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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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1. General information

1.1. About Lotus Bakeries

The Lotus Bakeries started in Belgium in 1932 when the Boone family began baking the decorative caramelized biscuits and delivering them door to door in their signature red truck. Their specialty is the original caramelized biscuit, but they offer a wide range of other biscuits and cakes. Over the years, the family turned the small company into a world-renowned business. It's characterized with their tradition of craftsmanship and personal service.

Lotus Bakeries has his headquarter in Belgium, but they also have facilities in The Netherlands, Sweden, France and own different sales organizations in nine other countries. In total they have over 1.200 employees. By maintaining a healthy balance between tradition and innovation, Lotus Bakeries indulges consumers with a unique range of products.

1.2. Why Lotus speculaaspasta

Speculaaspasta is an original Belgian product with a typical caramelized flavour it gets during the baking process. Therefore speculaaspasta has a different flavour than the cookies.

In Belgium the cookies are a success in their branch, but Lotus Bakeries wanted to conquer the rest of the world with their cookies. They started to export and nowadays 75% of their sales happen outside Belgium.

Meanwhile in a Belgian television programme, where candidates had to find new inventions, someone used the Lotus cookies to make paste. Els Scheppers was the first one who produced speculaaspasta and Lotus Bakeries was interested in her idea. Thanks to the programme, speculaaspasta got a lot of attention and for Lotus Bakeries was this the sign to bring a new product on the market. They started with the production in 2008 for Belgium, but also exported speculaaspasta immediately to France and the Netherlands. Not long ago, Lotus Bakeries took over the Swedish company Anna's and now the typical speculaas cookies and the speculaaspasta is available in Sweden.

Till now, every country where Lotus Bakeries started to sell speculaaspasta became a success. It's a typical Belgian product with a high success potential. That's the reason of choosing speculaaspasta to export to a new market.

1.3. Why Bulgaria

2. Analysis of the international environment

2.1. Geographical environment

Bulgaria is situated in South-East Europe. It's an European and Balkan country. Bulgaria shares borders with Serbia, Macedonia, Romania, Greece, and Turkey. It lies in the centre of the crossroad between Europe, Asia and Africa. It's close to world markets and regions, which are rich in raw materials. The location of Bulgaria is ideal, it's really easy accessible because of its central location. It's connected to the capitals of the neighbouring countries and this is an opportunity for Lotus. Because if speculaaspasta becomes a success, than we can easily export it to the neighbouring countries through Bulgaria. It provides direct access to other key markets. The only problem Lotus can face is the fact that the existing transport infrastructure has an unsatisfactory condition and maintenance.

2.2. Demographical environment

Bulgaria has a population of 7,186,893 and the capital is Sofia. Sofia is also the largest city with an estimated population of 1.26 million people. Bulgarian is the official language of the country and it's the native language for over 85% of the country\'s residents.

Age Percentage Man Woman

0-14 years 14,54% 535,131 503,540

15-24 years 9,73% 362,805 332,358

25-54 years 43,33% 1,589,183 1,506,285

55-64 years 13,38 447,865 507,805

65 years and older 19,03% 552,217 807,464

Our target customers are between 0 and 54 years old. Those people have the willingness to taste new things, as they are open for changes. People older than 54 years old are harder to convince to taste speculaaspasta, because they are raised the old-fashioned way.

2.3. Economic environment

The Bulgarian currency is the Lev. This means Lotus has to use EUR in Belgium and Lev in Bulgaria. There are some risks, like the foreign exchange risk. This is the risk that an asset or investment denominated in a foreign currency will lose value as a result of unfavourable exchange rate fluctuations between the investment\'s foreign currency and the investment holder\'s domestic currency, for Lotus the Euro and Lev. At the moment the Bulgarian Lev is stable and economist don't expect any sudden and dramatically changes.

Low inflation and steady progress on structural reforms have improved the business environment. Bulgaria has an average 4% growth since 2000 and has attracted significant amounts of foreign multinationals. This is the beginning of creating an international environment with multinationals having a plant in Bulgaria. If the growth remains like this, the Bulgarian government has to change the legislation in an advantageous way for multinationals to keep them there. For Lotus, this is something positive if they would like to open a plant in Bulgaria in the future.

