Export Marketing Plan:
S & K Farming
MKTG 475 Monday 7pm
The goal of this project was to develop an export marketing plan to launch products into China
from Southern California. The name of the company we created was called S & K Farming and
the industry that we planned to pursue was agricultural, particularly the exportation of citrus
fruits. Our product line consisted of oranges, lemons, tangerines, limes and grapefruit. The
products are geared to Chinese consumers who are seeking a health conscious lifestyle.
The project tasks were divided into six sections: market segment, size of market, product mix,
market entry/promotional mix, localization requirements, and pricing/logistics.
1. Market Segment- After identifying our business, we had to research the best market
segment in China to export the citrus fruits. The country of Shandong was chosen due to
the large agricultural influence and prosperous citizen income.
2. Size of Market- With the population of China over one billion people and counting, S &
K Farming has the opportunity to solidify its place in this growing economy. S & K
Farming will be focusing on middle and upper income ranges.
3. Product Mix- S & K Farming will be exporting oranges, lemons, tangerines, limes and
grapefruit year round. We decided that the product line will consist of bulk and pre-
packaged fruit. Once S & K Farming becomes successful with its current product line in
China, the addition of fruit juices will be added in the future.
4. Market Entry/Promotional Mix- In this section, the market entry approach chosen was the
waterfall strategy. We also implemented various promotional mixes to reach our target
market segment which included internet and mobile marketing. Advertising, public
relations, and sales promotions were also included in the promotional mix.
5. Localization Requirements- The main focus for Chinese consumers is health and safety.
S & K Farming will have to continue to follow food safety procedures to remain a
reputable exporting fruit company.
6. Pricing/Logistics- S & K Farming will keep its price as low and fresh as possible. After-
sale support will be provided so that the retailers and/or consumers can contact them
whenever they have any questions or concerns.
I. Target Market
Due to China’s ever-growing population, their government is constantly looking for ways
to make ensure that there is enough food in circulation to feed the population. To make sure that
there in fact is and will be enough food for the entire population China not only grows and
produces their own food, but they have to import certain foods as well, especially produce. This
opportunity alone gives S & K Farming a way into their consumer market through exporting
oranges and other citrus fruits to China.
In order to get business with China, the S & K Farming company will highlight to China
the important elements that they bring to the table on their end of the deal. They will focus on the
fact that they will always produce and export enough oranges to meet China’s minimum quotas,
and that they will always deliver on-time to eliminate the worry of leaving the Chinese people
without fresh produce. As far as locations of exportation, S & K Farming will not necessarily
limit itself on where the oranges are exported to in China, but they will ultimately hone in on the
areas that will surely bring in the highest traffic, hence revealing their target market.
The markets showing most potential for S & K Farming are the southern province of
Guangdog, Hong Kong, and the country of Shandong. The transportation of U.S. fruit through
Hong Kong now accounts for the majority of all U.S. fruit consumed in China. Although Hong
Kong was named the number one U.S. fruit importer, S & K farming have identified Shandong
as the idea target market with the most potential due to the fact that it is an agricultural industry
with room to blossom. Geographically, Shandong is a coastal province of the East China region.
S & K farming will select Shandong as part of their target market because of the country’s focus
on agricultural production. Some of the other industries in Shandong include oil and foodstuffs
and pharmaceutical products. Being one of the wealthier provinces of China, Shandong’s
economic development focuses on large enterprises and they are also the top industrial producer
in China. Another part of S & K Farming’s target market will be Chinese consumers who are
seeking a health-conscious lifestyle.
Surveys show that consumers in China have a high level of awareness of food safety
incidents. S & K farming will target these health conscious people and attempt to create a bond
where the consumers can trust that they are getting a healthy and safe product. S & K Farming
will have success in exporting oranges to this consumer market in China especially since the
country has seen several scares involving disease ridden food. S & K Farming will highlight the
importance of being able to eat their oranges and not have to worry about getting sick from them.
S & K will have to invest heavily in quality control in order to avoid this crisis and be able to
guarantee the safety of their consumers.
II. Market Size
With a population of over one billion people and counting, S & K Farming has the
opportunity to solidify its place in this growing economy. With a middle class rapidly emerging
in China, our market size will be focused towards that growing market along with an emphasis
on citizens in the upper income range. In addition, we will also focus on selling our citrus fruits
to different regions within China. We plan to sell navel oranges in Northern China, in the
countries of Henan and Shanxi, since the navel oranges produced there are considered low grade
compared to those from Southern California. Dissecting the country by different types of
oranges, prices and packaging sizes will also allow us to expand our market size. Our major rival
to the market is only Florida, which leads the nation in orange production with a 63% market
share and California is second with a 34% market share. In 2011, the state of California exported
$155 million worth of oranges to China, according to California agricultural production statistics.
