Gallina Blanca : product adaptation to international markets

Hello. This time I ve decided to attach a case study to discuss with the readers the different options. This case offers a wide point of view options, from the commercial one to the marketing mix or strategic decisions from directors board. I would appreciate your comments

CASE Forum

Gallina Blanca: How must a global brand adapt to African tastes?

Gallina Blanca, one of Spain’s most famous global brands, has successfully penetrated the African market. How must the brand adapt to local tastes to go even further?

THE CASE

Getting consumers to hum along to your commercials and mistake your jingle for their national anthem is the dream of all marketing directors working in foreign markets. This is effectively what Gallina Blanca was able to do in Africa, thanks to a carefully conceived marketing effort adapted to local tastes. Granted, it took over three decades of hard work to arrive at the point where the Spanish producer of bouillon, instant soups and pasta had managed to achieve a successful commercial presence in 18 African countries.

Gallina Blanca first began exporting its products to Africa in 1972. In order for its bouillon to gain acceptance in the African market, the company had to make a number of adaptations, starting with the brand name itself.

The name, Gallina Blanca, which means “white hen” in Spanish, was changed to Jumbo, which is shorter and easier to pronounce in both English and French, the two lingua francas for most of the continent.

Its main competitor, Nestlé’s Maggi, sold its bouillon in 4-gram cubes. Jumbo sold its bouillon in larger, 10-gram rectangles, priced at the equivalent of two 4-gram Maggi cubes, so consumers were getting a bit more bouillon for their money.

In addition, the company made sure the tastes and colors of its products were in keeping with the preferences of the African palate.

These actions were supported by smart advertising campaigns, which were extremely respectful of each country’s indigenous languages, customs and traditions, often featuring members of the local population in its commercials.

Over time, the use of Jumbo bouillon became ingrained in African culinary traditions. With just a bit of bouillon, a handful of rice or pasta, and a few vegetables, any mother could fix her family a tasty, nutritious meal on a shoestring.

New Challenges BrewingHowever, with success came capacity issues. These were solved by manufacturing the premixes or powders in Spain and then exporting them in bulk to Africa. Gallina Blanca then got local importers and distributors to set up factories outfitted with compression and packaging machines. This boosted local economies by creating jobs and generating tax revenue for local governments. It also strengthened Jumbo’s reputation as a locally produced product, with a Western image of quality.

By 2005, the company was facing new challenges: trying to differentiate itself not only from its direct competitor, Maggi, but from new local entrants and Chinese generic brands as well. Consumers, too, were growing more sophisticated and demanding, expressing greater concerns over food health issues.

At the time, the World Health Organization and other NGOs were promoting programs for fortifying foods in Africa, though no one had ever mentioned bouillon cubes specifically. Within this climate, Jumbo’s marketing and R&D executives began exploring the possibility of enriching its bouillon with nutrients. They leaned toward vitamin A, which helps people develop and maintain healthy eyesight, teeth, bones and soft tissue, and is recommended for reproduction and breastfeeding.

The R&D process cost around 150,000 euros. Adding vitamin A to the product would drive up the manufacturing cost by around 10 percent, putting the manufacturing price of each bouillon cube up by a CFA franc. If Gallina Blanca didn’t increase the retail price of its products, the ex-factory gross margin would drop by 12.5 percent. However, the suggested retail price would have to be increased from 25 to 30 CFA francs, representing a 20 percent markup on the existing selling price.

Gallina Blanca’s executives were reluctant to raise prices. African consumers have low purchasing power, and any price increase could seriously hurt sales volumes. What’s more, both Gallina Blanca and its competitor, Maggi, had gone years without raising their prices, so a change like this could cause major fluctuations in their respective market shares. In the end, a price hike was considered unfeasible.

Yet the questions facing Gallina Blanca’s executives remained: Should they go ahead and launch a new, vitamin-enriched product? If so, what would be the most appropriate business strategy to follow?

According to surveys, African consumers had indicated they might welcome such a product. Even so, it was not easy to project the potential market share of the new offer. What would happen if the new product had a negative impact on sales of its long-established Jumbo favorite? Some considered that Gallina Blanca should do it anyway, regardless of any negative consequences, gaining satisfaction instead from the knowledge that the company was helping to improve the health and wellbeing of African consumers, and that was enough of a return.

