Link Natural (Pvt) International Audit
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Link Natural (Pvt) Ltd's decision to advance their business to France was apart of the economical and socio-cultural analysis carried out to identify the market potential for the product (Link Samahan) to be sustainable in the French herbal market. The company is already conducting their businesses in many locations around the world, and France was a further step taken to expand their global presence.
The following report is the market audit conducted in order to identify some of the key factors that should be taken into consideration when expanding a business across borders. A brief description of the product 'Link Samahan' is presented initially in the report followed by an analysis of the product acceptance as well as possibilities of product resistance by the French consumers. This was identified through considering factors such as trialability, complexity, relative advantage, observability and compatibility of the product in the French herbal beverage market.
The report further analyses the market in which the product will be sold and the geographical regions in France that were chosen for the initial business operations, namely Paris, Nice and Marseille. The basic transportation systems and modes in the selected areas are also discussed followed by the main communication methods used by them. Furthermore the report provides a description on consumer buying habits, distribution of the products, pricing strategies and the advertising and media usually used to reach the target market.
A comparison and contrast between Link Samahan and its competitors in the French market is also carried out in the report. The comparison includes the prices, product features, packaging differences along with the promotional methods and distribution channels utilized by Link Samahan and the other competitors. Moreover, the report extends to discuss the market size indicating the trend of the industry sales and the expected sales for Link Samahan in the coming year.
Finally, the agencies that will benefit the company and the important government regulations that should be followed by the company are discussed at the latter part of the market audit.
Link Natural Products (Pvt) Ltd. is a leading business entity in Sri Lanka that provides herbal, Ayurvedic pharmaceuticals as well as safe and effective herbal healthcare products. Some of the main products of Link Natural include, 'Link Kesha' hair oil, 'Link Sudantha' toothpaste, 'Gotukola Tea' and Spa/Aroma products. As a result of extensive research carried out for years, Link Natural introduced 'Link Samahan', a 100% natural herbal product to the market for curing common colds and similar ailments. Currently Link Natural is exporting their products to countries such as Malaysia, USA, UK, Germany, Thailand, India etc. ("Company Profile", 2009)
France being a European Union country owns the largest land among the EU countries. As an expansion in the maturity level of the product (Link Samahan), Link Natural has decided to distribute the product to three different locations situated in France. According to (Bell, 1997), French people consider herbal beverages to be healthy and they are most commonly used in every day life in the French culture. The demand for herbal products in the European market has risen over the years and this can be considered as a great opportunity for Link Natural to expand their business to France.
In order to identify the target market and their potential it is vital to carry out a detailed market analysis with regard to the product. Thus the main focus of the following report will be to evaluate a market plan and audit for the purpose of marketing Link Samahan in the French herbal beverages market. The market audit will comprise of a detailed description on the target market, geographical distribution, diffusion of innovation of the consumers as well as advertising, pricing and promotions in terms of the herbal beverages market in France.
THE PRODUCT: LINK SAMAHAN
Link Samahan is an authentic herbal product made in Sri Lanka and it is made of 14 natural plants which are generally used in 'Peyave' formulations. As stated in ("Product Data Sheet", n.d.), in ancient Sri Lanka 'Peyave' was considered to be one of the most popular cures for viral fevers and influenza, and it consists of a mixture of herbs in boiling water. This instant herbal beverage is used for common colds as other similar ailments such as sneezing, itching eyes, running noses etc.
Currently Link Samahan plays the leading role in the Sri Lankan herbal products market for colds and other related ailments, and Link Samahan is being distributed to 32 destinations in eight different countries around the world, ("About Samahan", 2009). (Refer Appendix 1).
Link Samahan will be expanding into the herbal beverage market in France for the first time. "An innovation is any product or a service that consumers perceive to be new', as stated by (Solomon, 2004, pg.567). Therefore, the following section will focus on how the proposed target market will perceive Link Samahan and their levels of acceptance and resistance will be determined.
LINK SAMAHAN AS AN INNOVATION (As perceived by the intended target market)
"Diffusion of innovation refers to the process whereby a new product, service, or idea spreads through a population", (Solomon, 2004, pg.567). The rate of adoption may differ from person to person even within the same culture. According to (Solomon, 2004, pg.567) a study of 11 European countries found that consumers in individualistic cultures are more innovative than consumers in collective cultures. Therefore to identify the acceptance rate of Link Samahan in France a few important factors will be analyzed apart from the consumer behavioural changes among the target market. These factors are as follows:
It is important that the consumers believe that the product is important and more beneficial for them than the alternative brands in the market, as the new product adaption rate is directly proportional to the relative advantage of the new product.
The main characteristic of Link Samahan is that it is an herbal drink, which can be prepared instantly by just dissolving in hot water. Furthermore it has the relative advantage of being a complete natural product that can not only be used to prevent colds and similar ailments, but also can be used as a hot beverage. Therefore, it can be said that Link Samahan has a 2-in-1 relative advantage compared to other herbal beverages.
According to (Solomon, 2004, pg.570), the innovation should be compatible with the lifestyle of the consumers. No matter how convenient the product is, sometimes the consumers may not accept the product due to ethical or cultural issues.
But as mentioned before according to (Bell, 1997), the French have a popular demand for herbal beverages, and have over a 70% of herbal products in large grocery stores and hypermarkets. This is one of the core reasons that Link Natural has decided to distribute Link Samahan to France. It can be stated that Link Samahan is strongly compatible with the French market and will potentially have a high usage rate.
Link Samahan is a moisture-proof, triple laminated sachet with a net weight of 4 gram per packet and contains a soluble powder that can be instantly made, which makes it very low in complexity. For the convenience of the French people the directions and other details will be indicated in French, as well as English as opposed to the Sinhala, Tamil and English product details used in Sri Lanka. Therefore the product will be easier to understand and use over the other competitor brands available in the market.
Link Samahan is considered to be a fast moving consumer good (FMCG). Therefore with regard to trialability, promotions will be carried out at the initial stage at the supermarkets and retail stores for the consumers to taste the product through free samples. Since consumers have the ability to try out the product and evaluate it through the free samples, Link Samahan has a very high trialability factor.
