Mkt_571_Week_4

Channel and Pricing Strategies Effua McGowan, Jamonica Disser, Josh Ray, Nicole Walls, Tamara Spells, Toi Eshun October 29th, 2012 MKT/571 Marketing Greg Luce Channel and Pricing Strategies As Kudler Fine Foods looks to expand its footprint internationally it has many choices. The company has decided to grow in Africa, near Ghana, and is considering the country of Cameroon. Before making investments the company must better understand the local market, its size, growth rate, and profitability. Kudler must consider the local government and the fiscal policies it has in place and how those will affect the bottom line. The technology that is available, the social, and cultural differences are also key issues that Kudler must understand before expanding. The goal of this report is to outline the opportunities and risks associated with Cameroon as a potential expansion market. What is the Sustainability of the Market' The decision to take Kudler Foods to an international market has sustainability. As an organization Kudler Foods decided to launch canned milk as the staple product for its international launch. The home base is Ghana and as Kudler Foods makes the decision to go international it has decided to stay within the same region to use another African country as an additional test market. Kudler will launch a store and new product in Cameroon. Cameroon is developing rapidly (Cameroon). Cameroon offers not only the traditional aspect of Africa with vast land and beaches; it also offers a developing township that has started to attract more tourism to the country. As Cameroon is growing, it is attracting more people each year. This will give sustainability to the market because Kudler can market and reach the people of the country and the tourists. The market will not only be able to provide aspects of the culture of the country it will also provide aspects of what Kudler was established on and this will help keep the market an interest among the people. What Factors Influenced the Selected Market' There are several factors that influenced the decision to choose Cameroon as an additional country for launch. In the beginning, Cameroon has one of the best banking and marketing systems, but in the 80s it started to fall. The market is on an upswing because Cameroon is developing as a country. These developments allow more products to enter the market and have growth. Cameroon trends are changing, and there are still some aspects of traditional land, but more parts of the country are developing with urbanization. They have started to expand into having malls and more markets. In Cameroon there will be two opportunities to market the product; in the traditional open farmers markets and in stand-alone stores (Atemnkeng & Nzongang). Kudler Pricing Strategies Kudler Fine Foods Ghana should consider a canned milk company that employs selective distribution. This method may allow Kudler to cover more of the market as only select intermediaries will be distributing the canned milk however not necessarily in the area of Kudler Fine Foods. Kudler should consider using a smaller canned milk producer willing to wholesale directly to Kudler Fine Foods, cutting out the need for a distributor; thus, creating an administered vertical marketing channel (Kotler & Keller, Marketing Management, 2007). As Kudler is introducing canned milk into the Ghana market, the company should use a market penetrating pricing system. This system will allow the product to penetrate the market at a low price (Kotler & Keller, A Framework for Marketing Management, 2006). To keep consumer interest, Kudler should establish an everyday low price for canned milk. This everyday low price will diminish the need for constant promotions to move product. Kudler Fine Foods Cameroon, as a branch of Kudler Fine Foods should be able to employ channel and pricing strategies similar to Kudler Fine Foods Ghana. There may be a potential difference in the administered vertical channel as the Cameroon facility may need to acquire canned milk through a distributor. However, if the wholesaler supplying Kudler Fine Foods Ghana is willing to supply Kudler Fine Foods Cameroon directly, the need for a distributor will be deleted. Using the same pricing strategy will keep prices uniform between stores and save the company money from constant promotion changes. Government Cameroon is a republic with a multiparty presidential regime. Its legal system is a mix of English common law, French civil law, and customary law. The president has the power to appoint and dismiss cabinet members, judges, generals, regional governors, prefects, sub-prefects, and heads of Cameroon's 100 state-controlled firms, obligate or disburse expenditures, approve or veto regulations, declare states of emergency, and appropriate and spend profits of parastatal firms without meeting with or consulting the National Assembly. The judicial hierarchy is comprised of the judiciary branch, which