Country Entry Strategies

Entry Strategies

Methods of entry. With rare exceptions, products just don’t emerge in foreign markets overnight—a firm has to build up a market over time. Several strategies, which differ in aggressiveness, risk, and the amount of control that the firm is able to maintain, are available:

• Exporting is a relatively low risk strategy in which few investments are made in the new country. A drawback is that, because the firm makes few if any marketing investments in the new country, market share may be below potential. Further, the firm, by not operating in the country, learns less about the market (What do consumers really want? Which kinds of advertising campaigns are most successful? What are the most effective methods of distribution?) If an importer is willing to do a good job of marketing, this arrangement may represent a "win-win" situation, but it may be more difficult for the firm to enter on its own later if it decides that larger profits can be made within the country.
• Licensing and franchising are also low exposure methods of entry—you allow someone else to use your trademarks and accumulated expertise. Your partner puts up the money and assumes the risk. Problems here involve the fact that you are training a potential competitor and that you have little control over how the business is operated. For example, American fast food restaurants have found that foreign franchisers often fail to maintain American standards of cleanliness. Similarly, a foreign manufacturer may use lower quality ingredients in manufacturing a brand based on premium contents in the home country.
• Turnkey Projects.  A firm uses knowledge and expertise it has gained in one or more markets to provide a working project—e.g.,  a factory, building, bridge, or other structure—to a buyer in a new country.  The firm can take advantage of investments already made in technology and/or development and may be able to receive greater profits since these investments do not have to be started from scratch again.  However, getting the technology to work in a new country may be challenging for a firm that does not have experience with the infrastructure, culture, and legal environment.
• Management Contracts.  A firm agrees to manage a facility—e.g., a factory, port, or airport—in a foreign country, using knowledge gained in other markets.  Again, one thing is to be able to transfer technology—another is to be able to work in a new country with a different infrastructure, culture, and political/legal environment.

• Contract manufacturing involves having someone else manufacture products while you take on some of the marketing efforts yourself. This saves investment, but again you may be training a competitor.
• Direct entry strategies, where the firm either acquires a firm or builds operations "from scratch" involve the highest exposure, but also the greatest opportunities for profits. The firm gains more knowledge about the local market and maintains greater control, but now has a huge investment. In some countries, the government may expropriate assets without compensation, so direct investment entails an additional risk. A variation involves a joint venture, where a local firm puts up some of the money and knowledge about the local market.

Country Entry: Decisions and Strategies (1)

Country Entry: Decisions and Strategies

Segmentation, Targeting, and Positioning.  Segmentation, in marketing, is usually done at the customer level.  However, in international marketing, it may sometimes be useful to see countries as segments.  This allows the decision maker to focus on common aspects of countries and avoid information overload.  It should be noted that variations within some countries (e.g., Brazil) are very large and therefore, averages may not be meaningful.   Country level segmentation may be done on levels such as geography—based on the belief that neighboring countries and countries with a particular type of climate or terrain tend to share similarities, demographics (e.g., population growth, educational attainment, population age distribution), or income.  Segmenting on income is tricky since the relative prices between countries may differ significantly (based, in part, on purchasing power parity measures that greatly affect the relative cost of imported and domestically produced products).

The importance of STP. Segmentation is the cornerstone of marketing—almost all marketing efforts in some way relate to decisions on who to serve or how to implement positioning through the different parts of the marketing mix. For example, one’s distribution strategy should consider where one’s target market is most likely to buy the product, and a promotional strategy should consider the target’s media habits and which kinds of messages will be most persuasive. Although it is often tempting, when observing large markets, to try to be "all things to all people," this is a dangerous strategy because the firm may lose its distinctive appeal to its chosen segments.

In terms of the "big picture," members of a segment should generally be as similar as possible to each other on a relevant dimension (e.g., preference for quality vs. low price) and as different as possible from members of other segments. That is, members should respond in similar ways to various treatments (such as discounts or high service) so that common campaigns can be aimed at segment members, but in order to justify a different treatment of other segments, their members should have their own unique response behavior.

Approaches to global segmentation. There are two main approaches to global segmentation. At the macro level, countries are seen as segments, given that country aggregate characteristics and statistics tend to differ significantly. For example, there will only be a large market for expensive pharmaceuticals in countries with certain income levels, and entry opportunities into infant clothing will be significantly greater in countries with large and growing birthrates (in countries with smaller birthrates or stable to declining birthrates, entrenched competitors will fight hard to keep the market share).

There are, however, significant differences within countries. For example, although it was thought that the Italian market would demand "no frills" inexpensive washing machines while German consumers would insist on high quality, very reliable ones, it was found that more units of the inexpensive kind were sold in Germany than in Italy—although many German consumers fit the predicted profile, there were large segment differences within that country. At the micro level, where one looks at segments within countries. Two approaches exist, and their use often parallels the firm’s stage of international involvement. Intramarket segmentation involves segmenting each country’s markets from scratch—i.e., an American firm going into the Brazilian market would do research to segment Brazilian consumers without incorporating knowledge of U.S. buyers. In contrast, intermarket segmentation involves the detection of segments that exist across borders. Note that not all segments that exist in one country will exist in another and that the sizes of the segments may differ significantly. For example, there is a huge small car segment in Europe, while it is considerably smaller in the U.S.

Intermarket segmentation entails several benefits. The fact that products and promotional campaigns may be used across markets introduces economies of scale, and learning that has been acquired in one market may be used in another—e.g., a firm that has been serving a segment of premium quality cellular phone buyers in one country can put its experience to use in another country that features that same segment. (Even though segments may be similar across the cultures, it should be noted that it is still necessary to learn about the local market. For example, although a segment common across two countries may seek the same benefits, the cultures of each country may cause people to respond differently to the "hard sell" advertising that has been successful in one).