Since our products will be produced from California, we feel that this is the market that we need
to dominate to become successful.
Even though the exporting amount dropped 14% in 2011 (California Agriculture
Statistics Review), California was still able to export 10.9 million dollars’ worth of lemons to
China. In the United States, California is the largest producer of lemons, producing more than
92% of the nation’s lemon production (Agriculture Marketing Center). Just like with lemons, we
have a region in China that we would specifically want to market our lemons. The City of
Beijing is known as one of the most unique and dynamic cities in the world, however, China’s
domestic lemons have been known to resemble an orange more than a lemon. With a vibrant city
life and increasing residual income, this would be a great place to market our high quality
lemons. We will market towards 4 and 5 star hotels and restaurants that use them as garnishes for
food and drinks.
Even though China is the world leader in grapefruits, they still need to import from other
countries to meet the demand. With California ranking number two in the United States in
grapefruit production (approx. $50,000,000 worth), we have the supply. With 12,000 metric tons
of grapefruit imported in 2012, China seems to have the demand. Unlike our previous citrus
fruits, the S & K Farming’s grapefruit is not going to be marketed for taste benefits but rather its
health benefits. China’s growing middle and upper classes have become aware and attracted
toward these health benefits. In addition, we want to focus on selling our products to juice
factories, grapefruit accounts for 30 percent of Beijing’s juice market. Targeting wealthier cities
such as Beijing, Hangzhou or Chongqing should be ideal for this exotic citrus fruit.
By exporting our product mix to different regions within the country, we successfully
placed the product where it should be. Our market size is made up of demand and supply. High
income cities such as, Beijing and Hangzhou, provide us with our supply for high end
grapefruits, while northern China cities Henan and Shanxi are more susceptible for S & K
Farming’s quality oranges. In each case, Florida remains our greatest competition for market
share, but S & K Farming have set sights on a market size that stable and growing.
III. Product Mix
Along with launching of oranges into China, a few more products will be entered as well.
The product mix, also known as product assortment, refers to the total number of product lines
that a company offers to its customers. The product mix consists of four dimensions which
include width, length, depth and consistency. The width of a company’s product mix pertains to
the number of product lines that a company sells. Product mix length pertains to the number of
total products or items in a company's product mix. Depth of a product mix pertains to the total
number of variations for each product. Product mix consistency pertains to how closely related
S & K Farming will be exporting oranges year round. The width of the product line will
consist of oranges, both Navel and Valencia’s. Navel oranges will be available for exporting
from the months of November until May. Valencia oranges will be available for exporting from
the months of February until October. Included in the product line will be lemons, tangerines,
limes and grapefruit. Lemons, tangerines, limes and grapefruit will be available for exporting
year round. The width of the product line is five and the length of the product mix is seven. All
of these product lines can be marketed to the health conscious consumer who is looking to find a
guilt-free and healthy treat to eat.
The product line will consist of bulk and pre-packaged fruit. The oranges, lemons and
limes will have the option of the bulk fruit, where consumers can choose which fruit they want to
purchase based on size and color, and pre-bagged in quantities of six. The grapefruit and
tangerines will be sold only in bulk. The farmers at S & K Farming will ensure consistency in
fruit production by using soils from sand and adobe clay. The farmers will also protect fruit trees
against frost, wind and sunlight to ensure all fruits taste great and have consistent quality. The
farmers will also take in consideration the importance of water quality and use exact nutrients
measurements to grow the sweetest and juiciest fruits in all of Southern California. Once S & K
Farming becomes successful with its current product line in China, the addition of fruit juices
will be added in the future.
IV. Marketing and Promotional Mix
S & K Farming will use the waterfall strategy when entering the Chinese market. The
waterfall strategy is used when a product is launched in one country at a time and new markets
are entered only after sales are established in the previous market. S & K Farming is already
successful in Southern California and will be broadening into China. In China, there is changing
demographics, rising incomes and increased consumer spending which helps to make the
Chinese market look more attractive. The first objective for S & K Farming’s market entry
strategy will be doing some extensive background research on the sale of oranges and other
citrus fruits in the Chinese market. Next, S & K Farming will determine the best channel partners
for selling the fruits through an agent and register trademarks in China prior to any exporting.
Finally, S & K Farming will carry out due diligence on prospective partners and employees for
their market entry strategy. An indirect channel will be used that consists of the manufacturer, a
wholesaler, supermarkets, and the finally the consumer who will receive the product. S & K
Farming will sell all fruit to a selling agent who will sell to wholesalers. An indirect channel is
ideal for S & K Farming because it will relieve the company from worrying about problems of
distribution and shift focus to concentrating fully on production.