Bulgaria is a member of the European Union. The European Union has some trade agreements to strengthen the economy. This is something positive, because it helps Lotus to compete more effectively and export more to countries of the European Union. This gives consumers a wider choice of products at lower prices. Due to the trade agreements, Lotus has to pay none or less custom duties or taxes when exporting to Bulgaria. There are also no quotas, so Lotus can export as many as they want.

2.4. Political environment

The most important weaknesses they are still working on, are bribery and corruption. Corruption and organised crime are the highest in Europe, 20 years after the end of communist rule. Perception of corruption in Bulgaria is the highest in the European Union. Bribery corruption as more entrepreneurs and companies refuses to pay bribes to government officials for deals and other services. Sofia has yet to install proper monitoring and prosecuting units. It also has to reform its slow and inefficient judiciary to effectively combat petty and high-level corruption. The chances Lotus is going to face this problem is small, because it's going to work together with Lidl, which already exists in Bulgaria. If Lotus wanted to start their own plant in Bulgaria, chances of faces corruption would be higher.

2.5. Competition environment

Lotus Bakeries faces competition of Ferrero. They produce the world-known paste Nutella. It's the most popular brand among chocolate paste. It's a nutritious and tasty chocolate hazelnut spread.  They spend a lot on promotion and sponsoring, especially in Europe. They have a presence in more than 75 countries and it's available in various types of packaging. Chocolate paste is more popular than speculaaspasta and it's a challenge to Lotus to become more popular than Nutella. With the right motivation and right way to attract customers, speculaaspasta could be a more successful than Nutella.

Another competitor could be homemade jellies. In Bulgaria, women tend to make their own jellies because of the traditions they have and because it's cheaper when they make it by themselves. Lotus should not face competition of this, because Bulgarians don't buy frequently jellies at supermarkets because they prefer homemade ones. Therefore Nutella is the biggest and probable the only competitor of speculaaspasta.

We could lose customers to competition. There are no switching costs with my product. Buyers could easily prefer to buy Nutella instead of speculaaspasta. Therefore the buying power is high in this aspect.

2.6. Working environment

As mentioned in the SWOT-analysis, there are some threats. Over the decades after World War II, working conditions improved in Bulgaria, with the introduction of new technologies, progressive legislation, social security systems and developed health-care. In recent years, more attention is paid to the working conditions with safety and environmental protection as most important subjects. Still there is a poorly maintained infrastructure and working conditions not meeting the European conditions. The European Union can set a fine on manufacturers if they not meet those conditions. We have to take this into account if Lotus wants to build their own plant in Bulgaria. Therefore it's better not to open a plant there, keep the production in Belgium and just sell through an intermediate, like Lidl.

2.7. Cultural environment

2.7.1. Income

The average monthly wage of a Bulgarian is almost 940 euros (June 2016). They spend almost 38% of their income to household debts, like mortgage loans.  For Lotus it's important to keep the costs low as possible so the selling price remains low. Bulgarians are not prepared to buy speculaaspasta if it's too expensive, because of their low income.

2.7.2. Buying behaviour

The buying behaviour of Bulgarians is characterized by frequent visits to the shops, with one or two visits per week the supermarkets. The shopping average in supermarkets is five times bigger the in hypermarkets. Popular supermarkets are Billa and Lidl, because the price is below average. There is an increased brand consciousness and Bulgarians tend to prefer brands rather than home brands.

We also have the opportunity to sell speculaaspasta through a website, so Bulgarians have the possibility to buy it online. But the problem is that shopping online in Bulgaria is risky, because Bulgarians take the risk of not getting what they ordered, having to pay more than the site indicated or simply never receiving the products they ordered. Therefore we are only going to sell speculaaspasta in shops.

2.7.3. Bread consumption

Bulgaria has the second most bread consumption per person per year. This is something positive because speculaaspasta is mostly spread on bread.

