The main distribution centers in Malaysia focus in all pharmacy chains, departmental stores and beauty retailers. The company is envisaged to transform from a local enterprise into a multinational rand company with growth plan to tap into overseas market. The company has a headquarter base in Cubans Jay Industrial Park with total 80 employees. The advantage of Avery Wellness products are HALL accreditation and this gave the company a strong market presence in Muslim segment.
The company with Its marketing and branding strategy by leveraging on local Muslim celebrity as ambassador to successful help the brand enters the Muslim market. 2. 2 Vision and Mission Avery Wellness is visioning to capture the South East Asian market and to emerge as a dominant company in providing skin care and sun care solution for all consumers. The mission of Avery Wellness is to provide continuous Innovative and reliable product to overcome all man and woman skin problems with a product certified hall accreditation. 2. Sales Revenue Avery Wellness average sales revenue for the past 3 years from 2010 to 2012 mainly contributed from 3 major brands which are Ageless solution, Clear & Clean and Sun Safe”* (Table 1). The percentage of contribution is 46%, 20% and 34% respectively. The Sun Safe”* brand has two main sun care products which are Sun Safe”* Face and Sun Safes Body. Currently the market share for these two products in sun care category is more than 35% in Malaysia. Table 1: Sale Revenue on Skin Care Brand for Avery Wellness Ageless 5. 5 5. 8 6. 0 5. 7 Clear & Clean 2. 4 2. 5 2. 5 2. 47 sun safes 4. 2 4. 3 4. 3 4. 27 2. 4 International Market Entry Objective In view of sales revenue stagnancy from year 2010 to 2012, and increasing of fixed and variable cost yearly such as cost of goods sold, salaries and wages, interest expenses and promotion, thus impacting in net income yearly. In fact, there is significant descent of net profit from 11. 4 % to only 9. 9% in year 2012 (Appendix 1). In order to sustain business growth and achieve imperative profitability, step to enter international market is essential.
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In particular, sustained economic growth has been experienced in emerging economies, which have become a source of expanding market opportunities and are currently underpinning the global recovery (Aziza Chew Sense et al, 2010). Malaysia policy of governance encourages local SEEM to go International. In the effort to encourage Seems to go global, SEEM Corp. has introduced the National Mark of Malaysia Brand which is a certification process, audited and monitored by Scrim.
Through this initiative, Malaysian Brands are developed not Just for the local market, but with the intention that they would be good enough to entreat international markets (Mood Rethreaded Maxim, 2012) In addition, the SEEM Master plan (2012-2020) has also outlined a High Impact Programmer – Going Export Programmer that will focus on addressing challenges faced by Seems on entering new markets overseas, which include high upfront costs and the lack of detailed knowledge about the markets and local competitors (Charles Fernando, 2013). 3 Country and Market Entry Analysis 3. Country Analysis Indonesia, Thailand and Singapore are selected as the potential markets for Avery Wellness’s expansion plan to sell HALL accreditation sun care products. In order to minimize business failure and find out the best of the country market, three candidate markets (Indonesia, Thailand and Singapore) which are the most nearest country to Malaysia are chosen to make comparison for the first step of Avery Wellness to success. The selection of oversea markets is a vital issue for a company, this is imperative as the international business environment is turbulent and more uncertain as compared to domestic market.
Therefore, fully identify the potential opportunities cab be exploited while minimizing threats and risks (Farina Hashish et al, 2010). 3. 1. 1 PESTLE Analysts n the political, economical, social, technological, environmental and legal factors that may influence the business operation for the company (Kettle 1994). A company must be aware of many considerations such as differences in language and customs as well as political and legal when doing business internationally (Fares et al, 2002).
Table 2: Comparison of PESTLE on Indonesia, Thailand and Singapore Analysis Factor Country Indonesia Totalitarianism’s Political & Legal(tax) Doing business in Indonesia is complex and time consuming. This is because of negotiation through the regulatory and industrial landscape. Corruption in the country is active at all levels. Skin care Import duties and taxes of 10% are applied in this country. Thailand is an export-dependent country. A total of $ 223 billion worth of goods in 2011 were exported, accounting 69% of its GAP. Corruption and lack of transparency still a major concerns especially in procurement tender.
Thailand average applied tariff rate is 11%. Highest tariff rates applied to imports competing with locally produced goods. Skin care is 35% of import duties and taxes. Singapore is a free port country. More than 99% of all imports enter Singapore duty-free. It is a liberal trading regime. Singapore is a strong intellectual property protection country with virtually no corruption. Singapore levies a 7% Goods and Services Tax (SST), including skin care products. Economic (Gross Domestic Product) Indonesia is the largest population with 240 million in Southeast Asia.