S & K Farming will use an intensive distribution channel where the major supermarkets
in Shandong will carry the fruits. An intensive distribution channel will be an effective
marketing strategy because the supermarkets in the area will carry all the products and
consumers will encounter the product in every supermarket they go to. The promotional mix for
S & K Farming will consist of advertising, public relations, and sales promotions. For the public
relations promotional mix, S & K Farming will be posting on Chinese language portals and
online websites. This will be an effective function because most Western news websites are
blocked in China therefore posting on Chinese websites is imperative to get the most exposure. S
& K Farming will also have language options on their website in English or simplified Chinese.
S & K Farming will also localize their website by using About Us and Contact Us pages, making
it easier for journalists to write stories about the fruit being imported into the country. For the
advertising promotional mix, S & K Farming will be using internet and mobile ads. The ads will
be created to involve appealing to the Chinese population’s public life because Chinese
individuals like to take a break from their mundane lives and socialize in the community
together. By appealing to Chinese public life, trust will be established. This in turn will allow the
fruit from S & K Farming to be portrayed as a global brand. S & K Farming will be using sales
promotion as a short-run tool to stimulate immediate increases in demand. Free samples and
coupons will be the main types of sales promotion that will be used. A table will be placed in the
entrance of every supermarket with an individual passing out free samples of the fruits along
with coupons to get discounted prices. The types of sales promotions that will be use include
informing, persuading and reminding the target audience of the products S & K Farming is
V. Product Modification or Localization Requirements
Since S & K Farming will be exporting a fruit into China, there are no localization
requirements that will be needed. The oranges will simply be exported in shipping boxes “as is”.
The only product modification that S & K Farming will face is the health implication that the
Chinese government stresses on all food imports. The Chinese government has had a long-time
ban on U.S. fruit imports due to their fear of diseases and pests. Thus, the main area of focus for
the Chinese consumers will be the health factor. Due to the past health scares the issue of food
safety is critical. S & K Farming will go to great measures with product checking and labeling to
ensure food safety to the Chinese consumers. To keep the consumers safe, the Chinese
government has placed strict rules regarding management of the food supply chain. The ability
of S & K Farming to build a reputation for food safety and quality for their citrus fruits is critical
to its success. Due to these new laws and regulations, S & K Farming will continue to adhere to
all food safety protocols and procedures to remain a reputable food exporting company.
VI. Pricing, Logistics and After-Sales Support Policies
Pricing is one of the most critical issues for our project. The price of oranges is $.99 cents
for five pounds of oranges, according to Superior Grocers. We can use that price for our
estimated average price. After in-depth calculation based on the estimated average price, figure 1
below describes the prices that will be charged.
Figure 1 represents calculations based on average costs to export citrus fruits to China from
(Per Pound) Domestic Influence
Domestic Selling Price $ 0.198 $ 0.198
Insurance and Shipping $ - $ 0.016
=CIF Cost $ - $ 0.214
+ Tariff (6%) $ - $ 0.01
= Landed Cost $ - $ 0.227
Imported Margin (25%) $ - $ 0.06
+ VAT 10% on full cost plus margin $ - $ 0.03
= Wholesale Cost $ - $ 0.312
Wholesale Margin 33.3% $ - $ 0.104
VAT 10% on Margin $ - $ 0.01
Retailer cost $ - $ 0.426
+ Retailer Margin (50%) $ - $ 0.21
+ VAT 10% Margin $ - $ -
= Retail (Consumer Price) $ 0.198 $ 0.639
Due to the fact we got the price from a domestic retailer, it is reasonable to expect a
reduction on the cost for the oranges up to 10% for the direct costs when we can get the products
from the farmers. OSHA indicates that "studies show that the ratio of indirect cost to direct costs
varies widely, from a high of 20:1 to a low of 1:1." (Manuele 2011). In order to reduce the risk
from currency exchange, we have decided to use the forward rate exchange rate even though we
know that Yen, Chinese currency, can be seen as a fixed rate currency. Payment will need to be
made by cash in advance for the 50% and/or open account of 45 day terms or following the
contracts. Another important issue is how we can transport our products from America to China.
Because this is our first move to the global market, it is necessary for us to select the best method
to move transport our products. After doing researches on logistics, we decided to cooperate with
Beijing Hezhong Inc. We decided to choose Beijing Hezhong Inc because during the past several
years it has attained significant performance in the logistic service field. It has over 100 transport
vehicles and two storehouses totaling 20,000 square meters. In order to provide better service to
its customers, Beijing Hezhong Inc. has built a national system of logistic networks and a private
logistic information system. In 2003, the Committee of China Food Industry awarded Beijing
Hezhong Inc. with recognition as a model base station of food logistic in China and model
training base station of food logistic in China. Next, we will need to have customer service
offices in both China and Irvine, California so that customers can reach us whenever they want.
Moreover, the agents in China will be responsible for not only the information but also the
payments from customers.
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