Bread production is relatively stable in countries like Italy, Denmark and Germany, but in most countries the bread production is slightly decreasing, like for instance in Turkey and Ukraine. The production of bread is slightly increasing in France, Russia and Spain. The European consumer eats on average of 59 kg bread per head a year, based on the statistics from these 15 countries. Countries with an average consumption of more than 50 kg bread per head can be considered as bread-eating countries. The highest consumption levels are recorded in Turkey with 104kg and Bulgaria with 95 kg. Speculaaspasta is mostly spread on bread and therefore we have chosen Bulgaria to export to.

3. International marketing

3.1. Market strategy

Lotus chooses for indirect export. Using this method, Lotus can penetrate into the Bulgarian market. Lotus can export with no incremental investment in fixed capital and low start-up costs. When exporting indirectly, Lotus chooses Lidl as an intermediate. Bulgarians tend to prefer supermarkets, so we could work together with Lidl and we already know Lidl because of its shops in Belgium. There is less risk at the beginning because Lidl has already more than 50 shops in Bulgaria and they know the market better than Lotus.

A big advantage for Lotus is that Lidl assumes all sales and credit risks. Moreover, he takes care of all formalities related to documentation, transport arrangements, financial, political and credit risks and obtaining licenses from Government departments. Therefore, Lotus is relieved from the botheration of complying with tedious formalities involved in the export activities.

Analysis of Lidl:

When selling through Lidl, Lotus avoids possible international lawsuits, because the legal relationships exist between Lidl and the client buyer.

Lotus will have more time to focus on the core competencies of their business operations, like producing speculaaspasta instead of investing time in market research.

Indirect exporting does not require a lot of organizational effort or commitment of staff workers. Lotus only employs a small number of employees as the main work is carried out by foreign trade partner Lidl.

When speculaaspasta doesn't become a success in Bulgaria, the loss will be smaller than when Lotus had chosen direct export, where they had to invest a lot of money.

There are also some disadvantages and risks when working with Lidl.

Lidl has to charge a commission for the services they provide. Therefore the profits are going to decrease because Lidl might receive a percentage of the profit.

Lotus is not involved in the selling process, therefore they don't know really who their customers are. When Lotus sells by themselves, they know who the customers are and they have the opportunity to make an analysis and try to expand their target group of customers. But they miss this opportunity when they work together with Lidl.

It's possible that Lidl might also offer products similar to speculaaspasta, including directly competitive products, to the same customers instead of providing exclusive representation  of speculaaspasta.

Lotus is  not in direct contact with the ultimate buyers in the market. As the export firm remains ignorant of the market, there is virtually no scope for product development because Lotus can't make an analysis of the needs of the customers.

3.2. Marketing mix

3.2.1. Product

3.2.1.1. Product lifecycle

The product life cycle has four clearly defined stages, each with its own characteristics that mean different things for business that are trying to manage the life cycle of their particular products.

In Belgium speculaaspasta is already a developed product in his sector. It went through the previous phases and competitors already made a familiar product in Belgium, like speculaaspasta made by Aldi and Colruyt. Lotus Bakeries also brought another version of the speculaaspasta on the market, which is more crunchy than the original one. By doing this, they wanted to extend the success of it. Over the years, Lotus Bakeries had the chance to develop their process of producing speculaaspasta and by doing this they took a stronger market position.

When exporting speculaaspasta to Bulgaria, it will be in the introducing phase. Speculaaspasta is not sold yet in Bulgaria and Lotus Bakeries will be the first doing it.

3.2.1.2. Ansoff Matrix

Market penetration:

Speculaaspasta is an existing product we want to introduce on an existing market. To attract customers we have to reach the customers of the competition and get an market share of the most important competitors. Or we can attract new customers by promoting our product.

3.2.2. Price

Competition-based pricing is an option to set the price. There are no other competitors selling speculaaspasta in Bulgaria, but we can compare the price with Nutella's, as speculaaspasta is a substitute of it.

When using the customer-based pricing, you look at the demand of the customer. We can't use this method because speculaaspasta is a new product on the Bulgarian market and there is no demand yet and customers don't know what to expect from it.

The method which we are going to use, is the cost-based pricing method. This is the easiest and most used way of pricing. When using this method, we can look at the other competitors, like Nutella and jellies to set our price, taking into account the profit margin and costs. The aim is not to set a high price, because as mentioned previously, the incomes of the Bulgarians are low in comparison with the incomes of Belgians. Therefore we have to try to reduce to costs as low as possible so the selling price remains low.