is subordinate to the Ministry of Justice, subordinate to the President. In 2008 the National Assembly removed limitations on the number of terms the president can serve and granted immunity for any acts committed during the course of his term (Cameroon Government). With such a strongly centralized government, the potential for political corruption is high and inherently increases the risk of doing business in the country. According to At a Glance - Cameroon (2012), “Companies should note that unofficial payments have become systematized in clearing goods through customs and 18% of the large companies operating in Cameroon admit having resorted to paying bribes in connection with the winning of contracts and of market shares,” (Risk of Corruption). However, in recent efforts to reduce corruption and improve the economic environment, Cameroon established the National Anti-Corruption Commission (CONAC) in 2006. In the years since its establishment, a number of high-ranking representatives, former ministers, and parliament members have been arrested and charged with corruption. In addition, Cameroon has joined the Central African Economic and Monetary Community (CEMAC) and the Organization for the Harmonization of Business Law in Africa (OHADA), as well as a host of other organizations, in hopes of facilitating trade rules and aligning Cameroonian business laws with other member countries. Kudler's decision to launch its private brand of organic canned milk in the Ghanaian market has shown an enormous increase in demand and profitability of the organization in the African market. In an effort to increase international market share and expand brand awareness, Cameroon is a promising market for expansion into central Africa as it is making positive strides to eliminate poverty and increase per capita income. Cameroon is the largest economy in CEMAC’s six-nation community, which also includes Central African Republic, Chad, Equatorial Guinea, Gabon, and the Republic of Congo. The common objectives of the CEMAC are achieving a positive basic fiscal balance, ensuring that the sum of all debt is kept below 70% of gross domestic product (GDP), the elimination of domestic and external deficits, and an annual inflation rate of three percent or less. As a member of the CEMAC, there is no custom duty rate applied to the import of necessary goods to Cameroon, making the present investment environment advantageous for Kudler's product launch in Cameroon (Cameroon Tax Rates). The European Union currently represents approximately 60% of Cameroon's trade share. The African Growth and Opportunity Act (AGOA) holds that Cameroon's potential trade benefits with the United States are under-realized. From 2010 to 2011 trade between the United States and Cameroon experienced a 20% increase and American exports were up by 75% (Country Profiles - Cameroon). Channel and Pricing Strategies The Bank of Ghana’s monetary policy governs the country interest rates (Monetary Policy). “The Bank's monetary policy objective is to ensure price stability – low inflation – and, subject to that, to support the Government's economic objectives including those for growth and employment. Price stability is defined by the Government's inflation target” (Monetary Policy). Fiscal policy controls the bank’s decisions. In fact two members of the Ghana’s government are members of the Bank of Ghana’s Monetary Policy Committee (Bank of Ghana, 2012). The country’s current interest rate is 1.87% and the exchange rate is 1.5 LCU per U.S. Dollar (Ghana). Cameroon is a member of the Central African Economic and Monetary Community of Central Africa (CEMAC). The CEMAC houses the Bank of Central African States (BEAC), which is attached to the Euro (Cameroon: Country Brief). “The BEAC policy instruments consist of refinancing and deposit windows for banks, interest rates, and reserve requirements” (Central African Economic and Monetary Community, 2012, p.1). Therefore, fiscal policy is the main policy the authorities use to regulate the economy. The fiscal policy’s goal is to regulate the country’s debt using its main resources (World Bank, 2012). Currently, Cameroon’s exchange rate is $417 LUC per U.S. dollars and deposit interest rates are 3.3% (Ghana). The role of interest rates, exchange rates, monetary policy, and fiscal policy is different in each country. Therefore, Kudler Fine Foods understands how to avoid risk considering these factors. The organization understands that although Cameroon’s market is a viable market for the canned milk, the market presents a bigger risk. Besides higher interest rates, Cameroon’s monetary policies are based upon the decision of a union that governs several others countries and could influence the profitability of the organization’s products. Innovation and Technology One of the most riveting innovations available to organizations that conduct international business is the international trade websites. The Internet