An innovation should be high in observability for an adopter to be aware of its existence. Having promotions as mentioned above can be of use to a certain extent (i.e. taste) but the exact outcome of Link Samahan cannot be observed immediately after the consumption.
MAJOR PROBLEMS & RESISTANCES TO THE ACCEPTANCE OF LINK SAMAHAN, BASED ON THE PROCEEDING EVALUATION
Any company when entering to a new market or introducing a new product is faced with a potential risk of failure no matter how favourable the circumstances are. Therefore it is essential to analyze the consumer acceptance for the product in order to survive in the market.
Based on the proceeding evaluation, Link Samahan has a high potential of the consumers acceptance as there are high levels of relative advantage, compatibility, trialability and it is also low in complexity.
MARKETS IN WHICH LINK SAMAHAN WILL BE SOLD
Through the sociocultural and an economical analysis conducted previously, it was identified that there is a favourable market for Link Samahan to be introduced in France. According to (Bell,1997), approximately 2500 metric tons are sold annually in the herbal beverages market in which 60% is in sachet format, 36% in instant products and about 2% in bulk.
One of the main reasons to penetrate the French market is their acceptance of herbal beverages. It is most commonly used in many households and is enjoyed by most French people. Thus there is a demand for herbal products, and in addition to this, Link Samahan can also be used as a cheap & effective way to cure common colds as oppose to using Saunas which is also highly popular in France.
Link Samahan is an FMCG which can be afforded by anyone ranging from lower-middle level to upper level income earners. France has an estimated population of 64,057,792 as mentioned in, ("France - Demography", n.d)
France is a Western European country which borders countries such as Belgium, Spain and Italy in the Europe region. 77% of the total population has been urbanized as of 2008 and 65% of the total population falls in the 15-64 years age category, ("Central Intelligence Agency", n.d.) (Refer Appendix 2).
The population is one of the main factors that have to be taken into consideration in deciding the main geographical regions for Link Samahan to be distributed and marketed to. According to research carried out by (Butler, 2009), the main cities in France with the highest populations are Paris (11,293,200 people), Marseille (1,532,400 people), Lyon (1,665,700 people), Toulouse (975,000 people), Nice (943,000 people) and Nantes (718,700 people).
Furthermore, France is generally known to be a cold city and it is a country with typical seasonal changes through out the year. Also, according to ("Central Intelligence Agency", n.d.), France is faced with floods, midwinter windstorms etc. at certain times of the year. Hence, the probability of people being faced with the common cold is high in terms of climate changes.
The company has selected Paris, Marseilles and Nice to distribute and market Link Samahan due to the above mentioned reasons. Another primary reason for selecting Marseilles and Nice is the easy access due to being situated in the coast of France bordering the Mediterranean sea. Hence geographically there is easy access to these cities and the products can be shipped conveniently from Sri Lanka.
Forms of transportation available in these regions
There are many forms of transportation used in Paris. It consists of four airports, Roissy-Charles de Gaulle and Orly being the main two commercial airports and, Le Bourget, and Beauvais Tille being two smaller airports for budget airlines and private jets, ("Paris Airports", n.d.)
Gare de Lyon train station in Paris provides rail services to the south and east of where Marseilles and Nice are situates. Therefore, Link Samahan can easily be transported to and fro from Paris to the other 2 selected locations, ("Gare de Lyon", n.d).
Apart from this the Metropolitan underground train network and the two tramlines are also commonly used for transportation in the city of Paris. The bus network in Paris covers the Ile-de-France region and also it extends in the central Paris. However, traffic has to be taken into consideration when travelling by bus as Paris a busy city, ("How to use Parisian transport networks", 2003).
Marseille has one airport. Similar to Paris it consists of a bus network and two metro lines which are commonly used among passengers. It is convenient to travel using the Metro Line over the bus network due to the heavy traffic situation in the city. The main train station in Marseille is called Gare Saint Charles and it connects to Paris, which takes approximately 3 hours, ("Marseille Transport", 2007).
The Marseille Port, being the largest port in France, plays a major role in transporting of Link Samahan from Sri Lanka to France, as the company will be using Vieux Port in Marseilles as the main port to distribute the products to Marseille and Paris and Nice respectively, ("Marseille Cruise Port", 2009). From Marseilles, Link Samahan will be transported via train from Gare Saint Charles Station to Paris.
The main concern of the company is transporting the product from Marseille to Nice. Therefore the Link Natural (Pvt) Ltd. will be using the railway system for the means of transporting the product to Nice.
Communication available in these regions
The most common methods in communicating in Paris are through telephone, Internet, and television. Some of the main telecommunication companies situated in Paris are Coriolis Télécom, France Telecom, Orange (France Telecom), Bouygues Télécom and SFR in which most provide the consumers with telephone as well as internet broadband facilities. ("France Telecommunication Companies", 2009)
According to ("Internet World Stats", 2008) the main dominator of all telecommunication methods such mobile, fixed, Internet and broadband in France is France Telecom. Similar to Paris, Nice and Marseille also use Internet, Telephone and television as main methods of communication.
58.1 % of the population uses the Internet in France ("Internet World Stats", 2008). Therefore, Link Natural can use Internet advertising to promote Link Samahan in France for wider reach of the target market.
According to ("Television Viewing by Country", n.d.), the average viewing rate of television in France is 23 hours per person per week, which indicates that accessibility for television is high among the consumers and therefore television media can be used as an effective means of communicating the product to the customers.
Consumer buying habits
Consumers' buying habits may vary according to the type of products purchased by them. For instance, people may compare and contrast when purchasing a 'shopping' good with the alternative products available in the market.
Since Link Samahan is a consumer good, which needs little effort of the consumer in purchasing the product the consumers in the intended target market are not expected spend a lot of time in deciding on purchasing the product. However, since the herbal beverages market is considerably large in France it is vital to pay attention to the leading competitor's brands purchased most frequently by the consumers.
