This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
In this Project we chose a consumer product which we would produce in or export to Italy or India. We decided to choose Noord Hollandse Gouda Cheese. We will analyze the market potential followed with the strengths and weaknesses for Dutch exporters and give a final advice how to enter the chosen market.
Noord Hollandse Gouda Cheese is a hard cheese made from whole cow's milk. The milk has starter bacteria added to it, and is then heated to help the curds separate from the whey. The curds are pressed into circular moulds for a few hours, and then soaked in brine. The cheeses are then removed from the moulds, dried for a few days then coated in wax and aged for at least a few weeks. The cheese ends up mild tasting and pale yellow with a hard rind.
The term “Gouda” is now a universal name, and not restricted to cheese of Dutch origin.
The term “Noord-Hollandse Gouda” is registered in the EU as a Protected Geographical Status. The cheese itself was originally developed in Gouda which is in the Dutch province South Holland; hence the registered name referring to North Holland seems incorrect. However, Gouda cheese is made and sold all around the world.
2. Market potential
Releasing a new product on the market is not as simple as it seems to be at the first moment. The market needs to be segmented in order to satisfy the needs of the potential customers. Market segmentation means to identify the segments of the market that are different from one another.
The cheese market has been expanding in the last couple years. As one of few products from the Netherlands, Cheese has a very big market potential. Gouda is widely available and quite affordable. Gouda cheese is traded all over the world. The original ingredients are only available in North of the Netherlands, therefore Gouda can never be produced in a foreign country. In the Netherlands the name Gouda can be found on every store and in each supermarket.
Gouda has two varieties, the young Gouda cheese aged between 1 and 6 months, rich yellow in color and with a red or yellow paraffin wax coating. This special kind of cheese cannot be found in every store unlike its counterpart normal Gouda cheese. Special cheeses are mostly used as a snack or on something like a cheeseboard. Gouda which has aged more has a pungent underlying bitterness, yet is still considerably creamier and sometimes discernible by a black paraffin wax coating. This strong tasting cheese is hard and often too brittle to cut using a slicer, but it can be sliced by knife or served cut in cubes, with drinks.
There are some customer characteristics such as geographic, demographic, psychographic and behaviorist which can be followed when segmenting a consumer market.
First of all we will analyze the geographic segmentation. The Export division of Noord Hollandse Gouda focuses primarily on international retailers, cheese shops and market dealings. Gouda is perhaps the most famous Dutch cheese export. Gouda did not focus on a specific country or region neither did they segment according to size of population. Gouda is being eaten by people who can afford it; therefore it is often available for costumers in urban population. Concerning the demographic segmentation
Gouda is made in many other nations, often by Dutch farmers who like to carry on the tradition of Gouda making. Gouda is often used on dessert platters, sandwiches, and at wine tastings as a palate cleanser. In addition to this the psychographic segmentation underlines the Idea of having breakfast without Cheese is impossible. At last the behaviorist segmentation which is based on actual customer behavior toward the products. This segmentation includes the variables brand loyalty, occasions, such as holidays and events that stimulate purchases and the user status which means the potential of the product and the first- time trial. All these variables used when segmenting the potential market help to identify the customer base that can be served best.
Competition is important for the orientation of price and consumer demand of a company. However competitors can seem to be like a barrier when trying to launch a new product into an existing market. Therefore the amount of competitors and also their strength and weaknesses have to be considered in order to know how to enter the market successfully.
India has over a billion consumers, presenting tempting prospects for international companies.
The market for Dairy food in India increased between year 2002 and 2008, growing at an average annual rate of 8.9%.
The leading company in the market in 2008 was GCMMF (Gujarat Co-operative Milk Marketing Federation Ltd). The second-largest player was TNCMPF (Tamil Nadu Cooperative Milk Producers' Federation) with Punjab State Co-operative Milk Producers Federation in third place.
All of these companies are big cheese producer and represented in India.
The dairy food market consists of spreadable fats, cheese, soy products, chilled desserts, milk, yogurt and cream.
