This allows for establishing production in Mexico to take advantage of low labor costs and seamless access to the U. S. And Canadian markets. The MERCURY agreement also provides similar ease of access among the South American countries of Argentina, Brazil, Paraguay, and Uruguay. These factors combined make Latin America a ripe market for Alistair Brands to enter. Initially, we entered the Mexican market and created five SKU that covered all four benefits to test the market for each type of benefit, as well as wanting to implement SKU that none of our competition was using, such as economy gel.
Our primary target markets were families with kids focused on economy, and younger focused on whitening. No one had tapped into the kid's market, SC we created a SKU to fill that demand, which also created a niche in the mark hat We dominated. Our primary channels Were the traditional and hyper- market, with a small section focused in web. The traditional channel had the largest number of outlets; thus, we allocated 25 sales people to that channel and it generated 12. 1 % of our sales.
Hypermarket had only one competitor and had the most growth potential, while the web had no real competition. We positioned ourselves in regards to pricing towards the lower spectrum with a 5% allowance. We set our MSP at double our production cost, still maintaining an economy price by being priced lower than our competitors. Striving to get our name out there in the initial period, we also spent SSL 50 million in promotion and $76 million in advertising and our ad campaigns focused on highlighting two of our SKU (younger/white and families/ economy).
Over the course of the simulation we entered three more Latin American countries (Brazil, Argentina, and Chile), built a plant in Brazil, left the traditional channel and entered the wholesale channel, changed SKU and pricing, discontinued and created new ads in all countries, tried to make our products standard in each country, exited a country that was not performing ell, and added new products to our existing product lines. After implementing and tweaking our marketing plan each year in the simulation, we ended the simulation with a BEE of 76. We saw a 6. % growth in unit sale 18. 3% growth in manufacturer sales, 29. 7% growth in gross margin, and 60. 3% growth in net contribution. We finished in fifth place with a cumulative net contribution of $400. 6 million. In the following few pages, we will demonstrate what our marketing plan was and how we implemented it in each year Of the simulation from beginning to end to effectively demonstrate owe our decision criteria led us to the position that we ended in. Situation Analysis Throughout the study, the opportunities and threats varied among the 1 0 decision making periods.
However, threats were mostly, actively controlled by a third party stimulator, while the opportunities describe our reaction to openings in the market for potential revenue. For example, a population product benefit without a SKIS to squelch the market need provided a clear opportunity for a new SKU with an updated promotional budget and campaign. The opportunities listed below detail the groups research for opportunities as well as the active response. After a forced entry in the Mexico market, one of the first opportunities was the cheap tariff and shipping costs from the US to Mexico. With a 0. % tariff, as a percent of CIFS and a shipping cost of approximately two cents per unit, entry into the market provided a strong base to grow our brand. There were also free trade agreements between the US and Mexico, making distribution, cost effective and permittivity seamless. With Brazil economic boom, it was impossible to ignore the specific opportunities in this market. With a surge in population, there began to arise product benefits that were not being met by competing products. Therefore, Alleles responded by implementing a SKIS that filled the family/healthy/ economy and size gap, as well as the kids market.
With space in the hypermarket and web. The Alleles group capitalized on these channels and spiked the promotional budget to raise product awareness and our resulting As the success in Brazil continued, Alleles constructed a second plant in period 3 that would offset the high shipping costs to the later entered, Argentinean an Chilean, markets, combined with a free trade agreement. Further, entry into the Brazilian, Argentinean and Chilean market was titivated by low transportation costs and tariffs. However shipping costs, from the home plant, did not prove a lucrative. With an opportunities analysis, a weakness analysis must follow.
Because Alleles was on a first mover into the South American toothpaste market, the company missed out on many of the advantages awarded to competitors, such as the ability to set standards concerning product expectation, the bill¶y' to educate the public about the product, and capitalize on unused distributors and suppliers. However, these weaknesses also provided an opportunity for Alleles to responds in self-benefiting methods. First, being a late entering competitor to an already established market, much of the risk was alleviated associated with introducing existing markets to new products.