Product use patterns
The herbal beverages market in the Europe has grown over the years due to health concerns of most consumers. People are more careful with their health as a result of their busy scheduled lifestyles. The French generally tend to consume herbal infusions daily in the night after dinner time. Therefore the usage of herbal beverages in France is regular and consistent in the current market.
Product feature preferences
Most people look for convenience when purchasing products and are more health conscious considering the health issues that they are exposed in the society as previously mentioned.
Link Samahan is marketed as a two in one product, which is an herbal cure of colds, as well as a normal hot beverage to the consumers. Therefore the taste of the product is given special consideration so that the consumers will show a favourable response towards the product. It also an instant drink which can be prepared easily.
According to the research carried out it was identified that the average consumer purchases herbal beverages approximately once in every three weeks. With the rise in health concerns among the people and herbal beverages being conveniently available in the local retail and supermarket outlets customers are bound to purchase them on a regular basis.
Distribution of the product
Most of the herbal beverage products are available all over France. They are mainly distributed in local grocery stores, retail outlets and many international supermarket and hypermarket chains located in the country. According to ("Shopping in France", n.d.) some of the main supermarket chains are Champion, Carrefour, Auchan, Casino, Leclerc and Intermarché.
Advertising and Promotion
Advertising media usually used to reach the target market
The usual methods of advertising FMCG products are through television, radio, and newspaper/magazine advertisements, as they are targeted towards a mass market of all levels of income earners.
Having the fourth highest television-viewing rate in the world, 99% of the households in France have access to televisions especially in the urban areas. According to ("Press Reference France", n.d.), there are 584 television networks currently operating in France and marketers of FMCG's frequently use television advertisements.
Another popular method of advertising is through Radio networks, as most people have access to radios. Considering the busy lifestyles of the people most companies have adopted this method as people in urban as well as rural areas are known to listen to the radio even when doing other work.
Other methods used include newspapers and magazines. French are said to have a high literacy rate of 99% and newspapers and magazines are commonly used around the country. Apart from these methods, Internet is also widely used for advertising consumer products as most people purchase goods online, especially the younger generation.
Sales promotions customarily used
For most FMCG products, most commonly used sales promotions methods are buy one get one free promotions, in store promotions and free sampling promotions held at retail stores and supermarkets.
Initially Link Natural will be using the price penetration strategy at a set price of €10.50 intending to attract more customers and capture a larger market share. However, the price maybe varied accordingly in the future depending on the purchasing trend of the consumers and discounts will be given during different seasons.
COMPARISON & CONTRAST OF LINK SAMAHAN WITH THE COMPETITOR'S PRODUCTS
Brand Name: The name Link Samahan is a 'family brand name', which is derived from the company name Link Natural. This gives Samahan a special recognition for the consumers, as Link Natural is a well-reputed company in many countries in the EU.
Features: Link Samahan is made using 14 natural Ayurvedic herbs, which were chosen through a comprehensive study done by Ayurvedic scientists for years. The main feature of the product is that it is a beverage, which can be made instantly by dissolving in hot water. The basic flavors of Samahan are Lime and Lemon, and will extend to include Mint and Linden (which is a common taste preference of the French people).
Package: The 100g pack consists of 25 moisture-proof, triple laminated sachets with a net weight of 4 grams per packet. The details on the sachet will be indicated in both French and English for the convenience of the consumers. The sachet will be yellow and green in color to give a natural look and the colors will be differed accordingly when new flavors are introduced.
The competitor's products
Link Samahan is mainly marketed as a medicine for curing common colds as well as a regular herbal beverage. Therefore there is no direct competitor for the product although there is a large market for herbal beverages in France.
There are many herbal tea products available in the French market. The market leader is Lipton with more that 46% of the herbal sachet tea market. The Lipton Company brands Elephant and Saveurs du Soir, dominate the French herbal beverage market by providing various types of herbal tea flavors.
The bulk herbal tea market is dominated by La Tisanerie brand, which is also a popular brand available in France. However, they also sell sachet packages in a variety of flavors. Apart from these competitors, Solinest's Ricola brand of instant herbal infusions dominates 90% of its product area while 10% of the market represents other Store brands, (Bell, 1997) (Refer Appendix 3)
Brand name: Lipton Elephant Brand & Lipton Saveurs Du Soir
Features: Both brands mentioned above are herbal teas and have different types of flavors ranging from mint to a wide range of fruit flavors. The price ranges from £6.00 to £7.00.
Package: Each pack contains 25 sachets and is presented in their own unique color depending on each flavor.
Brand name: La Tisanière
Features: La Tisanière is also an herbal tea with various flavors such as "Les Fruisanes" range, which has a variety of fruit flavors, "Trésors de Nature" range, which has a variety of flavors combining flowers and herbs and the "Wellness" range. ("What about La Tisanière", n.d)
Package: Different flavors are presented in different colors and packed in 25 sachet boxes.
Brand name: Ricola
Features: Ricola herbal tea is a popular hot beverage especially during the winter season and is commonly used as a remedy for colds and coughs, ("Instant Teas", n.d.) Similar to other competitors, Ricola also offers a wide variety of flavors in their herbal tea range.
Package: Ricola teas are generally packed in a plastic container ranging from 200g onwards and in presented in different colors according to the flavors.
All competitors of Link Samahan fall under the herbal tea category. Therefore there is a relative advantage for Samahan as it will be marketed as an herbal beverage as well as a medical concoction used for common colds and similar ailments.
Most competitor brands seem similar in appearance which makes it hard for the consumers to distinguish between them at a glance. However, Link Samahan will be presented in its own unique packaging so that it will be visible among rest of the products. The most significant difference between Link Samahan and other competitors is that the price of Link Samahan will be slightly higher due to the fact that it is more of a remedy to cure colds as well as a regular herbal beverage.
The competitor's price
The following is a list of prices of the competitors available in the herbal beverages market. There is no significant difference between the prices of each brand.
Competitor's promotion and advertising methods
The primary method of advertising used by Lipton is through newspaper advertisements. Lipton range consists of a wide range of brands. Thus, they advertise each brand separately rather than as a whole. Since most people have access to reading newspapers daily, they believe that it is the best way to capture the target market.
