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Export Marketing Plan

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Export Marketing Plan

  1. 1. Export Marketing Plan: S & K Farming Kristen Bak Stephanie Vincie Andrez Guillen Vay Nim MKTG 475 Monday 7pm
  2. 2. 2 Executive Summary 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.
  3. 3. 3 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
  4. 4. 4 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
  5. 5. 5 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.
  6. 6. 6 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 product lines are to one another in terms of use, production and distribution. 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
  7. 7. 7 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.
  8. 8. 8 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
  9. 9. 9 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 selling. 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
  10. 10. 10 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 Irvine, California. (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
  11. 11. 11 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.
  12. 12. 12 Bibliography Boriss, Hayley, and Diane Huntrods. "Citrus Profile - Agricultural Marketing Resource Center." Citrus Profile - Agricultural Marketing Resource Center. USDA Rural Development, Oct. 2013. Web. 25 Nov. 2013. <http://www.agmrc.org/commodities__products/fruits/citrus/citrus-profile/>. DENG, Xiuxin. "Fruit Production and Export of China." Centre of Sustainable Agricultural Mechanization, 2013. Web. 25 Nov. 2013 <http://www.unapcaem.org/Activities%20Files/A22/p50_FruitChina.pdf>. Doctoroff, Tom. Billions: Selling to the New Chinese Consumer. New York: Palgrave Macmillan, 2005. Print. Hedley, Mark and Matthew Harrison. "Entering Chinese Business-to-Business Markets: The Challenges & Opportunities." B2B International Entering Chinese Business to Business Markets The Challenges Opportunities Comments. B2B International, n.d. Web. 18 Nov. 2013. Hedley, Mark, and Matthew Harrison. "Marketing and Selling to Chinese Businesses." B2B International Marketing and Selling to Chinese Businesses Comments. B2B International, n.d. Web. 18 Nov. 2013. <http://www.b2binternational.com/publications/chinese- marketing-selling/>.
  13. 13. 13 Manuele, F. A. “Accident Costs Rethinking Ratios of Indirect to Direct Costs.” Professional Safety, 56(1), 39-47. (2011). http://search.proquest.com/docview/853140921?accountid=9840 “China Wireless Renews Contract with Professional Logistic Corporation to Increase Service Capacity.” (2004, Jun 18). PR Newswire. http://search.proquest.com/docview/444817106?accountid=9840 "Doing Business in China." CC-China--030211. N.p., n.d. Web. 25 Nov. 2013. http://export.gov/china/doingbizinchina/index.asp#P20_6511

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