In Belgium, speculaaspasta costs 2,29 Euro for 400g and 4,12 Euro for 720g. Those prices are not that high and we can use the same price in Bulgaria, if only Lotus still has a profit margin. Because we have to take into account the costs of working together with Lidl.

3.2.3. Promotion

The European Union set some regulation which have to be followed strictly. The most important for Lotus are:

• It must conform to European legislation on the prevention of health risks to consumers and the protection of the environment

• All products retailed on the French market must be accompanied by an information leaflet in French

• The use of the metric system is compulsory

• Mark of Origin \"Made In\" It is compulsory and controlled by Customs

The European food labelling rules have to be following when labelling. The packaging should be clear and have a harmonised presentation of allergens in the list of ingredients, for instance like soy, nuts, gluten and lactose. Information about energy, vitamins and sugar should be indicated on the packaging. also information on specific vegetable origin of refined oil and fats should be indicated on the packaging.

The packaging should be in Bulgarian. Language is not our biggest gap, because we can easily solve this by working together with a company specialized in translating. They can translate the label into Bulgarian and English.

The advertising can be done by Lidl and Lotus. Lidl can place speculaaspasta in their brochure, so when people get mail they see it.  Lotus can use other channels for advertising which are available and widely used in Bulgaria, like newspapers, internet banners, magazines, television, radio, and outdoor billboards and signs. This will costs some money, but if Lotus does it when speculaaspasta is still in the introduction phase, it will gain a lot of attention. When it becomes known by Bulgarians, Lotus can decrease their advertising and only use the brochure to promote speculaaspasta.

The original speculaaspasta has a red package. Are we going to use the same packaging in Bulgaria or are we going to choose another colour?

Here's information about the emotions some colours provoke and which we can use to sell speculaaspasta in Bulgaria:

Red Physical courage, strength, warmth, energy, basic survival, \'fight or flight\', stimulation, masculinity, excitement Violet Spiritual awareness, containment, vision, luxury, authenticity, truth, quality

Blue Intelligence, communication, trust, efficiency, serenity, duty, logic, coolness, reflection, calm Orange Physical comfort, food, warmth, security, sensuality, passion, abundance, fun

Yellow Optimism, confidence, self-esteem, extraversion, emotional strength, friendliness, creativity Pink Physical tranquillity, nurture, warmth, femininity, love, sexuality, survival of the species

Green Harmony, balance, refreshment, universal love, rest, restoration, reassurance, environmental awareness, equilibrium, peace Grey Psychological neutrality

Black Sophistication, glamour, security, emotional safety, efficiency, substance White Hygiene, sterility, clarity, purity, cleanness, simplicity, sophistication, efficiency

Packaging possibilities:

 

We choose for the original packaging in red. As a dominating colour, red adds gravity and heightened awareness to a product. Although red is not technically the most visible colour, it has the property of appearing to be nearer than it is and therefore it grabs our attention first. Its effect is physical, because it stimulates us and raises the pulse rate, giving the impression that time is passing faster than it is. It's stimulating and lively, very friendly. At the same time, it can be perceived as demanding and aggressive.

3.2.4. Place

We are going to work together with Lidl. There are around 54 Lidl supermarkets in Bulgaria. The buying behaviour of Bulgarians is characterized by frequent visits to supermarkets, with one to two visits per week to the supermarkets. Bulgarians prefer supermarkets like Lidl and Billa because the price is below average.

When working together with Lidl as an intermediate, they are responsible for the export. They have to pick up the speculaaspasta from Lembeke and transport it to Kabile in Bulgaria. Lidl probably is going to use trucks for transporting, because it's one of the cheapest transport methods. Lidl can use normal trucks, trucks without refrigerator, because speculaaspasta is not perishable. Not only the transport is for Lidl, but they also take the distribution for its account. They have to transport the products from their warehouse to the supermarkets in Bulgaria.

If speculaaspasta becomes a success in Bulgaria, we could reach new markets in the neighbouring countries, like Romania, Croatia and Hungaria. Those countries are almost similar

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