There was also less of a need for an educational promotional budget. Alleles was allowed to piggyback off of the market penetration of early entry competitors. Another additive that come with entering a market post-establishment, is the ability to put pressure on existing products, forcing them to make adjustments to account increased market competitor. Some of the changes included, price reductions, increasing sales force and raising advertising expense, all efforts to attempt to solidify their, now threatened, position in the market.
The Alleles response to increased opportunity was to lesson dependence on a single market by entering others. Finally, market threats perpetually interrupted the opportunity response progression for Alleles. For example, after entry into Chile, the brand began to notice a reoccurring cost that could not justify the company's market activity. Therefore, it became necessary to pull out of Chile in period 8. Also, the highly competitive arena in Brazil and Argentina provided the need to constantly adjust product SKILL, racing, production, promotion and advertising to account for competitor success.
The largest threat in the South American toothpaste market proved to reside in Venezuelan and Argentinean markets. Venezuela entered a recession walkway through the simulation, which prevented entrance from Alleles, and Argentina began to experience the impending effects of a recession, however, we had already invested too many resources to pull out of the country, so we had to adjust our skews to account for the change in shopping habits. Market Entry International market entry decisions are complicated. Most companies must rye to balance the benefits of increased control and the costs of resource commitment and risk .
Factors such as international experience, firm size, market knowledge, and economic attractiveness must all be taken into account. Therefore, market entry is critical to Allele's success. Alleles is interested in entering Latin America. Due to its large population and a variety of trade enhancement actions (NONFAT, MERCURY) that have been established in recent years Latin America has great potential. Before choosing which country to enter we wanted to perform a competitive analysis and selected macro-level indicators, such as economic development, to examine.
We then weighed their importance. We also examined product markets, such as market size and the number of competitors. These can be seen in the country attractiveness analysis sheet in the appendix Of this report. After weighing all of our information, Alleles decided to enter Mexico market first. Alleles chose to enter Mexico through exporting the product from our home plant. Five Kiss were chosen to test the market for each type of benefit. We also wanted to implement SKU that no other competitor was using. Finally, we chose three distribution channels.
In this first market, and I being essentially a test market, Alleles was somewhat successful in establishing our name in the market. After being in Mexico for a year, we decided to use the 'X"tearful marketing effect" to enter Brazil. Alleles chose Brazil because of its similarities to Mexico. Using a slight product adaptation, four SKU and three distribution channels were chosen for Allele's entry into Brazil. Continuing with the "waterfall marketing effect" and utilizing straight extension, we next entered Argentina. At this time we had been established
Mexico for a few years and in Brazil for one. With moderate success in previous markets, Alleles entered Argentina with the same SKU and distribution channels utilized in Brazil. We also weighed the cost and benefit of continuing to export from the home plant against the risk of building a plant locally to our markets. Indicators weighed in favor of building locally. Therefore, Alleles began building a plant in Brazil. In the fourth year of marketing in Latin America we decided not to enter a new market. We wanted to focus our time and attention on Mexico, Brazil AR Argentina, as well as the new plant.
The plant also began to distribute to the Brazil and Argentina markets which lowered costs and increased profit. Year five did see a new endeavor for Alleles. We chose to enter the Chilean market further increasing our regional diversification.. The SKU and distribution channels were again a straight extension of the product. As we did in year four, years six and seven were spent focusing on our established markets. Alleles also took this time to increase capacity in our plant to accommodate the market need. Due to several issues, especially our sustained losses, Alleles exited Chill?s market.