La Tisanière on the other hand is mainly advertised through radio advertisements along with the Twininngs and Ovaltine, which are the other hot beverage products of their mother company Foods International.
Ricola's main focus is on health magazines as they stress on health benefits of consuming Ricola herbal tea such as a cure for coughs and colds. However, Ricola products are also advertised through radio advertisements as well as newspapers through feature articles etc.
Other main promotion methods used by these competitors are discounted prizes, special draws and competitions, sponsoring various events and coupon systems.
Competitor's distribution channels
Lipton: Hypermarkets and supermarket chains
Foods International: Supermarket chains and retail stores
Ricola: Hypermarkets, supermarkets and retails stores
Estimated industry sales for the planning year
According to the research carried out in France, a rise in the industry sales is expected in 2010/2011 due to the regular consumption of herbal products among the consumers. The income level of the consumers may not affect them since herbal beverages are considered as an FMCG.
Estimated sales for Link Samahan for the planning year
The graph indicates the forecasted sales for Link Samahan for the year 2010 per city. According to the figures shown, approximately about 45,350 packets per city will to be sold and roughly about 3250 packets will be sold per month in average in the year 2010. Furthermore, Link Samahan is expected to detain the market share rapidly in the French market according to the number of estimated sales. All these details are further discussed in the preliminary marketing plan.
GOVERNMENT PARTICIPATION IN THE MARKET PLACE
Agencies that can help Link Natural
The herbal beverages industry especially herbal tea industry is a rapidly growing market in France. Apart from being sold mainly in hypermarkets and supermarkets, herbal beverages are commonly used in health care centers, hospitals, holiday spas as well as hotels around the country. The usage of herbal beverages can be highly encouraged among the consumers through most of these agencies which will benefit the sellers in the trade.
For instance, Link Samahan can be made available in popular health spas and hotels such as George V-Buddha Bar Spa, Ban Thai Spa, Bleu comme Bleu and Spa Anne Fontaine in Paris, ("Spas What's New",n.d.), and SPA de l'hotel Boscolo Exedra - Doctor, sauna le cercle - Nice Saint Maurice and Nyrvana - Madeleine Nice, in Nice ("Saunas and Spas in Nice", 2009).
It will also enable brand recognition through making the products available in recognized organizations to grab the attention of the target market.
Regulations that must be followed
It is vital that all companies follow the rules and regulations of the country to avoid complications. France belongs to the European Union and according to (Gauthier, 2005, pg.7), the European Commission has decided to draft a legislation on herbal medicinal products, dietetic foods, nutritional and functional claims, and fortified foods.
Also according to (Gauthier, 2005, pg.7), the French Research Center on Nutrition and Food has a recommended allowance of a percentage of ingredients in the products to be consumed daily, and if the product doesn't meet those requirements, a special authorization from the French Public Superior Council for Hygiene (CSHPF) should be obtained by the manufacturer to market the product.
Also according to French regulations it is important that all information such as product definition, list of ingredients, shelf life, weight and volume etc. are labeled in French on the packaging of the product. (Gauthier, 2005, pg.7) Apart from these, according to ("France Trade Regulations and Standards", n.d.), quality and ecological labels, bar code price labeling, and usage instructions should also be mentioned.
In general it is important that the product does not portray any offensive material that is not accepted socially, religiously, ethically etc. in France as it will not be accepted under the government regulations.
The following preliminary marketing plan was prepared by Link Natural (Pvt) Ltd to present a comprehensible idea on their business expansion of Link Samahan to France after conducting an ample research on the feasibility of the product in the French market. The main objective of this report is to guarantee that the product will be successful in the French market when competing among the alternatives available.
The report portrays a detailed description mainly on the intended target market focusing on geographical, sociological, demographical etc. aspects, which are relevant to B2B and B2C markets. It gives an insight to the expected sales and the profit expectations for the year 2010. Furthermore, it explains the penetration strategies used by the company to gain market share of the consumers of herbal beverages in the market.
It is imperative to analyze the product adaptation and modification by using factors such as core components, packaging, and support services etc. to grasp a clear interpretation of the product, which is described with sufficient details in the analysis.
The report also focuses on to one of the major components in the marketing the mix, the promotions of the product carried out in France. The overall promotion objectives are explained followed by advertising, sales promotions, personal selling and other promotional tools used by the company to promote Link Samahan among the French consumers.
Moreover, it explains the distribution components from origin to destination, which includes port selection, mode selection, packing, important documentations, insurance claims etc. as well as channel of distribution and more importantly the price determination of the product.
Finally the terms of sales and method payment used by the company are explained followed by the budget and the financial statement of the entire business plan. Therefore as mentioned above, the crucial factors are highlighted in this report to ensure the success of Link Samahan's establishment in the French market.
THE MARKETING PLAN
France has been ranked the 19th most populated country in the world, with a population estimate of 64,057,792, as stated in ("France - Demography", n.d.). It is therefore impractical to target the entire population of the country. The company has taken into consideration factors such as demography and geography when selecting the target market for Link Samahan.
Demographically, the variables that were taken into consideration when selecting the target market were age, sex and income status. 65% of France's population falls within the age group 15-64 years ("Central Intelligence Agency", n.d.). Both males and females having a lower-middle to upper level income will be targeted since Link Samahan is an FMCG and is generally affordable to all the income groups mentioned above.
Geographically, Paris, Marseilles and Nice are 3 of the most populated and metropolitan cities in France. Collectively in these 3 cities, the total population amounts to approximately 14.6 million ("France - People", 2006).
Therefore, the primary business-to-consumer (B2C) target market for Link Samahan in France is: males & females, from lower-middle to upper level income groups, between the ages of 15-64 who are primarily residing in the cities of Paris, Marseilles or Nice.
There will also be a business-to-business (B2B) target market which would consist of the most visited retail stores, supermarket chains, hypermarkets and health & holiday spa's in the selected three cities. Such as: Auchan, Carrefour and Coop supermarket chains.
Expected Sales for year (2010)
The selling price of Link Samahan will be set at $15.75 (per packet of 25 sachets). The packets will be sold in France at a price of €10.50 (per packet of 25 sachets).
