L Marketing Tassal Is a Essay
- Length: 12 pages
- Sources: 10
- Subject: History - Asian
- Type: Essay
- Paper: #58603506
Excerpt from Essay :
Another major competitor in the Hong Kong market is COFCO (China National Cereals, Oils and Foodstuffs), which competes in the canned ready meal market and holds a 51% share there. All ready meals can be considered competitors for Tassal. COFCO is a Chinese brand with a major Hong Kong subsidiary. Another major competitor is Kraft, which markets a wide variety of all food products, including some ready meals (Market Research Centre, 2006).
The fragmented nature of the industry and the multiple distribution channels gives rise to an interesting industry dynamic. Firms can be intensely competitive, but for the most part they compete against one their own merits, rather than against one another. This allows new entrants to gain access to the market without significant backlash. With multiple distribution channels available, there are many ways for firms to enter the Hong Kong market. Competition is based on a wide range of metrics -- Western firms tend to opt for premium pricing backed by strong brand identity. A firm such as Tassal should expect to compete on this basis, largely with other Western brands, but all the while should also expect to have to take market share from established domestic and Chinese competitors.
Growth potential in Hong Kong is strong. The market for ready meals is growing more rapidly than the population. This indicates a trend towards ready meals in the market. It should be noted that a portion of the potential in the Hong Kong market lies in the lessons that will be learned in advance of a major launch into China. It is the Chinese market that holds the most potential with GDP growth rates between 8-10% annually. The move into Hong Kong is merely the first step in a broader expansion strategy for Tassal.
Another distinguishing characteristic of the Hong Kong market is the lack of ovens. Only 0.1% of Hong Kong homes have ovens (Market Research Centre, 2006). All of Tassal's dishes can be heated in a microwave (Tassal, 2009) but this remains a hurdle that the company must overcome in order to gain a foothold in the market. Tassal can view this as an opportunity, however, because it allows them to place additional emphasis on developing microwave-friendly products. This is essential because oven penetration in China is around the same level as that of Hong Kong.
6. Market Segmentation
The only relevant market for Tassal is the consumer market. Within this market, there are a couple of useful means of segmentation. The first is by income level and the second is by ethnicity. Income level is a useful means of segmentation because there are significant differences in disposable income among Hong Kongers At the high end, 14.4% of households earn more than $6,338 per month; while at the low end 14.8% of households earn less than $951 per month in Canadian dollars (C$ is worth just slightly more than the A$). This disparity presents opportunities not only for the development of mass market products but also for niche products. If Tassal enters with high-end positioning, it can tap into that 14.4% (approximately 1 million people).
The other means of segmenting the market is by segmenting according to ethnicity. Caucasian ex-pats are a small minority in Hong Kong with just 36,000 Caucasians in Hong Kong as of 2006, ten thousand fewer than in 2001 (Census and Statistics Department, 2006). These are a mix of second- or third-generation white Hong Kongers and ex-pats. They are concentrated geographically, in particular in Mid-Levels and other neighborhoods uphill from the downtown core. Most Hong Kong Caucasians are in the upper income brackets.
The most attractive segmentation method, therefore, is by income. The dwindling population of Caucasians and small market size thereof makes that segment relatively unattractive compared to the 1 million wealth Hong Kongers overall. While penetration into the Caucasian market is likely to be easiest, it is not large enough to justify the expense of entering the Hong Kong market. Moreover, by targeting by income, the primary target customer will be Chinese. This will help Tassal to learn how to market to Chinese consumers in advance of its push into the mainland down the road.
7. In the short-term, the best way to enter the Hong Kong market is by exporting. Tassal's production cannot at this point be transferred out of Tasmania. The company sources its salmon from proprietary fish farms, located in Tasmania. The infrastructure investment cost for fish farms is very high (Tassal website, 2009). As such, it would be very difficult to start a new facility and enter the Hong Kong market in a timely manner. Additionally, fish farming is best carried out in remote geographic regions to minimize the impact of civilization on the farms and the impact of farms on existing fish stocks. As such, it would be difficult to set up a fish farm in Hong Kong. Thus, in the short-term, the best approach for market entry is to export the fish products to Hong Kong on freezer tankers.
Another compelling reason for exporting is that the company can trade on its geographic origins. Hong Kongers use healthfulness as one of their purchasing criteria (Market Research Centre, 2006). As such, they may be more open to fish from a place with a pure and natural image such as Tasmania. If the salmon for the dishes was sourced from China, Hong Kong or other East Asian locale, it may not have the same cachet in the market with respect to purity and cleanliness.
Lastly, exporting in the short-term allows Tassal to explore the possibilities of the greater Chinese market without making a high level of investment in infrastructure. Market entry can be conducted strictly through a licensed distributor and this gives Tassal the ability to exit the market easily. Since it is their first foray into international markets, a steep learning curve can be expected. As such, it is valuable for the company to be in a position to exit the market if they are unsuccessful, without having to absorb a high level of fixed or sunk costs.
Over the long run, there is little reason to change if they are only going to remain in the Hong Kong market. Even if setting up a fish farm in Hong Kong were possible, it is likely cost prohibitive to do so. It is possible, however, that Tassal could benefit from setting up a joint venture in China in order to serve Hong Kong (and of course China). Potential demand in Hong Kong alone is insufficient to justify any further investment beyond exporting. However, the grander strategy may have the firm seeking additional aquaculture production sites in China. Not only is China a major fish exporter to Hong Kong, but it is also the source of a significant amount of ready meals. Competitors based in China have both cultural and cost advantages over foreign producers.
Therefore, it is recommended that for long-term market development, Tassal should explore the option of a joint venture with a local firm. One possible form for the venture could be Tassal shipping fish to China for processing locally. Another form would be finding a local partner to help develop fish farms in China. Joint ventures are virtually essential in China because of government control of the economy and limitations on foreign direct investment. Moreover, local knowledge is required in order to operate any facilities and to ensure cooperation of potentially corrupt local authorities.
If the move into Hong Kong is sufficiently successful, a joint venture could even be developed in Hong Kong, forgoing the mainland entirely. Many of the leading ready meal companies in the Hong Kong market are domestic, so manufacturing capability exists locally. In addition, these firms have the strongest distribution networks and the best marketing. Tassal's salmon-based meals would act as a complement to the lines of many of these firms, especially the companies specializing in Western-style food.
In terms of timeline, beginning by exporting and then moving to a joint venture roughly corresponds with an increase in the commitment level of the company to the Hong Kong market. Tassal initially is conducting a trial to see if they can unlock the potential of the market. Once they realized that they can sell their meals in the city, they will be willing to increase their commitment to the market. A joint venture does just that. It would be foolish for a firm with no international experience to commit to an overseas expansion, but once the company has demonstrated that it can succeed in Hong Kong, it is in a stronger position to increase its commitment level. Given the nature of the business and the nature of the market, the joint venture is the most logical means of doing this.
8. International Marketing
The brand would be positioned in the market at the medium- to high-end. Primary research indicates that the income disparity in Hong Kong is high;…