America, the Middle East and Asia. • Alternative retail formats are growing and expanding their product offerings to include grocery and other consumer products. • Convenience Stores like Oxxo or Mi Bodega in Mexico and LatinAmerica. • 'Pharmacy' Chains like Farmacias El Fenix and Farmacias Guadalajara throughout Latin America.
9. Export Pricing • Identify the most appropriate pricing mechanism for the company's international business. • It is important to build the pricing structure following a reverse pricing methodology. Define a target shelf retail price, and then incorporate all of the value chain variables from the bottom up. • Retail Margin • Wholesale Margin • Commercial Conditions (listing fees, promos) • Distributor Margin • Landing Costs • Freight Costs
Barriers and Challenges To International Success • Lack of commitment • Underestimate the competitive environment • Underinvestment • Lack of local marketing knowledge • Miscalculate pricing • International sales under domestic umbrella - International becomes a nuisance and a distraction
Thank You!
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