INTERNATIONAL GLOBAL MARKETING REPORT-BEGAWAN SOLO SINGAPORE INTO HONG

KONG MARKET
by Student’s Name
Course Name
City/State
Contents
TOC o “1-3” h z u HYPERLINK l “_Toc375301958” Executive
Summary PAGEREF _Toc375301958 h 3
HYPERLINK l “_Toc375301959” 1. Introduction PAGEREF _Toc375301959
h 4
HYPERLINK l “_Toc375301960” 2. International Marketing Situation
Analysis PAGEREF _Toc375301960 h 4
HYPERLINK l “_Toc375301961” 2.1 External Environment PAGEREF
_Toc375301961 h 4
HYPERLINK l “_Toc375301962” 2.2.1 PESTLE Analysis PAGEREF
_Toc375301962 h 5
HYPERLINK l “_Toc375301963” 2.2.2 Porters 5 Forces PAGEREF
_Toc375301963 h 7
HYPERLINK l “_Toc375301964” 2.3 Internal Environment of company
PAGEREF _Toc375301964 h 9
HYPERLINK l “_Toc375301965” 2.4 SWOT Analysis PAGEREF
_Toc375301965 h 10
HYPERLINK l “_Toc375301966” 2.5 International Marketing Implications
PAGEREF _Toc375301966 h 12
HYPERLINK l “_Toc375301967” 3.0 International Marketing Plan
PAGEREF _Toc375301967 h 13
HYPERLINK l “_Toc375301968” 3.1 International Marketing Objectives
PAGEREF _Toc375301968 h 13
HYPERLINK l “_Toc375301969” 3.2 Target Market PAGEREF
_Toc375301969 h 13
HYPERLINK l “_Toc375301970” 3.3 Review of Existing Strategies
PAGEREF _Toc375301970 h 14
HYPERLINK l “_Toc375301971” 4.0 Recommendations for Improvements
PAGEREF _Toc375301971 h 15
HYPERLINK l “_Toc375301972” 4.1 Corporate Mission PAGEREF
_Toc375301972 h 15
HYPERLINK l “_Toc375301973” 4.2 Personnel Resources PAGEREF
_Toc375301973 h 15
HYPERLINK l “_Toc375301974” 4.3 Financial Resources PAGEREF
_Toc375301974 h 15
HYPERLINK l “_Toc375301975” 4.4 Financials PAGEREF _Toc375301975
h 16
HYPERLINK l “_Toc375301976” 4.4.1 Marketing Expenses Budget (for the
next one year) PAGEREF _Toc375301976 h 16
HYPERLINK l “_Toc375301977” 4.4.2. Sales and Revenue Forecast
PAGEREF _Toc375301977 h 16
HYPERLINK l “_Toc375301978” 4.5 Contingency Planning PAGEREF
_Toc375301978 h 17
HYPERLINK l “_Toc375301979” 5.0 Conclusion PAGEREF _Toc375301979
h 17
Executive Summary
The paper has focused on international expansion of Bengawan Sole into
Hong Kong. It is a Singapore based private owned company, which produces
a range of products including cookies, kueh, cakes, buns, as well as
mooncakes. The company targets middle income customers of all ages.
External environment, which includes the PESTEL analysis of Hong Kong,
has been discussed. From the analysis it has been evidenced that the
company stands to gain from the favorable environment of the country.
Besides, the paper has provided an analysis of the company’s SWOT
analysis, Porters 5 forces, as well as the internal environment. The
success of Bengawan Solo can be linked to its favorable marketing
strategies including the 4p’s. The combination of the 4p’s and
foreign direct investment will enable the company to enter successfully
in the new market. Sales and revenue forecasts, as well as marketing
expenses budget have been provided. Implementation and control of
various functions have also been discussed.
Bengawan Solo is a bakery chain based in Singapore. The company was
established in 1979 by Anastasia Tjendri-Liew and since then, it has
been recording upward growth (Chua 2010). It has been evidenced that
Bengawan Solo is amongst the most thriving bakeries in Singapore based
on the quality of its products, good image and reputation. It was
established as a single shop and currently, it has grown to more than 40
outlets country-wide. Bengawan Solo makes a wide range of products such
as pastries and nonya-style cakes including cookies, kueh, cakes, buns,
as well as mooncakes (Bengawan Solo 2013). The products are made at the
company’s factory based at 23 Woodlands and then distributed to its
stores.