GAP growth above 6. 5% in 2011 and projected to remain above 6%. GAP per capita of $3,500.. The total population in Thailand in year 2012 is 67 Million. Thai economy grew only 1% in 2011, as the devastation caused by severe flooding that happened yearly in the country. GAP growth rate only 5. % in year 2012 and estimated will be above 7. 5% in year 2013. Total population in in year 2012 is 5 Million Singapore economy expanded by 14. 5% in year 2012, become the second fastest growing economy in the world. GAP is expected sustainable growth of 4% in 2013.
Social & Cultural Rich natural resources country with very strong domestic demand. Bases is a common speaking and language used in Indonesia. Indonesian labor cost is relatively low by compare other Southeast Countries. Consumers are extremely price-conscious; prefer lower prices over product quality. Thai and English are the most common spoken language in the country. Labor cost is moderate, where unemployment rate in 2010 only 1% of the labor force. Most citizen and people are highly educated. English is common language for business and education.
Local labor laws are flexible. Environment Infrastructure and service networks still under developed in the country. Most of the area are rural and with more than 180 islands in the country. Severe flooding occurred yearly. It caused thousands of homes were inundated and many business operations affected. Singapore levies high excise taxes on motor Technology Mobile internet is now emerges in the country, providing opportunities to o business through internet. E-commerce technology enables Thai to support “business to business” collaboration.
It is another technology upcoming trend in the country. Telecommunications and Internet facilities in Singapore are extremely well developed. Resource: 2012 Country Commercial Guide for U. S. Companies (http:// whom. State. Gob/) 3. 2 Selection of Country Base on the PESTLE analysis (Table 2), Indonesia will be the best country as the target market of Sun Safe expansion plan outside Malaysia because of its the excellent overall performing ability, widely accepted culture, comparably higher economic Roth with less interest rate, and moderate corporate tax rate.
What’s more the fact that Indonesia is the largest population growth country which means a vast room for expansion has make it a more attractive market than Thailand and Singapore. 3. 3 Type of Entry mode The expansion into Indonesia market usually could be achieved by indirect investment such as exporting, licensing, trading, Joint venture and direct investment. Export Trading Company acts more like an agent to pay the manufacturer for the exported products and thereafter sell the product to interested buyers.
There is an advantage to help securing foreign market share on behalf of its clients (Farina hashish et al, 2010). Avery Wellness is recommended to start its business by appointing a local trading and distribution company in the targeted sun care market. The reasons of appointing a trading company are 2 folds: First of all, risk can be transferred to the appointed local company in the new market development. This is because risks still exist since such market expansions come along with potential failures besides profit makings.
Secondly, a well established local trading and distribution company has been proved successful pool their resources such as experiences, technologies and capitals together to expand the business in a fast speed. 3. 4 Trading Company Analysis and Selection In order to minimize the rate of failure and ensure the success entry to Indonesia market, an audit to local well known trading companies is made to compare the background of the company, services provided, distribution channel coverage and the reliabilities of the company (Farina Hashish et al, 2010).
There are 3 local trading companies which are PIT Dos In Roar, PIT Amah Jay Escondido and PIT Fremont Amusement Trading that already well-established in Indonesia (Table 3). PIT Dos In Roar is the best trading company of Avery Wellness because of its market expansion in Indonesia that covers a lot of states and operational experiences in the business. Table 3: Comparison of Trading Companies in Indonesia PIT Dos In Roar (DEN Distribution) PIT Amah Jay Escondido (MS) PIT Fremont Amusement Trading (.NET) Company Background PIT Dos In Roar (DEN) was established in year 1963. The company is now a truly professional distributor in the country.
PIT Amah Jay Escondido (MS) is a 15 years old trading company in Indonesia and primary business is exporting fast moving consumer goods to Indonesia Borneo and Sumatra island, and other part of SEAN countries. PIT Fremont Amusement Trading Sony, Panasonic and LEG in Indonesia. The company was established in 1985. Scope of Services Sales and distribution of pharmaceutical products, consumer products, medical supplies and equipment including after sales service. Logistics services including importation, storage, shipping and inventory management Export and distribution of consumer goods.