Italy has lot of competition. They have over 66 companies which are producing cheese.
Leprino Foods Company is the world's largest producer of mozzarella and one of the leading Italian cheese producers of the world. It is difficult for Gouda to compete with Italian cheese because they already have their own preference. Italy is known for its different types of cheese. But the consume rate of cheese don't sink.
Companies in both countries have to be analysed and understood in order to compete against them.
Exporting a product to the international world trade market
Exporting a product means when a country trade a product or service out of the country to another country. In economics and export it is any good commodity, transported from one country to another country in a legitimate fashion, typically for use and trade.
There are different types to export a product or service. One of them is direct exporting. An organization which makes direct exporting analyses their markets and market potential very good and very detailed that means the organization make special surveys about how huge the demand for their product is or could be. They make special market researches about the consumer relation to the product. They collect data and information to improve their products. With this kind of method the companies have more control over the export process and built a closer relationship to the overseas markets. The direct exporting is complex and very time intensive, cost a lot of money and require substantial resources but in general these organizations reach a higher profit. Sales Representatives, distributors, foreign retailers are part of the indirect method.
Another method is that it is very common to use private firms. They offer an export department for non-competing manufacturers and producers. They make orders from foreign buyers and take possession and title of their goods for direct imports. Another strategy is that domestic buyers export the product which was a filling order or organizations are looking for domestic buyers who represent foreign customers. Other parts of indirect export is licensing, franchising or contract manufacturing and piggyback marketing which is an arrangement between two companies whereby the one company distribute the product or products from a second firm. This is an advantage or a good opportunity for an organization when one company offers a product line and the other products appeal them and reach the same customers.Accessory type products and value added reseller are part of these methods.
Exporting products is a world-wide trade so that rules and constructions have to be considered. Being a member of the EU or an organization like the WTO (World Trade Organization) or the APEC (International organization of free trade in the Pacific area) plays an important role in making business with other countries which can be effective on costs and time.
The strengths and weaknesses to export cheese to India
India is a potential market to export our product because it has an average economic growth of 5.6 % annually the past 20 years and they expect growth rates from 8 till 10 % for the next several years. Furthermore it is one of the fastest growing markets in the world. The country is an interesting market for us with a lot of potential in present and in the future. However, the market is not considered shortly. Institutions of this market can be both difficult and resource-intensive and requires a long-term strategy to reach a profitable outcome.
The demands for cheese and milk products are increasing. However it is still phenomena in those huge cities, but the market of it is growing over 20% with a consumption of 7.000 tons per year.
Both countries, the Netherlands and India are members of the WTO which means that tariff rates and commitments are lower. The countries can make sure that these countries bargain legal because those members support unfairness and improve legal certainty. The countries can feel safe because the WTO is effective and make actions more transparent.
Certainly India is not a part of the EU that means trading to each other is not free from tariff taxes because the tariff walls were drop out and our cheese is produced in the EU, so it will determine costs and national instructions like guidelines for labels have to be followed.
Cheese belongs to eatables, which makes us focus also on other regulations, to have permission to export, like the HACCP- concept (Hazard, Analysis, Critical, Control, Points). The concept is a hygiene action where different points will be controlled like dangers, risks, critical points and the product will be controlled which determines also costs and time.
India is not (yet) a member of the APEC (International organization of free trade in the Pacific area) which cost also taxes.
No doubt, India is one of the fastest growing markets in the world and a growing market for cheese, however we should not just count on it because it is an increasing market, other organizations can be interested as well and competition can be very high.
5 Enter the market in India.
When we talk about exporting a product to a foreign country there are three different ways to enter a market.Fig.1
So the choices are exporting, joint venturing and direct investment. While each of the three methods has its own advantage, each one also has its disadvantage. Since the product we have chosen is cheese, it is very important for us to look at the facts, what makes our cheese superior comparing to the other cheeses, which are being exported. Before we go there we will explain the differences between these three ways of entering a market.