Since 2003, plans of expanding the company internationally have been
ongoing. Nevertheless, the need to do a thorough research regarding the
best markets, quality control, and production issues at foreign trade
fairs has slowed the plans. Most of Bengawan Solo clients are tourists
from Malaysia, Japan and Hong Kong (Chua 2010). This paper focuses on
international expansion of Bengawan Solo into Hong Kong market. These
nations are the initial focus for global expansion. The report provides
an analysis of external and internal environment, as well as an
international marketing plan.
International Marketing Situation Analysis
2.1 External Environment
External environment focuses on the external factors affecting the
company. These include PESTEL and the Porters 5 forces. Examining the
major concerns in the external environment is significant in that it
would offer a greater understanding and evaluate Bengawan Solo position
in its relevant businesses (McDonald, Burton & Dowling 2002).
2.2.1 PESTLE Analysis
Political
Hong Kong has a stable political and regulatory environment (Tsang
2007). Its general risk rating is 81.74 which mirror moderately hushed
risks. The nation was ranked forth in terms of political risks.
It is a democratic nation that does not tolerate corruption at all
costs. This provides a good environment for business operation.
Economic
Hong Kong is among the most affluent countries in the globe. It is
categorized by World Bank as a high income nation. The Gross Domestic
Product rose 0.50% in the initial quarter of the year 2013 as compared
to the preceding quarter.
The nation has stable and practical macro-economic policy which has
ensured its continual success in sustaining a high degree of economic
freedom internationally (Farhoomand 2005).
Economic vitality has been enabled by the country’s openness to
international investment and trade. It is a free market economy with a
3.96 percent average growth in economy annually.
Hong Kong holds collaborations opportunities for food business such as
Food EXPO 2013, the HOFEX 2013, and the 11th Hong Kong Food Festival
2013, and this is good for business.
Huge market for Bengawan Solo due to high population density.
Tax rates are low and competitive and this promotes vibrant business
activities. For instance, low incorporate tax offering a favorable tax
environment for investors. Presently, incorporated businesses pay a tax
of 16.5 percent whilst unincorporated ones pay 15 percent. Investment
and capital incomes are not taxed, whilst dividends are not liable to
VAT or profit tax.
Technological
Hong Kong has an easily affordable transport system. Various modes of
transport are used including Mass Transit Railway, Ferries, Trams,
Taxis, and buses.
Bengawan Solo employs technology with an aim of enhancing the production
procedure. They include Japanese encrusting technology, depositors and
air-mixers, rotating-steaming conveyor system, and custom-made revolving
ovens.
Legal
Hong Kong has a stable legal environment. The country has an effective
judicial system that sustains the rule of law (Tsang 2007).
To ensure food safety, there are strict food laws and legislations in
Hong Kong whose purpose is to reduce the probability of exposure of food
linked diseases by observing cleanliness standards. All food businesses
are required to obtain a license from the government.
Food businesses are required to take precautionary measures against
invasion of the premises by mice, birds, rats, and insects. Food for
sale should be stored appropriately to prevent them from being
contaminated.
Environmental
Environmental issues are a major concern in Hong Kong.
Companies are required to observe environmental safety during their
daily business operations.
To ensure company compliance, various laws have been enacted. Social
Hong Kong consumers would purchase Kuehs and cakes for their friends.
The Straight Times highlights Hong Kong celebrities as fans of Pandan
Chiffon Cake made by Bengawan Solo.
In a nutshell, Hong Kong has a stable political, economic, social,
technological, environmental, and legal environment. It is characterized
by low political risks, favorable taxation, growth in GDP and CPI,
population growth, as well as good infrastructure.
2.2.2 Porters 5 Forces
Intensity of Rivalry
The bakery industry is characterized by extreme rivalry.
Bengawan Solo faces direct competition from already established
companies including BreadTalk, neighborhood bakeries, Prima Déli, and
Polar Puffs and Cakes.
These rivals offer the same products at competitive prices. For
instance, neighborhood bakeries provide its products at considerably
cheap prices as matched up with other bakeries. Threat of New Entrants
The bakery sector is characterized by low entry barriers. This implies
that there is a high threat of new entrants as it is easier for them to
enter into the industry.
