TABLE OF CONTENT
KIWIKIDS EXPNSION IN SINGAPORE
Kiwikids, is a New Zealand based company, established in 1958, Headquartered in Auckland. is in the nutritional product industry, we make nutritional milk powder for children between the ages of one and three. Our product NUTRIBUDDY not only has all the minerals that cow's milk has but also had extra added vitamins and minerals like vitamin D that help the child in growing.
Kiwikids is well established in the New Zealand market with about 45% market share and net worth of 15 billion NZ$
We are well known and among the top 3 companies in New Zealand due to our USP of home grown product and ensuring quality of the product. We're pleased with the organization we keep, and are blessed to work close by specialists and teachers at the largest amounts over various fields- paediatrics, adolescence advancement and sustenance. In addition, our nutritionists and researchers at recognize what it takes to deliver world-class and quality product. NUTRIBUDDY is the top selling product in New Zealand and trusted by thousands of families for early childhood nutrition requirements.
Apart from Kiwikids also makes a range of products such as cheese, butter and milk.
Kiwikids has 16000 employees, with each NUTRIBUDDY having 5000 employees in total including our in-house paediatrics ensuring the product is safe and meet the requirements of the child and dietary needs.
On our 60th anniversary in 2018, we want to expand our business overseas and take it to the international markets. Our choice of market is Singapore as is it the transit hub and a tourist destination for as to make our product visible to the international market.
The product assumptions are given by the 4 p's of marketing:
1) Product: The assumptions of the product are made keeping in mind the analysis of data on Singapore.
Quality: The product will be a premium product.
Size of the product: The product will weigh 1kg which will suffice for 1 month.
Price of the product: The pricing of the product will be high due to premium quality and for creating a high standard and quality perception through pricing of the product.
Packaging: The product will be packed in a tin container to increase shelf life and to protect the product from oxidisation and so that the product can be resealed and also preserves the contents of the product without the addition of preservatives. It is 100% recyclable hence creating less impact to the environment. ( Guide Marketing, Inc., 2009)
Types: The product will be made in three flavours,1. chocolate ,2. vanilla, 3. Strawberry to create diversity of the product as children prefer flavoured milk over plain milk (Williamson, 2015).
2) Price: The price of the product is decided to be high as compared to the average price of milk powders in Singapore is 56.06$ (Tay, 2017). As we want to place our product as premium in the market, we would keep our pricing as 60$, since it is average and also, we will further be using the penetration strategy in marketing for entering a new market. (details given below)
3) Promotion: The promotion of our product will be done by creating advertising in Singapore itself using Singapore families and paediatrics to create a positive mind set highlighting the importance of a balanced diet in children and how what they eat is insufficient to their dietary requirements. The major USP would be introduction of flavours in our milk powders as children prefer flavoured milk over regular milk.
Sampling: One of the main aspects we would use is sampling and giving out samples of the product for the nominal price for the first 1 month of market entry, the sampled would be of 10g sachets and be priced at 1$ per packet as trial, all the 3 flavours will be available in the samples. Samples would be sold and distributed to all the supermarkets and also there would be stalls set up in the supermarkets doing sales promotions for the 1st month.
4) Place: The distribution of the product will be intensive and widely spread over Singapore for as to help better promotion product and use intensive marketing as the only brand providing flavour in their milk powder with no added sugar.
3.TARGET MARKET ASSUMPTIONS
Our target market in would be based on Singapore's population, birth rate, affordability, etc.
The population of Singapore is =5,888,926 (Central intelligence agency, 2017)
The population under 14 years of age is =755,013 (Central intelligence agency, 2017)
The GDP is= $87,800 (Central intelligence agency, 2017)
The birth rate is= 8.6/1000
755013/14x3= 161788 =current target market size
growth rate=population under 14/14 x3 x8.6/1000=1331 =total birth growth/ year
(Total population x birth rate x 3 )x avg consumption rate x avg selling price x affordability
161788 x 3(per month) x60 x80/100 =23,297,472(Approx. quantity needed)
A. PESTLE ANALYSIS-The country overview is given by the PESTLE analysis given below, we tried to do a detailed research of Singapore in terms of political, economic, societal, technological, environmental and legal.