5.2 Ways of entering a foreign market
The easiest way to enter a foreign countries market is exporting your own surpluses to the foreign market in this way the company produces all its goods in its home country and it doesn't have to modify the product for the export market. Exporting involves at least change in the company's product lines, organization, investments or mission. There are two ways of exporting a product.
- Indirect exporting: By using the marketing intermediaries, indirect exporting involves less investment because the firm does not require an overseas sales force or set of contacts. It also involves less risk. Returns will be lower.
- Direct exporting: Sellers may eventually move into direct exporting, whereby they handle their own exports. The investment and risk are somewhat greater in this strategy, but so is the potential return.
5.2.2 Joint venturing
Joining with foreign companies to produce products or services and/or market them. Joint venturing differs from exporting in this point that the company joins with a partner to sell or market abroad. It differs from direct investment in that point that an association is formed with someone in the foreign country. This can be done in four ways licensing, contract manufacturing, management contracting management and joint ownership. So technically another company produces and sells our product.
5.2.3 Direct investment
Enter a foreign market by developing foreign-based assembly or manufacturing facilities.
While this method has its advantages, full control over the product and the return is usually the highest of the three. Unfortunately the risk in using this method is also the highest of the three possibilities as people often underestimate the foreign culture and their product.
5.3 Entering the Indian cheese market
As our cheese has to be made in the Netherlands (province of Noord-Holland) in order to be called Noord hollandse kaas (North-Dutch cheese) we cannot use any of the above methods other than exporting because the foreign companies cannot produce the particular brand themselves first of all because the name of the cheese has geo-locational protection
So it isn't allowed by law to set up production facilities in a foreign country because the cows which are used in this process have to be cows grazing in the province of north Holland. On the other hand this is what defines Dutch cheese. The specific taste of the grass eaten by the cows gives the cheese a more fulfilling taste and it also makes sure that the quality of our product remains high.
Having decided that the export way is the best way to choose, we will now have to use either the indirect or the direct method to export our cheese.
5.3.1 Direct or indirect exporting?
Usually you would see a company start by exporting their product indirectly, then pass to direct while it slowly shifts towards direct investment.
In our case because joint venturing and direct investment aren't possible the complete shift cannot take place. It is however possible for us to start out by indirect exporting our product and once we have made a name and the product becomes a success to open a sales division in India and start exporting directly. By following this path we will minimize our financial risk.
The question, after the analyzing of the marketing potential between Italy and India, is what would be the best country to export our Noord Hollandse Gouda Cheese product. So it is important to start with researches in those mentioned countries.
First of all we mention the geographic, demographic, psychographic and behaviorist market. To take a closer look at the market potential makes you realize that cheese market is an expanding market which has increased in the last couple years, so there is an opportunity to succeed internationally. It is also important to discuss the competition between the countries because price and consumer plays a big role as a matter of fact. Further to contrast Italy and India in their strong and weak points concerning the entering market shows the advantages India`s because of the population which is over 1 billion consumers and underlines the potential. In addition India has three leading companies on the market and Italy has about 66 companies, so that shows that it is more difficult to compete with Italian companies. Furthermore India has an average economic of 5.6% annually for the past 20 years and it is expected to increase even higher in the future. One disadvantage about India is the fact that it is not in the EU, so tariff taxes have to be paid. The fact that India and the Netherlands are members of the WTO is an advantage because the tariff rates and commitments are lower.
At the end we dealt with the issue how to enter India`s market and showed the 3 ways how to export products to different countries which are exporting, joint venturing and direct investment. To treat this issue it is important to see the advantages and disadvantages between those 3 ways of exporting.
Finally we came to the conclusion to use the exporting way and we would choose India as the preferable country because it has one of the fastest growing market in the entire world and a huge potential market for our cheese product. To minimize the financial risk we would start with indirect exporting until we have a name in India, afterwards we would start with direct exporting.
Philip Kotler,Principles of Marketing, 4th European edition