The sales figures will vary according to the rates of adoption, as well as the seasonal and climatic changes. It is expected that the initial take-up rate of Link Samahan in France will be slow, but by the 3rd month after the launch the adoption rate is expected to pick up.
Also, the months October to April entertain strong winters and a cold climate in France; whereas May to September is relatively warm ("France - Climate", 2006). Therefore it can be predicted that the demand for Link Samahan will be higher in the cold winter months.
Taking these factors into consideration the estimated sales for each city for the year (2010) are as follows:
Total expected sales per month (per city)
As explained previously the graph shows a slow take-up rate initially, and high sales figures during the months of winter. Accordingly;
- The total estimated sales for Link Samahan, per city are 45,350 packets for the year 2010.
- This amounts to (45,350 X 3 cities) = 136,050 packets (total sales) for the year 2010
Therefore the total estimated sales revenue for yeas 2010 is:
(136,050 X $15.75) = $ 2,142,788
(136,050 X €10.50) = € 1,428,525
Profit expectations year (2010)
Link Samahan has estimated the total cost per packet (including production, overheads, and distribution) to be $9.50. Thereby, the company retains a profit of $6.25 per packet of Link Samahan sold, at a mark-up percentage of 66%.
Accordingly the total estimated gross profit for the year 2010 is: $2,108,888 and the net profit is $1,540,486 (Refer Pro Forma Financial Statement).
Market penetration and coverage
Link Samahan is an herbal product that can be used as a medical infusion to cure colds and similar illnesses, and also used as a hot beverage. According to (Bell, 1997), "In France it has long since been the culture to consume herbal concoctions. Such concoctions include herbal medicines and drinks, and are most popularly known in France as 'Tisanes' or 'Infusions'. Consumption of herbal mixed medicine and beverages are common in both hospitals and families".
For the company Link Natural, the marketing strategy for Link Samahan would be a market development strategy. This strategy will be adopted as an existing product (Link Samahan) would be sold to a new market (France).
According to ("Ansoff's product/market matrix", n.d), this strategy can be adopted by companies in many ways. Link Natural will adopt this strategy by geographically marketing to a completely news market (France), and also by altering the product package component (new colours to match the new flavours, use of the French language etc).
The penetration or expansion to the French market by Link Samahan was done after much analysis that indicated that the French market shows potential for growth in the herbal medical & drink sector.
According to (Doole, 2001, p.306), "the life cycle concept is used as a model for considering the implications for marketing management of a product passing through the stages of introduction, growth, maturity and decline and can be applied to international marketing".
It has been identified that when the basic product (Link Samahan), reaches the maturity stage in the life cycle various adaptations and modifications must take place in order to extend the life cycle and further expand the herbal market share in France. The adaptations that will be done to the core component, packaging component as well as the support services component are explained below.
The basic product component of Link Samahan consists of various herbs in one packet that must be mixed with boiling water to create the herbal drink/medicine. When this core product reaches the maturity stage the company will consider expanding the product to include various flavours such as Lime and Lemon. According to (Bell, 1997), "the Tisane's that are most commonly demanded in France are Mint, Linden and Verbena".
Therefore in addition to Lime and Lemon, the company will adapt the core component of Link Samahan to include the flavours that are mainly desired by French as stated above.
Other modifications, as stated in ("Link Samahan Superbrands", n.d., p.52), is "to create a sugar free, low calorie Link Samahan for consumers who are diet conscious".
Each Sachet of Link Samahan contains 4 grams of the herbal mix product. 25 sachets will be available in 1 packet of Link Samahan (100g). At the maturity stage, the company can consider packaging the herbal mix (Link Samahan product) in a 50, 100 or 200 gram bottle instead of sachets. This would enable long term use of the product as well.
Furthermore, the basic Link Samahan product appears in a standard yellow packaging with red and green wording. However, when the new flavours are introduced it would be more advantageous to introduce new colours for different flavours. For example: Light green package for Lime flavour, and dark green package for Mint flavour.
The instructions, ingredients, manufacture details and other details must be provided in French as well as English.
Support Services Component
As stated in (Doole, 2001, p.294), "Marketing support services are the additional elements to the core product which contribute to providing satisfaction, and include delivery, after sales service and guarantees".
Since Link Samahan can be considered an FMCG, it is difficult to provide support services to the end consumer (B2C). However, Link Samahan can provide support services to the B2B customers by way of delivering the stock to the supermarket, hypermarket outlets and health spa's, and also by stacking & maintaining the goods in the shelves.
According to (Keegan, 2008, p.408), "Advertising may be defined as any sponsored, paid message placed in a mass medium". There are numerous advertising media which include: television, radio, newspaper, transit and outdoor advertising. Since Link Samahan will be a completely new product in the French herbal medicine & beverage market, advertising is essential to attract customers and increase awareness.
The basic objectives of advertising Link Samahan in France is to:
- Create awareness about Link Samahan, which is a herbal concoction that can be used as a remedy to cure common colds, as well as a hot beverage.
- Create an interest in natural or herbal medicine as opposed to chemical products, which would lead to growth of the herbal medicine market.
Furthermore, through advertisements the company can explain the specific benefits of using Link Samahan such as: cleansing the system and help prevent ailments such as body ache and itchy throat.
THE MEDIA MIX
In order to create maximum awareness about the product and reach majority of the target market, Link Samahan will use a variety of mediums to advertise. The media mix for Link Samahan will therefore consist of: television, radio, magazine and newspaper advertisements.
France has been ranked 4th highest in television viewing, amounting to an estimated 23 hours a week per person. Also, research indicates that 95% of households in France have televisions, ("Television viewing by country", n.d.). Therefore, broadcasting Link Samahan advertisements in selected channels would greatly help increase awareness of the product to the target market.
TF1 & France 2 are privately-run media and the two most popular channels in France ("Guide to French TV channels", 2003). Since these have been ranked as the most viewed channels, Link Samahan will air a 30 second advertisement on these channels during peak hours, 3 times a week in order to increase awareness. After the initial 3 months the advertisement will air once a week.