We had been in the country for three years and we continued to set in the red. Furthermore, after examining the competition, we knew it would take us years to compete as market leader and the markets in Brazil and Mexico had much greater potential. Exiting Chile was the last "market entry/exit" decision that Alleles made. We spent the new couple of years focusing on the markets that we had entered and that were doing well. Overall, by utilizing the "waterfall" approach and using the money made in one market to help fund efforts in new markets, Alleles was successful with our market entries. Manufacturing location and sourcing
There were many factors to consider when our company was assessing the attractiveness of building a plant in another country. Political stability, shipping expenses, market economy, natural hazards and transportation were just a few indicators that needed to be examined. Understanding these influences enabled our company to make the right decision. Brazil is one of South America's most stable and prosperous nations. It's economy outweighs that of all other South American countries and Brazil is expanding its presence in world markets. Shipping costs from Brazil to it's neighboring countries is quite cheap.
According to Country Manager, hipping from Brazil to Mexico is the highest at . Therefore, We would continue to ship to Mexico from our home Plant and use the Brazilian Plant to ship to Argentina (. 020) and Chile (. 020). A local plant, which Brazil would be for all but Mexico, results in fixed costs from depreciation and the per unit (variable) cost of production. Country Manager cost analysis has Brazil at the head of the pack in terms of fixed cost (1 5% cost reduction). Furthermore, building in Brazil would result in a 0% tariff in regards to Argentina and Chile. Both of these indicators pointed favorably to building in Brazil.
Natural hazards are present in every country, however, it is an indicator that must be taken into account. Brazil is home to droughts in the northeast and frost in the south. These particular natural hazards aren't very severe in terms of affecting shipping further making Brazil our top choice in Plant location. Transportation was an important factor we took into account when deciding where to build Allele's plant. Having the means to transport/ship the product to market is essential. Brazil is home to 4,000 airports, 28,857 km of railways and 1 , 751 ,868 km of roadways and this doesn't take into account its shipping ports.
Because there are so many options for transporting goods, the cost of goods sold can be kept reasonable. Utilizing all of these indicators, it was clear that Alleles should build in Brazil. The plant's capacity was set to the projected unit sales in Brazil for the following period because we did not want to have a large excess which would lead to avoidable loss. However, we increased our plant production capacity by 50 million units (100 million units total) after one year. This was done to meet the demand of our past sales and accommodate for our forecasted sales.
We also began distributing to Argentina from our Brazil plant in effort f decreasing shipping and tariff expenses. As each period progressed we assessed the plant's capacity and adjusted accordingly, for example, we increased our plant production capacity again by 40 million units (140 million units total) in order to accommodate our entry into Chile. Once this capacity increase was accomplished there were no changes made to the production capacity for one year because our capacity perfectly lined up with the amount of units sold in Chile, Argentina, and Brazil.
However, the following year we increased production capacity by 15 million units to accommodate projected unit sales and a further 55 million units, eased on our need forecast for the next period, the year after that. With Alleles exiting Chile in year eight, we did not increase our plant capacity again. Building our plant in Brazil proved to be a success. Alleles was able to put pressure on all other competitors, especially other domestic companies. This helped drive share of mind and sales leadership in Brazil - enabling us to more effectively compete with the local and regional competitors which were two of the market leaders.
Target Marketing Strategy Target marketing strategy was an important part to make Alleles achieve success when we enter and explore a new country. In target marketing strategy, we have to determine our main potential customers, try to attract attention from them, raise our target customers' interests, convince our customers' desires and lead our customers purchasing. Therefore, we had used MIMIC and AID (Attention, Interest, Desire, Action) model to help Alleles make a right target marketing strategy for each country that we entered. Mexico Alleles chose enter Mexico market first.
Based on data provided from cross- section decision analysis in Mexico, price was customer most care about with 50. % weight and product effect was second with 27. 6%. For demographic, the families was most demographics population which was 55. 9% Of customers with 62. 2% of demand. The younger was second largest demographic population (27%) with 23. 7% of demand. See demographics with benefits, families/economy are largest market with 34. 6%pop and 36. 7% demand; younger/white are second with 6. 9% pop and 10. 2% demand. By benefits view, the economy and white are majority benefits that Mexican customers would like to buy.