The international product life cycle suggests that product adoption and spread in some markets may lag significantly behind those of others. Often, then, a segment that has existed for some time in an "early adopter" country such as the U.S. or Japan will emerge after several years (or even decades) in a "late adopter" country such as Britain or most developing countries. (We will discuss this issue in more detail when we cover the product mix in the second half of the term).

10 ADVISE BEFORE STARTING EXPORT

1. - FINANCIAL MUSCLE have we got time and money to invest in the development of markets and product adaptation?

2. - ORGANIZATIONAL CAPACITY do we count  on prepared people? is this an organized company to react quickly when a possible demand arrives?

3. - MARKET STUDY do we know the important parameters of the market that we want to go? 

 4. - SUITABLE DESTINIES, recommend those compatible and near markets but cultural, geographically and psychologically but "being smart" . We do not try to sell wine in France, at least, when want to begin

5. - NORTH or SOUTH developed markets or emergent markets? then it depends 

 6. - GREAT or SMALL, I am of whom think THINK BIG. That is, better we go to a market with potential that to one small one. But care, is necessary to know cua to them are our limitations. Itself we can sell p.e 10,000 wine bottles, we do not put in a chain that the first order already 10.000 

 7. - COMMERCIAL PLAN Once decided the objective market or markets is necessary to design a commercial plan: price, product, channel of distribution, equipment of sale, publicity etc and this clear one that what is used for Holland is not used for Switzerland for example

8. - TENACITY. Another word that can replace this serious PATIENCE,. I always say that there are 3 years to be present in a market (time that I consider from which an importer, distributor, client, store, or distribution channel anyone will twice think it before removing to us from its for whatever reason commercial catalogue) and 4 years but so that we have a presence and notoriety of mark between our habitual consumers and distributors.

 9. - CONCENTRATION or DISPERSION: that we preferred, to be in a few markets and to focus the distribution and marketing with greater pressure or but amount of markets but with smaller control? It will be subjected to our capacities, resources, objectives, philosophy, management of the market and necessity to establish one previously is present at strong or not before embarking new objectives.

10. - MORE MARKETS. It has to do with the previous points. As well as to extend the product range, to make white mark, to take representations from other companies, etc. For that it is necessary to have experience first because it is a natural step of optimization of the intangible ones that we have created by means of the value of the internationalization.

DOING BUSINESS IN JAPAN, cultural aspects to remember

Disturb them tattoos, avoid the number four and  frowned upon blowing your nose in public. Here's a short guide to surviving in Japan.
It is one of the most unique and enigmatic in the world. Anyone wishing to visit it without doing mistakes should leave the Western mind in the attic of the house. The Ask.com site has compiled a list of behaviors you should avoid in the Land of the Rising Sun.
If you ignore this advice there is less chance that you look like an ignorant tourist and unbearable.
1. Do not blow your nose in publicHe is considered a serious lack of education, especially if you take off the scarf on the subway or bus. If there is no choice, play the sly.
2. Prohibited point fingersThe Japanese are so respectful that may come to seem cool. I never hear them speak up and not support someone to point a finger, an attitude they find threatening. If you have that tendency, you know, his hands still in pockets!
3. Never give out with "cheers ( chin chin )Go out with a group of Japanese can be a hazard. It is polite to serve others rather than oneself. They will like you so careful with the booze. If you are going to offer, do not you dare do it with our classic 'chin chin' (for them means "male genitalia"). Use the word 'Kampai'.
4. Beware of slippersThe Nipponese go barefoot around the house, but have a habit of saving in the toilet slippers around the house. Do not be afraid to use them within the services. The problem is that you get confused and leave them on your feet when you leave. Can cause a short circuit in your hosts mental.
5. Avoid the number 4 
Japan is cursed because it is pronounced like the word for death (shi). The superstition goes so far as hotels and hospitals often move from the plant three to five.
6. Do not teach tattoosPublic baths are in vogue, but you should avoid if you have a visible tattoo on your body. Are typical of the Yakuza (Japanese mafia) and may be anxious to see Nipponese.
7. Do not pass food with chopsticksNot bad seen slurping noodles or chew food. However, socially it wrong to spend on sushi for a diner to another with traditional sticks (the gesture is reserved for funeral celebrations).
8. Eye with chopsticksNever leave chopsticks stuck into the rice bowl. This movement is reminiscent of ancestral offerings and use because it can be considered disrespectful.
9. Do not trash the cardThe Japanese are used to give your business card when you know. It's a crucial time. Nor wrinkle, nor will the goals in his pocket as usual. Most educated would catch it with both hands and put it in the portfolio with the greatest care.
10. Take your shoes offThe Nipponese will make descalzarte just inside their homes. You are warned: do not even think to pack socks with tomatoes.

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