P-POLITICAL: Singapore is a democratic country with low political risk. Government is centralized and socialist in approach. Due to fear of laws, one cannot speak out against the government, even jokingly as they have strict censorship laws. Government is import friendly and invite foreign investment. (Clements & co., 2017)
E- ECONOMY: Singapore is a vibrant free-market economy and export dependant country. The country's per-capita income is relatively higher than other Asian countries. Fiscal policy attracts foreign investment. A corruption-free environment supports the business sector. It is among the most competitive countries. The educated and motivated workers strengthen it, unemployment rate is relatively low in Singapore (approx. 2.2%), which gives more purchasing power to customers. (Healy Consultants PLC, 2017)
S- SOCIETY: Singapore still follows traditional family values. It is true that the younger generation has the tendency to follow western culture and values. Being on ti (Goodwins, 2007)me is very important for Singaporeans, late is sign of disrespect. they dislike shaking hands with left hand, a hand shake is traditional way to greet but not with opposite sex. Senior persons should be greeted first. Gifts are sign of bribes. avoid direct eye contact for longer periods, it is considered as rude. Sometimes their yes means no or may be because they avoid conflict. Reports suggest that most Singaporeans dislike blue collar jobs. (Goodwins, 2007)
T -TECHNOLOGY: Literacy rate is one of the main reasons for high technological advancement in the country. Good command on English and Chinese languages gives Singaporeans an advantage, the cost and time to communicate business is relatively cheaper than other Asian Countries and thus attracts international trade and foreign investment. (pestle analysis of singapore, 2015)
The IT infrastructure is strong and gives birth to strong E-commerce and eB2Cmodels model. cross-border e-commerce laws and policies support and secure Electronic Transactions Act, Intellectual Property Rights, Amendments to the Evidence Act, Content Regulation, Tax Issues and Import and Export Procedures. (pestle analysis of singapore, 2015)
E-ENVIORONMENTAL: Singapore is facing problem of pollution in urban areas. It has one of the world's best waste management system emphasising on recycling, optimum usage. Supporting recycling initiatives of government can be helpful in gaining local peoples and government support. (pestle analysis of singapore, 2015)
L-LEGAL: with low corruption level in Singapore, it is an ease to operate business. Strict laws and legal framework helps to protect your intellectual property safe. It is based on English common law with two major sources of law: legislation and case laws. A private company can be incorporated with one director and one shareholder, out of which one should be resident of Singapore. There is an option of branch of foreign company, which does not require director or shareholder to be a resident, but just need to employee two local residents. (Goodwins, 2007)
B. COMPETITORS IN SINGAPORE.
The competitors in Singapore are carefully analyses and their products are taken into consideration (little steps, 2016). The main competitors for NUTRIBUDDY would be,
1.Abbot with Similac, Isomil, Grow & Pediasure (Abbott, 2016)
2.Nestle with NAN (Nestle, 2017)
3.Wyeth with S26 (wyeth nutrition singapore, 2014)
4.Dumex with mamil (Dumex products: age 1-3, 2014)
5.MARKET ENTRY METHODS
Direct exporting: Kiwikids shall use a direct exporting market entry mode as the Singapore market is easy to enter and the firm size is big enough to support direct export and marketing activities, the firm is capable enough to use its own resources to do a direct export.
Marketing and sales: Kiwikids will be using the company DKSH (DiethelmKellerSiberHegner)
For marketing and sales activities as the company doesn't want to face psychic distance.
Distribution and logistics: Kiwikids will also be using DKSH for distribution and logistics activities as they have excellent distribution networks and would be able to roll out our product into the market within 30 days, also it would be cost effective. (DKSH, 2017)
Key drivers to entry and expansion in Singapore: The key driver for expansion and entry in the Singapore market is the manufacturing ability and there is growth in the manufacturing in the country. This can be used widely to further expand into the market to set up own manufacturing.
5.THEORIES OF INTERNATIONAL TRADE
1. Absolute advantage theory: Absolute advantage country specialize in the production of goods that are most efficient to produce than any other county and thus creates an absolute advantage(Adam Smith), hence new Zealand has an absolute advantage on dairy products and the quality perceived is high, hence there is absolute advantage to produce more and export more.
2. Comparative advantage theory: The comparative advantage theory would be used to further increase the market as there is a key driving factor in Singapore which is manufacturing. The cost of production would come down and hence it would give the company a comparative advantage, the raw material could be sourced from New Zealand while the production could be done in Singapore for comparative advantage. The comparative advantage theory states that the country with better production has a comparative advantage. (̧c, 2002)
6.NEW TRADE THEORIES
1. Economies of scale: Economic scale cause the average cost of production decrease as the output volume increases (The economist, 2008)
As we already know the target market and increase we can go for economies of scale and maximize production as we need to export all together for a low cost.
Frequent export would not be an option as it would cost more. Bulk export would be beneficial in terms of distribution as well as the logistics and distribution costs would also automatically come down
2. Late mover advantage: kiwikids has a late mover advantage in the coutry as there are substitute products already available in the country and there are many other competitive products available, kid's kids can hence learn from the mistakes of the available product and companies by doing research and analysis.
3. Porters 5 force model (E.Porter, 2008): Porter's Five Forces is a simple but powerful tool for understanding the business environment and its competitveness, and for identifying the potential profitability of your strategy. (porters five forces, 2017)
The five force model is explained deeply in detail below:
Threat of entry: Singapore is not big (in terms of geographical size), but very lucrative market. Since it is a big transitional hub for the world, it is obvious it has attraction of all the world. moreover, it is corruption free country, so entry to this market is very easy, and many companies enter to acquire market share. But since, we are very large company, we have opted to enter with one product now, but slowly would like to capture milk powder industry here.