The television advertisement will be purely informational and will state the benefits of Link Samahan, such as; that it can be made instantaneously, it can cure common colds, it is nutritious etc. The advertisement will be aired in French since the majority of the target market is fluent in French language.
Since television advertising in France is relatively expensive, and since Link Samahan is an FMCG, the company will focus more on radio, magazine and newspaper advertising.
In France, 911.699 people in every 1000 have access to a radio, ("Radio (per capita) by country", n.d.). Radio advertisements are purely auditory the people are able to easily understand and grasp information. Therefore, Link Samahan will chose 1 radio station in each city and air a 30 second radio advertisement twice a day, on 3 days a week for the first 4 months. After that the advertisements will be aired once a day, 3 times a week. The advertisement will be in French so as to increase the communication effectiveness with the selected target audience.
The radio stations selected are: 13 FM (Marseilles), Cherie FM (Paris), and KISS FM (Nice). These radio stations have been selected because they have internet broadcasting as well, therefore the advertisement will have a wider coverage.
The magazine viewing rate in France is very high and is spread across the country. Therefore a full page advertisement (for the first 3 months) will be put on monthly magazines of three different categories in order to have maximum exposure to the target market. After the first 3 months the advertisements will be quarter page advertisements. The magazines chosen are as follows:
Health & fitness magazines:
- Correspondances en medicine
- La lettre de l'infectiologue
- La lettre La Famille et l'Ecole
- Selection du Reader's Digest
Food & drink magazines:
- Gaute et Millau
- Bourgogne Aujourd'hui
All advertisements will be in French since 99.0% are literate in French. They will also provide detailed information regarding Link Samahan, the benefits, outlets of purchase, price, manufacture details and other relevant information.
The newspaper circulation in France is the 10th highest in the world. Since Link Samahan is an FMCG, and it is targeted to all income groups, it is both cheaper and effective to the company to advertise through this medium.
The Advertisements will be in French and placed in the lifestyle section of 2 local newspapers in the chosen 3 areas (Paris, Marseilles and Nice). The selected newspapers are:
- Paris - Le Parisien, and Le Nouvel Oberservateur
- Marseilles - La Provence, and Marseille Plus
- Nice - Nice Matin, and Metro Cote d'Azur
The newspaper entries will be posted on the Sunday newspapers every week for the first four months, and then every other week after that.
The message that will be communicated through these advertising media is that Link Samahan is a completely natural, herbal drink that can not only be used as a health drink, but also as an herbal medicine that can cure common colds and similar ailments.
The message will also convey that Link Samahan can be made instantly and comes in various flavours and is available in a range of supermarkets and retail stores.
The tag line that has been used to convey this message more effectively is:
"Link Samahan - 100% natural, safe and effective,
You're instantaneous, 2-in-1 herbal drink and solution to common colds"
The tag line in French will be as follows:
"Link Samahan - 100% normal, sûr et efficace, vous êtes instantané, la boisson 2 in-1 et la solution de fines herbes aux colds communs"
The average cost of advertising for each medium in France is indicated below:
- 30 second television advertisement - $ 1,400
- 30 second radio advertisement - $ 900
- Full page magazine advertisement - $ 1,250
- ¼ page magazine advertisement - $ 580
- Newspaper advertisement - $ 50
Therefore, the total estimated cost of advertising Link Samahan in France in the first year is:
($1,400 X 3 times a week X 4 weeks X 3 months) + ($1,400 X 1 a week X 4 weeks X 9 months) = $100,800.
($900 X 3 times a week X 4 weeks X 4 months) + ($900 X 1 a week X 4 weeks X 8 months) = $72,000.
($1,250 X 3 months X 6 magazines) + ($580 X 9 months X 6 magazines) = $53,820.
($50 X 4 times a month X 4 months X 2 newspapers x 3 cities) + ($50 X 2 times a month X 8 months X 2 newspapers X 3 cities) = $9,600.
Therefore, the total estimated cost to be incurred by Link Natural in advertising Link Samahan in France is $236,220.
According to (Lewis, 2003, pg.132), "Sales promotion is used in a variety of markets and in a variety of ways. Short term activity designed to achieve an increase in sales of the company's goods or services maybe achieved through discounting of other incentives". Since, Link Samahan is considered an FMCG, sales promotions can be considered an important aspect of the promotion mix.
The main objective of using sales promotion for Link Samahan is to boost short term sales. Other objectives of sales promotion include:
- Facilitating the introduction of the new Link Samahan product through free samples
- Attracting, creating awareness and interest in first time buyers and other customers regarding the product
- To maintain sales during different seasons (since Link Samahan can be considered a seasonal product)
- Increase long term market share by being a strong competitor
("Sales Promotion; Business studies", n.d, pg.117)
At the introductory stage, this will be the most important sales promotion to be adopted by Link Samahan. The company will provide free samples to customers at strategic points in the selected retail stores, supermarkets and health spa's.
Free samples will enable the customers to taste the new product, become aware of it and develop an interest towards consuming it.
COMPETITIONS AND PRICE DRAWS
According to ("Sales Promotions", 2009), "Competitions and price draws can be put in newspapers, magazines, on the TV, radio, Internet, and on packs".
The main competition that will be held to promote Link Samahan is: to cut out a specified side of the Link Samahan product box, collect four of these cuttings and post it to a given address. 2 free 100g bottles of Link Samahan will be given to the winner of the compeition. This compeition will be advertised in the newspaper and magazines.
Other competitions held on the internet would include: writing a short description of the unique taste of Link Samahan, and the winner of the best description would receive 2 free 100g bottles of Link Samahan.
Such competitions would encourage the customers to purchase, and re-purchase the product, hence increasing short term sales. The internet competition will further enable the company to identify its brand loyal customers, and have a direct insight to the perception of Link Samahan by the mass market.
Link Samahan will have a "Buy - two 100g packets - and get one 50g bottle of Link Samahan free". This will take the consumers out of the market to finish consuming the product, and also encourage immediate purchase because as they will receive an extra 50g for free.