Trading and distribution of home appliances. Distribution Channel DEN has 30 branches and 19 sub-branches spread out all over Indonesia: Java Island (greater Jakarta, west Java, central Java, east Java), Bali & NASA Teenager, Sumatra, Claimant, Salaries, Capybara. MS distribution is mainly in the sub-urban and rural areas of Indonesia especially in Sumatra island. The 8 sales offices of MS are for exporting businesses. FONT has the largest distribution coverage across the 3 main islands of Indonesia – Java, Sumatra and Borneo.
The business model of FONT is wholesaling of the home appliances. Business License Trading license with ability to do product registration as currently distributing consumer health supplement products. Trading and Export license but MS only experience in trading locally produced consumer goods. Trading license on home appliances Current Business Partners DEN is one of the trading company for international consumer goods of Milliner, Kraft Food and leading local beauty products Mustier Rata and international L’Oreal and medical products B. Braun, Innovations, Sheering Plough.
Yummy Food Tama is the largest consumer goods in Indonesia with brands such as Indore and Yam Yam instant noodles. MS is the sole trading company. Wholesaling partners for Sony, Panasonic and LEG. FONT also is sole distributor of Yamaha heavy equipment in Indonesia such as water pumps, and power generators. Source: Indonesia Business Directory, www. Sandiness. Com 4. Market and Industry Analysis 4. 1 Porter’s Five Forces Analysis Competitive rivalry within an industry An industry could be defined as substance between the established competitors and the substitute products (Porter, 2008).
And the competitive rivalry exists between the established competitors in the same product segment and it is the center of the Michael Porter’s five forces model. Sun care industry in Indonesia, though there are many large corporations such as Beresford and Airframe Cosmetics, but the industrial competitive rivalry would not obviously affect Avery Wellness as there is till a large potential growth of sun care in the country. Bargaining power of customers The bargaining power of the customers also poses significant influence over the business behaviors within the sun care industry.
Such forces usually could be seen in term of forced down prices, demand for higher-quality or more services and pit rival organizations against one another (Porter, 2008). However, most customers with demand in effectiveness product. Threat of new entrants The threat of new entrants comes is quite high due to the low entry barriers in Indonesia. This is because Sun Care products can be imported easily into the country f only 10% import taxes imposed. Besides, Indonesia with population of 240 million people among Southeast Asia country is attracted with all multinational company to tap into this large resource country.
Bargaining power of supplier Collaborations with manufacturer Follow Me Industries Sad Bad in Malaysia has given Avery Wellness a quality assurance and stability supplied of innovative products. Base on the excellence working relationship for more than 20 years with existing cooperation, it should be possible for Avery Wellness to control such increases in bargaining power from suppliers due to the increasing demand of reduces during the execution of the Indonesia market expansion plan.
Threat of substitute products The threat from substitute products to sun care products is very less thanks to the ingredients of sun reflective function named titanium dioxide and zinc oxide. This is because the 2 main ingredients only can be used on sun protection purpose. 4. 2 SOOT Analysts SOOT analysis used to summarize audit which concentrates upon main issues for objectives, strategies and tactics. The audit consists of internal current strengths and weakness that largely controllable, and also external future opportunities and threats hat unpredictable (Lancaster & Massing, 2011).
Table 4: SOOT Analysts Internal Strength: -Both have been establishing for more than 20 years and expertise in product sales and marketing strategy. -Hall certification for both sun care products help to gain more Muslim consumers which is occupied of 65% of Malaysian populations and 95% of Indonesian populations. Weakness: -Avery Wellness as a Distribution company in fact fully reliable on Follow Me as a Manufacturer to provide sun care product. -Market development solely dependent on PIT BAN as trading company without involving in any management and strategic planning.
External Opportunity: -Indonesia population estimated to be more than 250 million with 58% live in Java island. -Similar tropical country with sunny weather almost throughout the year to promote the using of Sun Care product. -Common language and culture between Threat: -Sun Care products can be imported easily into Indonesia because of only 10% import taxes imposed. -Plenty of existing premium Sun Care brands such as Clique, Clarions, Bothers are entering Indonesia market. -Sun protection awareness is still primarily high only in Jakarta district.
But the sub-urban and rural populations are very lacking of health unconscious towards sun protection. 4. 3 Total Market Size and Share of Sun Care Despite the market size of Sun Care in Indonesia relatively low compare to other country such as Malaysia, Singapore and Thailand even though at same currency exchange, whereby Indonesia population is 5-10 times larger compare to these countries, but still it shown the growth of sun care market ascent almost double from 1 1. 3 ban Rapid to 20. 2 ban Rapid within 6 years from 2007 to 2012 (Table 5). Positively, a sun care product is expected to have greater growth rate in Indonesia market.