Bargaining power of customer: bargaining power of customer affects the market price and thus to profit. But in case Singapore, people are urbanised and have small families, therefore their purchasing power is high. a high positioned product has a scope in this market. Since milk powder is sensitive corner of every parent, right marketing skills can give an ease to bargaining power of customers in New Zealand. Secondly, the company from Singapore is also benefitted for perception of quality of milk.
Bargaining power of supplier: being a company from New Zealand, it is expected to maintain good quality which gives an extra benefit for a New Zealand company to attain good bargaining power of price control.
Threat of substitute: it is easy to develop substitutes of any product in today's technological world. We have plan to enter with unique products with different flavours. But if you give competitive price with regular supply and maintain the quality, brand loyalty gives relief from threat of substitute. But you should have strong eye on the market and all the competitors' activities.
Competitive rivalry in the industry: a healthy competition is always a positive sign for the growth. There are few major rivals is present in the market, but with healthy competition, we can sustain in the market for long.
7.HIGHLIGHTS OF A TRADITIONAL FIRM.
As a traditional firm, we will be looking into the aspects that a traditional firm follows, such as:
1. Focus on domestic market and maximum sales from domestic country.
2. Learning to internationalization, for a firm to carry on and move forward, we will need to set up our own manufacturing and production units in Singapore.
3. Psychic distance matters a lot to the firm and hence a traditional firm should have a slow start in internationalization and should work in order of psychic distance, in our case, since we are entering through network of business partners we need not worry about psychic distance.
4. In the early market stages, the network of business partners are used as to ensure the psychic distance of the country is met, these then need to be replaced with internalization and gradually replacing the network with own resources.
The recommendations of the case can be given by keeping in mind all the factors given below
1. Strategy: Kiwikids should enter the Singapore market due to free trade and because it is a transit hub. The GDP of the country is high and the target market is also high, the market share of our own company in home country is high and the revenue is high, the company can indulge in advertising the product and can also create a good marketing strategy, according to us the marketing strategy that would best be suitable would be the Market penetration strategy (Quick MBA, 2010).
The market penetration strategy states that any new market can be penetrated by keeping the cost out your product low or an introductory price, in our case the introductory price would be the sample packets that we are offering for trial and to record the outcome of the research. Keeping the price low or at an average will increase our products market share and will help us gain more number of customers in the country. Due to the market penetration strategy, we can also dominate the growth market which is Singapore, the trial packs will also be used in hospitals as they are just one serving and one serving is enough to get the consumer hooked to the product. The growing market of milk formula is growing with the increasing birth rate in the country. Penetration strategy would work extensively and on a higher level to gain maximum market share keeping in mind that we are offering a premium and well-known product at a average price. Keeping the price of the product low at the start and then gradually increasing it would help us to capture the market and create repeat purchases as milk powder brands are not easily switched by parents.
Hence it is our recommendation to use Igor Ansoff's model and choose the penetration strategy.
The operations of the company can be given by the Uppsala model (Hansson, Sundell, & Öhman, 2004)
The Uppsala models shows a gradual progress of a firm's internationalization process
There are 4 levels of internationalization process:
(Development within country)
1.No regular export: NUTRIBUDDY will be created by economies of scale and hence there will be no regular export activities. We will try to keep our cost minimum by minimum number of export activities.
2.Export via indirect agent: NUTRIBUDDY will be exported via indirect agents and distributed via indirect agents to meet the psychic distance requirements. This will ensure there is proper research and local needs are met of the country since kiwkids has no experience in the international market.
3.Establishment of overseas sales subsidy: we recommend that after the market share starts to build up in Singapore, we establish overseas sales subsidy and move from domestic market to intensify the global market activities.
4.Overseas production/Manufacturing: This is the 4th step in the Uppsala model and it's the last step where after the establishment and continuous growth of our company in the international market we set up production and manufacturing in Singapore for lower cost and higher production benefit.
(Development across country)
we would strongly suggest entering the Malaysia market due to psychic distance and choose it as a new market for expansion as it is right across the border.
Expansion in Malaysia should be done because once the firm is established in Singapore the relative perceived distance between the home market i.e. Singapore (after establishment) is relatively less.
We can learn from the neighbouring countries and invest sequentially with experience.
Once the production units are set up in Singapore, It will become easier to export to the neighbouring countries and hence there will be less export charges hence we can keep the price lower than the Singapore market. The Singapore market has skilled labour and a manufacturing advantage hence we can create economies of scale once the production or manufacturing has started in the country.
Singapore being a transit hub will be well known into the international markets and expected to expand if established properly in the Singapore market.
Singapore proves to be a strong expansion area according to our research and hence we would like to go ahead with this plan.
Hence these are our suggestions and recommendations when it comes to expansion of kiwikids and its products in the Singapore market.
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