Free sampling and competitions are of lesser cost to the company. "The buy-2 and get 1 bottle free" promotion has a relatively fixed cost. Therefore the estimated cost of sales promotion of Link Samahan to the company is $50,000 (Refer budget for the break down of sales promotion costs).
According to (Steinhoff, 1979), "Personal selling includes all activities and characteristics of an individual salesperson that result in successful sales. The basic steps to successful personal selling is as follows: 1) identify the most prospective customers, 2) obtain those customer's attention, 3) arouse their interest, 4) overcome their objections, 5) create and encourage desire for the product, 6) close the sale, and 7) follow up the sale to be assured that the customer is satisfied".
For Link Samahan, personal sellers will be used to sell to both business-to-business (B2B) and business-to-consumer (B2C) customers.
The company will send sales representatives to the selected retail chains, supermarkets and health spa's to convince the management that Link Samahan is a profitable product to sell to the end consumer. The personal sellers must inform these businesses of the benefits that the end consumers will get, and the increasing demand for herbal infusions. Furthermore, once the sale has been concluded the Link Natural personal sellers will follow up the sale to ensure that the sale was a success. This would encourage future business dealings and overall satisfaction to the B2B customers.
Personal selling is a vital aspect of the promotional mix in order to boost sales and make the introduction of the product a success with the end consumers. Sales representatives will be allocated in the selected retail stores and supermarkets in strategic locations and they would encourage the customers to consume a sample of Link Samahan. Also, since it is a face-to-face interaction the sales representatives can clear any queries that the customers may have, and also make the customers aware and inform them of the numerous benefits of consuming the Link Samahan infusion.
Other Promotional Tools
"Participating firms at a trade show pay a fee to rent a booth in which to display their products. Such shows attract crowds to visit, evaluate, and buy the products on display", (Steinhoff, 1979).
Link Samahan will rent a booth in the following trade shows (held once a year) in selected locations, which would enable the company to promote the Link Samahan product and provide free samples and increase customer awareness.
- LES THERMALIES - A water, wellness, thermalism and thalassotherapy exhibition
- NATEXPO - Trade show for organic, fitness and health products
- VIVEZ NATURE PARIS - Bio agriculture and natural products fair
- ARTEMISIA - Wellness and natural products expo
("Health and nature trade shows in France", n.d.)
DISTRIBUTION: (from origin to destination)
France is well known having some of the best known harbours in Europe as it borders the Atlantic Ocean, as well as the Mediterranean Sea. Link Natural will be choosing Vieux Port situated in Marseille to transport the goods to France from Sri Lanka.
This port has primarily been selected as it is one of the most easily accessible harbours in France, and also since it is situated in Marseilles which is one of the main cities chosen by the company to distribute Link Samahan in. Furthermore, the distribution to Nice and Paris from Marseilles is made easy by the numerous transportation methods available that link these cities.
The basic modes of delivering goods to France are by air or sea. One of the main advantages of air travel is the time factor as the goods can be delivered within a couple of days. Although France has more than 400 airports which operate domestically as well as internationally, if Link Natural chooses air travel as a mode of transportation, the company will have to bare extremely high costs in transporting Link Samahan to France.
On the other hand, travelling by sea is less costly compared with air travel but it takes approximately 20 - 25 days to reach France from Sri Lanka. Considering the cost factor, as well as the fact that the shipments will only need to be made twice a year, Link Natural has chosen shipping (sea) to transport Link Samahan to France.
Once the goods reach Marseilles, they will be transported to Paris and Nice by means of train cargo (railway), and, will be distributed to the retail stores, supermarket outlets and health spas through trucks and goods containers.
The Link Samahan sachet is moisture-proof, triple laminated and is packed in a cardboard box each containing 25 sachet packets, 4grams each with a net weight of 100g a box. These features will protect the product and refrain from the Samahan content being contaminated.
However, special attention should be given when placing them in the carrier containers in order to avoid damages to the outer package. Therefore, when being packed into containers and cargo for transportation, 100 Link Samahan packets will be packed together in a box which is air tight and waterproof for the safety of the products, as well as easy stacking and unloading.
International Commercial Invoice
This document must be printed on the company letterhead and this bill should be provided by Link Natural to the buyer, and it should also be signed by an authorized official in Link Samahan. The basic details included in the bill are the place and date of the preparation of the invoice, shipment method, the quantity of goods and payment methods etc. ("France Trade Regulations and Standards", n.d.)
Bill of Loading
Bill of loading is a document which states that the owner of the goods has a contract with the carrier, ("France Trade Regulations and Standards", n.d.)
Certificate of Origin
This document has to be provided to declare that Link Samahan is produced in Sri Lanka. It is not necessary to present a certificate of origin but according to ("France Trade Regulations and Standards", n.d.) it is strongly recommended to be safe to have the document at hand at the point of arrival in France.
Apart from the above mentioned documentation it should taken into account that, a banking intermediary should approve export transactions which are exceeding €250,000. Furthermore it is important that all documentations are provided to avoid any unnecessary predicaments.
It is important that all damages that may occur during shipment and transits are covered by an insurance claim. As means of this factor, Link Natural will be obtaining insurance claim for Link Samahan by a Sri Lankan freight forwarder. The insurance claim will cover all areas such as warehousing, transiting, packing and clearance. Other details regarding insurance will be explained when determining insurance costs further on in the report.
Link Natural has chosen Aitken Spence Shipping Services Ltd., a leading conglomerate in Sri Lanka as the freight forwarding company which will be responsible for the shipments of Link Samahan to France.
CHANNELS OF DISTRIBUTION
RETAILERS FOR LINK SAMAHAN
Link Samahan will be distributed through three international retail chains, which are namely Auchan, Coop and Carrefour. Since it is a consumer good, it is vital that the maximum reach is obtained among the target market. Therefore, these retailers have been specifically chosen by Link Natural as they have a large network of outlets throughout Franc.
