Kudler Fine Foods' international expansion strategy in Italy

Kudler Fine Foods: Italian Entrance Plan

Started in 1998 by Kathy Kudler to supply a perceived demand for high-end gourmet items at reasonable prices, Kudler Fine Foods, has already expanded to four stores and is exploring the option of international expansion. Specifically, the organization is considering a move into the Italian retail grocery market, offering the products it has sourced as well as its retail image to a culture well versed in gourmet foods and certain to have strong opinions about this new American entrant. Despite the challenges that cultural resistance might pose in this venture, there is a great deal of reason for optimism as to the profitability of Kudler's entrance into the Italian grocery market, as shall be described below.

Market Justification

The sustainability of the Italian grocery retail market has actually been a matter of great debate recently, with some analysts predicting a complete lack of retail grocery service in some parts of the country occurring in the next five years (Datamonitor 2010; Alvin 2010). While this could be seen as a threat to many, it also present an excellent opportunity for Kudler to both increase its niche presence and expand into larger grocery retail operations, maintaining a focus on price and quality while serving a dramatically under-served community of consumers (Datamonitor 2010). The current market instability is one of the major reasons Italy was chosen as a place for international entry; despite the greater risks it poses, with steady control and a strong plan the payoffs will also be substantially greater.

Current trends in the Italian grocery market have emphasized food and beverage sales over other product classes and have also demonstrated a current growth in preference for discount items and retail chains (Datamonitor 2010); Aruvian 2010). With a market size of many millions of consumers, however, there are necessarily niche markets that could be identified and profitably exploited through proper branding and marketing efforts (Alvin 2010). The market has actually be shrinking at the present time, but a lack of service to certain geographic areas as well as the boost to gourmet markets that can be achieved though a perception of scarcity can also be beneficial to the company (Datamonitor 2010); Alvin 2010). Profitability will not be easy to achieve in this market, but persistence and proper positioning in Kudler Fine Foods' identified niche market will assist in the growth and profitability for this company in the Italian retail grocery market (Aruvian 2010).

Environmental Factors

While regulating the labeling, distribution, and sale of food items like any other national government, there is not a great deal of interference by the Italian government in the Italian grocery market expected in the near future. There is some possibility that mandates for maintaining and/or establishing operations in certain regions might be implemented to ensure adequate food distribution to all of Italy as a means of addressing current trends and concerns, such a move is considered highly unlikely (Datamonitor 2010; Aruvian 2010). It is also unclear whether such a move by the Italian governement would be damaging or even necessarily applicable to Kudler Fine Foods unless it expanded its product offerings to wider and less expensive grocery offerings. Little else in the legal environment of this market has changes (Alvin 2010).

There are also legal entities and agencies in the European Union that influence and affect the Italian retail grocery market, and general European economic cooperation policies and tendencies also present something of a barrier to entry from an American competitor such as Kudler Fine Foods (Alvin 2010; Aruvian 2010). Organizational decision-making must account for the desire for increased European and Italian self-reliance and competitiveness, while at the same time taking advantage of the relatively few direct and explicit legal barriers to entry and continued profitable competition in the Italian retail grocery industry by American firms (Aruvian 2010). The risk of increased regulation or other legal constraints that mandate service or otherwise limit profitability are not seen to be especially large or threatening, and what risk factors do exist are far outweighed by the potential gains and profits for Kudler Fine Foods (Datamonitor 2010; Alvin 2010).

Economic, Technologic, and Social Factors

Current shocks to the European financial system and the Pan-European currency greatly cheapens market entry in the current era, and Kudler Fine Foods -- as well as any other American organization -- would be well advised to move quickly into the Italian market if such a move is planed for the near future (Datamonitor 2010). Technological innovations that could assist the organization include increased networking and global communications technologies as well as computerized ordering and stock advisory systems. At the customer level, a purposeful lack of technological growth will increase utilization of Kudler staff and thus emphasize branding.

Given the rich heritage of Italian cuisine and food products as well as a sometimes fierce national pride regarding these matters, Kudler Fine Foods will certainly need to employ Italian personnel in high-level managerial and operations positions in order to meet customer expectations (Datamonitor 2010; Alvin 2010). The skills necessary to achieve the required diversity include a mutual respect for cultural practices and beliefs as well as the ability to engage passionately yet rationally in conversations and decision-making with multicultural partners. The costs necessary to develop these kills are negligible as they are predominately personality traits that can be developed through training, but that more often are the result of direct life experience and general perspective; hiring and cultivating the right individuals for such tasks and promulgating the culture that these individuals bring with them will likely produce all of the necessary traits for the company's success in its Italian endeavor.

Conclusion

To move from a local gourmet foods supplier to an international grocery retail chain in the span of just over a decade might perhaps seem overly ambitious. For Kudler Fine Foods, however, this move makes sense and could be enormously profitably to all company shareholders. Though the Italian retail grocery market has suffered some significant setbacks recently, these can actually be used to the company's advantage as it enters this unstable market as a niche provider of quality goods. It is hoped that the above analysis will assist in Kudler's decision making process.