High entry level is made possible by low capital expenditure, presence
of product differentiation, and easily accessible distribution channels
(Kurtz 2010). With reference to this, Bengawan Solo stands to face major
competition from new entrants.
Bargaining Power of Buyers
Buyers have high bargaining power in the bakery industry since low
costs of switching are incurred.
Generally, there is high price elasticity of the demand of food (Kurtz
2010). This means that a small amplification in price would make
customers to modify their preferences and tastes therefore, switching to
alternatives and cheap products.
High buyers bargaining power means that Bengawan Solo should be
sensitive and careful in its pricing. Bargaining Power of Suppliers
Suppliers bargaining power is low in the food manufacturing industry,
based on the fact that there exists numerous suppliers.
Considering that bakeries are their main clients who buy in bulk, they
are able to suppress suppliers bargaining power.
Furthermore raw materials provided by suppliers including eggs and flour
are similar, and this lowers their bargaining power further.
Threat of Substitute
There is a high threat of product substitute in the bakery sector. As
aforementioned, the cost incurred by customers whilst switching to
alternatives is low.
Besides, products prices are relatively low.
Substitutes encompass takeaway snacks opted for by customers. These may
be obtained from snack joints including Mr. Bean and Jollibean, and Old
Chang Kee.
The bakery industry is characterized by severe competition as there is
high intensity of rivalry and high threat of new entrants. Besides, the
bargaining power of buyers is high, whilst the threat of substitutes is
high. Nevertheless, the supplies have a low bargaining power.
Considering these factors, Bengawan Solo is operating in a highly
competitive environment.
2.3 Internal Environment of company
The financial record of Bengawan Solo has been pleasing. With continual
business success, the company turnover rates since its established has
been rising. In 2000, the turnover was approximately S$30 million, which
rose to S$36 million in 2006 (Chua 2010). In 2008, sales turnover was
S$43 million. It is evidenced that every year has been characterized by
a growth rate of approximately 10 percent to 15 percent over the past
decade. The production capacity of the bakery was doubled in 2009 after
the establishment of a second factory. The cost of the establishment
was S$5.2 million. The company does not have bank borrowings or debts,
and it has evidenced continued increase in profitability.
The high brand equity and provision of high quality products are some of
the competitive advantages of Bengawan Solo. It is believed to be a well
recognized Singaporean brand identical with high quality cakes.
Bengawan Solo has more than 40 outlets national-wide and still sustains
the natural homemade quality of its products. It has a factory based at
23 Woodlands where the products are made and then distributed to the
outlets (Chua 2010). These, together with a great number of human
resources are some of Bengawan Solo resources. The company uses fresh
and fine ingredients and does not add artificial preservatives in its
products. Bengawan Solo dedication and passion to quality and great
taste has enhanced its image in addition to attracting foreign tourists
looking for exceptionally Singaporean first-class food (Superbrands
2002). These forms part of the company core competencies.
2.4 SWOT Analysis
Strengths
The company has entered in Singapore’s list of Enterprise 50. These
are top private owned companies.
Strong brand name- it is among the key recognized brands in Singapore
Provision of innovative and new products whilst still maintaining
traditional recipes, and new outlet styles.
Continued increase in profitability
Has a good reputation in the production of high quality products, and
the employment of quality ingredients
Wide array of product offering- the company makes more than 50 different
kinds of kueh and cakes whilst sustaining a handmade component to
preserve traditional taste
Employment of technology in order to enhance the production procedure.
Such technology encompasses Japanese encrusting technology, depositors
and air-mixers, rotating-steaming conveyor system, and custom-made
revolving ovens.
Weaknesses
The company relies heavily on the bakery division and Singapore market.
Relying on a single geographical region and on a single sector is risky
considering that the company contains its risk on a solitary segment.
High operating costs due to the use of expensive fresh ingredients
High priced products as compared to other companies.
Kuehs and cakes are deemed to be unhealthy foods.
The bakery sector depends on fashion and modifying customer preference.
Bengawan solo’s focuses mainly on the older generation, thus obtaining
a small customer base.
Opportunities
Growth in food business and the amplification of travelers in Hong Kong
offers a good basis for the company to enter the Hong Kong market.
Hong Kong is one of the customer base for Bengawan solo’s products as
many tourists travelled to Singapore to purchase the company’s
products.
Hong Kong inhabitants, especially the busy one, have a high preference
of ready made food.