Auchan is an international retail group and has 116 hypermarkets located in France according to ("Shopping in France", n.d.). Also, the French owned Carrefour is the world's largest hypermarket chain in the world. It has 1021 supermarkets, 218 hypermarkets and 3245 convenience stores all around France. ("Carrefour Annual Report", 2007, pg.34)
Link Natural has chosen AWU (Pvt.) Ltd., a French based import/export agent to take charge of transaction between the company and the selected French retailers.
Warehousing is an important aspect that must be looked into by Link Natural since the Link Samahan stocks will be shipped only twice a year and would require adequate warehousing till they are distributed in due course to the selected retailers.
The company has therefore chosen Schmid & Kahlert, which is a French Warehousing company with over 170 years of experience, and their main business activities include removals, relocation, sea freight and bonded warehousing, ("Europages; Schmid & Kahlert", n.d).
There are various factors that are taken into consideration when determining the selling price of Link Samahan. These factors include:
Cost of shipment of goods
Since Vieux Port in Marseilles is the largest port in France, ("Marseille Cruise Port", 2009), it has been decided that the goods will be shipped from Sri Lanka to Vieux Port.
In ("Ease of doing business", 2009), France has been ranked 22nd in the world as being easy to trade across borders. Accordingly, the approximate cost to export to France will be $1,708 (per container). Link Samahan stocks will be sent only twice a year (every 6 months), since the expiry period for the herbal product spans 2 years. This would amount to 68,000 packets of Samahan with a net weight of 6800kg.
According to ("SR International Logistics", n.d), the tare weight for a standard size '40 container is 3,700kg. Therefore Link Natural Company will use 2 standard size '40 containers to ship the goods to Vieux Port in Marseilles, France twice a year.
Hence the total cost of shipment of goods for the year 2010 = (4 containers X $1,708) = $6,832.
Once the Link Samahan stock arrives in Marseilles, Vieux Port, they will be distributed by train to the cities of Nice and Paris. Then the products will proceed to be distributed to the retail stores, supermarkets and health spas by way of trucks or goods containers.
According to ("Veolia Cargo News", 2008), "Veolia Cargo is a transportation service within France, where the Link Samahan shipment will be transported from the Marseilles port to Paris and Nice in high quality rail tankers which includes strict policies on food hygiene".
The total transportation cost for train cargo and truck for the year 2010 will be approximately $2,400.
These are the expenses that will be incurred when dealing with unloading the goods, stacking into shelves, warehousing etc. Since Link Samahan will not be a breakable or heavy product to handle, the handling expenses will be relatively low, an amount to $650 for the year 2010.
According to ("Total loss coverage", n.d), "goods being transported will be under a total loss insurance which would apply to the entire shipment resulting from risks such as: collision, overturning or other accidents to the truck, ship or train, sprinkler leakage, floods, earth quakes, derailment etc".
Since the content of Link Samahan can be spoilt by exposure to access water, heat, ice etc, the insurance costs will be quite high. The total insurance cost for each shipment will be $1,200, which would amount to $2,400 for the year 2010.
As stated in ("France - Customs & Duties", n.d), "Majority of the import duties in France come under a Ad Valorem basis and include cost, insurance and freight. Since France is a member of the EU, the external tariffs and import regulations of EU also applies to France. Therefore most manufactured goods will be subject to a tariff of 5% to 17%". Since Samahan is a manufactured good, and falls within the category of food/medical, and also since it is imported from outside the EU the customs duty has been set at 16%.
Import taxes and value added taxes
Import tax is the fee that is charged for goods being imported into the country. "The version of VAT that is used in France is referred to as taxe sur la valeur ajoutee or TVA".
Also, the current rate of VAT in France that Link Samahan will be subject to is 19.6%, ("Value Added Tax in France", n.d).
Wholesale and retail mark-ups and discounts
"Mark-ups are a percentage added to the cost of the product to form a retail selling price", (Waters, n.d). This enables not only the company (Link Natural), but also the wholesalers and retailers to keep a profit margin.
According to (Holland, 1998), the selling price and total cost figures can be used to determine the mark up percentage using the following formula:
Mark-up percent = (selling price - total cost) ÷ total cost
Therefore the mark up percent for Link Samahan is:
($15.75 - $9.50) ÷ $9.50 = 66%
Company's gross margins
The following formula was used to calculate the gross margin percentage of the company.
According to, (Holland, 1998) gross margin percentage can be calculated using selling price and the total cost.
Selling Price of Link Samahan = US $15.75
Total cost per pack = US $ 9.50
Therefore the gross margin for Link Samahan is 40 %
The selling price for 25 sachets (1 packet) of Link Samahan is $15.75 (€10.50). This price has been calculated by taking into account all costs, including: production, packaging, shipment, transportation, taxes and other customs duties. The company will consider increasing this set price of the basic product to approximately $16.75, after considering the fluctuations in demand, and the introduction of the flavoured Samahan packets.
TERMS OF SALE
Terms of sale are often referred to as "trade terms". According to, (Cateora et al, 2008, pg.529) "international terms of sales refers to how the buyers and sellers agree on the costs involved in various types of international transactions and how they divide the risks and obligations involved". According to ("General Terms of Sales-France and Broad",2002), Link Samahan will consider some of following terms of sales used in France and overseas when conducting international businesses:
Contract Nature and Execution
The contract has to be signed by Link Natural as well as the buyer, or an acceptance letter by Link Natural must be made available when they receive an order, for the contract to be valid. Any modification to the contract will be given in writing by Link Natural, and should be carried out according to the terms stated in the contract.
The packaging costs are borne by the buyer as an addition to the agreed price and shall not be exempted by Link Natural unless it is previously specified.
The prices of Link Samahan will be inclusive of net of taxes since it is a product that does not have a special packaging.
Link Samahan will be delivered in their standard packaging and the delivery terms will be indicated when ordering the goods. However, the risks and expenses involved in areas such as handling, transporting, storing etc. should be borne by the buyer, and, they should inform Link Natural within 72 hours if there are any claims to be made at the arrival of the goods.
The general payment terms of Link Natural are such that: the payment should be made in such a way that 1/2 of the payment is made initially when ordering Link Samahan, and the balance of the payment to be made at the goods being available at the relevant places.
Link Natural will not be respon
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