already has a dominant role in international business and the means to conduct business globally. Therefore, international trading websites, such as Alibaba will allow Kudler Fine Foods to conduct international business with more ease. Alibaba “is a family of Internet-based businesses that includes online marketplaces that facilitate business-to-business international and domestic China trade, retail and payment platforms, shopping search engine and distributed cloud computing services” (Company Overview). This technological change will help broden the organization market exposure and respect within the international community. Social Factors in Cameroon Cameroon is a country of diversity. This comes in the form of the coexistence of two primary official languages, French, and English. The West African Nation of about 16 million people boasts a cultural mix of 200 different ethnic groups. The country has balanced religious affiliations. Finally, the historic background of colonialism has a permanent place in the country. This setting provides a strong background for economic prosperity. The cultural background of Cameroon allows a company to offer a variety of products. As of 2008, the country boasted a 78% literacy rate, which is relatively high for sub-Sahara Africa. For a product launch, the country is fertile ground as most of the population is relatively young, under age 50 (Fotabong, 2012). To take advantage of the cultural diversity, organizations should study the various cultures, ensuring that the approach taken acknowledges and respects the collective diversity. In addition to the research companies need to offer diversity training to employees who will interact with the country. The ready availability of manpower at a cheaper rate is a sound fiscal reason to embrace the diversity of Cameroon. Organizations need to ensure communications skills of those interacting with foreign markets are aligned with the desired results. Diversity training is an added opportunity cost to businesses and organizations. In addition, companies have costs associated with diversity management programs in foreign countries. These programs require ongoing maintenance that translates to recurring costs. Another budget item is the developing policies that align with the local regulations (Fotabong, 2012). Conclusion Kudler Fine Foods is eager to expand its footprint in Africa but wants to do it the smart way. Conducting research on the government of Cameroon, the fiscal policy, economy, culture, people, and religions, Kudler has done its due diligence and can make a more informed decision to move forward with expansion plans or find a better location. Cameroon is a country that a business like Kudler will thrive in if Kudler recognizes the risks and takes the appropriate steps to mitigate those risks. Bibliography At a Glance - Cameroon. (n.d.). Retrieved October 26, 2012, from TrustLaw: http://www.trust.org/trustlaw/country-profiles/at-a-glance.dot'id=e9f09186-f2df-4ea6-b969-e2f0ec4be36d Atemnkeng, J., & Nzongang, J. (n.d.). Market Structure and Profitability Performance in the Banking africa.com/Jsda/Summer_2006/PDF/ARC_MarketStructureProfitabilityPerformace.pdf Cameroon. (n.d.). Retrieved October 25, 2012, from All Africa: http://allafrica.com/cameroon/ Cameroon Government. (n.d.). Retrieved October 24, 2012, from Michigan State University: http://globaledge.msu.edu/Countries/Cameroon/government Cameroon Tax Rates. (n.d.). Retrieved October 24, 2012, from Tax Rates: http://www.taxrates.cc/html/cameroon-tax-rates.html Cameroon: Country Brief. (n.d.). Retrieved October 24, 2012, from Worldbank: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/CAMEROONEXTN/0,,menuPK:343823~pagePK:141132~piPK:141107~theSitePK:343813,00.html Central African Economic and Monetary Community. (2012, August). Retrieved October 26, 2012, from International Monetary Fune: http://www.imf.org/external/pubs/ft/scr/2012/cr12244.pdf Company Overview. (n.d.). Retrieved October 24, 2012, from Alibaba: http://news.alibaba.com/specials/aboutalibaba/aligroup/index.html Country Profiles - Cameroon. (n.d.). Retrieved October 25, 2012, from Export.gov: http://export.gov/arizona/access2012/eg_us_az_040465.asp#P40_5037 Fotabong, L. (2012, January 1). The Microfinance Market of Cameroon. Retrieved October 26, 2012, from Microfinance Gateway: http://www.microfinancegateway.org/gm/document-1.9.57347/The%20Microfinance%20Market%20of%20Cameroon.docxFinal.docxfinal2012.pdf Ghana. (n.d.). Retrieved October 25, 2012, from The World Bank: http://www.worldbank.org/en/country/ghana Kotler, P., & Keller, K. L. (2006). A Framework for Marketing Management (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Kotler, P., & Keller, K. L. (2007). Marketing Management (12th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Monetary Policy. (n.d.). Retrieved October 24, 2012, from Bank of Ghana: http://www.bog.gov.gh/index.php'option=com_content&view=article&id=73&Itemid=137