Accelerating wealth and household income in the Asian region, including
Hong Kong, due to the growth of economy. Threats
Increased competition from existing bakery chains in Hong Kong as well
as new entrants including saint honore and Maxims.
Kuehs and cakesr are deemed as unhealthy foods thus, younger generations
may prefer healthier foods.
Business may be affected by economic recession whereby, customers may
prefer heavy meals so as to save.
From the table above, it is evident that the strengths and opportunities
of Bengawan Solo surpass its weaknesses and threats. The key strengths
encompass strong brand name, production of wide array of products, and
increase in productivity. The opportunities encompass huge customer base
and accelerating household income. On the other hand, the weaknesses
encompass high product prices, high operating costs, and unhealthy
products. Finally, the major threat is high competition from already
established and new companies in Hong Kong.
2.5 International Marketing Implications
Considering the threats in the Hong Kong market, it is significant for
Bengawan Solo to be cautious. Besides, maximizing on the available
opportunities would ensure success of the company. The entry would
enable the company to reach a wide range of customers, spread its risks
in other geographical areas, and increase its market share.
Nevertheless, there is a threat of high competition considering that
there are other bakeries companies in Hong Kong.
3.0 International Marketing Plan
3.1 International Marketing Objectives
International expansion of businesses is extremely beneficial. The
marketing objectives of expanding Bengawan Solo into Hong Kong market
encompass:
Increase in market share by 15% in the next one year
Increase in profitability by 15% in the next one year
Sales increase by 20% in the next one year
Boost in customer base by 20% in the next one year
Opening two branches in Hong Kong at the end of one year
Becoming a globally recognized confectionary company
Opening 10 shops in Hong Kong at the end of 3 years.
3.2 Target Market
Customers can be targeted in terms of demographic factors which include
age and income. The bakery industry in Asia is projected to grow by
10-15% in the subsequent years (Delios 2012). As a result, this will
offer a wide market by increasing the customer base. Bengawan Solo will
target middle class adults in Hong Kong who have the purchasing power.
In the past few years, Asian middle class has been rising considerably
as per a study conducted by Deutsche Bank Research. With the increasing
wealth of the Asian region, household incomes are projected to increase.
This would increase customers’ purchasing power and besides, they
would be more willing to spend on high quality products.
3.3 Review of Existing Strategies
Currently, Bengawan Solo is using the marketing mix as its marketing
strategy (Hephaestus Books 2011). It comprises of the 4p’s which
include price, product, promotion, and place (Rajagopal 2007).
Price is the amount at which the company sells its products. Bengawan
Solo will adopt variable cost pricing strategy. The pricing of products
allows considerable generation of profits and revenue, enabling
continuous business survival. This strategy is applicable as the company
is targeting middle income families.
Bengawan Solo sells a wide array of products. It makes more than 50
different kinds of kueh and cakes encompassing cookies, kueh, cakes,
buns, as well as mooncakes (Hephaestus Books 2011). The company will
adopt a product communication adaptation strategy while entering Hong
Kong market. The novel Cantonese name will be incorporated in its
product design and branding to enhance brand selling. Advertisement
approach will be used to promote promotional communication.
Promotion strategies are believed to be the most significant in a
business operation (Kurtz 2010). Bengawan Solo will use a wide range of
promotion strategies including advertisement, public relations, sales
promotion, direct marketing, and personal selling. Advertisements in
digital media such as social media, magazines, and electronic media such
as TV will be utilized. The TV stations encompass TVB and Asia TV. Hong
Kong has 56 Internet providers, while the number of Internet users has
been rising in Asia. Use of social media including Twitter and Faceook,
together with the company’s website, Bengawan Solo can be able to
market its programmes.
Place is the last marketing strategy used by the company, and it entails
the distribution methods used by the company to distribute its products.
Kowloon is the setup location that will be targeted by Bengawan Solo due
to various reasons. It is a recognized tourist attraction with tourist
hubs such as Tsim Sha Tsui, the name is favorable, and it is a “nine
dragons” in Cantonese. The availability of Panda leaves in Kowloon city,
and high population are other factors considered for the location. These
will offer supplies and a huge market for the company’s products.
4.0 Recommendations for Improvements
Bengawan Solo will enter the Hong Kong market through ownership (Barkema
& Vermeulen 1998). According to Anderson & Hubert (1986), ownership is
recommended over other modes due to various benefits. For instance,
ownership would allow the company to have better control of product
quality to match the company corporate mission on freshness on the
cakes. Another benefit of ownership is that Bengawan Solo would have the
capacity to communicate and take entire control of the operations of the
company.
Other benefits of ownership include corporate mission, personnel
resources, and financial resources as explained herein.
4.1 Corporate Mission
Offering quality products and sustaining improved standards and
freshness are some of the company aims. Bengawan Solo’s policy entails
buying fresh ingredients, and sustaining continuous production basis. In
order to attain this, ownership is the best entry mode. This is based on
the fact that other entry modes such as joint venture and franchising
allow limited control over product quality and raw materials, thus
difficult to control. This may in turn impact the matchless taste of the
company’s products.
4.2 Personnel Resources
Bengawan Solo should use local communities in Hong Kong to obtain
suggestions and feedback before launching a novel product. Through this,
the company will not only market its product, but will also comprehend
the local needs of the people in a better way. Ownership will offer a
good platform for the company to use any strategy that it feels
appropriate, unlike other entry modes where limitation on control is a
concern.
4.3 Financial Resources
Although higher capital investment is required for ownership unlike
other entry modes such as licensing, joint venture and franchising which
require low capital investment, the former is deemed appropriate. This
is because, through ownership, the company will have complete control of
the entire operations.
4.4 Financials
4.4.1 Marketing Expenses Budget (for the next one year)
Medium 1st Quarter
(S$) 2nd Quarter
(S$) 3rd Quarter
(S$) 4th Quarter
(S$)
Advertisements 30,000 20,000 10,000 5,000
Public relations 25,000 15,000 8,000 3,000
Sales promotions 25,000 10,000 5,000 1,000
Direct marketing 15,000 10,000 8,000 2,000
Personal selling 10,000
Total Marketing Expenses 95,000 55,000 31,000 21,000
4.4.2. Sales and Revenue Forecast
Forecast 1st Quarter
(S$) 2nd Quarter
(S$) 3rd Quarter
(S$) 4th Quarter
(S$)
Sales 35,000 50,000 70,000 90,000
Revenues 20,000 45,000 65,000 80,000
Implementation and Control
Responsibility Assigned person Start date End date Budget
(S$)
Completion of marketing plan Marketing manager 1/12/2013 30/01/2014
20,000
Research and development Product development manager 1/02/2014
30/03/2014 60,000
Advertising campaign 1 Marketing manager 1/04/2014 30/05/2014 120,000
Advertising campaign 2 Marketing manager 1/06/2014 30/08/2014 90,000
4.5 Contingency Planning
Entry into the new market may be faced by a number of risks and
difficulties. These include failure of the business to support itself on
a continuous basis considering it is entering as a foreign direct
investment. This can be solved by looking for alternative sources of
revenue to support the business.
Another risk is entry of an established competitor into the market. this
can be solved by implementing efficient marketing strategies and
capitalizing on the competitive advantages.
5.0 Conclusion
International market expansion is one of the major factors that results
in business success. This paper has focused on expansion of Bengawan
Solo, a private owned company in Singapore, into the Hong Kong market.
It has been evidenced that Bengawan Solo is amongst the most thriving
bakeries in Singapore based on the quality of its products and good
image and reputation. Bengawan Solo makes a wide range of products such
as pastries and nonya-style cakes including cookies, kueh, cakes, buns,
as well as mooncakes. The company targets middle class of all ages as
these have a high purchasing power. The success of the company can be
linked with the favorable internal and external environment it operates
in. From the analysis, it is evident that Singapore has a stable
political, economic and legal environment. The SWOT analysis shows that
Bengawan Solo has more strengths and a range of opportunities which it
can maximize. By implementing proper strategies, the company can be able
to overcome its weaknesses and threats. From the porters 5 forces, the
bakery industry is characterized by high threats of entry and
substitutes, high buyer bargaining power, and intense rivalry. By
entering into Hong Kong market, Bengawan Solo can be able to spread its
risks. The chosen entry mode strategy is foreign direct investment
whereby the company will use its resources in the new market. This
together with the current strategies, the 4p’s will result in
successful entry. Through proper advertisements and campaigns, the
company stands to gain as revealed in the sales and revenue forecasts.
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International Marketing Report
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